Thursday, March 26, 2009 35 Comments

The Geithner plan, slightly demystified

Sometimes homeless guys come up to me on the street and ask: "what is this PPIP thing, anyway? One: does it have anything to do with PPP, IP, or PPTP? And two: will it work?"

One: no. But as one who once designed a C++ class called "PPTPPPPLink" - a choice from which my programming career has never quite recovered - I feel Secretary Geithner's pain. At least his latest acronyms no longer include words like "Troubled" or remind us of Star Wars villains.

And two: no. At least, not if by "work" you mean "convert our rapidly-disintegrating Rube Goldberg machine into a healthy, stable and productive financial system." Perhaps this comes as a surprise to you. But probably not.

But a more interesting question is: will the Geithner plan achieve its intended results?

Obviously, the PPIP is a bandaid, not a reboot. Its goal is not to create perfection. Its goal is to stop the hemorrhage. Will the artery finally clot, this time? If you know the answer, you can either make a lot of money, or at least avoid losing one. At least if you're the sort of fellow who can raise $500 million from your friends at the Palm Beach Country Club. I'm afraid the truth will not help the skells raise any quarters, though. Ah, change.

Unfortunately, my answer is: I don't know. I can guess, though, and I will.

Let's start by looking at one common misconception about the Geithner plan. Perhaps by clearing it up we can take our first step toward some small enlightenment.

The misconception I have is that the Geithner plan (and its predecessors in the department of liquidity-enhancing Star Wars villains, from MLEC to TALF) represents a subsidy to the hedge funds and other fat cats who may, or may not, participate in it. The essential Steve Waldman has battered this issue much, most recently here.

One can argue this point, if one is willing to finesse the word subsidy. But for me, a program is not a subsidy unless it can turn loss into profit. This the PPIP cannot do.

If the word subsidy attracts you solely on the basis of its negative connotations, fine. I am happy to admit that the PPIP is a black, reeking horror. And I wouldn't be surprised if its designers agree. Surely at least they consider it the least of many possible evils.

But, at its bottom, the PPIP is a government loan facility. By definition, no loan can render an insolvent balance sheet solvent. You cannot borrow your way to profitability.

So, as a fairly typical example of the misconception, the New Yorker's Surowiecki writes:
In fact, it’s essentially the same kind of subsidy that the entire U.S. banking system has depended on for the last seventy-five years. What are FDIC-insured bank deposits, after all? They’re non-recourse loans to banks. You deposit money with a bank—that is, you lend it your money. The bank can then take that money, and leverage it up nine-to-one to make loans or acquire assets. If the loans are good, they keep all the profits. If the loans go bad, the most the bank can lose is the capital it’s invested.
First, Surowiecki seems confused about the difference between a non-recourse loan and a loan guarantee. The FDIC's loan guarantee can be seen as a free option, but this option is a gift not to the bank, but to the "depositor." (I find "deposit," an English word which connotes the act of putting something somewhere and leaving it there, a dubious euphemism for a zero-term loan - hence the quotes.) The same is true for the PPIP loan guarantee.

A simpler way to model this transaction is that the "depositor" or PPIP bondholder lends to USG, whose credit rating is perfect thanks to its ability to print dollars, and USG then lends to the bank. If the bank fails, USG eats the loss and takes the assets - like any financial intermediary. This accounting interpretation produces exactly the same results. And it involves no funky instruments, just bog-standard vanilla loans.

Again: the PPIP is a loan from USG. Since USG can print infinite dollars, it can loan infinite dollars. But since a loan is neutral on the balance sheet, it is not a subsidy in my doxology.

So - second - consider Surowiecki's phrasing:
The bank can then take that money, and leverage it up nine-to-one to make loans or acquire assets. If the loans are good, they keep all the profits. If the loans go bad, the most the bank can lose is the capital it’s invested.
I have seen this explanation a million times. The usual implication is that this represents a one-way bet - a typical case of Wall Street's practice of "socializing loss, privatizing profit." And perhaps it does, but not in the obvious sense.

In the obvious sense, the outcomes for the PPIP playa are exactly the same as in any leveraged investment. The most our playa can lose is everything he puts in. Duh. If you make an investment leveraged at 10 to 1, and that investment goes down by 10%, you lose all your money. If it goes up by 10%, you double your money.

This is not a subsidy. It is normal finance. It is true whoever is providing your leverage financing - Goldman Sachs, USG, or your Uncle Ernie. It is true whatever your asset is - Florida swampland, gold, or frozen-concentrated orange juice. The most you can lose is all your money. Again: duh. For what investment is this not true?

While I am not a fund manager, I am quite confident that there is no shortage of leverage for collateralized loans, whatever the asset, on Wall Street today. The cause of deleveraging is not a shortage of leverage, ie, of prime brokers willing to lend against collateral. While it's true that many of the "toxic assets" are one-off securities for which establishing a market price is not just a matter of a ticker query, this is why the big boys make the big bucks. Moreover, the spiral of deleveraging has affected quite a few assets which are continuously quoted.

The cause of deleveraging, and of course its result as well, is falling asset prices. More on this in a moment. But suffice it to say: no one at Treasury is stupid. They know this.

So what were the designers of the PPIP thinking? How is this machine intended to work? I was not, of course, in the room, but I am no dummy myself and I think I have it figured out. While my guess is that the PPIP, like its predecessors, will not operate correctly as designed, (a) I could be wrong; and (b) it could produce the desired result through unintended means.

First, let's review what makes a "toxic asset" toxic.

The prices of any asset X, whether stock, bond or Kewpie doll, is set by supply and demand. But in the Anglo-American financial system, which was invented by God and is so perfect that it has worked the same for over 300 years, banks practice a practice called maturity transformation. MT lets lenders who want to lend at a short or even zero term (such as bank "depositors") fund loans of a long term (such as mortgages). ("Fractional-reserve banking" is a special case of MT.) Thus, demand for X is magically transmuted into demand for Y.

Ie: MT creates demand for long-term loans. Ie: MT raises the price of long-term loans. Ie: MT lowers the interest rate on long-term loans. Ie: if MT breaks for any reason, the price of long-term loans falls sharply, and the interest rate rises. This is a "bank run," "liquidity crisis," etc, etc, etc.

In a world without MT - ie, one in which 30-year borrowers are funded by 30-year lenders - a cluster of bad loans (such as NINJA loans to impecunious strippers) would simply result in proportional haircuts to the original lenders.

But when 30-year borrowers are funded by zero-term lenders, falling loan prices force the maturity-transforming bank to sell more loans, receiving present cash with which to meet its zero-term commitments. This lowers the price of these loans, and so on - creating the feedback loop that is the basis of the bank run.

"Toxic assets" are toxic because they are at the business end of a bank run. In a "normal" market, the default risk of a loan can be calculated by comparing its yield to the yield of a risk-free security, such as a Treasury bond, of the same term. The spread between these yields can be assumed to represent the market's estimate of the probability that the loan will default.

In a bank run, this formula produces nonsense, because it is comparing apples to oranges. The market for toxic assets is simply a different market than the market for Treasuries. The latter contains new demand from maturity-transforming banks. The former does not.

Thus the yield on Treasuries is around 3%, whereas the yield on "toxic assets" excluding default risk (ie, the yield on an imaginary risk-free toxic asset) is probably something like 20%. The only buyers of toxic waste at the moment are the most patient "vulture" investors. The carcass-to-vulture ratio is quite high, and getting higher. Ergo: supply and demand, baby.

The goal of the various liquidity restoration plans, including PPIP, is to break down the partition between these markets, creating a flood of gigantic profits as sea levels equalize. We are now ready to look at how PPIP is supposed to work.

PPIP is essentially a bank-run-proof leverage facility. The key to PPIP is the difference between PPIP and an ordinary margin loan. As we've seen already, the risk-return profile of a PPIP investment is generally no different from that of an ordinary leveraged investment. There is a difference, though, and the difference is in the details.

An ordinary margin loan is a zero-term loan, like a bank "deposit." Unlike a bank "deposit," it is completely safe for the lender, even without an FDIC guarantee, because it is continuously marked to market. If you lever up at 10 to 1 to buy an asset on Tuesday, and that asset falls 10% on Wednesday, your broker will instantly and automatically sell the asset to repay the loan. The lender is left with all his money. You are left with squat. (If bank "deposits" worked this way, there would be no such thing as a zombie bank - Citi would be rotting peacefully in the grave.)

So, if you use an ordinary margin loan to lever up and buy toxic assets, and the asset price continues to dive, two things happen. One: you lose all your money, instantly. Two: the asset is sold, putting it back on the market and further depressing the price.

PPIP attacks this in two ways.

First, the PPIP loans are long-term. When you use a normal, zero-maturity margin loan to leverage collateral, say at 10 to 1, you are betting that the price of your asset will never drop by 10%. When you use a PPIP loan, say of 10-year maturity, to leverage collateral, you are betting that the price of the asset will not have dropped by 10% at the end of 10 years. Big difference!

