“We are in the midst of a sea change in U.S. hegemonic influence in political, financial and economic spheres. American financial, economic and political power has peaked,” writes Sherry Cooper, chief economist with the BMO Financial Group. Really? Is it all that bad?
I wonder if Ms. Cooper and the growing chorus of similar voices are seeing all the warts of the beast they live close to and fewer of the blemishes on the beasts living further afield. While the U.S. certainly has its problems, so do other countries around the world — we perhaps don’t see them as much because of the distance and language barriers.
Take the economic miracle in China. It seems to me to be based in large part upon the suppression of market forces, which is not usually a lasting formula — especially for wrestling hegemony away from the U.S. Like Mother Nature, it’s not nice to fool with market forces. They release a lot of unintended consequences that grow and fester and eventually win out, undermining edifices built without regard for them.
Chinese exports are surging because appreciation in the Yuan has been held far below market levels by printing up scads of Yuan to buy up mountains of U.S. dollars. Supplementing this intervention are currency controls that restrict Yuan convertibility.
Any country can do this sort of thing and put up an impressive run for a time. Japan tried it in the 1980s and early 1990s. But most don’t do it, at least for very long, because it leads to an inflation problem — as highlighted by China’s current annual inflation rate near 8%. And again, this performance would look worse without market interventions: if oil prices in China weren’t subsidized below world levels, the inflation rate could be well into double-digit territory, closer to 15%.
Running the printing presses to suppress currency rates, oil prices, and other things is a recipe for galloping inflation and escalating wages, which, by raising the structure of domestic costs, eventually offsets the competitive edge due to artificially low exchange rates. And currency controls spawn black markets that in time defeat the intent of controls while having other negative side effects.
Any society which permits shocking acts of cruelty to animals is one without morals, without values, one of sub-human parasites. Reader discretion advised.