Remembering Remembrance Day
Every war in history had its fair share of bumbles and mishaps – but one sticks out in Bill Bonner’s mind as being almost unbelievable in its amount of catastrophes and calamities…
We can think of scarcely a single war that was not begun in treachery and fraud. Nor can we think of any that wasn’t carried out with woodenheaded imbecility. Military history makes the whole profession look nearly as incompetent as psychology or marriage counseling. Were it not for the corpses, you could get a good laugh from it.
Almost every account of war, from Thucydides, to Clausewitz, to Keegan, is a farce of missed cues and pratfalls combined with backstabbing and cluelessness. Troops never seem to get where they are supposed to be when they are supposed to be there. Armies walk into obvious traps with their eyes wide open. Generals reach beyond their supply lines and routinely run out of ammunition or food. Orders are mixed up…or lost…or handed to the enemy. When a victory is gained, it is as much a result of luck as of skill, and then subsequently reversed by further bungling. Most of mankind’s wars, far from being stories of valiant heroism, are absurd farces that even the cavalry horses must have laughed at, until they starved to death.
World War I Blunders: Everyone Looks Like a Jackass
World War I was famously badly scripted. If it had been a movie rather than an actual event, the actors would have turned up their noses and refused to have anything to do with it. Audiences would have sniffed and turned away in disbelief. But put the actors in uniform, and they are ready to play any part – no matter how preposterous. Told to go "over the top" and advance across a "no man’s land" with the enemy shooting at them, the soldiers acted like dumb mules – that is, they did as they were told. It was a case of "lions led by donkeys," said the popular press. The top brass were idiots, wrote the columnists, but our boys performed magnificently. And yet, when looked at with an unsentimental eye, they all look like jackasses.
On the Eastern front, the Russian army was commanded largely by German-speaking officers. Often as not, their orders would fall into the hands of the enemy – meaning, the Germans, who could read them without translation. If they fell into the hands of their own Russian troops, meanwhile, they were unintelligible. The Russian army in WWI must have been among the most incompetent ever put into the field. But at least it was better in many respects from the Soviet Army that Stalin threw against the Germans 26 years later. In the intervening years, Stalin had had most of the decent officers shot. You’d think the officer class might have seen what was coming and marched on the Kremlin before Stalin moved against them. But the top brass never seemed to anticipate anything. Those in charge of the guns let themselves be shot. Their replacements spoke Russian. But they were not only completely untutored in military art; they were murderous beyond belief. It has been estimated that in the first months of the war, half of all Soviet casualties were caused by the Soviets themselves. Their planes were so badly made, that just as many fell from the air because of construction defects as enemy fire. And their officers showed as little mercy to their own infantry as to the Wehrmacht. The troops were ordered to advance en masse into the enemy’s lethal fire; if they failed to move ahead, their own comrades shot them in the back.
World War I Blunders: Never Ask Questions
There is something about the métier of soldiering that seems to attract martinets and blockheads. We see what it is immediately. A thoughtful man might wonder what the point is. He might spend his moments on guard duty reflecting on the ‘why’ of it. Why in Hell would I want to do something so moronic, he would eventually ask himself. Then, he’d be useless for further military service.
But the real military man – even one of great genius – never asks questions, not even the questions that are critical to his survival. Time after time, we see vast movements of troops and weapons operating in complete ignorance. The legendary "fog of war" seems to seep into the brains of commanders and soldiers alike. Nobody knows much of anything. Alexander, perhaps the greatest general of all time, marched his troops through the Gedrosian desert, where tens of thousands of them perished from thirst and hunger. Had he bothered to ask directions? Yes. Apparently, he just wanted to see if he could do it. The Romans, supposedly the greatest military geniuses of all time, were taken completely by surprise when Hannibal came down from the Alps. And then the Carthaginian wandered around Italy for the next 10 years before the Roman troops could finally get rid of him. Napoleon attacked Russia, and later, so did Hitler. Both of them were apparently unaware of the Russian weather. Neither had thought to properly outfit his troops for the cold winter. German generals even carried copies of Caulaincourt’s history of Napoleon’s bitter experience in their pockets.
