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The Daily Reckoning | Friday, August 10, 2012 A closer look at the cyclical nature of economic and societal changes... On Bastiat’s differing plans and similar planners... Plus, how a gift from “Little Pearl Harbor” could end up saving thousands of lives, and plenty more... ------------------------------------------------------- External Advertisement What’s REALLY wrong with America today? Conservatives blame the Leftist media for America’s ills. Liberals blame the greedy Right. The 99% blames the 1%. The 1% says “don’t look at us, Congress makes the rules.” Schoolteachers blame terrible parents. Parents blame teachers’ unions. Arizonans blame Mexicans. Christians blame Muslims... and gays. But a wealthy Florida businessman says that’s “all just smoke and mirrors.” He says the REAL problem with America today is something few citizens have ever considered. And he says you must understand this idea if you want to protect yourself and your family over the next few years. See his unique and eye-opening analysis, free of charge, here... Quote of the Day... “It is easy to prescribe improvement for others; it is easy to organize something, to institutionalize this or that, to pass laws, multiply bureaucratic agencies, form pressure groups, start revolutions, change forms of government, tinker at political theory. The fact that these expedients have been tried unsuccessfully in every conceivable combination for 6,000 years has not noticeably impaired a credulous unintelligent willingness to keep on trying them again and again.” — Albert Jay Nock, from Memoirs of a Superfluous Man Back Where We Began Learning from Brief and Lengthy Economic Cycles Joel Bowman Reckoning today from Ouzilly, France... Stocks went nowhere yesterday. Gold dropped a few bucks. No big deal. So, let’s move on... We’ve been thinking lately about cycles. Not the kind you pedal along winding roads out in the French countryside...but the kind you experience day to day...year to year...generation to generation. And sometimes, beyond... Some cycles are short. Election cycles, say. Barely has one president finished fluffing his White House pillows when it’s time to start penning the empty slogans and gearing up for the next election campaign. Presidents occupy their position for four short years...eight if they’re particularly adept at fudging numbers and whipping the nation into a prideful frenzy. In the grand scheme of things, that may not seem like a lot of time to make a complete mess of things. Nevertheless, the politicians do their best. In 2009, the year of the current president’s inauguration, US federal debt stood at about $10 trillion, give or take a few hundred billion, with roughly half that amount held by “the public.” By 2013, when the next term begins, that figure will have ballooned to over $17 trillion. The public will by then be on the hook for $10.6 trillion. Maybe more. Only in the few years immediately following WWII was the debt-to-GDP ratio higher than it is today. And then only marginally. The graph, if you’ve seen it, has a very “hockey stick” feel to it. And so, these mini-cycles proceed, on and on, with a parade of cheats, scammers and dodgy salesmen marching in turn through the Oval Office. They really ought to install a revolving door. One might think this process would quickly erode a country’s resources but, as Adam Smith was famously said to have remarked, “There’s a lot of ruin in a nation.” In any case, string a half-dozen or so of these mini-cycles together and you get...slightly longer cycles. Generational cycles, we’ll call them. No doubt you’ve heard of these before. They’re made up of fathers who vote one way their whole lives...and of wives who go along just the same. (Or maybe it’s the other way around.) These people spend their years voting Labor or Tory, Republican or Democrat...or they go in for the Independents in a mild-hearted effort to “throw the bums out!” The supply of bums yearning for power, however, appears to be without exhaustion. Good folk who dedicated their entire lives to casting these rascals out of office go to their graves having made no change at all, save for validating the system they so raged against. Then, the mantle passes to the next generation...along with a whole lot more debt, bureaucracy and rot corrupting the process. “The plans differ,” noted French political scientist, Frédéric Bastiat, but “the planners are all alike.” Still, we’re only talking here about relatively short cycles. What, after all, is a quarter century? The cycle of political systems themselves, for instance, can be, and often is, larger. Much larger. In the US, the system of constitutional republicanism came to supplant that of King George III’s own particular brand of monarchy. In Russia, the Bolsheviks booted out the Tsars, paving the way for the Union of Soviet Socialist Republics (USSR)...which eventually gave way to communism...(and after theperestroika)...to rule by oligarchy...and, at present, a curious form of politics known as “Putinism.” The cycle of political systems can be short, sharp and oftentimes violent...or they can be long, slow undulations spanning many, many hundreds of years, remaining almost imperceptible to we busy little humans. One could, for example, have lived and died in communist Russia (as many poor souls did) without ever having known anything different...without seeing either the beginning nor the end, of the political cycle. Same thing in the US, where the current system has been around, more or less in its current form (though gradually, steadily degenerating) for two and a quarter centuries. Broadly, we’re talking here about centralization and decentralization. At times, political systems work toward honing and focusing power, concentrating it into fewer and fewer hands. Centralizing it, in other words. At its height, the Roman Empire represented the pinnacle of centralized power. “Right as diverse pathes leden the folk the righte wey to Rome,” wrote Chaucer, almost a millennium after the Great Empire’s fall. But as with all cycles, short and long, the wheels of history were always turning. During Rome’s later, degenerate stages, and certainly after its collapse, the continent of Europe fragmented into hundreds of smaller, feuding principalities. The Middle Ages (roughly 450-1350) were, by and large, an era of a great political decentralization. Princes and dukes wielded absolute power over their small territories, weakening various kings’ claims on their lands. Indeed, it wasn’t really until the Renaissance