Data-images from Krishna Guha's report in yesterday's FT Times.
I hear it said sometimes that national boundaries mean less today than they used to. The word 'globalization' is thrown around. We have come to the end of 'national soveriegnty.' Nations now are all 'in it together.' 'Interdependent.'
I don't doubt the people who say these things are right, and that globalization is significant. But we all still live in nations, whether we like it or not.
In fact, I think Americans are right now facing a major problem that sits squarely at the feet of us as a nation: As a people our collective debt/wealth, taken together, is worth far, far less than it was sitting at 21 months ago (see the middle data-image above). Some of us are doing fine anyway. Some of us aren't. There are major differences among us. But together, no matter where you are, your life is affected by the dramatic depression in the value of American debt. Financing like we've enjoyed the past decade just isn't available right now, and companies as well as households are forced to cut back in this world without such easy money.
Have you heard the phrase 'toxic assets'? That our banks hold toxic assets is the crux of the current financial crisis. So what is a toxic asset? Toxic assets mean debt nobody will purchase.
I have to say, I find that so remarkable, that our debt is near worthless. The most followed economist of the last fifty years -- Milton Friedman -- figured he'd never see the day the collective debt of private Americans couldn't find a market. And here we are, living through precisely that, getting to look at it with our own eyes. But Mr. Friedman was right: he didn't live to see it. He passed on in 2006, bless his soul, a full year ahead of the meltdown that began in August 2007.
So, anyway, I assume economic growth is the goal. How then do we achieve it? The situation we have is the following, and it's not pretty. Either we quickly re-store our national credit-worthiness to past levels and beyond, trying to maintain the system we have enjoyed so much in which the world stockpiles dollars and finances American debt. Or we use political power to create a new system that is, like the previous one, built toward our interests.
Put another way, the question is, have we hit the peak of diminishing returns of the old system? Should we scrap it? Oh, but then we can't forget: Are we intellectually smart enough to create a robust and prosperous new system? And I guess we even need to ask: Are we that politically powerful any longer? After Iraq, and with the rise of China, ignoring this question seems untenable.
It might just be me, but it seems to be the case that, for the first time since WWII, economic growth in America has a highly uncertain future. If so, that means, cautiously speaking, that we are entering an entirely new kind of America from that which anybody under the age of 60 has ever experienced.