By: Ken(neth Louis) Grant
“Now we’re all sons of bitches”
— Kenneth Bainbridge (Test Director, Manhattan Project)
Yeah; I figure I’ll roll with this whole modified byline thing. At least for now.
Meantime, 75 years ago this past Thursday (7/16), Robert Oppenheimer and a team of physicists from the military and academia successfully detonated the world’s first atomic bomb. The location was tower in a forlorn, godforsaken spot in the New Mexico desert. At 5:29 a.m., Oppenheimer pressed the button. The tower vaporized in tremendous explosion. When the dust settled, all that was left was (no lie) fine green glass. Bainbridge uttered his famous phrase. Yes, we were all, from then on, sons of bitches.
And the world was changed forever that day. Less that 3 weeks later, Truman dropped “Little Boy” and “Fat Man”, respectively, on Hiroshima and Nagasaki. Eleven days after that, Japan surrendered to the Allies. And, son-of-a-bitch: World War II was over.
As I’ve written many times, for the next 75 years (1945 – 2020), the West – particularly America – enjoyed an historically unprecedented era of peace and prosperity. Yes, there were problems aplenty. Korea. Vietnam. Watergate. The Energy Crisis. AIDS. 9/11. The Crash. And, of course, that misguided film production of Sgt. Pepper’s Lonely-Hearts Club Band, starring Peter Frampton and the Bee Gees.
But compare this experience to the preceding three generations (1870 –1945). Two World Wars and a Great Depression. The emergence of communist dictatorship in Russia and China. The Spanish Civil War. Other stuff. Or the 75 years before that (1795 – 1870). The American Civil War. The French Reign of Terror. I could go on. Or further back. But must I?
So, I hold it as resolved that virtually all of us within the ranges of these pages have lived in sweet times. And long before this newly emerging interval of (at least on a relative basis) uber buzz kill, I’d wondered if it was sustainable. History would suggest not. History suggests that we’ve been playing with house money for longer than we had a right to expect.
Have our house chips now run out? We don’t know for sure, but it’s a reasonable bet that they have. That we’re in for a much tougher slog from here on in. I’m not saying we are, but man oh man, don’t the air feel heavy in our lungs lately?
And if our fabulous innings in the sun were only meant to span 75 years, if we are indeed re-normalizing the human experience back to its long-standing protocols of folly (which we never lost), disease, disaster and the like, then the ironies of comparison between the end of our golden era and our re-entry into grim, historical reality, are notable The Manhattan Project was the “writ large” manifestation of the tremendous impact of the universe of particles and sub-particles, interacting with one another, in close proximity. Then, as now, they can, and beneath our eyes, wreak unspeakable havoc on the masses. And as it goes with atomic (and subatomic) particles, so it goes with viral cells. In 2020, as in 1945, the core of the destruction cannot be seen by the naked eye. Perhaps it was ever thus, as, to lift a quote from one of my heroes: William Makepeace Thackeray “when sojourning among savages (who are out in force of late), man fears the mosquito more than the lion”.
Kind of has a ring of authenticity to the present day, now, don’t it?
But I reckon we have no choice other than to gather ourselves – perhaps under the titular banner of a New Manhattan Project. And if we do, we may just want to consider starting with Manhattan itself, which (along with the other four boros) is a hot mess at the moment. Worth a try? Well, remember, the original MP ushered in 75 years of conditions, for which, at the moment, we can only pine.
The markets carry on, seemingly untroubled by it all, and this renders me concerned that we lack the conditions needed to jumpstart New Manhattan. Consider, if you will, that the original project emerged as a desperate race against Hitler to develop nuclear weapons. He was close, you know, and does anyone really doubt that: a) he might’ve won; and b) had a) transpired, he would’ve lost even a moment in lobbing his own Fat Boy (Fetter Junge) over New York, London and Moscow?
But so long as the markets carry on as they have, largely untroubled by the declining economic conditions unfolding before us, said urgency is in short supply. And they have. Carried on serenely that is. This past week, the Gallant 500 waltzed briefly into positive territory for the year, before getting winded and settling at a still astonishing -0.19% year-to-date. Its dance partner, the lovely Vixen VIX, met its every step in the opposite direction, with Ginger Rogers aplomb, registering its lowest levels since late February, when everyone thought covid would play out as little more than a pesky but minor annoyance.
And this pair was hardly the most joyous at the ball. Record issuance and credit problems to beat the band notwithstanding, Investment Grade Debt baskets now trade at all-time records, and are annualizing at fat double digits for 2020:
But (of course) all of these hoofers have been forced to yield the floor to Captain Naz, which preens and prances from one record high to the next and is annualizing at 25% in what we might at some point characterize as the investment equivalent to the Grand Ballroom on the Titanic.
And all of it brings to my mind nothing so much as images of a financial particle collider/atom smasher, just being rolled out for testing purposes, like those original MP prototypes developed under the football field at the University of Chicago’s Amos Alonzo Stagg Stadium in the early ‘40s. On one side of the machine, we’ve got decades high unemployment, record debt, no visible way out of the Public Health Crisis for, at best, several months, and (likely) years ahead of economic impairment. On the other, we have, to date, $6 Trillion of stimulus.
Note that the latter is all additional debt of one form or another. Thee $3 Trillion CARES Act is financed by incremental Treasury issuance. The other $3T of Fed Balance Sheet expansion is funded by the creation of new fiat currency, which is nothing more than a promise by our government as to its validity to meet any and all future obligations. If you doubt this, just bust out your wallet and look at the fine print that accompanies the images of those recently criminalized icons of our past: Washington, Lincoln, Hamilton (?), Jackson and Grant. Take a look. It’s there on the left.
So, what I observe is a policy approach under which, to address the increasing fundamental insolvency we face, we just borrow more. And why not? It’s been tried before – not just by governments but also by businesses and individuals. And once in a blue moon, it’s actually worked.
But know this: these mega particles are certain to both expand, and, ultimately, to collide. There will be vaporizations, and maybe even some green glass. And we just don’t know what else, but it will be fascinating to observe in its unfolding. Particularly if, as a nation, we choose this (dubious) moment to correct nearly 2.5 centuries of perceived social injustice, aggressively redistribute our (dwindling) resources and wealth, rewrite our history so as to throw mad shade on our forbearers, limit the words we say and the stories we tell for fear of offending someone, etcetera, etcetera, etcetera.
I want you to know that I recognize my critical role in guiding us through this once-in-a-lifetime change in conditions. I know you are there with me, and this is what gives me strength. Though we are small compared to those stars we gaze up at in the Northern Skies, together, we will be too many for them. We just gotta get through it is all. For better or worse. For richer or poorer. In sickness and in health. Till death do us part.
But we gotta tread lightly, fearing the mosquito more than the lion. As was the case 75 years ago this week, we’re all sons of bitches now. But it’s not like we ever shed this designation. Maybe every 75 years ushers in a new era, and if so, then maybe this one has just begun.
I think there are worse concepts with which to commence than a New Manhattan Project.
And if this notion does take hold, all I ask is that you remember where you first encountered it.
TIMSHEL