http://www.the-rude-awakening.com/RAissues/2006/march/RA081006.html

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And more views from France:

*** As you know, Addison is in Cannes, working with Dr. Kurt Richebacher on some insights into the current state of the bubble economy in the United States. This morning, he sends along these money paragraphs:

"Though we dislike admitting it, we have, in common with Mr. Bernanke, taken great interest in what went wrong in the United States during the 1920s that lead to the Great Depression.

"Bernanke has even gone so far as to claim an understanding of the Great Depression as the ‘Holy Grail of macroeconomics.’ We agree that the experience at the time offers, in many respects, most valuable lessons for past and present, but to learn and understand these lessons, it definitely needs digging deeper than just changes in money supply and bank reserves.

"Bernanke’s folly, and apparently that of monetarists in general, is the categorical assumption that sufficient monetary ease does infallibly guarantee desired economic growth under any conditions. This implies every recession arises from the failure of a central bank to provide the necessary monetary ease. The possibility that the gathering economic and financial dislocations during the prior boom years, which impose severe constraint on the decisions of banks, firms, and consumers, is completely alien to their thinking.

"Until long after World War II, it was the accepted notion that the U.S. Great Depression of the 1930s had its decisive causes in a variety of such dislocations and imbalances, which the U.S. economy and its financial system had incurred during the prior boom years in the wake of major excesses in borrowing, lending, and spending at the time.

"The possibility that monetary policy may become ineffective is something a true monetarist cannot and will not swallow. With this conviction in mind, they have rewritten the history of the Great Depression during the early 1930s. The catalyst for this change in perception was one book: A Monetary History of the United States, 1867-1960, written by Milton Friedman and Anna J. Schwartz and published in 1963.

"In time, the Friedman and Schwartz view was to monopolize the revisionist view of the Great Depression."

Says Addison: "Since November of 2002, when Ben Bernanke gave his now famous ‘Helicopter Theory’ speech, the monetarist view of the Great Depression has been a huge driver in the interest rate strategy employed by the Fed. Dr. Richebacher -- as strong-minded as ever at 88 years old -- is convinced this view is wrong and that ‘monetary policy’ will be completely useless during the next downturn in the economy."

We can’t wait to read the good doctor’s magnum opus. For more on the good doctor:

Countdown To Crisis

http://www1.youreletters.com/t/396100/4459110/793018/0/

*** The recent breakdown of the oil pipeline from Alaska…strain on the electrical power system…failure of the New Orleans levees…gummed up traffic…the Big Dig et al.…brought forth reflections from our colleague, Eric Fry:

"George Bush et al. have been so focused on the enemy without, that they have completely ignored the enemy within -- i.e., our crumbling physical AND FINANCIAL infrastructure," he writes.

"Corroding pipes on the North Slope knocked out more oil production than all the terrorists attacks of the last three years combined…

"This is how Empires crumble, from within. America seems unaccustomed to -- and unprepared for -- internal decay. She will realize it eventually, and as she does, she will devote resources to addressing the problems. For the investor, therefore, the better big-picture investments will be in the companies like Gorman-Rupp that make pumps for New Orleans (thank you, Chris Mayer) or Grant Prideco, which makes the sorts of pipes that are corroding in Alaska (thank you, Dan Amoss), rather than some military hardware provider."

*** Another colleague, Dan Denning, is more pessimistic.

"Maybe that national infrastructure won't be repaired or replaced," he suggests. "It'll simply crumble, and state governments or private sector companies will focus on the critical projects.

"Think about the scale of national industrial infrastructure: ports, waterways, canals, bridges, roads, interstate highways, airports, the air traffic control network, water grids, electric grids, gas and oil pipelines.

"That's a lot of fixed capital investment. Not exactly the kind of thing the country has been doing lately............The only enduring icons to Rome, ironically, are its roads, aqueducts, and...walls. In the early days, the republic had its priorities right. You can find those sturdy icons all over Europe. Heck, when I worked in Paris, I walked up the rue St. Martin...which was straight as an arrow because it was built on top of an old Roman north-south road through the city.

