[Note by JW:  Ambrose has written something which should provide lively debate on the TTP Forum.  Feel free to counter him with opposing facts and data.] Americans are purging their excesses one by one. Spending by the US Federal government has seen the steepest drop as share of national income since demobilization after the Second World War. Claims that President Barack Obama is bankrupting America with a lurch towards hard-left statism are for tabloid consumption only. Outlays have fallen from 24.4% to 20.6% of GDP in five years. Spending is roughly in line with its 40-year average. This fiscal squeeze has been achieved without driving the economy into recession or a Lost Decade, a remarkable feat. The US Congressional Budget Office expects the budget deficit to drop to 2.8% of GDP this year, and 2.6% next year. This is about the same as the Eurozone but with a huge difference. The US economy is expanding fast enough to outgrow its debts. The US energy revolution is of course at least half the story. It has stoked booms across the Dakotas, Wyoming, Nebraska, Washington, Oregon, Utah and Texas. Francisco Blanch, from Bank of America, estimates that shale gas and oil have given the US economy an extra tailwind worth 1.9% of GDP - what he calls the "energy carry" - with effects rippling through the chemical and plastics industries. New investments in ammonia plants are rising at an exponential rate, thanks to natural gas prices that are $4.40 (per BTU) in the US and $15 on Asia's spot market. While Obama can in no way claim credit for this, the other half of the story is monetary stimulus a l'outrance (to the bitter end) - quantitative easing - to offset fiscal tightening and prevent a "pro-cyclical" downward spiral, which is what occurred when the European Central Bank jumped the gun and raised rates twice in 2011 before recovery was entrenched, setting off the cataclysmic crisis that nearly destroyed EMU in mid-2012.

The most terrifying aspect of the collapse of US power worldwide is the US's indifferent response to it. In Europe, in Asia, in the Middle East and beyond, America's most dangerous foes are engaging in aggression and brinkmanship unseen in decades. The US has responded to Chinese aggression with ever-escalating attempts to placate Beijing - while China has responded to these US overtures by demonstrating contempt for US power. As for Europe, the Obama administration's responses to Russia's annexation of Crimea and to its acts of aggression against Ukraine bespeak a lack of seriousness and dangerous indifference to the fate of the US alliance structure in Eastern Europe. In the Middle East, it is not only the US's obsessive approach to the Palestinian conflict with Israel that lies in shambles. The entire US alliance system and the Obama administration's other signature initiatives have also collapsed.  The key examples are Iran and Syria. Yet the problem is not limited to Obama and his advisers or even to the political Left. Their delusional view that the US will suffer no consequences for its consistent record of failure and defeat is shared by a growing chorus of conservatives.

Russia is at increasing risk of a full-blown financial crisis as the West tightens sanctions and Russian meddling in Ukraine pushes the region towards conflagration. The country's private companies have been shut out of global capital markets almost entirely since the crisis erupted, causing a serious credit crunch and raising concerns that firms may not be able to refinance debt without Russian state support. "No Eurobonds have been rolled over for six weeks. This cannot continue for long and is becoming a massive issue," said an official from a major Russian bank. "Companies have to roll over $10bn a month and nothing is moving. The markets have been remarkably relaxed about this, given how dangerous it is. Russia's greatest vulnerability is the bond market," he said. The warnings came as EU foreign ministers agreed to draft plans for "Stage III" sanctions - this time hitting economic and financial targets - if Russian president Vladimir Putin sends troops into East Ukraine or tries to seize territory. Washington is forcing the pace in any case as is tightens the noose by other means, using regulatory "stealth" power to force banks across the world to pull back from Russia.

On Tuesday (4/08), we learned that "crews searching for the missing Malaysia Airlines flight MH370 have failed to relocate the sounds previously heard deep in the Indian Ocean, raising fears that the batteries in the plane's black box may have died." The tragic disappearance of all 239 people on board flight MH370 in the Indian Ocean has one really peculiar feature to it: none of the possible explanations is remotely plausible, yet one of them must be true. The usual rule on these occasions - choose the simplest explanation or, as William of Ockham taught, make the fewest assumptions - simply does not work. There is no simple explanation. Whether the cause was an accidental decompression, a terrorist act or a suicide, all three require us to assume that an outlandish and bizarre sequence of events happened. I don't know about you, but I have had conversations about MH370 with many people recently, some of whom were fairly confident that they knew what had happened. Yet every story they told was baroque in its contrivance to the point of implausibility, requiring a chain of events that stretched my credulity. Yet, as I say, one such story will turn out to be right. Consider the sequence of events.

