A Solution to the Financial Crisis

It is terribly unsatisfying to watch all the purported experts fumbling with problems that are way too large for their skillsets, which mostly consist of knowing how to talk to each other and the public in a commonly accepted vocabulary of existing economic doctrine, without any sign of creativity or genuine insight into history and society.

So here is my "outside of the box" proposal to give the U.S. a new start. It's a simple concept, really, although there would be myriad details to resolve. In short, we enter into one huge deal with the Chinese -- they acquire sovereignty over the entire state of California, in exchange for forgiving all U.S. government and agency debt (with accrued interest) currently held by them. They would of course assume responsibility for California's existing legal and financial obligations as well.

There will be many objections, of course, and time and space will not allow for a proper anticipation and rebuttal, but the main point is that America is flailing around in a very deep soup, and absent drastic action, things will only get worse.

Let me turn to some of the advantages.

The obvious goal is to sufficiently restore Uncle Sam's creditworthiness to put us in a position to supply sufficient capital to save the banking and auto industries. But there will be many ancillary advantages. For example, the troubled Las Vegas economy will receive an enormous boost by virtue of proximity. The Chinese love to gamble.

Residential real estate all over the country, especially in coastal areas, like Florida and even poor New Orleans, will see tremendous rush of buying activity by those Californias who don't wish to live under a nominally-Communist dictatorship. Not that I have any real pity for Californians -- there is no one to blame but themselves for their terrible fiscal mess. And they tend to be annoying. Tough times call for tough solutions. Plus, it would be a challenge worthy of Arnold and his electorate, to be a democratising influence on their new trans-Pacific affiliates.

Given the attractiveness of the prize, at least from the point of the Chinese, who presumably don't know just how crazy people in California actually are, I think we could extract some other important concessions and advantages. I think they would agree to at least the following things, which would enhance America's long-term strategic position:

1. Hands off Taiwan
2. Human rights in Tibet.
3. Cease supporting hostile regimes such as North Korea and Iran.
4. If we push hard enough -- a mutual defense treaty for the U.S., Japan and China, in the event of Russian aggression.

I am probably leaving out a few things we could ask for, but the state department has no shortage of policy wonks to think this thing through.

There would be plenty of business points to iron out. We could retain Goldman Sachs and Morgan Stanley to advise the government, with the fees to be reimbursed by the buyer. This alone would be a boost for the ailing New York economy.

There will be some serious diplomatic challenges of course. The Europeans may feel left out. Mexico may wish to assert that California was stolen from them in the first place. For these reasons, it is essential that it be done quickly, while President Obama is still basking in worldwide goodwill. And since it is clear that U.S. engine is what pulls the entire worldwide economic train, all should rejoice in seeing us resolve our economic woes.

Who knows what new creative forces would be unleashed by the cross-fertilization of culture, finance, industry and form of goverment? What wonders of modern cuisine, art and literature might be emerge from this experiment in modern civilization?

It is indeed time to pause and reflect on the miracle of modernity. It seems like only yesterday when the prevailing image in this country was of little yellow men in wide straw hats breaking rocks to build the railroads. The "yellow peril" indeed!!!!!Well, no tickee no washee is still the rule of the day and we owe them trillions of dollars. We bought stuff we didn't need with money we didn't have. Maybe someone in California is clever enough to think of another way to pay China back, but this is my best shot at it.

mg (New York -- 02/20/2009)