IN THE LAST months of 2010 there were yet more big shifts in the position and prospects of the US, China and Germany: advantage the US, with potential (self-imposed) pain for China and Germany. The big change is that the US has woken up – possibly aggressively so – after having rested on its economic laurels for the dozen or so years up to 2007. Then, the surplus countries pursued their various high-savings strategies that boiled down to export-led growth, Japan with its soft peg trotting along behind China and Germany with their fixed-exchange-rate policies. US citizens looked only at the immediate result – cheap goods to buy and cheap money to buy them with – and thought it would be rude to refuse. The resultant dangerous run-up of global imbalances and US private-sector debt was ignored. Until it hit us all over the head from behind. Now the US is confronted with multi-year private-sector deleverage that threatens deflation. A huge increase in government debt is all but inevitable. US policies to deal with this are a big threat to Chinese growth in both the short and medium term. In the short term, US measures are sharply worsening China’s already dangerous home-grown inflation.