Ludwig von Mises had a similar view of economics:
Whether we like it or not, it is a fact that economics cannot remain an esoteric branch of knowledge accessible only to small groups of scholars and specialists. Economics deals with society's fundamental problems; it concerns everyone and belongs to all. It is the main and proper study of every citizen. - Human ActionI don't know about "main and proper"; but it certainly is important.
In a way, the Westminster Larger Catechism expresses a similar sentiment in its discussion of the 8th Commandment (beginning at Question 140):
Question 140: Which is the eighth commandment?Elements of the duties required and the sins forbidden by the commandment really do require some knowledge of economics. One is to "study to get, keep, use, and dispose these things which are necessary and convenient" for sustenance. One should also engage in a "lawful" calling, and be diligent in it. Additionally one should be frugal, avoid unnecessary lawsuits.
Answer: The eighth commandment is, Thou shalt not steal.
Question 141: What are the duties required in the eighth commandment?
Answer: The duties required in the eighth commandment are, truth, faithfulness, and justice in contracts and commerce between man and man; rendering to everyone his due; restitution of goods unlawfully detained from the right owners thereof; giving and lending freely, according to our abilities, and the necessities of others; moderation of our judgments, wills, and affections concerning worldly goods; a provident care and study to get, keep, use, and dispose these things which are necessary and convenient for the sustentation of our nature, and suitable to our condition; a lawful calling, and diligence in it; frugality; avoiding unnecessary lawsuits and suretyship, or other like engagements; and an endeavor, by all just and lawful means, to procure, preserve, and further the wealth and outward estate of others, as well as our own.
Question 142: What are the sins forbidden in the eighth commandment?
Answer: The sins forbidden in the eighth commandment, besides the neglect of the duties required, are, theft, robbery, man_stealing, and receiving anything that is stolen; fraudulent dealing, false weights and measures, removing land marks, injustice and unfaithfulness in contracts between man and man, or in matters of trust; oppression, extortion, usury, bribery, vexatious lawsuits, unjust enclosures and depopulations; engrossing commodities to enhance the price; unlawful callings, and all other unjust or sinful ways of taking or withholding from our neighbor: What belongs to him, or of enriching ourselves; covetousness; inordinate prizing and affecting worldly goods; distrustful and distracting cares and studies in getting, keeping, and using them; envying at the prosperity of others; as likewise idleness, prodigality, wasteful gaming; and all other ways whereby we do unduly prejudice our own outward estate, and defrauding ourselves of the due use and comfort of that estate which God has given us.
But it isn't a matter of being self absorbed with regard to material concerns. We must also work to procure, preserve, and even increase the wealth of others, in addition to our own. Moreover we should resist all unjust or sinful ways of taking or withholding from our neighbor what belongs to him, or of enriching ourselves at his expense. We are to avoid covetousness; "inordinate prizing" of worldly goods, as well as dishonest means of getting, keeping, and using them. This one is particularly hard for liberals and socialists: We should not envy the prosperity of others. Here's one that difficult for professional welfare recipients: not engaging in idleness, prodigality, and gambling.
From the perspective of Reformed ethics, these things are central to economics, which used to be a branch of moral science.
That -- right there -- is one of the reason I blog so much on politics and economics.
No, I didn't watch His Beatitude's address last night. For one thing I rarely watch or listen to speeches: I don't waste an hour of my time listening to a speech that will take me only a handful of minutes to read. Last night's took me less than ten minutes. I especially have no interest in a speech for which the speaker is going to disrespect my time by showing he's in charge by making me wait for him to show up late and then going over his allotted time. Why should I give a guy that much of time when he's going to abuse it like that?
Be that as it may, having read the speech, I can say it was predictable. He complained about the massive debt "we've" inherited, and then attempted to inspire us with a speech about how he's going to continue the same type of government policies we've been living with since Roosevelt's New Deal and Johnson's Great Society.
In response to a recession, which follows on the heels of a boom created by credit expansion (which, in turn, was a response to the dot com bust), he promised -- if you can believe it -- more credit expansion. Those banks must get lending again because credit is the life-blood of capitalism. Businesses, among other things, can borrow what they need in order to make payroll.
These are people who know nothing about business. If you must borrow in order to make payroll, you're in a world of hurt. (Makes one wonder why its called "capitalism" and not "creditalism", or something like that.) But I digress.
I read it myself in black and white: credit caused this problem; and credit is the answer to the problem. Of course, he really couldn't press the credit expansion issue too far. He wants us to focus on Democrat hobby-horses as the causes of the recession: tax cuts for the rich (never any explanation of how they caused the recession which, we were initially told, was caused by predatory lending), dependence upon foreign oil, rising healthcare prices, incompetent schools, an inefficient energy grid. But not credit expansion -- except for the part where he blamed people taking on loans they couldn't pay, and people who sold such loans.
One would love to analyze the speech. But it would take a book.
I did enjoy one thing. Several times, in discussing government provision of healthcare I have asked if we might have to draft people into the medical professions should an insufficient number of people be attracted to it, for whatever reason. Last night, His Beatitude announced that dropping out of school will no longer be permitted. Your country needs you, damn it. And you're going to get an education whether you want one or not. And, apparently, these people will be forced to work, drafted into the work force, which, in a different era, was called slavery. Now, no doubt, it will be called patriotism. (Similar to Lincoln's attitude toward the Confederacy: You can't secede. Your country needs you, especially the tariffs your trade generates for us.) But, on another hand, he's effectively put an end to welfare reform, so maybe not. Hard to tell with these people.
Then there was the pretense of knowledge that these people always have, sort of. I mean, first they admit they don't really know if the stimulus plan will work, but we can't do nothing. (Oh, please, can we at least test that hypothesis?) Then, last night, we are told what the plan will do. For one thing, the plan will create or save 3.5 million jobs, which, of course, means that the people who came up with the plan know how to create jobs. (The laundry list is in the speech, which you can read, here.) One wonders why they didn't, in true capitalist fashion, take some intiative and create those jobs themselves.
