Among the many books written by Henri Nouwen (1932-1996), one stands out as an enduring little classic, The Wounded Healer. For those who knew him, this book is especially powerful because, without expressly intending to, it describes so well the man himself. It was because of his own wounds that he was able to touch the lives of so many people. “By his wounds we have been healed,” St Peter wrote of Jesus (1 Peter 2:24). However, there was a different reaction to Nouwen’s book from a fundamentalist Christian who reviewed it and announced that a Christian minister should not come before people as a wounded healer but as “a prophet of God and as a helper in their afflictions.” These different reactions show a gulf between Christians that is probably deeper than most of the issues that divide Christians Churches.
Are you helped by someone who defines himself as a helper? Can you feel cared for by someone who defines himself as a prophet? If the Christian life were only a matter of external prescriptions, then probably yes: in the way that you can get help from an accountant or a lawyer. But since it touches the innermost places in us – the very springs of our thoughts and actions – this approach is less than helpful. Hear Nouwen again (in Out of Solitude): “When we honestly ask ourselves which persons in our lives mean the most to us, we often find that it is those who, instead of giving much advice, solutions, or cures, have chosen rather to share our pain and touch our wounds with a gentle and tender hand. The friend who can be silent with us in a moment of despair or confusion, who can stay with us in an hour of grief and bereavement, who can tolerate not-knowing, not-curing, not-healing and face with us the reality of our powerlessness, that is the friend who cares…. By the honest recognition and confession of our human sameness we can participate in the care of God who came, not to the powerful but powerless, not to be different but the same, not to take our pain away but to share it. Through this participation we can open our hearts to each other and form a new community.”
In the first reading at today’s Mass, God’s call made Isaiah aware of his own weakness and unworthiness, exactly as Jesus’ call to Peter made Peter blurt out, “Go away from me, Lord, for I am a sinful man!” If Christians do not carry the precious knowledge of their own weakness and sinfulness, then all their attempts to help you are nothing but an ego-trip: by ‘helping’ you they are feeding on your strength and making you weak; by ‘loving’ you they are seeking ways to snare you and make you dependent on them; by ‘caring’ for you they are preening their own image.
Back to Henri Nouwen: “We tend to look at caring as an attitude of the strong toward the weak, of the powerful toward the powerless, of the have’s toward the have-not’s….[But] the word ‘care’ finds its roots in the Gothic ‘Kara’ which means lament. The basic meaning of care is: to grieve, to experience sorrow, to cry out with.”
February 7th, 2010
“We cannot have reform of the system driven by what each country sees that it needs for itself,” Dominique Strauss-Kahn, head of the International Monetary Fund, told the Davos forum on Saturday. “We need to have co-ordination – we cannot afford to have different solutions in different parts of the world.”
Bankers fight controls
As Davos ends, bankers fight to fend off controls on matters ranging from bonuses to proprietary trading and derivatives.
February 7th, 2010
Catholic . . . or not – must see! If you are Catholic, watch it. If not, watch it anyway. I’m sending this video out quickly with the hopes that it will get as far as it can before it is pulled by the “Powers that be.” Please watch this video as soon as you receive it, then forward it, please. It tells all. Turn on the speakers
http://www.youtube.com/watch?v=vVN2MMuiedI&feature=sdig
The word subsidiarity is derived from the Latin word subsidiarius and has its origins in Catholic social teaching (see Subsidiarity (Catholicism)).[1] The concept or principle is found in several constitutions around the world (for example, the Tenth Amendment to the United States Constitution which asserts States rights).
It is presently best known as a fundamental principle of European Union law. According to this principle, the EU may only act (i.e. make laws) where action of individual countries is insufficient. The principle was established in the 1992 Treaty of Maastricht[2]. However, at the local level it was already a key element of the European Charter of Local Self-Government, an instrument of the Council of Europe promulgated in 1985 (see Article 4, Paragraph 3 of the Charter) (which states that the exercise of public responsibilities should be decentralised). Subsidiarity is similar in concept to, but should not be confused with Margin of appreciation
February 6th, 2010
“I have to think this train is probably going to leave the station soon and we need to focus our efforts on explaining the story as best we can. There were too many people involved in the deals — too many counterparties, too many lawyers and advisors, too many people from AIG — to keep a determined Congress from the information.” James P. Bergin, NY Fed, in an email to his Fed colleagues
‘Though it is hard to divine much understanding from the unredacted filing, it has become clear that Goldman had more involvement than previously believed: In addition to the credit default swaps it bought from AIG, the filing shows that Goldman Sachs also originated many of the underlying assets that AIG and the New York Fed bought back from Société Générale.
The American people have the right to know how their tax dollars were spent and who benefited most from this back-door bailout,” said Kurt Bardella, spokesman for Issa. “Now that it’s public, let’s see if the sky really does fall as the New York Fed said it would to justify its coverup.”
Other lawmakers believed that the New York Fed was trying to hide its ties to Goldman Sachs.’ AIG Reveals the Story – CNN
“Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.
We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system — apart from the matter of AIG’s bailout — deserves further congressional scrutiny…
By pursuing this line of inquiry, the hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve.
This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank…
New York Fed staff and outside lawyers from Davis Polk & Wardell edited AIG communications to investors and intervened with the Securities and Exchange Commission to shield details about the buyout transactions, according to a report by Issa.
That the New York Fed, a quasi-governmental body, was able to push around the SEC, an executive-branch agency, deserves a congressional hearing all by itself.” Secret Banking Cabal Emerges From AIG Shadows – Reilly – Bloomberg
Hat Tip to : Jesse
January 31st, 2010
The Chinese government just did what some Americans would like to do: pull the plug on Avatar and replace it with more patriotic fare. Only in China, “patriotic” means a state-sponsored biopic of Confucius, currently under renovation as an icon of Chinese moral and cultural superiority.
I enjoyed the spectacle of Avatar but like many other Americans was annoyed by its portrayal of my 22nd-century countrymen as ruthless capitalists and mercenaries raping a pure, sylvan planet called Pandora. But of course, it was this aspect that won Avatar a spot on the list of 20 U.S. films allowed into China each year. The State Administration of Radio, Film and Television (SARFT) prefers films that show America in a negative light.
Today, rumor has it that SARFT’s selection of Avatar has backfired. Both China Daily and CCTV-International report audiences interpreting the scene where the invaders bulldoze the sacred forest of Pandora as an allegory for forced evictions carried out by ruthless developers in their own country. As one blogger wrote, “I am wondering whether [director James] Cameron lived in China before coming up with such an idea.”
