Wars of Terror

The Daily Reckoning PRESENTS: Here at The Daily Reckoning, we are opposed to war, in the sense that we are opposed to election fraud or stomach gas. But we take it for granted that war happens from time to time. Read on…


Whether the War on Terror will prove beneficial either to America or the human race, we cannot say. But every once in a while a man seems to feel the need to turn howling mad and swing his arms around. That is an aspect of war that is under-appreciated: the apish imbecility of it.

The problem with war, in general, is that people are too simpleminded about it. They see it as either good or bad…right or wrong. Either you are for it or you are against it. War either it turns out to be a magnificent triumph or an abysmal defeat. When they come up against a Korea or a Vietnam, they don’t know what to make of it. It seems incomplete and unsatisfying…like a baseball game that got rained out. They yearn for a simple answer: yes, no…friend, foe. They want to know who wins and who loses.

But, judging from the historical record, most wars have no identifiable winners – especially, wars of terror. Usually, such wars end neither in victory nor defeat, but in humiliation. The fighters merely give up because they are exhausted, broke and embarrassed. Even when there is an apparent victor, he is hardly any better off. Nor is the apparent loser any worse off! France lost the Franco Prussian War after the battle of Sedan in 1870. After that, came the Belle Epoch…the nation never had it so good. And a fat lot of good it did them after they “won” World War I. When the war was over, the loser, Germany, picked herself up and was soon the strongest, most confident and most dynamic nation in Europe.

But the subject of this little reflection is not the grand wars of Europe, but the dirty wars of Latin America…specifically, the wars of terror in Nicaragua. What initiated our interest was a copy of Humberto Ortega’s history of the Sandinista revolution, sent to us by a friend from Managua. Readers will remember the name. Humberto Ortega, along with his brother Daniel, was a leader of the Sandinistas.

Senor Ortega begins by giving us a history of Nicaragua and the role played in it by his own family. The impulse to improve the world, we notice, may be genetic. Ortega, the elder, was also an activist and an admirer of Madame Blavatsky, the Russian émigré to the United States who founded the Theosophical Society. He was also a supporter of the original Sandinista, Augusto C. Sandino, who had begun a revolutionary movement in the ’20s and 30s. Sandino’s goal was to get the U.S. marines, who had been sent to meddle in Nicaraguan affairs by William Howard Taft, out of the country. Sandino figured the country would be better off without them. Others figured the country would be better off without Sandino, so they killed him. And then, the policia put Ortega in jail when they realized he was a Sandino supporter. “I long to be at your side and fight for our country, liberty and national honor,” Ortega senior had written to Sandino.

We read Ortega’s history with a mixture of boredom and despair. It is a long recitation of people making remarkably naïve and idiotic decisions that had predictably preposterous and disastrous consequences in the course of a long war of terror. But most of all, it is the story of a frightfully tedious revolution. Ortega tells of many trips back and forth to Cuba, endless meetings and rendezvous, and long periods spent in jail.

Even though by the 1970s Marxism was already démodé as a model for democratic liberation, the brothers Ortega and their fellow world improvers still traveled around the world – taking advice and arms from Ho Chi Minh, Che Guevara and other homicidal dreamers.

At first, the Sandinistas organized a war of terror against the Somoza regime. Somoza may have been a pig, but according to Ortega’s account, his regime was – like the Tsarist regime overturned by the Bolsheviks – surprisingly restrained in its treatment of potential revolutionaries. Humberto Ortega must not have been a very good revolutionary. He was always getting arrested. Yet, somehow, he always regained his liberty and went back to work trying to undermine the government that let him get away. Stalin wouldn’t make the same mistake. His enemies never got a second chance. By some accounts, the Ortega’s enemies didn’t either. After the wars were over, as many as 14,000 cases of torture and murder by the Sandinista police forces were alleged.

But we are getting ahead of ourselves. The Sandinistas’ war of terror reached its end in July of 1979, after thousands of Sandinista revolutionaries stormed the capital. Then, they stepped into the same offices and took up the same slimy projects left behind by the Somoza regime. Large landholdings were seized from the Somozistas and transferred to the Sandinistas. And the war on terror continued, too – only now, the terrorists and anti-terror forces had changed places. The former landowners, bourgeoisie and Somozistas, supported by the Reagan administration, took to the jungle.