The PPIP leverage can withstand short-term fluctuations; the standard margin loan cannot. Thus, it is not at all unreasonable for Treasury to hope that PPIP will attract buyers who are not, at present, ready to make leveraged bets on dodgy mortgage-backed securities.

Second, if the worst comes to worst and the toxic assets have not recovered even after 10 years, PPIP does not dump them back onto the market. It sells them to Uncle Sam, who buys them with his magic printing press. Thus, there is no feedback-loop spiral of asset dumping, as in the classic bank run.

(By the way, using the phrase "taxpayer dollars" to describe expansion of the Fed's balance sheet is a horrific abuse of both good English and good accounting. Sorry, Americans: USG does not need your dollars. It can print its own without any trouble at all. It taxes you simply because otherwise, everyone would be too rich, and prices would go up. In other words, the purpose of taxation under a fiat-currency regime is not to finance government expenditures, but to minimize monetary dilution, thus defending the currency as an effective medium of saving.)

So: do I think PPIP will work - as in, achieve its goal of taking the toxic assets off the bank balance sheets and restoring them to ruddy good health? Well, it is certainly not impossible. But no, I don't think it will work. There are three big problems.

One, PPIP has a long row to hoe in generating enough demand for the toxic waste for the banks to be willing to sell. Banks do not want to sell their toxic assets at the vulture-investor bid, because holding these assets at non-market prices allows them to pretend to be solvent. If the market price is 30 and PPIP demand can get that up to 50, a zombie bank that needs 85 for any kind of solvency will not sell.

Now, one way in which PPIP could work is if banks find a way to use it to buy assets from themselves. If they can bid 90 for their own assets held at 95, PPIP is simply a cover for the obvious solution, which is for the Fed to just buy all the toxic assets from the banks, at prices congenial to the latter. However, I don't expect this to happen, because this type of Enron scammery normally happens in the absence of public scrutiny. The PPIP could easily work by turning into a fraud, but USG winks at fraud only when no one is looking. Now and for the foreseeable future, the stadium lights are on. I'd be quite surprised if anyone major tries anything funny.

Two, remember our original point: leverage cannot turn losses into profits. If asset prices rise, PPIP investors will make money hand over fist. If they remain durably depressed, as in Japan, PPIP investors will lose their entire investment. If investors anticipate this result, they will not participate in PPIP. If investors do not participate in PPIP, asset prices will remain depressed - absent some more generous program.

Toxic assets tend to be collateralized loans themselves, and the collateral is generally real estate. Falling real-estate prices create defaulting loans. But since all real-estate is bought with loans, we see the vicious circle again. Asset-price deflation has its own momentum.

As the suction of deleveraging feeds through the economy, more and more assets enter the toxic category. Thus: expanding supply. Thus: falling price. PPIP must push uphill against this brutal, unrelenting gravitational suckage. Not an easy task.

Three, the vicious circle is not at all irrational. It is actually quite sensible.

Doug Noland, whose Credit Bubble Bulletin has been reporting on the impending disaster since Jesus was a little boy, calculates that the US economy needs about $2 trillion a year of new lending just to stay in the same place. This is obviously a seat-of-the-pants guess, but it sounds about right to me. Thus all the noise from the great and the good about "restarting the flow of credit," etc, etc, etc.

If we separate the economy into two consolidated balance sheets - A, the balance sheet of the government and the banking industry; B, the balance sheet of all other industries and households - we feel it is perfectly normal for B to borrow more and more money, every year, from A. But is it?

In fact, when this "flow of credit" ceases, the result is described as a "recession." And it is certainly quite painful. And when the flow reverses - that's real pain.

Now: imagine you were considering investment in a business, and that business had borrowed two trillion dollars last year. Or two billion dollars. Or two million dollars.

There are two possibilities. One, the business is in an expansion stage, and is creating equity with negative cashflow. It has a "burn rate." But it is using this money to make productive long-term investments which will, in time, reverse this and produce a profit.

Two: the business is a dog. It is losing money. It needs to be liquidated or at least restructured. Woof! Sorry, Old Yeller. The time has come to say hello to Mr. Smith and Mr. Wesson.

Which is it? There is no way to know. However, if we discover that the same business has been borrowing money every year, in the same way, for the past decade, we probably have our answer. If it has been bleeding for the past quarter-century... behold: Exhibit A.

In this interpretation, the United States, as a whole, is a money-losing operation. The fact that the dollar is a fiat currency has allowed us to disguise this, because fiat currency is essentially equity, and equity can always be diluted. So our losses are funneled into a hemorrhage of new shares, in the classic equity death spiral of the dying corporation. But since USG, unlike most dying corporations, is sovereign, the game can continue indefinitely.

The difference between capitalism and socialism is the difference between profit and loss. It's not just that money-losing businesses lose money. They also produce crappy goods and services. Once disconnected from the need to make a profit, they lose the tension that makes them perform. There is only one way for a string to be taut, but all kinds of crazy ways for it to be slack.

Nor is the US unique. If there is an economy in the world that does not run a trade deficit with the future, so to speak, I do not know of it. The fact that we think of continuously increasing debt levels as normal is a measure of the 20th-century detachment from reality. Reality just called - it wants its money back.

This structure is especially interesting when juxtaposed with the fact that there are less than 2 trillion actual dollars in the world (M0). How can a company be capitalized at $50 trillion, when its customers have less than $2 trillion to spend? Because the Fed can create new dollars, both explicitly by expanding its balance sheet, and implicitly by issuing formal or informal loan guarantees.

And it does. At least in normal times. But these are not normal times. Owen Glendower could call spirits from the vasty deep. Did they come, when he called? Not as I recall.

The Fed can create new dollars, by the quadrillion. It could buy every slice of pizza on the planet for a hundred dollars each, and abolish the IRS in the bargain. But will it? As we see above, the Fed's mission is to lend, not buy. And it seems to be having a bit of trouble in doing that. If PPIP fails, does it have the political power to take the next step and straight-out buy toxic waste? With "taxpayer dollars?" I am not sure - not sure at all.

USG can also emit dollars via deficit spending. At present, via the wonders of "quantitative easing," it is selling bonds for dollars to fund its deficit, then buying those bonds with printed dollars. Net effect: spending printed money. But how much money is USG really capable of injecting into the economy, via all its lightbulb-changers, roof-caulkers and Iowa piglet museums? It'll take a lot of lightbulbs, even the most sophisticated and environmentally pure, to replace all those home-equity cashouts from 2006.

USG is simply an senescent state. It is so vast, ancient and sclerotic that it has great difficulty in accomplishing the most basic function of government: wasting money. If it cannot continue to produce dollars and spread them around broadly, the spiral of deleveraging continues. Asset valuations that look reasonable in the light of M0 are the only possible backstop.

And if USG can muster the energy to hemorrhage money, it diverts more and more of its productive resources toward the point of the bleeding, and gradually turns into the Brezhnev-era Soviet Union. In case you have difficulty translating "Brezhnev" into English, the word you are looking for is "Dilbert." Non-profitable businesses become process-oriented, ineffective, and generally insufferable for employees and customers alike. To say nothing of shareholders!

If both these outcomes seem unattractive, perhaps it's time to consider Plan M. (M - for Moldbug.) I feel it's essential to accompany all such destructive criticism with a positive proposal, even just a summary. It's always nice to end on an up note.

The goal of Plan M is to shut down our present financial system and replace it with one that is healthy and stable, preserving relative valuations in a way that is fair to everyone and doesn't interfere with anyone's life or work.

A healthy, stable financial system has two main characteristics.

One, it uses a hard currency - one with a fixed or naturally restricted supply. An example of the latter: gold. An example of the former: the numbers from 0 to (2^64 - 1).

Two, it exhibits balanced lending - maturity-matched banking. For every private-sector borrower of $X at term T, there is a private-sector lender of $X dollars at term T. I believe this is what is known as a "free market." Financial intermediaries diversify risk by aggregating loans, but do not systematically violate this constraint. Interest rates at every term are set by this equilibrium, producing a stable yield curve which shifts only with real supply and demand.

The catch is that to convert our present 300-year-old Anglo-American Frankenstein into a healthy, stable financial system, a complete shutdown and reset is required. USG is no more capable of this procedure than I am of jumping to the moon, but we can still talk about it, I hope.

To reset: consolidate all financial securities and their collateral, including real estate, onto the Fed's balance sheet, at the present market price. The Fed buys all stocks, all bonds, all houses, all commercial real-estate, etc. Automated appraisal tools, a la Zillow, can be used for unique assets. If you own a home, your mortgage becomes rent and your equity becomes cash.

The result is a 14- or 15-figure M0 that includes all former financial assets. Corporate debt disappears, because it becomes debt from the Fed to itself. Same with mortgage debt. If it is necessary to buy votes, unsecured personal loans can be forgiven. Otherwise, they are debts to the government - tax liabilities, essentially.

And all the toxic assets cancel, because they were held by banks whose stock is acquired, and owed by homeowners whose home has been acquired. Again, the Fed owes itself nothing.

