I’m not really observing radio silence this week, but if you’ve ever been on a cruise ship you’ll know that shipboard Internet operates by smoke signal or some other antiquated technology. (Not to worry: I already have this Saturday’s “Week in Pictures” filed for posting automatically, in case I end up in a Russian jail cell on Friday.) Currently steaming through the Baltic Sea with our pals at the Pacific Research Institute and, this morning, nursing a massive hangover after drinking whiskey and smoking cigars until the wee hours with Jonah Goldberg. Cuban cigars, naturally, on the theory that if we can’t bomb their cities at least we can burn their crops. Important safety tip: that last glass of whiskey at midnight is always a bad idea.
Anyway I should have some video and/or audio after I get back stateside; it is impossible to post any large files. Meanwhile, in this condition I can’t quite tell—is that a whale swimming nearby, or is it a Russian submarine? And I hadn’t paid attention to the fact that Finland (next stop) is in the Eurozone. Gives a whole new meaning to “Finlandization.” I’m sure Finnish taxpayers are just delighted to be kicking in to the $86 billion rescue package for Greece, especially since their favorite neighbor—that big place that begins with an “R”—played a role in the can-kicking outcome of the latest phase of the Greek comic-drama.
I can still manage to chase down the Wall Street Journal (otherwise, DTs), and yesterday’s contained a headline that prompted one of those “well, duh!” moments: “U.S. Lacks Ammo for Next Economic Crisis.” Where do you go when interest rates are already zero, and you actually ought to be raising them, but a weakening economy might be just over the horizon? Never mind a weakening economy—what if we have another full-scale, 2008-style financial crisis? What do you mean “what if”? It is almost a certainty that the question is not “if” but “when.” I’m guessing the story of “Old Yellen” might have the same ending as “Old Yeller.” I especially jumped at a quote from a banker at HSBC: “The world economy is like an ocean liner without lifeboats.” Just the kind of sentiment you like to read on an ocean liner.
Financial doomsters are like other kinds of doomsters: you can always make a scare-the-pants-off-of-you case for imminent rack and ruin, and it is usually wrong, or at least we’re able to weather the crisis and rebound without the world totally coming to an end. And I tend to avoid macro-prophecy, especially about the future. But I wonder: China’s stock market crashed about another 6 percent yesterday, and I suspect China’s economy is faltering badly. For a variety of reasons, some of them demographic, I’ve long expected that China would follow the path of Japan eventually: rapid growth ending in a stall and then prolonged stagnation. But it’s hard to know: does anyone trust China’s reported economic statistics? The swoon in global commodity prices likely represents weakening Chinese demand for raw materials. The devaluation of the Yuan last week was a shock not so much for the substance as the unexpected surprise of it. China’s central bankers are pouring out money faster that Ben Bernanke’s helicopter, but it may not be enough. If devaluation doesn’t keep foreign trade and especially American dollars flowing in, might China have to resort to selling some of their large American Treasury note holdings to raise hard currency reserves? That could take our plans to raise interest rates out of our hands.
I have no idea what the answers to these queries might be, and your guess is probably better than mine. But it bears watching closely. Here’s another piece of relevant information from yesterday’s Wall Street Journal: “Currency Woes to the South.” Most South American currencies have been in free fall for several months, especially currencies linked to commodity-heavy economies. (The Australian dollar has also swooned lately.) This is probably not a good sign.
So I say (once again): canned goods, gold, and real ammo. And maybe I should order another whiskey right now.