Market mania fuels the good life in the US

THERE are distinct advantages to being an American abroad. You get to live in London, the most enjoyable capital city in the world. You get to disassociate yourself from the missile strikes against Afghanistan and Sudan if you believe their only lasting effect will be to breed more terrorism. You get to go home on holiday each summer and see what's happening in your native land with a singular combination of intimacy and detachment.

This August I have been back in the Blue Ridge mountains of North Carolina and on the New Jersey shore experiencing what I've been reading about in the papers - the takeover of the country's consciousness by Wall Street, the stock market, and the Dow Jones Industrial Average. People in the trendy districts of the US - especially in New York - have always been obsessed with money.

But this summer everybody in the country everywhere I went seemed to be talking about the stock market. On Wednesday 5 August family, friends, and the petrol pump cashier I met in downtown Lake Lure, North Carolina had only one topic of conversation - the Dow's 300 point plunge the day before.

If a financial bubble is defined as a phenomenon during which financial assets - be they Dutch tulips or US mutual funds - grip a nation's consciousness to the point of distorting and overshadowing all other aspects of life, then the US is without doubt in the midst of one of the bigger financial bubbles of all time.

The strange thing, though, in keeping with our age of irony, is that the 40 per cent of Americans who own shares, and perhaps 25 per cent more who do not but follow Wall Street anyway, are not only in the bubble, they are self-conscious about this condition.

It is, indeed, this self-consciousness that confounds pundits when they speculate on when the bubble will burst. The answer is obvious. The bubble will burst when there is panic selling on Wall Street. The trick is guessing when this will happen. The trouble is the US has become a house of mirrors. How can you figure when the Dow is going to crash when everyone in the country is speculating on when the Dow will crash?

Although it is a cliche to say so, America this August really did seem like Rome. Goods poured in from the four corners of the world. Asian exporters seemed in the grip of a different kind of mania. They were cutting prices frantically simply to get their wares stateside. Picking up one bargain after another - can of tennis balls $2, five blouses, $25, lobster dinner for four, $60 - I checked out the "made-in" labels and read the names of one Asian country after another. At a dinner party I was served lemon biscuits. The tin in which they came showed they had been imported vacuum- packed from Indonesia.

In a 13 August Wall Street Journal article headlined "Americans Embrace Their Beloved Role as World's Spenders", Bernard Wysocki Jr reported that "so much cargo is arriving from Asia that Long Beach, California, the nation's largest port, has set up special storage areas to handle the overflow. In tonnage, the arrivals there from South Korea are up 34 per cent; from Hong Kong, 29 per cent; and from China, 21 per cent. And more ships than ever are sailing back to Asia empty."

Acknowledging this bonanza, most people I talked to said it could not last. The current standard of living in the US, and the social security system, now depend to a significant degree on the stock market remaining up permanently. For all this self-consciousness, however, most of the people I talked to were, to use the American term, "in denial". "Of course, it's not going to last," was the refrain. "But I'll be all right when it stops." Aside from talking about the market, Americans this summer were spending hours discussing their survival strategies for after the market crashed.

The US can be accused of being parochial, even isolationist. But Europeans overstate the ignorance about the rest of the world of America's share- owning class. I got the predictable questions about the Royal family this summer - and about Di, Dodi, and "that guy who owns Harrods". But I also got probing questions about the effect of the Asian financial crisis on Europe.

Americans leave the job of protecting the juicy position enjoyed by the US in the global economy to Washington. That is why Washington craziness - the Bill & Monica show - drags on even though Americans have contempt for it. Someone has to manage the empire: let those who put themselves up for the job do it.

The New World Order proclaimed by former president George Bush during the Gulf War seemed to many Europeans like folly or worse. But eight years on the meaning of the phrase has come clear. Under the New World Order all the world's countries are meant to clone themselves into US-style market economies. Terrorists like Osama bin Laden pose one threat to this order. But a more fundamental threat comes from everything in the international financial system threatening confidence in the US stock market.

Without grasping the full details of the Asian financial crisis, the average American understands its broad implications. The present cornucopia of goods flooding US shop floors at dirt cheap prices is the result of the favourable trade and financial flows. These flows depend on the continuing extension of US-style market economies from region to region. But since last October this process has gone into reverse. The New World Order may be about to crack - not because of bin Laden and his camps, but because of the spread of the Asian financial crisis to Russia and Latin America and the prospect of lower earnings by US companies dependent on these withering markets.

Americans don't know what to do about this. Most are simply crossing their fingers. City investors looking to time the puncturing of the bubble that I see distorting the US economy are playing a dangerous, if not impossible, game. Forces of history are at work which no one has yet described, let alone analysed. But in the parts of the US I saw this summer there was a palpable sense of steam pressures rising - gaskets about to blow.

Washington has by no means given up on policymaking to stave off a market crash. Clinton himself may be a shadow of his former self because of Monica. But there is Greenspan. There is also the US treasury duo of secretary Robert Rubin and deputy secretary Lawrence Summers - working in tandem with the IMF duo of managing director Michel Camdessus and first deputy managing director Stanley Fischer. These men are all highly competent and resourceful. They may yet find a way to let the air out of the bubble gently.

Still, as I returned to work in London last week - aside from the incessant, low-level jungle warfare that is Fleet Street life - I felt like a boat returning to safe harbour before a storm.