Thursday, February 19, 2009
If contrarianism appeals to you, run, don't walk, to read Spengler on the global economic crisis, and the enormous economic and geopolitical adantage it confers on... the United States.
The silliest thing that clever people are saying about the world economic crisis is that the United States will lose its position as the dominant world superpower in consequence. On the contrary: the crisis strengthens the relative position of the United States and exposes the far graver weaknesses of all prospective competitors. It makes the debt of the American government the world's most desirable asset. America may deserve to decline, but as Clint Eastwood said in another context, "deserve's got nothing to do with it". President Barack Obama may turn out to be the most egregious unilateralist in American history...
Obama isn't entirely to blame for this sorry state of affairs, to be sure, given that these trends were in place before he took office. Still, it is incongruous that the liberal consensus welcomed the multilateralist Obama and bade good riddance to the unilateralist Republicans. A radical shift in economic power in favor of the United States makes Obama the moral equivalent of a unilateralist, to a degree that Reagan never could have imagined.
To overpay unionized construction workers to build bridges, and bail out the bloated budgets of American states, the Obama administration will flood the world with so much Treasury debt that capital will flow out of the poorest countries to buy it. Rather than protest this outrageously unilateralist action, the rest of the world encourages him to do so, hoping that somehow the Obama stimulus package will get American consumers to buy their goods once again...
By all means comment, but only if you read the whole thing.
CWCID: A reader.
The opinion is interesting from the point of view that Spengler may understand something of macroeconomics (or may not, as the case may be).
I claim no personal knowledge, but there is a funny correspondance to the issuing of US T-bills and the growth of worldwide wealth. The debt we incur by issuing T-bills becomes a low risk, moderate yield asset to the buyers, and is probably more secure collateral than all the phoney-baloney mortgages that were floated in the last few years that were also used as "credit collateral". So by spending $800B on the bailout and now the mortgage entitlement that is being floated on the backs of trillions of dollars of new debt, maybe the Obama Administration is doing the one right thing to help fix the world economy; issuing valuable collateral for credit institutions. Hmmm.
But the kicker is we do have to keep paying on the interest on all that debt, doesn't it? Or the whole structure collapses in a catastrophic way.
We are likely to see catastrophic global declines. Spengler is right about other countries, however even America can be screwed up by a clown like Obama.
Reagan used the deficit to jump start the economy like FDR "finally" did with WWII, by pumping up defense spending which bootstrapped industrial production, the key driver for economic recover in 1984.
Obama will use the deficit to pay off connected cronies and political organizations, not even build bridges. None of the spendulus bill will do anything except move money into connected crony pockets.
Inflation is likely to coincide with stagnant economies, causing protectionism, trade wars, and general decrease (a feature of inflation) of purchasing power of imports, while saddling the US with no ability to push industrial exports.
We are just as likely to see nations "hunker down" and go back to the Gold Standard to put a "floor" on their collapsing currencies to afford critical imports.
In this the US is better off since it's imports of cheap Chinese junk are not critical, and oil imports come from Canada and Mexico mainly. We have most of our own food.
A Worldwide depression followed by various military adventures by desperate North Korea, China, Pakistan, Iran, India, Russia, Brazil, Venezuela, is just as likely, with collapse of such nations as Mexico and Egypt.
A lot of armwaving in the article to avoid discussing how China's financial stability in the current downturn improves their relative power position.
Also a strawman in saying America will lose its dominance rather than have its dominance reduced.
Assistant - Americans and Europeans won't be able to lend/invest money in other countries to the same extent as before, while the Chinese are much less affected. The relative financial power shifts somewhat to the Chinese.