Note: If Obama were Bush, the press would be spending time on nothing but the claim that America invented the automobile.
On Thursday (Sept 18, at 11am) the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S. To the tune of $550 billion was being drawn out in the matter of an hour or two. The Treasury opened up its window to help and pumped a $105 billion in the system and quickly realized that they could not stem the tide. We were having an electronic run on the banks. They decided to close the operation, close down the money accounts and announce a guarantee of $250,000 per account so there wouldn't be further panic out there.Well, what I think is this. It does present an argument in favor of a mixed economy as opposed to a "fully" capitalist one. But it does so only on the hypothesis that fully capitalist economies have no means of preventing, coping with or withstanding the effects of bank runs.
If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.
What a bank run is
A bank run occurs when a large number of bank customers withdraw their deposits because they believe the bank is, or might become, insolvent. (I here overlook the question of how depositors come to believe the bank is in danger of insolvency.) As the run progresses, it acquires a momentum of its own, in a kind of self-fulfilling prophecy. As more people withdraw their deposits, the likelihood of insolvency naturally increases, which encourages further withdrawals. This can destabilize the bank to the point where it, indeed, faces bankruptcy.
How we had this run
The run in question here, and which has Curtis's interest, began, or was noticed, with a draw-down of money market accounts in the U.S. to the extent of $550 billion being drawn of these accounts in the matter of an hour or two. We are not told in the video to which Curtis links, what proportion of total money market deposit accounts in represented by the $550 billion, so, to be quite technical, we really don't know that it was a crisis. Clearly the Federal Reserve thought it was a crisis; I suppose we can assume the Fed knew what proportion of total money market deposits was represented by the $550 billion. (I personally avoid making favorable assumptions about the Fed. I'm not a fan. But I digress.)
We are not told who was drawing out this money, or why. But it does have the ear-mark of a run: a sudden and apparently significant withdrawal of deposits. But the video clip here includes neither an explanation of how this draw-down signaled a danger, nor an explanation of what a money market deposit account is. (Never fear: I know what a money market account is. For our purposes let's just say it is a deposit account at a bank, and therefore the sort of account significant withdrawals from which would constitute a run.) Apparently the draw-down constituted a danger because, we are to believe, despite knowing neither the banks in danger or their financial solvency, the banks did not have the reserves to cover the funds being pulled from these money market accounts.
Nevertheless, the behavior of depositors does constitute a run, so in all fairness we'll grant that single proposition.
How banks become susceptible to runs
But how can this happen? If one deposits one's money in a bank, that money should be there when one wants to withdraw it. By logical extension, if five hundred people deposit money in a bank, then all that money should be there even if all five hundred depositors arrive to withdraw all of their deposits. How, then, do banks face risk of insolvency just by virtue of having all deposits withdrawn?
It's something like this. Most banks practice a type of banking called fractional-reserve banking. Under this type of operation, banks retain only a fraction of their demand deposits as cash. What is not retained as cash is invested in securities and loans. So, if all the people who bank where you do all got together with their passbooks and totaled up the amount you all have deposited, including money market, savings, checking accounts, and (what the heck) IRA's, that amount might come to, say, $100 million -- chump change. But, let's say, your bank has taken half of that amount (i.e., $50 million) and loaned out half of that (i.e., $25 million) and, with the other half (i.e., $25 million), it has purchased stocks, shares of mutual funds and so forth. Of the $100 million dollars you and your fellow-depositors have placed with the bank, there is only $50 million in the bank. You can easily see that there is no way the bank could handle a sudden withdrawal of all its deposits. On any day your bank could only cough up half of what has been deposited with it. So, no bank has enough reserves on hand to cope with more than a fraction of deposits being taken out at once. (This is one reason for those pesky charges you pay for early withdrawal on some of your accounts.)
How banks can protect themselves from runs
Banks can employ several techniques to prevent, or cope with, bank runs. Individual banks may, independently of the rest of the economy:
1. temporarily suspend withdrawals (unless stupidly prohibited by law), called suspension of convertibility (in many cases the mere threat of suspension can prevent a run, which means the threat need not be carried out at all);
2. impose upon themselves a reserve ratio requirement, the higher the better, which limits the proportion of deposits which are lent out, making it less likely for a bank run to start, as more reserves will be available to satisfy the demands of depositors;
3. practice full-reserve banking, in which case the reserve ratio is set to 100%, eliminating the risk of a run because maturities of deposits and loans will be matched, avoiding vulnerability to runs.
Collectively, banks may:
4. utilize a central bank as a lender of last resort, guaranteeing to make short-term loans to banks, to ensure that, if they remain economically viable, they will always have enough liquidity to honor their deposits;
5. employ deposit insurance systems to insure each depositor up to a certain amount, so that depositors' savings will be protected even if the bank fails, removing the incentive to withdraw one's deposits simply because others are withdrawing theirs (however, depositors may still be motivated by fears they will lack immediate access to deposits during a bank reorganization).
How this run was managed
In general this run was handled utilizing a combination of the aforementioned strategies, specifically, 1, 4, and 5. In this case the Treasury, with its "pumping" of $105 billion into the system and guarantee of $250,000 per account acted as lender (or loan shark) of last resort, rather than the Fed. One wonders how this maneuver demonstrates the superiority of a mixed economy over a fully capitalist one. We have to assume that a fully capitalist system would be without ability to engage a lender of last resort, or even, given free enterprise, a plethora of lenders of last resort. (No point looking to the Great Depression as demonstration of the inability of a fully capitalist economy to handle bank runs. Our mixed economy goes back to The Progressive Era which began in the 19th century. And, if not then, certainly with the creation of the Federal Reserve in 1913.)