Taken at face value, these reports suggest that Cameron is a hero, not only for sticking it to America but also for striking a blow for free speech in China. But the story is a bit more complicated, because at work here is a calculation by the Chinese Communist Party that is based on a mixture of propaganda and profit motives that is alien to most Americans.
On the propaganda side, Chinese New Year is approaching and millions of ordinary Chinese are about to splurge on movie tickets. So the Party has clearly decided that the best film for the masses to see is the uplifting, patriotic Confucius. At the same time, Avatar continues to play in high-priced 3-D and Imax theaters – no doubt because the Party does not want to deprive affluent elites of the chance to visit Cameron’s extraterrestrial (and anti-American) paradise.
On the profit side, the calculation is probably that Chinese films do well among the masses, so Confucius will hold its own, while Avatar continues to rake it in among the sort of audiences whose property is not being bulldozed. Avatar has grossed $75.6 million in China, breaking all previous box-office records, and some of that goes to the local distributor, China Film Group, which like all Chinese media companies is directed by the Party.
As for the reports of Chinese viewers finding subversive meaning in Avatar, most of these appeared in the outward-facing English-language organs of China’s tightly controlled news media. Here the calculation is more subtle: whenever Chinese censorship hits the global headlines, as it has been doing recently (can you Google “Google”?), the Party tries to distract the foreign press with a carefully orchestrated dust-up that gives the appearance of free speech. And for this purpose, what better topic than the inner meaning of a blockbuster film, about which no one will agree anyway?
More…
January 31st, 2010
Modern man seems to live in a perpetual tug of war between the struggle to make money and the demand to redistribute it. In the United States, this tug of war is more or less accurately represented by two opposing political parties, the Republicans who are more focused on creating wealth, and the Democrats who are more focused on reallocating the wealth we already have. There are many other differences, of course, some more important than money, but I suspect this general dichotomy is similar elsewhere. The tug of war has become a way of life, and we seem to continually shift our weight from one side to the other to tweak the existing system.
I’ve been thinking a good deal about this lately, and whenever I do, I keep hearing a voice in my head, as if from the Son of Man, saying: “The exclusively binary model of market-plus-State is corrosive of society.” Perhaps that doesn’t sound like Jesus Christ’s speaking style, but in a very real sense it is, because Benedict XVI said it in his recent great social encyclical, Caritas in Veritate (#39). And if the Son of Man speaking through Benedict is right, as we know He is, then all of us need to radically rethink the social order.
Benedict made this particular remark is the context of solidarity. He argued in Caritas in Veritate that if we construe the social order as controlled by impersonal forces—economic laws and government regulations—we inevitably produce a corrosive culture in which the inequities created by involuntary market dynamics depend for their resolution on involuntary government controls after the fact. This rarely works very well, and it is both impersonal and coercive to boot. But when we view the social order as shaped primarily by personal moral decisions, then we have a chance to shape it according to the principle of solidarity—the concern of all for all.
Solidarity Demands Subsidiarity
This leads us once again to the forgotten principle of subsidiarity, because solidarity and subsidiarity are really opposite signs of the same coin. I have said in earlier writings that those in our culture who seem most concerned about social inequities appear to be committed to solidarity without paying the least attention to subsidiarity. On deeper reflection, I would argue a stronger case. The very fact that many people can express deep concern about unfortunate social situations without thinking in terms of subsidiarity is clear evidence that they really don’t understand solidarity at all. Their solutions to social problems almost always involve the expansion of state power to do things for (or perhaps to) those of us, rich and poor, who are not living according to their prescribed vision. To be sure, the careful application of the force of law in such matters is sometime both necessary and salutary, but more often the resort to government power actually represents a failure or even a deliberate bypassing of solidarity, an unwillingness to work shoulder to shoulder with those people who ought to be actively incorporated into proposed solutions to their problems.
When we’re really concerned about persons, and not just about “situations”, we always want to get them involved in the process of making their lives better. We want to explore their concerns, weaknesses and strengths, and find ways for them to participate in the solutions. We want to stimulate effective and voluntary action on the part of all concerned so as to create as many stakeholders as possible in the process of improvement. This simply isn’t possible without subsidiarity, without attempting to create effective mechanisms at the most appropriate levels to address core issues. If we are really moved by the principle of solidarity to be significantly concerned about others, we will always look for ways to build productive, multi-level relationships among the real people who must collaborate to make things better.
Intermediary Institutions
Subsidiarity is closely connected to the role of what we call intermediary institutions. In a medieval monarchy, for example, there was generally far more personal and group freedom with respect to central government than we experience in today’s democracies. This statement may be incomprehensible to the modern mind, but its truth is proved by the existence and operation of the intermediary institutions through which so many divergent aspects of the social order were organized. The most important of these intermediary institutions was the Church, of course, though the Church is only incidentally an intermediary institution between the citizen and the State. In her own sphere the Church is not intermediary but sovereign. But in addition to the Church, the nobility had their traditional rights, privileges and deliberative bodies, as did the free towns, as did the guilds which represented skilled laborers of every kind.
Intermediary institutions contribute greatly to the vibrancy of human culture because they involve human persons in the activities and decisions which affect their destinies precisely at the level at which each solution ought to be decided and implemented. Strong intermediary institutions also serve as a necessary hedge against the tendency of those higher up to grab increasing amounts of power so that they might order the world to suit themselves.
Another and even more remarkable instance of the role of intermediary institutions was evident in the difference between slavery in the United States and in the New World colonies of Spain. While it is obvious that slavery should never have gotten started among Christians in the first place, it was difficult to root out in a New World dominated by large landowners with a strong sense of commercial self-interest. But the Catholic Church was a very strong intermediary institution in both Spain and her colonies. Slaves were recognized as persons and protected from many forms of abuse. They had time off, they could earn money, and they were permitted to purchase their freedom. In addition, the laws of the Spanish Crown, formed over the centuries under the influence of the Church, mitigated slavery in the colonies, and in the end the practice was abandoned under the combined pressures of institutions operating from within the social order.
In the United States, however, the Catholic Church was weak, and the voice of religion was divided among hundreds of differing sects, which were often quite willing to serve the moral convenience of their congregations; nor had the laws of the United States been shaped under the influence of the Church. Therefore, in the United States slavery became what historians can only describe as a Peculiar Institution. Slaves were treated not just as slaves in a traditional sense—human persons in servitude—but as animals, as non-persons. No intermediary institution of any significance was capable of mitigating the horrors of American slavery, still less of converting or pressuring the wealthy landowners who kept the Peculiar Institution in place. In the United States, slavery was a problem that would ultimately be solved through the cataclysm of civil war.
