Crimea. This is a fast-moving situation with big implications for our favourite emerging market, Russia. (Hint: We still think it’s a bargain.)
What we know for sure is that the news out of the region gave the markets a serious case of the heebie-jeebies. The Dow ended the session down 153 (back from a 250-point selloff). Gold rose by $28 an ounce.
We also know that the Fed’s zero-interest-rate policy…and its $4.1 trillion balance sheet are a standing invitation for trouble. What form that trouble takes will be determined later.
Meanwhile, Washington’s mountain of debt gets bigger and bigger — aiming for $20 trillion of official debt by 2020. As it gets bigger it weighs on the US economy. Several studies have shown debt slows down economic growth.
The reason is fairly easy to see. Remember that hamburger you ate in 2007? You enjoyed it then. The hamburger joint made money. The cook made money. And the economy registered a boost to GDP.
But if you paid for it with a credit card, the transaction may still be incomplete. You may still be paying interest on that burger. That means less money for you to spend…and less for others to earn.
And this drag on the economy won’t go away until you’ve paid off the debt.
In monetary terms, the money supply expands when a credit-card loan is made. It contracts when it is repaid. Banks create money ex nihilo when they make loans. When repaid, the loan goes back whence it came.
As economies slow down it becomes harder and harder to keep up with the debt. More and more of current output must be used to satisfy past consumption. By way of comparison, the US government has 10 times as much debt-to-GDP as Russia. In this sense, the US has 10 times as much trouble in store, should it find itself in a debt squeeze.
But again, we await developments…
We spent all day yesterday driving back home to Baltimore from Aiken, South Carolina.
‘You’re not going to try to drive back,‘ said the clerk at the Willcox Hotel. ‘There’s a huge snowstorm coming. The whole East Coast is going to get hit hard. You won’t be able to make it. Better stay here another day.‘
But we were getting a little restless…not that Aiken isn’t delightful and charming. But we had been there a week. Wife Elizabeth had won her blue and yellow ribbons for horse-riding. It was time to move on — snow or no snow.
So we set off early in the morning…keeping an eye on the weather via our shiny new iPhone. It was sunny and warm in South Carolina; it was hard for us to believe the weather could be so much worse up the coast.
We dallied, taking small roads over to Columbia to get a better idea of the countryside. What we discovered was that it was poor. The earth was poor; in some areas there was barely any topsoil covering the white sand. People were poor too; many of them lived in dilapidated trailers or rustic shacks. Often, there were the husks of automobiles and trucks decorating their yards and gardens.
Almost as soon as we got on the highway the foul weather caught up to us: first a light rain…then a heavy rain…then a freezing rain…then, as we entered North Carolina, sleet…and finally snow.
We kept up a tolerable pace. Our plan was to continue driving north as long as possible. If the snow became too heavy or the road too icy we would put in at a motel in Greensboro…or Durham…or, if we made it that far, Richmond.
The thing that bothered us was the geography of the route. There is a vast pine forest that envelopes Route 85 as it goes through North Carolina and Virginia. If the storm were to hit us hard there, we might not find a port to put into. Signs were warning travellers. Cars and trucks were returning home. The roads were becoming quieter and quieter.
Still in a light snow, we set out from Durham hoping at least to reach Petersburg or Richmond before we got walloped.
Our wheels (on a Ford F-150) do not have much traction unless the truck is loaded. Normally, it slips and slides readily. But the longer we kept chugging along, the more ice clung to the chassis and the heavier it got. Soon, the road was covered in snow and ice; but we just kept moving along without much trouble.
By the time we got to Richmond, it looked as though we had reached the end of our travels for that day.
Traffic was still thin, but there were many accidents. Several cars had hit the guard rails…a few more had slid off the road…and one tractor-trailer, pulling what looked like a gasoline tank in tow, had jack-knifed just south of the city.
But just when we began looking for a Super 8 motel, or a Sleepy Time Inn, the sky brightened enough to give us hope. Besides, our iPhone reported that the snow had stopped in Washington, DC. If we could just get clear of Richmond, we reasoned, it might be smooth sailing.
As it turned out, getting clear of Richmond was a long, slow slog…but it eventually worked out more or less as we had hoped.
We arrived at the Washington Beltway at rush hour. But there was no rush. Federal employees had deserted their posts at the first snowflake. The Beltway was as empty as we’d ever seen it.
And with the cops busy with so many accidents in the area, we felt a strange liberty. What should we do? Rob a liquor store or just break the speed limit?
In the event, we hastened home…
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