Myths confirmed

I wonder why otherwise reputable Foreign Affairs has published this article on The Overstretch Myth, the purpose of which is to dispel the notion that the US current account deficit & foreign debt are threats to its global position.

While the question is an extraordinarily valid one, deserving a lot of well reasoned attention, the "reasoning" it receives by Messrs Levey & Brown is less than convincing. What the article boils down to are a few dogmata, embellished with some remotely connected numbers. Here's the crucial bullet points to save you reading the article:
  • "The economy will at some point have to adjust to a decline in the dollar and a rise in interest rates. But these trends will at worst slow the growth of US consumers' standard of living, not undermine the United States' role as global pacesetter."
  • "Although the net international investment position will surely continue to grow for many years to come, its increase will be far less dramatic than many economists fear."
  • "Although the period of global rebalancing would be painful for U.S. consumers and workers, it would be even harder on the European and Japanese economies, with their propensity for deflation and stagnation. Such a transitory adjustment would be unpleasant, but it would not undermine the economic foundations of U.S. hegemony."
  • "Only one development could upset this optimistic prognosis: an end to the technological dynamism, openness to trade, and flexibility that have powered the U.S. economy. The biggest threat to U.S. hegemony, accordingly, stems not from the sentiments of foreign investors, but from protectionism and isolationism at home."
  • The last point, while certainly true, illustrates the warped, US-centric perception of the piece to perfection: Economically, we're the best, and we'll stay that way because - we'll stay that way. Does that sound dogmatical? To me, it does.

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