Category Archives: History

Learning from the past

Let’s honor our generation’s greatest leader, one of the chief builders of a New America

Summary: Enough time has passed so that we can see in the 8 years of George W. Bush America changed to a degree seldom seen in our history, making him one of our few transformative Presidents. That many (perhaps most) of us do not like the specific changes he made does not matter. The 1% — his peers, in whose interest he ruled — gain much from the big steps under Bush away from the America-that-once-was towards a New America.  (This is the 2nd of 2 posts today.)

“The best leaders are those the people hardly know exist.
The next best is a leader who is loved and praised.
Next comes the one who is feared.
The worst one is the leader that is despised.

— Laozi, in the Tao Te Ching

Mt Rushmore as it will be, with President Bush

Mount Rushmore as it will be. One of these Presidents is not like the others.

George W. Bush on the USS Abraham Lincoln

On the USS Abraham Lincoln, 1 May 2003 (AP/Damian Dovarganes)

 

Contents

  1. Our 7th transformative President
  2. National Security: triumph of the Deep State
  3. Undercutting the solvency of the government
  4. Etc, etc
  5. His buddy, Obama
  6. For More Information

(1)  Our 7th transformative President

Since his inauguration, following his award of the Nobel Peace Prize, many have called for Obama to be added to Mount Rushmore (or, realistically, said that he deserved to be there). That is obviously absurd. ObamaCare is almost his only substantial legislative accomplishment. He executed the end of the Iraq War, negotiated by President Bush Jr. Obama made some executive orders, which might prove significant (or not, or might be cancelled by a successor). He followed trends well-advanced at the State level expanding civil rights to gays. But his major accomplishments were overwhelmingly to continue, deepen, and expand the policies of his truly transformative predecessor. A man who deserves to be on Mount Rushmore: George W. Bush.

More accurately, a statue of Bush should begin a similar yet competing line of sculpture, since he undercut or outright reversed the accomplishments of Washington, Jefferson, Teddy Roosevelt, and Lincoln. The changes Bush made had precedents — as Hoover’s policies foreshadowed FDR’s, and Carter’s did Reagan’s. But like the bold measures of Washington, Jefferson, Jackson, Lincoln, FDR, and LBJ, Bush’s effects on America are of breadth and scale that defy easy description. We’re too close to see the full range of theses changes, to assess their relative importance, or do more than guess at their effects. But they’ve clearly set America on a new path.

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Lessons from WWI about “markets” ability to see the future

Summary: Brad Delong (Prof Economics, Berkeley) reminds us that on this day in 1914 the NYSE ended the longest period of stopped trading. The outbreak of war on 31 July triggered “the longest circuit breaker” in NYSE history. His post, as usual, gives an interesting account of that episode. Who closed the NYSE, and why? There is another lesson from this history, one of importance to us today.  (This is the second of 2 posts today)

Expect the unexpected: fish

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“Unless you expect the unexpected you will never find truth, for it is difficult to discover.”

— Heraclitus, the pre-Socratic “Weeping Philosopher” of Ionia

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Stock market strategists and economists often tell us about markets’ fantastic predictive ability (an emergent phenomenon from millions of investors), often to the extent of referring to stock prices as a barometer of economic health. Count me among the skeptics when it comes to forecasting.

Here’s a survey of risks by Nial Ferguson (Prof History, Harvard), typical of those before the 2008 crash. He doesn’t even mention the structural weakness of banks, the factor converting a real estate downturn into a global crash. But then nobody saw this (that I’ve found).

Even in what investors should see best — economic cycles — their record is mixed. Sometimes the market gets it wrong; the October 1987 crash predicted nothing. Sometimes the market sees things a little late: the Great Depression began as the US economic downturn began in August 1929; the stock market crashed on October 29 (timeline here).  Sometimes the market gets it right: the stock market peaked on 9 October 2007, the recession began in December, the economy crashed in Fall 2008 (timeline here).

Geopolitics have an immense effect on markets. Here economists have very poor record of forecasting, although they often see themselves as bookies of geopolitics (they tend to be hawks, which is odd given the horrific history of war’s effects). Likewise, investors poorly assess geopolitical threats. On this 100th anniversary of WWI let’s see how well investors anticipated that climatic event (timeline here).

