There are no do-overs in life, goes the old adage.
But even old adages have their caveats. For some, apparently, there are do-overs in life.
Consider the group of Nixon era hold-overs who currently hold many of the reins of US power, such as: Donald Rumsfeld, Richard Cheney and Henry Kissinger, to name a few. For these people the current wars in Iraq and Afghanistan provide a do-over of the Vietnam War.
To their credit, these men admit mistakes were made in the late 60s and early 70s. To their detriment, in my view, the mistake they admit is a lack of executive resolve. For these men, the mistake was not the decision to go to war in the first place, always a hazardous endeavor, but the decision to listen to the will of the populace and leave.
Alas for these men, but fortunately for us, the remains of representative government are still in place, even if only in slightly better shape than was the case in Rome when Augustus became Emperor. For those unfamiliar with that period in Roman history, Augustus learned from the experience of his grand-uncle and adopted father, Julius that he needed to maintain the outward form of government the people wished, i.e. the Republic, even if the true power resided in his person. The nasty eventual effects of this policy of government by gross deception can be seen in a review of the reigns of the later Tiberius, Caligula, Claudius and Nero.
Returning our attention to the present moment, what can a group of men do who believe the problem lies with a reluctant population? One possible solution: lie.
Enter Henry Kissinger, stage left, repeating a favorites maxim: It is not a matter of what is true that counts, but a matter of what is perceived to be true.
Thus, if you wish people to agree with your policies, you must make them believe things which beg those policies, and those in positions of power have the ability to, in the words of Noam Chomsky, manufacture consent. The temptations of power, and credibility recall the wise words of Voltaire, those who can make you believe absurdities can make you commit atrocities.
Thus the torturing of statistics becomes as legal and desirable as waterboarding, at least to those not on the receiving end.
If too many domestic wartime casualties leads people to demand an end to war then such statistics needs to be downplayed or outright fudged.
If too many civilian casualties in the theater of operations leads people to demand an end to the war then statistics portraying such a reality need to be deemed, not credible.
If the projected cost of the wars leads people to think twice about the venture, then one avers that the wars will be self financing.
If the effects of the war on the domestic economy lead people to demand an end to the war then the domestic economy, and most importantly the financial expressions thereof must be supported even if it results in a bigger problem down the road.
Of course, the key question of whether this view that the problem during the Vietnam War was a lack of resolve remains unanswered, for now.
Kissinger's view that perception trumps reality is, in my view, only valid in a local sense. While I agree that people act on their beliefs and not on reality, whether they are aware of this or not, men can change their beliefs while reality remains what it is. You can lead people to believe that hugging rattlesnakes prolongs life but this faith will quickly change once put to the test in the real world. Reality can, and does, bite.
"Life," quoth the bard, Forest Gump, "is like a box of chocolates. You never know what you're gonna' get." Paraphrased, life is an experiment for testing ideas, or so the Pragmatists put it. The truth, argued William James, has a cash value in the walk of life. Faith in the truth improves one's life while faith in the false has the opposite effect.
So I sit and watch the experiment in greater executive branch resolve run its course. Unlike the Nixon version, there will be no "cutting and running". There will be no open discussions of increasing casualties or costs. Economic and financial controls will not be lifted and nobody will ever resign. As Donald Rumsfeld put it the other day, you can bank it.
Yet the theorist in me yearns to speculate on the end result of this experiment, in the, to some, unlikely event that the guiding view of the executive branch proves false.
Let us, dear readers (dare I use the plural after so long an absence from the screen) try to imagine a world in which reality trumps perception- in which obscuring, embellishing and even outright lying about the effects of one's actions makes problems worse.
In a world where hugging rattlesnakes is a bad idea regardless of what people believe, wars which kill lots of people and impoverish populations lead to a lack of state credibility. In that world continued denial and obfuscation by the executive branch only makes the eventual reckoning that much worse. That is, the people's skepticism of the state and institutions in general during the 70s might pale in comparison to the coming skepticism.
For my financial minded readers, in that world where reality trumps perception the current efforts to revive the myth of the goldilocks economy and deny the view of an economy caught between the Scylla of an imploding housing bubble that could make the 30s seem tame and the Charybdis of an inflationary spiral might, if the view is believed, as seems to be the case, catch the markets off sides.
For it is in the world of finance that perceptions with the most tenuous relation with reality quickly manifest as large scale bets- bets which, as an rather large aside, beg the emergence of the reality forecast by the perceptions in order to not have deleterious effect. And the bigger the bet, and the further from reality the perception, the more deleterious the effects of those bets will prove to be.
In the event that the Goldilocks economy proves as accurate an assessment as the view that the wars in Iraq and Afghanistan are going well, the backlash could get violent. The months long trend favoring bonds and equities over commodities might reverse, and quickly.
In a recent phone conversation with some players in the financial markets I expressed my fear that quite a few funds were, given my sense of current conditions, in a very risky position- long things which can be easily produced, bonds and equities and short things much harder to produce, commodities. Bonds and equities can lose all their value, in some cases quite quickly, like those of Enron while commodities are never valueless, and sometimes cannot be got for any amount of currency, such as in the Weimar Republic.
As I cut my teeth, so to write, in the commodity markets, I very early on learned that there were two things to avoid as a commodity speculator, taking delivery and getting caught short in a squeeze and the latter was far worse than the former. While I don't know too many people who would wish to have 5,000 bushels of soybeans sitting in their driveway it would be far worse to owe those same 5,000 bushels while the price keeps rising. In the first case, the downside is limited to the cost of the beans, and mitigated by the possession thereof, while in the latter case the downside can be many multiple of the original price and in certain rare cases, virtually unlimited.
In a world where reality eventually trumps perception, revelation follows denial. Thus as an adherent to that faith, I wait for the moment of revelation when the veil of denial is pierced and the sun shines brightly. These wars have not been self financing and as of this writing have not produced anything but negative returns for the many. Commerce, argued Bastiat, is not assisted by breaking windows. When the veil of denial is pierced I expect to see a rather violent correction in fund positioning.
In the meantime, I'm enjoying the scenery of upstate NY in the fall.