Tag Archives: civil order

Why the Bankers Are Trapped

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Few seem to grasp that we have arrived at a turning point; a nation and a world confronted with extraordinary structural change.

To think of the future in terms of recovering the past will not be helpful. We must pick ourselves up, hit the reset button, and move forward in a manner that is congruent with a rapidly changing reality.

I am not a banker or economist. I cannot speak with authority regarding the fragile conditions to which we are exposed. But neither am I trapped in past assumptions or blinkered by custom. My intent here is to monitor a transition I think we should all try to understand.

There are many aspects to the changes we are experiencing, some with immediate implications, others longer-term.

However, I think it useful to begin with a particular question with critical immediacy: “Why is the Federal Reserve unable to return the economy to some semblance of order?” Or, to put it another way: “Why has nothing actually been fixed since 2008?”

Here we find a powerful illustration of what is meant by structural change.

The short answer to these questions is that they want to believe they are dealing with a cyclical crisis rather than a structural crisis.

Again, why? Because the truth represents an unbearable existential threat.

Structural change has shifted the economy into a long-term deflationary trend, which presents financial institutions and governments with an impossible situation.

I refer you here to James Rickards’ recent best-seller, “The Death of Money: The Coming Collapse of the International Monetary System”. A monetary economist and former banker, Rickards is an adviser to the Pentagon and CIA.

Using simple math, Rickards’ explains how “in effect, the impact of declining prices [deflation] more than offsets declining nominal growth [GDP] and therefore produces real growth.”

Most of us would think this is a good thing.

He writes: “Despite possible real growth, the U.S. Treasury and the Federal Reserve fear deflation more than any other economic outcome. Deflation means a persistent decline in price levels for goods and services. Lower prices allow for a higher living standard even when wages are constant, because consumer goods cost less. This would seem to be a desirable outcome, based on advances in technology and productivity that result in certain products dropping in price over time….”

Why is the Federal Reserve so fearful of deflation that it resorts to extreme measures to oppose it? Rickards gives us four reasons.

First, deflation has a severe impact on government debt. “U.S. debt is at a point where no feasible combination of real growth and taxes will finance repayment…. But if the Fed can cause inflation…, the debt will be manageable because it will be repaid in less valuable nominal dollars. In deflation, the opposite occurs, and the real value of the debt increases….”

Second, deflation impacts the debt-to-GDP ratio, causing foreign creditors to lose confidence and demand higher interest rates. This is an urgent problem because the debt is continually increasing. Budget deficits require new financing, and interest payments are being financed with new debt.

Third, deflation is a major problem for banks. As Rickards’ puts it, “deflation increases money’s real value and therefore increases the real value of lenders’ claims on debtors…. But as deflation progresses, the real weight of the debt becomes too great, and debtor defaults surge.”

The fourth problem with deflation is about taxes. When a worker receives a raise, the additional income is subject to taxes. But, if the cost of living drops by the same amount, the worker in effect receives the same raise and the government cannot tax it.

“In summary,” writes Rickards, “the Federal Reserve prefers inflation because it erases government debt, reduces the debt-to-GDP ratio, props up banks, and can be taxed.”

“Deflation may help consumers and workers,” he says, “but it hurts the Treasury and the banks…. The consequence of these deflationary dynamics is that the government must have inflation, and the Fed must cause it. The dynamics amount to a historic collision between the natural forces of deflation and the government’s need for inflation.”

Such are the difficulties and dilemmas of structural change.

Tom

Next week: Insolvency and the Devaluation of the Dollar.

Note to readers: You can support this blog and the book project by suggesting that your friends and associates take a look.

If Humankind is to Survive…

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City 4

“The fact is we can only love what we know personally. And we cannot know much. In public affairs, in the rebuilding of civilization, something less dramatic and emotional is needed, namely tolerance.”

–E. M. Forster (Novelist)

“If man is to survive, he will have learned to take a delight in the essential differences between men and between cultures. He will learn that differences in ideas and attitudes are a delight, part of life’s exciting variety, not something to fear.”

–Gene Roddenberry (Creator of Star Trek)

A Freedom of Differences

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Coast 6

“Opinion has caused more trouble on this little earth than plagues or earthquakes.”

