Foreigners and Us

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• Poor Japan! The country just can’t seem to break out if it’s long, slow, soft, on-again, off-again recession. The 4th quarter of last year was not a good one for Japan. Consumer spending went down; the economy contracted.

What must Mr. Asakawa think? The poor man has been sleeping with his infernal currency market monitor next to his bed, his slumber disturbed every time the dollar falls… and for what? Japan holds more than $700 billion worth of U.S. treasury bonds. Sure, Japan lost more than $100 billion last year (compared to holding the euro), but buying the U.S. debt was supposed to guarantee that Americans would continue buying (which they did)… and supposed to guarantee that Japan’s exports, and its economy, kept growing. Something is very wrong with this formula. Mr. Asakawa must be thinking that he should throw the damned currency monitor away… dump the bonds… and get a good night’s sleep.

• A great day for the macro guys… Dan Denning sends us this:

"Yesterday was one of those days, like hitting for the cycle… or batting around in an inning. The U.S. government finds itself on the edge of the social welfare crisis everyone has been predicting for 30 years. The chairman is befuddled that long yields aren’t rising, as if he wonders why the rest of the world doesn’t see the ugly truth behind the dollar. And China is pushing OPEC to max out oil production. At the same time she’s eating more red meat and using more steel than America.

"It’s not often you find a country that consumes more than U.S. Too bad it’s driving the price of oil up!"

• "I spent two years in Houston," said a Frenchman in the oil business. "It was amazing. We loved it. We traveled around. You know, America is so cheap. And there’s so much to see. But what was amazing was the way Americans are so uncurious. As I say, we were there for two years. We lived in one of those newish, upscale communities. Supposedly our neighbors were well-educated, upper-middle class people. But in the entire two years not one person ever asked a single question about France… or what people thought in France… or what we thought. We found it very strange. There’s a lack of conversation that is remarkable. People don’t seem to entertain very much. At least, they didn’t seem to want to entertain us. They were friendly, but just not interested. We ended up spending our social time with foreigners. It was easy to make friends with the Germans, other French people of course, but also with people from the Middle East and North Africa. We had a lively social life, but not with Americans.

"I think Americans have a deep inferiority complex. They’re ill at ease with Europeans on cultural matters. They don’t know much about history or art or philosophy. They don’t know how to make dinner conversation. At least, that is what we think we saw in the Houston area.

"Of course, the French have an inferiority complex too. We envy America’s energy, its commercial dynamism. Even its excesses are liberating to us.

"You know, we Europeans are much more careful. We don’t spend our money quite as readily. We don’t take to new ideas or new things easily. But there’s a good reason for that. We know that it’s very hard to recover from mistakes. Things are expensive in Europe… and take a lot of time. So you have to be careful. If you innovate… it can take a long time to make any money from it. And it can ruin you. And if you’re ruined, you probably won’t be able to recover from it. So there’s a lot to lose and not a lot to gain.

"But in America, if you come up with some crazy new idea, you can make a fortune quickly. So why not take the chance? Besides, if you’re wrong, you can try something else. You have time to recover. The people who make the big successes seem to be those who take big chances.

"That attitude carries over into foreign policy, I think. We Europeans saw the war in Iraq as a lot of risk and not much gain. We have small armies now. And we distrust military campaigns of all sorts. We had enough of that in WWI and WWII. But you Americans have a big army. You can afford to try all sorts of things — even things we would consider foolhardy. If you’re wrong, you can recover. You can try something else. A mistake is not fatal."

• A thoughtful comment from a reader:

"Regarding your 10:1 negative email, take heart. It is reported that Socrates once proposed that, because there were far more fools than wise men in the world, any majority decision must be worthless. His peers agreed and approved his proposition by a large majority."

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century.

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