Sylvester J. Kowalski. November 3, 2018
The seven contradictions currently facing the U.S.:
- The federal debt. When will it implode?
- The high fiscal deficit due to the military program, and the belief that this deficit is sustainable. When will it not be sustainable?
- The high trade deficit due to the decades long de-industrialization. The trade deficit is being sustained by debt. How long can this go on?
- The high stock market capitalization versus the high U.S. corporate debt. A recent example is General Electric’s near bankruptcy due to its high debt. In all reality, GE’s problems are the result of asset stripping by its executives. How long is this fantasy market sustainable?
- The U.S. belief that it is the world hegemon, but, in reality, China is the world economic superpower and Russia is much more powerful militarily. While not admitting that this is the case, the U.S. is well aware that it no longer is the world hegemon. The trade wars, the “Russia is destroying the U.S.”, and the drive to leave the INF treaty are the U.S. responses to its dilemma.
- Trump’s infantile belief that he can re-industrialize the U.S. by invoking tariffs on its competitors. Re-industrialization can only be accomplished by blood, sweat, and tears. Re-industrialization has a cost, and that cost must come from the hides of Americans.
- The Pentagon believes it can regain its military superpower status by leaving the INF treaty and then successfully blackmail Russia with a threat of (or actual) limited nuclear strike with new intermediate nuclear missiles.. Russia likely will neutralize this threat by installing nuclear missiles in Cuba, and all aimed at the U.S.
How long can the U.S. continue functioning with all of these contradictions? There is no easy answer. Likely, the key issue is the federal debt, and the stability of the U.S. Treasury bond market. The availability of foreign buyers and the maintenance of low interest rates are likely key. Interest rates are rising, but whether this is a trend is something unknown by other than central bankers.