Financial power is another leg of America's superpower status, and now that the leading global financial position of the U.S. is not only under attack but under attack because of policies that Washington freely chose to adopt (failure to monitor Wall Street by collecting data, failure to regulate Wall Street by constraining behavior, promoting the sale of homes to unqualified buyers), it seems reasonable to wonder if the U.S. can maintain its economic superpower status.
To what extent will the world decide to pull itself away from a dollar-centric global economy...and, of course, have the ability to achieve such a goal?
- Will the trend toward denomination of oil in Euros accelerate?
- Will China and Japan try to get rid of their dollar holdings?
Assuming such trends occur, the value of the dollar and the living standards of Americans will presumably decline. Would that undercut American power over the long run or might it restore a sense of balance to American citizens addicted to easy credit and American politicians addicted to a cosy elitist revolving door? Currently, government officials facilitate the pursuit of wealth by corporate officials because the government officials either were corporate officials before entering government or anticipate corporate sinecures after leaving government. The astonishing idea of imagining that Paulson would discipline Wall Street is a case in point. Where, after all, did Paulson come from? Foxes guarding the chicken coop...
So one can imagine two very different results from the erosion of American financial power coming on top of the erosion of American military power (again, defined not as the ability to destroy but as the ability to achieve goals):
1) Cutting the U.S. down to size;
2) Teaching the U.S. elite and people a much needed lesson in living within their means (in terms of both lifestyle and imperial hubris).
The first produces a world without a clear leader. Given the recent record of U.S. leadership, this might be advantageous for us all, but it could also lead to chaos. The second produces an America with a restored foundation for leadership. Over the long run, these two alternatives lead to very different global futures. Over the short run, they both point to a far weaker United States.