Manhole covers on Pennsylvania Avenue are welded tight. Street light poles are removed for fear they may have been packed with some nefarious element while passersby within a 100 square block area get frisked as they walk to their homes. Hundreds of thousands of police, para- and military forces have their assignments. The routes to and from a score of more or less monumental sites are being scoured and sealed for the post event revelries. From Tuesday on, DC will be closed off to traffic and flights in and out of Dulles, BWI and Reagan National will grind to a complete halt by Thursday morning Next week, in the DC Green Zone, they will be partying.
Like the jumbo screens scattered down the Mall, what is truly eerie about this event is it's made for TV DNA. In reality, the Presidential armada rarely ventures out on the streets of Washington. Thursday's price-tag for the short 16 block trip up Pennsylvania Avenue to the West side of the Capitol and then back to the White House will come in well over $50 million. To cover the $17.3 million in increased police coverage, the erection of ultra-secure parade stands, demonstrator barriers, etc, the federal government has asked the District of Columbia to use up funding it received for Homeland security infrastructure. In other words, even as the sponsors charge $60 and up for seats in the grandstand for invitees, DC is being asked to use civil defense moneys.
As you know, we wouldn't have mentioned this piece of local chicanery here in BlowBack if there wasn't some wider tale to hang upon it. And to put your mind at rest, no, we do not underestimate the importance of the symbolism: even as the country folk wage distant wars to protect the petroleum supply, er.... bring freedom and democracy to a corner of the Persian Gulf. There is purpose in the great continuity of a presidential swearing in. Of course, for those of us old enough to remember Presidents casually walking down Pennsylvania Avenue after making their oath, this hermetic event hardly strikes the chord of business as usual. But yes, for the vast TV audience, the President must stand--or at least appear to- at the foot of the West Capitol steps with the great flags hanging below the dome as his backdrop, while he takes the oath of office.
But television appearance is fungible. So why not, in recognition of the war's toll, or in recognition of the Government's budget troubles or the great impracticality of trying to make believe the President of the United States can still venture out in an automobile a few blocks, forgo the most wasteful aspects of this great expense?
Because, of course, at this pivotal moment in the evolution of the world economy, we have a President who has absolutely no recognition of waste or even the peril he is putting us all in as he continues to enjoy the cost-free life. As in the case of this inauguration ceremony, bills are for other people to pick up and, anyway, they, won't come due right away.
As we've mentioned many times before, the United States occupies a unique place in the world when it comes to money. As a result of monetary agreements made in the wake of World War II, Americans have actually been getting things for nothing for a long time. The dollar, by agreement, gets stored in the coffers of foreign government central banks as a so-called reserve currency. In this sense, it is treated by the official world economy as something akin to the gold deposits that once were the required backing for paper money. But gold, for all its limitations (and we'll avoid arguing with you true gold bugs out there), has one great virtue when restraint is called for; it is limited by its rarity.
Throughout history, every time a country managed to break away from the shackles of backing up its paper money with gold, that paper money has ended up as wallpaper or garden mulch. In the latter part of the 20th Century we have managed to break that sad record (remember the Weimar Republic) by relying on the greenback. And as long as the US remained an unparalleled engine of economic growth, the world has been willing to store its wealth in dollars. Of course, this has been a great boon to the United States. Whereas other countries have to be careful about how much they import compared to their exports, the United States has had a blank check. All told, the US has been able to print money, spend it on gadgets and raw materials from around the world and not worry that the errant dollars would ever come back for redemption. This is, of course, a privilege and a responsibility.
Just last October, the US spent 70 billion dollars more than it took in. This was yet another in a series of record monthly trade deficits that add up to a series of record annual trade deficits (over 650 billion in 2004). It's not hard to figure out what's going on, we merely have to pull into the parking lot of the nearest Wal-Mart or fly over L.A. harbor to get the picture. Asia makes, we buy, they take more dollars.
For countries like the Asian titans and tots, this is a little like the goose that laid the golden egg. They may be getting paid in ever riskier and less valuable dollars but they are working, exporting and getting paid. None of these countries wants this good thing to stop and so they have set up a kind of subsidy ring in which they use their extra dollars to buy up the debt the US issues in the form of T-bills. It would appear that they have too much as stake to let us falter.
What's to worry? you might ask. Maybe, this can go on forever or, at least long enough for us to come up with the next big thing. And, perhaps it can and perhaps we will. Nobody knows just what straw it will take to break the bank. And so the Administration talks about fighting the war off this year's budget. On paper, that means the deficit will not be as big as it really is. And, perhaps, we can pull a few trillion more out of the air to fund a scheme to pump up the stock market with private savings accounts; money that otherwise would have gone into government coffers through payroll taxes.
And yes, the Fed can always let the dollar float downward against the currencies of countries that have managed to save more and run up lower trade deficits. And so we continue to bet that important numbers of private and public foreign financial interests will forgo the higher returns they can get by buying instruments denominated in euros or Swiss francs, say, ( some of the currencies that float up as the dollar goes down) to instead get dollar denominated gild-edges that will be paid off with negative returns as the dollar continues to devalue.
We, of course, don't know what is going to happen to markets or to vulnerable paper currency systems. We do know, however, that even in topsy-turvy Bushworld , most people will seek to boost their profits. Countries that go into debt to arm themselves to the teeth and then have to depend on the kindness of strangers for their daily bread, have not fared well in the past. But perhaps, as stock market cheerleaders remind us all the time, when it comes to counter-indicators like today's historically high P/E's, this time it's gonna be different.
And so Bush will have his Green-zone inauguration, even if it costs an extra $50 mil or so. Like DC picking up part of the tab, up to now it's proved true, we can always beggar our neighbor.
