Wednesday, June 06, 2012

That Doctrine...

Detractors of United States policy must be crestfallen with its stubborn adhesion as world hegemony.  It seems as though the U.S. is always ascendant regardless of economic and political cycles, and each time the U.S. appears on the verge of being suitably chastened, it once again ekes out victory.

The “decoupling” intellectual exercise that posited Emerging Markets as being on the verge of dominance is now exposed for its weakness.  Without increasing GDP, these countries quickly fall from grace as their institutions lack the capacity to handle any amount of social disorder.

With the recent GDP print of Brazil and associated rate cut, we are now seeing the next step in the development of country-formation and the fruition of the Obama Doctrine fully developed in the Antipodes.

One of the important observations to note is that global interest rates are the lowest in history (per capita if not on an absolute basis) and yet the globe is mired in deflationary pressures, contrary to classical economic theory.

With Argentina, Ecuador, Venezuela, Mexico, etc. destabilizing quickly, a region with a historically communist/socialist bent will experience a resurgence of such activity.  In a previous post, I opined that the U.S. activities with respect to the drug war have anticipated these events and have built a network of partners in order to guarantee stability in the area.

The economic pressure building in locales that have little experience or expertise in dealing with financial calamity and wealth destruction is enormous, and provides the U.S. with an once in a millennium opportunity to cement its position.

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