The Rich He Hath Sent Away

There is much to celebrate in the collapse of Lehman Brothers and Merrill Lynch; not the fall of these companies in particular, but what the fall represents. It shows the impossibility of holding onto wealth and power in a free society that is always in flux. And this is as it should be.
I’ll explain why, but first consider an implausible take-off point: the Magnificat, the glorious song of Mary from the Gospel of Luke. We Catholics sing the following: “Dispersit superbos mente cordis sui; deposuit potentes de sede et exaltavit humiles.”
It translates as, “He hath scattered the proud in the conceit of their heart. He hath put down the mighty from their seat, and hath exalted the humble.” Then the finishing touch on these astonishing words: “et divites dimisit inanes.” The rich he hath sent away empty. This is the year that this song has become our living reality.
The deeper question is why this is a celebratory text. Why should toppling big shots be a great thing? Because entrenched establishments almost always lead to corruption and stand against social progress, particularly when those establishments tie together business and government.
Think of the headlines of the last days and how they seem to conform to the text of the Magnificat. Think of Freddie Mac, Fannie Mae, Lehman, Merrill, AIG. Together they controlled trillions. The mighty and the rich should be vulnerable in a perfect world.
This is one message of the Magnificat. It reminds us that life is full of illusions that can be revealed in an instant. We shouldn’t take for granted that the powerful and wealthy will always be so. There are forces operating in the universe that no man can put down.
These words tap into an inchoate sense we all have that establishments sometimes need to be shaken to their core. But how do you reform institutions that are deeply burrowed into the power centers, hooked into the money machine and seemingly untouchable by regular people?
Here we have one of the longest-running critiques of capitalism: its supposed tendency to create monopolistic money centers. But, really, this is based on confusion. The source of monopoly is not capitalism as such but the special privileges given to institutions such as Freddie and Fannie. They were able to offer special terms for borrowers, ones more favorable than other commercial institutions. And their liabilities enjoyed an implicit guarantee that they would be covered by the state should anything go wrong.
Lehman and Merrill were hooked into this mortgage racket, too. They too rode high on a bubble created by loose and subsidized lending. When the market prices for housing took a turn south, these institutions all began to blow apart. It’s not that they didn’t anticipate that the market would turn; everyone knew that this good thing couldn’t last forever. The problem is knowing precisely when that would occur. If you get out too soon, you miss profit opportunities. If you wait too long, you endanger the very life of your institution. Such is the peril of doing business in a bubble.
We visit large cities and see huge skyscrapers, and we tend to think the institutions that inhabit them are invincible and will surely last forever. But this is an illusion. They are no more secure than the hotdog vendor on the street below. Whether the revenue is $100 per day or $10,000,000, both businesses face that great equalizing force in the universe: uncertainty. Neither knows for sure what the next day will bring. No matter what the revenue, what matters most for profitability is the difference between what goes out and what comes in. Profits are made on the difference, which means it is the marginal dollar, not the total dollar amount, that keeps companies growing and prospering.
Market conditions change. A dramatic change can blow away a company with billions in assets in a matter of days. With communication technology moving information at lightning speed every second of every day all over the world, there is nothing anyone can do to stop this from happening. The secretary of the Treasury, the heads of the Fortune 500, and the governors of the Federal Reserve can meet in rooms and hammer out deals all they want. But they are powerless to stop a market that has turned.
Mostly what the powerful attempt to do is provide more of what started this mess to begin with: floods of paper money. What is the effect of that? It can postpone the day of reckoning sometimes. But at what cost? Every dollar that the Federal Reserve prints waters down the value of the existing dollar, which means one thing: inflation. Actually, it means one more thing: distorted market signals.
Even then, the market winds blow ever stronger. The injections of credit in the past didn’t stop the present crisis; it only worsened them by creating the illusion that life could go on as usual.
Think of how marvelous this capacity of the market is to upend the established order of things and set us on a new course. The tendency toward stasis afflicts every society. We have this hope that democracy will somehow rotate elites so that they do not become too powerful and persist in error and corruption. Every candidate runs on a platform of “change,” and we usually always fall for it. But do we get change? Not really. The substructure of the state is a permanent thing. Only appearances and priorities change, not the fundamentals.
The longing for a fresh start is also the basis for why many people support war. Recall the dream of the Iraq war — we were told that it would spark a revolutionary democratic movement that would sweep the Islamic world. People would see that dictators are vulnerable. We’d overthrow the elites, and freedom would be reborn.
But what happened instead? Lots of lives were lost and much property destroyed, and the affected populations became madder than ever before. War as an agent of change has failed.
Revolutions have a similar problem. They sound promising but, typically, evil and ruthless people take charge during revolutions. The French Revolution and the Russian Revolution are cases in point, and even the American Revolution raised the status of military leaders and financiers, who were nobodies before the war and then took charge after it was over — and not all to the good.
Socialism is no solution, despite its appeal since the ancient world. Rather than upending establishments, it creates the worst form of stasis: a totalitarian society in which the state rules and the people become nothing more than cogs in a machine.
Entrenched establishments need to be destabilized sometimes, but not through violence, rebellion, revolution, socialism, or other such means. We need mechanisms that assert truth and reality over lies and illusions, but do it in a way that spares lives and truly reflects the social will.
The free market provides just that mechanism. It has the remarkable way of aggregating billions of tiny decisions all over the world into a single unit called the price, and that price serves as the basis of the calculation of profit and loss, the tools that tell an enterprise if it should keep doing what it is doing or whether it should change. When the price changes, and the accountants deliver the news, all the best-laid plans are in tatters.
It is a beautiful thing to see: The proud are scattered. The mighty are removed from their seats. And the rich are sent away. Is there any other institution that can make this happen, without votes, bombs, meetings, plots, plans, conspiracies, or anything else? The structure of reality itself mandates the shift as a reflection of the will of billions of people involved in the daily process of conforming their economic lives to the living reality around them.
There are economic reasons to celebrate such upheavals. True prosperity is based on wealth and accumulated capital; it is rooted in the savings that come from deferred consumption. The prosperity of the bubble is different; it is based on the illusions that are generated by paper money and false credit signals manufactured by the central bank.
Illusions can’t be the basis of a lasting prosperity. The bust period of the business cycle is a time of truth-telling, a time in which the reality conquers illusion and the system is put back on a solid foundation for the future. A bust that goes to the bottom is a good sign for the future, because it permits bad investments to be washed away and solid investments to return.
I’m not denying that there is pain associated with business failure. It is the form of pain that is summarized in the expression: truth hurts. The great truth we should take away from today’s headlines is that, even under the best conditions, wealth and power in this world is not permanent. The large institutions that are being blown away in the winds of change were built on the sand of paper money. Whatever institutions replace them would do well to build on the rock of savings and well-earned capital.

Jeffrey Tucker

By

Jeffrey Tucker is managing editor of Sacred Music and publications editor of the Church Music Association of America. He writes a bi-weekly column on sacred music and liturgy for Crisis Magazine and also runs the Chant Cafe Blog. Jeffrey@chantcafe.com

  • Joe H

    An article like this really puts to the test my new resolve to remain diplomatic and respectful at all times when discussing politics.

    To say the very least, I am shocked by the premise of this entire argument.

    I begin with this notion that the “mighty have fallen”. Over the last three years the top executives of the top 7 US banks, taken together, have made 95 billion in compensation. That’s 95,000,000,000, while they were reporting losses of 500 billion – that’s 500,000,000,000. Hopefully some of these people will end up in jail. Most of them will get off with nothing more than a slap on the wrist, and no one is going to make them give back money they can’t find. No, the people who are directly responsible for this crisis will go on with their lives.

