America the Pitiful?

With the meeting of the G20 in London, much has been said about the loss of American leadership among the world community. What isn't clear is just what place in the world's hierarchy America will actually take as the countries of the G20 work their way out of the current economic crises. Our current solutions for the meltdown are not met universally with dancing in the streets. Suffice it to say that asking more well-heeled allies to participate in printing money to re-invigorate our waning economies is not universally seen as an answer to an absence of private capital.

Germany and France see little profit in bucking their country's populist fevers and many more among the G20 are simply not in a position to do any more than they already have. With a dramatic decrease in oil revenues during the past six months, Russia's economy is teetering on a return to pre-Glasnost centralization. Medvedev, Putin's hand puppet, is asking the country's billionaires to provide employment guarantees and spending schemes that would prop up the failing economy. It should prove challenging enough to repair strained relations between the U. S. and Russia, re-initiate proliferation agreements and soothe Russia's ruffled feathers over a creeping NATO without pushing Medvedev towards adopting a western-style regulatory apparatus.

President Obama and Prime Minister Brown are trying to present a "glass half full" during the summit in which France's President Sarkozy has German Chancellor Merkel's full support in walking out of the summit in the absence of substantive agreements on policy. It is quite apparent that the world blames America for the meltdown and thus has most of the G20 countries pointing fingers and justifying their xenophobic agendas, much to the chagrin of the Anglo-Saxon members. This will be problematic in trying to effect a unified stimulus scheme, much less so, one hopes, in trying to reform the regulatory systems that so clearly allowed the failure in the first place. It is increasingly evident that the rest of the world judges the problem as being America's to solve.

China, a surplus nation, might flex its muscle to insist on certain regulatory revisions before it comes back to the Treasury auctions, which are showing the strain of a lack of foreign interest. The Fed cannot take the place of foreign investors forever. As the deficit being created to finance the current proposed budgets balloons to somewhere north of $8 or $9 trillion, the obvious question is; who will be there to finance the debt? It might well be that the single greatest sales job the Obama administration will ever have is restoring confidence in surplus nations that America is indeed the safest haven for their reserves. Without that, the United States will lose its leadership among world economies and at the very best, be relegated to an equal partnership among developed nations. Also, dare we mention that we will be stuck with a debt that, coupled with burgeoning entitlement programs as the baby boomers step up to the window, could force us to cut back a military that is already as big as the next 13 nations combined. A lack of our projecting American military might around the world will seal the deal. We will be a second-rate power with an economy buried in public debt and no doubt, without the investment capital necessary to fund the technological research that has kept us afloat as our industrial capacity has dwindled.

The most important agenda for President Obama will be to recreate the sense of security in our financial system. It is easy to spend money. It is far more difficult to produce real changes in the way we manage capital that will attract both foreign investment and loose the chains that currently restrain private investment. Any government enters a fool's paradise that believes that public spending can take the place of private investment.