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On January 29, 1845, the New York Evening Mirror published a poem that would go on to be one of the most celebrated narrative poems ever penned. It depicted a tragic romantic’s desperate descent into madness over the loss of his love; and it made its author, Edgar Allan Poe, one of the most feted poets of his time.
The poem was entitled “The Raven,” and its star was an ominous black bird that visits an unnamed narrator who is lamenting the loss of his true love…
So, with the vision firmly planted in your mind’s eye of a man completely out of touch with reality, seeking wisdom from a mysterious talking bird — knowing that there is only one response, no matter the question — Dear Reader, allow me to present to you a chart. It is one I have used before, but its importance is enormous, and it will form the foundation of this week’s discussion (alongside a few others that break it down into its constituent parts).
Ladies and gentlemen, I give you (drumroll please) total outstanding credit versus GDP in the United States from 1929 to 2012:
This one chart shows exactly WHY we are where we are, folks.
From the moment Richard Nixon toppled the US dollar from its golden foundation and ushered in the era of pure fiat money (oxymoron though that may be) on August 15, 1971, there has been a ubiquitous and dangerous synonym for “growth”: credit.
The world embarked upon a multi-decade credit-fueled binge and claimed the results as growth.
Floated ever higher on a cushion of credit that has expanded exponentially, as you can see. (The expansion of true growth would have been largely linear — though one can only speculate as to the trajectory of that GDP line had so much credit NOT been extended.) The world has congratulated itself on its “outperformance,” when the truth is that bills have been run up relentlessly, with only the occasional hiccup along the way (each of which has manifested itself as a violent reaction to the over-extension of cheap money).
Folks, rates WILL have to go up again. They cannot stay at zero forever. We all know that. When they DO, because of all the additional debt that has been ladled atop the existing pile, the whole thing will come tumbling down.
All of it.
There is simply no way out, I am afraid. But that is clearly a problem for another day. Right now, everything is fine, so we can all go on pretending it will continue that way.
So now, if you’ll indulge me in a little poetic license (not to mention there being not one but four mysterious strangers in my offering), I give you, “The Maven” (abridged version):
Once upon a midnight dreary, while I pondered, weak and weary,
Over many a quaint and curious volume of financial lore
While I nodded, nearly napping, suddenly there came a tapping,
As of some one gently rapping, rapping at my chamber door.
“‘Tis some visiter,” I muttered, “tapping at my chamber door
Only this and nothing more.”
Ah, distinctly I remember it was in the bleak December;
And each separate dying ember wrought its ghost upon the floor.
Eagerly I wished the morrow; — for the world had sought to borrow
From both friend and foe and neighbour — borrow, borrow, borrow more
For the cheap and easy money which the bankers forth did pour
Shall be paid back nevermore.
Deep into that darkness peering, long I stood there wondering, fearing,
Doubting, dreaming dreams no mortal ever dared to dream before;
But the silence was unbroken, and the stillness gave no token,
And the only word there spoken was the whispered words, “Some More?”
This I whispered, and an echo murmured back the words, “Some More”
Merely this and nothing more.
Open here I flung the shutter, when, with many a flirt and flutter,
In there stepped four stately Mavens from the Central Banks of yore;
Not the least obeisance made they; not a minute stopped or stayed they;
But, with air of lord or lady, stood inside my chamber door —
Standing by a mug from Dallas just inside my chamber door —
Stood, and stared, and nothing more.
Then these tired-looking men beguiling my sad fancy into smiling,
By the grave and stern decorum of the countenance they wore,
“Though thy faces look unshaven, thou,” I said, “art sure enslaven’d,
Ghastly grim and ancient Mavens wandering from the Nightly shore —
To free money ever after lest the markets pitch and yaw.”
Quoth the Mavens, “Evermore.”
While I marvelled this ungainly bearded man explained so plainly,
Though his answer little meaning — little relevancy bore;
For he cannot help a-printing, brand new currency a-minting
Ever yet was blessed with seeing nothing wrong in doing more
Mortgage bonds upon his balance sheet he’ll place, then markets jaw
With the promise “Evermore.”
