Empire of Debt

The Rise of an Epic Financial Crisis

Will Bonner, Addison Wiggin

• Publisher: Wiley
• Year: 2011
• Print ISBN: 9780471980483, 9780471739029
• eBook ISBN: 9781118040546
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Inversiones y valores

In Empire of Debt, maverick financial writers Bill Bonner and Addison Wiggin provide you with the first in-depth look at how the American character has shifted to accommodate its new imperial role; how we have abandoned the private virtues of personal liberty, economic freedom, and fiscal restraint; and how the government has gained control of public life and the economy.

II

WOODROW CROSSES THE RUBICON

The road to Hell is paved with good intentions.

—Anonymous

5

The Road to Hell

We are dogged by dead men. Down the street from our old office in Paris was the site of the world’s first central bank, put up by John Law, before he was forced to hightail it out of town. Around the corner from our new office is the Crillon Hotel, where Theodore Roosevelt, then an assistant secretary of the U.S. Navy, dined in high style while pretending to get the lowdown on the doughboys in the trenches. In the next war, Ernest Hemingway claimed to have liberated the bar at the Crillon from the Nazis as they left for the Rhine.

But it is back in Baltimore, Maryland, where the ghosts haunt us most. In our very own office, according to the local history buffs, Woodrow Wilson got together with the U.S. ambassador to Belgium, Theodore Marburg, and ginned up one of the grandest wish lists of all time—the League of Nations.

An honest, upright man has no place in national politics. A man with his wits about him is too modest for the role. He suffers greatness as a sort of hypocrisy. He has no better idea of how the nation should be led than anyone else—and he knows it.

Dissembling wears him down until he is shouldered out of the way by bolder liars and abject stoneheads. The former will say whatever the voters want to hear—and then go on with disastrous projects. The latter have no plans or fixed ideas of any sort; they merely shake hands and blabber whatever cockamamy nonsense comes into their heads. The former never make good presidents. The latter often do.

THE BEST PRESIDENTS

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. We would have to know what would have happened if the man in the Oval Office had done something different. Would the nation be better off if Lincoln had not slaughtered so many Southerners? Would world history have been worse if Wilson had not meddled in World War I? We can’t know the answers; we can only guess. But the historians who guess about such matters have a disturbing tilt—not toward mediocrity, but toward imbecility. Like crooked butchers, they advertise our biggest mutton-brains as prime beef—and push their thumbs down on the scales of history to give them extra weight. Those they select as great are merely those who have given them the most meat—those who have made the biggest public spectacles of themselves.

Most historians rate Lincoln, Wilson, and Franklin Roosevelt as our greatest presidents. But all of them might just as well have been charged with dereliction, gross incompetence, and treason. For at one time or another, each of them betrayed the Constitution, got the country into a war that probably could have been avoided, and practically bankrupted the nation.

The presumption that underlies the popular opinion is that a president faces challenges. He is rated on how well he faces up to them. But the biggest challenge a president will face is no different from that faced by a Louis or a Charles—merely staying out of the way. People have their own challenges, their own plans, and their own private lives to lead. The last thing they need is a president who wants to improve the world. Every supposed improvement costs citizens dearly. If it is a bridge, it is they who must pay for it, whether it is needed or not. If it is a law forbidding this or regulating that, it is their activities that are interdicted. If it is a war, it is they who must die. Every step toward phony public do-goodism comes at the expense of genuine private improvements.

That is why a president who does nothing is a treasure. William Henry Harrison was a model national leader. Rare in a president, he did what he promised to do. He told voters that he would “under no circumstances” serve more than a single term. He made good on his promise in the most conclusive way. The poor man caught pneumonia giving his inaugural address. He was dead within 31 days of taking the oath of office.

James A. Garfield was another great leader. He took office in March 1881. The man was a marvel who could write Latin with one hand and Greek with the other—at the same time. He was shot in July and died three months later. “He didn’t have time to accomplish his plans,” say the standard histories. Thank God.

Millard Fillmore was one of America’s greatest presidents. He did little—other than try to preserve peace in the period leading up to the War between the States. Preserving peace was an achievement, but instead of giving the man credit, historians hold up the humbug, Abraham Lincoln, for praise. The United States has never suffered more harm than on Lincoln’s watch. Still, it is the Lincoln Memorial to which crowds of agitators and malcontents repair, not the Fillmore Memorial. As far as we know, no monument exists to Fillmore, who not only kept the peace, but also installed the first system of running water in the White House—giving the place its first bathtub. Fillmore was a modest man. Oxford University offered him an honorary degree. But Fillmore couldn’t read Latin. He refused the diploma, saying he didn’t want a degree he couldn’t read.

