America's Threat du Jour

It's not the Chinese, Japanese, or Arabs that'll do us in.

As we have all read countless times, America's culture, liberties, economy, and people are under threat as never before.  We have never faced such a soul-crushing array of problems, nor been led by such utterly feckless and incompetent (if not positively malevolent) political and corporate leadership.

Well.  It's true that times are bad; it's true that President Obama is America's most openly socialistic leader since, oh, Woodrow Wilson.  A little historical perspective can prove cheering, however, so let's talk about a little-known and somewhat ridiculed 1981 Jane Fonda/Kris Kristofferson movie Rollover.

The Amazon blurb for this reel describes it as "The widow of a murdered bank president and a maverick financier must prevent a crisis when Arab nations threaten to pull their funds from U.S. banks, thereby causing a worldwide financial collapse."  The blurb is misleading in every possible way large and small - she's the widow of a murdered conglomerate president, and the "maverick financier" is in fact the president of a bank.

The description's worst confusion is "must prevent a crisis."  In fact, the entire movie is about how the main characters, and indeed everyone else of note in the entire Western world, totally and completely fail to do anything whatsoever about preventing the Arabs from causing worldwide financial collapse - which they most carefully never threaten to do, they simply go ahead and do it.

Ahab the Omnipotent Arab?

The details of the highly contrived plot and the murder that, oddly, nobody seems to particularly care about, are irrelevant.  What's interesting is the fundamental premise: that the Arab oil sheiks have gotten so fabulously wealthy that they have the power to destroy the world economy by simply yanking their money from all the world's banks at the same time.

The movie is dated 1981, but its development surely covered several years at the end of the 1970s when America still suffered under the Carter economy and the ongoing oil shocks.  In those bygone days, many real-world commentators fretted about just such a situation as this movie attempts to portray.

It never happened: the Muslim world has been the source of no end of global trouble from that day to this, but intentional economic sabotage, no.  It turned out that the sheiks had better things to do with their money than play silly financial games with it, from supporting al Qaeda and Hamas to attempting to bribe their own restive peoples into submission.

Are the Arab oil countries wealthy?  Of course they are.  Can they cause problems?  Certainly.  But their powers are limited; by themselves, they can't actually destroy the world economy.

What's more, they don't really want to.  Minus the occasional frothing exception, oil-drenched ruling princes enjoy the good life modern wealth brings as much as anyone: the notorious Prince Jefri Bolkiah of Brunei was for many years the world's ultimate hedonist, enjoying sybaritic delights that would make a Hollywood mogul blush with shame.  A destroyed world economy would put his toys at risk if not his personal hide.

At the time, in the 1970s and early 1980s, the threat seemed real.  During the Reagan and early Bush years, we kind of forgot the boogeyman of the rich sheik and instead fretted about the bogeyman of the rich Japanese.  A somewhat better-known flick, the first Die Hard movie, portrays the corruption and illicit pleasure of the impossibly wealthy yellow peril - which by the 1990s, proved to be every bit as imaginary and irrelevant.

Japan has now endured two lost decades in a row, culminating in the recent tsunami disaster; they're no threat to anyone.  The hugely rich oil sheiks may live life large in private, but between Iranian nukes and popular uprisings, their thrones are more than a bit shaky.  In a way, they need us more than we need them.

The Mutual Suicide Pact

Today we worry about the Chinese.  Unlike the Arabs of Rollover, they seem to like to invest their governmental trillions in Treasury bonds, but precisely the same problem is threatened: if they cashed them out all at once, our economy would collapse just as surely.

Just as surely, they won't.  It's a simple fact that the Chinese will never, ever get back all the money they've loaned us as they know perfectly well.  China's rulers know that it doesn't really matter; by loaning American the money that has allowed us to buy their wares for twenty years, thus creating a bustling modern economy where there was none before, they have purchased something far more valuable than mere money.  They've bought a ticket into the first world.

The Chinese people may not see it that way; if something caused the value of China's paper assets to vanish on paper, there'd be a revolution if not a popularly-demanded war, no matter how counterproductive that would be.  Just so long as nothing changes on paper, though, China's rulers are safe; they will never yank the rug out from under their own selves.

Could modern China collapse the world economy like the fictional Arabs of three decades past in Rollover?  Sure, but they all know that they'd be committing suicide both nationally and literally, so they won't.

The More Unreal Threats Change, The More the Real One Stays

For all these false threats to American well-being, there is a real one which has not changed.  In a way, Rollover illustrates this very real threat without meaning to.  Near the movie's climax, where Our Hero realizes what is about to happen and confronts one of the titans of Wall Street finance who's assisting the Arabs with their investments, the titan blithely points out that all he's been doing is helping a client invest his money as he sees fit.  Nothing illegal about that; it is in fact the job of an investment banker.

