BALTIMORE – The Dow rose 126 points on Thursday – just shy of 1%. Not enough to reverse the market’s apparent downward bias [ed note: the rebound gathered pace on Friday].
Stocks are most likely headed down because the thing that sent them up has come to an end. Here is a chart that tells the tale:
Federal Reserve assets vs. the S&P 500 Index
As you can see, over the last six years or so, gains for the S&P 500 have closely tracked the ballooning of the Fed’s balance sheet under QE. After shelling out almost $4 trillion on bonds, the Fed’s QE is on pause. And stocks are struggling. Coincidence? We don’t think so.
Deep State Cronies in Action
We stuffed a few copies of the Hindustan Times in our bag before boarding the plane back from Mumbai. On the front page, French president Francois Hollande is receiving an awkward hug from India’s top man, Narendra Modi.
Over in the entertainment section is another note of interest. Actress Julie Gayet has put together a film production company. And lucky for her – she has backing from one of India’s biggest conglomerates, the Reliance group.
Nowhere does the paper mention that Ms. Gayet is Mr. Hollande’s main squeeze. She is the woman for whom he snuck away on a motor scooter from the presidential palace, where he lived with his then First Girlfriend, journalist Valerie Trierweiler.
Mr. Hollande and his old squeeze Valerie Trierweiler (left) and her replacement Julie Gayet (right)
Reliance is owned by the Ambani family, which lives in Mumbai in the most expensive house ever built. It is 60-story skyscraper, put up at a cost of $1 billion, which now takes a staff of 600 to keep the furniture dusted. On Sunday, the two events were reported. On Monday, the paper added the connective tissue. It announced that India and France had inked “$15 billion in business deals.”
No mention was made of how Reliance may benefit from any of the French investment. But Mr. Hollande’s deepening ties with India… and Ms. Gayet’s deepening ties with Mr. Hollande… can’t have hurt the former TV actress’s bid for funding from one India’s most powerful and well-connected families. But this is written on Friday, so it’s time to reach back into the archives.
The Ambani House in Mumbai
Photo credit: India Today
U.S. Marine Corps Major General Smedley Butler – who twice won the Medal of Honor – knew war far better than most. “War is a racket,” he wrote. But it’s the Deep State’s favorite racket – partly because there is so much money in it… partly because its main mission is to protect the Deep State’s own elite… and partly because the typical citizen never catches on to what a racket it is. In today’s essay from the archives, we look at why war is so appealing…
War and Peace
[Ed. note: originally published on April 9, 2003]
“The heart has reasons reason cannot reach.”
Sylvie (my French tutor), quoting Sommeil
Man is badly designed. Not in every particular but in a few. That insight comes not as a theoretical point but as a bit of practical information. Sketching out a man’s internal plumbing on a piece of prescription paper, Dr. Moreau of the staff of the American Hospital’s emergency room revealed a design flaw.
“As you can see,” he explained, with the impatience of a nuclear physicist explaining photons to an orangutan, “it’s bound to cause trouble, sooner or later.”
What a strange thing: The same God that built such an exquisite universe seemed to have lost interest when he got to man’s entrails.
For there, on the left side of the intestinal tract, is a little appendix – with no role except to create problems. And then, down below are various tubes and passages. Had one of them been made just a little more commodious… I would have been spared a visit to the American Hospital.
Useless organs meeting (Spleen to Eye: “I see something you don’t”)
“And look at that,” said Dr. Moreau, holding up an X-ray as though it were an aerial photo of the Hindu Kush. “You’re going to have trouble here.”
He was pointing to the range of lower vertebra. After years of heavy lifting, the cushions between the bones have been worn down.
“You must have lower back pain from time to time,” the doctor noted. It is not our place to carp and criticize. But it would have been nice if the manufacturer had installed more durable cartilage in the 1948 models. And more flexible tubing.
“But that is the problem,” said my French tutor. “Men are not as you want them to be; they are as they are.”
