Standalone Economy

   The U.S. economy is improving, but stormy winds still blow across Europe and Asia. So the question becomes this: Can the U.S. go it alone as a self-contained system, immune from economic infection from the rest of the world?
   American workers found more jobs last month, increasing payrolls across the country by 231,000, with the unemployment rate below 6 percent. Along with this, the housing market is responding with positive signs as families feel more secure with their jobs and income.
   Exports from American firms rose by $2.3 billion in October from the month before, outpacing the dollar value of imports. Result: A reduction in the international trade deficit.
   The Federal Reserve reported that national economic activity continued to expand in October and November. Separately, sales of new single-family homes totaled 458,000 in October, up 0.7 percent from September and up 1.8 percent from a year ago, according to the U.S. Bureau of Economic Analysis. And personal income increased 0.2 percent, with spending rising at the same rate, the government said.
   Overall, GDP in America -- the total value of goods and services -- increased at an annual rate of 3.9 percent, according to government statistics.

   And now here comes the but. The 18 nations of the European Union are still struggling to achieve solid economic growth, and the European Central Bank said it will try again to stimulate the stalled economy. Central banks in Japan and England have already been attempting to boost growth by making more money available, thus lowering interest rates. One problem, of course, is that interest rates are already near zero in those countries, and there is the danger that more money will only raise prices -- also known as inflation. Moreover, in many parts of the world, this tactic isn't working.
   In America, the Federal Reserve has drawn interest rates down to near zero, and the Fed has suggested it may pull back from its "quantitative easing" as the economy recovers. The economy does seem to be recovering, but whether it's doing so on its own or as a result of Fed actions may be arguable.

   Now back to the question. Can the U.S. continue its upward trend as a standalone economy? And is it strong enough to build not only its own strength but that of the rest of the world as well?
   True, U.S. exports have been increasing faster than imports, which means that American firms and consumers are selling more stuff than they buy. This, of course, is good for America, but if other nations flag their purchasing rate even as U.S. firms trim their own, the result can only be trouble.
   A related issue is inflation. A little bit is a good thing, according to conventional economic wisdom, since it encourages people to buy now before the price goes even higher. But when the reverse happens and deflation -- meaning lower prices -- sets in people tend to hold off on purchases in the expectation that prices will fall even further. This is especially true when jobs are scarce.
   Superpatriots will wave the flag and insist that they don't need anyone else in order to prosper. Close the borders, they say, and we'll bootstrap ourselves to prosperity. However, history teaches otherwise. And those who do not learn from history are condemned to repeat it. Remember the Smoot-Hawley Act, which erected stiff tariff walls to protect American producers? Unfortunately, many other countries did the same, and the result was a worldwide Great Depression.