So, our Lord and Savior Big Government, saved us all -- the whole world, in fact -- from world-wide economic collapse. Or, did it?
On the averted economic collapse
"If they had not done that, their estimation is that by 2pm that afternoon, $5.5 trillion would have been drawn out of the money market system of the U.S., would have collapsed the entire economy of the U.S., and within 24 hours the world economy would have collapsed. It would have been the end of our economic system and our political system as we know it.”
It isn't enough to tell us where money was pulled out of. Unless the people doing all of this withdrawing were stuffing the money in mattresses or holes in the dirt, then it was simply moving from one segment of the economy to another; it wasn't being pulled out of the economy simply by virtue of being pulled from money market deposit accounts. The Fed may have known that money was leaving these money market deposit accounts, but did not, ostensibly, seek to ascertain where the money was going when it left those accounts. It is possible that a great number of banks might have failed as a result of insufficient reserves to cover all those withdrawals. That is one of the costs of foolishness and poor risk assessment. But the economy isn't just the banks. And, contrary, to the Congressman's assertion, you can indeed have an economy without banks. It simply depends upon the nature of the banks in question. What you can't have, without the sort of banking system we have, especially with our fiat – or credit – money system, is just the sort of economy the Congressman undoubtedly wants: a mixed economy, which is a government-dominated economy. This mixed economy might have collapsed. But cooler heads could quite possibly have led a shift to a fully capitalist economy, which is a truly, and fully, free economy.
This argument in favor of a mixed economy rests upon the saving -- if it truly was that -- of a mixed economy. It's looks like a sound argument: "See," it asserts, "we need a mixed economy as evidenced by the ability of a mixed economy to save itself." But it begs the question: it assumes that a fully capitalist economy would not have its own methods. Frankly, the bankers in a fully capitalist economy would be more highly motivated to create systems for avoiding, or coping, with runs -- perhaps even 100% reserve banking. For one thing, without the government stealing, or just creating, money and credit out of thin air, their bearing of the entire burden of risk would make the risk assessments very highly conservative. Moreover, without the politically correct loan requirements imposed upon lenders, at gun-point, lenders would probably not be as over-extended as their government requires them to be. But, again, I digress.
This argument also fails as an argument for a mixed economy because we don't really know if the economy was saved, or was even in danger of collapse. Those two claims have certainly been made. But, of course, the government is going to make such claims: its power rests upon a mixed economy. Ever see the movie Dragonheart? Dennis Quiad, a dragon-slayer-for-hire, and Sean Connery, a dragon, form a partnership, and the two begin defrauding local villages with staged dragon-slayings. The dragon attacks a village, Quaid offers to kill him for a fee, and pretends to spear the dragon, who then falls into a nearby lake and swims out of sight underwater.
That’s the government in a mixed economy: causing problems left and right, with its demands for politically expedient, rather than economic, decisions, and then rushing in like that lunatic, Teddy Roosevelt, charging up San Juan Hill to save the day.
Our communion, then, with God consisteth in his communication of himself unto us, with our returnal unto him of that which he requireth and accepteth, flowing from that union which in Jesus Christ we have with him. And it is twofold:— 1. Perfect and complete, in the full fruition of his glory and total giving up of ourselves to him, resting in him as our utmost end; which we shall enjoy when we see him as he is; — and, 2. Initial and incomplete, in the first-fruits and dawnings of that perfection which we have here in grace; which only I shall handle. It is, then, I say, of that mutual communication in giving and receiving, after a most holy and spiritual manner, which is between God and the saints while they walk together in a covenant of peace, ratified in the blood of Jesus, whereof we are to treat.
And this we shall do, if God permit; in the meantime praying the God and Father of our Lord and Saviour Jesus Christ, who hath, of the riches of his grace, recovered us from a state of enmity into a condition of communion and fellowship with himself, that both he that writes, and they that read the words of his mercy, may have such a taste of his sweetness and excellencies therein, as to be stirred up to a farther longing after the fulness of his salvation, and the eternal fruition of him in glory. – John Owen, Of Communion, with God the Father, Son and the Holy Ghost,, Chapter 1.
There must be a civil right to trespass. How else to explain a thirty-two million dollar lawsuit, by 16 Mexican nationals, in which the defendant, Roger Barnett, is said to have violated their civil rights?
They trespassed on his land, known by federal and county law enforcement authorities as "the avenue of choice" for immigrants seeking to enter the United States illegally. He stopped them at gunpoint. Now, they sue him for $32 million dollars.
You have to love the way some people attempt to subvert the law to their purposes. One of the counts alleges that the Barnett conspired, in violation of 42 U.S.C. §1985(3), to deprive Plaintiffs of their right to interstate travel. (See Defendant's Motion for Summary Judgment , p. 2.) Note the logic: the right to interstate travel implies the right to trespass on private property. Want to go from Texas to Kentucky? Forget the highways; hop in a four-wheeler and drive in a straight line. And if any property owner objects, just assert your right to interstate travel. Beautiful. Reminds me of that line from Beverly Hills Cop: "What's the charge for getting hit by a car? Jay-walking?"
Barnett's attorney presented a strange argument against this charge:
[I]llegal aliens have no constitutional right to interstate travel. It would seem counterintuitive to maintain that an illegal alien, who is subject to arrest and removal by the government at any time (as indeed Plaintiffs were removed), and whose interstate transportation is a felony, 8 U.S.C. §1324(a)(1)(A)(ii), possesses a constitutional right to travel within the United States; at the very least, this would be a strange species of “constitutional right.” (Defendant's Motion , p. 7, emphasis mine.No kidding. You don't have a right to be here in the first place. Indeed, your being here (as a consequence of an illegal border-crossing) is a violation of federal law. So, you have no right to interstate travel. That's deep.
