The first episode, dating to my childhood, came a few years after OPEC flexed its muscles in the 1973 oil embargo. The Saudis and others started using their petrodollars to buy up U.S. assets here and there, generating a fair degree of Arab-bashing at the time. It even served as fodder for the rants of the fictional anchorman Howard Beale in Network — a great movie in its own right, and an excellent moment-in-time capturing the zeitgeist of helplessness in post-Vietnam, post-Watergate America. A few years later, OPEC lost all its pricing power as oil was back to nearly $10 a barrel and the storm passed.

The second episode came in the 80s, when Japanese investors started snapping up U.S. commercial real estate, including Rockefeller Center. Time magazine, still sort of relevant in that pre-Internet era, captured the moment with a quote from freshman Senator Joe Lieberman (one must imagine him saying this in his voice for the full effect): “This year when they turn on the lights of that Christmas tree in Rockefeller Center, we Americans are going to have to come to grips with the reality that this great national celebration is actually occurring on Japanese property.” The following year, Japan entered its recession-in-perpetuity and Rockefeller Center was back in U.S. hands by 1995.

This time the “assault” is coming not from Arabs, not from the Japanese… but from everyone. And that’s what could make the backlash so ugly. America against the world.

Look at just the last two days: Arabs buying the Chrysler Building (never mind that it was already owned by the German subsidiary of an Atlanta-based fund, making its American provenance rather dubious to begin with), and today Europeans are bidding for Budweiser maker Anheuser-Busch. The outraged flag-waving is underway.

Americans will not want to hear that all this is their own fault, borrowing and spending on both a personal and governmental level to a point where they can’t help but be in hock to the rest of the world, while the rest of the world seeks real assets to take the place of its increasingly-worthless dollars.

So not only are we heading for a financial storm and an energy storm, but also very likely a storm of ugly jingoism that will only accentuate and accelerate America’s pariah-state status. The phenomena might very well feed on each other. (And depending on when it reaches critical mass, it could even prove a decisive factor in the presidential election.) Soon the rest of the world could be as repulsed by the American people as it is by the U.S. government — as our Founders weep in their graves for the Republic that’s been lost.

Update: While not exactly a case of “furriners” buying up “Merkin” assets, this is definitely in the same vein — a growing legend that the dastardly Chinese are drilling for oil off Cuba, despite not a drop of evidence to back it up. Memo to Dick Cheney and everyone else peddling this nonsense: If you stopped sucking up to the Cuba Lobby and recognize that if the embargo hasn’t worked by now it never will, your friends at Big Oil might be drilling those reserves right now.

Source: Xenophobia Redux

Today is a holiday in Britain and America. But here at The Daily Reckoning, we are on the job – because there are things that need to be reckoned with.

Before we get down to serious reckoning, however, we give you a look at the news from the end of last week.

On Friday, the Dow fell another 145 points. Oil stuck around $132 and the dollar at $1.57 per euro. Gold rose to $925.

Remember when you could buy an ounce of gold for less than $100? We do. Remember when you could buy a gallon of gas for 25 cents? We do. What is Memorial Day for…but for remembering?

First, let us pause for a moment of silence, in honor of our ancestors, our veterans and our war dead. Like Pericles, we recognize that we have a big debt to the generations that went before us — their sacrifices have helped made us what we are…and made the country what it is. They saved. They invented. They built. What we see around us is mostly the result of their hard work…and many years of saving. If our ancestors had used up everything they produced, there would have been nothing left behind. But they didn’t. They left us their inventions and their constructions. They left us money, too. In the post-WWI period up until the mid-‘1980s, America was the world’s biggest creditor. More people owed more money to Americans than to any other nation. Public finances were occasionally stretched – such as during WWII itself – but from the founding of the republic almost until the Reagan years, each federal administration generally tried to leave the government cash till in about the same state it found it.

But in the space of a single generation, that huge legacy of capital and custom has been squandered. Now, the United States is the world’s greatest debtor – by a huge margin. Every year, it spends approximately 6% more than it earns. Its leaders have abandoned the virtuous practices of their ancestors. They no longer even pay them the homage of hypocrisy; they don’t even pretend to balance the budget, and the latest tally reported in these reckonings put the total unfunded liability at $61 trillion. This has effectively bankrupted the average family. It also turns every new baby in the U.S.A. into a major debtor – with more than $100,000 worth of unpaid bills –on the day he is born.

So we have a lot to remember this Memorial Day, and a lot to reckon with.

Warren Buffett was born in 1930. He must remember what the United States was like when it was still growing and genuinely prosperous.

“I’m fond of 1929,” said he a few months ago. “I was conceived that year and have always had an agreeable feeling towards the crash.”

Now, the richest man in the world, Buffett has come to Europe looking for better investments.

