Been lazy about updating. Things going well, many fun games, much good anime, etc, etc.

Steven is pessimistic about the long-term trajectory of the US economy, given the apparently-inevitable increase in debt. Fortunately the situation is better than what he's presenting, though for reasons that aren't terribly cheery in and of themselves.

First, while his analysis isn't incorrect, it's looking at the US in a vacuum. But we're not in a vacuum - we're in a world with a significant number of other countries. And those countries have their own problems... including the same problem the US has with respect to deficit spending. But worse.

While we certainly should be worried about the rapidly-approaching tiger, in practice we don't have to outpace it - just outpace the other competitors. Whether it's Japan's huge debt-to-GDP ratio and incipient population implosion, or Europe's deficits and other issues, or China's upcoming mother-of-all-burst-bubbles, none of our major competitors is anything like financially healthy. (Germany might be, were it not shackled into the Euro. Norway is, but it's tiny.)

The collapse of any of those major competitors is bad, in the sense that they are major markets. But from the chaos would come lots of opportunities for the US as well. Our prosperity in the '50s was not wholly unrelated to the happy fact that most of the other advanced economies had been bombed into rubble while ours was untouched, after all.

Behind all that, though, is a darker reason. We haven't been entirely idle, grasshoppering away in the sun. Sure, the dollar is backed by confidence in the American economy... but it's also backed by a dozen fleet carriers and a bunch of nuclear weapons. The US's naval superiority is essentially absolute at this point (the only country within shouting range, and they'd better use a megaphone, is the UK.) That doesn't mean that we can mwa-ha-ha rule the world... but it does mean that the transport of the commodity upon which all modern industry relies, oil, moves by our leave and no others. We don't use that power - we've never used that power - but it's there, and if push came to shove, it would be done.

When you're a banana vendor in a small room with an 800 pound gorilla, and he's buying bananas, that's a good position to be in. But if he comes to you and says "hey, I'm going to need credit for bananas for a while," you're going to offer him credit... even if you don't particularly expect to be paid. Why? Because the alternative to him buying your bananas is NOT "gorilla goes hungry".

Which is to say, the world's got a vested interest in keeping the US reasonably happy, because if we're not happy, we will spread around the unhappy with a big brush.

Not precisely a cheering thought, but there you have it...

Posted by: Avatar_exADV at 10:06 PM | Comments (6) | Add Comment
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