Empire of Debt, and other personal woes

The grand sweep of history in economic terms is not frequently come by. And when one is published it will likely die the dastarly death of a thousand generalizations. But once in awhile a jewel comes along that cuts deep into the underlying currents--the emergence of new phenomenon and evolution of founding institutions--while retaining the richness of detail and precision of research marked by a specialist's carefully qualified account.

And those tomes--rousing to life anthropology, history, and economics from the dead prose of their academic gravestones--become popular favorites in a society burdened with cutting-edge information and not a whit of wisdom with which to fully partake in it. Far from an exception myself, I have barely the faintest about Ancient Greek history, or how its institutional patterns juxtapose with those of the Maya. Like many, I learned with glee from Guns, Germs and Steel and The Rise and Fall of the Great Powers that China had all the skill and luck for empire but chose against it. (History is so big, week-night so short; woe is me.)

To get to the point, the new book by the editors of The Daily Reckoning, The Empire of Debt, provides some nice "literary economics," as they call it. Aside from a politically charged and controversial thesis that argues that the Federal Reserve's loose line on credit finances wanton American Empire, the book marches through the empires, corrals them with a list of parallels, and throws the noose around the head Uncle Sam, clutching the Constitution in his right hand and a red correction pen in the left.

Readers may stop short at the intimations favoring a return to the gold standard and some may even balk at the very suggestion that the world's premiere democracy is anything but pleasant and mollifying, but the book nonetheless pulls the strands of a scope shocking book together to makes its point: empires have a life of their own, and their inevitable decline is not always apparent to its participants. Besides, they manage to be almost scandalously entertaining considering they talk at length about the national debt and accounts deficit.

A national debt page turner--almost as shocking as the debt itself or the dearth of real coverage on the topic in the media or Congress. My questions are; what does it take to get public attention and political pressure on this issue? how brutal will adjustment be? How deeply rooted are the current prodigal financial habits in the function of 'the system'? And, uh, will I have to pay for other people's tab on reckless borrowing and subsidized consumption?

U.S. NATIONAL ACCOUNTS (c/o Reuters)
* United States' current account deficit for 2004 was a record
$666 billion, or 5.7 percent of GDP, up $135 billion or 25
percent compared with 2003. The deficit was $195.8 billion in
the third quarter of 2005 alone - 6.2 percent of quarterly
GDP and down from a record 6.5 percent in the first quarter.
IMF expects the annual gap to rise to $759 billion in 2005
and $805 billion in 2006 - 6.1 percent of GDP in both years.
* U.S. Net International Investment Position, which measures
country's total stock of IoUs to foreign investors and
governments, was in the red to the tune of $2.484 trillion
at end of 2004 -- or 21.3 percent of GDP.
* U.S. budget deficit for the fiscal year ended Sept 30, 2005
dropped to $319 billion, less than 3 percent of GDP, from
fiscal 2004's $412 billion, or 3.8 percent of GDP, according
to the non-partisan Congressional Budget Office. Booming tax
revenues were the main reason, even as interest payments on
the national debt jumped 14 pct, the CBO said. The U.S.
recorded an $83 billion deficit in November, the largest
November deficit on record and more than $25 billion above
the deficit a year earlier.