http://news.yahoo.com/s/ap/20110513/ap_on_re_us/us_us_libya
oh no… europe supports american conservative ideology
last week i commented on mr. cameron’s speech concerning the failure of blind tolerance and multiculturalism, now mr. sarkozy, ms. merkel, mr. howard and mr. aznar have chimed in the chorus.
as liberals (a recklessly hijacked term mind you) in this country follow european leadership like a lost puppies, this certainly leaves them in a lurch!
seemingly the last remaining deluged ‘bigger minds’ are here in this county. the same who condescendingly tell the poor they aren’t good enough and the rich they are too greedy, the Christians they are too closed minded and the morally bankrupt they are righteous, are now left on a rotting branch by themselves.
hope the fading view is pleasant. i’m sure they’ll tell us all we’re missing out.
http://news.yahoo.com/s/afp/20110210/wl_afp/francepoliticsimmigrationsociety_20110210231042
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strength from across the pond
wow… hard to believe the usually big bunch of pansies are showing up the typically rough and tumble yanks! but read what david cameron had to say about the state of ‘tolerance’ and the failed states of ‘multiculturalism’ in the uk.
http://www.bbc.co.uk/news/uk-politics-12371994
the us tends to trail the social policies of europe by a handful of years. hopefully we can learn from their vast and numerous mistakes. their social and political decisions can be described as no less than disastrous and ruinous.
it frightens me that we have such short sighted elected officials who are simply too enamored with the affairs of europe (which g. washington famously warned against) to see what has happened there is on the verge of happening here.
i love this quote by mr. cameron: “Frankly, we need a lot less of the passive tolerance of recent years and much more active, muscular liberalism,” the prime minister said.
what a brilliant sentiment. i love the idea of ‘muscular liberalism’. this may become my new catch phrase.
for far too long we’ve compromised our national identity for those inside and out who fail to appreciate how good we have it. we’ve apologized for being the greatest country ever created with the trust respect for people and the most intense lust for liberty.
as europe is culturally yesterday’s new, i fail to see a point in following them down their path of national suicide. its encouraging to see me with courage like mr. cameron. well played sir.
http://www.bbc.co.uk/news/uk-politics-12371994
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finally… a man who is not a wuss
thank goodness for a man who is willing to stand in the gap and speak hard truths. too many minds are simply too tired and weak to listen to difficult ideas.
i for one am proud we still have men in this country who will not be shouted down by inferior and petty.
http://politicalticker.blogs.cnn.com/2011/02/11/paul-gets-cpac-crowd-on-their-feet/
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Egypt – US tie in
(Quick author’s note): All around the world, eyes and thoughts are turned toward the anti-democratic country of Egypt. The sham elections of the ‘president’ and mockery of a democratic government complete with toothless parliament and corrupt officials hit a flashpoint as sparked by social media.
The ramifications of the social media in this and other rather small scale previous uprisings in Tunisia and other minor states will be studied for years to come. What is fascinating to me is the lack of brotherhood we feel with these protesters. Isn’t freedom something we hold sacred? Why we do not stand firmly behind those desiring free elections is a baffling idea.
It may be that those they elect weaken the U.S. position in the area, side with our enemies or worse, plot against Israel; but the hope of all free people is we can shoulder together and round the rough edges of the powers of representation. We should not be afraid of these ideas, the very same ideas the world feared during our revolution.
On to the tie in….
A world first occurred this week, Egypt shut down the Internet. What is becoming a mainstay of human existence, and damn near a ‘human right’ providing a free flow of thought, speech and ideas, the Internet is also seen as a danger. To the power elite, holding power over the masses tends to be more salient in their minds then the reason their power was created.
When Washington handed over power peacefully to Adams, the world was shocked. It was the antithesis of what we see today in our own country and abroad. The powerful will fight the populist at all cost, even suspending the very ideas we hold most dear.
It came as no great surprise when Mubarak shut down the Internet. The dictator is terrified of a populist uprising. An uprising whose flames of thought and purpose could be fanned by intelligent thought and planning. Evolution of freedom in a country is terrifying to one who only cares to hold power, not wield it benevolently and most certainly not freely pass it to the next man.
