Like in the twenties, consumer spending has kept going despite the fact that consumers aren’t getting their fair share. Unlike in the 20’s the American consumer, and America as a whole, is a net debtor - Americans have kept consuming by borrowing. Estimates of how much money the US borrows range from 80% of the world’s lendable money, to over 100%. (Yeah, over. In other words, all the legal money, plus a lot of the illegal money.) The American public has been running a literally negative savings rate, and so has the US government.

In the 20’s the US was the new great industrial power behind tariff walls and with substantial trade surpluses Today it is in deficit. This parallels not the US in the 20’s, but Britain in the 20’s. At that time Britain had negative trade balances and Europe in general was in negative trade balance with the US. In order to buy cheap US goods they had to borrow the money, and the US was all too willing to lend.

Today that role is played by China and Japan. While China and Japan don’t use classic tariffs as their primary economic subsidy for their internal industries the way the US did in the 20’s, their strong intervention to keep their own currencies artificially low against the dollar (an intervention that is costing China about 10% of its entirely yearly GDP) functions the same way - a cheap Yuan or Yen makes their imports very competitive against made in America goods, and makes American manufactured goods (and American services) much less competitive in China. The massive gutting of manufacturing jobs over the last seven years is probably at least two thirds the result of these subsidies, and the massive trade and balance-of-payment deficits are also exacerbated by this policy.

The US’s consumption is fueled by what amount to Chinese and Japanese loans, and the Chinese internal economy is not sufficient to absorb the products of thier own manufacturing capacity.

Meanwhile, in China, by the end of January, there were 80 million retail brokerage accounts (when you consider the size of the Chinese middle class, this is astonishing). The Shanghai stock exchange is on a tear, real estate in much of China’s coastal areas is rising at double digit rates every year and savings accounts are paying 3% or less. Like the US in the 20’s, and unlike America today, the Chinese have a huge savings rate (around 50%). And in another, eerie presage of the Great Depression, soil erosion in China’s interior, where the majority are still farmers, is out of control and leading to dust storms. (The Great Depression was made much worse by huge dust storms as the prairie top soil blew away after years of being abused combined with a few years of drought.)

We have little time left. I suspect like Germany and Japan in the 30's we will turn to our military to obtain the "precious fluids" and other resources necessary to preserve our economy and our power. But, like them, it won't be enough. The only question is how quickly will our militaristic strategy take us down? My guess? Sooner than we think. You want to know why Cheney wishes to use nukes against Iran? It isn't to destroy Iran's pitiful nuclear program, it's to show the world that we are still cowboys at heart, still willing to "shoot first and ask questions later," still the only country stupid enough to have used, and to continue to plan to use, nuclear weapons against a defenseless nation.

It's what gangsters do after all when they want to expand their territory and make more money, or to ensure the survival of their criminal enterprises from other competitors. They break a few legs, whack a few guys, do whatever is necessary, leave all options on the table. Dick wants to use those nukes not to stop Iran, but to threaten China. Count on it. And when the collapse comes, the urge to use our biggest weapon to intimidate our principal creditors and resource suppliers will only intensify.

As long as we allow politicians to be led around by the nose at the whim of their corporate paymasters, we will see no one with the courage to stand against this rising tide of authoritarianism, militarism and out-sized greed. And we will allow it to continue until the bottom falls out. In 1932 we were lucky to get Roosevelt, a progressive thinker and leader who literally saved our country from fascism. Germany was not so lucky. They got Hitler.

I fear for what may befall America when the next depression hits. And absent a miracle, that's just what will happen. In 1932 our military was small and devalued. Today? The military is the most trusted institution in America. Now that's a scary thought. What do you think that means for our future?

Iraq Iran Middle East George W. Bush Dick Cheney Globalization Depression Economics Fascism Democrats Republicans Election 2008