In his trip to China last week, Tim Geithner, the US Treasury secretary made some fairly unexceptional comments about the need for appropriate policies in both countries to address the issue of imbalances. He was careful not to say anything about currency manipulation, which would have upset his Chinese hosts inordinately.

Is it true that they are manipulating the renminbi? Of course it is. Any pegged currency is by definition manipulated. But there is little point in putting on the pressure and aggravating sensibilities when you need massive Chinese participation in funding your gaping fiscal deficits.

Timmy created some comic moments in a speech before an audience of university students. On hearing his statement that "Chinese assets are very safe" they broke out in loud laughter. These smart students know that accumulating IOUs issued by the US government is a risky proposition.

Also, the students appear to have a sharp sense of the changing global balance of power. They have noticed that an ongoing shift is taking place, principally away from the United States and towards China, in Asia and globally. In addition, a number of countries are increasingly exercising various degrees of regional power, including India, Russia, Brazil and Iran.

In military terms, China is building up its navy and modernising its forces in a variety of ways. More importantly, in economic and commercial terms it continues to make inroads in Asia, Africa and Latin America. As it moves up the technological ladder, China will be able to supplant American and European exporters for a range of products.

The rivalry for global power is taking place in many theatres, including the Middle East. China and Russia do not have a military presence in the area but they are quite ready to take advantage of America's mistakes in expanding their political and economic influence.

As for the US, it is now desperately trying to maintain its authority and prestige in the Middle East, where its power is declining rapidly. President Obama's recent trip to two major Arab countries and his speech in Cairo, addressing the Muslim world, was intended to be a step in reversing America's losses.

However, the response in the region has been one of massive scepticism. The overall assessment is that the speech contained pretty words and platitudes but not much else. Frankly, most people in the Middle East have low expectations of any positive steps from the US, based on past experience.

They have long memories of American misdeeds, stretching back many decades. And the Americans have no memory at all, suffering from total amnesia. How do you bridge such a wide gulf? Well, not by mellifluous words alone.

It is very late in the day to merely engage in platitudinous talk. There are genuine grievances in the region that need to be addressed without delay. People need to be convinced of real shifts in policy. Unfortunately, there are no signs of that from the US side. What is striking about the Obama administration is not the desire to implement change but the wish to maintain continuity with the Bush regime.

The choice of Egypt as a venue for making the speech has been criticised in many quarters. Egypt's profile in the region is one of an American client-state with a repressive regime, whose elite has been bought off by being paid an annual stipend to support US policies. In any case, since the speech was directed at all Muslims, and most of them live in countries outside the Middle East, a better choice of venue may have been India, Nigeria or Indonesia.

It is difficult to be hopeful that the US can prevent further decline in its power in the region. Its presence in the Middle East is modelled on out-of-date imperialist models from a previous age, based on manipulating a number of repressive client states and taking expedient actions with little concern for principle or long-run consequences.

In today's world, autocratic regimes are on the defensive, as people insist on exercising their rights. Information is more freely available then ever before, such that censorship is increasingly being bypassed through access to new technologies. The level of education is rising, leading people to question authorities and demand change. In such a world the only successful form of interstate relationship is one of coalitions and alliances based on mutual interests.

Iraj Pouyandeh is a strategist and senior portfolio manager at LOM Asset Management. He manages the LOM Global Equity Fund. For more information on LOM Asset Management please visit www.lomam.com