US, Return of the Mack: Did We Get it Right or Wrong?



After the Middle East, we now look at our third indicator. Back in January, this blog forecast the re-emergence of the United States of America as a world leader, a shift in its Middle East policy and a turn towards Africa and Asia. Were we right or wrong about it?

Indicator C: US, Return of the Mack

In economic terms, 2015 was kind to the US: Americans are more confident; and because of low gas prices, both consumer spending and the sales of homes have gone up. Another positive note is the job creation that has been on the rise too. Nevertheless, business spending and investment haven't returned to the levels of pre-financial crisis (due to inactive export, cheap oil and lower profits).

The U.S. has generated 12.1 million new jobs in the past five years, pushing the unemployment rate down to an eight-year low of 5% and giving Americans more money to spend – Jefry Bartash

Despite the hopeful data, some remain sceptical because even though the unemployment rates remain at 5% they don't see an economic boom, and the GDP shrunk in the third quarter (to 2%). Notwithstanding, in general terms, people seem confident about the US economy as it remains being the biggest economy. So, like Jack Lew said the US is "ending the year well positioned".

Middle East

It has been interesting to watch the US dealings in the Middle East: the eagerness to sign a “historic” nuclear pact with Iran (that not only angered both Arab and Jewish allies alike) caused America to turn a blind eye to Oman's human rights transgressions (i.e. forced labour and human trafficking) due to the Sultanate's assistance in completing the deal. Could this be a sign that America is finally realising that concepts such as democracy, freedom, human rights etc only work in the West; and if so, will it extend the same courtesy to African countries (and stop imposing the Gay Rights issue on them)?

Oman, a trusted U.S. ally in a strategic location at the toe of the Arabian Peninsula, prides itself as a stable presence and mediator in a region beset by conflict. The country of 4 million people has a “good neighbor” policy with Iran and close relations with the West.- Reuters

The United States of America is now energy independent (one of the fulfilled promises made by President Obama, in 2008); however, it has been forced to assure its oil producing allies that little had changed in their relations – but this is not entirely true, particularly when we look at Syria (where the US let Russia assume a more prominent role in the fight against ISIS) and at the Arab-Israel conflict (where President Obama finally succumbed to reality on the ground). But however you look at the situation, it's obvious that American policy is gradually shifting – hopefully, in a better direction.

Africa

The US has been pivoting to Africa for a couple of years, to counter China's growing influence in the continent. This pivot was patiently done, through AFRICOM, in order to gain the trust of Africans (whom, for a long time, held anti-West socialist views but now begin to open up more) by training soldiers, police officers, and by participating in hundreds of security operations to help stabilise the continent, and eventually increase investment in a continent that is projected to become one of the largest markets by 2050.

While China seems to be taking a step back from its investments in Africa, and elsewhere, due to its economic issues; the US took advantage and penetrated the continent to benefit from its wealth. The only downside of American participation in Africa is, once again, the imposition of Western paradigms in the local political system – a couple of examples of this is the Gay Rights Issue (that have exposed African gays to danger) and the efforts to depose certain African leaders (e.g. Paul Kagame [Rwanda] and Yoweri Museveni [Uganda]) because they don't fit the US democratic model (NB: the people of Rwanda and of the Republic of Congo voted, in a referendum, to keep their leaders in power – should America go against the will of the people?). Nevertheless, overall speaking, we see America's involvement in Africa with positive eyes.

Asia

America's involvement in Asia has been quite interesting too: it has supported Japan's alteration of article 9; it has stood up to China regarding the South China Sea (avoiding thus a major confrontation between its allies and the Red Dragon) and it has maintained the balance of power in the region, in quite an effective way (better than in the Middle East).  It can be said that in Asia: it has behaved like a world power and leader.


Verdict





We got it wrong when we assumed that the US would re-emerge as a leader, on a global level, when it didn't quite do so concerning the Middle East; it failed its mediation of the Arab-Israeli Conflict; and it diplomatically shot itself on the foot in Africa (risking thus making the same mistakes as in other regions). 
     







But at the same time, we got it right when we predicted the continuation of a stable economy – perhaps a reason why the Obama Administration preferred to focus on domestic policies (as an antithesis to the Bush Administration that focused more on wars abroad, neglecting thus the economy at home)? - and we also got it right when we said America would begin to shift away from the ME and to turn to Africa and Asia. 





