Oct 06 2005
A New Pattern of Multurally Assured Destruction (MAD)?
The more I study the current account issue, the more I am convinced that there is a new pattern of MAD developing.
The new paradigm in International Relations are today more in the area of global economy and finance.
United State, by breaking down regional gravitational centers and by building a huge arms gap, has made the cost of acquiring global dominance extremely costly, especially in the short run.
The resut is the shift of power struggle from “guns to dollars”.
Any game has a Nash-equilibrium. In Cold War, it was Nuclear MAD. Today, it may very well be the balance of trade deficit and foreign owned assets.
The next question is, who has the upper hand of deterrence? Assuming there is no winner if such a “war” breaks out, which loser would come out less died?
Related Sources:
1. The Fresh Air 2005/10/6 Guests: Paul Krugman and Stuart Butler. Archive here. During the discussion, Krugman eluded to the muturally destructive nature of the current account deficit.
2. Speech by William Poole. Archive here. “If the current account were driving the capital account, then a weakening dollar would likely result.”
3. New Yorker Book Review. Biography of Herman Kahn by Sharon Ghamari-Tabrizi. ” His point is that unless Americans really do believe that nuclear war is survivable, and survivable under conditions that, although hardly desirable, are acceptable and manageable, then deterrence has no meaning.”
4. My previous blog entry.