American Money Worries

Anxiety comes in different forms on either side of the Atlantic. Take the proverbial German angst, a type of quiet hysteria, a panicky collective fear that often doesn’t seem to have any connection to real danger. Just one recent example: Germans cancelled trips to Japan in the aftermath of the Fukushima nuclear accident, despite the fact that their destination might be hundreds of miles away from the earthquake zone. Others fretted that the atomic cloud might arrive on the other side of the globe, pouring radioactive rain over them and their wheatfields. It shouldn’t have surprised me that most Germans rather sheepishly fell into the usual pattern of free-floating angst when the fear of yet another economic crisis hit home.

The first week of August was undoubtedly a grim one, echoing the depths of the crisis in the markets nearly three years ago. Global equity markets had already plunged in the previous week; now they had to absorb news of an unprecedented downgrading of America’s credit rating. The reaction in Germany was predictable: anticipation that the next big crisis would hit the superpower America — a kind of pre-emptive schadenfreude that seems to have become the gold standard when reacting to American affairs in Germany. Germans themselves had been fretting about how to support the Greeks and the next flagging state, Italy. Now that an escalation of the Eurozone debt crisis coincided with weak economic growth in the United States, a sense of disappointment at being let down by the formerly rich American uncle, now almost bankrupt, became apparent.

When I flew to New York that same week, the picture, however, looked different, despite the concerned headlines of the papers. There was much less sense of panic, which the German media seemed to have hoped for; it was instead the sense of a rabbit caught in the headlights. One factor might have been that America still reported solid job growth, despite the wobbly course of the economy, which might have helped to calm investors. The spending cuts that Obama was required to make in return for Congress agreeing to raise the debt ceiling were seen as a temporary fix, not a cure. The crisis was not just seen as a political and fiscal challenge: it was also a constitutional one.  

Even the cover of the trendy New York magazine, which is usually reserved for celebrities or the latest events in the city, ran a story by the former New York Times columnist Frank Rich. “Something rotten — Obama’s failure to right the wrongs of the crash has haunted his presidency, and could undo it,” ran the headline. Now we had what could turn into a new crash. At the same time, America is clearly going through a period of political turmoil: a profound debate about whether it wants “big government”, Obama-style, or “small government”, as the Tea Party advocates. 

This is a major decision — the acrimony of the political debate might just be commensurate with the momentous decisions ahead, rather than a sign of the American hegemony that for Germans always seems to be lurking just around the corner. Why are Europeans (and perhaps Germans in particular) so reluctant to accept that such debates might take years and possibly several elections to be decided? However alien — if not dysfunctional — it may look from Europe, the US constitution was designed to make it difficult for anyone to change the country easily or quickly. The message of the op-ed pieces in Germany is that a) America must get its house in order and do so fast, and b) should stop being so full of itself. Can you have it both ways? Such a mismatch in expectations is bound to produce tensions.

Perhaps on this side of the Atlantic we have to learn to deal with the gnawing realisation that not only Europe but also America could face fundamental economic problems for years to come. The budget ceiling crisis and the market jitters that followed did not amount to a crash, only to shaken confidence. “The emperor is wearing clothes, but they’re Speedos,” the Financial Times commented. This ironical attitude seems far more productive than the sour tone of pessimism that has become the hallmark of German feeling towards America.

A thought occurred to me as I strolled through downtown Manhattan towards Wall Street, the scene of the 1929 crash that plunged the world into the Great Depression. In those dark days, Americans eventually overcame their fear; as President Roosevelt said in his 1933 inaugural address, “The only thing we have to fear is fear itself.” In Germany, by contrast, angst triumphed in the shape of dictatorship, with disastrous consequences for the whole of Europe. Shouldn’t Europeans, even now, be wary of sneering at America?

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