The idea that the U.S. is withdrawing from the world and abandoning its key foreign policy objectives is manifestly false. Anybody capable of reading mainstream media can see that every day.

There is a change, though. Gripped by binding fiscal and monetary constraints, the U.S. is just looking for more affordable, and – hopefully – smarter ways of doing things.

People who fail to see that are those who don’t understand that the U.S. is literally staring at a major financial crisis in months and years ahead.

As always, the detonator of the crisis is America’s unsound monetary policy that has recklessly taken on the role of politically paralyzed and perverted fiscal, foreign trade and structural policies.

That, unfortunately, is a permanent and systemic issue in American economics: Failures to adequately deal with problems of real economy immediately trigger calls for larger money supply provisions because, by its charter, the U.S. Federal Reserve (the Fed) is responsible for -- a mission impossible of -- maximum (i.e. full) employment and stable prices.

And here is what happens.

When election-obsessed politicians get on a spending spree, and ignore trade and structural (e.g. infrastructure and labor market) policies because they transcend election cycle boundaries – the Fed has to pick up the pieces by printing more money. As a result, infrastructure, trade and structural imbalances remain -- and get worse over years and decades of neglect.

The Fed has no good policy option

Under those circumstances, the monetary policy provides a temporary relief, but it ultimately leads to accelerating inflation, forcing the Fed to tighten credit conditions, raise interest rates, and throw the economy into recession and rising unemployment.

What’s the solution here? There is none.

No Fed chairperson ever dared to refuse calls from the White House or Wall Street, or both acting together, to expand money supply on the grounds that such a move would compromise economic stability. The Fed only acts when forced to raise interest rates by an increasing price inflation. But, at that point, rising prices can’t be stopped, and reversed, without a growth recession, devastating job losses and rising poverty.

Hence the axiom: Recessions are always caused by a monetary stimulus maintained beyond the point where the economy needs it.

As things now stand, that point in the U.S. economy has been passed a long time ago. The pandemic shock, its unpredictable sequels, and the looming – crucially important -- Congressional elections next year have only made things worse.

The policy now being contemplated by the Fed is just to “taper” an excessive monetary expansion.

But that is only putting off the inevitable. The U.S. price stability – measured by the consumer price index (CPI) -- has been eroding for the past two years to reach 5.4% last July. That trend will continue in an economy advancing at a rate that is three times above its physical limits to noninflationary growth.

The Fed, however, will only step on the breaks once that becomes clear to all. And that will be too late.

When that happens, there will be a huge shock to an economy that needs to finance a $3 trillion budget deficit (13.3% of GDP), and to keep rolling over a public debt of $29 trillion (125% of GDP).

Rising interest rates will puncture the asset bubble and slow the economy where 16 million people have no stable employment, with another 100 million out of the labor force -- and unemployable for lack of skills and education. That totally wasted manpower has increased by 20 million since 2000.

Will foreign investors be tempted by a cheaper dollar and rock-bottom U.S. asset prices?

Perhaps, but they will want very deep discounts to put their savings in a country whose net foreign liabilities at the end of last March stood at $14.3 trillion – an astounding 64% of U.S. GDP. That foreign debt also rose 16% from March 2020.

Fighting wars with other means

All those numbers show a precarious cyclical and structural position of the U.S. economy. They may not fully explain America’s precipitous military withdrawal from Afghanistan, but they should be enough to make clear why a “forever war” was no longer – if ever -- a viable option of American foreign policy.

But that does not mean that the U.S. will not use other instruments of influence and power projection, such as sweeping sanctions, economic containment, regime changes via proxy and hybrid wars, etc.

Biden administration is publicly on record that it wants to lead liberal democracies in defense of the Western world order (i.e. Pax Americana) against authoritarian systems – mainly Russia and China – officially labeled as strategic competitors.

As recently as two weeks ago, the U.S. Vice President Kamala Harris was denouncing, during her Asian trip, China’s allegedly aggressive behavior toward its neighbors. Beijing’s territorial claims in the South China Sea are also frequently challenged by U.S. Navy’s “freedom of navigation” sails.

Those U.S. Navy power demonstrations are also going on in the Taiwan Strait. And Washington just infuriated China with a $750 million of arms sales to Taiwan in violation of a “One-China Principle” accepted by the U.S. in a number of joint communiques. The U.S., however, qualifies its view of those agreements to justify its military and political contacts with Taiwan.

That’s where Beijing’s red lines clash with Washington’s key points of pressure. There is, therefore, no end in sight to U.S.-China confrontations, because China will not cooperate with the U.S. until Washington ceases its attacks on its political system, sovereignty and territorial integrity.

The U.S.-Russia confrontation is even more dangerous and flammable.

Russia’s economy is under constant pressure from sweeping American and American-ordered EU sanctions. Washington is also threatening, and actually applying, sanctions on countries buying Russian arms and entering in major business deals with Moscow.

Last week, Washington offered support for bringing NATO to Russian borders by advocating Ukraine’s membership in Euro-Atlantic alliances. To back that up, Ukraine got U.S. arms with military and economic assistance. It also seems that America gave a nod to Ukraine’s exit from a peace process designed to stop the fighting in the region of Donbas.

Poland and Baltic states also appear to believe that they can count on America’s support in their permanent confrontations with the Kremlin.

Those are examples of war by other means. And that’s the strategy the U.S. will pursue against Russia, China – and all comers -- in defense of a world order set up and operated by liberal democracies.

They are all extremely disruptive and dangerous actions -- until people begin to understand that the U.S. will not start a nuclear war with Russia and China on behalf of Taiwan, Ukraine, Syria, Libya …