THIS AIN’T NO BRAVE NEW WORLD. IT’S JUST A PLAIN OLD EMPIRE.

AMERICA-AN EMPIRE OF INCOMPTENCY?
WRITING IOUs INSTEAD OF DEMANDING TRIBUTE?

As the Author stated before the Christmas Holiday, he intended to read two books over the holidays and advise his Readers of the widely divergent views expressed in each book. And the Author always keeps his word. Three of the most recent posts have discussed the book “Our Brave New World” by Charles Gave, Anatole Kaletsky, and Louis-Vincent Gave of GaveKal Research[i].

A BRAVE NEW WORLD WOULD BE THE BETTER NEW WORLD.

The book “Our Brave New World” argues that structural changes in the world economy and the manufacturing industry could ensure that US and European countries maintain their dominance as designers, marketers and financiers of the world’s goods and services, while China and the rest of the developing world will perform the low profit tasks of manufacturing and routine service provision. This relationship has been paraphrased as “They sweat, we (US, Europe) think.”

ON A MUCH DARKER NOTE …

Empire of Debt, by Bill Bonner and Addison Wiggin[ii] sees not a glass half empty, but American coffers nearly empty. The Authors, libertarians, classical economic liberals, and old-style isolationists, first demonstrate, very convincingly, that America IS an imperial power, operating in the interventionist spirit of prior empires. The US, according to the authors, began its first steps toward empire with the taking of Cuba, Puerto Rico and the Philippines in the Spanish-American War of 1898[iii]. The next step, according to the Authors, was the US intervention in World War I, a war that did not threaten the vital interests of the US. The American empire grew between the wars, expanded greatly after World War II, and has found its latest expansion in the forcible occupation of Iraq. With these facts, the Author finds no argument, and objective observers can find little credible argument with this position.

WHAT KIND OF AN IDIOT EMPIRE STARTS OUT TO LOSE MONEY ON ITS COLONIES?

The Empire of Debt authors then make the point that unlike “rational” empires that extract tribute (wealth) from their imperial possessions, the US employs its vast military might to divest itself of its assets. It buys beads and trinkets from the rest of the world and sells of its capital assets in the form of treasury debt. It is a stark picture of an irrational nation doing irrational things to maintain its profligate consumer ways.

NOT A GARDEN OF SAND. AN EMPIRE OF SAND.

The Empire of Debt cannot long survive, argue the Authors. A nation cannot borrow its way to prosperity, nor consume without producing. It must use its capital account (here, in the form of debt), to balance its current account (trade deficit). Like sand though the hourglass, so are the slipping days of US prosperity. It is a view hard to reject, but it is a reality that the US must reject if it seeks to maintain itself as a dominant economic power.

IS THERE A THIRD WAY?

The Empire of Debt may presage the future of the American economy. American debt cannot finance indefinite consumption. Americans must create value and export it in rough balance with what it imports. The US traditional manufacturing base will inexorably shrink as lower cost producers come into the market. But there are other things to make, other services to provide. Americans must think better and not sweat harder. Save more and consume less. And bring government spending in line with revenues.

And, in the Author’s opinion, the US must slash military spending and pursue multilateral solutions through established world bodies. Signal the end of the Neocon death machine, the ad hoc international gangs of the “willing”, and the delusions of empire building. Become a great, generous and humble nation again. Have and show faith in the future and in our fellow humans to do the right thing.

THERE IS ALWAYS ANOTHER WAY IN THE DESERT OF THE REAL!
AND WE WILL ALWAYS WORK TO FIND IT!


[i] www.gavekal.com
[ii] http://www.invest-store.com/dailyreckoning/
[iii] The American empire began much earlier, of course. First with the genocide of the Native Americans and later with the Mexican War of 1848 where the US took by force of arms from Mexico the states of California, Arizona, and New Mexico.