To mark the 250 year anniversary of the US Declaration of Independence, Deutsche Bank has published a report looking at how the US emerged as a global superpower, and why it’s likely to remain one despite new challenges.
- First, DB considers how the US went from being a comparatively small country to the world's pre-eminent global power. These reasons range from the US' natural advantages, like favorable geography, to factors like its institutional stability and risk-tolerant capital markets.
- DB then considers the challenges that threaten US outperformance: China’s rapid growth means the US faces its biggest rival since its own emergence as the world’s dominant power. China's rise also coincides with several other issues: the rules based international system that the US helped create is under immense strain; the reserve currency status of the US Dollar is under pressure; and the country's public debt-to-GDP ratio is set to hit new records in the coming years.
- Finally, the bank's analysts Peter Sidorov and Henry Allen look at why the US is likely to sustain its outperformance, thanks to a collection of reinforcing advantages. In fact, the US has consistently emerged from challenging periods successfully, be that after the Great Depression, the malaise of the 1970s, and again around the GFC and its aftermath.
- The bank concludes with a few lessons for investors and for the rest of the world.
1. The Lessons from History: What underpins America’s Success?
Before delving into the drivers of US success, let us bring with a few highlights of its historical outperformance. Since the United States' founding, the country has achieved remarkable economic success on a whole range of metrics. For one, the US saw rap
