Bonner’s “Empire of Debt”

I bought this book some months back not knowing anything about Bonner or the Agora empire, although as it turned out, I had an acquaintance who had been working in a province of that empire for some time.  I bought the book on the strength of its title—someone who was not a member of the conspiracy-theory left or right had finally connected the dots between American expansion and economics in a concrete fashion—and on the strength of the names recommending the book on the dust jacket—Nassim Nicholas Taleb, Jim Rogers, Lew Rockwell.

Bonner argues, or at least asserts, that our debt is more or less a function of our imperialism and that our imperialism is more or less a function of our strength.  In other words, when a state can become a hegemon, it will do so; and being a hegemon is an expensive business that requires an intensification of resource utilization (not to put too fine a point on it) and yet simultaneously permits one to appropriate those resources through compulsion and/or tribute.  In the case of the United States, the reserve currency status of the dollar serves as a kind of proxy for that tribute.  We pay for our goods with debt lent to us by foreign producers, who benefit or seem to benefit—or who do not feel it necessary yet to point out otherwise—from Pax Americana.  Or perhaps we should call it Pax Chimerica. (I see from Google that somebody already has.)

Now, anybody who knows anything about Plato must be familiar with his theory of regimes, how a state devolves from a wholesome republican form to the basest tyranny and how this is linked to the psychology of the citizens.  This theme has been seized upon by all those who warn of the dangers of democracy slipping into dictatorship:  Greeks, Romans, Italians, the American Founders, and countless thinkers in between.  The American contribution to this insight can be found not only in the Federalist Papers, but also in the profound works of political theory written by John C Calhoun (yes, that Calhoun) and Irving Babbitt’s Democracy and Leadership.

Bill Bonner, however, first observes that imperialism is inevitable and then not only condemns this inevitability but mocks it.  This kind of cynical whimsy grows wearisome after a while, but this is the only book in the genre I know of, so we are stuck with it.  One might point to Ron Paul, but Paul, like many libertarians and conservatives, is saved from this abject cynicism by his faith in the power of liberty to inspire Americans to change.  This faith, unfortunately, is likely to go the way of Cicero and Cato.

One can, I think, disapprove of something one regards as inevitable, but can one ridicule it?  If we are spared the folly of our fellows, why is that?  Are we not perhaps unwitting dupes, as well, smiling in our self-assured omniscience?  Will this knowledge permit us to be spared?

Bonner wrote his book in 2006, and we must nod to his recognition of the outlandish excesses of the credit industry, the housing market, the Federal Reserve, economists, politicians, investors, the common folk, the media, virtually everybody.  And, he was a goldbug conservative before being a goldbug conservative was cool, to misquote Phil Gramm.

In other words, one certainly did not lose money between 2006 and now by heeding Bonner’s advice in this book.  Relative to the rest of the world, that is no trifling matter.

Beyond this, however, Bonner argues himself into a corner.  America is doomed to walk the path of imperialism, so one should generally be disengaged from the political process.  Cast a vote for Ron Paul at most, and be done.  Again, this line of argument, apart from the accompanying ridicule, is a highly legitimate one graced by a long and noble pedigree.

But, the downward path of imperialism is not only marked by a decline in power and wealth.  It is marked by social, economic, political, ideological, and religious convulsions.  We are witness to some of them now.  Domestically, some order will replace the current one, and as bad as democracy may be, it was still, as Plato’s Socrates noted, superior to dictatorship.  The rule of law may have already been corrupted to no small degree, but anyone who has lived (and not merely resided) outside of the West and its Westernized ex-colonies knows that things could be infinitely worse.

Bonner recommends his readers not only to buy gold but to practice the traditional virtues of investing.  Work hard, save your money, invest prudently.  Avoid speculation, ignore what the “stock market” is going to do and take a careful look at each company to determine its value relative to its price.  Imitate Warren Buffett, in other words.  Be wary of fads and novelty.

There is a tension, however, between this seemingly wise advice and the imperial, debt-ridden picture Bonner has been at pains to outline in his book.  We have a frayed and collapsing empire whose perverse monetary system is exacerbating domestic imbalances and is closely tied to an unsustainable social welfare program.  We have a recipe for apocalypse, but Bonner’s advice is to make sure one goes to work on time, so to speak.

This year, Bonner is arguing that gold is more or less fairly valued, that he does not know which way it will go, and that one could buy stocks if one conducts the kind of careful, fundamental microeconomic analysis described above and has a sufficiently long-term goal in mind.

When the economy is on the brink of potential collapse and/or deflation/inflation (depending on who you listen to), central banks are debasing currencies as fast as they can, and the political situation is becoming increasingly unpredictable, how can one argue that gold is more or less fairly valued or that one can invest in companies with a view towards the long-term?

How does one price rising political and economic risk and the sense that the number of “unknown unknowns” may be outstripping the other “knowns” and “unknowns”?  In other words, what are the chances, say, that Christine O’Donnell will be elected president in 2012?  Or Jon Stewart?  During the late stages of the Roman Republic, the state lurched between extreme right and left, as we call them today, until a hard-line imperial leftist, Julius Caesar, briefly took the helm.  If one is conscious of growing political and macroeconomic risk, investing like Warren Buffett will not be enough.

Jeff Rubin has described a world whose primary economic challenge is sky-rocketing oil prices.  Whatever one’s views on the cause of high oil prices, the consequences are described in compelling fashion.  This factor alone stands to dramatically alter our world by, for example, impacting the division of labor and global trade.  In 2008, when oil prices were peaking, we saw much more assertive behavior by oil-producing countries like Russia, Iran, and Venezuela.  Resource-starved countries, if under constant strain, might also become more aggressive.  If Fed-driven inflation were to push commodities of all kinds to the heights that inflation-hawks fear, who can predict the long-term performance of a widget-maker in Iowa (not that Americans produce widgets anymore) in such an unstable environment?  If we were to have to endure a military conflict in the “homeland”, how valuable would our gold be worth?  Barton Biggs has demonstrated that when the division of labor breaks down enough, such as in occupied parts of Europe during World War II, the ability to barter trumps having gold and precious metals.

My chief criticism, therefore, of Bonner’s book is not the ridicule and cynicism and so forth, but the failure to follow his principles to their logical conclusion.  If he had been more rigorous on this point, he would have been forced to step into the realm of political risk and analysis, which he seems to believe had been artfully dodged by his argument on the inevitability of imperialism.  On the contrary, Americans have had the luxury of not having to give a damn about politics, because our empire has been on autopilot for so long and has been delivering the goods, however fraudulently, but that will no longer be the case.  The real bull markets in the coming decades will not be gold or commodities as much as politics, war, and religion.  That is the lesson of empire.

Advertisements

No comments yet

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: