The Sweet Smell of Schadenfreude

The world is crowing over America's near-economic meltdown.

BY JOSHUA E. KEATING | AUGUST 2, 2011

Neither the left nor the right is particularly happy about the deal that was passed this week to avert a U.S. default -- memorably described by one congressman as a "sugar-coated Satan sandwich." Overseas, the reactions to Washington's dysfunction have ranged from confusion, to concern, to barely contained gloating. 

CHINA

As the largest foreign holder of U.S. debt, China's interest in the debt ceiling debate was hardly academic. State wire service Xinhua expressed its dismay at the potential of a default in the run-up to the final debt decisions, calling the political brinkmanship in Washington "dangerously irresponsible" in an editorial last week and noting that the "ugliest part of the saga is that the well-being of many other countries is also in the impact zone when the donkey and the elephant fight."

But now that Democrats and Republicans have come to an agreement, Xinhua hardly seems satisfied with the conclusion, enlisting American economist Dan Steinbock who writes, "Despite all the hype and drama," the deal is "unlikely to avert the downgrading of US credit rating."

The state-sponsored paper Global Times takes a bigger picture view, editorializing on how the -debate has already negatively affected U.S. standing in the world. "The US is well-known for promoting rules and regulations to other countries, but now countries are increasingly realizing Washington can stamp all over its own rules and regulations," the editors write. 

The piece goes on to speculate that U.S. instability could lead the country to lash out militarily at its rivals. "When the country prospers, it will use more civilized methods to secure its national priorities, but when it faces a crisis, it will use all methods to defend itself."

And as a final turn of the screw, the United States is made to look like an unruly, wayward child -- the editors lament that "the US debt China holds is too small to have any major leverage" and suggest that China needs "more patience and wisdom to acquire the capability to deal with the US."

SAUL LOEB/AFP/Getty Images

 

Joshua Keating is an associate editor at Foreign Policy.

HURRICANEWARNING

1:33 PM ET

August 3, 2011

alot of doom and gloom here.

alot of doom and gloom here. also, alot of short sighted, irrelevant comparisons, and statements. This smacks of a knee jerk reaction to a crisis. If we are being honest about things, then yes, the debt issues are a real black eye on America, and our downgraded rating is a serious issue too, but Great powers wax and wane. we are a young power, we are NOT Greece, we are NOT Rome, and we are NOT Britain. we are totally different in about a million different ways. The US isn't going anywhere. we'll take some hits on the chin, and we will lose some standing and power (short term), but we'll be back. You can't count out a country of 300 mil; with healthy demographics, an educated, literate population, 2 coasts, a massive military, natural resources, and 'stable' neighbors. If people fuck with us while we're down and out...they do so at their own peril.

 

HURRICANEWARNING

6:19 PM ET

August 3, 2011

Mexico, by the way, is

Mexico, by the way, is extremely stable. It is in neither the narcos or the governments best interest to allow a failed state. mexico's economy is booming, and aside from some lawless border and smuggling towns, Mexico is safe, and secure. especially for foreign investors. Also, the whole thing about how i was proving some parts of the article...you're right, and that was intentional. the article acted as if we would somehow become more vulnerable to military strike than we were before. my contention is the exact opposite, we are more dangerous, out of control and unpredictable when we are weak. And with a military like ours, undoubtedly the best in history, it would be unwise to EVER count us out. that would mean the end for whoever did. My point regarding the differences between America and rome had to do with the fact that if you look back into history, you realize that Rome had MANY large problems that it had to deal with in its history, many ups and downs, as did Britain, Greece, etc, etc, etc. We are currently experiencing one of these problems. The idea that we will stay this way, barring some sort of large scale disaster, is unlikely.

 

HURRICANEWARNING

6:19 PM ET

August 3, 2011

Mexico, by the way, is

Mexico, by the way, is extremely stable. It is in neither the narcos or the governments best interest to allow a failed state. mexico's economy is booming, and aside from some lawless border and smuggling towns, Mexico is safe, and secure. especially for foreign investors. Also, the whole thing about how i was proving some parts of the article...you're right, and that was intentional. the article acted as if we would somehow become more vulnerable to military strike than we were before. my contention is the exact opposite, we are more dangerous, out of control and unpredictable when we are weak. And with a military like ours, undoubtedly the best in history, it would be unwise to EVER count us out. that would mean the end for whoever did. My point regarding the differences between America and rome had to do with the fact that if you look back into history, you realize that Rome had MANY large problems that it had to deal with in its history, many ups and downs, as did Britain, Greece, etc, etc, etc. We are currently experiencing one of these problems. The idea that we will stay this way, barring some sort of large scale disaster, is unlikely.

 

ANON45

4:44 AM ET

August 4, 2011

If such happens, it will certainly be to world's detriment.

Once the Dollar is no longer the world's reserve currency, we can reasonably expect the dollar's value to plummet. We can then reasonably expect million upon millions of overseas workers to get laid off and many companies to go bankrupt as their primary market and holdings become worthless. Elsewhere less demand means less workers, which means unemployment. Expect even more widespread poverty, famine, and social unrest when the US dollar is no longer reserve currency.

US debt and the consumerism it drove was the engine for much of the developing world's development. Without that engine, expect a swift decline all around.