Where We Are Today
Over the past several hundred years, with the rise of the modern nation state, intermediary institutions have become largely non-existent or weak, and the living reality of subsidiarity (with or without formal instruction in the principle) has declined along with them. This goes a long way toward explaining how totalitarianism has become possible. It is true that Western commentators have frequently noticed a far stronger tradition of voluntarism in the United States than in Europe; we do have here a strong tradition of ad hoc organizations, typically non-profits, formed to address a wide variety of social problems and also to influence government policy. The United States also has a stronger tradition of State government than do the provinces of most other Western nations. But even in America, there can be no question both that non-governmental organizations have relatively shallow roots in the social order, and that intermediate levels of government, which theoretically represent a significant level of subsidiarity, have gradually lost more and more of their power and authority. In the West generally, it seems, there is little between the isolated individual and the highest level of government.
Yet it is precisely to the principle of subsidiarity that the West will have to look if it hopes to once again stimulate a strong and creative social order—a social order in which people actively cooperate in solving their own problems, rather than passively looking to take care of everything by funding monstrous top-level bureaucracies through monstrous bottom-level taxes. As I said at the outset, we seem to rely on the market to create wealth and the State to come along later and redistribute it, and the one great political fear on the part of the State is that it might act so aggressively in the redistribution as to kill the market’s Golden Goose. Meanwhile, regardless of how much money is earned and spent, large numbers of social problems continue to worsen.
Perhaps this is because “the exclusively binary model of market-plus-State is corrosive of society.”
“Articulation” in Business and Government
We unwittingly permit this social corrosion to occur because of our unfortuanate cultural blinders. As Benedict puts it, “The continuing hegemony of the binary model of market-plus-State has accustomed us to think only in terms of the private business leader of a capitalistic bent on the one hand, and the State director on the other” (#41)—leaving nearly everyone else out of the picture. In attempting to address this corrosion, the Pope frequently refers to the need for articulation or stratification in the way in which social problems are addressed. Here is a representative passage on the business side of the divide:
In reality, business has to be understood in an articulated way…. It is in response to the needs and the dignity of the worker, as well as the needs of society, that there exist various types of business enterprise, over and above the simple distinction between “private” and “public”. Each of them requires and expresses a specific business capacity. In order to construct an economy that will soon be in a position to serve the national and global common good, it is appropriate to take account of this broader significance of business activity. It favors cross-fertilization between different types of business activity, with shifting of competences from the “non-profit” world to the “profit” world and vice versa, from the public world to that of civil society, from advanced economies to developing countries. (#41)
A little later he uses the same terminology in his discussion of the need for world-wide regulation of international trade and finance:
In order not to produce a dangerous universal power of a tyrannical nature, the governance of globalization must be marked by subsidiarity, articulated into several layers and involving different levels that can work together. Globalization certainly requires authority, insofar as it poses the problem of a global common good that needs to be pursued. This authority, however, must be organized in a subsidiary and stratified way, if it is not to infringe upon freedom and if it is to yield effective results in practice. (#57)
In this passage, it becomes clear that the terms “articulated” and “stratified” refer to a sensible, targeted and effective organization, in different ways and at different levels, of all the roles, purposes, persons and authority necessary to address social problems—in a word, the implementation of subsidiarity through intermediary institutions. In the following passage, Benedict leaves no doubt as to his meaning:
Subsidiarity is first and foremost a form of assistance to the human person via the autonomy of intermediate bodies. Such assistance is offered when individuals or groups are unable to accomplish something on their own, and it is always designed to achieve their emancipation, because it fosters freedom and participation through assumption of responsibility. Subsidiarity respects personal dignity by recognizing in the person a subject who is always capable of giving something to others. By considering reciprocity as the heart of what it is to be a human being, subsidiarity is the most effective antidote against any form of all-encompassing welfare state. It is able to take account both of the manifold articulation of plans — and therefore of the plurality of subjects — as well as the coordination of those plans. Hence the principle of subsidiarity is particularly well-suited to managing globalization and directing it towards authentic human development. (#57)
The Problem Implies a Solution
It is probably an oversimplification, but not by much, to say of the two main political parties in the United States that the Republicans talk subsidiarity without solidarity and the Democrats talk solidarity without subsidiarity. I suspect the dichotomy holds true for conservatives and liberals in much of the Western world. In the conservative mind, which is usually market-oriented, the human person is too often reduced to the status of a commodity to be used by those who allegedly understand how to manage market forces. In the liberal mind, which is usually State-oriented, the human person becomes an object of social engineering by those who allegedly understand how to properly regulate all of life.
There are many reasons why it is difficult for significant numbers from both sides to come together through an understanding of the true reciprocity of solidarity and subsidiarity. The most important of these reasons is almost certainly the great division over critical issues involving human life, and I do not for a moment mean to put that in second place. But the need to get solidarity and subsidiarity working together is extremely grave, because neither can exist without the other. Anyone who embraces subsidiarity without solidarity necessarily commits himself to selfishness, while anyone who embraces solidarity without subsidiarity necessarily lies to himself. But at least now we can begin to understand why our social order has so many severe deficiencies; that is, we can begin to understand what is wrong. And what is wrong, at least in this context, is that “the exclusively binary model of market-plus-State is corrosive of society.”
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Jeffrey Mirus – President of CatholicCulture.org |
January 30th, 2010
It may be the start of the biggest oil job in the world. Each day, 20 workers from BP and China National Petroleum Corp. (CNPC) buckle down to the task of prepping the Rumaila oil field in southern Iraq for rapid development. In industry lingo, Rumaila is a “supergiant”—a 50-mile-long deposit of sweet crude with estimated reserves of 16 billion barrels, whose output may someday rank second only to Saudi Arabia’s vast Ghawar field. The Saudis, though, have carefully managed their oil assets for decades. In contrast, Rumaila, a lightly inhabited expanse of date groves and Bedouin encampments, has not had a proper upgrade since the 1970s. The Iraqis contracted with BP and CNPC last year (BP) to juice Rumaila’s production from 1.06 million barrels a day to 2.85 million, all in seven years. No one has ever tried such a ramp-up at a field as huge as this one. Putting Rumaila back in full working order will take tens of thousands of workers, 1,000 new wells, and billions in investment.