In hindsight WWI looks almost inevitable. Historians see its origin in two decades of rising geopolitical tensions among the major western powers as William Lind explains. Yet investors back then didn’t feel rising tension. For a scholarly yet readable account I recommend Nial Ferguson’s “Earning from History? Financial Markets and the Approach of World Wars” (Brookings, Spring 2008), which provides the quotes below. An assassin killed the Archduke Franz Ferdinand of Austria on June 28. In the following month stock prices declined throughout the western world. Prices of US railroad and industrial shares dropped 15%. The Vienna stock market crashed on  July 13.

Although selling spread of stocks and intensified, investors in most assets in the so-far unaffected nations remained calm (the bond markets dwarf stocks in size). Similar crisis had been resolved through diplomacy. Europe had not experienced widespread war for a century.  Compelling analysis by experts such as Jan Gotlib Bloch (Is War Now Impossible?) and Norman Angell (The Great Illusion) proved war to be irrational and hence unlikely.

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Requiem for fear. Let’s learn from failed predictions to have confidence in ourselves & our future

Summary: If journalists find it difficult to fill the spaces between ads, they might run articles debunking past popular predictions of doom. They could easily do so monthly. This week brought an unusually large harvest of evidence disproving the doomsters. We should ask ourselves why were we so credulous, even gullible, to believe these stories? What might be the consequences if we continue like this? I haven’t a clue to the former; at the end below is a guess about the latter.

New Scientist: collapse

Click to enlarge

The Ebola pandemic: millions will die!

Predictions of a global Ebola pandemic swept America before the election, revealed as conservative fear-mongering for political gain as they mysteriously disappeared on November 5. Like peak oil, there were ludicrously weak reasons given for these strident warnings. The WHO’s December 3 weekly status report shows that it has been eliminated from all but three poor African nations: “Case incidence is slightly increasing in Guinea, decreasing in Liberia, and may be increasing or stable in Sierra Leone.” No mea culpas from the fearmongers.

Hyperinflation! The dollar becomes worthless!

Every decade conservatives confidently forecast imminent doom from one or both of these. Always wrong. This year inflation continues at uncomfortably low levels (not much of a cushion against deflation, lethal in a high-debt economy like ours). The dollar continues to strengthen, so depressing exports and corporate profits (destabilizing many emerging nations).

Peak Oil — The end of civilization!

During the years 2005 – 2008 predictions that the end was nigh rang throughout the nation, a tune joyously played by Leftists certain they this proved the folly of capitalism. On 3 July 2008 WTI oil was $145, a record. This week it closed below $60, brought down by a combination of factors long discussed here: slower global growth, increased supply, and improved efficiency. “The cure for high prices is high prices.” Free markets at work. No mea culpas from the fearmongers.

That doesn’t prove the cornucopians’ dreams of cheap oil returning; $60 oil will force rapid slashing of capital investments and slowly return oil to their $80 – $100 range. Nor does that disprove the research warning that eventually this price reign will end with prices breaking higher into a new range, much as the 20 year range of $10 – $20 ended in 1999.

What matters is that there was never any basis for the predictions of imminent disaster, despite the applause for doomsters articles at websites such as The Oil Drum (not in the dustbin of history).

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Despite the Right’s Thanksgiving myth, the Pilgrims rebelled against their corporate landlord

Summary: Many posts here have documented the myths the Right has created to reshape our views of ourselves, of America. Today we debunk an especially ugly one, twisting the history of Thanksgiving. Read to the end for the big twist ending. {Second of two posts today}

Breaking the Myths

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Myths (AKA lies) are among the tools the Right uses to reshape America. Nicely crafted, interlocking stories about a fictional past of America. Such as a Thanksgiving as a celebration as an escape from socialism…

(a) The Great Thanksgiving Hoax“, Richard J. Maybury, Mises Institute, 20 November 1999 — Opening:

Each year at this time school children all over America are taught the official Thanksgiving story, and newspapers, radio, TV, and magazines devote vast amounts of time and space to it. It is all very colorful and fascinating. It is also very deceiving. This official story is nothing like what really happened. It is a fairy tale, a whitewashed and sanitized collection of half-truths which divert attention away from Thanksgiving’s real meaning.

