Showing posts with label US economy. Show all posts
Showing posts with label US economy. Show all posts

Friday, July 19, 2013

Detroit will have to get a magic horse

This sad photo of an abandoned mansion in an upper-class neighborhood of Detroit certainly gives the impression that the great automobile metropolis has hurtled downhill like an antiquated Cadillac with defective brakes.

Not so long ago, Detroit was an American symbol of prosperity.

Yesterday, with a debt of almost $20 billion dollars, Detroit filed for bankruptcy protection. Soon, many of the city's services will probably be forced to shut down, like this Detroit fire hydrant... not to mention 40 percent of the city's streetlights and half of their public parks.

For the moment, the city's destiny appears to be in the hands of an Afro-American lawyer, Kevyn Orr. To my inexpert mind, this would appear to be just about as bad a solution as being led by a banker or a TV evangelist. In any case, a specialist has stated that "the bankruptcy is likely to be a complicated and protracted process". To obtain urgently-needed cash, maybe Detroit could sell some of the city's assets, such as famous paintings in its art gallery. But how many highly-priced old paintings would it take to buy back the city's prestige as the place where the automobile industry was created?

In the pioneering days of the American automobile industry, whenever a horse-drawn cart drew up alongside a broken-down car (a situation that arose frequently), the man in the cart was wont to yell out sarcastically to the befuddled man at the wheel: "Get a horse!" Today, I fail to believe that there exists any magical horse capable of carting Detroit back along the bumpy road to prosperity and dignity. To put it harshly, a dream has ended... and it's difficult, if not impossible, to simply replace an old dream by a new one.

BREAKING NEWS (Friday 19 July 2013): A Michigan judge has ordered the withdrawal of a federal bankruptcy petition filed for the city of Detroit on Thursday.

Wednesday, February 13, 2013

Blog article by Jacques Attali

Yesterday, I came upon an interesting blog article in French by the celebrated writer Jacques Attali. [Use Google to discover the many talents of this eclectic French intellectual.] When I contacted the author, he gave me permission to translate his article and include it in my Antipodes blog. I've since discovered that an English version of Attali's blog already exists here.

The US is bankrupt
Jacques Attali

One day, we'll be obliged to thank English-language media and English-speaking politicians for having talked so much, at the start of this second decade of the 21st century, about the plight of the euro and the predicaments entailed in building Europe. These "Anglo-Saxons" (as the French say) will have made Europeans aware of such problems, and nudged them into looking for solutions.

It's a fact that, over the last three years, the European Union has transformed considerably its administrative institutions. Devices such as the Central Bank's LTRO (long-term refinancing operation), their OMT (outright monetary transactions) and the Luxembourg-based ESM (European stability mechanism) have been installed in order to fend off attacks against the euro. Financial tools have been invented with the aim of stabilizing Europe's banking system. We've witnessed initial attempts at budget convergency and even taxation uniformity. Much remains to be achieved, of course. Eurozone budget potential must become the source of large-scale investments. It must finance job training for the unemployed. It must promote the emergence of a genuine eurozone parliament. All those ambitions will be attained sooner or later. Europeans have finally started to realize that austerity is not an answer. Economic growth is the only acceptable democratic reaction to excessive debt and unemployment.

Meanwhile, the English-speaking world doesn't seem to realize that its bankruptcy is approaching fast. The British like to make fun of the eurozone, at the same time that they tolerate a budget deficit exceeding 8% of their GDP (gross domestic product) combined with uncontrollable public debts. As for Americans, they refuse to admit that, in many domains, their situation is far worse than that of Europeans. Within the eurozone, there is a balance of payments surplus, which is not the case in the US. Unemployment (based upon meaningful figures) is far greater in the US than in Europe, to the same extent as social inequalities and crime. Life expectancy is increasing in Europe, while dropping alarmingly in the US.

As for public debt—an Anglo-Saxon theme song whenever they start preaching to eurozone members—the US is in a state of crisis. Indeed, it's hardly an exaggeration to speak of bankruptcy. The level of US public debt has soared to 16,000 billions of dollars, which represents 100% of their GDP. Needless to say, this is far beyond the ceiling that Congress and the president had once set themselves. Recent calculations based upon data from the US Office of Budget indicate that the public deficit will be some 800 billions of dollars in 2014. Wishful thinking places the figure at 590 billions of dollars in 2018, provided that intended spending cuts are respected and that growth beyond 2015 remains superior to 4%, but these hypotheses are improbable. It's more likely that the deficit will stagnate, year in, year out, between 800 and a thousand billions of dollars. In other words, the best possible hypotheses would place the US public debt in the vicinity of 20 thousand billions of dollars in 2018, maybe even  22 thousand billions of dollars.

This public debt will be financed more and more in the only possible way, by the US Federal Reserve System. In other words, the US will persist in financing their defense system, their health services and their administration by means of new banknotes! And this paper will have no greater real value than the goodwill and trust of friends who need the presence and assistance of the United States of America...

