BSJY dot ORG

The Keynesians led vocally today by New York Times columnist Paul Krugman argue that the failure of President Obama’s stimulus to produce sharp increases in Gross Domestic Product was the result of too little government spending rather than too much. They rely on Keynes’ mechanical approach to macroeconomics: the famous P = C + I + G + X formula. According to the formula, the lack of growth in P despite the dramatic increase in G must be the result of too much retrenchment on the part of C (the Consumer) and I (net Investment, or business activity).

The Keynesians think of us the way Charles Shultz drew Charlie Brown and Lucy with the football: always running up for another kick even though she pulls it away. We laugh at pathetic Charlie because we know human beings learn from the past, albeit imperfectly. In contrast to the Keynesians, the idea of rational expectations put forward by Robert Lucas of the University of Chicago offers an explanation for the failure of this round of Keynesian stimulus: we have seen it before and we know there must be increases in taxes to pay for all this spending. Unlike Charlie Brown, we are not running forward to kick the football because we know Lucy will pull it away before we get a chance to swing our foot at it.

The Chicago School is famously the home of Milton Friedman, who offered the theoretical framework we call Monetarism. Friedman suggested that the main role for macroeconomics should be to maintain a steady rate of monetary growth. In this approach, he struck a middle ground between the Keynesians and the Austrians. Like the Keynesians, he accepted the framework of aggregates and equations that undergird the concept of macroeconomics. Like the Austrians, he accepted the limits of collectivist policymaking. The principal benefit of a steady state of monetary growth is that it offers a stable and predictable environment for business planning and investment. It presumes rational economic actors will in the main make rational economic decisions with the happy result that capital gets rationally rationed. It presumes intelligence where Keynes was left relying on “animal spirits.”

The Chicagoans’ monetary growth targeting ran into problems as the definition of “money” proved more dynamic than they anticipated, and we had a flood of “money” that was really credit somehow accorded the legal protections extended previously only to money. The money/credit supply increased under Monetarism, albeit surreptitiously, with the result expected by the Austrian business cycle theory: too much money distorted the investment/saving equilibrium such that a wave of malinvestment led to a boom and the inevitable bust.

Today’s economic rationalists operate with skepticism about government policymakers, and the rising price of commodities that cannot be explained by increased demand from emerging nations is the canary in the coal mine of monetary growth. Rational economic actors know we cannot create money from nothing but so long. While they wait for the other shoe to drop, the global economy stagnates. Lucy waits with the football in place, but Charlie Brown is willing to wait longer.

What would Job look like if he were moved from his ancient times to our modern time? Would he not be a successful businessman, the kind of man who serves on the finance council at his church or synagogue? The successful businessman with three healthy, well-adjusted children and a beautiful wife with kind eyes and a warm smile? Modern Job saved while he built his business, he moved into the distinguished neighborhoods. He had nice cars but never bought the red convertible in middle age. There was never a breath of scandal about him. Job would be the man in the pictures in the neighborhood newspaper covering local fundraisers for charity. Job reaped the rewards of living the good life that comes from hard work and moral rectitude.

How hard it was for Job, and is for us today, to accept God’s providence. Our modern Job would look on his earthly record and conclude he had done everything the right way. He would not be wrong, would he? Indeed, he had done it all the way God asked. Almost all, that is. God asked him to live that prudent and sober life full of joy in the knowledge of God’s dominion and provision. What trapped ancient Job traps modern Job: the sense that the fruits were the result of man’s labors. In truth, everything Job had was gifted to him by God to be enjoyed by Job and shared with God’s other children in full and public display of their ultimate source. Job believed he earned his own material well-being. Worse, he believed he established his own righteousness. Even when all his material wealth — and then his family and health — were lost, Job gripped tightly to his sense that he was righteous by his own merit.

Job’s peace is our peace. When we come to accept that everything is because it is God’s will, we take the first steps toward seeing the world clearly. When we come to accept that every situation is an opportunity to serve God irrespective of how we came to be in that situation, we take the first steps toward closely following God. When we come to see that lasting joy and peace are the gifts we receive from abiding in Him, we take the first steps toward loving him with all our hearts. We can take these steps each and every day. Day by day, we can see Him more clearly, follow Him more nearly, love Him more dearly. We can do this rich or poor, healthy or sick, surrounded by family or all alone.

From a book by the same title written in 1911 by Henry Osborn Taylor:

Nevertheless, the Latin Christianity of the Fathers and the antique fund of sentiment and knowledge, through their self-conserving strength, affected men in constant ways. Under their action the peoples of western Europe, from the eighth to the thirteenth century, passed through a homogeneous growth, and evolved a spirit different from that of any other period of history – a spirit which stood in awe before its monitors divine and human, and deemed that knowledge was to be drawn from the storehouse of the past; which seemed to rely on everything except its sin-crushed self, and trusted everything except its senses; which in the actual looked for the ideal, in the concrete saw the symbol, in the earthly Church beheld the heavenly, and in the fleshly joys discerned the devil’s lures; which lived in the unreconciled opposition between the lust and vain-glory of earth and the attainment of salvation; which felt life’s terror and its pitifulness, and its eternal hope; around which waved concrete infinitudes, and over which flamed the terror of darkness and the Judgment Day.

