Tag: war

Secrets under the sea

Keep this historical justification for American involvement in WWI in mind when you are tempted to buy into the Official Story of 9/11, the use of gas weapons by the Syrian government, and the perfidious behavior of the Russians in Ukraine:

It became a symbol of brutal German aggression – an unprovoked torpedo attack on a passenger cruise liner during the First World War.

The infamous sinking of the Lusitania in 1915, killing more than 1,000 innocent victims, sparked outrage in Britain and America. Public opinion in the States swung against the Kaiser – eventually helping President Woodrow Wilson take the country into the war in 1917.

But 70 years after the ship was torpedoed by a German U-boat eight miles off the coast of Ireland, British Government officials feared the secret of the tragedy would ‘blow up on us’ when a group of divers planned to search the wreck.

The German high command always maintained the steam liner, traveling between New York and Liverpool, was carrying explosives destined for the Western Front concealed as cheese or casks of beef. But ministers at the time rejected the claim and used the attack to whip up public anger against the Germans….

In a secret memo, Noel Marshall, from the Foreign Office’s North American department, said: ‘Successive British governments have always maintained that there was no munitions on board the Lusitania (and that the Germans were therefore in the wrong to claim to the contrary as an excuse for sinking the ship).

‘The facts are that there is a large amount of ammunition in the wreck, some of which is highly dangerous.’ He added: ‘I am left with the uneasy feeling that this subject may yet – literally – blow up on us.’

The more that history reveals, the more it becomes clear that there has likely never been a foreign intervention that can be justified by its historical justification. Not the Spanish-American War, not World War I, not World War II, and not whatever inventive justification will be served up for World War III.

The wider context

On Zerohedge, a Russian academic explains the roots of the conflict in Ukraine in terms of the long term objectives of the rival global elites:

Let’s look at the situation in and around Ukraine in a wider, global context, considering the role which the West collectively, by their various games, has assigned to Ukraine.

  •     Firstly – the battle against Russia.
  •     secondly – the clash with China, and
  •     thirdly – concerning the unleashing of war in the Middle East.

Let me repeat, By no means is it all groups in the West who want to unleash war in the Middle East. But quite a few of them are interested in it. Likewise Saudi Arabia and Israel are interested, for a whole series of reasons. And these three vectors converge in Ukraine – all three plans unite into one.

That is, the global geo-economic and geo-political re-distribution of assets in the course of the global economic crisis.

The “Yellowstone Threat”

Of course, there is this Yellowstone threat – I mean the super-volcano. That could completely change the rules of play at any time. The super-volcano could solve for the Western elite the very problems which they’ve been trying to solve for the last 50-60 years and have been unable to. An eruption of the volcano could solve those problems. But that’s another subject.

The origin of the current situation

Let’s look at how the situation came about that preceded the current situation, namely: It’s 1991. The USSR has collapsed. After 10 years of robbery the Americans are wondering “should we go for more?” Evidently they decided not to, as it would have fallen to the Chinese. Besides, Yeltsin’s team seemed to be running the country into the ground. Then suddenly in 2001 came the attacks in New York. The Americans’ political vector shifted to the Middle East. They became occupied with the Middle East. i.e. they got distracted from the goals.

Then we had Iraq, Afghanistan. During this time the Russian Federation got room to breathe, rise onto its feet again. Then there was the war of 08.08.08, which showed the West they had somewhat let go of Russia.

After that the Medvedev episode, when we didn’t react on Libya. Evidently, 08.08.08, Putin’s coming to power, and our position on Syria, in spite of the West’s pressure, changed the approach toward Russia of those who brought Obama to power.

Two points to note:

  •     Obama established his military doctrine during his address to the Australian parliament on 17 Nov 2011, and
  •     And a new military doctrine of the US, established by Obama on 05 Jan 2012.

In the new doctrine of 05 Jan 2012 is established that the US can wage one war and some other indirect actions in other parts of the world. Previously it said two wars – meaning they’re not up to that any more. More interesting statements made by Obama in the Australian parliament 17 Nov 2011: This was said in Obama’s vague style. But if we call a spade a spade, it means:

Firstly: in this doctrine: political-economic encirclement of China. Control over the flow of energy into China. That’s why we have seen their naval power being moved to the straits between the Indian Ocean and the Pacific. This is why land-based energy supply routes are so important for China. Sea-based supply routes can be easily interrupted by the Americans.

