Wednesday, January 5, 2022

"War in Pieces"

"War in Pieces"
by Bonner Private Research

Poitou, France - "The nasty little bug launched an aggressive new assault on the Bonner household yesterday. Another member of the family got sick… and your editor was ambushed in an unexpected flank attack. The doctor was called to the scene… a portly man with a walrus mustache. He came to the house and confirmed that we were sick. He left us with prescriptions for antibiotics… and advice to call him again if the bugs seem to be advancing. Your editor now sits in his office with a box of Kleenex and a cup of hot tea, nursing his wounds and planning his next move.

But there are still dots to connect… and it falls to him to connect them. So here goes: One of the curiosities of life in America, in the 21st century, is that no matter how many wars are lost… no matter how much money is wasted on them… or how many lives are ruined by them… people still want more. Or, at least, the deciders do.

One ‘expert’ warns that we must defend the Ukraine… or pretty soon, the Russians will be marching down the Champs-Élysées. Another tells us that our ‘credibility’ will be lost unless we confront China… or Iran. And, of course, we have to fight global warming, racism, the Covid, poverty, drugs – you name it. “War is the health of the state,” said Randolph Bourne. We’re neither condemning nor praising. We are just predicting; get ready for more of it.

The Dumbest Wars: So far this century, the feds have continued their misbegotten wars against drugs and poverty – losing both, but continuing to spend vast amounts of money, put thousands of harmless people in prison, and doom the poor to a life of welfare dependence. And then there’s the Bush administration, launching three of the dumbest wars in US history – the war in Afghanistan, the war against Iraq…and the woebegone ‘War on Terrorism.’

The first went on for 20 years… and ended in a loss for the US. The second contradicted the first, since Saddam Hussein was an enemy of Islamic terrorists. And the third never made sense at all. The war against terror was a war against nobody-in-particular which ended up costing $8 trillion and from which no-one-in-particular realized any real victory – except, of course, the military/industrial/surveillance complex.

The Fed’s Wall Street Bailout came next. Stocks were way too high. Too many people owed far too much money. Markets typically ‘correct’ errors and redress imbalances. But no sooner had Mr. Market wiped out Lehman Bros… on his way to cleaning up messes all up and down Wall Street… than the Fed declared war. Mario Dragi, then head of the European Central Bank, spoke for the whole brethren of the Elite Establishment. Facing falling asset prices, and sounding almost Churchillian, he said he would do “whatever it takes” to prevail over honest markets.

In the US, the Fed’s key rates, adjusted for inflation, were dropped into negative territory. The Fed also pumped some $4 trillion of new money into the system to spare Goldman Sachs and other large players the embarrassment of having to make good on their bad loans, pay their debts, and curb their multi-million-dollar bonuses. These steps were advertised as ‘emergency’ measures. But adjusted for inflation, the Fed was still lending money at negative rates in 2020 – 11 years after the Wall Street bailout.
Click image for larger size.
(Source: Board of Governors of the US Federal Reserve)

And then, when Covid Crisis arose, the trumpets sounded again. Another war! The enemy was tiny – a virus – but the stakes were huge… and so were the quantities of claptrap and capital drafted to fight the bug. In the space of just 2 years, the Fed added nearly $5 trillion more to its balance sheet. US debt rose nearly $6 trillion. Whole populations were confined to their barracks. Output of real goods and services collapsed. But some industries always do well in a war. And the pharma industry must have felt its hour had come when Donald Trump demanded a vaccine on the market at ‘Warp Speed,’ whatever that is.

But as the state’s cheeks got rosier, the people it is meant to serve grew pale and gray. For they are the ones who must pay. The costs get spread among the whole population… in higher taxes… more debt, and finally, inflated consumer prices. In short, more and more of their families’ output goes to support the government’s many ‘wars,’ leaving less and less for their peaceful lives.

How to Miss the Point: It is hard to put numbers on the phenomenon. And no one in The Elite Establishment would want to try. Or even admit that it is a phenomenon. As far as the deciders are concerned, they are doing God’s work… whether they are building pyramids to honor the ruling class, sending people to gulags to protect the workers’ paradise, or putting up windmills to protect the planet from ‘climate change.’ No questions are welcome. Who can doubt, they would say, that they are making the world a better place?

GDP growth, per capita, very roughly and imperfectly, measures the rate at which people get what they are after. As the wars increased, GDP growth/capita fell from an historic 2.2% per year… which was little changed from 1870 to 1999… down to 1.1% since then. US GDP per capita is now about $58,000. Van Hoisington comments:

"If the GDP per capita had grown at the pre-2000 pace, it would be nearly $73.474 or 25.6% higher. In the fourth quarter of 2019, the quarter before the pandemic disrupted economic activity, real per capita GDP was about 17% below the trend line of the historic pre-2000 growth rate. References that real GDP has recovered to the pre-pandemic level badly miss the point. As correctly documented many times, the expansion from 2009 until early 2020 was the worst in U.S. economic history. The period of subpar performance is not eleven years but nearly two decades. During this long span the pernicious effects of massive indebtedness on U.S. economic well-being has increased dramatically."

Simplifying, people either get what they want – by exchanging goods and services with each other. Or, they get what somebody else wants – thanks to the wars, regulations, taxes, inflation, debt etc that are imposed on them. Our guess… merely extrapolating from the last 20 years… is that we will see even less of the former and a lot more of the latter. Stay tuned."

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