That French Vote

We thought the French were just being coy. Every poll showed the “no” voters outnumbered the “yes” voters. But the frogs love to complain. We thought that once they got down to actually voting they would not want to confront the consequences of rejecting the constitution.

We were wrong. They said they were going to say “non” to the new constitution and they meant it.

Now, the European Union has to figure out what to do next.

Were we wrong about the euro, too? The dollar fell against the euro for three years — 2002, 2003 and 2004 — falling from about 88 cents to $1.36 per euro. Since then, it has gone up. But only to $1.25. It was $1.25 on Friday. This morning, after getting hit in early Asian trading, it was still at $1.25. Analysts warned that it might fall to $1.24.

The “no” vote was probably already discounted in the price of the euro. Our guess is that the European currency will soon resume its rise against the dollar. But it is just a guess. The U.S. money supply is falling. Commodity prices are down. Even gold is below $420. Interest rates are low…yields are falling. This is not the kind of world in which the dollar would go into freefall. It’s the kind of world in which the dollar would fall against more serious forms of money — gold, Swiss francs, the euro — but not disastrously. Why? Because so many debtors owe so many dollars to so many creditors. And because the Anglo-Saxon economies seem to be softly sinking into deflation, not entering a period of inflation.

Not that we know that for a fact. It just seems to be the drift of things.

But we have little faith in financial forecasts — especially our own. So, we buy gold. We buy gold because we see a dangerously unbalanced world economy with no painless way to set it straight. Americans cannot continue to run up debts forever. Their houses are not going to increase in price at three times the rate of GDP growth for much longer. The Chinese cannot continue to build factories in order to make products for people who can’t afford to pay for them. And the Japanese are not going to lend money forever to a country that cannot pay it back. But the most alarming feature of the world financial market circa 2005 is that so few people find it alarming. Every hedge fund manager and homeowner is leveraged to the eyeballs. Every analyst and strategist is confident. Every central banker is complacent.

“Europe is old news…it is hidebound…it is irrelevant in the modern world,” say the Americans. Of course, that is the very thing we like about it. Europe is on the sidelines; its money is relatively safe.

• We have no opinion on the constitution. But judging from the opinions other people have, we’re better off without them.

“A community needs a strong central government, otherwise, we’re a little irrelevant in the modern world…”

“Every country needs a constitution.”

“We must go forward with this thing; otherwise, we’ll be forced backwards.”

“People who are opposed to it are opposed for all the wrong reasons.”

“People who are pushing the constitution just want to take away our social benefits.”

Almost everyone has an opinion, and almost every opinion is idiotic.

• “I read something in the newspaper the other day,” began a woman at a dinner party on Sunday night. “It was very interesting. Apparently, there are two parts to the brain. They’ve done a lot of studies on this. The one part is language-based…or maybe I should say it is where we do our symbolic logic. It’s the part we’re using now to say what we want to say. The other part of the brain shapes its own ideas and opinions, but without using language or symbolic logic. I don’t know exactly why I brought it up, except that this constitution issue is so confusing, I think I’ll use the old part of my brain to make a decision. It makes no sense to the new part.”

The constitution is more than 400 pages long. Probably not one citizen in 500 actually read the thing. And the one who did is a fool for wasting his time. All he discovered, according to press reports, is that the thing is a monster of good intentions and bad draftsmanship. But what difference does it make? No one knows what comes in tomorrow’s news. And no one knows whether a constitution for Europe would be a good thing or a bad one. Most likely, the constitution will make no difference. Even in America, the constitution is largely beside the point.

The U.S. Constitution specifically and intentionally limits the power of the federal government — leaving all power not expressly given to the feds to the people and the states. Yet, what is it that the U.S. federal government cannot do? The U.S. Constitution specifically says that only Congress has the power to declare war. Yet, Congress hasn’t done so since 1942; U.S. soldiers have fought in dozens of wars since then. The Constitution says a dollar is a unit of gold and silver. Yet, since 1971, no dollar could be traded for gold at a fixed rate.

Throughout the 19th century…and up until the 1930s in the 20th…the Supreme Court was adamant about what the constitution said. It said the federal government couldn’t do things not expressly allowed by the Constitution. Other things were reserved, to the people, it said. Then, after the Roosevelt era, the Supreme Court came to believe that the Constitution said just the opposite thing: that the federal government could do anything that was not expressly forbidden to it.

How could the Constitution say one thing one time and another the next? Were the Supreme Court justices dumber in the 19th century than they were in the 20th?

What happened was that the country had changed. The Constitution was written for a modest republic. When the nation became an immodest empire, the Constitution became irrelevant. It can still be cited in court cases, but if the passage seems to interfere with the imperial program, the language will be re-interpreted. Supreme Court justices will come to think that the passage means something entirely different — even though their predecessors found it entirely acceptable for many, many decades.

Do you see what we see, dear reader? The fascinating part is that people — even the smartest people in the country — will think whatever the times require of them. The spirit of the times…the zeitgeist…the way people feel about themselves and their role in the world…these are the things that really make a difference. When America was a republic, they had republican thoughts. But when the United States became an empire, they put aside their republican thoughts and came to think like imperialists. They did not realize it. They would not admit it. They would never believe that their own conscious thoughts were formed by some process that they neither understood nor controlled. But that is what happens.

The subject came up over coffee on Sunday morning. Somehow, we were discussing women’s rights.

“Why did women care if they could vote or not?” we asked.

“They wanted to be full citizens, of course. They wanted to be treated fairly. They wanted to have a say in their government,” came Elizabeth’s reply.

“But were not all those things entirely obvious,” we continued. “And since they were obvious, how come they were not important to women before the end of the 18th century?”

“The ideas had just not evolved to that point…”

“Yes, why had they not evolved? This is a very simple matter. Either women are equal to men in politics or they are not. Sometimes, people — including women — judge the thing one way. We do not recall any popular uprising at the time of the American Revolution or Constitutional Congress. Then, as now, women were half the population. They could have made a big stink about it. But back then, the founders — people who were at least as smart as the present generation of political leaders — barely even considered the matter. They didn’t even want to give the vote to other men. They thought about it and decided to reserve the vote for white property owners.

“And yet, if it were a matter of fairness, justice, reason or logic they could have come to the very same conclusion that most people come to today. They were no strangers to the concepts. Still, they thought the fairest, most just and more reasonable thing to do was to not include women among the voting group. Today, very few people in America think women should not be allowed to vote. But back then, the best people seemed to think so.”

“I see what you mean. These things are not matters of logic at all. The founders were just as capable of logic. But the times were different. They weren’t reacting reasonably, but emotionally, or sentimentally.”

“Yes, people come to have whatever opinion the times require. But the opinions don’t come from thinking. The thinking comes merely to support the opinions. All this blabber of reasons and logic about whether you should vote for or against…or, in America, the great debate about whether the U.S. should have invaded Iraq…or whether taxes should be raised or lowered…all the ‘reasons’ are nonsense. They are merely expressions of sentiment, and excuses for it.”


Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century.