    But not a single word about the families that will be losing jobs, savings, pensions, health benefits, their homes, their very livelihoods as this meltdown reverberates throughout the entire US and global economy. No, instead they should break out the champagne and celebrate. Is this a serious argument?

    I don’t want to make any extreme or offensive analogies, but is this not extremely similar to the logic that communist dictators use? It goes something like this, and it can be used on either side: things may look bad now, but we must have the long view of history. Our system (insert socialism or capitalism here) is destined to triumph over (insert the opposite here). If we sacrifice today for (socialism or capitalism), tomorrow we will be lead into a more prosperous future. Yes we face (if capitalist, choose high unemployment and financial chaos, if socialist, massive inflation and chronic shortages), but if we stick to the script, we will overcome these problems.

    The 20th century should have taught us to kick ideology out of economics, or at least marginalize it and put it to the side. I think this article is a glaring example of ideological economics. Would it have been so terrible to consider that the trend for the last 30 years has not been more government involvement but less, not more regulation, but less? Not a word about the Glass-Stegall Act, which established the rules that prevented these sorts of things from happening since the Great Depression, or the Gramm-Leach-Blilely Act that undermined it. A little bit of regulation could have gone a long way towards preventing this.

    Finally, this worship of the market is idolatry at it’s worst. There is no escaping the fact that the short-term prospects of absconding with an obscene amount of wealth, for most people, always outweighs any consideration, if there ever is such a consideration, of the long-term consequences, or the wider social consequences. A system that rewards narrow, short-sighted and selfish behavior can only end in the complete disaster we see unfolding before us now.

    Somewhere between the ideological extremes of “the market can do everything” and “the state can do everything”, rational individuals who aren’t afraid to confront the strengths and weaknesses, the failures and accomplishments of different economic models must step in. The social teaching of the Church is an example of these efforts.

  • Todd

    “The mighty and the rich should be vulnerable in a perfect world.”

    Alas, for some, it is not so. Didn’t AIG just become the biggest welfare queen in American history?

  • RK

    Given their adherence to the boom/bust cycle, there was a certain inevitability to the collapse of these institutions. However, isn’t the real danger that the federal government steps in to bail them out? Doesn’t this, in effect, nationalize them and, to some extent, those companies that do business with them? The $85 billion bridge loan (to nowhere?) that AIG received will likely not be the last. It seems that socialism becomes much more palatable when crisis like this occur.

  • Vicki

    Please comment on the “golden parachutes” the CEO’s and CFO’s receive upon the collapse of their business… doesn’t seem to me that they’ve been sent empty away. All of those who work under them, maybe… the ones who were just following orders from the top and are now out of a job. My husband comments that all he has to do is become the president of a major company, run it into the ground, and then be let go with a severance package worth millions of dollars so that he’ll never have to work again. Sounds like a solid plan, eh?

  • Joe Marier

    1. Who associates skyscrapers with invulnerability these days?

    2. You can complain about the “flood of paper money”, but there was also a flood of investment capital that came from overseas (as Megan has repeatedly pointed out), and we could hardly be blamed for that.

    3. Fannie and Freddie didn’t offer special terms for borrowers; Fannie and Freddie don’t write mortages. They securitize mortgages, and they repeatedly loosened their standards for the mortgages they underwrote, in accordance with their belief in “affordable housing.”

    4. I’m kind of with Arnold Kling: it’s interesting how the freest markets have been secured by military power. Someone has to keep the shipping lanes open, and not everyone can be bought off.

  • J. M. Walden

    Mr. Tucker,

    From the financial services office in New jersey in which I type this I can assure you that I empathize with your article and agree with it in principle. But the rich remain wealthy when the towers fall, while the poor or those struggling desperately not to be poor any longer, see their dreams and comfort dashed. The proud and rich have been dealt, at best, a bad hand in a game they control. Though those companies failed the parvenus which controlled and profitted from them were left virtually unaffected, insulated by vast wealth. Many of our clients were affected however, as were the employees of those failed firms, and the subsidiary businesses (such as my employer) – all of whom may not be rich or proud or mighty. The things of this world pass and only God remains, but I think that Our Lady sheds a tear when retirees watch their savings get decimated or young people just starting out in life lose everything. When we say “Lenhman” and wag a finger disapprovingly at the practices that led to their failure, please do not forget that the livelihood and prosperity of many ethical and pious persons are caught up in the greed of a few selfish Mammonites. I rejoice in seeing that “[t]he proud are scattered. The mighty are removed from their seats. And the rich are sent away,” but with the master goes his servant, the former to temporary inconvenience, the latter to possible destitution. Please remember them in your prayers, none of us are so high and holy, so rich in assured salvation, that we can afford to be uncharitable.

    A very good article however, despite my paltry objection. I thank you. – JMW

  • Tom

    The real lesson we are being shown here is that we truly can not serve God and manna alike. So, when the god of worldliness falls will we follow the world and lay blame, hold envy, fear and greed in our hearts, or will we instead trust in our true God, maintain peace in our hearts and look for guidance to love and help one another?

  • Rob

    The problem is that when the rich tumble a lot of peope underneath them also take a fall. Businesses close, people lose their jobs, bankruptcies flow and ordinary folks find their retirement savings ravaged. I disagree with the implication that the toppling of economic giants such as Freddie Mac, Fannie Mae, Lehman, Merrill, AIG is good for our society.

  • Tom

    The real lesson we are being shown here is that we truly can not serve God and manna alike. So, when the god of worldliness falls will we follow the world and lay blame, hold envy, fear and greed in our hearts, or will we instead trust in our true God, maintain peace in our hearts and look for guidance to love and help one another?

    that should be mammon, not manna. sorry

  • Jeffrey

    Just letting you know that I’m reading comments. Thank you and keep them coming. By the way, I know there are other victims beside big shots. A down cycle like this can last a year or two unless steps are made that prolong it, such as was done by FDR. The Bush admin is doing its best to repeat that history.

  • Frederick Schmeck

    Unfortunately, every post here is incorrect.

    The truth is that the economic woes of the nation can be blamed on only one thing; Griffins.

    Obama and Palin are involved in a cover up of Griffin breeding in this country and unless we work together to stop it, the economic problems will continue and multiply…

    just like Griffins.

  • Brian Saint-Paul

    The truth is that the economic woes of the nation can be blamed on only one thing; Griffins.

    Somewhere, Merv Griffin is crying. Nice job, Frederick.

  • Dave

    I agree with the earlier comments that the greediest of the rich
    are the last to feel the consequences of their errors. Gold
    holds no allegiance to country or person. Still the underlings
    in this country taking the hit are much better off than most of
    the world as a whole. What is really needed is a fundamental
    change of heart across the whole spectrum of our society. We all
    should be thinking of the interests and needs of others in our
    day to day activities, remembering not to hoard while neglecting
    what’s left for others. If we don’t learn this lesson and make
    a real change, things will align for another cycle of the same.
    Just like riders at an amusement park, getting back in line for
    another turn on the same ride.

  • Alex

    AIG is an example of virtue and sin and how a sinner in the family can affect the whole family. The insurance side is sound and disciplined (regulated) while the Financial side lives in an in a sinner-constructed intoxicated dream that denies reality.

    Consumer and Commercial banks are also disciplined although they also have a financial side that may hurt them.

    Investment banks are sinful families where sanity is punished.

