Napoléon III versus Trump I

Review of our forecasting performance in 2017, inspired by Émile Zola’s 1871 novel “The Kill”

It’s the time of the year again, when Noah denkt™ looks back on the year gone by to qualify its economic forecasting acumen. This year however this poses somewhat of a problem. Sadly, we have hardly made any economic predictions throughout the year other than maintaining our view that the Trump presidency will ultimately do more damage to the economy than help it. In fact, we have been so turned off by the knee-jerk reaction of the stock market to the rambling goodies delivered by Trump Presidency (tax cuts, government spending, deregulation) that we couldn’t even focus on the economic coverage any more. Instead we have immersed ourselves in studying the analytical expertise of literary luminaries such as Honoré de Balzac or Henry Miller to find some intellectual reprieve from the socio-economic deterioration of which the Trump White House is only a symptom not the cause.  It therefore comes in handy for this year’s year-end review that we are just finishing the reading of Émile Zola’s 1871 novel “The Kill” (“La Curée”). There are such serious similarities in this novel to our present time that we simply cannot resist in including it in our annual evaluation exercise.

“The Kill” which is the second book in Émile Zola’s 20 volume series “Les Rougon-Marquarts” talks about the rise of a Paris financier (Aristide Saccard) during the real estate boom years of the 1860s in Paris. It describes how a self-obsessed Emperor (Napoléon III) flooded the city with capital in the vain attempt to glorify himself with the specter of brilliance and adventurism. It details how subject financial narcissism unleashed the “animal instincts” (Jamie Dimon) in the Parisian financial community and it has us understand how such mindless greed eventually ended in tears once the fundamental strategic miscalculations of the Napoléon reign came to light in the disastrous Franco-Prussian War of 1870/71.

Now, to be frank, Zola’s book is not first and foremost an economic study of the causes that led to the Long Depression in the 1870s. His work is primarily a socio-psychological analysis of the Saccard family and the circles they move in. “The Kill” consequently ends three years before the Napoléon daydream finally comes undone.  At that time, Mr. Saccard’s fortune’s are still by and large intact. And yet the ominous signs of the later breakdown of the entire financial system are already there to see for those who want to see them. The Moroccan Port Company had just failed miserably, the Bank “Crédit mobilier” had crashed and Napoléon III’s 1862 Mexico invasion had ended a year earlier in a shameful and humiliating retread. So by 1867 the Emperor himself is already talking about “some black spots that are darkening the French horizon” (see footnote*). Zola specifically refers to that famous Napoléon III speech of Aug 27, 1867 in his description of the Cotillion dance during the final ballroom spree hosted by Aristide Saccard and his wife Renée (see footnote**).  It is hence fair to say that there are ample allusions in Zola’s work to the fact that the intellectual deficiencies of the Napoléonic leadership will ultimately cause a serious bust in the French society and financial system. Here is the most important reference to that effect:   [For our own English translation of the following excerpt, please see footnote *** ]

“A cette heure, Paris offrait, pour un homme comme Aristide Saccard, le plus intéressant des spectacles. L’Empire venait d’être proclamé, apres ce fameux voyage pendant lequel le prince-président avait réussi à chauffer l’enthousiasme de quelques départements bonapartistes. Le silence s’était fait à la tribune et dans les journaux. La société, sauvée encore une fois, se felicitait, se reposait, faisait la grasse matinée, maintenant qu’un gouvernement fort la protégeait  et lui ôtait jusqu’au souci de penser et de régler ses affaires. La grande préoccupation de la sociéte était de savoir à quels amusements elle allait tuer le temps. Selon l’heureuse expression d’Eugène Rougon, Paris se mettait à table et rêvait gaudriole au dessert. La politique épouvantait, comme une drogue dangereuse. Les esprits lassés se tournait vers les affaires et les plaisirs. Ceux qui possédaient déterraient leur argent, et ceux qui ne possédaient pas cherchaient dans les coins les trésors oubliés. (…) Dans le grand silence de l’ordre, dans la paix aplatie du nouveau règne, montaient toutes sortes de rumeurs aimables, de promesses dorées et volupteuses. (…) L’Empire allait faire de Paris le mauvais lieu de l’Europe. Il fallait à cette poignée d’aventuriers que venaient de voler un trône un règne d’aventures, d’affaires véreuses, de consciences vendus, de femmes achetées, de soûlerie  furieuse et universelle. Et, dans la ville ou le sang de décembre était à peine lavé, grandissait, timide encore, cette folie de jouissance qui devait jeter la patrie au cabanon des nations pourris et déshonorées.

