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 Peak America? The Numbers Say, Yes!

By   Shlomo Maital

 

   Writing in the Washington Post, (and on his GPS program on CNN), Fareed Zakharia cites Morgan Stanley expert Ruchir Sharma, who argues that America may at this moment be at its peak of economic and financial power – and heading downward.

   “As Morgan Stanley’s Ruchir Sharma has pointed out, the global economy looks as if it’s at “peak America.” U.S. stocks have outperformed the rest of the world this decade, and that sort of trend rarely lasts. The current recovery is now the second-longest in history, and it is due for a downturn. Interest rates are rising, corporate profit growth is slowing, and budget deficits are surging. Even President Trump seems aware of the likelihood of a dip, which is why he has been preparing the ground for it, blaming the Federal Reserve for raising interest rates.”

   Sharma notes this striking fact: US stock markets have tripled in value since 2010, while all other stock markets in the world have risen by only an average of 50%.

   The last time such an imbalance happened? 1999 (just before the dot.com bubble burst). And before that?   1929.

   Zakharia notes:   “Anywhere one goes in the world these days, leaders talk about the United States’ retreat from the world stage. They note that it began before Trump. Most date it to the aftermath of the Iraq War, spanning the administrations of George W. Bush, Barack Obama and now Trump. And while the Trump administration is bellicose in its policies, especially on trade, they are all in service of a Fortress America mentality that seeks less engagement with the world, politically and economically.”

   And he continues: “Foreign leaders also note that the United States is likely to be increasingly constrained by its mounting budget woes. The Financial Times’s Gillian Tett points out that the U.S. government now spends $1.4 billion a day on its debt, 10 times more than the next major industrialized country does. As interest rates rise and more Americans reach the age of collecting Social Security and Medicare, the federal government will be unable to fund much else. Ezra Klein has quipped that the American government is “an insurance conglomerate protected by a large, standing army,” and that is becoming truer every day.”

   Many in the US and abroad loathe President Trump. They should not, however, gloat when he makes America decline (again)   (MAD).   A world with a declining America will be chaotic, violent and troubled.

     Zakharia: “American retreat will not produce a better world. It will be messier and uglier. To get a glimpse of it, look at the Middle East today. As the United States has withdrawn from its traditional role as the region’s power-broker — maintaining relations with all sides and striving to achieve some degree of stability — Iran, Turkey and Saudi Arabia are all jockeying for influence. The United States has simply subcontracted its policy to Riyadh, encouraging the Saudis’ reckless behavior and resulting in the world’s gravest humanitarian crisis, the war in Yemen, where 12 million people are on the verge of famine.”

 

   

 

 

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Blog entries written by Prof. Shlomo Maital

Shlomo Maital
September 2019
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