–Voltaire

“I never considered a difference of opinion in politics, in religion, in philosophy, as cause for withdrawing from a friend.”

–Thomas Jefferson

“To be free is not merely to cast off one’s chains, but to live in a way that respects and enhances the freedom of others.”

–Nelson Mandela

A Foundation for Renewal

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I cannot imagine an American renewal without a meaningful dialog concerning values.

Can we rise above our differences as Americans to agree on the most basic of shared values? Will a courageous few stand together to agree on a unified starting point – a common American “center” that transcends culture, religion, politics?

Will the center hold?

It is difficult to visualize how this can happen, yet I believe we can do it and will do it. I believe it possible in part because it is not necessary to begin with large numbers. A small unified core of determined Americans can make this happen, citizens with the tenacity and open-minded compassion necessary to assert a powerful moral presence.

If we are willing and able to present a vision for the future with a generous and welcoming spirit, it will be immensely attractive to a nation desperate for the feel of solid ground beneath its’ feet.

I believe the vision of a civil order based on trust and responsibility will draw Americans to it from every walk of life – from every religious faith, from every economic condition and political philosophy.

And, yes, this begs a question. How can we agree? We have substantial differences. This is the hard part.

What is essential is not that we agree on every aspect of personal belief, but that we join with one another to restore the integrity of a civil society that allows for constructive cooperation, engaging with one another respectfully, so that we can secure the safety of our families and the productivity of our communities.

If this is our priority we cannot allow America to disintegrate in unrestrained acrimony and hostility. We will have to choose our battles. Some will have to be fought on another day.

James Madison fought to have slavery abolished in the Constitution when it was first drafted in 1787. It was painful for him to walk away from that vision, but he realized it threatened to kill the entire project. It took decades of determination for abolitionists to finally get the job done.

Today, however, agreement on certain principles will be immediately necessary. What must these be?

What are the core principles that will put America on the road to a dynamic future? Not the core principles held dear by each of us personally, but the essential principles required to pull a diverse people together as a nation.

Each of us will have to decide what we can accept in a healthy, diverse, pluralistic American society. Each will need to consider the extent to which we are prepared to engage in meaningful dialog and debate concerning this question.

I have suggested several principles in these blog posts that I consider essential. In addition to a firm defense of the Constitution, I have written of the necessity for trustworthiness, for responsibility, and the concept of constructive action – action based on the principle of refusing to hurt or do harm, whether by impatience, dishonesty, hatred, or wishing ill of anybody.

(See especially September 26, Foundation of Trust; October 12, Bringing Light to Darkness; October 17, Finding Courage in Crisis; and December 12, First Principles.)

Now I would like to hear from readers. What principles would you ask your fellow Americans to commit themselves to? Please contribute your comments.

And, what of those who remain hardened in attitude, closed-minded, or confused? What of those who simply refuse to accept any kind of responsibility?

We must stand firm in the midst of chaos and not be moved from our choice of principles or our determination to rise above our differences.

A fully American vision can only be reached through thoughtful consultation – by discussing our hopes and beliefs with one another in good faith, exploring the fault lines where we can find common purpose and a higher calling.

A valid vision of the future will require genuine engagement and understanding. Only then can we start working together on real problems and real needs.

We are either all in, building a free, fair, and productive society, or we are each on our own in a devastated world.

Tom

A note to readers: Please share your thinking about principles and fundamental American values in your comments.

Keeping Our Eyes on the Prize

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Police 1 (Reuters)

“An attempt to achieve the good by force is like an attempt to provide a man with a picture gallery at the price of cutting out his eyes.”

–Ayn Rand

“They say ‘means are after all means’. I would say ‘means are after all everything’. As the means so the end.”

–Mohandas Gandhi

Reuters image

Principled Means, Principled Ends

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There are two reasons why political violence will never get Americans where we want to go. One is tactical. The second is strategic – and far more important.

I do not believe foreign powers will ever seriously challenge our national integrity. 2015 is not 1776. Rather, the danger lies within. The fight involves ideas, and the sincerity of our relationships with one another.