From one debacle to the next, the blunderers of all ranks and social status march blindly ahead. In the Crimea, Lord Cardigan was told to attack a Russian gun emplacement with his light brigade of cavalry. But inasmuch his lordship had barely visited front lines (he preferred the lodging of his own private yacht, anchored offshore in the Black Sea, and the cuisine of his own private French chef), he was unfamiliar with the battlefield. Naturally, he charged off in the wrong direction, getting almost all of his men annihilated. He returned to England as a national hero.
Another expression from the Great War has been handed down to us: "generals fighting the last war." Those in London and Paris, said the critics, thought they could win battles with Franco-Prussian war-era tactics. This judgment was nothing but flattery to the generals; they were fighting wars that hadn’t been fought in generations. Early in America’s War Between the States, General Stonewall Jackson noticed that a good defensive position was practically impossible to take. Advances in riflery made the defenders much more lethal from a much greater distance than they had been. Soldiers could stand their ground as the bodies of attackers piled up in front of them.
"Remember the stone wall," Jackson used to remind his fellow officers, urging them to let the Yankees do the attacking. But Jackson got his arm shot off, by his own men, predictably, and barely had his body reached room temperature when General Robert E. Lee forgot the advice. He ordered a fatal Napoleonic charge against Union positions at Gettysburg. It was obvious even then, a half a century before Passchendaele, that being the attacker was a losing proposition. But attack is just what German, British, and French troops were ordered to do – with inevitably disastrous results. Later, after the Europeans had learned their lessons, along came the fresh faced Americans – who attacked some more.
World War I Blunders: The Cult of the Cavalry Charge
Before the war began, French colonel Grandmaison had founded what was almost a cult based around the mad cavalry charge. What wins battles, he told the French, is neither tactics, nor supplies, nor firepower, nor strategy – it is élan! Dash, that is! Audacity! Attack! Grandmaison soon had an opportunity to put his principle to the test. We can scarcely imagine how beautiful it must have been. A whole regiment of cavalry sweeping across the battlefield, swords and helmets glistening in the sun…what élan! What courage! What glory! What jackasses! In a moment, the German machine guns opened up and cut them to pieces, including the colonel himself. Commentators noted how handsome and romantic the dead horsemen looked, in their bright scarlet tunics, polished brass, and grey pantalons, stained with the dark crimson of dried blood. Elan proved marvelous for poets. In the history of military affairs it was, hélas, a step to the rear.
What radically changed WWI was not élan, but internal combustion; what altered the course of warfare was not the gay cavalrymen, but the dour mechanics. The introduction of the tank made it possible to advance against an entrenched enemy without getting your derriere shot off. Naturally, none of the leading generals and strategists wanted anything to do with it. The French were particularly loathe to get involved with the infernal machines. Even though tanks proved themselves decisively – in early, clumsy versions no less – in WWI, by the time the next war came around the military men of the third republic still had no idea what to do with them.
Instead, they built fortifications that would have been a delight to Francois I, but were an embarrassment to Georges Clemenceau. At a cost of millions of dollars, up and down the Rhine Valley, over a period of many years, they poured concrete bunkers and laid up stone ramparts. This "Maginot Line" was obsolete before it was built. But the French only realized it when the whole line was sidestepped by a "blitzkrieg" of tanks. In a matter of hours, the French defensive line was behind the Germans’ line! General Gamelin, arriving at the front, a bit after the fact and behind the times, is actually said to have wanted to send a warning message back to Paris – by carrier pigeon.
It wasn’t as if the blitzkrieg was a secret. The Wehrmacht had just given French military leaders a demonstration and preview months before the attack across the Rhine, when they invaded Poland. There it was for the Poles, who were tragic blockheads. They hadn’t learned much of anything since being cut down by the Tamerlane’s General Subedei, in the Middle Ages. When the German’s panzers attacked, the Poles mounted up and charged. Practically the entire Polish army was wiped out. Those officers who managed to escape to the east were rounded up later by the Russians and systematically murdered.
