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Solon...Pericles...Leon Panetta?

Is the US Defense Secretary making an Ancient Greek mistake...?

YOUR CORRESPONDENT has brought his wife here to Cyprus on a weekend get-a-way, writes Bill Bonner, founder of the Daily Reckoning.

Besides, he wanted to see where Solon died. Whether or not Solon, the great Greek lawgiver, died in Cyprus or not is a matter of some dispute. And what he was doing here is unknown. But Herodotus says his body was 'consumed in Cyprian fire.' So this is the place he must have gone back to ash.

Solon was in charge of Athens in the second part of the 7th century BC. Then, as now, the people had gotten themselves into a jamb. They owed too much money. The burden of debt was so great that the economy was apparently being crushed by it.

But Solon was no dope.

"The Athenians were in the habit of disguising the unpleasant aspects of things, giving them endearing and charitable names," wrote Plutarch. "They refer to whores as mistresses, taxes as contributions, garrison cities as guards and the common jail as a residence."

So, according to Aristotle, Solon figured the thing to do was to organize a "shaking off of burdens." Solon "made a cancellation of debts, both private and public…they shook off the weight lying on them."

The problem with today's solons is that they do not shake off the weight lying on the public. They add to it. The problem in Europe is government debt. But every government in the EU continues to go further and further into debt.

And next week – on Halloween – the US is supposed to pass the point where it has national debt greater than 100% of its GDP. And at the present pace, each year's deficit adds about another $1.5 trillion.

If we are really following in the footsteps of Japan – as we think we are – we'll see the feds double their debt over the next 7-10 years.

But wait. Japan has an advantage. It has no military expenses of any consequence. The US has them up the kazoo. The cost of its wars and foreign meddling is more than $1 trillion a year. It cost a million a year just to maintain one soldier in Afghanistan. These expenses could be cut without much pain or suffering in the US itself.

But empires don't back up. Certainly, the Greek empire didn't. After Solon sorted out their debt problems, they were soon back in the empire business and back in debt. That's why much of the history of Cyprus is the story of one Greek misadventure after another. Sometimes the Athenians were fighting the Persians and the Phoenicians. Sometimes they were fighting other Greeks. Sometimes they were fighting the Cyprians. Sometimes they were fighting alongside the Cyprians. Like the Americans, they had troops all over the place…making enemies wherever they went.

A stele was discovered that recorded the names of the Athenians of the Erechtheid tribe who fell in the years 459-458 BC.

"Of the Erechtheid tribe, these are they who died in war, in Cyprus, in Egypt, in Halieis, in Aegina, at Megara…" Inscribed are the names of 177 soldiers.

Athens didn't back up. It kept going until it had gone too far. In 431 BC Pericles gave the kind of speech that Mitt Romney just gave at the Citadel. (No presidential candidate can talk openly about managing the process of decline….that would be political suicide.)

Pericles praised his forefathers for their efforts:

"They dwelt in the country without break in the succession from generation to generation, and handed it down free to the present time… And if our remote ancestors deserve praise, much more do our own fathers, who added to their inheritance the empire which we now possess, and spared no pains to be able to leave their acquisitions to the present generation…. You may reflect that it was by courage, sense of duty and a keen feeling of honor in action that men were enabled to win all this…" .

Then, he vowed to stay the course:

"You cannot decline the burdens of empire and still expect to share its honors."

He should have backed up. Under his guidance, Athens continued to make war on just about everyone…until the Spartans invaded it, laid wasted to the city and enslaved its people. Pericles died of plague.

Don't expect the US to back up either.

Threatened with budget cuts, Defense Secretary Leon Panetta reacted not with thoughtful reflection, but with Greek-like lunacy. As to the budget cuts, he called them a "doomsday mechanism." They would be 'catastrophic.' We would be "shooting ourselves in the head," he went on.

These would be the effects, said he, of spending only as much as the whole rest of the world put together.

Of the people who propose to put on the brakes, they are like the Nazis at Bastogne, asking Patton to surrender. "Nuts," says he replied.

Spending cuts are intolerable…so is any talk of "decline" or backing up. The armed zombies who run the defense industry won't permit it.

But imperial decline doesn't have to be such a bad thing. Gideon Rachman, in the Financial Times, explains:

What the UK discovered after 1945 is that a decline in national power is perfectly compatible with an improvement in living standards for ordinary people, and with the maintenance of national security. Decline need not mean the end of peace and prosperity. But it does mean making choices and forging alliances. In an era of massive budget deficits, and rising Chinese power, the US will have to think harder about its priorities. Last week, Hillary Clinton insisted that America will remain a major power in Asia – with all the military expenditure that this implies. Very well. But what does that mean for spending at home? Few politicians are prepared to have that discussion. Instead, particularly among Republicans, they fall back on feel-good slogans about American "greatness".

Those who refuse to entertain any discussion of decline actually risk accelerating the process. A realistic acknowledgement that America's position in the world is under threat should be a spur to determined action on everything from educational reform to the budget deficit. The endless politicking in Washington reflects a certain complacency – a belief that America's position as number one is so impregnable that it can afford self-indulgent episodes such as the summer's near-debt default.

The failure to have a proper discussion of relative decline also risks leaving American public opinion unprepared for a new era. As a result, the public reaction to setbacks at home and abroad is less likely to be calm and determined and more likely to be angry and irrational – feeding what the historian Richard Hofstadter famously called "the paranoid style in American politics".

These days the British have learnt almost to revel in failure. They buy volumes with titles like the "Book of Heroic Failures" in large numbers. It is quite common for the supporters of a losing English soccer team to chant, "We're shit and we know we are." This is not a habit I can see catching on in the US. When it comes to managing decline, self-abasement is optional.

And here's another piece from the Financial Times, describing America's "Eclipse":

…In this challenging new study, Arvind Subramaniam of the Peterson Institute for International Economics writes of the next transfer, that from the US to China. This one is surely closer. While Americans were prating of the "uni¬polar moment", its economic foundations were crumbling away. Properly measured, he argues, China is already its economic equal. Very soon it will be far more powerful, economically, and ultimately, also militarily.

The book's most striking prediction is that the Renminbi will match, or replace, the Dollar as a reserve currency by the early 2020s, far sooner than most now suppose. This is largely because China will emerge as far and away the world's largest trading power: currency follows trade.

Buying Gold?...

New York Times best-selling finance author Bill Bonner founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group exposed and predicted some of the world's biggest shifts since, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and the election of President Trump (2016). Sharing his personal thoughts and opinions each day from 1999 in the globally successful Daily Reckoning and then his Diary of a Rogue Economist, Bonner now makes his views and ideas available alongside analysis from a small hand-picked team of specialists through Bonner Private Research.

See full archive of Bill Bonner articles

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