Twofish's Blog

October 19, 2006

Political shocks

Filed under: china, iraq — twofish @ 5:11 pm

I heard the expression a “bomb without a fuse” which I think accurately describes the situation with the US current account deficit. The thing that makes the US different from Argentina and Mexico is that the United States effectively is the worlds policeman, and pretty much all of the actors involved are willing to prop up the US economy in order have the US play this role.

The scenarios that bother me involve a political shock of some sort which radically changes the political dynamics of the situation. The obvious trigger (Taiwan) has pretty much been defused, but I’m worried about North Korea. Suppose NK were to go nuts and invade SK, or if there is a coup in NK that deposes Kim.

I think the big limit is not the willingness of China, Russia, and the Gulf States to fund the United States as world police, but the willingness of the American voter to continue to do so. One thing that scares me is that it is plainly obvious that avoiding disaster in Iraq is going to require a “butchers bill” that is going to be borne by middle America. At some point (and I’m looking at 2012 and 2016), the American voter may grow tired of its Empire the way that the British grew tired of its. However, if the US does not serve as world policeman, then China, Russia, and the Gulf States have no reason to continue to fund US military expenditures.


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