So, okay, my wife and I were watching a Netflix movie last night. It was that Jack Ryan: Shadow Recruit thing. Very entertaining, with Captain Kirk (the young one, Chris Pine) pretending to be an economist/CIA agent, Kevin Costner as his handler, Kenneth Branagh as a super-scary Russki bad guy, and Keira Knightley given absolutely nothing whatever do to except get rescued.
But here’s the bad guy’s plot. He runs a Russian multi-national corporation, but one with a lot of assets that don’t turn up on their financial reports. Which super-sleuth Jack Ryan (working for the American branch of the same multi-national as, I think, a shadow accountant/spy) digs deeply enough to find, the rest of the company’s accounting staff consisting, apparently, of trained chimpanzees. It’s seriously amazing; he’s supposed to be doing this astonishing feat of accounting legerdemain, but from what we can see, it seems to consist mostly of Googling ‘my company’s hidden assets’ and waiting ten seconds.
Anyway, Jack sleuths around, and mopes over his laptop a lot, and blows off dates with Keira Knightley, and figures it out. The Russians are buying American dollars. A lot of dollars; like, 2 trillion dollars worth. (Which are overvalued! A company is buying overvalued assets! What do they know!) And then they’re going to sell ’em all the same day, and destroy the American economy. On the same day that a bomb goes off on Wall Street! And it’ll totally work! A second Great Depression!
I am not an economist, or a financial expert, or a stockbroker, or the CEO of a big corporation. I’m a playwright who doesn’t know how to balance a checkbook. But I have studied economics some (onnacounta this play dealy I wrote). Lots of companies buy T-bills. Buy and sell. So, first of all, if you set off a bomb on Wall Street, they’d suspend trading and all those sell orders wouldn’t mean doodly squat. But if you did suddenly sell dollars, what would happen? Uh, not much, and nothing bad.
I texted my son (who is an economist) and described this nefarious plot. He thought it was silly too, “because the ensuing low interest rates would just wreak havoc.” (Cue heavy sarcasm music). And that’s about it. Interest rates would go down. Might spur investment. Otherwise, yawn.
Now a truck bomb in downtown Manhattan would be bad. And Our Hero thwarts that one too, with a big fight scene against the son of Branagh’s bad guy character, who is (of course) also in on it. So yay for us!
But this is such a fantasy, oft-heard by conservatives. “See, what happens if the Chinese decide to call in all that debt we owe them! It would destroy our economy!” But no, that’s not how it works. If China suddenly decided to sell off all their treasuries, the price would go down, and they’d lose a ton of money. It would have no effect on the US economy. Likewise, Russia. Or anyone else. No one’s going to call in their debt, and if they did, it wouldn’t be a big deal. It would lower interest rates some.
The movie makes passing mention of the reason this dastardly Russian plot would work; because the US national debt is so high. And it’s true, our national debt is high. And that might cause a problem sometime down the road. But it’s not hurting anything now. If the national debt were damaging to the economy today, we’d see it in a rise of inflation. And that’s not happening. And it would be good, right now, if we did see some mild inflation. So that’s another chimera.
The 2 trillion dollars the Russians are planning, in the movie, to dump onto monetary markets is an interesting figure. For one thing, if you want to destroy the American economy, it’s way way way too small. It’s like a mouse saying ‘I know how to kill that elephant; feed it one more peanut.’ One multi-national corporation is not capable of destroying the American economy by selling off T-bills. (It takes a whole bunch of corporations trading in worthless mortage-based CDOs!) But it’s also more or less the same amount of cash that the biggest American corporations are sitting on right now, mostly stashing off-seas. They’re not investing it, they’re not opening factories, they’re not hiring people; they’re just sitting on it. Why? Demand is low. It’s one of the ways bad economies self-perpetuate; people are worried about their jobs, so don’t purchase, so demand remains low, so companies don’t produce goods, and jobs aren’t created. The way to break the cycle is with a stimulus–hire people, put them to work, get them consuming. So what are the chances that a jobs bill, or any kind of stimulus bills, make it through the House of Representatives as currently constituted?
This is all just macro-economics 101. I don’t blame Kenneth Branagh (who also did a nice job directing the film, which I quite liked), for not knowing how silly the plot was. I blame Tom Clancy, who wrote the novel it’s based on. The sky is not falling, the Russians (or the Chinese, or Somali pirate cartels) are not capable of destroying the American economy with one big trade on them there fancy schmancy computer-type internet deals.
It’s a harmless enough movie. Chris Pine is great in it, and so is Kevin Costner. Plus there’s a brief Nonso Anozie sighting (a very large but really good British actor who I’ve liked in everything I’ve seen him in). As my wife pointed out, we don’t want action movies to feature actually workable, plausible terrorist plots. We want silly ones. And she’s completely right. But there’s silly and then there’s silly. It really only works for people who don’t know anything about economics, which means, of course, most people. Don’t be troubled, though. It really, genuinely is just a movie.