The issue is as Nick E says relative to what. As I have argued elsewhere, the EU is much more vulnerable to this financial contagion than anyplace else but the few emerging market basket cases that are well enough off to have some credit, but are not real surplus economies (eg Turkey, Thailand). Europe has been growing faster than potential for years, had housing booms in some countries (Eire, UK, Spain, Greece, parts of Portugal and Italy) that ran up higher than in the US and involved greater shares of GDP in real estate, had fundamentally fragile banking systems in the semi-public sector (Germany, Belgium, Italy, and to a lesser degree France), and is more dependent upon bank lending for corporate finance without alternative channels. Even though for these weeks those alternative credit channels are clogged globally, their existence was a real reason that the financial turmoil until now didn’t overly harm the US real economy.

No one in their right mind would want to play Russia’s hand. The record for longevity of despots over natural resource based economies includes some lengthy stays, but does not include many cases of sustained growth or functioning.

But most of all, let’s remember – as the very different Russia and Germany currently demonstrate, in line with long patterns in the data – an economy can run repeated current account surpluses and even fiscal surpluses, and still underperform on productivitiy, and still be vulnerable to crisis. Those cyclical attributes are neither sufficient nor necessary to stability.

We shouldn’t forget that Europe’s growth over the past year helped support the US economy and indeed the global economy; Chinese exports to Europe now top Chinese exports to the US and have been growing more rapidly. Until recently ongoing growth in Europe helped support the euro, and the euro’s strength against the dollar and the resulting growth in US exports helps to explain how the US has, up until now, avoided (perhaps) an outright recession. Power is a relative concept, but in this case I would accept a (temporary) fall in the United States relative economic and financial prestige in exchange for ongoing strength in Europe that helped maintain global demand for US exports while the US repairs its financial system. Just as US weakness reverberated to Europe, Europe’s weaknesses will reverberate back to the US.

Events reinforced last week’s comments arguing that the American era is a long way from being over. (Supporting Nick Eberstadt, similar sentiments were expressed by Joe Nye, Brink Lindsey, Desmond Lachman, and Roger Kubarych.) To be sure, the US faces huge difficulties ahead, not least because the real economy seems to be slowing rapidly, judging both from the stockmarket’s Friday slide and from that the weak jobs report. But in the end the US political system delivered a bold policy response in short order; and it’s a pretty fair bet that more will follow, perhaps starting with budgetary support to cash-strapped state governments. In Europe, by contrast, the authorities are struggling to muster a coordinated response. The French proposed a Euro-version of the Paulson plan, the Germans stomped on it, and the French unproposed it. Meanwhile the British are furious with the Irish over their blanket deposit guarantee, which threatens to create a run on non-Irish banks as deposits flow into the protective embrace of the Dublin government. In Friday’s FT, Stefan Jacoby, the head of VW, was quoted saying that a recession in Europe will last longer than in the US because the policy response will be more sluggish.

So it’s been a good week for US power, at least relative to Europe. Not long ago Europeans were sounding smug that American hyper-finance had suffered a come-uppance; now European banks look at least as weak as American ones. Recent work by Kristin Forbes of MIT (hat tip: The Economist) confirms that foreigners’ hold savings in dollars largely because of the deepness and perceived safety of US markets; if US finance seemed shakier than its European rival, this would have consequences for the dollar’s status as a reserve currency, since the euro is the dollar’s obvious rival. But as Brad Setser notes in his Forum comment last week, more dollars are being held as central bank reserves than ever before. If European finance is about to go through a prolonged crisis, the appetite for dollars is likely to be resilient.

US power relative to Asia is a different question. Desmond Lachman points out that Asia’s export-focused model may be vulnerable to a stagnation in global demand. According to MacQuarie Research, Asia’s exports (direct and indirect) to the US and the EU are equivalent to 33% of GDP, up from just 19% in 1994. Asia’s exports grew by more than a fifth in the year to July, and the same was true even if you exclude China; if that robust growth turns into a decline, Asia is bound to suffer. Moreover, Asia is not immune to a global credit crunch: MacQuarie reports that G-3 bank lending to Asia has doubled since 2004 to US$1.7 trillion. Nevertheless, some forecasters continue to insist that Asia will come through fine. The Asian Development Bank, for example, expects Asian growth to slow from 9 percent in 2007 to 7.5 percent this year and 7.2 percent next year—a cooling, certainly, but hardly a calamity. Is that too rosy? Do these Asia-wide numbers obscure trends that matter to US power? It can hardly be good news, for example, that China remains the most robust Asian economy while US allies in Japan and India are facing more trouble. Japan is on the verge of a recession. And India is expected to slow sharply, partly because its software and back-office service exporters are exposed to a contraction in the financial sectors of New York and London.

There is doubtless more to say about the United States relative to Europe or Asia. I’d be interested in comments on how ministers at this week’s IMF-Bank meetings should be responding to the crisis.