WILL CHINA OVERTAKE US? China is willing to go to extremes to surpass the US as the top world economic power. If it does, that would mean the further decline of US-allied democracies, and the further rise of authoritarian socialism in the world.

Many allege that China intentionally released Covid-19 around the world. This pandemic has shaken and continues to shake economies globally. Whole nations have closed down for long periods. Countless businesses will not reopen. Nearly all nations are seeking a way to recovery.

Many suspect China unleashed the virus so that the world would suffer with it. Otherwise, if it kept the virus from spreading, China would have fallen back in its drive to world preeminence.

The whole world also suffered from US 1929 stock market crash. However, the US had not intended for the subsequent Great Depression to spread worldwide. Still, along with Germany and Austria, the US bore the main brunt of that crisis. Wave after wave of US banks failed in 1930-33. Each wave caused masses of people to panic. They withdrew as much money as they could from banks before the money ran out.

Renowned economist Milton Friedman has blamed the US Federal Reserve System for failing to make more cash available to the banks. When it finally did so in mid-1932, the remedy came too late. The crisis persisted until one-third of the banks had failed and one-third of the money supply had vanished by March 1933.

Circulating 2.2 trillion in US dollars

This time the US applied that lesson. Congress voted for the $2.2 trillion CARES Act in May. It authorized the IRS to send stimulus checks to individuals. It provided $350 billion to small businesses to cover payroll and overhead expenses. And it allocated $500 billion for a corporate bailout fund,plus $150 billion for state and local governments. Beyond that, it expanded unemployment benefits and provided aid for healthcare providers and hospitals.

The US economy has remained preeminent during the Covid-19 crisis. As global markets collapsed, international investors sought refuge in the US dollar. As a result, the US Federal Reserve had to make huge amounts of dollars available to them too.

The US has maintained its preeminence since mid-20^th century. However, its economy has declined from almost 40% of global GDP in 1960 to 25% today. But as long as it stays preeminent, the US can pay lower rates on dollar assets. It can run larger deficits. And it can make US financial markets more liquid, and banks more appealing because they provide dollar funding. Thus the US can manage to circulate huge sums of dollars in such a disaster.

But the Chinese renminbi (RMB) remains the greatest rival to the US dollar. The more China grows and integrates into the world economy, the more Chinese currency will circulate.

Yet China cannot make much further progress without moving to a more market-driven economy. Its own socialist limitations prevent it from exporting socialism around the world. Its corporations and financial markets are still too bound to the communist party control to gain the respect and confidence of nations around the world.

Will the US fall into the same trap as China?

However, the US runs the risk of falling into the same trap. If the Democrats win in November, they will face enormous pressure from their growing socialist wing. That wing supports the sometimes violent attacks on police as ways to weaken the government. It supports the lawless attacks on monuments as ways to destroy our democratic heritage. More moderate Democrats have failed to denounce these attacks.

Instead they have joined with the socialist Democrats in pushing a $3 trillion “Heroes Act” through the House. But it has no chance of passing the Republican-majority Senate. One Republican called it “a grab-bag of Democratic/Socialist priorities” that has “nothing to do with coronavirus.”

The US rose to become the world’s top economic power because its vibrant free market economy far outperformed the Soviet Union and China’s controlled economies. The US can continue to prevail if it allows free rein for new secure financial technologies to develop.

Of course we will have to watch that they aren’t used for illicit finance. But new financial technologies will eventually dominate global trade and investment. The US can lead the way in implementing these technologies.

Yet if socialists in the US impose too many controls on new technologies, the US will lose ground to China. In fact most Chinese are already conducting all transactions with new technologies via smartphones.

Also, if US socialists impose too many government-run programs, deficits and debts will drag the US economy down.

Will the world then have to choose between an authoritarian socialist US, and an authoritarian communist China? We must pray that the US will remain a free-market democracy. And that China will become one, and partner with us instead of scheme against us.