Nothing will underscore the downward trajectory of American influence like the reordering of international economic institutions emerging players expect to see in the next few years. Not to mention a host of smaller, export-oriented nations whose trade surpluses have created the cash mountains, known as “Sovereign Wealth Funds,” that underwrote U.S. fiscal profligacy in recent years.
Swooning oil prices cut some of these newly rich states off at the knees (Russia, Venezuela and Iran, in particular). But China, India, Brazil, and older export powerhouses, such as the E.U., South Korea, Saudi Arabia and Japan, will no longer accept Washington’s veto on matters of trade and development policy (at the World Bank and IMF), or currency regulations.
The call by BRIC nations for the dollar to be displaced as the global reserve currency lacks much credibility for now, but that will not remain true. President Obama’s ability to avoid protectionist pressures and begin to address fiscal and other U.S. imbalances will be crucial to the future flexibility and potential impact of his foreign policy.
Setbacks in other areas - the Afghan and Iraq wars, or in restarting growth inside the U.S. - will also pose challenges.
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