(b) The Real Story of Thanksgiving“, Rush Limbaugh, 21 November 2007 — Opening:

That Thanksgiving story is right out of my second book, See, I Told You So, and we do that in the last half hour of every show on the Wednesday prior to Thanksgiving. It is so at odds with what all of us were taught in school. I’ll just give you a little heads-up. If you were like me, what we were taught in school was that the Pilgrims came over, and they were just overwhelmed; they were swamped; they had no clue where they were; they had no clue how to feed themselves; they had to clue how to protect themselves; they had no idea how to stay warm; they had no idea how to do anything. They were just typical, dumb white people fleeing some other place they couldn’t manage to live in.

(c) The Lost Lesson of Thanksgiving“, John Stossel, Fox News, 24 November 2010 — “Had today’s political class been in power in 1623, tomorrow’s holiday would have been called “Starvation Day” instead of Thanksgiving.”

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Did anyone predict the 2008 crash? Will anyone predict the next crash?

Summary: There are many who claim to have predicted the 2008 crash. Most (or all) in fact did not foresee the banking collapse that was at its center, that expanded a commonplace downturn into the worst global downturn since the 1930s. That tells us something important about our times, and what we an expect in the future.

Expect the unexpected: fish

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“Unless you expect the unexpected you will never find truth, for it is difficult to discover.”

— Heraclitus, the pre-Socratic “Weeping Philosopher” of Ionia

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An important message of the FM website is that the post-WW2 era has ended, starting an era of unpredictable events. It’s a message nobody wants to hear, ripping asunder our comfortable belief in the reliability and normality of our institutions. We see these things in the history of the 2008 crash, the worst since the Great Depression. Legions claim to have seen it coming; in fact few (perhaps nobody) predicted its nature.

I doubt the many (or anyone) will do better in the next crisis. This uncertainty is a fundamental aspect of our situation. We’re “off the map”, sailing through unknown conditions (that part of the puzzle I got right, writing about it as early as Sept 2008).

As an example of how this worked — and what we can expect in the future — a previous post looked at Steve Keen’s predictions of trouble for our financial system.  He saw the flaws in our financial system, the potentially ruinous fault lines — but not the distinguishing feature that in 2008 turned the commonplace bursting of an investment bubble into a global 1929-like crash: the collapse of banks in the USA and Europe.

Other economists, such as Nouriel Roubini, also saw the danger in broad terms, but not the fragility of the banks that brought so many nations to the brink of Depression. Many non-economists also saw it (though in less detail), such as myself (e.g., the housing bubble and unsustainable levels of debt). I doubt that the senior managers of the banks themselves saw the danger (although their blindness proved quite profitable for themselves, getting paid both to cause and clean-up the bubble).

Another prediction of the crash

Another description of a successful prediction appeared in Gideon Rachman’s review of Jonathan Kirshner’s new book, American Power after the Financial Crisis (Financial Times, February 9): “The fire of the crisis was extinguished at great cost, but ‘the firetrap remained.”

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Mark Twain gives us advice about our wars

Summary: Most of America’s wars have been counterinsurgencies, fought before Mao brought 4GW to maturity after WW2. As we start a new war, let’s take advice from wise men of our past about such conflicts. Such as Mark Twain (1835-1910), who lived during America’s golden age of counterinsurgency. Today we have two of his articles. One gives advice. The other is something to shock us into sense.

Mark Twain

Contents

  1. Mark Twain’s advice about Counterinsurgency
  2. The War Prayer
  3. Other notes from the past

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(1) Advice

Mark Twain on Counterinsurgency

by Mike Few at the Small Wars Journal
16 November 2010
Reposted with his generous permission

In a month when we’re asking the experts hard questions on the need to reform FM 3-24 Counterinsurgency and rethinking the colonial methods, Mark Twain, the quintessential American writer, decided to chime in. Nearly 100 years after his death, Mark Twain is finally publishing his autobiography. In his political views, Twain was decidedly anti-imperialist. Twain wrote in “Returning Home” (interview in the New York World, 4 October 1900):

You ask me about what is called imperialism. Well, I have formed views about that question. I am at the disadvantage of not knowing whether our people are for or against spreading themselves over the face of the globe. I should be sorry if they are, for I don’t think that it is wise or a necessary development.