    “May the Lord silence
    the smooth tongue and boasting lips that say:
    “Our words will triumph!
    with weapons like these
    who can master us?”
    Then the Lord speaks out:
    “I will act now
    for the poor are broken
    and the needy groan.
    When they call out,
    I will protect them” (Ps 12)

  • Joe Marier

    Speaking of insurance regulation:

    Yes and no. The unique thing about insurance is that it’s regulated by the states. So, big multinational insurance companies have to beg, bribe, and cajole 50 state legislatures whenever they have a new product. The big downside is that you can’t buy a policy across state lines… which still strikes me as a violation of the laws regarding interstate commerce.

    That being said, financials are heavily regulated. They just are. All that more regulation would do is empower the two remaining firms to bust competitors, grab more market share, and then screw up in newer and more creative ways.

  • Elaine

    Alas, my dear brothers and sisters in Christ, the bottom line here is that GOD will win in the end. God IS Lord over all! If God is not Lord over all, then HE is not God at all. God wins in the END! Trust in Jesus :0)

  • The Mother of Two Boys

    1) The Rich are sent empty away…… huh? it looks like they are the only ones protected in this example. And, 2) it is our relationship to money as Christians…. arms length, at best, that enables such mind boggling financial disasters to take place right under our very eyes! Shame on us all!

    If more Christians would be in these positions we would not be in this crisis!!! Money doesn’t corrupt; unattended/unchecked hearts minds and souls, corrupt!!!

  • jamie hunt

    “… the American Revolution raised the status of military leaders and financiers, who were nobodies before the war and then took charge after it was over — and not all to the good. …”

    +++++++++++++++

    Curse you, O Washington and Hamilton, for bequeathing us a free land, representative government, and a way out of the crushing debt and inflation of the post-Revolutionary War era.

    Curse you for being human!

  • James

    Mr. Walden – Very well said. And good luck to you and yours.

    And your point serves as aggravating evidence of the seriousness of the crimes of the Masters of the Universe who perpetuated this mess. The list of their victims, and the final tally of their actions, are unknowable, but staggering for sure. Every family who had to move and ended up overpaying for a house is a victim (not speculators). Every employee of these firms who is laid off, their families, pensioners whose funds have been hit, municipalities.

    But to save the companies because of these people is to allow the criminals to use their victims as human shields.

    I think we ought to force the powers that be to disgorge some of the ridiculous bonuses they received in the last 5 years. Use that money to “save the financial system.”

    Joe – A couple of things, the foreign investment that poured in was chasing the fictional yields of the toxic paper being churned out by Wall Street. To say Wall Street is not responsible for that is to be shocked that leaving a honey bowl on the picnic table attracts bees.

    And I wish I could agree completely with your point that “…financials are heavily regulated. They just are. All that more regulation would do is empower the two remaining firms to bust competitors, grab more market share, and then screw up in newer and more creative ways.” Financials may be heavily regulated, but they are obviously not well-regulated. The fact that many overseers exist does not translate into effective regulation actually occurring. Hence we’ve had a steady stream of relaxing of a number of critical regulations that might (who really knows) have helped slow this train down.

    That said, I would be willing to completely let them go (God help us), if I were assured that no government bailouts or taxpayer money were used to “save the financial system.” And since history supports the ‘too big to fail’ rationale, I’d call anyone making such an assurance a liar.

    Since the taxpayer is ultimately on the hook, then the taxpayer has a right to regulate what’s going on. Don’t think of it as government meddling, think of it as the influence of a silent shareholder.

  • Jennifer

    My friend and neighbor, father of three children, practicing Catholic and soccer coach extrodinaire and employee of Lehman Brothers for 19 years, will be comforted by your piece. When the “rich” fall, so do a lot of other people, most of whom aren’t rich at all.

  • blofeld

    i cant imagine working for an extended period of time (say over one year) in an organization and have NO IDEA there was something dishonest going on – i really can’t.

    Either these innocent waifs are

    A.) invincibly ignorant (meaning he worked in Facilities or IT or was an admin)
    B.) cowards
    C.) evil
    D.) just happened to be in the wrong place at the wrong time
    E.) part of the problem and are getting their just rewards.

    You know them best – Chose all that apply.

    give thou me a break.

  • Just Ann

    While I realize this is not really the venue for financial analysis, this article misses the real root of the problem, in the well-meaning policies of former administrations, such as the now infamous Community Redevelopment Act, which forced mortgage writers to lend to the unqualified, by geographic location, rather than by risk. And that was on top of previous policies. It all just snowballed.

  • Sue

    of this piece. Jennifer’s right. There are plenty of victims here. Viewing Lehman Brothers or AIC as monolithic is simplistic and simpleminded.

  • taad

    This whole mess was started by politicians who were playing with regulations that were suppose to keep the system honest. I suggest we not give the same politicians (from both parties) the power to fix it. They started it and they profited from it gaining votes, power, and money. The problem is in the Congress on both sides of isle. They start the problem and then when it hits the fan they blame everyone but themselves. What racket they have. Government is the most inefficient “business” and should be very limited in it’s powers. It couldn’t organize a lemonade stand.

  • Joe Marier

    Hence we’ve had a steady stream of relaxing of a number of critical regulations that might (who really knows) have helped slow this train down.

    That said, I would be willing to completely let them go (God help us), if I were assured that no government bailouts or taxpayer money were used to “save the financial system.” And since history supports the ‘too big to fail’ rationale, I’d call anyone making such an assurance a liar.

    Since the taxpayer is ultimately on the hook, then the taxpayer has a right to regulate what’s going on. Don’t think of it as government meddling, think of it as the influence of a silent shareholder.

    Not a lot that I disagree with there. Except for this: I’m not sure the train should have been slowed down. The market hit its high October of last year, and people knew that there were issues in financials then. It’s now been nearly a year, and who knows if everything’s unwound? I’d rather have seen the bottom six months ago.

    Regarding the taxpayer on the hook: fair enough, but it seems to work in reverse a lot. The government regulates what’s going on, and then the companies ask for taxpayer money, or taxpayer loans, to make up for the increased costs of the regulations. That’s what’s going on with the car companies right now.

  • JC

    1. As for who are “innocent victims” in corporate scandals, no one is: first, in Enron & co., all the “witnesses” who formerly worked at those companies testified that they knew stuff was going on that broke the law, and they didn’t say anything. Secondly, anyone who’s worked in a job knows that ethical violations are everywhere, and no one really cares. From the most bottom level employee to the CEO, blurring the lines is rewarded. Even on my ethical quiz at a former employer (a for-profit education company), I realized I could “beat” the HR test by choosing the “grey area” on every ethical question.

    2. The best argument about what *caused* the current financial crisis is gas prices. As urban sprawl has increased, so have gas prices, and, when gas prices became too high, the housing market “burst.”

    3. This was all predicted by John XXIII in _Mater et Magistra_ as the natural consequence of contraception: the average square foot per person in America today is several times what it was in the 1950s. EVeryone needs “space.” So you have 2 parent, 2.5 kid families living in expensive 2000+ square foot homes. Also, we’ve depopulated our work force, and the economy cannot support it.

    4. As so many others have said, the rich are the ones getting bailed out. The government is gaining more centralized control over the economy. It’s the homeowners who have gotten hurt. The over-ambitious upper middle classes created this mess with their McMansions, but the ones who are suffering are the lower middle class and first time homebuyersl.

