The American Era: R.I.P.

The past week I have been AWOP (absent without posting). There certainly has been plenty going on. Obama’s announcement of his economic team was actually, to me, somewhat reassuring. Make no mistake (as Obama likes to say), we are going to see a huge expansion of government. Crises such as wars and the Depression have always led to growth in government and this will be no exception. Chief-of-staff Rahm Emanuel’s statement, “Never waste a crisis,” is clear evidence that history again will be prologue.

I think Hillary Clinton is a good choice for Secretary of State. I believe she will put America’s interests second only to her own. She’s smart, tough and can put on that big smile while she’s deciding where to plunge the dagger. I like that in a diplomat. None of this Jimmy Carter guilty appeasement for her.

Barack may think that by bringing her on board he has neutralized a Senate enemy. But he may have let the Trojan horse inside the gates. And, to stretch the equine analogy a bit, Obama is getting the stud (“I did not have sex…”) with the mare. Does anyone really think the Clintons have given up on 2012? The clashes between Hillary and Rahm Emanuel will make the war with the Taliban look like a Sunday croquet game. It will be great theatre if we get to see it.

Getting back to economics, we are witnessing the end of the American Era. Our decades of living on credit, as individuals and as a Nation, have caught up with us. In a financial crisis cash is king and we don’t have the cash. As long as oil was north of $100 the Saudis, Russians and Iranians were holding the money bags. But the collapse in oil prices has them scrambling, too.

The Chinese are the cash kings. We’ve been shipping our dollars over there for years in exchange for cheap goods. Plus the Chinese themselves boast a 50% savings rate. Their economy is hurting, too, but they have a couple of trillion in reserves, more than enough to finance their own recovery and take advantage of our illiquidity at the same time.

Instead of the sole superpower, we will now be first among equals. With 25% of the world’s economy, we won’t become a second rate nation overnight. We will, however, have fewer options and a lower average standard of living.

Of greater consequence is the fact that we will no longer be the deterrent to aggression and tyranny that we have been for the past six decades. With the end of The American Peace will come more international conflict and a more turbulent world.