Heroes of the Revolution

The Daily Reckoning PRESENTS: Here at The Daily Reckoning, we like to look for examples of historical figures who have been made into a cultural icon, while having the mainstream public not really know what he or she actually did, what a monumental failure he or she really turned out to be, or how lame his or her ideas really were. Bill Bonner explores the life of Che Guevara…


We laughed, recently, when we read in the paper that Evo Morales, the new president of Bolivia, said he was “following in the footsteps of Che Guevara.” Either the fellow has a sense of humor, or he is as stone stupid as Che himself.

Like all world improvers, Che claimed a remarkable ability to look into the future and then improve it before it happened. And like all world improvers, the world would have been better off without him. Of course, we all try to peek ahead, and we all try to avoid traffic collisions and bad restaurants. Everyone tries to make his own world better, but only a jackass tries to improve the entire planet.

Who are we to argue with success? Che has become one of the best-selling brands of all time. At a recent Sundance Film Festival, the audience gave a standing ovation to the film “Motorcycle Diaries,” which recounts the story of the young Che’s goofball adventures. Jean Paul Sartre called Che the world’s “most complete human being.” And that other towering intellectual, Mike Tyson, has a picture of him tattooed on his abdomen. Even our own son Henry has a Che T-shirt. And some of Evo Morales’s Bolivian voters apparently pray to “Santo Che” in the hope that he will intervene with the heavens to make it rain.

If anyone ever got what he deserved, it was Che. On October 9, 1967, a Bolivian firing squad put him against the wall of a schoolhouse in La Higuera. “Aim well,” Che is supposed to have said. They aimed well enough; that is where Che’s footsteps stopped.

The Russians had let their young revolutionaries escape a number of times. The Cubans opened the doors of the cell that held Fidel Castro and let him out years before his term had been served. But the Bolivians in the 1960s weren’t fooling around. Che’s associates had bought a tract of land in the country on which he was planning a revolutionary movement that would spread into all of South America. This was it, he had said, with his typical lunatic grandeur; this is the struggle that will determine whether the world goes capitalist or Marxist. Of course, in a sense, he was right. After they shot him dead, the world did seem to give up on the Bolshevik swindle. Practically every government in Latin America hardened against it.

That was typical of Che, too. Practically everything he tried to do went bad. He was in Bolivia for 11 months trying to stir up a popular uprising, but his projects were not even popular with the local commies, who denounced him to the police. As a revolutionary, Che was a washout. As an intellectual, he makes George W. Bush look like Heisenberg.But here, we let Che prove it in his own writings:

“The past makes itself felt not only in the individual consciousness – in which the residue of an education systematically oriented toward isolating the individual still weighs heavily – but also through the very character of this transition period in which commodity relations still persist, although this is still a subjective aspiration, not yet systematized.”

Or how about this:

“It is still necessary to deepen his conscious participation, individual and collective, in all the mechanisms of management and production, and to link this to the idea of the need for technical and ideological education, so that we see how closely interdependent these processes are and how their advancement is parallel. In this way he will reach total consciousness of his social being, which is equivalent to his full realization as a human creature, once the chains of alienation are broken.”

As bad as he was as a thinker, as a man of action he was worse. As a military strategist he made Custer look like Julius Ceasar. As a central banker, he made Alan Greenspan look like…well…John Law. And as a guerrilla leader, he was an embarrassment to an absurd trade. Confronting the Bay of Pigs invasion, he mistakenly thought the landing was at another spot and went thither with his troops – only to wait and wait until the fighting at the Bay of Pigs was over. Still, Che came back from the battle with a bullet wound to the face. How did he get it when he was nowhere near the actual combat? Apparently, his pistol went off in his hands.

What launched Che on his road to T-shirt stardom was a meeting in Mexico with Castro.Che was, by then, a doctor by training– or so he claimed – and a Marxist by inclination.He and the Cuban (Che was Argentine) spoke for 10 hours.Then, Che decided to cast his lot with Fidel’s insurgent movement.

The planned assault by sea got off to a rough start. Their yacht was sold by a turncoat, and they ended up crowded onto a smaller boat, retching on the deck all the way to Cuba.There, they were so pathetically unprepared that most of their group was killed straightaway. Che and only eleven others got away into the hills where they began their war of terror, gnawing on sugarcane to keep themselves going. The whole preposterous campaign would have come to nothing at all had not the Batista government been even more incompetent than they were. When the United States decided not to poke its nose into the business, Batista thought he had better get out while the getting was good. And so, unlikely as it was, power was left in the hands of Fidel, his brother, Che, and a small group of world improvers, imposters, and sociopaths. They promptly turned the island into a tropical version of Abu Ghraib.

