Has The USA Reached Another Historical Inflection Point? by Kevin Duffy

SLL has long argued that we are at the historical point of peak government. In other words, they dissolve, splinter, and get smaller and less powerful. The turning point was the dissolution of the Soviet Union. Here’s somebody who sees things the same way. From Kevin Duffy at mises.org:

“At the rate things are going, we are all going to end up working for the Japanese.”

—Lester Thurow, MIT economist, 1989

“The United States is rapidly becoming a colony of Japan.”

—Congresswoman Helen Bentley, 1990

“The Japanese can buy our buildings, our Wall Street firms, and there’s virtually nothing to stop them. In fact, bidding on a building in New York is an act of futility, because the Japanese will pay more than it’s worth just to screw us. They want to own Manhattan.”

—Donald Trump, March 1990

During the late 1980s, Japan had the Midas touch. In the eyes of the mainstream media, Wall Street strategists, economists and politicians, the Japanese could do no wrong. America’s brand of capitalism—self-centered, greedy, chaotic, and unplanned—was no match for Japan’s unique brand of state capitalism, with the long-term-oriented government bureaucrat, aggressive businessman and diligent, loyal employees all working in perfect harmony for the common good. Newspaper headlines routinely lamented America’s decline as much as they feared Japan’s rise.

While a whole slew of Keynesians and mercantilists confused a liquidity bubble for an economic miracle, a handful of contrarians, including Jim Grant, John Templeton and Marc Faber, parted ways with the crowd. At the end of 1988, I wrote, in a letter to the editor that was published in the Wall Street Journal,

By the end of this century, the question may not be “Will the U.S. be No. 1?” but “Will Japan still be No. 2?”

That was a pretty bold prediction at the time. (I was young, naïve and didn’t know better.) There was some luck, no doubt. My study of financial bubbles, including Extraordinary Popular Delusions and the Madness of Crowds, implanted the idea that a frenzied crowd is almost guaranteed to be wrong. And my discovery of Austrian economics, especially Murray Rothbard’s America’s Great Depression, provided the economic rationale for why government intervention would not only fail in Japan, but likely intensify with the downturn and usher in a decade or more of stagnation. My sense was that the world’s financial markets were at a major inflection point and that sticking my neck out and flaunting the consensus would lead to significant returns.

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