The Day After the Drachma Crashes

You remember that part of Annie Hall where Woody Allen is standing in the movie line, and some blowhard professor starts delivering a pompous lecture about Marshall McLuhan? Woody Allen starts arguing withe the fellow and as the discussion of what McLuhan really meant gets heated, Allen turns, and says, "I happen to have Marshall McLuhan right here..."

As McLuhan tells the egghead, "you understand nothing of my work," Allen turns to the camera and asks his audience, "Dontcha wish life was really like that?"

I had one of those moments last week when a couple friends of mine started speculating (in discussion) about the collapse of the Greek debt rating, and with it, the country's banks, its economy, its participation in the E.U. economic zone, and, oh, well, you know -- its future.

One friend averred, in so many words, "Today Greece, tomorrow the U.S." Heck, we've certainly got the debt levels; we've got the moribund socialist-fascist bureaucracy -- what Tocqueville called the "velvet tyranny" of the "nanny state."

We've even got the mentality of a country that has done its hard work and built its empire, and now expects to exact economic rents from the rest of the world rather than having to work to produce competitive products and new services and inventions.  "Lookit, we gave you guys the internet and Man-Bear-Pig; what, you expect us to keep on working 40 hours a week?"

Nah, my other friend said with equal confidence -- the U.S. is the world's reserve currency. What happens in Athens stays in Athens. America has the privilege of writing checks that other countries don't cash -- they just carry them around like actual currency, and swap them like money, so that we never even have to balance our account. Like it or not, Pal 2.0 concluded, the U.S. can't have a Greek-style crash when we print the world's money.

Well, I said, "I happen to have Damon Vickers right here" -- a familiar figure to these two as the author of The Day After the Dollar Crashes, a Times Business bestseller that includes a 14-day timeline of what currency Armageddon looks like. (I didn't actually have Vickers there, just the book, but I got an appreciative laugh anyway.) "And Vickers says..." (pause for effect...)

"He'd say you're both right -- or you're both wrong." 

Friend 2 is right that under the current reserve currency system, the dollar, and probably U.S. Treasuries, can't collapse. We owe the bank so much money that it no longer owns us, we own it.

Friend 1 is right that this could change -- and that when systems and infrastructures collapse, it's often the result of an unforeseeable cause.

Will the Greek tragedy soon become the American comeuppance? Who knows?

You'd probably be a fool to buy a lot of June puts on the theory that it will happen that predictably. The whole point of Vickers's book, with its 14-day timeline, was, this is one way it could happen... but there are 100 others.

But you'd also be a fool to think that what's true of the dollar today will be true of the dollar forever -- any more than it was for the British Pound Sterling, the reserve currency supplanted by the American dollar, or the other world currencies that preceded the pound.

Sometimes an airplaine hits a building and nobody dies -- but sometimes, it's a sub-code government-run structure in New York, and the twin towers collapse. Sometimes an obscure prince or dutchess gets shot and it barely makes Paris Hilton's twitter page -- but sometimes, it's Archduke Ferdinand.ckck, there are all sorts of treaty obligations and mobilization schedules to meet, and you get World War Ihttp://damonvickers.com/sites/damonvickers.com/themes/vickers/images/home-bond.jpg

Of course, you're probably better off reading the actual book. Reserve currency arbitrageurs? They're all Greek to me.

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