Mar 18, 2008

Faith in numbers

"Every dead man is to every other dead man a cousin," said ibn Sina according to tradition when he lay dying by an unknown grave on his southward journey home and asked to be buried there.

According to the Edgar Wallace thriller “The Thirteen Just Men,” a Hebrew tradition says there are thirteen just men in the world at any one time, never more or less. None of them know that’s what they are, and if one of them should find out, he immediately dies and some one else replaces him.

Alan Greenspan's suggestion, that obligations should be debited in the budget when they are incurred, and not, as currently, when they fall due for payment, is a fairly obvious piece of prudence. What family budget would survive having every utility bill arrive as an unexpected shock, rather than being allowed for as and when electricity and the telephone are being used? The net result of adopting Mr. Greenspan's obvious suggestion, however, would be to more than double the budget deficit currently projected.

It is a pity we cannot adopt some of the Emperor Caligula's little money-raising devices. Caligula used to issue mandatory invitations to the wealthiest men in Rome to attend auctions where some of his personal effects were sold. Since he had already proclaimed himself a god, a low bid for his old socks and other memorabilia was sacrilege as well as a personal slight to the imperial person, and the tactless bidder would find his life become suddenly and painfully difficult.

Not that we need to encourage more delusions of grandeur. The problem is that internal transfers of funds have no effect at all on the external debt. Tax breaks for the poverty-stricken will be money spent on steaks and electronic gadgets and trips to Disneyworld, yes, whereas the wealthy can only eat one steak at a time, have more electronic gadgets than they can handle, and wouldn't be caught dead in Disneyworld, but none of this has much effect on the external debt, the fact that the country as a whole, the nation in its relations with other nations, is spending more than it takes in.

What can be done has already been done. The frozen funds of the Iraqi government have been seized, because Saddam is an evil man, it has been made clear that Iraqi oil will pay for the rebuilding of the rubble in Iraq, and plans are in train to have other nations, through the UN, be allowed also to help make good the destruction of Iraqi cities, and I would guess pay for the armaments that destroyed them, without being allowed any control over what actually happens in Iraq. That's the plan, anyhow. What more could be done to get the costs down?

Two methods to deal with the external deficit exist: 1. Print more money to cover the difference, the Bernanke approach, which will produce galloping inflation, so that eventually you must stuff your tote bag with $100 bills to get your double cheeseburger from the Golden Arches, or 2. Borrow the difference from outside the country by having foreigners buy Treasury Bonds, US stocks, or bring money into the US for any other reason.

The stock market has meanwhile been heavily supported by the Plunge Prevention Team, responsible for surreptitious government purchase of stocks to prevent panic, a technique imitated from the Japanese which fails to take account of the difficulties this has caused Japan. One day future historians will come across warehouses full of Cisco and Global Crossing stock purchased by the US Treasury in much the same way as mass graves are discovered in the Balkans. The irony is that if a genuinely free and open market were permitted, the level of the stockmarket would be some 20 to 30 per cent lower than it is now, but the outside world might well find a number of stocks worth buying.

If the countries determined that oil prices shall in future be denominated in currencies other than dollars get their way, the dollar will certainly fall very heavily, and the resulting cheap dollar, cheap stocks, and the natural inventiveness of US manufacturers, not to mention their marketing skills, would probably have US products outselling any others, the US stock market would be a natural magnet for foreign capital, and the whole problem would not exist. The longer you delay, however, the higher the cost, as Japan has found, which I regard as another demonstration of the relentless operation of divine justice.

Divine justice is in practice subject to human interpretation, however. One of my favorite pieces of Americana is the presidential candidate back in the mists of history, who certainly, while lost in the wilds with his companions, had to resort to cannibalism to survive on the long trek back to civilization. In the bitter personal attacks that accompanied his bid for the presidency this was never raised, however. What occupied his opponents was the possibility that he was a closet Catholic! Marvellous. Absolutely marvellous.

Similar to the Catholics are the Shia, with the little red flags fluttering over their graves in Bahrain like Tibetan prayer flags. "Ya Hussein, ya Hussein," they chant as they beat themselves with chains till the blood runs down, like a medieval penitentiary procession, in memory of the appointed successor to the prophet treacherously murdered. They've been doing it for about 1400 years. They never forget and they never forgive.

It's the Shi'ites in the south that stopped the fantasies in their tracks. The Sunni are more the Protestants, more sober and boring, with the Hanafi rite people running Saudi Arabia definitely towards the Puritan end of the spectrum, and they regard the Shi'ites with endless suspicion. "Shi'ites will piss in your tea, they'll do anything," one Saudi prince is quoted as saying. The Sunnis have the same kind of suspicion of sober men for the colorful rituals of the Shia that the Protestants often have of the Catholic church. "They must be up to something."

No normal human being can take in the legend of the thirteen just men quoted above without wondering, in the darkness behind their eyes, whether they might be one of those thirteen, and thus getting jogged into acting justly a few times more than they might otherwise have done. The tradition is a practical device to encourage just action, if nothing more, and so perhaps all these financial details are not very important. Justice is justice, however, even in finance, indeed especially in finance.

If bird flu is the second of the four horsemen coming over the horizon, perhaps dying together is the only way left to get the essential brotherhood through some of our thick skulls.


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