We went into a steep recession, and may be still be there (or in the "Double Dip") depending on whose numbers you believe. And it *seems* like things are a little better, the State Run Media and our president say so... But, there are still LOTS of homes in "Shadow Inventory", lots of people out of work (again, disputed figures, Shadowstats has us at 16% unemployment), green energy companies laying off people and going bankrupt, etc.
Further, I see little investment in manufacturing here in the USA. I read recently that almost all of Apple's products are Made in China... Virtually NOTHING in that iPhone or iPad is made here. No one that I know of is building a bearing plant here...
It is NOT a guarantee that America is in decline, but sure does FEEL like it. Many people I know are worse off than in 2007. WE most certainly are worse off (lower income because of ZIRP)! Savers are being penalized... And people saving money is the SOURCE of capital for investment.
***
If we accept the premise of America in decline (or even just entertain this as another "Thought Experiment"), then a brief review of history is worthwhile. The USA is often characterized as an empire, in that we are all over the world involved in other countries' business, what with wars and general brow-beating. We certainly are The Superpower, even with a growing China (still poor!). Europe (aka Yurp, thx DCFusor!) is in decline, as we watch to see if Greece defaults and Portugal likely close behind.
Let us then look at a couple of well known empires, how and why they declined and what the lessons may be for us. The Roman Empire was a major power for over 500 years (and was a Superpower for perhaps 150 years almost on the scale of the USA, say, in the year 2000).
I cannot claim to be anything close to an expert on the ancient history of Rome, but many who know more than I do have said that Rome declined (and fell) due to a number of reasons. One reason, probably important, was that Rome eventually turned into a "welfare state" (at least in the city) -- bread and circuses for the masses. They didn't need to work! Hmm... Also, as an Empire, Rome became multicultural, though the role of multiculturalism in Rome's decline is definitely disputed. We see here in America a quiet "La Reconquista" (the long hoped, by Mexico, Reconquest of the lands they lost in the war we had with them in the 1840s) going on, a vivid example of which is Victor Davis Hanson's piece I linked to a couple of weeks ago (about how the Valley of California is becoming a lawless region due to the Mexican gangs' power, click the link here (this should be required reading for any thinking American): http://victorhanson.com/
I move on to the case of the British Empire (I claim no particular expertise here either). England grew to become arguably the greatest empire the world has ever seen! "The sun never set on the British Empire". They grew so powerful because they understood the power of naval power and of relative free merchant trade. Remember what they owned: big parts of North America, India, major parts of Africa, bits and pieces of Asia...
The principal reason cited for their decline is "imperial overstretch", that is, not enough Englishmen to properly control and manage their huge holdings, who all wanted to be independent anyway... England also had/has their own problems with multiculturalism (again disputed). We here in the USA now have between ONE and SIX wars going on (again, depending on who's counting and what the meaning of "war" is). These wars have been HORRIFICALLY expensive, and the costs will continue (medical care for wounded veterans) far into the future, even if we left right now. We have up to 700 military bases, of one sort or another, scattered around the globe. In many ways we irritate other countries with silly demands (eg, that China cut back on CO2 emissiions)...
But, it took a long time for England to lose her empire too. And there were other reasons (WWII for example). DEBTS played a part, so did high taxes...
***
But, there are some differences between Ancient Rome and the British Empire. We have three things that the other two did not:
- fast transportation (airplanes and vehicles)
- fast moving and sensitive financial markets
- the internet, computers and television
These three differences all involve speed. This opens up the possibility of events here in the USA, or even elsewhere, even obscure places (Greece) causing tremors within our country. I believe that our entire system is more precarious than what we hear from "the men behind the curtain." One little "push", and that could be the start of a crash...
So, anything bad, really BAD, could happen fast, or maybe not. Perhaps our system can be saved, perhaps not. My prediction record of future events (short-term anyway) is notoriously bad -- ask any of my friends!
"The Powers That Be" (TPTB) have shown a great adeptness at "kicking the can down the road", the historically most common choice, rather than allowing the bad parts of the country to fail, and then rebuild with the capital from the savers (yes, mostly the prudent rich and upper middle class). Kicking the can via bailouts, huge deficit spending and consequent huge debts has sort-of worked to date (again, in dispute).
UPDATE!
pmbug (owner of pmbug.com, a great precious metals forum with a nice non-junky atmosphere) just informed (by comment below) that it was John Maynard Keynes not Galbraith as I earlier wrote...
I believe it was John (see Update above) who wrote words to the effect that the markets can stay irrational longer than you can stay solvent... Meaning that you may be right, but lose your money anyway (the timing thing). In an email to me, FOFOA himself said that he had NO IDEA when "Freegold" could happen, it could be tomorrow or it could still be years away...
So, all of this just grinds on and on. And who knows for how long. Although aggravating, this gives us all more time to prepare for anything bad. And I am a big believer in being prepared. You should too!
http://youtu.be/eBhwfMdxCPI
So, anything bad, really BAD, could happen fast, or maybe not. Perhaps our system can be saved, perhaps not. My prediction record of future events (short-term anyway) is notoriously bad -- ask any of my friends!
"The Powers That Be" (TPTB) have shown a great adeptness at "kicking the can down the road", the historically most common choice, rather than allowing the bad parts of the country to fail, and then rebuild with the capital from the savers (yes, mostly the prudent rich and upper middle class). Kicking the can via bailouts, huge deficit spending and consequent huge debts has sort-of worked to date (again, in dispute).
UPDATE!
pmbug (owner of pmbug.com, a great precious metals forum with a nice non-junky atmosphere) just informed (by comment below) that it was John Maynard Keynes not Galbraith as I earlier wrote...
I believe it was John (see Update above) who wrote words to the effect that the markets can stay irrational longer than you can stay solvent... Meaning that you may be right, but lose your money anyway (the timing thing). In an email to me, FOFOA himself said that he had NO IDEA when "Freegold" could happen, it could be tomorrow or it could still be years away...
So, all of this just grinds on and on. And who knows for how long. Although aggravating, this gives us all more time to prepare for anything bad. And I am a big believer in being prepared. You should too!
http://youtu.be/eBhwfMdxCPI
"I believe it was John Kenneth Galbraith who wrote words to the effect that the markets can stay irrational longer than you can stay solvent"
ReplyDeleteNope. That was actually John Maynard Keynes.