Change in tactics...

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Xflies's picture
Status: Silver Member (Offline)
Joined: Aug 19 2008
Posts: 157
Change in tactics...

Let me first off say, thanks for putting all of this together. I haven't found a better presentation summing up our current situation than your crash course. It should become required reading in school and just like your 'hockey stick' charts, I can see how your readership must be growing.
I'd like to throw a theory of mine at the wall and see what sticks.
The US gov't isn't as irresponsible or stupid as sometimes you make them seem. It is also not likely that they are like deer caught in headlights and I would bet that they've got a few smart people working there. If that were the case, one might ask... well why they hell haven't they done anything about it? I think the answer is much more complicated than can be covered in any crash course and it does involve countries outside the US. As our world becomes smaller, the network of ties between economies grows more complex and more entwined. Even your original examples of war causing inflation were made up of domestic battles for the first few hundred years but the US got dragged into global world wars which really changed history and yes, monetary policy of the free world economies. All I'm trying to say here is that there are probably reasons why smart men couldn't find solutions to a way out and by the time they got any type of progress, their 4 year tenure is up and the new guy has to start all over again.
My theory on the Iraq war: I don't want to start a political blog battle so rather than say what I think the war was NOT about, I will just say that I believe the war was about taking assets paid by debt that were useless like bombs and recouping value for them. Did it not seem strange to people that the government glorified the 'shock and awe' compaign as to a show of military might, blowing up bombs over deserted desert, or was it possibly trying to expend as much munition as possible so that the cost of war would go up? Somewhere deepn in those gold vaults, a US gov't appointed clerical accountant was ringing the cash register every time a bomb was dropped.
The fact is that all munitions have a life span. Bombs have springs, technology makes things obsolete... so what's the US to do with this vast stockpile of aging military might? The answer: Find a war everytime the pile gets too high and get back as much as you can for it. How do they do that? Liberate a country who has something of global value that won't get marginalized in value by increasing inflation, aka, oil.
All of this isn't something I can prove so if someone can tell me that the US gov't will never get paid a penny for all of its work to liberate Iraq, then I will admit that I am wrong, however, if the US gov't were to receive money from Iraq to pay for its liberation of a penny, a dollar, a few thousand, a few million or maybe, just maybe a few trillion... well that's money that they never counted on and that is my theory. The US gov't saw the predictament that they were in so one of the solutions was to exchange assets that couldn't pay for themselves into assets that could. Any recovery of any amount would be a benefit and fuel further military spending (although if you believe this was concocted by the braniacs of the US Treasury, then you would spend less on the military going forward) as well as go towards repaying some debt. I should mention one more thing about the military... if one wants to become a Super Power, it is incumbent for them to be at the bleeding edge of technology so 'recycling' your military requires either a LOT of money constantly being spent OR finding a war every 20 years or so. There are a lot of 'Dictators' out there... did it ever occur odd to anyone why they chose to go after Sadam and not some other bad guy who just might be in the middle of a very poor country and had no ability to repay the US for its 'liberation'? Anyways, enough said on that...
There will be some funny accounting in the middle which is basically a timing issue of recording expensed military spending and when the revenue will be received but to the whole monetary policy cycle, getting anything for those bombs is better than nothing. There are also other benefits to war (ironically)... it forces people to save- there's just not that much you can buy when you're on a call of duty. The growth rate falls for a bit, and it also gives some of the populous an opportunity to take a breather and retrain skills once they get back.
I'm getting off topic but one thing I haven't seen so far in your crash course is the possibility that the problems of the US get diluted down into a world economy that's still growing through the flows of foreign investment. There is the deliberate claim of foreign assets through things like war (my theory above) and there is also not so deliberate attraction of foreign capital through such problems as the recent credit crisis where middle easterners or asians who have just too much money, throw a few billion here and there to invest in Citigroup and other big banks without doing their full due diligence.
My question is this... could the US wiggle their way out of its mess by attracting foreign capital and encouraging their domestic businesses to become international and stake claims in other countries... I'll just call it Economic Imperialism... or in other words, a more 'civilized', 20th Century version of taking over other countries to bring about prosperity and growth?

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