The world has become a strange place. We are right in the middle of a global economic crisis that has deeply affected all of us and that tends to affect even further.  The global crisis originated from the US. What would you expect in such a condition? You would think that "the US hegemony has come to an end", wouldn't you? However, the reality does not seem so and also does not seem to evolve in that direction. President Obama keeps saying "we are done, we are ruined" all day long, but the present tendencies indicate that the US is still an important economic actor. We are rapidly entering a new environment. If you are wondering how the US will manage to preserve its importance in this new economic environment, please go on reading.

Let us start with the estimations made by the Institute of International Finance (IIF) with respect to the international flow of funds in 2009. In 2007, in that good old year where Turkish economy grew by 4.6 percent, net capital flow towards emerging markets totaled 929 billion USD. In 2008, this amount fell down by fifty percent to 466 billion USD. And here comes the big news: It is estimated that the capital flow will fall further to 165 billion USD in 2009. So, what do the prospects say? The amount of funds which circulate in the global economy and which are used for financing the growth of economies will diminish to one-tenth from 2007 to 2009. So, let us state quickly the first point of the day: We have just entered a new period in which China, Brazil, India, Russia and other emerging economies as well as Turkey will settle for their share in the cake which rapidly becomes smaller.

Here is the second point which is also connected with the first one: During the transition period we are in, global funds will predominantly flow toward the US. The US is the most indebted country of the world with a foreign debt of 12 trillion USD. There are not any prospects for a change in the foreign debt payment capacity of the US. It appears that the amount required to finance the policy package to be introduced to tackle the crisis is in fact likely to create unfavorable effects for the amount of free funds that are to flow toward emerging countries like Turkey.  In other words, the cake will become smaller, but the share of the US in that smaller cake will be even bigger.  Why is it so? It is so, because, the US, under the current circumstances, demonstrates a more foreseeable environment as compared to other countries. At this point, saying that "the US economy is risky now" seems to be just an empty talk.

Then, under these circumstances, what will countries like Turkey, which have to maintain current account deficit to be able to gear the economy do? At this phase, the US has to assume a new role in the global arena. This is what we will be discussing in the near future if not today. If the global market mechanism cannot manage to direct the flow of funds necessary to gear the economies in the right direction, this implies a new role for the US. In fact, the mentioned new role is not new at all; this year, we will return to the "inter-state fund flows" mechanism observed in the non-globalized world of 1970s. Under this nostalgic form of relations, fund flows will take place not from private markets to private companies but from a stare to another one. It will be wise to keep in mind that this is the picture we will encounter in the near future.

If Washington is intervening in the decisions made in New York when the markets fail to perform their functions, it will also intervene and direct the fund flows toward other states when the global markets fails to function properly. The environment we are entering is a nostalgic one resembling 1970s with this respect to the form the fund flows will take. And this is the third point.

If Washington rather than New York will decide toward which country the funds will flow, this implies that we are in a period where foreign policy will determine economic policy. Will the ones that will make critical decisions setting the direction of the flow of funds take only the economic motives into consideration? Or will the issues related to foreign policy be more determinant? It will be beneficial to assess the issue from this angle. It is necessary to reevaluate the intersection space between economic policy and foreign policy. We do not know what you think; but we believe that, this year, economic issues will take precedence over the US foreign policy.

The fact that the US is suffering from crisis does not imply that the US will lose power. It is most likely that the exact opposite will prove valid.

How else can we explain that we are in a period where instantaneous reactions shall be avoided? We prefer to explain it this way: We are in a period where each step to be taken shall be measured.

Who starts up in anger sits down with a loss.

Kindly submitted to whom this might concern.

This commentary was published in Referans daily on 03.02.2009