Private Briefing with Byron King, Part One

Friday, November 29th, 2024

Laramie, Wyoming,

By Dan Denning

Greetings on the last trading day of the month! While we were away gorging ourselves on turkey and stuffing, we learned that the official inflation figure has been ‘stuck’ at around 2.7% for the last seven months. The core personal consumption expenditure metric the Fed watches actually clocked in at 2.8% in October. And remember, that doesn’t include energy or food prices.

The Fed doesn’t meet again until December 17th. But it sure looks like inflation is not coming down to its target rate of 2%, and may even be picking up again. The Atlanta Fed keeps track of ‘sticky’ inflation. It’s a basket of goods and services where prices are less volatile (change less often, and less wildly). The ‘sticky’ rate of inflation was 3.9% in October.

The chart below zooms out and looks at the ‘sticky’ rate since the late 1960s. The obvious point today is that there were three distinct ‘waves’ of inflation the the 1970s. Each was caused by a policy mistake from the Fed, thinking inflation was vanquished and lowering rates, only to see inflation storm back. If we’re right, the first wave of inflation in this cycle bottomed at around 2.7%. The next one will begin in 2025.

Today, we zoom further out in history by bringing in my old friend Byron King for a Private Briefing. This is pure ‘big picture’ stuff and we cover a lot of ground—from a gold-backed Treasury bond to the odds of nuclear war with Russia.

We covered so much, in fact, that I extended the normal time limit for a Private Briefing to 90 minutes. You can watch the whole interview below by clicking on the image.

If you’d prefer to read it, I’ve broken it up into two parts to make it more manageable. Part One is below. I’ll publish Part Two tomorrow. And tomorrow, I’ll include a downloadable PDF of the entire Private Briefing if you’d prefer to print it out and read it.

Until tomorrow,

Dan

PS Thank you to all the readers who wrote in with detailed suggestions about how to improve gut health (and its connection to brain health). I received dozens of replies. If you don’t hear back from me right away, it doesn’t mean I’m not thankful. I am. So thank you!

PPS Did you see Vladimir Putin say that Donald Trump is ‘not safe now.’ Putin seems to believe there are a lot of vested financial and political interests in Washington who don’t want to see Trump take office and may not be done trying to prevent it, even if it means another assassination attempt. What do you think? The stock market is not thinking about it all. Not yet.

CLICK ON THE IMAGE BELOW TO BEGIN PLAYING THIS PRIVATE BRIEFING

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TRANSCRIPT OF PART ONE BEGINS NOW (transcript has been lightly edited for clarity).

Dan Denning: All right. Well, we're back and we're on the clock. Welcome back to Bonner Private Research. I'm Dan Denning, and for this month's Private Briefing, I'm joined by an old friend who many of you will know from many years ago. And if you don't, I'll tell you how we met. But first of all, I just want to welcome him and thank him for joining us on short notice before he heads up to upstate New York for Thanksgiving, Byron King from Lifetime Income and Paradigm Press. How are you, Byron?

Byron King: Very well, thank you, Dan. It's great to be with you. And hello to all the Bonner Private Researchers out there.

Dan Denning: I’d like to tell new readers who might not have met you yet, a little bit about how long you've actually been involved in our project, both officially and unofficially. But as I mentioned, just in case you missed it, if you like what Byron has to say today and are interested in hearing more, he's a regular contributor to the Lifetime Income letter published by Paradigm Press.

But his history and his background and his qualifications, the things that make him such an interesting person to talk to on these Private Briefings, go back to his degree in geological sciences from Harvard University. From there, as I understand it, Byron's first gig was as a geologist for the Gulf Oil Exploration and Production. So we're going to talk a lot about oil and energy today. You sometimes hear us refer to him as Captain King. That's because Byron had a tour as a flight officer in the US Navy, and during that time he was an aide to the United States chief of Naval operations.

