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The American Economy is Lagging Behind

Bhuwan Thapaliya - 12/31/2005

In today's world, a superpower is no longer determined by its military force only, but by its economic performances too. Therefore, the main issue for America is now the "dollar" and understanding where it is heading. The good news for America is that in recent times the dollar has strengthened significantly against all the major currencies. So far this year, the dollar has risen 14 percent against the euro and 15 percent against the yen. Moreover, the Federal Reserve's policy has taken overnight interest rates to four percent and has lured investors into short-term dollar deposits. Analysts expect the U.S. dollar to appreciate further against the euro, as investors have increasingly shifted funds to the dollar in the aftermath of the French riots and the European Central Bank's failure to match the American Central Bank's rising interest rates. However, in the midst of this, all is not going well for America.

The U.S. is still the most influential economy in the world, and its military potential is still the largest by far, but there are many indicators that America is lagging behind in the 21st century.

It is an open secret that the U.S. is slowly losing its economic grip due to the Iraq war, as exemplified further by its massive current account deficit, which reflects the realities of the American economy.

Furthermore, along with its economic grip, it seems that it is loosing its diplomatic muscle too, as the U.S. no longer has the ability to control large strategic players, primarily Germany and Japan, and the fastest rising players, such as India and China.

So, where is America heading? Arguably, not towards its golden era -- where everything was made in America, when it was largely a self-contained economy, often free from foreign competition and blessed with steadily rising incomes where families were more stable. That America is partly the stuff of myth, now.

Nostalgia for the past is natural, but the trouble is, contemporary America is not the same country that Mr. Bush, Mr. Clinton, and Mr. Dole grew up in, and unfortunately, it never will be again.

Modern America and her innocent general public is plagued with confrontation because of Washington's inability to curb the global outrage soaring against them, most probably because of its binary foreign policies.

Meanwhile, the danger is this: if Washington doesn't dramatically change direction, in a few years from now, American's condition will depreciate further and steer the dignity of this great nation towards the abyss of uncertainty.

However, the question in America is just how seriously the regime, notably Mr. Bush, is committed to America. Mr. Bush, however, increasingly has to play a delicate balancing act between America and the rest of the world, and lead a global peace initiative, but it seems at this stage that he is willing to do neither.

Nonetheless, everyone knows that the longer the battle continues in Iraq, however, the greater the risks of both its economy and diplomacy being hit. Is Mr. Bush listening? For now it seems, Mr. Bush is preoccupied with trying to protect himself by defending his actions.

Will it lift America's spirits? Definitely no. The majority of Americans are not excited at all by this.