In an interview for Der Speigel, the Sage of the Plains said the United States was already in a recession and that it would be “deeper and longer than people think.”

He was in Madrid over the weekend, so we picked up a copy of El Pais to see what else he was saying.

When will growth in the U.S. economy pick up, the Spanish paper wanted to know?

“I have no idea,” Buffett replied.

When will the financial markets stabilize?” El Pais persisted.

“No idea about that either.”

So you see, Buffett could write for The Daily Reckoning; he would fit right in. Go ahead; ask us a question. We’ll give you the same answer Buffett gives:

We have no idea. But we do have opinions.

And in our opinion, George Soros is probably right when he says:

“The current financial crisis was precipitated by a bubble in the US housing market. In some ways it resembles other crises that have occurred since the end of the second world war at intervals ranging from four to 10 years. However, there is a profound difference: the current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years.”

*** Yes, it was a super-boom that Soros describes. And it coincided with your author’s life. He was born at the beginning of it. He has now reached what he thinks is the end of it. That financial super-boom also probably marked America’s great peak – when everything went so well for so long that politicians and central bankers all wanted to claim credit for it.

But the tippy top of the peak also coincided with a number of trends and events that made it possible. Among the most important was a low oil price. Back in the ‘70s, the price of oil went to $30 – and shocked the world. It stayed around that level for 5 years, long enough to convince people that it was permanent. Consumers – especially in Europe – learned to live with less energy. Oil companies spent fortunes to produce more. And then the price plummeted back to $10…and world enjoyed a great boom.

That boom seems to be over, it drowned in the rising tide of the oil price. The black goo has gone up $50 a barrel since last September. The world’s consumers and producers should simply take the price clue with good grace – cutting back consumption and looking for new supplies, just as they did in the ‘70s.

That is what is happening. The oil companies are spending four times as much on exploration as they did eight years ago. And consumers are being forced to cut back too. But it is not all that is happening. Central banks are fighting the correction with everything they have – and all they have is cheap money.

As you know, the combination of higher fuel prices…and lower housing prices…is squeezing America’s family. Comes news at the end of last week that the typical house in California is down 32% from a year ago. The state also has the second highest foreclosure rate in the nation, with one out of every 204 houses going back to lenders.

The other thing putting pressure on U.S. family budgets is the price of food. For the 15 years, up to 2007, food prices rose only 2.5% per year. This was the “Great Moderation” that central banks felt so proud of. But in the last 12 months, food prices are said to be up 4%.

One of those countries is Cuba. Under a series of executive orders and laws, it’s illegal for a U.S. citizen to travel to Cuba, without a “license” issued by OFAC. It’s also illegal for a U.S. company to do business with Cuba without a license, except in narrowly defined circumstances.

However, these laws and regulations have no legal effect in other countries. If someone, say, in Spain, wants to travel to Cuba, there’s no violation of U.S. law because the United States has no jurisdiction over Spain.

Only, it does, according to OFAC. In October, OFAC shut down 80 websites owned by a British travel agent named Steve Marshall who sells vacations to Europeans. Why? Because Cuba is one of the travel destinations Marshall offers his clients.

This was justified, according to OFAC, because Marshall’s company “helped Americans evade restrictions on travel to Cuba” and was “a generator of resources that the Cuban regime uses to oppress its people.”

Marshall says he didn’t market Cuban vacations to Americans, “because they can’t travel there, anyway.” But his real mistake was using a U.S.-based domain name registrar for his websites. This gave OFAC the ability to contact the registrar, eNom, and order the company to pull the plug on Marshall’s websites.

Given the fact that failure to comply with OFAC regulations can be punished with a 30-year prison sentence, a US$5 million criminal fine, or a civil penalty of up to US$1 million, eNom quickly complied.

Fortunately, Marshall was able to re-register his websites with a European registrar, although he had to rename most of his websites. He added the suffix “.net” rather than “.com.”

But there’s a larger issue at stake. OFAC shut down Marshall’s business without warning, without a hearing. And it resulted in hundreds of thousands of dollars in lost revenues. Not exactly the “American way” we read about in civics textbooks.

However, it could have been worse. If Marshall had established a U.S. bank account, or maintained any other asset in the United States, the U.S. bank or custodian would have been obliged to freeze it, and turn the proceeds over to OFAC.

Are you on the OFAC terrorist watch list? You can find out for yourself by visiting OFAC’s list of “specially designated nationals” here.

If you’re on the list, though, don’t count on getting off anytime soon. That’s because the only way to get off is to ask OFAC to remove you from the list. This is an administrative determination – you have no right to a court hearing to determine if you should have been put there in the first place.

In other words, the same bureaucrat who put you on the watch list in the first place may be the one who you ask to take you off of it. Good luck…