Decline of American Power?

Christian Gregory christian11 at mindspring.com
Fri Oct 11 11:14:24 PDT 2002



>
> There can be twin collapses of Japan and USA,
given their politico-economic interdependency, no? To what extent is the European economy dependent on the US being the consumer of last resort? Peter Gowan says that "The final implementation of the Euro in July 2002 will supply a very substantial shield for Western Europe, particularly when it is combined with an integrated deep and liquid EU financial system. The strength of this shield will be all the greater in that, despite all the talk of economic globalisation, the European economy is becoming an increasingly closed one, less and less reliant upon transatlantic trade."

Some of this depends upon how "twin" the twin collapses are. If a banking crisis in Japan pulls down the dollar (as the Japanese liquidate US debt), it would be one thing. But even then, this might not be bad middle term for the US--it would be favorable for both debt and exports. (Though again, where the demand is going to come from is the big question.) Europe's banks are in worse shape than the US's, with lower reserves and returns on equity--Commerzbank and CSG are in horrible shape. (See yesterday's WSJ.) And growth has been anemic--Germany, its largest economy, is also its weakest. In the short term, it's hard to see how Gowan's picture plays out.

To ask the obvious: will anything change substantially until American military power gets delivered as serious setback? Isn't it the republicrat way to have gov't spending (keeps down unemployment) and your imperial outposts of progress, too?

Christian



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