So in a world first, the Internet in Egypt ceased. No Facebook, no cell phones, no twitter, no Google, no flash games, no restaurant reviews. Nothing. Dead space. Offline notices. No free exchange of thought or speech.
De-evolution of freedom. This is why the protesters fight and die (over 100 now). They fight much as we fought so many years ago… for a hope and dream of what is ‘right’.
But as we sit in our comfortable chairs, bellies full, reading on a hi-bandwidth Internet connection we forget we are not to far behind the Egyptians. One Mr. Joe Lieberman (d) proposes the idea that freedom is scary and thus threatens the power structure.
Turns out, men of his kind are terrified by those who he supposedly represents and champions. Led by the always self-righteous and never less than hypocritical democrats, a bill was pushed through to effectively provide the president with a ‘kill switch’. We might aptly re-name it the ‘I refuse to allow freedom when it threatens my power’ switch.
This turncoat legislation, sugar coated and guised for the masses as ‘protection’, is an abomination and evidence that the little Dutch boy is no longer able to keep his finger in the crack of the damn of our own demise.
So as we condescend towards Egypt and their repressive ways our democratic party is begging, pleading, stomping, and forcing us to follow the same path. Shame on you democrats. Shame on you Lieberman and Reid. You are the bane of our freedom and the enemy within.
http://www.fastcompany.com/1721753/egypt-internet-kill-switch
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birthers re-birth?
not sure whats going on here and why after two years this issue of the president’s birth certificate continues to be an hotspot, but things are heating up in hawaii.
if you haven’t been keeping up on your hawaiian dramas, the ‘birthers’ claim mr. obama was not legally eligible to serve his elected office due to a questionable birthplace. his grandmother says he was born in kenyna and the governor of hawaii says hawaii.
governor abercrombi promised to ‘prove’ the local birth by supplying the evidence. then days later reported no records could be found. retractions and redactions flew the next few days as claims and counter claims from the governor’s office and reporters flew.
then as crazies on both sides were getting stirred up (this was this past week mind you), the hawaii legislature said it was against the law to show the birth certificate. Case settled.
not so fast. with an about face quick and abrupt enough to make any devil dog blush, the legislature said they would propose legislation to not only show the document, but charge $100 per viewing! WHAT?!
okay, finally… case closed.
again, not so fast. in a bit of ridiculousness that only the finest of hawaiian mary jane could induce, the pointless adventure continued. today, news comes that ‘interim hawaii health director dr. neal palafox abruptly quit wednesday, the first of new gov. neil abercrombie’s cabinet appointees to leave.’
why the departure when hawaii was just now really turning the heat up on hawaii is unclear. no reason was provided and no one from the leis-laden governor’s office has opened up as to whether or not he was forced out or simply resigned.
i don’t know about you, but we are a bit too far down the road to have this issue continue to plague us. why mr. obama refuses to simply put the issue to rest and pull from his sock drawer his crumpled up birth certificate is beyond me. what i do know is we are not about to solve the mystery at this point, there are bigger fish to fry, and he is a one term president…. so perhaps we should let this sleeping dog lei… i mean lie.
a much better use of our time may be to institute what arizona and other states around the nation are proposing with a requirement to provide in a public forum the requisite materials proving eligibility.
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Of Mystery
I lay awake, curiously pondering the sensation of losing that spark; the spark of intrigue, of the mystery which surrounds life as a child. Do you remember when you were a child playing outside? You didn’t require anything more then a stick for a sword and an old towel for a cape. Life teamed with mystery and the unknown. There were creeks to explore, rocks to overturn, trees to climb, bugs to squash…all in the name of mystery and natural philosophy. Though those particular words would not be used, for that is the way a grown-up would explain it.
I am reminded of Saint-Exupéry’s wonderful contrast between the mind of a child and the mind of an adult in Le Petit Prince. In it, Saint-Exupéry so eloquently demonstrated the lack of imagination of the narrator. It was to his shame. So often I feel like the pilot in the story. I have lost the ability to be amazed. I have lost the sense of mystery.