After the High Middle Ages, there is another flowering watered by the rediscovery of additional antiquities: that period we call the Renaissance. Whether as consequence of or as cooperator with the Renaissance, the Church fractures and a new age is born. As Latin Christianity loses its hold on the minds of the elites, a new spirit rises. The new spirit, the Modern Spirit, is in many ways the antithesis of the Mediaeval Mind: it no longer stands in awe of any external power, either divine or human, but deconstructs both; it sees no sin in itself; it revels in its senses, trusting feelings much more than logic despite adoption of appellations like Empiricism and Objectivism; it strips from the Church whatever is not earthly, worships the flesh and promotes lust and vain-glory and finally denies the reality of a Judgment Day.

Here in the first part of the 21st century, we see what a few hundred years without the Mediaeval mind can do. Civilizations die because of corruption. Loss of the knowledge from the storehouse of the past has led Western Civilization to the brink of death, as we no longer believe the Church is authoritative on Reality, nor do we believe we can learn from the Past. Like a drunken old man, we wheeze our way toward death mumbling incoherently the lies only we believe about our greatness.

There is no salvation outside the Church. Nobody dares say that these days, yet we see it is so not only for individuals seeking eternal bliss but also for civilizations seeking strength and renewal. If we love our country and we suppress the church, we prove ourselves to be either fools or liars.

Slightly restated, the Paul positions reflect the traditional small-government tenor of the GOP before it fell in love with big government.

1. We cannot have liberty without respect for property rights, which depend on a steady measure of the value of property, which depends on sound money, which the Fed has destroyed over the past 90 years. Something significant must be done to recover our money and our liberty.
2. We cannot have taxation (and the taking of private property on which taxation is based) without representation and call ourselves heirs to the Founding Fathers of this country. An administrative state in which unelected technocrats make rules with the force of laws and carry guns to enforce those rules is closer to Germany of the 1930s than anything consistent with the U.S. Constitution. Something significant must be done to recover our representative republic and our liberty.
3. We cannot respect the lives of our military men and women if we are sending them into harm’s way without the deliberation prescribed by the Constitution. American blood is too precious to be wasted in non-critical conflagrations in remote parts of the world. The defense forces are primarily for defense, not a police force for the world, and something significant must be done to recover our Constitutional mandate for the military.

These are the views of Tea Party people. While it might be that his father Ron is no longer taken seriously, Senator Rand Paul seems to be able to articulate these themes with an even tone. Liberty rests on limited government, as our country’s founders knew. We need no more of good government types that know how to “do” things; it is time for future government leaders to listen to the Carrie Underwood song and “Undo It.”

As a libertarian evangelical Catholic grandson of a social gospel-ing Episcopalian priest candidate for NYC Assemblyman in the 1920s on the Socialst ticket, I have spent a great deal of time trying to understand how and why smart men like my grandfather could believe all they do believe.

In the case of the second generation, those that came to maturity around the Great War, it is somewhat explained in that the new ideas had hardly been tried. Bold and broad prescriptions for the ills of industrial society found an audience, much as Hope and Change appealed broadly in 2008 to U.S. voters. In the case of the current generation, it is clear that a century’s evidence indicates the prescriptions are not only insufficient to the problem but are in fact injurious to humanity.

Rather than scour the ruling classes of wickedness, leftist programs tried around the globe have institutionalized wicked ruling classes. Those societies most removed from active Christian practice revealed most clearly the depravity potential of a Progressive regime: the atheistic Communist governments of the USSR, China, the National Socialists, and the Khmer Rouge piled up bodies at a horrific rate. De-Christianized Europe and radicalized Muslim governments lagged well behind in total body counts, but in both cases the declaration of noble ends justified overt and subtle means of repression. The leftists of America announced a revolutionary program at the dawn of the 20th century, and it was implemented step by step over the course of 100 years, with only a five year hiatus during the Coolidge Administration. Even under Ronald Reagan the Leviathan grew. Now, already a decade into the 21st century, there is no cover left for the utter ineffectiveness of Progressivism to reach its stated goals of a Kallipolis.

The United States was founded by men who wittingly or not subscribed to the Thomistic/Aristotlean realism of man rather than the soaring Platonist idealism of their French contemporaries. Woodrow Wilson’s and Herbert Croly’s efforts to import a European solution failed because this country is not and never will be Europe. Rather than noble ideals, it is now apparent Progressivism trades in class envy and resentment. These sell in the short term but destroy in the long term. It is a sign of American health that Progressivism is losing its credibility, as Americans reclaim liberty as the founding principle of the country.