In his essay, "The Path of the Law", Justice Holmes wrote, "The primary rights and duties with which jurisprudence busies itself...are nothing but prophecies.... [A] legal duty...is nothing but a prediction that if a man does or omits certain things he will be made to suffer in this or that way by judgment of the court."
In case Justice Holmes's style is a bit difficult to grasp, whenever someone says, "You have a legal duty to perform some act R," what he really means is, "I predict that if you do not perform R the court will make you suffer in some way," (e.g., by throwing your butt into jail). "You have a duty" is, therefore, nothing but a threat of force.
Conversely, a legal right is nothing but a prediction that if a man does or omits certain things he will not be made to suffer in this or that way by judgment of the court. It's getting more and more difficult to know what our rights are, not because we can't read the Constitution (that's easy enough, which is why so many people don't like it), but because we can increasingly not predict those things for which a court may make us suffer.
And that's limiting ourselves to what courts decide. Juries are entirely unpredictable. A woman sues McDonald's because the hot coffee she spilled on herself was, well, hot. And the jury awards her damages. (You can read an interesting 2004 legal discussion of this case, here.)
I suspect Barnett's in trouble and will probably have to sell his ranch to pay the damages.
We are hardly in the same condition this country was in when the market crashed in 1929, but we have the largest legislation of this type ever in the nation's history. Why? Because statists can never let slip an opportunity to garner ever more power for the state.
That's why these people didn't read this bill. They didn't have to. Without reading it they know all they need to know: it grows government. Not as much as they want; but it's a start.
That's why it stinks. But what does it smell like?
Paul Shlichta suggests that the stench may be turpentine.
On the other hand, maybe he doesn't really have to read it to know what's in it -- business give-aways to companies like General Electric and Vestas, among others (the Left's version of "big oil"). And it doesn't really matter what's in it. Appropriate bureaucrats will just make up for deficiencies by fiat, or Our Benevolent Leader will issue the executive order needed to patch up any missing elements. It would have been just as effective to write a one-page bill to the effect that the President is empowered to do, by fiat, whatever it takes to fix the economy, and whatever else Congressional Democrats and their Republican trophy wives determine he should be personally empowered to do.
After all, they love us and want only what's best for us; and what's best for us is whatever it is they decide to do.
My close friend, Lew Rockwell, reacts:
After all the ghastly statism of the Bush years, you might think that the Left would back off from using power to achieve its aims. Instead, they have learned nothing. The Left has been lying in wait for its chance. As the Obama people entered the White House, it was as if they found a closet labeled "failed ideas of the past." They opened it and the contents spilled everywhere. They started grabbing things and putting them in the regulatory books and in legislation.
What an amazing pile of junky, worn-out, bogus policy ideas! Equal pay for equal work. Infrastructure spending. More money to the public schools. Socialized medicine. Rock-bottom interest rates. Welfare! Every wish granted by government. Down with business. Down with business failures. Curbs on fat-cat pay. Down with Wall Street. Turn on the money spigots. Expropriate the expropriators. Subsidies for every lifestyle that flies in the face of bourgeois prejudice.[...]
Those Obamaites! So compassionate, loving, universally minded, progressive — except that their ideological cousins managed to starve and destroy whole civilizations. Loyalty to their creed means death, because their ideology is the pathway to the gulag — and for one simple reason: their preferred means of social change is the state. The state is always and everywhere a threat to liberty, and liberty is the basic building block of prosperity and civilization.
Despite the slogans about progress, the upshot of the Obama administration is as deeply reactionary as anything that Bush conjured up. Despite all the hype and hope, what Obama offers is nothing new. It amounts to the robber state and the regimentation of society, a plan that will kill off prosperity and the conditions that allow for it.
The Republicans are right to fight this tendency at every turn, for it represents a radical attack on all things truly American. Worse still, by playing with the printing presses, the policy tendency here is also deeply dangerous. It could destroy the dollar internationally and domestically, igniting a hyperinflation that no one will be able to control once it gets going. One only wishes that the Republicans had been so principled when their president was in charge! (Emphasis mine.)
Okay, Lew isn't a close friend -- not even an acquaintance; but he should be.
Today we have the rankings of our presidents. Naturally, Lincoln came in first. Maybe this will be the last year that happens.
It doesn't matter. We don't need even one great president. A great president is nothing more than a president who acted extra-constitutionally, the more extra-constitutionally the better. The only thing I wonder, is why, given all the supposedly extra-constitutionally acts he perpetrated, our last president didn't supplant Lincoln, or, at least, Wilson. Of course, given the qualification (i.e., extra-constitutional acts), I don't object to Lincoln being called the greatest. I mean, what can you call a president who invades sovereign states for the expressed purpose of instituting regime change and collecting taxes?
On the subject of Great President, Robert Higgs published an article The Free Market (March 1997, Volume 15, Number 3) available here, but I'm publishing it here in full to save you time:
No More "Great Presidents"
by Robert Higgs
My idea of a great president is one who acts in accordance with his oath of office to "preserve, protect, and defend the Constitution of the United States." Not since the presidency of Grover Cleveland has any president achieved greatness by this standard. Worse, the most admired have been those who failed most miserably. Evidently my standard differs from that employed by others who judge presidential greatness.
In the New York Times Magazine for December 15, 1996, Arthur M. Schlesinger, Jr., presented the results of a poll of historians asked to rank the presidents (excepting only William Henry Harrison and Zachary Taylor, who held office very briefly). Thirty historians plus politicos Mario M. Cuomo and Paul Simon were asked to rank the nations chief executives as Great, Near Great, Average, Below Average, or Failure. The ranking applies to performance in the White House, not to lifetime accomplishments, and the historians used their own judgment as to what constitutes greatness or failure.
