Weathering The Storm With Our Fair Weathered Friends

There is a running joke in my house that we pay our children's friends to be friends with them. It's not true, of course, but neither is it an unrealistic premise for a relationship.

There has not been a single day in my life that the US has not been the most dominant player in the world space. As a country, that kind of supremacy has its rewards -- everyone wants to be your friend. Fortunately for the rest of the world, and until recently, the US has also been a responsible neighbor. We've participated in a few just wars. We've staged a few token humanitarian interventions. Mostly we've used our accumulated power carefully, strategically, diplomatically. Yeah, we've run some puppet theater and some covert nastiness but karma has had a way of evening things out in the end.

When you consider the amazing progress we've made in just a few short centuries you realize that much of this good fortune has been due to the secluded Galapagosian existence we enjoyed in our formative years: We'll do our thing over here... you do your thing over there. We evolved into something strong and self-reliant.

I'm tempted to wax nostalgic on the age of isolationism but instead I'll admit that the globalization that's occurred since the 50's has made this country unbelievably wealthy. Even our poorest souls live well by global standards in 2007. We have to remember, though, that this prosperity has come with a price. We've traded our self-reliance for it. Not entirely a bad move but not entirely without consequences, either. Personally, I would have preferred a little less prosperity and a little more self-reliance. Apparently I am in the minority.

Where stock market performance has been making most people happy these days, I find it profoundly troubling... a sign of the kind of free for all excess that foretells certain doom. Alan Greenspan may have mastered the market by manipulating interest rates for short term benefit but I fear that what he's really created is a profitable illusion. Together, Greenspan and globalization have created a consumer driven economy that's about as stable as a house of cards.

Our banking community has just awoken from its cheap money binge like a college student on the morning after a big beer bash: panicked, broke, and trying to think of a good cover story for its parents. Nouriel Roubini discusses their frantic bail-out-that's-not-really-a-bail-out-but-still-kind-of-a-bailout scheme here. I usually only understand about every third word Roubini writes but this one especially is a doozy. The big worry is that our debt has become too high risk to buy. This wouldn't be such a problem if we hadn't been living like Wimpy for the past decade with an "I'll gladly pay you Tuesday for a hamburger today" mentality. It doesn't take an economics guru to figure out where this is leading: without foreign debt financiers we'll revert to traditional lending, which means tighter lending requirements, which means less consumer borrowing, which means less consumer spending, which means our consumer driven economy will shrink faster than Anna Nicole on speed.

This is on top of a decimated real estate market. As a reminder, the real estate market has been the primary contributor to at least one of the only four job growth sectors in the past 7 years: construction (the other three are services, health care, and government... everything else is a net loss).

Throw in some out of control oil speculation and you've got serious energy bubble concerns. (Is oil the new information technology real estate?)

I am not thrilled about facing an economic retraction but I'm more concerned about what it will mean in the changing world order. Think of it this way.... Everyone loves you when you're on top but gawd help you if you fall; all of the cling-ons who've been fawning over your celebrity will be the first ones to kick you when you're down and then step on your body in the hopes of being elevated an inch or two. What a culture shock that's going to be after the past 7 years of unparalleled hubris. Everyone was willing to smile and put up with us because we kept them all rolling in dough. They needed us as much as we needed them. What happens when there's no more dough? What happens when we need them more than they need us?

I could be wrong... we're resilient people, and maybe this whole economy thing isn't as bad as I'm thinking it's going to be. Or maybe it will be bad but only for a while.

I just have a really bad feeling.