It sounds good and I tell it often because, like Freudian theories in the hands of the lazy or the partially informed, it seems – with almost shocking ease -to explain everything worth explaining.
The trouble is, I have no idea if it’s true. So I turn to those of you here with fuller understanding to review and correct my beliefs.
It’s a simple story and goes as follows:
The US is a debtor with an immense trade deficit. As a nation, we are living beyond our means. Despite this fact, which would send less powerful countries to IMF debt counseling, followed – after the IMF advice was heeded - by the emergence of bread lines and other unhappiness, the US continues to seem rich.
There are two sources for this:
a.) The US is still rich when all the factors that make up conventional definitions of national wealth are compared to other nations
b.) Perhaps more importantly, a mountain of foreign capital underwrites our debt and allows us to continue to pretend to be wealthier than we are. Foreign capital likes the US because it is a safe place to park money and export driven countries like S. Korea and Japan have gotten rich by selling increasingly sophisticated goods and services to the living-on-credit American market.
So no one wants to call in their IOUs because the customer is such an easy mark and a good fence for moving capital.
The Bushies’ neo-Roman dreams are threatening this circular debt party by going too far – both in the amount of debt accumulated to fund militarism and in their eagerness to demean the rest of the world (made possible by the perverse synergy of arrogance and the aforementioned militarism). Sooner or later a new structure will emerge that will leave the US essentially out and reveal the depth of our collectively empty pockets.
The day when this steaming pile of goo hits the fan will be, to put it mildly, unpleasant.
………….
That’s the story, which has enlivened many a party. Libertarians and liberals seem to love it, or parts of it. Bush/Reagan style conservatives, shielded from doubt by faith in the market, dismiss it.
Perhaps they’re right. Am I off base here?
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