The results of the poll correspond well with the results of a number of earlier polls, especially in the set of presidents regarded as Great or Near Great. The three Great ones are Washington, Lincoln, and Franklin D. Roosevelt. The Near Great comprise Jefferson, Jackson, Polk, Theodore Roosevelt, Wilson, and Truman. The Failures are Pierce, Buchanan, Andrew Johnson, Grant, Harding, Hoover, and Nixon, the last ranking at the very bottom of the heap.
What are we to make of this ranking? Well, it helps to know that the historians (and two politicians) doing the ranking are nearly all left-liberals. In this regard they faithfully represent the historical profession in the United States today. In making their judgments, such historians bring to bear left-liberal beliefs and values. Thus, one respondent, James MacGregor Burns, asks: "How can one evaluate such an idiosyncratic President [as Nixon], so brilliant and so morally lacking?"--as if Nixon were, in this crowd, uniquely immoral.
One need not ponder the rankings long, however, to discover a remarkable correlation: all but one of the presidents ranked as Great or Near Great had an intimate association with war, either in office or by reputation before taking office. Of the top-ranking "nine immortals," five (Lincoln, FDR, Polk, Wilson, and Truman) were commander in chief when the nation went to war, and three (Washington, Jackson, and Teddy Roosevelt) were best known prior to becoming president for their martial exploits. The one exception, Jefferson, confined his presidential bellicosity to authorizing, with Congressional consent, the naval engagements against the Barbary pirates. (Of course, he had been a revolutionary official during the War of Independence.)
In contrast, of the eleven presidents ranked as Below Average or Failure, all but one (Nixon) managed to keep the nation at peace during their terms in office, and even Nixon ultimately extracted the United States from the quagmire of the war in Vietnam, though not until many more lives had been squandered.
The lesson seems obvious. Any president who craves a high place in the annals of history should hasten to thrust the American people into an orgy of death and destruction. It does not matter how ill-conceived the war may be. Lincoln achieved his presidential immortality by quite unnecessarily plunging America into its greatest bloodbath--ostensibly to maintain the boundaries of an existing federal union, as if those boundaries possessed some sacred status. Wilson, on his own initiative and against the preference of a clear majority of the American people, propelled the country into a grotesquely senseless, shockingly barbarous clash of European dynasties in which the United States had no substantial national interest. On such savage and foolish foundations is presidential greatness constructed.
I hold no brief for John Quincy Adams, Martin Van Buren, or Chester Arthur. But give them their due; at least they did not spill the blood of their fellow citizens. Grant and Harding, who always rank near the bottom, do not deserve such contempt. Schlesinger observes that "their sin was excessive loyalty to crooked friends"--a sin that, in truth, many presidents have committed. And even Schlesinger admits: "Scandal and corruption are indefensible, but they may injure the general welfare less than misconceived policies."
Indeed, scandal and corruption, which not surprisingly have tainted most administrations to some degree, pale by comparison to the damage presidential policy decisions have wreaked. What weight does Grant's Credit Mobilier scandal have in comparison to Lincoln's 620,000 dead in the Civil War? Harding's Teapot Dome affair is but a drop in the ocean compared to the global horrors set in train by Wilson's decision to take the United States into World War I: Allied victory, a harsh Versailles treaty, German resentment, the rise of Nazism, and World War II, not to speak of the rise of Communism, which also followed in World War I's wake. Why do the historians, and following them the public, place on pedestals the leaders responsible for such utter catastrophes?
I have a theory: left-liberal historians worship political power, and idolize those who wield it most lavishly in the service of left-liberal causes. How else can one account for the beatification of Lincoln, Wilson, and Franklin Roosevelt? Truman, now so elevated in the estimation of the historians, left office in unpopularity bordering on disgrace because of his Korean War disaster, but the historians forgive him, admiring his use of nuclear weapons and attempts to preserve and extend the New Deal. Theodore Roosevelt, a bloodthirsty proto-fascist, evokes admiration because of his public flogging of big business, a perennial left-liberal whipping boy.
Were I to rank the presidents, I would not quite turn the historians ranking on its head, but I would move in that direction. Certainly Lincoln, Wilson, FDR, Truman, and Lyndon Johnson belong at the bottom, for their statist economic policies as well as their supremely catastrophic war policies.
Finding presidents to put at the top of the list poses more difficulty, especially in choosing among those who have held office during the past century. Grover Cleveland, though far from perfect, may have been the best. He kept the country at peace. He respected the Constitution, acknowledging that the national government has only a limited mission to perform and shaping his policies accordingly. He fought to lower tariffs; preserved the gold standard in its time of crisis; and restored order forcibly when hoodlums disturbed the peace on a wide front during the great railroad strike of 1894.
Washington, I think, actually does deserve a high rating--not even the historians can be wrong all the time. He established the precedent of stepping down after two terms, which lasted until it clashed with FDR's insatiable ambition, and he prescribed the sensible foreign policy, later slandered as "isolationism," that served the nation well for more than a century. Other early presidents who were not entirely reprehensible in office include Jefferson and Jackson, though each committed grave derelictions.
Of the presidents since Cleveland, I rank Coolidge the highest. He sponsored sharp tax cuts and greatly reduced the national debt. As H.L. Mencken wrote, "There were no thrills while he reigned, but neither were there any headaches. He had no ideas, and he was not a nuisance"--high praise in view of the execrable performance of other twentieth-century presidents. Taft and Eisenhower were a cut above the rest, but that's not saying much.
Unfortunately, under FDR the Constitution suffered damage that none of his successors has repaired and most have made worse. Certainly since 1932--and, one might well argue, since 1896--no president has been true to his oath of office. Realizing the ambitions harbored by Teddy Roosevelt and Wilson, Franklin Roosevelt created the "imperial presidency," and we have been the worse for it ever since.
