Monday, August 9, 2010

The U.S., The Long Slide Down

The U.S., as things stand now, looks destined to be an empire that rots from the inside out. And the American people do not currently have the political, intellectual or historical background to analyze what is going on. So we will have more senseless attacks on the vulnerable, more finger pointing about the lazy unemployed, public sector workers or illegal immigrants. Cowardly scapegoating based upon the political ideology of 'me', in other words, no political ideology at all.

But it has gotten to the point where it is impossible for a country that represents about 15-17% of global manufacturing output, and a bit more of GDP, to continue to support the demands of reserve currency status. The dollar is too strong relative to America's productive output and quality, and because of this the country's manufacturing capabilities will continue to slide if not collapse. With it comes lost employment and the multipliers that come with manufacturing, as well as its long association with rising living standards. The U.S will have permanent structural unemployment, or employment supported by massive government borrowing and spending on a more or less permanent level. Which will create an instability of its own.

So as American financial power through the dollar's role in international trade, especially commodities and most especially oil, becomes even more concentrated, leadership will face multiple domestic credibility crises from which there is no economic solution within the current framework. At the time of Bretton Woods the U.S. represented some 50% of total global industrial output; it was productive enough to support a gold standard. Then it wasn't. Kissinger's petrodollar deal in the mid 70's forestalled crisis, but it was done from a position of fundamental weakness. That weakness has grown into a gaping hole evident in every walk of American life. The US economy is collapsing from within bringing with it unknown but probably radical political consequences. Ultimately, it will be up to the population - the masses - to determine the future.

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