Paving the Road to Hell

The path that led America to its place as the biggest debtor…biggest consumer…and most meddling military in the world was not forged alone. But, as Bill Bonner points out, there is one world improver who stands out among the crowd…

We are dogged by history. Down the street from our old office in Paris was the site of the world’s first central bank, put up by John Law, before he was forced to high-tail it out of town. Around the corner from our new office, is the Crillon Hotel, where Franklin Roosevelt, then an Assistant Secretary of the Navy, dined in high style while pretending to be getting the low-down on how the doughboys were doing in the trenches. In the next war, Ernest Hemingway claimed to have liberated the bar at the Crillon from the Nazis as they left for the Rhine.

But it is back in Baltimore where the hounds bay the loudest. In our very own office, according to the local history buffs, Woodrow Wilson got together with U.S. Ambassador to Belgium, Theodore Marburg, and ginned up one of the grandest wish lists of all time – the League of Nations.

You’ll recall that two weeks ago, we wrote about some of America’s best presidents: Chester A. Arthur, Millard Fillmore, Warren Gamaliel Harding. While the clumsy giants left their deep footprints in the earth along Pennsylvania Avenue and trod upon practically everyone who got in their way, these midgets managed to make their way through the nation’s highest office leaving hardly a trace. That is, they left people alone…and left the nation as good as they found it.

This week we write about one of America’s worst presidents…Thomas Woodrow Wilson. In the crowded contest for “America’s Worst President,” Wilson stands out. As a world improver, Wilson’s stature is world class. He was humorless, immodest, and self-righteous – ranking along with the great scoundrels of the 20th century…Che, Mao, Lenin, Mussolini, just to name a few. Each was full of good intentions, or so they say.

The Wilson Presidency: “A Mentally Ill, Pitiless Mythomaniac”

America has come to such a position of prominence in the world. It is the world’s biggest debtor. It is the world’s biggest consumer. It is the world’s most aggressive and meddling military power. No country on earth is so godforsaken as to escape America’s notice…nor too poor to lend it money. We pause a moment and wonder how we got where we are. We go to the scene of the crime and look for evidence. There, we take a few samples…over to lab. And what do we find? That the DNA samples are those of Thomas Woodrow Wilson.

We do not blame the man. Or hold him uniquely responsible. His protégé at the Navy Department, Franklin Roosevelt, was an eager accomplice. Lyndon Johnson drove the getaway car. Ronald Reagan, Alan Greenspan and George W. Bush were certainly members of the gang. But Wilson was the mastermind. It is he that gets our attention today.

“A mentally ill, pitiless, mythomaniac, …an enlightened man who believed himself in direct communication with God, guided by an intelligent power outside of himself…” thus did the father of modern psychoanalysis describe America’s 28th president. But Freud’s judgment of the man was too generous. Wilson was a self-satisfied, sanctimonious delusional bungler, who almost single-handedly turned the country into a hollow, mocking parody of what it was supposed to be.

We begin our inspection with a quotation, attributed to Wilson after his presidential election victory: “Remember that God ordained that I should be the next president of the United States. Neither you, nor any other mortal or mortals could have prevented this.”

Is there any doubt that Wilson was mad? He claimed to be a Democrat. Later, he claimed to want to make the world “safe for democracy.” But right here, we see he believed that divine providence decided leadership issues. He had not been elected by the people; he had been chosen by God. Why then, bother to have elections at all?

We also pause to wonder how the former college professor could have known of God’s mind. We have tried ourselves, many times. Does God intend stock prices to rise, we ask ourselves? Will God let this plane land safely, we wondered recently? Where the hell did God let me leave the car keys? But though we have given the matter a good-faith try…we have never mastered it. Each time, we merely hear a booming voice that says: Find the damn car keys yourself!

Surely, Woodrow must have supped with God. Perhaps he had God’s ear…or even His throat. For the man could look into the future as easily as you or I could look into an empty glass of beer. He knew not only that he was destined to become president, but that he could build a world even better than the one God had given him – by replacing the private plans of millions of people with plans of his own.