Outcome: the citizens of America are sitting on a giant buttload of cash. The Fed is sitting on a giant buttload of real assets. A giant auction is held. Eternal Bolshevism is averted, and life returns to normal. Only better, I suspect.

This dollar pool can either be fixed, producing an ultra-hard fiat currency, or mapped to the nation's gold reserve. While the former is economically optimal, the latter has numerous political advantages.

Mapping 10^15 dollars to Fort Knox will produce a much higher gold price than the current value. This is a feature, not a bug. It has the usual effect of currency devaluation, ie, stimulating economic activity. But the stimulus does not become addictive, because the currency is now hard and will stay that way. There is also a Keynesian effect in which gold mining absorbs a large number of now-unemployed workers. While the production of currency does not create goods and services, from a political perspective it never hurts to get disgruntled people off the street. Gold holders also win big, but they win big in the right way: by being right.

And, of course, a hard gold standard is self-enforcing, whereas a fixed money supply is not that hard to un-fix. Given the 20th-century experience with virtual money, I suspect that it may be another century or two before the snake can tempt Eve again. As Mark Twain said, a cat who sits on a hot stove will never sit on a hot stove again - or a cold stove, either.

While Plan M (which I've been proposing for, oh, about the last year and a half) is politically inconceivable, it is an economic no-brainer. At least to me. If you agree, perhaps you should consider what can be done about the political obstacles. America certainly has no shortage of lampposts.

Wednesday, March 18, 2009 23 Comments

The Raven

He seems to like bacon. An
Eat-it-all, a follower
Of lions, wolves, hyenas,
But not averse to peanuts,

He is found in crowds
And pairs, and by himself.
This one will come and beg,
Like a big black bluejay.

Honor is not his forte.
Neither is humility.
He takes and goes angrily,
The sufferer, the activist.

How can I not love him?

Wednesday, March 11, 2009 43 Comments

'Pearl Harbor' (Jeffers)

              I

Here are the fireworks. The men who conspired
            and labored
To embroil this republic in the wreck of Europe have got
            their bargain -
And a bushel more. As for me, what can I do but fly the
            national flag from the top of the tower?
America has neither race nor religion nor its own lan-
            guage: nation or nothing.
                                                            Stare, little tower,
Confidently across the Pacific, the flag on your head. I
            built you at the other war's end,
And the sick peace; I based you on living rock, granite
            on granite; I said, "Look, you gray stones:
Civilization is sick; stand awhile and be quiet and drink
            the sea-wind, you will survive
Civilization."
                       But now I am old, and O stones be modest.
            Look, little tower:
This dust blowing is only the British Empire; these torn
            leaves flying
Are only Europe; the wind is the plane-propellers;
            the smoke is Tokyo. The child with the butchered
            throat
Was too young to be named. Look no further ahead.

              II

The war that we have carefully for years provoked
Catches us unprepared, amazed and indignant. Our war-
            ships are shot
Like sitting ducks and our planes like nest-birds, both our
            coasts ridiculously panicked,
And our leaders make orations. This is the people
That hopes to impose on the whole planetary world
An American peace.
                                      (Oh, we'll not lose our war: my
            money on amazed Gulliver
And his horse-pistols.)
                                           Meanwhile our prudent officers
Have cleared the coast-long ocean of ships and fishing-
            craft, the sky of planes, the windows of light:
            these clearings
Make a great beauty. Watch the wide sea; there is noth-
            ing human; its gulls have it. Watch the wide sky
All day clean of machines; only at dawn and dusk one
            military hawk passes
High on patrol. Walk at night in the black-out,
The firefly lights that used to line the long shore
Are all struck dumb; shut are the shops, mouse-dark the
            houses. Here the prehuman dignity of night
Stands, as it was before and will be again. O beautiful
Darkness and silence, the two eyes that see God; great
            staring eyes.


--- Robinson Jeffers (published 1948)

Monday, March 9, 2009 12 Comments

From 'Nineteen Hundred and Nineteen' (Yeats)

Many ingenious lovely things are gone
That seemed sheer miracle to the multitude,
Protected from the circle of the moon
That pitches common things about. There stood
Amid the ornamental bronze and stone
An ancient image made of olive wood -
And gone are Phidias' famous ivories
And all the golden grasshoppers and bees.

We too had many pretty toys when young;
A law indifferent to blame or praise,
To bribe or threat; habits that made old wrong
Melt down, as it were wax in the sun's rays;
Public opinion ripening for so long
We thought it would outlive all future days.
O what fine thought we had because we thought
That the worst rogues and rascals had died out.

All teeth were drawn, all ancient tricks unlearned,
And a great army but a showy thing;
What matter that no cannon had been turned
Into a ploughshare? Parliament and king
Thought that unless a little powder burned
The trumpeters might burst with trumpeting
And yet it lack all glory; and perchance
The guardsmen's drowsy chargers would not prance.

Now days are dragon-ridden, the nightmare
Rides upon sleep: a drunken soldiery
Can leave the mother, murdered at her door,
To crawl in her own blood, and go scot-free;
The night can sweat with terror as before
We pieced our thoughts into philosophy,
And planned to bring the world under a rule,
Who are but weasels fighting in a hole.

He who can read the signs nor sink unmanned
Into the half-deceit of some intoxicant
From shallow wits; who knows no work can stand,
Whether health, wealth or peace of mind were spent
On master-work of intellect or hand,
No honour leave its mighty monument,
Has but one comfort left: all triumph would
But break upon his ghostly solitude.

But is there any comfort to be found?
Man is in love and loves what vanishes,
What more is there to say? That country round
None dared admit, if such a thought were his,
Incendiary or bigot could be found
To burn that stump on the Acropolis,
Or break in bits the famous ivories
Or traffic in the grasshoppers or bees.


--- William Butler Yeats (1922)

Thursday, March 5, 2009 74 Comments

A gentle introduction to Unqualified Reservations (part 7)

It occurs to me that the previous chapter may have fallen a bit short of its surgical purpose.

I mean, I did promise to relieve your skull of democracy's mendacious and infinitely self-serving history of itself. That ancient, poisoned puffball, its mycelia deep in your medulla. Yet here you still are, still believing in basically all of it. So what gives?

Patience, that's all. Obviously you have that. Or you wouldn't be here at UR. Why stop now?

In last week's episode, we explained the important part of modern history: the part about the winners. Ie, how we got from a few well-meaning Mugwumps to Kafka's castle in glass and concrete, the vast, sclerotic and depressing Modern Structure.

This week and next we're going to focus on the exciting part of the story. This is the story of the losers - the Neanderthals, as it were, who lost out to the Modern Structure and its lusty hominid forebears. Ie, to the great democratic movement for freedom, justice and democracy.

The Neanderthal experience is an exciting one for many reasons. It evokes strong emotions in those who have received the full democratic programming, which is pretty much all of us. Some of the Neanderthal characters are surprisingly sympathetic, but fated of course to lose, lending a certain Shakespearean attraction to their story. And last but not least, the struggle between moderns and archaics was generally settled by the most exciting phenomenon in hominid ethology - war.

It is important for us to remember, however, that there are no more Neanderthals. Hitler is not going to crawl out from under your bed and bite off your toes. Jefferson Davis, even if he weren't dead, would not have much chance for the Republican nomination in 2012. And not even old Kaiser Bill so much as rattles a bone in his Dutch grave - though an especially delicate geophone might just pick up his feelings about the American mulatto, Barack Obama, who spoke so eloquently before his father's Victory Column.

In history, it is the winners who matter. The losers, no matter how good or evil they were, cannot count. They lost, and ceased to exist. There is no existing institution, culture, or doctrine which is descended from the Gestapo, the Confederate Army, or the Austro-Hungarian Navy. The same cannot be said for the OSS, the Union Army, or (barely) the British Navy.

Therefore, the nature of the latter set is a practical question; the nature of the former set is not. The only practical reason to understand the Confederacy is that, to understand the Union, we may need to understand the Confederacy. Our moral judgment of the Confederacy is relevant only inasmuch as it confirms or challenges the Union's moral judgment.

And when we condemn the Gestapo, we are not striking at the legitimacy of any existing institution. And when we praise the Gestapo (should we choose to praise the Gestapo), we are not promoting the legitimacy of any existing institution. And therefore, as students of history, we feel free to say whatever we want about the Gestapo - as long as it is true, of course.

(It is an interesting fact about UR that, while I receive a fair amount of email which is almost uniformly of an extremely high quality and will all be answered some day, I have never received a single hostile communication. I sometimes feel like going to the SPLC and reporting myself. But not quite. Anyway - thank you, dear readers, and please help keep this record intact.)

So: clearly, our study of the anti-democratic Neanderthals revolves around three major wars. Together, we can call them the Three Modern Wars. To prevent any stray tentacles of mycelium from entering the surgical cavity, let's assign each a neutral name: the War of Secession, the First German War, the Second German War. No prizes for matching these events to their democratic doppelgangers.

Our focus today is the War of Secession (1861-65). But let's not zoom in on it just yet. What's interesting about the Modern Wars is that they share a number of common features. These resemblances might of course be coincidental, but then again they might not. If we list them first, we can look for them in the War of Secession - which, fortuitously, is not only the first but also the easiest to understand.

