Friday, August 14, 2009

Progress Marches Backward

Whiskey & Gunpowder
Gary’s Note: We’re about due for the next worldwide nervous breakdown that results in pointless slaughter. Progress is a funny thing — as Bill Bonner and Addison Wiggin explain below in this excerpt from Financial Reckoning Day Fallout — and it regularly marches backward with the attendant descent into misery and chaos. It’s good to know it’s coming and to get ready for it. Enjoy.

Whiskey & Gunpowder
By Bill Bonner and Addison Wiggin

August 14, 2009
Baltimore, Maryland, U.S.A.

Progress Marches Backward

In science and technology, knowledge builds up as people make new mistakes: Technology may, like digits in an actuarial table, improve and compound, accumulating gradually over time. But in love, finance, and the rest of life, people make the same old mistakes, over and over again. As soon as the memory of some ancient folly grows moss–covered and forgotten, people trip over it anew. Likewise, man’s use of technology — for profits, for war, or even to make improvements in his standard of living — follows the deep cycles of the human heart, rising like the confidence of a dipsomaniac after his first drink and falling into fear and uncertainty when he finally sobers up.


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“Progress” is no sure thing. Beyond the cycles of greed and fear, confidence and desperation, are other episodes that surpass human desires and capacity. Following the collapse of the Roman Empire in AD 476, people in Europe did not wish to become poorer. They underwent no genetic change that made them less intelligent or less suited to material comfort or less adept at technological progress. Yet, technological innovation and material progress went into a slump for nearly 1,000 years. According to historians, the order that had allowed trade and prosperity gave way to disorder and poverty. Who wanted such a change? Why would people permit it? Seeing their standard of living threatened, why did they not do something to counteract it? Surely government officials could simply have come up with new policies that would set things right again?

Likewise, in 1914, although lessons had supposedly been learned from the wars of the nineteenth century, the world once again found itself on a road to disaster, with the outbreak of World War I. From a military point of view, the war had effectively been “won” by France at the first Battle of the Marne in September 1914. France had defeated the German army and forced it back to a line situated not too far from where it had begun. Like many of the other battles fought, the battle of the Marne, with an estimated 512,733 killed, only served to underline the futility of a war. Little was gained at the cost of enormous human sacrifices.

Yet, what came to be known as “The Great War” continued for another four years. By 1916, it had become such a folly of senseless slaughter that the French were on the edge of mutiny. Troops on both sides, seeing no point to the continued bloodshed, often agreed on informal cease — fires. Senior officers repeatedly had to intervene to make sure their soldiers continued to kill each other. Hopelessly bogged down in trench warfare where neither side had a decisive advantage or even a reasonable war aim, sensible men might have decided that enough was enough. Even now, few people can come up with a good explanation for why the nations involved went to war, what they hoped to gain from it, and why they did not stop fighting after it became clear that the war was a losing proposition. It was the costliest war in human history, with an additional 31 million men dead, missing, or wounded.

Moreover, it was no real war in a conventional sense, as neither side had anything to gain, and indeed did not gain anything.

Prior to the French Revolution and industrialization, wars were much more limited. Armies would take the field for short periods of time — usually in the summer, when roads were passable and before the harvests. They would do their mischief and then go home. There were few popular wars. Instead, conflicts were between groups of people whose lands and lives were immediately threatene — by an invasion of barbarians from the East, for example. More often, they were localized rivalries — one monarch against another, duking it out with a relatively small number of paid mercenaries. In 1066, William the Conqueror (formerly known as William the Bastard) took all of England with a force of only about 5,000 men.

In the twentieth century, by contrast, wars involved huge numbers of combatants. Even noncombatants were called on to play support roles. In World War II, American women were called out of the home to work in aircraft plants and take up jobs formerly done by men. Whole populations were mobilized and enlisted in the war efforts, which were far more costly in lives and money than any wars in history, despite the fact that these wars often seemed to serve no other domestic purpose than to lead the way to ruin.

Why did such wars occur in the last century and not before? We have two answers. The first is the standard one: Never before was savagery on such a scale possible. It took industrial economies, abetted by ever-innovative technology, to produce industrial — scale wars. The second: Never before was it possible for so many people to share so many bad ideas all at once. Thanks to progress in communications, men and women were drawn to group thinking like moths to a flame. Soon, they were talking all sorts of nonsense and making their own lives miserable with wars and upheavals that contributed nothing to their well-being, other than being a distraction from their personal problems.

