17 January 2013

Hitlerland: Making a Deadly Peace with the Devil


"We cannot look to the conscience of the world when our own conscience is asleep."

Carl von Ossietzky, German editor of Die Weltbühne, awarded the Nobel Peace Prize in 1935


"It would be no sin if statesmen learned enough of history to realize that no system which implies control of society by privilege seekers has ever ended in any other way than collapse."

William Dodd, historian and US Ambassador to Germany, 1933

I am reading a new book titled Hitlerland, by Andrew Nagorski. Thank you to reader Andrew for recommending it. He knows I am very widely read in this period of history and find it fascinating both from an economic, sociological, and political perspective.

I was prepared for a rehashing of things I have already known and read, and I must admit I was initially put off a bit by the title which sounds frivolous. I was pleasantly surprised, even a bit amazed.

The book is highly original, and extraordinarily factual, in that Nagorski spent an extraordinary effort investigating eyewitness accounts, many of them unpublished, by Americans who lived there during the period in Germany from the Weimar Republic to the rise of Hitler and the beginning of the Second War.

He inserts minimal personal opinion and analysis into the writing, being more the journalist than the historian. He does treat the after-the-fact accounts with the proper regard for posturing and self promotion. He does have some very charming vignettes as well that make it a highly readable book.

It is well done, a 'must read' for anyone who wishes to understand that period of time from the perspective of those who lived it.  It adds a new dimension to a much written about period of time.  Remarkably so.

If there is anything that was surprising, it is the abject misery and despair of the German people during the Weimar Republic with the hyperinflation, and how few people actually saw the worst to come politically, after a false economic recovery, with the Crash of 1929. One knows these things, but they do not really understand them, not having lived it.

 Personal accounts help in this. This is why I found the book, When Money Dies by Adam Fergusson so helpful in this regard, as well as Ken Burns masterful documentary, The Civil War.

The fear of the Socialists and the Communists in particular is a key driver for the events of that time, and is not to be discounted.  The cynical dealing and irresoluteness of the Weimar politicians is another factor.  There were open fights in the streets on a regular basis, although they were often surprisingly 'orderly' as this book relates. Some of the passages are quite amusing for those familiar with the German penchant for orderliness, even in the midst of urban warfare.

The capacity for self-delusion and a bad compromise is amazing, especially during periods of confusion, fear, and distraction. And the moral base in Germany at that interwar period was already notoriously relativistic and given to occultism, odd theories, and Nietzchean extremes.  And after war, hyperinflation, and a new Depression, their spirit and will to resist evil was simply exhausted, especially when it was backed by systematic terror and force.

We ought not to be too critical of those people, many of the Americans included, who did not see the worst coming. Did you see the recent financial collapse coming, and what has followed? Do you even understand it yet? History may be amazed at your ignorance. And yet all the signs of trouble were there during the period from 1999 to 2007.

Some people were warning of the credit bubble, the imbalanced financial sector, and widespread fraud.  And the American people were distracted by a 'war on terror,' and not the collapse of their lives and savings after the decimation from a brutal world war that left the flower of their youth dead, crippled, or broken.

And then in Germany there was another Crash, and the onset of Great Depression, and the people thought, no, not again. Anything is better than this. And so the bargain with the devil was made, and after a brief blaze of false glory, hell followed.

This is not to excuse anything that was done, or permitted to happen. Far from it. But it is to place this sort of tragedy within its human context, and to remind us that we are all capable of such confused cowardice and acquiescence in the face of evil.  We must remain steadfast and resolute against it, especially before resistance demands the type of heroism of which few are capable.

The consensus of those who met Hitler was that he was a most ordinary person, with little charisma or appeal.  Dorothy Thompson called him 'the very prototype of the Little Man.'  He seemed nondescript, but inwardly mad, illogical and ineffective, and they were incredulous that he could rise to power.

