The Rape of Nanking

 Those who believe in the unstoppable march of progress have a lot of explaining to do… as this DR Classique, originally broadcast on 13 December, 1999, makes abundantly clear.

The storm that knocked out our power also blew apart many of the decorations for year 2000 in little Lathus. Even in their prime, they looked rather feeble. Now they are pathetic.

As we drove up to the church at Bourg Archambault, we found that the wind had also knocked over the cross in front of the church. There was the Nazarine, still nailed to the cross. But the cross was lying on the ground. Father Marchand took it as a good sign. But everything is a good sign to him. Every storm portends fair weather.

He is a stopped clock. A perpetual optimist. A perma-bull on the perfectibility of man and the triumph of good over evil.

But, beginning in December 1937… only 65 years ago… the world was reminded of what evil was all about. Previous records in political depravity were broken when the devil worked overtime for a six-week period. When it was over, an estimated 377,000 people had been slaughtered.

These people, by the way, were not soldiers of the Reich nor draftees of the Kremlin. They were men, women and children of all ages and party affiliations. Democrats. Catholics. Confucians. Bricklayers. They shared one common mistake – they were in the wrong place at the wrong time.

These people were not obliterated in an impersonal air- raid… such as the 60,000 thought to have been killed at Dresden or the 200,000 killed at Nagasaki and Hiroshima.

Nor were they killed methodically and systematically as the Nazis and Bolsheviks usually did with their victims.

The rape of Nanking: Nothing Personal

Instead, they were put to death one by one…or in small groups. They were often tortured…degraded…and made to suffer as much as the killers’ imagination made possible. Nothing personal…of course.

Butchery. Barbarity. Bestiality. It is hard to describe what happened in words that do it justice.

When the Roman legions destroyed Carthage, they took the lives of about 150,000. Timur Lenk killed 100,000 prisoners at Delhi in 1398. He built towers of skulls in Syria in 1400.

But no cameras recorded the spectacles. The photos in Iris Chang’s book provide evidence against those who believe in the perfectibility of man. The event in question occurred more than 100 years after the Rights of Man had been declared. And nearly two millennia after the birth of the Prince of Peace. The prohibition against murder was well- established in all major religions. Of course, the victims would have welcomed murder – it would have been a comfort, like a stop loss in a bear market.

Some of the photos in Iris Chang’s book are so revolting that I wish I had not seen them. Once seen… they could not be ignored. I could barely go on with my work. One of the photos in The Big Black Book of Communism had the same effect… I could not look at it again… but it was hard not to recall it.

You might be tempted to say of the perpetrators of these crimes that they were “animals.” Such a comment libels the animal kingdom. No beast of burden or leisure would do such a thing…

I am talking about the “Rape of Nanking,” revealed to us in gruesome detail by Iris Chang’s book of the same name. The term “Rape” fails to convey the extent of the misery visited on the hapless citizens of Nanking, China in 1937.

“Rape” is not a nice thing… but it hardly describes what the Japanese Imperial Army under Gen. Iwane Matsui did to the Chinese who fell into their hands after they took the city of Nanking in 1937.

The Rape of Nanking: A Dominant Military Caste

Though reported in the international press at the time, it was practically ignored by everyone and quickly forgotten. It was the Nobody of mass slaughters.

A shame. It might have alerted the world to what was to come.

If Mr. Bewitt were right about being no more than the sum of his experiences… it is no mystery why the Japanese behaved as they did. Japan’s dominant caste was military… had been for centuries. It sought to create a race of superior soldiers… with complete confidence in themselves… and total contempt for the rest of the world. The whole society had been politicized.

Iris Chang recounts the story of one schoolboy who quivered at dissecting a frog. Struck by his teacher, he is asked, “Why are you crying about one lousy frog? When you grow up you’ll have to kill one hundred, two hundred chinks!”

The Chinese were deconstructed into “chinks”…pigs…animals… subhumans. And enemies of the Imperial Army.

Here’s what happened. Just as things couldn’t be better for Wall Street today [‘today’ being back in December 1999], they couldn’t have been worse for Nanking in 1937. Or so it seemed. And just as everyone is long on the future of NYC, and America, on the eve of this Christmas season… everyone was short Nanking back then. Nanking was near a bottom – its quality of life, its morale, its capital values, even its population…were all sinking fast.

