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The Equality Act and Religious Freedom

Posted on Friday, July 24, 2015 No comments

Friday, July 24, 2015

Yesterday (Thursday, July 22, 2015) "The Equality Act" was introduced in Congress.  This act would "outlaw discrimination on the basis of sexual orientation or gender identity in employment, housing, public accommodations, and other areas of law where discrimination is already prohibited for others," according to a MarketWatch article.

This is certain to butt up against the traditional view of religious freedom held by many Americans.  It is also certain to keep the political waters roiling, which may be part of what it is designed to do anyway. In its current form I doubt it is likely to pass the Republican Congress. But we have to have more than just a "no" vote.

The Standard "Three-Prong Test"

Federal courts have a very well-established precedent for evaluating laws which place restrictions on constitutional liberties.  In order to have a productive, reasoned debate about this issue, these liberties have to be clarified.  While we may not like having to accept the reality of a constitutional right to marriage, these are now the judicial 'facts on the ground'.

The second liberty in question is the freedom of religion, which is inescapably in question here.  The homosexual community will argue that it is not in question because the courts have already ruled that people cannot be denied things like housing (e.g. an unmarried heterosexual couple) based on religious objections to their living arrangement. Apples are being compared to oranges here, and this comparison will become clear when we look at this "three prong test."

When a law restricts the exercise of a constitutional right, the government must show three things: 1) the restriction is in furtherance of a "compelling governmental interest;" 2) the restriction is the "least restrictive means" of furthering that interest; and 3) the restriction does not place an "undue burden" on the individual seeking to exercise that right.  If a former test can not be met, the latter test or tests are moot.

Apples and Oranges

This is why, to start with, the law cannot infringe upon the religious freedom of a Christian photographer or baker unless it can be argued that there is a "compelling governmental interest" in a gay couple being served by one photographer over another, or by one baker over another.  If that first test is not passed, the other two are irrelevant.

It gets a little more complicated when it comes to service in, say, a restaurant.  While it could be argued that there are other restaurants which will serve a gay couple (the same basic argument as the baker/photographer), it can be argued (and personally, this is how I see the issue) that access to basics like food implicate a "compelling governmental interest" and so can be required by law regardless of a restaurant owner's moral objections.  If a restaurant can deny service to a gay couple, then a grocery store could as well.  If we follow the logic to its necessary end, the "compelling governmental interest" only becomes clearer the further we go along that logical path.

And it becomes easily recognized when we talk about housing.  The ability to obtain shelter is clearly a "compelling governmental interest" and so the law can require a Christian landlord to rent to a gay couple just as it now does an unmarried heterosexual couple - religious convictions notwithstanding.

Questionable Motives

If the effort is to have a reasoned debate, it is usually not helpful to question motives.  But there is a side to this matter that merits a question: Islam as a religion has the same, if not an even stronger and more uniform objection to homosexuality as does conservative Christianity.  Yet there have been no reports of gay couples seeking out the services of Muslim photographers or bakers.  Are we to conclude that we have no Muslim neighbors engaged in these professions?  Or is this a concerted effort to both marginalize and criminalize the consciences of conservative Christians?

There is an intellectual drift on the part of the American Left away from classical liberalism when it comes to religion.  We saw this in the Obama administration's original regulations on birth control and health insurance.  An exemption was granted for "houses of worship" but not for an organization like a Christian hospital.  What this amounts to is the transformation of "freedom of religion" into "freedom of worship."  These two are not the same.

We see the same pattern in this debate over gay marriage.  It is said that churches and ministers will not be required to host or officiate gay marriages.  But a Christian baker, photographer, or wedding planner will have to serve a gay couple in the preparation and performance of their wedding.  The distinction is disingenuous (and patently illiberal) precisely because it diminishes the freedom of religion into merely a freedom of worship.  The difference between the two is conscience.  For the freedom of religion to survive, our consciences must remain free to guide our actions unless a "compelling governmental interest" is otherwise implicated.  Again, the burden lies on the gay couple to prove there exists a "compelling governmental interest" in being served by one photographer, baker, or wedding planner over another.

