Review – Patriots: The Men Who Started The American Revolution

Was the American Revolution (and the War of Independence) a popular political movement?

After reading A.J. Langguth’s Patriots: The Men Who Started the American Revolution, it sure doesn’t seem to have been. With a total population in the colonies somewhere around 3 million, the patriots were only ever able to field a few thousand (and in total, a few ten thousand) men at arms in most of the major battles and the Congress was apparently not popular enough to convince the colonies to let it raise its own taxes to properly feed and clothe its army. Considering that the right of parliaments to levy taxes to pay for wars was a key aspect of British legal philosophy which had been developing for centuries since the Magna Carta, the inability of the Congress to avoid resistance to the issue of taxation to support the war effort appears to be as strong an indication as any that this was a minority struggle engineered by a crafty competing elite.

Given its lack of popularity, and the fact that many of those who were first agitating for the conflict had become wealthy by circumventing mercantilist trade laws in the colony (what we might crudely call “smuggling contraband”, much like a modern drug trafficker), the even more puzzling question is why they bothered to start it in the first place? Wouldn’t men like John Hancock have been better off collecting the monopoly rents granted to them by the system of restraints on trade in place which they so profitably worked around? Why were new laws like the Stamp Act, which would have only increased the profitability of their operations, the cause for a major escalation in the dispute between colonial citizens, their local (British-approved) magistrates and the Crown and British Parliament itself?

Unfortunately, “Patriots” doesn’t spend much time pondering or attempting to answer questions like that, which to me is a shame because the reason I bought the book was that both the title and the insinuations of many of the reviewers seemed to suggest it had some conspiratorial light to shed on this momentous historical series of events.

My expectations ran high in the initial chapters of the book. Langguth’s chosen motif, if it isn’t obvious, is to highlight a key personality in the chronological narrative in each chapter. He starts with “Otis”, “Adams” and then “Henry”, but quickly ventures off the rails with “Riots”, and “Politics” and eventually “Saratoga” and “Victory.” The first few chapters outlining some key legal and social goings on, centered primarily in Boston, are exciting, detailed and alive with the moment. The author succeeds again and again at painting a neat little portrait of each major player as they enter the stage such that you get a sense of their personality, their motivations and ambitions and some of their personal back story that helps to create a context for why they’re involved at key moments and why they might have acted as they did. He excels in these early parts at providing interesting data, economic, demographic and otherwise, that help the reader to draw inferences about the larger context of each disturbance, one of my favorite being that the British customs service (responsible for enforcing the system of tariffs that bolstered the mercantilist relationship of the mother country to its colonies) cost 8,000 pounds sterling to operate each year but only managed to collect 2,000 pounds sterling in revenues and fines. Considering the public and private corruption the customs service engendered, why bother with such a system if only to operate it at a 6,000 pound loss every year? It is a piece of data that leads one down many puzzling philosophical paths!

But as the conflicts in Boston move from the courthouses and legislatures to the streets and, eventually, the towns and fields of battle, the narrative structure loses its way. It becomes clear that this is a story that is much too complex to fit this “great personalities” framework and the author seems to willingly abandon it but not before introducing a cavalcade of new characters along the way without fanfare or suitable explanation. In one chapter, a teenage Alexander Hamilton pops his head in for a paragraph in the form of hoping for a war in a letter written to a friend in New York but we hear nothing from or about him until almost two hundred pages later and even then he plays a minor role seemingly mentioned only because of the narrative omniscience that he’ll mean more to American history at a later date.

Aside from covering some of the major struggles in Boston, Langguth talks about issues being debated in Virginia in the House of Burgesses. The rest of the colonies (11 out of the 13 total, mind you!) go essentially without mention in terms of their own internal problems with British authority culminating in their decisions to join an armed rebellion. They only pop in here and there when their representatives make some motion in the Congress, or one of their militia bands achieves some glory (or disgrace) on a battlefield somewhere. If you went off of Langguth’s telling alone, Boston was the only intellectual and politically active place in the 13 colonies and it somehow managed to drag all the rest of the population into a conflict that they had nothing to do with.

Equally puzzling is the intense focus on the military campaign in New England, centered around action in Philadelphia, New Jersey and New York state. Though references are made several times to the “Southern campaign” and the “Northern army” engaged in key battles at Saratoga, Canada and elsewhere, it is almost as if there wasn’t a brutal, guerrilla¬†war despite the colonial military campaign somehow abruptly concluding with Cornwallis’s entrapment and surrender in the Southern (Virginian) Yorktown. Now how on earth did Yorktown become decisive when the fighting all seemed to take place in New England?

