Why The United States And Canada Should Merge: Foreign Policy Opinion

Actually, the United States Has Defaulted Before

Desomorphine, however, is not why krokodil is so dangerous. About 10 years ago, Russians apparently discovered how to synthesize desomorphine at home using commercially available ingredients including red phosphorus, which they reportedly glean from the sides of matchboxes, and codeine, which until last year was available over the counter in Russia. The resulting substance contains several caustic byproducts. When you use the krokodil . . . really what youre doing is injecting red phosphorus and solvents into your body, said Matt Zuckerman, a toxicologist at the University of Massachusetts Medical School. With regular use, those toxins can rot flesh, causing abscesses and gangrene. A recent U.N. report attributed krokodils emergence to a heroin shortage in Russia. The countrys head drug official has said that a ban on over-the-counter sales of codeine has reduced krokodil use.

Zivney and Marcus examined what happened to T-bill interest rates as a result of this small, temporary default. They find a surprisingly large effect. As best they can tell, T-bill interest rates increased about 60 basis points after the first default and remained elevated for at least several months thereafter. A simple way to see that is to look at daily changes in T-bill yields: T-bill rates spiked upwards four times in the months around the default. In November 1978, Henry Dr. Doom Kaufman predicted that interest rates would rise. They did. Turn-of-the-year cash management disrupted rates as 1978 became 1979. And rates spiked and fell in October 1979 when Paul Volcker announced that the Fed would target monetary aggregates rather than interest rates (the Saturday night special). The fourth big move was the day of the first default, when T-bill rates rose almost 0.6 percentage points (i.e., 60 basis points).Theres no indication this increase reversed in the days that followed (the vertical line on the chart is just a marker for the day of default). Indeed, using more sophisticated means, including comparing T-bill rates to interest on commercial paper, the authors conclude that default led to a persistent increase in T-bill rates and, therefore, higher borrowing costs for the federal government. The financial world has changed dramatically in the intervening decades.

“The idea of the book is to start a conversation. . . . The conversation isn’t that enlightening yet, but it will be.” And she knows it’s ambitious: She never shies away from the biggest parallels she can draw — there’s that “Marshall Plan” for investment in Canada, and comparisons to German reunification or potential Korean reunification abound. But there’s an analogy Francis doesn’t make. In 1985, Ibrahim Ibrahim, then a professor at Georgetown, presented a Cassandra-like proposal. With economic challenges looming in North Africa, Ibrahim suggested a three-way merger of Egypt, Libya and Sudan. Egypt’s abundant population and technological development could provide the impetus to turn Sudan into a “breadbasket” for the region, Ibrahim argued, and Libya could find political unity and integration, lest it be “abandoned to the wiles of history.” The plan was similar to the one Francis proposes: “Initially, a common market would be created among the three, one in which free movement of labor and capital would be guaranteed. … In the second phase of the common market, the three countries would establish a formal political confederation, allowing for free trade, the integration of production, and technical integration. Only then can the three embark on a systematic, long-term plan of investment for the twenty-first century.” Like Francis’ proposal, the plan was politically outlandish but economically sensible. Twenty-eight years later, after political and economic desperation have brought revolutions in Libya and Egypt, and with Sudan now partitioned but still underdeveloped, was this period of decline inevitable? The sensational, possibly hyperbolic future Francis envisions, of rising powers whittling away at Canada’s — and ultimately America’s — resources and sovereignty, is similarly dire.