A strong United States is good for us Ameropeans, but heaven help us now that the dollar is on its knees.

The collapse in the dollar and the realisation by Federal Reserve boss Ben Bernanke that the US economy is facing a housing slump poses a number of tricky questions for Ireland.

For years, Ireland has played a smart game pivoting between the US and the EU. Despite professing publicly to be good Europeans, Ireland benefits more when Europe is weak and America is strong – not the other way around. The fusion of monetary economics, demography and investment flows explains this.

When Europe is in recession, Irish interest rates are extremely low to reflect this. But because we are much younger than the rest of Europe and young countries spend more, we get a free lunch. We get German interest rates that fuel the Irish boom.

On top of this, when Germany is weak, the dollar is strong against the euro. This makes Ireland look cheap and hyper-productive to American investors, creating more jobs here, reinforcing the injection of German cash because, as our incomes rise, we can borrow more without necessarily feeling the strain.

This was the way it worked up until this year. Now the US is facing a currency crisis as the dollar slumps, highlighting the deep structural problems in the US, largely resulting from a borrowing binge which has only been outdone in Ireland. We are getting into debt five times faster than the Americans.

As a result, our geo-political blueprint has to be reassessed because, since 1996, we have profited enormously from being a transit nation for American capital and European labour. When we had no capital, we attracted in American investment by giving it a tax break and when we ran out of our own workers we attracted in European migrants by opening our door.

Both have been hosted here with impressive results. We are an Ameropean nation, half-American, half-European.

This constant juggling has had an impact on us, our political system, our expectations and national philosophy. This Ameropean geo-political stance is evident in elections.

Irish politicians, commentators and the electorate in general seem to think that we can have the tax system of Texas and yet deliver the social welfare system of Sweden. This can only happen if the growth rate is always better than your neighbour and for this to be the case, we need a strong America.

Unfortunately, the American economy is now unravelling. The pyramid scheme, whereby the Americans funded their day to day spending not from their savings but from equity release on their overvalued houses, has been exposed. In contrast, Germany is growing faster than anyone expected, so both interest rates and the dollar are going the wrong way for Ireland.

The last thing we need is a wounded America whose economic and political power has been emasculated by the disastrous Bush administration. Because we are small, we are liberated when America is the world’s only hyperpower. Since the end of the Cold War, the US’s grand strategy has been to maintain its overwhelming military, political and economic pre-eminence.

For that, we should be thankful — not because the strategy has been remotely designed with Ireland’s interests in mind, but because, as a by-product of US dominance, we have flourished.

Our increase in living standards has been the result of cherry-picking from both the European and American way. By attracting foreign investment on the one hand, and taking advantage of the European pool of savings on the other, we have profited in ways unimaginable only a few years ago.

But all this is changing. The dollar is now at its lowest level ever against the euro. This makes us look expensive for American multinationals, which now account for close to 80 per cent of our exports. (The figure for total multinational exports is 94 per cent of all Irish exports.) Taken together, the output of Intel, Dell and Microsoft in Ireland amounts to 20 per cent of our GDP.

As our currency rises against the dollar and sterling – our two biggest trading partners by far – we have to ask ourselves the question, why is this happening?

The reason is that we are locked into the most inappropriate currency regime which has helped turn a lean, fit, exporting country into a flabby, indebted outfit that is cannibalising itself.

We are turning into a mini version of the US where borrowing against overvalued houses begets more borrowing and the debt inferno gets bigger and bigger. This is not an economic miracle, it is fool’s gold.

In recent weeks, those who expose this sham and tie it into events playing out in America have been deemed unpatriotic.

There has been a ‘bull’ and ‘bear’ game playing out. The allegation is that it is possible to talk down the economy. However, when you dig a little deeper you see that the ‘bulls’ on the Irish economy are not bulls on the Irish economy at all , but bulls on the housing market – and the reason is that they are paid to ensure the housing market keeps rising.

But the housing market is not the economy, in fact the housing market has to fall for the rest of the economy to breathe.

The bizarre thing about the bullish case for the Irish housing market is that it is predicated on impoverishing the young Irish workforce by sentencing them to years of debt. In addition, the reason the government is hyping up housing is that it gets about 28 per cent of the price of every new house in taxes.

Our entire budgetary strategy has the effect of indebting our young people. The government takes money from young workers through the housing market and uses the cash to engineer tax cuts ahead of elections pretending to be a tax-cutting government. In reality it is just robbing Peter to pay Paul!

In short, like the Bush administration whose tax cuts were dressed up as revolutionary, our administration and their cheerleaders are trying to tell us that the housing market and the economy are the same thing because both the government and the banks make money out of housing.

Their entire ‘‘bull’’ case for Ireland impoverishes young workers and forces them to spend 15 times their annual salary on a shoebox 50miles away from their job. If this is what they mean by ‘‘economic success’’, one shudders to think what they would term ‘‘economic failure’’?

The ‘bear’ case is that we need to blow all this froth off our economy so that we can recover and instead of spending our cash on equity release for SUVs, second apartments and Big Bertha golf clubs, we need to get back to basics, start innovating and competing again.

When seen from this perspective it becomes apparent that the so-called ‘doom and gloom merchants’ are in fact the only ones that have a clear vision of a successful future for the country. On the other hand, the ‘blue skies’ merchants offer nothing but promises, debts and progressive economic emasculation.

That’s what the cheerleaders offered America up to last year. Look at what has transpired. Who’s patriotic now?

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