There were a few takeaways that seemed clear to me. War and military combat is horrible and there is nothing glorious about it, not even when fighting (nominally) for political freedom. Descriptions of the bayonet charges, of men having their heads pulverized on impact by cannonballs, of the mutilations and amputations that are left after a major battle all made it clear that¬†war is inhumane. Another takeaway was that war is not carried out by men shooting at each other on battlegrounds alone. Spying and intelligence gathering, bribery and loyalty-negotiation and even market forces are all things a commander needs to contend with. Finally, while I certainly don’t believe it is reasonable to expect men to be “better” than this anytime soon, it was fascinating to see how many of the various “Patriots” were what might be described as traumatized, ego-driven personalities who struggled vainly for glory and treasure and were willing to do violence because of these passions. It really got me thinking about how little conflict the world would be engendered by if it wasn’t populated by men willing to abandon their loving families for years on end to engage in oratorical parlors (Congress) or to carry out war and destruction for a little excitement (Hamilton, Washington, etc.).

One of my biggest frustrations with the book turned out to be the fact that over half of the book followed the military campaigns of the Revolution, but it was difficult and at times impossible for me to parse Langguth’s narrative to understand what, physically, was occurring on the battlefield and why. There are clearly reasons why men with rifles and cannon did what they did to defeat one another in those days, but it was rarely clear to me a.) what it was they were actually doing and b.) why they determined it to be advantageous. I know very little about how war is conducted, in this era or any other, and this author didn’t help resolve my veil of ignorance.

Why do we travel? 4

This may be the last in the series as our trip is coming to an end and my interest in blogging about it may be as well, I fear.

Today we got a late start. We work up around 7 but didn’t really get our act together and find food until around 830. We ended up picking up some bagel sandwiches and cappucinos (called a white here, as opposed to a black or straight coffee) from Two Men Bagel House. The bagels were outstanding, crispy on the outside, moist and chewy on the inside as promised in the reviews and the sandwiches themselves were creative and filling. Our quality coffee escapades continued, I found my cappucino extremely satisfying as did the Wolf.

We ended up watching the rest of “Indiana Jones Raiders of the Lost Ark” on Netflix with breakfast and by the time we finished it was almost 1030. The day was fast getting away from us and we hadn’t decided what to do yet and were seriously considering just staying back and relaxing. But somehow this felt like a copout. We came all this way and we still knew so little about the city. The Gardens by the Bay and Cloud Forest seemed interesting but we just didn’t feel much excitement about potential sun and heat exposure… It’s really, really warm here.

We were working on narrowing down a short list of air conditioned history and art museums when my friend from LA started texting me. It led to an interesting exchange which I thought I’d partially relay here as its relevant to the subject of why we travel.

The first thing he asked is if I think this is Asia’s century. I’m borrowing some logic from a book I read on the way over, “[amazon text=Asian Godfathers&asin=0802143911]” by Joe Studwell, but my answer is not really. Taipei is an industrious, commercial environment but I didn’t see much in the way of economic trends noticeable back home and I didn’t see any brands or businesses I could imagine dominating the US or Europe. It seems their role in the value chain is to add manufacturing technology exports to branded finished products and serve their domestic markets with largely unconsolidated product and service businesses, at least for now.

When it comes to Western brands in HK and Singapore, financial services dominate but there are also some inroads being made most conspicuously by McDonald’s, Starbucks and purveyors such as Marks and Spencer. Global fashion brands have done an outstanding job of penetrating all of these markets. There is a 3story Apple store in HK in the IFC Mall but I don’t know where one is in Singapore or Taipei, probably somewhere though as I saw authorized resellers.

Again in HK and Singapore, I don’t see anything that looks like it could become an emergent global brand. So this is Studwell’s point– these economies are dominated by raw materials monopolies granted to local cronies and their near captive financial institutions, and none of these businesses face competition from global firms which also means the local entrepreneurs aren’t being challenged to produce brands that are exportable.

No exportable brands mean no “Asian century”. The demographics may be on their side but the political systems are trapped in the mercantilist past. That’s weird to say as a person who is skeptical of the idea that the West in general and the US in particular have not seen their power and prestige eclipsed.

But for now I’ll say, based off the limited experiences of this trip the Asian century is not upon us. But I don’t know what is. It also doesn’t mean I’m calling for stagnation or economic collapse in this part of the world (China the possible exception, that place is weird.)