The U.S. had supported Somoza’s war on terror for many years. When that washed up, America became a terrorist-supporting organization itself – offering direct aid and encouragement to the Contras. What it produced was what you might expect. The following comes to us from a forgotten source:

“I was present at a meeting at the U.S. embassy in London in the late 1980s.

“The United States Congress was about to decide whether to give more money to the Contras in their campaign against the state of Nicaragua. I was a member of a delegation speaking on behalf of Nicaragua, but the most important member of this delegation was a Father John Metcalf. The leader of the U.S. body was Raymond Seitz (then number two to the ambassador, later ambassador himself). Father Metcalf said: ‘Sir, I am in charge of a parish in the north of Nicaragua. My parishioners built a school, a health centre, and a cultural centre. We have lived in peace. A few months ago a Contra force attacked the parish. They destroyed everything: the school, the health centre, and the cultural centre. They raped nurses and teachers, slaughtered doctors, in the most brutal manner. They behaved like savages. Please demand that the U.S. government withdraw its support from this shocking terrorist activity.’

“Raymond Seitz had a very good reputation as a rational, responsible and highly sophisticated man. He was greatly respected in diplomatic circles. He listened, paused and then spoke with some gravity. ‘Father,’ he said, ‘let me tell you something. In war, innocent people always suffer.'”

It is amazing what you can get away with. Reports like this caused Congress to outlaw support to the Contras. But the fact that it was illegal as well as immoral didn’t stop the terror sponsors in Washington. It was later revealed that they continued to back the Contras, by selling weapons to Iran and recycling the money to the Contras. (Investigator Gary Webb also alleged that the CIA allowed money from illegal drug sales to finance the Contras. Poor Webb was found dead with two bullet holes in the back of his head on December 10, 2004. The coroner ruled it a suicide, though he admitted it was an “unusual” one. People sometimes shoot themselves in the head once; rarely twice.)

Thus had the public spectacle evolved in the typical way: from treachery to absurdity to disaster. The war on terror became a war of terror; the terrorists became the terror-stoppers…until, finally, both sides were exhausted. Under pressure, Daniel Ortega resigned as Sandinista dictator and agreed to national elections. Tens of thousands of people had died, and Nicaragua was poorer than ever. It was richer per capita than Costa Rica before the terror wars began. When they were over, it was the poorest country in Latin America.

Bill Bonner
The Daily Reckoning
London, England
February 17, 2006

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 here.

Ben Bernanke seems to have what it takes to be a high-level functionary – he doesn’t seem to mind wasting time.

So far, he has spent the last two days gabbing to Congress and feeding the old pols what they expected to hear: Yes, the U.S. economy is robust…blooming… getting healthier by the minute. Yes, the last quarter was a disappointment, but the recovery to stronger rates of growth should be swift and sure. And yes, further rate increases could be necessary.

The new Fed chairman even stooped to admonish the Chinese. They ought to loosen up, he said.

They had better loosen up, Senator Charles Schumer adds sternly. If they don’t let their currency rise against the dollar, we should impose trade restrictions, quotas and sanctions!

The trade deficit, the senator figures (almost on target, we believe), “indicate a slow bleeding at the wrists economically for the United States.” Schumer proposes not bandages or even a tourniquet, but immediate surgery. “To protect American jobs,” he says, we have to force China to revalue its currency upwards, thus making exports to the United States more expensive. He must figure that more New Yorkers are likely to vote to save their jobs than are likely to vote to save Everyday Low Prices at Wal-Mart. He could be right about that, but what he is certainly wrong about is the way the world works. His hypothesis is that he can make Americans better off economically by passing a law. Many are the people who believe this. Many are the times it has been tried. And countless are the laws on the books already, designed to make people richer. But the instances in which passing a law actually made people richer are few, and those only worked because they undid other laws that made them poorer.

A politician hates to admit that there are things beyond his control. He prefers to think that the lights turn on because of his sage legislation. In his private imaginings, he even wonders if the sun only rises because of some act of Congress passed years ago and now forgotten. Of course, the last thing the voters want to hear is the truth.

“Look,” he might say, if he were put under the influence of a truth serum, “it’s not our fault the Chinese work for $1 an hour. It’s not our fault they make things cheaper and better than we do. It’s not our fault capitalists want to make things in China. And so, it’s not our fault that real wages for most Americans are going down. And guess what else? There’s nothing we can do about it. At least, nothing that won’t make the situation worse.”

That is not a speech we are likely to hear any time soon. Instead, as the effect of our Big Es become more widely understood, we are likely to find more and more attempts to stop them.