So to the extent that we're going to talk about strategy and military affairs and what's coming in 2025 for the war in Ukraine and in other places, Byron has a unique perspective on that. After leaving active duty, Byron began practicing law. And we will not hold that against you today, Byron, because without it, I think we wouldn't have some of your perspective.

But that brings us up to at least my experience with you. And this was in early, probably 1999 or early 2000, where you became what Bill called the unofficial and unpaid Pittsburgh correspondent of the Daily Reckoning. Long time Bill Bonner readers will know that the very first edition of Bill's essays, which some people call the first blog in the internet, certainly one of the first e-letters, was called the Daily Reckoning. It’s how I met Bill, and that's how Byron and I met.

We were in the lobby of the Fairmont Hotel, I believe it was in the spring of 2000. That's back when San Francisco was a nice place to be. And Nob Hill was one of the most beautiful spots in the city. Byron and I were both at a resource conference when gold was under $300 an ounce.

And of course, that was before the bull market in gold. It was before 9/11, the wars in Iraq and Afghanistan and the boom in shale gas, which we're also going to talk about today. So my point is that Byron has a unique background and he's able to provide insight and analysis on a wide variety of investment stories that touch on geology, military history, law, and national strategy. So we're going to talk about all of those things today.

But by the way, Byron, because you always give something valuable to me when we have these conversations, I wanted to let you know I found out something interesting today that leads to my first question. Did you know that the Fairmont Hotel, which is the first in the Fairmont chain, which is now of course an international chain, but the one in San Francisco was the first one, and it was named after a man named James Graham Fair, who was an Irish immigrant to California?

He became one of the Silver kings from the Comstock Lode in Nevada. He and four of his business partners consolidated a bunch of claims from the Comstock Lode, and they discovered ‘the big bonanza’, which apparently is derived from the Spanish term rich ore body. So they were in the right place at the right time in 1876, and they got filthy rich from silver and earned themselves the nicknames of the Bonanza Kings. And James Graham Fair went on to be a senator from the great state of Nevada. So there is hope for all of us who've been languishing in silver and silver stocks for the last few years.

But Byron, I wanted to start today with gold because it's important to a lot of our readers. When Donald Trump announced the nomination of Scott Bessent as the new Treasury Secretary last week, he said, "On the eve of our nation's 250th birthday, he will help usher in a new golden age."

And then we found out that Bessent had said previously to his nomination, "I think we're in a long-term bull market for gold. We're seeing reserve accumulation by central banks.I follow it closely. It's my biggest position."

So that's from the new nominee for Treasury Secretary. But let me start with a more formal question that Judy Shelton brought up in recent comments. And of course, people know that Judy Shelton is a former Trump advisor. She was possibly a nominee for the Federal Reserve in the last administration, maybe again. Last week, she floated the idea of a 50-year US government bond backed by gold. So specifically, if I understand it correctly, it would be redeemable for gold.

My question to you to start off with for our readers is is this the beginning of a return to a gold standard? And if not, what is the benefit to either gold or the US government of having a bond that's backed by physical gold and if it is a return... These are a lot of questions, so I can repeat them, but if it is a return to the gold standard, would it make gold more valuable or would it make US bonds more valuable?

Byron King: Oh my goodness, boy oh boy, you've opened the gates to heaven or hell. We have to figure out which one it is. The first thing I want to do is I want to add one little point to my biography that when you say I studied geology at Harvard, I just want to make sure that people understood. I went to that Harvard, that Harvard long ago. I didn't go to this Harvard with all of the issues. I went to that Harvard, high SATs, high grades, high standards, all that stuff. What we see today is different and interesting.

Speaking of gold and gold standards, holy smokes, the shine is off of that one. Alumni donations are down 40%. The university is actually getting to the point of being illiquid right now. They're having to move cash around so that they can just pay the bills because a big whack of Harvard's budget is just the donations they get. Every year you think, "Well, wait a minute, they have a $60 billion endowment." Yeah, but it's all locked up tighter than a drum. It's all segregated.