I also was raving about some of the food we had had so far, here and the previous locales and my friend asked if I’d consider it best in the world or how I’d rank it. I think that question kind of misses the point. We decided to skip an opportunity to eat at one of the “Top 50” restaurants in the world here in Singapore despite securing a reservation months before our trip. That kind of restaurant caters to food innovation and the experience of dining. I’ve been to places like that– they’re amazing, you often feel entranced and delightfully confused about how food can be what it is on your plate or in your bowl or what have you. But that isn’t about eating so much as it is about imagining, in my mind. There’s a time and a place for it but I wouldn’t judge a place and its food culture by trying to rank it against experiences like that.

What I am after in eating is intensity of flavors and simple food made from timeless, cultural recipes that speaks to the incrementally developed genius of a people and their place and how they turn their culture into what they eat. I’m talking about the stuff people eat day in, day out, that I’d be happy eating with similar frequency. Some people call this “local”, whatever you call it, it’s not cuisine and it can’t be ranked.

Some of the meals we’ve had in this sense have been superb. The purveyors aren’t trying to impress or win accolades. But they sometimes do both in the course of making their traditional dishes.

Another thing we discussed was the purposelessness of this trip. We didn’t come for work. We didn’t come to see friends or family. We really don’t know much about the history or culture of these places. It is a bit of an existential crisis initially to arrive somewhere without anything to accomplish besides “seeing” it, and then, not knowing much about what you’re seeing or what you might keep an eye out for.

Having visited these three cities now and noticed their similarities and differences, both compared to one another and to places and ways of life back home, I feel confident in saying we could live here if we wanted to and we’d be quite comfortable. I’m sure of that. But at this point I’m still not certain why we’d want to move.

There are some things that are far ahead of where were from that are wonderful– the cleanliness and efficiency of mass transit, the cheapness and ubiquity of mobile communications technology, the attitude of cooperation and community. And there are some things that are unique, like some of the food spots that it will just be hard to find something of similar quality back home even in a diverse place.

But other than that, I haven’t seen anything that really appeals to me in some deep way, that I can’t get where I come from. These places aren’t freer. It isn’t any easier to start a business. Or even to grow wealthy– no El Dorado here, as far as I could see. Why pack up and go across the globe for what would essentially be an economic and financial reset?

P and I have remarked several times how fun it would be to raise children in a foreign place and let them learn new cultures and languages from their friends. But it would also be great to raise them in a uniform culture were familiar with, hopefully amongst a community of like-minded progressive parents like us (not big P progressive, mind you!!) Those are tradeoffs to pick one over the other and I’m not sure why we’d come all this way for that particular trade-off.

Living and working in Hong Kong and Singapore in particular seem like a young man’s game. If we turned back he clock ten or fifteen years and I was just about to make a go of it, and I knew of these places, I’d probably head this way and try to make my fortunes on my own, especially if there was greater opportunity for a Westerner looking to take that risk. Without a spouse, without family obligations and without a routine and a financial basis for myself back home I’d quickly set out for a place like this and see if I could try. The only reason I didn’t when that was the case was that these places simply weren’t on my radar.

But now, it makes less sense. Without some compelling economic reason, why come here versus continue on roughly where we are? That choice seems rather arbitrary.

One of the reasons we travel, and here in particular, is to see if we feel like we could make a go of it some place else. And I guess I’m a little disappointed to realize these last few times that we could, that we’d be happy, but I can’t find a compelling reason to jump.

Notes – The Great Deformation, Part III, “New Deal Legends”

The Great Deformation: The Corruption of Capitalism in America

by David A. Stockman, published 2013

Chapter 8
Stockman doesn’t go into much detail on where the boom ending in 1929 came from, but he does provide an interpretation of why the bust lasted so long and went so deep– the forcible closing off of international trade via protectionist policies and the undermining of the global gold-backed monetary regime by American and European governments alike.

In Stockman’s telling, American president Herbert Hoover was a mostly free enterprise and sound money kind of guy who wanted to avoid inflationist solutions to the economic slump. By 1932 the economy had liquidated the bulk of the malinvestments in excess inventories and capital assets and was ready to turn toward genuine recovery. This process only took as long as it did because ill-reasoned policies like the Smoot-Hawley Act in the United States and similar nationalistic policies in European states along with uncertainty about the British plans to keep the gold-backed pound sterling in place hampered international trade flows. According to Stockman, the United States between 1914 and 1929 had become, much like China circa 1994-2012, a major exporter of capital and consumer goods to the rest of the world particularly in response to trade and economic disruptions of industry and agriculture in European economies during the First World War. The US economy was geared up to provide steel, cotton, cereal grains and other commodities to the rest of the world and had a hard time adjusting output to meet domestic demand when the collapse came in 1929.

