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Empire of Debt, by Bill Bonner and Addison Wiggin

I presume that most readers are aware that the federal government recently increased its debt ceiling—and promptly went on another spending spree. Most thoughtful individuals, upon hearing the news, probably shook their heads and sighed. I suspect the contrarians Bill Bonner and Addison Wiggin cackled with laughter. That's just one of the things I appreciate about contrarians. In addition to often providing a nice jolt of humor where it's least expected, they often shake us more mundane folks out of our routines, and cause us to look more closely at phenomena or ideas we'd either already passed judgment upon, or passed over as inconsequential.

Under a patriotic-looking dust jacket and the rather dry title Empire of Debt: The Rise of an Epic Financial Crisis, Bonner and Wiggin have presented a contrarian paean to history. In sixteen chapters organized into four sections, they show how attending to Dead Men Talking—the title of the first chapter—can help guide individuals through today's choppy waters and, quite likely, through the unseen but anticipated circumstances of the future. And they often do it with words highly likely to appeal to those with an anarchistic or voluntaryistic bent:

And what about the millions of dead Americans who immigrated to the United States to find freedom; what do they think of the country now? They came believing that if they minded their own business, they would be left alone to do what they wanted. But now, every pettifogging Pecksniff with a government service (GS) rating is on their grandchildren's case. ....

Each generation seems to think they are the first to stand upright, that their mothers and fathers walked on four legs and howled at the moon! Even when the living feign admiration for same [sic] fallen forebear, it is usually without paying of the least attention to what the poor schmuck actually said or knew. The dead leave us their memoirs, their gospels, their histories, and their constitutions—for what is a constitution but a pact with the dead?—and we ignore them. We seem to believe that all that they suffered, all they went through, all the mistakes they made, hold no more interest for us than a comment by a sunstruck contestant in a TV survival show: This is . . . like . . . weird . . . (p. 29, emphasis mine)

Bonner's and Wiggin's style is as contrarian as many of their ideas. Their dry humor, sometimes self-deprecating and sometimes sardonic, may be off-putting to some, especially when its target is an admired figure, but the wit helps the bad news go down, and helps one wade through the sometimes repetitious 300-plus pages. And make no mistake, the news is bad: America's empire of debt has been a long time in the making, and according to some, appears to be on the edge of collapsing. Having been raised by parents who experienced the Depression, and currently doing occasional work digging up economic statistics, I didn't require a lot of convincing. Thus for me, much of the value of Empire of Debt is in the back story—the history leading to today's outrageous profligacy. It's refreshing to see prominent authors lampoon not only former leaders, but those who build and maintain their undeserved thrones:

Many of the best American presidents—such as Garfield, Harding, and Arthur—are rarely even mentioned. Lincoln, Wilson, and Theodore Roosevelt, on the other hand, are routinely described as national heroes. Nobody really knows which president was good for the nation and which was bad. .... But the historians who guess about such matters have a disturbing tilt—not toward mediocrity, but toward imbecility. (p. 94)

Joining with Jim Bovard, they also question the claim that to be a democracy is to be peaceful:

Even today, people still believe that democracies are more peaceful than other forms of government. The United States of America maintains that her form of democracy is so important to the peace and prosperity of the world, she not only invites other nations to join her, she insists. And yet the point has hardly ever been seriously addressed and never proven.

What we do know is that since democracy has become widespread, there has been little letup in the incidence of war and probably an increase in its violence. Unlike the subjects of a tyrant or a monarch, the citizens of a democratic regime are more fully and readily engaged in wartime. When people feel threatened, or feel that they have a stake in the conflict, they are more inclined to devote their energy and resources to victory. Popular newspapers and television work them up to violence easily. (p. 107)

Tying together military and monetary madness, Bonner and Wiggin neatly encapsulate the recent onslaught of liberty:

