Collective Conscious

The US Con­gress has been in a ridicu­lously amaz­ing flurry of activ­ity since the ‘lame duck’ ses­sion started. Yes, it means that Obama has been the most suc­cess­ful mod­ern Pres­i­dent; yes, it means that Mitch McConnell’s absurd obstruc­tion­ism has failed. And so we enter a new era of divided gov­ern­ment, one in which every bill from appro­pri­a­tions to the debt limit will have to be approved by a Republican-​​run House of Rep­re­sen­ta­tives. It will be inter­est­ing, and I look for­ward to see­ing the back­lash against obstruc­tion­ism that may reshape the way the Sen­ate does business.

But what’s been going on abroad? Much is not bet­ter; the rela­tion­ships among the major economies of Europe and the world are still fail­ing to pro­vide the secu­rity and sta­bil­ity we will need for recov­ery. The key ques­tion is cur­rency — with the Euro at the mercy of Ger­many and other cred­i­tors, how do the US, China, and the devel­op­ing world respond?

The key con­cern is sta­bil­ity and debt-​​service. The US and the devel­op­ing world rely on debt finance to grease the wheels of pub­lic pol­icy; by and large, China finances it. The United States has the good for­tune of issu­ing debt in its own cur­rency, but other nations are deal­ing in cur­ren­cies they don’t con­trol, or their cur­ren­cies are tied to the US or China.

When these cur­ren­cies shift rapidly for inter­nal polit­i­cal or eco­nomic rea­sons, the shock waves can severely dam­age the debt-​​service abil­ity of smaller nations who are bound to the cur­rency. That’s why cur­rency is war. But the Euro economies are avoid­ing the ques­tion alto­gether as they sort out the fis­cal cri­sis they’ve found them­selves in. And it’s cost the devel­op­ing coun­tries, espe­cially those attached to the Euro, dearly.

What can we do from the US? Not much, but keep an eye out into the mon­e­tary deal­ings of the wider world, espe­cially if we grind to a halt dur­ing the next Con­gress. Rus­sia and China are already mov­ing away from the dol­lar, and the impli­ca­tions for our own finances could be severe, par­tic­u­larly if they con­tinue to deteriorate.