Wednesday, October 1, 2008

What is Really Going On, and does it matter?

I have been trying to follow the financial news, but I have been rather confused by the impact of it all outside of the banking sphere (which is relevant, in some ways, to my day to day life, as my husband works in New York and has banks as his clients).

I wish that the media would do more to educate us. I don't think that the campaigns should be suspended, but I sort of wish that the 24 hour news coverage of the campaigns would be. I also wish that TV news was not so entertainment and ratings driven, so that they could focus on actual issues affecting our nation.

This morning my husband sent me this essay, from the New York Times, which I found very helpful.


Right Said Red said...

Thanks for the link MA. I just started trying to read up on everything Monday!

Juris Mater said...

This is why I've kept all our savings in the form of $20 bills duct-taped under our mattress for all these years. Wall Street? Where is that?

Joking of course. Thanks, MA, for this VERY informative article. My husband and I have lingered around the table for several recent nights trying to figure out what's really happening, and this clarifies a lot.

B-Mama said...

I'm totally enlightened. This has been one of those ongoing news stories that I've acknowledged, but taken very little time to really understand (amidst sippy cups and dirty diapers).

I'm very glad to be a well-informed SAHM today. Thank you, MA.

GB said...

You should read the editorial page of the Wall Street Journal - which I trust infinitely more than the New York Times...

JimmyV said...

I've been trying to learna bout all this stuff too so I will recommend a few things.

For a general and intelligible understanding of economics, Basic Economics by Thomas Sowell is great.

For current explanations, I recommend:

and of course, me:

Clare Krishan said...

I don't want to poo-poo those who rely on their nearest and dearest for intellectual insights, but beware of the NYTimes as the paragon of virtue regarding what is true and good! Here's the "natural law" way of looking at the tyranny of relativism being perpetrated before our very eyes:

A healthy economy ought not suffer booms and busts (unless we assume right reason in human action is not geared to human flourishing, in which case contraception (boom) and abortion (bust) are also reasonable practices within a "healthy" marriage). Such macroeconomically damaging (global security) and microeconomically detrimental (homeland security) instabilities enter in when public authorities and private institutions in a position to influence the relative values being exchanged in the marketplace award a preferential weight to certain kinds of commerce to the detriment of others (set unjust prices, coerce the populace, dictate terms).

We can no longer speak of free markets but mercantilism (where aggregates of supply and demand are manipulated along with collectivist cooperation amongst foreign central banks in currency fluctuations to profit certain business segments by exploitung/defrauding others - currently the US, the EU and China all operate mercantilist economies whereby central banks control the means of exchange - the specie used to pay the price negotiated - to inflate or deflate their own commercial activity and siphon-off funds by taxing from the citizenry's GDP or as seignorage on the the holders of the currency by debasing the dollar)

As Catholics we need to understand ourselves and our lives as "acting persons" in our social institutions (education, performing arts, domestic residential arrangements, economy, finance, healthcare, charitable assistance) that is, we are so much more than human units of production that can be placed as terms in a utilitarian calculus, we may not permit our destininies to be determined exogenously by logical positivism's relative priorities. We have one eternal priority (the "first thing") to guide us in using our free will to determine what we value. We must apply our agency to further those values by demanding that the truth always is adhered to, since anything less is an illusion not worthy of those made in His image.

What the NYTimes article fails to articulate is that the Great Depression didn't just appear out of nowhere by surprise - it was the conclusion of the inflationary currency debasements of the roaring twenties, where peoples pocket books were flush with credit NOT savings earned, since during the previous decade the global economy suffered the destructive effects of malinvestment of capital in non-creative enterprises (destructive weaponry that demolished the centers of production in hunderds of European cities and wiped out a generation of young men who may have founded families with more conservative values has they lived to be economically active during instead of the self-indulgent flappers who feeling sorry for the indigent began to relax centuries of Christian disapproval on contraceptive prophylaxis. Are we are surprised that the "moral" culture has so much to say about the "secular"? The volatility inherent in our understanding of "credit" is as incoherent as the modern conceptualization of "conjugal act" - the means to extend credit come from productive wealth creation of industrious persons who defer gratification in order to retain a part of their revenue stream as SAVINGS. Americans long ago stopped being open to saving prefering instant gratification (indeed the trend tracks the same time frame as Americans stopped being open to life within sexual relations) - the way we bank now is we borrow money from nations that still have surpluses (the monarchy of Saudi Arabia that bans bibles, the communist slave camp of China that aborts all but one baby born to their women citizens -- foreigners are exempt, expats can have as many babies as they have the funds to cover the $100,000 maternity hospital delivery bills)

This situation is made the more dire since savings are not being safeguarded as "deposits": a certain fraction is withheld as a reserve in case some depositors want their money back (we the taxpayer step in if all of them want their savings back at once, a "moral hazard' where the FDIC's permits the banks to gamble for private gain at our expense via socialized loss). The remainder is being extended -- expropriated, embezzled -- in the form of multiplying the credit "liquidity" at the expense of depositors solvency - here's how fractional reserve banking works

The Catholic Church has long taught that private property is the bottom line for that charitable justice we owe our creator: we are to use our gifts for the common good. Operative here is "our" - the stewardship is not commons but personal, the gainful outcome or result is common. Who gets to decide what is "gainful" and how? The utilitarians would say that the maximum aggregate good dictates the outcome, and would demand we submit to their designs on our freedoms. NO, I say again NO! The good is a question of metaphysics not math, it requires men and women to engage their consciences to invite the Holy Spirit's generosity in gifting us with counsel on the Truth. In the current crisis, the Truth is similar to the Great Depression, but the NYTimes fails to recognise what aspects are congruent and thus errs in proscribing the same faulty remedies that led to pretty awful suffering, but more horrid yet tragically culminated in the outbreak of a second World War, that saw demagoguery blame a whole race the world over for the sins of the greedy here at home amongst us, and send 6 million to their deaths in the Holocaust, and end the lives of another 60 million through military attrition, famine and disease:
"The total estimated human loss of life caused by World War II was roughly 72 million people, making it the deadliest and most destructive war in human history. The civilian toll was around 47 million, including 20 million deaths due to war-related famine and disease. The military toll was about 25 million, including the deaths of about 4 million prisoners of war in captivity. The Allies lost approximately 61 million people, and the Axis powers lost 11 million."

Ladies this is a spiritual issue - voices within the Church, especially encyclicals and proouncements from the Holy Fathers at the Vatican over the most bloody century in history, have attempted to criticize capitalism for its excesses, yet American Catholics preferred to turn a dead ear. Capital as a form of cultural wealth expressed as creative production for the common good of healthy human flourishing, capital as accumulation of money that turns a blind eye to the natural law is not.

For more on the metaphysics of the economy read up on the Austrian schools scholarly discussions of
"What is money"
"What is measured by price?"
"What 'a priori' truths help guide human action in the pursuit of personal thriving via social institutions, market economies, local and global politics?"
"Aristotle, Menger, Mises:
An Essay in the Metaphysics of Economics
You may, like me, find a lot in common with the natural law arguements against Roe-v-Wade and in support of the pro-life social conservative agenda in general. Be prepared to revise all you may have assumed about the economics of life thus far, a deflationary period is ahead, it remains to be seen if it will be a long-haul depression for all or a short-haul punishment of just the bad actors.

Clare Krishan said...

And here's Prof. Elizabeth Schlitz at Mirror of Justice blog on the theme (Catholic Social Thought aka the natural law in economic matters) re: stewardship and solidarity:
and fractional reserve banking