A History of Lefty Grooming

Our lefty friends seem to be mad as hell about being called "groomers" for grooming our kids in the glories of the LGBT life.

This is something of a breakthrough on the pejorative front. Ever since the end of the worst thing ever, McCarthyism -- imagine, the very idea of Communists in the State Department! -- our lefty friends have been doing the pejorative thing on us. Racist, sexist, homophobe, and all the rest of the -phobes.

Now, all of a sudden, our lefty friends are outraged, outraged, that we evil far-right violent extremists dare to say that schools with "transition closets" are grooming our kids for the LGBT life.

As Cpl. Jones would say in the Brit WWII series, Dad's Army, "they don't like it up them." I have no idea what he meant by that.

But really, isn't it the truth that leftism is groomism, and lefties are groomers. On everything.

Religious Grooming

The whole point of Horace Mann and the "common school" movement was first of all, to groom the children of the more severe Puritan sects away from their enthusiastic Christianity. Because the Boston Transcendentalists knew better. Later on, of course, the idea was to groom Irish kids away from their Catholicism, but the Irish weren't having it and built their own Catholic schools instead.

In my view not only is this vile and monstrous, but it also grooms the children of the lower classes away from the best road to the middle class, that encourages subordinate people to become responsible.

Anti-Capitalist Grooming

The whole point of grooming kids to love socialism or the welfare state is to make them into obedient subordinates. There was an excuse for Marx & Co. back in the day. The dark satanic mills of the early Industrial Revolution really did look pretty forbidding. Except, of course, that the workers were getting to live instead of dying out on the land, as they had in England since, say, 1500.

And the market economy encourages people to get out of subordinate peasantry and become an actor in the life not of making just for you and yours, but making stuff for the whole world and accepting its verdict in the wage you get for your labor, or the price you get for your product.

No doubt the market economy has its rough spots, particularly after wars when it is difficult for idiot governments to figure out how to return life -- and particularly the financial system -- to normalcy. But don't ever forget that in the last 200 years the average real per-capita income has gone up by 3,000 percent -- or 30 times. And nobody saw it coming. Oh, there was one guy, Carter Reynell in 1685:

Though we are a nation already pretty substantial... yet it is easy for us to be ten times richer.

But really! What did he know? Especially since it was three years before the Dutch invaded Britland in 1688 and installed the Dutch Finance that would lead to Britannia ruling the waves and Britons never, never, never being slaves.

Career Grooming

The whole point of feminism is that upper-class women don't really like to be domestic. So the schools groom girls to want to have careers.

I tend to find this amusing, for it assumes that men pursue careers because careers are rewarding and satisfying. Not exactly. Speaking as a man, a young man understands that he needs to have "prospects" if he expects to attract an attractive woman to his bed. Thus it is that in the lower classes, the men don't work much and the women don't marry much.

And the problem with grooming women for careers is that it tends to take them out of the baby business in their peak fertile years. You tell me that this is a good thing.

Sex Grooming

The whole point of grooming kids for the sexual revolution is what, exactly? My judgement is that free sex is not good for women at any number of levels. First of all, women are much more at risk from STDs, because of the enclosed nature of their sexual equipment. Secondly, women really do not like serial sexual affairs. It affects their, er, mental health. Or, if you prefer a more universal understanding of women and sex, women really want to cleave to one man and love him forever. Oh, of course, all the men in the world are cads and layabouts and heartless. But a girl can dream, right?

Anti-Family Grooming

The whole point of leftism is to marginalize the family, so it grooms young people away from the mainstream life of marriage and children. No doubt there are people in the world that are marked out to be creative artists, and burying them for thirty years in the work of marriage and children is a waste of their transcendental talent. No doubt there are masculine women that are just the wrong fit for mothering. But for 97.2 percent of people they need to get married and have a family because if they don't they will miss out on the whole point of life. And that is grandchildren.

LGBT Grooming

If you really can't stand a sexual relationship with the opposite sex, well good luck to you, for it's hard to miss out on the mainstream of life. But grooming kids to believe that LGBT is creative, or cool, or deliciously rebellious, or that LGBTs are innocent oppressed people since the dawn of time, is sick and wrong. And to facilitate and groom kids for "transitioning" is not just stupid -- as in good little liberal teachers toeing the party line -- but cruel. Society's message to LGBT should be: do it if you must, but don't frighten the horses in the street. Because the bottom line for human life is babies on the ground, and every child needs a mother and a father: their mother and their father.

I think we need something that rhymes with Groomer. Groomer Doomer? Groomer Broomer? Groomer Fumer? Groomer Puma? Groomer Vroomer?

I will put my unconscious mind to work on it.

Modern Monetary Theory (MMT): What's the Grift?

Since we all need to know about the left's latest wizard wheeze, Modern Monetary Theory (MMT), it's time to make sure we understand it and put it in the context of government finance in general and how government finance developed in history.

I understand the historical progress of government finance as follows:

Stage One: Physical Collection. This occurred in the days before Italian banks. Governments collected tribute in grain and silver from their feudal vassals, and the vassals collected the same from their underlings. But the king was always short of money. Always. Of course, if the king were conquering another country then he and his soldiers would loot and plunder the country to the bare walls. The Roman Empire ruled the world for centuries on this plan.

Stage Two: Italian Bankers. By the time of England's Edward III (reigned 1327-1377) a European monarch could borrow money for his military adventures from the leading bankers in the world: Italian bankers. Pity that Edward defaulted on his loans, and all. Maybe that's why the Brits lost the Hundred Years War and have had a soft spot for the Italians ever since.

Stage Three: Dutch Finance. In their war of independence from Spain the Dutch invented the central bank, the Exchange Bank of Amsterdam, to finance the war. It worked so well that they exported their idea and their regime to Britain and the British used the idea to win the Second Hundred Years War against the French at the Battle of Waterloo in 1815. The beauty of Dutch Finance is that enables the rulers to loot and plunder using the indirect method, partly through seigniorage and partly by the advantage of having its debt as the foundation of the banking system. In the 20th century the various nations used central banking and unlimited debt to fight two world wars. They could do this because they could use money printing and debt to loot their countries to the bare walls without the people rebelling.

Stage Three and a Half: Hamilton Economics. Alexander Hamilton, first US Secretary of the Treasury, ignited an economic boom when he determined to honor the war debt of the various states in the Union at par, and service the debt with new federal taxes.

Stage Three and Three Quarters: Bagehot Economics. After the Crash of 1873 Walter Bagehot in Lombard Street proposed that in the case of a credit collapse the government's central bank should act as "lender of last resort" to keep the financial system alive.

Stage Four: Keynesian Economics. After the cock-up of the Great Depression western political leaders needed a real simple strategy (like in The Manchurian Candidate) to know what to do when the economy was wrecked by a financial crash. The strategy was spend and borrow and elect, preferably with a genius like Lord Keynes in charge.

Stage Five: Bretton-Wood Economics. A big problem in the aftermath of wars conducted under Dutch Finance was "resumption," the attempt to return the value of a national currency to its pre-war value after the monetary inflation of war. After the Napoleonic Wars, the US Civil War, and World War I this resulted in "deflation" and social unrest, and usually a big credit crisis. So, after World War II the US did not resume gold payments at the pre-war level while pretending the value of the dollar was still $35 per ounce. The pretense of $35 per ounce was abandoned in 1971 by President Nixon at Camp David.

Stage Six: Supply-side Economics. After the cock-up of the inflationary 1970s politicians needed a real simple strategy to know what to do when Keynesian Economics wasn't working. The idea was to think about what government taxing and regulation was doing to actors in the economy. Maybe high marginal taxes on the rich wasn't a good idea. Notice the cunning in this strategy. It doesn't attempt to deal with the real problem, the loot and plunder of entitlement programs, but attempts some fine-tuning of the loot collection game in order to restore the economy after the stupidity of a Keynesian episode.

Stage Seven: Modern Monetary Theory (MMT). After the cock-up of the 2006-08 Great Recession -- caused by under-collateralized and non-performing home loans and a sub-standard recovery -- politicians that hated Supply-side Economics needed a real simple strategy to know what to do when Keynesian Economics wasn't working. La Wik says that MMT 

describes currency as a public monopoly and unemployment as evidence that a currency monopolist is overly restricting the supply of the financial assets needed to pay taxes and satisfy savings desires.

So, print money until the economy begs for mercy. MMT also says that the government should run "a budget deficit large enough to achieve full employment through a job guarantee." using "non-accelerating inflation buffer employment ratio (NAIBER)" rather than "non-accelerating inflation rate of unemployment (NAIRU)," which I take to be the conventional Keynesian option.  In other words, politicians should do what comes naturally without limit.

Stage Eight: Schachtian Economics. Hjalmar Schacht was the guy that ended the hyperinflation in Germany after World War I. He simply stopped printing unlimited paper money.

Here's what I think.

