A Weird Year Draws To A Close
by Paul McGoldrick
Most of the US population is unaware of the current value of the US Dollar because it "doesn't concern them day-to-day." Think again. Over the last months the Dollar has slipped to a position where the Euro is 30% more valuable, and for a single British Pound you will today get just about USD $2. You think gas prices went out of control, but it is more that the US Dollar is out of control.
The weak Dollar is filling transatlantic airplanes -- even with extra flights being added to the routes -- and the voices next to you in Times Square in the weeks before Christmas are more likely to have British than New York accents. Even carrying bags of loot back into the UK worth way over the permitted allowances, one's paid duties and flight costs are totally recoverable after spending more than about $1500. And people are buying a lot, lot more than that.
The economic situation in the US is clearly spiraling out of control, with a deficit that one can only see growing instead of being paid off. And most of that deficit is, of course, ending up in the pockets of a few wealthy Americans/companies who are getting a lot wealthier by the minute. Wars are resource-greedy but highly profitable things, and technology wars -- the ones we think, arrogantly enough, we will always win -- are delusional for the perpetrators, who clearly do not understand that fighting for your country always has the edge over a fight of choice. Once it gets down to ground fighting, with an enemy that is not wearing insignia to identify itself, you have lost. Try to police an insurgency? Lose again.
The lessons of Vietnam are clearly not understood in Bush's Washington. The French, before the Americans, got totally bogged down in Indochina's fight to be de-colonized from a European power. Such struggles are not new in many formerly French, Italian and, especially, British colonies. But Iraq is probably the first war to be started by a man who felt he had to finish his father's business -- a country run by a man who tried to "kill [his] daddy" and a source of that precious liquid asset needed to run those precious SUVs (charmingly known now in the UK as "Chelsea Tanks," because of the proliferation of such vehicles in that unaffordable area of London).
Britain has known for centuries that the way to take a firm hold of a country is to actually create a new one by drawing borders in the sand, mixing tribes up, and then controlling the ticking bomb with ruthlessness. But Britain failed to do that both in what we now call Iraq and in Afghanistan. The Soviets also failed in Afghanistan despite their might. And the United States, Britain and the other small contingents of collaborative countries' troops ("don't forget Poland!") are going to fail again.
The idea of establishing democracy in both these countries is insane. Afghanistan has never had a central government; Kabul has always provided a neutral ground where the warlords would allow the international "stuff" that a country needs to take place. Iraq might either be divided into three countries (as Cyprus successfully was into two), or Iran simply be given the East. Logically, the North should become part of Turkey, or the Kurdish areas in Southern Turkey should be added to Kurdish lands in Iraq. Unfortunately, either of the latter scenarios would result in yet another war -- expanding the war that the Turks have had with the Kurds for the last forty years but kept incredibly low-key to the rest of the world, mostly by restricting travel in those areas by all foreigners and a large section of their own population. (Freedom of travel will truly be tested in that part of Turkey if they are ever rewarded with membership in the EU.)
We have seen this fall a change in the power structure in Washington. Although the way it will all work is really an unknown, for the next two years there will, at last, be the restoration of some of the congressional checks and balances that the founding fathers had in mind. Fear is no longer the silver bullet that the White House can shoot at will. But with a presidential veto, and those sneaky signing statements, it is very muddy as to whether much can change.
But during those two years there is, clearly, no way of recovering the economy. Whoever ultimately takes the 44th presidency will be handed an elephant or donkey that will be barely alive.
For our industry, having US-based fabs manufacturing semiconductors should provide even higher margins. But there are all those Asean operations, whether they be fabs or back-end work, to be reckoned with: they may still be priced in US Dollars, but we're going to be paying a lot more of them. And, of course, bringing anything into the US is going to be pricier as investors move more and more to currencies where they can make bigger money. The biggest player in that respect is mainland China; if they choose to move from US Dollars to Euros, for example, it would probably be economic doom to the US with incredible inflation. Britain learned that painful economic lesson back in the 1960s when Nigeria got ticked off about something Her Majesty's Government wanted them to do, or not do -- I don't remember which -- and they moved, overnight, from holding Sterling to selling it all in exchange for US Dollars. (Not that Nigeria offers a good example of how to run an economy; I used to pay my driver 30 Naira (NGN) a month in the late 1970s, which was about USD $25. On the open market -- not the black market where you will pay a lot more -- you now need NGN 128 to buy one US Dollar.)
At analogZONE we remain confident that our section of the industry will weather economic conditions rather well. But, as we see house prices diving again we are going to have a lot of people living with negative equity in their properties. They will walk away from their mortgages, dropping the front door keys in the bank depository as they go; lenders will become more rigorous on their lending policies, preventing the young from even getting on the first rung of owning their own home and reducing property values even more as the number of qualified buyers falls. And, to make the Dollar as attractive as possible to investors, interest rates will soar -- giving the negative cycle even more impetus.
It's a market economy, but it's also people's lives, both domestically and for the ill-equipped men and women on foreign soil. I am quite sure that were I the US President (which I thankfully cannot be), I would not be able to sleep at night for fear of the news I was going to get when I awoke. Damn my conscience!
However you celebrate the season (and Lee Goldberg urges you to buy green presents only) as a Christian, Jew, Muslim, Pagan, Buddhist, Agnostic, or whatever, analogZONE wishes you the very best and hopes that the New Year brings you all that you want for your family and yourself. Have a great holiday!
