Going out with a whimper

Posted: August 3, 2011 in President George Bush, The Economy, Thoughts on the Day
Tags: , ,

Scanning the news this morning,  I read an opinion piece by a private investment adviser by the name of Martin Sosnoff who posits in his title that “This is the Way the World Ends“.  Sosnoff was referring to the debt ceiling debates deleterious effect on our credit rating and the subsequent downturn in the markets added to an already slowing economy that hasn’t yet climbed out of its recessionary trough.  It’s  not clear to me if Sosnoff is referring to the end of humanity, civilization or just the U.S.

This was followed up by news from NPR.  They had a story this morning on the Global Economic Ills by Tom Gjelten.  He posited that the number of western nations carrying heavy debt loads may be a sign of a massive global shift and realignment.  Focusing on author Kenneth Rogoff’s opinion that slow downs after big financial crises is typical because governments drive themselves deep into debt in order to reinvigorate consumer demand and thus revive the economy.  Too many crises like this have occurred in recent times in western nations and the debt load is simply becoming too much to bear say Rogoff.

However, there is one particular point that must be made here.  While the debt in other countries like Spain and Greece, etc may be the result of poorly balanced books (i.e., too many benefits going out being financed by loans and not enough real revenue going in) that is not the case with the U.S.  Progressives have been shouting the fact that the majority of the debt we face in the U.S. is the direct result of two unfunded wars concurrent with ill advised (if not downright idiotic) tax  cuts during the Bush administration.

While this point matters very much on the domestic front in the upcoming 2012 presidential battle, it has little bearing on the economic global outlook.  The view from 30,000 feet IS that the U.S. along with Greece, Spain, Ireland, etc is staggering under its debt load an there is a global shift happening.

Only time will tell if this shift is the natural result of globalization and the supposedly inevitable readjustment as if we’re all on an unbalanced scale where the current industrialized, western nations are on one side sitting high and pretty, and the rest of the developing and non-developing  nations are on the other side of the scale weighted down low.  As the west loses wealth and influence its side lowers and the rest of the world’s side rises until some kind of equilibrium is found.  This process of finding equilibrium is precisely what many conservative isolationists have feared for decades.

What if it isn’t a naturally occurring phenomenon though?  Surely the actions of nations affects not only the pace but the equilibrium.  No economy functions in a vacuum separated from political and social influences.  So far the evidence indicates that our actions have only sped up the process of moving towards that equilibrium.  What I fear is that the U.S. has behaved so shortsightedly that we’ll have a very damaging seesaw effect that will not only introduce too much instability in our own economy but will also cause a side-to-side movement of economies from one scale to the other (if you’ll pardon the stretching of this metaphor).

But is it the end of the World?  No.  What is clear to me is that this IS how the U.S. dominance as a superpower ends AND I believe it marks the decline of the dominance of Western Civilization over the global economy.  Now it is only a matter of how it will play out.


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