"Before they were conquerors, the Romans were builders. In fact, engineers at the Department of Transportation say that Roman concrete from 2,000 years ago is superior to the concrete we produce today. So much for progress! And if you've ever been to the Pantheon, you'll know what I mean.

"The foundations of Empire are an efficient transportation system that can get armies and commercial goods and food and water from one place to the other quickly, at a relatively low cost. It's almost a logistics story.

And a building materials story…"

Meanwhile, Justice Litle sees a future for the U.S. with bananas in it:

"Well, there's always the Macquarie solution: Let overseas investors with capital surpluses buy up all the infrastructure in disrepair, fix it up, and lease it back to us for a 99-year term. The ultimate outsourcing.

"Then 10 or 15 years down the road, when the Macquaries of the world have covered their initial investment outlays and are taking in pure profit with each toll payment in the box, we nationalize everything and embrace our new role as a banana republic."

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The Daily Reckoning PRESENTS: It is perhaps best that soldiers don’t think. But of course, those in charge of armies must think, and often enough the outcome of that is far from what was expected. Bill Bonner discusses decisive thought in ancient battles.

Cannons to the Right, Cannons to the Left by Bill Bonner

"Their's not to make reply,

Their's not to reason why,

Their's but to do and die..."

"The Charge of the Light Brigade," Alfred, Lord Tennyson

In September of A.D. 9, Emperor Augustus was behaving like a lunatic.

Reports circulated that he was banging his head against stone walls muttering, "Quintili Vare, redde legions" ("Quinctilius Varus, give me back my legions"). The legions had been lost in Rome’s worst military disaster since the Battle of Cannae. Augustus could have demanded the head of the general responsible, but he already had it. The Germans had sent it to him.

The battle of Cannae, in which Hannibal faced a Roman army twice as large as his own, and beat it decisively -- killing some 70,000 Romans -- was already as distant in Roman memory as Ticonderoga is to Americans today.

Otherwise, they might have thought twice about getting themselves into the same situation with the German tribes. But Americans no longer remember Ticonderoga and the Romans had forgotten Cannae.

Here follows our brief account.

When Hannibal crossed the Alps to attack the Romans at Cannae, the Roman equivalent of Homeland Security was caught completely unprepared. Even though the Carthaginians had lost many of their North African troops, almost all of their elephants, and many of their mules and horses, and though Hannibal himself had lost an eye, the invading troops still managed to send the Romans fleeing back to Rome -- those that weren’t killed or captured, at any rate.

But alas, poor Hannibal had his failings.

"Vincere scis, Hannibal, victoria uti nescis," said his cavalry commander.

("You know how to win, Hannibal, but you don’t know how to profit from the victory.")

Instead of gathering his forces and marching straight to Rome, Hannibal dithered, negotiating, while Rome regrouped and raised new armies.

Eventually, their time came. The Punic invaders were put to rout…Carthage was razed... and the land around the city salted and made infertile forever. Rome went on to dominate the entire Mediterranean for another 700 years.

Hannibal’s mistake was a common one. The Confederacy made a similar error when it failed to follow up its victory at Bull Run in 1861 with a massive attack on Washington. It might have dictated the terms of an armistice; instead, it waited for a negotiation that never came. Then, Gen. Robert E. Lee made the mistake that sealed the fate of the Southern cause. He said he thought his soldiers were "invincible" and sent them up Cemetery Ridge to attack the Union forces, even though it had long been obvious that a frontal charge across open space was a losing proposition.