If Fillmore couldn’t read Latin, Andrew Johnson was lucky to be able to read at all. He never went to any kind of school; his wife taught him to read. He is often held up as an example of a failed presidency. Instead, he seems to have made one of the best deals for the American people ever—buying Alaska from Russia for $7.2 million. Who has added so much since? Who has actually made the nation richer, rather than poorer? Johnson did the nation a great service. Still, he gets little respect and practically no thanks.

But our favorite president is Warren Gamaliel Harding.

In his hit book, Blink,¹ Malcolm Gladwell tells how Harry Daugherty (a leader of the Republican Party in Ohio) met Warren Harding in 1899 in the back garden of the Globe Hotel in Richwood, Ohio, where both were having their shoes shined.

Daugherty blinked and thought he saw a man who could be president.

Journalist Mark Sullivan described the moment:

Harding was worth looking at. He was at the time about 35 years old. His head, features, shoulders and torso had a size that attracted attention, their proportions to each other made an effect, which in any male at any place would justify more than the term handsome. In later years, when he came to be known beyond his local world, the word “Roman” was occasionally used in descriptions of him. As he stepped down from the stand, his legs bore out the striking and agreeable proportions of his body; and his lightness on his feet, his erectness, his easy bearing, added to the impression of physical grace and virility. His suppleness, combined with his bigness of frame, and his large, wide-set rather glowing eyes, his very black hair, and bronze complexion gave him some of the handsomeness of an Indian. His courtesy as he surrendered his seat to the other customer suggested genuine friendliness toward all mankind. His voice was noticeably resonant, masculine, and warm. His pleasure in the attentions of the bootblack’s whisk reflected a consciousness about clothes unusual in a small-town man. His manner as he bestowed a tip suggested generous good-nature, a wish to give pleasure, based on physical well-being and sincere kindliness of heart.²

Not only did Harding have the looks and the presence, he also had the bad-boy image. Gladwell writes, “Not especially intelligent. Liked to play poker and to drink . . . and most of all, chase women; his sexual appetites were the stuff of legend.”³

As he rose from one office to the next, he “never distinguished himself.” His speeches were vacuous. He had few ideas, and those that he had were probably bad ones. Still, when Daugherty arranged for Harding to speak to the 1916 Republican National Convention, he guessed what might happen.

“ There is a man who looks like he should be president,” the onlookers would say. Later that day, in the smoke-filled rooms of the Blackstone Hotel in Chicago, the power brokers realized they had a problem. Whom could they find that none of them would object to? Well, there was Harding!

“Harding became President Harding [in 1921],” writes Gladwell. “He served two years before dying unexpectedly of a stroke. He was, most historians agree, one of the worst presidents in American history.”⁴

On the surface, he sounds like one of the best. We have never heard of anyone being arrested and charged under the “Harding Act.” We have never seen a building in Washington, or anywhere else, named the Harding Building. We know of no wars the man caused. We recall no government programs he set in motion.

As far as we know, the nation and everyone in it were no better off the day Warren Harding stepped into office than they were the day he was carried out of it.

Harding was a decent man of reasonable talents. He held poker games in the White House twice a week. And whenever he got a chance, he sneaked away to a burlesque show. These pastimes seemed enough for the man; they helped him bear up in his eminent role and kept him from wanting to do anything. Another saving grace was that the president neither thought nor spoke clearly enough for anyone to figure out what he was talking about. He couldn’t rally the troops and get them behind his ideas; he had none. And even if he tried, they wouldn’t understand him.

H. L. Mencken preserved a bit of what he called Gamalielese, just to hold it up to ridicule:

I would like government to do all it can to mitigate, then, in understanding in mutuality of interest, in concern for the common good, our tasks will be solved.⁵

The sentence is so idiotic and meaningless, it could have come from the mouth of our current president. But the crowds seemed to like the way he delivered it. He said it with such solid conviction, it “was like a blacksmith bringing down a hammer on an egg,”⁶ says Mencken.

Harding was so full of such thunderous twaddle that he stormed into office . . . and then drizzled away until he died. Bravo! Well done.

WILSON CROSSES THE RUBICON

Harding, Arthur, Fillmore—unlike the clumsy giants who left their deep footprints in the earth along Pennsylvania Avenue and trod on practically everyone who got in their way—these midgets managed to make their way through the nation’s highest office leaving hardly a trace. That is, they left the country alone.

