Hidden Blessings

Bret Stephens: "Before yesterday's surge, the Dow had dropped 25% in three months. But that only means it had outperformed nearly every single major foreign stock exchange, including Germany's XETRADAX (down 28%) China's Shanghai exchange (down 30%), Japan's NIKK225 (down 37%), Brazil's BOVESPA (down 41%) and Russia RTSI (down 61%). These contrasts are a useful demonstration that America's financial woes are nobody else's gain. ...the ratio of government debt to GDP in the U.S. runs to about 62%. For the eurozone, it's 75%; for Japan, 180%."

So, yeah, there's some local pain. Not as much as most other places. It's a systole-diastole thing. The real world does not progress without the occasional backstep. In business, rationality is the watchword. Emotion is for private life. When prices fall, that's the time to buy, not to sell. You know, buy low sell high. Even I know that. But that's the ideal, and idealism is the opposite of practicality. So it's sort of contradictory. Or not: sometimes practical considerations force us to sell low. Point is, it should be rational.

"On the other hand, global economic distress doesn't invariably work at cross-purposes with American interests. Hugo Chávez's nosedive toward bankruptcy begins when oil dips below $80 a barrel, the price where it hovers now. An identical logic, if perhaps at a different price, applies to the petrodictatorships in Moscow and Tehran, which already are heavily saddled with inflationary and investor-confidence concerns. Russia will also likely burn through its $550 billion in foreign-currency reserves faster than anticipated -- a pleasing if roundabout comeuppance for last summer's Georgian adventure."

Usually when I quote at length, it's to show what an idiot someone is. Some abortionist or other malefactor. But excellence too should be honored, and this Bret fella is interesting enough to be right. It's a problem, then, for these inimical oil magnates who gloat at our distress while ignoring their own. How very Russian, and Latin as well. I've told the old story, of the Russian peasant to whom an angel promised any gift, but which would be given double to his neighbor. Said the spiteful old man, "I wish that I may be blind in one eye."

"Nor does the U.S. seem all that badly off, comparatively speaking, when it comes to its ability to finance a bailout. Last month's $700 billion bailout package seems staggeringly large, but it amounts to a little more than 5% of U.S. gross domestic product. Compare that to Germany's $400 billion to $536 billion rescue package (between 12% and 16% of its GDP), or Britain's $835 billion plan (30%)."

I don't know about the wisdom of bailouts. I just don't know. I try not to be so theoretical anymore. Capitalism is a great theory, the practice of which has brought great benefit. But there never has been a purely capitalistic system. Government has been used in various ways, exploited by the fatcat robber barons as in the Gilded Age, or to curtail their depredations, as in the Progressive Era of Teddy Roosevelt. Point is, in both cases capitalism was affected by government. No real laissez faire. And phrased as Stephens has it, five percent isn't so much. It's not as much as we pay in interest on the national debt -- talk about money down the toilet. At least here we're actually buying assets, mortgages, albeit overpriced. There is an actual piece of property, for all that it will be left derelict, stripped of its copper pipes, and then sold at auction for fractions of pennies on the dollar. A fixer-upper, then. That's good for the economy too.

"It also helps that the U.S. continues to have the world's largest inflows of foreign direct investment; that it ranks third in the world (after Singapore and New Zealand) for ease of doing business, according to the World Bank..."

It's important to keep things in perspective. It's important to find the good, even if it's only a comparative good. The fact that our hardship is less then someone else's isn't a good thing, but it's a salutary lesson -- things could be so much worse.

"Above all, the U.S. remains biased toward financial transparency. ...a system that demands timely and accurate financial disclosure and doesn't interfere with price discovery will invariably prove more resilient over time than a system that does not make such demands. ...one of the unremarked ironies of the present crisis is that America's financial vulnerabilities came fully into view months before Europe's (or the rest of the world's) did. That's one reason the dollar has rallied in recent months. It's also why the U.S. is likely to come through the crisis much more quickly than, say, Japan, which spent the better part of the 1990s hiding its own banking crisis from itself."

Stephens uses the image of the Augean Stables -- the impossible filth of which Hercules was challenged to cleanse. He did so by redirecting a river through it. It must have been traumatic, catastrophic even, for all the maggots and stinkflies and dung beetles and other creatures of offal who thrived in the ordure.

Weak? Are we weak? No more than we were before we learned of the crisis. The beauty of our system, and of our temperament, is that even in the distress of discovering corruption, we resolve to correct it, rather than crumble before its threats and posturings. I am strong, it says, when it is weak. I am honorable, when it is worthless. So it is, with corrupt practices. Its ugliness will not shame us. We will tear it down, and rebuild.

This is our way. It's why I do, I really do love America. Flawed, deeply -- just the best human thing we've got going. In any case, we do not abandon the ones we love, when they are distressed, or when they are weak, or when they are selfish. We don't do that. We leave that sort of thing for others to do.

"Severe recessions or depressions are fundamentally political events that can last a decade or longer -- however long economic policy remains bad." Alas, Obama seems poised to win. He will be a poor president. A combination of the spineless Carter, the hapless Hoover and the impetuous FDR. Disastrous. But we've survived disasters.

The future is just the past waiting to happen. We've survived the past. What terror can the future hold? Only that which we avoided facing when we met it before. Think of it as a second chance.


J