The Internet was not such a revolution as the New Era dreamers had come to believe. The price of communications had been dropping for the past 200 years — from the telegraph, to telephone and radio, to television, to CB radio. These, coupled with cheap newsprint, increased the availability of information to nearly everyone, but they also made much bigger mobs possible, and bigger bubbles, too. Instead of reducing violence in international politics, cheaper communications increased it. At the beginning of the century, railroads, telegraph, and popular newspapers made possible the biggest, most costly war in all human history — with far more people involved than ever before. By the century’s end, the Internet and television made possible the biggest bubble ever — with much greater public participation than at any time in history.


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Millennial Optimists

At the end of the nineteenth century, it had also seemed — as it did at the end of the 20th — that progress was inevitable. People expected progress in every aspect of life. The world’ s economies were booming. The industrial revolution was in full throttle and spreading its smoky aroma throughout the world. A person could already hop on a train in Paris and ride in luxury all the way to Moscow. A man in London could order his spiced tea from the Orient and his carpets from Istanbul. Was there any reason to believe that this bounty — products of new technology, free markets, and enlightened political stewardship — would not continue?

By the end of the nineteenth century, the overt use of torture had disappeared in the Western world and slavery had been completely abolished in civilized countries. It seemed — at the height of the Belle É poque — that manners, art, and personal security were improving. Moreover, as Europe had enjoyed nearly three decades without a major war, there was a widespread belief that war was a thing of the past, not of the future.

Yet, only a few years later, the world began walking backward, and the most costly and barbarous wars in history began. Between 1914 and 1919, France lost 20 percent of her young men of military age — and the century had scarcely begun! With hardly a pause for breath, from 1914 to 1945, people shot, tortured, murdered, blew up, poisoned, and starved each other on a scale the world had never seen.

The twentieth century turned out to be a period of what Brzezinski called “megadeath,” with an estimated 187 million victims. By 1945, all of the world’s major economies — save one, that of the United States — were in ruins. Japan, the Soviet Union, and Germany were little more than heaps of ash and twisted metal. France and Britain were mostly intact, but geared up for war, not for peacetime production. Worse, both were in the hands of socialists and syndicalists, which so inhibited their recovery that they were soon overtaken by their former enemies — Germany and Japan. Progress is never guaranteed, neither material nor moral.

The Rape of Nanking

Like it or not, the world is still ruled largely by the heart: It is full of sin and sorrow, sturm und drang, madness, and the kindness of strangers. It is a world whose history, as Voltaire observed, is “a collection of the crimes, follies and misfortunes” of mankind. On December 13, 1937, the Japanese Imperial Army made history. Previous records in depravity were broken when the devil worked overtime for a six-week period. When it was over, an estimated 377,000 people had been slaughtered.

The victims were not soldiers of the Reich or draftees of the Kremlin. They were men, women, and children of all ages and party affiliations. Democrats. Catholics. Confucians. Bricklayers… They shared one common mistake — they were in the wrong place at the wrong time. These people were not obliterated in an impersonal air raid, such as the 60,000 thought to have been killed at Dresden or the 200,000 killed at Nagasaki and Hiroshima. Nor were they killed methodically and systematically as the Nazis and Bolsheviks usually did with their victims. Instead, they were put to death one by one, or in small groups, after being tortured, degraded, and made to suffer as much as the killers’ imagination made possible.

Butchery. Barbarity. Bestiality. It is hard to describe what happened in words that do it justice.

When the Roman legions destroyed Carthage, they took the lives of about 150,000. Timur Lenk killed 100,000 prisoners at Delhi in 1398. He built towers of skulls in Syria in 1400. Yet no cameras recorded the spectacles. Meanwhile, the photos in Iris Chang’s book, The Rape of Nanking, provide evidence against those who believe in the inevitability of moral progress. The event in question occurred more than 100 years after the Rights of Man had been declared. And nearly two millennia after the birth of the Prince of Peace. The prohibition against murder was well-established in all major religions. Of course, the victims would have welcomed murder — it would have been a comfort, like a stop loss in a bear market.