The people who ratified the original Constitution never intended the presidency to be a powerful office spawning "great men." Article II, Sections 2-4, which enumerate the powers of the president, comprise but four paragraphs, most of which deal with appointments and minor duties.
The president is to act as commander in chief of the army and navy, but Congress alone can commit the nation to war, that is, "declare war." The president is to "take care that the laws be faithfully executed," but only Congress can enact laws, and then only within the scope of its limited, enumerated powers. The presidency was intended to be a largely ceremonial position whose occupant would confine himself to enforcing federal laws.
But over time, abruptly during Lincoln's presidency and progressively during the twentieth century, presidents seized more and more power.
Just before Clinton took office in 1993, the Seattle Times crowned an opinion article with the stunningly stupid headline, "Can Bill Clinton Save America?"
American liberty will never be reestablished so long as elites and masses alike look to the president to perform supernatural feats and therefore tolerate his virtually unlimited exercise of power. Until we can restore limited, constitutional government in this country, God save us from great presidents.
If I ever ran for president, my most important campaign promise would be this:
I promise that, if elected, I will do everything within the scope of my power to prevent my ever being called a Great President. And trust me: that will require some hard work on my part.
Extended governments ...soon become absolute....A large government is accustomed by degrees to tyranny; because each act of violence is at first performed upon a part, which, being distant from the majority, is not taken notice of, nor excites any violent ferment. Besides, a large government, though the whole be discontented, may, by a little art, be kept in obedience; while each part, ignorant of the resolutions of the rest, is afraid to begin any commotion or insurrection. Not to mention, that there is a superstitious reverence for princes, which mankind naturally contract when they do not often see the sovereign, and when many of them become not acquainted with him so as to perceive his weaknesses. And as large states can afford a great expence, in order to support the pomp of majesty; this is a kind of fascination on men, and naturally contributes to the enslaving of them. -- David Hume, "Of the Rise and Progress of the Arts and Sciences"Rush Limbaugh, and other believers in the mystical union of states who also think they believe in small and limited government, should consider that the larger the territory to be governed the larger the government must be. As my professor of ancient Roman history once said in a lecture: The Roman Republic disintegrated because they discovered they could not rule an empire with a republican form of government.
Quite obviously, the lesson is that had the Romans wanted to preserve their liberties, they should have let their empire go.
He did neither.
Limbaugh, clearly a believer in what Thomas DiLorenzo calls the "mystical union of states" laments: If Lincoln hadn't done what he did the United States wouldn't be one country. It would be two.
One who believes in the consent of the governed shouldn't have a problem with that.
No. The United States would indeed be one country. So would the Confederacy. Two countries. What's wrong with that? The United States are one country. The United Mexican States are one country. Canada is one country. When the thirteen colonies seceded from the British Empire, the British Empire didn't become two countries. It just became a smaller country. So would it have been had the Confederate States won the war for their independence from the Union. There is nothing wrong with there being multiple countries.
This is one of those areas where Limbaugh, an obvious statist, and I part company. It is thoroughly absurd for Limbaugh to believe that it was legitimate for the colonies to secede from the British Empire, but not for any states to secede from a union they freely joined. Limbaugh believes in divorce, but not secession.
And to think, I wasn't going to say anything about Lincoln today.
There is some legend that, at some point, Lincoln came to faith in Jesus Christ. Well, I wish him well in the blessings of the eternal state. But, meanwhile, back on earth, he destroyed, not preserved, the union.
And it is trying my patience listening to Rush -- who believes the un-federal government is becoming increasingly tyrannical -- genuflect before the mythical Lincoln. Limbaugh probably thinks the Roman Empire fell because of its immoralities.
Wait. Maybe I will keep listening. He's just promised to spend a great deal of time singing the praises of Cessna.
That's what President Bush did, with his tax cuts and rebates; and – his critics said quite by accident – it turned out to be precisely the right policy, for Keynesians, anyway.
But Keynes's own formula in The General Theory was subtler, making Bush’s approach, Keynesianesque, if not Keynesian. The key to recovery, on Keynes’s view, lies in investor psychology. Investors are motivated "as a result of animal spirits—of a spontaneous urge to action rather than inaction." Investors overcome their fears "as a healthy man puts aside the expectation of death."
On such a view here is the central task for His Beatitude: He needs to reduce uncertainty and fear in the financial markets by promoting policies that are stable and predictable. When President Bush was Commander-in-Chief of the Economy (or, Chief Entrepreneur) some argued that this meant less ideological crusading about tax cutting and moral hazards overseas, less of the impulsiveness and unilateralism that had made the whole world nervous. It meant governing “sensibly” and “responsibly”, with less “partisanship” and “point-scoring”. In other words, it isn't enough just to put money in peoples' hands. They must be motivated to put that money to work, or at least to spend it. If investors are going to invest, they must have reason to believe that the future will be such as will likely yield a return on investment. The future must also be such as to allow entrepreneurs to make fairly accurate predictions about consumers future consumption. That's a tall order.
But,the future over which investors think they can plan has become shorter, as political uncertainty and instability have increased. Bush’s job as Entrepreneur-in-Chief was to employ the “right” policies to make the future grow longer again, to restore the climate for investment and growth. (Make the future grow longer; restore the climate for investment and growth -- you have to love the way these people talk; they are almost poetic. Why don't we just ask our leaders for another parting of the Red Sea, as long as they're making the future longer and restoring the investment climate?
Surely, Obama's task is the same: employ the “right” policies to make the future grow longer again, and restore the climate for investment and growth, so that investors will feel good about investing.
On a Keynesian view, apparently, the investor is phobia-ridden Adrian Monk, and the President is his psychiatrist, Doctor Kroger, whose job it is to help Monk deal with his phobias, one of which is investophobia. The President is supposed to be personally responsible for easing investors’ worries.