A key tenet of the Nazis was the rejection of objective fact and reason in favor of the passions of 'the blood' and of instinct.  Truth was not an impartial consideration or serious limitation to conclusion and action.  That is a familiar refrain amongst ideologues and the more extreme elements of both left and right on the political continuum.

There are a few heroic figures in this book, and prominent among them is the Pulitzer prize winning journalist Edgar Ansel Mowrer, whom I had never heard about before this, which is a shame. I will let you read about him for yourself.

I had not realized how badly the prospects of the National Socialist party had fallen in the years after Hitler's imprisonment for the abortive putsch and before his sudden rise to power as chancellor.  They were essentially done.  But they served a purpose as a cat's paw for those wealthy bankers and industrialists who feared the Communists and Socialists, and for cynical Weimar pols who were too busy fighting for power amongst themselves to see the rising threat of fascism.

I had not remembered that during the Night of the Long Knives not only the SA leadership was taken on shot, but old political rivals as well, some of whom were retired from political life. Hitler's ruthlessness was exhaustive, and examples were often made. Again, we ought not to discount the regular use of domestic terror as party policy from the very onset of its ascendancy.

That rise to power was supported by the fresh fears and concerns brought on by the Great Depression which knocked Germany back off course, and the craven weakness of spirit of the politicians of his day. In the manner of Mussolini he gained power almost by default, and then secured it with a brutal iron fist. I am now convinced that without that terrible economic collapse after 1929 to provide a ready platform, he would have died a relatively forgotten crank.

One thing that I wonder about often is the attention given to Hitler because of his abominable atrocities, and the relatively little time spent on his role model, Mussolini. I have read a bit more on him, and he was despicable, a ruthless thug. The early Nazis were referred to by the Americans as the fascisti.  

Here is a brief excerpt from the accounts of the American journalist Edgar Mowrer. It is not anything I had not known from other readings but gives one a sense of the style in which Nagorski allows events to unfold through the words of his witnesses to history, and how he weaves their testimony into a rich tapestry.



If You Remember Nothing Else About the Financial Crisis, Remember This


Few knowledgeable people talk about the need for financial reform anymore, just a few short years after the financial crisis and collapse.

The right talks about getting tough on the weak and settling old scores, and the left is losing its way in obtuse gimmickry and quack economics that promote their own statist agendas. Pile enough rancid margarine on the bread and you won't see its thinness or the mold.

The broad center, independents, and progressives are largely silent, having averted one almost certain disastrous choice in the most recent national election, only to find themselves still on unsteady ground with a weak and wavering 'champion' who may once more betray their trust for his own interests, and the deal.

And yet this is not nearly our darkest hour. That may be yet to come.

All the reform that has occurred so far has been largely window-dressing. Financial and political corruption is a tax that the real economy cannot support or endure while remaining free.

 Until there is substantial reform, there will be no sustainable recovery. This is only the appearance of recovery in the empire of illusion.

"From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent.

Simon Johnson, 13 Bankers


"The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises.

If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time."

Simon Johnson, The Quiet Coup


Gold Daily and Silver Weekly Charts


It is interesting to see stocks and the metals moving back together again.

I would very much like to see gold and silver return to and take out the pre-December levels. And if there is a stock market correction I would like even more to see a divergence and a flight to safety in the precious metals.

So far gold has made a bottom at a 60% correction off the prior range, aka the 'cup.' Yes, I am still keeping an eye on that one.

So let's see what happens.



SP 500 and NDX Futures Daily Charts - Managed Volatilty at Relative Complacency


Things were coming up rosy today as housing starts and new unemployment claims had the bulls snorting, even while they shook off the Philly Fed.

Intel turned in mediocre results after the close, except perhaps for gross margins.

Complacency is not quite the word for this market overall.

Take a look at the VIX chart at the bottom, and the Relative Strength Index which has flatlined since the first of the year.

Perceived volatility is well-managed, but for how long, by whom, and why?

I do tend to think this is a 'pool operation' as a set up for a takedown, but one cannot be sure. I don't think it is anything official or quasi-monetary, but time will tell.