I think that going back to the dawn of time, governments are always cocking-up the economy with their wars or their loot-and-plunder economic policies. And it's worse than it used to be. Back in Stage One it was really hard for the king to loot the place to pay for his wars. Stage Three: Dutch Finance made war-making much easier, but didn't have a real simple theory for dealing with the financial crashes that occurred from time to time, especially after wars when the government attempted to return to the gold standard at the pre-war parity.

Also, I think that as governments have fine-tuned and learned more and more how to use money printing and debt to loot the country that they have had to let the financial system in on the action. So now we have highly leveraged private-equity funds that the government permits, probably because the finance sector is willing to pay powerful people for the privilege of doing highly-leveraged finance.

My guess is that almost all government spending amounts to loot and plunder and is a net loss to the prosperity and the well-being of the people. So, with government spending at 40 percent of GDP in the US and 50 percent of GDP in the UK you can see that there is a lot of looting and plundering going on, and it subtracts from the possible prosperity that might obtain if the government weren't collecting so much of peoples' incomes and handing it out to its supporters.

And, I would say, as government collects and spends more and more money, it needs new theories to justify its looting and plundering and to get it out of a jam when its cock-ups wreck the economy.

The interesting thing to me is that even lickle AOC knows all about MMT. Like in The Manchurian Candidate, your average politician needs it to be "real simple."

But we wouldn't need all these dodges and cunning tricks to pay for wars and entitlements if government would only keep out of wars and away from loot-and-plunder entitlements.

In another world.

The Two Kinds of Slavery

I just had an epiphany over the weekend with respect to slavery. And it came to me as I puzzle over my Great Reaction notion that socialism is a return to slavery and the welfare state is a return to feudalism.

But, of course, under feudalism they also had slavery: voluntary slavery. It is described in The Year 1000 by Robert Lacey and Danny Danziger. You could go to your feudal lord in Britain in the year 1000 and place your head in his hands and become his bondsman. The lord gave you a bill-hook and three squares for the rest of your life. It was called "head for food."

So there are two kinds of slavery: conquest slavery and voluntary slavery. You can become a slave in the aftermath of your tribe being conquered. Presumably all the adult males would be killed and the women and children sold into slavery. But you can also place yourself into slavery, and say "I give up. Look after me, Master, because I can't take it any more."

Yes, but we are beyond all that, right?

I don't think so. Let's rewrite my Great Reaction maxim like this.

Great Reaction: Socialism is a return to conquest slavery; the welfare state is a return to feudalism; welfare is a return to "head-for-food" slavery; identity politics is neo-tribalism; etc.

I have done a piece or two on welfare that indicates how close it is to slavery. In "A Brief History of Welfare" I note the various stages in England since the year 1000.

• "Head for food" slavery.
• Early vagrancy laws.
• First Poor Law in 1597.
• Workhouses in 1830s: "indoor relief."
• Modern welfare: "outdoor relief."

Let us try to think what happened between each stage. I imagine that in the "head for food" slavery days that there was no social space outside being the vassal of your local lord. And if you caused any trouble the lord had no trouble in dealing with you. But in the Tudor era of the 16th century two things were going on. First, the feudal monarchies supported by feudal nobles were turning into absolute monarchies financed by merchant credit. This meant that monarchs could finance their armies through the credit system rather than the private feudal hosts of the nobles. So the nobles weren't interested in "head for food" slaves eating their heads off that might be useful in the odd little war.

Second, the feudal lords themselves got involved in the money economy and started to "improve" their lands by draining the swamps and trying new agricultural methods: the agricultural revolution. Oh, and also by "enclosing" common lands. This created a "surplus population."

The first Poor Laws at the end of the 16th century were a way to keep the poor out of the cities, and dispersed in the countryside. Each parish had to look after its own poor, and the poor were not allowed to move around. Then, by the early 19th century, there was enough money to build "workhouses" to imprison the poor and put them to work. Was this just "head for food" slavery by another name? You tell me.

But really, the problem of the poor and vagrancy didn't get solved until the Industrial Revolution put the poor to work in factories. Then the landless, starving poor headed for the industrial cities where they got jobs. But here is a question: in the disciplined work of factories are things any different? Workers are extremely disciplined and ordered around, and after a while they start to believe that their employers "owe" them their jobs and benefits as a lifetime obligation. Is this that different from "head for food" slavery? You tell me.

In our age, with its real per-capita income about 30 times what it was two centuries ago, we can afford to throw our hand up with regard to the poor. So the poor apply to their local social-services bureaucrat for welfare and housing vouchers and EBT "cards for food." Is this not a kind of slavery? Do not the modern welfare recipients place their heads in the hand of the social worker in return for three squares a day?

And how different is this from the situation of the average corporate or government worker that works under an informal job-for-life contract? When a corporation or a government "down-sizes" do not the workers feel betrayed? Have they not, in fact, enslaved themselves to their corporate or government master in return for three squares?

This is thrown for me into stark relief with the situation of teenage migrant Chinese workers -- described in Factory Girls by Leslie T. Chang -- that have left the farm, because nothing is happening -- for the crazy world of the big city factories, where they learn that it is up to them to get ahead, because they are on their own.

It makes me wonder what the English factory workers of the early 19th century thought about their lives and their work.

In our day we make a big deal about the conquest slavery of the plantations, where West Africans were sold by African chiefs to Brit and Dutch slavers and sent to the Americas.

And we've made a big deal about freeing the plantation slaves and how we owe them reparations.

But we don't make much of a deal of the hundred million Russians that were bundled into slavery in the Soviet Union. And how Mao Zedong enslaved hundreds of millions of Chinese into his slave-state hell. It seems, to our more advanced citizens, that these horrors are just "stuff happens."

But I think that subordination, slavery if you will, is still very much alive today, and for two reasons. First, there are a lot of humans that get off on subordinating other humans to their physical and moral hegemony. Second, there are a lot of humans that prefer to live as subordinates rather than accept the risks of responsibility.

So I think that we should be careful about patting ourselves on the back for "ending slavery." I think there is still a lot of slavery around. We just don't call it "slavery" and we don't call the subordinates in question "slaves."

Dutch Finance in Brief

Today we take it for granted that government and finance are joined at the hip. But it was not always so. Back in the feudal era the monarchs funded themselves from their royal estates and they fought wars with the feudal hosts of their top vassals, their noble tenants-in-chief.

Commerce and trading run on credit. Merchants typically borrow to anticipate the sale of their merchandise; it just makes sense. But merchants also need protection, for their valuable cargoes are an eternal temptation to Vikings and pirates upon the high seas. Thus the need for navies. It just makes sense for merchants to finance the local political Big Man in return for protection from pirates.

And it makes sense for the local political Big Man to cultivate the local merchants and borrow from them.

Of course, it can all go wrong, and Britain's King Edward III ruined a few Italian bankers with his Hundred Years War in France.

But when Henry VIII of the six wives decided to nationalize the English armed forces and disarm the nobles, things got more serious, and Henry's wars resulted in multiple financial crises and debasings of the currency.

It was the Dutch that solved the problem with the invention of central banking in their war of liberation against Spain from 1566-1608. The Exchange Bank of Amsterdam provided a market in government debt that, you might say, joined government and commerce into a joint enterprise.

The Dutch brought their finance to England when they invaded in 1688 and set up the Bank of England in 1692. The Brits promptly started a Second Hundred Years War against France, and ran their national debt up to 250 percent of GDP before teaching the French a lesson near the village of Waterloo in 1815.

Alexander Hamilton brought Dutch Finance to the newly born United States of America and founded the US national debt by buying the debt issued by the various states during the Revolutionary War at par and setting up the Bank of the United States. Hamilton's financial system made it possible for President Jefferson to finance the Louisiana Purchase mostly with debt.

Since the early 19th century two additional lessons have been learned. The first, advocated by Walter Bagehot in 1873 in Lombard Street is that the central bank must act as the "lender of last resort" for the financial system backed, if necessary, by the full faith and credit of the national government. But this lesson have proved hard for US central bankers to learn, as the Federal Reserve System failed to act as "lender of last resort" in the Wall Street Crash of 1929 and the Lehman Brothers failure of 2008.

The second lesson is not to permit a collapse of government credit into hyper-inflation. Because Hitler.

Dutch Finance Table of Contents

Dutch Finance -- Contents

How The Dutch Taught Us about Government Finance

0. Dutch Finance in Brief

1. Liberals Tiptoe Around "Reckless Endangerment"
   
   
2. Fixing the Economy
   
   
3. Fixing Our Broken Finance
   
   
4. Let's Have a Class War
   
   
5. The Fed Gooses: Dutch Finance or French Finance?
   
   
6. Will Wall Street Own Romney?
   
   
7. Capitalism's Century Five
   
   
8. "You and Your Family"
   
   
9. The Beautiful Dream of American Exceptionalism
   
   
10. Do We Have What It Takes?
    
    
11. Let Liberal Billionaires Help With Debt Ceiling
    
    
12. Millennials: Business is More Than Domination
    
    
13. The Ordinary Middle Class on the "Golden Princess"
    
    
14. Mend the Fed? Be Careful What You Wish For
    
    
15. Yes, Let's Think About the First Principles of Capitalism, Rana Foroohar
    
    
16. Mob vs. Snob: Let's See If I Understand This
    
    
17. Missing the Point on Economics and Government
    
    
18. All Politics is Reactionary
    
    
19. Yeah, Let's Talk About Reparations, Concentration Camps, etc.
    
    
20. The Two Kinds of Slavery
    

Yeah, Let's Talk About Reparations, Concentration Camps, etc.

