1 SEPTEMBER 2007, Page 18

Now America faces not-so-friendly fire from the rest of the financial world

MARTIN VANDER WEYER 1 'm back, as Arnold Schwarzenegger famously declared in Terminator 3: Rise of the Machines. In fact I haven't really been away, just hovering in cyberspace to leave room for other contributors in our slimmed-down-for-thebeach summer Business section. While I've been up there, financial markets have begun to look like a Los Angeles freeway visited by an enemy android at the wheel of a runaway fire truck. But the idea of an Arnie-sized American superhero capable of defending the free world against the forces of chaos, in stock markets or anywhere else, now looks more tainted than ever. During and after most of the downturns and market falls of recent decades, it was conventional to praise the remarkable recovery powers of the US economy and its ability to drag the rest of the world out of trouble. This time, as the follies of US sub-prime mortgage lending unravel, knocking over the dominoes in many other markets around the world, such positive sentiments seem certain to be drowned by a clamour of anti-Americanism among financial experts to match the widespread anger over Iraq expressed by foreign-policy pundits. It is all very much as predicted by Bill Bonner — an American himself — in an article in our issue of 31 December 2005, in which he raged against the 'star-spangled bumpkin', his archetypal fellow countryman who 'believes he can get richer by spending rather than saving. . . borrow without paying back [and] invade foreign countries and the natives will say thank you'.

This new surge of hostility towards America will of course contain a large element of hypocrisy, since British lenders have also been shovelling out credit despite faltering house prices and unprecedentedly high levels of consumer debt, and since many European banks have greedily jumped on the sub-prime bandwagon: some German regional banks have huge exposures to `collateralised debt obligations', the bundles of repackaged US mortgages which until recently seemed to offer such attractive returns. But none of that will diminish the antipathy towards what is now so widely seen as the arrogant stupidity of 21st-century American money and power — personified in George W. Bush.

The headline that provoked this train of thought — on the Telegraph website — was 'Swiss banker attacks US'. It led into a report of remarks by Jean-Pierre Roth, president of the Swiss National Bank, about the 'unbelievable' standards applied by US lenders offering attractive credit terms to 'people who had neither income nor capital'. But for a moment I pictured that startled look on Bush's face, interrupted while reading another story about a pet goat to another school class. 'This time it's guys in dark suits with European accents, Mr President,' the aide whispers. 'And they've got BlackBerrys.'

Small arms race My oldest godson is a polite young man with a degree in the history of art. He's also a soldier, not long out of Sandhurst, and last month his Snatch armoured Land Rover was attacked on convoy duty between Kuwait and Basra. Lance sergeant Chris Casey and lance corporal Kirk Redpath of the 1st battalion, Irish Guards, travelling in the back, were killed. The driver was relatively unscathed; my godson (I will abide by MoD practice of not naming the wounded) took a nasty but non-life-threatening blow to the face and had to be dragged from the burning vehicle. He was helicoptered out of danger and flown back to Brize Norton; within 72 hours I was able to visit him in Selly Oak hospital, in a ward reserved for casualties from Iraq and Afghanistan. It was a jolting experience. In the next bed was a man who had lost an arm in a mortar attack on the Basra airport base. Through the blur of painkillers, my godson gave a matter-of-fact description of life in the tented camp that made it sound like an experience from the first world war, and the horror was suddenly made vivid when the hospital fire alarm went off. He lurched sideways — then straightened up again, a little sheepishly. 'Sorry,' he said. 'That's exactly the sound of the incoming mortar alarm. I was about to throw you under the bed.'

You may wonder what this story is doing in a business column. Bear with me: it connects in a roundabout way with the shooting of Rhys Jones in Liverpool and with Matthew Lynn's thoughtful article last week about the arms industry. The 'improvised explosive device' that injured my godson was of a type that used to be homemade — the IRA made them from baked-bean cans — but is now almost certainly mass-produced in Iranian factories. The gun that killed Rhys Jones could have come from one of any number of factories in eastern Europe or elsewhere. Men and boys are not being killed and maimed by warheads that can be can be counted and monitored — and, God willing, will never be used — but by handguns, mortars and tin-can projectiles turned out in uncountable thousands. Small arms, not big ones, are ripping civilisation apart day by day, and it is the proliferating international trade in them which the UN and responsible governments should seek urgently to disrupt. Incidentally, I gather General Mikhail Kalashnikov, the 87-year-old designer of the AK-47 rifle which has killed so many men and boys around the world, now says he wishes he had designed a lawnmower instead.

No Helmsley legacy I felt a twinge of regret at the passing of Leona Helmsley, the New York hotelier and real estate billionairess who famously declared that 'only little people pay taxes'. Not that I felt she deserved a longer life — she also made it to 87, outliving by a decade her long-suffering third husband, Harry, who made all the money. I just hoped `the Queen of Mean' would live long enough to spot my home town of Helmsley in North Yorkshire on a map, leap vainly to the misapprehension that we had renamed the place in her honour, and decide to alter her will with a substantial endowment in our favour. Sadly that does not seem to have happened. In the early 1990s, when I was first raising money for the development of the town's nowfamous arts centre, I really did have her name on a list of wealthy people to whom I planned to send appeal letters — but I never found the address of the prison where she was serving her sentence for tax evasion.