Yet, we seem to hear implied threats of armed rebellion. One hopes the partisan will read the Second Amendment very carefully. (Please see January 2 post.)

Any patriot of today preparing for armed resistance in the tradition of 1776 will pit himself against an extraordinary opponent. He will be outmaneuvered and outgunned by fully militarized police possessing the most advanced surveillance technology and backed by massive firepower.

The mythical ideal of the citizen soldier remains deeply engrained in the American psyche. But the plain fact is, if we imagine a heroic Star Wars scenario in defense of freedom and justice, we are in la-la land.

I am not interested in arguing about this, because there is a much more significant problem with this kind of thinking. And it is this:

American police agencies and the United States military are served by Americans.

As I wrote here last week, violence committed by Americans against Americans would contradict the rationale behind the impetus to violence itself. It would be self-contradictory, pitting us against one another and subverting the integrity and viability of the American Idea as a guiding force for the good.

These are our people, our sons and daughters, friends and neighbors. They are working people. They may be working for deluded or destructive political and economic forces, but they are Americans who should be approached respectfully and won over by persuasive argument and compassionate example.

Our views on government overreach, threats to the integrity of the Constitution, or the loss of liberty in any form are serious matters that must be addressed. But, public servants, police officers and bureaucrats are not the problem.

We must respect these people, not just as a matter of principle, but because we need them. They are essential to a constructive solution.

Any resort to violence within the American community will tear the fabric of the republic and threaten the safety of our families and communities. And, it is simply not necessary.

Some may think the financial elite are our opponents or some dark conspiracy, but it will be our own people, Americans from our own communities, who serve on the front lines arrayed against the self-styled patriot-hero.

Americans will not be persuaded if we are attacked. When people are confronted with hostility we close ranks in self-defense.

Even the misguided rebellion of tiny splinter groups will be destructive to the cause of liberty. This can easily lead to cascading consequences in which violence begets violence in a downward spiral, endangering everyone and threatening the progress of constructive action.

As aggravating as our neighbors may be, it is really not necessary for us to agree about everything. Our differences must be respected, yes. But, if we want to rebuild the foundations of the republic, the American people must rise above our differences to resolve practical problems, define shared values, and together assert the moral center of the nation.

I did not say it would be easy.

The essential question to ask ourselves, and the question by which to judge constructive action, is the spirit and quality of the future we wish to secure. This is not a theoretical nicety. It is a necessity.

Going to war with our fellow citizens would make no sense. Indeed, the ends we seek could be delayed by decades and possibly destroyed by an impractical or intemperate course of action.

Tom

Next week: A Foundation Based on Values

Ends and Means

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“The principle that the ends justify the means is in individualist ethics regarded as the denial of all morals.”

–F. A. Hayek

“He who chooses the beginning of the road chooses the place it leads to. It is the means that determine the end.”

–Harry Emerson Fosdick

The Second Amendment, Then and Now

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The Bill of Rights, which includes the first ten of the amendments to the Constitution, was first proposed to Congress by James Madison as articles to be incorporated into the main body of the Constitution.

Congress approved twelve articles of amendment to the Constitution in 1789 and submitted them to the states for ratification. Contrary to Madison’s proposal, they were submitted as “supplemental” additions. Articles Three through Twelve were ratified by the required number of states and became Amendments One through Ten in 1791.

The Second Amendment, which has become a matter of considerable interest in recent years, reads as follows:

“A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.”

This was not controversial at the time. The concept existed in English common law long before the enactment of the Bill of Rights. And for a variety of reasons today many Americans feel it is necessary to own firearms.

The importance of this issue to the founders was quite clear. James Madison introduced the language that became the Second Amendment and also wrote: “The Constitution preserves the advantage of being armed which Americans possess over the people of almost every other nation where the governments are afraid to trust the people with arms.”

Alexander Hamilton, like Madison a strong advocate for Federalism, was equally explicit: “The constitution shall never be construed…to prevent the people of the United States who are peaceable citizens from keeping their own arms.”

Thomas Jefferson famously said: “No freeman shall be debarred the use of arms.” And he also wrote that “The strongest reason for the people to retain their right to keep and bear arms is as a last resort to protect themselves against tyranny in government.”