Okay, we're way off on a tangent on that. Let's get back to the gold standard. Funny how we met in San Francisco, which was a city created, well created long ago, by the Spaniards, and before that, whatever, we could talk about the post-glacial sea rise and what created San Francisco Bay. But no, we won't. The city in many ways, modern city was created by the California Gold Rush, 1849, 1850, thereabouts.

And then again, it was greatly enhanced over time by the Silver Rush, the Comstock Lode of Nevada. So the Western states and the Western United States was in so many ways created by mines and mining. And that was then, this was in the 1860s and '70s and '80s, the great discoveries just across the west and the copper in Arizona, the silver in Idaho, the mines and minerals all through the Rocky Mountains. So it's what built the country in so many ways.

I mean, the country had already been built east of the Mississippi, but west of the Mississippi, what brought people out there was hard assets, something that we talk about in Bonner Private Research. And now, fast-forward, jump to Trump here, and Trump is talking about recycling history, gold standards. He's talking about tariffs. He talks about William McKinley tariffs the government made. We made so much money we didn't know how to spend it way back when in the days of tariffs, before the Federal Reserve, before all of this.

I like to use 1914, 1913, '14 as a dividing point, because on December 23rd, 1913, it was like Christmas Eve weekend, whatever, Washington DC was empty. Congress passed the Federal Reserve Act, Woodrow Wilson signed it, and by 1914, the Federal Reserve was in the money business. And nothing happens immediately. Well, sometimes things do, but money-wise, things take time.

And the first thing that the Federal Reserve did in 1914 was later in the year begin to fund World War I when Britain and France and Germany all went to war, and they were broke within a few months. And it was US credit over the next few years that kept the war going on the British and the French side. They bled Germany dry in so many ways, and Russia dropped out of the war.

The Bolsheviks took over. I mean, holy smokes, if you really want to talk about problems that spring from unintended actions, the Federal Reserve has its fingerprints on a lot of things. Here we are 110 years later. And what? I mean, what's that dollar from then worth today?

Real quick, I like show and tell. This is show and tell. So here's the $20 bill, you have one in your wallet, I have one in my wallet, so I have one in my hand here. This is your basic $20 bill, $20 note that I got from the ATM machine at PNC Bank from half a mile the way down there. This is a $20 note, a US $20 note from 1914.

This is 1914 series. This is one of the first notes that the Federal Reserve issued. And so you say, "Well, that's a $20 bill then and a $20 bill now." Well, first of all, this is smaller. In 1928, we shrunk the size of the money. That was William Howard Taft's idea. That sort of took a few years to kick in, but we need smaller notes that'll fit into our wallets.

But this $20 note, I mean, you can't really read it. It's a nicely printed item. It's got some pretty things on it, pretty printing and everything else. But basically what it says is that the Treasury of the United States will pay to the bearer of this note, the sum of $20.

And you say, wait a minute. Isn't this $20? No, that's not $20. This is $20. This is a $20 gold piece from 1908. I don't have one from 1914. Or I'd compare them. But this 1908, 1914 is no big difference.

If you had gone to a bank back then and handed them one of these paper notes, they would've been obliged to hand you one of these because back then gold was money. Gold was money. This was a note. In a legal sense a note is a promise to pay. The promise to pay was money, meaning this. Now let's compare things.

Like today, a hundred years later, this particular item, this paper item that I hold in my left hand here, this item is worth a couple of hundred, let's say $250 just as a museum item. I mean the scarcity value of it, but it's a $20 bill. This thing today, the gold alone is worth, it's like 0.92 of an ounce. So the gold is worth, pick a number, 25, $2600. I mean, and as a numismatic item, this thing's worth over $3,000 if you try to buy it on eBay or something.

So $20 then, $20 today, except that this is worth 130 times more. So the US dollar over the 110 years has lost all of that purchasing power. And so you say, "Well, what is it? Wait a minute. What's going on?" The gold is to say this coin is the same as the day it was minted. The metal in there is the same. Nothing has changed.

