Thursday, February 24, 2005

Foreign Affairs - US Hegemony Well Entrenched

Foreign Affairs - The Overstretch Myth - David H. Levey and Stuart S. Brown

A very thorough article which argues that the US will keep it's economic control over the world in spite of the dire warnings over excessive debt.
I may not agree completely with the conclusions of the article but it is noce to see a careful explaination that refutes the NYTimes nay-sayers.
The conclusions are very one-sided.
There is a lot of meat in this article. Sometimes it is difficult to keep the numbers staright, but it is worth the effort to work through it.

Despite the persistence and pervasiveness of this doomsday prophecy, U.S. hegemony is in reality solidly grounded: it rests on an economy that is continually extending its lead in the innovation and application of new technology, ensuring its continued appeal for foreign central banks and private investors.
The U.S. dollar will remain dominant in global trade, payments, and capital flows, based as it is in a country with safe, well-regulated financial markets. Provided U.S. firms maintain their entrepreneurial edge--and despite much anxiety, there is little reason to expect otherwise--global asset managers will continue to want to hold portfolios rich in U.S. corporate stocks and bonds.
Only one development could upset this optimistic prognosis: an end to the technological dynamism, openness to trade, and flexibility that have powered the U.S. economy. The biggest threat to U.S. hegemony, accordingly, stems not from the sentiments of foreign investors, but from protectionism and isolationism at home.

Foreign Affairs - The Overstretch Myth - David H. Levey and Stuart S. Brown


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