July 07, 2011

The confidence in the dollar and USA’s defense capabilities are as connected as they can be

Sir, when Sebastian Mallaby in “American power requires economic sacrifice”, July 7 discusses USA’s spending on defense he fails to mention one important related question namely… how much of the world’s clearly extreme confidence in the US dollar depends on the US conserving at least the appearance of omnipotence? My answer would be “much much more than what you think… this is really terrain where realpolitik reigns”. 

In this respect any defense savings that comes, for instance, from not fighting useless wars will be acceptable, but any saving that leads to a perception of a lessened military readiness of USA would become extremely expensive, as a result of the dollar being worth less, or the markets demanding higher interest rates to hold US public debt.