Spengler on the Tea Parties

[Simple Minded]

http://fora.tv/2010/02/22/Joseph_Stiglitz_Freefall#fullprogram

I think Stiglitz nails it all.

I would have thought that the Commonwealth Club of California would spend most of their time talking about how to financially rape the next generation......

Nobel prize laureate, Columbia graduate........seems like those creds don't impress as many people now as they did two years ago....... or even five days ago.......

If Stiglitz is currently in vogue, I have a pretty good idea of what his ideology is already. Still when I get a chance, I'll listen to some more of it. Stiglitz can't be as clueless as Krugman.....

[ellens]

The item that Stiglitz seemed to take greatest pride in was in getting fired from the World Bank for opposing the economic policies of the "Washington Group" whatever that was. Both parties are responsible for the financial mess we are today, although I would tend to blame the Republicans more because their obsession with deregulation helped to gut out the mechanisms that could have prevented some of the banking calamity. Everybody should see the movie, "Inside Job" to get an idea how little oversight there was over what the major investment banks were doing during the last 20 years. The people employed to provide oversight and regulation, including the credit rating agencies, were all bought off by the major banks, as were the economic advisors to all the presidents, including Obama.

[Michael]

A couple books:

The Roots of Inflation by R. J. Rushdoony

The Roots of Inflation by R.J. Rushdoony, published by Ross House Books, 96 pages (1982). Recently republished as Larceny of the Heart by R.J. Rushdoony, Ross House Books, 144 pages with Index.

I first read this book in 1997. It's a wonderful treatise on the core issue in economics: Thou shalt not covet. It is our lust for our neighbour's goods and lifestyle that leads us to devise schemes whereby we can obtain more today with the promise to pay tomorrow. Since it is, in fact, paying for goods today with money that doesn't yet exist, the cost of the good has been deferred while the relative value of your money has decreased. This is inflation.

Sure, governments create it as they devalue our money supply. But what kind of government would do such a thing? One that we elected. God created every thing out of nothing, and now, in his quest to be as God, man makes money the same way.

The root of inflation is the larceny in our own hearts. We need to stop looking for places to fix the blame. We are the cause of our own economic demise.

Usury, destroyer of nations by S. C. Mooney

Reader Review

This is one of the most thought-provoking books any Christian who takes the Bible seriously as a guide to all of life can read on the subject of interest-taking or usury. Gary North has interacted with this book somewhat and rejects the author's thesis, which I think can be summarized as "interest-taking (i.e., usury) is only to be used as a means of subjugating the borrower, and thus must be rejected by Christians in their dealings with other Christians." I put that in quotation marks but it is NOT a direct quote from the book, which I don't have in my possession at the moment, and my apologies to the author if I have not summarized his thinking fairly, but in any case that's at least close to what his position is. Many Bible-believing Christians take the position that the biblical prohibition is actually only against the taking of interest on CHARITABLE loans, but the taking of interest on business loans is legitimate, even if both parties are Christians. Mooney looks at the Bible and concludes that the Bible in fact denies the legitimacy of charging interest to fellow believers under any circumstances.

(And furthermore he seems to apply this concept to rent, as well, although that aspect is not dealt with extensively in this book.)

In modern society, these are very hard words to hear, and I have really struggled with (or perhaps against) the book's thesis. However, the more I keep coming back to this in my mind, the harder I am finding it to continue rejecting the author's conclusions. A great deal of the argument on both sides comes down to how Jesus' parable of the talents is to be understood. Is that parable affirming the legitimacy of taking interest, or denying it? For a long time I thought that the parable was affirming the legitimacy of taking interest, but after considering the author's arguments, I am inclined to think he is right -- the parable is rejecting the legitimacy of interest-taking. Of course, if one assumes that it all came from one Author, the parable cannot be considered in isolation and needs to be considered together with everything else in the Bible.

(Although it is more or less outside the scope of this book, I am LESS convinced that the same prohibition applies by logical extension to rent. However, at least concerning the charging of interest on money-lending, the author's arguments deserve a serious hearing among all Bible-believing Christians.)

Part of the reason I came around to being more sympathetic to the author's views is my gradual development of appreciation for the fact that in the modern world, MONEY IS DEBT. (Do a Google search on the phrase "Money as Debt" to find a short film by Paul Grignon that explains this in an easy-to-understand manner. That film's proposals for a solution are in error, but its explanation of what is wrong with the modern monetary system is very good.) The world is a closed system, and as all money is created by bankers from debt -- meaning it accrues interest -- the only way to pay off the principal and the interest in entirely is to create more money. But the creation of more money necessarily means the creation of more interest-bearing debt, and the vicious cycle never ends. As time goes by, the insane "logic" of this approach moves inexorably toward the totally absurd conclusion that eventually, ownership of the entire world must be transferred to the bankers. Now the world is a closed system but it is also a very large system -- large and still immature. So it takes a long time (many generations) for these implications to be fully worked out. But worked out they shall be, eventually. So when we see the absurdity and the evil of the ultimate conclusion -- that everyone in the world should be reduced to serfs working on the bankers' plantations, it makes it a lot easier to go back to the biblical text and see why God prohibits usury.