The Chinese army was overtaken by despair. Nothing partakes in group-think so much as an army. That’s why morale is so important to a fighting force. At Nanking, the Chinese army so oversold itself that it became, literally, worthless. Soldiers laid down their weapons without a fight. This confirmed the Japanese contempt for the Chinese. The prisoners were taken away… and killed.

This left the whole city at the mercy of the Japanese. “On December 13, 1937, Japanese soldiers began an orgy of cruelty seldom if ever matched in world history,” says Chang. “… Young men were mowed down by machine guns, used for bayonet practice, or soaked with gasoline and burned alive.”

…but the soldiers were just getting started.

“Not only did live burials, castration, the carving of organs and the roasting of people become routine, but more diabolical tortures were practiced, such as hanging people by the tongues on iron hooks or burying people to their waists and watching them get torn apart by German shepherds… even the Nazis in the city were horrified… “

To his credit, General Matsui was horrified, too. He had been sick and away from the city. Upon returning, he was shocked to see how his troops had been turned into a mob from hell.

The Rape of Nanking: John Rabe

Curiously, one of the heroes of Nanking was, in fact, a Nazi. John Rabe was a member of the Nazi party. But he was also a representative of the Siemens company and felt a personal responsibility to protect his Chinese workers.

Once started on this course, his courage and energy were exemplary. He led an entire community of missionaries – many of them American – and other foreigners, as well as thousands of Chinese in the foreigners’ compound, through the experience.

Rabe took it personally. He risked his life daily, confronting the Japanese military authorities and butting in to save individual Chinese from Japanese soldiers whenever he could.

Only his Nazi armband protected him… but he could never be sure how far that would take him.

(After the war, Rabe, returned to Germany, was disgraced as a Nazi… and impoverished. The citizens of Nanking took up a collection on his behalf.)

Japan is the world’s most law-abiding and polite society. But storms of evil blow up from time to time. No race or nation is beyond their reach. (I got a message from a Daily Reckoning reader describing how American soldiers shot Cheyenne children for sport.)

Give the devil his due – the events described above occurred during the lifetimes of many people reading this message. In our century. Our time. Our world.

Many of the killers are still alive, too… enjoying their comfortable retirements… and looking forward, no doubt, to the new millennium.


Bill Bonner

December 12, 2003

Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of the NY Times and international best-seller: “Financial Reckoning Day: Surviving The Soft Depression of The 21st Century” (John Wiley & Sons).




“Gentlemen, they offer us their flank.”

The statement came from the mouth of General Gallieni… and changed the course of history.

The Germans attacked France in August of 1914. They moved swiftly and drove the French out of their defenses and back towards Paris. But instead of concentrating their forces on an attack on the city, the German general von Kluck decided to chase the French down along the Marne river, hoping to destroy them. Doing so, he exposed his troops to a counter- attack from Paris.

The old Gallieni knew a short sale opportunity when he saw one. He urged the French to go on the offense. Paris taxicabs were lined up – thousands of them – to drive the troops East of the city, where they could assault the Germans. The result was the Battle of the Marne, which was probably the single-most important battle of the 20th century.

The Germans lost the initiative. The war went bad in a way no one expected. A few months later, millions of soldiers were stuck in the trench mud of Northern France and Belgium – bleeding away the best of Western civilization.

Late in the war, American troops arrived – fresh and foolish. The Europeans might have settled… and learned a lesson. But now the Americans tipped the scales against the Germans. Europe became unbalanced and, ultimately, unhinged. Reparations, resentment, hyper-inflation, depression – all the pent-up frustration and rage of the war eears and its resolution then pushed the Europeans to even more frightful madness – the arditi, the black- shirts… fascism, communism… orphism, purism, and precisionism. Wilson’s war to make the world safe for democracy backfired; moderate democracy was practically exterminated by his victory.

So what?

“Is it wrong to make money off of the lemming-like rush to debt in America?” asks a friend by email.

Do they not offer us their flank, dear reader? Have not the dumb Klucks made appalling mistakes – buying stocks at outrageous prices… lending at Eisenhower-era rates in a Bush world… borrowing when they have no means of paying back…

My friend John Mauldin sends this scary peek through the perpetual fog inside investors’ cloudy crania:

“15% of investors thought that if you bought a share of stock you would get your money back with interest or had lent the company money. Only 40% knew that if interest rates drop, then bond values will go up. 25% thought it meant bond values would go down and 12% said it does not affect the price.

