And more views from Bill:
*** The German's exports equal 40% of their economy. For Austria, Belgium, the Netherlands, and Ireland exports are half of GDP. All these countries are benefiting from globalization.
The US, on the other hand, has been a victim of its own good fortune. It can export money. America has the world's reserve currency which put it in much the same position as Spain in the 16th century. Gold, then, was the world's reserve currency. And Spain had gold. She had stolen it from the Aztecs and Incas, fair and square. And when she brought it back to the Old World, she found herself immensely rich.
What happened next, you might wonder? Well, we'll tell you...
Two things:
First, this extra gold represented a huge increase in the money supply. Naturally, prices rose. Consumer price inflation soon became a major fact of life throughout Europe – but especially in Spain.
Second, the Spanish found that they could buy what they needed from abroad. They had money, so they didn't need to develop domestic manufactures. Neglecting their own business and commerce, the Spanish lived on imports. We don't have the figures, but the circumstances imply a huge trade deficit between Spain and the rest of Europe during the 1500s. Goods and services came to Spain…and gold left her.
By mid-century, Spain was already in decline. Her gold had run out. All she had left was military power. So she put together her 'Invincible Armada' to attack England. As we all know, the armada soon proved vincible and Spain retired to second-rate, then third-rate status and remained there for centuries. As recently as the 1970s, people in France said: "Africa starts at the Pyrennees."
*** "What is really driving the US economy is the war in Iraq and the war against terror," said a dinner companion on Saturday night. "They're spending $75 billion per quarter; that's $300 billion a year. And it's in addition to the regular budget. People think that money goes to building roads and schools in Iraq. But most of it – all but 15% or so – is spent in the US It goes to contractors for computer programs, weapons, supplies. That has a huge impact on the economy. And that's why there is so little opposition to the war. People know that when the war stops, the economy goes into recession."
Our friend is a contractor for the Pentagon:
"It is unbelievable how much money is being spent. They are spending billions right on the Pentagon building itself. And now there's a lot of argument about where the money is being spent. People in New York are complaining about spending money in Montana. And they've got a point, of course. Montana is not exactly the front lines in the war against terror. But from a defence point of view, almost all the money is wasted anyway, so it probably doesn't make much difference.
"What a strange and wonderful war. Rather than tightening our belts, the war is taken as a pretext to spend more money.