I do not feel alone however. I am accompanied by most all of the men and woman on this fine rock. Where is the mystery we so enjoyed as a child? The resounding answer is, it’s gone. Lost. Never to be found again. It is not a loss of innocence on the part of the observer, but merely a consenting sigh. We have no continents to discover, no pyramids to uncover, no seas to explore, no conquests left unturned, no forgotten people, no race untried. No mystery.
All is explained. There is no longer the question of why something falls or how to determine longitude. We no longer wonder at the marvels of the balanced humours in the body, make up of light, or life at the bottom of the ocean. Science has given us all the answers. There is no Santa and, what is more, there never was.
We are nearly done explaining. We are most definitely done exploring. What is left? Where does a man extinguish his innate desire to conquer, explore and discover? Simply put, nowhere. It’s like buying a new house. The first few months feel exuberant and wistful. Each corner, nook and cranny is new and unique; yet inevitably, the newness wears off and what is left is living. We are as a people now living.
Look at the big picture of science and development in recent times; effort is not put toward the challenge of new things to come, rather to creature comforts and longer life. But it’s not beyond reasonable to ask the point of a longer life void of the possibility of mystery and adventure? Who wants to live bored longer?
Now truly in your mind as you read you are sure to think of dozens of things exciting and truly worth living for and indeed I am with you one hundred percent. But I hope you understand my point. I miss the mystery of youth. I miss the promises of new and unexplained. I miss the hope of adventure and the insecurity of doubt. Bring back the mystery and you will bring back the spark of the living.
Part of me thinks it is a sign of the times, a consequence of our occupancy and tenure, the other thinks it may simply be a human condition. I’ve often wondered what it might be like if lo and behold a press conference is held announcing our allegiance with little green men from outer space; these little green guys are friendly and desire a peaceful co-existence filled with cooperation and mutual benefaction. Imagine the awe and surprise. But after a few years would it stop being interesting? Would it be like the short lived television show Alien Nation where ‘Newcomers’ are added to the mix and once the new car smell is gone we learn they are as bored as we are holding down regular jobs and miring through similar financial, familiar and relational issues?
Life requires a since of purpose. Life requires a since of mystery. I made the off-handed comment in a past post, ‘It seems the human constitution is weak unless provoked; we tend toward the lowest common denominator unless pushed.’ If this is true, what do we have left to push us? This author has no answers as I am searching for mystery myself.
There is at least One whom I fear; whose very idea is a mystery with no beginning or end. God. Perhaps He set life up in such a manner that ultimately we would seek Him as the true mystery and only satisfying journey.
I dislike the idea of a neat little bow, wrapping up a post for the simple hope of closure. Sometimes there is no closure, there is only observation. So I’ll leave you with this question: where can a man find a touch of mystery in this shabby little town?
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The Zanetti Report
January 19, 2009
Hola One and All,
Well, we are home…sort of. We are currently at Ft. Bliss, TX going through the Army’s out-processing system. After seven years of war, the Army has this figured out. We methodically go from station to station getting cleared from medical, finance, legal, etc.
It is kind of like being on a conveyer belt.
Still, there are only smiles. We are all looking forward to resuming our lives and looking ahead into 2009.
Speaking of 2009, I am resisting the temptation to do the annual predictions missive. My 2007 predictions were remarkably accurate…not even Ms. Cleo from the Psychic Hotline could have done better. Now, because of the deployment, I did not make 2008 predictions. Thank goodness…there was no “crystal-balling” 2008.
Rather, we will start this year with a series about winners vs. losers. I will make connections between jihadists and investment bankers…the Taliban and Wall Street…detainees and hedge fund managers. This is not to say I believe that terrorists and hedge fund managers are the same. Clearly they are not…and I am not calling the scoundrels on Wall Street terrorists. However, both made poor choices that need to be understood if we are to get out of the mess we are in.
I hope you find Part 1 of this series interesting and thought provoking.