Then came FDR and his unique brand of economically inane autarkic nationalist policy. Stockman faults FDR for prolonging, nay, creating, the actual Depression singlehandedly. First, FDR began his presidency by fomenting a banking crisis and declaring a major bank holiday which Stockman saw as unnecessary. As Stockman tells it, the 12,000 some bank failures in the United States during this period mostly occurred in over leveraged regional/rural banks centered around the agricultural and export-oriented areas of the economy representing at most 3% of banking system deposits. Major money center banks in financial centers such as New York never faced a solvency crisis, making FDRs response a solution to a nonexistent problem and therefore a serious problem-creating blunder itself.

Second, FDR torpedoed the London Conference on international monetary mechanisms, throwing the whole system into chaos and instigating another round of protectionist measures at home and abroad. Third, he arbitrarily decided to undermine the US’s own commitment to a constant redeemability ratio for the dollar, creating further fear and uncertainty in the economy. And finally, he created a cartel system (National Recovery Administration) which served to freeze prices, arbitrarily shift capital around the economy and buy votes as necessary but did nothing to create the kind of stable conditions preferred by business people and entrepreneurs attempting to make capital investments to serve anticipated consumer demand.

The Depression was a recession that was working itself out despite the protectionist political measures put in place which made adjusting the structure of production to domestic rather than foreign needs, but then FDR came along and made the economy his plaything as he tinkered according to his whims and played power broker on the side. That’s what turned the recession into a true Depression.

Chapter 9
Fannie Mae, which was envisioned as a way to revitalize a moribund middle class housing market during the Great Depression by creating a “secondary market” for uneconomic 30 year mortgages at subsidized interest rates, has in the 75 years since its founding led to the total corruption and now nationalization of the home loan market. The creation of the secondary market divorced mortgage underwriting from mortgage servicing as it allowed for mortgages to be easily issued, packaged up and sold to investors as government-backstopped financial products. Further, it resulted in local savings funding local housing investments being transformed into a national and now international market, with the final result being that “Red China” bankrolls $1T+ of the federal home loan market due to balance of payment issues tied to competitive currency issuance.

Social Security, rather than being the crowning social achievement of the New Deal, was its greatest fiscal folly and has created an embarrassing Ponzi legacy that is with us even today. The systems actuarial projections were based on an impossible 5% continual GDP growth rate. The payroll tax used to fund it has proved “regressive” and continues to grow over time, with a current 6.5% of GDP consumed by the tax. The $3T of “trust fund reserves” have been lent out and spent by other parts of the government and represent nothing more than future taxes due.

In so many words, the innovation of deposit insurance combined with the Glass-Steagall act, a bout of inflationary monetary policy which destroyed the profitability of traditional deposit lending under Glass-Steagall and then a round of “deregulations” designed to create new areas of profitability for banks at the expense of growing moral hazard resulted in the utter corruption of the system and the inevitability of a major financial meltdown as witnessed in 2008.

With the outbreak of war in Europe in 1914 and the initiation of a war loan program by the United States government, US farms became the breadbasket of the world. They took on massive debt to expand capital machinery and bring additional acreage into cultivation which resulted in growing farm output prices. When the war ended, the capital investments, including the debt overhang, remained. The financial collapse in the 1930s further exacerbated the situation, leaving farmers as a desperate coalition looking for a political solution to their contractual obligations.

With the nations farmers the hardest hit by the twin spikes of failing cash flow and high debt burdens, they became a powerful voting bloc that got FDR elected which allowed for the cartelization of the farming industry to take place. The thought was that cartelizing the industry and pushing up farm and farm output prices would result in a return to prosperity as rural buyers bought manufactured products from city centers. With their programs in place, the farming lobby was then willing to trade votes for growth and maintenance of these subsidies and controls going forward into the future.

The “Thomas Amendment” created four options for expanding the money supply via currency issuance or gold or silver content debauchery. This inflationary response was seen as the proper antidote to too much debt and too little money and political authorities of the day figured it would give them a free pass to avoid the pains of the bust following the ill-gotten gains of the boom.

FDR channeled the $2.8B windfall from his emergency dollar “revaluation” against gold into his Exchange Stabilization Fund, which the Secretary of the Treasury was then able to disburse at his discretion, turning him into what Stockman calls a “money czar” much like Hank Paulson and Neil Kashkari during TARP.

