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"Different Kind of Dumb, Part IV"
"Like a sheep he was led to the slaughter
And like a lamb dumb before its shearer..."
Acts 8: 26-40
Dublin, Ireland - "One of the key dates for understanding how we got where we are is 1992. That was the year when Francis Fukuyama wrote his famous essay and wondered if it was the ‘end of history.’ The West was triumphant. No need for further ‘history.’ No further experiments. No need to learn... to evolve... or to question. Wars? Revolutions? New systems of government or economics? All of that was in the past. We had found the winning formula.
Looking in the mirror, back then, it seemed obvious what would happen next. Everybody wanted to be like us. They’d all become ‘Westerners.’ China was already learning fast. Following the model set for it by Japan, it was building an export-led economy... selling cheap products, gaining expertise and capital... and building out its manufacturing sectors.
All those exports helped to keep US consumer prices low... and gave China the money to buy US bonds. And why wouldn’t they? Everybody knew they were the world’s largest, most liquid, and safest asset.
Putin as Capitalist: Russia, back then, had just become Russia again. The Soviet Union, with its central planning and stifling economic controls, just couldn’t compete. Its insiders looked across the border at West Germany and wanted what they saw. They realized that owning the means of production - as capitalists - would be better than continuing to control them as bureaucrats. They gave up being apparatchiks in the Soviet system and became oligarchs in the new ‘Western’ system. Vladimir Putin even thought Russia might join NATO.
The trouble for the oligarchs was that the Soviet Union produced very few goods or services that Westerners would buy. All they really had was raw materials and energy. But with the profit carrot in front of them, rather than the communist whip on their backs... the oligarchs cranked up the mines and wells... and were soon driving down prices for basic resources.
Talk about sweet spots! With the Soviet menace out of the way, the US could enjoy a ‘peace dividend;’ it could cut military spending by hundreds of billions. And with the oligarchs now flooding the world with cheap commodities... and the Chinese pumping out cheap finished products - ‘The West’ never had it so good. Its consumer costs were going down as its asset prices were going up. Let the others sweat, it could think…and print dollars.
A colossus of plenty... a titan of justice and goodness... a Goliath of military might - the US, and its whole client kingdom - basked in glory for a charmed decade. The Primary Trend was up for financial assets... and policymakers in China, Russia and the US helped keep the boom going.
But they also laid the groundwork for the next Primary Trend. The US might have used this Goldilocks period to increase its savings, update its institutions and improve its infrastructure. Instead, after 1999 its deciders - perhaps guided by an ‘invisible hand’ to take the empire down a notch - made some of the most pigheaded, disastrous policy mistakes in US history.
No Peace Dividend: Military spending actually increased. There was no ‘peace dividend.’ Instead there were capital calls to pay for an outrageous invasion of Iraq and a farcical War on Terror. Then, in 2009, the feds (including the Fed itself) bailed out Wall Street... and took interest rates down below zero (adjusted for inflation) and left them there for more than 10 years.
If this weren’t enough, trade barriers were set up to slow Chinese imports. Sanctions were imposed wantonly, weakening the dollar-based international payments system. And trillions of dollars were squandered funding wars abroad and stimmie checks at home.
In 1992, the US had a remarkable opportunity. It already stood on top of the world. And thanks to new policies in China and Russia, it could have shored up its position - debt free, entanglement free... at peace, and more prosperous than ever.
Instead, it went on a spree of war and deficit spending... adding $30 trillion to its debt. And now... its domestic politics are a laughingstock; its foreign policies are a disgrace... and as it is shackled to a $34 trillion ball and chain, America struggles with a new and pitiless Primary Trend. Its asset prices are going down as its consumer prices are going up; its economy is slowing as its financial obligations speed up.
And much of the rest of the world, watching the catastrophe in ‘real time,’ vows not to follow. Instead, it is eager to ‘de-Westernize.’ Stay tuned."
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