What had set Sylvie off was neither my plumbing nor my neglect of the subjunctive, but my thoughts on war and peace.
“Almost every war Americans have ever fought turned out to be a mistake,” I had told her. I had taken her on a brief tour of American military history. Every war had its “reasons,” but they were all absurd.
“What good did the American Revolution accomplish,” I wondered aloud, “when other colonies of Britain negotiated their way to independence and were no worse off for it?”
“What about the War Between the States? If it was fought to get rid of slavery, it was a poor way to do it. Slavery disappeared from the rest of the world with hardly a single fatality. And if it was fought to “Preserve the Union,” it was a fraud. Said union was founded on the principle that people could decide for themselves what government they wanted to plunder them.
The wreck of the USS Maine – the sinking of the ship was used as a pretext to start the Spanish-American war.
“As for the Spanish-American War, who knows why it was fought. And who cares? “And World War I…”
“Well, at least you had a good reason for that one,” Sylvie interrupted, smiling. “To come to our aid.”
What’s the Point?
“Yes. But what was the point? If the U.S. hadn’t pumped in so much money, war material, and then soldiers, the war probably would have ended sooner. And much better.
“By 1917, both sides were nearly exhausted. They would have had to negotiate an end to the war. But the entry of the U.S. gave the Allies ammunition and the Germans targets. The U.S. encouraged the British and French to believe they could win the war, so they wouldn’t have to accept a negotiated settlement.
“So, the war continued until Germany finally capitulated. But it was Germany’s defeat, and the terms imposed on her by the Allies, that led to hyperinflation in Germany… the rise of the Nazis… World War II… and the Holocaust…
US newspaper report on the assassination of Archduke Ferdinand
“The average American couldn’t have cared less about the Archduke Ferdinand. He had no idea who Ferdinand was… or where he stood in the pecking order of European politics.
“He was as ignorant of the Austro-Hungarian Empire as he was of the contents of Austrian sausages. An American of sound mind and decent judgment would have just as soon seen the Archduke stuffed and used as a parlor ornament as revenged.
“But once stirred up by the press – and the big idea of ‘making the world safe for democracy’ – he was ready to enlist and get himself blown up believing that he was protecting Western civilization from the invading Huns.
“World War II was an exception, from a U.S. point of view,” I continued.
“The U.S. was attacked. Japan and Germany declared war on the U.S. It made sense to fight back. But for the people who started the war – the Germans and Japanese – it was a complete disaster. It would be hard to imagine a more foolish course of action. The two nations who caused the war were completely ruined by it.”
The remains of Nagasaki after the nuclear bomb
Photo via Wikimedia Commons
Sylvie had sat quietly through this rant – merely correcting my grammar as necessary. But now she calmly replied:
“You’re right, of course. War doesn’t make much sense. But so what? Who ever said it had to?”
The Absurdity of Reason
In 1910, British author, journalist, and politician Sir Ralph Norman Angell (who later won a Nobel Peace Prize) convinced many of the world’s leading intellectuals that war was a thing of the past. His argument was reasonable, logical… and, of course, ridiculous.
But you, dear reader, are already in on the secret – reason is no rampart against imbecility. Man, with his power of reason, is badly designed. Since he is able to reason, he imagines that the world – and he himself – acts the way it thinks reasonable. But as often as not, reason merely leads him into absurdity. Angell was not the only one to underestimate war. As the soldiers gathered on the eve of World War I, one intellectual argued:
“War is costly; therefore, it will be short. The Germans want to crush the French as quickly as possible so they can turn their attentions to the Russians. The Austrians want to get rid of the Serbians as fast as they can so they can turn to face the Cossacks. The Russians must get to the front as soon as possible so they can relieve France.
“And the French prepare to launch their offensive in Lorraine at the first opportunity. Everyone believes that speed is the key to success.”
“Our soldiers leave and leave gaily,” reported French newspaper Le Figaro on August 2, 1914.
