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OpEdNews Op Eds    H2'ed 1/1/18

Caught Between the Vietnam Syndrome and Irrational Exuberance

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Message Jean-Luc Basle

Every country has its demons. In the United States, they take the form of the Vietnam syndrome and the irrational exuberance; i.e., the inability to admit defeat and a blind faith in the market. These two bode ill for 2018 -- a year in which the world may witness a hot war and a financial crash, or both if the crash comes first.

In July 1953, the United States signed an armistice with North Korea. An armistice is a truce, a suspension of hostilities. It differs from a peace treaty, which is an agreement to end a war. The United States is still at war, despite repeated pleas from North Korean authorities to sign a peace treaty. From an American point of view, such a treaty is conceivable only if Korea is reunited under the United States' aegis, as was the case with Germany. With the demise of the Soviet Union in December 1991, the American elite believed they won the Cold War. But, from a Russian perspective, it only was the recognition that the Soviet regime was flawed with structural weaknesses. It had to be dropped for a return to the pre-1917 economic and political system, without an emperor.

In any war, the winner is entitled to the spoils. The Americans robbed Russia blind under Boris Yeltsin (see Anne Williamson's testimony before the Committee on Banking and Financial Services on September 21, 1999). Vladimir Putin put an end to it. The American elite felt it had been cheated. It is determined to get the loot it believes it rightly deserves. Hence, the demonization of Vladimir Putin and Russia. Even though not a thread of evidence has ever been provided by American intelligence agencies or special prosecutor Robert Mueller in over a year, the Russia-gate story continues unabated in the main-stream media. The Washington Post just released a 4000-word article explaining how Russia hackers are fooling innocent Americans on the Net. The bigger the lie, the more likely it is to be believed.

The United States' Middle East policy is another example of the Vietnam syndrome. It is misconceived. It is naà ve to believe maps can be redrawn along tribal and religious lines. If anything, history teaches us that borders are an extremely sensitive subject, which is better left alone. After years of meddling in the Middle East, the American policy created the "arch of chaos" it wanted to prevent. Through Iraq and Syria, an arch connects Iran to Lebanon; i.e., to Hezbollah -- Israel's sworn enemy. In Syria, the United States lost the war it fought through proxies. The Free Syrian Army has been defeated. Unable to admit defeat, the Department of Defense is planning to spend half a billion dollars on Syrian opposition forces and another $1.2 billion in Iraq in 2018. There are other ways besides blunt force to achieve one's objectives in international relations. Diplomacy is one. Isn't it time for the American authorities to reassess their policy, before they go "one bridge too far"?

The American economy is doing very well. Growth should reach 2.2% in 2017 against 1.7% in 2016. The unemployment rate is dropping (4.4%) and inflation is subdued (1.8%). Not surprisingly, the stock market is ecstatic. The S&P 500 index closed at 2,764 on December 29th. This is its highest level ever. It is totally disconnected from the real economy, the value of which it is supposed to embody. Robert Shiller, who was awarded the Nobel Prize in economics for his theory on irrational exuberance, calculates the price/earnings ratio on a ten-year moving average. Since March 2017, the ratio exceeds its October 1929 level -- a cause for concern perhaps? Not for Wall Streeters. "This time is different". Two economists, Carmen M. Reinhart and Kenneth S. Rogoff, used that very expression for the title of their book to demonstrate that this time is not different. To no avail. Wall Street welcomed The Tax Cuts and Jobs Act approved by Congress on December 21st. It is a tax cut for the wealthy. It does little, if anything, for the economy but over time it will increase the federal debt, which now equals the gross domestic product. The next time the economy tanks, the government will be powerless. Unlike in 1929, the American government is overextended. It does not have the wherewithal to withstand a major crisis. The Depression will be brutal.

Demons are consubstantial to our nature. They are hard to fight. Caught between the Vietnam syndrome and the irrational exuberance, the United States is embarked on a doomsday scenario -- a scenario apparently no one, or nothing can stop. Welcome to 2018.

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Former Vice President Citigroup New York (retired) Columbia University -- Business School Princeton University -- Woodrow Wilson School

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