Signed Your Traded-The-Iguanas-Of-GTMO-For-The-Rattlesnakes-Of-Ft.-Bliss Soldier,
Greg
—-
They got a name for the winners in the world,
I want a name when I lose.
They call Alabama the Crimson Tide,
They call me deacon blues.
Steely Dan from the song Deacon Blues
Thanks to my deployment to Guantanamo Bay, I learned a lot about how detained enemy combatants (detainees) think.
Thanks to 21-years in the financial services industry, I learned a lot about how Wall Street thinks.
In 2008 I came to believe that both detainees and Wall Street’s “Masters of the Universe” were failures…and remarkably for many of the same reasons. Unfortunately, the consequences of their failures were not limited to themselves; each claimed a lot of innocent victims.
Linking Wall Street sharpies to Jihadist extremists is not usual, but the thinking and behavior of both groups is disconcertingly similar. The holes in each’s value system doom them to failure.
Over the next few weeks we will examine how Wall Street and al Qaeda lost their way. I will pivot off of the work of Ralph Peters who presciently wrote a piece in 1998 called “Spotting the Losers, Seven Signs of Non-competitive States” for Parameters, the US Army’s War College publication. By way of background, Peters in a retired and respected intelligence officer who has authored 22 books. He is a frequent contributor to US Today, Fox News, and CNN.
Like Steely Dan, his “Loser” article differentiates the “winners” from the “losers” in the world. He concluded that nations do not succeed or fail based on geography, climate, natural resources, or access to trade routes. They succeed or fail based on what they value…or better said, how they behave and how they think.
For example, Hong Kong is a rock with no natural resources… and yet it succeeds. Argentina has everything a nation needs to excel and yet it lurches from crisis to crisis. The difference lies in what each society values.
Anyway, back to the theme of terrorists and investment bankers as losers…
Historically, terrorist groups ultimately fail because their value systems are fatally flawed. Wall Street similarly succeeds or fails on what it values and holds dear.
And while al Qaeda/Taliban and Wall Street are not nation states in Peters’ classic model, their influence certainly rivals that of many of the world’s governments. And because of that influence, we have lived with the consequences of al Qaeda’s failed value system since 9/11/2001. We have also lived with the consequences of Wall Street’s failed value system since the dot com debacle unraveled in the spring of 2000.
So, let’s peel back the onion and see what went wrong.
First, it is clear that money does not make a winner. Over the past several decades, trillions of dollars in oil wealth have poured into the Middle East. Yet, what do these nations have to show for it? Where are the great technological advances? Where are the advances in medicine? Where are the advances in physics, chemistry, philosophy, mathematics, or biology?
For all of that money, what did the Middle East give back to the world?
The answer is palaces, wars, internecine battles, and discontent. Oh yes, the elite of those societies partied hard in Paris and LA. Great.
Sadly, living standards have actually declined in the OPEC nations as the oil revenues have risen. It is scary to contemplate what will happen to these societies when the oil runs out. Rebellion, violence, chaos are the most likely scenarios.
The center won’t hold. Things will fall apart.
Likewise on Wall Street, money did not make them winners. Over the past several decades, trillions of dollars have poured into New York’s investment banks and brokerage firms. Yet, what do these firms have to show for it? What did they contribute? Did America’s industrial base grow? Did the wealth-production segment of the economy advance? Were Americans employed in higher paying, more secure jobs? For all that money, what did Wall Street give back?
The answer is obscene salaries and bonuses, out-sourced jobs, a diminished industrial base, and fraud & distrust so pervasive that the entire financial system is now staring into the abyss. But they, too, partied hard…some parties even had elephants. Really…elephants…no joke. Great.
And, sadly, living standards are starting to fall in the West as we struggle with recession and the fallout from the self-inflicted financial crisis. As the truth of the fraud comes out, Americans’ anger is rising. Fortunately, Americans have a history of dealing with crisis peacefully.
Still, it is fair to wonder if our center will hold…or will things fall apart?
So if money doesn’t make you a winner, what does? Let’s try to spot the traits.
The first thing winners do is allow the free flow of information.
