Would a severe recession in the U.S. sink the global economy? As recently as five years ago, the answer probably would have been yes. But trade between foreign nations has been expanding so rapidly in recent years that a knockout punch, particularly to the robust Asian economies, seems unlikely. As one participant, 'CJF,' noted in the Rick's Picks chat room yesterday, emerging markets are heavily dependent on exports and will most surely suffer in a U.S. downturn. 'However, intra-Asian trade is growing much faster,' CJF noted, 'and the question is whether these countries can keep internal demand moving up to compensate for loss of U.S. demand. Just yesterday there was news that consumer spending in China was up big.' Up big indeed. In the last year or so, China has acted very aggressively to ramp up its consumer economy in anticipation of a U.S. bust. In the meantime, far from pulling the plug on U.S. Treasury debt, the Chinese have continued to effectively lend Americans money to buy its exports. But this is not going to continue indefinitely, since China knows what most Americans probably already sense -- that the U.S. has racked up far more IOU's than it will ever be able to repay. In fact, with the U.S. financial sector in a state of incipient collapse, the only way America can conceivably redeem the nearly $1 trillion of U.S. debt held by China is through default or hyperinflation. Neither course is particularly appealing to China, to say the least, and so we should expect them to grow their exports to countries other than the U.S. as rapidly as possible. One thing is certain: When the U.S. hits bottom in perhaps another 7 to 10 years, the only way back to prosperity will be to compete in manufacturing and
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