Che was first put in charge of killing people. He executed as many as eight people himself – without trial, and often even without real cause. Then, the real killing began. Again, Che was in charge. He signed between 500 and 2,000 death warrants and presided over a whole system of torture, labor camps, and murder.

When the blood dried, Che took on another role: he was made head of Cuba’s central bank. How could there ever have been any doubt that the Fidelistas were mad? Anyway, there was concrete proof of it enough soon – within months, the sugarcane industry had collapsed, Soviet-style industrialization failed completely, and food had to be rationed.

Bill Bonner
February 24, 2006

The Daily Reckoning

Editor’s Note: Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of The Wall Street Journal best seller Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (John Wiley & Sons).

In Bonner and Wiggin’s follow-up book, Empire of Debt: The Rise of an Epic Financial Crisis, they wield their sardonic brand of humor to expose the nation for what it really is – an empire built on delusions. Daily Reckoning readers can buy their copy of Empire of Debt at a 40% discount – just click on the link below:

“Now Perhaps Someone Will Listen!”

“The best laid schemes o’ mice an’ men gang aft a-gley,” wrote the Scottish poet Robert Burns, noting the tendency of even the best plans to go awry. We are not sure exactly what he had in mind when he wrote it, but we think we see some signs of “a-gley” coming pretty soon in this market.

Today, we belabor one sign:

If you had lent the U.S. government money yesterday, you would have gotten a yield of 4.71% on a six-month loan. On a loan for a longer period, the yield would have been lower: 4.51% for a 30-year bond.

Obviously, there is something distinctly odd about this. Why would you get less money for a loan that takes longer to come back to you? The longer the time, the more risk. Tsunamis, nuclear wars, the melting of the polar ice caps, a new Fed chief…so many things can happen over a longer time, dear reader. So many things can exhibit this nasty tendency to go “a-gley,” which is why the long-term rates should be higher. And if they’re not, then it’s what economists like to call an “inverted yield curve.” This means that the line on the chart that indicates yield goes down with time. And most economists now think the yield curve will become even more inverted by the end of March, after Mr. Bernanke announces another rate hike.

Generally, or at least since the 1950s, an invested yield curve has been a signal of a coming slump. It signals that the Fed’s short-term rates are too high, which is what makes the economy slump, many believe.

And the fourth quarter of 2005 suggested – well, it was more like proclaimed at the top of its voice – that a slump might be on its way. GDP grew far more slowly than expected, inching along painfully at an annual rate of only 1.1%.

Ours is an economy dominated by consumption, and consumption requires spending, which insists that people have something to spend. In today’s news we find that average weekly consumer incomes in the month of January went down 0.4% from the year before. We also find more circumstantial evidence that the spendable cash is getting tighter and tighter.

The reason is not hard to find. The spending boom of the 2001-2005 period owed its genesis to the boom in real estate. Their own four walls and roof turned many Americans into party animals. Asha Bangalore, an economist at Northern Trust Company, figures that 43% of the jobs created in the U.S. during that period were a by-product of real estate. People were put to work building houses, fixing up houses, financing houses, selling houses…or put to work serving drinks to people who made money on houses. In the first nine months of 2005, calculates Bangalore’s colleague Paul Kasriel, 100% of the increase in household net worth came from asset-price appreciation, most of which was the increase in house prices.

We can still hear echoes of the boom reverberating, but the source of the explosion seems to have died down. In Orlando, for example, the local paper tells us that there are now twice as many houses for sale as there were a year ago. “Homes hit market in record numbers,” says a Sun Sentinel headline.

Since there is no “spot” market in houses, owners adjust their expectations slowly. No one knows what the exact market price really is, and few are willing to accept a figure lower than the one gotten by their neighbor down the street. So, instead of adjusting quickly to a softer market, prices tend to trail off slowly as inventories build. The boom ends with a whimper, not a bang.

It’s not really any of his business, but the housing market is bound to be weighing on Ben Bernanke’s mind as he considers the Fed’s next rate move. The yield curve will be bothering him, too. In a speech last March, Bernanke already told listeners what he would do when he took the top post. He would aim the fed funds rate so that “the slope of the term structure of interest rates is approximately normal, as best as can be determined.”

Unfortunately, there is nothing even remotely normal about the present U.S. economy.

But we will let that pass and focus on the shape of that yield curve. “Approximately normal” is a curve that slopes up, not down. To get the present curve back to “approximately normal” either short rates have to go down or long rates have to go up.Mr. Bernanke controls only the rates on the short end. It is hardly a stroke of genius on our part to suggest that he will not raise them. Heck, he might even lower them.