During the years leading up to the Revolutionary War there was mob violence in several of the colonies. In addition, many American lived in or close to wilderness regions where conditions were essentially lawless. The need people felt to protect their families was quite rational.

It should be noted that a primary motivation for supporting “a well regulated Militia,” articulated in the Second Amendment as “being necessary to the security of a free State,” was the strong opposition among the founders to the concept of a standing army.

Thomas Jefferson put it this way: “None but an armed nation can dispense with a standing army. To keep ours armed and disciplined is therefore at all times important.” “Every citizen should be a soldier,” he wrote. “This was the case with the Greeks and Romans, and must be that of every free state.”

The American reality in 1776 and 1791 was entirely different from that confronting us today. Yet, news of social, religious, and psychopathic violence imposes itself on us every day. Older Americans are particularly sensitized to what has changed: the radical loss of trust and the lack of civility, ethical integrity, and social responsibility we see everywhere.

We must acknowledge the compelling reasons why so many feel it necessary to own firearms.

That said, however, I must tell you I believe the use of force among Americans today, in defense of the Constitution and the American freedoms, would be counterproductive and incompatible with an effective strategy.

Our consideration in recent posts of the dynamic relation of means to ends should, in my view, make this clear.

Violence committed by Americans against Americans would contradict the rationale behind the impetus to violence itself. It would be self-contradictory, pitting brother and sister against brother and sister, subverting the integrity and viability of the American Idea as a guiding force for the good.

We can do far better.

I have presented principles supporting this assertion in previous posts, (see especially Nov 28 and Dec 12), and will offer a more explicit argument next week.

We need to consider this carefully and get it right. We face a long crisis. Many dark and dangerous things are possible.

Tom

Next week: Principled Means, Principled Ends

Note to readers: You can support this blog and the book project by suggesting that your friends and associates take a look.

First Principle

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If we are to rebuild the foundations of this nation in a manner consistent with principle, it will be wise to employ means that lead effectively to the ends we seek. Let us proceed with wisdom and foresight rather than emotion and ego.

Nothing will cause greater destruction to our purpose than a combative attitude that alienates the very people we need to win over.

If we avoid allowing our differences to tear us apart, we can choose to cooperate in addressing the structural problems that threaten the safety and security of our communities. And, it is only in the context of personal relationships tasked with essential responsibilities that we can come to understand and influence one another.

As long-time readers know, I have urged that we turn away from the dysfunction, dishonesty, and deceit of national politics to the extent possible, and join with one another to rebuild America in our local communities.

I have described three essential elements – trust, dependability, and constructive action – which will be necessary to regain stability and to move us forward. These elements will only be found in communities where neighbors rise above their differences to serve a higher purpose.

I have chosen the term “constructive action” to describe the means by which we can realistically progress. And I have explained in recent posts why a shared sense of purpose will be required to guide constructive action.

Shared purpose, I wrote, is a lens through which the challenges of necessity can be brought into focus. The efforts of diverse personalities can be coordinated. Purpose provides a standard by which to determine priorities and judge progress. In short, forward motion is essential; yet it is impossible without unity of purpose.

So, how can we understand constructive action?

Constructive action is action based on the refusal to do harm. It is action taken in a spirit of respectful kindness, a spirit founded upon the refusal to fight, to kill, or to damage. The principle here is the refusal to hurt – by impatience, dishonesty, hatred, or wishing ill of anybody.

I submit to you that this is the first principle upon which all other values, principles, and purposes depend.

Please do not misinterpret constructive action as merely a negative state of harmlessness. Quite the contrary, while constructive action in its purest form attempts to treat even the evil-doer with good-will, it by no means assists the evil-doer in doing wrong or tolerates wrong-doing in any way.

The state of constructive action requires that we resist what is wrong and disassociate ourselves from it even if doing so antagonizes the wrong-doer.

There is a close relationship between the positive spirit of kindness, respect, and trustworthiness that characterizes constructive action and the moral integrity of the free society we wish to build. The two are inseparable.