The problem with our lefty friends is that they don't really want to have what they call a "conversation." Their idea of conversation is the deployment of catchphrases by activists in ideological combat: words as weapons.

Let's take slavery and reparations. First, slavery.

Slavery was ubiquitious in human society up until the day before yesterday. Ancient Greeks? Slavery. Romans? Slavery. A thousand years ago in Europe? Here are a few words from The Year 1000 by Robert Lacey and Danny Danziger.

Welleas, or Welshman, was one of the Old English words for slave -- which showed where the Anglo Saxons got their slaves... Bristol was a slave port, trading with the Viking slave merchants based in Ireland. According to contemporary chronicles, eleventh-century Dublin operated the largest slave market in western Europe.

People also surrendered themselves into bondage at times of famine and distress... [I]n the year 1000 the starving man had no other resort but to kneel before his lord or lady and place his head in their hands... It was a basic transaction -- heads for food.

And, of course, plantation slavery started right after the Crusades when western Europeans learned about sugar cane from their Muslim enemies. The first slave sugar plantations were established on Cyprus, were financed by Venetian merchants, and used local serfs and Muslim slaves as labor. I should say western capitalistic slave plantations. It was the beginning of a big business that spread westward to the Islas Canarias and then to South America. The Brits got involved in 1640 when they learned the business from the Dutch and set up slave plantations in Barbados.

And then, sometime in the 18th century, slave plantations started to become a scandal. Why? My take is: partly the populist moralism of the Great Awakening, and partly upper-class resentment of the new slave barons -- think the Bertrams of Mansfield Park -- that were building obscene mansions and pushing their way into the Brit Parliament. Also, I suspect, there is this. Slaves have to be guarded and disciplined with the cow-hide whip -- and fed, and housed. But free labor just has to be paid: must less bother. And, lefty politicians have been glad to take the workers off the hands of the ca-pittle-ists and make them into neo-serfs and neo-slaves in the great plantation -- or concentration camp -- of the welfare state. And then the biggest reason of all. With free labor the ca-pittle-ists make more money than with slave labor. Who knew?

What about reparations? Old as the hills. Back in the day, of course, the whole point of "conquest warfare" was loot and plunder. Reparations was the plundering of a defeated people. And it makes sense because back in the day wealth was equal to land and to grain stores and livestock. So the Vikings would visit the Brits every fall, sail up the rivers, take the grain, kill the men and transport the women and children to the slave market in Dublin. That'll teach 'em.

My take is that loot and plunder -- the noble and woke civilized looting operations of the big government welfare state excepted -- has only become scandalous because it does not pay in the modern world where something like 80 percent of wealth or capital is "intangible" capital, the kind that resides between human ears. And I predict that the days of the welfare state are numbered because it does not pay. Much better to have the workers save for their own retirement and health care. They will work a lot harder than when retirement and health care are managed neo-feudal style in entitlement programs run by the educated ruling class.

That's another reason why concentration camps are probably on their way out. (Modern concentration camps were invented by the Brits, by the way, in the Boer War in South Africa. They were not concentrating the innocent Bantu warriors of Shaka the Zulu, by the way, but the Dutch Boers, who were conducting a guerrilla war against the armies of Britland.) Just look at the absolute waste of the Nazi concentration/labor/death camps. I'd say that if you were conducting a global war for Lebensraum you would want to mobilize everyone in the glorious Reich to produce the sinews of war. And that means mobilize their minds. And who has sharper minds than the Jews? And let us not forget the labor/death camps of the Bolsheviks: the Gulag Archipelago; the White Sea Canal; the Kolyma goldfields.

Sorry, Mao ZeDong and Pol Pot. I didn't mean to insult you guys. You chaps had slavery and concentration camps that were tops. And your famines were the best. Made those white supremacists in Europe and North America look like pikers.

My point is that slavery and concentration camps and piles of skulls are as human as apple pie. The astonishing thing is that we moderns, for all our follies and faults, have come to think of slavery and concentration camps and Trails of Tears as scandalous.

But I do not think our modern ideas indicate a more advanced morality. Not at all. I just think that we are stumbling towards a realization that loot and plunder and slaves and camps are brutally inefficient ways for the ruling class to get rich off the labor of their deplorable subjects. Much better to let creative minds loose and turn responsible wage-earners to their jobs. And just tax 'em at the rate approved by Presidential Medal of Freedom Recipient Art Laffer according to his eponymous curve.

And then everyone will live happily ever after.

Reparations? I agree with Ryan Bomberger, who identifies as half-white half-black. Let the Democratic Party pay for reparations. They, after all, were the party of slavery, of Jim Crow, of the KKK, of Bull Connor, of the neo-slavery of the welfare state. Let the enthusiasts of the Great Awokening pay reparations, and save their activist souls.

All Politics is Reactionary

Our lefty friends have made a big thing about representing their politics as "progressive" whereas the politics of their opponents is regressive and "reactionary." There are those that actually believe such nonsense.

A lot of people on the alt-right seem ready to take them at their word, understanding that all politics will end up as race or ethnic politics, so why not start a self-conscious white identity politics before it is too late? Vox Day, today, has a cartoon of Uncle Sam trying to put the American eagle back together again from all its broken parts from conservatives to Hispanics. Day's bête noire is "civic nationalism," the attempt to create a nation out of the constitution, the English language, and a common culture. On his view this is doomed to disappointment, because people keep their ethnic identities unto the nth generation.

The reason why this might be so is not hard to figure out. Politics is division, and the easiest way for a politician to divide is people by religion, race, ethnicitiy, and language. Thus presidential election campaigns to this day know they need to appeal to voters by touching all these idols. It still pays politicians to appeal to the Irishness in Irish Americans and the Italianness in Italian Americans. German Americans, of course, need not apply; their ethnicity was driven underground in World War I. Of course, the contribution of Marxism to this game was to introduce class as a good way to divide and conquer people.

Now, the question is whether the left's identity politics is unstoppable, or whether it will drive us eventually into a war of all against all. Maybe it will. Then again maybe it won't.

Here are my arguments for hope.

Base and superstructure. Marx argued that the economic relations of production are what really defines a society. All the politics and culture is just superstructure. On that argument, the base today is the market economy of millions of prices urging people every day to put their money and their effort into satisfying the wants of the consumers. And in this base we work with anyone that will work with us, because not to do so leaves money on the table. Willy nilly, the superstructure will end up reflecting this reality.

The need for big battalions. The present world of nation states did not come into existence because nations were ordained by God back in the Garden of Eden. They were forged by force. In Britain and France, this forced unification occurred centuries ago. These nations were forged because smaller units were too weak. But German nationhood was forged within historical memory by uniting Germans in three wars, first against the Danes (!), then the Austrians, then the French. The US, of course, was built by flat-out conquest, assisted by a bit of Dutch Finance in the Louisiana Purchase. The reason we see a lot of separatism, from Scotland to Catalonia, is that today people think they can make it without being part of a big fat nation state. I wonder if they are right?

South and East Asians. I had a email from a South Asian decrying the war against the west. The west, she insisted, invented the modern world, and it would be madness to throw it over. I dare say there are more like her. Then there are the words of a Chinese Christian reported by David Aikman in Jesus in Beijing.

At first, we thought [the power of the West] was because you had more powerful guns than we had. Then we thought it was because you had the best political system. Next we focused on your economic system. But in the past twenty years, we have realized that the heart of your culture is your religion: Christianity. 

I think that the biggest thing going in the world today is the determination of the Indians and Chinese to get back on top after the humiliation of the last 500 years. You get an insight into the humiliation the Chinese felt in the 19th century from Jung Chang's book on the last Dowager Empress Cixi of China. The Chinese ruling class was divided into a conservative faction that wanted to return to the ideas of Confucius and Mencius, and modernists that wanted to modernize. Notice that the modernist efforts began with nationalism of the Xinhai revolution, then Maoist socialism, and now the one-party capitalism (fascism?) of the current regime. Notice how they are flopping around between competing western ideas. Same thing in India, where the Indian National Movement became a sort of Fabian socialism, then reformed into the present reform towards a more naked capitalism.

In other words, if you are not doing some sort of western-invented capitalism with a market-directed economy, you are an idiot, Cuba and Venezuela.

Trumpism. So where does Trump fit in all this? Is he an idiot, as our lefty friends insist, or does he just play one on TV? Clearly, despite his populism, he is a capitalist, through and through, with his appointees ripping out administrative-state regulations by the bushel. He is supporting a tax reform to reduce loopholes and carveouts, to the extent possible. He appeals to the notion of the United States as a nation, not a congeries of identities. Hey, it might just work!