What has changed about this coin is the perception of its value having to do with the purchasing power of the US dollar. So we live in a different world between then and now, obviously. But now gets back to your question on Judy Shelton's talking about issuing a treasury or US bond backed by gold. What does that mean?

Well, first of all, and the incoming Treasury secretary speaks kindly towards gold, let's say. Well, it means that first of all, we have some people who understand that they get the gold argument.

If you're a Bonner Private Research reader, you probably get the gold argument. If you've been hanging around Bill Bonner for more than two or three days, he's probably rubbed off on you. Dan, you and I have been hanging around Bill Bonner for 25 years or something, and it's definitely rubbed off on as part of our DNA here.

Gold is money. It's the old JP Morgan line when he was asked by the congressional hearings, what is money? He says, "Gold is money, everything else is credit."

So when the federal government, our federal indebted $36 trillion government with the national debt, the interest on the debt being close to $2 trillion a year, 2 trillion with a T dollars per year just in interest, and all of a sudden they're talking about gold back bonds. What's going on here?

Well, part of it is that they want to demonstrate solvency to the world, and the rest of the world views gold as something solvent. I mean, we see echoes of that, not in modern monetary thinking, but we see it in, for example, the BRICS, the B-R-I-C-S, Brazil, Russia and China, South Africa and that whole group.

They're getting together. There's a de-dollarization effort in the world. We see it where China will trade with Brazil in Rial, Brazil and China's Yuan or China will trade oil for Saudi Arabia in Saudi, Rials versus Chinese, Yuan.

And kicking Russia out of SWIFT over the Ukraine incursion. Kicking Russia out of SWIFT didn't mean that Russia stopped doing business. It just meant that Russia sold its oil in rubles or sold its oil in something else. They traded with China. They sold oil to India for rupees. I mean, Russia is still trading. They export oil. They export metals and materials. They export agricultural products. They export aerospace products

They export lots of things. They just don't do it in dollars anymore. And so what has happened is that you've taken a couple of the world's great economic and military powers, Russia, China, big countries, lots of weapons, lots of industry, and you have taught them for a couple of years how not to use dollars. Okay, well, guess what?

They're using fewer dollars. And so the BRICS idea is that they want to create a currency unit, which we might even call the unit, something else, I don't know. And that unit will be at least in part, backed by gold. Now the BRICS organization had a meeting in Kazan, Russia, a little over a month ago in the end of October. And there was a lot of expectation that they would come out of it saying, "Here's our unit. This is our competitor to the dollar."

There was a lot of buildup to that until the meeting. Then they had the meeting, and then they came out and they said, "Well, we've thought about it really hard. And there's a lot of difficulties just trying to create a global trade currency that's not the dollar, and we haven't quite got there yet, but we're working on it."

Okay, guess what? They just bought some time for the dollar. I think that President Trump ought to, on the first or second or third day of his administration, he ought to just sign a paper that says, "Russia is allowed back into SWIFT. We know we've had our differences. We know that there's going to be a lot of trust issues, but anybody who wants to can come back into the SWIFT system."

SWIFT, for those out there, I don't mean to throw an acronym at it. It means Society for Worldwide Interbank Financial Telecommunications. SWIFT is the system by which interbank transfers around the world all get converted into one currency or another. And the platform is basically dollar-based. If you're out of the SWIFT system, you have a lot of trouble trading, whether you're selling palm oil or petroleum oil, or whether you're selling wheat or nickel or whatever.

If you're not in SWIFT, you have trouble doing your banking. Well, we kicked Russia out of the banking system, but guess what? They set up their own competing banking system. I think we should bring them back in and they may or may not go back in, but it will make it much more difficult for the BRICS people to justify their BRICS unit.

