Propaganda, Magical Thinking and Failed Offensives
  (September 17, 2009)

The Evil Empire of the Fed, Treasury and Wall Street are "declaring victory"-- "the recession is over. Can magical thinking and propaganda conquer reality?

The rural residents of Japan who lived far from the war were shocked to learn that the Japanese Empire had lost World War Two. After all, the only news they received was of one victory after another.

"Good Germans" and "good Japanese" alike were also shocked to learn that their respective Empires were Evil. After all, the propaganda which had dominated their media and lives had promoted the idea that their conquests were "freeing the oppressed peoples of the Earth."

Lest you think their belief in propaganda and their shock at the Evil perpetrated by their dictatorships naive, I direct your attention to the propaganda machine and magical thinking behind "the recession is over." Oh, and our financial Dictatorship is Evil, too.

Does saying it so make it so? That's magical thinking. When it's a child of five believing in the magic of incantations, we think it's cute. But when Ben Bernanke and the rest of the Financial Dictatorship spew their incantations ("the recession is over, the recession is over, now click your heels together three times...") then their motivation is Evil: to pesuade the populace their domination is total and they've "won the war"--that is, credit and debt can continue expanding three times faster than the economy forever.

Why? Their dominance, power and wealth depend on the populace's naive belief that "the system" works to their benefit. That is the Big Lie--the system works to the Financial Dictatorship's benefit, not to the citizenry's.

I usually shy away from military analogies, as they veer to cliche: "This is his Waterloo," etc. (And never mind only a late arrival of reinforcements staved off a French victory.)

But the present propaganda campaign waged by our "Powers That Be" is so pervasive and so distorted that both my wife and I realized that the only equivalent is wartime propaganda.

Yes, the stakes for the Powers That Be are that high. They must persuade the American public that "victory is at hand" and their dominance is unchallenged, or their Evil Empire will crumble.

The catalyst for our insight was the 1954 classic Japanese film Twenty-Four Eyes (directed by Keisuke Kinoshita), the story of a rural Japanese teacher and her abiding ties to her first 12 students.

There are no combat scenes or bombs exploding; like much of Japan, this remote island experienced no bombing raids. The war was experienced second-hand; only the arrival of the remains of young soldiers revealed the cost of the Empire's ambitions.

Of the teacher's six male students, three are killed in combat, as is her husband, while two return disfigured/crippled.

The Nazi propaganda machine was equally effective. Our friend's 92-year old father, a German-speaking Romanian, fought on the Eastern Front in the German Army. He has told us that before the war then he truly believed the National Socialist Party (Nazis) was the best choice for Germany. He was not alone. I Will Bear Witness 1942-1945: A Diary of the Nazi Years offers a first-hand account of the final war years.

Even as bombs rained on their cities, the civilian populace was relentlessly pounded by magical thinking propaganda: that is, if we tell them "we're winning," then their belief will actually enable if not victory then a negotiated peace.

There are two related military analogies of our Financial Dictatorship's desperate propaganda offensive on deflation and credit destruction: The Battle of Leyte Gulf in the Pacific War, and the Battle of the Bulge in the European War.

Both were last-ditch offensives designed to gamble the last resources of the crumbling Empires on a victory so smashing that it would reverse their failing fortunes.

Both were well-planned and executed, and both very nearly succeeded. Poor weather hindered the Allies' air power from playing a decisive role in stopping the German advance. In the Pacific, the Japanese succeeded in drawing Admiral Halsey's main battle fleet north in a wild goose chase after the remaining Japanese aircraft carriers, while the main Japanese fleet of battleships and cruisers slipped toward the essentially defenseless American landing fleet.

Only a handful of thinly armored and lightly armed destroyers--nicknamed "tin cans"-- stood between the American fleet's light carriers and support craft, and the Japanese were poised to complete their bold plan: to destroy the entire American support fleet and foil the invasion of the Philippines. Just as they'd hoped, Halsey had taken the fast American aircraft carriers north, and so American air power was nowhere in sight.

As described by the recent book The Last Stand of the Tin Can Sailors: The U.S. Navy's Finest Hour (James D. Hornfischer), the handful of small destroyers launched a suicide attack on the incoming Japanese battleships.

This attack unnerved the Japanese commander, who suspected such an attack might presage a trap of some sort; and so at the very door of victory he turned his fleet around.

By gambling their last resources on a bold offensive, the two Evil Empires sealed their fate. Both offensives failed, and both decimated the Empire's remaining assets.

Now the Fed and Treasury have thrown their last best assets--trillions of dollars in newly created money, new Treasury bonds and trillions more in guarantees--in a last-ditch offensive against debt/credit destruction.

They are also waging a relentless propaganda war on the American public, trying to convince them that the last decade of exponential-credit-expansion "prosperity" is sustainable. One of their chief weapons is the stock market "rally" which is being supported by their Financial Dictatorship allies in China, Japan and Europe, all of whom have similarly thrown their last best assets into the "final battle" for victory.

Thus global stock markets are moving upward in a manufactured perfect unison.

Beneath the screaming propaganda campaign declaring victory, the financial casualties mount: 5 million homes in the foreclosure pipeline, 16% unemployment, household wealth down a third, credit card write-offs are surging and not a single driver of future growth in sight.

The propaganda machine touts all sorts of nonsense: nanotechnology! Does anyone spouting this really know what a molecular foundry even does, and how limited the industrial base and scope of such technology may be? If nanotechnology comes to fruition,it will be in coatings and the like which are applied in automated factories with few workers, or scaled up and manufactured in Asia.

Even Warren Buffett is part of the propaganda machine. Like the veteran commander trotted out to inspire the home audience, Buffett announces "it's a good time to buy stocks" and "the worst is over" even as the calamity has barely gotten underway.

I suspect Buffett got "The Call" last year from Hank Paulson: you know, the one begging him to go public with some heartening statement because his stature would reassure a wavering public.

He undoubtedly received The Call this year, too--perhaps it was the President himself, or Geithner. We need your help, Mr. Buffett: please reassure the public once again that magical thinking will work, and that believing it is so will make it so.

Sorry, Financial Dictatorship: the weather has turned, and reality is preparing a counterattack on your magical thinking propaganda offensive. Reality is gathering its forces and your pathetic "charm offensive" will be revealed for what it is--blatant propaganda--within the next 12 months.

Saying it is so does not make it so.

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