Unconservative Moralism

But there is a flip side to this debate.  I have already written about how, if I were a baker and were in the business of baking wedding cakes, my conscience would lead me not only to serve the gay couple, but to bake them the very finest possible wedding cake.  My conscience leads me in this way because I observe from Scripture that sex and gender are characteristics we share with the animals, not with God.  We are created in the "image of God" and so we share certain characteristics with God as well - our creativity perhaps being the most important of many.

I would certainly be uncomfortable so serving a gay couple.  But my Scriptures also teach me that being redemptive is - more often than not - quite uncomfortable.  And as time passes, it only seems to become more so.  As a result it becomes ever more important that my conscience call me back to the very foundation of Judeo-Christian ethics - presenting the "image of God" in our world.  I reason that in the exercise of my creativity - be that in baking cakes, as it were - I meaningfully present the image of God.  As so, to present His image in the lives of a gay couple who are my neighbors, I would create the finest possible cake for their wedding.

My question for those who share my conservative outlook and my discomfort with homosexuality is this: Am I free to follow my conscience without a cloud of unconservative moralism hovering over it?  I am not objecting to being asked to weigh the ethical issues surrounding this topic from both sides.  I am objecting to the sense that "being right" is a valid end in and of itself.  Maybe in a court of law it is, but as I seek to be redemptive in my world, it manifestly is not.

Sovereignty and Debt: Financial War Breaks Out Into the Open

Posted on Tuesday, July 14, 2015 No comments

Tuesday, July 14, 2015

We are about to find out how far Europe is willing to go in throwing away democracy (which was, of course, born in Greece) to the keep the sham which is the Eurozone alive.

The purpose of the Eurozone, from its inception in earlier forms to the shared currency, is to prevent nationalist rivalries – mainly between France and Germany – from consuming the Continent in another arms race as a prelude to another war.  The effort has succeeded if we limit our idea of ‘war’ to bombs and bullets.  It has failed miserably if we consider the reality of a financial war.

Many commentators have already noted that we are well into the midst of such a war.  One term which has been used is a ‘currency war’ involving players such as the United States, Russia and China.  But an even wider financial war is being fought over the battlefield of economic self-determination.

This war is really no different than the First and Second Bishops War of the mid-17th century.  Having expended its wealth on the former, the British Crown (King Charles I) confiscated gold deposited in the Royal Mint in order to pay his soldiers to fight the latter. This fight was about religious self-determination – who would appoint bishops over the Church of Scotland. But in order to fight this war, Charles I needed first to win a brief skirmish over the money supply.

The gold held in deposit by the Royal Mint did not belong to the Crown, but rather to English merchants who had earned it in the course of commerce.  By confiscating this gold as a forced loan, Charles I won the initial skirmish – over the money supply – necessary to fight the rest of his war to force his appointment of bishops over Scotland.

Charles I repaid the loan, but the English merchants were tired of being dragged into the Crown’s wars and so began to deposit their gold with trusted goldsmiths.  These goldsmiths issued receipts which guaranteed the redemption of the amount of gold to its owner upon presentation.  These receipts – ‘promissory notes’ – were the forerunner for what we Americans know as ‘Federal Reserve Notes’ – the U.S. Dollar.

But even these goldsmiths were not immune to the temptation to control the money supply.  They noticed that these notes were circulating in the economy without being presented for redemption.  What happened was civil society realized the notes were useful for facilitating everyday commerce.  It was much easier to carry the notes around rather than the gold.  So the goldsmiths began issuing ‘extra’ notes and lending them out at interest.  That they did not have the gold to back the sum total of all of the notes in circulation was their dirty little secret.

