Asian Economic Growth May Lead to Sea Change in U.S. Finances

The rise of China and the growth of other Asian economies could hold serious consequences for the U.S. economy, and subsequently relations with other countries. One day, major world economies no longer will use the dollar as the basis for international transactions. And when the U.S. dollar no longer is the global currency of choice, the United States will have to enter a period of severe frugality. This scenario was offered by Dr. Denny Roy, senior fellow and supervisor of POSCO Fellowship Program, East-West Center. Speaking in a panel on the Pacific Rim at TechNet Asia-Pacific 2009, being held in Honolulu, Hawaii November 2-5, Roy explained that the United States will not be able to continue its current fiscal policies under the huge debt it carries, and the result will be permanent belt-tightening. China, with its fast-growing economy, soon will diversify its investments and its markets so it won't have to rely on the U.S. market as much as it does now. That will give it economic and political flexibility. Currently, China would be harmed if it were to sever the economic relationship between the two economic superpowers. That becomes less of a problem with global diversification. Smaller Asian nations are worried about U.S. economic power fading. Adm. Thomas B. Fargo, USN (Ret.), former commander, U.S. Pacific Command, offered in the same panel that they are concerned about the U.S. debt. These smaller nations fear that the belt-tightening forced by debt service will reduce the U.S. ability to deal with them on a continuing basis. They worry that the United States may not be able to maintain its interests in Asia, Adm. Fargo related.