Signs of a shift in economic power

You wonder whether the warning by the Chinese to the Americans ovrer their debt levels may be the shape of things to come.

The Chinese demanded that the Obama administration "guarantee the safety" of its $1 trillion in American bonds worried about the spiralling US debt.

China is now the largest holder of American treasury bonds as has enormous leverage over the US economy whilst holding them.If it sold the cost of borrowing would rocket,hardly something that the Obama administration could deal with in the middle of a financial stimulus package.

However does this episode offer a taster of a seismic shift to the Far East and maybe a shot across the bows for the West ahead of G20?

Problems loom for the IPOD generation

Generation IPOD has had a uniquely gilded life with high expectations of future wages, financial security and consumer goods. Following in the footsteps of their baby-boomer parents and lacking the good housekeeping of older generations, they have continued to party long past 1999. However, in the process of this acquisition they have run up huge credit card bills, smashed their piggy banks and are now staring at a broken housing ladder.

That is the finding of the Reform think tank

Quite frightening as we enter a recession.The summary says that that half have debts of up to £10,000 and the same proportion that has no debt owes over £10,000.As far as savings are concerned one third have none at all.

One this means as we hit hard times is far from clear but without the cushion of continuing growth,one wonders how this generation is going to cope.

How debt will take over the political landscape

A timely leader in the Times this morning,if you will excuse the pun.

As the government is poised to take Bradford and Bingley into public ownership,it argues that The issue of debt will now dominate political debate

It argues on two fronts,firstly that

by getting a poor return on its public spending, the Government has avoidably taken public finances into the red. From its recent low of 29.6 per cent in 2002, debt as a proportion of GDP has risen steadily. In August of this year it stood at 43.3 per cent. This parlous financial position is a direct political legacy. A government of genuine prudence might have put money in the bank at the top of the cycle to pay the bills at the bottom. But it would then have been unable to argue that the Conservative plans to cut taxes would require cuts in public spending. The dividing line of investment versus cuts - on which the Government has fought the last two elections - does not work if there are funds in the bank.

and secondly

an expansion based on excessive household credit has gone predictably awry. At the same time as the public finances have been deteriorating, household debt has been rising. The value of Britain's personal debt - £1.35 trillion - is now greater than the value of its gross domestic product. The main reason, of course, is that a house in Britain is not a home: it is an investment. The ratio of household debt to post-tax income is now three times greater than 25 years ago.