BP is the largest partner in the venture, but only by a dipstick: It has a 38% stake, while the Chinese hold 37% (the rest is owned by an Iraqi company). The media focus has been on BP’s decision to take up the Rumaila challenge for a low fee of only $2 for every barrel the venture produces. But the more important story could be China’s role. “CNPC’s involvement brings together the country with the most rapid growth in energy demand in history with the country that plans the greatest buildup of production capacity ever,” says Alex Munton, an Iraq specialist at Edinburgh-based oil consultants Wood Mackenzie.
China has moved fast. In a little over a year, CNPC, China’s main oil producer with revenues of more than $188 billion and a 1.5 million-worker payroll, has won large stakes in three Iraqi oil fields. The total production target for those fields is around 3.5 million barrels per day—close to China’s domestic output. In two of the ventures, China is the controlling partner. Over two decades or so, CNPC may spend some $20 billion on the fields, the most of any oil company in Iraq since Saddam Hussein fell. For China’s oil industry, “Iraq is a game-changer,” says Wenrang Jiang, an authority on the country’s energy thirst who teaches at Canada’s University of Alberta.
Red Star Over Iraq Business Week (hat tip to Naked Capitalism)
January 24th, 2010
For almost a year now, Democratic pollsters have been pointing out how much the public hates the bank bailout and despises Wall Street. But there was no reason for Democratic leaders in Congress or the White House to pay much attention. After all, it was a Republican president and a Republican Congress that came up with the bank bailout plan to begin with. Some stalwart Republicans had grumbled about it, of course, but Republicans have always been on the side of Wall Street and big business and weren’t likely to call for strong measures to prevent the Street from getting into trouble again.
Larry Summers and Tim Geithner scuttled Paul Volcker’s plan to separate the banks’ commercial and investment functions, and didn’t want to limit the size of banks or the risks they could take on. Summers and Geithner have wanted to get the banks back to profitability as soon as possible. And Dems in Congress have had no stomach to take on Wall Street, a major source of campaign funding.
But suddenly the winds are blowing in a different direction over the Potomac. The 2010 midterms are getting closer, and the Dems are scared. Their polls are plummeting. The upsurge in mad-as-hell populism requires that Democrats become indignant on behalf of Americans, and indignation is meaningless without a target. They can’t target big government because Republicans do that one better, especially when they’re out of power. So what’s the alternative? Wall Street.
Perhaps I’m being too cynical. Maybe the Obama and congressional Democrats are now ready to give up Wall Street trickle-down economics and focus on Main Street trickle-up. “There are two ideas of government,” said William Jennings Bryan at the Democratic National Convention in Chicago in 1896. “There are those who believe that you just legislate to make the well-to-do prosperous, that their prosperity will leak through on those below. The Democratic idea has been that if you legislate to make the masses prosperous their prosperity will find its way up and through every class that rests upon it.” He couldn’t have said it better.
January 23rd, 2010
Last week Iranian activist Abed Tavancheh was sentenced to one year in prison for giving an interview to SPIEGEL about student protests. His lawyer Naser Zarafshan says his client doesn’t regret speaking out.
SPIEGEL: Your client Abed Tavancheh was supposed to have been arrested last Tuesday. What do the authorities in Iran accuse him of having done?
Naser Zarafshan: Abed Tavancheh fights for freedom of expression and democracy. He had already been arrested four times and sentenced to eight months’ imprisonment. A part of the current allegations against him relate to these activities. The primary charge, though, has to do with an interview he did with SPIEGEL in September about the tense atmosphere in the universities. The state prosecutor says that by doing this he spread “propaganda against the holy order of the Islamic Republic” and that he “incited unrest.”
SPIEGEL: How did the authorities become aware of the interview?
Zarafshan: Immediately after the publication of the interview, a “special report” was published in a large, extremely conservative daily newspaper. The report labeled SPIEGEL a “Zionist magazine” and Tavancheh was harshly attacked as a “US-oriented left winger.” Subsequently the state prosecutor summoned him.
SPIEGEL: Did the case go to trial?
Zarafshan: The interrogation was followed by three hearings before a revolutionary tribunal. I was even not summoned to two of the hearings. One cannot hope for justice there. We cited the right to freedom of expression which is guaranteed in our constitution. Nevertheless the court considered the interview to be a “violation of national security.” For this, Tavancheh got a new prison sentence of one year.
SPIEGEL: Did your client accept the verdict?
Zarafshan: No, we don’t recognize this verdict, which wasn’t even given to us in writing. Because my client assumed he would be arrested, he quickly left the courtroom.
SPIEGEL: Now the authorities are looking for Tavancheh. Does he now regret having given the interview?
Zarafshan: My client knew what he was getting into. He stands by every sentence.
January 23rd, 2010
A Greenpeace activist dressed as an egg plant, or aubergine, protests in Bangalore, India on Friday against Bt brinjal, a genetically modified (GM) egg plant crop. The Indian government is organizing a series of public consultations to decide on whether to approve it as India’s first GM crop.
January 23rd, 2010
he big banks have gotten plenty of help with their debts. But what about struggling households and non-financial institutions? Roosevelt Institute Braintruster Marshall Auerback investigates.
Once all the TARPs are tidied up and the quarterly profits no longer a revelation, American consumers will still be swaddled in debt. What’s to stop them from just walking away from it–and who’s to say, if the banks keep this kind of behavior up, we don’t want them to?
In The Holy Grail of Macroeconomics, an account of post-bubble Japan, Richard C. Koo illustrates that highly-indebted corporations with depressed asset holdings and a positive cash flow will embark on sustained debt repayment until their balance sheets are healthy once again. He argues that this happened in Japan over the last two decades and also happened in the U.S. over the four years of the Great Depression. This ongoing debt repayment created decades of economic stagnation, particularly because the fiscal response was so fitful and inconsistently applied.
But does it follow that sustained debt repayment will be the response of a household sector in the U.S. with destroyed asset holdings and high debt? To our way of thinking, it is unclear. This is especially the case with respect to mortgage indebtedness; U. S. households have non-recourse mortgage loans and can walk away from their debts rather than pay them down.
Public opinion polls reveal that Americans are angry about the current economic, healthcare, housing and environmental crises. Polls also document that a significant majority of Americans want the federal government to do something to fix these problems. But you’ve also got the makings of a huge neo-populist anger brewing, largely because (in the words of Frank Rich), “What disturbs Americans of all ideological persuasions is the fear that almost everything, not just government, is fixed or manipulated by some powerful hidden hand, from commercial transactions as trivial as the sales of prime concert tickets to cultural forces as pervasive as the news media.” In other words, even the feds might not be able to help.