My Take. See, my ground zero is the staggering social and economic revolution of the last 200 years, what Deirdre McCloskey calls the Great Enrichment. It is just as earth-shattering as the physics revolution that has brought us quantum mechanics and smartphones. The key point of the physics revolution is that we cannot imagine what is going on at the micro level; we just have to believe the math. Our daily-life concepts just do not describe the way the world works with electrons and photons quarks and all the rest of the Greek and Joyce-named stuff.

The world of the economic Great Enrichment is just the same. Markets and prices work in a mysterious way, through connections between millions of consumers and producers that magically coordinate economic efforts all across the world. All we know is that, if you try to replace the probabilistic economic state function with a rigid materialist administrative function you get the economic meltdown of the Soviet Union, Maoist China, Castroist Cuba, and Bolivarian Venezuela. No wonder many people want to retreat to the comfort of the face-to-face village community or the tribe of the kindred. The new world is too hard.

And yet. The worst thing in the world is to imagine that your political leaders will "take care" of you. They can't; they won't. As a black state representative said: Politicians don't care about you; they only care about your vote. Ask the white working class about that.

The only thing to do is to get out into the price-driven economy and learn how to swim in its frightening currents. There are no magic tricks, no simple solution, no safe haven. But the results! A thirty-fold increase in per capita income in 200 years! There has never been anything like it, ever.

The modern economy merely says that you should find something to do that other people are willing to pay for. First of all, find a way to be of use in the world; then get your paycheck. Is that not the basis of all the Axial Age religions? Of course it is, because the Axial Age religions all got started when cities got started, and cities are all about buying and selling, prices and credit, figuring out how to make a buck in the swirl of the money economy. Only now, everyone is involved in the city economy, and everyone needs to know its ways, its rules, and how to wive and thrive under its sway. If they know what is good for them.

And so the politicians entice us with their reactionary appeals to tribe and identity. A world that is, quoth the raven, nevermore.

Missing the Point on Economics and Government

Thanks to the magic of the internet, I got to read a piece in the London Guardian about "How Economics Became a Religion" by John Rapley.

The article is a promo for Rapley's book just out, Twilight of the Money Gods: Economics as a Religion and How it all Went Wrong. I think that Rapley, at least in the Guardian's "long read" article, misses the point completely.

Rapley writes about how

Economics offers a comprehensive doctrine with a moral code promising adherents salvation in this world; an ideology so compelling that the faithful remake whole societies to conform to its demands. It has its gnostics, mystics and magicians who conjure money out of thin air, using spells such as “derivative” or “structured investment vehicle”. And, like the old religions it has displaced, it has its prophets, reformists, moralists and above all, its high priests who uphold orthodoxy in the face of heresy.

Well, yes. But there is a tendency for all doctrines to elevate themselves above mere practical utility and attempt to penetrate the empyrean. For one thing, it helps in fending off pretenders to knowledge who have no business challenging the high priests of the temple.

But the point about economics is that its practitioners are very useful to politicians, because economists advertise that they can help to keep the ship of state from foundering on hidden economic reefs.

It is one step from merely using economists as cooks in the kitchen of economic policymaking to elevating them to the status of priests and shamans versed in the mysteries of economic divination, in order to represent ordinary political power plays and routine political looting as the divine rulings of the immortal gods rather than shabby efforts to use the economy as a piggy bank to reward the supporters of the ruling class, in accordance with my dictum:

Government is an armed minority occupying territory and taxing the inhabitants thereof to reward its supporters.

Now in the dim and distant past, before the advent of modern economics, rulers frequently got into a bit of a jam when it came to funding their wars and rewarding their supporters. To my recollection, Edward III ruined a few Italian bankers in his efforts to fund the First Hundred Years War against France and to set up the Black Prince as a prince among men. Henry VIII, he of the multiple wives, had several financial crises during his reign, which included debasing the currency. He had it harder than Edward III because his policy of disarming the nobles meant that he needed to fund the entire national security budget through taxes and with credits from the merchants of London rather than in the old feudal way of Shakespeare's Wars of the Roses plays when each nobleman talked about bringing "our powers" to the battle.

But then the Dutch invented central banking in their war of liberation against the empire of Spain, and when they invaded Britain in 1688 they brought their financial technology with them. The result was that the Brits won the Second Hundred Years War against the French even though they had cranked up their National Debt to 250 percent of GDP by 1815 and the decisive Battle of Waterloo. France lost the war because it was cursed with financial twerps like John Law that ruined French finances (he was treated as a demi-god until it turned out he had feet of clay).

In the middle of all this, enter the classical economists with their notion of the division of labor and their two-pronged value theory: use value and exchange value -- plus comparative advantage, free trade and all that. All this was pretty magical, but nobody thought to sell it to the people as magic. Not yet.

It was Karl Marx who elevated economics to the status of a religion. That's because Marxism is a secular religion promising heaven on earth if only we follow the prophet Marx and his precepts, which were a dog's breakfast of classical economics, a mashup of use value, exchange value, surplus value, and the obvious point that, in a competitive market, all the profit gets squeezed out and everybody gets poorer and poorer as they fight for market share on diminishing profit margins. Marx had the brilliant insight that you could dress up your political ideas as "science" and promise to save the world from a fate worse than death.

Of course, Marx finished his Capital in the early 1860s and published Volume 1 in 1866-67, just before the marginal value revolution of 1870 that made nonsense of his economics. Hey, that happens, but you will read Marxist writers in vain to discover any attempt to revise Marx's prophecy in light of the new science. So they had to elevate his prophesies into Holy Writ.

Up until Bismarck's social insurance politics of the 1880s government's only interest in economics was in funding its wars, and this could be done using the precepts of central banking developed by the Dutch and brilliantly executed in the US by folks like Alexander Hamilton.

But the big-government state that Bismarck and the social reformers instantiated before and after World War I raised the stakes on government. Government began interfering with the workings of the price system and the economy in a number of ways, and so government needed technical experts to make sure that its usual blunders didn't pitch the economy into a big financial panic.

Just as natural science allows humans to build structures and engines and internets that would be impossible without the technology built upon a foundation of natural science, it is also true that government could not run the current mega-state with its myriad of taxes and privileges and subsidies without a technology to guide them.

Gee, funny how the first thing that happened after economists really got into the saddle was the mother of all financial crashes, the Great Depression of 1929-33.

Obviously, after a blunder like the Great Depression, government needed a miracle, and it got one, in the form of Keynesianism. Keynes taught a receptive audience that it was the height of progress and sophistication to spend borrowed money on the regime's supporters in the aftermath of a financial crisis. Obviously, governments could not say that the point of Keynesianism was to clean up the mess made by interventionist government. Instead they let it be known that their tame economists were geniuses that had completely reformed the old, classical economics that had got us into the Great Depression. Eventually, the government's tame economists decided that they had tamed the business cycle. Of course they did. That was in the 1960s, right before the inflation of the 1970s and the big recession of 1980-81.

With that sort of politics and its constant mumbling and bumbling, pretty soon you need to make economists into demi-gods, cunningly manipulating the economic world from Mt. Olympus, so that the politicians on the bridge can report to the people that they will navigate the ship of state out of financial trouble with a magical economic compass that only those initiated into the mysteries of the New Economics could read. It's the obvious thing to do. When practical knowledge fails, humans resort to magic.

And naturally, just as we tend to venerate Albert Einstein as a kind of demi-god for coming up with relativity, we tend to venerate the economists that walk on the death-defying tightrope of economic policy, trying to find cunning ways for the government to win elections and hand out free stuff without going full Venezuela.

Obviously it is best not to let the plebs see how this sausage gets made. It is better to distract them and rulers since the dawn of time have done that in a condominium with shamans, temple priests, and established churches. Or, as Rapley writes,

Over time, successive economists slid into the role we had removed from the churchmen: giving us guidance on how to reach a promised land of material abundance and endless contentment. 

Of course they did. The ordinary person doesn't understand economics. So the sensible thing for the ruling class to do is to cloister the right kind of economists in educational monasteries and treat their utterances as holy writ. As was the case with good old established churches, the politicians get to appoint the abbots and bishops of the economic monasteries and cathedrals and the abbots and bishops loyally maintain the fiction that their divinations come directly from God, er, science. Nothing to see here. It's the way it always works.

I see what Rapley's game is. You can see it from the blurb at Amazon.

Imagine one day you went to a cash-machine and found your money was gone. You rushed to your branch, where a teller said that overnight people had stopped believing in money, and it all vanished. Seem incredible? It happened, and it could happen again. Twilight of the Money Gods is the story of economics, told not as the science it strove to be...

Well, yes. The government's tame economist bishops and abbots are exactly what the established church abbots and bishops were: ruling class stooges. And when the music stops the bishops and the abbots won't be a bit of good to help you get money out of your local ATM.

When the music stops the key thing is for the government to step into its role of "lender of last resort." Walter Bagehot wrote the bible on that in Lombard Street. In the 2008 crash the government ended up doing a pretty good job of last-resort lender, after a brief panic when Ben Bernanke muffed on his priestly job of bailing out Lehman Brothers in September 2008. He said he didn't have the legal authority to bail them out. Oh please, Ben. The only job of the Federal Reserve is to be lender of last resort. Period. And you muffed it, and you made it worse. Of course, Ben Bernanke was an academic economist.