"Remember the stone wall," Stonewall Jackson used to say, referring to the stone wall at Chancellorsville, where, in 1863, he learned the critical lesson that a fortified position is almost impossible to take by direct attack. In almost every battle of the War Between the States, it was the defenders who were the winners. There was a very simple reason: Rifles had become more accurate at longer range than they used to be. So important was the lesson and so obvious were the consequences of disregarding it that Gen. Longstreet dared to differ with his legendary commander. Only a fool would attack up that hill, he warned Lee. Longstreet was right. The Southerners who charged under Gen. Pickett might have been tough, but they proved that they were still vincible.

Robert E. Lee may have been a legend, but as Gettysburg shows, there is something about camp life that turns even the best men into blockheads. We say that, mind you, in admiration, not contempt. After all, the world needs good soldiers who don’t think too much, and a really good soldier would rather die than think. Often he does.

The last thing you want in the enlisted mess is philosophers. They are liable to begin asking questions. Imagine the reaction of a Russell, or a Wittgenstein, or a Camus, had they been in the Wehrmacht in 1942 when the German army advanced on Moscow:

"We’re going to march across the biggest land mass on Earth…we’re going to fight the biggest army on Earth…we’re going to freeze our butts off in the coldest, least hospitable place on the planet, across the widest front line in history…with the Soviet Army in front and partisan guerrillas at our rear…and we’re going to do this without enough fuel or supplies…led by a bunch of fanatics, who are at least delirious, and probably criminally insane..." Right.

No, you don’t want thinkers with guns in their hands. But at the top of the chain of command, thinking might not be such a bad thing...if only it were done right. But it never is. Put a man on a public stage and he gets an almost irresistible urge to make a spectacle of himself. He thinks. Or thinks he thinks. But his thoughts get all tangled up with his amour-propre. The next thing you know, he is doing something, but something so absurd that even the theater mice are tittering at him.

In contrast, a man in his own private life need not think too much. He can get by on instinct and tradition...making his idle mistakes and suffering its petty consequences. Then, after he is in the grave, people may remember him for his kind remarks or the wart on his nose…or they may not...and life goes on just as well without him.

Not so the public man. Seduced by the stage on which he struts, he imagines he is a thinker...and an actor...on whom the planet depends. All public spectacles begin with this delusion, segue into farce, and conclude with a flourish in disaster.

And nowhere are those disasters in sharper focus than in military affairs, where every vainglorious dimwit -- from P.Q. Varus to George Armstrong Custer -- has left behind him a charred trail of corpses and burned-out war chariots.

There was, for another instance, Lord Cardigan, who having bought his commission in the British Army, was moored in the Black Sea enjoying life aboard his private yacht -- attended by a French chef -- while his soldiers shivered, starved, and died in misery in the Crimean War. Called to action and never having seen the terrain, he took his light brigade of cavalry on a mad dash in the wrong direction down into the "valley of Death." A thinking cavalryman might have pulled the plug on that operation. Apparently, there were none. Instead, they all rode to their deaths -- except, of course, Lord Cardigan, who returned home to England a national hero.

Then, there’s the Italian ace, Italo Balbo, who was given the command of Italy’s forces in Libya in 1940. He flew to take charge…and was shot down by his own troops.

A British general, whose name we don’t recall, thought it rather unmanly to duck. Touring the trenches in WWI, his lieutenants urged him to put his head down. No, said he, if we all go crouching around all the time, we’ll never be able to fight the war, let alone win it. He had just finished his sentence when a German marksman shot him in the head.

Of course, some commanders are simply mad. Confederate Gen. Richard S. Ewell, who had a bald head and a beaked nose, believed he was a bird.

Reports circulated that he pecked at his food and made noises as if he were chirping. The Prussian field marshal Leberecht von Blucher tiptoed around his room, claiming the French had heated the floor. He also believed that he had been raped by a French soldier and was pregnant with an elephant.

But most military commanders the gods destroy without bothering to make mad. We turn back to Publius Quinctilius Varus and Rome’s great defeat at the hands of the Germans.