    Instead of putting the kabosh on refinancing, the FHA has cut loans that were designed to help lower-middle class families buy affordable housing, particularly the programs that helped lower-middle class people buy foreclosures.

    So all these foreclosures are going on the market, and the only people who can afford to buy them are the ones who can pay cash, resulting in more rentals.

    The rich get richer and the poor get poorer.

  • Phil

    i cant imagine working for an extended period of time (say over one year) in an organization and have NO IDEA there was something dishonest going on – i really can’t.

    Either these innocent waifs are

    A.) invincibly ignorant (meaning he worked in Facilities or IT or was an admin)…

    blofeld: As an IT professional, I have to admit to being “invincibly ignorant”…man, that’s a great line. Not sure the “invincible” part applies to me as I’m just plain ignorant. But I love the way it sounds. [smiley=happy]

  • Jurek

    Just today at Mass we hear:
    i Cor 15, ’12 Now if Christ is proclaimed as raised from the dead, how can some of you be saying that there is no resurrection of the dead?
    13 If there is no resurrection of the dead, then Christ cannot have been raised either,
    14 and if Christ has not been raised, then our preaching is without substance, and so is your faith.
    15 What is more, we have proved to be false witnesses to God, for testifying against God that he raised Christ to life when he did not raise him — if it is true that the dead are not raised.
    16 For, if the dead are not raised, neither is Christ;
    17 and if Christ has not been raised, your faith is pointless and you have not, after all, been released from your sins.
    18 In addition, those who have fallen asleep in Christ are utterly lost.
    19 If our hope in Christ has been for this life only, we are of all people the most pitiable.
    20 In fact, however, Christ has been raised from the dead, as the first-fruits of all who have fallen asleep.’

  • Nancy

    [smiley=shock] Greed has been man’s problem from the beginning of time. Events are happening at such a shocking pace, it’s difficult to keep up. My state has been without power since last Sunday, and we’re just now getting back to a somewhat normal pace.There are still over 100,000 without power. My state isn’t alone. Ohio, Indiana, and many others are in bad shape from the aftermath of “Ike.” God HATES greed!!! We have left Him out of so much of our life, what do we expect? And WE AIN’T SEEN NOTHIN YET! He will not be mocked by His children, especially those that He’s given power to. Greedy men have sold this country “DOWN THE RIVER,” and before we know it, our government will declare “Martial Law,” and we will lose what little freedoms we have left. If it wasn’t for the Christians in this country, we would have been destroyed long ago. That is my firm belief. May God have Mercy on us all.

  • Calm

    You mentioned the salary of the top executives of the banks. I found that very interesting.

    Would you have a link where I could chase that information down?

    Calm

  • J Brent

    First of all, God has given us a mind and and blessed us with common sense. How did man ever exist before the advent of Wall Street? Oh my, I forgot, everyone died and no one lived before the USA and it’s present form of government and finance existed. Before Social Security, Federal Income Taxes, and Medicare, before the war on Drugs and the war on Terror, everyone cheated everyone, lied to everyone and were high on drugs, beat their spouses and children and stole each others property!!! Thank God we have the present form of Justice to erase all the injustice and greed that makes this country the greatest place on Earth!!! God bless the USA!!! We have always been the REAL Chosen people of God!!!

  • thomas

    Corporate capitalism and the stock market lives and breathes to insure that ‘profit’ is always the bottom line. ‘Profit’ trumps everything including ethics under such a system. Thus, mammon and the love of mammon becomes the foundation of such an economic system. It becomes the root of all evil. Corporate capitalism running amok throughout the world will bring about an equal reaction. It will be the money-less economic system of the antichrist. Only those who look to the perfect justice and mercy of our Lord and Savior Jesus Christ will escape the deception that is to come.

  • R Smith

    Joe H,

    I disagree with your suggestion that so-called capitalism (Karl Marx’s word) causes high unemployment and chaos, even in the short term. Even in my Microeconomics 101 class it was demonstrated clearly that it is government interference that leads to these structural problems in the economy.

    And so we see today – the resulting problems from the collapses of Lehman Bros et al have as their root cause the monetary manipulation by the US Fed Government, not so-called capitalism. It is not a matter of taking this pain now and then we will be taken to the promised land. This pain will come again and again as long as we have fiat currencies and a fractional reserve banking system.

    This system was put into place by the Big Business/ Big Gov’t symbiote during the early 20th Century. Even if these guys get away with the cash and the rest of us suffer, I think Mr. Tucker is alluding to the fact that these failures are still a big kick in the face to all of these elites.

    I can only hope that the man in the street can one day draw the necessary conclusion: the fiat/fractional reserve system must end!

  • thomas

    Let’s not infer that people who criticise ‘capitalism’ are Marxists. The early church in Jerusalem were voluntary socialists. If this nation returned to its roots whereby corporations were strictly regulated by the states wherein they were incorporated we would not have this extremity of abuses. If we were to disban the stock market and revert to family operated businesses many of these abuses would subside. Every professing Christian must always be on guard against ‘the love of money’. As it is, the Amish and the Mennonites are the only peoples who are escaping the trap of our corporate-stock market driven economy. Getting rid of government would not solve the problem. Government is ordained of God to put restraints on the wicked. There is much that needs to be restrained in a corporate-stock market driven system.

  • Xharles

    Government is the most inefficient “business” and should be very limited in it’s powers.

    Had the Constitution been followed rather than ignored, government would be VERY limited in its powers. According to the Constitution, the federal government is to have only those “enumerated powers” listed therein. Think: No foreign aid; no individual or corporate welfare; no wars without appropriate declarations of war bu Congress (which last happened in 1941); no “entangling alliances”; no…

  • alajac

    When the Fed creates money to replace what the banks/brokers have lost, it is not creating inflation because it is just replacing debt-mooney that is being destroyed by the bad debts. But what it is doing is stealing the value of everyone else`s money that increased when the debt-money was destroyed. This is plain and simle theft, and can also be considered `taxation without representation`, a term I heard used somewhere else I believe.

    Hmailton`s Constitution WAS followed. He set up the Supreme Court to reinterpret the words of the Constitution to mean whateever the government wanted them to mean. And Hamilton wanted them to mean “government can do whatever it wants to do“.

    Regulation is what the spider uses to get the fly to drop his guard. The rich hire politicians with campaign `contributions` and reward compliant regulators with post-public employment to make sure the regulations don`t really get enforced. Forget about regulating safety, just always remember you are dealing with spiders. Here`s a better idea.

    HOW TO FIX THE ECONOMY (change the system, not the faces)

    a plan to stimulate the economy, lower taxes, start paying off the National Debt, alleviate poverty and decrease crime

    by replacing our OLD economic system with a NEW system based on

    a new and debt-free U.S. currency to replace Federal Reserve Debt-Money,

    a 0.5% tax on electronic transfers to replace the Federal Income Tax and the IRS,

    and $1000 per month privatization compensation (non-Fed $) for all legal U.S. residents

    There is NO BENEFIT AT ALL in having a Central Bank (well, none for us) compared to having the U.S. Treasury print and distribute our own debt-free money to ourselves. THE ONLY DIFFERENCE between having a central bank or not, is that “One system costs us 95% of our wealth every hundred years and puts us and our posterity into mind-boggling debt until the end of time“… and the other doesn`t.

