America's super status on the line
Deteriorating conditions overseas and lots of international trade mean fears the nation will lose its financial superpower status are overblown.
NEW YORK (CNNMoney.com) -- The United States is suffering the worst financial crisis since the Great Depression. The nation's reliance on the rest of the world to support its rampant spending is increasing and across the nation Americans are losing their jobs.
All this has led many to ask the once-unthinkable question: Is the United States at risk of losing its status as the world's top financial superpower? To be sure, things seem grim.
Declining home values have decimated the banking sector and sparked a freeze-up in credit. Financial products - invented in the United States - that allowed the housing bubble to grow so large are now infecting foreign markets.
Nearly 1 million Americans have lost their jobs since the start of the year and a deep recession now seems unavoidable.
Plus, the government is borrowing ever more money as it attempts to stem the crisis, adding to a mushrooming national debt. Meanwhile, baby boomers are retiring, drawing huge amounts of money from Medicare and Social Security and threatening to bankrupt the federal government.
With mounting debt and fewer jobs, many Americans feel their country's best days are behind it.
"America is no longer an economic superpower - it is following the path of the Romans and the British," one CNNMoney.com reader wrote on our talkback. "This country has no real future and no real leadership."
Many point to the latest credit crisis, which originated in the United States, as proof.
"The U.S. will lose its superpower status in the global financial system," Germany's finance minister was quoted saying last month as the crisis unfolded.
This crisis will certainly leave its mark on America.
"Our credibility has been destroyed," said Joseph Stiglitz, a Nobel Prize-winning economist at Columbia University. "There will be a fundamental change in the role of the U.S."
For starters, it'll be a long time before a U.S. Treasury Secretary can go over to India or China and tell those countries how they should run their banking systems.
Also, more jobs will likely be shed in the U.S., economic growth will slow for several more years, and the amount it costs to borrow money will increase.
But economists including Stiglitz are nearly unanimous: The United States won't lose its position as the world's financial superpower because foreign economies are slowing just as fast as America's, their debt levels are just as high, and the developing world is too reliant on the U.S. market to achieve significant growth on its own.
"The U.S. will still be the world's largest economy," said Stiglitz.
Irene Finel-Honigman, a colleague of Stiglitz's at Columbia, put it more bluntly.
"The U.S. remains and will remain the standard bearer in financial markets," said Honigman, an expert in international finance. "Even in a recession, the U.S. will lead the way out."
It's not just American economists who think the United States will remain the world's financial center for the foreseeable future.
"It's overdone to think the credit crunch itself will mark the end for the U.S. as the world's most powerful capital market," said Lex Hoogduin, chief economist with Dutch investment firm Robeco. "It's popular in political or left-leaning circles, but I don't think they will be proven right."
Part of the reason America will remain the world's largest economy is not because things aren't bad here, but because they're bad - or worse - everywhere else.
Two main things hit consumers in 2008 - high energy prices and falling home values - and both happened more or less worldwide.
Oil is a global market, and the record prices seen in 2008 happened almost everywhere, barring countries like Saudi Arabia and Venezuela that had major gasoline subsidies.
And the U.S. wasn't the only country with deflating home prices. Many European countries saw home values plummet. Some reports indicate China's housing bubble is far worse than that in the U.S., and it's about to pop.
Moreover, because many foreign banks were big buyers of U.S. financial products tied to home loans, a global recession - not just a U.S. recession - is increasingly likely, wreaking havoc on foreign stock markets.
The Dow has lost nearly 30% over the last two months, but so has London's FTSE, Germany's DAX and Hong's Kong's Hang Seng. Japan's Nikkei is off 40%.
"The U.S. will remain number one by default," said Alan Tonelson, a research fellow at the U.S. Business and Industry Council. "Everyone else has major economic problems of their own."
The budget deficit and national debt are also concerns for economists, and in the United States both have indeed been growing.
President George Bush ran a deficit of more than $400 billion last year, plus some $200 billion more if the wars in Iraq and Afghanistan are figured in.
The national debt - the accumulation of all those years of deficits - is a staggering $10.5 trillion.
This is only projected to get worse. As baby boomers retire and draw on Medicare and Social Security, some estimates say the debt could swell to more than $50 trillion over the next several decades, unless those programs are seriously trimmed.
The danger is that at some point the world will decide the U.S. has too much debt and is no longer creditworthy.
But that hasn't happened yet. Investors are still buying U.S. debt and making it cheaper for the government to borrow money. That's exactly the opposite of what would happen if investors thought the U.S. is on the wane.
And there's good news amid all these daunting debt figures, if only by comparison.
First, the birthrate in the U.S. is fairly high by industrialized standards, meaning there'll be more people to pay that big tab.
In Europe, plenty of people will be retiring over the next few years as well, but there are fewer workers to replace them when compared to America.
Second, while $10 trillion is no small sum, it's only about 70% of our total yearly economic output, said Jay Bryson, a global economist at Wachovia Corp.
Some European countries have debts that are 100% of their yearly economic output, while Japan's debt stands at 150%, said Bryson.
"Is this the death blow for the U.S. as the world's financial center?" he asked, referring to all the country's ills. "Probably not."
With China's unbridled economic growth spurt, there's talk that it could one day overtake the United States. While that could happen several decades from now, China's fate currently is directly tied to the U.S. If we don't buy, they don't grow.
China and other big exporters to the U.S. are laden with dollars, not because its a great investment, but because the U.S. buys so many foreign goods in dollars, argues JPMorgan Senior Economist Jim Glassman.
If they tried to switch to another currency, they'd have to sell those dollars and flood the market.
That would kill the value of the dollar and push other currencies up. Exports to the U.S. market would become much more expensive for Americans to buy and it could sink the economy of countries that lack large enough domestic markets.
"'Whether they like it or not, they are compelled to hold the dollar," said Glassman. "We're enabling their growth and development."
And enabling development overseas, even if that means job losses in the U.S. and manufacturing shifting abroad, is no bad thing, argues Glassman.
"These developing countries have a clear link to us, and we're benefiting from it," said Glassman. "Markets are being created, the pie is growing."
None of this means the U.S. will remain number one forever. Countries rarely keep the top spot for more than a few centuries, and we've already had one.
But for the next five or 10 years, it seems the American Century is in little danger of ending. 