Secondly: applying pressure on the Russian Federation, as a partner of China, and as a country beginning to rise up.

Really, Obama didn’t say anything new here.

There’s an organization Stratfor -(Strategic Forecasting Inc), a kind of private CIA. Their founder and chairman, George Friedman, said openly that the primary task of the United States is the destabilization of Eurasia, in order that there could never be a state or group of states able to challenge the US.

I find the point about Yellowstone to be intriguing, especially considering the source.  What are “the very problems which they’ve been trying to solve for the last 50-60 years and have been unable to?” I imagine they are the limitations imposed by the remnants of the US Constitutional system and the fact that the traditional American population is armed and therefore must be deceived and persuaded and ruled indirectly rather than directly by dictate.

If you find it hard to understand why rich and intelligent men not only seek wars, but work very diligently to start them, you have to stop thinking of war as intrinsically bad and see it as a tool. It is like dynamite; if you want to move large quantities of earth, you are going to need a powerful destructive force.

Large-scale wars happen when multiple parties reach the conclusion that the only way they can obtain their objectives is through a war involving other parties that increase their leverage. World War I happened mostly because French politician Raymond Poincaré was obsessed with recovering Alsace-Lorraine, the Russians sought to regain their position on the Black Sea they had lost in the Crimean War, and the Serbs sought to reclaim Bosnia and Herzegovina from the Austro-Hungarian empire. As it happened, both the French and the Russians were successful in their objectives; despite being the ones to set the match for the winning side, the Serbs ended up losing everything.

Faith and trust and pixie dust

David Brooks asks a grand strategic expert to help him make sense of his impression that the international system is collapsing:

All around, the fabric of peace and order is fraying. The leaders of Russia and Ukraine escalate their apocalyptic rhetoric. The Sunni-Shiite split worsens as Syria and Iraq slide into chaos. China pushes its weight around in the Pacific. I help teach a grand strategy course at Yale, and I asked my colleagues to make sense of what’s going on. Charles Hill, who was a legendary State Department officer before going to Yale, wrote back:

“The ‘category error’ of our experts is to tell us that our system is doing just fine and proceeding on its eternal course toward ever-greater progress and global goodness. This is whistling past the graveyard.

“The lesson-category within grand strategic history is that when an established international system enters its phase of deterioration, many leaders nonetheless respond with insouciance, obliviousness, and self-congratulation. When the wolves of the world sense this, they, of course, will begin to make their moves to probe the ambiguities of the aging system and pick off choice pieces to devour at their leisure.

“This is what Putin is doing; this is what China has been moving toward doing in the maritime waters of Asia; this is what in the largest sense the upheavals of the Middle East are all about: i.e., who and what politico-ideological force will emerge as hegemon over the region in the new order to come. The old order, once known as ‘the American Century’ has been situated within ‘the modern era,’ an era which appears to be stalling out after some 300-plus years. The replacement era will not be modern and will not be a nice one.”

This is correct. Notice in particular the phrase “when an established international system enters its phase of deterioration”. Emphasis on “its phase” rather than “a phase”. The phase is terminal. It is not part of a gentle cycle. And it usually ends in a considerable amount of war before its successor system is established.

Brooks more or less accurately describes the establishment of modern nationalist civilization, although he neglects to observe that this was a Christian civilization that imposed the modern order. The combination of religious homogeneity and technogical dominance is what made the establishment of the order both desirable and possible.

When Hill talks about the modern order he is referring to a state system that restrained the two great vices of foreign affairs: the desire for regional dominance and the desire to eliminate diversity. Throughout recorded history, large regional powers have generally gobbled up little nations. Powerful people have generally tried to impose their version of the Truth on less powerful people.

But, over these centuries, civilized leaders have banded together to restrain these vices. As far back as the Treaty of Westphalia in 1648, dominant powers tried to establish procedures and norms to secure national borders and protect diversity. Hegemons like the Nazis or the Communists tried to challenge this system, but the other powers fought back.

