The Iraq War - Part I

There is much controversy surrounding the war in Iraq…but most who speak out against it, miss the true geopolitical importance of the war. Bill Bonner explains…

"We have brought torture, cluster bombs, depleted uranium, innumerable acts of random murder, misery and degradation to the Iraqi people and call it ‘bringing freedom and democracy to the Middle East,’" said yesterday’s winner of the Nobel Prize for literature.

"But as we all know, we have not been welcomed with the predicted flowers. What we have unleashed is a ferocious and unremitting resistance, mayhem and chaos."

Invading Iraq was a "bandit act, an act of blatant state terrorism, demonstrating absolute contempt for the concept for International Law. An arbitrary military action inspired by a series of lies upon lies and gross manipulation of the media and therefore of the public. And act intended to consolidate American military and economic control of the Middle East masquerading – as a last resort (all other justifications having failed to justify themselves) – as liberation."

Harold Pinter is a playwright. That he should fail to see the geopolitical importance of the war is hardly surprising.

But Zbigniew Brzezinski, a former U.S. national security advisor, ought not to miss it. Quoting Arnold Toynbee, he accuses the Bush administration of "suicidal statecraft…the ultimate cause of imperial collapse."

Iraq War Debate: Potential Terrorists with Grudges

What neither man seems to realize is that ‘suicidal statecraft’ is just what the situation calls for.

The great Anglo-Saxon empire has reached its ‘sell by’ date. Its imperial advantage – its lead in the Industrial Revolution – has disappeared. It now counts on the savings of foreigners to keep going. But while its homeland bound citizens groan under the burden of debt, its military and political leaders still talk tough. ‘You got terrorists with a grudge against the United States?’ asked the Commander-in-Chief. Well "bring ’em on." He might as well have put a gun to his head. Now, with the curiosity of a reporter watching a hanging, we wait to see if he pulls the trigger.

Iraq is full of potential terrorists with grudges. Had the Anglo-Americans bothered to look before they leaped they would have seen a country that is a mix of tribes, clans, families, and religious groups – all of whom loathe each other and all of whom take it as an inherited obligation to avenge any wrong done to any of their own group by any member of any other group back to five generations.

But there is one thing these people despise more than each other – a foreign invader.

Patrick Cockburn, writing in the Independent, reminds us of the insights of a British civil servant, Arnold Wilson. Mr. Wilson wrote this in 1919, two years after the British took Baghdad from the Turks:

"Wilson…warned that the creation of a new state out of Iraq was a recipe for disaster. He said it was impossible to weld together Shia, Sunni and Kurd, three groups of people who detested each other. Wilson told the British government that the new state could only be ‘the antithesis of democratic government.’ This was because the Shia majority rejected domination by the Sunni minority, but n ‘no form of government has yet been envisaged which does not involve Sunni domination.’. The Kurds in the north, whom it was intended to include in Iraq, ‘will never accept Arab rule.’"

All of this was correct. But what they would accept even less was rule by the British. The whole country soon rose up against British forces; there were more than more than 10,000 dead before it was over.

This was the world into which the Bush administration bumbled. Every great empire – from the Assyrians to the Mongols to the British had taken Baghdad. America had to do it too.

Iraq War Debate: Armed Missionaries

"Nobody likes armed missionaries," said Robespierre when the French tried to export their democracy, at the point of a gun, throughout Europe. That too was an insight missed by the Bush team, but that is why the Bush bunch are so perfectly suited to the present circumstance. They seem to have no knowledge or apparent interest in history; they get to relive every bit of it as if for the very first time.

There is hardly an error chronicled in any history of imperial wars that American forces have not committed. They went into Iraq on bad information. Where were the WMD? Where were the rose petals upon which they expected to tread? Where were the happy new democrats, ready to shop at Wal-Mart for backyard barbecues and granite countertops?