Where did those plans come from? How did he know that the world would be a better place if a Federal Reserve System were set up to control the nation’s money. How did he know that Mexico would be a worse country…and a worse friend to the United States – if it had General Huerta at its head, rather than Wilson’s man, Carranza…or even Pancho Villa, whom he also backed for a while. What made him think that his own judgment was better than that of the Mexicans themselves? His “democrats” in Mexico murdered priests and nuns. Wilson must have thought it a reasonable price to pay for the benefits of enlightened government – and nothing compared to the price the world paid in Wilson’s European War – but what made him think that a democracy was so superior to a constitutional monarchy?

The Wilson Presidency: Atrocious Judgment in Everything

Wilson’s judgment about nearly everything was atrocious. In his April 2nd, 1917 speech, in which he urged the nation to war, Wilson noted that the Russians had always been “democratic at heart.”

“[W]onderful, and heartening things…have been happening with the last few weeks in Russia,” he continued. What had been happening was the beginning of the Bolshevik Revolution. Germany feared America’s entry in the war on the enemy’s side, and she desperately needed to stabilize the Eastern Front so she could turn her attention to the renewed threat in the West. Her technique was as clever as it was calamitous. She found a revolutionary named Lenin who had been exiled from Russia many years before. He was put on a train, bankrolled and sent back into Russia with the express purpose of making trouble. It was the trouble he made that Wilson applauded…and would later regret. Lenin led the Bolshevik uprising that knocked Russia out of the war. How could Wilson be so sure that the revolutionaries in Moscow and St. Petersburg would be better than the Romanoff’s they replaced?

Readers will rush to judgment themselves. “He made a mistake.” They will say. “Or, how could anyone know that the Russian Revolution would be followed by one of the most cruel and absurd episodes of bad government in the entire history of the planet?”

Of course, he could not know. But Wilson wasn’t really thinking at all; he was just pawing the ground and looking for a head to butt or a purse to steal. And he didn’t particularly care whose. Later even sent troops to Russia to try to beat back the Bolsheviks. But this was typical of Wilson. He seemed to want to intervene, not merely on one side – but sometimes both.

And now, we pause again to wonder at the woebegone majesty of it all. For it is neither love nor money that makes the world go ’round – but vanity. Wilson had no particular love…and not much money. King George V drew his measure as accurately as Freud, calling him “an entirely cold academic professor – an odious man.” But vanity he had in abundance.

People flatter themselves. Animals may act on instinct and primitive urges, but we humans – albeit descended from animal species – operate in an entirely different manner. We think…and coolly adapt our own behavior to the opportunities and challenges that present themselves. And yet, a naturalist dropped down from another galaxy would have a hard time telling where thinking begins and instinct ends. Stags and bulls butt heads from time to time. So do men. Men strut and puff themselves up too – like cocks on a walk. Throughout the entire animal kingdom, fighting, bullying and bluffing are just a part of life. Males come with a desire to dominate…to show that they’re superior. They do this out of no evil motive; it is just nature’s way of allowing females to choose the best mates…like putting a rich lawyer in a Mercedes. Hardly any man thinks about it, and no female either. But then, who thinks about breathing?

Woodrow Wilson was a thinking man. But his thoughts nearly always brought him to want to boss other men around. There was no logic to it. He had no more idea than anyone else what was coming…or what might actually make the world a better place. Yet, he was eager to disturb the plans of millions so that his own plans might be pressed down on them….and his own vision of a better world might be forcibly imprinted on everyone’s landscape.


Bill Bonner
The Daily Reckoning

April 08, 2005

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).

You can’t lose money buying good stocks and holding for the long run. That’s what Peter Lynch used to say. Lynch made his reputation running America’s largest equity fund – Fidelity Magellan. He had a winning streak and retired a rich genius. Investors, naturally, mistook his good fortune for good sense. They piled into Fidelity Magellan only to watch the price drop 23% over the last five years.

They might have done worse. USA Today reports that the 50 hottest selling funds of 2000 have lost investors an average of 42% of their money in the last five years. Investors were “fooled by randomness,” says our friend Nicholas Taleb. They saw something go up; they figured there was more to it than dumb luck. They were wrong. Fidelity’s Aggressive Growth fund, for example, had $23 billion in assets in March of 2000. But if you’d invested $10,000 back then you’d have only $2,697 today, a loss of 73%. How’s that for aggressive growth! The fund will have to go up 271% just to get even. It will probably be a long time before that happens. Another popular fund, Janus Worldwide, lost investors 67% of their money. Even if you avoided all the popular funds and just put your money into any old fund you could find, you still would have lost money in real terms. The average fund is up only 1% in the last five years. Adjusted for inflation – that leaves a substantial negative number that we’re not going to bother to figure out.

