Russian oligarchs are greedy for hard currency, American politicians for soft dollars, and there lies, I think, the crux of the situation in which the Bank of New York is seen to be representing the United States-and holding up our end damn well, too, thank you very much! The crooks have replaced the fools at the summit of U.S. banking, and the spectacle is and will be ever so much more fun to watch!
As usual, what was known by whom, and when, lies at the heart of the matter. The International Monetary Fund has been pumping billions into Russia for some time now, and even without its participation in this mess as an underwriter of mass-scale corruption and defalcation, billions in flight capital have been pouring across the Volga into Western assets for several years, and no one has blinked. Certainly no one in Washington or on Wall Street, although as this column, and the work of my colleague-in-arms, John Dizard, have tried to point out over and over, the Chechen conflict was essentially about which route of misappropriation millions of barrels of Caucasus crude oil would be directed along, about whether, essentially, the black gold would go to the left or to the right at Grozny. East Timor is about oil, and so is Dagestan, and about which among us-make that them -shall be first at the trough.
It’s been years now, literally, since the first anecdotal evidence came loud and clear in brassy voice about Russians-about one of Boris Yeltsin’s cronies-buying a $70 million villa in the south of France; about Russians taking half the places in the matriculating classes at swank Swiss schools like Le Rosey; about Russians paying for Rolls-Royces and Mercedes-Benzes with politico-choking rolls of $100 bills. In the New York Press of Sept. 8, Taki Theodoracopulos-who has seen it all at firsthand, and disapprovingly-wrote a really wonderful column on the subject, and now-thank God!-William Safire is on the case.
How much Russian money-those “soft dollars”-is invested in the Clinton-Gore Administration, I hate to think. My own theory is that Bob Rubin’s decision to take early retirement may have been prompted by his awareness of what’s been going on in the I.M.F.-Russia-Bank of New York-U.B.S., etc., daisy chain and his unease with the Administration position that, in this, as in everything else (one thinks of Long-Term Capital Management) bearing on the ethical character of the nation’s financial and political commerce, it is best that the people not be told. It is probably redundant to note that in these situations it is invariably the People’s Capital that is drawn upon to make restitution.
Anyway, Mr. Rubin is both an honest man and a good soldier: It would appear that he simply evaluated his options in terms of the Hirschman alternatives of “voice” or “exit” and opted for the latter.
For whatever reason, the story has certainly been underplayed here. It was only on Sept. 8 that The Washington Post published news of the Swiss investigation of what must surely be called “Russiagate.” I happened to have been in Italy a week earlier, and I can tell you that Corriere della Sera was all over the story. So why the gap? Which reminds one what a boring, gutless paper The Times seems to have become, a fact in this writer’s opinion not unconnected with the transmutation some years back of Punch Sulzberger the marine into Punch Sulzberger the chairman of the board of trustees of the Metropolitan Museum of Art.
It will be amusing-and perhaps then some-to see how it plays out. My own nostrils tell me that larger fish than “Russiagate” are being borne by destiny toward the frying pan of fate that lies at the end of all booms, that chickens the size of 747’s may at last be vectoring onto final approach.
There was a good piece by David Ignatius in The Washington Post of Sept. 5, which I saw in The International Herald-Tribune the next day, that propounded the theory-long espoused in this space as well-that our aggregate trade deficit must ultimately spell the end of the dollar’s dual hegemony, as both the invoicing and the reserve money of the global economy (once again, thank you, Jim Grant!), with consequences whose ugliness will bring joy to America-haters of every persuasion watching from across the oceans. One senses that the best seats in the best locations are already selling briskly, many to Russians, since nothing will bury “Russiagate” more effectively than a good, big, bloody Wall Street crash.
“Simply put,” Mr. Ignatius writes, “Americans consume hundreds of billions of dollars more in goods and services than they produce-with the rest of the world financing their free ride.” I don’t entirely buy this description, and I think that’s important. The possibility of a cure is only as good as the quality and accuracy of the diagnosis, and we tend to be careless with diagnostic descriptions. For instance, I was taught to swing a golf club “from the inside out,” which may be what it feels like, but isn’t what actually happens, and if you try to swing that way, the results will force you to take up the William Jefferson Clinton method of golf accountancy if you wish to be able to report that you broke 100. Mr. Ignatius’ description lays the blame on the people. I think that’s wrong. I would put it this way: “Americans spend too much abroad, too little at home-because they have no choice.”
And why do we have no choice? Simple: because the Big Three handed a significant share of the auto market to the Japanese in the post-OPEC 1970’s. Because the profits Wall Street wants from companies that actually do something are maximized by using $1-a-day third-world labor, and so on. In a commercial culture in which the principal objective of top management, after lining its own pocket, is to “create wealth” by “maximizing stockholder value,” managers are perforce going to increase the payments gap if they intend to increase the profits on which Wall Street builds its “wealth-creating” market valuations.
This seems merely commonsensical. If you doubt this, Reader, do a country-of-origin audit of the goods that improve your life style, and the truth will be plain. What is troubling is the fact that the payments deficit keeps growing even as we are told that this economy is increasingly dominated by services as opposed to goods. Services are ipso facto consumed on home soil, which should add to the domestic savings pool.
Repeat to yourself three times, Reader, the Midas gospel: Every dollar spent is somewhere saved; what matters is where. If the “where” is “here,” O.K. If it’s “there,” not so good. So why haven’t we imploded? The fact seems to be that U.S. savings, abetted by “repatriated” dollars owned overseas but put to work here, are sufficient to run the country in low-interest, price-stable boom times. But in bad times? It pains a boy to think, especially because if the crash comes, it won’t be the Prince of Swine and his ilk who bear the brunt, it’ll be the little guy. Do not lose sight of the fact that-if you discount the pangs of conscience felt at the time by a very few-there has hardly ever been a better time to be rich in this country, relatively speaking, than the 1930’s. If I was Donald Trump, however, I wouldn’t bet on it working out quite that well this time around. This time, the people may decide to speak out. And why not? It’s their money.
We are coming to the end-my sense is that it’s the end-of a quarter-century during which anyone in the world with any money to speak of wanted to hold that wealth in dollars. It started in 1973 with OPEC’s “dollarized” beggary of the third world, which was like a casino declaring that only the red chips count, and players holding chips of other colors are just out of luck. That’s a long time for a single system to prevail. Every additional month may be pushing it.
I think there are things we can do to forestall horror, if not pain. In coming columns, I’ll offer a few of my own thoughts. Whether these ideas are worth a damn or not, one thing I do know: To get out of the place we are at, as we used to say in “th’awl bidness,” will take a combination of creativity, common sense and realism. It will take political leadership that embodies the kind of qualities that, in the bygone days when there was no such word as “Internet,” were esteemed on Wall Street as “solid.” It will take vision as measured by standards other than lip speed. It will take qualities that I can see only in Bill Bradley. I wouldn’t trust W. as far as I can throw him.