Japan is one of the world’s most law — abiding and polite societies. But storms of evil blow up from time to time. No race or nation is beyond their reach.

Those who believe in the perfectibility of man have a lot of explaining to do.

Bill Bonner and Addison Wiggin

Parting Shot...
Ah, the industrial democratic nation-state…bringing out the worst in humanity on a heretofore unmatched scale since the 18th century.

To your letters!

My sincere apologies for the bashing by that very bitter and sad woman. You didn’t denigrate me one bit.  I am a woman, but I am too old for you.  I’m sorry too.

I’m honored. And you’d be surprised. I’ll court any interested woman north of age 30.

Let that be a hint to my entire female readership. If interested, send modest pictures and a brief essay to

I figure that if you read Whiskey, we’d get along great. We just have to make sure we abide by Linda “Aunt Libby” Brady Traynham’s sage advice in today’s Morning Whiskey.

Love your daily thoughts and those of the other writers, whether I agree with them or not.
My sister was born in 1938.  The costs of the hospital and the doctor combined approached $60.  She was in a large sophisticated hospital with a first class doctor.  That was in Upland, California, not Bucktooth, Alaska.  The private market discipline made it affordable, and made the doctor concerned about the quality of her (it was a woman) services.  When I was born, 4 years later, the cost was …the same!
As for current or future health care, use needs to be limited by cost paid by the patient.  If it is free, subsidized or aggregated with other services, it will be used to excess and the cost will be prohibitive.  Does that mean that there is some health care we cannot afford?  Yes.  Though we can come close to creating a robotic human replacing a significant portion of its parts, the cost is prohibitive (regardless of the value). 
If we are concerned that catastrophic medical costs will destroy individual citizens, we can start down the slippery slope of insuring catastrophic medical care alone.  If we are concerned that some part of our society (the 11% which receives food stamps) will not be able to have some minimal level of medical care, we can subsidize that.  I’m opposed to both, but those might be legitimate moderate solutions.
The idea that all health care for all people should be provided by the government (for “free”) is preposterous.  It will make it unaffordable regardless of how rich the society may be (and for now we’re closer to a “bankrupt” society than a “rich” society….thanks once again to government bureaucrats).
And without reference to “if you like the Post Office you’ll love socialized medicine,” and without reference to the fact that of every dollar spent by government an indecent part goes to bureaucratic waste, a public system cannot provide the discipline which comes with the service provider having to consider the concerns of the customer.
Private, market regulated health care may be objectionable to the free lunch crowd, but it’s far better and more cost effective than anything which can be provided by government.  Perhaps the right rule is to enforce anti-trust rules and price fixing rules against hospitals, clinics and insurance companies.  At least then hospitals would not be able to charge “uninsured” patients 10X what they end up charging insured patients.  This would quickly bring down the apparent cost of health care.


The Agora family is large and well connected. Can any of them give us information about when the government is stepping into the market to boost prices with taxpayer’s money?

We are fairly large…but well connected? How I chuckled at that one. Much like Cassandra, no one wanted anything to do with us for a long, long time...

When our founders labeled gold as the “trade of the decade” back in 2001’s edition of Financial Reckoning Day people dismissed us as wacky gold bugs. In 2004-2005 when we predicted that the U.S. housing market would collapse, and that Fannie Mae and Freddie Mac would crumble, we were just “doom and gloomers.” Later those same years, when we laid out a case for why oil would hit $150 per barrel...people only shook their heads and laughed softly.

Now though, after years of being very well “DIS-connected,” it seems people actually want our predictions...

Recently the Wall Street Journal called Dan Amoss — our resident accounting expert, doomsday predictor, and generally the nicest guy you’d ever want to meet — to ask his thoughts on real estate investment trusts. And while Dan gave them his general comments, he didn’t tell them his advice on what to do. Instead he reserved that advice for you.

If you’d like to gain access to Dan’s paid publication, you now have the opportunity to try a month long trial subscription for just $1. Of course, we believe it’s worth much more than that. But you won't know until you give it a here to give it a whirl.

Now, back to your original question about the government stepping in. We have no clue on when that it’ll happen. But we’re willing to guess that it’ll be sooner, rather than later.

Gary Gibson
Managing Editor,
Whiskey & Gunpowder

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