US is steadily losing its mantle - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 6 January 2011
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Did we give you all our Predictions-Plus? You know, the things you OUGHT to believe, even if they are not guaranteed, sure-fire, absolutely, 100% in-the-bag.

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Here's another one:

The US Empire Has Peaked Out.

We don't know if it is true or not. And in the last two centuries it was a mistake to bet against America.

But this is the 21st century. Things have changed.

Where is the world's fastest train?

Where is the world's tallest building?

Where is GDP growing fastest?

Where are most cars being made...and sold?

Who graduates the most engineers? Who pours the most cement? Who produces the most steel?

The fact is, if the word has an "est" on the end of it, it is probably not referring to the USA. Unless it is talking about debt. Of which, the US has the MOSTEST in the world.

What a change this is from a few years ago. Remember when the US was on top of the world...trying to get other nations to straighten up? Now, it's America who is slouching...while the rest of the world that wags its finger.

Here's the Telegraph:

"We're not going to allow our American friends to melt the dollar," said Mr Mantega, [Brazil's finance minister] who views the US government's move to pump $600bn (387bn) into its economy as an unfair attempt to help exports.

"There are infinite measures that we can take. One of them is to manage the entry of speculative capital in the short-term."

"His comments came after Chile's central bank announced a plan to buy $12bn (7.7bn) of US dollars on international markets on Monday in an attempt to stem its own currency appreciation. "

"The Chilean peso has gained by more than 17pc cent against the US dollar since June, fuelled by increases in the price of copper, which is Chile's biggest export."

"It was Mr Mantega who coined the term "currency war" last year as he voiced concerns that Brazilian exports were being damaged. In October he tripled the tax on foreign investments in some bonds to six per cent, a measure he said had since been "effective"."


Now, it's the "banana republics" that are doing the responsible thing. They're trying to protect themselves.

It's the US Fed that has gone bananas - trying to print its way out of a debt deflation.

The emerging economies are growing fast - like the US in the 19th and early 20th centuries. In a few years, if this continues, they'll overtake America as the biggest economies on the planet. Then, a few years later, they'll have the most lethal military forces too.

Maybe it won't happen. We don't know. We can't tell you what tomorrow's newspapers will say, let alone those 10 or 20 years in the future.

But this is not an ordinary prediction. This is a "Prediction Plus." You ought to believe it, even if it turns out not to be true.

Why?

Because there's a downside to every upside...

Because every empire eventually declines...

Because US is a high-cost, high tax, high debt economy, competing against cheaper economies less burdened by debts and taxes...

Because the US is full of zombies, people who produce nothing, while emerging markets are relatively zombie-free...

Because the US has enjoyed two centuries of success; failure is bound to await somewhere...

Because the US is broke...with a $200 trillion funding gap...

Because US labor claims to be 'skilled'...but what kind of a skill is a degree in "communications" or "sociology?"

And because US assets are already fully priced - as if the US could expect to be the world's hegemonic power forever.

Because...because...because...

Most important, investors still buy US bonds and the US dollar in a crisis. When the real crisis comes, they'll wish they had bought something else.

*** More on the state of the empire:

An Empire in Decline

Wednesday, January 5, 2011
By Dan Simpson, Pittsburgh Post-Gazette

The International Monetary Fund has cheerfully informed the world that America is lagging in its economic growth rate by rather large margins.

We will assume that, apart from putting out its figures because that is what the IMF does this time of year, one of the organization's objectives is to scare the administration of President Barack Obama and the new U.S. Congress into more reasonable financial behavior in the coming year. If that was part of its motivation, we wish it "good luck."

The Obama administration is already focusing on moving key players out of Washington to Chicago, in spite of the winter weather there, to concentrate on Mr. Obama's 2012 re-election campaign. The campaign, contrary to the hopes of desperately naive Americans who believed in "change you can believe in," appears to have begun, in effect, on Nov. 5, 2008.

