I read an article on Newsweek this week that state that the United States of America will still be the world leader once the current global financial crisis is over.
It’s actually a well-written article on the various reasons why the writer believes this will be the case, but I disagree with the writer on the outcome. I have a suspicion that once this financial crisis is over, America might not be the world leader anymore. Most likely America will be just one of superpowers, instead of the hyperpower it currently is.
There are 3 main reasons for my belief. First off, this crisis is not over. Despite good news from some companies, most American companies who received the Fed bailout money are still in trouble. Just recently, CIT Group faced bankruptcy despite getting about US$2.3 billion in bailout money last year. And CIT is small fry compare to some of the other companies on the list. Despite talk in Singapore about how Citigroup has turned around after posting a US$4.3 billion profit, Citigroup is actually losing money. The only reason they posted a profit is because they sold off their Smith Barney brokerage unit. Take that out and Citigroup actually lost money.
Second is the trillion dollar deficit America is facing. The American government is stimulating the economy by pumping money into the system. Money it does not have and will have to pay back sooner or later. I’m not saying it’s a bad idea to run a deficit now, but you have to cover the shortfall sooner or later. It took George Bush Sr. and Bill Clinton about 8 years to clear the deficit Ronald Reagan ran up, so god knows how long it will take to clear this record deficit (which is growing daily).
However the biggest I see for America is the fact that lessons has not been learned from this crisis. Despite what U.S. Treasury Secretary Tim Geithner and Federal Reserve Chairman Ben Bernanke have been saying, it seems like its business as usual in America. Goldman Sachs and JPMorgan Chase had good results and almost immediately announced million dollar bonuses for their top employees. The crisis started because financial companies were more interested in chasing after big deals instead of good deals and it seems the actual same problems that caused the global financial crisis in the first place are still been practiced in America.
If the United States of America is going to come out as the leader of the world once the current global financial crisis is over, it needs to first learn some lessons from it.