One of the most riveting features is the remarkable way the masses rush not only to their own ruin, but to the elimination of the institutions they claim to cherish. In America, they claim to love freedom but at the first imperial trumpet blow—the war to make the world safe for democracy, the Cold War to contain the red menace, or the War on Terror—they line up to get registered, inspected, searched, proved approved, and certified. There seems to be no violation of their liberty so great that they would protest nor any violation of anyone else's that they wouldn't applaud, and no expenditure of funds so extravagant that they would bother to ask questions. (p. 79)

And while both have presumably added to their wealth over the past years, that doesn't stop them from offering sobering insights into market cycles that also apply more broadly:

[I]t is feelings that move the market. Like bilgewater, they tend to slosh from starboard to port and back, in short cycles and in long ones. In the end, they give us the averages—the normal, the ordinary, the balance that keeps the boat from sinking altogether.

The same is true in all areas of collective action. The crowd can do no real thinking or real analysis. It has no private, insider information. It is not because of logical, objective reasoning that the mob of investors deems a stock worth 10 times earnings one day and 20 times earnings two years later. Nor does logical reasoning lead one generation to favor a republican form of government while the next happily consents to a dictator or an empire. (pp. 324-5)

Weary as I've become of ostensibly pro-freedom individuals who see nothing wrong with what Bonner and Wiggin term pax dollarium (and sometimes pax dollarum, presumably a spell-check and proofreader failure), their brief but spot-on treatment of gold was most appreciated:

Gold has a long history. And during its history, many was the time that humans were tempted to replace it with other forms of money—which they believed would be more convenient, more modern, and most importantly, more accommodating. Gold is hard to find and hard to bring up out of the earth. By its nature, the quantity of gold is always limited.

Paper money, by contrast, offers irresistible possibilities. The list of bright paper rivals is long and colorful. You will find hundreds of examples, from assignats to zlotys, and from imperial purple to beer suds brown. But the story of paper money is short and predictable. Since the invention of the printing press, a new paper dollar or franc can be brought out at negligible cost. Nor does it cost much to increase the money supply by a factor of 10 or 100—simply add zeros. It may seem obvious, but adding zeros does not add value. . . . .

The trouble with gold is that it turns its back on world improvers, empire builders, and do-gooders. It is money that no central bank promotes and none destroys. It is money that exists only in a tangible form, a real metal—a number on the periodic table. Gold goes up and down, just like other kinds of money, say economists. Which is true. You can protect yourself from inflation in other ways, say the speculators. True again. Gold pays no dividends or interest, say the investors. True.

Nor will gold cure baldness or add inches to your most private part. Even as money, gold may not be perfect. But it is better money than anything else. (pp. 328-9)

Given how frequently Bonner and Wiggin poke at targets bound to be sacred to someone—past presidents (including Ronald Reagan), Alan Greenspan, the war on terror, the current real estate market, the stock market, and the almighty dollar among them—it's surprising on one hand that Empire of Debt has sold so well. On the other, however, Addison and Bonner have earned strong reputations in the financial world, so it's hard to ignore what they say, however unpleasant it may be. If you're a regular reader of their Daily Reckoning newsletter, Empire of Debt may not pack as strong a punch, as the points have probably been presented there, perhaps as frequently as they're repeated in the book. Scattered typos and verbatim repetitions (including an entire paragraph, and a singular phrase repeated twice on the same page) may annoy some readers. Nonetheless, I found Empire of Debt very informative and cleverly written. Arguably, the most valuable idea Bonner and Wiggin present is a broad caution each of us would do well to remember from time to time:

Distilled information tends to be expressed as moral interdictions. Don't steal. Don't lie. Don't buy expensive stocks or sell cheap ones. Don't expect to get something for nothing. Don't neglect your spouse. .... Each don't represents lessons learned by previous generations. For every don't, there must be a million sorry souls burning in Hell.

Undistilled information, on the other hand, is nothing more than noise—newspaper headlines, TV babble, cocktail chatter, the latest innovation, the latest business secret, the latest fashion. It is public information, backed by no real experience or private insights. It is not useless. It is worse than useless, for it misleads people into thinking they know something. (pp. 34-35)

For all their self-deprecation, these two witty contrarians appear to be on to something. Now if I could only laugh about what's coming our way as they do ...


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