Economic strength and global leadership have come as a pair for nations and empires throughout history.

Today America is considered the world’s economic powerhouse, but don’t assume that today’s financial status will be tomorrow’s. While America has focused on the wars in Iraq, Afghanistan and on terrorism, it has neglected another battle: the war for financial leadership.

After World War ii, America rocketed to global financial preeminence. Holding 80 percent of the world’s gold reserves, an economy bristling with manufacturers, and the world’s most powerful army and navy to secure it, America quickly became a global economic powerhouse of a stature that, except for Great Britain before it, was unrivaled in history.

Unravaged by war, America’s financial markets dominated the globe. When the world needed money, it looked to America. When the world sold goods, it sold them to America. When the world wanted to invest, it invested in America.

Yet, signs are emerging that the world is no longer looking to America to the degree it used to. America is losing its status as the world’s financial center, just as a financially broke Britain did after the Second World War.

As noted by the Wall Street Journal (March 28), America is struggling to maintain its position as the predominant source for capital and the predominant location to invest capital.

It used to be that when a country needed a loan or a corporation needed to raise money, it came to America. Those days are clearly ending. On a federal level, America is no longer a creditor nation, but is the world’s biggest debtor. All levels of America are becoming increasingly saturated with debt. For the last two years, Americans have on average spent more than they have earned (as evidenced by America’s negative savings rate). As debt grows and savings fall, America’s lending ability is pinched. Savings drives lending and investment (Bill Bonner and Addison Wiggin, Empire of Debt). Without abundant and growing savings, America will not be able to remain the predominant source for capital.

Already, countries like China and the oil-rich nations of the Middle East are challenging America’s status as the go-to place for capital. The largest example of this to date is China’s recent announcement that it will set up an investment fund using over $300 billion worth of its foreign exchange reserves. The Norwegians have similarly furnished a near $300 billion investment fund with profits from high oil prices; many Middle Eastern nations have also built comparable multi-billion-dollar funds. With other sources of funding now readily available, other nations are snapping up investment opportunities that Americans used to have first dibs on.

Signs that international corporations also realize America is no longer the dominant source for capital are also showing up on American stock exchanges. Increasingly, corporations are choosing to go to the stock exchanges of other countries to raise capital. In 1996, 60 percent of all companies that became publicly traded corporations listed on a U.S. stock exchange. By 2005, that number had fallen to 15 percent.

Although the New York Stock Exchange is still the world’s largest exchange, and investors still look to its daily opening for global market direction, interestingly its most recent plunge was set off by China’s move to limit speculative investment on the Shanghai exchange, not by domestic U.S. earnings worries or other concerns.

The Wall Street Journal asks, “Is it only a matter of time until market direction in global equities is determined elsewhere?” (op. cit.).

Financial professionals seem to concur. One recent survey found that less than 10 percent felt New York would remain the global center of finance by 2015 (ibid.).

America’s days as the most profitable place to invest may be coming to an end as well. China, Russia and even Vietnam have embraced capitalism, or at least a form of it. Although this fact may represent an ideological victory, the U.S. must now adjust to the consequences of this victory. The economies of these countries are improving, and America now has to compete with them.

China’s economy has been growing at rates in excess of 10 percent for the last four years. Russia’s economy has grown at an average of 6.5 percent annually over the past three years, while Vietnam’s economy has grown between 7 and 8.4 percent each of the past five years. America, in contrast, is expected to grow at a 2.3 percent rate in 2007, which is even less than the European Union, which is expected to grow 2.4 percent.

As foreign economic clout grows, America’s ability to promote U.S. goals and agendas diminishes in step.

At one time, Britain ruled not only the waves, but global trade and commerce as well. Its banking and finance sector dwarfed those of its competitors. Any person, corporation or country wanting access to Britain’s capital and markets had to play by Britain’s rules. Less than three generations later, Britain’s economic and financial center is a hollowed-out shell of its former grandeur.

Eerily reminiscent of Britain in its heyday, America stands ready to follow this rapid downward path. It cannot expect to continue in its leadership position while maintaining irresponsible financial behavior such as its massive monetary liabilities, debts, and trade deficits. Nations and investors are beginning to sense America’s weakness and are starting to look elsewhere to invest and to obtain investment capital. Today America may be the world’s financial kingpin, but judging by escalating economic evidence, don’t be shocked if, one of these tomorrows, that no longer is the case.