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Ruminations on defense strategies and fiscal responsibilities
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Ruminations, November 8, 2009
Defense strategies
On September 17, 2009, the 70th anniversary of the Soviet Union’s surprise attack on Poland, President Obama told Poland that he was abandoning the missile defense system that the United States had promised them. The Polish and Czech press (the Czech Republic had been part of that missile defense system) denounced Obama’s new position as “traitorous” and as “appeasement” towards Russia.
Now, it has been revealed, coincident with the United States’ abandonment of the missile system in September, Russia carried out biggest military war game since the end of the cold war. In that game, Russia simulated a nuclear attack on Poland and, together with Belarus forces, stormed a simulated Polish beach. (In August, Russia had threatened a nuclear attack on Poland but, it was thought at the time, that the threat was a rhetorical gesture aimed at the United States with a goal of eliminating the installation of the missile defense system – which seems to have worked.)
Poland, which has been one of America’s strongest allies in the war on terror, providing troops in both Iraq and Afghanistan, has request that the U.S. send troops to Poland to help deter any precipitous Russian action. In assessing the situation, Polish Minister of Foreign Affairs Radoslaw Sikorski said to the United States, “Our wish is to have American troops stationed in our country as a shield against Russian aggression.”
Is Poland a little hypersensitive or, perhaps, paranoid? Maybe but, on the other hand, if your country had been occupied by Russia for all but 40 of the last 215 years, it is understandable and even rational. Sikorski went on to say, “There are 900 tanks on one side [of the Polish border] and only six [American] soldiers on other. Could you be calm in this situation? ... If you can still afford it, we need some strategic reassurance."
Hmmm. “Strategic reassurance.”
Military strategies have not exactly been Obama’s strong point. It has been reported that Obama recently held his sixth meeting on developing a new strategy for Afghanistan. That’s six meetings over the last four months with each meeting lasting less than one day. If Obama has devoted so little time to a hot war, a war he has called one “worth fighting … [and] fundamental to the defense of our people,” how much time will he spend on a potential war protecting Poland?
No meetings are yet scheduled to develop a Polish reassurance strategy.
The decline and fall of exceptional nations
Up to the early 17th century, Spain had been a world power. It dominated the Iberian Peninsula, Holland and Latin America, and had its armies in Germany and Italy. It led in the exploration of the new world. It seemed to have the corner on the world’s gold reserves.
Looking ahead, the Spanish government saw a bright but challenging future. In order to finance their ambitious programs they began a program of deficit spending financed by debasing their currency and promoting inflation. As a result of this fiscal program, Spain was unable to collect meaningful taxes from its citizenry or loans from other nations and, as a world power, it sank to a second tier level of world powers.
Up to the early 21st century, the United States has been a world power. It dominated the American continent, Europe and Latin America, and had its armies in Afghanistan, Iraq and elsewhere. It leads in the exploration of the new worlds in the solar system. The U.S. Dollar is the reserve currency of the world.
Looking ahead, the United States government sees a bright but challenging future. In order to finance their ambitious programs they have begun a program of deficit spending financed by effectively debasing their currency and promoting inflation. The U.S. government is running up a deficit of a trillion dollars in 2009, embarking on a health care program that could, once all aspects are counted, add another trillion dollars or more to the debt. And now, United States’ leaders are discussing a second stimulus program which could add close to another trillion dollars to the debt. As a result of this fiscal program, the United States could sink to a second tier level of world powers.
Although the U.S. dollar is still the world’s predominant reserve currency, that is beginning to change. In the last ten years, the dollar’s position as a reserve currency has dropped ten percent, and, according to a Reuters’ poll of financial strategists, is expected to drop another 20% to 25% in the next ten years. Acting perhaps as a harbinger of things to come, last month, India sold 6.7 billion U.S. dollars of its reserve and replaced the dollar with gold (putting India some $250 million ahead of where they would have been if they had stayed in dollars.)
Of course the world has changed dramatically since Spain fell from power and there are enormous differences between 17th century Spain and the 21st century United States. Still, the world is full of examples of nations whose dubious fiscal performance hastened their downfall. Some notable examples are 19th century France, 20th century Germany’s Weimar Republic and the 20th century Soviet Union.
Many people feel that the United States is an exceptional nation. Are we so exceptional that we can ignore fiscal sanity? Some in this country seem to think that we can. Others, evidently including a large percentage of the world’s financial community, think we would be better off playing by the rules of fiscal probity.
Exceptional countries stay exceptional by their performance.
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