There is an extremely important observation to be made at this point – and this forms the entire premise of this post: What we know today as ‘money’ originated as a tool or utility – contrived not by a monarch or by a ruling class – but by ordinary civil society to facilitate everyday commerce.  As the Greek crisis proves, what we know of ‘money’ today has now become first a tool of the State for the pursuit of inherently undemocratic political goals.

It isn’t that peace in Europe is not a worthy goal. It is, rather, that peace in Europe has to begin with civil society and only then can it become a formal relationship between the several states of Europe.  The European Union’s fallacy – the reason why the Euro is destined to fail – is that its perception of Europe is one where the State is the most significant unit of society.  Conservative political commentators in America refer to this way of seeing things as ‘statism’.  And because the European elite are essentially ‘statists’ their view of money follows: Instead of first being a utility contrived by civil society to facilitate commerce, it is first a tool of the State to impose a political order favored by elites.  Whether it be a monarch wishing to confiscate the money supply for religious purposes or an elite ruling class wishing to do so for political purposes – this theft of the money supply is theft just the same.

This is how I have come to what seems to be a decidedly non-conservative conclusion: Greek civil society must insist their parliament refuse the demands of the ‘deal’ struck between Europe and their Prime Minister Alexis Tsipras. This will certainly mean expulsion from the common currency and the reintroduction of a devalued Drachma.  But it will also put Europe in the position of having to negotiate an honest settlement on debt relief – or get nothing at all.

That this will set a precedent for the rest of debt-laden Europe – specifically the much larger economies of Italy and Spain – is really what European elites fear.  But it is important to understand why they fear this: their entire statist project will be revealed for the house of cards it is.  The world will see what happens when the ‘ruling class’ confiscates the money supply.

There have been whispers of late that the ‘cooking of the books’ that got Greece into the Eurozone to begin with was done at the behest of the European financial sector and that it may not be restricted to Greece.  It is not hard to understand why: the more countries which use the Euro, the more ‘customers’ there are for the banks.  Where the ‘extra’ notes were the English goldsmiths’ dirty little secret, one wonders whether the cooking of the books of southern European countries is the dirty little secret of today’s European financial sector.

It is also important to understand how the interests of political society and the financial sector coincide.  The first order of political society is to get elected.  Southern European political society – Greece’s included – has accomplished this by making promises which cannot possibly be kept.  The financial sector has been happy to paper over these falsehoods.  They do so by printing money and lending it out at interest in the form of ‘sovereign debt’.

But as the ‘deal’ has proven, there is nothing sovereign about this debt; indeed this debt has come at the cost of Greek financial sovereignty.  But if ‘sovereignty’ is to have a financial dimension, this must be the case for both the debtor and the creditor.  The fundamental problem with having the financial sector – with their shareholders’ investment at stake – in control of the money supply is how the financial sovereignty of the creditor nations is protected at all costs and the financial sovereignty of the debtor nation is completely exposed; some are more ‘sovereign’ than others.  If this state of affairs is allowed to stand - with no 'haircuts' for the creditors - all risk has been shifted to the debtor and no risk is assumed by the creditor.  The irresponsible lending – and therefore the irresponsible borrowing – will only continue until even the slightest breeze strews this tower of cards throughout the whole house.

To reject the terms of this ‘deal’ will be an immense sacrifice for the Greek people.  But they will have both their sovereignty and their dignity back.  The problem is you cannot feed your children and your aged with either sovereignty or dignity.  If they choose this route – and for the sake of my children and grandchildren I hope they do – they will go down in history once again as those who led the world away from the cliff that is ‘sovereign debt’.  But in order to lead in such an historic way, the people of Greece must first give birth to an energetic civil society and take the social reigns from political society so they can then have a smaller government, with a lower tax burden, and actually begin innovating, improving things in the real economy and creating real wealth again.

Political society – Greece’s included – has failed to lead us to prosperity.  It is now up to civil society to show the way.

'Sovereign Debt' is an 'ὀξύσμωρός': Repudiate It!