Comments

  1. Max, congratulations to you on getting the prediction that the US will begin exporting oil. That would never have crossed my mind, especially with the energy hostile government we have. Fracking saved the US economy.

    To quibble with something, the number of new jobs (net) created over the last 5 years could not possibly have exceeded 3 million, based on the total employment statistics. A link is here. The labor participation rate went down by 3 percent over this period, but a mass influx of immigrants has also occurred. Our government counts jobs added, but they don't subtract jobs that are deleted, thus, the discrepancy between the headlines and the real number of jobs. The US unemployment measure only includes those who file for unemployment benefits, so it is a very narrow measure that excludes any new graduate who fails to find a job, and many others. Of course we also have runaway deficit spending, both official and off-books. This represents the mother of all WMDs (Weapons of Monetary Destruction), and will eventually self-detonate.

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    1. Hi Looney :D!

      Thank you *bowing*. I agree that Fracking was essential to the US economy. I think that most of the hostility towards fracking was due to the Saudi, and other oil producing countries, lobbies - those guys are ferocious; but in the end common sense prevailed, thank G-d.

      Then I stand corrected (thank you for correcting it): it goes to show the amount of propaganda going around in mainstream media. Next time, I will use the link you provided here (thanks).
      One detail though: if there's such a higher unemployment rate how do we explain the increase in consumption rates? And this happens everywhere, not just in the US. So, technically people are getting revenue off the books, yes? And if so, then the statistics are flawed...

      lol I like that "Weapons of Monetary Destruction" lol...I agree with you, though, that fiscal discipline is vital for a countries economy; fiscal discipline and transparency.

      Looney, thank you so much for your great comment :D.

      Cheers

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    2. I can only speculate about increased "consumption rates", but here goes: First, are we talking about "total consumption" or "consumption rate". I say that because the welfare migrants from the third world are being paid to become first world consumers via the welfare system, even though most do not work. Thus, there is going to be an increase in consumption that follows the migrants, even if per capita consumption is flat. (Why are the environmentalists silent on this?) WSJ has an article on the welfare payout rates. The other big factor is that the US was forgiving $85 billion per month worth of bad housing loans. The net effect is to free people from housing loans so that they can put their money into other things, but this creates only an illusion of economic growth, since the debt goes onto the government and is not counted with the deficit. In spite of all the rhetoric and theatrics during the subprime crisis, the US government still mandates that banks give housing loans to minorities who have insufficient or no income to pay them back. This only works because the government promises to take the bad loans, while the government stands ready to demonize the banks again if the problems get too bad. There are many other smaller factors. (e.g. What happens when marijuana consumption statistics are added?)

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    3. Looney,

      Excellent explanation, thank you (sorry, by "consumption rates" I meant private consumption; as total consumption includes private and state consumption [expenditure]). Like one of our contributors would say "the system is starting to crack" because this doesn't sound sustainable: everything is fake (fake middle class that doesn't own anything; fake state wealth; fake accounts etc).
      You are right about the promiscuous relationship between banks and the government (my Portuguese contributor actually wrote about that too, if you read Portuguese I'd send it to you).

      So, consumption is fake because they include non-working people on welfare that increase demand but also represent an expenditure that contributes to the deficit?

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    4. Max, I would say that the consumption is real, but it is being achieved by means that are unsustainable and economically destructive. My favorite characterization would be "growing the economy by paying drunks to go to the bar".

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    5. Looney, I hear you. lol it's a good characterisation. Thank you so much for teaching us more about the situation in the US, I appreciate it :D.
      Cheers

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  2. On balance, not bad forecasting if one gives allowance for different perspectives of the leadership position of the USA. Congratulations.

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    1. Hi Rummy :D!

      Thank you for your generosity *bowing*. I should've taken those differences into perspective and I didn't it entirely - I guess I was too optimistic.

      Rummy, thank you so much for your comment :D.

      Cheers

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  3. I agree with Rummuser, I mean given the dynamics of the present US politics it's hard to predict their next step. Besides, American politicians seem bent on taking America down. But most of it, you got it right though Looney's comment makes sense!

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    1. Hi Raquel :D!

      All I can say is that many people are counting the days till November, let's just hope they won't regret it later on...

      Darling, thank you for your comment and, yes, Looney's comment was perfect :D.

      Cheers

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