On Topic: Why what happens over there is important over here

Michael Chevy Castranova
Published: April 7 2013 | 6:30 am - Updated: 28 March 2014 | 1:42 pm in
Print Print

Warren Buffett, the business oracle of the 20th century and, so far, of the 21st, more than once has professed a love of newspapers.

And, as his company, Berkshire Hathaway, continues to pocket a clutch of publications here and there around the country, he has remarked that newspapers should stick to what they — theoretically at least — do best: local news.

“If you want to know what’s going on in your town, whether the news is about the mayor or taxes or high school football, there is no substitute for a local newspaper that is doing its job,” the one-time newspaper-delivery boy said.

He’s right, of course. No other medium can do as good a job at taking the time to ferret out the details as to what’s going on, then distill that research into a comprehensive package for you to consider.

Business news, too, is all about learning what’s what, and how that news and information will help or hurt your profession or your company.

So why the heck do we bother filling up prime real estate on the pages of The Gazette with distant shrieks and gnashing of teeth from the likes of tiny Cyprus? Or, for that matter, any of the ongoing Grimms’ financial horror tales that come out of Europe?

The key reason is what happens over there indeed will reach our shores here, sooner or later, in some manner small or large.

To recap: Little more than a week ago the European Union and the International Monetary Fund agreed to bail out the cash-starved island nation with $13 billion, rather than booting it out of the EU. In exchange, Cyprus, an offshore financing hub, will close its second-biggest bank, decimating its uninsured depositors and bondholders, and will restructure its No. 1 bank.

So much for the concept of a unified, strength-in-numbers EU currency. Oodles of cash — some $5.38 billion of those uninsured depositors’ savings — as well as trust will be lost, never to return.

To spread the unease to other challenged EU member countries, Jeroen Dijsselbloem, head of the eurozone finance chiefs, suggested that this scheme could be “a template” for resolving bank quagmires elsewhere.

So, back to America: Kevin G. Hall, writing for McClatchy Newspapers, suggested that, “The levy on bank deposits will make treasurers of global American companies think twice about where they bank their foreign earnings and in what currency.”

Closer to wallets at home, Hall pointed out continuing European jitters have hurt U.S. carmakers — “Chevrolet, Ford and General Motors saw respective European monthly sales declines in February of 38 percent, 20.8 percent and 20.1 percent … .”

Here’s another home-front angle, this one from Melvin Rhodes, whom I’ve met a few times and who’s been out in the world, having worked in Rhodesia as a government district officer, among other locales.

In a recent blog post, he posited that something akin to the Cyprus precedent could be visited upon his own financially imperiled state. Michigan’s cities, he noted, are confronted with $12.7 billion in unfunded liabilities, mostly for health care and pension commitments.

Is it unthinkable, he wondered, that its citizens ultimately might be forced to share the pain of that state’s fiscal rehab?

I’ve no idea how Michigan will manage to fix its crushing problems, or what other painful, Draconian contrivances Europe might conjure up. Here in Eastern Iowa, we debate the value of business tax incentives and who should pay for them, how we’ll administer health insurance, and whether downtowns are worth our investments.

But to understand local issues, sometimes we need also to keep an ear open for what’s going in those distant time zones — if only to ensure it doesn’t happen here.

Have you found an error or omission in our reporting? Is there other feedback and/or ideas you want to share with us? Tell us here.