Walter Russell Mead’s blog has a post on this subject, from the perspective of the perplexed Progressive

Scott Sumner, writing here in National Review Online, proposes that the Fed focus on targeting Nominal GDP (NGDP) because:

• Deflation is very, very bad (viz. Japan since 1990)
• Government inflation measures (i.e., CPI) are subject to manipulation by government statisticians and difficult to measure accurately
• The fiat money system is here to stay
• Gold-based monetary systems stabilize the price of gold and allow all other prices to fluctuate

Scott is off base for a number of reasons.

He is merely changing the output measure to target. Instead of measuring the difficult-to-measure Consumer Price Index, he proposes we measure the slightly-less-difficult-to-measure Nominal Gross Domestic Product. Both data series are designed by government, modified by government, and measured by government. Scott admits that one flaw in the current targeting approach is that the target measure (inflation rates) is subject to gamesmanship by the government bureaucrats. That is not just one flaw, that is the canary in the coal mine regarding centralized government planning or targeting of anything. The men and women that constitute the government planners and measurers are no better equipped than you and me when it comes to planning and measuring an economy as large and complex as ours. Any error, made because of malfeasance or incompetence, is grossly magnified because everything monetary goes through a single clearing desk: the Federal Reserve Board of Governors. Using outcome data, the Fed claims the ability to target (and the implication is to deliver) specific levels of economic growth in the future. The truth is the Fed does not know the future any better than you know it.

He is not acknowledging the fundamental reality of economics: output comes from increases in input and productivity. We only know the scale of productivity gains when we measure the output against the number of inputs (e.g., laborers). No better than the fellow who skips dinner three nights a week to save money for his invention in the basement that will change the manufacture of widgets forever does the government know which particular activities are heralds of a future increase in productivity. Even in a primitive economy, sources of incredible productivity gains had their origins in “foolish” endeavors. Consider the person who got tired of digging with a stone and started looking for something stronger that could be more easily worked into usable shapes. How he and his family must have been mocked by the community over the generations it took to search for bronze, figure out how to fashion bronze, and then demonstrate the utility of bronze. Central planners are in fact misnomers, they arrive to plan after the fact of individual creativity and productivity has been made evident. They are a drag on growth rather than an enabler of growth.

Scott does not seem to understand the order of economic decision-making. He says about the recent decline in nominal GDP and the debt crisis:

In 2009, the U.S. saw the biggest fall in nominal GDP (NGDP) since 1938. It is thus no surprise that we had a debt crisis: Borrowers almost always have trouble repaying debts when nominal income comes in much lower than was expected when the debts were contracted.

The debt crisis preceded the fall in nominal GDP. The increase in nominal GDP in the years before the debt crisis were in part attributable to the central bank’s efforts to impede the market’s natural function of pricing debt. In a fiat world, the monetary/political decisions made by the central bank and the fiscal/political decisions made by the legislature send signals to market participants about the price of risk, as reflected in interest rates, which help individuals decide whether or not to defer spending of their accumulated savings. When the central bank suppressed interest rates and the government agencies established to promote home ownership accepted low-quality loans into their guaranteed mortgage portfolios, individual investors received two signals for immediate consumption (a large part of nominal or real GDP) and residential construction investment (another large part of GDP). Bit by bit, marginal investors saw through the charade, until a tipping point was reached and the whole house of cards came crashing down. It was only after a year of malinvestment bills coming due that the government central bankers were spurred to act to resolve the “crisis.” Thus we had in late 2008 the spectacle of the Wall Street Secretary of the Treasury down on his knees begging an overmatched Speaker of the House to save the economy. (When the Speaker of the House explains repeatedly that unemployment is the most effective demand multiplier available, it is an act of charity to call her overmatched. To the extent she was selected because of her sex, let us all be reminded that affirmative action has a cost no matter how noble the intent may be.)

Scott moves to the question of the appropriate target for his preferred measure, nominal GDP. He notes Freidrich Hayek, who taught at Scott’s alma mater, U. of Chicago, proposed a target NGDP rate of zero. Hayek, brought up in the Austrian school of economics, knew that printing money was the starting point for boom-and-bust business cycles. The Great Depression was caused by this money printing in the United States after the creation of the Federal Reserve system and the vast expansion of consumer credit that spurred growth beyond a sustainable rate. That the responses to the Great Depression were wrongheaded does not detract from the reality that the source of the Great Depression were malinvestment booms lengthened by the fact that the government could print money longer without repercussions than could individual banks and other private lenders. The Japanese problems of the 1990s were the result of another long period of government-led malinvestment. The wonder of MITI, which was nothing more than mercantilism, paired with the Japanese investor community’s parochial acceptance of the low savings rates offered by the Postal System, created an artificially low interest rate that signalled savers to make over-investments in real estate and through leverage. We have not witnessed a decade and a half of deflation in Japan as much as we have witnessed a decade and a half of unwillingness to write off bad debts. The Japanese government has been propping up weak banks for far too long, all to the detriment of the Japanese economy. To the extent that the US government policy props up weak banks, we are repeating the Japanese “mistake.”

