I’m not convinced by the liberal illuminati, though, that government intervention is going to play Superman and save the day.

So the dollar is the reserve currency, and people who need dollars have trouble getting them because the banks have deflated the supply.

Which reminds me, why is it we let these banks manipulate our money supply? I can see the historical reasons—banks were powerful when government was weak, and it was a daring move for governments to declare a monopoly on printing money and forbid banknotes. But why should we continue to trust these bozos to manage the currency? They haven’t been doing all that great a job.

I’ve been wondering about that. Do you have an explanation? It just plain doesn’t make sense, does it?

We have a financial catastrophe, there’s every reason to expect the dollar to be devalued even further, every reason to expect a lot of inflation, and somebody foreign wants dollars!

From what I´ve read on economic blogs part of the reason for the rising dollar seems to be de-leveraging. Till 2007 or so it was pretty easy to get a loan. And I suspect lots of these (international) loans were denominated in dollars.

1) You wanted to finance a merger, leveraged-buy-out or take control of an English Premier League football club on credit? You went to an investment bank to put together a loan package.

2) I´ve read that in countries like Iceland or the East European countries lots of loans (consumer loans, car loans, mortgages) were made in foreign currencies (dollars, Euros, yen, Swiss franc). Maybe in other regions of the world too? I don´t know the reason for that, maybe lower interest rates?
Anyway, how can an Icelandic or Hungarian bank make a loan denominated in dollars? It first has to get a dollar loan from an American bank before it can then loan dollars to its customers.

3) Plus the usual dollar denominated bonds issued by foreign governments or large businesses.

Now a lot of these original loans in 1) and 2) are probably short term or middle term loans. While the follow-up loans/contracts (mortgage, merger for example) were middle or long term “assets”. That wasn´t a problem before the credit crunch. When one loan became due you could just get a new loan to pay the old one.

After the credit crunch though banks became really reluctant to extend loans. So I suspect lots of organizations suddenly had to scramble for dollars to pay back mature loans. That might explain why the Fed entered in such large dollar swap agreements with other Central Banks. Huge dollar demand, not enough supply.

Didn’t you mean to say?

…and its military power could not compel submission…

also, same paragraph, you may have and is where you mean as.

More to your point, my way of thinking is that the Reagan/Weinberger approach of bombing Tripoli or conquering mighty Grenada to everyone’s surprise, as opposed to Powell’s Gulf War I to nobody’s surprise and everyone’s support, are both excellent examples of not biting off more than you can chew. Unless you meant Powell’s unfortunate selling of the current Iraq war to the UN, which he never would have gone along with had he known his facts weren’t truthy.

But Kagan and Quiggin seem to be conflating two distinct issues. The first is whether the relative standing on material and social indicators translates into commensurate influence over others (the hegemony and unipolarity debates). The second is the efficacy of military force (the Vietnam and Iraq debates).

US dominance did not guarantee it undisputed allied support for the wars in Vietnam or Iraq, and its military power could compel submission in those areas. None of this bodes well for Afghanistan. US military, economic, and social might does not enable it to root out al Qaeda from Afghanistan and Pakistan. Cooperation by US allies will not change this is the problem is the ineffectiveness of military force.

By the way, the “Vietnam syndrome” is the US fear that military interventions will lead to quagmires. The Lebanon pullout in 1983, Somalia pullout in 1993, the Rwandan non-intervention in 1994, the aversion to ground intervention in Bosnia and Kosovo in the 1990s, and the effective neglect of Sudan and Congo are all the results of this “syndrome.” The answer was the Weinberger/Powell doctrine of overwhelming, decisive, and short uses of force, which often meant excessive, disproportionate, and abrupt uses of force.

It sounds to me as though Kagan believes America is still a superpower. To Richard Haas’ statement that the United States remains “the single most powerful entity in the world” but that it “cannot dominate, much less dictate, and expect that others will follow” Kagan says “That is true. But when was it not?”

We went through this soul searching after the United States lost the Vietnam War. Now we are doing it again because withdrawal from Iraq sounds like “defeat.” But to those of us who said we never should have invaded Iraq, it is a Pyrrhic victory.