Short of a great big hug for investors, in the present circumstances there are two alternatives (if we are going to limit ourselves to Keynesian or Keynesianesque policies): tax cuts or deficit spending, or a combination of the two. Bush did tax cuts, with some deficit spending. Obama is going to do deficit spending with some tax cuts. The variation may be different, but the theme is the same; and the theme is Keynesian.
So, where exactly is the change?
Here’s how Cocco explains it :
We do not know if this giant stimulus plan will work -- if it is big enough and bold enough. But at least it marks an overdue abandonment of the approach we know has failed.
Well, there you have it sports fans. We do not know if this plan will work, despite its being treated as a sure thing. But she's confident we're getting change because, although we're still getting "trickle down", the recipients of the trickle have changed. And the method of trickle is different: rather than tax-cuts, the trickle is dependent upon deficit spending. Wow. That's deep. And what’s even deeper is that even though we don’t know whether it will work, we know it’s right because, if nothing else -- absolutely nothing else --it (i.e., Obama's Keynesianesque approach) “marks an overdue abandonment of the approach [i.e., Bush's Keynesianesque approach] we know has failed.” Deficit spending and a big hug for investors, instead of tax cuts and a big hug for investors.
Oh, it is change. But the change amounts to something like this: the change from the First to the Second movement of Beethoven's "Moonlight Sonata". They're still playing the "Moonlight Sonata".
Now, what if these Keynesian, or Keynesianesque, approaches are both based on a mistaken notion of the boom-bust cycle?
To be continued...
H/T: Randy Barnett, at The Volokh Conspiracy.
Note: They have the same offer for Star Trek (TOS); The Twilight Zone ; and many others.
Arlen Specter informs his constituents that he voted for the Senate because, "The economists tell us that if we do nothing" this crisis will become a catastrophe. Specter must be getting his information from Obama.
There you have it, something unusual, unanimity among "the economists" -- the new priesthood. "They" have spoken. We must believe them. We simply must trust them. They know. We don't.
Well, the fact is there isn't this unanimity.
Specter. Weren't those the bad guys in Dr. No? Why, yes. They were.
[T]he simple fact of the matter is that the political conversation, which shifts from time to time, has shifted anew, and for the foreseeable future Americans will be more engaged with questions about how to manage a mixed economy than about whether we should have one.Where have these people been? With few exceptions there hasn't been much discussion of any note of whether we should have a mixed economy. That we would have a mixed economy was a foregone conclusion of the two presidential campaigns won by President Bush and the last campaign. For all his talk about businesses' need for tax relief, the fact of the matter is McCain is still a believer in interventionst economics. It is just a matter of the type of intervention. Tax cuts are not the absence of government intervention: the taxes are still in place; the only difference is reduction of the tax rate! Moreover, the purpose of the tax rate cut is to affect the economy. That is interventionist economics just as much as Obama's deficit-spending-ridden stimulus.
But Newsweek have even bigger news than that: "In many ways our economy already resembles a European one. As boomers age and spending grows, we will become even more French."
Gosh, ya think?
I have news for Newsweek: Garet Garret broke this story decades ago. Decades. 1938, to be precise.
Some conservatives have been saying this for years. When they have done so, they have been treated as if they have foil in their hats, to keep the commies from programming their minds.
Now; now that journalists (rushing in like the newsies of yester-year , with their read-all-about-it baloney) have said so; now, at long last -- now, we are entitled to believe we live in a socialist nation.
While one might want to say, as Bruce Willis did to Reginald VelJohnson , in Die Hard, "Welcome to the party, pal!"
But the fact is it's more than a little too late.
The American people, for too long, have been denied critical, need-to-know information, like this guy:
Yeah. It's like that sometimes.
Now for an economic strategy that really trickles down.Look, Bush's supposedly discredited economic policies were Keynesian, or at least Keynesianesque. So are Obama's supposedly different economic policies.
Down to laid-off workers who lost their health insurance with their jobs. Down to the working poor and the newly poor, who need food stamps for their families to survive. Down to the teachers who will remain in their classrooms because states won't have to severely reduce their aid to cities and counties. Down to construction workers, and perhaps even down to those just laid off at Caterpillar who might be called back from the unemployment line. They can get to work making the heavy equipment the construction crews will need to repair roads and bridges and sewer lines.
I know: "James," you ask, "how can this be?"
Since Keynes's topic is relevant to the dilemma we now confront (i.e., how to coax a revival of prosperity at a time of declining business confidence and investment) let's recap Keynes's economics, specifically as he explained it in his 73 year-old, The General Theory of Employment, Interest and Money, (a real page-turner), written during The (First) Great Depression (the Second, apparently being the one in which we presently live). Here's a quick and dirty overview. Now, forget the Econ 101 gloss about how Keynes was little more than an advocate of deficit spending. That is propagated only by people who cannot possibly have read the General Theory, or have a vested interested in not giving an accurate report of its content. (On the other hand, to be fair, that gloss may be honestly given by the sort of people who, in the interest of simplification think "Deficit Spending" is as accurate a way of summing up Keynes as "Twinkle, twinkle, little star, how I wonder where you are" is of summing up the purposes of astronomy. But I digress.)
Keynes was preoccupied with a situation very much like our own. A long boom had ended (i.e., the "Roaring" twenties). The boom, as he explained it, had been "characterized by optimistic expectations as to the future yield of capital goods." Even Keynes probably couldn't have imagined a world where a company could trade at more than its earnings, but that amount of optimism is certainly what he had in mind. And then came the crash, at which time "disillusion falls upon an over-optimistic and over-bought market, [and] it...[falls] with sudden and even catastrophic force." The traditional cure for such an investment collapse was a decline in interest rates. Lower rates, at least in theory (I love that phrase), should encourage investment in productive assets, the returns upon which are likely to be higher than the cost of borrowing, and higher than the return on Treasury bonds. But what if the decline in business confidence is so drastic that the owners of capital are wary of investing in new plants and equipment, regardless how low the interest rate falls? That's what happened during the Depression: the money was there; but it wasn't being invested.
