Many have predicted that Obama’s fiscal recklessness squandered finite, borrowed time and money. Sprinkled across hollow facades. Under this appraisal, Obama deficits, woefully inadequate stimulus, etc. -collectively they shot one of — if not the last — chits of the U.S. financial ‘supremacy’ meme living off inertia. Regardless, the financial world is all too clear about American pointless profligacy. Exploding debt service is a looming fact. *And* finally China, Japan, Germany and the rest of our creditors are saying no more. You (Obama/U.S.) are cut off. The Chinese have been surprisingly blunt lately. Their traditional indirect warnings disappeared in a cloud of Rahm’s vulgarities and the Summers et al. black hole of multi decade incompetence. All that accumulated debt and almost no actual investment in generating wealth creating, hard currency exports.
Doomsayers hit an agitated creative peak last Fall. We still have pollyannas. Green jobs will save entire states like Michgan. We are told that we will see new job growth. In the real world, green tech is already beyond our grasp. Americans at best will assemble products designed and created overseas. That pay might be a dollar or so above minimum wage. Politically it will be marketed as a triumph of American ingenuity. How small the American dream has become. We’ve yet to see a serious non-ideological depiction – from anywhere- of a sustainable U.S. economic policy beyond short term, tactical ‘fixes’.
The ‘Things aren’t so bad’ crowd have one systemic reality in their favor. Financial decision-makers in Frankfurt, Riyadh, Beijing, Tokyo, etc. are conservative and loathe to rock the boat. Even now. Better many think to discipline an irresponsible and clueless U.S. one knows than for Beijing and Tokyo etc. have the onus for building a new architecture while not shooting their own dollar holdings in the process. The problem, however, is that the U.S. economy is moribund, the dollar finished as a reserve currency. (We just don’t see it, yet). So the ‘pretend we can cajole’ game has a lingering but ultimately short life span.
In private councils the question before the world’s central bankers is “How to let the U.S. sink without blowing our own dollar holdings?” One can appreciate the predicament. It’s like the Chinese finger traps with two fingers. They tighten more if one seeks extrication.
Our creditors debate how but their public stance is unmistakeable. Any silver linings in American domestic politics? Fiscal realities a death knell for Neocon enthusiasms re Iran? Perhaps, but some creditors might leverage American debt addiction. Riyadh, for example, worried about the Persians (and keeping Mayo going and American call girls at the ready). In any event, America is no longer steering her own destiny.
This transition period we argue will be shorter than many hope for. We haven’t seen a convincing case for an integrated economic strategy. Pessimists/realists/Pollyannas — for all their self-adorned iconoclasm — largely envision tomorrow as today, only more so around the edges. (If you’ve seen a rigorous plan, please pass along). For example, imagine the IMF dictating austerity measures to the U.S. like it did as our agent of indirect imperial rule in so many cases. Fantastical? What about the obverse? The U.S. uses this transition period to fashion a coordinated economic plan that integrates trade, fiscal, financial, labor polices to promote American domestic development. Which is more far fetched?
Here’s another thought experiment. The Stiftung Library has mint original manufactured currency imposed on Japan by SCAP (Supreme Command Allied Powers (our Shogun, Douglas MacArthur)). The cases are not closely analogous. Military obliteration, Robert Strange McNamara and Curtis LeMay planning the mass murder for wooden Tokyo in low level incendiary bombing raids. The devastation – like Bomber Harris’ war crime against Dresden – was orders of magnitude beyond the 2 atomic weapons. Still, while SCAP’s tenure evolved in a complicated dynamic of Japanese realities, SCAP’s initial ignorance and American domestic politics, we did get the Japanese to print that money.
The Japanese proved cannier in the end. They all but outfoxed and co-opted the initially serenely unaware Americans. Korea in 1950 changed everything anyway. We offer this not as analogy but to shake people out of tomorrow being like today but a little more so rut. From this prostration the Japanese invented the merchantilist model of economic development copied around the world. What will it take for Americans to stop shooting ‘Free Trade’ smack into their veins? We continue to defeat ourselves pissing away trillions on Bedazzlers, Snuggies and McMansions, chasing empty, transitory consumption. The real beneficiaries are the financial engineering Class and the merchantilists.
What would a comprehensive American economic re-development plan look like? That examines the American economy holistically, from an input-output matrix point of view. That can learn the best parts of the Asian spectacular success and create something for our circumstances. Can our political system even debate it? Implement it? The draconian possibilities above may never come to pass. Why not try and think now during this transition period to minimize future surprise? The unexpected shapes history, of course, every day.
It is so fantastical to ask ‘What if?’ At a minimum, surely we can begin designing logos and suitable color graphics for our signature before the solvent at transition’s end. Perhaps in Palin’s peppy motif?