In his astonishingly prescient book, “The World Is Curved: Hidden Dangers to the Global Economy,” David M. Smick argues that we have inherited an impressive global economic system. It, with the U.S. as the hub, has produced unprecedented levels of global prosperity. But it has now spun wildly out of control. It can’t be fixed with the shock and awe of a $700 billion rescue package, Smick says. The fundamental architecture needs to be reformed.
It will take, he suggests, a global leadership class that can answer essential questions: How much leverage should be allowed? Can we preserve the development model in which certain nations pile up giant reserves and park them in the U.S.?
Until these and other issues are addressed, the global markets will lack confidence in asset values. Bankers will cower, afraid to lend. America’s role as the global hub will be threatened. Europeans will drift toward nationalization. Neomercantilists will fill the vacuum.
This is the test. This is the problem that will consume the next president. Meanwhile, the two candidates for that office are talking about Bill Ayers and Charles Keating.