House Rules

28 Jun

In the global casino that is modern day capital markets, the U.S. has always acted as if it is the house. As you may or may not know, the house always has the edge in the various games of chance, the only difference being is the degree of edge. In its sports books, for example, the house really has no edge thus sports betting tends to be a loss leader for the slots business in which the house has a commanding edge. The ultimate edge for the U.S. in global capital markets historically has been the dollar. As the worlds reserve currency, and not coincidentally the deepest market for foreign trade and investment, the U.S.(dollar) stands as the arbiter of global capital flows. However, unlike the standard casino/patron relationship, the U.S. and its trading counterparts relationship is highly co-dependent. While it may be true that the major trading partners of the U.S. need the depth and stability of the worlds largest trading partner, the U.S. also needs captive buyers for the trillions of excess dollars generated through its cumulative fiscal excess. While it may seem reasonable to rail on trade imbalances, trade surpluses are virtually impossible with excessive and consistent fiscal imbalances (of the un-monetized variety).  The current administration runs the risk of underestimating this co-dependency, and in doing so puts the whole global economy in jeopardy.

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