China’s business community is all abuzz about moving to a "post Dollar" economy. Obama strongly urged everybody at the G-20 to develop their own domestic markets instead of depending on the voracious appetite of the American consumer; he was talking straight to China.
China has been trying to carry fewer dollars in its reserves but they have been stymied in finding an answer to the problem. They don’t want to shift to an American style consumer market, preferring to maintain their 40% savings rate. Americans are only saving 3% and that’s up from a negative number under Bush.
The pre-Reagan savings rate was around 20% coupled with a higher average standard of living and no crushing debt load. Pension plans were common and you could actually live on Social Security. College was cheap or free; medical insurance was affordable; people financed a car for a year or two at most; a house was something you expected to pay off by the time you were fifty instead of never.
China’s middle class thinks we are a bunch of idiots for having thrown away everything we had. This realization frightens them on several levels; they are afraid that perhaps the Capitalism that they have embraced is not really a good idea. They are also afraid we may drag them down with us or that it is some sort of deliberate plot to destroy China. Their government is constantly in fear of an internal panic or outright revolution.
Obama’s meetings with China’s leaders will determine where we go from here. China is talking more and more about disengaging from the US economy. The question then is can we than rebuild from 30 years of Republican destruction. They have really brought us to the point where the South was in 1860 where everything is imported and we export only raw materials. The only reason we still have a middle class anymore is the credit card from China and China is getting out the scissors. If Obama fails and the Republicans and conservative Democrats succeed in coming back to power then the Old South will rise again and the middle class will be gone forever.