Even when the officer class is painfully close to the facts, often it cannot come to putting two and two together, nor bring itself to take the obvious action. Recall the systematic purges of the military in Russia. The German general staff was no better. In early 1945 and even long before, Germany was going down to defeat. Every officer knew it. The Russians were closing in on Berlin from the East. In the West, the allies were across the Rhine. And there in his command bunker, Der Fuhrer was barking mad. If he were out of the picture, there might have been a chance to save something. At least they could have organized a rational endgame defense, shifting troops to the east to hold off the bloodthirsty Russians while allowing the Americans to advance to Berlin. But the same officers who had ordered the deaths of millions in more than four years of warfare, who had watched thousands of their soldiers and friends die in combat, prison camps, and before Hitler’s firing squads, could not seem to summon up the gumption to put a bullet into one single especially vile and addled head.
But that is the glory war. Gamelin, Grandmaison, Haig, Pershing, Paulus, Kluge and millions of nameless dead men…we remember them all. Gutless, witless, fighting today’s pointless wars with yesterday’s senseless tactics, they were nevertheless humans, just like us. It is the heart that remembers them on Remembrance Day; the brain is appalled.
The Daily Reckoning
November 18, 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).
Would you rather hold one thousand dollars…or two ounces of gold?
It is a little like asking if we would rather have one old woman dressed for Sunday services or two young ones stark naked. Ask us something harder.
What happened yesterday? The price of gold jumped another $7. It is headed for $500. We may have to move up our buying target.
Why is the price of gold so important? Because gold is the ultimate competitor to the dollar. A vote for gold is a vote against the dollar, against paper money…and paper assets. It’s a way of saying, "Yes, we know Bernanke, Bush, Greenspan, Trichet and Goldman Sachs have everything under control, but we thought it might be a good idea to have some REAL money, just in case."
Gold is a remarkable thing. It is found in the earth’s crust like lead or coal and sits on the periodic table. It can be mined, but it cannot be manufactured. It can be polished, but it cannot be enhanced. It can be wrought and worked, but it cannot be manipulated like paper money. It can be flattened into a sheet thinner than paper, but it yields to neither political pressure nor financial desperation.
For thousands of years, gold has been a measure of wealth and a way to keep it. Protecting your wealth was simple: you bought gold and hid it (Invading armies often routinely tortured their victims to get them to tell them where the gold was hidden.).
At last night’s dinner party, we sat next to a woman who is writing a book about Napoleon Bonaparte.
"Bonaparte hated debt," she said. "And he hated paper money. He had seen what it had done to France during the Revolution. He insisted on an honest currency based on gold coins."
Why gold coins? Because gold is nature’s money. Central bankers can’t create it at will. They have to buy it like everyone else. This naturally limits the "money supply," generally keeping it in line with the economy itself.
Bonaparte’s financial system helped make France one of the world’s most prosperous countries. The evidence is all around us. Everywhere you go in France you see the buildings put in the 19th century – handsome edifices, solidly built. Most of Paris itself is a product of the same 19th century prosperity.
But the world turns. By the beginning of the 20th century, it had been a long time since people had suffered inflation. So, along came economists saying to no longer worry about it. In they’d be better off if prices rose a little bit. It would "stimulate" the economy. It would help give people jobs. These same economists offered to "manage" their nations’ monies in order to produce the improvements they promised. Henceforth, no one needed to be crucified on a cross of gold, they explained.
Reluctantly, by fits and starts…the world’s money and gold were unhitched. On August 15, 1971, the last link was cut. Since then, we have been enjoying an experiment – a world of "managed" currencies. As far as anyone can tell, it is a success. The world’s most prolific currency – the dollar – is still accepted everywhere as though it were real money. Lenders have trillions of dollars worth of credits, and hold them as though they will be still be valuable next year…even 10 years into the future. Merchants do not laugh when you take a dollar out of your pocket. You can use the dollar to pay your bills. Dollars you left in your desk drawer last year are worth almost as much a year later.
Is this really a new era, dear reader? After all these thousands of years, has mankind really learned how to control paper money?
