Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 9/21) 

Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s SHEconomics.

Is Libya’s Muammar Gaddafi looking more and more like Clarabell or is it just my imagination? And seriously, after 40 years at Libya’s helm, shouldn’t he have risen above the rank of Colonel?

The fact that these thoughts are uppermost after reviewing the goings-on at the United Nations this week says it all. Though President Obama appears to have wrested from President Medvedev a vague commitment to consider toughening sanctions on Iran (presumably in exchange for torching our proposed missile defense system) and extracted from China possible support for a nuclear weapons ban, not much of substance emerged from the weeklong gridlock imposed on midtown Manhattan. Now the party moves to Pittsburgh, where the G-20 has first turned its attentions to not-so-shocking claims that Iran has been illegally enriching uranium. Beyond setting a deadline for Iran to come clean about its activities, the G-20 leaders will push to rebalance the engines of growth, insisting that the U.S. consumer cannot support the advances of the rest of the globe.

This is diplomatic code for the U.S. reining in our spendthrift consumers and China doing all it can to stimulate domestic spending. That the Chinese have even participated in such conversations is considered astonishing by some, given the nation’s history of going it alone. Before rushing to embrace Beijing’s newfound clubbiness, we should consider that nearly everything China does is in its self-interest. Starting with the extraordinary success of last year’s Olympics, and bolstered by its impressive economic performance during the financial crisis, China’s confidence is in full bloom. They are ready to climb the global podium.

One symptom of China’s emerging self-importance is that tweaking the West has become a national pastime. As the country approaches its 60th anniversary on October 1, the Communist Party has continued its tradition of honoring "model workers." While in the past these individuals have typically been oilfield workers or latrine cleaners, the Financial Times reports that this year the country is praising bankers – of all people – sending them out to tour the country and extolling their efforts to "maintain growth, protect people’s livelihoods (and) maintain stability." What more mischievous way to contrast China’s continued growth with the West’s banking meltdown?

More importantly, next week the country will put on a military review that will draw global attention to the massive 20-year investment China has made in its weapons stash and in its armed forces. Among other new toys on display will be an upgraded intercontinental nuclear missile capable of reaching Washington. After decades of hosting a military long on bodies and short on guns, the Chinese now boast a 21st-century army of 2.3 million.

Competition with China that originally emanated from corporate boardrooms is, in other words, spreading. Because China holds over $800 billion in U.S. government debt, a figure that continues to grow, the country expects and indeed has a seat at our financial table. What does it mean for Americans?

Our indebtedness to China means that we are not in a position to bully Beijing to revalue the yuan, though early on the Obama administration talked tough on this issue, which in turn limits our ability to export to China and to other countries. It also means that Americans will not be alone in pressing the administration to rein in government deficits. The Chinese will have to balance its continuing need for export demand with its concern over depreciating dollar-based assets. The bottom line is that our complicated symbiotic relationship with the Chinese is yet another factor arguing for slower growth in the U.S. going forward.