The approach to financial reform that the Obama Administration has hitherto adopted is a classic illustration of this problem. Financial institutions are now back to business as usual and have provided limited help to the non-financial sector. In fact, some of them are clearly committed to worsen households’ financial position and have oriented their activity toward this end in order to maximize their profitability. Yet, they have received commitments from the taxpayer totaling $23.7 trillion.
Marshall Auerback argues that a debtor’s revolt would be a good thing.
H/T to Naked Capitalism
January 18th, 2010
Let’s hope he doesn’t end up the same way:
“Could it all be a bad dream, or a nightmare? Is it my imagination, or have we lost our minds? It’s surreal; it’s just not believable. A grand absurdity; a great deception, a delusion of momentous proportions; based on preposterous notions; and on ideas whose time should never have come; simplicity grossly distorted and complicated; insanity passed off as logic; grandiose schemes built on falsehoods with the morality of Ponzi and Madoff; evil described as virtue; ignorance pawned off as wisdom; destruction and impoverishment in the name of humanitarianism; violence, the tool of change; preventive wars used as the road to peace; tolerance delivered by government guns; reactionary views in the guise of progress; an empire replacing the Republic; slavery sold as liberty; excellence and virtue traded for mediocracy; socialism to save capitalism; a government out of control, unrestrained by the Constitution, the rule of law, or morality; bickering over petty politics as we collapse into chaos; the philosophy that destroys us is not even defined.
We have broken from reality–a psychotic Nation. Ignorance with a pretense of knowledge replacing wisdom. Money does not grow on trees, nor does prosperity come from a government printing press or escalating deficits.
We’re now in the midst of unlimited spending of the people’s money, exorbitant taxation, deficits of trillions of dollars–spent on a failed welfare/warfare state; an epidemic of cronyism; unlimited supplies of paper money equated with wealth.
A central bank that deliberately destroys the value of the currency in secrecy, without restraint, without nary a whimper. Yet, cheered on by the pseudo-capitalists of Wall Street, the military industrial complex, and Detroit.
We police our world empire with troops on 700 bases and in 130 countries around the world. A dangerous war now spreads throughout the Middle East and Central Asia. Thousands of innocent people being killed, as we become known as the torturers of the 21st century.
We assume that by keeping the already-known torture pictures from the public’s eye, we will be remembered only as a generous and good people. If our enemies want to attack us only because we are free and rich, proof of torture would be irrelevant.
The sad part of all this is that we have forgotten what made America great, good, and prosperous. We need to quickly refresh our memories and once again reinvigorate our love, understanding, and confidence in liberty. The status quo cannot be maintained, considering the current conditions. Violence and lost liberty will result without some revolutionary thinking.
We must escape from the madness of crowds now gathering. The good news is the reversal is achievable through peaceful and intellectual means and, fortunately, the number of those who care are growing exponentially.
Of course, it could all be a bad dream, a nightmare, and that I’m seriously mistaken, overreacting, and that my worries are unfounded. I hope so. But just in case, we ought to prepare ourselves for revolutionary changes in the not-too-distant future.”
January 18th, 2010
As a daily nyc subway rider, this is very edifying for me….John Brian
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A new pro-God ad campaign will reach 1,00 subway cars in New York starting tomorrow with the message of God’s love. Times Square Church, which is located in the heart of Times Square in New York City, is sponsoring the campaign. In addition to the subway cars, the ads will appear on 50 platform posters in many Manhattan stations.
Ads will boldly feature the words “God is” in the center,surrounded by words describing God’s qualities in colorful fonts. Among the “God is” attributes are: with you, willing to help, able to protect, a father, a husband to the widow, your friend, aware of your struggle, a good listener, the one who loves you, power to change, incredible, ready to forgive, there when no one else is, looking at you, Jesus.
“We want to encourage people to seek God and prove that indeed He is,” explains Carter Conlon, senior pastor of Times Square Church. “The ads describe God in just a few of the infinite ways He proves His presence to us every day.”
This is not the first outreach effort by Times Square Church; this past September the church hosted “Prayer in the Square” in which over 300 churches and 65 youth organizations gathered for an hour of prayer in Times Square.
With this new effort, the church is hoping to not only reach unbelievers but those who have left the faith. “We are praying that people who don’t know God and would like to know Him, would be moved by these ads to visit Times Square Church or any Bible believing church in New York City and find God through the forgiveness freely offered through His Son, Jesus Christ,” Conlon said. “And to those who once knew God and need to get back to God, we want to say simply this: His arms are open wide always ready to welcome you home.”
A photo of the ads appears below.
January 18th, 2010
The real economy is still deflating. Just look at the jobs situation. Far from slowing or stabilizing, 2009 was the worst year yet for job losses – ‘07…’08 …and ‘09…each year has produced greater losses. Even James Grant, who predicted a “barn burning recovery” now admits that his forecast has gone up in flames. He was “either early or wrong,” he says.
And just look at the real estate market. “Home prices are softening again,” says David Rosenberg. As for commercial real estate, here’s Kenneth Laub, who’s been in the business for 50 years, as reported by Bloomberg:
“He says the current downturn will overshadow all of the others…
“‘It won’t be a typical part of a cycle where we’re down for two or three years and things recover,’ says Laub, 70, whose New York firm, Kenneth D. Laub & Co., says it has handled more than $40 billion of real estate transactions since its inception in 1969. ‘It will be longer than we’ve gone through before.’
“As in past slumps, the weak US economy is curbing demand for commercial space, increasing vacancies and causing rents and property values to fall. The key difference today is the explosion in debt financing and related derivatives that fueled a run-up in commercial real estate prices in the 2000s, Laub says. That’s left property owners struggling to make mortgage payments. The overhang of debt will delay any recovery, he says.
“‘It’s not a supply-demand thing; it’s an overleveraged condition,’ Laub says.
“Laub expects a wave of restructurings by troubled commercial borrowers as hundreds of billions of dollars of loans come due annually during the next few years. Commercial real estate may still be recovering a decade from now, he says. ‘What you’re going to see is a tremendously long workout period unprecedented in commercial real estate in this country,’ Laub says. ‘That’s where we’re going, and it’s just beginning.’”