We will watch see. We will see. We will hold gold tight and enjoy the show.
Now, more from our news team…
Craig Walters, reporting for The Rude Awakening
"Urea ammonium nitrate is not a chemical weapon…nor is it a homeopathic dietary supplement. It is North America’s most versatile nitrogen fertilizer…and one company manufactures more of it than anyone else in the world."
Bill Bonner, back in "the city of burning cars" with more views…
*** Our book hits bookstores this week. Anecdotally, the Barnes & Noble in Towson, Maryland stocked 5 copies yesterday and sold 4 of them. That seems like a good trend.
*** It’s selling well on Amazon, too. We’ve been #1 on the business list, notably ahead of Friedman’s World Is Flat, for the last three days. But we’re getting beat out by two pop-up kid’s books and an Oprah book club recommendation for the number one slot on the general list. Perhaps, we should have gone with our original hunch and written the signature pop-up edition of Empire of Debt, complete with presidential seal.
*** Well, it’s Friday, November 18, 2005. Not only should copies of Empire of Debt be in bookstores, but a copy should have landed on Congressional desks all across the nation by now.
You want to have a little fun? Join us by contacting your Senator or Representative to make sure they both receive their copy and take a peak between the covers. "We’re only asking them to read the introduction," says Addison.
For convenience sake, we included both the Open Letter To Congress we sent along with the book and contact information for every Senator and Representative on the Daily Reckoning website. You’ll find phone, e-mail or physical address information… whichever method suits your style best.
Who knows…Maybe we can scare up a Congressional comment on the state of the Union’s balance sheet.
*** At dinner last night, an American woman explained why there is so much activity in what is called "private capital."
"It’s really very simple," began the former investment banker, "the cost of money is lower than the earnings yield. If you can borrow money at 6% and use it to buy a company that is earning 8%, well…duh…"
Private capital firms aggregate money from big investors and use it either to buy private companies and take them public, or to buy public companies and take them private. With interest rates this low, and profits this high, there is apparently a lot of running around in the marketplace.
"Imagine you find a company that is worth $10 million in the marketplace. And the company is earning $1 million each year. You borrow $10 million at 6% and buy it. Your interest cost is only $600,000 per year. But the company you bought earns $1 million per year (and don’t forget…you bought the company’s assets…you might get non-performing properties that you can sell off too…reducing your basis in the company itself). So, you end up with $400,000 per year in profit. It isn’t usually that simple, but that’s the idea."
This is why the "Fed model" and many investment analysts compare stock prices to interest rates. When rates are low, stocks are "worth" more, because you get more out of them than you could by simply lending out your money. They’re "worth" more too, because there are a lot of people who want to make the $400,000 described above by bidding up the prices of equities. It’s a kind of arbitrage, which reduces all assets to the same basic level, adjusted for risk. There’s no reason you should be able to make 5% from one investment and 10% from another – unless the one is more risky than the other. Generally, these differences disappear; investors buy the "cheap" sources of earnings until prices are no longer cheap.
Then, when the equities have been bid up to the point where they are no longer cheap, analysts explain why they are properly priced. Because interest rates are low, they say.
But here we pause to admire the elegant perversity of nature, and her markets. The same low rates that bring out the wheeler-dealers in the equity markets also bring the lumpenconsumers into Wal-Mart and the lumpenhomebuyers into the real estate agents’ offices. Pretty soon, a boom has been created – with cash registers ringing all over the country. Profit margins rise – especially for the companies that earn money by "financing" rather than making things. We note in passing, that Ford Motor Company wouldn’t make any money at all if it weren’t for financing – making companies more valuable still. But the boom, and the value of the assets, rests entirely on the low rates. If rates were to rise, sales would decline, profits would fall, and not only would a company’s earnings drag down its stock price, so would the higher interest-rate environment (the earnings themselves would be considered worth less when you could earn more from lending money out).
What would make rates rise? People could come to believe that a dollar next year, might not buy as much as a dollar this year, for example. Why would they think such a thing? Because so many dollars had been created in the boom brought about by low rates! Oh dear reader, it is a wicked world we live in.