Why War Now?

by Milo Clark

January 1, 2002


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Government, education and business are redolent with intelligent, skilled people strongly motivated by professional standards as they understand them and have been taught. There are vast reservoirs of data and statistics coupled with immense information resources. Think tanks abound.

Whether asked or not, this corps of intelligent, skilled and professional people can and will provide myriad reports often with impressive internal logics and excellent and relevant compilations of data. Most will assert that this type of work is what professionalism is about.

Enter political or other objectives which frame the questions asked or assumed and things change radically. Ask me the wrong question and I can give you a magnificently wrong answer. Even rank amateurs, Yale or Harvard Business School graduates, can ask questions yielding perverse answers. Polymorphously perverse.

During the Vietnam years, I was perplexed in many ways. When I separated the emotional issues from more pragmatic considerations, a type of clarity slowly emerged. Patterns connected. Wandering around in the statistical records readily available to those who will look, dropping the overt political fogs spewed so vehemently, I got it.

Politicians starting with Roosevelt and extending through Nixon all thought they could handle it without much hassle. Playing realpolitik is an aphrodisiac for politicians. Safe wars are assumed to guarantee political longevity. They are much more fun than murking through domestic squabbles.

For many years, the exciting games of cat and mouse which underlay Southeast Asia gave a lot of folks opportunities to advance careers at relatively low cost, nobody paid much attention and hush-hush conditions avoided oversight. A significant portion of related expenses were covered far off budget. Some bad habits were established, however.

A minor quality white lie, the harmless white lie, still sets up situations where grayer lies need to be created to cover the white and then increasingly graying lies until it all gets impenetrably dark. Putting aside all the emotional stuff, where Vietnam entered quagmire stage was in economics.

By the time it came to Johnson's turn at graying the white lies, the "Guns and Butter" strategy was blown pretty badly. In short, the reported expenditures for all the fun in Southeast Asia got so far out of line with actual costs that cracks developed in the economy as a whole.

Bad managers tend to throw good money after bad. Enron being a current example. "Sunk cost" is a term used by financial types. Politicians are rarely good managers. Politicians tend to be seduced by sunk costs. Seduction can be fun, too.

On one side, those who will go back to look will find that a net lender was on its way to becoming a gross borrower. The USA then maintained a market for gold at a fixed price. If market conditions elsewhere moved the price of gold above that fixed price, and certain classes of folks (outside the USA) could buy gold which impacted on Fort Knox reserves at a lower price than world price or even spot price: bingo! Folks in India figured that out early.

If war-related expenses were exceeding or cutting into financial reserves, statistics showing lowering reserves create speculative conditions which certain classes of folks can exploit very profitably. The white lies get very dark very fast, in other words. The financial equivalents of critical mass come together, bust! Whether tulips or stock markets, bubbles burst eventually.

You can check exchange, currency movements and dollar relationships in terms of Swiss Francs, West German Marks, British Pounds, Lebanese and other more exotic currencies which prevailed and then took strange twists during the emergent 1960s.

It was during those years that electronic exchange transactions emerged, too. Within a very few years, daily (yes, daily) governmentally traceable currency transactions zipped through the billions into trillions. Those of us who looked into such matters were aware that unreported and untraceable transactions exceeded these by growing factors.

Clue: look at the official US resistance to international attempts to control such transactions right now. The smoke screen is going after terrorist money. Financial institutions need some opacity to their work and strongly resist being regulated. Sort of the like the NRA on gun control.

On one side, politicians like safe wars because they made outstanding contributions to economic statistics. No market factors involved, either. Given a cash economy, expansive credit accommodations and consumer stimulation through advertising, when folks are working and motivated by a "just" war; politicians tend to keep their jobs, business hums and all is well.

On the other side, some delicate games are required to keep a war under control, in relative balance. In Southeast Asia, during the early 1960s that balance got lost. Guns and butter wouldn't hack it any longer. Besides, the gooks weren't fighting fair.

Neither Nixon nor Kissinger nor any of the folks who came to power in 1968 were lacking in brains or such. If they were, there were folks lined up to supply it. Look more closely at 1972. The international financial markets called the USA and the USA cracked. Nixon needed to find out if the Democrats were going to use this situation politically. Watergate happened.

Nixon and crowd had a major problem. To continue the general illusion of economic prosperity, they needed the war. The war, though, was costing so much more than reported that, in actuality as such things can be measured, the USA was technically bankrupt. Yes, I know, governments like the USA don't often go bankrupt, they just play money games. The Fed diddles with interest rates and money supply. The treasury gins up the printing presses. Government bond issues expand as buyers, real or otherwise, appear. The measure of panic at the time was seen in the suspension of gold sales, dropping of Bretton Woods standards, etc. You can look it all up.

All the whooping and hollering anti-war stuff didn't impress Nixon and crowd one bit. You can look that up, too. That war ended because it got out of hand economically, period. Realekonomik, in a word.

Right now, today, all those bright folks lurking around the Beltway are slipping notes up the chains of command whispering politely something like "Hey, man or woman, the economy is messed up bad!" Remember the Clinton era nostrum, "It's the economy, stupid!"

Yep, it is the economy. You now have a short and simple answer to why a safe war now.


A Few Clues as of December 14, 2001

Interest rates and market returns have fallen significantly. Money market funds are now paying less than 2 percent, that is, below inflation as reported. Market returns as measured by major indexes are likely to be net negative for another year. Redundancies, layoffs, early retirement schemes, profit warnings abound. Safety net is ripped. Danger signs.

In addition to the shutdowns of Dot.Com and burstings of high tech bubbles, multiplier effects ripple through affected and related areas, whether geographical, financial or personal. Multiplier estimates range from four to twenty and vary with circumstances. They are not denied. For every one job-holder no longer working, four to twenty others are affected. Run that through a few rounds and the fallout is broader than most imagine.

For people who had income expectations related to interest-bearing accounts, those expectations are dashed. Those who were counting on market appreciation, stock options or bonuses are disappointed. For those still employed, belts are tightened. Perhaps the credit habits die hard, but sooner or later they do.

Services tend to depend on disposable and discretionary income. Discretionary income is among those first reduced as belts tighten.

Financial institutions are afloat in cash. With low interest rates designed to motivate borrowers, signs suggest that credit-worthy borrowers are not flocking. Financing scams come out fast in these conditions. Witness the flurry of promotions related to refinancing mortgages. Mortgage brokers pop up like daisies in spring. On examination, many if not most refinancing schemes end up costing those who refinance as much or more than saved in real terms.

Corporations are buying back stock to inflate executive portfolios and support stock options more than to restructure finances for harder times.

At government levels, tax collections are plummeting. Budgets are being cut at local and state levels while the federal government starts a war to obfuscate the intensification and expansion of corporate welfare and looting of the treasury. Official recession in process. Statistical bending on a roar--viz: unemployment, underemployment. Deficit spending has returned already -- Repulsivans, no less!

Coup and containment.


       Milo Clark, a founding member of Swans, had it all: Harvard MBA, big house, three-car garage, top management... Yet, once he had seemingly achieved the famed American dream he felt something was missing somewhere. As any good executive he decided to investigate. Since then, he has become a curmudgeon and, after living in Berkeley, California, where he was growing bamboos, making water gardens, listening to muses, writing, cogitating and pondering, he has moved on to the Big Island in Hawaii where he creates thought forms about sunshine. Milo can be reached at Swans.

       Please, DO NOT steal, scavenge or repost this work without the expressed written authorization of Swans, which will seek permission from the author. This material is copyrighted, © Milo G. Clark 2002. All rights reserved.

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Published January 1, 2002
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