    So the first thing we need for our NEW SYSTEM is our own, debt-free U.S. Government fiat currency, backed by all the property within the nation`s borders. Obviously I disagree with those who insist that `only gold is real money`. The hoarding of gold-backed money has led to and prolonged many U.S. economic depressions which explains why the U.S. has tried and abandoned `the gold standard` many times over the years. “Bad money drives out good“ means people will always wind up using as money whatever has the least actual value that will still be accepted by others to facilitate trade. Debt-Free fiat money will work just as well as Federal Reserve fiat Debt-money, but without all the nasty side-effects. (end of part 1)

  • alajac

    Another problem with the OLD SYSTEM is that income-based taxation creates wasteful tax avoidance behavior, requires an expensive tax reporting industry and an intrusive collection bureaucracy, and is, arguably, a form of `involuntary servitude`. Under our NEW SYSTEM, we should replace all income-related taxes with a one-half percent, automatically-collected electronic transfer tax (also known as a `debit tax`) which will be avoidable by transacting business using cash or barter. This will not only rid us of the IRS (saving the billions currently spent on `tax reporting`), it will also end the current penalization of work and entrepreneurism, as well as freeing up untold billions currently spent on `tax avoidance`. A debit tax is `more just`, corresponding closely with “benefits previously-obtained“ rather than penalizing labor and industriousness, and (as it can be legally avoided, even if only inconveniently so) this debit tax can be considered “voluntarily-paid“. A small electronic transfer tax will also act to discourage excessive short-term market speculation and should be able to raise enough revenue to begin paying off the National Debt. The tax should be either paid with the new debt-free money or exchanged for it by the Treasury with tax revenue on Federal Reserve money being used to start retiring the National Debt.

    As argued by Tom Paine in his 1797 essay “Agrarian Justice“, the third problem with the OLD SYSTEM is that, because governments privatize all of their claimed property (allocating it however they like), everyone winds up being denied free access to all property (other than that which has been specifically allocated to them) without being compensated for that loss. That`s not a problem for those with access to capital and property ownership, but for the rest of us, it is totally unfair and creates a slanted playing field upon which wealth gravitates to the already wealthy and the well-connected. However governments allocate their property, every method has the same result of `denial to everyone of free access to all land`. It has taken 200 years for this injustice to be acknowledged in a place and time where something can be done about it and when events have conspired to make rectification not only just, but vital to our economic survival. Just as compensation for eminent domain takings are provided for in the 5th Amendment of the U.S. Constitution, governments should provide compensation for denying everyone `right of free access to all property`.

    Thus, in order to remedy this, we must elect a Congress that will PAY EVERY LEGAL U.S. RESIDENT `Adequate and Equal Compensation for Denial of Free Access to U.S. Property`, compensation which can FUNCTIONALLY REPLACE ALL FORMS OF PERSONAL AND CORPORATE WELFARE AND SUBSIDIES, including rescinding Federal Minimum Wage laws and phasing-out the Social Security system. (Once everyone is getting `Denial of Free Access` compensation their whole lives, most people will be able to save enough to be able to comfortably cease working at some point in their lives.) (end part 2)

  • alajac

    Our NEW SYSTEM should pay $1000 per month (of our new, non-Fed, non-Debt-Money) to every legal adult resident. Compensation for minors should be held in a trust fund to avoid incentivizing `baby factories`. Since everyone gets the same amount of compensation, this plan is not wealth redistributive, but will give the least wealthy the biggest relative monthly percentage increase of wealth. Because when people HAVE something, they have something to lose, we can expect a reduction in all sorts of crime under our NEW SYSTEM as well as better childcare, less poverty, more rural homesteading, better maintained urban areas, less intrusive and cheaper government with lower military-related expenses and a safer world in general. Once this NEW SYSTEM gets going, I expect residents of other countries will insist their governments either copy our NEW SYSTEM or else apply for U.S. statehood as Texas did in 1845.

    HEALTH CARE…The AMA and FDA work to constrain competition in order to maximize the medical and pharmaceutical industries` ability to extort unconscionable prices for services and substances that should be affordable out-of-pocket. We need to train up thousands more doctors and other healthcare professionals and to decriminalize and unbridle access for adults to WHATEVER drugs adults want, obtained from WHATEVER source adults decide thay want to obtain them, for WHATEVER purpose those adults wish to use them, and let the market work to make prices of normal medical help and pharmacology affordable.

    SEND A MESSAGE to candidates running for Congress in 2010 and 2012 (that, in order to get elected, they will need to support a change to a NEW SYSTEM, whether exactly like my plan or not) with a MASS WRITE-IN CAMPAIGN that `blows socks off` from DC to LA. I will be registered as a Write-In Candidate for US President in Michigan, and in other states as I get help with other states` registering processes. Pass this message along to several people every day (or, even better, to everyone you know today, and to everyone you meet from now on). IF EACH OF US EVERY DAY CONVINCE EVEN ONE OTHER PERSON TO JOIN US, OVER ONE BILLION PEOPLE WILL BE `ON BOARD` IN 30 DAYS. (Seriously. Grab a calculator and start doubling from 1.) For an e-copy, or to ask questions or volunteer, write me at alan_jacquemotte@yahoo.com or P.O. Box 183393, Shelby Twp, MI 48318.

  • Bryan Morton

    Economic systems fail. Actual free market capitalism, (not to be confused with various forms of corporatism, mercantilism, etc.), isn’t a “system.” It is the market in its natural environment. It is not perfect. There are ups and downs. In fact, the free market is driven by imperfect information and fluctuations. The attempts cure these imperfections, by imposing various economic systems, always have negative repercussions.

  • DH

    “and even the American Revolution raised the status of military leaders and financiers, who were nobodies before the war and then took charge after it was over — and not all to the good.”

    I’m amazed that any freedom loving person could make such a statement about the greatest nation ever in history. The sacrifices of the founders of our country deserve better than this tripe.

  • Jennifer

    Tucker is right. But I see many commentators mention that the rich appear to get away easy (although they are shamed and disgraced), and the schemes of the rich (the business/government racket) primarily hurt ordinary people. This is unavoidable — every economy, whether free market or communism/socialism/facism/monopoly capitalism (these four are ultimately indistinguishable)– involves everyone in it. Indeed, economics, as Tucker points out, is the foundation of all societies and persons.

    The question then, for a Christian, is, what economic structure has the Creator designed for his creation? Scripture teaches that dishonest weights and measures and theft are against his design, i.e., sins. America

  • Patricia

    There is much to celebrate in the collapse !!! I would have not used “celebrate”. There is nothing to celebrate nor “beautiful to see” in the collapse of these companies. However, this is a wake up call, time to take a closer look at how far we have drifted from what God intended. Yes! we are seeing the consecuences of greed and unfortunately it will affect the people that are trying to live according to the gospel and those who are not. It will trickle down to affect all of us, including the person who wrote this article. So no!, there is no reason to celebrate, nor beautiful to see the rich go away empty. I think the words of the gospel meant that yes there will be consecuences for our sin and that God will bring justice, but we christians/catholics should take an opportunity to meditate on this, pray more, pray that we learn from this and pray especially for those who are in bondage from greed. Jesus did not rejoice in the downfall of the sinners, but He did call for purification and change.

  • Steven Stip
  • Steven Stip

    Whether the high and mighty walk with billions or not, they have to live with themselves and the damage they have caused. I would not change places and I am no peach myself!