Of course, there’s still real estate. You can’t lose buying residential property, right?

But what’s this? An article on Richard Russell’s website tells us that the asking price for condos in San Diego has gone down from $1,005,161 in June of 2004 to around $800,000 today. Could this be true? If you had purchased with 20% down… it means you’ve been wiped out.

Speculators typically buy 30% to 40% of these new condos says the article. The buyer never moves in and doesn’t even bother to rent. He just pays the $700 a month homeowner’s fee and waits to flip his condo at a profit. But how can you make a profit when prices are going down?

And why are prices going down? Because builders noticed prices soaring and tripled the supply. Now, there’s an oversupply…and prices seem to be falling. “Unsold Homes Pile Up in Some Areas,” says a Wall Street Journal headline.

Russell points out that the Philadelphia Housing Index seems to have peaked out too. This could be the end of the housing boom, he thinks.

More news, from our friends at The Rude Awakening…


Eric Fry, reporting from Manhattan:

“This thing feels very toppy. It’s easy to get whipsawed in markets like this. It’s the type of market where you feel stupid, no matter what you do. If you’re long, you feel stupid; if you’re short you feel stupid…Sometimes you just gotta make yourself do nothing.”


Bill Bonner, back in…well, we just stepped off a plane. It’s gray and raining. This must be Europe…

*** Well, there are always Treasury bonds. At least, you can’t lose money on those. They’re guaranteed by the U.S. government, right? George W. Bush went to see a pile of them in Parkersburg, West Virginia, on Tuesday. He didn’t seem very impressed. He was visiting the Federal Bureau of Public Debt, an agency that is probably the closest thing to the “lock box” that is supposed to hold our Social Security savings. The president looked inside. “There is no trust fund,” he reveal, “just IOUs that I saw first hand.”

What the president was looking at were Treasury bonds and bills. They are called “securities,” but as the commander-in-chief noticed, they are nothing more than IOUs. What he didn’t say is that they are IOUs issued by a borrower who can never repay. “To balance the budget by 2030 (assuming we do nothing until then [which seems like a best-case scenario to us]) we would have to raise all payroll taxes by 100 percent and individual income taxes by 50% or we would have to cut Social Security and Medicare benefits in half and cut all non-defense spending by half,” writes Peter Peterson in “Running on Empty.” You don’t have to worry about that, dear reader. Politicians would sooner cut off their own hands than pull the lever for those reforms. Instead, they will let the dollar…and U.S. government “securities” die.

*** Now, we’re being accused of possessing skills that we didn’t even know we had. Another incensed Canuck writes:

“I’m afraid your apology is so thin that it is worthless…a joke!!!!!!

“Your banner headline ‘BACKSTABBED’ was just a cheap shot – you now tell us – to appeal to people that have that “kind of bone-headed thinking that pervades not only our government, but our populace these days.” But not us ‘such humble folk’ at Daily Reckoning…???

“No – your error was just one more example of the general (and shared by you, obviously) U.S. attitude. Canada has been very slow in realizing what kind of a friend they have as a neighbor. Perhaps they have woken up – before it is too late.

“If you want to apologize – consider yourself and your own attitudes first – or admit what you really are doing when you write such trash.


We wrote back:

“I really do believe you are right. Don’t know what other way to say it. The U.S. is probably going to have to get its hubris beaten out of it before it goes away. At least, that what history shows…”

In response to the apology, the same reader wrote:

“OK – thank you – I think…I wish I could say this gracefully…but I can’t…because I have to add that I noticed that you could not resist just one more ‘sell’ for your article…

“Of course, you could have made your point (as you profess it) by stating your opinion about the opinion held by ‘most Americans’ – without resorting to the hype of ‘Backstabbed by Canadians’ – but I assume you wanted the ‘mileage’ associated with promoting a negative view of your Northern neighbors – and so have left the poor American smucks wondering why… even those closest to them in the rest of the world (and therefore those that should know them better…) don’t like them…If, as I believe, you are a consummate pro at PR – what should I have expected…”

*** Whatever the motive of our “Backstabbed” piece – it certainly struck a chord – North and South of the border. Fully half of the “page views” on our discussion boards come from the thread that thrashes out the same subject.

The Daily Reckoning