However, Brooks goes awry and leaves out two of the primary threats to the system when he considers the opponents of what he calls “liberal pluralism”:

Today that system is under assault not by a single empire but by a hundred big and little foes. As Walter Russell Mead argues in a superb article in Foreign Affairs, geopolitics is back with a vengeance. Whether it’s Russia seizing Crimea or China asserting itself, old-fashioned power plays are back in vogue. Meanwhile, pre-modern movements and people try to eliminate ethnic and religious diversity in Egypt, Ukraine and beyond.

China, Russia and Iran have different values, but all oppose this system of liberal pluralism. The U.S. faces a death by a thousand cuts dilemma. No individual problem is worth devoting giant resources to. It’s not worth it to spend huge amounts of treasure to establish stability in Syria or defend a Western-oriented Ukraine. But, collectively, all the little problems can undermine the modern system. No individual ailment is worth the expense of treating it, but, collectively, they can kill you.

These two additional threats are globalism and multiculturalism. Both are also attempts to eliminate ethnic and religious diversity at the national level. But nations exist for a very important reason: to provide sufficient homogeneity within a political entity to prevent tribal power struggles by reducing violent conflict to mere political conflict. Attempting to spread the nations externally (globalism) while mixing them internally (multiculturalism), puts even more pressure on liberal pluralism than pre-modern movements. Indeed, it is mass immigration, which is the bastard child of globalism and multiculturalism, that has injected these poisonous pre-modern movements into Western civilization.

John Gaddis, another grand strategy professor, directs us to George Kennan’s insights from the early Cold War, which he feels are still relevant as a corrective to the death-by-a-thousand-cuts mentality. He argues that we should contain these menaces until they collapse internally. The Moscow regime requires a hostile outside world to maintain its own internal stability. That’s a weakness. By not behaving stupidly, by not overextending ourselves for example, we can, Gaddis argues, “make sure Putin’s seeds of self-destruction are more deeply rooted than our own.”

That’s smart, but I think I’m less sure that time is on our side. The weakness with any democratic foreign policy is the problem of motivation. How do you get the electorate to support the constant burden of defending the liberal system?

It was barely possible when we were facing an obviously menacing foe like the Soviet Union. But it’s harder when the system is being gouged by a hundred sub-threshold threats.

Gaddis’s answer is a complete non-starter, which Brooks would have realized if he had properly taken the two additional threats I have mentioned into account. How can the West “contain these menaces until they collapse internally” when the West has taken those menaces into itself? The Moscow regime and the Muslim world may both require their Dar al-Harbs to maintain their internal stability, but at least they have an internal stability. The West has little more than termites in its foundations, clogged arteries in its heart, and parasitic cysts in its brain.

The
Republicans seem to have given up global agreements that form the
fabric of that system, while Democrats are slashing the defense budget
that undergirds it. Moreover,
people will die for Mother Russia or Allah. But it is harder to get
people to die for a set of pluralistic procedures to protect faraway
places. It’s been pulling teeth to get people to accept commercial pain
and impose sanctions.
The
liberal pluralistic system is not a spontaneous natural thing.
Preserving that hard-earned ecosystem requires an ever-advancing fabric
of alliances, clear lines about what behavior is unacceptably
system-disrupting, and the credible threat of political, financial and
hard power enforcement.

It is true that liberal pluralism is not a spontaneous natural thing. The rest is meaningless gobbledy-gook. The globalist, multiculturalist West is no longer liberal or pluralistic, so it should be no surprise that the system of liberal pluralism is on the verge of collapse and that its rivals are increasingly confident that they need neither fear nor respect it. There will be no “saving the system”, not when its self-appointed defenders neither understand the extent of the problem and are more than a little sympathetic towards some of the threats posed.

Amateur hour

I haven’t written much about the prospective war in Ukraine because it is mostly a military farce:

Standing on the hood of an armored personnel carrier as his ashen-faced
paratroopers slumped behind him, Col. Alexander Shvets of Ukraine’s
25th Airborne reported back to command on a cheap cell phone.

