An op-ed piece in the WSJ by Paul Kennedy must be read. Try to get it.
Here are some of his points:
- America will lose more ground in the years to come than other nations due to exceptional budgetary and trade deficits.
- No one seems to be certain how usefully (or feckless) the stimulus money will be applied. Kennedy is scared that Obama’s administration will feel under time pressures to shovel out the money without adequate precautions. and that a lot of it will slip into wrong hands.
- He anticipates that we will have little money to ourselves to pay for the Treasury bonds that are going to be issued. Who will buy the $1.2 trillion 2009 budget deficit when it is funded? Unlike WW II when we had a rising GDP and we sold war bonds, we have declining incomes.
- Early Treasury sales this year could go well as panicked investors may prefer to buy bonds that pay nothing to shares of companies that may go bust.
- If a miracle happened and China bought our $1.2 trillion what would our state of dependency be?
- When the dust settles on this alarming and perhaps protracted global economic crisis, we should not expect national shares of world production to be the same as in, say, 2005. Uncle Sam may have to come down a peg or two.
- Imperial overstretch has led to a staggering array of overseas military commitments that weigh on the US.
- If the above is half-true the conclusions are not pleasant; that the economic and political travails of the next several years will badly crimp many of the visions offered in Mr Obama’s election campaign.
- This country possesses tremendous advantages compared to other great powers in ts demographics, its land-to-people ratio, its raw materials, it research universities and laboratories, its flexible work force, etc.
- These strengths have been overshadowed during a near-decade of political irresponsibility in Washington, rampant greed on Wall Street, and its outliers, and excessive military ventures abroad.
- The global tectonic power shifts, towards Asia and away from the West, seem hard to reverse.
- But sensible policies agreed to by the US Congress and White House could certainly make those historical transformations less violent and much less unpleasant.