Feature A: in each Modern War, we see an archaic side (anti-democratic, right-wing, reactionary, etc) and a modern side (democratic, left-wing, revolutionary, etc). It is easy to see which is which: the Confederacy, Wilhelmine Germany, and Nazi Germany are archaic.

Feature B: in each Modern War, the archaic side initiated military activity by attacking the modern forces. The Confederates shelled Fort Sumter, the Kaiser invaded Belgium, Hitler invaded Poland and the Japanese bombed Hawaii, etc, etc. This might of course be a mere military coincidence, but I don't think it is.

Feature C: In each Modern War, the archaic side was substantially weaker on paper than the modern. The Union was substantially more populous and industrially productive than the Confederacy, the Triple Entente than the Triple Alliance, the Allies than the Axis.

Feature D: In each Modern War, the modern side defeated the archaic, and imposed its own terms of surrender without negotiation. The defeated political structures were thoroughly liquidated, and replaced by new structures of the victor's design.

The conjunction of B, C and D is especially intriguing. If the archaics always look like they will lose the war, and indeed always do lose the war, why do they always start the war?

The obvious theory is that they're so evil, they just can't help it. Perhaps this works for you, and perhaps it always will. But we will suggest another solution to this mystery.

And there is also a Feature E, which demands slightly more explanation.

You may or may not be familiar with Moldbug's Universal Peace Plan. Now, your usual, common or run-of-the-mill peace plan is a special-purpose plan. It is designed, by expert experts, to produce a peaceful outcome for a single conflict. Palestine, say, or Northern Ireland, or Sri Lanka. You could have the perfect peace plan for Sri Lanka, and apply it to the Gaza Strip, and the result would just be absolute chaos.

The UPP is different. It's a general formula for peace. It stops any war, anywhere, any time. At least, if both sides are willing to accept it. But isn't that true of all peace plans?

To apply the Universal Peace Plan, first ask the question: do both sides maintain effective and undisputed control over at least one town, city, or other civilized urban area? If not, one or both sides is no sovereign at all, but a mere gang of bandits. To restore peace: hang the bandits.

Otherwise, the conflict is a war between two governments. The UPP prescribes the simplest possible settlement. The new boundary between the governments is the present line of military control. Each recognizes the other as a sovereign peer under classical international law. All financial claims from the war are cancelled; all prewar obligations remain. Done.

The great merit of the UPP, aside from its perfection and universal applicability, is that we can see easily whether or not any side in any past or present conflict would accept it, even when we have no record of anyone considering the proposition. Moreover, it is obvious that if both sides would accept the UPP, the war cannot continue.

Therefore, in an ongoing war, there must be one side that would accept the UPP and one that would not. This introduces a useful asymmetry. We can call the side that would not accept the UPP the plaintiff, and the side that would accept it the defendant. [Edit - in the original post, these labels were reversed. Sorry for the confusion!]

Of course, this asymmetry may reverse with the fortunes of war. But to put it in plain English, the plaintiff is the party that wants to continue the war. The defendant is the party that would be happy to let it stop where it is.

This asymmetry does not imply any moral judgment. If the plaintiff has been wronged, he may be perfectly justified in pursuing the war to redress this wrong. His offensive may be preemptive and self-defensive in nature. Etc, etc, etc. Unlike modern international law, classical international law is perfectly comfortable with the notion of a justified offensive war.

All that said, however, perhaps the most common form of warfare throughout history can be described as simple predation. In predation, the predator attacks the prey. The weak are the dinner of the strong. And the predator is generally the plaintiff, for obvious reasons.

So, feature E. For at least most of the duration of the Modern Wars, the modern side is the plaintiff and the archaic side is the defendant.

Eg: the North is trying to subdue the South; the South is trying not to be subdued by the North. Victory for the Confederacy means the survival of the Confederacy. Victory for the Union means the non-survival of the Confederacy. The German Wars are slightly more complex, but through most of both wars, it was the Germans who made peace proposals, their enemies who rejected them.

The combination of features E and C suggests the possibility that predation is the best metaphor with which to explain the Modern Wars. At least, if we did not find E and C, we could exclude predation. We do see E and C; so we must still consider predation.

Therefore, we have two conflicting perspectives with which to examine the Modern Wars. We have the standard modern perspective, which is that the archaics were just evil. And we have this synthetic perspective, a sterile hypothesis for which we have seen no evidence whatsoever - the theory that the modern, democratic side in these wars was in some sense predatory.

Now let's have a look at the War of Secession.

Unless you are not an American at all, but some kind of exotic foreigner - and probably even then - you already have a favorite side in the War of Secession. Probably for most UR readers (nay, hopefully for most UR readers) this is the Union side. All normal people in 2009 know the Union was right. Only weirdos are fans of the Confederates. Of course, only weirdos read UR, but most weirdos do not read UR, and nor should they.

Our goal today is not to change your decision in this matter. While I have trouble seeing how any informed, reasonable person today could be anything but a Loyalist in the matter of the American Rebellion, I feel that any vote in the election of 1860 is reasonably justifiable. Picking sides in this war, in particular, is a matter of moral wisdom and intuitive judgment. These qualities cannot be transmitted over the Internet.

I will state quite confidently, however, that unless you are such a weirdo that like me you have chosen to research the matter for yourself, your opinion on the War of Secession - whether Unionist or Confederate - is not a well-informed one. If you doubt this, I have links for you. Not only is most neo-Unionist history garbage, most neo-Confederate history is garbage as well.

It is easy to understand why Unionist history would be unreliable. Having won the war, this side has no motive for humility. Moreover, 21st-century progressivism has the best of grounds for associating itself with its ancient ancestor, abolitionism.

On the neo-Confederate front, I do have to give some props to Professor DiLorenzo, because one of his anti-Lincoln books was the first non-Unionist history of the war I read. Many, even most, of his facts are correct. However, his libertarian Confederacy is as perfect a fantasy as anything by Howard Zinn. The proposition that the Confederates were, in some sense, acting on the basis of classical-liberal ideology, is not DiLorenzo's invention (it was designed to promote British intervention on the side of the South), but it is no more true in 2009 than it was in 1862. The Confederates were aristocratic conservatives, whose sympathy for free trade was a matter of geography rather than principle. The primary ideological issue of the war was, of course, slavery.

So let's start with slavery. As a faithful devotee of the Modern Structure, 2009, your view of the War of Secession is or at least includes the following judgment: the war was a good thing, because it abolished slavery. The North was good, because it was fighting against slavery. The South was bad, because it was fighting for slavery.

This is a very simple view. And here at UR, we find great virtue in simplicity. But of course, one can be simply wrong as well as simply right.

We will consider the question of slavery - never fear. However, because our emotional associations with the word and concept are so strong, rational thought in its presence is hard. What we need is a conceptual tool which can separate our moral judgment of slavery from our critical assessment of the political acts and actions of the 1850s.

So, for example: if you see someone lying, cheating, and stealing, you are inclined to dislike him. But if he is lying, cheating, and stealing with the goal of freeing the slaves, what shall we make of him? It's a complicated issue. We would like to at least separate the questions, and determine first whether he is lying, cheating, and stealing, without having to think about slaves first.

The name of our tool is temperance. Ie, prohibition of alcohol. For reasons that will be obvious to any UR reader, the temperance and abolition movements were close bedfellows. The match is not perfect, of course, but if we replace slavery with liquor, we have a hot-button issue in the 1850s whose emotional connotations in 2009 are comical at best.

So, for example: when politicians are fighting about whether "slavery shall go into Kansas," just think of them as fighting about whether liquor shall go into Kansas. Is Kansas to be a wet state, or a dry state? Shall Congress decide? Or the settlers in Kansas? Are prohibitionists in Massachusetts organizing to dispatch teetotalers to the territories? Are all the worst sots of Missouri up in arms against them?

With this device at our disposal, we are equipped to ask: disregarding the moral connotations of slavery (which we will consider later), which side in the War of Secession was in the right?

We'll need a precise definition of "in the right." Frederick Maitland once wrote that all systems of law resolve into two commandments: keep your promises, and tell the truth. These will do as well as any others.

We'll add a third: be reasonable. Reliability, honesty, and reasonableness tend to go together. Moreover, we have a remarkable facility for determining the last: hindsight. If one side predicts that the effect of A will be B, another predicts C, and A happens, we have a nice experiment.

Note, unless you have made some special study of the period, the total uselessness of your democratic education in answering the question. See how the righteousness of the crusade against slavery can cover and excuse any conceivable sin. Might it be possible that the same effect was already active in the 1850s? It might indeed be possible.

So let's start our examination of the evidence by considering two quotes from 1856. Our first:
Do you say that such restriction of slavery would be unconstitutional, and that some of the States would not submit to its enforcement? I grant you that an unconstitutional act is not a law; but I do not ask and will not take your construction of the Constitution. The Supreme Court of the United States is the tribunal to decide such a question, and we will submit to its decisions; and if you do also, there will be an end of the matter. Will you? If not, who are the disunionists—you or we? We, the majority, would not strive to dissolve the Union; and if any attempt is made, it must be by you, who so loudly stigmatize us as disunionists.

