The Dow is down and the Duma is out – for Yeltsin’s blood. The Japanese have found a prime minister who makes Alan Greenspan look like the life and soul of the party. Somehow there is less of the old triumphalism around. Lots of bankers who brayed over the worldwide victory of free markets are decibelling for bailouts for the bankrupt regimes in which they sank their money.
In case you have forgotten how it works, the bankers loaned a lot of money to shaky governments which immediately allowed it to be looted by their cronies as fast as you could say, ‘Mobutu.’ The $70 bn of foreign money that has gone into Russia, for example, is matched by an equal amount of what it is coyly called ‘flight capital’. That is money looted from the ‘privatized’ industries and banks, usually by former Communist Party apparatchiks who knew exactly where the roubles were buried, and then siphoned them off to Switzerland, London and New York, leaving unpaid Russian workers and pensioners with the foreign debt to pay.
No wonder a recent poll shows that a lot of Russians are considering an armed uprising. To be fair, successive White House incumbents have bamboozled American investors by hymning Boris Yeltsin as the answer to Western prayers. From the beginning he’s been an obviously bibulous bully whose ambition has always vastly outweighed his ability. Whatever the question is at this stage of Russia’s history, it is clear that Tsar Boris is not the answer.
Of course turmoil in a country that still has the world’s second largest nuclear arsenal is of more than academic interest to the rest of us. Of more pressing concern is the knock-on effect. The collapse of the Russian bear already seems to be the last bliny that is breaking the bull’s back.
In strict terms of trade and production, the Russian economy is so shrunken that its downfall would not affect Western economies. But more insidious is that other northern mammal, the lemming. If you prick American investors’ confidence, do they not bleed like those in Jakarta, Moscow and Tokyo? Too true they do. Once the bubble of investors’ confidence finally bursts, there is no telling how far they will run.
If the Fed follows in its own footsteps (after all, its tracks have been followed by central bankers all over the world), we could have an icy recession hitting the heartland. The slump of the 1930s was caused by central bankers deciding that inflation and a sound currency were the alpha and omega of economics.
It may seem premature, but the cure for that depression was World War II, which did wonders for unemployment, production and productivity. Of course, it was financed by deficit spending, but Mars hath charms to soothe the savage breasts of the most ferocious tax-reducers, as shown by the current huge military budget a decade after the last credible enemy disappeared.
If legislators refuse to adopt sensible Keynesian policies by spending on infrastructure, research and education, then we just have to bite the bullet and go for war. But we need a war with minimal casualties that still burns up billions, nay trillions, of hardware, while boosting technology in a big way.
Spending $75 mn on cruise missiles to blow up a few Afghan caves and a Sudanese pharmaceutical plant is a good start, but much more is needed. If Russia is a dead Muscovy duck and the Japanese economy is committing hara-kiri, then that leaves China as the only credible enemy. But we need the Chinese to make all those cheap consumer goods that our malls make such big margins on, so it would have to be a proxy war.
Clearly, we need to subsidize the Chinese space effort and slip a bit more technology their way. I am sure that they’ll regularize it with a steady stream of bipartisan campaign contributions. Then together we can have the mother of star wars on the moon, as our robots and missiles face off against theirs. With no casualties, it could go on for ever. And with Steven Spielberg handling media coverage we could get heroes galore risking their lives in Dreamworks studios while the rockets’ red glare would actually be visible from the ground, at prime time!
There may be a few quibbles, like treaties internationalizing outer space and banning weapons there, but what’s the fun of being the only superpower if you can’t get a security council resolution deputizing the Pentagon to act on the UN’s behalf? After all, it’s the world economy, stupid!
Of course, some of the tree-huggers may go all sentimental and complain about environmental damage. Puh-lease! Have you looked up there lately? A few more craters on the moon would make as much difference as a zit on ol’ pineapple face, Noriega. I mean, those are not real seas, otherwise we could throw in some robot submarines with Sean Connery in the studio piloting them. And if we hurry, it might get the president into war-games and take his mind off… you know, the other thing. But he’ll have to hurry anyway. Administrations that have basked in undeserved credit for an economic boom are more than likely to take the heat for a bust.
The Speculator