Constructive action is the means. Unity of purpose, grounded in the truthfulness of moral integrity, is the end.

Western political thinking has always considered means to be either an abstraction of tactics or simply the character of social and political machinery. In both cases means are considered only in their service to the desired ends, or goals, of particular political interests. We will approach our understanding of means in quite a different way, replacing an end-serving with an end-creating function.

Such an approach to means is necessary if we seek to apply traditional American values to rapidly changing circumstances.

This is the reason for my insistence on the meaningful engagement of all Americans in this endeavor, despite our vast diversity. A genuinely American future can only be realized in the context of our differences.

I believe this is what America has always been about. Is it what we want now, or not?

We have a clear choice to make. Either we choose to recover and reconstruct the fundamental meaning of the American Idea, or we can walk away forever from the safety, stability, and meaning of an America we can trust and believe in.

Tom

A note to readers: The next several posts will explore the meaning and implications of this “first principle.” I will take a breather for the holidays, so please look for the next post on January 2-4: “The Second Amendment, Then and Now”.

A Severe Choice

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The confluence of crises confronting the American people in this new century represents a profound turning point in the nation’s history, and for each of us personally.

In the turbulence of multiple crises it can be easy to forget the unique stature of the United States and the role it has played and will continue to play in the progress of an ever-advancing civilization.

The American Idea has been a beacon of hope for the world, however imperfect the reality might be. America has been an intense source of intellectual and creative vibrancy, and has served as a model of political freedom, social diversity, and economic vitality.

Ω

Many new readers have started following this blog, particularly on the Facebook page. So, I will pause this week to clarify my purpose.

I have been presenting ideas concerning the motives and principles and discipline I believe we will need to successfully rebuild the foundation of the United States as a free and democratic republic. During the holiday period I will be focused on the importance of ensuring that our means are consistent with the ends we desire.

Some of you will find these ideas familiar, especially those who are rooted in a religious tradition. However, I will propose thinking that I hope will be meaningful to everyone, religious and non-religious alike.

The opening words of this post were lifted from the first chapter of the book I am working on, and I offer more of the same passage below.

Ω

The United States has entered the fiery test of a crucible in which the forces of crisis will burn away the self-centeredness and sloppy thinking of the past to forge an American identity we can feel good about.

Or, if we fail to rise to our calling, the social violence arising from failing institutions and human suffering will incinerate our children’s future and turn a great vision to hopelessness and anguish.

At a time of extraordinary existential threat we are confronted with a severe choice.

Will we return to the founding principles of these United States as the bedrock on which to build a free, ethical, and comfortable future? Will we defend and protect two hundred years of commitment, hard work, and sacrifice by generations of Americans who have given their lives to this unprecedented vision?

Or, will we give way to the emotions of uncompromising partisanship – and allow a great trust to shatter and vanish?

Infrastructure, systems, and services we have long depended upon are going to fail in the coming years. Problems will have to be solved without many of the tools and supports to which we are accustomed.

So, let us set aside partisanship and sectarian differences when necessary, in the interest of stabilizing and rebuilding the nation. Panic neither serves nor becomes us.

This nation has progressed gradually toward maturity, dedicated to the cause of liberty built upon the foundation of unity within diversity – diversity of nationality, religion, ethnicity, and, most of all, political philosophy.

We possess wide ranging distinctions and differences, but together we share an essential inviolable common ground.

Let us pull together, reorient ourselves to the originating principles upon which this country was built, and step forward to reassert the vision and secure our communities.

I submit to you that something far better, far nobler, something perhaps beyond our present capacity to imagine, will emerge from the present turmoil.

If, however, we cannot work effectively to build safe communities with people we are not in complete agreement with, then we will be condemned to the only possible alternative: a collapsing civilization characterized by fear and violence, a nightmare for our children, and a land where no principles, no values, no stable order can be realized.

Tom

Next week: First Principles

A House Divided…

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Soldier 3

“A house divided against itself cannot stand.”

–Abraham Lincoln

Trust

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People 13

“Trust is the glue of life. It’s the most essential ingredient in effective communication. It’s the foundational principle that holds all relationships.”

–Stephen Covey