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Much has been made of the challenges confronting President Barack Obama, who assumes office in what appear to be the early stages of the worst economic downturn since the Great Depression. More should be made of the opportunities he faces.
We Americans are more than $2 trillion poorer, and counting, as a result of the subprime mortgage crisis, and our confidence has been badly shaken. But power is relative. The United States is more powerful today relative to our adversaries than at any time since Aug. 29, 1949, when the Soviet Union exploded its first atomic bomb.
Mitigating the damage done by greed, corruption and stupidity on Wall Street and in Washington has been the collapse of the price of oil. A gallon of gasoline sells for about half what it did last summer.
More beneficial than the relief the oil price collapse provides to our pocketbooks is the harm it does to our enemies.
Venezuelan dictator Hugo Chavez, who kicked out foreign oil companies from his country in 2007, is now begging them to return.
The International Monetary Fund estimated last fall that Iran needs an oil price of about $90 a barrel to meet its budgetary obligations. The collapse in oil prices is stirring unrest at home, and forcing Iran to reduce support for the terror groups Hezbollah and Hamas.
Last summer Russia, with petrodollars pouring into its coffers, was as big a bully as the old Soviet Union. When Russia invaded its tiny neighbor, Georgia, in August, there were fears of a new Cold War. But that action, coupled with the collapse of energy prices, has doomed the Russian economy. Russia backed off Tuesday from an attempt to bully another neighbor, Ukraine, by cutting off supplies of natural gas, because Russia needed the money from the sale of the gas more than the Ukrainians needed the gas. Foreign investment fled from Russia with the invasion of Georgia. This didn't matter so much when the prices of oil and natural gas were high. But it's critical now that prices have collapsed.
Alex Alexiev, a Russian expert with the Hudson Institute, estimates Gazprom needs a minimum of $20 billion in foreign investment each year for 10 years to stave off a production collapse. It won't get that money unless Russia's international behavior improves.
The Chinese are understandably upset with us for our mismanagement of their investments. But the worldwide recession brought on by the subprime mortgage crisis demonstrates that we still need to borrow their money, and they still need our markets. China can disrupt our economy by withholding investment, but only at the price of sabotaging their own. If we fail to cooperate, it'll be bad for us both. We may be reluctant partners, but partners we must be.
Most European economies are in worse shape than ours, so there is little likelihood the euro will replace the dollar as the principal currency for international transactions. The crisis has demonstrated that however bad America may be as a place to invest your money, it is still not as bad as most other places. Our economy will recover -- if the president and Congress don't load it with debt for pork barrel projects of dubious merit -- and likely will recover faster than economies elsewhere.
What is essentially a victory in Iraq, coupled with the harm done to Iran by the oil price collapse and rising Sunni Muslim fear of Iran and her proxies, gives President Obama a more tractable situation in the Middle East than President Bush faced when he assumed office. The critical mistake he must avoid is permitting Iran to acquire nuclear weapons. That would alter the world situation as swiftly and dramatically for the worse as the explosion of the Soviet bomb did in 1949.
President Obama begins his term of office with more than national and international good will. He inherits a strategic situation more beneficial to the United States than any since the collapse of the Soviet Union. If President Obama fails, it won't be because the challenges he faced were too great. It will be because he failed to seize the opportunities he was offered.
First Published January 25, 2009 12:00 am