Is it easier to learn Mandarin or Cantonese?
Last week S&P took the first bold action against the U.S.’s credit rating after many warnings about its out-of-control deficit and debt situation. The credit rating was not actually changed, but S&P downgraded the economic outlook in the U.S. from “stable” to “negative.” That means that there is a 33% chance that our top-tier credit rating will be lowered within the next two years.
Now the International Monetary Fund issued a report stating that China’s economy will surpass the United States by 2016! That is much sooner than originally forecasted. From The New American:
The International Monetary Fund (IMF) now predicts that the size of China’s economy will surpass America’s by 2016, far earlier than most mainstream economists have been forecasting. Some analysts ridiculed the Fund’s prediction, but others warned that it could happen even sooner.
The IMF forecast calculated that in five years, using GDP figures based on “purchasing power parity,” the Chinese economy would represent just over 18 percent of the world total, up from around 14 percent right now. According to the Fund’s projections, China’s adjusted GDP will rise from about $11.2 trillion in 2011 to $19 trillion by 2016.
The $15 trillion U.S. economy, which currently accounts for almost 20 percent of global GDP, would decrease to about 17.7 percent of the international total by 2016. During the next five years, according to the IMF forecast, it will grow by a mere $3.5 trillion.
How is this possible? I thought the United States was the champion of the free enterprise and capitalism. Read more:
Some economists also argue that China’s policy of undervaluing its currency has helped it gain a significant competitive edge in exports, at least in the short-term. And the Chinese dictatorship, instead of waging foreign wars and doling out foreign aid, has been aggressively buying up resources, companies and raw materials around the world.
Meanwhile, the U.S. economy has become increasingly less competitive over the last decade. Burdened with growing, unsustainable government borrowing and spending; multiple undeclared foreign wars; an economy-destroying regulatory regime; never-ending bailouts; and a monetary policy that serves to transfer the people’s wealth into the hands of well-connected insiders; growth in America is lagging behind. And that trend is only accelerating.
While I do not think this is a doomsday report it is definitely another warning sign for the American people and their elected officials. The timing of these reports are good considering that deficit spending and the national debt are the primary focus in Washington and in the state and local governments. But will they act before it is too late?
I’ll leave you with this thought: If China’s economy surpasses the United States and China holds the largest percentage of foreign debt, who will be the primary economic superpower?