Dazed and Confused

Let's see, I think I've heard all this before. Five years ago, the new "superpower" was supposed to be the European Union. The United States was supposed to succumb and the new monetary union was supposed to enable "the ten" to efficiently trade and out-trade and out-produce the USA, both entrepreneurially and intra-prenerially. Fast forward five years: the Euro is weak, two countries are actually considering dropping out of the currency agreement, the proposed EU constitution was rejected, and most of the countries in Europe remain mired in their own stubborn socialist quagmires with unemployment in the double digits. Riots engulf France, Neo-Nazism is re-emerging in Germany, Iceland's currency has collapsed and according to the Financial Times, Hungary's is about to do so. No superpower there.

Back in the 1980s. Japan was supposed to become the next superpower which would eclipse the United States. Books like the "House of Nomura" were selling like hotcakes, the Japanese were buying up much of Hawaii, Radio City and Universal Studios. Companies all over the world rushed to emulate "the Japanese way". And the huge concern in the world with the trade deficit was that with Japan. We talked of a re-emerging Japanese military and even that they would have "the bomb".

Flash forward 20 years, after about 20 years of near depression and deflation, the crash of the Nikkei, the collapse of multiple Japanese banks, the plundering of the currency, and the purchases of huge amounts of "cheap' Japanese assets by the USA, Japan is only very recently "somewhat" emerging from its dire straits. Superpower? Not.

In the 1960s, the co-superpower was going to be the Soviet Union. In 1957 the USA was treated to all sorts of academic thinking that the Soviet model was the "cat's pajamas". We had Sputnik, state owned industries, and the military. Krushkev exclaimed, "We will crush you".

Well I am here to tell you that I personally witnessed the empty store shelves, the knocked over statues of Lenin, and seeing Ph.D.s selling books on the streets of Moscow. Grandmothers were begging for food in the Kremlin. Superpower? Not.

Now we have China, a country inextricably dependent upon US capital for its existence. It is an autocracy, it is highly dependent upon crude oil. China is a hugely diverse country (despite how it is portrayed), it's labor resources only need a little bit of "nudging" to rebel against the slave labor under which most of its workers are compelled to work. And 17% of the people there live on less than $1 per day.

Will China survive as a monolith? Likely not. The language, being one of the oldest in the world, is hugely dialectic and its culture even moreso. I think a fairly reasonable model is that of the recent experienece with the Soviet Union. China will probably break up into autonomous regions. And social demand will not find current investment in the military as tenable. Its oil consumption and pollution are also completely untenable, the article states that 15 of the worlds 20 most polluted cities are in China.

Who will buy the goods produced by China if we don't? A stagnating Europe? A warring Middle East? Africa? A poor Russia? Antarctica, maybe?

And where will China invest its budgetary surplus if not the USA? Few consider why the dollar remains the world's reserve currency. See above.

Yep, the European press has been gleefully anticipating the demise of the USA for years.

Yesterday, the Saudi stock market declined 8% while our Dow rallied 195 points. Gee, I wonder where the petrol dollars went, Estonia, maybe?