Swedish Spoken Here
I was talking to friend in New York City the other day about the current financial crisis, and she told me about a scene she had just witnessed in the lobby of the Warwick Hotel. Four Swedish tourists, who clearly had been on a shopping spree in Manhattan, fueled by the still cheap dollar, were trying to cram all their purchases into four suitcases. They had bought a hand-held scale — one of those you just grip onto the suitcase and lift — to make sure all their American goodies were not overweight for the flight home.
Another friend of mine in the ship-supply business in Baltimore, Alan Kotz, told me about a German customer who recently put in double his normal order. When Alan asked him if he was aware of how much he had ordered, the German brushed his question away and laughed: “Alan, nevermind, everything for us is half price.”
And a good thing it is. Even though the dollar has strengthened a bit lately, we are going to need foreigners and sovereign wealth funds from China, Asia, Europe and the Middle East more than ever to survive this crisis — and they are going to need us to be healthy as well. In the process, we are going to become even more intertwined and dependent on the rest of the world.
Sarah Palin won’t have to worry that she doesn’t know what the Bush doctrine is. No one really knew what it meant. But it had something to do with the unilateral exercise of American power, and the next president’s ability to act unilaterally on anything other than vital national security issues is going to be reduced. As the old saying goes: He who has the gold makes the rules. Well, we no longer have as much gold, and until we get some, we will have to pay more heed to the rules of those who lend us theirs.
At a time when the U.S. government gets half its borrowings from abroad, at a time when the U.S. household savings rate is hovering around zero and China alone is already holding around $1 trillion in U.S. Treasury notes and Fannie Mae and Freddie Mac bonds — yes, that’s how you got that cheap subprime mortgage — it can’t be any other way.
Somebody better tell John McCain: We are all Swedes now. Forget about “Live Free or Die.” Until we get our financial act together, our motto is going to be: “Swedish spoken here — or Arabic or Chinese or German …”
I would also bet that more and more of the foreign investors who come our way are going to want to buy hard, tangible assets — skyscrapers, real estate and real companies — not just mutual funds, T-bills, bank stocks or other equities. No problem. Americans own assets all over the world; foreigners have long owned substantial positions in U.S. companies. That’s globalization — and now you are going to see globalization and financial integration on steroids. It should help us, but also change us.
“The next round of capital that comes in from abroad is going to be much more demanding and move into real assets,” argued Jeffrey Garten, professor of trade and finance at the Yale School of Management. “Being a bigger debtor nation means losing even more of our sovereignty. It means conducting our economic policies with an eye toward whether others approve. It means bearing the advice and criticism that we have dispensed ad nauseam to other countries for over half a century. It means far more intensive consultations with other capitals on our fiscal policies and our monetary policies.”
At the same time, added Garten, “Corporate decisions will become more sensitive to international factors, in part because more non-Americans will be on the governing boards.” Ultimately, this could make American industry even more globally competitive — but for those who can’t pass global muster or enlist global collaborators, the consequences could be harsh.
Of course, neither Barack Obama nor John McCain dare talk about this now. They want to pretend nothing has really changed. The minute one of them steps into the Oval Office, they will tell us otherwise. That will be the January surprise.
There was a lot of talk after Russia invaded Georgia that globalization was over and we were seeing the return of “history” and the primacy of politics over economics. I think not. Politics and economics are always inextricably intertwined. History-making is rarely free. The Russian stock market has been hammered as a result of its invasion of Georgia, and the global slowdown has sunk Russian oil and gas earnings. No country is an island today.
Making history is not simply about the will to do so. It’s also about the way — the resources you have to achieve your ends. Whatever wills the next American president comes to office with, he is going to find that his ways have been diminished and restricted — until we roll up our sleeves and work our way out of this mess.