You will find their pictures on no “dead presidents,” that is, on none of the nation’s currency. Nor will you find their profiles chiseled on the towering rocks of the Dakota hills. Instead, there you find blowhards such as Theodore Roosevelt and saintly frauds such as Abraham Lincoln. But in the crowded field of contestants for America’s worst president, one man stands out. As a world improver, his stature is world class. He was humor-less, immodest, and self-righteous.

Woodrow Wilson was the worst kind of politician—he wouldn’t lie and couldn’t be bought. He was so full of good intentions he could practically pave the road to Hell by himself.

Between the beginning of the twentieth century and the end of World War II, the United States became the world’s richest, most advanced, and most powerful nation in history. More people owed more money to America than had ever owed money to any nation anywhere. More people viewed America favorably than ever had viewed any country before. Americans stood astride the globe, a well-meaning and able colossus.

But there never was a silver lining without a cloud wrapped around it. America was too fortunate for her own good. Now, just six decades later, the country is the world’s biggest debtor. It is the world’s biggest consumer—the “world’s mouth.” It is the world’s most aggressive and meddling military power. No country on earth is so godforsaken as to escape America’s notice nor too poor to lend it money. The United States had been the freest country on earth. Now, it has more people locked up in jail than any other country (some of whom it tortures) and employs a huge army of busybodies and snitches all determined that no commercial act between consenting adults will take place without the explicit approval of a half dozen major bureaucracies.

We pause a moment and wonder how we got where we are. Surely, some terrible crime has been committed. We go to the scene to look for evidence. There, we find a few samples and take them over to the lab. And what do we find? The DNA samples are those of Thomas Woodrow Wilson.

We do not blame the man. Or hold him uniquely responsible. His protégé at the Navy Department, Franklin Roosevelt, was an eager accomplice. Lyndon Johnson drove the getaway car. Ronald Reagan, Alan Greenspan, and George W. Bush joined the gang later. But Wilson was the mastermind. It was he who decided to “improve” the U.S. system of government. It was he who also decided to improve much of the world. It was as if he thought all the generations of Americans that preceded him—and all the peoples of the world outside U.S. borders—were a bunch of nincompoops. He, and apparently, he alone was blessed with the ability to see just what the entire world needed. And thus he undertook to change the U.S. Constitution in the most fundamental ways and to reorder the system of international relations that had evolved over thousands of years.

“ The spirit of liberty is the spirit which is not too sure that it is right,” said Judge Learned Hand in 1944.⁷ Such modesty never bothered America’s twenty-eighth president.

“A mentally ill, pitiless, mythomaniac, . . . who believed himself in direct communication with God, guided by an intelligent power outside of himself. . . .”⁸ Thus did the father of modern psychoanalysis describe Woodrow Wilson. But Freud’s judgment of the man was too generous. Wilson was a self-satisfied, sanctimonious delusional bungler who practically single-handedly transformed the country into a mocking shell of what it was supposed to be.

We begin our inspection with a quotation attributed to Wilson after his presidential election victory: “Remember that God ordained that I should be the next president of the United States. Neither you nor any other mortal or mortals could have prevented this.”

Is there any doubt that Wilson was mad? He claimed to be a Democrat. Later, he claimed to want to make the world “safe for democracy.” But right here, we see he believed in divine providence to decide leadership issues. He had not been elected by the people; he had been chosen by God. Why then, bother to have elections at all?

We also pause to wonder how the former college professor could have known God’s mind. We have tried ourselves, many times. Does God intend stock prices to rise, we ask ourselves? Will God let this plane land safely, we wondered recently? Where the hell did God let us leave the car keys? But though we have given the matter a good-faith try, we have never mastered it.

Surely, Woodrow must have supped with the gods. Perhaps he had God’s ear or even his throat. For the man could look into the future as easily as we can look into an empty beer stein. He knew not only that he was destined to become president, but that he could build a world even better than the one God had given him—by looking into the future and improving it before it happened and by replacing the private goals and hopes of millions of people with those of his own.

How did he know that the world would be a better place if a Federal Reserve System were set up to control the nation’s money? How did he know that Mexico would be a worse country and a worse friend to the United States—if it had General Huerta at its head, instead...

Table of contents

• Title Page
• Copyright Page
• Introduction
• I - IMPERIA ABSURDUM
• II - WOODROW CROSSES THE RUBICON
• III - EVENING IN AMERICA
• IV - THE ESSENTIAL INVESTOR
• Appendix - The Essentialist Glossary
• Notes
• Index