God*Mmit, I'm an American

There has been a long-standing sense of disdain for Americans traveling abroad – and Bill Bonner explains both sides of this story…

It is early spring in the southern hemisphere. A fresh warm breeze blows across the Rio Plata. Trees along Buenos Aires’ broad boulevards are budding out. Cherry trees are in bloom. Here and there, groups of American tourists peer in shop windows. Birds sing. Lovers stroll arm in arm. It looks as though it might be the beginning of something.

Americans abroad have a mixed reputation. They are loud. They dress badly. And they have a superior attitude that foreigners take for arrogance. But they tip better than Europeans.

In our trip through Argentina, we were no different, no better. None of us had bothered to learn Spanish properly. We spoke it badly, if at all. We expected the locals to speak English…and often commented on how bad the hotel clerks’ command of our mother tongue was, hardly noticing that it was still far better than our knowledge of Spanish.

We Americans are not mean spirited or pompous about it; still, unconsciously, we expect a little deference…a little obsequiousness…a little bowing and scraping in our direction. After all, we are the imperial race. We are the alpha nation. We have the most popular culture. We have the most powerful military. We have the money.

Argentina and Tourism: Why Americans Hate the French

"Why do so many Americans hate the French?" asked a member of our party. The answer is obvious: the French refuse to bend. The unmitigated Gauls actually turn up their noses at American tourists and make them feel like bumpkins. The French don’t dispute that our army could whip their derrieres, if it came to it. They concede, too, that the average white American probably has more money in his pocket than the average Frenchman. But neither of those things counts, say the French; what matters is culture and French culture is superior.

"God*mmit…I’m an American," says the ugly tourist. He is convinced that the frogs, the Huns, and the A-rabs are all incompetent and uncivilized. He is the heir of his English cousins, who used to say: "The wogs start at Calais." He demands better service than they give each other. He can’t understand why they can’t seem to do things the way they do back in the states…can’t pick up the trash…and can’t be trusted. Why do they drive old cars? Why don’t they have more ATM machines? How come they are always taking passport numbers and demanding papers; don’t they know that freedom is the way to go?

He is convinced; too, that the whole world yearns to be just like him, and that it is just a matter of time before they succeed. This conceit is so deeply felt he is not even aware of it. Besides, he sees more evidence of it every time he takes a trip abroad. He leaves the airport in London and sees McDonald’s along the way. He reads the classified in Paris and sees apartments advertising their "American style" kitchens. He picks up a menu in Buenos Aires and finds he can order an American breakfast. He goes to the Far East and finds familiar brands everywhere he looks (he may not even realize that they are made there…not in America).

He judges the quality of everything he sees by how American it is. Is the toilet paper soft…just like it is at home? Do the shops take credit cards, just like they do in Flagstaff? Are the roads paved as well as they are in Michigan?

If not, they soon will be, he tells himself; for he is convinced that the whole world is going his way. At least, that is what we thought on this trip to Argentina. The country is big, beautiful and cheap. Surely, Americans will want to live here. The Atlantic coast of Argentina is just like the Carolinas…but empty. The far northeast is like Utah or Montana…but at a third the price. And down in San Martin, isn’t it just like Aspen…as it was in 1965?

But won’t Americans find Argentina too, well, foreign? Not at all, down on the pampas they are becoming just like us back on the Great Plains. Soon, we will be able to live as comfortably in Patagonia as in Pennsylvania.

Argentina and Tourism: The Peak of the Imperial Cycle

At the peak of an imperial cycle, the imperialists always seem to delude themselves. Looking at the world, they see neither a glass half empty nor one half full, but one spilling over. The Romans spread out all over their empire, building villas in France, in England, and out on the banks of the Black Sea. The Moorish empire reached its peak in the eighth century. Then, too, they were making plans for new mosques in Poitiers, just before they were chased from the country. And all over Africa, you see the ruined houses of the European imperialists who colonized the country. "I used to have a farm in Africa," they still tell people.

The trouble with being on the top of the world is that the world turns, and there is nowhere to go but down. In national economies and markets, as in the movement of the planets, there are small cycles and big cycles. The world turns, and also revolves around the sun. Day follows night; winter follows summer. National pride is self-correcting.

Argentina recently had a dark night of crisis…one of many in a long season of bad weather. The 1930s brought Peronism – a popular brand of socialism – to the country. The nation’s politicians shot the country in the foot, and then in the leg. By the 1980s, they had the gun to their heads – with inflation running at 1,000 percent, per year and war with the English. One problem lead to another and in the 1990s, intending to stop inflation, the Argentine currency was pegged to the dollar, but at too high a rate. The economy collapsed again; much of the middle class was ruined.

But in 2002, the sun peeked over the horizon and began what might be not only a new day, but a new season. Since the second quarter of 2002, the country has seen 12 consecutive quarters of growth, with GDP shooting up at twice the rate of America’s "recovery." We put the word in quotes to signal that we think there is something fishy about it. America’s dawning prosperity came without pain or sacrifice. Americans never stopped borrowing and spending in the recession of ’01-’02; they merely borrowed and spent even more coming out of it. See, they said to the world, our economy can’t be beat. Because, god*mmit, we’re Americans. But the recovery was phony. There was never much of a correction to recover from. So, when the time for an upturn came, all consumers could do was to borrow more money and go further into debt. They had never stopped spending, so they had no money saved.

South of the Rio Plata, on the other hand, the recovery seems to be real. Here is an economy that seems to be getting back on its feet, after a long spell on the sickbed. The recovery is driven not by debt, but by real savings…and not by consumption, but business investment, which rose recently at rates as high as 11.2% per quarter. Consumers couldn’t lead a recovery in Argentina even if they wanted to. Who would be foolish enough to lend them money? Credit card debt is extremely limited. And if you want to buy property down here, we were told, "you have to pay cash." Or, if you have good credit, you may get a bank willing to finance half of the price.