  • Greg Jaxon

    Patricia & Joe,
    Jeffrey’s celebration of “creative destruction” in free markets is neither ideological nor out-of-place. Surely you both recognize that the force of the current corrections is equal and opposite to the total force that went into producing the distorted valuations. In its very character we see that it is reactive, not malignant. Our only wish would be that the reactive doses could be smaller and less compressed in time – spread out over the course of the same time as it took to sign all those liar-mortgage papers, to leverage bank reserves to fund those mortgages, and then to hedge all those securitized bets with credit insurance. Of course Patricia is right that greed prevented those small corrections; greed enabled by the way power absolves the actors of personal responsibility and transfers the cost to the collective tax roles of the next generations.

    That the market fails to correct in a continuous and timely fashion is evidence that it really isn’t so free and unregulated: instead those “little bits of regulation” that seem to do some good impede the honest instincts of the market participants and provide them with the legal cover to exercise their greed in the name of “fairer housing” and no end of Good Intentions. The market place is not an ideological construct – it is simply reality and its natural laws. The ideology comes from thinking that political law can rearrange natural law to serve some human ends. We’re pretty clever at those ideological games, but not clever enough to win in the end.

  • Stanley Pinchak

    Steven Stip,
    Glory to Jesus Christ! You are right on the money with regards to worrying about our own actions first. We would do well to remember what is said in the readings of both the Old and New Testament. Vengeance is mine sayeth the Lord. I will repay.

    If we concern ourselves with the flaws of others, we are liable to injure those closest to us with the beam protruding from our own eye. It is better that we act with justice in our dealings with others, and demand the same of our elected leaders.

    Before we judge the actions of others, we should examine our own actions to ensure that we are not guilty of the same offense. Do not be so quick to throw stones, for many have profited from ill gotten gains during this bubble. Just because most of us were not as successful as the poster boy CEOs does not excuse our participation in the scheme.

    How many of us are guilty of living beyond our means, having bought into the belief of the false god of refinancing and rotating credit card debt? How many of us have fleeced our neighbors in other countries by sending dollars of falling value for superfluous toys? As the Bible states, an unjust weight or measure is an abomination to the Lord.

    We have like Cain come to ask, am I my brother’s keeper? But we did nothing to rein in the toxic Federal Reserve, we offered no guidance and are now caught unprepared like the foolish bridesmaids. We have all bought into the antichrist’s money system. We have no one to blame for this but our own failure to regulate our “leaders.” How hypocritical is it to cry Lord!, Lord!, when we have failed to take any steps to prevent this situation?

    It is said that ignorance is bliss, but the effects of our own ignorance can not be forestalled. We will become cognizant of the whirlwind which our tacit approval has sown. How many of us have knocked on the door of sound money and just exchange? Now it is late at night and the master of the house will not come to the door.

    In the morning, we would do well to correct our flaws. we would do well to insist on sound money. We would do well to involve ourselves only in just trade with honest measures. And we would do well to voluntarily give charitably to those in most need.

    The Lord is the Lawgiver and the Righteous Judge.

  • Ol’ Grey Ghost

    In the movie “Evel Knievel” about the motorcycle daredevil of the same name, there is a scene where Evel, played by George Hamilton (“Mr. Suntan”), approaches a rodeo manager and tells him about a new stunt he has where he jumps a motorcycle over a couple of trucks. The rodeo manager offers Evel $100 if he makes the jump and $50 if he misses. Evel says he will need a lot more money if he misses than if he makes it so the manager offers him $75 which ever way he lands. Though Evel makes the jump in the movie just imagine for moment if he had missed. Some outside observer might consider the manager was out of his mind for paying Evel so much for what appeared to be a failure. The manager would have to confess that the full payment was what he had agreed to pay before the jump was even attempted.

    Keep that in mind when you want to whine about the severance packages some CEO’s are receiving. They were promised these payoffs before they would even attempt to make the jump and being a CEO of a large corporation is a lot by being a daredevil; one bad miss and your career is over…

  • Tony Pivetta

    “The source of monopoly is not capitalism as such but the special privileges given to institutions such as Freddie and Fannie.”

    Mr. Tucker is quite right. Capitalism, properly understood, is the only economic system consistent with Christian morality. Mixed-economy capitalism (which is what we have in the U.S.), fascism and socialism all violate the Seventh Commandment, and they all promote monopoly.

    Pure capitalism is anti-monopoly. If we own our lives, we own the goods and services generated by our lives’ labors. As a corollary, we’re free to exchange our goods and services for others’ goods and services in a market economy. (We’re also free to give our goods and services away, as we’re called to do in Christian charity.) The market is self-correcting, as Mr. Tucker deftly illustrates.

    Monopoly originates in the State’s violations of the Seventh Commandment. Politically-connected special interests receive their funding from the State, which receives its funding through theft and extortion, i.e., taxation. Knowing it risks revolution if it taxes too much, the State creates central banks and grants them the authority to create credit and currency out of thin air. This is counterfeiting–yet another violation of the Seventh Commandment. The resulting inflation steals from those who are prudent and save. The resulting market distortions and misallocated capital precipitate the inevitable boom and bust.

    People can be “greedy” (read: A has more things than B thinks he should) under under capitalism, fascism or socialism. Throwing the word around gets us nowhere. The question remains: Which economic system is consistent with the Ten Commandments and allows people to flourish? I’d say it’s free-market capitalism.

  • Paul

    Joe,

    Your comments are spot on – if we are concerned with this world. It is true that the mighty have been humbled (we’re still waiting to see who’s next), but I pity these executives when I think of the time that they truly will walk away empty-handed.

    God does not work on our time table. I pray that I will never be sent away without His grace on the day it truly matters.

    We continually break His laws, and are saved by grace. We should mourn for those who, winning in this world, forfeit their redemption.

    Sigh,

    The truth shall set you free – but this does not mean you get a plasma tv, bmw, or fine wine and rib-eye steaks!

    paul

  • Aaron David Ward

    So many to blame so little time.
    (1) The federal government specifically the Federal Reserve created the conditions for the bubble to occur with the creation of easy credit and easy cash.
    (2) Wall Street investors, Masters of the Universe, and speculators eager to take advantage of the easy credit and easy cash created by the Federal Reserve and the federal government.
    (3) Propsective home owners without solid credit histories eager to take advantage of government handouts, artifically low interest rates, and easy credit and easy cash.
    (4) Mom and Pop investors eager to build wealth without having to work.
    (5) Terrorists hoping the United States would eventually bankrupt itself so it would stop intervening overtly and covertly in foreign affairs.
    (6) Mortgage lenders, brokers, real estate agents, banks, investment advisors, insurance companies, and others eager to capitalize on the bubble.
    (7) Foreign investors looking to make a fast buck in the United States while ignoring or supressing their own poverty-striken citizens.
    (smilies/cool.gif Organized religions eager to accuse as many people as possible of engaging in sinful behavior to justify their own existince.
    (9) The poor eager to see the rich eat crow.
    (10) The middle class eager to see the rich fail.
    (11) The rich eager to see the super rich fail and eat crow.
    (12) The government eager to see the private sector suffer.
    (13) Central bankers eager to ruin the dollar and replace it with the Amero.
    (14) The entire world eager to see America brought to its financial knees for the evil is has prepetrated overtly and covertly by intervening in the affairs of foreign countries for more than 200 years.
    There may be other groups and individuals I’ve left out but the point is sin affects all of us ultimately.
    May God have mercy on our souls.
    Aaron David Ward
    http://www.aarondavidward.com
    http://www.myspace.com/aarondavidward

  • Fr. Joseph

    This crisis is occurring because of that bogus “American Dream” of owning a house–in collusion with that bogus version of “Catholic Social Teaching” which applauds whenever people “get ahead”–regardless of the means used.