“We’ll be back… It will be over quickly,” a group of infantrymen told a reporter from another French rag Le Temps.
It was widely believed that – like a barroom brawl – the war would be quick and violent. There was no time to wait… no time to think… no time to second-guess. It was time to throw a punch. The Commander-in-Chief of the French forces on the Western Front during the first two years of the war, Marshal Joffre, believed in “the offensive at all costs.”
French Marshal Joseph Joffre – believer in offensive war
Photo via uselectionatlas.org
And why not? The war would be over quickly. Why hold back? As another high-ranking French general Louis Grandmaison explained, “In the offensive, imprudence is the greatest safeguard.”
The logic was impeccable. If the war was to be swiftly decided, the winner would be the one who brought to bear the greatest force of arms the most quickly; holding back could be fatal.
General Grandmaison was a real thinker. But his thinking couldn’t make the world behave as he thought it should. He believed in “attaque à outrance” – best understood as an excessive or reckless attack. It was just such an attack that got him killed in one of the first battles of the war, at Reims.
The war continued for four long years. The final outcome was determined not by the initial attacks but by what was held in reserve: manpower, material, and money. And although the patriotic élan of the soldiers may have made their countrymen proud, it was the profit motive of the bankers and manufacturers in London and New York that decided the outcome.
The funeral of General Louis Loyseaux Grandmaison
Photo credit: Roger-Viollet
Surely, on some forgotten monument in some forgotten burg somewhere in France, you will find Grandmaison’s name among “Nos Héros… Mort Pour La France.”
Perhaps someone has inscribed a parenthetical remark: “General Grandmaison – A hero and a chump… faithfully imprudent to the end.”
Chart by: Bonner and Partners
Image captions by PT
The above article originally appeared as “Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.” at the Diary of a Rogue Economist, written for
It is that time of the year again – our semi-annual funding drive begins today. Give us a little hand in offsetting the costs of running this blog, as advertising revenue alone is insufficient. You can help us reach our modest funding goal by donating either via paypal or bitcoin. Those of you who have made a ton of money based on some of the things we have said in these pages (we actually made a few good calls lately!), please feel free to up your donations accordingly (we are sorry if you have followed one of our bad calls. This is of course your own fault). Other than that, we can only repeat that donations to this site are apt to secure many benefits. These range from sound sleep, to children including you in their songs, to the potential of obtaining privileges in the afterlife (the latter cannot be guaranteed, but it seems highly likely). As always, we are greatly honored by your readership and hope that our special mixture of entertainment and education is adding a little value to your life!
Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke
2 Responses to “Military Misadventures”
Most read in the last 20 days:
- Gold Price Skyrockets in India after Currency Ban – Part III
When Money Dies In part-I of the dispatch we talked about what happened during the first two days after Indian Prime Minister, Narendra Modi banned Rs 500 and Rs 1000 banknotes, comprising of 88% of the monetary value of cash in circulation. In part-II, we talked about the scenes, chaos, desperation, and massive loss of productive capacity that this ban had led to over the next few days. Indian prime minister Narendra Modi – another finger-wagger, as can be seen in this...
- Gold Price Skyrockets in India after Currency Ban – Part II
Chaos in the Wake of the Ban Here is a link to Part 1, about what happened in the first two days after India's government made Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes illegal. They can now only be converted to Rs 100 (~$1.50) or lower denomination notes, at bank branches or post offices. Banks were closed the first day after the decision. What follows is the crux of what has happened over the subsequent four days. India's prime minister Nahendra Modi, author of the...
- Gold Price Skyrockets in India after Currency Ban – Part IV
A Market Gripped by Fear The Indian Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes would no longer be legal tender. Linked are Part-I, Part-II and Part-III updates on the rapidly encroaching police state. The economic and social mess that Modi has created is unprecedented. It will go down in history as an epitome of naivety and arrogance due to Modi’s self-centered desire to increase tax-collection at any cost. Indian jewelry...