More news from Aussie Joel and The Rude Awakening…


Maria Reynolds reporting from Wall Street:

“A good leveler is to compare Buenos Aires, Argentina, with Montevideo, Uruguay, and Punta del Este (Uruguay’s prime beach resort) with the Argentine Atlantic coast.”

For the rest of this story, and for more market insights, see today’s issue of The Rude Awakening.


Bill Bonner, back in France with more views…

*** From Addison:

“The show CBS Sunday Morning w/Charles Osgood sent a camera crew and producer to Baltimore from their DC bureau on Tuesday. They’re doing a story on the American love affair with debt. The segment will air this Sunday. If you’re a fan of the show you can check it out between 9:00 – 10:30am on CBS. They were trying to get me to take a pretty hard position on the build up of debt…it wasn’t hard to do. Who knows how they’ll skew the message.

“But what was more interesting was their interest in our campus here in Baltimore. ‘We are dogged by dead men,’ we write in the opening of a chapter we affectionately titled The Road To Hell in the Empire of Debt, ‘it is in Baltimore, Maryland, where the ghosts haunt us the most. In our very own office, according to the local history buffs, Woodrow Wilson got together with the U.S. Ambassador to Belgium, Theodore Marburg on the of the grandest wish lists of all time – The League of Nations.’

“‘You’re proud of that?’ the producer who conducted the interview asked. They had set up a makeshift studio in the library of the old Marburg mansion – the very room in which the first draft of the League of Nations was reputedly penned.

“Earlier this week, we were interviewed by the Baltimore Sun because of our presence in these buildings in Mt. Vernon. We’ve apparently had an impact on the job growth in downtown Baltimore.

“The neighborhood has come a long way, certainly. Back in 1995, when we first moved into the Marburg Mansion, the gentleman who was moving out, a doctor retiring from his practice, was mugged at gunpoint on the steps at 1:00 p.m., broad daylight.

“Anyway, these buildings make for entertaining conversation at cocktail parties.

“Here’s what we put in the company newsletter after the Baltimore Sun piece was published:

“‘Agora Inc. was featured in a front-page news story in the Baltimore Sun for its contribution to the job renaissance underway in downtown Baltimore. Our own Addison Wiggin, of Agora Financial, explained that the neighborhood definitely seems more vibrant than it used to when we moved in a decade ago.

“‘About 30 minutes after this article hit the newsstands, the mayor’s office called. They’ve posted the article on their site. Of course, it’s a campaign year, so would we expect anything less? Baltimore is, however, being singled out for being a real world example of what’s called: New Urbanism. An architectural movement that stresses ‘mixed use urban renewal’ in direct response to suburban sprawl.’

“Back to Bill…”

*** Is there anyone among you, dear readers, who would like to buy a magnificent chateau in France? The Forbes family has one. Mick Jagger has one. Surely, someone else wants one?

We sincerely hope so.

We drove out to Normandy yesterday. It was bitterly cold and snowing. Maybe the weather depressed us. Or maybe it was the staggering scale of the work – not to mention the expense – on our pile of old stones.

It seemed like such a fun project when we took it on. We imagined ourselves spending weekends out in the country, cheerfully whistling while we lay up stonewalls. We imagined the many conferences, colloquies and seminars that we would be able to host…not to mention the lavish dinner parties and convivial weekend retreats.

But something has gone wrong with this cozy picture. It began, as we have already reported to you, when we gutted the basement and discovered what to old oak beams must be the equivalent of avian flu. They had to come out…to be replaced by concrete.And then, the roof was next. We had not noticed that one of the major structural beams holding it had rotted on one end. The roof had to come off so that it could be replaced.Next, a French bureaucrat informed us, sniffily, that the house was a “public building,” even though it was not open to the public. It was simply too large to be considered private. All of a sudden, we were looking at wheelchair ramps and handicapped bathrooms. And then, along came the agency in charge of historic monuments. Didn’t we realize that this was a “classified” building? Didn’t we realize that we needed permission before we touched anything? And didn’t we realize that there was no way in hell that we were going to put in any handicap ramps?

Each step of the way made the project more and more costly and less and less fun. When it is finished, we will have a magnificent building, but we won’t be able to take much pleasure in it. We will have spent too much. The chateau will be in good shape. We doubt we will be able to say the same about ourselves.

We chuckle at all this. We, who wrote about the bubble in real estate prices, who warned against spending too much on vanity projects, who profess humility and eschew conspicuous consumption in all its forms – we have let ourselves get trapped by a huge (for us) investment in a grandiose property. Now, we have no choice…we have to hang our head, brace ourselves, and see it through.

We couldn’t wait to buy the place two years ago. Now, we can’t wait to sell it.

The Daily Reckoning