The whole lender-of-last-resort operation in 2008 added up to about $16 to 20 trillion in bailouts and (mostly) guarantees. See my TARP bailout page for details. So in the end the priests and abbots of the global established church of economics did their job and applied extreme unction to the economy with the appropriate rites, incense, and laying on of hands. Whatever that means.

But don't forget the unforgettable Mrs. Proudie. There must be a role for her in the New Church of Economics. 

Yes, Let's Think About the First Principles of Capitalism, Rana Foroohar

Over at Time magazine, one of their managing editors, Rana Foroohar, has penned a long think piece about "American Capitalism's Great Crisis," and ends up with a typical non-ending:

Crises of faith like the one American capitalism is currently suffering can be a good thing if they lead to re-examination and reaffirmation of first principles. The right question here is in fact the simplest one: Are financial institutions doing things that provide a clear, measurable benefit to the real economy? Sadly, the answer at the moment is mostly no. But we can change things. Our system of market capitalism wasn’t handed down, in perfect form, on stone tablets. We wrote the rules. We broke them. And we can fix them.

The article is based, presumably, on Fohoorar's book Makers and Takers: The Rise of Finance and the Fall of American Business. But the article fails to address its subject in the same way that the AP's Seth Borenstein fails to address the question of climate change. When you are a media hack you really can't move too far from the conventional wisdom on your beat. It's not just that journalists are "Democratic operatives with bylines;" it is just a fact of life for a beat reporter that if you move too far from the conventional wisdom you will lose your audience and you will kill your access to powerful people.

So what do we learn from Foroohar?

There is, she writes, a crisis of faith in capitalism. In a poll, only 26% of millennials "considered themselves capitalists." Indeed, "Americans have plenty of concrete reasons to question their system." And it's not just a question of breaking up banks or raising taxes on hedge-funders or more or less regulation. The problem is bigger than that, as Foroohar's book explains.

In the old days from "the late 1790s to the early 1970s, finance took individual and corporate savings and funneled them into productive enterprises, creating new jobs, new wealth and, ultimately, economic growth." But now "only a fraction of all the money washing around the financial markets these days actually makes it to Main Street businesses." And that goes not just for the US but across the world. "Most of the money in the system is being used for lending against existing assets such as housing, stocks and bonds."

America’s economic illness has a name: financialization. It’s an academic term for the trend by which Wall Street and its methods have come to reign supreme in America, permeating not just the financial industry but also much of American business.

We are talking about everything from the size of finance to "debt-fueled speculation" to "risky, selfish thinking," public and private, the "increasing political power of financiers and the CEOs they enrich," and the ideology of "markets know best."

The rot started when post-WWII growth started to slow in the 1970s.

[Instead of making tough decisions] politicians decided to pass that responsibility to the financial markets. Little by little, the Depression-era regulation that had served America so well was rolled back, and finance grew to become the dominant force that it is today. 

So we got the "Carter-era deregulation of interest rates," Reaganomics "that favored Wall Street," then Clinton era deregulation to get out of the late 1980s doldrums, and Greenspan era loose money that led to today's "near-zero interest rates to keep from falling back into recession." We have a financial policy that amounts to "let them eat credit," a "palliative" to medicate the "downward mobility in the middle class" instead of facing the nation's problems.

Of course, there are many reasons for America's "low-growth economy," from "globalization to technology-related job destruction."

But the single biggest unexplored reason for long-term slower growth is that the financial system has stopped serving the real economy and now serves mainly itself. 

And now small business formation is down and big corporations buy back their stock rather than invest in R&D. Apple borrows money so it doesn't have to repatriate profits and pay taxes on it.

But hey, help is on the way.

Remooring finance in the real economy isn’t as simple as splitting up the biggest banks (although that would be a good start). It’s about dismantling the hold of financial-oriented thinking in every corner of corporate America. It’s about reforming business education, which is still permeated with academics who resist challenges to the gospel of efficient markets... It’s about changing a tax system that treats one-year investment gains the same as longer-term ones, and induces financial institutions to push overconsumption and speculation rather than healthy lending to small businesses and job creators. It’s about rethinking retirement, crafting smarter housing policy and restraining a money culture filled with lobbyists who violate America’s essential economic principles.

This is, of course, mainstream conventional wisdom, as it should be, coming from Time magazine. It's full of standard liberal memes, from the good old Depression era regulation to the crazed Reagan era to the greedy banker stuff to short-sighted CEOs. It is the view of someone "in the arena." And it assumes that the answers come from the usual experts "crafting smarter" policies. Oh yeah.

But maybe there is another way to look at Capitalism 2016. Maybe we need a whole new narrative.

The first thing to establish is that government and finance are joined at the hip. To understand that, go and watch The Tudors on Netflix. In an early episode, Henry VIII proudly points out of his window to a warship at anchor. How do you think that warship and its heart of oak got built? On the profits from Henry's royal estates? Or watch Admiral on Netflix, and then go and read up on Dutch national hero Admiral Michiel de Ruyter on La Wik. In the mid 17th century the Dutch merchants had to do something about the Russian and the Brit and the French monarchs mucking about with their trading system. For that they needed a navy to protect their argosies and teach the monarchs a lesson and for that they needed to give money to government to build a navy to make the world safe for capitalism.

That is the story of capitalism from that day to this. Capitalism can't bring us fabulous goods and services unless government keeps the peace. So merchants have provided credit to governments so that governments could finance navies and keep the trade routes open.

But things never stop just there. After inventing the central bank and national debt and financing their war of independence from Spain, the Dutch launched a 500 ship invasion force on the Brits in 1688 and then installed Willem of Oranje as King William III and set up the Bank of England and the National Debt and used Britain as a base for a Second Hundred Years War against the French, won in 1815 at the Battle of Waterloo. British national debt went from nothing in 1688 to 250% GDP in 1815.

National debt won the US Civil War, and World War I and World War II. And probably the Cold War too. The point is that the incredible wealth of capitalism allows government to borrow and spend. On wars, on education, on entitlement programs, on anything that buys votes.

For over a century, from 1848 to 1990, high-minded intellectuals tried to bury capitalism with the romantic idea of socialism and a money-free administrative system, but by the 1980s even socialists realized that a much better system would be to use the wealth of capitalism to finance their agenda rather than replace it with administration and bureaucracy. So now government is busy using the credit system for all sorts of projects. Most notably it subsidized home mortgages, first with the 30-year fixed-rate mortgage, and lately with mortgages for people that couldn't service them. What could go wrong?

According to Walter Bagehot in Lombard Street, the credit system needs two things. It needs loans that are properly collateralized, and it needs borrowers that can be relied upon to make their payments. Looking back at the sub-prime mortgage era, what could go wrong? In fact, looking at everything that government does with borrowed money, what can you expect but mayhem?

You can see that the problem is mission creep. It's one thing to finance old Grandad de Ruyter to teach the absolute monarchs a lesson on the North Sea, or put the French in their place at a little town in Belgium. That is national debt serving the interests of commerce. But when government becomes 35% or more of GDP and the whole economy is riddled with government credit subsidy schemes, then something has to give. And don't forget that all the time the financiers are joined at the hip to the government. That's because, as I read years ago, the most important government program is the selling of the debt to the financiers. It misses the point to talk about breaking up the banks, or jiggling financial regulation. The elephant in the room is the government and its finances, and the various shifts and tricks it uses to get itself out of the latest jam.

It misses the point to complain that the finance industry doesn't finance growth. It never has. Credit and debt are for solid, no worries, ongoing operations, like financing a store's inventory, or lending money to get goods from where they are to where they are wanted. Financing growth is about startups and private equity and mad money.

It misses the point to complain about CEOs shorting R&D for buying back their stock. Big public corporations are usually reaching the end of their growth phase. They are just money machines until the inevitable day when some little startup puts them out of business.

It misses the point completely to write about American Capitalism's Great Crisis. Capitalism never had a crisis and never will. Capitalism uses credit as it is supposed to be used, to finance ongoing operations. And it can supply, from time to time, mad money for startups and other risky ventures which is the real engine that gets us from $3 per capita per day in 1800 to $100 per capita per day in 2016. The problem is the intersection of capitalism and government. When government grabs all the credit to fight a war, it really bollixes up the economy. When government encourages deadbeats to borrow money to buy a house, it leads to a Crash of 2008. And when government goes the easy money route to get out of a jam, the money sluices into all kinds of cracks and corners and encourages financial shenanigans from all sorts of shady characters.

But don't expect a Rana Foroohar to say that. A mainstream journalist has to stay mainstream. Just like Seth Borenstein, the AP's climate change guy. Really, how could an AP reporter on the climate beat do anything but breathlessly retail the latest wizard wheeze from the $1.5 trillion a year global climate community?

And how could a reporter on the finance beat do anything but retail liberal blame-the-bankers scapegoating?