“A total of 60% of investors did not understand the relationship between interest rates and bonds. Given that interest rates are likely to rise over this decade, that lack of understanding does not bode well for investors.

“Only 21% could correctly identify a no-load mutual fund, and 31% thought it meant a fund with no fees. Maybe it was just a poorly worded question, but a staggering 46% believed that they were insured against stock market losses by (choose one): the SEC (16%), FDIC (14%), SIPC (12%) or the NASD (4%).

“The survey revealed that despite the recent bear markets, we are still optimistic about future market returns. 40% of us believe that a reasonable average long-term return from a broadly diversified mutual fund will be 10%. That, by the way, is the survey answer that was considered ‘correct.’

“6% of those surveyed thought that 20% or more was a reasonable expectation, and 15% thought that 15% was reasonable. That adds up to 61% who think the markets will give them 10% or more over the long term.

“They are likely to be disappointed over the next 10 years. Starting from today’s high P/E ratios, Yale Professor Robert Shiller clearly shows there has never been a time in which investors saw returns that were better than that of simply parking their cash in a money market fund. The studies of Arnott, Bernstein, Grantham, Alexander, Dreman, Stein, Buffett, Montier, Easterling and many others (along with the work of your humble analyst), all show the likelihood of meager returns over the next decade.”

Is it wrong to take the other side of these investors’ trades? Are their flanks not completely exposed?

Dow 10,000 is a fact. Dow 5,000 is just a prediction…

Over to you, Addison… with more news:


Addison Wiggin with the latest in the markets…

– The “recession-that-wasn’t” became even less so, yesterday.

– After moving the base year for its “various price indexes” from 1996 to 2000, the Bureau of Economic Analysis announced that the 4th-quarter GDP for 2001 shrank less than previously thought. That quarter was the last of the quarters to undergo shrinkage in what can only be described as the most ineffective recession to ever grace the history of the American economy.

– Along with the revising away of the recession-that-wasn’t, the BEA also revealed that personal incomes during 2001 fell further than was previously reported… and personal spending rose! Saving, too, was revised down at the national level. “The shortfall in national savings,” chimes the Washington Post, “is now equal to about 5 percent of GDP.

– “The recession,” writes Richard Duncan in his book, The Dollar Crisis, “is the period during which equilibrium is restored to the economy after a long period of over- stimulation due to excessive monetary stimulation through credit expansion.” Does rising consumer spending on the back of falling personal income sound like the hallmark of an economy restoring its way to equilibrium? The work of putting things back into whack hasn’t even begun yet. And yet, government quants are busy revising the effects away (by moving the base year to the peak of the asset bubble, no less!).

– In his book, Duncan forecasts a New Paradigm Recession… one that will be global in scope, given the world’s dependency on the U.S. dollar. “The New Paradigm Recession,” writes Robert Blumen on the site in an excellent review of Duncan’s book, “will emerge out of the continuing (sic!) U.S. downturn (which Duncan views as only a warm-up for the real thing) as the U.S. economy can no longer service the massive debt load that exists in the consumer, corporate and government sectors. The recession, when it comes, will be global in scope. It must come, Duncan argues, because of the unsustainability of current trading patterns and exchange rates.”

– These currently unsustainable trading patterns, in fact, drove the Dow past the 10,000 mark yesterday for the first time since May 2002. The Nasdaq and S&P 500 caught the fever themselves, closing up 37 points to 1,942 and 12 to 1,071 respectively. Gold fell to $1.60 to $405… while the dollar hesitated on its trip South, resting for the evening at $1.22.

– “At the start of 2003, the financial news was full of stories about how much stock market investors had ‘learned’ during the bear market, and how much wiser they would be from now on,” writes Elliott Wave’s Robert Folsom on “You haven’t seen many of those stories lately, because the market rally since March has shown all the symptoms of the late 1990s mania: Specualation in unproven companies, historically unsafe P/E ratios, share prices utterly detached from the companies value.”

– “And it hasn’t been that long,” Folsom points out, “since politicians in Washington told voters how much they had learned about tax and spending: Leaders of both major parties claimed to understand the wisdom of balanced budgets and ‘pay as you go.’ Remember?”

– You may recall that Folsom penned an essay a few weeks back that we featured here in the Daily Reckoning. He, along with co-author Wendy Raffel, suggested that “The public’s willingness to submit to the servitude of credit is a direct measure of their optimism – or pessimism – about the future, and a reflection of mass psychology and social mood.” Given the general acceptance of the title of our book, “Financial Reckoning Day” by the mainstream media, we’d have to say: The social mood is bullish. Only during a mania such as this can the government get away with its behaviour of late.