We can never eliminate error from human planning, so we will never eliminate booms and busts. What we can do is reduce the impact by moving the planning down to the lowest level possible and restoring at that lowest level the costs of error. When banks make loans that their loan officers know are unlikely to be repaid in full, they should suffer the consequences of those bad loans. That is not the case today. The old method of enforcing prudence on bankers was the bank run. We had one when Bear Stearns went under, and we should have let the other weak banks fail for their poor decisions. Instead, we propped them up, requiring strong banks to take TARP money to cover up the mistakes made by the weak ones.

Scott’s error is in trusting that central planners can improve economic performance. The gold standard, which he dismisses, is only the best standard because all the other possibilities are worse. Monetary systems have been abused since we had monetary systems: each time the metallic currency was recalled to stamp the new ruler’s face on the coins there was an opportunity to debase the currency, and the kings often took that opportunity. We have Gresham’s Law in economics (“the bad money chases out the good”) because of this tendency. The fiat money system makes debasement easier, which is why we have had such violent and global economic gyrations since the adoption of fiat money systems in the early 1900s. It doesn’t matter which output the fiat money governors use to measure because it is their system that is causing the trouble.

In her review of the 8/28 Event led by TV and radio host Glenn Beck, Ms. Parker made sport of the disease of addiction and its most effective treatment, Alcoholics Anonymous.

Beck’s history of alcoholism and addiction is familiar to any who follow him. He has made no secret of his past and is quick to make fun of himself. As he once said: “You can get rich making fun of me. I know. I’ve made a lot of money making fun of me.”
Self-mockery — and cash — seems to come easily to him.

[ ... ]

For Beck, addiction has been a defining part of his life…. His emotional, public breakdowns are replicated in AA meetings in towns and cities every day.

The full price of her Faustian bargain with the Washington Post/CNN elites is now clear.  To ascend to the TV throne in D.C. from the dregs of middle class South Carolina, Ms. Parker must stoop to a level of mockery heretofore reached only by Keith Olbermann.  It recalls the words of attorney for the Army, Joseph Welch, on June 9, 1954, to Senator McCarthy.

Until this moment, Senator, I think I never really gauged your cruelty or your recklessness. Let us not assassinate this lad further, senator. You have done enough. Have you no sense of decency?

Ms. Parker’s honest answer would have to be, “No.”

^*Ms. Parker’s new middle name comes from the musical, “Damn Yankees,” in which Joe Boyd, a middle-aged real estate agent and fan of the Washington Senators sells his soul to the Devil to become Joe Hardy, a long-ball slugger who helps them catch the Yankees in the pennant race.

May this Holy Week be a time when the hearts of the frightened and the minds of the timid are enlargened to see the redemptive power of forgiveness. May those who lurk in the darkness of agnosticism and atheism break through to the light of truth and love and see that the pain they feel cannot be treated successfully by cynicism because their hearts are restless for their creator’s redeeming love. Love wins in the end, and love’s power comes from its willingness to let others hate. Love wins because it serves while the pusillanimous and cynical sit in judgement. Love wins, and it is calling you to come home.

Years ago a foetal-blogger wrote an introductory paragraph to an English history survey course. Memorize the paragraph, and you have memorized the sequence of English Kings and Queens since 1066.

Wiliam would have said he ruled justly his ever expanding English realm. He had helped establish English rights. He, having eliminated much egregious judicial corruption, created justice where merely a generation gone greed governed. With venality eradicated, good English government emerged.

William – William the Conqueror
would – William Rufus
have Henry I
said – Stephen
he – Henry II
ruled – Richard I
justly – John I
his – Henry III
ever – Edward I
expanding – Edward II
English – Edward III
realm. – Richard II
He – Henry IV
had – Henry V
helped – Henry VI
establish – Edward IV
English – Edward V
rights. – Richard III
He, – Henry VII
having – Henry VIII
eliminated – Edward VI
much – Mary I
egregious – Elizabeth
judicial – James I
corruption, – Charles I
created – Charles II
justice – James II
where – William III
merely – Mary II
a – Anne
generation – George I
gone – George II
greed – George III
governed. – George IV
With – William IV
venality – Victoria
eradicated, – Edward VII
good – George V
English – Edward VIII
government – George VI
emerged – Elizabeth II