By calling the Chinese out explicitly on their currency manipulation in his concluding address to the G-20 summit last week, President Barack Obama may have torpedoed his relationship with Beijing for the remainder of what China's bosses most certainly now hope is his first and only term. Burdened by a Republican-controlled, Tea Party-infused House, and bathed in hypocrisy thanks to the Fed's own, just-announced currency manipulation (aka, QE2), Obama seems not to recognize either the gravity of his nation's long-term economic situation or the degree to which his own political fate now hinges on his administration's increasingly stormy ties with China.
Here's the larger picture: Asia, anchored by China, is now the global economy's center of gravity when it comes to deployable savings. As Europe heads into retirement and the U.S. refuses to come to grips with its unsustainable trajectory, China stands tall thanks to its capacity to spend and invest -- even as that capacity seems woefully insufficient for the bevy of historical tasks at hand. Beijing must already see to the care and feeding of 22 percent of humanity, the bulk of whom remain impoverished by anybody's reasonable standards. But in addition, China is now expected to cover the spendthrift West's need to boost exports, while also serving as income-elevating engine for the rest of the world's developing economies -- largely through the Middle Kingdom's ravenous resource demands. ...
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