Victims of Success, Part II

The Daily Reckoning – Weekend Edition
May 5-6, 2007
London, England
by Bill Bonner


Why is it that George Washington is described as the “Father of his country”? Where did the founders get that idea? Well, from Rome of course, where Augustus Caesar was said to be “Pater Patria” – the founder of his country.

Augustus, Caesar’s grand nephew, took power after a long period of civil war had destabilized Rome. The people were so fed up with disorder that they actually demanded that Augustus become a dictator. August demurred. Instead, he wisely pretended to re-establish the old republic, while putting in place a strong, centralized, imperial government. In fact, to re-establish order, he had 130 senators killed…and 3,000 of Rome’s leading citizens.

You are probably thinking that 130 Senators is a small price to pay for the benefits of order. Well, that is what people thought back then, too.

The people were, for the most part, delighted with Augustus and the empire, and there followed a period of relative peace and prosperity that lasted until the death of Marcus Aurelius, two centuries later. Gibbon says those were the best 100 years in human history – between the death of Domitian and the rise of Commodus.

And one of the key concepts of this ‘best government in the world,’ as Cicero called it, was that no citizen was above the law – not even the emperor. Augustus might be the ‘father of his country’ and the ‘master of the world’, but when he wanted to build his Temple of Mars the Avenger, he still had to work around local property rights. Even Augustus could not get the owners to sell him the property he wanted…so he was forced to build it in asymmetrical form.

Another feature of the Roman system of government that Americans will find familiar is the Twelve Tables, which were a kind of Bill of Rights for Roman citizens. During the Republic, a citizen could not be arrested in his own home, criminal courts had to follow procedures designed to protect the innocent, and the writ of Habeas Corpus was established.

Later, of course, many of these protections of the individual were tossed out…as indeed many have been recently in America today. The latest military spending bill, for example, just passed by Congress, permits the president of the United States to become a kind of dictator in the event of a ‘situation’ that he feels calls for martial law.

There are, of course, many other ways in which Rome tells us something about America today.

Empire then, in it’s most naked form, was basically a protection racket – as it also is today. Rome provided security. Its subject states and vassal kingdoms paid tribute. Expanding Rome’s frontiers was usually hugely profitable. Caesar’s eight-year campaign to subdue the Gauls, for example, resulted in hundreds of thousands of fresh slaves shipped to Italy. The slave market near Rome was said to have sold more than 1,000 of them in a single day. Vast quantities of gold, silver, and jewels also ended up in Roman hands. Then, once a new territory was securely under Rome’s yoke, the poor yokels had to pull hard to pay their annual tribute – usually in the form of wheat or olives or cattle.

Providing ‘security’ was dangerous and difficult work to the troops in the field, but the folks at home took the new bounty as though it were manna from heaven – just as they do today. We have no precise figures on it, but at least we have no inconvenient facts to interfere with our theory. The influx of free ‘wealth’ into the homeland depressed the value of local production and undermined the local economy.

It was much like what happened in Spain after the Conquistadores discovered the gold of the Incas and Aztecs in the 16th century. The Spanish became rich almost overnight. The money supply soared and prices followed. Since the Spaniards could buy what they needed from foreign manufacturers and foreign farmers, they left their own mills idle and their own fields fallow. In about three generations the New World natives’ pockets were emptied and the easy money gone. But by then, Spain’s domestic economy had been destroyed. Soon after, the country fell into a slump and didn’t recover until the 1980s – after it joined the European Union.

To be continued, below…

Bill Bonner
The Daily Reckoning
May 5, 2007

P.S. Don’t forget – you can hear Bill (along with all of your favorite DR editors) speak at this year’s Agora Financial Investment Symposium in Vancouver, British Columbia. This year’s theme is “Rim of Fire: Crisis & Opportunity in the New Asian Era” – and it’s your first look at investment opportunities, global market concerns, and the best investment bets across the globe.

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by Bill Bonner and Addison Wiggin

After a generation of being spoon-fed reality by media, it’s understandable that Americans are confused about the state of their nation. In Empire of Debt, Bonner and Wiggin wield their sardonic brand of humor to expose the nation for what it really is – an empire built on delusions.

Americans are rapidly facing a choice: recognize these dangerous delusions and take steps to avoid their collapse. Or remain ignorant of them and risk losing all of their wealth when the house of cards comes crashing down.