But the Union, in any event, will not be dissolved. We don't want to dissolve it, and if you attempt it we won't let you. With the purse and sword, the army and navy and treasury, in our hands and at our command, you could not do it. This government would be very weak indeed if a majority with a disciplined army and navy and a well-filled treasury could not preserve itself when attacked by an unarmed, undisciplined, unorganized minority. All this talk about the dissolution of the Union is humbug, nothing but folly. We do not want to dissolve the Union; you shall not.
Our second:
Perfect liberty of association for political objects and the widest scope of discussion are the received and ordinary conditions of government in our country. Our institutions, framed in the spirit of confidence in the intelligence and integrity of the people, do not forbid citizens, either individually or associated together, to attack by writing, speech, or any other methods short of physical force the Constitution and the very existence of the Union. Under the shelter of this great liberty, and protected by the laws and usages of the Government they assail, associations have been formed in some of the States of individuals who, pretending to seek only to prevent the spread of slavery into the present or future inchoate States of the Union, are really inflamed with desire to change the domestic institutions of existing States. To accomplish their objects they dedicate themselves to the odious task of depreciating the government organization which stands in their way and of calumniating with indiscriminate invective not only the citizens of particular States with whose laws they find fault, but all others of their fellow-citizens throughout the country who do not participate with them in their assaults upon the Constitution, framed and adopted by our fathers, and claiming for the privileges it has secured and the blessings it has conferred the steady support and grateful reverence of their children. They seek an object which they well know to be a revolutionary one. They are perfectly aware that the change in the relative condition of the white and black races in the slaveholding States which they would promote is beyond their lawful authority; that to them it is a foreign object; that it can not be effected by any peaceful instrumentality of theirs; that for them and the States of which they are citizens the only path to its accomplishment is through burning cities, and ravaged fields, and slaughtered populations, and all there is most terrible in foreign complicated with civil and servile war; and that the first step in the attempt is the forcible disruption of a country embracing in its broad bosom a degree of liberty and an amount of individual and public prosperity to which there is no parallel in history, and substituting in its place hostile governments, driven at once and inevitably into mutual devastation and fratricidal carnage, transforming the now peaceful and felicitous brotherhood into a vast permanent camp of armed men like the rival monarchies of Europe and Asia.
The first quote: Abraham Lincoln, August 1, 1856. The favorite president of the democratic historian. The second quote: Franklin Pierce, December 2, 1856. Not the favorite president of the democratic historian.

Pierce's last State of the Union address, at the link above, is an excellent introduction to the crisis from a perspective you have probably never seen before. Read the whole thing. Beveridge - of whom more shortly - has this to say about Pierce's state of mind at the time:
Pierce was leaving public life forever; there was not even the possibility of a hope that he could be President again; at the Cincinnati Convention the South had left him for Douglas; he was going back to his New Hampshire home and that State had become almost as fierce against slavery and the South. If any man ever was free from political influence, Franklin Pierce was unbound and untrammelled when he wrote his last annual message to Congress.
Pierce makes exactly one error in his dark prophecy. By "servile war," he refers to the common expectation that any North-South conflict will include some sort of a slave revolt. The slaves in fact remained loyal, an outcome which only the most diehard Southern partisans predicted.

Note that the Lincoln quote contains a broken promise as well as a flagrantly incorrect prediction. Lincoln is referring to the impending Dred Scott decision. Republican submission to the Supreme Court on this outcome was not, in fact, conspicuous. To say the least.

(Also notable is Lincoln's denial of the charge that he is a disunionist; this is a strawman. No reasonable person would have made this charge about Lincoln himself, who was always an anti-slavery man but never an abolitionist. It was the abolitionists, such as Garrison, who advocated Northern secession right up until a more attractive alternative appeared.)

This example is not definitive. But it is characteristic. Let it sit for a minute, and let me try to explain how the War of Secession came about.

At the time of American independence, there was little or no proslavery ideology. American slavery was an accident, an outlier. It was an African institution which had spread to the English colonies via Portugal and Spain. It survived because English property and contract law of the time was so strong that it frowned not at all on contractual servitude. This was easily extended to Negro slaves purchased from the existing Spanish asiento trade, though they had signed no contract of indenture. Slavery existed at first because no one had the power to ban it or to confiscate slaves. Before the American Rebellion it was gradually regularized - in all states, not just the South - by legal recognition of actual fact. It was, in short, an unprincipled exception to the democratic enthusiasms of the 18th century.

So, for example, a Virginian slaveholder like Jefferson could write a prohibition of slavery into the law that established the Northwest Territory, because the issue at the time was not a bone of contention. Statesmen of the early Republic, North and South, generally saw slavery as an artifact of history which was undesirable and fated, somehow, to disappear.

All this changed in the '20s, and still more in the '30s, with the rise of abolitionism. Imported from England and associated, as we would expect, with Quakers, Unitarians, Methodists, etc, etc, abolitionism was the first great cause of the democratic era. Its original exponents, as we would expect, were highly moral and principled intellectuals, such as John Quincy Adams.

There were two basic problems with abolitionism.

One: it could not be seen as anything but an attack on the South, the weaker party, by the North, the stronger party. Once the lines of sectional politics were clear, as Jefferson saw clearly in 1820, the question of whether a new state would allow slavery was the question of which bloc would get its two new Senators.

Two: the North had no legal basis whatsoever for this attack. The idea that the Federal government had the power to end slavery and free the slaves was roughly as foreign to antebellum constitutional law as the proposition that Barack Obama could order Rush Limbaugh hanged at dawn, "just because he's an asshole," is to ours.

It is difficult to find a legal or substantive argument in the Republican political rhetoric of the era that is (a) valid, (b) nontrivial, and (c) sincere. Skipping ahead to the legality of secession, for example, the modern historian David Potter (writing so late as 1977) lists the five most common explanations of it (or, more precisely, of the illegality of coercing a state to remain in the Union), and then remarks, without irony as far as I can tell:
Against the defenders of this doctrine, the defenders of nationalism did not come off as well as they might have, partly because they accepted the assumption that the nature of the Union should be determined by legal means, somewhat as if it were a case in the law of contracts.
Indeed. Pity the poor bastards, who thought that the nature of the Union should be "determined by legal means!" When - as seen previously on UR - the Union was created by anything but legal means. Mob, brickbat and musket return, and claim their inheritance in blood. With interest.

But suffice it to say: in the reactionary atmosphere of 1787, no one at the Constitutional Convention had any idea that they were signing anything but a legal document, "as if it were a case in the law of contracts." Fortunately for the 18th century, romantic nationalism had not been invented quite yet. Of course, to a romantic nationalist, this means nothing at all, and it is perfectly reasonable to argue, as Lincoln did, that "the Union is older than the states," etc, etc.

This situation set the pattern of the resulting cold war. Southern politicians, writers and ministers found the moral defense of slavery in the context of democracy and Christianity a difficult problem, but not at all impossible for the sinuous. But they found the legal defense of slavery no problem at all, because the law was on their side from day one.

Northern politicians, writers and ministers had exactly the opposite problem. While the American mores of 1850 were not quite the same as ours, moral condemnation of slavery came almost as naturally then as it does now. However, said moral condemnation created the urge to actually do something about the problem. For which the North had no legal standing at all.

During the 1840s and 1850s, the antislavery movement spread far beyond the handful of Massachusetts intellectuals who were the original abolitionists. And its features became extremely unattractive. Because it had no legal means to proceed, it resorted to illegal ones. Because the truth was that the North was attacking the South and trying to abolish slavery, its politicians had to assert that the South was attacking the North and trying to propagate slavery. Conspiracy theories abounded - such as Lincoln's completely false charge that the Dred Scott decision was a conspiracy between Douglas, Buchanan, Taney and Pierce to bring about national slavery, as wild a lie as anything in American political history.

As the ideology of antislavery spread West, it passed from those who hated slavery because they loved Negroes as fellow men, to those who hated slavery because they didn't want Negroes around. (Lincoln, with typical dexterity, managed to convince his audiences that he was in both categories.) Thus the free-state Kansas constitution prohibited Negroes free or slave, as did that of Oregon. By 1860, little that is human or humane can be found in the antislavery movement. Its engine runs on pure chimp rage. As Pierce's speech shows, it took no hindsight to detect the growing smell of blood.

Responsible Northern statesmen, typically Democrats or "old line" Whigs, saw where things were going, and with their old Southern Unionist friends did their best to shut the antislavery agitation off. This was generally taken by antislavery men, and by your less scrupulous historians, as complicity with the infamous Slave Power.

So, for example, the authors of the Dred Scott decision had no thought of instituting slavery in Vermont. Their goal was to drive a legal nail into the coffin of the antislavery movement, allowing a country in which the map of slavery had been finally and completely outlined (after Kansas, there were no remaining territorial quarrels) to return to politics as usual. But every attempt of this type was no more than political fuel to the antislavery machine.

