Mish:
Excellent commentary.
It is a delight to me that your response to Andy's point of view is polite and cerebral rather than what one often finds on some sites,..... a put-down.
With respect to what follows the housing bubble, I can't help but think that things are going to get "messy". I have racked my brain in conjecture as to what new rabbit Greenspan might extract from his hat but, short of buying back his own printing press offal, I can see no way that a nasty recession/depression can be avoided. And at this stage, perhaps such an event will actually prove to be the vile-tasting, but necessary medicine that U.S. debt-crazed citizenry must surely swallow before it can once again become a balanced, productive society.
One item that I rarely see discussed is the fact that the US is now endeavouring to support a military that it simply cannot afford. This has happened to many powerful nations down through history and almost always leads to a similar economic implosion. Given the many other imbalances at work in the US economy, one has to wonder what will give first. Certainly, it doesn't take rocket science intelligence to foresee lots of large military vessels rusting at their moorings or rotting on the desert in the future for lack of
dollars to fuel or man them.
I do share your optimistic view that the US is not necessarily doomed to join the long and dreary list of countries that "rose and fell" never to re-appear on the world's stage as a strong player again. American history provides many examples of periods when the nation has faced massive problems and defeated them. Alas, the coming turbulence has "perfect storm" written all over it and it is going to require a huge shift in attitudes and work ethic, gigantic "writedowns", a retirement from the global "policeman's" role and a facing up to the fact that the nation's balance sheet has been run into the ground. Of course time will tell.
I would also add that I don't share the increasingly accepted view that China will emerge as the next dominant global player. Yes, it is a very large nation that is (delightfully) starting to grow economically. But its economic problems, while very different from those facing the US, are nevertheless most foreboding. The Chinese banking system is essentially bust. Worse, its recent massive expansion in manufacturing appears to have been ill-timed in that it simply added additional capacity to already glutted sectors that were serving already saturated markets. Then too, the genie of capitalism has been let out of the bottle over there and fundamental political changes will be required if it is to be properly harnessed,.... a job that the current form of governence in China may not be able to deliver (the break-up of the USSR comes to mind).
None of us can accurately forecast what will occur over the next few years, but I do think we can forecast what the dominant issues will be and perhaps the probable direction in which these issues will nudge the globe. To me, the largest of those issues is the staggering debt level that has been accumulated by the US and the fact that the nation simply refuses to deal with it in an intelligent manner. The longer this stance continues, the tougher will be the climb out of the hole.
Best, Earlie |