 

VERBATIM

2:31 PM ET

August 3, 2011

It's Envy

Yes, they envy the good old US, our democracy above all : How it works for our plutocracy. There is no trouble here, we have yet a few million of them homeowners to screw before they default too. All is well. Sweet dreams.

 

WILLWISH

2:47 PM ET

August 5, 2011

We are totally different in

We are totally different in about a million different ways. The US isn't going anywhere. we'll take some hits on the chin, and we will lose some standing and power (short term), but we'll be back. We are not a 3rd world country that just exports handmade jewelry. You can't count out a country of 300 mil; with healthy demographics, an educated, literate population, 2 coasts, a massive military, natural resources, and 'stable' neighbors.

 

IEWGNEM

6:49 PM ET

August 3, 2011

Almost all the ingredients

Almost all the ingredients for the US to descend down the path Nazi Germany are here: a bad economy, an ideology driven political system, a culture of blaming others for one's own problems and a habit of of solve problems with violence. All that's needed now is for some charismatic lunatic to unite all the crazies and the world will wish the Soviets won the Cold War.

 

JBIRDMENJ

5:44 PM ET

August 4, 2011

Open your eyes

The idea that what the Republicans or tea party did is somehow illegitimate is crazy. I think that most of the stimulus was a waste and that the USA needs to lower its total take from federal taxes to about 10% of GDP and learn to live within that limit.

The tea party is saving America and is the opposite of "a culture of blaming others for one's own problems"; it is forcing the Democrats to start dealing with our nation's problems. It is also ironic that the Republicans are critisized for "mis-using" the debt ceiling law; before last fall's election, the Democrats controlled both houses of Congress, including the Senate with a filibuster-proof majority, and the Presidency, and not only did they not eliminate the debt ceiling law, but they also passed massive spending bills and didn't pass a budget - the US hasn't had a budget since 2009, I think.

The government, both Republicans and Democrats, cannot be trusted to preserve assets during boom times and have money set aside for stimulis during downturns. In order to prevent massive deficits, we need a balanced-budget amendment which would only allow deficits if approved by a supermajority.

 

PHILBEST

11:08 PM ET

August 12, 2011

Urban land price bubbles are the killer

The biggest single cause of economic trouble today, is urban land price bubbles.

Everyone getting schadenfreude over the USA needs to take a look at their own economy - including India and China. Their urban land price bubbles are easily as bad today as Japan's was in 1990, and you can be sure the next "Asian Crisis" is going to be even bigger because of this. It can't be long.

Proportionately, most of the world's economies are in even more trouble than the USA's. The USA does have a high proportion of cities with low, stable urban land prices that did not bubble like California's did. (If not for California, the USA would not have had a crisis at all). These cities are pulling the US economy back up today. Most other bubble nations do NOT have these anchors of economic stability.

People confuse high urban land prices FROM PROSPERITY, with high urban land prices FROM SPECULATION which is out of all proportion to income levels - like when a share market's P/E ratio is way out of line. China and India are both in big trouble in this regard today.

The causes of these urban land price bubbles are, "running out of land" in Japan's case, corruption surrounding development processes in China's case and India's; and environmentalism and anti sprawl politics, in most Western nations. Land rich nations have no excuse at all for these bubbles - it is always possible for "agricultural rent" land to be brought into the "Land supply" for the urban economy, which keeps the prices low and stable. This is the only thing that DOES keep urban land prices low and stable.

This is why Texas and the Carolinas and other Southern and heartland States are the only part of the world economy worth moving to, investing in, or starting a business in, today. There are other States with low urban land prices, but with aggressive unions and high taxes and so on.

 

MAZO

1:14 PM ET

August 19, 2011

Two choices for America..

Reform or roll over.

And I think with the growing grass roots movement across the United States both on the right and the left, America is just beginning to go through a transformation that will carry it through the 21 century. There is great transition in America in almost every sphere. America has pushed its muscle as far as it will go and now it is going through some tough choices that will force it to change. The big institutionalized monster will give way to a leaner and more responsive.

While it might be popular to say that America is over, many who see the situation objectively will rather say that America is at a cross roads. America is still the primary source of scientific invention on the planet. American companies, institutions and the government spend more on scientific research than the entire world combines. America's economy while in a recession is more than 3 times larger than China's economy - basically 3 China's are equal to one America today and China is presently working with 1.6 Billion people and massive levels of government investment! For China to basically quadruple its current economy will be an extremely challenging task no matter how productive and skewed the Chinese government trade policy is.
Perhaps what will ensure American per-eminence is the looming political transformation of China, that has already taken root across Chinese society. China has achieved all of the material gain without investing any real social and political capital and this debt will have to be paid. Not to mention the cost of inflation - that though extremely suppressed will raise its head quickly as Chins liberalizes its economy more and more to leverage greater and greater economic growth.

 

SEO IN KENT

8:54 AM ET

August 25, 2011

Get act together

Lets hope that the USA and other western countires can get their act together so we can overcome this misery and bad economy. seo in kent

 

YARINSIZ

11:16 PM ET

August 28, 2011

Elsewhere less demand means

Elsewhere less demand means less workers, which means unemployment. Expect even more widespread poverty, famine, and social unrest when the US dollar is no longer reserve currency.

US debt and the consumerism it drove was the engine for much of the developing world's development. seslisiteler Without that engine, expect a swift decline all around