The eurozone debt crisis is deepening and threatens to re-erupt on a larger scale when the liquidity cycle turns, a leading panel of economists warned in a clash of views with German officials in Berlin. "Debts above 130% of GDP for Italy and 170% for Greece are a recipe for disaster once we go into the next downturn," said Professor Charles Wyplosz, from Geneva University. "Today's politicians believe the crisis is over and don't want to hear any more about it, but they have not tackled the core issues of fiscal union and public debt," he said, speaking at Euromoney's annual Germany conference. Ludger Schuknecht, director-general of the German finance ministry, insisted that the debt-stricken states of the eurozone are well on the way to recovery, ending their EU-IMF rescue programs successfully one by one. There is no need for any major shift in policy. "The strategy has been right. We need to bring down debt and this is now consensus," he said. This optimism is sharply at odds with the view of almost every foreign-based economist attending the event. Charles Dallara, former head of the International Institute for Finance and chief negotiator for global banks in Greece's debt-restructuring, said little has been done to put the eurozone on a viable footing, even if sovereign bond yields in southern Europe have fallen to record lows.

Capital flight from Russia has spiked dramatically since President Vladimir Putin first sent troops into Crimea and may reach $70 billion over the first quarter of the year, prompting fears that the country may soon have to impose capital controls to stem the loss. "It is shocking," says Bartosz Pawlowski from BNP Paribas. "Markets have been extremely complacent, fooling themselves that Russia is invulnerable because it has almost half a trillion in foreign reserves. But reserves can become almost irrelevant in this sort of crisis." Lars Christensen from Danske Bank says the authorities may resort to some form of financial coercion to lock down funds in Russia. "Capital controls are a serious risk, and should not be discounted. Whatever now happens, there has been permanent damage to the Russian economy because investors are not going to forget this lightly." The US and the EU are ratcheting up the pressure each day following a spate of sanctions last week on Mr. Putin's inner circle. The latest example came Monday (3/24), when....

Russia risks a wave of capital flight and a shattering economic crisis as the West prepares a package of sanctions over the seizure of Crimea. Chancellor Angela Merkel spelled out the danger for Russia in a speech to the German Parliament yesterday (3/13) that silenced pro-Kremlin voices in her own coalition and left no doubt that Europe is now fully behind the US on punitive measures. "If Russia continues on its course of the past weeks, that will not only be a great catastrophe for Ukraine. It will cause massive damage to Russia, both economically and politically," she said. "None of us wants it to come to this, but we are determined to act. Let me be absolutely clear; the territorial integrity of Ukraine is not up for discussion." The West has threatened visa bans and an asset freeze on individuals as early as next Monday (3/17) unless Russia steps back from the brink on the annexation of Crimea. And that is only the begining. Russia has threatened to retaliate with "symmetrical sanctions" but Tim Ash, from Standard Bank, said it is a one-sided contest that Moscow cannot win.  Here's why.

China's Xi Jinping has cast the die. After weighing up the unappetizing choice before him for a year, he has picked the lesser of two poisons. The balance of evidence is that most powerful Chinese leader since Mao Tse-tung aims to prick China's $24 trillion credit bubble early in his 10-year term, rather than putting off the day of reckoning for yet another cycle. This may be well-advised for China, but the rest of the world seems remarkably nonchalant over the implications. Brazil, Russia, South Africa, and the commodity bloc are already in the cross-hairs. "China is getting serious about deleveraging," says Patrick Legland and Wei Yao from Societe Generale. "It is difficult to gently deflate a bubble. There is a very real possibility that this slow deflation may get out of control and lead to a hard landing." Societe Generale has defined its hard landing as a fall in Chinese growth to a trough of 2%, with two quarters of contraction. This would cause a 30% slide in Chinese equities, a 50% crash in copper prices, and a drop in Brent crude to $75.

In last week's Half-Full Report (see the section on Debbie Does USAF), Jack asked me to comment about America's F-22A Raptor and F-35A/B/C Lightning II fighters.  Namely: if the F-22 Raptor was the better fighter, why was it canceled in favor of the F-35? Both fighters sit at the nexus of some pretty big assumptions and questions about US air power in the next few decades, so it's hard to give a brief answer, but I'm going to try. In brief: Yes, the F-22 is a much better fighter than the F-35. Indeed, it remains the best fighter in the world by a wide margin. The flip side is that it can't perform some roles, costs a lot to maintain, and will cost quite a lot ($7 billion or more) to upgrade to modern standards. But the bottom line is thatI don't think the core problem is F-22 vs. F-35. The core problem is...