    Starting in the 1970s, I remember seeing more than one TV drama about the abomination of “redlining.” The campaign against “redlining” was all over the place. And the Carter and Clinton administrations were all for wiping out this atrocity. “Redlining” was the new Jim Crow. Ever since the end of Jim Crow, everything is the new Jim Crow.

    Turns out that “redlining” was basically nothing but refusing to make loans to people who couldn’t repay them. What a shock!

    Turns out that Fannie and Freddie were headed by Democrat cronies of Democrat presidents, running off with $100 Million here, $27 Million there–and cooking the books to trigger these bonuses in the tens of millions. In the meantime, the federal government was systematically threatening legitimate bankers, as opposed to these Democrat plunderers, to keep making billions in bad loans–threatening them with fines, closures, and prison. Oh, the beauties of a society run according to Gospel principles!

    But Obamessiah will save us! All we have to do is let him funnel more billions to his Chicago-machine thug buddies like Tony Rezko, the slumlord, who already took $100 Million of taxpayers’ money from Obama and built a bunch of crackerbox apartments–now boarded up, rat-infested drug dens.

    And here come more of the “Catholic” devotees of the Messiah–with the Gospel Message that if we only kill more babies–and let’s try killing them after birth, too–the gods will smile on us. That’s “gods,” as in “demons.”

    Outside of the National Socialists, the Bolsheviks, the Maoists, the Ba’athists, and some others, there has never been a political party so wicked, violent, dishonest, and Satanic as the Democrat Party. It is the most evil conglomeration of thieves, murderers, and frauds that has ever governed a non-totalitarian country. Not that it isn’t their goal to make this one the next totalitarian country.

    Regarding the notion that the “Magnificat” is “about” this latest financial upheaval: DON’T IMMANENTIZE THE ESCHATON.

  • Adriana

    Joe:

    While I may not agree with you on everything, your comment on this vomitous column is right on the money.

    So what if families lose their homes, their jobs, their insurance, their savings, their retirement? THE SYSTEM IS RENEWING ITSELF, and that is to the good, and the grandchildren of those suffering now will be better off. If there are any grandchildren.

    Not to mention the half trillion dollars in taxpayers money that will be spent on fixing this mess.

    When in the middle of a heated election, we see some swift biparatisan action, you know that the situation is bad. We are at the border of a precipice, as Greenspan himself said.

    Please do not tell me to vote for a pro-life candidate this election. The last time I did, we got this incompetent who took a prosperous economy and ran it into the ground. I do not care what McCain says about abortion. I care that he says that the economy is sound and that he wants to continue the disastrous Bush policies.

    Frankly, the boat is leaking water, and the pro-life candidate does not see the problem.

    I DO NOT WANT TO DROWN.

    If you want me to vote for a pro-life candidate, find me a competent one.

  • Miguel Miramon

    Great article! Gave me comfort on this day. The mighty do fall and sometimes that is for the good. There are so may chickens coming home to roost in this financial debacle that feathers are flying everywhere.
    But out here in the wilds of NM, “a country boy can survive” (Hank Williams).

  • Duane

    I find it appalling that you are celebrating the demise of these companies. I have no love for them, but there are many dedicated hard working who will likely be unemployed now. Odds are some of them are devout Catholics or at least good moral people. Their families will be stressed as they have to find a new job to support themselves. I am sorry that you find such joy in their misery, what a uncaring attitude.

  • Adriana

    Indeed, Duane, this is a very sick, sick, person who wrote it. Schadenfreudne, I think is what Germans call it, the rejoicing at the misfortunes of another.

    Schadenfreunde does not put food on your table nor keep a roof over you head, which is what we should be concerned about it in this mess.

  • Stanley Pinchak

    Adriana and Duane,
    Glory to Jesus Christ! It would be perverse to celebrate the misfortunes of the innocent. It is quite another thing to appreciate the natural market corrective action of the liquidation of misallocated capital (yeah I know that sounds harsh, but there is a perpetrator of this situation, it was not inevitable, and the author of this article is not the villian). One can sympathise over the plight of the unfortunate while observing the inevitable. If the Federal Reserve and Treasury were to keep the artificially low interest rates and increase the creation of ex-nihilo credit to keep the bubble from popping, we would have a much worse situation. You have heard of the Wiemar Republic hyperinflation? That is our alternative future.

    This scandal should land squarely at the feet of the bankers who desired money above all else, the Federal Reserve, who have provided the bankers with the means to act on their licentious impulses, and Congress for abdicating their responsibility for maintaining the value of the dollar. Additional blame goes to the voter and public at large for continually re-electing the fraudsters in Washington and going along with the system of a free lunch.

    Blaming the messenger because you didn’t like his tone differs only in degree with the actions of Herod chopping off the head of John the Forerunner, or the martyrdom of John Chrysostom. There have been writers and economists who have been calling in the wilderness for this country to repent its easy credit ways and to stop prostituting itself and prostrating itself in front of the altar of easy credit. If you investigate the author’s previous writing, you will find that he is cut of this cloth, and not that of a sadist.

  • Joe H

    I hope the people who addressed me are still checking the thread. I’m drastically reducing the time I spend posting online.

    Calm,

    you asked where I got those numbers from. They were recently reported in the Financial Times. I don’t have the article saved, unfortunately.

    R Smith,

    First of all, “capitalism” is not Marx’s word. It was first used by the French physiocrats.

    Secondly, I simply don’t buy into the Ron Paul narrative, where the Federal Reserve in particular, and government in general, are to blame for these problems.

    Speaking of Ron Paul, and this is on a semi-related note: He was at a loss to coherently explain this crisis to Wolf Blitzer on CNN, and there is a reason for that – it is the philosophy of unfettered markets, his fundamental philosophy that was the cause of this crisis.

    For instance I was amused when he said that capital was “supposed to” come from savings (as opposed to borrowing, credit, etc.) – there is no “supposed to” in the free market with respect to who can buy or sell or loan or borrow, and, what century is he living in? Capital from savings? When wages have completely failed to keep pace with inflation? Did he mean the “savings” of the wealthy? I’ve never seen someone so out of touch with economic reality, except John McCain.

    As soon as you start saying what people “should do” and are “supposed to do”, and it is evident that no one is able or willing to do it, either a) you’ve revealed your political bankruptcy and irrelevance or b) you’re just another kind of “socialist”, possibly a worse kind, who wants to mandate what people can and can’t do with their money. I’d rather just be open about it so we can focus on what needs to be done and put the fairy tale behind us.

    The deregulation of the banks, the aggressive predatory lending, the decline in wages and rising costs of living that made millions of working families consider going into debt for things their parents could have paid for with the money they made at a well-paying job; these were all problems caused not by the expansion of government but by its drastic reduction beginning with Ronald Reagan and continuing under Bush Sr., Bush Jr, and yes, even Bill Clinton, who was/is a “New Democrat” – look that up if you haven’t heard of it.

    Crises such as these are built directly into a market economy with no oversight, no regulation, and no stable foundations in communities. Conservatives above all should understand this; they are the first to acknowledge the imperfectability of man, the first to be skeptical of rosy and lofty appraisals of a human race tainted with the stain of original sin.

    Yet when it comes to economics we are supposed to believe that these sins will, through the invisible hand, translate into public benefits. In the short run, yes, maybe, perhaps. In the long run… we are seeing the long run right now, the chickens coming home to roost. We are seeing what happens when individuals are left to their own devices, to acquire as much wealth as they can without limit. There was no trickle down, and now we are seeing a gravity-defying movement of wealth upward, not in a trickle but in a massive deluge.