Mend the Fed? Be Careful What You Wish For

Republican presidential candidate Donald Trump has accused the Fed of keeping interest rates low at the behest of President Obama. Marco Rubio waffles about Fed overreach that has led to an unhealthy “Fed-centric economy.” Ted Cruz talks about tying monetary policy to the price of gold.

But I wonder if anyone has really thought about what it would mean to reform the Federal Reserve System.

No doubt, the Fed’s zero interest rate policy is all about keeping the government’s debt interest costs down and protecting debtors from the aftermath of the Crash of 2008. But what would it mean to return to a normal interest rate policy?

No doubt the Fed has badly warped the economy, not just in the past few years, but ever since its inception in 1913.

No doubt, all things being equal, it would be best to link the dollar to gold.

But what, really, should we do? And more to the point, what do we dare to do?

We all complain about the Federal Reserve System. But do we really want to do anything about it?

Modern central banking started with the Dutch and their Amsterdam Exchange Bank. It provided the credit that enabled the Dutch to fight and win independence from Spain. Then the Dutch Prince William of Orange invaded Britain in 1688 and within a decade founded the Bank of England and used the British National Debt to conduct a Second Hundred Years War against the French, ending with victory in 1815. But the fact is that the central bank tended to roil the economy badly, since its war finance operations created inflation, and its post-war resumption tended to bankrupt debtors with withering deflation. Even without a central bank, the US Revolutionary and Civil Wars created first ruinous inflation and then bone-jarring deflation.

Our situation is the same, but different. Now the central bank is involved in goosing and/or cooling the economy on the conceit that monetary policy can help moderate the boom-and-bust cycle.

But I suspect that the real role of the central bank today is to smooth over the distortions caused by the huge presence of government operations in the modern big-government economy.

In the old days, the central bank’s credit operations helped the government commandeer the nation’s resources so that it could fight its national wars. That would result in ruinous inflation during the war and ruinous deflation after the war.

But today the central bank’s credit operations are intended to help the government commandeer the nation’s resources so that it can conduct its redistribution operations, from Social Security to mortgage subsidies. This has resulted in a century of inflation punctuated by various financial panics and banking collapses. The Crash of 2008 was caused by the Fed trying to cool the Fannie/Freddie fueled housing bubble of the 2000s. Call it the government’s clumsy right hand trying to correct the errors of its clumsy left hand. But before that was the Savings and Loan collapse, in which the government’s subsidized Savings and Loan lenders collapsed in the 1980s. It was a case of the government’s deflationary policy of the 1980s having to deal with the fallout of its inflationary policy in the 1960s and 1970s.

We are taught to believe that the Fed wisely guides the economy with the predictions of its economic models and economic data. But most likely it is just muddling through, trying to pick up the pieces of the government’s continuing failed interventions in the national economy. And every time we never see the crash coming.

So what are the chances of reforming the Fed so it doesn’t keep interest rates down to reduce the government’s interest payments. or reduce the “Fed-centered” economy, or get back to gold?

I’d say the chances are slim to none. As long as the government is seizing 35 percent of GDP to redistribute to to powerful interests, and using the credit system in all kinds of ways to favor certain interests, it is going to set up inflations and deflations, and crashes, and it will need the power of the printing press get itself out of a jam, by bailing out banks and frequently acting as lender of last resort to prevent a “sudden stop” in the credit system, and using cheap money to "stimulate" the economy.

And we will continue to build up the Chairmen of the Federal Reserve System, from William McChesney Martin to Alan Greenspan to Ben Bernanke to Janet Yellen, as wise financial soothsayers protecting the nation from fearful portents in the financial heavens.

Because the alternative of recognizing that they are all dull political hacks fumbling their way in the dark is too horrible to admit.

The Ordinary Middle Class on the "Golden Princess"

ON BOARD GOLDEN PRINCESS IN INSIDE PASSAGE  Cruise passengers, according to John Derbyshire, are predominantly over-50s.  No doubt he's right, and I've been observing these ordinary American middle-class over 50s the last few days as they "come back new" on board the Golden Princess.  I'll tell you what I think.

You don't get to see the ordinary middle class where I live in liberal Seattle.  You only get to see the precious people that drive Subarus and Priuses and Volvos.  Liberal Seattleites are obviously richer and younger and more educated than the Princess cruisers. And I dare say they enjoy more economic security too. Tenure, don't you know.

But you do get to see the ordinary middle class on board the Golden Princess.

It all makes me think how cruelly the ruling class has treated the ordinary middle class these last few years. Yes, things seem hunky-dory in liberal Seattle: house prices are up, tear-downs are starting in every street. But the daughter of an acquaintance outside the magic liberal circle is just getting life restarted after the hell of the Great Recession in which she lost her home.

You look at those folks on the cruise and you wonder how they are doing with savings account interest down at zero. You think of how they probably blame the banks for this. You think of how they are paying much higher health insurance premiums and deductibles.  You think about how these stolid people are coping with the miserable Obama economy.  Can they hope to retire? If they retire will their teacher and health-worker pensions be there when the state and local government financial crisis deepens?

And what happens to them when the Fed starts raising interest rates, probably because the inflationary boom from zero interest rates is causing even Obama officials to worry about the future?

I think that the ruling class should be forced to take a cruise once a year -- incognito, without staff and perquisites -- so they can see and hear what they are doing to the ordinary American middle class.

I don't suppose it will do any good, but it might make them pause in their grand plans for this affordable program or that necessary subsidy.

It's telling that the present Affordable Care Act had a predecessor.  Remember "affordable housing?"  That was the siren song that got us into the Great Recession as all the folks that had borrowed against their houses, desperately trying to ride the real-estate bull, and all the folks that had strained their finances to the utmost to afford their dream house, all those folks went to the wall.

Was it really fair or just to subject these ordinary people to all this heavy financial weather? First they got ripped off because they came late to the real-estate party.  Then their nest egg got crushed when the market collapsed.

Of course, the politicians and the activists and their willing accomplices in the media have persuaded everyone that it was all the bankers' fault.  Really, the old saw about patriotism being the last resort of the scoundrel had it completely wrong. Instead we should say that any politician that blames the bankers is a monster. Because the government runs the credit system and has done ever since the Dutch invented central banking.

Yes, I know. The people voted for the scoundrels; they had it coming. But the whole point of the Progressive movement of the late 19th century of which today's liberals are the residual legatees was that the educated experts and their rational policy analysts would be above petty partisan politicking and crude corruption. Liberals insisted then and insist now that they are the evolved ones, the educated ones, the rational ones. That's what gives them the license to blame bankers and businessmen and racists, sexists and homophobes.

Only it's all a lie.  Liberals have lied and lied again; they have blindfolded the American people and turned them around and confused and misled them. And now the American people are screwed.

You only have one life to live. When the politicians go to the Fed to get them out of a jam as they did in 2008 and in all the years since, it means that the American people are getting screwed; it means that the government is going to get in their pockets and relieve them of a good portion of their wages and their savings. All because of promises that should never have been made by the sort of people that liberals claimed to be.  And the American people will never get their money or their lives back.

If there were any justice in the world liberals would be on the run right now like the French aristocrats in 1792. But since there isn't any justice I expect that liberals will get another couple of chances to ruin the nation before the American people rise up in righteous rebellion.

Of course then it will be too late.

Millennials: Business is More Than Domination

In the last post we looked at the two remaining mega-fauna on Earth: big government and big business.  Both are monstrous systems and the purpose of systems, the German neo-Marxists tell us, is domination.

But business seems to be something more, because in the last two centuries, the age of business, the per-capita income of humans within the boundaries of capitalism has gone up by 20 times.  There has been nothing like it in human history, ever.  Remember those Robber Barons?  Steel magnate Andrew Carnegie made a fortune -- by cutting steel prices by two-thirds.  Oil monopolist John D. Rockefeller made billions by cutting the price of illuminating oil, the stuff they used in those cute oil lamps in Hollywood westerns, by 90 percent.  Today the Bill Gates and Steve Jobs are doing the same thing with computers and devices.

But what is it?  Matt Ridley in The Rational Optimist calls it the collective mind.  Humans, unlike chimpanzees understand barter and exchange.  This means that humans can specialize and get really good at one thing, exchanging for the other things of life.  And that creates wealth, enormous wealth.

David Graeber in Debt: The First 5,000 Years confirms this idea.  There's an idea that the modern economy is founded upon money, he writes.  But really it's founded upon debt, and debt is founded upon the exchange of favors.  If I do you a favor then you owe me one in return.  People keep a rough balance of favors given and received, and it eventually gets formalized in debt and credit and money.  Credit, of course, means belief, the belief that the other guy will return the favor.  In The Righteous Mind, Jonathan Haidt calls this "equality matching" that gets formalized into "market pricing."

And that's the point.  Big business may be monstrous and terrifying, but it is based on the exchange of favors and trust.  Nobody forces me to go to Walmart; it's the low prices that attract me.  Nobody forces me to buy at Whole Foods, but if I believe in buying local and organic food and sustainability and Fair Trade it makes me feel better to pay a little more to John Mackey.