As to China, I quite approve of our Government’s action in getting free of that complication. They are withdrawing, I understand, having done what they wanted. That is quite right. We have no more business in China than in any other country that is not ours.

There is the case of the Philippines. I have tried hard, and yet I cannot for the life of me comprehend how we got into that mess. Perhaps we could not have avoided it — perhaps it was inevitable that we should come to be fighting the natives of those islands — but I cannot understand it, and have never been able to get at the bottom of the origin of our antagonism to the natives. I thought we should act as their protector — not try to get them under our heel.

We were to relieve them from Spanish tyranny to enable them to set up a government of their own, and we were to stand by and see that it got a fair trial. It was not to be a government according to our ideas, but a government that represented the feeling of the majority of the Filipinos, a government according to Filipino ideas. That would have been a worthy mission for the United States. But now — why, we have got into a mess, a quagmire from which each fresh step renders the difficulty of extrication immensely greater. I’m sure I wish I could see what we were getting out of it, and all it means to us as a nation.

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Before your celebrate Labor Day, look at the reality of America’s workers

Summary: On this Labor Day let’s revisit the lost history of the union movement, and its vital contribution to building America’s middle class. Before you celebrate, look at the situation of America’s workers, and the trends.

“If any man tells you he loves America, yet hates labor, he is a liar. If any man tells you he trusts America, yet fears labor, he is a fool.”
— attributed to Abraham Lincoln

Union: bargain or beg

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Contents

  1. Talking to the workers of America
  2. Rise and Fall of America’s Middle Class seen in graphs
  3. We throw away 150 years of effort
  4. For More Information
  5. A note from our past

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(1)  Talking to the workers of America

“There are no problems we cannot solve together, and very few that we can solve alone.
— attributed to Lyndon Baines Johnson

I travel a lot. Usually in a narrow circle of airports, hotels, and business districts. Lately I’ve gone to a wider range of events: farmers’ markets, gun shows, stock car races, etc. I chat, looking at the faces of the people I meet. Looking into their eyes. Here are my impressions, totally subjective — FWIW.

Most of the people I meet are white. I ask what they think about many things. To grossly oversimplify, in general I get similar responses. The economy (it sucks), about gold (they trust it), the government (the enemy), Blacks and Hispanics (they don’t like them), immigrants (they hate them), Asians (envy and some mistrust), police (strong but mixed feelings), the military (admiration), Obama (a wide range of unfavorable impressions).

These are strong hard-working people. They see their cultural washing away. They’re under increasing economic stress, with their class experiencing severe downward mobility (by now unmistakable). They’ve been subjected to generations of information operations by conservatives and liberals. As a result their view of the world is a confused mish-mash of discordant elements, much of which is false (about our past and present, about science and culture).

Most important, the concept of collective action has been erased from their consciousness. No matter how great their strength of the will and bodies, their worship of individualism makes them as easily controlled as sheep. This is easily seen when asking how they’d respond to a great disaster, perhaps the social collapse so many of them expect. Guns, gold, family — perhaps combined with a retreat to the hills.  A guaranteed futile fantasy.

These are the people revolutions are made of. They are soldiers waiting for a cause and a Leader. Let’s hope they get neither. My guess (emphasis on guess) is that the result will be painful for America.

(2)  Rise and Fall of America’s Middle Class seen in graphs

The economic drivers of this class struggle are easily seen. Since 1990 wages are falling as a share of Gross Domestic Income (GDI), especially for the lower middle class. Corporate profits are rising. The reasons are complex, the result has by now become unmistakable: a shift of our national income from return on labor to return on capital. Since the nation’s wealth is so highly concentrated, the result is rising inequality of income.

Wages paid as a share of Gross Domestic Income: at a post-WW2 low and falling fast.
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FRED: compensationGDI
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About half of this lost share of national income has gone to boost domestic industries’ share of Gross Domestic Income: now at the highest level since 1968, and rising.

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