Members of the new 112th Congress are busy, too. Republicans are planning whatever wrecking they can do to what Mr. Obama has achieved so far, firmly focused on the mission that Senate Minority Leader Mitch McConnell of Kentucky gave them as their No. 1 priority: defeating Mr. Obama in 2012, as opposed to governing the country sensibly.

Senators and representatives are busy making themselves comfortable in Washington, the newly elected ones meeting the lobbyists, particularly those known to be especially generous in handing out campaign contributions.

A survey indicated that 15 percent of House freshmen plan to sleep in their offices. I don't mean sleep at their desks after lunch when they are pretending to be thinking, I mean sleep, as in bunk in their offices instead of finding an apartment or house to rent or buy. A member of Congress makes $174,000 per year plus allowances. (Have you ever smelled the office of someone who sleeps in it?)

The crunch will come when it comes time to translate into practical actions the fundamental conflict between spending, which is what governments and legislators like to do, and cutting the $1-trillion-plus budget deficit to end the rise in the national debt, now approaching $14 trillion, which the Obama administration and the legislators have both pledged to do.

Mr. Obama and the previous Congress just blew the lid off prospects for achieving those contradictory objectives by passing, before Christmas, the bill preserving the tax cuts for the rich, while also helping the so-called middle class and extending benefits to the unemployed. Now our representatives are all going to find themselves in extremis as they try to find someplace to cut -- in principle, fat, not muscle and bone.

An obvious place to start would be the defense budget: End the two wars and save big money, estimated now at over $2 billion a week in Afghanistan alone. But the Republicans don't want to cut the defense budget, thereby weakening their image as strong on security. And the Democrats don't want to cut the defense budget, opening themselves up to attack by the Republicans as soft on security. No one wants to cut Social Security or Medicare: Old people have time to vote and do.

Thus, legislators of both parties are driven to zero in on things like education to make budget cuts. Never mind that to do so is utterly insane in a society with 10 percent unemployment where education and job training are absolutely key to forward movement. There is also the clear evidence that American education is rapidly and decisively dropping behind education in many other countries, dooming us to perpetual and increasing second-class status in world competition. We average 27th in reading, science and math.

The IMF figures on how we are doing, in comparison to the rest of the world, are depressing almost to the point of being horrifying if one starts to think in terms of the death of empire. The last announced, estimated U.S. annual growth rate was a pallid 2.6 percent. The IMF estimates that China and India grew 10 percent in 2010. Asia as a whole achieved 7.9 percent; Latin America, 6.3 percent; Africa, 5 percent; and the Middle East and North Africa, 4.1 percent.

Taking into account that most countries in the regions with higher growth rates than America's have a long way to go before they reach our general standard of living, it is the trend that is troubling -- and what we are not doing.

California's just-retired governor, Arnold Schwarzenegger, ended up being excoriated, with very low approval ratings, for the high budget deficit he left his successor, Gov. Jerry Brown. But at the same time he set in motion the building and rebuilding of countless pieces of California infrastructure -- roads, bridges and the like -- which will improve the state's economic and social prospects for the future.

The continuing enormous expenditure of Mr. Obama and the Congress for the wars in Iraq and Afghanistan and the military in general not only does nothing in terms of building up America's strength and productive capacity at home, it also commits us to even greater expenditures in the future to take care of the growing number of soldiers who will come home with physical and psychological wounds that may make them dependent on us for the rest of their lives.

It's got to stop. An America that is strong at home is an America that is respected abroad. An America correctly perceived by the rest of the world as in decline, with high unemployment and feeble economic growth, simply will neither be taken seriously in the global race for markets, nor in political influence.

It is hard to imagine that decline in our country's status in the world is what Americans want. I don't know how the politicians who are starting the year in Washington are going to turn this around, but they must if we are not to fall increasingly into dismal decline.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

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1 Responses to "US is steadily losing its mantle"

Ganesh K

Jan 6, 2011

US decides to modernise border policing to stop illigal immigrants from Mexico. To finance this,doubles H1B Visa fee.To pay medical expenses of 9/11 victims, US taxes IT companies of non-Us origin. These are clear signs of the mighty USA is beggar now.

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