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Every country has an industrial policy of some sort, ranging
from active mercantilism to laissez-faire. Even no policy is a policy. But
through its tax code, regulations, investments, and monetary activity each
country shapes to a great degree the posture of its economy vis-à-vis
the rest of the world.
For at least the last thirty years the industrial policy of the US has been
to stimulate domestic consumption through encouraging and promoting the
growth of the single owner housing industry. There are a number of domestic
policy reasons for this, some of which Stiglitz
highlights in the video below.
Other countries tend to not encourage domestic consumption, favoring an
export policy to attract hard currencies. Since the US owned the world's
reserve currency since the Bretton Woods agreement,
it was to its advantage and even its obligation to engage in a debt based
consumption.
These trends are playing out. One can only aggressively net export and engage
in vendor financing through currency manipulation until their customers are
rendered insolvent, and build houses and create debt until the financial
system collapses and the balance sheets of the nation are in shambles.
Now the US, and by consequence the rest of the world, is engaged in a
great reset, the establishment of a new international trade and financial
exchange system.
One of the great unanswered questions is the role of the sovereign nation in
this brave new world. Although they rarely mention it, economists have long
known that unless it can control its own currency and trade environment, no
nation can be truly sovereign in its fiscal, and thereby policy, decisions.
On a micro level we see this clearly in the Eurozone,
where to a large extent Germany shapes the continent's trade and currency
policies to support their export industries, certainly to the disadvantage of
the consuming nations of the south.
So too, the trade regime and the gaming of the currency exchanges especially
since the 1990's have placed the US in a difficult position. Can a nation
choose to have a 'green' environmental domestic policy with reasonable
healthcare for all, a democratic and educated people, while competing in a
rigged system with a feudal country that cares not for the environment, the
people in general, and for freedom?
This is why I have observed that the great story of this generation will be
the reconsideration of the position of the individual and their relationship
with the State. And one of the great variables in this discussion will be the
resolution of the trade and monetary systems, since a modern person is by
nature a transactional being. I consider the libertarian phenomenon a nostalgia for a past, of rugged individualism and ideal
independence, that is utopian; it probably never really existed.
I am not presenting any answers here. What I am trying to highlight is the
great macro trend that is driving the world at this time, which is the
establishment of a new system to take the place of the crumbling grand
agreement that served between the end of the Second World War and the end of
the Cold War. The end of this global accord is marked roughly by the collapse
of the former Soviet Union with the Asian currency crisis, and the entry of
China into favored nation trade status with the rest of the world through the
auspices of the US under Bill Clinton.
That is the backdrop, the great slate, the tablet if you will, on which
history is being written.
Chart courtesy of CalculatedRisk
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