The problem with the Fed-fueled stock market rally is that you can’t trust it. It’s not based on anything solid. Investors are not really investing in solid companies that are expected to produce solid growth and profits in the years ahead. They’re speculating that the Fed’s EZ money will boost share prices.
Maybe it will. And maybe it won’t.
It seems likely, to us at least, that money printing by the Fed will push up the stock market. But it also seems likely that people will soon begin to wonder:
How long will it last?
What will happen when money printing ends?
Anticipating the next phase is likely to touch off panic attacks… which could have grim consequences for speculators.
In any event, we’re not speculators. So, we’re out. We’re bargain hunters. We’re real asset accumulators. We’re lots of things. But we’re not believers in the miraculous powers of the Fed to turn stones into bread… and we’re not speculators on the uncertain and unpredictable consequences of Fed money-pumping.
On Wednesday the minutes from the Fed’s January rate-setting committee meeting seemed to spook investors. Turns out “many” committee officials are starting to get spooked. They’re wondering whether QE to Eternity is really working. They’re nervous about what unforeseen consequences it might have. And they’re worried about how they’ll ever get out of it.
The market – driven by the expectation of more and more QE – will not take a cutoff lightly. We saw on Wednesday that even a hint of it – merely a slight motion of the Fed’s hand toward the faucet – was enough to send shivers up their spines.
And yesterday, the market continued its jitters… but calmed somewhat. The Dow went down a few points; gold held steady.
But enough of that… let’s turn back to something more serious. We’re reading a good book called Furies by Lauro Martines. It is the story – as told by eyewitnesses – of the European wars between 1450 and 1700. What makes it important from our standpoint is that it helps us understand the role of leadership in human affairs.A Disastrous Affair
In a word: disastrous.
Which is not to say that Europeans suffered bad leadership in the 15th, 16th and 17th century. Au contraire. The problem was good leadership. Gustavus Adolphus, the Duke of Marlborough, Blaise de Monluc. All were good leaders. The trouble is, good leaders are usually bad.
Or the curse is leadership, period.
The Renaissance is regarded as a period of enlightenment… when rays of rational thinking, science, art and cultural growth spread out over Europe. The warmth and light fell first upon major centers of learning – principally in northern Italy – and then penetrated into almost every doorway.
This may be true. But the period was hardly one in which standards of living and the quality of life rose evenly and gently. Instead, it was a time of almost unbelievably brutal warfare that caused suffering on a scale not seen again until the wars of the 20th century.
War is a luxury to some. It is a business to others. To most Europeans between 1450 and 1700 it was a nightmare. The typical peasant – which is what most people were during the period – could barely support himself and his family. The return on investment in agriculture was low. A setback – unseasonable weather, for example – could cause whole communities to starve.
There were other setbacks, too. The bubonic plague struck Europe in the middle of the 14th century. It carried off about a third of the population – rich and poor. Thereafter, it came back in waves… along with other epidemics and diseases such as typhus and syphilis. Weakened by bad harvests, people fell to the ground quickly when they got sick.
But there was still another major cause of death, destruction and misery: leadership. As hard as it was to raise enough food to support a family it frequently became impossible when groups of armed, murderous, often-starving men invaded.
But this is what often happened. While most people fought with the elements for their survival, a few fought each other for profit, status and power. These were the leaders of men… many of whom are still revered today for their military achievements.
The Competition for Power and Wealth
Europe had been settled by tribes. They spoke different languages. They had different customs. They worshipped different gods.
What they shared were frontiers and ambitions and, often, bloodlust.
Leaders were those who had managed to exert their power over an area… and over a group. They now formed Europe’s aristocracy – an aristocracy whose mÃ©tier was fighting. They then jostled up against other leaders… all of them warlike… and competed with them for more power and more wealth.
Enterprising local aristocrats – called “enterprisers” – would form their own armies and sell their services to richer, more powerful aristocrats. These would join together with still more powerful aristocrats – kings and dukes – and go to war.
An army might have soldiers from all over – Serbs, French, English, Irish, Florentines, Spanish, Catalan. These soldiers were regarded as the “scum of the earth,” by practically everyone. They were men who were frequently on the run… or on the lam. Vagabonds, bums, murderers, mental defectives – they were usually illiterate and impoverished. Often, they joined the army because it promised food. Sometimes they were tricked or dragooned into service by roving press gangs.
