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May 30, 2006
American Memorial Days
Given it is too humide to breathe, some quick thoughts on my fine Memorial Day with my cretinous american cousins. One involving discussions of the Gold Standard and Middle East & North African Infrastructure.
First, it had entirely escaped me that Monday is Memorial Day in the US of A (which is not to say I was utterly unaware of the day, but I haven't been in the US of A for a long time, aside from a few days here and there on business, and I recall I tended to work through Memorial Day back in my USA working days - being busy in that era being a perfect excuse not to visit the wastes of human flesh that are my fine US relations - with some exceptions of course, especially those I am indebted to for opening their home to me when my Cancer Exile began).
Regardless, it was an interesting barbecue experience.
Some highlights then.
First, I am continue to be impressed with the level of questions that relatives and friends of relatives, and other cretinous hangers-on manage to come up with, in respect to their long-lost overseas cousin (me) current place of residence.
Do you have electricity?
Is it civilised?
Is it all desert like Lawrence of Arabia?
Do you have running water?
And so on.
Okay, the desert questions are not so unreasonable, although where I live is not in fact desert. But I can see the question.
Regardless, the fact that friends, random hangers on, relatives etc., despite learning or knowing that I work in the financial sector for an American firm (ableit one so poorly managed as to make Arab firms look like models of good governance), pose such questions really underlines the degree to which Americans have a vision of the rest of the world as living in primative squalor (Americans of course are hardly unique in this, but the extentand intensity due to insularity is breathtaking) , a vision that I think is ..... harmful to the way the American public understands the foreign policies it is sold.
But let me of course admit that despite my attempt to make this a sort of analytical observeration, I am really just tired of explaning that no, my life in MENA is not one of primative squalor, that my JV partner did not just crawl out from under a tent-flap, and that generally the wierd combination of Saudi Arabia and Afghanistan that seems to make up American imagery of the region and leads me to have to field really idiotic questions again and again and again has gotten personally tiresome. But since I am being generously hosted by some of the same questioners, I have to reign in my tongue.
That and the audience is not really up to following me ranting on about MENA economies or even explaining really what I do. I have to say, it is not terribly evident, what I do, to someone who hasn't had exposure to large financial institutions internal operations, and the universe of parasites (or service providers) that surround them. (That would be me, in the parasite category, or service provider or something).
More for a certain Pantom's amusement, I do note that I had the occasion to rant about the evils of the Gold Standard. Of course he would not agree entirely, but it was moderately entertaining nevertheless to have the occasion to launch into a diatribe about the inappropriateness of the gold standard for the modern world, and defend the US President Nixon (for no particular reason I confess than out of sheer contrariness and the fact it gave a break from questions about my exotic place of residence and work).
As long as I am blithering on, I am reflecting on a potential job offer from a financial trade association to potentially become a Director of Research for their emerging markets "practice" or whatever one would call what a trade association does. Fun title, I wonder how leverageable it would be in the future to move on?
Posted by The Lounsbury at May 30, 2006 06:54 AM
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Comments
Don't worry about it. Even in Britain, one meets this kind of comic pig-ignorance from time to time. I recall being asked on a school trip to France "if you can drink the water in Paris."
I also recall a French person who claimed to be so afraid of Mad Cow Disease that they wanted to eat no British food at all.
Fortunately, nobody in Britain supports the gold standard. I theorise that the years of depression unleashed by going back on it in 1925 - The Economic Consequences of Mr. Churchill, as Keynes put it - inoculated the nation against this particular economic delusion.
Posted by: Alex at May 30, 2006 10:14 AM
Talking about Nixon's economic policy would have been a welcome respite from the sheer and exceptionally tedious drivel I have had to endure the past two days.
Posted by: mark at May 30, 2006 03:26 PM
I always used to say that the previous image of the region as a big saudi arabia (which was bad enough) has now been replaced by afghanistan.
As a testament to this, one television programme (Lost) purportedly showning an iraqi village, showed what was clearly an afghani market. In various other media (most evidently political cartoons) the 'arab' image shifted from the ghotra and the goatee to the afghani dress and long beard.