Southerners developed the increasingly beleaguered sense of nationalism that terminated in secession. They had two choices, neither good. If they compromised and accepted Northern demands, despite the essential asymmetry of the situation, they gave in to force and fed a crocodile. The next round of agitation would demand more. If Southerners resisted, being the hot-blooded people they were, or even raised the ante, they were conjuring the specter of the Slave Power and contributing to Northern paranoia.

The repeal of the Missouri Compromise in 1854 is a typical event. As Pierce notes, the original compromise of 1820 had been repeatedly abused and violated by the North, most notably in the complete evisceration of the fugitive-slave clause. The Compromise of 1850, regarded by both sides as a last-ditch attempt to prevent Southern secession, had replaced a sensible geographical boundary with the murky Douglasian principle of popular sovereignty. It had not, however, made it clear that this principle was to apply to territories on the Northern side of the 1820 line - such as Kansas and Nebraska - as well as the Mexican territories on the Southern side, such as Utah and New Mexico.

At the time this appeared to work, and the antislavery agitation drained away. But in 1854 Douglas made a fatal mistake: he wanted to organize Kansas and Nebraska as territorial governments, because he wanted to run the transcontinental railroad through them. This was a blow to the South, because the obvious alternative was a Southern rather than central route. As a small payoff to Southern senators, he proposed a bill for the territorial organization that adopted the language already used for Utah and New Mexico.

This was not quite enough for some of the Southern hard-liners. They wanted the Missouri Compromise repealed explicitly, an outcome they took to be (a) only fair, (b) implicit in the Compromise of 1850, and (c) irrelevant in practice, as Kansas and Nebraska were not at all suitable for the slave plantation system. This was not a substantive point for the South, but - like so many other points in the controversy - one of mere honor.

Of course, Southerners took honor quite seriously. It was their general assumption that anyone who failed to defend a trivial point of honor would soon have neither honor nor anything else to defend. And in the vicious political world of 19th-century America, they may well have been right. However, it was foolish of both Douglas and the Southerners to expect even the slightest symbolic concession to be made to the Slave Power, without reigniting the antislavery agitation. And this indeed was the result.

This pattern holds right down to the proximate cause of the war, the Fort Sumter incident, whose story I take from George Lunt's Origin of the Late War (Boston, 1865):
Mr. Campbell, of Alabama, who had resigned his position as one of the justices of the Supreme Court of the United States, when the State in which he resided declared for secession, was the organ of communication, at Washington, between the Department of State and the Confederate commissioners. His account of his negotiation has been before the public, and has not been contradicted upon any known authority. He stated that Mr. Seward authorized him to give assurances to the Southern commissioners that Fort Sumter would be evacuated. This assurance appears to have been repeated, on various occasions, and at length with the statement that the fort would be immediately evacuated. On the seventh of April, Mr. Campbell, having learned, doubtless, that ships-of-war were in motion at New York and elsewhere, and hearing the rumors at Washington, addressed a note, indicating his uneasiness, to the Secretary of State, and received the explicit reply: "Faith as to Sumter fully kept - wait and see." On the twelfth of April, a fleet, consisting of two sloops-of-war, a steam cutter, and three steam transports appeared off Charleston harbor, and remained at anchor in the offing, inactively, during the assault which ensued. It is well known that upon the appearance of this fleet, a message was despatched to Montgomery for orders, to which the reply was, to demand the surrender of the fort, and to reduce it if compliance with the demand were refused. Upon Major Anderson's refusal, the bombardment began.

Whether the appearance of this fleet, under the circumstances, could be considered a pacific or a hostile demonstration, may be left to inference. Whether its total inaction, during the fierce bombardment of the fort and its defence, continued for days, and until its final surrender, justly bears the aspect of an intention to avoid the charge of "aggression," and to give the whole affair the appearance of defence merely, may also be referred to the judgment of the reader. The question also occurs - whether this sudden naval demonstration was not such a palpable violation of the promise - "faith as to Sumter fully kept" - as to be an unmistakable menace of "aggression," if not absolute aggression in itself. For these inquiries are not to be settled upon the basis of the abstract right or duty of the Government to adopt one line of conduct or another, in its own support; but, in reference to the position in which it had placed itself, to the understanding between the parties, and to the whole circumstances of the actual case in hand. It should also be considered that when the fleet came to anchor off Charleston bar, it was well known that many other and larger vessels-of-war, attended by transports containing troops and surf-boats, and all the necessary means of landing forces, had already sailed from Northern ports - "destination unknown" - and that very considerable time must have been requisite to get this expedition ready for sea, during the period that assurances had been so repeatedly given of the evacuation of the fort. It bore the aspect, certainly, of a manoeuvre, which military persons, and sometimes, metaphorically, politicians, denominate "stealing a march." It was generally thought at the North that the attack on Fort Sumter was a desperate, if not a treacherous deed; but it was considered at the South as the repulse of a threatened assault upon Charleston, involving an ostensible breach of faith by a responsible officer and agent of the administration.
I can find very little information on George Lunt, for reasons that should be obvious. (I was linked to Lunt by Carlyle, who mentions him in a footnote in Shooting Niagara.) He was obviously a capable historian, and an old-line Whig of the Daniel Webster school. I'm afraid his verse does not speak to me.

As with Pierce, it must have been clear to Lunt that his words could earn him nothing but ignominy and oblivion. I cannot even fathom the quantity of testicular fortitude required to publish this sort of material in Boston in 1865. Origin of the Late War is simply a wonderful book; it has both judgment and immediacy, detail and passion. I recommend it highly. If you only read one primary source on the War of Secession, this should probably be the one.

We start to see the effective strategy here. It is perhaps not a conscious one in anyone's mind. (For example, it is quite plausible that the mixed messages sent about Sumter were simply a result of disorganization in the early Lincoln administration, although the conclusion that Lincoln, despite his speeches at the time, wanted a war and was happy to get one is unavoidable. It is really difficult to understate Lincoln's sincerity.) Nonetheless, the strategy works quite well.

The approach is one of camouflaged predation. Perhaps it can be summarized as: "kick the dog until he bites, then shoot him." Press your target, using blows that hurt but do not draw blood, until he finally snaps and bites back. Then it's time for the Glock. The resulting execution appears to the casual observer, who misses the kicks or can be persuaded not to see them, as a simple case of justified self-defense - putting down a biting dog.

We have an explanation for feature B, the tendency of the weaker party to attack. It is what an animal trainer would call fear biting. Moreover, the dog that does not fear-bite is liable to be kicked to death. Sovereign rights, when not defended, tend to vanish.

There is an accepted diplomatic term for what Seward and Lincoln, whatever did or did not pass between them, did at Sumter. That term is provocation. A provocation is an act designed, or reasonably expected, to cause the target to initiate hostilities. Provocation is only a useful tactic when the provoker is (a) stronger than the provokee, (b) does not want to be seen as the initiator of the conflict, and (c) knows that the provokee has no alternative but to respond.

For example, if the Confederacy had not fired on Sumter after Seward's provocation, it would have effectively demonstrated its cowardice and pusillanimity to a population, North and South, well-trained to recognize both. It would have become laughable, and soon disappeared - as many in the North were predicting. The decision was fatal, of course, but there was no choice.

And so democracy claims another victim. Did you ever wonder how it took over the world? Here's your answer. Camouflaged predation tends to be popular with the voters, who read it as laudable self-defence, the extermination of vermin, or both. And of course it deceives the enemy as well. Had the South seceded in 1850, even had Virginia voted to secede (as she almost did) in 1861 before Lincoln's inauguration, we would probably have a Southern Confederacy to this day.

For fans of the Confederacy, we must describe the general mistake that brought it down. The Confederates made many errors, of course, as any government of any longevity must; but perhaps the general pattern of their error was that the Confederate nation was conservative, rather than reactionary. Perhaps, in the 19th century, this was avoidable; but it was still fatal.

A conservative is one who, rather than simply rejecting the revolutionary tradition of democracy, finds some effective way to contaminate it with reality, thus producing a weak but somewhat effective simulation of archism out of basically anarchist materials. Conservatism always appears, because it is easy. And it always fails, because it is weak and fraudulent. It is a case of tiling over the linoleum.

The American populist conservatism of the late 20th century, so reminiscent of Disraeli's "Tory democracy," is a fine example. It uses the tools of democracy to appeal to the inchoate urge of the petty-bourgeois or kulak class for law, order, and national power. In the long run, this is a great way to persuade your aristocracy that it needs to smash the bourgeoisie. Not a fortunate result, and not the only way that real power has of resisting this feeble attack, either. But in the short run it can improve things, sort of, for a little while.

The Confederates failed because they failed to realize that they were Cavaliers. Lord only knows what they would have done if they had, but it would have been quite a bit more drastic. This was not quite a realization available to the 19th-century Southern intellectual - not even to the most extreme, such as the fascinating George Fitzhugh, star of what Louis Hartz called the "Reactionary Enlightenment" and author of the amazing and mischievous proslavery tract Cannibals All. Even Fitzhugh was not quite ready to restore the Stuarts, and he was probably more talked about in the North than read in the South. It was just the wrong century for that sort of a thing.