“We’ve been taken captive. They used dirty tricks,” he said. The
hundreds of local residents and ragtag militiamen that had surrounded
his column of 13 APCs throughout Wednesday bayed. “Look,” he continued,
losing his patience. “I’ve been surrounded by a human shield of 500
people all day. You don’t know what you’re fucking talking about.”

As the sun set, Shvets and his men — many of whom were reservists
called up to help Ukraine regain control of the eastern province of
Donetsk from anti-government rebel groups — were allowed to drive back
to their base in neighboring Dnipropetrovsk. The day they spent here
outside the small town of Kramatorsk, hemmed in by angry residents, was
emblematic of the Ukrainian central government’s withering attempt to
assert control in the East, now in tatters….

Ukraine’s “anti-terrorist operation” against
anti-government rebels has proved a spectacular debacle. Soldiers
refused to move in on rebel-held positions. The rebels captured six
APCs, drove the soldiers into Slovyansk flying the Russian flag, and
sent them back on dingy buses, dejected, disarmed, and defeated.
Self-appointed “self-defense” commanders who couldn’t even agree on
which one of them was in charge disarmed and defeated Ukraine’s army.

This government ineptitude is a common theme of late. An elderly rancher forced hundreds of federal agents into retreat. A few hundred civilians captured multiple armored personal carriers. The USA has been pursuing an obviously futile occupation in Afghanistan for 13 years now to little purpose and no avail. Mexico is a failed state where cartels rule entire regions.

The central governments are exhausted and bankrupt. They’re turning up the tax and regulatory heat around the world even as their corruption becomes ever more apparent. Meanwhile, they are afraid to utilize their heavily militarized agencies because they fear the inevitable backlash that will threaten to destabilize their pretenses to legitimacy. The people over which they nominally rule are fat, decadent, weak, and fearful.

Fraud and empty gestures are the order of the day. A battalion of troops have been sent to Poland, of all places? A whole battalion to intimidate the Russians, who sent both Napoleon and Hitler running? This would be comical if it wasn’t an obvious harbinger of much more difficult times to come.

Neoconnery is anti-American

A Pakistani neocon explains why it is vital for American troops to remain at the disposal of Pakistani interests:

We neocons have fallen out of favor, not just on the left, where “neocon” is routinely used as a term of abuse, but also on the right, where libertarian-minded conservatives who favor a smaller (and cheaper) military have seized the initiative. Rand Paul, the junior senator from Kentucky, is just one of many Tea Party conservatives who has defined his foreign policy views in opposition to the neocons. And it’s easy to see why….

Given all of this, why am I still a neocon? Why do I still believe that the U.S. should maintain an overwhelming military edge over all potential rivals, and that we as a country ought to be willing to use our military power in defense of our ideals as well as our interests narrowly defined? There are two reasons: The first is that American strength is the linchpin of a peaceful, economically integrating world; and the second is that we know what it looks like when America embraces amoral realpolitik, and it’s not pretty.

Like it or not, America’s failure in Iraq does not change the fact that global stability depends on American global leadership, and American global leadership costs money. The United States is at the heart of a dense web of alliances. We extend formal security guarantees to more than 50 countries. Some see these alliances and guarantees as little more than a burden the U.S. can no longer afford. Yet what they actually do is dampen security competition. They reassure partner countries that they needn’t build up their militaries to defend themselves against their neighbors, which then reassures their neighbors that they needn’t build up their militaries. This virtuous cycle is one of the central reasons Western Europe and Japan recovered so quickly after the devastation of World War II, and why globalization has helped ease poverty around the world. For this virtuous cycle to be maintained, however, U.S. security guarantees must be considered credible. It must be clear that when the U.S. makes a security commitment to another country, that commitment will be met. This in turn means that the U.S. military must have the power and the reach to defend countries far from our borders.

It’s not an accident that most of the necons complaining that American isolationists ” don’t understand about American military power—and American morality” are second- and third-generation immigrants. They may be U.S. citizens but they are not Americans and they simply do not understand, at all, George Washington’s warning about entangling alliances.

