Response Blog Post #1
It isn't any breaking news to reiterate the fact that the
US Federal Reserve (Fed) interest rates are low (between zero and one-quarter percent).
The news that has been circulating recently,
though, is that these low rates are expected to stay low for a while. They have
been low for quite a long time, starting after 9/11 under Greenspan's
administration with multiple attempts to revive the economy by making it easier
and cheaper to borrow money. The unprecedented response was that the low
interest rates led to a new demand for mortgages and home equity loans, which,
in turn, led to the housing bubble and the subsequent bubble burst and financial
crisis of 2008. Now, in late 2015, with the low rates and implementation of
quantitative easing methods bringing an apparent boom to the economy, some
question why we still have these low rates in place. There is controversy going
on over whether or not it is safe to raise rates. A Realist's standpoint to all
of this would likely be indifference, or, he would probably just look on the
surface, like many Americans are doing, and give approval to raising the rate.
What the Realist probably wouldn’t consider, though, is volatility of the
global financial market, namely, the devaluation of the currency in China due
to the major market selloff. The Chinese government came
in with an attempt at a rescue and pumped money into the market to serve
as a boost, but this didn’t seem to work. European equities markets have been
dropped down very low and raising the Fed rate at this time, though widely anticipated,
would not be the smartest decision. The foreign trade sector represents roughly
one third of the supply and demand, so it would be silly for the US Fed to
ignore the rest of the world’s economic activity just to control inflation or
to give banks more incentives to give out loans.
Realists would most likely underestimate the importance
of the Fed's interest rates. This is because economic power is not as important
to a Realist as military power, unless that economic power is interlaced with
the military power. This Realistic viewpoint is unreliable because it is too
pessimistic, doubting the morality and consequent sensibility of the
international system. If a Realist thinks that countries all act in their own
self interests, then how could one account for the US giving billions of
dollars to needy countries? To a Realist, this would be a silly move. Yet the
US has done so and still maintains its position as a regional power. Moreover,
if each country only thought about its own interests, then the world’s
international policies would be at a deadlock. Admittedly, some policies have
more weight than others, but overall, this is not the case. For example, the
European Union has been successful in distributing its large numbers of refugees
over the member countries, with the US taking in 100,000 per year and Germany
taking in a whopping 500,000 per year. These large accomplishments would not
have occurred without the countries working together, not pitting themselves
against each other. In this way, they defy Realist tendencies successfully, and
hopefully the Fed interest rates will do the same.
I agree with you that Realists undervalue the importance of economic aspects of states in the international system. A state simply cannot ignore the economic situation of other states. Low federal interest rates would definitely be one area of importance that states must monitor if they want to be successful in a global economy. I disagree, however, with the idea that charity from the U.S. discredits the idea of Realism. I think a realist would defend the idea of charity based on the fact that it can make the U.S. a cultural hegemon in the region of interest. Would a realist approve of the amount of money the U.S. is spending? Probably not. But the idea of charity itself would not be discredited in realism; the idea of altruistic charity would.
ReplyDeleteI can see what would lead you to think that a Realist would defend the idea of charity, but not the money that the US is spending. However, culture is not the primary worry of Realists. Instead they are focused on the military. You share my belief that altruistic sentiments would be denied by a Realist. It should also be noted that Liberalists too would not necessarily accept the altruistic ideas, or at least, it is not inherent in their nature, but is often a subsequent consequence of their cooperative ideas.
ReplyDeleteI completely agree with you on the idea that a realist would not delve deeper into the rising rates and that they would just see the increase as a good thing without understanding it. Realists do not care that much about the economic or political standpoint of the government rather they focus on the military powers and how we can fix them.In regards to Jake, I also dont believe that a realist would consider the amount of money the US spends unless it was on militaristic things.
ReplyDeleteYes, I share your belief. This is why Realism does not accurately account for modern international politics. Nowadays, the political standpoint of the government holds a major role, as was evident in the Vietnam war and other cases.
DeleteWhile I would agree that Realism as a theory certainly overlooks economics as a factor in the international system, I would not go so far as to say that economics only matter to realists insofar as it is laced with military power. While realists focus on the balance of power and relative (militaristic) gains, this idea of power imbalance is not merely limited to military power; economic power also enters into the equation. States whose economies is growing are also gaining power, since economic strength often translates to power in the international system. Thus, realists, and in particular neo-realists, also pay attention to a states economy as it relates to power.
ReplyDeleteI understand your point of how economic strength can translate to power in the international system. I did not think of that before. Neo-realists, then, would be a more accurate depiction of the modern international system, but I still disagree with the foundations of Realism as a whole.
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