But what about banksters and insurance companies and overpaid CEOs?  What about the hard-hearted private equity guy Mitt Romney that laid off steelworker Joe Soptic?  There's a chicken-and-egg problem to ponder here.  Who dances to whose tune: are bankers the dupes of the political ruling class or are politicians the bribed apologists of the corporate plutocrats.

It comes down to this: Does Warren Buffett call the tune for the Obama administration or does wily Warren contribute money and support (for tax increases) in order to curry favor with the Obamis in the hope that they will leave him and his trains alone?  Obviously it is important to get it right.  Because if you get it wrong then you have completely misunderstood the economic and political reality of the modern era.

Here's my take on this.  My take is that modern political power is founded upon a strong and vibrant economy. A politician cannot cut a dash on the world stage unless he is backed by a vast economy that can yield vast revenues with which the politician can project national power.  On this view businessmen are pets to be encouraged and fed so they will dutifully generate huge wealth.  But it is the political ruling class that calls the shots.  Of course, if the politicians come down too hard on the businessmen and loot the productive sector so badly that they wreck the economy -- hey, it happens -- then they lose everything.  And so do you and I.

I have developed a simple notion to illustrate what I mean.  It's the difference between Dutch Finance and French Finance.  In the 16th century the Dutch developed, for the first time, a national debt, money that they borrowed from the Amsterdam merchants, and they used that debt in a rebellion to free the Dutch people from the empire of Spain.  The Dutch debt was a "funded" debt meaning that taxes were specifically earmarked to service the debt.  The British were impressed by the results, so when they invited Dutch stadtholder William of Orange to come over in 1688 and run things as King William III, they set up the Bank of England and started a funded national debt of their own.  It worked so well that in a century later the Brits defeated the French in the Battle of Waterloo at the end of the Second Hundred Years War and the French have never amounted to much in the world since.  The Brits defeated the French because French national finance was all screwed up.  They used the state's power to exploit the economy; they spent more money than the economy could afford; they defaulted on their national debt several times.  The French Revolution, after all, began with a mess in the French government finances.  My point is that the government has the power to encourage business and grow the economy; it also has the power to wreck the economy.  The banksters and Matthew Josephson's Robber Barons are all hostages to the government's economic policy.

The US started out with the economic policy of Alexander Hamilton.  As a kid, Hamilton had run a merchant's office in the West Indies.  As the nation's first Secretary of the Treasury he set up a funded national debt just like the Brits and the Dutch.  America's economy took off like a rocket.

Of course, if a businessman is smart he can make a fortune out of the government's mismanagement.  I am thinking of John Paulson who made billions betting against sub-prime mortgage securities in the run-up to the Great Crash of 2008.  But does John Paulson have political power?

Of course, I don't expect you to believe all this crazy stuff right off the bat.  But suppose it's true.  Suppose the politicians are in charge and the banksters are just their dupes.  What does it mean?  What does it tell us about the proper relationship between government and business, not to mention government and people?  That's what we'll look at in the next post.

Let Liberal Billionaires Help With Debt Ceiling

There is only one thing that a government must avoid if it wants to live long on this earth.  It must avoid the situation of Greece and Co.  They must avoid the situation where the government has to offer brutal rates of interest to lenders.



Put it another way.  If you can sell your government debt for a reasonable rate of interest, you are in clover.  It's when you have to pay north of 10% interest that things start to go south quickly.



But right now the US Treasury expected to pay an average of 1.2% per year net interest, or $223 billion in FY14, according to usfederalbudget.us.  Hey, me worry?



No the real problem is a "sudden stop" like they had in Britain under the Stuarts.  That's why the Brits had to call in the Dutch Prince William of Orange and his Dutch Finance.



The problem for the US government if Congress fails to pass an increase in the debt ceiling is a) whether to ignore Congress, and b) what programs to finance.  Oh, the agony!



But I have a better idea.  Let liberals step in and help.  Liberals after all believe with Oliver Wendell Holmes that "I like to pay taxes.  With them I buy civilization."



OK liberals, here's a chance for you to walk the walk.  Just log into eftps.gov and pay the Feds some estimated on your 2013 Federal Income Tax.  Here's the schedule I suggest for my liberal friends.

1. If you are a liberal billionaire, in the Warren Buffet or Penny Pritzker class, I suggest a $10,000,000 payment on eftps.gov.  Remember, the poorest guy on the Forbes 400 is worth $1.2 billion so there ought to be a good 100 liberals in there.   That $1 billion to buy civilization.


2. If you are a liberal centi-millionaire, I suggest a $1,000,000 payment on eftps.gov.  There ought to be a good thousand or so of liberal centi-millionaires.  That's another $1 billion.


3. If you are a liberal earning over $10,000,000 a year, I suggest a $100,000 payment to eftps.gov.  I figure there must be 10,000 of you chaps.  So that's another $1 billion.


4. If you are a liberal earning over $1,000,000 a year, I suggest a $10,000 payment to eftps.gov.  There must be 100,000 of you.  So now we've got another $1 billion.


5. Now let's talk about the lumpen liberals: government managers, professors, executives with non-for-profits.  There must be half a million of you folks.  How about a cool $2,000 payment to eftps.gov for you guys and girls.  That adds up to another $1 billion.

So there we have a quick $5 billion whip-round to tide Uncle Sam over for the week or so before we get a deal on the debt ceiling.  And liberals will like it.  Because by paying those taxes, liberals will buy civilization.



Oh, don't worry, liberals.  eftps.gov is still up and running.  In spite of the government shutdown.

And if that $5 billion isn't enough, hey liberals!  Pony up another $5 billion.  We are talking civilization here.

Do We Have What It Takes?

It's all very well to imagine a war against liberals, as I did yesterday.  You can conjure up a purpose, to turn back the administrative state, and objectives, to demoralize and delegitimize liberals, and so I did.

But do conservatives have what it takes to turn back the administrative state and fight the decisive battle against liberal cultural and political hegemony?  Back in the early 20th century, conservatives and liberals like to remember, Antonio Gramsci called for a "long march through the institutions."  Well, liberals did that, and so they control the parameters of all the great cultural institutions of our society -- excepting a few redoubts like talk radio.

More to the point, the ordinary young person grows up in the culture of liberalism: it is the water in which he and she swim.  How can conservatives hope to penetrate the citadel of liberalism to get a chance to communicate to young people, let alone actually persuade them of the glories of an America freed from the fetters of the liberal administrative state?

The short answer is that it can be done.  It has been done.

Let us take as our example the great wars between Britain and France.  In the Hundred Years War the British were continually invading France, from the time of Edward III to Henry V.  They were always winning battles: Crecy, Poitiers, Agincourt.  But Britain just did not have the power to defeat France.  At the end of it, the Brits decided to go in for the civil Wars of the Roses back home.  So that was the end of the conquest of France.

Never mind.  After the civil wars of the 15th century and the civil wars of the 17th century, the Brits got a Dutch king, and the first thing the Dutch King William III did was to start another war with the French, sending John Churchill off to fight the War of the Spanish Succession. It was the first bout in the Second Hundred Years War.

Only this time, in the Second Hundred Years War from 1690 to 1815, the Brits won.  They beat them in North America; they beat them in India; and they beat them in Europe, with the culminating Battle of Waterloo.  France was never the same again.

Want to know why the Brits won?  The answer is Dutch Finance.  The Brits paid for their century long war with a gigantic National Debt.  Here is what it looks like, from ukpublicspending.co.uk:

Yeah.  It's impressive, making the debt for the 20th century wars look puny in comparison.

The National Debt is key because, unlike the French, the Brits in the Second Hundred Years War never went through a national financial collapse.  They were always able to keep paying interest on the National Debt, and that meant that there were always more people willing to lend money to the Brits.  Look at that chart.  The Brits cranked the National Debt all the way up to 250 percent!  But they never succumbed to sovereign debt default.

Conservatives today are in the position of the Brits in the First Hundred Years War.  We can score fantastic victories against the liberals, like the Reagan era in the 1980s.  But it doesn't stick.  So we need a paradigm change, something equivalent to the Dutch Finance that William of Orange brought from the Dutch Republic to London.  Something that transforms the correlation of forces.

Otherwise our glorious conservatism will be limited to the modern equivalent of the fine speeches at Harfleur and Agincourt conjured up by Shakespeare to make a national icon out of Henry V.

And a modern French cynic will be able to say: "C'est magnifique, mais ce n'est pas la guerre."

The Beautiful Dream of American Exceptionalism

President Obama taught us all a lesson a while back.  When asked about American exceptionalism in 2009 he replied:

"I believe in American exceptionalism, just as I suspect that the Brits believe in British exceptionalism and the Greeks believe in Greek exceptionalism."

Yeah.  In other words, it's a nationalistic fantasy.

But, of course, the president is wrong: the United States is an exceptional nation.  It was founded upon an idea, the rising idea of its age, of republican self-government, on the Axial Age concept of the "responsible self."  From that idea came the whole exceptional package: limited government under law, separation of powers, the "Dutch finance" of Alexander Hamilton, the whole idea of civil society, of a middle ground of free association between the government and the individual.