“You there” said I, “standing muted — what is there to do aboot it?”
In a heavy accent quoth he — that by God he was quite sure
That more money being printed and, new measures being hinted
At would quell all fear of meltdown and the markets all would soar
Would this mean the printing presses would forever roar?
Quoth the Maven, “Evermore.”
Lastly to the fore there strode a small and bookish man, Kuroda,
Who with glint of eye did warn that he was happy to explore
Measures once thought so outrageous as to never mark the pages
In the history of finance — but those times were days of yore
Drastic printing was required, this was tantamount to war
Quoth the Maven, “Evermore.”
And the Mavens, never blinking, only sitting, only thinking
By the Cowboys mug from Dallas just inside my chamber door;
Really do believe their action has created decent traction,
And that freshly printed money can spew forth for evermore;
But the truth about the ending shall be seen when markets, bending
Shall be lifted — nevermore!
The full must-read Grant Williams letter is below:
(Un)Paving Our Way To Nirvana
The citizens who do recognize their own discomfort in this geography of nowhere generally articulate it as a response to “ugliness.” This is only part of the story. The effects actually run much deeper. The aggressive and immersive ugliness of the built landscape is entropy made visible. It is composed of elements that move us in the direction of death, and the apprehension of this dynamic is what really makes people uncomfortable. It spreads a vacuum of lost meaning and purpose wherever it reaches. It is worse than nothing, worse than if it had never existed. As such, it qualifies under St. Augustine’s conception of “evil” in the sense that it represents antagonism to the forces of life.
We find ourselves now in a strange slough of history. Circumstances gathering in the home economics of mankind ought to inform us that we can’t keep living this way and need to make plans for living differently. But our sunk costs in this infrastructure for daily life with no future prevent us from making better choices. At least for the moment. In large part this is because the “development” of all this ghastly crap — the vinyl-and-strandboard housing subdivisions, the highway strips, malls, and “lifestyle centers,” the “Darth Vader” office parks, the infinity of asphalt pavements — became, for a while, our replacement for an economy of ecological sanity. The housing bubble was all about building more stuff with no future, and that is why the attempt to re-start it is evil.
Sooner rather than later we’ll have to make better choices. We’ll have to redesign the human habitat in America because our current environs will become uninhabitable. The means and modes for doing this are already understood. They do not require heroic “innovation” or great leaps of “new technology.” Mostly they require a decent respect for easily referenced history and a readjustment of our values in the general direction of promoting life over death. This means for accomplishing this will be the subject of Part II of this essay, but it is necessary to review a pathology report of the damage done.
I have a new theory of history: things happen in human affairs because they seem like a good idea at the time. This helps explain events that otherwise defy understanding, for example the causes of the First World War. England, France, Russia, Germany, and Italy joined that war because it seemed like a good idea at the time, namely August of 1914. There hadn’t been a real good dust-up on the continent since Waterloo in 1814. Old grievances were stewing. Empires were both rising and falling, contracting and reaching out. The “players” seemed to go into the war thinking it would be a short, redemptive, and rather glorious adventure, complete with cavalry charges and evenings in ballrooms. The “deciders” failed to take into account the effects of newly mechanized warfare. The result was the staggering industrial slaughter of the trenches. Poison gas attacks did not inspire picturesque heroism. And what started the whole thing? Ostensibly the assassination of an unpopular Hapsburg prince in Serbia. Was Franz Ferdinand an important figure? Not really. Was Austria a threat to France and England? It was in steep decline, a sclerotic empire held together with whipped cream and waltz music. Did Russia really care about little Serbia? Was Germany insane to attack on two fronts? Starting the fight seemed like a good idea at the time — and then, of course, the unintended consequences bit back like a mad dog from hell.
Likewise America’s war against its own landscape, which got underway in earnest just as the First World War ended (1918). The preceding years had seen Henry Ford perfect, first, the Model T (1908), and then the assembly line method of production (1915), and when WW I was out of the way, America embarked on its romance with democratic motoring. First, the cities were retrofitted for cars. This seemed like a good idea at the time, but the streets were soon overwhelmed by them. By the mid-1920s the temptation to motorize the countryside beyond the cities was irresistible, as were the potential profits to be reaped. What’s more, automobilizing the cities made them more unpleasant places to live, and reinforced the established American animus against city life in general, while supporting and enabling the fantasy that everyone ought to live in some approximation to a country squire, preferably in some kind of frontier.
