The changing fortunes of countries and the economic realities make even experts lose their bearings! Globalization interlinks the whole world; either we swim together, or sink as one! Any turbulence in one country reverberates and resonates around the world. And with weapons of mass destructions, even our survival is linked! There is no place to hide or seek shelter. The whole world has to cooperate to stay alive and progress; the risk of destruction is much higher with each passing day!
Like changing seasons & temperatures, the fortunes of countries change and are reflected in currency valuations. The major currencies like US Dollar, Euro, Pound sterling, AUD gyrate wildly, as also the price of oil and other commodities. News of the economy turning the corner makes oil and commodities dearer. Gold is a pure asset as it is not a liability of any country. There are many bulls backing it as a safe haven in times of financial turbulence, but one has to depend on capital appreciation and willing to take hits on the principal amount invested.
Obviously, there has been a seismic shift over the past couple of decades, accelerating in the last few years. China has overtaken all, as the biggest accumulator of foreign reserves, with over two and half trillion dollars and still counting! Sadly, the champion of the free world, America, is tottering with increased debt and seems lost in its way! This change in fortune is throwing the world power equations in disarray; it is becoming a one horse race! China is the world factory, mass producing consumer goods cheaper than others; also, sourcing raw materials from across the world. So, prosperity rests with them and the resource rich countries that supply the commodities like Australia, Brazil. Of course, oil exporting countries still hold sway. The others are lost, their manufacturing debased, unable to compete with the fire-spitting dragon!
America, still the biggest economy by far, is fighting to stay the ground, without losing its bearings. With the former Soviet Union history, some felt uncomfortable with America showing its might. But the emergence of China, flexing its muscles increasingly, has unnerved many. They have inalienable friends like North Korea, and that says much about their foreign policy; others will be entitled to its view only! They do not bother about internal political systems, they just deal with whoever is in power, be it the military junta in Myanmar or others in Iran etc.
Apart from the new realities of a bipolar world with the emergence of China, the economic seismic shift would also have its impact on the survival of many nascent democratic countries. There is no top-down policy strictures laid down like in a one party hegemony, only a democratic way of bottoms-up that reflects the will of the people. Obviously, that will lose out to the marauding forces, with single-minded focus to achieve their goals; whatever it takes! Those who were uncomfortable with America taking major decisions on its own, with President Bush’s famous “either you are with us or with them”, feel the real heat now with a no-nonsense China, to the extent they want America to keep them company for comfort!
How the harsh reality of power play, between the biggest creditor and the biggest borrower, runs its course is anybody’s guess. Obviously, the creditor has to worry more than the debtor! China’s prosperity and stability depends on the biggest economy by far, America, and both are in a bear-hug for mutual survival. The rest cannot survive & prosper in isolation. Europe depends on both, but still trying to make sense of the European Union and even the survival of the Euro itself. These three are the key players in the unfolding drama that will decide the stability of the world political and financial system. Earlier times of closed door countries, living in splendid isolation, will no more hold water, especially with modern technology that makes the world as one community, interlinked more than ever. And as Wiki leaks reveal, none is spared and can get away with cloak and dagger diplomacy! We swim or sink together; we have no choice but to find common ground beyond the rhetoric!