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10/18/2008

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Sven Ortmann

There needs to be a huge reduction of consumption in the U.S. (both private and government) - the nation won't arrive at a black trade balance (the deficit is at about 6% GNP) and the necessary savings rate (up by 6-10% GNP) without a huge reduction of consumption. An alternative would be a huge economic boom solely used for these purposes, which is unrealistic.
"Joe Sixpack" can expect to have a reduction of his real consumption by about 10-20% in 5-10 years, even without losing his job.

It's open to the U.S. government to influence this adaption/correction, and I believe that a reduction of the military expenditures (cuts back to Clinton-age size at most) is one of the least painful ways. It won't suffice on its own, though - the gap between reality and sustainable is much greater than the Leviathanic (para)military expenditures are.

I'm not sure that the U.S. government does/will soon understand the nature of the problem, though. Attempts to increase private/public consumption are aimed at going back to the unsustainable past condition - which won't happen. The goodwill of foreigners who financed U.S. consumption with credit is exhausted.

The topic wasn't only about the U.S., though. It was rather an attempt to shatter old and outdated perceptions. Japan might be a huge industrial nation, but it's not fit for a huge arms race despite its large economy. The same applies (to a lesser degree) to some medium and large European states and of course to the U.S.

Btw, I had a follow-on article;
http://defense-and-freedom.blogspot.com/2008/10/public-debt-military-expenditures.html

Ian

There's the further problem that the current American way of war is exceedingly cost inefficient. Expect American forces to be weakened by budget cuts at the same time that the sort of militias they might expect to fight may actually be strengthened by an economic downturn. Increased poverty is likely to increase recruiting for organizations like Hezbollah; militias with a civilian social services branch will become increasingly popular, not to mention that they will have available increased numbers of desperate young men.

Fighting a land war in Asia looks ever less attractive.

Microsoft Outlook 2010

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