– “My nominees for the 2003 Spend-Like-Drunken-Sailors Award,” writes Folsom “are the legislative and executive branches of the Federal Government, a.k.a. the 108th Congress and Bush administration.” Rightly defending the nomination as “non-partisan,” Folsom offers up “An itemized short list of the nominees’ accomplishments [which] includes:

** The “Supplemental Budget Request” to rebuild & secure Iraq and Afghanistan, which will spend $87 billion, but was not part of…

** The “National Defense Authorization Act,” which at $401billion is the largest-ever defense budget.

** The “Medicare Prescription Drug, Improvement, and Modernization Act of 2003,” to the tune of $400 billion, the largest-ever increase for a single Medicare benefit.

** The “Consolidated Appropriations Bill,” expected to require spending the modest sum of $820 billion.

** The largest-ever budget deficit, projected at $500 billion in fiscal year 2004, due in part to this year’s $1 trillion tax cut. The deficit is smaller than it would otherwise be, of course, if it weren’t for annual Social Security taxes exceeding spending by $160 billion, an over- taxation that Congress promptly spends as general revenue.

“Please note that I used ‘short’ to describe the list above,” Folsom explains, “because a fully itemized list would likely demand months of your life, both in reading time and due to the potential traumatic shock… Reckless budgeting on this scale reflects something beyond the dumb stuff that Congress typically does with the Federal Balance sheet.

“This is not bullish behavior,” Folsom concludes, “this is recklessly bullish behavior.”

– For his part, Greenspan jumped on the Chinese bashing bandwagon yesterday. He called for the Chinese to de-peg the yuan from the dollar. But not for the usual glad- handing reasons that have led to a host of ridiculous tariffs and “trade war” initiatives. In fact, Greenspan said he thought that “a rise in value of the renminbi would be unlikely to have much, if any, effect on aggregate employment in the United States.” Any decrease in Chinese imports resulting from a rising yuan would quickly be replaced by cheap imports from other low-wage countries… likewise, American jobs.

– Yesterday, the Labor Department reported initial jobless claims rose last week at the highest rate since the end of October. But in keeping with the “bullish social mood,” a slew of analysts interviewed by Bloomberg were more than willing to brush the numbers off. “We’ve seen four straight months of solid job gains,” Greg Mankiw, chairman of the President’s Council of Economic Advisers, remarked. “We’re going to see more.” From whence, he did not say.

– Meanwhile, the pao mo bubble got another puff of air. We told you about the IPO of the Chinese Internet travel company,, which more than doubled on Tuesday. Yesterday, China Life, the country’s largest insurance company, raised $3 billion in the largest global IPO of the 2003. The stock will begin trading in New York on Wednesday, December 17th.

– And, according to the International Energy Agency, Chinese demand for crude oil jumped by 11.5 in October; expanding “at breakneck speed.” The global appetite for crude is expected to grow by 1.4 million barrels a day in 2003, and 1.2 million barrels in 2004. In a move that’s likely to make Wang Jian just a little bit more nervous, OPEC announced it will look into pricing oil in euros to offset losses incurred from a falling dollar.


Bill Bonner, Back in Baltimore…

*** “He’s not a nincompoop,” said a friend of our president. “But he tends to listen to whomever he talks to, unless it’s an issue he really understands or feels strongly about.”

We were visiting an old friend from Washington – someone now well-placed in conservative Republican circles, whose name we cannot reveal, except maybe under torture… or the offer of a drink.

We had asked what he really thought of George W. Bush.

“What happened was that after the Sept. 11th attacks… the Bush administration had to react in some forceful way. Afghanistan hadn’t done the job. Blowing up caves wasn’t enough. And the only people who had a ready plan were the pro-Israeli neo-cons. They put the plan in front of Bush… they mentioned weapons of mass destruction and terrorists… and Bush was off. Then, the dope Saddam stuck out his chin and practically dared Bush to take a swing at it. And now, we’ve got to find a way to get out of Iraq… or to control the costs of it…

“It’s all very unfortunate because it distracts everybody from the very good work we’re doing in other areas. Bush is very solid on issues such as education, Social Security and taxes. On taxes, for example, he saw what happened to his father when he broke the pledge. He’s not about to raise taxes.”