Comes the protest, "Shouldn't you tell the Department of the Treasury?  The Comptroller of the Currency?  The President?"  Nope; as the titan resignedly points out those bozos wouldn't be able to get off their hands or do anything intelligent about it anyway.

Indeed, the portrayal of government authority in thirty-year-old Rollover is as demeaning and contemptuous as any modern Tea Partier could wish.  What's more, its portrayal of greedy and amoral bankers would bring cheers from the OWS crowd too.

This highlights a striking aspect to the Rollover collapse scenario.  When the Arabs pull all their money from all the world's banks, they do so in the most routine of ways: a simple telex to each bank requested withdrawal and closure of their account.  Any one of us could do that today; indeed, the OWS protestors supported Bank Transfer Day, an effort to encourage individuals to remove their money from major banks and re-deposit it with nonprofit credit unions.

Every American has a perfect right to move their own money around, just as surely as the Arabs, the Japanese, or the Chinese - or so you'd think.  What's notable about Rollover is that the bankers receive this devastating request and all meekly carry it out, consciously destroying their own banks and the world economy in the process.

Perhaps the movie-writers of the late 1970s, while rightly having no confidence in government or high finance, still had a solid belief in the Rule of Law and of private property even of your enemies.  Such a scenario would be absolutely inconceivable today: the minute every bank in the country got the same instruction from the Chinese to cash out of everything, they'd all be on the phone with the Fed.

Within the hour, the Treasury Department would call it an act of economic war, forbid the banks from complying, and slap harsh currency controls on any avenues the Chinese might use to get their money back.  The Chinese know this, of course, which is yet another reason why they'll never try it.

In this extreme case, our Founders would applaud a limit to the private property rights of our enemies; they were desperately worried about foreign economic influences.  The trouble is, our government has gotten in the habit of disregarding private property rights entirely; it wasn't the Chinese that were robbed during the GM and Chrysler bankruptcies, but American investors, American bondholders, and American retirement funds.

No, America's economy cannot be destroyed by nefarious foreigners no matter how wealthy, or even by emergency government intervention to prevent foreign assault.  It can only be ruined - is in fact being ruined - by our own tolerance of government interference and control on an everyday, ongoing, and routine basis.

That threat hasn't changed from the 1970s - or from the 1930s, or indeed from the 1780s when our Founders tried to design a Constitution that would permanently bind the hands of the government from amassing too much power over the citizens.  Our government is and always has been the only realistic threat to our prosperity.  As Pogo often put it, "We have met the enemy and it is us."

Petrarch is a contributing editor for Scragged.  Read other articles by Petrarch or other articles on Economics.
Reader Comments

A quiet endorsement for Ron Paul, I assume? :-)

December 7, 2011 8:19 AM

Without going into great detail worrying about the Arabs or the Chinese accumulating our dollars and demanding them is simply fiction. It would be economic suicide on their part. It would be better for us in the short run and the long run if we amassed huge deficits right now. The circle is very easy to explain. We buy goods from the Chinese that are of a similar quality at a less expensive price here in the states. We now enjoys those goods. The money we save is spent on other goods and services here in the states creating jobs and wealth in those sectors. If the Chinese just put their money in a bank vault all they have is green paper which would be pretty stupid on their part. They have to spend it somewhere, either here or in another country. Regardless of where they spend it, it has to come back to the states and be spent here, creating jobs and services. Short term advantages of price in a particular product evens out in the long run as consumers always vote, or should I say buy, with their pocketbooks. It doesn't matter if you are in union or not, you will do what is in your economic interest. Let the Chinese keep buying our treasuries with money that we spend with them, for the short run they are working for free. As a side note on the aforementioned observation of the union worker he will soon realize that he is cutting his own throat by paying union dues to an unproductive union boss. It's just a matter of time, much like the Chinese advantage that we enjoy today.

December 7, 2011 11:20 AM

You got it, bassboat!

You must have read this article, it goes into detail about your post. It also says the Chinese can't call their loans:

Geithner assured that Chinese that our government planned to "live within our means." What hogwash!

This explains how Obozo has decided to steal not only from his own taxpayers but from the entire world!

December 7, 2011 2:03 PM


Thanks for the comment. I didn't read the article you mentioned as I have only been a member of Scagged for several months. I however can't take credit for the idea. This theory has been around for years and it makes sense to me. To even simplify it even more, the old saying, " What goes around comes around" might be appropriate in this sense.

December 7, 2011 2:48 PM
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