Calblog

Going by the list you presented: Russia is dying, China headed for civil war, Japan is moribund, while Europe has more problems than a klansman in full regalia at a Black Muslim meeting. Hell, if Italy continues on the way it has there will come a time when the US may have to buy the place and establish settlements just to have somebody living there.

(I can see it now. "In the 16th through 18th centuries Europe colonized a North America largely depopulated by European epidemics. In the 22nd century North America returned the favor and colonized a Europe largely depopulated by birth control devices and mass emigration.)

Let's face it, if we didn't have such a strong economy they wouldn't loan us the money in the first place.

My point exactly, the rest of the world buys US Securities, because long-term there is nowhere else to go. Really, only US Treasuries are considered "safe." Not to mention, we have a trade deficit because other countries often enough, can only sell to us. And can't generate enough sales domestically.

Joel,

I agree that the sky is not falling... yet.

But remember that France was the big kid on the block in the 18th Century, and they eventually went through a revolution at least in part because they had run up so many debts that no one would lend to them anymore.

Given the fact that we're spending so much of the deficit on stupid things like pork and $800 toilet seats, I think it would be a good move to impose a little more fiscal discipline.

Yes, the rest of the world is in worse shape, but that does not excuse our problems.

Trouble is, in the 18th century France was a basket case. Between her wars, her infrastructure, and her moribund economy France was ready for collapse. When Britain decided to cut the U.S. loose she was making peace with the strongest member of the coalition, all things considered.

Your analogy is an analogy of appearance and not of substance.

Alan,

You're right; we're not there, yet, which was my initial point.

We've only really been running up serious debt for a few decades now.

Remember, Louis XIV lamented on his deathbed that he had spent and fought too much during his long reign. It took France another 75 years to collapse.

Here's the problem with this entire line of thinking: We're not playing against the rest of the world, we're playing against ourselves.

Not to be corny, but the American Dream isn't about living better than the Japanese or the Europeans or the Russians: It's about enjoying a standard of living that's better than your parents' and giving your kids the opportunity to do better still. That means a secure retirement with access to ever-improving health care (both points that would be jeopardized by rolling back the entitlements). It means the ability to purchase more and better material goods (something that would be jeopardized as the dollar continues to fall, making imports look more expensive).

You're right, Joel, the sky's not falling. One of the neat things about macroeconomic theory is the way countervailing forces tend to pull each other back to equilibrium (those rising import prices would eventually prompt more domestic manufacturing activity, generating more jobs, more buying power, and eventually strengthening the dollar).

But there can be a lot of pain while those equilibria are emerging, and a policy of permanent deficits (which is apparently the view of the Bush administration and something you seem to endorse with your "where else are they going to go?" reasoning), is going to make it much harder to soften the blow.

Certainly, we are playing against ourselves, and we want the best for ourselves and our fellow countrypeople. However, I attribute the decline in the dollar and the rise of gold to shorting by Soros and other currency speculators. Long-term, I have far less faith in even the existence of the Euro let alone its rise.