Posted on Monday, July 13, 2015 No comments

Monday, July 13, 2015

The people of Greek are bewildered by the 'deal' (which is really a complete capitulation) struck by the Tsipras government with Greece's creditors. From MarketWatch:

“I’m quite upset with this deal, it doesn’t feel like I live in a sovereign country anymore,” said Haris Manolopoulos, who works as a buyer in the aircraft industry. But he added: “There was no other option, really. I negotiate deals for a living and I know this: The moment you start looking for money, you are in a bad negotiating position.”

Hopefully Greece - which has given birth to much of what we take for granted politically and culturally - will learn the lesson the entire Western world needs to learn.  If so, common sense might be born there, too.

'Sovereign debt' is an oxymoron.

The etymology of that term is interesting.  At first I thought it was rooted somehow in the Greek όχι (for 'no' and which was the Tsipras government's theme in the referendum).  But it is actually a compound of ὀξύς (sharp/keen) and μωρός (dull/stupid).  And so something that is in itself a contradiction of terms is an 'oxymoron'.

The degree to which one country is indebted to another is the degree to which the debtor has ceded its sovereignty to the creditor.  This is more than just a 'feeling' in Greece now - it is a reality with talk of privatizing Greek islands - literally selling sovereignty (over territory) to pay a debt.  All Tsipras got was an agreement to administer the fire sale in Greece - under European supervision.  And so "sovereign debt" is clearly an oxymoron.

It is even an oxymoron when looked at from the creditor's point of view.  Let's take Germany as an example: The memory of the Wiemar Republic is alive and well, so Germans are loath to repeat this mistake by monetizing the debt of debtor countries like Greece.  For them it would be a matter of being robbed of their purchasing power to pay the debt of other countries.

Interesting how 'sovereignty' works both ways, isn't it?  The German demand to have their purchasing power protected is 'sovereignty' from the creditor's perspective.  The Greek demand to retain control over their financial affairs is sovereignty from the debtor's perspective.  But sovereign debt is - whether the loss of sovereignty implicates purchasing power or financial prerogatives - an oxymoron just the same.

Do the Greeks Desire to be Part of a Failing Project?

It really is only a matter of time, and the circumstances under which we will learn the needed lessons. Regardless of the time and circumstances, the lessons will be very difficult to learn, but the same road will have to be traveled regardless.

So let's say the Greek parliament does what they recommended to their people, vote όχι (no) on the slate of legislation that will be presented Wednesday.  Such a vote will be a recovery of sovereignty, but will certainly come at the cost of membership in the Eurozone. By doing so, the Greek government would actually be in its strongest position yet if the aim is to get genuine debt relief rather than to just roll over the loans.

As I noted here, most of what is beautiful in European (and American) culture (both in terms of our forms of government and our religious traditions) was born in Greece.  As such, the Greek people naturally see themselves as Europeans.

But if this week's decisions are to be about more than that past (which will not feed their children nor care for their elderly today or into the future), the Greek people might want to ask whether being part of this money printing and lending enterprise of European political society is really what they have in mind when they think of themselves as Europeans.  The Greek problem (debts that simply cannot be repaid in money at its current value) is a small version of the same problem in the other heavily indebted, but much larger economies of southern Europe.

But this problem is really one rooted in the games being played between European political society and the financial sector. European political society (Greece's included) gets elected by making social promises that simply cannot be kept. They get away with this because the European financial sector prints money and lends it out (at interest, of course) so the false promises can be papered over with - you guessed it - sovereign debt.  And there have been whispers that Greece's books are not the only ones that were 'cooked' - and perhaps even at the behest of the European financial sector itself. This actually makes sense: More countries in the Eurozone means more interest-paying 'customers' for the money being printed - and more profits for the banks. This is certainly not merely a European scam - the Federal Reserve here in the U.S. is playing the same games with U.S. political society.