Trump on the campaign trail, at least said, we have to keep the dollar as the world reserve currency. If we lose the dollar, it's like losing a war. He's definitely right about that. I mean, if somehow, or if something bad happened to the US dollar, and if there was a currency crisis, if we woke up one morning and you pick up your iPhone and you're like, "What's in the news today?"

You're laying in bed sort of scratching your eyes and you're going, "What's going on?" Dollar in currency crisis or something like that, if you see that headline, your life's going to change in about five minutes.

Okay? Your ATM machine might not work. And the price of gas, if the gas pump's going to go up, and good luck at the grocery store. And what's the value of anything anymore if the dollar craters? And so we don't want that to happen. We can talk about it all day, but we don't have all day.

So getting back to your question, again, eventually we come around, Trump and the weave, like he was talking to Joe Rogan. Coming back to your question, is it a good idea to have a gold backed treasury? I think it's a brilliant idea. Good, go for it.

Put out something that looks like this $20 note from 1914 that the Treasury of the United States, the government will pay to the bearer $20 of real money. That's what a gold backed bond would be. It is absolute to the extent anybody can trust anything that the federal government does. It is an absolute guarantee that people will loan money to the United States government and expect to get it back.

I mean, if you just issued a 50-year treasury bond to somebody, in 50 years the money, the $100s that I loan you today at 50 years will be worth, what? $3 or something? I mean, come on. People don't want to do that. So we are going back full circle from where we are to a hundred and some years ago.

Again, Trump's talking about tariffs, McKinley era things, and that gets into the whole bimetallism argument of is one gold dollar worth... It's worth 20 silver dollars. And hang on here. This is an 1880 silver dollar from the New Orleans Mint. And you say, "Well, why was there ever a mint in New Orleans? There's no mines or silver mines or anything in New Orleans."

The New Orleans Mint was set up in the 1830s by Andrew Jackson, partly for sectional reasons, the South needed a mint, but partly because New Orleans was an exporting site. The ships would sail away with cotton and they would come back literally with bars of silver in the lock boxes. And so the mint was there to mint coins.

And then during the Civil War, they minted Confederate coins. When the Civil War was over, they went back to minting US coins. This particular coin, the 1880 from the late 1870s to about the mid-late 1880s, much of the silver that went to the New Orleans Mint came from Tombstone, Arizona. The Tombstone Silver District in the southeast part of the state they had a train spur that went to the Texas Pacific Railroad and hauled it across back east over New Orleans. And that silver got turned into these silver dollars.

We had a mint in San Francisco, to mint gold coins. There was a mint in Carson City Nevada to mint silver from the Comstock Lode. There was a mint in Denver to mint coins from Idaho and Colorado, from the Rocky Mountain Mines, and then the New Orleans Mint. There's the old Charlotte Mint in North Carolina. That was from the 1830s as well, to mint coins out of the gold from the Piedmont.

The first American gold rush was in Western North Carolina in the 1810s, '20s or so. The first discovery in North Carolina was in the very, very early 1800s, but by the 1820s and '30s, they were mining gold in North Carolina. And so the Charlotte Mint was set up to mint gold coins.

The very first American Mint was in Philadelphia. It was authorized in 1792. By 1794, they minted the first US silver dollar. This was an outgrowth of the Whiskey Rebellion, which gets back to our old Whiskey and Gunpowder newspaper. The US government was broke in the early days. We had a Constitutional Convention in 1787, constitution ratified, 1788.

We had an election, George Washington, Alexander Hamilton. They look around, it's like, "Hey, we don't have any money." "Oh golly, what are we going to do? Raise taxes, put sack taxes on stills, but make whiskey." So out in Western Pennsylvania, the farmers are like, "Oh, we don't even have a currency. We can't pay taxes. We have no money."

So Whiskey Rebellion, out of that came the Currency Act of 1792. By 1794, there was a Philadelphia Mint. The very first silver dollar minted by the mint was called a Flowing Hair silver dollar. The US Mint just, not too long ago, had the 230th anniversary restrike, remint of that. You can see the image, I hope people can see.