Posted by: Ali K at May 30, 2006 06:14 PM
You defended Nixon? Wow!
Actually, I wouldn't defend the Keynes-inspired Bretton Woods, but it was a mistake to ditch the peg to gold without extracting an ironclad agreement to go with strictly floating exchange values thereafter, except of course for the usual extraordinary circumstances (war, depression, plagues, that sort of thing), which would have enforced a similar discipline to gold. Paul Einzig's Destiny of the Dollar, written shortly after the decision, is an excellent little dissertation on all the issues at the time, except he thought floating exchanges would just inspire protectionist behavior via the currency on everyone's part, and would never work. So far, events are proving him right.
Now for the inevitable rant:
As for it causing the depression, well, all I have to say is, if you asked a gold bug in 1913 what would happen if everyone abandoned the gold standard to go to war in 1914, he would have replied, "war, inflation, and then depression." Which, of course, is what happened. Actually, it was war, inflation, revolution, hyperinflation, a wild speculative boom, depression, and then more war, the worst the world has ever seen. That "return to gold" was to a gold-exchange standard where bullion only moved in wholesale amounts, rather than the pre-1914 standard, because Britain insisted on overvaluing itself at the pre-1914 parity, and then of course acted all surprised when the deflation that anyone could have told them would happen from such a dumb decision actually did happen.
Also, since absolute credibility in maintaining a commitment to the standard was killed by WWI, speculation, which had a stabilizing effect under the gold standard, instead had the destabilizing effect we've all come to know and love since. Result, to quote a good site with a good explanation of gold, was as follows:
...monetary policy was affected greatly by domestic politics rather than geared to preservation of currency convertibility. (9) Especially because of (8), the credibility in authorities' commitment to the gold standard was not absolute. Convertibility risk and exchange risk could be well above zero, and currency speculation could be destabilizing rather than stabilizing; so that when a country's currency approached or reached its gold-export point, speculators might anticipate that currency convertibility would not be maintained and the currency devalued. Hence they would sell rather than buy the currency, which, of course, would help bring about the very outcome anticipated.
Which is a neat summary of what happened in the runup to the Depression, and what made it so bad. But the cause of that lack of credibility was WWI.
In sum, the developed world's decision to blow itself up in WWI was the cause of the Great Depression. Of course the world's governments lost all credibility after that disaster.
Only a superficial reading of history would lay the blame on the crippled interwar gold-exchange standard, itself a product of governments' willful refusal - especially Britain's - to face reality.
C'est la guerre.
Post-1971, it was inflation, then stagflation, then, here in the US, the worst recession since the Depression, then, finally, a few years of ultra-high interest rates to squeeze out everything and finally settle it all down. Took more than 10 years to get it all stabilized. And that was just on abandoning a vestigial peg to continue a relatively minor war (Vietnam).
And today we have a complete mess (floating exchanges, pegs to the dollar, a monetary union in Europe) with the US running huge deficits, while running yet another minor war, financed by Asian CB's trying to debase their own currencies even faster than the US is debasing its own, while everyone sits around waiting for it to explode in everyone's faces.
Oh well, can't blame that defunct standard this time. Even the vestiges are gone.
In sum, what has happened is that the world made a collective decision, in 1914, to issue paper so they could have a nice, big fat war, and in the interwar period they wanted to have gold on their own terms rather than on the terms of the market itself, which failed, as such attempts always do, so they just went back to issuing paper. Keynes supplied the big words to justify their decision.
End of rant.
Color me comically pig-ignorant.
Posted by: pantom at May 31, 2006 07:29 PM
if you asked a gold bug in 1913 what would happen if everyone abandoned the gold standard to go to war in 1914, he would have replied, "war, inflation, and then depression."
If everyone abandoned the gold standard to go to war there might be a war! What a prediction.
Posted by: Alex at June 1, 2006 10:00 AM
Oh fine. Take the last two then.
Some people...
Posted by: pantom at June 1, 2006 05:24 PM

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