Quite to the contrary, they demand more and more entanglement, preferably with their true homelands. As the Baseball, hot dogs, and apple pie-named Reihan Salam admits:

Why insist on moralistic crusades, as neocons are wont to do? I suppose I have a personal reason for doing so. It turns out that this week isn’t just the anniversary of the fall of Baghdad. It is also the 43rd anniversary of a telegram which an American consul general, Archer Blood, took the unusual
step of condemning his own government. As Gary Bass recounts in his chilling book The Blood Telegram, Richard Nixon and his chief foreign policy consigliere, Henry Kissinger, enthusiastically backed Pakistan’s military junta in its efforts to not only overturn the results of its country’s first free and fair election, but to massacre hundreds of thousands of Bengalis in an effort to teach what was then a rebellious province a lesson. One of the men who died, as it happens, was my uncle.

Knowing fully well that he was endangering his career, Blood decried
the American failure to defend democracy or to denounce Pakistani
atrocities. He also knew that had President Nixon decided to lift a
finger, he could have forced Pakistan to stay its hand. Yet it seems
that humanitarian considerations never entered the picture for Nixon and
Kissinger. They were apparently too taken with treating the world as a
chessboard to bother reckoning with the monstrous crimes they were
aiding and abetting. Though Pakistan was unable to prevent the emergence
of an independent Bangladesh, thanks in large part to India’s decision
to intervene, the country remains scarred by the bloodletting. Imagine
if a different president hadn’t cheered on Pakistan’s military rulers
but rather threatened to use U.S. power in defense of Bengali civilians.

Neocons are, for the most part, non-Americans who use the United States as a base in order to subvert American national interest in favor of Pakistani, or Israeli, or Iraqi, or Ukrainian national interests. The massacre of hundreds of thousands of barbarians by another group of barbarians is of no concern whatsoever to the American people. And clearly it is a mistake to have allowed men like Mr. Salem to enter the country, because he has repaid his hosts by attempting to involve them in the very violence he fled Pakistan to escape!

One can’t even properly describe these neocons as traitors, because they are loyal to their nations. The problem is that their nation is not the American nation. What Mr. Salem does not realize is that Rand Paul and most American isolationists understands very well what Mr. Salem and his fellow neocons want. They simply believe in putting American interests first.

An appeal to false consciousness

Such is Naomi Wolf’s dedication to the Unreality Principle that she can’t even consider the possibility that the increasing appeal of traditional nationalism and to women in the West is neither fascist nor false.

Many lower-income women in Western Europe today – often single parents working pink-collar ghetto jobs that leave them exhausted and without realistic hope of advancement – can reasonably enough feel a sense of nostalgia for past values and certainties. For them, the idealized vision of an earlier age, one in which social roles were intact and women’s traditional contribution supposedly valued, can be highly compelling.

And, of course, parties that promote such a vision promise women – including those habituated to second-class status at work and the bulk of the labor at home – that they are not just faceless atoms in the postmodern mass. Rather, you, the lowly clerical worker, are a “true” Danish, Norwegian, or French woman. You are an heiress to a noble heritage, and thus not only better than the mass of immigrants, but also part of something larger and more compelling than is implied by the cog status that a multiracial, secular society offers you.

The attraction of right-wing parties to women should be examined, not merely condemned. If a society does not offer individuals a community life that takes them beyond themselves, values only production and the bottom line, and opens itself to immigrants without asserting and cherishing what is special and valuable about Danish, Norwegian, or French culture, it is asking for trouble. For example, upholding the heritage of the Enlightenment and progressive social ideals does not require racism or pejorative treatment of other cultures; but politically correct curricula no longer even make the attempt to do so.

There are numerous errors in her essay. The first, and most important, is her failure to recognize that it is the multiculturalists who are both anti-democratic and fascist. It is the eurofascists of the EU and their corporatist allies in the USA who forcibly installed unelected governments in Greece and Italy, who attempted to deny the Russian nationalists in the Crimea their right to self-determination and they are now turning against the Ukrainian nationalists who supported their anti-democratic coup in Ukraine.

The second is her denial of the fact that there are, materially, true Danes, Norwegians, and French. She obviously subscribes to the bureaucratic myth of geographic relocation, where the simple act of traveling by plane magically transforms an individual into something he is not. As an expat myself, I continually find it amazing that people who would absolutely insist that I am an American will turn around and claim that Moroccans who happen to be in Holland or Turks who happen to be in Germany are actually Dutch or German simply because they have a piece of paper granting them state citizenship.

