A precedent has been created. It is now acceptable for politicians to kidnap the American economy and world markets for political reasons. Therefore, it is even possible that at the beginning of 2013 – when the debt ceiling needs to be raised again – a new nuclear war will start between Republicans and Democrats with no one standing at the end (at best one party might eke out a Pyrrhic victory).
In both Europe and the U.S. politicians seem to be constantly at each other’s throats, and mostly they present plans to make grander plans instead of offering a balanced, intelligent and credible strategy. Others are profiting from this. China has made inroads into Europe by offering countries assistance. Slowly but steadily it is increasing its political and economic weight in Europe. Americans too have to take Chinese attitudes and opinions into account; China’s position at the table of power is getting more prominent by the day.
Although China owns too much American Treasuries to be able to make a credible threat to dump American government bonds altogether, the U.S. is financially dependent on China – and China can profit from this by nodding and steering America into the direction it wants via diplomatic, political, economic and military channels. The Chinese have lost faith in America’s government and its economic stewardship as they see the giant stumble on its feet. And they’re not alone. American allies will also increasingly scratch their heads and wonder if they still can rely on this politically confused, economically vulnerable, and insecurel giant. They could decide to bet on other horses too; horses that will be the political and economic giants of the future. If China has a soft economic landing and Europe and the U.S. will weaken, China will turn out to be the victor of the debt crisis.