Why the World Needs America

[Dog's_Breakfast]

You know you can just look at the world economy to see if the world needs America or not. Since 2009 and the Economic Recession in America, it became a global epidemic with markets weakened across the board. The world NEEDS America. America's the economic center of the world and has been since it became a superpower. If America defaulted, it would kill just about every other economic system in the world.

Your statements above don't prove that the world NEEDS America. It demonstrates that when the USA flooded the world's highly-globalized banking system with fraudulent derivatives (which received AAA ratings from US credit-rating agencies like Standard-and-Poors and Moody's), it did indeed severely weaken markets worldwide and has pushed some countries into slow-motion financial collapse. The US banks and financial markets (ie Wall Street) would have also collapsed, had it not been for around $16 trillion worth of bailouts (which are now on the back of US taxpayers).

The euro is already failing because south Europe depends on tourism. Where from? That's right America!

You think that's why the Euro is collapsing - because not enough American tourists are visiting Greece and Spain? That isn't even close to reality. Aside from the fact that the vast majority of tourists who visit southern Europe are northern Europeans (and these days, many Asian tourists as well), the Euro's slow-motion collapse is happening because the Europeans played their own Ponzi scheme (mostly in the City of London, Europe's Wall Street). The first domino in the Euro zone to fall, Greece, had considerable help from US based hedge fund Goldman-Sachs. In a rational world, the corporate execs at Goldman-Sachs would be in jail (see the People vs Goldman-Sachs).

Right now the eurozone is solely dependent on how long Germany can hold out and keep bailing out the failing economies of Greece, Spain, Portugal, Italy, et. Britain had those riots not too long ago. Even in the east, Japan depends a helluva lot on the US and so does South Korea. Even fricking China would be screwed. Its economy slowed down alot since 2009 because everything about its economy revolves around the USD.

I can mostly agree with this part of your post. The huge damage to the US economy from the 2008 market scandals reduced the USA's ability to buy imports, which negatively affected exporters (notably Japan, South Korea and China). Thanks to "globalization," collapse in any large economy will affect the others. The term used to describe this is "financial contagion."

Bottom line the world loses America, the world is screwed.

I feel confident in stating that sooner or later, the USA will default on its debts, because they are unpayable. Despite the much-ballyhooed "recovery," all that has been accomplished since 2009 is more clever papering over to hide the problem. The approximately $600 trillion of fraudulent derivatives are still floating around, moved from one balance sheet to another. I must say though that I am impressed at how long this game of musical chairs has been played, but as in all Ponzi schemes, sooner or later the music stops.

Yes, when the USA defaults, it will hurt the whole world, Taiwan included. Those countries that will be hurt the least will be those that have gotten rid of all US Treasuries and stocked up on hard commodities and built their own manufacturing industries serving their domestic markets. In other words, far from needing America, the world would be wise to detach itself from the US financial Ponzi games as soon as possible.

If you want to get a clue about what actually happened in the 2008 financial collapse, I recommend that you view this video, it's a good primer:

Meltdown, the Men Who Crashed the World

[RealityBites]

I think if the world economy follows the US whether it rises or falls kinda makes it dependent on it which is kinda what the word need means. I mean I'm not gonna argue if its good or bad or why it got so dependent on America, but I am gonna say it does need it today.

I can totally agree. If every other country that needs America right now somehow found some way to keep their economies going without depending on the US, then sure they won't need the US. let's be real. That ain't happening.

You know I can definitely admit I oversimplified and generalized about the tourism being the only thing, but it is still the big one and relying on American funds like you said cost Greece. South Europe still depends at least in a big part not saying all of it on America.

I wouldn't be so smug about saying US will default. You have any idea how bad it would get if the US really did default? Just look at the world today. That's a tip of the iceberg. Saying it'll "hurt the whole world" is one helluva understatement. I really hope for the world's sake the US comes up with something besides defaulting.

[Dog's_Breakfast]

I think if the world economy follows the US whether it rises or falls kinda makes it dependent on it which is kinda what the word need means. I mean I'm not gonna argue if its good or bad or why it got so dependent on America, but I am gonna say it does need it today.

Thanks for your post RB, and sorry I didn't respond sooner. I think maybe you're getting to the crux of the issue - is having (most of) the world's economy dependent on the USA a good thing, or a bad thing? You've taken a mostly neutral position on that, but I think the original poster's position was to suggest that it's a good thing. That is to say, the USA is a positive influence on the world's economy. I think I've made it clear that I feel it isn't so positive. It has nothing to do with whether or not I think the USA is a good or bad country, but simply that "put all your eggs in one basket" is always risky.

In the past, most the world trusted the USA to regulate its excesses. Especially after the depression of the 1930s, when the USA passed the Glass-Steagall Act (which made it very hard to scam the banking system), the USA gained a reputation for managing its currency well. The USA won this trust the hard way, by diligently regulating and prosecuting fraud. This is what made it possible for the world to use the US dollar as the reserve currency. You wouldn't trust Zimbabwe dollars or North Korean Won as a world reserve currency for obvious reasons. The USA deserved the world's trust until 1999, when Glass-Steagall was repealed. Ever since, the US financial markets and banks have engaged in unprecedented fraud, and today the US banking system is a complex pyramid of financial bad paper. Tremendous effort goes into trying to hide the turd because the consequences of reporting the true state of US Ponzi finance would be so dire. At least Zimbabwe is more transparent.

I can totally agree. If every other country that needs America right now somehow found some way to keep their economies going without depending on the US, then sure they won't need the US. let's be real. That ain't happening.

I would contend that at some point the world won't have a choice. Some countries are taking the first necessary steps - the recent decision by Japan and China to perform all financial transactions with each other directly (eliminating US dollar trade between them) is an example. But both Japan and China hold large quantities of US Treasuries, a very dangerous vulnerability that I'm sure they would like to get rid of, if only they could find a sucker who would buy the Treasuries.

I wouldn't be so smug about saying US will default.

I said in an earlier post (not the one you were referring to) that there are two basic methods of default: 1) direct (declaring bankruptcy, and 2) Money-printing. I believe that the USA will take the second method. It's a kinder-gentler default, but ultimately the result is the same. The USA is already doing it, but too much money-printing at once has to be avoided, or else you get Weimar-style inflation.

You have any idea how bad it would get if the US really did default?

Yes I do. I'm afraid that Taiwan will be badly hit. The banking system here holds a lot of US Treasuries. Some day they will be worth their weight in toilet paper. If the Taiwanese weren't so besotted with "the wonderful USA," they would be selling off those Treasuries at a steep discount (probably to US investors) and using the cash to buy physical metals, and store them in Taiwan rather than trust any US entity to safeguard their assets. As the old saying goes, a bird in hand is worth two in the bush.

I really hope for the world's sake the US comes up with something besides defaulting.

I do too, but nothing that I've seen in recent times makes me optimistic. The scams continue, unpunished. Literally trillions being stolen, not a single prosecution. I cannot believe that this will end well.

However it does end, I predict that at some point in the future, the USA will have a greatly diminished role in the world's economy. The USA won't simply disappear, but may find itself about as important to the world economy as Argentina.