Varus’s father was a high-ranking Roman, holding the post of quaestor, but, apparently, not a smart one. After the assassination of Caesar, Sextus Varus chose to back the wrong side in the civil war that ensued, aligning himself with Brutus and Cassius, Ceasar’s murderers. At the Battle of Philippi in 42 B.C., Varus’s team was thrashed. It was Roman tradition that the leaders of the losing squad committed suicide. Varus turned to his slave and asked the man to kill him with his own sword. We don’t know whether the servant was delighted or appalled. All we know is that he did what was asked of him and Varus disappeared from history.

His son, P.Q., married carefully -- that is to say, in a way that brought him to Emperor Augustus’s notice. In fact, he married twice, each time bringing himself a little closer to the imperial household. Given the governorship of Syria, he came to it as a poor man to a rich province. He left it as a rich man leaving a poor one. Longing for more glory, he saw his opportunity east of the Rhine River, where the Germans had not quite been brought into the Empire.

In the Romans’ view, the Germans were a wild, unruly, and uncivilized group of tribes. When they weren’t getting drunk and fighting with each other, they were just getting drunk. They were regarded much in the way as Iraqis today are seen by senior American military leaders -- as incompetent and disorganized. The Romans, on the other hand, were well organized, but their contempt for the barbarians…and their general arrogance toward all subject peoples…made them prey to error.

Varus’s first mistake was that he trusted the young leader of the Cherusci tribe, Arminius, who spoke Latin and had ambitions of his own. Arminius told him of the Chauci -- a tribe to the east of his own Cherusci, far from the Roman fortresses along the Rhine. Varus couldn’t resist the opportunity for glory. He gathered three legions together -- along with several cohorts of Germanic auxiliary troops -- to put down the rebellion.

His second mistake was not listening to Arminius’s own uncle, who warned him of the trap.

And his third mistake was to take his troops through a narrow defile where they could be easily ambushed.

Varus was probably riding along happily, imagining the triumphal march he would make through Rome when he returned, when he first heard the "baritus." It was a sort of war cry, made by the Germans before a battle, a kind of low moan produced by roaring in a deep voice against their own shields.

It began at Kalkriese, near today’s Osnabruck, and is called the Battle of the Teutoburg Forest. Varus was so confident that he had brought with him a whole caravan of women, children, and supplies. The army was stretched out along a narrow road through the forest. To make matters worse, it rained. Roman archers found that their bows were almost useless. Foot soldiers could not form up properly. All their training, tactics, and careful administration were of no use.

Arminius had managed to bring together the Cherusci, Marsi, Chatti, and Bructeri -- all the local tribes -- and set them on the Romans. They may have been no match for the Romans on open ground…but here in the forest, they were having a picnic. They wiped out the baggage train first. Women and children were killed or taken as slaves. Then, they went to work on the Roman soldiers. Soon, the auxiliaries not only deserted, but went over to the enemy.

For several days, the legions held together -- out of discipline and desperation. They even managed to build impromptu fortifications. But they had no way out. When it was clear their situation was hopeless, Varus must have followed family tradition. He probably buried his sword in the ground and fell upon it. The Germans picked him out among the dead, cut off his head…and sent it to Rome. Arminius was later defeated by Roman forces sent to get even, but Germany was never subdued…and never part of the Empire.

Regards,

Bill Bonner

The Daily Reckoning

Editor's Note: Bill Bonner is the founder and editor of The Daily Reckoning. He is also the author, with Addison Wiggin, of The Wall Street Journal best seller Financial Reckoning Day: Surviving the Soft Depression of the 21st Century (John Wiley & Sons).

In Bonner and Wiggin's follow-up book, Empire of Debt: The Rise of an Epic Financial Crisis, they wield their sardonic brand of humor to expose the nation for what it really is -- an Empire built on delusions. Daily Reckoning readers can buy their copy of Empire of Debt at a discount -- just click on the link below:

The Most Feared Book in Washington!

http://www.dailyreckoning.com/empireofdebt.html

-- Posted Friday, 11 August 2006 | Digg This Article