January 18th, 2010
Otherwise-obscure central bankers spent an unprecedented amount of time in the global limelight last year. As the crisis brought down not only banking behemoths, but also macroeconomic axioms, the expansionary measures enacted by the Fed’s Ben Bernanke, the European Central Bank’s Jean-Claude Trichet, and the Bank of England’s Mervyn King have been credited, at least for now, with preventing a second coming of the Great Depression. And for that they have been hailed: Bernanke is both Time’s Person of the Year and Foreign Policy’s top global thinker, while Trichet wields tangible power in an otherwise diffuse EU and King has expressed ideas that are likely to influence future financial architecture more than those emanating from 10 Downing Street. But an epic battle unleashed last week between the Argentine government and its central bank is an apt reminder that the most challenging times for central bankers may lay not in the recent past, but in a more problematic future.
Argentina is usually singled out in textbooks as an example of what not to do with a country. Coup d’états and contradictory economic models have turned the fifth richest economy a century ago into the largest-ever sovereign debt defaulter in 2001. It is a tragic story. Since their accession to power in 2003, Néstor and Cristina Fernández de Kirchner, the country’s former and current president, respectively, seemed intent on changing Argentina’s direction post-default. Yet they soon revealed themselves to be another pair of messiahs turned into despots.
As in most developed nations, Argentina’s central bank is, by charter, independent of the country’s executive. The Harvard-educated, intellectually impressive current governor, Martín Redrado, has largely stood behind the Kirchners’ heterodox economic program, which favors export-driven growth as well as interventionist policies, including price controls and active resistance against peso revaluation. He was so supportive that in 2006 he provided central bank reserves to pay back all of Argentina’s outstanding debts with the IMF. As the country has remained largely cut off from capital markets since the default, paying back loans that accrued low single-digit interest (the IMF’s) while continuing to pay double-digit interest rates for “patriotic” bonds financed by their closest regional ally (none other than Venezuela’s Hugo Chávez) was clearly a political decision. For the Kirchners, hatred of the Washington Consensus weights more than the burden of interest.
In their second administration, however, the Kirchners’ authoritarian style has run them into trouble; in the midst of the global crisis, they sought to secure future sources of government spending in what became a true “asset grab.” First, they tried to radically increase taxes on agro-exports (rather sensationally, it was the government’s own vice-president who defeated the bill after a Senate tie). Then, in late 2008, the president pushed for the nationalization of all private pension funds, bringing an additional $25 billion under government control. Everyone saw it for what it was: a scramble for liquidity. Such moves have destroyed what was left of the ruling couple’s international reputation, and also much of their domestic political capital.
But it was only last week that the Kirchners’ hubris provoked a fully-fledged institutional crisis. Sidestepping an increasingly critical Parliament, the president took advantage of a legislative summer recess to issue a decree ordering Redrado to transfer $6.5 billion of bank reserves (around a quarter of the total, depending on the calculation) to the Treasury’s “Bicentennial Fund.” The purpose of such a euphemistically-baptized vehicle was to guarantee outright all 2010 foreign debt payments, in the hope that capital markets would welcome back the government and that fresh funds would revitalize the administration ahead of the 2011 presidential elections.
Reflecting changing political tides, however, Redrado refused to wire reserves to the Treasury, warning that they may be subject to confiscation abroad. After all, many of those bondholders hurt by the 2001 default have yet to settle their cases in international courts. But while the opposition attempted to convene an extraordinary parliamentary session to shoot down Kirchner’s decree, the administration doubled down: Through another decree, it fired the central bank governor. Hence they made a former key ally into a political martyr (and, odds are, a future paladin of the opposition).
How NOT to Manage a Central Bank Pierpaolo Barbieri
Related article:
What Bernanke’s Confirmation Hearing Tells Us About the Future of the Fed
January 16th, 2010
Google to defy China
Google announces an end to censored search results in China following alleged cyber attacks. Is Google.cn finished?
January 16th, 2010
By Richard Alford, a former economist at the New York Fed. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side.
A week ago, in Atlanta, Bernanke responded to his critics, including John Taylor of Taylor Rule fame (the Taylor Rule is a benchmark widely used by central banks in setting their “policy” interest rates). Bernanke asserted that monetary/interest policy has been appropriate-and was not” too low for too long” from 2001-2006. Taylor responded in a WSJ Op-Ed piece on January 11th reasserting his position that interest rates were “too low for too long”. A very public debate has been joined. Taylor’s view is based on his chosen variant of the Taylor Rule, while Bernanke cites his own chosen variant of the Taylor rule.
This post establishes that interest rates were “too low for too long” (from 1996-2006) while dispensing with the Taylor Rule and its sensitivity to choices of inputs and assumptions. It does so in a framework that employs definitions and measures favored by Bernanke. The frame work of the analysis is then used to answer other questions about economic policy in the past and going forward.
The Deflationary Threat?
Price stability/inflation targeting has been center stage of interest rate policy since Japan began its lost decades. Fear of deflation dominated the thinking of the Fed. This was especially evident in the response to the recession of 2001. The decidedly expansionary monetary policy adopted at the time was justified in terms of preventing a deflationary episode like Japan’s. In a February 2002 speech titled “Deflation: Making Sure ‘It’ Doesn’t Happen Here.” Bernanke defined deflation as:
“Deflation is a general decline in prices, with emphasis on the word “general”.
Bernanke was drawing a distinction between changes in relative prices of some goods on the one hand and deflation – pervasive declines in prices – on the other. Later in the speech, Bernanke re-emphasized the point: “Deflation per se occurs only when price declines are so widespread that broad-based indexes of prices register ongoing declines.” However, Bernanke and the Fed allow for exceptions. For example, food and energy inflation/deflation have been ignored even when changes in food and energy prices registered on broad-based indexes.
In the speech, Bernanke also specified the cause of deflation: “Deflation is in almost all cases a side effect of a collapse of aggregate demand –a drop in spending so severe that producers must cut prices…to find buyers.” In a footnote, Bernanke added:” I don’t know of any unambiguous example of a supply-side deflation, although China in recent years is a possible case.”
Bernanke therefore defines a deflation as a generalized, broad-based, widespread decline in prices brought on by a severe drop in spending. The 425 bps of rate cuts in the Fed funds target during 2001 was presented as necessary to prevent a demand-lead deflationary spiral.
However, a simple decomposition of Bernanke’s favorite inflation measure, the PCE, for the bubble years 1996-2006 indicates that price declines were not broad-based, widespread, or “general”, but localized even as they introduced disinflation to the broad-based price indexes. Furthermore, there is evidence that demand by US-based economic agents did not drop below the level implied by full employment.
