Courtesy of Bill Buckler, author of The Privateer [6]
If It Doesn’t Work - Keep Trying It Until It Does:
Those running the big investment banks and trading floors today bear an uncanny resemblance to the generals on both sides of the conflict in WWI. There is an old military saying about the folly of fighting the “next” war by the methods of the last war. In modern times, the best illustration of the truth of that adage is what happened on the Western Front between 1914 and 1918.
When 1914 dawned, Europe had not seen a continental war for a century. Most of the generals and the vast majority of their political masters on both sides had not noticed that the years since the Battle of Waterloo in 1815 had seen what was and remains the greatest technological revolution in the history of the world. Both sides had seen the US Civil War of 1861-65, a war which proved beyond all shadow of a doubt that a frontal assault on an established defensive position was almost guaranteed to fail. Both sides completely ignored the lesson. The literal “cannon fodder” on both sides paid a gruesome price.
The result of this stubborn ignorance, as the history books so voluminously recount, was the antithesis of “bliss”. It was mass carnage. When an attack by 50,000 men proved impotent to the task, the numbers were raised to 100,000 and then 250,000. When an hour of preliminary shelling of the target proved insufficient, it was raised to an entire morning and then to a day and then to the best part of a week. The “big” battalions got bigger and Bigger and BIGGER. The trenches proliferated. The barbed wire proliferated. The casualties proliferated. The destruction proliferated.
The men on the firing line on both sides quickly realised the futility of what those who commanded them were attempting to do. But there was no escape for them. They died in their millions while the generals and the politicians clung tenaciously to the goal of trying to make the unworkable “work”. Any suggestion of a deviation from the frontal assault was fiercely resisted. On the few occasions when it was actually tried, such as the Cambrai offensive with its use of tanks and no preliminary bombardment, it was done over protest and the means supplied were intentionally insufficient to the task. The end came as it was always going to come, with exhaustion.
Four Years Of False Dawns
WWI lasted 51 months, from August 1914 until November 1918. If we go back 51 months from the present, we reach late March 2008 - six months before the Lehman crisis hit. From that day to this, has there been ANY more deviation from the “approved” method of extracting the world from its financial morass than was shown by the WWI commanders in extracting themselves from their military morass?
The answer is crystal clear. There has been NO such deviation. There has simply been more of the same. When half a $US TRILLION in annual deficits proved insufficient to the task, the number was raised to $US 1 TRILLION and then the best part of $US 2 TRILLION. When central bank interest rates equalling the lowest in history didn’t work, interest rates were eradicated altogether. When existing methods of bailing out insolvent banks proved insufficient to the task, new methods were invented in an ever increasing stream. When the results of the inevitable financial carnage became too big to ignore, the figures which reported it were adulterated or simply suppressed completely.
With every new year that has dawned since 2008, the powers that be everywhere have announced that THIS TIME, the recovery is “real”. In March 2012, French President Sarkozy was announcing that: “Today, the problem is solved!” Christine Lagarde over at the IMF proclaimed that: “Economic spring is in the air.” Not to be outdone, President Obama was telling his fellow Americans that: “The recovery is accelerating, America is coming back!” The same songbook was followed in 2009, 2010 and 2011.
It was followed in WWI too, long after the contrast with the REAL situation had gone far beyond the grotesque. Today, there is only ONE place left in the world which still clings to its long-fostered stubborn ignorance. That place is the financial markets. They STILL believe in the BIGGER batallions.
The One “Good” Thing About A Big War:
A “big” war becomes the almost exclusive centre of attention to all those engaged in it, whether on the front or keeping the “home fires burning”. It is impossible to pretend that it is not happening and equally impossible to cover up the devastation in lives and property which it causes. Many people don’t come home from BIG wars, leaving those left behind with agonising and very REAL losses. War causes destruction which is immediate and visible. It is not something that can be swept under the carpet.
Today, we are in the midst of a financial debacle which is more truly global than any world war. There are no lines of trenches, no shattered towns and cities, no casualty lists in the papers and no “we regret to inform you” telegrams being delivered. The carnage is real but it is invisible. No lives have been lost. All that has happened is that the living of life has become more difficult and the ability to rely on the fruits of past efforts for future comfort and “security” has been all but extinguished. The vast majority of the people are cannon fodder in this financial debacle. Like the real thing in the trenches of the Western Front, they have long since realised the futility of the efforts of their “generals”. They know that the “recession” is not over. They are starting to realise that it will never be over as long as the same methods which produced it are being used to get out from under it. But most see no escape, having become used to looking to those same “generals” to tell them what to do.
To an extent which goes far beyond even the politicians and the bankers, the “market makers” want to fight this new financial war with the methods of the old ones. In WWI, the generals held to the end that if your shelling made a big enough noise, the danger of an attack would go away. The “market makers” figure that if they stuff enough new freshly-printed money in their ears, they won’t have to hear the sound of the economy falling away from underneath them. “Less Talk - More Stimulus?” That is a message that the generals of WWI would have understood very well. It didn’t work then. It won’t work now.