We're Drawing Blood

"We believe!" cried the planet after watching the real life production of the play, “S&P lowers America's debt rating." Who cares that the plot was ridiculous? It may have been the U.S. rating that went down, but the consequences hit everyone else. We believe the story. But what will happen next?

America has drawn blood, of course, but it’s somebody else's. It’s our blood, the blood of the unsuspecting audience. And it's not the first time; we are happy to be so trusting. Hollywood technologies have long played a part in U.S. foreign policy, and now they have reached their economy, as well as the global economy. If you want to verify the above, just look at certain past events.

A few years ago I was attending an editorial meeting and cheerfully telling my colleagues the day’s top news story: America was about to declare a default. Hurray! Finally! We weren't able to pay our debts back in 1998. Now, we aren't the only oafs! Here they come; they've been caught at last! You know what I mean. Everything's fine with us (it was the mid 2000s) and not so fine with them. Citizens with the recent “pioneer past” of Russian communism in mind were happy to learn of it and they believed it. The U.S. president himself declared the danger of default. We wrote about it then and in the heat of the moment we scared everybody out of their wits. But the story that came out was a feast for the eyes. It was front-page news and everything, you know? Never mind the fact that no default ever came. Readers couldn't tear themselves away. Competitors missed the whole thing. Oh, what a pleasure it was.

When the situation repeated itself the following year in a very similar way, I was overwhelmed with suspicions. I discussed the issue with the overseas intelligentsia and realized it was merely internal political play — like the presidential elections, like the conflict between Republicans and Democrats, or like American democracy in general (the latter being when everyone waves their hands and goes into ecstasies without thinking that campaign promises should actually be fulfilled). Inside Congressional walls Democrats and Republicans work happily together, but in public they are implacable enemies (from this point of view, we have an ideal democratic leader in Zhirinovsky). Anyway, we wrote about the U.S. default again, this time without panicking. The year after there was — well, I'll tell you about it briefly. I’m not a theater critic and there's nothing to write about, except with a sneer. Take, for example, Obama's promise to abolish the Jackson-Vanik or accept us into the WTO.

After watching previous years’ events it was even more fun to watch how the plot unfolded this year. Almost everyone took it all in good faith. They believed it. All of this is because the so-called producers had an entirely different purpose for the play this year. So, this time it wasn't an imitation of political activity in the U.S like last time, but intimidation of the whole world, with a clear and simple goal: Let out the steam in order to warm America up. It was as if they were drawing blood in order to bring down the swelling in the financial markets. It's a mini 2008 crisis developing according to the same predictable scenario.

In fact, the goal is still good. The fact is that speculators responsible for the 2008 financial market collapse have now happily inflated new bubbles. All the talk about the global economy working in new ways and speculators being let down remains moot. Meaningless G-20 summits have failed. Everything remains the same as before and the threat of a larger crisis remains. Everyone understands it, but can’t do anything about it. And the Americans have managed to apply their elective technology to the global economy, the proverbial tail wagging the dog. And they did it. They staged a default.

Everyone, of course, was terrified. First of all, the journalists. Analysts were terrified too, but not as much. They have better memories. Markets sagged a bit in a show of decency, but not enough — the usual routine. To really draw blood, it had to be a greater dip so that investors would withdraw their money from emerging markets and give it to America’s markets. This way everyone else would crash, and the U.S.? Not so much; no need to wait for a real recession. Will the dollar fall? If it does, fine. American products will sell better abroad. Will bonds crash? Nothing to worry about. There will be less to pay off. In the end, the default story didn’t work out. For days, directors skillfully built up the panic according to the laws of the genre. Nevertheless, the markets were pretty shaken. Then it was time for a bigger blow, the downgrade of the U.S. debt rating. And here it is!

What is this rating? It’s nothing, just one single agency. Just one less point. The U.S. bonds remain the most desirable asset on the planet. They (and this is important!) were affected by the downgrade to a lesser degree than, say, shares of Russian companies were. All the trillions of dollars lost by global financial markets eventually worked out for the benefit of the U.S. In a situation like this, investors still resort to American negotiable papers (bravo to the printing press) and the gold reserve (America has about 8,000 tons of gold, which is significantly more than that possessed by any of the world’s richest countries). There's the whole picture.

On the other hand, it's not really the whole picture. There’s Standard & Poor's. How can anyone suspect the agency of being under orders to downgrade the country's rating? Especially after it practically slept through the previous crisis, backing up the largest American corporations until the last minute? They had already been essentially bankrupt, but S&P still didn't lower the U.S. rating. And now, when America is still, by all practical means, the most reliable borrower in the world, they did lower the rating. France, with its far more vulnerable economic state and lack of a monetary printing press, has the AAA rating, while the U.S has just AA+. If you don't find that information reliable, just go to the website of S&P’s owner, the U.S.-based corporation, McGraw-Hill. There, right on the main page in the upper left corner in large letters it is written that S&P is a separate and completely independent entity. Don't think anything’s wrong. What if someone suspects the U.S. media group that recently published the book, "Say It Like Obama," of being in cahoots with the American government? Have a look through the website. For example, I came across a press release that begins with: "Together with the Obama administration, whose policy is aimed at improving the quality of scientific, technological, engineering and mathematical education in U.S. schools in order to improve the global competitiveness of America, the presidential advisory council was called up with the involvement of the McGraw-Hill corporation…"

In general, the picture is clear. The global economy has purposely had a bloodletting done that, in general, might do it some good. Perhaps it may even prevent a more serious crisis. But first and foremost, it will benefit the U.S. economy. The question is how will it work out? Is there a possibility that the process may become unmanageable? I am afraid that not only I, but also the scriptwriters themselves, have no real answer to this question. Indeed, in the worst-case scenario, a more serious collapse than that of 2008 awaits us because there's not much of a reserve left in national economies, including ours. The latter may lead to the fall of the ruble, making the hole in the budget a truly threatening size. And all of this happens when the elections are coming up. Political instability in Europe, incidentally, is also beneficial to the U.S. economy. In fact, it grew stronger because of European wars. Does anybody know what was in that script?

I must say that there is no worldwide conspiracy here. There is global competition. The one mentioned in the press release. All countries have been known to pull the blanket over themselves. This is normal. American financiers are cooler than ours. You don't need a fortune-teller to tell you that. That's why they win. We can only be spectators who pay for the performance. After all, our reserves are in U.S. securities. The Ministry of Finance has them in bonds. Citizens have them in dollars. So, everything might still turn out ok.