Obamas Team FEARS 'Economic Collapse' Of `Unstable Nation

by **J The Kidd** Thu Dec 11, 2008 3:36 pm

It's quite unsettling to talk to members of Barack Obama's
transition teams these days, especially those who are helping with the
economics portfolio. Without going into details, the sense I get from
them is that they are very worried that the economy will get a lot
worse before it gets better. Not just worse... a lot worse.

As in -- double digit unemployment without the wiggle factors. Huge
declines in aggregate demand. Significant, persistent deficits.

Where the discussion isn't going, at least in public, (or the PR
level), is the possibility that the first foreign policy crisis the
administration will face will be the complete economic collapse of a
large, unstable nation.

To be sure, Pakistan is nearly broke, and U.S. policy makers seem to be
aware of that; but a worldwide demand crisis could lead to social
unrest in countries like Indonesia and Malaysia, Singapore, the
Ukraine, Japan, Turkey or Egypt (which is facing an internal political
crisis of epic proportions already). The U.S. won't have the resources
to, say, engineer the rescue of the peso again, or intervene in Asia as
in 1997.

Which unstable states would concern us the most? Is there something the
U.S. can do, in advance, should do, in advance, to forestall the
collapse of other economies?

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