This weekend, there is a meeting of parasites in Washington to discuss the host’s shortage of blood. The finance ministers of the G7 (“group of seven” major economic powers of the world) are meeting in DC to discuss the global economic collapse brought on by the U.S. finally being sucked dry of all its assets through the trade deficit. Conspicuously absent from this group of mites is China, the six-inch-long bloodsucking leech that’s been latched onto a main artery of America’s economy.
Every once in a while, the head of the host, Bush, pops up to reassure us all: “Everything’s OK! We’re workin’ on it! It’s hard work! We’re all in this together and we’ll get out of it together!”
Although I’m making light of it, this meeting is significant because it may be a crucial turning point for our economy if the talks break down. Although the statements emanating from the meeting express unity and resolve, don’t be fooled. The other six of the G7, our parasitic trade “partners,” came to town mad as hell. Although Russia isn’t included, Putin has been very open about blaming the U.S. for this global crisis. European leaders have been more muted in their criticism, but generally agree with him. All are angry that the U.S. assets they’ve purchased with our dollars are proving to be worthless. They want their money back. In the meantime, the U.S. is making a case for them to put even more blind faith into our bankrupt economy.
These talks are doomed to collapse or, at the most, to produce one more statement of “unity” and “resolve,” crafted to mask the behind-the-scenes vitriol. The problem is that all sides enter into these talks believing in their own B.S., to put it rather indelicately. Our trade “partners” believe that free trade and globalism works, because the surplus they have with the U.S. does a very nice job of propping up their bloated labor forces, and they want to keep it going. The U.S., on the other hand, believes that if we just stick with it long enough, things will turn in our favor in a big way. All ignore the reality of the situation, that trade deficits are simply unsustainable for any protracted period of time, and America’s is now thirty-three years long and growing. Another problem is that the worst economic parasite of them all, China, isn’t even represented at this meeting.
One of two things will happen. Either the other six of the G7 will capitulate and agree to invest blindly in American banks and other institutions, ignoring their own well-being and their well-founded suspicions that such investments are worthless, or the talks will devolve into a shouting match, probably led by Japan and Germany demanding that we make good on their investments, while Paulson and Bernanke demand more blind faith in their endless bail-outs. In a best-case scenario, the angry discussion may turn toward trade, with the U.S. blaming the others for not meeting their obligations. If that happens – and it very well could – we may finally have reached a turning point in our decades-long economic nightmare.
As much as this economic turmoil hurts, especially the huge drop in equities, it may work out for the best. There may be a bright light at the end of this very dark tunnel – the dawning of the realization among America’s leaders that huge trade deficits can’t be sustained, and that positive steps must be taken to restore a balance.