Blog assignment 1

Which economy will be the biggest in the future?
As we all know today it is USA, followed by Japan and then China.
I read an interesting article recently where the writer said: “What happens today is even bigger then the industrial revolution”. The industrial revolution only concerned one third of the world population, this revolution concerns the entire world.
That is interesting!
In the nearest five years I still think that USA will hold its position as the biggest economy in the world, but China will come closer and closer. This will not continue without problems. I mean China today faces pressure from other countries to do something with their large current account surplus, which cause global imbalances.
USA could also use protectionism as a weapon against China, but USA is also dependent on China. USA has a big budget deficit, which is financed by obligations, where China is a big buyer to keep the yen fixed to the US-dollar. In the future China realizes the problem and cut down on US obligations and let the yen increase in value, more then they already done. What happens with USA then? Will other big countries or China still buy US-obligations or do they require higher interest rates? Well they have to do something about the problem and try to cut down the budget deficit. This could affect consumptions, investments and other things in the US economy.
This will affect other parts of the world. The main question is how severe these problems will be and could another economy like China act like a new leader?

Will the american dream survive?