Subscribe to Print Edition | Thu., April 30, 2009 Iyyar 6, 5769 | | Israel Time: 21:03 (EST+7)   Back to Homepage web haaretz.com Haaretz Toolbar Diplomacy Defense Jewish World Opinion National Print Edition Car Rental Books Haaretz Magazine Business Real Estate Focus U.S.A. Travel Week's End Anglo File TLV 100

Clear and present danger By Guy Rolnik Tags: Independence Day, Israel News Richard H.K. Vietor, an environmental management professor and dean at Harvard Business School, would punctuate his lectures every five minutes with screaming warnings that the U.S. economy was headed for disaster and that Americans were forfeiting their future by selling out their assets to foreign investors. The screams were carefully orchestrated; he would build up an argument and let loose a scream, usually in the form of a rhetorical question. Students who could not understand his closely constructed arguments, formulas and figures were frightened and bewildered. But the students who got the picture were delighted; they were sometimes even tempted to scream along with him. One thing is certain: Whether they understood or not, none of his students ever forgot him. The screams were a kind of trademark; ostensibly it was a small marketing exercise by this professor at a business school where marketing is the name of the game. I realized, however, that the screams were not only a marketing ploy, they were an early warning by a professor, back in the autumn of 2002, who really cared about what he was teaching. Vietor wanted his students to understand the gravity of the situation. In teaching U.S. macroeconomic policy, he was eager to transmit to them, especially the Americans, that the United States was on a collision course, that it was mortgaging its future. Advertisement Naturally, I was already familiar with America's twin deficits - the trade deficit and the federal one - well before I attended Vietor's lectures at Harvard. The American nation was not saving its pennies, the average American was buying goods and services on credit at a frantic pace, and the country's trade deficit was gargantuan. Vietor instructed us to read and review massive tables of figures - these were the records of America's national accounting. We consumed endless columns of numbers with nine to 12 zeros each. When we broke down the routine terms, negative savings and asset sales, the message was driven home: The American economy was increasingly basing itself on consumption while selling out its assets and future to foreign investors. The first column I wrote after returning from Cambridge was called "The leveraged economy that we all rely on." In that article, which appeared on January 18, 2003, in the Hebrew edition of Haaretz, I wrote: "The American public continues to ignore all the warning signs now flashing wildly and is steadily increasing private consumption. Moreover, it is doing so using its favorite technique - the credit card combined with ever-mushrooming mortgages, which depend on a seething real estate market, in which property prices are constantly climbing. In accordance with this line of thinking, the major engine driving America's impressive recovery is not just an amalgam of productivity and efficiency but a leveraged economy, which is being enthusiastically supported by president George W. Bush and his 280 million consumers. That leveraged economy consists, in fact, of both the continually ballooning expenditures of the administration and p rivate consumption, which is being financed with loans." For five years, Vietor's screams and the long columns of figures were always with me, from the fall of 2003 to the fall of 2008, when the credit bubble burst and the U.S. economy was hit with unprecedented intensity. During that period, as analysts, economists and leading members of America's business community were explaining that the nation was building a new economy - that Americans could leverage themselves forever at the expense of the Chinese and other foreigners - I never forgot the long columns and Vietor's screams. In 2005, I met Vietor at a Harvard workshop in England. The credit bubble was continuing to expand, the U.S. economy was galloping forward and, for the moment, it seemed his warnings were totally unrealistic. Unable to resist the chance to venture a gentle jab, I said to him that the bubble showed no signs of bursting. His dry reply was that America was headed for trouble, real trouble. During those five years, I continued to write columns about the U.S. credit bubble and the frivolous spending under George W. Bush and Federal Reserve chairman Alan Greenspan. But the markets in the United States and around the world seemed to mock my statements as they continued their way ever forward (so it seemed). At a certain point, I admit, I began to feel like a latter-day Cassandra. But in late 2007 and during the first quarter of 2008, I was convinced Vietor's grim predictions would prove true. On March 28 last year I discussed the imminent bursting of the financial bubble. I decided to use a sharp, terrifying title: "A clear and present danger." In retrospect, I should probably have written three or four times as many columns on America's credit and financial bubble after having attended Prof. Vietor's classes. But I'm not certain how much that would have helped. The reactions even to my March column were marginal. No one seemed the slightest bit upset by what I had written. After a five-year financial upsurge, it was very difficult to get the attention of readers, investors or even regulators. Bookmark to del.icio.us   Swine killed over flu Egypt orders pigs killed in anticipation of pandemic. Obama greets Israel U.S. President salutes Israel's 61st independence day.

Read & React Israel to EU: Criticism of Netanyahu government unacceptable Responses: 256 British airline apologizes for deleting Israel from map Responses: 87 Ari Shavit: Obama in 2012, after he fails to deal with Iran Responses: 99 Peres: Bombing Iran may not be the 'best solution' Responses: 96 More Headlines 19:21 Two more suspected swine flu cases as Health Ministry raises alert 19:41 'Galilee Freedom Fighters': Israeli Arab terror suspects are our operatives 19:40 Police grill Lieberman for fourth time in graft probe 19:34 British airline apologizes for deleting Israel from map 20:31 Saudi Arabia: U.S. lied, Saudi king did not speak with Peres 19:19 Palestinian hijacker of Achille Lauro cruise released from jail 18:34 Exposed: Director of Nazis' anti-Jewish propaganda 21:43 WATCH: Daily news round-up from Israel 20:02 UN: Gaza still awaiting aid pledged for reconstruction 16:15 Report: Turkey ends war crimes probe of Israel over Gaza op 17:22 Lawyer: 8-year-old Saudi girl divorces 50-year-old husband 17:07 Israel to EU: Criticism of Netanyahu government unacceptable 10:55 Parents in shock as court acquits two mobsters in murder of girl Previous Editions Select Day 29 apr 28 apr 27 apr 26 apr 24 apr 23 apr 22 apr 21 apr 20 apr 19 apr 17 apr 16 apr

Special Offers Advertisement Spring Specials-Dan Hotels Jerusalem from 179$. Tel-Aviv from 223$. Herzliya from 336$ The Meier on Rothschild Tower Masterpiece Residence in the Heart of Tel Aviv Dead Sea Skin Care Quality cosmetics from the Dead Sea. Coupon code HAARETZ for 12% off! Camp Kimama Israel 2009 The best place for your children this summer Eldan Rent a Car Israel's leading car rental company offers you a 20% discount on online reservations Jewish Singles Personal Ads Find the love of your life on JDate.com Junkyard Junk a car - get free towing nationwide and a tax-deductible receipt

Home | TV | Print Edition | Diplomacy | Opinion | Arts & Leisure | Sports | Jewish World | | Israel 2009 election results

Site rules | Makom: Engaging on Israel | Search engine marketing

Haaretz.com, the online edition of Haaretz Newspaper in Israel, offers real-time breaking news, opinions and analysis from Israel and the Middle East. Haaretz.com provides extensive and in-depth coverage of Israel, the Jewish World and the Middle East, including defense, diplomacy, the Arab-Israeli conflict, the peace process, Israeli politics, Jerusalem affairs, international relations, Iran, Iraq, Syria, Lebanon, the Palestinian Authority, the West Bank and the Gaza Strip, the Israeli business world and Jewish life in Israel and the Diaspora.

© Copyright  Haaretz. All rights reserved