Classical Values :: Money Following The Money Followers

October 06, 2008

Money Following The Money Followers

Spengler explains why America with all its problems is still a safe haven for the world's capital. He blames it on hockey moms.

Why do Asian investors depend on American capital markets? Given the near breakdown of key sectors of the American market, one might expect Asians to bring their money home. Quite the opposite has happened: Asian currencies have fallen sharply against the American dollar.

Spengler says Asian markets can't absorb Asian savings. Which is rather odd. Given the low state of economic development and high returns on capital it would seem Asia would be an ideal place for Asian money. Yet it is not.

What does America have that Asia doesn't have? The answer is, Sarah Palin - not Sarah Palin the vice presidential candidate, but Sarah Palin the "hockey mom" turned small-town mayor and reforming Alaska governor. All the PhDs and MBAs in the world can't make a capital market work, but ordinary people like Sarah Palin can. Laws depend on the will of the people to enforce them. It is the initiative of ordinary people that makes America's political system the world's most reliable.

America is the heir to a long tradition of Anglo-Saxon law that began with jury trial and the Magna Carta and continued through the English Revolution of the 17th century and the American Revolution of the 18th. Ordinary people like Palin are the bearers of this tradition.

It is the basic honesty of ordinary people that make America work. When dishonesty rears its ugly head ordinary people go to work to clean out the pigsty. They wipe the lipstick off the pig and take it to the abattoir to eliminate the problem.

The fact that ordinary people safeguard their rights and have the means to challenge established interests does not exclude the possibility of fraud on a grand scale.

Asian investors were cheated by a conspiracy of the financial industry and the ratings agencies, which sold them ostensibly low-risk securities that turned out to be toxic. The just-approved US$700 billion support package for American banks sets America back to a regime of oligarchy, according to New York Times columnist David Brooks. Despite this fraud and its attendant humiliation, and despite the deterioration of governance in American markets, Asian investors are putting more rather than less money into America, judging from the decline of Asian currencies against the dollar in the course of the crisis.

One doesn't see demonstrations by wronged peasants in the small towns of America. There never were peasants - American farmers always were entrepreneurs - and the locals avenge injury by taking over their local governments, which have sufficient authority to make a difference. At the capillary level, school boards, the Parent Teachers' Association, self-administered religious organizations and volunteer organizations incubate a political class entirely different from anything to be found in Asia. There are tens of thousands of Sarah Palins lurking in the minor leagues of American politics, and they are the guarantors of market probity.

Rights. That is the key. In most of the world the people are servants of the government. In America they have this peculiar notion that government is the servant of the people. And where did that peculiar idea originate? In Anglo Saxon Culture. From the Magna Carta to the Constitution of the US of A. In Anglo Saxon Culture there is not just a belief in honest government but also a demand for it.

It is true that Asian economies depend on American consumers and an American recession is bad for Asian currencies. But why don't Asians consume what they produce at home? The trouble is that rich Asians don't lend to poor Asians in their own countries. Capital markets don't work in the developing world because it is too easy to steal money. Subprime mortgages in the US have suffered from poor documentation. What kind of documentation does one encounter in countries where everyone from the clerk at the records office to the secretary who hands you a form requires a small bribe? America is litigious to a fault, but its courts are fair and hard to corrupt.

Asians are reluctant to lend money to each other under the circumstances; they would rather lend money in places where a hockey mom can get involved in local politics and, on encountering graft and corruption, run a successful campaign to turn the scoundrels out. You do not need PhDs and MBAs for that. You need ordinary people who care sufficiently about the places in which they live to take control of their own towns and states when required. And, yes, it doesn't hurt if they own guns. Popular gun ownership places a limit on the abuse of state power.

You know maybe that old f**ker Mao was on to something when he said political power comes from the barrel of a gun. His problem was that he did not trust his own people with guns or political power. Uprisings of the people against their presumed masters can be so inconvenient. And that in a nutshell is the weakness of the rest of the world and the strength of America. Americans are jealous of their rights and will defend them with the barrels of their guns if push comes to shove.

The Battle of Athens, Tennessee should be a lesson to all American politicians. Let us hope the politicians learn their lesson before they wind up on the wrong side of the guns.

Cross Posted at Power and Control

posted by Simon on 10.06.08 at 02:04 PM

TrackBack

TrackBack URL for this entry:
http://classicalvalues.com/cgi-bin/pings.cgi/7438

Comments

People won't invest in places where their money is likely to be stolen from them.

Gideon7 · October 6, 2008 03:03 PM

Spengler's essay, and your comments, are quietly inspiring. Refreshing.

