The U.S. Is Collapsing – Again

America is suffering a serious debt and self-confidence crisis, but no one should make the mistake of writing the United States off. Hardly any other country has better conditions for the future.

The longing for an end to American hegemony in the world must be enormous. The prophets of American doom jump on every little reason to justify their predictions of a gloomy American future. The recent midterm elections were seized upon as proof of the “end of the American era” and even the collapse of “the frightened States of America.”

There’s no doubt that the U.S. is going through a difficult economic and socio-psychological crisis. The unemployment rate hovers around ten percent. Forty million Americans are on food stamps, which is almost one in seven. At the same time, both private and public debt are skyrocketing.

To add insult to injury, Forbes magazine downgraded Obama from “world’s most powerful man” to second place behind Chinese leader Hu Jintao. Is the U.S. superpower really in permanent decline? It wouldn’t be the first time that America’s demise had been greatly exaggerated.

Since 1945, four waves of fear have swept across America: in 1957, the Soviet launch of Sputnik caused the U.S. to fear it had lost the technology race; in the 1970s America had to contend with the trauma of Vietnam, double-digit unemployment and inflation, an immoral president (Nixon) and a weak president (Carter); in the 1980s, they feared the acquisition-happy Japanese; now pressure is coming from too much debt, two battlefield fiascos and China. But the U.S. has always come out of every previous crisis renewed and strengthened.

This time it could take longer for households to dig their way out from under the mountain of debt that buries them and begin spending once again. And America’s economic lead over the rest of the world may be permanently shortened. The strong dynamics and potential of emerging economies such as China, India or Brazil are only now being realized at a higher level with their greater voting power in the International Monetary Fund. The balance of power is shifting, but the United States will retain the lead because it has the ways and means to do so. That’s what differentiates the United States from the rest of the world.

The dollar does matter. The U.S. makes up about one fourth of global economic activity and is therefore able to pass the costs of its financial crisis off to others. It’s not exactly fair, but it’s being done in any case. That’s only possible because the dollar is the world’s reserve currency. If the Fed pumps 600 billion new dollars into the economy, the dollar will weaken and thereby benefit U.S. exporting firms. It will also cause a jump in inflation that will result in a devaluation of U.S. debt, of which China, for example, holds about $1.5 trillion. The possibility of the euro or the yuan replacing the dollar as the global reserve currency doesn’t really appear feasible.

America’s military supremacy is also undisputed. These are hard facts that the crocodile tears shed by prophets of doom are unable to soften.

There are also two significant facts about the future that should make Americans confident. Unlike moribund and immigration-allergic Europe, the American birth rate is high and the U.S. education system is still attractive to the world’s most intelligent people. Seven of the world’s ten best universities are located in the United States. They just produced three of this year’s ten Nobel Prizewinners. China also had its first Nobel laureate this year, but he wasn’t a scientist. He was a political dissident.

Is it possible that the 21st century will belong to America, as many hope?