That's what Keynes explored in The General Theory. He called the reluctance of investors to purchase real assets, "liquidity preference".
"The collapse," he wrote, "may be so complete that no practicable reduction in the rate of interest will be enough." This is exactly the problem that Greenspan (and President Bush) faced in 2001, Greenspan cut interest rates seven times in 2001, for a total of three full percentage points (by August 2001), but investment spending still declined. The Dow moved from 10,551.18 on Monday, 1 August to 9,949.75 on Friday 31 August 2001. The following week the Dow rallied a bit closing at 10,033.27 on Wednesday, but finished the week at 9,605.85 on Friday, 7 September (down from 11,259.87 the previous year). This, you may recall, was all a result of the Bush campaign's “talking the economy down”.
And then, of course, there was 11 September 2001. The following week, the Dow closed at 8,235.81, 21 September, from which date the market began a rather steady increase, closing at 10,635.25 on 19 March 2002. But by Friday 20 September 2002, a year after the week beginning 10 September 2001, the market closed at 7,942.39. Tough times, to be sure. But by late 2007, things had improved – no thanks to the now-discredited “Bush” policies, I’m sure. On 9 October 2007 the Dow closed at 14,164.53. On 11 October it reached an intra-day actual of 14,198.10. At that point the ride was pretty well over. Housing prices, which had peaked in 2005, were declining by 2006. And, in October 2007, the Treasury Secretary was referring to the bursting housing bubble "the most significant risk to our economy” (here). The rest is history.
President Obama now faces circumstances similar to those his predecessor faced.
To be continued...
Protectionist interventionist political-market economics is alive and well in the bill Rush Limbaugh has kick-named Porculus.
Earlier this month...the U.S. iron and steel industry was lobbying for a "Buy America" provision in the stimulus package. Now everybody's getting into the act.
On Tuesday [27 January] the Senate Appropriations Committee added "manufactured goods" to the list of items that must be American-made in order to qualify for stimulus dollars under the American Recovery and Reinvestment Act. Congress is signaling to the rest of the world that U.S. protectionists are in charge. Forcing U.S. contractors to buy domestic goods instead of shopping for the best price available world-wide means that taxpayers risk overpaying for their roads and bridges. And that means capital will be misallocated, fewer projects will be built and the bill will go ever-higher.
It's the easiest thing in the world to believe: the way to improve economic conditions here at home, is to encourage, inspire, motivate, cajole, require or just down-right force the purchase of domestic goods. If only it really were that easy.
There is also the little matter of retaliation by our trading partners. The European steel industry has said that it will urge the EU to challenge the provision at the World Trade Organization. That's the high road. Another course would be for other countries to lock American companies out of the bidding on their projects. China's stimulus is estimated at $600 billion. Caterpillar Tractor says that it has a "major initiative to compete in infrastructure projects around the world -- particularly in China -- and this would seriously undermine it." Congress must want more Caterpillar layoffs.
Only if Congress knew as much about economics as His Beatitudes ministers pretend to do could they know that this protectionism will, among other things, result in more Caterpillar layoffs.
On the other hand, maybe it won't. If Congress can require American-made in order to qualify for stimulus dollars under the American Recovery and Reinvestment Act, then it can also require no layoffs in order to qualify for stimulus dollars under the American Recovery and Reinvestment Act.
And, according to, David A. Patten, Newsmax, "Economists have warned that over-stimulating the economy could lead to runaway inflation, once the immediate crisis has passed." He doesn't say which economists, regrettably. But it doesn't matter: it stands to reason.
If you don't know why, thank a teacher, but only if (1) your school offered economics, (2) you signed up for the class, and (3) received a passing grade.
One of the attractions, for me, of Reformational Philosophy, especially as a Calvinist, is that the approach is one of, “In the long run, creation may be cursed, but it’s still ours, in Christ, who calls every last inch of it His own.”
[There is no] realm of common grace independent from a realm of special grace in Christ Jesus. The Fall turned the heart, the root of creation, away from God. Creation therefore, had to be reborn in its root through Christ. Special or saving grace can therefore not be a separate realm. It touches, as did the Fall, the supra-temporal core, the heart, the root of all temporal creation. Common grace does not touch this supra-temporal root, but only the temporal ordinance of life: God halts the decomposition caused by sin. But this common, merely temporal grace of God has no other root than Christ Jesus. The grace of rebirth, given to us by God in Him, is the true hidden root of common grace which must be made evident in the church as organism, that is, in Christian unfolding of life within all temporal structures of reality. When, by God’s common grace in this sinful temporal life, culture, learning, art, family and political life, etc., are still possible, the inescapable call comes to the Christian to make Christ, as true Root of creation, as King of all temporal life, visibly manifest. For the Christian this task makes political life also a holy Christian calling. It is true that under the rule of common grace Christ’s kingdom cannot come to unbroken realization, for the power of sin continues to turn itself against this kingdom until the last day, but fundamentally in the root of Creation the victory has been won by the Lamb of God, and creation, in all its structures, has been maintained, saved, redeemed! ~ Herman Dooyeweerd, The Christian Idea of the State, (John Kraay, Tr., R. J. Rushdoony, Intro., Nutley, NJ: The Craig Press, 1978), 32-33, (internal quotations and italics removed).Now, maybe Reformational Philosophy constitutes philosophically barking up the wrong tree. The alternatives, however, all strike me as sophisticated ways of hanging around, trying to stay out of trouble, and staving off boredom, while waiting for the Rapture or the Second Coming.
- James Frank Solís
- Former soldier (USA). Graduate-level educated. Married 26 years. Texas ex-patriate. Ruling elder in the Presbyterian Church in America.
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