Barnaby was right and should have gone further
Posted by Dave Bath on 2009-12-15
Poor Barnaby Joyce! When he points out an elephant in the room, he cops flak from all sides: the elephant in the room in this case being US indebtedness and the risk of default, and the need for Australia to have contigency plans for either the default or the necessary collapse of US consumer spending.
If he’d followed his chain of reasoning further, noting the commonality of risks and appropriate responses of the economic corrections for both US default and climate change, he’d have had the environmentally responsible wings of both left and right calling him a hero.
Which makes me wonder: why didn’t he follow the chain of logic he started?
US consumption, debt-fueled, has to a large extent involved China loaning money to the US or supporting the Greenback, and Australia, as China’s quarry, has gained considerable income by supplying the raw materials – although not enough to compensate for our own debt-fueled overconsumption.
According to all economic rules, this indebtedness must be repaid through consumer constraint sooner or later, in the same way that US-controlled international finance agencies have forced constraint on many debtor nations over the years.
This constraint on US consumers will decrease demand on Australia as China’s quarry, unless the rise in demand from other Asian countries for Chinese goods picks up even further.
Thus, US profligacy is a significant threat to Australian income, just as Barnaby said, a risk that demands mitigation.
This mitigation involves controlling Australian consumption, and having something else other than dirt to sell to other countries.
In other words, the appropriate response to the threat of a collapse in US consumer spending is to plan for a less extravagant lifestyle, and rework our economy to be less dependent on carbon-intensive industry and mining… the same as we need to do in response to the threat of climate change.
Maybe Barnaby didn’t go there so as not to offend the paymasters of the major political parties.
Barnaby also didn’t touch on the changes to our diplomatic strategies necessitated by diminishing US economic power, for either we ditch our century-long approach of being the lackey of the world’s greatest power by continuing to suck up to a falling US, or we stick with our approach and start tugging our forelocks to the rising power, China.
No, Barnaby wouldn’t dare touch that implication of his alarm either!
Personally, I reckon the collapse of the US economy, through default or a gutted Greenback, would be a good thing, and the sooner and harder it happens, the better. We’d see one of the world’s most carbon intensive and wasteful economies do much less damage, and the likely social autophagy of the poster-child of capitalism would be salutory for all other nations. The US might even be forced to cut military spending on toys and adventures.
The only problem with a collapse in US economic power is that you’d have something as mad as the proverbial cut snake, but with the problem of that cut snake having more poison (in the form of nuclear, chemical and biological weapons) than any other snake in history.
Of course, if Uncle Sam had followed the advice of Mr Micawber, we wouldn’t have such a threat to the world’s environment or economy.
- "KAL and the Chinese Reserve" (2007-08-14) is worth another look, although it’s a bit dated by the Global Financial Crisis, and the "1.33 trillion" is now 2 trillion (with another trillion owed by the US to Japan, and yet another owed to sundry other countries). The 2 trillion owed to China is despite China gradually spending that reserve hand-over-first on overseas assets. Today, the dragon might be threatening to release the floodgates not to pressure on exchange rates, but on climate policy.