Daily Reckoning readers can purchase their copy of the book that The

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THIS WEEK in THE DAILY RECKONING: Caught a touch of spring fever and missed an issue of The Daily Reckoning? No worries – that’s what we’re here for! You can catch up, below…

Victims of Success                                              05/04/07
by Bill Bonner
“Throughout history, it is clear that becoming successful is hardly ever easy. Often times it takes a great deal of fortitude, and it can even be very dangerous. But as Bill Bonner explains, without these inherent dangers, our lives as we know them might be completely different. Read on…”

Extraordinary Monetary Measures                   05/03/07
by Dr. Marc Faber
“Illiquidity among the U.S. household sector, along with the reluctance of the Fed to cut rates right away, combined with the requirements for enormous capital investments for infrastructure in emerging and developed economies, could lead to some tightening of liquidity around the world. Marc Faber explains…”

A Distant Peak?                                                   05/02/07
by Byron King
“The Peak Oil theory is still widely debated…and our intrepid correspondent, Byron King, sends us this report back from the Offshore Technology Conference, where Exxon Mobile gave their take on the subject. Read on…”

China Takes the Ruhr                                          05/01/07
by Chris Mayer
“You may not be surprised to learn that Germany lost thousands of steel mill jobs to China. But you may be surprised to learn that it also lost the steel mill itself. Once in Dortmund, Germany, the same mill now works on the banks of the Yangtze in China. Chris Mayer explores…”

The Gluttony of Hedonic Adjustments                04/30/07
by The Mogambo Guru
“If you are new to the Rants And Raves Of The Mighty Mogambo (RAROTMM), here is a little background: inflation is the worst thing that can happen to your economy. This week, he expounds on the mystery of ‘hedonic adjustments.'”


FLOTSAM AND JETSAM: One key to the success of the Roman Empire was its emphasis on the fact that no citizen was above the law – not even the emperor. But as we see in the final part of Bill Bonner’s essay, our own society is beginning to treat this facet of government with less and less importance, and it might bring about our downfall. Read on…

Victims of Succcess, Part II (cont’d)

When the expansion of the Roman Empire ceased under the reign of Trajan, so did the big flow of slaves and booty back to the homeland. But by then, the independent farmers and the free tradesmen were disappearing. How could their wheat compete with the free grain shipped in as tribute from Egypt and North Africa? How could their labor compete with the new, abundant slave labor coming from Gaul and Dacia?

Soon, the honest plebes were no longer able to support the government; instead, they expected the government to support them. And the old families that had been the backbone of the Republic began disappearing too. While the Romans had had a civilizing influence on the barbarians they brought into the empire in the beginning, the very success of Rome later had a barbarizing influence on the Romans themselves. The tough old values of independence, discipline and thrift gave way to soft new values – that were measured in easy money and credit, bound up in corrupt connections and special favors, and operated through slave labor.

So it was that gradually the empire weakened…until finally the barbarians could be held back no more. They started by being admitted peacefully. Later, they came when they wanted…sacked Rome and took over what was left of the empire in the West.

And so too with America. Americans have enjoyed a huge financial advantage from the fact that the U.S. dollar is the world’s currency. Its central bankers can create vast quantities of dollars at virtually no cost. It is as if they had discovered Atahualpa’s hidden gold mines all by themselves. De Gaulle called the whole scheme an “exorbitant advantage…that the Americans can pay the rest of the world with a currency whose value only they control.”

It is this extraordinary good fortune that Americans have banked on…and borrowed on. Thanks to such a ready supply of dollars, other nations have been practically forced to increase their own money supplies. And thanks to all these currencies reproducing bunny-like, the world economy now enjoys a period of unprecedented globalized madness.

“The credit of the money market is intimately bound up with the prosperity of Asia,” said Cicero, writing during the reign of Augustus but sounding as if he lived today. Eastern prosperity was the key to Western credit then…as again it is today.

Now, again, the Westerners spend, and the Easterners lend the money back so the spending can go on some more. Ships come into Long Beach harbor – like galleons back to Cadiz or corbitas back to Rome – so heavily laden with Chinese-made goods, they practically sink below the waterline. And all over the world, speculators celebrate their good fortune by buying ever more absurd assets at ever more preposterous prices.

Deeper and deeper into debt sink the westerners, buying up goods and services from Asia, while neglecting their own looms, fields and blast furnaces. Three million factory jobs were lost in the United States since the year 2000, and more debt was added to her than in all the previous years of the republic put together. It is the way all empires have acted. It is the imperial destiny.

The Imperiosus imperative. Or, you might say, nothing quite fails like success.

Bill Bonner
The Daily Reckoning
May 5, 2007

Editor’s Note: 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).

In Bonner and Wiggin’s follow-up book, Empire of Debt: The Rise of an Epic Financial Crisis, they wield their sardonic brand of humor to expose the nation for what it really is – an empire built on delusions. Daily Reckoning readers can buy their copy of Empire of Debt at a discount – just click on the link below:

Empire of Debt

The Daily Reckoning