The current systemic mess in Asia’s financial markets, by some seen perhaps to be moving ominously eastward with the sun toward this country, represents as fine an hour as doublespeak and gobbledygook have ever known, presenting an opportunity for pontifical chin-stroking and finger-steepling that man-kind hasn’t seen since the great and good of Munich had their day almost 60 years ago. One awaits breathlessly for the final word on the subject from the chairman of the Federal Reserve, who is to portentous flapdoodle what Jascha Heifetz was to fiddle-playing; all that he has said to date, in Congressional testimony and elsewhere, must be regarded as mere tuning up for what will be a truly virtuoso display when-or if-Japan’s central bankers, out of necessity or panic, reach into the mattress, and the market for U.S. Treasurys hits the fan.
Amid the storm of comment, analysis, prescription, blame-avoidance and finger pointing, there is one truly sublime irony that runs through the global financial situation like a vein of gold, if you will. It is this: The greatest trouble is being experienced by what we might call “the thrift economies,” the high-savings-rate, low-consumption, output-oriented, quasi-mercantilist nations whom we “spendthrift” Americans have for 25 years been lectured by our public and private eminences to emulate. In effect, Aesop has been stood on his head: Today, it is the grasshopper who gloats and basks in the sun of an 8,000 Dow Jones while the ants plead shrilly for an International Monetary Fund bailout.
What we are seeing is a classic case of overinvestment in relation to demand. Inflation, about which Alan Greenspan and his soul mates lecture us interminably, is classically described as too much money chasing too few goods, the result of undersaving. The specter invariably promoted is of overindulged, overpaid, underproductive workers driving up the price of Chevrolets, ranch houses and Sonys. There is another, no less insidious form of inflation, seldom publicized, that consists of a surplus of capital in pursuit of a shortage of deals, too much money chasing too few pieces of paper: public- and private-sector I.O.U.’s, common stocks, real estate participations. If surplus capital finds its way to fewer and fewer hands as profits or interest or Wall Street bonuses, securities and high-ticket markets go wild; if it is spread widely to workers or almoners, at a rate exceeding its productivity, then it is Big Macs that will jump in price. The net effect is the same, ultimately, which means that putting too much money in the hands of financiers can prove as self-destructive to a political economy as putting too much money in the hands of its hoi polloi. The difference, of course, is that in the current jargon, buying a penny stock is “savings,” is “investment,” while buying a car, color TV or house is not.
The overwhelming truth of finance, which Wall Street works very hard to make us overlook, and which this space has continually harped upon, is that every dollar consumed is ultimately somewhere saved. If you and I spend, say, $300 on a new TV set, that $300 will be cut up into many pieces as it is divided along the manufacturing, distribution, investment and tax food chain, but sooner or later, those pieces, recombined like DNA molecules, will come to rest as “savings” available for “investment.”
Unless concentrated “saved” capital is to a substantial extent recycled-I hesitate to use the dread Marxist-New Deal word “redistributed”-back into the mass-demand economy, ultimately a fatal disproportion is created, and the system can become unstable. There are too many goods and services on offer, too little money to pay for them. Demand falls. Markdowns ensue, followed by a drop in prices, profits become evanescent, losses become the norm, plants close, jobs fall, investors disappear. Defaults multiply on all levels of credit. Capital markets collapse. At this point, what had been the genial clamor of busy markets may be replaced by the ominous sound of pikestaffs being sharpened, of white horses being saddled.
Despite Mr. Greenspan’s pose to the contrary, the Old Blowhard believes his fears to be shared by none other than the chairman of the Federal Reserve. In recent months, the dollar money supply has grown steadily, an earnest on the part of someone powerful that the danger foreseen is not of an inflationary excess of liquidity, period, but of a deflationary deficiency of cash at the consumption level. To rectify such a condition should be the real purpose of “bailout” schemes, Draconian measures, such as now proposed for Korea, that will fall on the heads of largely innocent people. What are invariably announced as rescues of “economies” are in fact intended-like the Mexican model-to make whole an oligarchy of paper merchants, the “investors and lenders” who caused the mess in the first place through offenses against prudence and common sense that would bring shame and discredit upon the meanest, least financially savvy household in the afflicted lands.
