Ides of March

In this Daily Reckoning classique, which originally ran on March 15, 2002, Bill Bonner looks at the War on Terror and the super-power that is the U.S military, and wonders: Is the United States to big to fail?

Caesar (to the soothsayer): The Ides of March are come.

Soothsayer: Ay, Caesar; but not gone.

Shakespeare’s "Julius Caesar"

On March 15, 2046 years ago, Julius Caesar was assassinated by his friend Brutus and other conspirators. Caesar had it coming, of course. He had crossed the Rubicon with his army – something that was forbidden under Roman law – and had seized power by force. But when Caesar fell to the ‘unkindest cut of all’ it set off a power struggle in Rome that soon had armies on the march all around the Mediterranean and ended up by – among other things – ending Ptolemaic rule of Egypt with the death of Marc’s Anthony’s lover, Cleopatra.

What a marvelous story – full of power, war, deceit, backstabbing, jealousy, sex… even animals! No wonder people love politics…it is so much like real life.

As promised, today’s letter will not ask long-term Daily Reckoning sufferers to reckon with Alan Greenspan, nor with the Japanese economy.

Instead, we will render unto Caesar what is his – turning our reckoning away from markets and towards politics. That is, away from illusions of wealth towards delusions of grandeur… away from greed and fear towards hypocrisy and larceny… and away from charming rogues towards rogues with no charm whatsoever.

We turn, in other words, from the distortions and hype of the financial pages to the empty headed pomposity of the editorial pages.

Combating Terrorism: Looking For Things That Cause Trouble

In particular, we turn to the newspapers to find out what is happening in the War Against Terror (WAT).

"Fierce fiery warriors fought upon the clouds,
In ranks and squadrons and right form of war,
Which drizzled blood upon the Capitol;
The noise of battle hurtled in the air,
Horses did night, and dying men did groan,
And ghosts did shriek and squeal about the streets."

Caesar’s wife, Calpurnia, might have been describing the WAT. Instead, she was recalling a nightmare and giving her husband a warning: Beware the ides of March.

But what husband listens to his wife’s bad dreams? Caesar went forth, fearless. "Danger knows full well," says he, "that Caesar is more dangerous than he."

We do not read the news as others do – that is, to avoid doing anything useful or uplifting. Instead, we consult the headlines the way the Romans consulted augurs – looking for things that might cause trouble. Is something happening in the world that might trump the normal patterns of boom and bust, or overrule a financial trend… like WWII is said to have brought an end to the Great Depression?

A preliminary conclusion: nothing in the news suggests that the Axel of Evil is turning any more slowly today than it was before the WAT was announced. ‘Terrorists’ have been rounded up or killed by the thousands. But like the terrorists who bedeviled Roman legions… there will be plenty more to take their places.

And a sneaking suspicion: if the terrorists fail to come forward on their own… we will create them.

The nice thing about being the world’s only super-power, you can launch the most absurd campaigns on the basis of the most preposterous pretenses – and who’s going to stand in your way?

And a further reflection: little noticed in the celebration of America’s victory over Afghanistan – a country hosting one of the world’s governments that is least able to defend itself – is that the U.S. military has far outpaced the rest of the world. It has gotten so far ahead of the competition that it represents a threat to everyone – including itself. With nothing to stand it in its way, it ends up in places it ought not be. And with no enemy capable of delivering a decisive strike – it may have to blow itself up.

"If Congress cranks up the Pentagon’s budget as much as George W. Bush would like," reckons a N.Y.TIMES editorial, "the U.S. will soon be spending more on defense than all the other countries of the world combined. That is just one measure of America’s armed might – and of a global imbalance of power the likes of which has probably not been seen since the height of the Roman Empire."

Combating Terrorism: The Margin of Power

Even in Caesar’s day, Rome did not enjoy the margin of power that the U.S. does today. There was still another great empire in Persia," writes Paul Kennedy, "and another one in China." (Crassus, a rich Roman, had tried to make a name for himself by launching a military campaign against Parthia [near present day Iraq]. The Parthians attacked on camels – so destabilizing the Roman mercenaries that many broke and ran. Crassus was captured and met his end by having molten gold poured down his throat. His imprisoned soldiers ended up, believe it or not, as mercenaries to a Chinese general and were eventually settled in China.)

"No equivalent concentration of power to a U.S. carrier task forces exists in the world," writes Kennedy, "the few UK, French and Indian carriers are minuscule by comparison, the Russian ones are rusting away."

"This array of force is staggering. Were it ever assembled en masse the result would be the largest concentration of naval and aerial force the world would have seen."

