America Will Remain the Superpower

[José]

OCTOBER 14 2008

America Will Remain the Superpower

When the tide laps at Gulliver's waistline, it usually means the Lilliputians are already 10 feet under.

By BRET STEPHENS

Constantinople fell to the Ottomans after two centuries of retreat and decline. It took two world wars, a global depression and the onset of the Cold War to lay the British Empire low.

So it's a safe bet that the era of American dominance will not be brought to a close by credit default swaps, mark-to-market accounting or (even) Barney Frank.

Not that there's a shortage of invitations to believe otherwise. Almost in unison, Germany's finance minister, Russia's prime minister and Iran's president predict the end of U.S. "hegemony," financial and/or otherwise. The New York Times weighs in with meditations on "A Power That May Not Stay So Super." Der Spiegel gives us "The End of Hubris." Guardian columnist John Gray sees "A Shattering Moment in America's Fall From Power."

Much of this is said, or written, with ill-disguised glee. But when the tide laps at Gulliver's waistline, it usually means the Lilliputians are already 10 feet under. Before yesterday's surge, the Dow had dropped 25% in three months. But that only means it had outperformed nearly every single major foreign stock exchange, including Germany's XETRADAX (down 28%) China's Shanghai exchange (down 30%), Japan's NIKK225 (down 37%), Brazil's BOVESPA (down 41%) and Russia RTSI (down 61%). These contrasts are a useful demonstration that America's financial woes are nobody else's gain.

On the other hand, global economic distress doesn't invariably work at cross-purposes with American interests. Hugo Chávez's nosedive toward bankruptcy begins when oil dips below $80 a barrel, the price where it hovers now. An identical logic, if perhaps at a different price, applies to the petrodictatorships in Moscow and Tehran, which already are heavily saddled with inflationary and investor-confidence concerns. Russia will also likely burn through its $550 billion in foreign-currency reserves faster than anticipated -- a pleasing if roundabout comeuppance for last summer's Georgian adventure.

Nor does the U.S. seem all that badly off, comparatively speaking, when it comes to its ability to finance a bailout. Last month's $700 billion bailout package seems staggeringly large, but it amounts to a little more than 5% of U.S. gross domestic product. Compare that to Germany's $400 billion to $536 billion rescue package (between 12% and 16% of its GDP), or Britain's $835 billion plan (30%).

Of course it may require considerably more than $700 billion to clean out our Augean Stables. But here it helps that the ratio of government debt to GDP in the U.S. runs to about 62%. For the eurozone, it's 75%; for Japan, 180%.

It also helps that the U.S. continues to have the world's largest inflows of foreign direct investment; that it ranks third in the world (after Singapore and New Zealand) for ease of doing business, according to the World Bank; and that its demographic trends aren't headed toward a tall and steep cliff -- as they are in the EU, Russia, Japan and China.

Above all, the U.S. remains biased toward financial transparency. I am agnostic as to whether mark-to-market accounting is a good idea; last month's temporary ban on short-selling financials seemed a bad one.

But a system that demands timely and accurate financial disclosure and doesn't interfere with price discovery will invariably prove more resilient over time than a system that does not make such demands. If Fannie Mae and Freddie Mac were financial time bombs of one kind, then surely China's state-owned enterprises are time bombs of another. Can anyone determine with even approximate confidence the extent of their liabilities?

This isn't to say that the abrupt failure of the SOEs would be in anyone's interests, including the U.S.'s. But one of the unremarked ironies of the present crisis is that America's financial vulnerabilities came fully into view months before Europe's (or the rest of the world's) did. That's one reason the dollar has rallied in recent months. It's also why the U.S. is likely to come through the crisis much more quickly than, say, Japan, which spent the better part of the 1990s hiding its own banking crisis from itself.

Exactly how -- and how quickly -- the U.S. does come through is anyone's guess. Recessions are periodic facts of economic life that tend to last anywhere between six and 16 months. Severe recessions or depressions are fundamentally political events that can last a decade or longer -- however long economic policy remains bad.

If the next administration is wise, it will do what it can to help the markets clear, let the recession take its course, and do what it can to preserve intact a financial system that has served us splendidly. If it is unwise, it will embark on several years of grandiose social experimentation. Either way, the United States will eventually regain its economic footing and maintain its place.

http://online.wsj.com/article/SB122394103108030821.html

[rixxe]

http://online.wsj.com/article/SB122394103108030821.html

(…)

Of course it may require considerably more than $700 billion to clean out our Augean Stables. But here it helps that the ratio of government debt to GDP in the U.S. runs to about 62%. For the eurozone, it's 75%; for Japan, 180%.

Il y a tout de même une grosse différence entre la dette japonaise et la dette américaine. 95% de la dette japonaise est interne - le gouvernement japonais a emprunté à des japonais. Le gouvernement américains lui s'est endetté auprès des chinois, des saoudiens, des japonais, etc. Ca change la donne…

[Punu]

Mieux vaut en rire. Et relire Marc Aurèle.

[Jesrad]

Plus le temps passe et plus je me dis que les étrangers paieront pour les pertes US, pour ne pas voir sombrer ce marché qui leur est, en particulier pour la Chine, indispensable, et pour ne pas affaiblir ce qui reste malgré tout pour eux un gage de stabilité géopolitique.

La France n'aura bien sûr pas cette chance…

[Frozenlock]

Il y a tout de même une grosse différence entre la dette japonaise et la dette américaine. 95% de la dette japonaise est interne - le gouvernement japonais a emprunté à des japonais. Le gouvernement américains lui s'est endetté auprès des chinois, des saoudiens, des japonais, etc. Ca change la donne…

Pourquoi?

C'est plus facile pour l'état de dire "Nonon, je ne vous dois rien" ?

[rixxe]

Pourquoi?

C'est plus facile pour l'état de dire "Nonon, je ne vous dois rien" ?

Lorsque l'état japonais paie les intérêts de sa dette, il le fait à des japonais, donc l'argent reste dans le pays.

Lorsque l'état américain paie les intérêts de sa dette, ça part dans les caisses des chinois.

[Rincevent]

Lorsque l'état japonais paie les intérêts de sa dette, il le fait à des japonais, donc l'argent reste dans le pays.

Lorsque l'état américain paie les intérêts de sa dette, ça part dans les caisses des chinois.

… So what ?

[ledubitatif]

Plus le temps passe et plus je me dis que les étrangers paieront pour les pertes US, pour ne pas voir sombrer ce marché qui leur est, en particulier pour la Chine, indispensable

Il n'y aurait pas un joli sophisme là-dessous ? Je donne de l'argent pour qu'on puisse me payer avec ?

Mais il est possible que ça se passe comme ça effectivement, un sophisme n'est pas de taille à arrêter un gouvernement.

Lorsque l'état japonais paie les intérêts de sa dette, il le fait à des japonais, donc l'argent reste dans le pays.

Lorsque l'état américain paie les intérêts de sa dette, ça part dans les caisses des chinois.

… So what ?

Le gouvernement japonais peut en fait s'arranger assez facilement pour récupérer l'argent du contribuable japonais. Il est bien plus difficile pour le gouvernement US de se servir dans la poche des chinois. Dans le premier cas on a une affaire banale de politique intérieure. Dans le deuxième cas c'est un problème de relations internationales, bien plus sensible. Mais somme toute, ça n'est pas un avantage pour les japonais.

[Jesrad]

Il n'y aurait pas un joli sophisme là-dessous ? Je donne de l'argent pour qu'on puisse me payer avec ?

Ce n'est pas une question de rentabilité ou de profits ou quoi que ce soit d'autre, c'est une question de contrôle et de statu quo.