Supply-side economics are all right as long as they are made to apply to both sides of the investment-consumption ledger. This is a truth not to be forgotten as the sun moves steadily across the Pacific, very possibly bringing darkness in its wake even as the grasshopper works on his tan. Better that, I should think, than the equally sound remedy proposed long ago by H.L. Mencken: When a bank fails, he wrote, its board of directors should be promptly hanged. He did not put the word “central” before “bank,” but were he living today, I’m sure he would have.
Christmas gift suggestions
Driving, as I do, a one-day 200-mile round trip most weeks to hang out with Francis, I have become addicted to books on tape and CD. The budget classical music label Naxos has put out a 12-unit (cassette or CD) abridgment of Edward Gibbon’s Decline and Fall of the Roman Empire that is thrilling, there is no other word for it. The reader, the English actor Philip Madoc, is note-perfect, every syllable a reminder that here is perhaps the most perfect, Mozartian English prose ever written-and what a story! It comes in two sets of six CDs or tapes each-the first dealing with Rome, the second with Constantinople-for a total of under $100 postpaid. The same incomparable series includes a terrific reading of James Joyce’s Ulysses and of Marcel Proust’s Remembrance of Things Past and a catalogue to suit all tastes, young and old. Yes, they are abridgments, but they make a full, fulfilling, lingering repast. They can be found in some Borders Books & Music stores, through Naxos at 609-751-4744, and through Ned Parkhouse Music in Sag Harbor, 516-725-9830. The latter, incidentally, is Orpheus reborn, for you who recall my old classical-CD store on Lexington Avenue. Flawless judgment, stylishly dispensed.
We will shortly be seeing the TV version of Anthony Powell’s A Dance to the Music of Time . It is, I hear, dreadful, except for the performance of the actor Simon Russell Beale (memorable this year as the Royal Shakespeare Company’s Iago) as Widmerpool. The latter is one of the immortal characters of English fiction, up there with Micawber, Falstaff and Becky Sharp. So entrenched is Widmerpool in the English mentality that a lively debate presently ensues as to which public figure of today comes closest to Powell’s bumptiously self-involved creation. Many have been nominated-including, I’m sad to say, my old chum Baroness Margaret Jay-and the give-and-take has been riveting, although I have it on reputable authority that the closest Widmerpool has ever come to existing in the flesh was in the person of someone called Fogg who used to work for Morgan Stanley.
Be that as it may, there is a 24-tape (two tapes-three hours-a volume) version of A Dance , read by Simon Callow, that is note-perfect and hilarious, take it from this veteran Powellian. You can obtain it for around $150 postpaid from the Internet Talking Bookshop, attn. Sheila (www.orma.co.uk/intabs.htm, or fax 011-44-181-402-7886).
Finally: two books and a ‘zine. There is much, much more to the WASP gestalt than Polo. If you wish to understand it, get Louis Auchincloss’ newest, Atonement and Other Stories , which explores the subject with depth, wit and illumination, like a faceted prism held up in a changing light. The best art book of the year, published in a limited edition by the Pierpont Morgan Library (so move quickly, or hope that Norton or Knopf will pick it up) is Reflections of an Independent Mind , by Eugene V. Thaw, the nonpareil art dealer of our era. It is a collection of pieces dealing with a wide range of topics; taken all in all, it will leave a reader equipped to confront with clear eyes a world that the flimflam artists, money men and flapdoodlists have bent all out of recognition. Finally, although I have had my differences with my colleague Hilton Kramer, but let it be said that, issue in, issue out, his New Criterion is the most interesting journal going. If you know one of those rare people who still cares about thinking, or who seriously gives a damn about culture in our time, a subscription would make a fine and living present.
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