Chapter 10
In this chapter, Stockman argues that World War II and the Korean War were the last wars to be mostly financed by current taxation in the US. WWII in particular saw a rise in household saving and a decline in household indebtedness that offset the massive rise in public indebtedness. He attributes this in part to the fact that wartime command economy measures dictated that there was little to consume on store shelves, in part to the fact that the government’s propaganda campaigns for war bond drives were a success and in part because the government had adopted an arbitrary bond yield peg that lowered investment returns in competing assets and made government bonds more attractive as a conservative savings vehicle.

Stockman claims that William McChesney Martin, who headed the Fed through the 1950s, was a “tribune of sound money” and saw it as his mission to restrain credit expansion and tame the inflation rate, rather than to stoke it like modern Fed heads. He also claims that the Fed only lent on liquid commercial receivables during this era, compared with the present where the Fed has become a warehouse for illiquid claims on real assets.

Chapter 11
Stockman argues that President Eisenhower was the “last of the fiscal Mohicans” dedicated to trimming federal budgets and making government spending respectful of tax revenue means. At the same time, a growing chorus of voices on the right and the left begin arguing for a “new economics”, Keynesian government planning of the macro economy, to not only fight recessions but “fine tune potential GDP” during recoveries and booms. This theory comes at the expense of sound money and has a pro-inflation bias.

Chapter 12
Following World War I, Great Britain attempted to return to the pre-war parity between the pound Sterling, gold and the US dollar despite a massive inflation during the war years. At the same time, the British government embarked on an expansion of its domestic welfare programs which ultimately broke the back of the pound culminating in the London gold conference in 1931 which proved the futility of maintaining the old exchange ratios in the face of inflationary chaos.

At the end of World War II, the United States attempted to take the lead with a gold-backed dollar as the world’s reserve currency in a new arrangement, the gold exchange standard, engineered at the Bretton Woods conference in 1944. Of course, the architect of this scheme was the exact same architect of the doomed British plan (monetary and social policy), the imperious Lord Keynes. And rather than a true gold standard, what Keynes wrought was a feeble attempt to hide dollar inflation by creating a scheme where foreign exchange was to be exchanged for dollars, not gold, which was ostensibly suppose to allow additional credit and currency to be pyramided atop the same amount of gold reserves at formal exchange rates.

For a time, this precarious system seemed to work, helped along by the US-led international “gold pool” which sought to exchange gold against currency to calm price increases in the private London gold market.

However, the decision to engage in fiscal expansionism in the US via welfare spending increases and costly wars abroad (ie, Vietnam) all financed by deficit spending rather than real tax increases led to an unhinged inflation and a boiling London gold market. The international gold pool was quickly depleted in a series of panics in the late 1960s, eventually culminating in Nixon’s infamous closing of the US gold window.

This “guns and butter” policy, led by the intellectual disciples of Keynes ensconced in major US universities, was the final nail in the coffin of sound money in the US, and perhaps even the world, and ushered in a new era of freely floating currencies, chronic deficits, massive credit expansion and a seemingly never-ending series of financial and economic bubbles that we are all living with the consequences of today– ironically, the media at the time was fooled into believing this “enlightened” policy had permanently tamed the (government-policy induced) business cycle.

Chapter 13
Milton Friedman, hailed as a staunch libertarian and champion of small government politics and free market economics, gave intellectual blessing to the greatest economic bastardization of all time– the transformation of the gold standard US dollar, once and for all, into the “T-bill Standard”.

Friedman’s erroneous analysis of the cause of the Great Depression — a crashing M1 money supply caused by an overly tight Federal Reserve — led him to faith in a new standard for monetary policy, a simple inflation targeting of 3% per annum, with the market smoothing out the rest. Friedman believed that if the Fed could credibly adhere to a uniform rate of inflation over time, the business cycle could be banished and the economy would be free to grow without abatement and without the restrictive context of a gold-backed currency.

This new policy proved its danger almost immediately with the out of control inflation of the 1970s and opened the door for unending deficit finance by the federal government. And while Friedman had hoped for a series of Fed chairmen who would objectively guide the M1 money supply along this path (a strategy destined to failure because it turns out the Fed doesn’t control M1, market demand for loanable funds does) instead the office has been inhabited by activist acolytes since the tight money days of Volcker.

The current global monetary regime of competitive free floating currencies is truly without precedent and much of the modern US’s largesse was financed by willing mercantilist politicians in foreign trading partner nations. It remains to be seen what happens to this system when one or more countries reach the end of their rope, domestically, and are not longer willing to import the United States’ inflation as they export their wealth to foreigners for consumption.