George W. has learned it, Gordon Brown is learning: governments can always get through money
CHRISTOPHER FILDES
TNew York
he age of prosperity, so Al Gore promised, was only just starting: 'You ain't seen nothin' yet?' In a sense, he was right: we hadn't. Two years ago the two runners in the presidential stakes were neck and neck in the last furlong, with a crock of gold at the winning post. The United States Treasury was overflowing with money, and the candidates vied with each other to devise appropriate ways of getting through it. Mr Gore thought that his voters might prefer to see a welfare label on it, but George W. Bush thought that his voters would rather have tax cuts. In the end, and with brotherly help from some chads, Mr Bush got his chance, but by then the problem was well on the way towards solving itself. Governments can always shrug off surpluses, as Gordon Brown is learning. More money gurgles out through the plughole and less splashes in through the taps. Now steam is leaking out of the US economy. In the last quarter of this year, growth will be barely discernible, and early next year it may disappear altogether. Out in the woods the fearless Alan Greenspan stands on guard with his rifle. He can always fire his silver bullet and cut interest rates and cheer everyone up. The trouble is that he keeps on firing these bullets and his magazine is running low. America's consumers have propped the economy up for so long, but now their confidence has plummeted, and what they need to do is to rebuild their savings. In the old days, of course, the stock market saved for them, without any effort on their part — but those days are gone, so it must be somebody's fault.
Pitt falls
IT does not seem to count as the President's fault, or not yet, or not in ways that have harmed his party's vote in this week's midterm elections. It does not even seem to count as the fault of Paul O'Neill, his Treasury Secretary — but then, Mr O'Neill's only audible contributions to policy are his expressions of confidence, in the economy and in the stock market, which come round with the regularity of a recorded announcement. So it must be the fault of Harvey Pitt, the bursting horsehair sofa lookalike chosen by them as financial watchdog in chief at the head of the Securities and Exchange Commission_ Mr Pitt has been engaged in choosing an additional watchdog to bark at
accountants. The preferred candidate turns out to have chaired the audit committee of a company whose accounts are in question, and Mr Pitt turns out to have known this but not to have passed the word to his fellow selectors. As scapegoats go, late on election day, he went.
Do me a favour
THE president of the New York Stock Exchange, Richard Grasso, says that there are terrorists in the nation's boardrooms. My goodness, what will they do next — seize the smoked salmon sandwiches and hold them to ransom? No doubt Mr Grasso, in his rhetorical way, is getting at boardroom barons like Bernie Ebbers of WorldCom, the chairman who boasted of an ever-rising share price until it suddenly turned turtle. In a pleasing example of corporate governance a la mode, when WorldCom lent Mr Ebbers upsides of $400 million, this had to be approved by the board's compensation committee. Mr Ebbers then agreed to let the committee's chairman rent one of WorldCom's corporate aircraft for a dollar a month and a fee of $400. The poor chap — well, apparently, rich, having made his money in nursing homes — has now had to resign from the board and to reimburse WorldCom, and is lucky not to have been charged for the sandwiches. At least, unlike Dennis Koslowski of Tyco, Mr Ebbers has not shovelled money to Cambridge to finance a professor of corporate governance.
Muffy and Joe
BLAME moves on from the barons to the bankers. Who else promoted all these everrising shares? Whose analysts wrote those persuasive commentaries, but also wrote the e-mails that disclosed their private thoughts? Now, by way of atonement, the investment banks must establish some sort of reference library of impartially written research. I am never surprised to be told that, in markets, where there's a tip, there's a tap, but it seems to have surprised Joe Oddlot and Muffy Daytrader — or, now that their shares have turned turtle, they say so. Did someone steal their money or did they lose it? I dare say they lost it.
Staying sane
MARKETS are ruled by greed and fear, and Robert Menschel. who is Senior Director of Goldman Sachs, has survived half a century in them, blessed by the good fortune that introduced him, when at college, to Charles Mackay's Victorian classic, Extraordinaty Popular Delusions and the Madness of Crowds. It has inspired his own anthology, Markets, Mobs tfc Mayhem (John Wiley, £17.50), with examples that range from the bull market in Dutch tulip bulbs to the fables of James Thurber. Hitler appears as the pied piper of Nuremburg, flying saucers are reported from New Mexico, and a dotcombatant reflects on his time in the wars: The key to the new economy fantasy was the mutual reinforcement of stupid ideas by stupid money.' In those heady days Mr Menschel's ideas were unfashionable. He warns against the marketplace's infectious enthusiasms. He likes investing in good solid companies with comprehensible products. He looks for the rewards that come from avoiding mistakes. He can see value in today's markets, taking the view that the worst of the rush to sell is behind us. I find this more encouraging than the Treasury Secretary's pre-recorded expressions of confidence.
The martini hour
MY hopes and thirst rise in my quest for the two-dollar martini. Ten years ago the pound had its brief shining moment, the rate of exchange touched $2, and I was urging my readers to fly the Atlantic and drink while stocks lasted. Then the rate tumbled all the way down to $1.35, but now it is pushing up towards $1.60, and the pundits agree that the dollar is still overvalued. Finding a currency that looks undervalued is harder. The pound, the euro, the yen? Not exactly. Perhaps all these currencies are overvalued against some absolute standard, such as gold, or the martini.
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