Martin Wolf wrote an Op-Ed entitled “Grim truths Obama should have told Jintao”. See the following link.
Methinks Martin Wolf has in large part got it the wrong way round.
In the early 70s, Japan and Germany were forced to adapt their monetary policies to reflect the fiscal incontinence of the US – overspending resulting from the latter’s Vietnam entanglement and its Great Society programme. The result? The end of Bretton Woods. Since then, the US has let its overspending explode and, through abusing the ‘exhorbitant privilege of the US Dollar’s reserve currency status, come to expect the rest of the world to underwrite that overspending. Today the US (4% of the world’s population) consumes over 60% of the world’s mobile savings (the West as a whole consumes over 85%). And yet now it is the turn of China, 21% of the world’s population, to dance to the rhythms of the continued overspending of that 4%? Am I missing something here? A far more interesting Op-Ed from Mr Wolf would surely have been “Grim truths Jintao should have told Obama.”
Those truths would surely have centred on one particular point. “President Obama, the US is spending too much. Your health reforms may be noble, but can the US as a nation really afford them? Your military may be magnificent, but can you afford it? You may be the Arsenal of Democracy but isn’t it a bit rich when 4% of the world’s population spend over 50% of its defence budget?
“America, be careful what you wish for. If you had no current account deficit, you would have to live within your means. Do you really think your hyper-democratic society could endure the cold turkey necessary to reach that status?”
And then Jintao would have handed Obama the fortune cookie refered to below…