In the Middle East, the State controls the newspapers, TV, radio, periodicals, and even the Internet.
Common sense alone tells you that if you attempt to control communications today, you will fail. You cannot compete with those who know more (and act more quickly) on accurate information. I believe this is true at the macro and micro levels.
I saw this with the detainees at GTMO. Communications inside the camps were controlled by “ranking” detainees based on age, tribe, clan, or nationality. Only certain detainees were afforded the liberty of free communications. Others were shouted-down or told to “know their place.” Not surprisingly, this dynamic limited the detainees’ effectiveness “inside-the-wire.”
Like Middle Eastern nations and detainees, Wall Street, too, fell into this trap.
In the age of hedge funds, CDSs, CDOs, CLOs, leverage, & derivatives, free and open communications became a thing of the past. Communications between Wall Street and the public became disproportionately controlled by those who told us, “Don’t worry. These things are complicated; we’ll handle it for you.”
Transparency was replaced with obfuscation. Moreover, when information was communicated it was often dishonest and meant to deceive. Unlike detainees, the public was not shouted-down; rather it was belittled and condescended to.
In fairness, there were some stubborn and inquiring members of the public who demanded to know the truth. They sought recourse from the regulatory bodies for open and honest disclosure. Tragically, the SEC, NYSE, CFTC, and other regulatory bodies sided with the insiders and prevaricators. Free, open, and honest communications fell apart.
The results were the same for investors and for Wall Street as they were for detainees at GTMO and countries in the Middle East. Failure.
Investors lost money, but more importantly they lost their dreams. Retirement and travel plans are now being replaced by part-time jobs and stay-cations. The real shame is that this failure is infecting the entire economy via the recession, job losses, and a loss of confidence in our institutions.
New York and Wall Street saw their dreams collapse as well. Wall Street is now ceding power and control over its future to Washington…in exchange for bailouts. Ironically, the bailouts are not transparent either. Sigh.
Internationally, markets and exchanges that were once dominated by New York are now flexing their muscles as Shanghai, Dubai, Tokyo, and London are claiming open and honest disclosure and communications.
So, if free and open communications lead to success, why do so many eschew it?
With governments, nation-states, detainees, or investment- firms the answer is usually the same…power. We all know that knowledge is power…and with open communication comes the loss of power to the elite.
I believe there is incalculable gain to dispersing that power.
Of course, with free communication comes additional risk. For example, while the Internet allows the student from Harvard to compare ideas with the manufacturer in Prague, it also allows for fiction to be presented as fact, the wonton spread of pornography, and the propagation of hate and violence.
Still, on balance the good will outweigh the bad.
Thus, lesson number one is…winners allow for free and open communication.
Next week, we will continue to examine what differentiates success from failure. Now that the introduction and the “framing of the issue” parts are behind us, we will zip through the traits far more quickly.
Until then, may you all have “winner names” like Crimson Tide instead of “loser-names” like Osama bin Laden.
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December 24, 2008
Hola One and All,
Christmas at GTMO is hard to explain. After all, we are on a communist island, and Castro made Communism the State religion years ago. Those poor Cuban kids. Sigh.
Anyway, I suppose the only public Christmas celebrations will be in our little corner of Cuba. As a result, the Naval Base goes all out. Christmas decorations and lights are everywhere.
Still, it’s a little odd. Santa Clauses, candy canes, and manger scenes don’t exactly go with iguanas, banana rats, and detainees. Still, something good happens here during Christmas. Maybe it’s because we are away from home and deployed to an “island on an island” that we forge a special kind of bond amongst friends. Everyone is smiling. Every house and hooch are open to anyone who happens to stop by. People are offering to take each others’ shifts. The chaplains are seeing a few more troopers in the pews. Small gifts are being exchanged with a hug and a peck on the cheek. It doesn’t replace home, but it’s nice.
In the spirit of the season, this week’s missive should be Christmas-y, but instead I drifted to WWII movies from 30 years ago and little German Frauleins from the 1920’s. Go figure.