The Confederacy, in particular, failed first and foremost because it seceded way too late. It should have done the deed in 1850 at the latest, and probably earlier. It was not necessary to wait for Abraham Lincoln, John Brown and the Secret Six for the South to know that the North was after its blood. It should have been clear by the 1830s that the marriage with Puritan revolutionary democracy was not a winner.

After that, it failed because it failed to secure British support. Sheldon Vanauken, in his excellent Glittering Illusion, tells the story of this fiasco. The demise of the Confederacy was the demise of the aristocratic tradition in Great Britain, and yet these natural allies could both have survived had Palmerston lifted a finger in the appropriate direction.

The reason he did not, as Vanauken explains, is that the general feeling in Britain was that the Confederacy could not possibly lose - being far more studly than the successful nationalist revolutionaries in Greece and Italy. (Of course, the liberals of Greece and Italy (a) were actually liberal, and (b) actually had the British Navy on their side.)

Thus, the fighting should be kept going as long as possible, to bleed the loathsome Jonathan. Many British aristocrats were quite surprised, and quite disappointed, when the surrender of Richmond did not lead to a protracted guerrilla campaign. Of course, this was not to be expected from a movement which was conservative, rather than revolutionary - not to mention one faced with the utterly (and appropriately, in my judgment) ruthless North. Again, the error is one of building reaction on the ideological foundations of revolution.

But before we get too carried away with the Lost Cause, note: we are still working on the temperance theory. We are describing the Confederacy as if it were a normal country, not one built on the evil of slavery. Surely, different rules apply.

I have been writing as if slavery, as a moral question, was a non-issue (like temperance). Had the gigantic mendacity and ruthless violence of the North been unleashed not against slavery, but alcohol, there are only two ways in which the historian of 2009 might regard the War of Secession. He might see it as the historians of the 1930s saw it, a tragedy at best and a crime at worst. Or he might live in a country bone-dry for a century and a half, and see alcohol the way we see slavery. Error has a way of compounding itself.

But the war was not about alcohol. It was about slavery. To re-examine the war, and not at the same time consider slavery, strikes me as an evasion.

For the reader of 2009, the problem is simple. "Slavery" is a word. The word, by itself, means nothing at all. You associate the word with a phenomenon, a picture, perhaps even a movie, one that perhaps owes something to Harriet Beecher Stowe, maybe even a little to Addio Zio Tom, and certainly a good bit to National Public Radio. Therefore, when you read the writing of Abraham Lincoln or Franklin Pierce, and you see the word "slavery," you see this picture.

And where, exactly, did this picture come from? Certainly not from anything you saw with your own eyes. No. We know where these pictures come from. It is not reality. I mean: you know Uncle Tom's Cabin is a propaganda novel. Do you get your views on Jews from Jud Süß? If not, why not? Like, duh, man.

The only remedy is more primary sources. Let me recommend two. One is the Rev. Richard Bickell's West Indies As They Are, written in 1824 about Jamaica. (Note that slavery in Jamaica in 1824 is almost certainly worse than slavery anywhere in the US in 1854.) As Bickell explains:
At the present time, when the humane and religious of all classes and sects in the United Kingdoms, seem deeply impressed with the evils, and are anxious to alleviate the hardships of Slavery in our West Indian colonies; some remarks on the real state of that Slavery, with the effects it produces on the different classes of the inhabitants, by one who has been an eye-witness, and has had abundant opportunities of making himself acquainted with the subject on which he writes, may not be unacceptable to the public ; more especially, as there has been a great conflict of opinions between those on the different sides of the question; the colonists and their abettors asserting that the Slaves are better off than the labourers in England; whilst the abolitionists, the friends of the Slaves in this country, on the other hand, have been misinformed as to some of the evils of Slavery, and have represented to the world, by their writings, the condition of the Negroes as being rather worse than it really is. The truth, most likely, lies between the statements of these two parties, for the colonists may very justly be suspected of being too much interested to give an impartial statement of their own affairs, being prejudiced by birth, or long residence, and by their contempt for the Negro race; whilst some of their opponents may have suffered themselves to be carried away by the overflowings of humanity and a generous sympathy for the oppressed, without a due consideration for vested rights; or may have been misled by the interested statements of disappointed men; or through an opposite interest, some of them may have been, in some measure, influenced by the spirit of party.
Indeed. (And note also that the Rev. Bickell sheds fresh light on the mystery of the Mustiphino.)

My other favorite primary source on slavery is the Rev. Nehemiah Adams' South-Side View of Slavery (1854), by a Unitarian minister from Boston who observed the peculiar institution in its native habitat. The Rev. Adams is also a fellow of weird honesty:
Very early in my visit at the south, agreeable impressions were made upon me, which soon began to be interspersed with impressions of a different kind in looking at slavery. The reader will bear this in mind, and not suppose, at any one point in the narrative, that I am giving results not to be qualified by subsequent statements. The feelings awakened by each new disclosure or train of reflection are stated without waiting for any thing which may follow.

Just before leaving home, several things had prepared me to feel a special interest in going to the south.

The last thing which I did out of doors before leaving Boston was, to sign the remonstrance of the New England clergymen against the extension of slavery into the contemplated territories of Nebraska and Kansas. I had assisted in framing that remonstrance.

The last thing which I happened to do late at night before I began my journey was, to provide something for a freed slave on his way to Liberia, who was endeavoring to raise several thousand dollars to redeem his wife and children from bondage. My conversations relating to this slave and his family had filled me with new but by no means strange distress, and the thought of looking slavery in the face, of seeing the things which had so frequently disturbed my self-possession, was by no means pleasant. To the anticipation of all the afflictive sights which I should behold there was added the old despair of seeing any way of relieving this fearful evil, while the unavailing desire to find it, excited by the actual sight of wrongs and woe, I feared would make my residence at the south painful.
[...]
In the growth of the human mind, fancy takes the lead of observation, and-through life it is always running ahead of it. Who has not been greatly amused, sometimes provoked, and sometimes, perhaps, been made an object of mirth, at the preconceived notions which he had formed of an individual, or place, or coming event Who has not sometimes prudently kept his fancies to himself? Taking four hundred ministers of my denomination in Massachusetts, and knowing how we all converse, and preach, and pray about slavery, and noticing since my return from the south the questions which are put, and the remarks which are made upon the answers, it will be safe to assert that on going south I had at least the average amount of information and ignorance with regard to the subject. Some may affect to wonder even at the little which has now been disclosed of my secret fancies. I should have done the same in the case of another; for the credulity or simplicity of a friend, when expressed or exposed, generally raises self-satisfied feelings in the most of us. Our southern friends, on first witnessing our snow storms, sleigh rides, and the gathering of our ice crops, are full as simple as we are in a first visit among them. We "suffer fools gladly, seeing" that we ourselves "are wise."
Perhaps Adams and Lunt occasionally conversed. Their words surely won them few other friends in that time and place. Lest I be accused of substituting my own judgment, I will spare you the actual content. If you care, I'm sure you will read it.

For a general history of American slavery from my favorite period of the craft, try Ulrich Phillips, American Negro Slavery (1918). If you must have a source which is both modern and mainstream, there is always Eugene Genovese, Roll, Jordan, Roll (1976). Neither of these will be mistaken for the work of Mrs. Stowe, and they are generally synoptic with Adams and Bickell. And there are always the Slave Narratives, though it is very difficult to sense the reliability of each individual story.

I should also say something briefly about the theory of slavery. As anyone who has read Aristotle knows, slavery is nanogovernment. If you scale down the relationship of authority between government and subject, you obtain the relationship between master and slave.

This is, in a word, sovereignty. A can claim any percentage of B's labor, and has the right and power to direct, restrict or punish B as A sees fit. Slavery is actually a toned-down imitation of sovereignty, because the master is responsible to a government, whereas a government by definition is responsible to no higher power.

What was slavery like, for the slave? It depended on the quality of your master. What is government like, for the governed? It depends on the quality of your government. In the history of American slavery, it can safely be said that most slaveowners were decent people who treated their slaves reasonably, while a nontrivial percentage were not.

Note also that we are talking about heavy agricultural laborers in an unpleasant climate. When most of us imagine ourselves as slaves, I suspect most of the suffering we imagine is in picking cotton, cutting sugar cane, etc. I wouldn't last a day - would you? Yet we should remember that whatever Lincoln and Grant did for the slaves, it did not involve freeing them from agricultural labor.

It is in fact very difficult to argue that the War of Secession made anyone's life more pleasant, including that of the freed slaves. (Perhaps your best case would be for New York profiteers and Unitarian poets who produced homilies to war.) War destroyed the economy of the South. It brought poverty, disease and death. As Lincoln put it: "root, hog, or die." While material things are not everything, and the psychological impact of freedom was large and usually positive, you will find few slave narratives in which the late 1860s are remembered as days of wine and roses.