that any meaningful, large scale consolidation took hold on the continent. During this period, stronger principalities, those that had prospered in trade and were therefore better equipped to withstand military attacks and plagues, began working together and expanding their territories. Once again began a cycle of centralization, of disparate states coagulating into a mass of cells, fused together by broader, overarching legal and political systems, trade agreements and strategic alliances. Wealthy families, too, began to gain power and control over larger territories during this time. It was an era that gave rise to the Medici’s, for example, a family of bankers from Florence that gained control of governments in various Italian regions and, later, even assumed the papacy. The Medici appointed family members as princes in lands afar and assured their protection by the Medici-controlled Vatican. Once again, power came to rest in fewer and fewer hands. It was as if history itself had inhaled, drawing closer the disjointed peoples of once-warring regions into bordered, sovereign states. By the 18th and, especially, the 19th century, principalities had fallen almost entirely out of favor...and the world witnessed the birth of the modern nation state. So where does that leave us? Ah...you’ll have to tune in next week, Fellow Reckoner. Until then, we turn the page over to technology expert, Ray Blanco, as he follows another type of cycle entirely. Please enjoy... P.S. The quote above, by the inimitable Albert Jay Nock, is taken from his superbMemoirs of a Superfluous Man. Jeffrey Tucker and the team at Laissez-Faire Books have been working hard to bring Nock’s masterpiece to a new digital format. Having done just that, they are proud to present Nock’s work as the ebook of the week in the Laissez Faire Club. You can download it now for just $9 by going to their website. 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The Daily Reckoning Presents The Gift from “Little Pearl Harbor” Ray Blanco Sometimes medical revolutions happen under the most unlikely circumstances... On Dec. 2, 1943, a surprise air raid on the Allied-controlled port of Bari, Italy, was so successful as to receive the name “Little Pearl Harbor.” Among the ships damaged by aerial bombardment were the SS John Harvey and its load of chemical weapons. Fires set off by exploding bombs released tons of deadly chemical warfare agents into the air and water around Bari, exposing thousands of people and producing hundreds of casualties. You see, in late 1943, Allied forces had just secured military control of southern Italy in a strategy designed to open a new front against the Axis cancer in the “soft underbelly of Europe.” The tide of war was turning, but the outcome was yet far from certain. Furthermore, a disturbing fact was known to the Allies. Nations on both sides of the war had signed the Geneva Protocol against the use of chemical weapons. Nazi Germany had, however, developed a large stockpile of potent chemical weapons. If Hitler chose to use them in desperation, the results could be dire. Thoughts of a Luftwaffe raid dropping nerve gas bombs above London’s skies loomed large in the minds of military planners. Allied powers, therefore, produced chemical weapons of their own as a deterrent against any possible Axis use. Behind the scenes, they also began to move them into the battle space...just in case. Secretly, the SS John Harvey, a cargo ship loaded with thousands chemical warfare bombs, arrived in the newly captured Italian port of Bari. Located in the south end of the peninsula, Bari had become a major logistical hub for Allies in the Italian campaign. However, since the Axis air forces were considered to be too thinly stretched to be much of a threat, the port was only lightly defended against aerial attack. This proved to be a critical miscalculation. From “Little Pearl Harbor,” however, an opportunity emerged. The US Department of Defense had recently initiated research of possible therapeutic applications for chemical weapon agents. Shortly after the disaster, the US dispatched medical experts to investigate the effects of mustard gas on humans. A study of the aftermath showed that mustard gas suppressed rapidly dividing cell lines responsible for producing blood cells. Yale University researchers later demonstrated that the chemical agents dispersed by the Bari raid could also be used to suppress rapidly dividing cancer cell lines. Chemical agents were to open up a new front in a new war — attacking cancer’s soft underbelly. With a boom, the chemotherapy revolution had begun. Since the discovery at Bari, chemo drugs have become the mainstay in the fight against cancer. While chemo is old news as far as medical technology goes, it’s still a tough technology to improve upon — even with the latest wonder drugs. Many biotechnology companies use proprietary technological platforms to move new cancer therapies into market. Some companies, however, use a different approach. They focus on acquiring overlooked yet promising oncology compounds pioneered by others. The advantage of this approach is that by the time an acquisition is made, a lot of the early work on a compound has already been done. Unlike a biotechnology company developing a new therapeutic platform, a company using existing compounds doesn’t necessarily have to wait a decade or more before seeing revenues. A smart acquisition that can be commercialized quickly can start generating sales in a fraction of the time... And that is what is happening today. Take pancreatic cancer for example. Pancreatic cancer is the deadliest of cancers. Although pancreatic cancer is not among the most common cancer types, its high mortality rate still makes it the fourth-biggest killer overall. Only 6% of people diagnosed with metastatic pancreatic cancer survive to the five-year mark, and the average life expectancy is only about six months. Today, the leading drug for treating pancreatic cancer is the chemotherapy compound gemcitabine. But it turns out that gemcitabine — or compounds containing it — can be effective against other cancers as well. Regards, Ray Blanco, for The Daily Reckoning P.S. Recently, I told my Technology Profits Confidential readers about a biotechnology company using science to teach this old dog a few new tricks. In the process, this company holds the potential to unlock billions of dollars’ worth of revenues. To access the full report, simply click here. ------------------------------------------------------- Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com