[lbo-talk] Goldman on Greenspan & the US c/a deficit

[boddi satva]

Sorry about the over-post but Niall Ferguson and others make an
extremely persuasive case that military dominance has, througout
history, been a product of superior financial structures and not the
other way around. It's no accident that we were the country which
built the armed forces that destroyed the Axis. If social relations
dominate, then we have to figure out how, without a large empire and
while paying our workers some of the best average wages in the world,
America created the greatest armed force in history. To build such a
force was a fantastic financial accomplishment.

In other words, we weren't enslaving people better than anybody else
so what were we doing right? I think the answer is that we had created
the legal structures to access more capital than other countries and
that dominance just got larger.

On 12/6/05, Willy Greenfields <filthydirtyunwashed at yahoo.com> wrote:
> Boddi wrote:
>
> >I have been saying for years to anybody who would
> listen that
> >the thig which props up the US economy is not our
> military or
> >our relative geographical advantages but the
> superiority of the
> >dollar-based financial system
>
> ...
>
> >The challenge, I think, will come from the euro-based
> system
> >because it has fewer theoretical upper limits.
>
> I always assumed a lot of the attraction of
> "dollar-based financial system" was a function of our
> military might and the sheer size of the market: the
> world bought into the giant market of Treasury
> instruments b/c we were conceived of as indispensible
> during the Cold War.
>
> Our recent attempts at indispensibility fall far
> short. The Terror War is not a credible replacement
> for the twilight struggle against world communism.
> We're certainly seeing some diversification out of
> dollars precisely b/c we look like a bad bet now
> (though surely crap bond yields are a stronger
> motive). But I can't help but see the system preserved
> by virtue of its size. This time though its not its
> size relative to other attractive opportunities or its
> size as a guarantee against a menacing communism, but
> the fact that so much is invested here. I mean, even
> if Europe built a solid, frictionless system  of
> unprecedented scale, how long would it take the rest
> of the  world to unwind its treasury positions w/o
> suffering a massive haircut (is it possible that they
> could cause a run on the dollar?)?
>
> Incidentally, I was struck by the readiness of the
> financial press to accuse China of the worst sorts of
> chicanery after the copper episode after their
> collective unwillingness to see the Chinese de-pegging
> as indicative as a vote against dollar reserves.
>
>
>
>
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