Aristide Saccard, depuis les premiers jours, sentait venir ce flot montant de la speculation, don’t l’écume allait couvrir Paris entire. Il en suivit les progress avec une attention profonde. Il se trouvait au beau milieu de la pluie chaude d’écus tombant dru sur les toits de la cité. (Émile Zola: La Curée, Pocket 1990, ISBN 978-2-266-19802-8, p 82-83)

We are intrigued by this description since subject reality lends itself quite forcefully to comparisons with the current Trump Presidency. It is true that the US society isn’t yet in a state of political apathy. It hasn’t accepted authoritarianism yet and wide sectors of the US electorate are still up in arms (in particular the media) about the unhinged presidency they are being confronted with. The fact however remains that the all-important financial community isn’t participating in this resistance. Quite to the contrary! The stock market in particular is acting as if the specter of an eventual constitutional crisis weren’t looming in the background. Instead it mindlessly rejoices in the fact that liquidity abounds, that taxes are being cut and that governmental spending is projected to be bountiful. Like Aristide Saccard, the Jamie Dimons of New York deem themselves to be just as much in the middle of promising warm rain of money as the Parisian financiers were back in the 60s of the 19th century.

Such lack of foresight and such unrestrained celebration of greed will have to end just as much in tears as it did in the 1871. And the reason for this being the equally self-obsessed leadership of the current Napoléon III in the Washington White House. Now don’t get us wrong. We do believe that massive infrastructure spending in the US is long overdue as is the improvement of the US tax code. However a warm rain of money, the kind of which Trump has in mind, should only be showered onto the domestic markets if it is being managed by a leadership that has a profound, nuanced and level-headed understanding of the world we live in.  After all, we are talking about the all but last full-throttle bullet the government still has at its disposal to project the country onto the path of sustainable growth. Such stern injection of cortisone should hence not be squandered easily. Alas, the Trump cosmos is so full of his own personal needs for gratification that there is little room to even discuss, let alone implement, the much needed social reforms (schools, vocational training etc..) that otherwise should have  accompanied the final bullet money showering which is being fired in the US now.

Noah denkt™ is hence quite skeptical about the sustainability of the economic confidence which is so lavishly being generated in US at this time. But then again, we were wrong about the Klinsmann reforms in German soccer too. So all hope is not lost, even if we cannot see it.

As for Europe the specter is more promising. There are some dark spots there too (overly generous ECB policies, Greece, populist parties make inroads, Brexit etc…) but by and large the European theater is still relatively sane. But how can that possibly save us if the US were indeed to drown itself in its own quagmire?  – Again, let’s hope against all hope.  Have a good and prosperous 2018 and many more years to come.

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Footnote*:   “Des points noirs assombrissent notre horizon”, says Napoléon III in a speech on Aug 27, 1867 (see editorial comments on page 314)

Footnote **:  “Ce sont des “Points Noirs””, he has M. de Saffré say as he leads that Cotillion dance (see page 314)

Footnote *** :  Here is our own English translation of the quote above:

At this hour, Paris offered, for a man like Aristide Saccard, the most interesting spectacle. The Empire had just been proclaimed after this famous voyage during which the Prince-President had succeeded in warming the enthusiasm of some Bonapartist departments. A silence had settled in both in parliament and in the newspapers. Society, saved once more, congratulating itself on the outcome, went into a profound sleep, now that a strong government was protecting it and taking all worries away from it. The only concern left in that society was how it was going to kill time night. According to the happy expression of Eugène Rougon, Paris was sitting at the table and dreaming merrily about dessert. Politics frightened, like a dangerous drug. The weary minds turned to business and pleasure. Those who had it were digging up their money, and those who did not possess were looking in the corners for forgotten treasures. (…) In the great silence of Imperial law and order, in the flattened peace of the new reign, all kinds of kind rumors emerged, golden and voluptuous promises. (…) The Empire was going to make Paris the bad place of Europe. This handful of adventurers who had just stolen a throne needed to install a reign of adventures, of wicked affairs, of consciences sold, of women bought, of furious and universal drunkenness. And in the city where the blood of December was scarcely washed away, grew, at first still timidly, a folly of pleasure which was to throw the country into the shed of rotten and dishonored nations.

Aristide Saccard, from the earliest days, sensed the coming flood of speculation, whose foam was going to cover Paris. He followed the progress with deep attention. He was in the middle of the hot rain of Écus falling thick on the roofs of the city.

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