The urban hinterlands presented just such a simulacrum of a frontier. It wasn’t a true frontier anymore in the sense of civilization meeting wilderness, but it was a real estate frontier and that was good enough for the moment. Developing it with houses seemed like a good idea. Indeed, it proved to be an excellent way to make money. The first iteration of 1920s car suburbs bloomed in the rural ring around every city in the land. An expanding middle class could “move to the country” but still have easy access to the city, with all its business and cultural amenities. What a wonderful thing! And so suburban real estate development became embedded in the national economic psychology as a pillar of “progress” and “growth.”
This activity contributed hugely to the fabled boom of the 1920s. Alas, the financial shenanigans arising out of all this new wealth, along with other disorders of capital, such as the saturation of markets, blew up the banking system and the Great Depression was on. The construction industry was hardest it. Very little private real estate development happened in the 1930s. And as that decade segued right into the Second World War, the dearth continued.
When the soldiers came home, the economic climate had shifted. America was the only industrial economy left standing, with all the advantages implied by that, plus military control over the loser lands. We already possessed the world’s biggest oil industry. But after two decades of depression, war, and neglect, American cities were less appealing than ever. The dominant image of city life in 1952 was Ralph Kramden’s apartment inThe Honeymooners TV show. Yccchhh. America was a large nation, with a lot of agricultural land just beyond the city limits. Hence, the mushrooming middle class, including now well-paid factory workers, could easily be sold on “country living.” The suburban project, languishing since 1930, resumed with a vengeance. The interstate highway program accelerated it.
The Broken Promises of Suburbia
It seemed like a good idea at the time. Country life for everybody in the world’s savior democracy! Fresh air! Light! Play space for the little ones! Nothing in world history had been easier to sell. Interestingly, in a nation newly-addicted to television viewing, the suburban expansion of the 1950s took on a cartoon flavor. It was soon apparent that the emergent “product” was not “country living” but rather a cartoon of a country house in a cartoon of the country. Yet it still sold. Americans were quite satisfied to live in a cartoon environment. It was uncomplicated. It could be purchased on installment loans. We had plenty of cheap energy to run it.
It took decades of accreting suburbia for its more insidious deficiencies to become apparent. Most noticeable was the disappearance of the rural edge as the subdivisions quickly fanned outward, dissolving the adjacent pastures, cornfields, and forests that served as reminder of the original promise of “country living.” Next was the parallel problem of accreting car traffic. Soon, that negated the promise of spacious country living in other ways. The hated urban “congestion” of living among too many people became an even more obnoxious congestion of cars. That problem was aggravated by the idiocies of single-use zoning, which mandated the strictest possible separation of activities and forced every denizen of the suburbs into driving for every little task. Under those codes (no mixed use!), the corner store was outlawed, as well as the café, the bistro, indeed any sort of gathering place within a short walk that is normal in one form or another in virtually every other culture.
This lack of public amenity drove the movement to make every household a self-contained, hermetically-sealed social unit. Instead of mixing with other people outside the family on a regular basis, Americans had TV and developed more meaningful relations with the characters on it than with the real people around them. Television was also the perfect medium for selling redundant “consumer” products: every house had to have its own lawnmower, washing machine, and pretty soon a separate TV for each family member. The result of all that was the corrosion of civic life (a.k.a “community”) until just about every civic association except for school oversight (the fabled PTA) dwindled and faded. And the net effect of all that was the stupendous loneliness, monotony, atomization, superficiality, and boredom of suburbia’s social vacuum. It was especially hard on the supposed greatest beneficiaries, children, who, having outgrown the play space of the yard by age eight, could not easily navigate the matrix of freeways and highways outside the subdivision without the aid of the “family chauffeur,” (i.e. Mom).