But the nation is not the state. In fact, the nation-state is generally considered to date back to about 1700 and the Treaty of Westphalia, so it should be obvious that making a national the citizen of a state belonging to a different nation does not change anything intrinsic about the national.

The third is that it is objectively obvious that the nationals of a state being invaded by hordes of immigrants are heirs to a materially better heritage than the invaders. The invaders want to live in the society created by that heritage; the national does not want to go and live in society created by the invaders’ heritage.

The fourth error is the failure to grasp that mass immigration will end. It is mathematically doomed. The secular advocates of The Invaded Society don’t seem to grasp that all of these various nations did not come into existence ex nihilo. They were created by the same force of natural human preferences that will soon bring a violent end to The Invaded Society.

It’s all very simple. British people want to remain British. They don’t want to be African, or Pakistani, or some sort of Afro-Britistani melange. The Dutch want to remain Dutch, they don’t want to become Moroccan. And neither black nor white Americans want to become Mexican. And they will not, even if that means wars will be fought and national borders will be redrawn.

A belated awakening

It would appear that the Ukrainian nationalists who led the US/EU supported charge against the democratically elected government are beginning to wake up to the fact that they were used as cannon fodder by the globalists:

Fears are growing of a neo-fascist uprising in Ukraine as ousted president Viktor Yanukovych called for referendums in every region to determine how pro-Russian the country actually is. Hundreds of members of the ultra-nationalist Right Sector movement stormed the parliament (Rada) building in Kiev last night, smashing windows and breaking down doors.

The riot erupted just hours before Russia’s foreign ministry today warned that ethnic minorities in Ukraine are ‘living in fear’ of the expanding power of the far-right across the divided nation.

Right Sector activists are angry over the killing of their leader, Oleksandr Muzychko, better known as Sashko Bily, who died in a shoot-out with police in a cafe in Rivne, in western Ukraine, on Monday.

Based on the term “neo-fascist” that is being applied to them now, what do you want to bet that Right Sector’s assault on the unelected government will be portrayed rather differently than their previous assault on the duly elected one in the Western media?

The consequence of multiculturalism

Roissy points out more scholastic support for the hypothesis that Diversity + Proximity = WAR:

Community psychologists are interested in creating contexts that promote both respect for diversity and sense of community. However, recent theoretical and empirical work has uncovered a community-diversity dialectic wherein the contextual conditions that foster respect for diversity run in opposition to those that foster sense of community. More specifically, within neighborhoods, residential integration provides opportunities for intergroup contact that are necessary to promote respect for diversity but may prevent the formation of dense interpersonal networks that are necessary to promote sense of community.

Using agent-based modeling to simulate neighborhoods and neighborhood social network formation, we explore whether the community-diversity dialectic emerges from two principle of relationship formation: homophily and proximity. The model suggests that when people form relationships with similar and nearby others, the contexts that offer opportunities to develop a respect for diversity are different from the contexts that foster a sense of community. Based on these results, we conclude with a discussion of whether it is possible to create neighborhoods that simultaneously foster respect for diversity and sense of community.

Multiculturalism isn’t merely a failure, it is, like the War on Drugs and the War on Poverty, a leftist program that is delivering precisely the opposite of what it purported to deliver. Instead of racial peace, it has created racial hate. Instead of an end to nationalism, it is delivering intranational ethnic strife.

The Croats don’t fight the Vietnamese, they fight the Serbs. The North Koreans don’t threaten the Ibo, they threaten the South Koreans. And mass inter-ethnic migration has only ensured that the 21st century wars will be even more savage and less limited than those of the 20th century.

War and the Austrian Business Cycle

David Stockman explains the oft-observed connection between economic contraction and military conflict. Astute observers will note that the cycle he describes correlates much better with my “Limits of Demand” modification of the core mechanism of the Austrian Business Cycle:

During World War I the US public debt rose from $1.5 billion to $27 billion—an eruption that would have been virtually impossible without wartime amendments which allowed the Fed to own or finance U.S. Treasury debt.  These “emergency” amendments—it’s always an emergency in wartime—enabled a fiscal scheme that was ingenious, but turned the Fed’s modus operandi upside down and paved the way for today’s monetary central planning.

