Global Economies Surge Forward Without the US

There was a time…not so very long ago…when Americans held all the top spots. We had the most…the best…the biggest companies. And the richest people.

Those days are gone…

MEXICO CITY (AP) –Mexican telecom tycoon Carlos Slim is the first man from a developing nation to become the world’s richest person – a shift that underlines the loosening of America and Europe’s stranglehold on the top spots in the billionaires’ club.

Slim’s arrival at the top aroused both pride and anger in Mexico, where many see his fantastic wealth in a poverty-afflicted nation as a sign of what ails it.

With a recovery in the value of his cell phone holdings pushing his estimated fortune to $53.5 billion, Slim jumped past Microsoft founder Bill Gates and investor Warren Buffett when Forbes magazine released its 2010 list of the world’s wealthiest Wednesday.

The rise of Slim, the 70-year-old son of an immigrant shopkeeper, is just a part of the emergence of billionaires in developing countries, Forbes reporter Keren Blankfeld said. She noted this year’s top 10 richest also include two billionaires from India and one from Brazil.

Here’s another item in today’s news:

“China becomes world’s biggest internet market,” says a Reuters headline. There are more Internet users in China than in any other country, says the article. And more cars sold. And more concrete poured.

Travel broadens your horizons, they say. More importantly, it humbles you. You realize that there are a lot more people doing a lot more things than you thought.

All over the world, people bus, hump, schlep, toil and strain. Some work hard. Some work not so hard. Some work smart; others don’t.

But over time, fashions and circumstances change. What goes around, comes around. Those that did once ride so high now lie low…

Yes, dear reader, the world turns. And traveling around…you get to see different parts of it…with different stories to tell…

This morning’s news tells us that 60,000 people are rioting in Greece…torching German cars and generally behaving badly.

What’s their beef? They’re running out of money, running out of credit…and running out of time. Modern macro-economic policies have turned against them.

But they’re not alone. The news from the plains tells us that Kansas might have to close half of its public schools…if it doesn’t find a way to close its budget gap.

The news from other states is not very different. Many foreign governments are in the same fix. Ireland has already begun its “austerity” programs. Italy and Spain can’t be far behind.

But what about the US federal government? No austerity at all. Just the opposite. The feds announced the biggest budget deficit ever – $221 billion for the month of February. In other words, per family, the American government spent approximately $2,000 more than it received in tax revenues. Hmmm….if it continues at this rate, it will spend $24,000 more than it receives per family this year. In round numbers, the typical family will pay about $25,000 in taxes…and receive about $50,000 worth of ‘services.’

Is that a great deal…or what?

It’s an absurdity…it’s preposterous…it’s weird and unnatural. And it can’t last.

It is only possible now because of the peculiar circumstances of today’s financial world. Lenders, investors…Chinese creditors…give their dollars to the US government, believing it to be the most credit-worthy borrower in the world. But as the supply of US debt goes up the quality of it declines.

Already, the US is – from a GAAP accounting point of view – bankrupt. Lenders cannot reasonably expect to get their money back. But that doesn’t seem to bother them. US debt still looks like a better bet than, say, Greek debt.

But the world is full of surprises. What a shock it will be when the US finds itself in Greece’s shoes!

Bill Bonner
for The Daily Reckoning

The Daily Reckoning