What So Proudly We Hailed, Part II

“I have just one question,” asked a representative of the John Birch Society many years ago. “Do you love this country?”

I doubted that I could give him an answer that would satisfy him. He was looking for Patriotism. But not the sort of patriotism I am capable of. Fortunately, my friend Jim Davidson was there at the time. As always, Jim had an answer that satisfied us both:

Quoting John Milton, Jim replied: ‘Wherever freedom is, that is my country.'”

The John Birch Society representative, perhaps a little too slow on the draw to distinguish freedom from nationalism, went on his way.

Hearts swelled yesterday as bands played the Star Spangled Banner. Voices, stretched to their limits, choked or went dumb, depending upon the key…and people all over the nation…and the world…celebrated their sentimental attachment to the Stars and Stripes.

And such an odd attachment it is. America never really was a nation state – despite the efforts of the public schools and the 1950s nationalists to make it one.

It is a powerful state. But there is no nation of Americans. Instead, there are groups of immigrants from various places in the world with very different ideas about how the world should work.

Culturally and genetically, I probably have more in common with most Europeans than Americans. I feel at home among the French, the English, the Germans, Swiss, Austrians and the Irish. I feel safer on city streets in any of these countries than I do in Baltimore. I enjoy the music, the food, and the architecture on the east side of Paris more than on the east side of Washington, D.C.

This makes me a bit footloose. But wherever I go, I am still an American.

Americans are not united by blood, not by territory. America began as a group of colonies on the East Coast of North America. But the land itself meant nothing. Over the years, America has taken many different shapes – spreading out to the west all the way to the other side of the continent…and then hopping over 4,000 miles of the Pacific Ocean to the Hawaiian islands.

No particular land or climate characterizes the U.S. You can find almost any variety you like.

Nor are the America people a “nation” in a tribal sense. Unlike, say, the Scots, the Irish, or the even the French, there are no over-riding blood links with other Americans. Any individual American might have more in common, genetically and culturally, with a tribe in Africa or a clan in Scotland than with the rest of the population of the U.S.

We do not even have a language of our own.

Compare this to France, perhaps the best example of a nation-state. The French are, with the exception of immigrants such as I, related to one another, speak a common language, have a common history, and inhabit the same land – bordered by the Pyrenees on one side and the Rhine river on the other – where they have lived for more than a thousand years.

Frenchmen are rooted in France. They rarely leave it. Though many will spend years working abroad, most eventually return.

When I first arrived in Lathus, I was visited by the local police.

“What are you doing here,” they asked, putting the question directly.

I explained my business rationale. France is centrally located; it gives me a base of operations for Britain and Germany. This would have been satisfying to an American, but it seemed to have little effect on the gendarmes. They seemed suspicious. There were rumors that the chateau had been purchased by an American cult (I didn’t know at the time that I was a cultist). The police were eager to know what was up.

Then I explained that my mother’s family was of French origin, from a nearby area, in fact, Deux Sevres. Suddenly, their expressions changed. They almost smiled in relief. Now it made sense to them. We were coming back home (after two centuries in the New World!)

Neither blood nationalism, nor land, unites Americans. It is only an idea that holds us together…an idea that is in danger of disappearing all together, like the last Liberty Tree that was cut down last autumn in Annapolis.

What makes America special is the idea of independence and liberty. The Declaration of Independence established America as the first and only country in which the individual was free and sovereign – free to go where he chose and do as he pleased…without having to get the permission of the ruling class. And the new country was open to anyone and everyone who liked that idea.

In came the huddled masses yearning to breathe free. They brought ideas and energy…and made the country the most dynamic place on earth.

Our hearts, too, swelled with pride…at the dinner table yesterday…where we suddenly reflected on what being an American was all about.

We, who live in the Old World again…and still yearn to breathe free. We are still very much Americans.

Your patriotic, sentimental correspondent,

Bill Bonner

Ouzilly, France Where Its Que Sera Sera All Year Round July 5, 2000

*** Nothing to report from Wall Street yesterday. It was closed for the holiday. No widows were robbed, no orphans became wards of the state, and no fools were parted from their money. But it’s back to business as usual today.

*** It is not at all surprising that Wall Street separates fools from their money. That is its role in life. What is more puzzling is how the fools got together with their money in the first place.

*** A lot of it is, of course, borrowed money. Bill King tells us that the average U.S. household now has 13 credit cards and a balance of $7,500. “Non-financial companies,” he says, “borrowed an additional $4.5 trillion, or an increase of 67%, in the last 5 years.”

[If you’re interested in Bill King’s service, just call 1- 800-433-1528 and ask for code 3457 to receive a FREE one- month trial.]

*** IBM, for example, illustrates both the trend towards corporate debt and the fraudulent nature of delivering “shareholder value” on a short-term basis. The company earned $31.1 billion over the last 4 years. But it spent $34 billion just to buy back its own shares.

*** Over this same period, IBM’s revenues rose only 5%. Gross profits rose barely at all – only 1.3%. But debt rose from 31% of capitalization to 54%. Thus, while the stock price rose, the net value of the company actually fell.

*** Which is what has happened in the entire market. Money that might have been used to build up balance sheets – by paying off debt or buying capital assets (such as new plant and equipment) – was instead thrown into stocks – many of them new ventures that could never reasonably be expected to produce satisfactory earnings.

*** The result? Lower earnings. And weaker balance sheets. In a cyclical downturn, may I remind you of the obvious, stocks go down in value. Debt does not.

*** And yet, we are told, almost daily, that the American model – with its quest for ‘shareholder value,’ its debt, its free spending consumers, and its own Harry Potter Greenspan who is able to conjure up whatever miracle the economy requires at precisely the right moment – is superior in every way. How is it then, that the stodgy, rigid German economy has managed higher levels of productivity growth for almost 20 years – 1.9% vs. 1.4% for the years 1977 to 1995? Only recently has the U.S. economy outpaced the Germans in productivity…and then only after the statisticians at the Bureau of Labor Statistics stopped crunching numbers and began extruding them.

*** According to a ’96 GAO audit, reported recently by Richard Russell, Alan Greenspan – America’s most beloved bureaucrat – commands a staff of 25,000 employees, with its own air force of 47 Lear jets and cargo planes, a fleet of cars that includes personal cars for the 59 Fed bank managers, a full-time curator who oversees the Fed’s collection of paintings and sculptures and a budget of $2 billion.

*** Thank God there is the Fed, though. Its main job is to protect the value of the U.S. dollar – which was stable for the entire 19th century. Since the Fed has been in business the dollar has lost 95% of its value. But who knows what would have happened without the Fed.

*** “June normally produces the best return of the Summer Rally,” Bill King tells us. Everything went as well as it could, King believes – “Easy Al” did not raise rates, inflation, productivity and other numbers were as flattering as the BLS could fudge them, polls showed Bush with an increasing lead over Gore. Still, the June rallies were unimpressive.

*** To get our bearings after the holiday…the Dow is down 9% so far this year. The S&P is down 2%.

*** The Saudis announced that they would pump more oil and the price of oil fell $1.55 on the news.

*** Japan’s Tankan report said that business was picking up. Could it be that the sun is finally rising in the land of the rising sun…after 11 years of darkness?

*** “In all technological revolutions from the railways to the Internet,” says a recent article in the Economist, “the only sure long-term winners are consumers who gain from lower prices and hence higher real wages.”

*** An Arkansas panel of judges is trying to get our president disbarred. They claim he lacks “overall fitness” and has “damaged the legal profession” by lying in his Paula Jones testimony.

The Daily Reckoning