US exceptionalism

While Britain and continental Europe struggle to deal with the energy crisis, rampant inflation, negative growth and currency pressures, across the Atlantic things are brighter. America is less exposed to the energy blackmail inflicted by Vladimir Putin on countries unwise enough to make themselves dependent on Russian oil and gas.

The Fed has pursued a more aggressive monetary policy designed to get on top of inflation by raising interest rates earlier and faster than the Bank of England or the European Central Bank. As a result, the dollar has strengthened markedly against sterling and the euro. The pound fell to its lowest level since 1985 yesterday, with some experts predicting the once-unthinkable prospect of parity.

The flight to the dollar as a safe haven is indicative of trouble elsewhere in the world economy. While the Americans have largely weathered the storm engendered by the pandemic, Europe is heading back into recession, with countries such as Germany – and probably the UK – already there.

With the energy crisis worsening, the US is pulling ahead of Europe through its energy self-sufficiency and without being hamstrung by regulatory restrictions on exploiting sources such as shale. Donald Trump warned Europe about its over-dependence on Russian energy and what might happen if Putin turned off the taps. Rather than listen to what he said, EU leaders chose to deride him. Their short-sightedness has led to a perverse state of affairs whereby the same countries imposing sanctions on Russia are also pouring billions into the Kremlin’s war chest.