There must be something wrong with me. I generally consider myself a fairly upbeat person, but I gotta say that I’m unusually drawn to the writings of Nouriel Roubini — the New York University economist whose dire, but prescient writings on the economic crapper we’re in have moved beyond prediction to reality. I’ve been reading his blog since I subscribed to it a few months ago, and while it’s not a blog where you get things like “Hey check out this pic of cat on rollerskates!” it does have that appeal in that, I can’t look away.
One of the themes that repeats in his writings (and one that’ll make most people say, “Tell us something we don’t know”) is the accumulation of debt. But it’s not debt that some of us carry because we need something now (i.e., a new washer/dryer) and will pay it off. It’s the kind of debt that people carry and either can’t afford to pay it off, or never intend to. But it not just people spending more than they have, it’s a complex web of the financial practices, political ideology, legislation, and global capitalism that got us to where we are today. One of the things Roubini stated in a New York Times Magazine piece was that this financial crisis was going to change the United States in a profound way:
“Our biggest financiers are China, Russia and the gulf states,” Roubini noted. “These are rivals, not allies.”
The United States, Roubini went on, will likely muddle through the crisis but will emerge from it a different nation, with a different place in the world. “Once you run current-account deficits, you depend on the kindness of strangers,” he said, pausing to let out a resigned sigh. “This might be the beginning of the end of the American empire.”
And here we thought it would be communism or Islamic terrorism would end the American empire. If Nouriel “Dr. Doom” Roubini is to be believed, the end will come mostly from within than without.
Jules
December 23, 2008 at 2:55 pmWhat's that old saying, "If you lay down with dogs, you wake up with fleas"? Well, I'm not saying that China, Russia, and the gulf states have fleas, but I do think that relying on our strength over these growing economies to keep them in check, when their goals are in opposition to ours, is a dangerous game. There may be fleas involved at some point, and we will only have ourselves to blame.
Lalpunci
December 23, 2008 at 6:19 pmInteresting post Ted. History does repeat itself. At the end of WWI and WWIII, Europe was in debt to the US for billions. Some of these debts were never paid back. The US forgave them, or the countries said we can't pay it back. Since China, Russia, and the Gulf States rely on Europe and the US to consume their exports, and in turn lend us the money we paid them for their goods, they will also run out of money because the supply will run out. if we stop consuming (buying). It is a vicious cycle. What I am trying to say is that if Europe and the U.S. economies tank everybody goes down. Look what happened when oil prices spiked this summer, it spiraled the U.S. and Europe into a deep recession. Now China and Japan can't sell their goods because we stopped buying. There is a lot more to the equation than what Dr. Doom is presenting.