Flowing Hair, which I would know nothing about. But this is marked 2024, but it's a ceremonial coin. It's the 230th anniversary. But a lot of pretty stuff, lots of symbology there. And again, we could talk about it all day, but so somehow it gets back to what is money?

What is money in the context of the United States? How do we do things? I mean, yeah, sure. You go to the 7-Eleven and you go to the grocery store and you use credit cards most of the time. But we use this kind of stuff, these kind of Andrew Jacksons that just, they print them by the gazillions at the US engraving office.

But really, the roots of it go back here, and they actually go back even further. I hate to do this. Here's a $10 bill. This is a standard $10 bill, right? It looks like any other dollar bill. This is another $10 note and you say, "What is that? Get it out of my face."

This is a $10 national currency note. This is from about 1904. In the olden days, before there was a Federal Reserve, what did we do? What did we do before there was a Federal Reserve? I'm glad you asked, grasshopper. The banks issued their own notes. Okay, this one is from the Delaware County National Bank of Chester, Pennsylvania.

And you say, "Well, it looks weird, or did you cut it off wrong or something?"

No, they used to print them and then they would literally, with a pair of scissors, they would cut them out and so sometimes there were mistakes, but this is a $10 national currency note from. Again, but it says this bank will pay to the bearer the sum of $10. It doesn't say this is $10. It says it will pay to the bearer the sum of $10.

Well, guess what? In the olden days, that bank had to have $10. This is a $10 gold coin here. This is a US 1894 $10 gold coin. I don't know if you can see it. Yeah, you can sort of.

Dan Denning: Yeah, I can see it.

Byron King: This was money back then. This $10 gold coin was the money. This was the note. This was the national currency note that represented it. Rather than people walk around with this stuff jingling in their pocket and it might fall out or you might get robbed, lose your real money, you carry this. But the banks, way back when, the banks if they were issuing currency in their own name, they had better be backing it up with this.

In terms of how much they could loan out versus how much was literally sitting in the vault, I mean, it mattered because if you were on the board of directors of this bank, the Chester Bank, and you couldn't cover your script, your bank went out of business and you were personally liable and you were ruined. You would lose all your other assets, you lose your house and everything else. That's what you call responsible banking way back when. Anyhow, oh my goodness, we've had a nice, long diversion.

Dan Denning: I think it's an important conversation. I think it's a good start and we'll move on. But I think you hit on all the main points and one of the interesting ones for next year is it seems like the dollar has seen the euro off as a competitor because of problems in Europe, and the BRICS seemed to fire a dud in Kazan.

And now we have the suggestion that the new administration might, we're not going to be issuing T-bills backed by gold because the bulk of the debt issued is 10-year notes, five-year notes, seven-year notes, T-bills, whatnot. But the existence of a long-term US government security backed for convertible redeemable by gold changes the game a little bit, so it's definitely a big story for next year. And the idea that sound money might be making a comeback is probably welcome news to some of us.

But I want to talk about another source of national power other than credit. This is something also that you've written about extensively, and that's maybe not that power comes from the barrel of a gun, but from the keel of an aircraft carrier. My question to you as we switch gears is you've written at length in the past because of your history about an 1890 book by Alfred Thayer Mahan called The Influence of Sea Power Upon History, which people can find online. For new readers or listeners, can you summarize what Mahan's theory was, how it influenced the US military posture, and the growth of the US economy in the 20th century?

But more importantly, to bring this up to date and make it current, this is a question that I thought about and Tom has a follow-up to this, by the way, is have the Houthis, the Iranian-backed militia or group near the Red Sea, have they confirmed or disproven Mahan's theory of sea power? Do drones in hypersonic missiles from countries like China or missiles from the Houthis render US aircraft carriers, and therefore the projection of US power and policy abroad just too expensive to use? Has the game changed? So why don't we start with Mahan, and see if the Houthis have confirmed or disproven his theory of sea power?