I am still not 100% certain as to whether I want to embrace Mooney's essential thesis, but I am strongly inclined to think he is probably correct. The question then arises, "Is it workable?" I think the answer to that is yes, it can be done. However, if this is what God is commanding at this point, obeying God in this matter would completely transform modern culture into something very different from what it is now. And perhaps that is exactly the point! This is "just one commandment" but it is one that would radically transform the modern world if it was obeyed (assuming, of course, that Mooney is correct). Christians must not shy away from careful consideration of this subject. It would NOT be adequate to obey God on everything else (not that we do so, of course) but then to fail to obey God on this one point. After all, as the Scripture tells us, the law of God is a unified whole and it is not possible to abrogate it at one point without abrogating the whole.

I'm very grateful to the author for this extremely thought-provoking work and I recommend it, and indeed all of his writings relevant to this topic, to Bible-believing Christians and to anyone else who wants to study what the Bible teaches on this subject. At the time of this writing, the book is no longer in print; however, unused copies may still be available and one way to find them may be to go to the various blogs where C.S. Mooney's writings are discussed and inquire with the blog author as to whether he knows where Mooney's books can be obtained.

For what it's worth, I work in the real estate securitization department of one of Japan's largest securities companies. (Believe me, I feel the irony every day.)

A final thought: Biblical "slavery," as opposed to the chattel slavery practiced in the Ante-Bellum South, was more like what we understand as "servitude." The Old Testament slave-holder owned property in the labor of his "slave" but did not own the slave's person. If the borrower is slave or servant to the lender, and if servitude consists of someone else owning property in one's labor, what then is debt except voluntary servitude?

But if the servant declares, ‘I love my master . . and do not want to go free,’ then his master must take him before the judges. He shall take him to the door or the doorpost and pierce his ear with an awl. Then he will be his servant for life.

—from Exodus 21

Even if one used a gold or gold-based currency, fluctuations in the purchasing power of money would be inevitable. In the early 19th century, with an increase in the supply of goods and services, gold appreciated in value. The opening up of the Californian and Australian gold-fields reversed this process.

As regards rent and interest, the essential difference is that "rent issues out of the land" If one acre can produce more than another, for the same cost of production, the difference is rent, in economic terms, and reflects the value at which the land can be let. Likewise, of course, if the situation of the land means lower transport costs to market and so on, or offers other advantages that another piece of land does not. The same applies to a productive chattel, like a plough or a truck.

Where money is "lent," in return for a share of the profits, that is not really "loan" at all (even if the principal is repayable), but partnership and the prohibition on usury was never thought to apply to it. Likewise, where a loan is made out of working capital, on which the lender could have expected to make a return by buying stock-in-trade &c, interest is a compensation for an anticipated loss and was always considered legitimate.

[Marcus]

Even if one used a gold or gold-based currency, fluctuations in the purchasing power of money would be inevitable. In the early 19th century, with an increase in the supply of goods and services, gold appreciated in value. The opening up of the Californian and Australian gold-fields reversed this process.

All valuation is subjective and subject to supply and demand. That is not the point. For something to serve as money in any social order—gold, silver, beaver pelts, salt, etc.—it must be reasonably expected to define or predestine the future as a store of value. In 1965 I bought a brand-new, full-size Chevrolet pickup for $2000. What's the price today? Twenty-five thousand or so? But 2000 silver dollars will still buy a new Chevy pickup.

As regards rent and interest, the essential difference is that "rent issues out of the land" If one acre can produce more than another, for the same cost of production, the difference is rent, in economic terms, and reflects the value at which the land can be let. Likewise, of course, if the situation of the land means lower transport costs to market and so on, or offers other advantages that another piece of land does not. The same applies to a productive chattel, like a plough or a truck.

Where money is "lent," in return for a share of the profits, that is not really "loan" at all (even if the principal is repayable), but partnership and the prohibition on usury was never thought to apply to it. Likewise, where a loan is made out of working capital, on which the lender could have expected to make a return by buying stock-in-trade &c, interest is a compensation for an anticipated loss and was always considered legitimate.