To get in the spirit though, please feel free to pour some Christmas spirit into your eggnog before reading this week’s missive. And should you feel the urge to toast those in harm’s way, I will raise my glass in accord. Merry Christmas, Happy Hanukkah, and Cheers.
Signed, Your Wondering-If-Now-That-Castro-Is-Near-The-End-Of-His-Life-If-He-Misses-Christmas Soldier,
Greg
In the 1978 movie, Force 10 from Navarone, British Major Keith Mallory (Robert Shaw) and American Lieutenant Colonel Mike Barnsby (Harrison Ford) are given the mission to sneak into the bowels of a German Dam and blow it up from the base. The explosives expert Sergeant Dusty Miller (Edward Fox) gives them each a backpack of dynamite to do the deed.
Mallory and Barnsby steal some German uniforms and manage to make it to the inner workings inside the dam. They then acknowledge that they are about to die, and light the fuses. Out of instinct, they run as the explosives go off…and except for a few small pops and a cloud of dust, nothing happens.
Panicked, Mallory and Barnsby race up the stairs. Simultaneously, the Germans race the down the stairs to investigate. In the confusion, Mallory and Barnsby manage to escape and get to the adjacent hillside where the rest of the team is waiting. Mallory and Barnsby then start screaming at Miller for not giving them enough explosives to complete the job.
Miller, meanwhile, is resting against the back of tree smoking a pipe. He calmly says, “Gentlemen, let nature do her work.” Sure enough, the small explosives have done enough damage to the dam’s structural integrity that the water pressure behind the dam begins to crack the foundation. Soon it is chaos, as the dam breaks and a torrent of water races downstream just as a German armor division is crossing a vital bridge. The wall of water destroys the panzer-laden bridge and our heroes begin the long trek back to allied lines as the credits roll.
So what does this have to do with investing?
Gentle readers, monetary and fiscal explosions are going off and seemingly nothing is happening. In October, a $700 billion bailout bill was agreed to and “nothing happened.” Credit remained frozen. Banks wouldn’t lend. The stock market continued to tread water.
Meanwhile, AIG, Citi, GE Credit, and others received billions, but again to no effect. Then, trillions (with a ‘t’) were committed to shore up Commercial Paper Programs, Term Auction Facilities, Money Market Funds, FDIC Insurance, Discount Window borrowing, Overnight Loans, and Secondary Credit Programs…and that money disappeared into the maw.
The Federal Reserve then dropped interest rates to 0-.25% and world markets yawned. Now, the Federal Reserve is buying 10-year Treasury Notes directly from the government in what is called “quantitative easing,” (but is really just printing money) to buy the nation’s ever mounting debt.
Despite all these efforts, nothing seems to be happening.
So, we are doing what Mallory and Barnsby did. We are demanding even more explosives. Early next year, we will see a stimulus package that will be north of $850 billion…perhaps even over a trillion. 2009 treasury debt issuance is already expected to be over $1.5 trillion…assuming someone will buy it…at 0% interest!
But, what if something really is happening and we just don’t see it manifest yet? What if the pressure is building? What if the dam is destined to break, (as it likely is) but we just don’t know when?
I believe that despite the best intentions of our leaders, there will be unintended consequences to our current “stimulate or die” philosophy that will turn our heroes into goats and our desired happy ending into a nightmare. Unfortunately, in the financial world, we have seen this “movie” before…and, like Force 10 From Navarone the site was Germany.
So let’s return to the days of yesteryear and look at 1920’s Germany and a depression scenario opposite of the American depression scenario. As a reminder, our US Depression was deflationary. Prices and economic activity fell. Dollars were in short supply.
From that, Americans learned that the best economic remedy was to “accelerate through” deflationary depressions via massive government spending and stimulus. (As an aside, this may not have been the best remedy, but that is what we believe today…and this thinking dominates current US economic thought.)
The Germans, meanwhile, experienced a hyper-inflationary depression. Economic activity slowed, but prices soared. Reich Marks (RM) were in abundant supply. In this environment, “accelerating through it” brought only more pain. Let’s examine the facts.
