Heads on Pikes

The difference between illegal insurrections and glorious revolutions

(Source: Getty Images)

Bill Bonner, reckoning today from Baltimore, Maryland...

Bastille Day

What is the difference between an illegal insurrection – such as the one being investigated on Capitol Hill – and a glorious revolution, such as the one that began on this day 233 years ago?

That question may or may not have occurred to Bernard-Rene de Launay. As commander of the Bastille, his job was to keep it under his control. That meant, he had to stop the group of hotheads from taking over his fortress. And had he succeeded, the story might have had a very different ending. The elite of the First Estate might have retained power. And they might have convened their own investigation into who was responsible for the insurrection.

Instead, de Launay’s head – rather than resting comfortably on his own shoulders – was soon mounted on a pike, and the rioters were triumphant.

How might the Jan 6. riot have turned out differently if Nancy Pelosi’s or Mike Pence’s head had been mounted on a pike? We don’t know. But the rioters were woefully unprepared; there were no pikes among them. And America’s first estate is still in charge.

Not so, the French. The rioters went from wickedness to debauchery. Killing, robbing, raping, destroying – they made a wretched wreck of France. But they gave it a new government. Instead of being bossed around by incompetent aristocrats, the French were now bossed around by ideologues and technocrats.

Three empires, three insurrections, and five republics later, France has a government much like that of the US. That is, it is incompetent, corrupt, and delusional.

Disinfecting Sunlight

Yesterday, we left you with the fleeting thought that the deeper meaning of today’s financial woes might be political as well as economic; our western democracies could be in trouble.

Presidential approval rates are down – from Malibu to Minsk. The more light the 24/7 media shines on our leaders, the more we despise them.  

Capital values are falling too… as the value of the reserve currency itself – the dollar – falls at the fastest rate in 41 years. Today’s Wall Street Journal headline story:

Inflation Hurtles to Highest Since ‘81

A 9.1% price rise adds pressure on the Fed as more investors expect a bigger rate boost in July

One of the major themes of the financial press is sympathy for the Fed. One article laments that the “Fed is under increasing pressure.” Another tells us that “it won’t be easy for the Fed.”  Still another worries that the “Fed faces its toughest challenge in decades.”

The mainstream press wants us to feel the pain of the orphan who killed his parents. The Fed, more than anyone, created this mess. And anyone who still thinks central banks can make people richer is either a moron or an economist.  

But here we are. And here we have a corollary to our explanations for ‘what’s happening now.’  

In short, we could be looking – somewhere up ahead – at our Bastille moment, and the end of the line for modern, post-French Revolution, welfare state democracy.  

Exposed and Punished

Democracy works tolerably well, but only in small settings. In a New England town, for example… or in a club… All the participants know more or less the same set of facts… and all have equal power. People can be persuaded by the most forceful and most eloquent members of the group, but decisions rarely fall too far from the tree of practical alternatives available. 

Not only do all the participants share the same information… they also share the same culture and language… and the same codes and rules. More importantly, they also know they have to bear the costs of whatever mischief their decisions cause. In small groups, as in families, mistakes are exposed and punished… so, people tend to make fewer of them.    

But in large settings… the feedback loops get tangled or cut. People are busy with their own lives… and way too far from the ‘facts’ to have useful opinions. They can’t be expected to master epidemiology one day and the history of the steppes the next. Should the Donetsk People’s Republic be free from the Ukraine? How would they know?  

As for his elected ‘representatives’… they are quickly captured by pressure groups… political donors… think tanks… and the Deep State.

In practice, the government ‘of the people, by the people and for the people’ is none of those things. It is a government of the elite, run by insiders, for the benefit of chiselers and busybodies.  

In 1789, Louis XVI ran out of time, ran out of money, and ran out of luck. The ‘system’ no longer worked. Could something similar be happening in today’s western democracies? Is it Jerome Powell’s head that should grace the pike this time?

Stay tuned...

Bill Bonner

Joel’s Note: It may seem odd, even somewhat uncouth, to quote Mr. John Maynard Keynes in these pages… but after yesterday’s 9.1% CPI print, the following lines, from the father of Keynesian economics himself, seem disturbingly appropriate…

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some.

The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth… as the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be meaningless; and the process of wealth-getting degenerates into gambling and lottery. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner in which not one man in a million is able to diagnose.

One is left to wonder. Is the system being destroyed by fools… or by villains? Hanlon’s razor cautions us never to attribute to malice that which might adequately be explained by stupidity. So where does that leave us?

Feel free to let us know your thoughts on the matter, below…