    Paul,

    Thanks smilies/smiley.gif

    Adrianna,

    I agree. This is very sick, it is a disturbing argument that resembles the extreme Protestant churches that revel in every crisis as a sign that Christ’s return is immanent. That whole thing about being stewards of the earth (which at this point must include a stable and sound economy) must have just been a piece of Vatican II fluff.

    But I will admit, it takes a lot of stones to glorify what is happening now.

  • Duane

    Stanley,

    The author of this column starts by saying “there is much to rejoice in the collapse of Lehman Brothers and Merrill Lynch.” he then continues with phrases such as “it is a beautiful thing to see.” Perhaps if he had written “this is a harsh, painful, yet necessary lesson learned” I wouldn’t be so critical of him. I agree with some of his larger points about the illusion of the bubble and the problem of the easy money policies, but his glee at others’ misery is sickening. This author is just rehashing class warfare rhetoric and cloaking it in Scripture; he would be right at home in the pulpit of a liberal protestant church.

  • R Smith

    John H,

    Thank you very much for your comprehensive reply.

    I cede your point that Karl Marx did not coin the term

  • Joe H

    R,

    You write,

    “My point is really that the

  • Stanley Pinchak

    Joe H,
    Glory to Jesus Christ! On the subject of business cycle theories, you are right to point out that there are many competing schools of thought. However, the Austrians are the only school who’s theory covers all aspects of the business cycle. It explains the boom, the bust, the relatively greater boom and larger bust in the capital goods sector, and explains why their is a cluster of entrepreneurial error. It also explains why we only began to see the business cycle with the advent of systematic fractional reserve banking, or in those cases where bankers fraudulently counterfeited gold or silver certificates.

    You also cogently point out that this country has reduced its manufacturing base due to uncompetitive wages. I would like to provide an explanation for why our manufacturing jobs are slipping overseas. All real wage gains (relative to the prices of goods available for purchase) come about when the discounted marginal revenue product of the individual worker is increased. That is the worker must through increased efficiency or greater training and diligence produce more in the same time period, or the same in a shorter time period.

    The essential element for this increased efficiency is the existence of (and increasing) present savings for the purchase of capital goods which lengthen the time structure of production, but increase the discounted marginal revenue product of the workers employing them. We as a nation have dissaved, and consumed our capital structure. We have reduced the discounted marginal revenue product of our manufacturing workers and as a result, their wages, once propped up by unions and artificial credit created by the Federal Reserve, became uncompetitive with those of the less capital intensive foreign competition. The spiraling debt and inflation have led to a situation where our manufacturing base was and is gutted and sent to China and India. They in turn have been saving and increasing their capital structure, further precluding the recovery here.

    The government’s taxes on capital through capital gains taxes, progressive income taxes, and inheritance taxes have stifled the investment in our capital structure here at home. The combination of inflation with taxes and fixed depreciation schedules on very durable capital goods (typically found in manufacturing), leads to a situation where the price of replacement far exceeds the amount saved by the entrepreneur as amortized. The government and central bank’s actions in these areas should be scrutinized if we are to recover the manufacturing base.

  • Joe H

    Stanley,

    You write,

    “However, the Austrians are the only school who’s theory covers all aspects of the business cycle.”

    I’m not so sure about that. If we were to list everything that is considered “an aspect of the business cycle”, I think we would find that different theories highlight and emphasize different aspects, to the neglect of others.

    You make the following claim:

    “All real wage gains (relative to the prices of goods available for purchase) come about when the discounted marginal revenue product of the individual worker is increased. That is the worker must through increased efficiency or greater training and diligence produce more in the same time period, or the same in a shorter time period.”

    Here I would disagree – greater productivity does not automatically translate into wage increases. I’m not sure if you consider yourself a subscriber to the Austiran school, but I find it strange when the argument comes back to productivity for people who, when arguing against Marxism, insist that there is no such thing as objective value, only subjective interpretations of value.

    Wages are ultimately the result of market forces and negotiations between the buyers and sellers of labor; productivity (something that can be measured empirically and therefore objective) has little if anything to do with wages, and the last several decades are proof of that. Productivity has greatly increased while real wages have declined. That is because labor does not produce wages. Wages produce labor.

    Lest you mistake me for something I am not, I don’t believe in arbitrarily granting higher wages, but in restructuring firms so that those who actually do productive, economically useful labor are the direct and immediate beneficiaries of that labor. In other words, I want to see an economy where increased productivity actually DOES translate into greater compensation. But it cannot be in the form of wages; it must be in the form dividends.

    You summarize your argument by saying,

    “The government’s taxes on capital through capital gains taxes, progressive income taxes, and inheritance taxes have stifled the investment in our capital structure here at home… The government and central bank’s actions in these areas should be scrutinized if we are to recover the manufacturing base.”

    When we say that the problem is essentially taxation, it is tantamount to saying that the country is being blackmailed by people who put profits ahead of all other considerations. I am no nationalist, far from it. But I do question whether or not this thing we call a “nation” can continue to make sense in a globalized economy.

    My tentative suggestion would be to have a government that offered to buy up plants that may be sent overseas and grant them to workers to operate in return for a certain level of taxation. They may even place them in the care of a whole community or city. These workers could then hire executives who would work for salaries and earn shares of ownership only on the condition of satisfactory performance. No golden parachutes, no ridiculous bonuses – executives will become more akin to public servants. Even John McCain is talking about CEOs making no more than a government official (my jaw almost hit the floor – then I realized it is empty campaign rhetoric). We want to start making cuts as a society, we should start right there.

    We start getting our priorities straight – the economy exists to serve man and not vice-versa. We can live comfortable and dignified lives with a certain level of taxation. We can’t with economic chaos.

  • R. Smith

    Joe H,

    Thanks again for your reply.

    With regard to your comments about combining

  • Joe H

    R,

    You write,

    “Unless of course, the workers simply own stock in the company, in which case that could be any partnership or private company.”

    Yes, I am talking about workers cooperatives, which are owned directly by the workers. When the means of production are owned and operated in common, even if each individual has a private share, I would consider that a social form of ownership.

    It is also social in that it will take an active effort by society, from the local community to the national government, to get such a system started. Therefore these businesses would owe society something in return. It would be a voluntary contract, and most libertarians who don’t cross over into anarchism recognize that force can be used to uphold a voluntary contract. I think many people would willingly agree to pay taxes on incomes and dividends if it meant owning a substantial share of the social wealth and having real decision making power in their place of work.

    Regarding this:

    “With regard the USSR et al, my view is that there is no fundamental difference between that government and the US Federal Government or any government for that matter. The difference is really one of degree, where they are on different points on the sliding scale of Statism.”

    That is a bit extreme, don’t you think? No fundamental difference? I would say that total nationalization of industry and near total nationalization of agriculture and a highly planned economy are a great deal different than what has existed in the US since the end of WWII. Ultimately yes, everything can be placed on a scale, but I might place these societies further apart than you.

    “Regarding the following:

  • R Smith

    Joe H,

    I actually don’t see much to disagree with in your last post, although it is obvious that we are viewing this crisis through opposing lenses. In other words, you appear to see the crisis as the result of too little regulation whereas I see it as the result of too much.

    What you say about us all being held hostage by a small sliver of the population… isn’t that ever the problem!

    Obviously, we are not going to convince each other over the Internet so I will bow out now.

    Thank you for your time and best of luck surviving the crisis!
    R. Smith.

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