Byron King: Oh, that's another wide open question here. Well, you told me you were going to discuss it so I pulled off the shelf my copy of The Influence of Sea Power Upon History. Notice, it's 1660 to 1783. This Alfred Thayer Mahan guy, he was a naval officer in the late 1800s. His father had been an instructor at West Point, and so he grew up in a military type of family. Mahan himself was not this brave, seafaring, battling captain kind of a guy. He worked his way up through a mostly peacetime Navy force structure.

He wound up at what eventually became the War College in Newport, Rhode Island, of which I am a graduate by the way. In addition to any other degrees I have, I have a diploma from the US Naval War College. He traveled a bit. He got a lot of his ideas for this book in a visit to Chile at the time. He was in Valparaiso, Chile. Chile and the British had a lot going on at this time. He dealt a lot with British officers.

And while he was in Chile and in South America, he went up into Peru and whatever. He searched through the archives of Old Spain and the old Spanish power, which is why we're talking 1660 to 1783. I mean, he was looking at how did things happen?

He borrowed from a different writer, but he borrowed the idea of a very, very famous line in the book that, "The mines of Brazil were the ruin of Portugal, just as the mines of Peru and Mexico were the ruin of Spain."

And he said, "Wait a minute. The mines of Brazil and Peru and Spain and Mexico, I mean, they're pulling gold and silver and gemstones and everything out of those mines. What's wrong with that?"

Well, they shipped it all back to Portugal and Spain and what'd they do with it? They lived high on the hog. They just, "Hey, we got these treasure ships coming in with all this gold and silver and jewels and everything. This is cool. This is great. We don't need to make anything. We don't need to manufacture anything. If we need something, we buy it. We need somebody to do something, we hire them." And he studied that extensively.

One of the themes of Mahan is sea power. Of course, that sea power matters, but backing it up a little bit is that the industrial capability to do sea power also matters. If you can't build ships, you can't have power. If you don't have power, you can't be an empire. You have trouble just making your way in the world.

And so the theme of industrial base, and that gets into the educational base, the skills base of a society, that theme is present. Military power is the first derivative of industrial power. In a modern sense, if you don't have electric power, if you don't have, say, steel mills and other metal production facilities, if you can't bend metal, if you can't weld it together, if you can't design electronics, you can't be an industrial power.

To bring it to today's situation, look around in the United States. I mean, are we ready to retain our position at the forefront of military power with the industrial base that we have? The COVID situation demonstrated that we lack just basic capabilities to produce medicines, medical equipment, things like that. The Ukraine matter shows that we lack the ability to produce lots and lots and lots of basic things like artillery shells and artillery tubes to shoot the shells and armored vehicles to haul the guns around. We're in bad shape in that regard. And then we get into the more advanced stuff, the air-to-air missiles, the surface-to-air missiles.

Admiral Sam Paparo, P-A-P-A-R-O, Sam Paparo, the four-star admiral in charge of what's called INDOPACOM, Indian Ocean Pacific Command, has given a couple of interviews recently just in the last two, three weeks, where he's talking about, "Guys, we don't have enough missiles. Every patriot missile that we send to Ukraine or Israel or that we use in the Red Sea is one less that I have in my magazine or in my locker if we have a war with China."

Now, just digress on this for a minute. INDOPACOM geographically would be the areas of responsibility of in World War II analogy, Chester Nimitz, Douglas MacArthur, and Lord Mountbatten. That's who INDOPACOM is, or that's his geography of the world. It's only about, what? A fifth of the planet or something. And Paparo's job as the four-star admiral in charge, his job is not to start a war. His job is, he doesn't do that, the politicians start the war. But if war happens with China, for example, his job's to fight it.

