America --- the New Minotaur?

"Improbably enough, a Greek economist named Yanis Varoufakis has been drawing attention in many of the hot spots of global finance lately, offering the Minotaur myth as a metaphor for understanding recent macroeconomic events. As Varoufakis writes in his recent book, “The Global Minotaur,” the world in which we have been living until recently functioned thanks to the voracious consumption of a different kind of beast. After World War II, the U.S. built up the infrastructure of its European allies as well as its former enemies, all of whom became trading partners. The U.S., with its great industrial and financial might, became the world’s surplus nation: its profits flowed out to its allies in the form of aid and investments. By the early 1970s, however, other countries had robust economies, and the U.S. was a debtor nation. “At that moment, certain very bright men within the American financial hierarchy made a stunning realization,” Varoufakis told me. The realization was that it didn’t matter if the U.S. was the biggest surplus or biggest debtor nation. What mattered was controlling the world’s primary currency, which would allow the United States to continue to recycle the global economic surplus. The idea was not unlike the thinking behind a casino — whichever gamblers are winning or losing, the house, which sets the terms and takes its cut, always wins.

So a new system came into being, in which a huge part of the world’s capital flows went to service debt originating in the United States. American debt, and the need to feed it, would be the modern Minotaur. The Wall Street financial houses became the handmaidens of the Minotaur. “The massive flow of capital into Wall Street gave it the impetus for financialization,” Varoufakis said, referring to the creation of derivatives and other risky financial vehicles. “And so Wall Street created a great deal of private money, with which it flooded the world and created huge bubbles, in the U.S. housing market and elsewhere.”

When that system came crashing down in 2008, Varoufakis says, “it was then only a matter of time that the euro would come into crisis.” Europe’s powerhouse economies — essentially, the northern countries — no longer had a place to sell their goods." ~ Russell Shorto, The New York Times.

This was so interesting I had to post it in its entirety.