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"Mike and Jon, Jon and Mike—I've known them both for years, and, clearly, one of them is very funny. As for the other: truly one of the great hangers-on of our time."—Steve Bodow, head writer, The Daily Show
"Who can really judge what's funny? If humor is a subjective medium, then can there be something that is really and truly hilarious? Me. This book."—Daniel Handler, author, Adverbs, and personal representative of Lemony Snicket
"The good news: I thought Our Kampf was consistently hilarious. The bad news: I’m the guy who wrote Monkeybone."—Sam Hamm, screenwriter, Batman, Batman Returns, and Homecoming
May 06, 2005
Happy Day After Debt Repudiation Day!
Yesterday was Cinco de Mayo. Or, as los gringos call it, May 5th.
Most people have no idea what Cinco de Mayo is about, except for the cheap beer part. And arguably the cheap beer part is most important. But the rest of it is also interesting, and (unfortunately) relevant.
Cinco de Mayo celebrates the victory of Mexican troops over an invading French army at the Battle of Puebla on May 5, 1862. While militarily it wasn't that important, it was a big watershed in Mexican national consciousness. Nothing brings people together like fighting others.
Anyway, here's the important part: France was invading Mexico essentially because Mexico owed France money.
Through history, countries have built up unsustainable debts to others all the time. In this case, Mexico had borrowed lots of money from Europe while establishing its independence and then fighting the US invasion in the 1840s.
In these situations, it's best for everyone--both debtors and creditors--to work out some kind of default. But the creditors usually don't see it that way. They want their sweet, sweet money.
In this case, France wanted its money so much it invaded Mexico. After the loss at Puebla they sent more troops and installed Archduke Maximilian of Austria to run things so they'd get paid back.
This was admirably honest. International relations are often like organized crime on a gigantic scale, but people pretend otherwise. Here there was no pretense: the loanshark's enforcers beat the crap out an entire country.
By contrast, creditors today have things like the IMF, which is essentially a creditors' cartel. The IMF is in charge of squeezing countries until they pay back their debts. This often involves lots of people dying... but in quiet ways, without armies involved.
The reason this is relevant to Americans today is now WE'RE in deeper and deeper hock to others. Will China invade us to get their money back? Probably not. We're more powerful than Mexico in 1862. What's more likely is we'll go through the same kind of "structural adjustment" we've imposed on others via the IMF. This means slower economic growth, cutbacks in Social Security and Medicare, and all the other things that benefit normal people.
Now, you might assume this will have to be forced on us, because all Americans would oppose it. BUT YOU WOULD BE WRONG--just as you'd be wrong if you were a regular Mexican and believed no Mexicans would support Archduke Maximilian.
The truth is most of the richer people in America will push for it to happen, because it's good for them. True, it will make America poorer and weaker as a whole--but it will make them more relatively powerful within America. And that's what the elites of most countries care about, just as Saddam Hussein cared about himself rather than the well being of Iraq.
For a glimpse of our future, I recommend the book Savages about Ecuador, a country with its own foreign debt problems. Ecuador as a whole would be better off defaulting on its debt, but that doesn't matter:
My family and I rented an apartment in the new section of Quito... Beyond the office towers, up along the valley walls, were lavish new condominiums and golf courses and tennis clubs. A good French dinner ran about fifteen dollars, a full-time, live-in house servant about twenty-five dollars a month.
I called them servants; one of my neighbors, Alex, called them slaves...
For someone like Alex--that is, for anyone, American or Ecuadorian, who works in the white-collar end of the petroleum business... Ecuador's ever-increasing poverty was a windfall. The price of slaves kept dropping. "The debt?" Alex said. "I love the debt."