But what about spending… we asked… isn’t it increasing at twice the rate as it did under Clinton? Isn’t this going to bankrupt the country long before you get a chance to reform Social Security?

“Well, we have to get spending under control. No doubt about that. But Social Security is going bankrupt no matter what. So the real issue is what takes its place and how. That’s what we’re working on.”

*** Another friend, Byron King, sends this little reminder of how politics works:

“I used to live across the street from Joe Barr, former Mayor of Pittsburgh (1959-1969). Joe was a protégé of Dave Lawrence (b.1889-d.1966), also a former Mayor of Pittsburgh (1946-1958), Penna Governor (1959-1963) and a political powerhouse within the Democratic Party, counselor to presidents (FDR, HST, JFK, LBJ) and maybe some kings, for all I know.

“Back to Mayor Barr. One night, I was over at Mayor Barr’s house, hanging out with his son, who was about my age and a good pal of mine.

“I asked hizzoner, ‘Mayor, what is it that you have to know to be the Mayor?’ He looked at me. I continued, ‘If you want to be a doctor, you have to go to medical school. If you want to be an engineer, you have to go to engineering college. To be a lawyer, you need to go to law school. But what is it that qualifies somebody to be mayor?’“Old Joe Barr leaned back in his chair and smiled his Irish smile, and he said these words of wisdom, these eternal verities that still echo in my eardrums to this day: ‘When you hold political power, you have control over so much money and so many jobs. You have to know and understand who ought to get the money, and who gets the jobs. If you can figure that out, you can succeed in politics.’

“And then this homme d’affaires went on: ‘It has been true since about forever. Back in the days of ancient Egypt, what do you think Pharaoh spent most of his time doing? I’ll bet that every night, Pharaoh and his chamberlains sat around at some table in the great hall, looking over the contracts they were letting out to build the Pyramids. Who gets the contract for limestone? Who builds the barges to haul the granite from Aswan? Who supplies the bread for the workers? It’s all about who gets the money and who gets the jobs. Think of ancient Rome and the Caesars, building roads and monuments. Think of China and her Emperors, building the dikes and the Great Wall. It hasn’t changed in thousands of years.’

“Bill, I remember the conversation from thirty-five years ago like it was this morning. And politicians and governments are still building pyramids and monuments and Great Walls, except today we call them something else: ‘public works,’ ‘great society,’ ‘medicare,’ ‘social security,’ ‘national defense,’ or just plain ‘authorizations’ and ‘entitlements.’ It’s all about taking wealth, in the form of the nation’s currency, from people who produce it and earn it, and handing it out to other people. It is all about using the fruit of one person’s effort, and passing it out as a ‘job’ to some even more deserving fellow citizen.

“Sure, it can work for a while. After all, somebody built the Pyramids, the Coliseum, the Great Wall. Fine structures, all of them. And how long can it all last? How long is it before politicians anywhere and everywhere stop understanding the nature of money, and the underlying wealth that it represents and reflects? How long before they pull down the walls of their own house upon their heads?

“Today, as I write to you, the City of Pittsburgh is attempting to invoke ‘Act 47’ under Pennsylvania law. That is, the City is broke, and attempting to file a state-law version of municipal bankruptcy. This is Pittsburgh, the Silicon Valley of the last century, where people made money by the long yard. Andrew Mellon made so much money in Western Pennsylvania that he had to spend it buying Old Masters in Europe, giving them ‘to the people of the United States of America,’ and building the National Gallery in Washington DC as a place in which to house them. Pittsburgh, the home of Big Bucks, Bill. We are talking about THAT kind of money.

“And today the City is broke. Unlike in the days of Joe Barr and Dave Lawrence, the ‘hizzoners’ of recent vintage did not really understand who ought to get the money and the jobs. They handed out money and jobs until the city was broke, and now the Grim Reaper stands at the doors of the City-County Building. Sadly, Pittsburgh is reflective of what is going on in the rest of the country as well. Welcome to the future of America.”

*** A side note… Jennifer Stevens, a writer friend of ours, sends word that she is heading up a new Travel Writers conference this January in Las Vegas. If you like to travel, particularly to exotic locations, and wouldn’t mind getting paid for it… you may want to take a look.

Former participants in Jennifer’s Paris workshops have great things to say about them. “Best workshop I’ve attended in many, many years,” Nadia B. writes. “Jen is absolutely wonderful – there is an astounding amount of information,” says Amanda S.



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