John Quiggin

Grennes appears to be something of a doctrinal neo-classicist. His descriptions of graceful and timely transitions from deficit to surplus remind one of Newton’s description of the cosmos. These beliefs drove the happy times before evidence of discontinuity and crisis came to cause people to overthrow classical versions of the cosmos.

Thus:

“the United States has had alternating periods
of persistent deficits and surpluses throughout its history. In the 19th century the
U.S. had deficits in 90 percent of the years, and they continued until World War I.
The balance of payments turned to persistent surpluses until 1982, followed by
persistent deficits.”

This summary of United States financial history is unexceptionable, but Grennes ignores the fact each transition he describes was accompanied by instability, chaos and suffering.

Grennes seems to imply that for any counterargument to have weight, the United States would have to be destroyed, or transmogrified into some other entity.

In order for a counter-argument to be significant, it seems to me, one would only need to prove that each of these transitions had geo-political effects that impacted immediately on the lives of Americans and eventually on the lives of large sections of the world’s population.

Moreover, Grennes assumes that investment decisions that drove these transitions were based on a perfect calculation of opportunity cost. If investors in fact had that olympian understanding of the consequences of their decisions, they’d observe “well, my financial ruin is an educational example of the genius of the free market” instead of jumping off the top of a skyscraper.

Such models never survive the first contact with reality.