 Remembrance
Day
Bill Bonner
The
Daily Reckoning
Nov 15, 2004
The Daily Reckoning
PRESENTS: People can be convinced to do the craziest things:
They will dress up like comic book heroes on Halloween, paint
their bare, beer-bellies for a football game... and even
kill one another. Bill Bonner takes a look at the logic behind
war, and other public spectacles. Read on...
"If any
question why we died,
Tell them, because our fathers lied."
-Rudyard Kipling
Yesterday,
at precisely 11am, on the 11th day of the 11th month - London
took time to catch its breath.
"We remind
you to observe two minutes of silence in honor of Remembrance
Day," came the announcement over the office loudspeaker.
No one said
a word. The phones stopped ringing. Even the tappety-tappety
of keyboards ceased. In the distance, we heard the faint bells
of St. Paul's.
For whom did
the bells toll? It was precisely this hour on this day of this
month in 1918 that bloodiest war in human history came to an
end.
The armistice
had, of course, been agreed upon days in advance. On that day,
soldiers all knew the war was coming to a close. Who would want
to catch the last bullet? A reasonable man would have sat it
out that day; for there was nothing to be gained, and much to
be lost. And yet, Max Hastings, writing in the British press,
reports that the fighting was particularly brutal on the 11th
of November 1918, with more casualties than usual.
But then, war
- like markets, politics and team sports - has a logic of it's
own. It is a public spectacle, not a private one. Masses of people
are stirred up - mobs, groups, and crowds - to do the most remarkable
and preposterous things.
What man, on
his own, would consider walking across open ground while people
tried to kill him? Or asking his rich neighbor down the street
to give him a portion of his income? Or telling the boys down
at the pub that they can no longer smoke cigarettes on the premises?
Privately,
an investor buys a business only after a thorough and reasonable
study of it, after he's figured out how much it is worth to him.
He will pay that much and not a penny more. But the same man,
acting as a member of the great mass of investors, will buy a
company, in the form of a publicly-traded stock, with hardly
a moment's forethought.
Crowds, mobs,
masses, and collections of men do not think; they do not analyze;
instead, they only feel and act, and make public spectacles of
themselves.
And here, dear
reader, we interrupt ourselves with a quick investment tip: You
are far better off making your investment decisions as you make
your other private decisions. Do not read the newspaper. Turn
off the television. Instead, do your own personal research and
figure out how well an investment purchase might fit into your
own personal plans. Buy a stock the way Buffet does - as if it
was your own business and you were buying the whole thing. Study
it beforehand and make sure that it gives you the return that
you expect. Do not pay attention to stockbrokers. Do not put
your money into a mutual fund or hedge fund.
But let us
continue our story. You see, when we open our eyes and look at
today's economic picture... we can't help wanting to go behind
the screen to see where the wires lead. The trade deficit did
not just "happen." It is plugged into the housing boom.
With higher housing prices, Americans could not continue spending...
and the housing boom couldn't happen without Mr. Greenspan's
low interest rates. One wire leads to another. Rates came down
because of the tech blow-up of 00-01... which can be traced to
the EZ credit policies of the '90s... and from there you can
follow the lines all the way back to cutting the dollar's connection
to gold in August of '71... which was done because of Lyndon
Johnson's unfunded wars on poverty and Vietnam... which grew
out of the boom of the '60s... after the lean years of the Great
Depression and World War II.
And here, another
interruption. There is no need to worry about Americans spending
more than they earn, we are told, and they did the same thing
in the early '50s. In fact, in 1950, the typical wage earner
spent $1.05 for every dollar he brought home. But there is a
big difference between 1950 and 2004. What could you buy during
the war years? Even butter had disappeared from the shelves.
Wages rose, but there was nothing to do with the money but save
it. When the war was over, the troops came home, married, begat
families, and began spending money on refrigerators, houses,
cars... and everything else they needed. The money they were
spending was money they had earned and saved up. And it was money
they could put back into savings as their incomes increased.
Today, the
typical householder spends $1.04 for every $1 of income. He lived
it up during the '90s. Now he is living it up even more. He has
no savings, so has to borrow the money. And he has no ready way
to pay it back. Looking back, the spending of the '50s led to
the boom of the '60s. Looking ahead, the overspending of the
'90s and early years of this decade will probably have the opposite
result.
From the '50s...
the trail leads back to the Depression itself... and the stock
market crash of '29 that began it. And what's this? How did the
market get jived up in the first place? We trace the wire and
find it in the hands of Benjamin Strong, Fed chief in 1927. The
English were broke after World War I. Strong wanted to help them
out, by giving a little "coup de whiskey" to the financial
system.
One thing leads
to another. But it all seems to lead back to the Wilson period...
and the biggest public spectacle of all - World War I. In the
period, 1913-18, everything changed. The Fed was created. An
income tax was laid on. A whole generation of European men was
practically wiped out. Nearly every major government in Europe
fell... and every major combatant, except the United States,
went bankrupt.
And so, on
this Remembrance Day, we wonder: What is it we're supposed to
remember? Why had so many young men died?
Blame the fathers
who lied, says Kipling, whose own son was killed in the war.
The first lie
came from Britain. The British had cut the transatlantic cable
from Berlin to New York. After the war began, Americans got their
information from London, information that had been doctored by
British propagandists. Reports told of German atrocities in Belgium.
The Huns were barbarians. The Huns were murderers. The Huns were
rapists, according to the news.
A group of
investigators was dispatched from the United States. They could
not confirm a single charge. It was all lies. The Germans were
no better - and apparently no worse - than other troops. Almost
all the reports of German atrocities against civilians in Belgium
and France were made up.
But soon, the
public came to believe that the Germans were responsible for
the war... and that they were murderers.
Germany found
itself in a tight spot after the assassination of the Archduke
Ferdinand. It faced war on two fronts. Russia was Serbia's ally.
France was Russia's ally. Austria had declared war on Serbia.
Austria was Germany's ally. What could Germany do? Its military
strategists had always warned against a two-front war. The German
Chief of Staff, Helmuth von Moltke, the Rumsfeld of 1914, urged
action. Germany must move quickly to knock out France, he said,
in order to free its armies for the larger enemy - Russia.
The Kaiser
dithered. But von Moltke pushed ahead. And so the war was on.
Regards,
Bill Bonner
Nov 12, 2004
The
Daily Reckoning
Editor's Note:
Bill Bonner is the founder and editor of The Daily Reckoning.
He is also the author, with Addison Wiggin, of the NY Times,
Wall Street Journal and international bestseller: "Financial
Reckoning Day:
Surviving The Soft Depression of The 21st Century" (John
Wiley & Sons).
321gold
Inc Miami USA
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