Then, of course, they went in preaching democracy and freedom – about which the Iraqis were as indifferent as Americans themselves. What Iraqis really wanted at first was just a chance to steal something; later they would welcome a chance to kill someone. The desert tribes are looters. They climb gleefully through the ruins of a tank or a hotel, looking for something that might be useful.

But their new rulers are little better. Soldiers have a license to kill. A video aired on American TV showed a U.S. soldier gunning down a helpless prisoner. "This one is still alive." Sounds of gunfire. "Now he’s dead." A poll taken days later signaled just how far the public had gone in its descent into imperial madness – most people said they thought the killing was justified.

This attitude goes down badly in a place with 100,000 Iraqi casualties…and where revenge is such a serious matter. Pretty soon, talk of ‘insurgents’ and ‘foreign fighters’ was beside the point. The average Iraqi now jumped for joy when an American soldier went down…and rushed to give the man a kick before his compatriots came to his rescue.

More to come…

Bill Bonner
The Daily Reckoning

October 14, 2005 — London, England

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).

We had a vision this morning.

Two headlines hit us like a rock in the head; in a flash, we saw disaster coming.

"Refco halts business" was the first of them. The news story must already be familiar to you, dear reader. The giant futures trader ran into trouble and ran out of money. All of a sudden, it couldn’t honor its commitments.

"Area resale home prices peaking," was the second. It came from the Arizona Republic. The story went on to tell us what we were beginning to guess: house prices are weakening all over the country. In the last 12 months, the typical maison out in the desert has gone up almost 50% – to $263,000.

(Even that seems like peanuts to we poor American émigrés posted in London. Doghouses sell for more than that here.)

But what goes up goes down…or at least flattens out for a while giving inflation a chance to catch up with it. London houses are said to be going down in price. And in Arizona, price increases that ran about 4% per month have been cut down to only 1.6% last month.

Last year, the English, as well as the Americans, enjoyed a big bonus. Their houses increased so much they were able to ‘take out equity’ – by refinancing, mortgage-linked lines of credit and so forth – and continue their spending spree. It was as if they had looked around the house and found things they could sell on Ebay…a painting stripped from the bedroom walls…an old fur coat up in the attic…a lawnmower. None of this stuff did they miss.

In the United States, the loot from these sales brought in an astonishing $600 billion – or about 5% of GDP. That is, they made more money from refinancing their houses than they gained from salary increases, investment returns or any other source.

Now it is a year later and house prices are no longer rising as fast as they were. Houses are taking longer to sell. Americans are going to their closets and attics, looking for equity. But they find that they are bare; they’ve already sold off all they could. There is no longer any equity to ‘take out.’

What can they do? They have no choice. They must give up something. Already, in Britain, the governor of the Bank of England warns that a fall off in consumer spending may soon lead to recession. Can America’s recession be far behind?

A slowdown in American spending and American living standards, however, is only the beginning. Chinese manufacturers depend on buying from the United States. In the new globablized economy, our working-class, factory-laden neighborhoods are on the other side of the globe. And there, they operate on wafer-thin profit margins…or no margins at all. And Chinese banks, already shaky, are heavily exposed to Chinese companies on the one hand…and to U.S. dollar bonds on the other. What begins as a consumer pullback in America will likely develop as a capital, social, political and financial crisis in China. It will be Refco raised to the power of 10, with bankrupt businesses, supported by bankrupt banks, held up by a bankrupt government afraid to let anything go down for fear that the masses may revolt.

But China will not be the only one facing bankruptcy. David Walker, auditor of the federal government’s books, tells us that the total of all federal commitments and obligations has a present value of $43 trillion, or about $350,000 of debt for every full time employee in the country. In addition, there is private debt – equal to nearly 20% of household income.

