If America wants to know what is the best method to deal with our debts tomorrow, we should watch with eagerness what is happening in Britain today. Many experts have come out saying that the British has accumulated too much debt in the past 24 months, and there may be consequences.

Experts like Morgan Stanley have suggested that the UK has spent too much in the past couple of years in trying to prop up the economy. It has a tremendous amount of debt; its debt vs GDP ratio is much higher than ours here in the US.

Most experts still agree that the UK would not crash as yet; but an outcome would be that her currency , the Pound Sterling, would have to be weakened . While there would be many businesses that rejoice at that news, it is not all that rosy.

For one, a weakening of the pound would mean a rise in inflation for the local Brits. Imported goods would cost more. Most of the products made in the United Kingdom are, like most countries, made in China. So there would be a rise in prices in Chinese products.

We here, across the Atlantic should take note. While our debt vs GDP is not as bad as it is for Japan, India, Italy or the United Kingdom, we still have more debt than all of them put together. We still have got issues to sort out, like our lack of tax income and our terrible health care problem. We are still borrowing more and more money from the Chinese. A few bad moves in the next few years might make us experience the bad outcome before the United Kingdom.

Of course there are advantages with our system. For one, if we want to, we can virtually produce everything in America. That is something that the United Kingdom can only dream of. Technically speaking, if we lower the value of our dollar, companies would be more interested in opening factories and production centers in America. We have the resources as our country is huge, the United Kingdom does not. Also with full employment as the result of the factories, there would come the demand which would strengthen the dollar back to what it is supposed to be in the long run. We do have a juggernaut of an economy that is much larger than the Brits’.

That being said,football games are not won on paper. We need to play the game well to win. In this case, anything could go wrong; from bad leadership to counter measures by the Chinese. There are lots of things that could happen.

So it is very essential that we sit back and watch how the British handle their debt problem. If they do it well, we should model ours based on their techniques. If they screw up, we should learn from their mistakes and avoid making them. It is something that is very important for the future of our nation.

We should do our part as a people and read up on the situation. We should be keen about what is going on over there. In that manner, we can vote the person with the right solution into power.

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To give you some idea of how bad the situation is in Japan is, the Japanese economy has an annualized contraction that is about 8 times more than the Eurozone. Furthermore the Eurozone already have economies that need bailout from the IMF. It is nearly twice as badly affected as the US. This is the deepest recession since the Second World War! Prime Minister Taro Aso put it in the most blunt way possible :“The economy is worsening.”

To add to all this woes, Toyota, the world’s largest car maker has asked help from the Japanese government in the form of a loan. They have joined their domestic rivals in that direction. Toyota expects to cut production by half this year. That is one huge drop.

Bloomberg also reports that real estate giant Pacific Holdings Company has also filed for bankruptcy this week. They had $1.7 billion worth of liabilities! Just a few years ago this was a company that would have been seen as one of the safest investments around.

The reason why Japan is in one of the deepest recessions in the world is because it is a very export driven economy. The reason the economy over there is in such a drag is because export figures are tremendously bad. For example, year on year Japan’s halved in January. Halved!

This in fact should be a lesson to the Japanese and the rest of the world in the future. One cannot every depend exclusively on exports for growth. When a nation exports, it is partly affected by the state of the importing country. If its entire economy is based on exports, then the entire economy is in the hands of the importing countries.

Right now, there are no buyers of Japanese goods in the EU and the US. Japan is entirely dependent on the EU and the US to prop up or else whatever the Japanese companies do would be in vain. This is something that Prime Minister Aso would never mention to his citizens as it would be political suicide to do so.

To a certain extent however, the whole world’s economies actually hinges on a US recovery. It is just how much dependence there is on an individual country on the US. That is the reason why President Obama is right now one of the most important US Presidents in history. What he does can make or break the global economy.

This is very similar to the position that President Roosevelt was in in the 1920s. He turned out to be one of the best Presidents that the US ever produced and now the world need President Obama to do the same. Thank God though that President Bush was not in charge now.

Another aspect to look at this is that of China. China is even more export orientated than Japan. China supplies is the biggest exporter in the world and yet does not seem to be affected much. It is still affected and would be facing deflation soon. But its currency manipulation of the US dollar is the single biggest factor that she is still growing albeit no more having double digit growth … for now at least!

The other country that should also learn a lesson from this is Russia. Russia is less of an export based economy but more of a raw material based one. It has vast amount of natural resources and her entire economy hinges on that. For example, if Europe wants to have energy from oil, gas or coal, they get it from Russia. They want nuclear power, they get Uranium from Russia, and the same for solar panels.

Should the element of natural resource collapse, Russia is in trouble as she does not have a strong banking sector or retail sector to fall back on. Russia has a lot of billionaires, but her people are still has only 5% of the consumer spending capacity of the US. This is long term would afftect Russia very badly.

Japan and the rest of the world though, I believe would see an end to this crisis faster than many people expect. I do expect to see definite growth early in 2010 in the US. From there, I think that the other economies around the world would pick up around the second half of 2010 with the Eurozone, Brazil, Russia and China leading the way.

It may take many years to be where we were 2 years ago, but I believe that we would be there soon.

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