America's debt to other countries
As America's banks announce multi-billion dollar losses as a result of their (what shall we say?) incautious excursions into the sub-prime mortgage market, the New York Stock Exchange this week is nervous as a kitten.
Stocks wobbled on Monday and there are fears that a new cycle has begun from which only the brightest and the best will emerge unscathed.
Bloomberg, the financial information giant two-thirds owned by New York mayor Michael J Bloomberg, interpreted events as follows:
" Skittishness over the US stock market's record-setting rally is reaching a crescendo among options traders who are preparing for a crash."
Oh dear. That doesn't sound good. If America is the locomotive that drags the rest of us along the economic track, what happens when the engine disappears up a branch line and hits the buffers?
Now don't get me wrong. This is not 1929 and businessmen are not currently throwing themselves out of the windows of tall buildings. But it is still a delicate time for investors.
There are two main factors at work. First, the United States is moving out of manufacturing, except at the level of high technology. Second, the country relies increasingly on China and the Gulf states both to take up the slack in manufactured goods and - ironically - to invest the profit in the US economy, including the dollar.
I am no economist, but it seems to me that this is not a recipe for long-term growth and stability.
Imagine a group of 10 people living in a gated community on which rent is due. Each of the 10 starts out with $$100,000. One of them runs a gas station; one is a banker. Of the rest, one is in charge of security; one rents DVDs, one is a lawyer and another a journalist. One is retired and the remaining two run a small restaurant.
Over time, as the retailers buy in the materials necessary to keep their businesses afloat and everybody pays rent to the owners of the facility, money becomes scarce. The banker helps out by borrowing from the outside and lending it to his co-residents at less than a commercial rate, which is all they can afford. But eventually everyone runs out of cash and the restaurant goes bust. At this point, the banker's debt is called in and the pensioner takes up busking. Is this the way America is going? Maybe and maybe not. Those in charge of the economy insist that the underlying strength of the nation's economy will see it through the trials ahead. Money being made is being invested in industry, they say. Yet, as in Britain, including Northern Ireland (where, as my brother-in-law recently remarked, everyone will soon be employed selling coffee to everybody else), the trend is inescapable. The only way nations grow richer is by making, or recovering, things that they then sell, which can be anything from aircraft, to computers, to feature films, to oil and gas, or else by providing expensive, top-end financial services to the rest of the world.
In the 1950s and '60s, the US did both to a degree unparalleled in human history. Cars, aeroplanes, fridges, ships, oil, weapons, wars, movies, popular music, business consultancy, insurance, banking ¿ you name it, they did it, and nobody did it bigger or better.
This is not the case today. In the 21st century, there are still big US manufacturing companies. In the computer sector we have Microsoft, Oracle, Hewlet-Packard and IBM; in aviation and defence, Boeing, Lockheed Martin and Northrup Grumman; and in engineering, General Electric. And there are others. These are huge businesses that, in spite of everything, have held on to their competitive edge. At a pinch, we could add to these Google and Yahoo - assuming, that is, that information really is a commodity.
But, increasingly, jobs in the US, as in the UK, are service-based. If we strip out public servants, including the armed forces and police, and the oil sector (clearly a wasting asset), most Americans work in banks, insurance offices, real estate, legal practises (there are more than one million registered lawyers), smalltime workshops and retail. Retail remains crucial, with monster chains like Wal-Mart, Target, Sears and Home Depot. Well, China needs outlets for its goods. But it is in financial services that we see the most astonishing growth.
In 1982, according to All the Money in the World, a new study of America's richest, by journalists Peter W Bernstein and Annalyn Swan, manufacturing accounted for 22% of America's wealth, and oil for 23%. Today, the figures are 8% and 18%. Financial services, by contrast, have rocketed from less than 5% to 25% - fully a quarter of all the nation's worth.
In New York last year alone, another 24 billionaire money men emerged, most of them hedge fund tycoons. One in every fourteen dollars in America is now controlled by hedge fund managers. You want to make money? Then make money is my advice. But what happens when the Chinese, and the Indians, and the Saudis, and the Qataris and, Lord help us, the Vietnamese call in their debts? And what happens when nobody makes anything anymore and everyone from sea to shining sea is selling each other annuities? I have no idea but, fortunately, I don't think I'll be around to find out.