Chart (I) is of the PCE (and its components) price deflator(s). It clearly indicates that deflationary pressure was far from broad-based or generalized. The deflationary pressure was confined to the consumer durable goods component of PCE. The durable goods component had a weight between 12 to 13% during the period 2001-2006.
January 16th, 2010
….the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.
The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.
Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing.
FDR’s first inaugural address
January 16th, 2010
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| Flagging: a US sailor stands on the flight deck of the aircraft carrier USS George Washington |
If a week is a long time in politics, a decade is starting to look like an age in geopolitics. Comparing the America that began the 21st century with the America of today is to witness a country that has in some ways quite radically altered its view of itself and its relationship to the world.
In short, the metallic rust of decline has crept into the American soul. “You could argue that the first decade of the 21st century was the last decade of the American century,” says David Rothkopf, a former Clinton administration official and student of US foreign policy. “We are now entering the multipolar century.”
January 16th, 2010
It’s everywhere at the multiplex these days: religion. Or if that word makes you uncomfortable, you can go with the more general “spirituality.”
In movies as varied as the dead serious “The Road,” the uplifting family picture “The Blind Side,” the biting comedy “The Invention of Lying” and even James Cameron’s sci-fi opus “Avatar,” issues of faith and morality and mankind’s place in the universe are all the rage.
Not all of these movies embrace religion. Some question human gullibility. Some ask for evidence of a higher purpose in what often seems a random universe. But whether they encourage prayer or doubt, they’re all part of the zeitgeist.
But why now?
“There are two schools of thought about that,” said Greg Wright, an editor at HollywoodJesus.com, which examines popular culture from a religious perspective.
“The more paranoid elements of our culture tend to think Hollywood has a proactive agenda, that producers have a grand scheme to use movies to shape the thinking of audiences. I don’t subscribe to that school.
“I believe that Hollywood gives audiences what audiences want to see. If people don’t want to see movies with certain messages, they won’t buy tickets.
“So if there’s a trend out there, it’s one reflecting what people are already thinking and feeling,” Wright said.
No coincidence
And what are we thinking?
Sister Rose Pacatte, who reviews movies for the Pauline Center for Media Studies in Los Angeles, said it isn’t mere coincidence that a new animated version of Dickens’s “A Christmas Carol” came along in 2009. The film was released in the wake of an economic crisis fueled by greedy self-interest on an unprecedented scale, she said.
“Being a good man of business will not save your soul. That’s an essential message of ‘A Christmas Carol’ and one emphasized by this version,” she said.
Dickens’s tale may have little to say about God and Jesus, but it stresses charity and the dangers of poverty and ignorance, she said.
Other current films, while not overtly religious, stress the idea of human beings as dependent on one another and responsible for one another’s well-being.
Pacatte pointed to “Up in the Air,” in which George Clooney plays a loner whose job is to fire downsized employees and who has attempted to insulate himself from all human commitment.
“In some ways it’s a modern ‘Christmas Carol,’ with Clooney’s character becoming a bit more human, becoming more aware of himself and others,” Pacatte said.
“Avatar” depicts humanity as a rapacious race represented by a soulless corporation and largely incapable of appreciating the simple ecological spiritualism of an alien race.
A runaway hit, too
Of course, some films put religion front and center.
“Of these films, ‘Blind Side’ has the most evangelical world view,” said Mark Moring, senior associate editor at Christianity Today. “It’s a movie based on real people who are devout Christians and whose faith clearly played a big part in their reaching out to this young homeless man and turning his world around.” That “The Blind Side” has become a runaway hit should further encourage Hollywood to deal with religious themes, Moring said.
“When ‘The Passion of the Christ’ came out in ‘04, it showed Hollywood they could make lots of money with in-your-face spiritual themes. It taught them they don’t have to be afraid of going with religious if not specifically Christian ideas. ‘Blind Side’ reinforces that,” Moring said.
Wright at HollywoodJesus.com said, “The market dynamics of film are just beginning to sort out what happened in the wake of ‘The Passion of the Christ.’ Given that film production cycles can take several years, I expect to see more religious-themed films in coming months.”
Not all of these will be big-budget Hollywood productions. Wright noted the box-office success of the low-budget “Facing the Giants” and “Fireproof,” two unabashedly religious dramas made by Sherwood Pictures, which is affiliated with a church in Georgia.
“We’re finally getting some decently crafted movies aimed at the faith audience,” Wright said. “In the wake of ‘Passion,’ lots of titles were rushed to market to take advantage of the religious audience, and they just weren’t very well written or produced. It’s taken a while to get the quality.”
Most likely the big studios quickly will lose interest in faith-themed subject matter, Wright said.
“Hollywood is all about cycles. This one will pass,” he said. “The films that really matter, that actually have something to say, are the indie titles that sneak into the Hollywood distribution system or make their way to home video or the film festivals.
“That’s where the real future of spiritual movies is — with niche independent filmmakers who are finding distribution channels that work for them. Hollywood will always have a huge appetite for big tent-pole films. But that leaves an opportunity for others to make more modest movies about things that matter,” Wright said.
Big-screen offerings
Recent or upcoming releases with religious themes:
“The Road”: Earth is dying. In the wake of an undisclosed disaster, a man (Viggo Mortensen) and his son (Kodi Smit-McPhee) wander a barren land, searching for sustenance and avoiding roaming bands of cannibals. Unrelentingly bleak, this cinematic version of Cormac McCarthy’s novel is about one man’s attempt to preserve what’s left of humanity’s goodness and innocence in his child. Though the film is never openly religious, many see it as a spiritual quest; McCarthy has spoken of his book as a sort of Christian allegory.
“The Lovely Bones”: Life after death? It’s a given in Peter Jackson’s adaptation of Alice Sebold’s novel about a murdered teen (Saoirse Ronan) who, from the afterlife, continues to watch over both her family and her killer (Stanley Tucci).
“The Invention of Lying”: Ricky Gervais’s comedy unfolds in an alternate universe where everybody compulsively tells the truth. But one man learns how to fib, and before long he’s telling whoppers. In an effort to placate his unhappy fellow men, he declares that the world is run by a big man in the sky. He codifies rules of behavior and writes them down on the lids of pizza boxes. (What . . . no stone tablets?) And, having no defense against prevarication, everyone believes him. This comic parable on the origins of religion is biting, but Gervais’s beaming delivery softens the blow. (No longer in theaters; due on DVD this month.)
“The Book of Eli”: Denzel Washington plays a lone man fighting his way across post-apocalyptic America to protect a sacred book that allegedly holds the secrets to saving humankind.