Both the feds and private households have gotten into the habit of spending more than they can afford. Where does the money come from? It comes from China and other, mostly Asian, lenders. Nearly nine out of ten of the dollars needed to fund the federal deficit come from foreign sources. One of the major sources is China. And when U.S. consumers cut back their purchases of Chinese-made geegaws, the Chinese – in addition to having plenty of problems of their own – will have no funds to recycle back into U.S. capital markets. Result? A spike up in Treasury bond yields…a deeper recession in the Anglo-Saxon world…and an end to the era of easy money.

Of course, the financial world is far too complex for your editor to try to anticipate in detail. Anything could happen. In a crisis, for example, U.S. Treasuries could even be seen as a safe harbor. Yields could go down rather than up. That is why we buy gold rather than U.S. Treasuries. At current low yields, there seems little to be gained from treasuries…and a lot to be lost. Gold, on the other hand, has been the best-performing financial sector this year – up about 16%. We doubt that the bull market in gold is over; we suspect it is just beginning.

More news from our team at The Rude Awakening:


Chris Mayer, reporting from Gaithersburg, Maryland…

"There is an oil crisis coming. Except that it’s not the crisis you’d expect. The price of oil is likely headed lower, not higher. The next oil crisis, therefore, is the looming sell-off in oil stocks that will send many of them to significantly lower prices."


Bill Bonner, with more views:

*** If you think of China as a happening nightclub with a stiff cover charge, you have the metaphor about right," says our friend, Chris Mayer.

"You can walk in the front door and pay the stiff cover charge. Or you can try to sneak in the back door. In other words, everyone is looking for China plays, and few of them are cheap. But with a little detective work, you can find interesting ways to play China without paying much for the pleasure.

"One of the ‘back doors’ I’ve discovered manufactures components for all kinds of electronic devices, and its largest manufacturing facility is in China. But the best part is, you can pick up shares on the cheap with the potential to double from here. The cherry on top of this financial sundae: The company is in great shape financially with loads of cash and no debt."

*** We are always on the lookout for a bolthole…a quiet place with bed, book, and candle where we can wait out the coming storm. Not that we are anti-social. But we have no wish to suffer along with everyone else. We would prefer to suffer alone.

Besides, we find that the farther we get from the action…the clearer and more amusing picture we get.

So have we made an offer on a ranch in Argentina…far from everything…nestled up against the Andes…under the wide open sky…out on the plains where never is heard a discouraging word…

Then, "let Rome into broad Tiber melt," we will say. Yes, we will watch the great Anglo-Saxon empire roll over from afar… We will read the news of it like we read the obituaries… We have never wished anyone ill, but we still read the obits with great interest.

"You mean…you’re actually going to live there," asked a friend.

"No, I’ll probably only go there a few times in my life. But it’s like a form of insurance. You hope you never have to use it. But you sleep better knowing it’s there…"

"I would sleep worse – thinking about the gauchos eating my cattle…stealing my furniture…squatting on my land…"

"I hadn’t thought about that…"

"And that’s the kind of place where they must look at foreigners as though they were fat sheep coming to a wolves’ picnic. You’ll probably go down there one day and find that the title was never any good…and it belongs to someone else…"


"And how are you going to run the place? You’re not even on the same continent…or the same hemisphere…and you don’t even speak Spanish…

"It’s just a romantic dream you have. You see yourself out on the range, going out on a horse to survey your domain…or gathered around a campfire with the gauchos…drinking that grass tea they make…

"…You see yourself happily doing this while Western civilization collapses, the dollar goes worthless, and people in the cities have to eat corpses to stay alive…

"…You are really dreaming…aren’t you?"

*** Another friend had a different view of it, our Pittsburgh correspondent, Byron King:

"Guillermo! You are soooo post Peak Oil! You are thinking 10 steps ahead of the crowd… Lotsa land! 9 kilofeet? Raising cows? The hands ride horses? You use little oil, and you produce food? Way cool. (Probably pretty chilly at night, and very chilly in winter.) This is perfect. Just stock up on good books and fine weapons, and you and your family and your gold will be set for the next century or so. Tell the Medicis to call the office."

The Daily Reckoning