- A Note on Gold and India – What is Driving the Gold Price?
Hidden Motives It is well-known that India's government wants to coerce its population into “modernizing” its financial behavior and abandoning its traditions. The recent ban on large-denomination banknotes was not only meant to fight corruption. Obviously, this very bad Indian has way too much cash. Just look at him, he looks suspicious! Photo via thenewsminute.com In fact, as our friend Jayant Bhandari has pointed out, fresh avenues for corruption ...
- Will Trump Do What Reagan Couldn’t?
Depravity and Degeneration BALTIMORE – Finally, it’s over. We were both delighted and appalled by the news. A smile spread over our face... and our steps lightened... as we looked ahead to four years without Hillary Clinton’s know-it-all mug in the news. Praise be! This mug will be largely missing from the airwaves and the intertubes in coming years. And your caption scribbler PT won't have to look for a fall-out shelter! We thank the Lord and the American public for...
- India's Currency Debacle – An Interview with Jayant Bhandari
A Major Crisis Last week Jayant Bhandari related the story of the overnight ban of certain banknotes in India under cover of “stamping out corruption” (see Gold Price Skyrockets In India after Currency Ban Part 1 and Part 2 for the details). Banned 500 rupee banknotes The problem is inter alia that the sudden ban of these banknotes has hit the Indian economy quite hard, given that 97% of all transactions in the country are cash-based. Not only that, it has...
- Inflation Expectations Rise Sharply
Mini-Panic Over Inflation After Trump's Election Victory We have witnessed truly astonishing short term market conniptions following the Donald Trump's election victory. In this post we want to focus on one aspect that seems to be exercising people quite a bit at present, namely the recent surge in inflation expectations reflected in the markets. Will we have to get those WIN buttons out again? A 1970s “whip inflation now” button. The only thing that was actually needed...
- Will the Swamp Swallow Trump?
Permanently Skewed TRUMP HOTEL, New York – Trump’s rambling army – professionals, amateurs, camp followers, and profiteers – is marching south, down the I-95 corridor. There, on the banks of the Potomac, it will fight its next big battle. Lieutenants in Trump's army: Bannon, Flynn & Sessions Photo credit: Drew Angerer / AFP Here at the Diary, we do not like to get involved in politics. But this is a special time in the history of our planet – a...
- There Are Two Types of Credit — One of Them Leads to Booms and Busts
Stumped by the Bust In the slump of a cycle, businesses that were thriving begin to experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy. People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs. What has caused the bust? The modern-day economic orthodoxy continues to be unable to provide...
- All Aboard! Trump’s Express Train to the Future
Free Money! BALTIMORE – Last week, the Dow punched up above 19,000 – a new all-time record. And on Monday, the Dow, the S&P 500, the Nasdaq, and the small-cap Russell 2000 each hit new all-time highs. The last time that happened was on the last day of December 1999. Ironically, two events that were almost universally expected to trigger large stock market declines were followed by quite rapid and strong gains. Would the market have fallen if Hillary Clinton had won...
- Gold Bull Market Remains Intact – Long Term Fundamentals Outweigh Short Term Market Gyrations
A Strong First Half of the Year, Followed by Another Retreat In early 2016 gold had a big bull run. The precious metal rose close to 25% this year, pushed higher in a summer rally that peaked on July 10th. Gold experienced a bumpy ride over the remainder of the summer though, as investors became increasingly concerned about a potential rate hike by the Federal Reserve. Uncertainty returned to gold market and has intensified further since then. Initially, gold rallied sharply...
- Too Early for “Inflation Bets”?
The Trump Trade After 35 years of waiting... so many false signals... so often deceived... so often disappointed... bond bears gathered on rooftops as though awaiting the Second Coming. Many times, investors have said to themselves, “This is it! This is the end of the Great Bull Market in Bonds!” The long bond's long cycle – red rectangles indicate when the post 1980 bull market was held to be “over” or “over for sure” or “100% over”, etc. We have...