As is well known, the Wilson war crusaders conducted massive nationwide campaigns to sell Liberty Bonds to the patriotic masses. What is far less understood is that Uncle Sam’s bond drives were the original case of no savings? No credit? No problem!

What happened was that every national bank in America conducted a land office business advancing loans for virtually 100 percent of the war bond purchase price—with such loans collateralized by Uncle Sam’s guarantee. Accordingly, any patriotic American with enough pulse to sign the loan papers could buy some Liberty Bonds.

And where did the commercial banks obtain the billions they loaned out to patriotic citizens to buy Liberty Bonds?  Why the Federal Reserve banks opened their discount loan windows to the now eligible collateral of war bonds.

Additionally, Washington pegged the rates on these loans below the rates on its treasury bonds, thereby providing a no-brainer arbitrage profit to bankers.

Through this backdoor maneuver, the war debt was thus massively monetized.  Washington learned that it could unplug the free market interest rate in favor of state administered prices for money, and that credit could be massively expanded without the inconvenience of higher savings out of deferred consumption.  Effectively, Washington financed Woodrow Wilson’s crusade with its newly discovered printing press—-turning the innocent “banker’s bank” legislated in 1913 into a dangerously potent new arm of the state.

It was this wartime transformation of the Fed into an activist central bank that postponed the normal post-war liquidation—-moving the world’s scheduled depression down the road to the 1930s. The Fed’s role in this startling feat is in plain sight in the history books, but its significance has been obfuscated by Keynesian and monetarist doctrinal blinders—that is, the presumption that the state must continuously manage the business cycle and macro-economy.

Having learned during the war that it could arbitrarily peg the price of money, the Fed next discovered it could manage the growth of bank reserves and thereby the expansion of credit and the activity rate of the wider macro-economy. This was accomplished through the conduct of “open market operations” under its new authority to buy and sell government bonds and bills—something which sounds innocuous by today’s lights but was actually the fatal inflection point. It transferred the process of credit creation from the free market to an agency of the state.

As it happened, the patriotic war bond buyers across the land did steadily pay-down their Liberty loans, and, in turn, the banking system liquidated its discount window borrowings—-with a $2.7 billion balance in 1920 plunging 80 percent by 1927. In classic fashion, this should have caused the banking system to shrink drastically as war debts were liquidated and war-time inflation and malinvestments were wrung out of the economy.

But big-time mission creep had already set in.  The legendary Benjamin Strong had now taken control of the system and on repeated occasions orchestrated giant open market bond buying campaigns to offset the natural liquidation of war time credit.

Accordingly, treasury bonds and bills owned by the Fed approximately doubled during the same 7-year period. Strong justified his Bernanke-like bond buying campaigns of 1924 and 1927 as helpful actions to off-set “deflation” in the domestic economy and to facilitate the return of England and Europe to convertibility under the gold standard.

But in truth the actions of Bubbles Ben 1.0 were every bit as destructive as those of Bubbles Ben 2.0.

In the first place, deflation was a good thing that was supposed to happen after a great war. Invariably, the rampant expansion of war time debt and paper money caused massive speculations and malinvestments that needed to be liquidated.

Likewise, the barrier to normalization globally was that England was unwilling to fully liquidate its vast wartime inflation of wage, prices and debts. Instead,  it had come-up with a painless way to achieve “resumption” at the age-old parity of $4.86 per pound; namely, the so-called gold exchange standard that it peddled assiduously through the League of Nations.

The short of it was that the British convinced France, Holland, Sweden and most of Europe to keep their excess holdings of sterling exchange on deposit in the London money markets, rather than convert it to gold as under the classic, pre-war gold standard.

This amounted to a large-scale loan to the faltering British economy, but when Chancellor of the Exchequer Winston Churchill did resume convertibility in April 1925 a huge problem soon emerged.  Churchill’s splendid war had so debilitated the British economy that markets did not believe its government had the resolve and financial discipline to maintain the old $4.86 parity. This, in turn, resulted in a considerable outflow of gold from the London exchange markets, putting powerful contractionary pressures on the British banking system and economy.