But there is one brute fact about exceptions.  They are exceptions to the rule.  If the United States was born as an exceptional nation, then it stands to reason--and experience--that the United States will eventually become ordinary: "regression to the mean" is the official term.

Our liberal friends, of course, think that American exceptionalism is a bad thing: nationalism, anti-intellectualism, the gun culture, Babbitry, boosterism, the money culture.  They want to get back to being a normal nation, like the Europeans and their social democracy.

The libertarian "instapundit" Glenn Reynolds likes to quote the science-fiction author Robert Heinlein at this point:

Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.

This is known as "bad luck."

The point is, of course, that "extremely small minorities" are people like Albert Einstein or Steve Jobs; they appear for a moment, like a blinding flash of light, and then they are gone.  Sometimes they are revered; often times, as in the case of a Rockefeller or a Morgan, they are reviled.  Then the world reverts to the mean.

I like to say that the United States is founded upon the exceptional idea of "Dutch finance" in which the government bases its finance on promoting the health of the rest of the financial and credit system.  The normal way of government finance is "French finance" where the government games the financial system to ward off the consequence of its overspending.  Dutch finance builds a strong nation; French finance leads to sovereign default, hyper-inflation, riots and revolution.

Under President Obama the US is heading as fast as politically possible down the path of French finance. That is the meaning of unsustainable entitlements; that is the meaning of cheesy "fiscal cliffs;" that is the meaning of trillion dollar deficits.

And it will be the "little people" who will end up "eating the paint off the walls."

All exceptions come to an end.  But it is a bitter thing to be living through the end of one so glorious and luminous as the American Exception.

"You and Your Family"

You always want to go to Rush Limbaugh to get your gut check on the previous day in politics.  Love him or hate him, Rush is the man with the golden gut.  And his analysis is that the core of Mitt Romney's acceptance speech at the 2012 Republican National Convention was this memorable line:

President Obama promised to slow the rise of the oceans and to heal the planet. My promise is to help you and your family.

It deals very neatly with the central delusion at the heart of modern liberalism: we've got the social problem licked and now it is time to move on to bigger things.  All this, remember, while the whole "blue social model" is collapsing everywhere from Athens to LA.



All in all, the Republican National Convention was a success and showed us how the Romney campaign will be fighting the election.  It will be hope and change, based on Mitt's leadership, judgment and ability.  Against the proven incompetence of Barack Obama, who did the wrong thing at the wrong time in the wrong way, i.e., the opposite of Aristotelian virtue.



Of course.  There are only two campaign themes.  There is "Four More Years" and there is "Hope and Change."  Everything else is just a detail.



But what bothers me is the central promise of modern politics: to help you and your family.  This is the basic "lie agreed upon" in modern life.  It is the idea that the big remote central government can stand ready to help you and your family.



Reality is something different.



Big government cannot help you and your family.  It can stabilize the credit system with Dutch finance.  It can build big bureaucratic programs that slosh money around, and that you can exploit for your own benefit.  It can, in emergency, mobilize to get food and supplies to you, although Walmart did that better after Hurricane Katrina in 2005.



Here's how Big Daddy can really help you and your family.  It's the story of Mitt Romney, Mormon church elder helping a family after a devastating automobile accident.  Andrew Ferguson tells the story.

I was struck by the story of a Mormon family called (unfortunately) Nixon. In the 1990s a car wreck rendered two of their boys quadriplegics. Drained financially from extraordinary expenses, Mr. Nixon got a call from Romney, whom he barely knew, asking if he could stop by on Christmas Eve. When the day came, all the Romneys arrived bearing presents, including a VCR and a new sound system the Romney boys set up. Later Romney told Nixon that he could take care of the children’s college tuition, which in the end proved unnecessary. “I knew how busy he was,” Nixon told the authors. “He was actually teaching his boys, saying, ‘This is what we do. We do this as a family.’ ”

It's not the same thing when government gives you an unemployment check after you have lost your job.  The politician is not coming round to your house to give you a hand. Not with his money, he ain't.



I've been hammering on the theme of "confiscation" in recent days.  What I really mean by that is exactly what liberals do and what Mitt Romney was promising in his speech: government that helps you and your family.  The problem is that it is the job of civil society to help you and your family.  The way that society works is that people help each other, and community leaders help more than most.  Every single thing that government "confiscates" is a string snipped out of that social safety web.



It is a fallacy and a delusion to believe that "helping" ever happens outside of the face-to-face society of family, friends, neighbors, and church members.



In the old days, in hunter-gatherer society, the whole of society was face to face.  So you relied on your fellow tribesmen and women to help you in need.  But the basic fact of modern society is that huge sectors are removed from face-to-face relationships and are organized not on a relationship basis but on a systems basis.  Thus Habermas talks about "steering media" like money that direct human behavior.  Instead of exchanging goods and services through face-to-face conversation, people do it by the hands-off exchange of money and markets.



The same thing applies to politics.  Politicians affect the conversation of the town meeting, the assembly of the whole community.  But they are really doing something else.  Modern politics is a spectator sport.  The voters sit in the stands experiencing the game vicariously while the professionals duke it out on the playing field.  President Obama's team playbook emphasizes fairness and sharing.  Governor Romney's team playbook emphasizes individuals striving to lift their families up.  When the game is over the spectators go to their voting booths and vote for the team of their choice.  To say that such a combat is "social" in the way that discussing tribal affairs over a camp-fire is social is to live in a dream world.



We can never go back to the community of the hunter-gatherer.  The Garden of Eden is gone forever.   Our world is much more complex.  We must learn to operate the levers of modern technology, from money and credit to power tools.  Yet, as James C. Scott has written, the world cannot operate as a pure mechanical system.  Humans still interact face to face, and it is the face-to-face communication that acts as the vital lubrication that makes the whole system work.  Great powerful automated systems are amazing.  But you still need the human touch to set it up, and apply a nudge and a check every so often.



That's the way to really "help you and your family."  Could we ever get a government with the wisdom to stand back and let us all get on with it?

Capitalism's Century Five

What will happen when we do the wrap on capitalism's Century Five in 2050?  Could it be, could it possibly be the end of big government?

Century One, from 1550 to 1650, was the century when the Dutch invented Dutch Finance.  They created a funded national debt and made the government's rock-solid bonds the foundation of the credit system.  The Dutch invented all this in their struggle for political and religious independence from the empire of Spain.

Century Two, from 1650 to 1750, was the century when the Dutch exported their financial system to Britain.  Historians disagree on whether the Brits invited William of Orange to be king, or whether his 500-ship invasion fleet flat out invaded the sceptred isle.  But the result was the Bank of England and a funded national debt.  The bad news is that the Brits used their new-found wealth to conquer India and North America, and scaled up the profitable notion of plantation slavery to make fortunes in the millions--and millions of slaves--in the sugar islands of the West Indies.

Century Three, from 1750 to 1850, was the century when capitalism invented cheap cotton textiles for the poor--with techniques stolen from the Bengalis--and railroad transportation for everyone.  It was a revolution, because for the first time the poor could get clean, and could travel around on something other than their feet.  The year 1800 is a watershed.  In industrializing Britain, it began an era of rising expectations.  The poor expected their children, maybe for the first time in history, to be better off than they were.  The bad news is that the French tried to wreck it all with their violent Jacobinism, and the folks migrating off the land to the industrial cities had a pretty rough half-century transitioning from the life on the land to the life in the city.

Century Four, from 1850 to 1950, was the century that started with ocean steamships that let the poor migrate across the world, from the Pale of Settlement to the Lower East Side, from Ireland's potato famine to Boston and New York, from the Mezzogiorno to Little Italys all over the northern United States.  Then the capitalists cut oil prices by 90 percent, steel prices by 66 percent, and motorized and electrified Everyman.  The bad news was that the "shock of the new" inspired a ton of people to believe that capitalism was the anti-Christ.  Two huge global wars were fought to neutralize reactionary movements against the new order of freedom and cooperation: one a nostalgic attempt to return to the communist egalitarianism of hunter-gatherers; the other a nostalgic attempt to return to the blood and soil of kinship and clan identity.

Century Five, from 1950 to 2050 is already half over.  We already know part of what it means.  Capitalism has brought about a communications revolution.  Now you can travel half way around the world in a day with jet travel, and you can communicate and work with anyone and anything with the Internet and computer technology.  We cannot know what the second half century will bring.  Some hope for an utter demolition of the big-government welfare state, a nostalgia for the bureaucratic centralism of the absolute monarchs, to match the demolition of communism and fascism in Century Four.  The bad news is that another movement of nostalgic rejection has arisen to challenge capitalism, the Islamic longing for the caliphate of 700-1500.

Nobody knows how Century Five will turn out.  But if we are going to roll back the injustice of the welfare state we would have to start in 2012 with the decisive rejection of the politics of the social-democratic educated class and its poster boy, the President of the United States, Barack Obama.