So your best bet, as a Union supporter, is probably the argument that the war made a better life for the children, grandchildren, etc, of the slaves it freed. On a moral level, this is slightly metaphysical for me, but I think on a historical level I can buy it. Of course, the war did also kill 600,000 people, but this is a small butcher's bill by the standards of the Modern Wars. Again, it's your choice.

There is one other fact to be mentioned on the subject, however. It comes to us from an essay that is perhaps the best introduction to the art of reconsidering the War of Secession - 'Tis Sixty Years Since (1913), by our good friend Charles Francis Adams, Jr. Note that Adams, besides being the scion of Presidents, commanded a Union brigade in his youth. The whole address is worth reading, but this passage will jump out at anyone:
So far, then, as the institution of slavery is concerned, in its relations to ownership and property in those of the human species, I have seen no reason whatever to revise or in any way to alter the theories and principles I entertained in 1853, and in the maintenance of which I subsequently bore arms between 1861 and 1865. Economically, socially, and from the point of view of abstract political justice, I hold that the institution of slavery, as it existed in this country prior to the year 1865, was in no respect either desirable or justifiable. That it had its good and even its elevating side, so far at least as the African is concerned, I am not here to deny. On the contrary, I see and recognize those features of the institution far more clearly now than I should have said would have been possible in 1853. That the institution in itself, under conditions then existing, tended to the elevation of the less advanced race, I frankly admit I did not then think. On the other hand, that it exercised a most pernicious influence upon those of the more advanced race, and especially upon that large majority of the more advanced race who were not themselves owners of slaves—of that I have become with time ever more and more satisfied. The noticeable feature, however, so far as I individually am concerned, has been the entire change of view as respects certain of the fundamental propositions at the base of our whole American political and social edifice brought about by a more careful and intelligent ethnological study. I refer to the political equality of man, and to that race absorption to which I have alluded—that belief that any foreign element introduced into the American social system and body politic would speedily be absorbed therein, and in a brief space thoroughly assimilated. In this all-important respect I do not hesitate to say we theorists and abstractionists of the North, throughout that long antislavery discussion which ended with the 1861 clash of arms, were thoroughly wrong. In utter disregard of fundamental, scientific facts, we theoretically believed that all men— no matter what might be the color of their skin, or the texture of their hair—were, if placed under exactly similar conditions, in essentials the same. In other words, we indulged in the curious and, as is now admitted, utterly erroneous theory that the African was, so to speak, an Anglo-Saxon, or, if you will, a Yankee "who had never had a chance"—a fellowman who was guilty, as we chose to express it, of a skin not colored like our own. In other words, though carved in ebony, he also was in the image of God.
This can only remind us of the period's most notorious public utterance:
The new constitution has put at rest, forever, all the agitating questions relating to our peculiar institution—African slavery as it exists amongst us—the proper status of the negro in our form of civilization. This was the immediate cause of the late rupture and present revolution. Jefferson in his forecast, had anticipated this, as the "rock upon which the old Union would split." He was right. What was conjecture with him, is now a realized fact. But whether he fully comprehended the great truth upon which that rock stood and stands, may be doubted. The prevailing ideas entertained by him and most of the leading statesmen at the time of the formation of the old constitution, were that the enslavement of the African was in violation of the laws of nature; that it was wrong in principle, socially, morally, and politically. It was an evil they knew not well how to deal with, but the general opinion of the men of that day was that, somehow or other in the order of Providence, the institution would be evanescent and pass away. This idea, though not incorporated in the constitution, was the prevailing idea at that time. The constitution, it is true, secured every essential guarantee to the institution while it should last, and hence no argument can be justly urged against the constitutional guarantees thus secured, because of the common sentiment of the day. Those ideas, however, were fundamentally wrong. They rested upon the assumption of the equality of races. This was an error. It was a sandy foundation, and the government built upon it fell when the "storm came and the wind blew."

Our new government is founded upon exactly the opposite idea; its foundations are laid, its corner- stone rests, upon the great truth that the negro is not equal to the white man; that slavery—subordination to the superior race—is his natural and normal condition. This, our new government, is the first, in the history of the world, based upon this great physical, philosophical, and moral truth. This truth has been slow in the process of its development, like all other truths in the various departments of science. It has been so even amongst us. Many who hear me, perhaps, can recollect well, that this truth was not generally admitted, even within their day. The errors of the past generation still clung to many as late as twenty years ago. Those at the North, who still cling to these errors, with a zeal above knowledge, we justly denominate fanatics. All fanaticism springs from an aberration of the mind—from a defect in reasoning. It is a species of insanity. One of the most striking characteristics of insanity, in many instances, is forming correct conclusions from fancied or erroneous premises; so with the anti-slavery fanatics. Their conclusions are right if their premises were. They assume that the negro is equal, and hence conclude that he is entitled to equal privileges and rights with the white man. If their premises were correct, their conclusions would be logical and just—but their premise being wrong, their whole argument fails. I recollect once of having heard a gentleman from one of the northern States, of great power and ability, announce in the House of Representatives, with imposing effect, that we of the South would be compelled, ultimately, to yield upon this subject of slavery, that it was as impossible to war successfully against a principle in politics, as it was in physics or mechanics. That the principle would ultimately prevail. That we, in maintaining slavery as it exists with us, were warring against a principle, a principle founded in nature, the principle of the equality of men. The reply I made to him was, that upon his own grounds, we should, ultimately, succeed, and that he and his associates, in this crusade against our institutions, would ultimately fail. The truth announced, that it was as impossible to war successfully against a principle in politics as it was in physics and mechanics, I admitted; but told him that it was he, and those acting with him, who were warring against a principle. They were attempting to make things equal which the Creator had made unequal.
James Watson, call your office.

How should those of us who have lost our faith in human neurological uniformity (HNU) react to the War of Secession? Presumably, since we are such smart white, Jewish and/or Asian people, we are smart enough to hold two ideas in our minds at the same time.

Idea one is that Adams and Stephens, as now seems obvious, are right about the facts of the matter. Idea two is that this does not, in any way, constitute proof that hereditary slavery is a good idea. No such proof can be constructed, because the question is moral and aesthetic, not factual or logical.

Your moral judgment of this war is yours alone. Just remember to judge the Union, not the Confederacy, because the Confederacy is a ghost whereas the Union still wants your money.

Finally, please do not take this description of events 150 years ago at my word, in case for some stupid reason you are tempted to. I have scarcely covered a fraction of the period, of course. Please allow me to recommend further reading.

The titanic book that smashed my delusions and forced me to recognize the awful reality of the era was, without a doubt, Albert Beveridge's unfinished Abraham Lincoln (1928). Here is a review by a modern historian, with whose few negative comments I would quarrel if it mattered. Beveridge died before completing his third volume, which would have started in 1858, but it scarcely matters. If time is short, you can just read the second volume. Also excellent, and even more brutal, is Edgar Lee Masters' Lincoln the Man (1931).

Almost all Lincoln biographies are completely worthless. They explain Lincoln as a saint, rather than the extraordinarily talented politician he was. Their method is as follows: tell us what Lincoln said, assume that he was saying what he was thinking, then praise this noble thought. When Lincoln emits "darky" jokes or other crass noises, this can be put down to necessary political opportunism, in which he had to engage if he was to fulfill his Father's mission. (Note that the same method, with the same results, can be used for Barack Obama.)

Masters and Beveridge put Lincoln in his political context, and they explain his speeches as what they were: not thoughts but actions, with intended results. Masters was America's leading poet and Beveridge a major senator, and neither of them have any patience with the "great man" act. Their books are hard to find, unfortunately, but there's always interlibrary loan.

It is also quite worthwhile to go in the opposite direction, and read antislavery propaganda. Actual propaganda from the actual 1850s (or, worse, the war) is simply unreadable, but I have found two later reminiscences of the good old activist life: James Freeman Clarke's breathless Anti-Slavery Days (1884), and John F. Hume's slightly more tolerable The Abolitionists (1905). Either of these will set any veteran of 21st-century freshman orientation gasping with pure deja vu. These people simply never, ever change. This is our misfortune, but their weakness.

Once you're done with this, why not read some Confederates? As an overall history of the entire period including Reconstruction, one simply can't beat the simple but powerful narrative of Hilary Herbert, The Abolition Crusade and its Consequences (1912), complete with an introduction by James Ford Rhodes. Other 20th-century historians worth reading: James G. Randall, Avery Craven, John Burgess, and (for those who like girls) Mary Scrugham.

For summer beach reading, there is nothing at all better than Admiral Semmes' Memoirs of Service Afloat, which aside from being a wonderfully written naval yarn is full of contemptuous humor and presents the true depth of Confederate legalism. If you feel the need to counter this with some Unionists, the memoirs of Grant and Sherman are not hard to find, and both are masterpieces.

And last but not least, do consider R.L. Dabney's Defence of Virginia (1867) - idiosyncratic and theology-packed. Stonewall Jackson was a notoriously religious man. Dabney was his minister. 'Nuff said. If you live in 2009 and can read, understand, and perhaps even respect R.L. Dabney, there can be no further doubt of the matter: you have an open mind.