These soldiers were rough men by every measure. Then they were made rougher by their own “enterprisers” who would cheat them regularly – failing to provide food and pay as promised.
But events often took a much worse turn. From Furies:You can imagine what happened when a hungry, unpaid group of these ruffians marched into a defenseless, isolated village. In the best of cases, they demanded food… got it… billeted themselves in houses and barns… and left. Then their food gone, villagers could try to figure out how to stay alive.
“On the morning of November 4, 1635,” recournts Martines, “about three hundred horsemen rode into Saint-Nicolas-de Port. Speaking “different tongues, some were dressed in the German manner, others like Croats.” They broke into houses and churches, using axes, and then attacked the inhabitants, stealing their clothing, stripping garments from their backs, and beating them with swords blows or “billy clubs” (nerfs de boeuf) to extract the whereabouts of their hiding places for valuables.
They were just as brutal with nuns and priests. Three days later – the horsemen having departed – into town rode the German Protestants and Swedish troops of Bernhard of Saxe-Weimar. They burst into the church, where they “raped women and killed the celebrant priests by battering them with candle holders and chalices.”
Not finding enough loot, they set fire to the roof of the church, having first wiped lard onto its supporting wooden beams to increase the intensity of the fire. The roof burned so fiercely that the lead melted, “pouring down like rain in a storm.”
The bells, it seems, also melted, and the entire church was destroyed. Not yet content, and evidently in a raging fury, the soldiers set fire to the whole town, running down the streets, igniting one house after another and killing anyone who got in their way.
In 1624, Saint-Nicolas-de-Port had 1,659 households. By 1639, the number had plunged to a mere 45.
Loot, Food and Gratification
This sort of thing went on all over Europe for a period of 150 years. Whole villages and towns were wiped out. Groups of marauders, deserters and “regular” troops attacked everything and everyone they came upon.
The word “enemy” had little meaning. Although the leaders and enterprisers had specific enemies in mind and specific military objectives, the troops had other ideas. They sought loot, food, gratification – and took it wherever and whenever they could get away with it.
Frequently, towns were attacked by one side. And then by the other. And then by the first again… and sometimes by a third or fourth group that had entered the melee. The townspeople were beaten, raped and killed. If they survived the direct assaults, they then had to survive without food and often without shelter.
The soldiers – unpaid and unfed – were probably as miserable as the peasants. They died with such regularity – mostly from disease and starvation – that when a young man went off to join the army his family believed that they would never see him again. Most often, they never did.
Naturally, the peasants hated soldiers of all types and took their revenge on them when they could. Armed peasants would attack groups of soldiers camped near their towns and massacre them. They would have done better to fall upon the leaders.
The Duke of Marlborough is celebrated for his famous victory at Blenheim, made possible by a march from Bedburg to the Danube. How was it possible to feed and supply such an army over that distance? It was not. His men “lived off the land.”
The land, however, was not so rich that it could support the people living on it already plus an army that numbered as many as 19,000. And the 250-mile trek, across the Rhine, through Mainz and Heidelberg, was accomplished in May, not in September.
This meant the summer harvests had not yet been made and the people of the region were already down to their last resources. What did the leader of the English forces do to feed his army in Bavaria? He authorized “free plunder.” Remarkably, a woman, disguised as a soldier, Mrs. Christian Davies, recorded what happened:
We miserably plundered the poor inhabitants. We spared nothing, killing, burning or otherwise destroying whatever we could [not] carry off. The bells of the churches we broke to pieces that we might bring them away with us.
Eight decades earlier another English leader, the Duke of Buckingham, was responsible for yet another misadventure. He landed on the tiny Island of Re, near La Rochelle, with a force of about 10,000 to 12,000 men and horses.
They were meant to besiege and capture the citadel of St. Martin. But the duke had neglected his logistics. He had little to feed his men. He repeatedly sent his backers in London desperate pleas for food. But London dithered.
Finally, the troops were so weakened by sickness and hunger and by a reckless assault on the citadel (during which it became clear that their scaling ladders were too short to reach the top of the walls) that they were forced to retreat.
The French took advantage of the situation. They attacked as the English ran for their ships. Few of them got back to England safely. The duke was assassinated a little later by an enraged lieutenant.