Poking through dusty ruins looking for our future. Greenspan and Bush accomplished a great feat…an explosion of spending that has blown up in our faces. The U.S. still on a slip-n-slide…and more!

“Let Rome in Tiber melt…”Rome did melt into the Tiber. The place was invaded by barbarians…the
population sank from over a million to under 100,000. And when the city
was “rediscovered” by tourists with a sense of history in the 17th
century…there were goats grazing amid the ruins of the ancient city.

There are people who believe that power, progress, and wealth are always
on a rising slope. Let them come to Rome!

Roman property was a sell for a period of probably a thousand years…from
the peak of Roman power, around 100 AD, down to its nadir, sometime after
the Renaissance.

We have come to Rome on your behalf, dear reader. We poke through its
dusty ruins looking for the future. There are more ruins to come, we
think…

(Oh, the labors we undertake for your sake, dear reader. Last night,
trying to get in the spirit of the place, we drank nearly a whole bottle
of wine from Abruzzo. Today, we will go with a Tuscan variety…)

But let us first look at the news:

“Does the US matter any more?” The question comes to us from the head of
research at Societe Generale. Looking at the data from the International
Energy Agency in Paris, reported in this space yesterday, he noticed that
now China, Russia, India and the Mideast use more oil than the USA. What’s
more, energy use in America is going down…while it is skyrocketing in
those other countries. Thanks largely to growing demand in the emerging
markets…and the falling value of the U.S. currency…the price of oil
hit a new record yesterday – at $118.

The United States matters less and less to the oil market – but is still
very important, of course.

We have guessed that the United States of America is a sell. Its money,
its paper, its property, its labor, its stocks, its industries, its debt –
sell them all.

We don’t mind saying so…still, we don’t like to hear the foreigners say
it. A man may have noticed the swelling with his own eyes; still he
doesn’t like to hear a stranger say his wife is getting fat. So when the
Financial Times comes out with an article saying the same thing, it sticks
in our craw.

At least the FT is nice enough to use a euphemism. Instead of seeing the
United States on its knees, it sees the “end of unipolarity.” As we all
know, when the Soviet Union threw in the towel in 1989, the US was the
world’s undisputed hegemon. America was on top of the world – with no real
competition. It was a “unipolar” world, as the FT would put it. The stock
market boomed. The dollar rose. America’s chest swelled with homegrown
pride and the entire world’s credit. And by the late ’90s, President
Clinton summed it up: “things couldn’t get better,” he said.

He was right. They couldn’t. So, they got worse.

No nation can stay on top of the world forever. But when you have no
competition, you can’t rely on others to bring you down; you have to find
ways to destroy yourself. For that job, America found just the men it
needed just when it needed them most – Alan Greenspan and George W. Bush.
What these two men accomplished is probably one of the greatest feats in
human history. They took the richest, most powerful country the world has
ever seen and, in the space of only five years, practically ruined it.

First, says the FT article, the soaring price of oil had the effect of
transferring trillions of dollars from the biggest oil user – the United
States – to the oil producers, notably the Arab states and its former
enemy, Russia.

Second, the federal government went from a budget surplus over $100
billion in 2000 to some of the largest government deficits ever recorded.
Those, along with huge current account deficits equal to 6% of GDP,
changed the United States from a chooser into a beggar – heavily reliant
on foreign money.

The FT doesn’t mention it, but America’s spending spree had another
important effect – it lit a fire under its new commercial rivals.
Americans spent absurdly – which caused the Chinese to build factories,
learn skills, and pile up a mountain of U.S. dollars.

Professor Paul Kennedy practically foretold all this when he noted that
super-powers tended to “over-reach.” But even he couldn’t imagine how much
of this over-reach would be caused by so few people in such a short period
of time. Alan Greenspan reached for the stars in the early 2000s. His
emergency-level Fed rates triggered an explosion of spending, borrowing
and leveraging…which has now blown up in our faces.

And the Bush Administration took on a war that has proved to be costly
beyond anyone’s imagination. The total price of the war may come to $1
trillion or more – at a time when the United States already needs to
borrow $2 billion per day.

Obviously, more prudent, more cautious leaders would have prevented these
catastrophes. They would have read history…reduced expenses…raised
interest rates…pulled back the troops…and saved money. But sensible
leaders do not make history. Fools do. People reach for glory. Then, they
over-reach.

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