"Nothing is more usual, among states which have made some advances in commerce, than to look on the progress of their neighbours with a suspicious eye, to consider all trading states as their rivals, and to suppose that it is impossible for any of them to flourish, but at their expence."
--David Hume, Of the Jealousy of Trade
These are days of optimism about U.S. and world economic prospects. The U.S. economy is poised for strong recovery, most Wall Street economists say. The optimism seems as misplaced as it was in 1999 when the U.S. economy was generally described in miraculous terms yet was on the verge of downturn and two years short of outright recession.
In many regards, the U.S. economic picture now looks far worse than it did in 1999. In 1999 there was a stock bubble that Federal Reserve Chairman Alan Greenspan had, it appeared, inadvertently allowed to build. Four years on, resorting actively to unsustainable bubbles in asset prices has become the mainstay of U.S. policymaking. What Greenspan refers to as "solid gains" in housing prices are no more than a bubble in the prices of households' most important financial asset. Cheap money has also helped to re-inflate stock prices. Meanwhile, the Bush Administration's fiscal policy, which floods the American consumer with windfall cash, seems just as unsustainable. The counterpart of these policies is the precipitous fall of the dollar.
All the mistakes are part of a general loss of direction in economic policymaking, an abandonment of ideas of sound money and honest reward. The United States is now pursuing a new goal in policymaking: the permanent consumer boom, instant wealth created by windfall. Perhaps this is a true measure of America's decline: immediate gratification has become not just the vice of the couch potato but that of Washington, dc.