What's more, the US balance of payments has had a yearly deficit, over the last decade, of some 500 billions of dollars.

Clearly, the US is in a far worse state than the EU as a whole. Their situation is even worse than that of the most debt-ridden nations in Europe.

One might imagine a day when China is suddenly alarmed by an anti-Japanese syndrome (capable of evolving through alliances into frank anti-Americanism), or a moment when the Gulf States (under the influence of Islamic fundamentalists) decide to invest in another currency and to cease quoting oil prices in dollars. A scenario of that kind would entail the fall of the US superpower, or its decision to use warfare in a vain last-minute fling aimed at resolving the nation's contradictions.

That kind of future would be repugnant to everybody concerned. We Europeans must offer Americans the same kind of sound advice that we have recently received from them. We must shout out to them, on the rooftops, that they're about to go bankrupt... so that they'll take steps immediately—if there's still some time left—to avoid such a fate. They have the necessary means to save themselves, provided that they realize that this salvation will not arise automatically and spontaneously, as something the world would owe them.

When great empires start to see themselves as immortal, they're inevitably on the edge of a fall.

 [translation by William Skyvington, submitted to Jacques Attali for approval]

Monday, March 15, 2010

Singular happenings

In my novel entitled All the Earth is Mine, the young mining engineer Jacob Rose has to transport equipment (including a small helicopter) and a handful of colleagues from Western Australia to Israel. So, he decides to use company funds to purchase

[...] a splendid sixty-foot deep-sea trawler, built five years ago at the Fremantle dockyards for an over-optimistic shrimp merchant who went bankrupt because he operated systematically in the wrong waters. Named Black Swan, this vessel was in perfect shape, since her owner had never been fortunate enough to have an opportunity of subjecting the trawler to the wear and tear of harsh seasons of shrimping. Jake, of course, was not interested in catching seafood. He intended to travel to Israel in this vessel, and to use it there both as a floating home and as a supply ship for his forthcoming operations. Prior to purchasing the trawler, Jake asked the owner to move the vessel to the Fremantle dockyards so that it could be inspected with a view to being fitted out with living quarters for six people. Jake also wanted to install a steel deck over the hold where nets full of shrimp were meant to be dragged into the vessel, enabling him to envisage folding the blades of his Ecureuil, hoisting the helicopter aboard and tying it down securely, under tarpaulins, for the trip to Israel. There would also be room underneath the tail section of the helicopter to stack a small Zodiac on the deck. In this way, the Black Swan would be an ideal mother ship for future operations at Caesarea. Fortunately, it would be possible to have these transformations carried out in a remarkably short period of time, meaning that Jake would be able to envisage their departure within about two months.

Here's my vision of Jake's converted trawler after its transformations in the Fremantle dockyards:

It wasn't particularly original of me to imagine the name Black Swan for Jake's trawler, since this creature is the celebrated symbol of Western Australia.

When I was a child, I remember hearing that the black species of Cygnus was found only in Australia, but this information didn't impress me greatly, for two obvious reasons: (1) I had never seen animals in any other natural environment beyond Australia, and (2) there are so many strange creatures in Australia that we have become blasé concerning adjectives such as "exotic" and "unique".

Recently, our famous bird acquired a new symbolic status through a best-seller entitled The Black Swan by the Lebanese intellectual Nassim Nicholas Taleb. He considers that certain unexpected happenings, of a spectacular nature, can be designated as Black Swan events [BSE]. They are defined by three characteristic features:
(1) BSE are totally unexpected.
(2) BSE give rise to profound effects with vast consequences.
(3) Such events can indeed be explained... but only retrospectively.

We can see why Taleb refers to black swans. In earlier centuries, it was thought that black swans simply did not exist. Then, in 1697, a Dutch navigator discovered that such birds did in fact exist in Western Australia. Consequently, the notion of a black swan came to designate something that went through these two phases, from total disbelief to astonished belief, followed by an a posteriori process of rationalization.

The culmination of my novel (which was completed several years before the publication of Taleb's book) is the transformation of Israel into a giant vessel that sails around the world. Funnily enough, this is a splendid example of a BSE! More realistic examples of BSEs, proposed by Taleb, are the Great War, personal computers and the Internet.

A fortnight ago, an interesting article entitled America, the fragile empire appeared in the Los Angeles Times [display]. Written by a Harvard historian, Niall Ferguson, the article had an even more eye-catching subtitle: Here today, gone tomorrow -- could the United States fall that fast? The gist of this short article is that the USA is a relatively fragile entity, which is capable of disintegrating unexpectedly and rapidly. In a nutshell, Niall Ferguson imagines that the fall of America could take the form of a Black Swan event.

Here's an excellent video in which TV host Harry Kreisler talks at length with Niall Ferguson about his book entitled The Ascent of Money: A Financial History of the World:

I must admit that I know little about the reputation of Ferguson among his peers, but I find that his style and assertions are startling, to say the least. But isn't that the very essence of a BSE?