He has been pounding the table very, very loudly, very crisply, very notably lately, "Hey, we do not have enough things with which to fight a war. Don't tell me that the drones are going to save us. That's not what happens. We're talking about a fifth of the planet, massive distances in geography. We need ships, we need planes, we need fuel, we need ammunition, we need training, we need allies," et cetera.

It it all gets back in a sense to this book. This book came out in, I guess 1890. It was an instant bestseller in the United States. It told a lot of people what they wanted to hear. We need to build a shipbuilding industry, we need to beef up our industries at home and devote them to military issues. The book was translated into numerous languages. I mean, French, German, Russian, Turkish, Japanese. The Tsar of Russia and Kaiser of Germany, they put copies of this in every library of every ship in their navy. They wanted all their officers to read this book because the book is all about not just sea power in the sense of ships sailing around, blasting each other with cannons.

It's more the idea that sea power and the ability to project your national interests across the oceans is critical to being a significant power in the world. This was in the imperial days where Britain ruled the waves, but France was also imperial power. Russia was an imperial power in the sense that it covered 11 time zones all the way to Vladivostok on the Pacific side. Japan had aspirations that came out of the Meiji Restorationin the 1860s and '70s, Japan was building up this book.

Really, it influenced a lot of people's thinking. Japan bought big chunks of a navy and an army from Britain and Germany. They bought their navy, you might say from Britain. They bought their army, you might say from Germany. Two very exemplary powers at the time. And then by 1905 in the Russian-Japanese war, the Japanese defeated Russia. I mean, during the Battle of Tsushima, they sank the Russian fleet. In Manchuria, they defeated Russian forces ashore.

It was the first time in 500 years that a non-European group had defeated a European power. The Russian-Japanese War of 1905 led to the rise of, say, the liberation movement in India, for example. It led to the formation of the African National Congress in what's now South Africa. It led to an independence movement, you might say, in Persia at the time, because Persia was dominated by the West.

This book had a lot of legs early on. And then we joke about it in the Navy, but we don't really joke about it. The book is a Navy bible. Now, the CliffNotes version of it is if you've read Influence of Sea Power, Mahan's added idea was don't divide the fleet. Okay, yeah. This is a thick book. It's a lot of pages. Many, many pages.

There's plenty in here other than don't divide the fleet. Very, very seminal, very important book. But just one of many that kicked off a long line of thinking. I mean, later on, there was a guy named Julian Corbett who talked about the reason you want to have sea power is to support your land power ashore. And then along came another guy, Halford Mackinder. [For BPR’s take on Mackinder and ‘the world empire’ please read this article from 2022.]

Halford Mackinder, this is a biography of the guy, but he was a geographer. He was a British geographer. He wrote books about geography, but traveling through the Rhineland of Germany and distant lands, elementary study in geography. But he was a geographer who wanted to educate people. Mackinder's view was that, yeah, there's the oceans out there, but then there is the land island of the world, Eurasia.

I think the takeaway from Mackinder is you never want to unite the Eurasian powers all together, because if the Eurasian powers all come together, they'll defeat all of the Rhineland powers, the naval powers. The Britains, and the Frances, and the Spains, and even the Americas of the world.

And so then if we want to get a little bit beyond that, there's a guy named Nicholas Spykman, S-P-Y-K-M-A-N, who was a professor at Yale in the '30s and '40s, and he wrote a lot of significant things. This is a first edition, America's Strategy in World Politics. He's writing this in the 1930s, '40s. What does a country like the United States do? And in particular, he was very influential coming out of the Second World War.

Okay, the British Empire is declining. The American Empire by default is rising. I mean, we've got our troops and our ships and our airplanes all over the world. This is the world of, say, 1945. We got people, we got ships, we got planes, we got munitions, we have influence, we have money.

We had Bretton Woods gold back money everywhere. So the United States was the big power in the world. Now, Russia, the Soviet Union, they thought they were a big power too. And in fact, they were. But we had nuclear weapons. They didn't, not for another four years until they detonated their own atom bomb.

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End of Part One….