Rent is not usury. Even St. Paul rented a house. This is usury:

Whoever increases wealth by taking interest or profit from the poor amasses it for another, who will be kind to the poor. —Proverbs

If you lend money to one of my people among you who is needy, do not treat it like a business deal; charge no interest. —Proverbs —Exodus

If any of your fellow Israelites become poor and are unable to support themselves among you, help them as you would a foreigner and stranger, so they can continue to live among you. Do not take interest or any profit from them, but fear your God, so that they may continue to live among you. 37 You must not lend them money at interest or sell them food at a profit. —Leviticus

Do not charge a fellow Israelite interest, whether on money or food or anything else that may earn interest. You may charge a foreigner interest, but not a fellow Israelite, so that the LORD your God may bless you in everything you put your hand to in the land you are entering to possess. —Deuternomy

[Simple Minded]

...... Both parties are responsible for the financial mess we are today, although I would tend to blame the Republicans more because their obsession with deregulation helped to gut out the mechanisms that could have prevented some of the banking calamity. Everybody should see the movie, "Inside Job" to get an idea how little oversight there was over what the major investment banks were doing during the last 20 years. The people employed to provide oversight and regulation, including the credit rating agencies, were all bought off by the major banks, as were the economic advisors to all the presidents, including Obama.

Excellent points ellens. In Elliott Wave terms, periods of optimism give rise to risk taking and deregulation, while periods of pessimism give rise to caution and increased regulation. While I wold love to believe one party is morally or intellectually superior to the other, (it would make voting easier), I see precious little difference between the two. Both parties are comprised of humans, both face the same (often perverse) incentives, both are subject to influence by zeitgeist, and elected officals that do not run with the herd are soon displaced.

IMO, the party in power at the time of the dominant social mood, will behave in accordance with that mood.

It is interesting to watch for changes that reverse previous actions, and how the changes may(?) identify the magnitude of the trend. During the bull market of the 1980-1990's, and even the bounce in the early 2000's you could see decisions, legislation, social norms, and human behavior being reversed that had been the established norm for years and even decades.

Buying a house with no money down for example. Can you imagine borrowers or lenders being so reckless 20 or 30 years ago?

Glass-Steagall was passed in 1933, and reversed on 11/12/1999. At that time, the Elliott Wavers pointed out that the reversal of legislation that is 66 years old, and designed to minimize economic risk is a mark of extreme optimism, perhaps even the ringing of the bell that signals the top of the market. Shortly after, the DJIA/gold cost ratio peaked. In other words, the DJIA peaked in terms of real money.

In the last few years there have been many very small indicators, that decades of social norms are reversing. Most of them escape me at the moment. Two that come to mind are Sears was recently open on Thanksgiving for the first time in their 120+ year history. Recently, the interest rate charged by the Bank of England was the lowest in it's 350+(?) year history (I think).

In the last election, several congressional seats changed parties for the first time in decades. When is that last time a member of the Royal Family of England was attacked by a crowd?

As the Elliott Wavers note, it is not a hard science, but an attempt to identify probable behavior. I think if nothing else, it indicates that current times may be more volatile than in the past.

[Michael]

Even if one used a gold or gold-based currency, fluctuations in the purchasing power of money would be inevitable. In the early 19th century, with an increase in the supply of goods and services, gold appreciated in value. The opening up of the Californian and Australian gold-fields reversed this process.

All valuation is subjective and subject to supply and demand. That is not the point. For something to serve as money in any social order—gold, silver, beaver pelts, salt, etc.—it must be reasonably expected to define or predestine the future as a store of value. In 1965 I bought a brand-new, full-size Chevrolet pickup for $2000. What's the price today? Twenty-five thousand or so? But 2000 silver dollars will still buy a new Chevy pickup.

As regards rent and interest, the essential difference is that "rent issues out of the land" If one acre can produce more than another, for the same cost of production, the difference is rent, in economic terms, and reflects the value at which the land can be let. Likewise, of course, if the situation of the land means lower transport costs to market and so on, or offers other advantages that another piece of land does not. The same applies to a productive chattel, like a plough or a truck.

Where money is "lent," in return for a share of the profits, that is not really "loan" at all (even if the principal is repayable), but partnership and the prohibition on usury was never thought to apply to it. Likewise, where a loan is made out of working capital, on which the lender could have expected to make a return by buying stock-in-trade &c, interest is a compensation for an anticipated loss and was always considered legitimate.

Rent is not usury. Even St. Paul rented a house. This is usury:

Whoever increases wealth by taking interest or profit from the poor amasses it for another, who will be kind to the poor. —Proverbs

If you lend money to one of my people among you who is needy, do not treat it like a business deal; charge no interest. —Proverbs —Exodus

If any of your fellow Israelites become poor and are unable to support themselves among you, help them as you would a foreigner and stranger, so they can continue to live among you. Do not take interest or any profit from them, but fear your God, so that they may continue to live among you. 37 You must not lend them money at interest or sell them food at a profit. —Leviticus

Do not charge a fellow Israelite interest, whether on money or food or anything else that may earn interest. You may charge a foreigner interest, but not a fellow Israelite, so that the LORD your God may bless you in everything you put your hand to in the land you are entering to possess. —Deuternomy

Governments have always manipulated the currency and, usually, by depreciating it, either by debasing the coinage, or by forcing the acceptance of fiat money as legal tender.

I agree with what you say about usury, but, over the centuries, it has been a favourite topic for moral theologians, as well as economists, with much debating over borderline cases.