Kennedy notes that he was able to follow the buildup and execution of WAT by looking at the Navy’s own websites. "Accompanying the enormous flagship [the carrier Enterprise] by that time," writes Kennedy, "were two cruisers, six destroyers and frigates, two attack submarines, two amphibious vessels with their troops, and supply-dock ships – in all, 15 vessels and 14,300 mean (including 3,250 troops)."

This really is a new era in warfare. As recently as half century ago, the U.S. Navy would scarcely give out to the public the configuration of its battle groups. "Loose lips sink ships," was the motto of the WWII era.

But the enemy today has no weapons to match against U.S. forces. American armies march around the globe – and appear to be invincible. Why not advertise their whereabouts? What can the enemy do about it?

The conclusion that most people draw from the Afghan war is "almost beside the point," Kennedy believes. "The larger lesson – and one stupefying to the Russian and Chinese military, worrying to the Indians, and disturbing to proponents of a common European defense policy – is that in military terms there is only one player on the field that counts."

"Everyone knew," he continues, "that with the Soviet Union’s forces in a state of decrepitude, the U.S. was in a class of its own. But is simply staggering to learn that this single country – a democratic republic that claims to despise large government – now spends more each year on the military than the next nine largest national defense budgets combined.

"Nothing has ever existed like this disparity of power; nothing… "

What does it mean? Has the U.S. military – and our economy – become too big to fail?


Bill Bonner
The Daily Reckoning
March 04, 2005 — Baltimore, Maryland

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).

Computer problems seem to be running rampant today, so we’re going to keep this short and sweet…

Oil charged through $55 a barrel yesterday, and the team at The Rude Awakening was there, on the floor of the New York Mercantile Exchange, to witness the craze it caused…We’ll turn it over to them for all the gory details…


Tom Dyson, reporting from Manhattan:

"Yesterday, The Rude Awakening toured the NYMEX. We saw frenzied traders in colored jackets screaming and yelling at one another in the crude pit, as oil challenged its all time high…


Back in Baltimore…

*** We’ve been telling you all week that Kevin Kerr knows his way around the commodities markets like the back of his hand… and to prove our point further:

Kevin Kerr advised his clients to sell their unleaded gasoline call options yesterday, for a 17% gain, saying the options were just too exposed to the immense volatility in the energy sector, and had to go. This slim gain is Kevin’s 17th consecutive winner! Congratulations, Resource Traders!

*** We often say that we write in the spirit of runaway modesty here at The Daily Reckoning…the more we think, the less we think we know for certain. One reader sends us his response to that notion:

"It has been my experience that the folks that know the least about a subject are those that are the most positive and forceful in their opinions. They are so ignorant that they literally do not know that they do not know. The people that truly know ‘all about’ a subject can also be quite forceful. For most complex situations, no one CAN know ‘all about’ a subject, but knowledgeable people can see many possibilities and ramifications and tend to hedge their opinions with ‘it depends,’ or ‘on the other hand.’ (One of the more famous sayings of Harry Truman was, ‘Go out and get me a one-armed economist.’) It is an ironic paradox that those that know the least are the more forceful in presenting their views, while those that know the most are the most equivocal. A consequence of this paradox is the knowledgeable person’s views are often discarded in favor of the more forceful presentation by the ignoramus.

"As an example, consider the present economy or present war or any large, complex phenomenon. It is my considered opinion that NO ONE ‘knows’ about ‘the war’ or ‘the economy.’ No one is a knowledgeable person to the point of ‘certainty.’ There are many opinions and many aspects of each one. As such, a person that knows ‘a lot’ about the subject can be quite hesitant about expressing a firm opinion, and may appear very indecisive and uncertain. A person who knows little about the subject can be quite vehement and forceful in his opinion – he is ‘certain.’ In a ‘contest’ for ‘acceptance,’ it is probable, perhaps likely, that the view of the person who knows little will prevail. When laymen say, ‘This ain’t rocket science’ about a complex topic, it usually means they do not comprehend enough of the subject matter to ascertain the level of complexity involved. Many times, they are too stupid to know they are ignorant.

"There are those that know what they are doing and know they know what they are doing. They are leaders; follow them.

"There are those that know what they are doing and don’t know they know what they are doing. They are fools; ignore them.

"There are those that don’t know what they are doing and know they don’t know what they are doing. They are students; teach them.

"There are those that don’t know what they are doing and don’t know they don’t know what they are doing. They are dangerous; avoid them."
We couldn’t have said it better ourselves…

The Daily Reckoning