The Weimar (pronounced Vy-mar) Republic of Germany was established following WWI in the city of Weimar (seems logical). The Germans were the losers of WWI and owed billions of Reich Marks (RM) in war reparations…mostly to the French. Let’s now defer to Wikipedia for a quick recap of what happened.
———
By 1923, the Republic claimed it could no longer afford the reparationspayments required by the Versailles treaty, and the government defaulted on some payments. In response, French and Belgian troops occupied the Ruhr region, Germany’s most productive industrial region at the time, taking control of most mining and manufacturing companies in January 1923. Strikes were called, and passive resistance was encouraged. These strikes lasted eight months, further damaging the economy and increasing the expense of imports. The strike meant no goods were being produced. This infuriated the French, who began to kill and exile protestors in the region.
Since striking workers were paid benefits by the state, much additional currency was printed, fueling a period of hyperinflation. The 1920s German inflation started when Germany had no goods with which to trade. The government printed money to deal with the crisis; this allowed Germany to pay war loans and reparations with worthless marks and helped formerly great industrialists to pay back their own loans. This also led to pay raises for workers and for businessmen who wanted to profit from it. Circulation of money rocketed, and soon the Germans discovered their money was worthless.
————-
And while reading about this is interesting, what most people of that generation remember are the visuals. Women with wheel barrows full of money trying to buy a loaf of bread…or Germans burning RM instead of coal because coal was more valuable. See below.
What stunned the world at the time was how quickly inflation took hold. Just prior to the great unraveling, there was actually a hint of deflation. Prices were stable, the economy was slowing, and unemployment was rising.
But you must remember that like the US today, Germany’s economy was credit based and the word credit derives from the Latin word credere “to believe.” Once belief in the value of the RM was questioned, the psychological dam broke. Germans raced to change their paper RM for tangible goods as the RM was rejected and debased.
In 1921, lunch at a German diner cost RM 10. By 1923 that same lunch cost over RM 1,000,000. Barter followed. Prostitution ran rampant. Gasoline was siphoned, copper pipes were stolen, murder rates rose, and drug and alcohol use soared. When RM trillion notes were issued, it was over. Society broke down for all but the richest of the rich.
So what are the parallels to today?
Like the US, Germany was a first world nation. They had industry and agriculture. They had an innovative and hard working population. They had an active cultural scene with orchestras, symphonies, operas, cabarets, and fine restaurants. They looked a lot like us today.
Unfortunately, like us today, their industrial base began to lag…albeit for different reasons. They had debilitating strikes and the vengeful French. We, of our own volition, exported much of our manufacturing base to Asia. Our massive trade deficits are a testament to our “production deficit.”
War reparations crippled German finances. Meanwhile, wars in Iraq and Afghanistan strain our Treasury today. Whether money goes to pay for reparations or for “surges,” the economic result is the same.
Next, while the German government paid striking workers directly, we pay for bloated welfare and entitlement programs…and our programs are bigger. One in six workers is already employed directly by Government (Federal, State, or Municipal). And, depending on how wide you throw the net, over 40% of American workers receive Government compensation either directly or indirectly. More bail-outs and massive infrastructure spending program will ensure this trend continues.
The point is this…
Often times, nations are the victims of their own experience. They believe that history repeats, when it merely rhymes. They then apply the wrong remedy…failing to notice that the circumstances and the facts have changed from one era to the next.
In the 1930’s we were a manufacturing giant. We had a positive trade deficit. We still maintained the gold standard as backing for our money. We had the luxury to “accelerate through it,” without crushing the currency.
Today, none of the above is true. Accelerating through our economic travails via government spending and borrowing is tantamount to exploding dynamite in our own dam while pressure on the dollar builds. We in the US are applying 1930’s US Depression models to a situation that looks far more like the 1920’s in Germany.
My concern is that we are reaching an inflection point where all of this printed money begins to work its way into circulation. When that occurs, inflation will come upon us like a promise. The economic dam will start cracking, the pipes will shudder and spew, the dam’s turbines will freeze. Then instead of our “movie” ending with the credits rolling across the screen, debits will roll instead.
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