Cutting Our Losses & Moving On
A couple of points about the current situation in suburbia ought to be self-evident. One is that our predicament vis-à-vis oil, along with cratering middle class incomes, suggests that we won’t be able to run this arrangement of things on the landscape a whole lot longer. The circulatory system of suburbia depends on cars which run on liquid hydrocarbon fuels. Despite the current propaganda (“drill, baby drill”), we have poor prospects of continuing an affordable supply of those things, and poorer prospects of running the US motor vehicle fleet by other means, despite the share price of Tesla, Inc. The second point is how poorly all suburbia’s components are aging — the vinyl-clad houses, the tilt-up strip malls, the countless chicken shacks, burger stands, and muffler shops, all the generic accessories and furnishings that litter the terrain from sea to shining sea. There are a lot of reasons these things now look bad (and lose value) but the chief one is that most of them are things nobody really cares about.
In Part II: A Better Human Habitat for the Next Economy, we explore the necessary behaviors we’ll need to adopt if we hope to have any prosperity in the years ahead. What seemed like a good idea at the time — through the 20th century and a little beyond — is looking more like an experiment that failed. Our sunk costs in it promote a tendency to agonize over it. I propose that we just give up the hand-wringing and prepare to cut our losses and move on. The reality of the situation is that the response to all this will arise emergently as circumstances compel us to change our behavior and make different (and we should hope) better choices. That is to say, don’t expect programmatic political action to change this, especially from remote authorities like federal or state governments. We will reorganize life on the ground because we will have to.
I Generally speaking, government always grows — it never shrinks — whether times are good or bad.
II In each area it purports to “assist”, government attempts to replace individual decision-making with central planning.
III In order to implement its grand central plans and solidify its power, government must take from one citizen to give to another; this is, in effect, lawful theft.
IV No matter how many times central planning fails, the self-appointed masterminds in government assert that “this time is different” and that with only a few tweaks and more money, their delusional plans will succeed.
V Because it uses funds confiscated from taxpayers, self-restraint is no obstacle to government’s ambitions.
VI Its fundamental misunderstanding of human nature notwithstanding, government must claim to grant “rights”, which require it steal the labors of one citizen to give to another (such as food, shelter, employment, and health care).
VII No matter how widespread the harm it causes, government will never provide an honest and historical accounting — a report card — of its failures.
VIII As more individuals and families are harmed by the failures of central planning, government must find suitable scapegoats, must lie to do so, and therefore must also repress dissent.
IX In order to build its network of redistribution and grow a culture of dependency on its services, government must inevitably undermine the family unit, religion, and the notion of God-given rights in order to cow, bribe, or intimidate its citizens.
X As government grows ever more powerful, it must also become increasingly oppressive through compulsion and force. To do otherwise would mean government must shrink, and this it cannot do.
Any of these characteristics recognizable?
- Why Central-Planning Won’t Work (itmakessenseblog.com)
- The Joy of Central Planning (tfmetalsreport.com)
- “Stealth Socialism” (adask.wordpress.com)
- James Scott and Friedrich von Hayek: Hoisted from the Archives from October 24, 2007 (delong.typepad.com)
How Should People of Faith – Or Atheists Who Want to Talk With Them – Think of Bank Crime? | Zero Hedge
What Would Jesus – Or the Rabbis of Old – Do?
Preface: If you are an atheist and believe that religion is crazy, please remember that some 85% of the American population identifies itself as Christian and millions more identify themselves as Jewish. Very few Americans are atheists. (And the majority don’t trust atheists.) Therefore, knowing a few bible verses may be essential for atheists to be able to speak to people of faith.
The head of Goldman Sachs said he’s doing “God’s work” withhis banking activities. The head of Barclays also told his congregation that banking as practiced by his company was not antithetical to Christian principles.
Are they right? Is big banking as practiced by the giant banks in harmony with Christian or traditional Jewish principles?…
- IMF Admits Usury Is The Root Problem Of The Global Financial System (barnabyisright.com)
- Many families at risk of poverty have problem with usury (timesofmalta.com)
- “It’s the usury, stupid!” – Understanding the Modern Money Con (farganne.wordpress.com)