Assistant Village Idiot · October 6, 2008 03:55 PM

From Edmund Burke, "Thoughts on the Present Discontents and Speeches (Cassell & Company, Limited: London, Paris, New York & Melbourne. 1886):

"When the affairs of the nation are distracted, private people are, by the spirit of that law, justified in stepping a little out of their ordinary sphere. They enjoy a privilege of somewhat more dignity and effect than that of idle lamentation over the calamities of their country. They may look into them narrowly; they may reason upon them liberally; and if they should be so fortunate as to discover the true source of the mischief, and to suggest any probable method of removing it, though they may displease the rulers for the day, they are certainly of service to the cause of Government. Government is deeply interested in everything which, even through the medium of some temporary uneasiness, may tend finally to compose the minds of the subjects, and to conciliate their affections. I have nothing to do here with the abstract value of the voice of the people. But as long as reputation, the most precious possession of every individual, and as long as opinion, the great support of the State, depend entirely upon that voice, it can never be considered as a thing of little consequence either to individuals or to Government. Nations are not primarily ruled by laws; less by violence. Whatever original energy may be supposed either in force or regulation, the operation of both is, in truth, merely instrumental. Nations are governed by the same methods, and on the same principles, by which an individual without authority is often able to govern those who are his equals or his superiors, by a knowledge of their temper, and by a judicious management of it; I mean, when public affairs are steadily and quietly conducted: not when Government is nothing but a continued scuffle between the magistrate and the multitude, in which sometimes the one and sometimes the other is uppermost--in which they alternately yield and prevail, in a series of contemptible victories and scandalous submissions. The temper of the people amongst whom he presides ought therefore to be the first study of a statesman. And the knowledge of this temper it is by no means impossible for him to attain, if he has not an interest in being ignorant of what it is his duty to learn."

We have relied upon the common-sense of matters in America since our founding. What happens when a political class unhinges itself from that common sense? We get "Chicken Little" policies, from tax law to global warming. These policies are exacerbated when the media and political parties apply the Afpel Test: they really, really, really believe that they're right.

On another note: welcome to a new blogger. Brooks Wilson is an economics instructor at McLennan Community College. His new blog can be found here:
http://tinyurl.com/4e292q
.
.

OregonGuy · October 6, 2008 05:42 PM

What we’ve done so well in the past, and must continue to do in the upcoming election is keep people away from the polls who might vote the wrong way. These people do not realize that voting is a privilege, not a right. In voting the wrong way for our country, they lose that privilege.
Negros and young people will be the objects of this year’s “Republican Voter Challenge” program. Send in suggestions to your local Republican Party headquarters and blog way that you think will be effective in keeping these undesirable elements away from the polls on Election Day!

jbStephens · October 6, 2008 07:14 PM

Oh, come on, that is too blatantly a moby, jbStephens. Conservatives/libertarians by and large do not want to stop eligible voters from voting; hitting them with a large cluebat until they understand what they're doing is an attractive thought, though.

Although, they do say, you can lead an ass to the water, but you sure can't make it drink...

Gregory · October 6, 2008 08:24 PM

And the award for least convincing impersonation of a conservative goes to... the envelope, please...

jbStephens!!!

Come up here an take a bow, sir!

Steve Skubinna · October 7, 2008 08:09 AM

His problem was that he did not trust his own people with guns or political power.

Have to disagree here - it wasn't Mao's problem, it was the problem of the entire Chinese population. Mao, like every bloody handed dictator, knew better than to let even a whiff of representative government into China. "Elect me so I can oppress and murder you" is not a winning campaign slogan.

Steve Skubinna · October 7, 2008 08:13 AM

"Americans are jealous of their rights and will defend them with the barrels of their guns if push comes to shove."

This is precisely what a local Judge relayed to me the other day:

The very foundation of our nation rests on four boxes.

The SOAP BOX from which, through a guarantee of free speech, we can state our case.

The BALLOT BOX to privately and without coercion vote for those leaders we feel best will represent us.

The JURY BOX from which we are all guaranteed to be judged by our peers. The Jury Box stands between a powerful government and the individual.

The CARTRIDGE BOX as representative of our guarantee of a last line of defense from an over-reaching and oppressive government.

Because the first three are still intact, we've not had to resort to the fourth. But we must be ever vigilant to ensure that the integrity of the first three are maintained and attempts to take them from us are stopped or the Cartridge Box will come into play. It would be our civic duty.

Oyster · October 7, 2008 09:10 AM

jbStephens is another great example of liberal projection. With many rumors but no evidence of conservative suppression of voters, coupled with evidence of Democratic suppression of voters, JBS's accusation can best be understood as "this is what we do when we have the chance against you thieving Republican bastards, therefore this must be what you do as well."

JBS, #1: the phrase "machine politics" - does it conjure up an image of rural, suburban, or urban politics? #2: what party do urban voters generally favor? Conclusion: you have to focus entirely on rumors of your opponents' evil, because even five minutes contemplation of your own side would be too overwhelming.

Assistant Village Idiot · October 7, 2008 10:05 AM