In a New York state of mind | David McWilliams

This week, the column comes from New York, where I have been working at the Irish Arts Centre in Hell?s Kitchen. While not anywhere near the billboard-size presence of The Gathering, this small theatre has been hosting Irish performers of all sorts ? actors, playwrights, stand-ups and musicians ? for years. It has been central to keeping the Irish cultural torch burning in a rapidly-changing city.

Next year, the theatre will undertake a major expansion, giving Irish culture a new, suitably impressive home to reflect the cultural impact the Irish have had on the city. From this base, Irish culture can be nourished all year around, rather than just on the annual St Patrick?s Day shenanigans.

When the theatre was formed in the early 1970s, Hell?s Kitchen was still run by the notorious ?Westies?, the last of the Irish Mob gangs, under the leadership of Mickey Spillane. Of course, today Hell?s Kitchen has moved with the city. It is trendy, expensive and displays that great indicator of social gentrification ? flamboyant gay men walking makey-uppey looking dogs in waistcoats.

It is this constant reinvention ? and more accurately, the belief in the right to reinvent ? that gives New York its special energy. Failure is a good thing; indeed, it is expected. One of my favourite New York expressions is ?if you haven?t failed, you aren?t trying hard enough.? This sums up the attitude here. My friends here ? all late 1980s emigrants from Ireland ? have had more careers than Alex Ferguson has had rows with referees. Some initiatives work, some don?t, but they are still here, having a go.

We don?t need to be reminded about how far this mindset is from the prevailing one in Ireland, where failure is seen as toxic and contagious. The person who fails is shunned and avoided, just in case you might catch the failure germ off him. Success is celebrated, and rightly; but for every success, there will be a failure and the failure should be the learning curve for the next success and so on.

This belief in the recurring cycle of what Keynes described as the ?animal spirits? drives US economic policy. Chairman of the Federal Reserve Ben Bernanke and co are trying as hard as they can to make it possible for animal spirits to take hold. The policy is working ? but only slowly. Like so much in this country, views on the economy line up with the ongoing culture war between left and right, Republican and Democrat, liberal and conservative, which is now playing itself out in the economic field.

On the Fox News-championed right, we have the view that Bernanke is destroying the US and hyper-inflation is just around the corner. On the left, championed by the New York Times, there is no inflation threat and the government has to keep spending and printing money.

Each side clutches the latest piece of evidence from the economy to prove that its position is right.
Last week, Times Square lit up with the news that the Dow Jones had hit an all-time high. Squashed between ads for the latest Broadway sensations or Hollywood blockbusters, the ticker tape of the Dow aims to reassure Americans that the future is bright.

Yet the sceptics worry that this is yet another credit-fuelled bubble which will burst.

The nearly 2,000-point rise in the Dow since last June at least partly reflects asset inflation stemming from all the money the Fed is printing looking for a home. There have been very real developments to justify it. The economy is fragile ? and, while unemployment numbers perked up a bit last month, this downturn is grinding on longer than anyone had anticipated.

A recent article in the Wall Street Journal, firmly in the Fox News camp, observed that farm prices in the Mid West were rising at a 13 per cent annual rate. How, it asked, could drought-stricken farms be gaining value so rapidly, other than through inflation generated by cheap credit? House prices also are climbing again in many areas.

As we know to our cost, asset prices, driven by cheap credit, tend to make you feel richer than you are. This wealth illusion affects everyone from the individual to the state. People borrow against their perceived new wealth and we get into trouble again.

To help this process along, the Fed has been buying up assets and paying for them with money ? the so-called quantitative easing.

Many feel that the US is now at a tipping point, where the easy money of the past few years comes back to haunt the economy.

On the bearish side, people argue that even the Fed?s own economists warned that the Fed itself could lose as much as $100 billion on this vast portfolio when bond prices finally fall from their artificially elevated levels. Meanwhile, higher interest rates will cause the cost of financing government debt to skyrocket.
On the bullish side, the left argues that there is a liquidity trap and, until the private sector is properly healed and has fixed its balance sheet ? which can only come about through higher house and share prices ? the economy will continue to be fragile. So their answer is ? keep printing and spending now ? let the economy turn and then worry about the future.

All the while, the animal spirits are stoked by the prospect that everyone has a chance ? and a second and a third chance too. They look to the wisdom of the likes of Warren Buffett who, last week, delivered his annual missive on how to invest successfully. The Sage of Omaha, known for his deft and successful investing over the years, advised people to buy newspaper stocks and old media, which in his mind are assets that are badly undervalued.

As I headed up 10th Avenue last Friday, having just heard about the examinership of this paper, I expect Buffett?s wisdom regarding newspapers is not misplaced this time too. After all, if we don?t fail at least once, it?s because we aren?t trying hard enough ? right?

Thank you for all your support of this newspaper. Let us hope that we emerge from examinership in good shape, still tackling the issues, offering opinion ? and doing it to the best of our ability.

Source: http://www.davidmcwilliams.ie/2013/03/11/in-a-new-york-state-of-mind

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