President Bush has already outlined a loopy plan to deal with the effects of higher Energy prices.

The Economy doesn’t seem to pay attention; it seems, instead, to be headed toward its inevitable cyclical downturn. The yield curve is still inverted, and the home-building industry seems to be in the early days of a major slump. On Tuesday, KBHomes said cancellations might force a revision – downward, of course – in its estimates for 2006. Toll Brothers had already told us that orders were running 29% below last year. Its share price has dropped almost 20% so far this year. And mortgage applications are at their lowest level in three years.

Of course, today’s press is still filled with whoopee. It tells us that housing starts soared in January – growing at their fastest pace in almost 33 years. But they don’t tell us why this is good news for housing. For it isn’t. Supplies of new, unsold houses are already rushing onto the market at the fastest clip in 21 years. Inventories are piling up. The paint on “for sale” signs is beginning to peal and blister. It looks like the last thing this market needs is any more new houses. But not to worry, dear reader. To try to stop the inevitable from happening, Ben Bernanke stands by ready to print up more money and, if necessary, drop it from helicopters

And while the Exodus of wealth and power from West to the East continues, Mr. Schumer will not be the only pharaoh to try to stop it.

China’s economy doubled in size over the last 10 years. It is now bigger than Britain. India is booming, too. More than likely, the rapid growth in Asia will carry on, and more than likely, relatively if not absolutely, Mr. Schumer’s voters will lose ground.

And what of the U.S. Empire? No empire lasts forever. No bubble remains un-popped. The only questions are when and how. The same is true for our Experiment with pure-paper money. The dollar may fascinate traders and speculators today. On some tomorrow, it will only fascinate historians.

But can’t something be done? The question came up just the other day. “Well, if you were head of the Fed, (the speaker left out ‘Mr. Smarty Pants,’ but we know what he was thinking), what would you do?”

And there is the problem. What can be done? Nothing. If we were not human, we could resist the temptation to destroy our own paper currency. If we had no natural arrogance, no instinct to over-reach or no normal stupidity, we could avoid ruining the Empire. But we are what we are; we will do what we always do. From yin to yang…boom to bust…victory to defeat…the best we can hope for is to do it with grace and beauty and to enjoy the show.

[Ed. Note: “The American economy is like a bicycle,” says Dr. Richebächer, “when it stalls, it falls.” Contrary to what Washington and the Fed want you to believe, our economy has already started to stall…and people are going to lose a lot of money. But you can protect your wealth… and even make money… while other investors merely struggle to survive.

More news from the pundits at The Rude Awakening…


From the desk of Dan Denning:

“Foreigners are loaning money to the U.S. government for a much shorter period of time… wary of the big risks they see brewing in an economy that continues to consume more than it produces.”

For the rest of this story, and for more market insights, see today’s issue of The Rude Awakening.


Bill Bonner, back in London with more opinions…

*** Gold futures closed higher today, at $553.90 an ounce, its highest level since Monday, spurred on by a new threat of violence in Nigeria and continued tensions with Iran.

“The gold market has been looking for more uncertainty and we are seeing it this morning,” Resource Trader Alert’s Kevin Kerr, told MarketWatch today.

“Investors are looking at gold as more of a buying opportunity after its steep decline than a commodity preparing to crash, “and this is prudent,” he said.

“After all nothing has fundamentally changed for gold and now technically we have had the correction we needed to see and new buying can pour back in.”

*** Single women are buying more houses than single men. Owning a house used to be considered an unwelcome burden on an unmarried woman. It was not just the expense, but also the upkeep that kept women away. Last year, one out of every five houses was sold to a single woman. Women (and men) wait longer to get married. Then, the average marriage has about a 50/50 chance of enduring ’til death them do part.

What’s more, men still die sooner than women, leaving widows who still need a place to live.

Women seem to like to buy houses. Men are more nomadic. We have no explanation for it; it’s just an observation.

Next week, we go back to Paris. Elizabeth wants to buy an apartment, where we will live after we leave London this coming summer. Your editor would just as soon rent. Prices have gone up already quite a bit in Paris. Renting is marginally cheaper and gives us a little more flexibility; we could always simply up and leave, if we wanted. But that is precisely what Elizabeth doesn’t want. She might take away our passports…if she could.

*** Syria announced that it was switching to the euro. Henceforth, it will hold its foreign reserves in the European currency.

The Daily Reckoning