Believe in America

The American election is front page news everywhere.  The BBC has been covering it nonstop for half a year now, devoting a permanent chunk of their news page just to American election coverage.  I would suspect in fact that they give more coverage to the American election than to their own.  The Globe and Mail here in Canada felt obligated to publish an endorsement of Obama and around the world news sources and even leaders have chimed in and thrown their weight around.  Clearly the American election is potentially very important for other nations because America is so critical to both world finances and world peace.  That is, they are likely to start bombing random nations and be a major force *against* world peace.  However, I think that just by paying so much attention to them we are actually propping up their unsustainable system.

One of the most outrageous occurrences in world finance occurred some time ago when the American credit rating was lowered.  Everyone expected that the value of their bonds would drop since of course if they are less likely to repay then the value must go down; the principles of economics are clear on this matter.  Instead the value of their bonds went *up* after the credit rating hit because everyone was so terrified of a crashing market they ran to the safest investment in the world - American government bonds.  If this were any other nation their value would have started plummeting and the absolutely outrageous deficit spending would have come to a screeching halt... but not America!  The belief in an invincible superpower and their eternal reign is still strong and that belief causes all kinds of ludicrous behaviour.

Just imagine if the world decided that it was time to stop loaning America money it obviously will never repay.  (It might print a gazillion dollars to repay the loans and cause a currency collapse, but the value will never be returned.)  Their budget would have to be slashed by a solid 40% just to get back to par and that sort of action would undoubtedly create a massive crash in revenues, requiring further cuts, etc.  The only thing preventing instant and total collapse is the irrational belief that America, and by extension the current fiscal order, is impregnable.  It isn't.

So what you really need to worry about is not that the wrong person gets elected in America.  What you really need to worry about is the rest of the world no longer caring who gets elected in America.  When that happens you know they are headed for a collapse that makes the recent hard times look like a birthday party and the rest of us are going to experience a whole lot of that pain too.  As long as we all maintain this fiction that American hegemony is everlasting and inevitable they will continue to abuse it to maintain an even greater bubble that the one that so recently burst.  All stories end; we just don't know how many chapters this one has left.