US ‘will lose financial superpower status’

[CelticKing]

US ‘will lose financial superpower status’

The US will lose its role as a global financial “superpower” in the wake of the financial crisis, Peer Steinbrück, the German finance minister, said on Thursday, blaming Washington for failing to take the regulatory steps that might have averted the crisis.

“The US will lose its status as the superpower of the world financial system. This world will become multipolar” with the emergence of stronger, better capitalised centres in Asia and Europe, Mr Steinbrück told the German parliament. “The world will never be the same again.”

His were the most outspoken comments by a senior European government figure since Wall Street fell into chaos two weeks ago.

He later told journalists: “When we look back 10 years from now, we will see 2008 as a fundamental rupture. I am not saying the dollar will lose its reserve currency status, but it will become relative.”

The minister, who has spearheaded German efforts to rein in financial markets in the past two years, attacked the US government for opposing stricter regulations even after the subprime crisis had broken out last summer.

The US notion that markets should remain as free as possible from regulatory shackles “was as simplistic as it was dangerous”, he said.

But Mr Steinbrück had warm words for the US’s crisis management in the past fortnight, including the government’s planned $700bn rescue package for the financial sector. Washington, he said, had earned credit for acting not just in the US interest but also in the interest of other nations.

Yet he repeated Germany’s refusal to mount a similar rescue operation using taxpayers’ money to acquire toxic assets. “This crisis originated in the US and is mainly hitting the US,” he said. In Europe and Germany, such a package would be “neither sensible nor necessary”.

The US, Mr Steinbrück said, had failed in its oversight of investment banks, adding that the crisis was an indictment of the US two-tier banking system and its “weak, divided financial oversight”.

He blamed Washington for refusing to consider proposals Berlin had made as it chaired the Group of Eight industrial nations last year. These proposals, he said, “elicited mockery at best or were seen as a typical example of Germans’ penchant for over-regulation”.

His comments followed calls this week by Nicolas Sarkozy, the French president and current holder of the European Union presidency, for an emergency G8 meeting on the crisis.

Mr Steinbrück’s proposals include a ban on “purely speculative short selling”; a crackdown on variable pay for bank managers, which had encouraged reckless risk-taking; a ban on banks securitising more than 80 per cent of the debt they hold; international standards making bank managers personally responsible for the consequences of their trades; and increased co-operation between European supervisors.

Following a meeting with Christine Lagarde, his French counterpart, in Berlin, he said France and Germany would set up a working group of treasury, central bank and supervisory authority officials that would consider tougher regulation of short selling.

 

[DennisRodman]

It is true. They probably will lose that status for a decade.

The only potential country to surpass US is probably China in like 20-30 years if things continue to proceed well.

 

[CelticKing]

It's pretty sad though considering even after 9/11 the US was still looked upon as the main leader for finance and economy.


And I agree with you that China (or possibly Russia) will surpass the US, if things continue going down the hill in the next few months.

 

[Shapecity]

Won't China's economy collapse if the US collapses? If the US stops consuming products manufactured in China it's going to have a major impact on their economy. Not to mention they own a substanial amount of our debt.

 

[DennisRodman]

Won't China's economy collapse if the US collapses? If the US stops consuming products manufactured in China it's going to have a major impact on their economy. Not to mention they own a substanial amount of our debt.

I have 3 points to why I would disagree.

1. Well one thing is, if the US`s economy collapses, people will still buy everyday stuff. Like cheaply produced goods made of plastic. For example, plastic forks, plastic bottles, cheap toys for kids. Some things from China I don`t see the demand changing much.

2. Their own building of new infrastructure within China produces jobs, and should continue.

3. China has other major trading partners.

EU, during this period reached US$129.9 billion.
China’s second largest trading partner, amounted to US$115.2 billion for the same period
Japan, China’s third largest trading partner, traded US$91.2 billion
The ASEAN bloc's trading with China totaled US$75.3 billion
Sino-Indian trade was worth US$14.2 billion

http://resources.alibaba.com/article/48519/China_s_net_exports_have_totaled_US_801_3_bln_so_far.htm

So if the US's economy "collapses", it would not mean China's economy would collapse. Would it slow down China's economy? Yes, however it doesn't mean China's economy would be in danger of a collapse.

 

[Shapecity]

I have 3 points to why I would disagree.

1. Well one thing is, if the US`s economy collapses, people will still buy everyday stuff. Like cheaply produced goods made of plastic. For example, plastic forks, plastic bottles, cheap toys for kids. Some things from China I don`t see the demand changing much.

2. Their own building of new infrastructure within China produces jobs, and should continue.

3. China has other major trading partners.

http://resources.alibaba.com/article/48519/China_s_net_exports_have_totaled_US_801_3_bln_so_far.htm

So if the US's economy "collapses", it would not mean China's economy would collapse. Would it slow down China's economy? Yes, however it doesn't mean China's economy would be in danger of a collapse.

When I was growing up a lot of cheap products came from Taiwan, but they transformed their economy and moved into manufacturing electronics. I wouldn't be surprised if China does as well (ie manufacturing cars) and China will need to outsource their manufacturing to other countries to take advantage of cheaper labor costs (ie Vietnam, Africa, & Cambodia).

China is susceptible to inflation and if raw material costs continue to rise then China's trade surplus will continue to shrink around the world.