Not surprisingly, real estate is not very expensive. Apartments on Buenos Aires’ most fashionable streets sell for about a quarter of what they would fetch in Paris, London or New York. Out in the boondocks, prices fall even further. How much would you expect to pay for a vineyard/winery in the Napa Valley? Out in Salta Province, one is available at a price that must bring tears to the eyes of a California vintner: 1,000 acres of mature vines for only $1.5 million. And there, he would pay only $10 a day for a good worker, and only $2.50 for a steak dinner.

North of the Rio Grande a homebuyer needs only a pulse. He will pay $25 for dinner, and at least $50 a day for labor. His $1.5 million will barely buy a trailer.

In both Argentina and in the United States, there is a light on the horizon. But on the pampas is the light of dawn. In America, alas, it is probably evening stretched out across the sky…like an emperor’s corpse on a viewing table.

Bill Bonner
The Daily Reckoning

September 30, 2005 — San Rafael, Argentina

Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of The Wall Street Journal best seller Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (John Wiley & Sons).

We looked out our hotel window this morning and saw the Andes sparkling, white, gleaming. They are still covered with snow. It is early spring here; everywhere you look, fruit trees are in bloom. Other trees are covered with buds and pullulating green shoots.

‘This is a nice place,’ we said to ourselves. ‘We could live here happily, though not grandly.’

A few hours later, we discovered that we would see more of San Rafael than we had planned. The Argentine airlines are on strike. No flights out of the city or into it are flying. There are no airplanes on the runway. All that exists are angry, desperate passengers trying to get somewhere.

We are neither angry, nor desperate. What could be a terrible inconvenience has been greeted as an adventure. We have decided to split into teams:

"Whoever gets to Salta first, wins," says a fellow traveler.

It is 12 hours by car. Fifteen days by horse. Thirty days at least, on foot.

"Hey…the guy at Hertz says he can get three cars…or maybe he can get three cars…maybe not," says our tour leader.

San Rafael is a pretty little town built in the center of a large oasis. The sun shines every day.

"It is a Mediterranean climate, without the Mediterranean," explains an Englishman who has lived here for the last 30 years. "It is warm and dry. In the winter there is often a little dusting of snow, but then it warms up during the day. In the summer, it can get quite hot, but even then, you often need a sweater in the evening. It’s very dry."

Water runs through sluices, channels, and irrigation ditches; it is what gives the place life. And what a life it has! Trees line the main irrigation channels, usually Lombardy poplars, giving a Cartesian order to the place. Between the lines of trees are fields of grapevines or fruit trees, often covered with protective netting to guard against hail damage. The plum trees are all in bloom. Whole fields are white…some are pink.

The land is very flat, which is why the irrigation works so well. Water flows wherever it is directed. The levelness of the place works against it from a tourist point of view. The beauty is subtle, and not helped by the typical trashiness of Latin American cities. Things are never quite in good order – never quite finished or quite repaired. Junk is everywhere.

The place brings back memories. We have never been here before, but it reminds us of Albuquerque in the early ’60s: Same architecture, same vegetation (the Rio Grande Valley is dry). It was full of fruit trees, now it is full of houses. There is the same language, the same junk, the same people…even the same cars. Here in San Rafael, people still drive Ford Falcons and Chevy trucks from the ’60s and ’70s.

"There is no crime here," continued our English friend. "It is really a very nice place to live. Especially, if you are retired. The pace of life is very slow. And everything is very cheap."

If you want to ruin yourself with debt, dear reader, this is not the place to come. You can buy a nice house for $100,000 -to $200,000 – one with several acres of fruit trees or vines. You can have your own vineyard and dry your own prunes. You can live passably well.

But of course, that is the case in many places.

"That’s what Americans ought to drive," said another man on the tour, pointing to a 30-year-old Peugeot rattling down the street. "They’d get where they were going, but wouldn’t owe money. That car was paid off a quarter of a century ago, and it’s still going."

"The whole thing is a fraud," said another friend, taking the words out of our mouth. "People think they have to drive fancy new cars, and they buy those big houses, but they are not a bit happier than people down here."

A cousin of ours is on the trip with us:

"You should see what is happening at home. It’s unbelievable. People from Washington are buying the huge houses all over the place. They are often two-income families with no children. They probably make good money working for the government – maybe $70,000 each. But then they pay $800,000 for a big monster of a house. That was just last year. This year it’s worth a million. They’ve done great. But they buy the places with no money down and interest-only mortgages, and still run out all their credit cards. So, they might not have any real equity. And, even with interest only, the payments are still a big percentage of their incomes.

"But what bothers me about these places is that the houses are so cheaply made. They are trash, really…very expensive trash…"

At least, here in San Rafael the trash is cheaper.

More news from our friends at The Rude Awakening…


Eric Fry, reporting from New York:

"We return today with our second and final installment of E-Day! – A spontaneous three-way debate over the state of the world after peak oil."


Bill Bonner, back in Argentina with more thoughts…

*** Argentine beef is probably the best in the world, but you pay only about $3 for a prime rib. And wine? It costs about $2 or $3 a bottle and is very good. We went to a local winery yesterday to try the stuff. Malbec, merlot, and cabernet – all the varieties were as good as the Californian wines; though not as complex or subtle as Bordeaux.

*** "I don’t know what really matters anymore," said an old friend, in a philosophical mood. "The older and richer I get, the less any of it really means to me. I guess as you get older fewer and fewer things matter. And then you die."

"At least you have something to look forward to," we offered in comfort.

The Daily Reckoning