“Legion”: God has lost all hope in humankind and sends his legion of angels to Earth to bring on the Apocalypse in this supernatural action thriller. In a remote truck stop diner named Paradise Falls, the archangel Michael (Paul Bettany) joins a group of strangers to defend the diner’s waitress, who may be pregnant with the Messiah.
“The Last Station”: The eternal battle between spirituality and materialism is waged in the soul of acclaimed Russian author Leo Tolstoy (Christopher Plummer), who is torn between his own need for transformation and the demands of his wife (Helen Mirren) and disciples.
“A Serious Man”: The Coen brothers retell the biblical story of Job, relocating it to the late ’60s Minneapolis suburbs of their adolescence. A Jewish college professor (Michael Stuhlbarg) finds everything in his life — from his marriage to his car — going down the tubes. In the original, God and Satan strike a deal to see how much grief one man can absorb before renouncing righteousness. This being a Coen brothers effort, God is nowhere in sight. Misery is just a universal fact of life; you’ll survive only if you can laugh at it. (No longer in theaters; due on DVD in February.)
“A Christmas Carol”: Charles Dickens wasn’t particularly religious, but he sure knew how to punch our spiritual buttons. This computer-animated retelling from director Robert Zemeckis (with Jim Carrey as a superlative Scrooge) doesn’t diminish Dickens’s message: Devote your life to the almighty dollar (or pound sterling) and you’ll spend eternity in the chains of your own making.
“Avatar”: James Cameron’s futuristic epic is about the efforts of humans to exploit the mineral wealth of a distant moon. Problem is, it’s already occupied by blue-skinned primitives who believe that everything on their world — animals, plants, the very dirt they walk on — is imbued with spiritual power that must not be disturbed. Human greed vs. spiritual enlightenment: a timely theme.
“The Blind Side”: In the holiday season’s unexpected sleeper hit, a homeless boy (Quinton Aaron) is adopted by a wealthy Memphis family (Sandra Bullock is the force-of-nature mom), and with the family’s love, dedication and disposable income, the kid raises his grades and becomes a terror on the football field. It’s the true story of Baltimore Ravens lineman Michael Oher, and writer-director John Lee Hancock lets us know that the family’s charity is rooted in their Christianity. Hollywood movies rarely know how to handle persons of faith; this one does.
– McClatchy Newspapers
January 10th, 2010
Bill Bonner writes at The Daily Reckoning:
The stock market has not been corrected. It could easily get cut in half in the next six months. (We’re leaving our ‘Crash Alert’ flying over the building with the gold balls…until stocks reach bargain prices.)
The bond market could crash any time. The US is borrowing more money than ever before – trillions more. With such a huge increase in supply, demand…and prices…it should crack, sooner or later. Higher bond yields would send the whole economy into a much deeper depression.
Even our gold holdings could lose 20%-30% of their value. And gold stocks? They could get killed in the next stock market downswing.
Despite a truly monumental (albeit imbecilic) effort to revive the economy…the latest figures show the weakest post-recession recovery ever. Jobs are missing. Consumer credit is shrinking. Inflation is going negative. There is no real recovery…it’s a mirage created by government spending.
Monetary policy is useless (banks won’t lend; consumers won’t borrow). And fiscal policy, while apparently more effective, destroys wealth; it doesn’t add to it.
The more the government increases spending, to offset the correction, the more the economy becomes addicted to it. It’s like trying to cure an alcoholic by introducing him to heroin. Take away the government spending – as Japan tried to do – and the economy collapses into a deeper depression. Not only that, but the budget deficit actually grows!
In other words, the feds spend money they don’t have trying to fight a correction. This creates huge budget deficits, but it makes it look like the economy is recovering. So they slack off. Then, they discover that their fiscal stimulus didn’t really create any genuine economic activity. Take away the fiscal stimulus and the economy collapses again…reducing tax receipts and widening the deficit. In effect, the cure became a disease of its own! Now they can’t cut government spending. The economy depends on it. Instead, they’re locked into a debt spiral…more and more deficits…higher and higher debt…down, down, down, until…
..until the whole thing finally crashes.
Japan faced this problem in the ’90s. It eased off its stimulus program…and the economy collapsed. Now, it’s become hooked on government spending. Where does it lead? We repeat this prescient note from The Telegraph, which we sent you yesterday:
“This is the year when Tokyo finds it can no longer borrow at 1pc from a captive bond market, and when it must foot the bill for all those fiscal packages that seemed such a good idea at the time…
“Once the dam breaks, debt service costs will tear the budget to pieces. The Bank of Japan will pull the emergency lever on QE [quantitative easing...aka 'printing money']. The country will flip from deflation to incipient hyperinflation…”
But we’re not worried. Somehow it will all work out. Americans are still trying to get even. They still believe that the stock market will recover – fully. They still think the Fed is in control…and that our economists know what they are doing. They are delusional, in other words.
January 9th, 2010
London, of all places, is leading the battle against exaggerated banker bonuses. And leaders from all over the world are discussing how they can put an end to the banking practices that caused the global economic crisis. They are also considering ways for banks to compensate for the damage they caused.
December 27th, 2009
Water flooded St. Mark’s Square in Venice on Wednesday, the highest level yet for 2009, with 143 centimeters. The flooding has filled more than half of the historical city center with water. The phenomenon of high water, which floods the Venice lagoon, occurs mainly between autumn and spring when tides are reinforced by seasonal winds. But the heavy rain and snowfall which has been hitting most of Italy in the past few days contributed to a rise in the lagoon’s water level. Officials are warning the water could remain until after Christmas and that tourists should be certain to bring along a pair of Wellington boots.
December 27th, 2009
By Frank Thadeusz
Did our Neolithic ancestors turn to agriculture so that they could be sure of a tipple? US Archaeologist Patrick McGovern thinks so. The expert on identifying traces of alcohol in prehistoric sites reckons the thirst for a brew was enough of an incentive to start growing crops.
It turns out the fall of man probably didn’t begin with an apple. More likely, it was a handful of mushy figs that first led humankind astray.
Here is how the story likely began — a prehistoric human picked up some dropped fruit from the ground and popped it unsuspectingly into his or her mouth. The first effect was nothing more than an agreeably bittersweet flavor spreading across the palate. But as alcohol entered the bloodstream, the brain started sending out a new message — whatever that was, I want more of it!
ALCOHOL’S NEOLITHIC ORIGINS
Brewing Up a Civilization
December 27th, 2009
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