Real Cause of the Great Depression: Collapse of the Artificial Boom

In this setting, Bubbles Ben 1.0 stormed in with a rescue plan that will sound familiar to contemporary ears. By means of his bond buying campaigns he sought to drive-down interest rates in New York relative to London, thereby encouraging British creditors to keep their money in higher yielding sterling rather than converting their claims to gold or dollars.

The British economy was thus given an option to keep rolling-over its debts and to continue living beyond its means. For a few years these proto-Keynesian “Lords of Finance” —- principally Ben Strong of the Fed and Montague Norman of the BOE—-managed to kick the can down the road.

But after the Credit Anstalt crisis in spring 1931, when creditors of shaky banks in central Europe demanded gold, England’s precarious mountain of sterling debts came into the cross-hairs.  In short order, the money printing scheme of Bubbles Ben 1.0 designed to keep the Brits in cheap interest rates and big debts came violently unwound.

In late September a weak British government defaulted on its gold exchange standard duty to convert sterling to gold, causing the French, Dutch and other central banks to absorb massive overnight losses. The global depression then to took another lurch downward.

But central bankers tamper with free market interest rates only at their peril—-so the domestic malinvestments and deformations which flowed from the monetary machinations of Bubbles Ben 1.0 were also monumental.

Owing to the splendid tax-cuts and budgetary surpluses of Secretary Andrew Mellon, the American economy was flush with cash, and due to the gold inflows from Europe the US banking system was extraordinarily liquid. The last thing that was needed in Roaring Twenties America was the cheap interest rates—-at 3 percent and under—that resulted from Strong’s meddling in the money markets.

At length, Strong’s ultra-low interest rates did cause credit growth to explode, but it did not end-up funding new steel mills or auto assembly plants.  Instead, the Fed’s cheap debt flooded into the Wall Street call money market where it fueled that greatest margin debt driven stock market bubble the world had ever seen. By 1929, margin debt on Wall Street had soared to 12 percent of GDP or the equivalent of $2 trillion in today’s economy.

As is well known, much economic carnage resulted from the Great Crash of 1929. But what is less well understood is that the great stock market bubble also spawned a parallel boom in foreign bonds—-specie of Wall Street paper that soon proved to be the sub-prime of its day.

Indeed, Bubbles Ben 1.0 triggered a veritable cascade of speculative borrowing that soon spread to the far corners of the globe, including places like municipality of Rio de Janeiro, the Kingdom of Denmark and the free city of Danzig, among countless others.

This is an excellent addition to both military and financial history. Be sure to read the whole thing; it’s close 10k words, but it is definitely worth the time and effort. This, in particular, is a key observation that underlines the falsity of the Keynesian narrative: “The Keynesians have never acknowledged the single most salient statistic about the war debt: namely, that the debt burden actually fell during the war, with the ratio of total credit market debt to GDP declining from 210 percent in 1938 to 190 percent at the 1945 peak!”

I’d noticed this myself in looking at total credit market debt, but never thought through the implications as Stockman has. One can even see it in the relevant chart posted in RGD.

US drone intercepted

It appears as if both sides of the Ukraine tinderbox are now assuming a war footing:

A United States surveillance
drone has been intercepted above the Ukranian region of Crimea, a
Russian state arms and technology group said Friday.

“The
drone was flying at about 4,000 metres (12,000 feet) and was virtually
invisible from the ground. It was possible to break the link with US
operators with complex radio-electronic” technology, said Rostec in a
statement. The drone fell
“almost intact into the hands of self-defence forces” added Rostec,
which said it had manufactured the equipment used to down the aircraft,
but did not specify who was operating it.

“Judging
by its identification number, UAV MQ-5B belonged to the 66th American
Reconnaissance Brigade, based in Bavaria,” Rostec said on its website,
which also carried a picture of what it said was the captured drone.

The Obama administration is flirting with an incredibly stupid war. Talk about cashing in one’s military credibility unwisely! Not only does the USA have zero support from the American people for a war against Russia over Ukraine, it’s entirely possible that more than half the American population believes Russia to be in the right.