Maybe it is time to call the scam what it is and put a stop to it.  What if Greece's parliament actually refuses to pass Wednesday's legislation?

It would leave the Eurozone and have to reintroduce the Drachma at a severely devalued rate.  This would be immensely painful for Greek society, but will also immediately put Greece in a more competitive place to begin creating wealth again.  But the Greek people will have to demand a smaller government, lower taxes, and develop an energetic civil society to address its social needs. As long as Greece labors under the weight of its huge public sector, political society will suck the money supply dry, leaving nothing to those who can innovate and improve things - those who can actually create new wealth.

But this would also teach the rest of Europe - Germany mainly - an extremely valuable (and needed) lesson about 'sovereign debt': It goes both ways.  The Germans were at risk of losing their sovereignty over the purchasing power of their savings.  That is the risk of irresponsible money printing and lending in the Eurozone.

Politics, Speculation and the Creation of Wealth

The implications of this sort of thing for the other countries of southern Europe is really what scares the cartel of European political society and their financial sector.  Regardless of how it would play out, interest rates would rise and the days of free money would be over.  What would this mean?

There are three basic paths money can take: It can be used to fund political preferences.  This is what happens when the money supply is routed to political society.  It can also be used to speculate.  When you can borrow for free and make up to 20% gambling on commodities, why would you bother building a factory and actually producing things? Lastly, the money supply can be used to actually innovate, produce and improve things.  This is where wealth is created - along with stable jobs.

As long as the financial sector can print money to prop up the false promises of political society, a country's money supply will go more and more to political preferences.  And as interest rates necessarily go down (no one rolls over a debt at a higher rate) the incentive only grows stronger to borrow for speculation.  Less and less money goes into actual wealth creation.

Put a stop to the scam, give birth to an energetic civil society, demand a smaller government with lower taxes, and Greece can become competitive again and begin to create real wealth for its people.  It starts by realizing that there can be no such thing as 'sovereign debt' - that debt has now cost you your sovereignty. In doing so you just might lead Europe away from a project which is destined to fail.

Vote όχι! Repudiate it!

Only Civil Society Can Save the European Project

Posted on Sunday, July 12, 2015 No comments

Sunday, July 12, 2015

In one of the most banal, intellectually dishonest rants of his career, Princeton Professor Paul Krugman has just tried to turn the debate over yet another bailout for Greece into an argument about Germany's "good intentions."

In a sense this has exposed the essential rift between liberal academic economists like Krugman and the real world. Liberals are driven first by the need to establish the goodness of their own intentions.  It is not a surprise, then, to see Krugman suggest that Germany's good intentions actually matter in this debate. They don't - and it is beyond egregious for Krugman to throw around a Nazi insinuation like this.

What matters are results.  Greece has received two bailouts so far and all of that, the money has circled the drain of the black hole that is Greek political society.  As Europe - the European Central Bank has pierced the zero-level-boundary on their interest rate for holding onto bank deposits - hits the mathematical limits of Keynesian credibility, the dishonesty of Krugman's ideas will become evident.  Krugman's system of thought is one with conveniently built-in excuses for failure.  When an infusion of newly printed money - a bailout - does not work, Krugman's excuse is that it wasn't big enough.  So when you infuse even more money into political society - a second bailout - and it doesn't work, the built-in excuse is deployed again; it wasn't big enough.  So now we are supposed to throw more money at Greek political society hoping it will be "different this time?"  Finally Europe's leaders are figuring this out; we can only hope they succeed in taking the lessons to their logical conclusion.

But that is unlikely to happen unless European civil society - Greece's included - realizes what has been going on for a generation now.  Political society secures power by making promises which cannot possibly be kept.  The financial sector prints up money to buy sovereign debt - at a profit to them, of course - so the falsehoods of these promises can be hidden from civil society - and political society can then keep making those false promises.

Today the credit rating of a country is no longer a measure of whether or not they can repay their debts; it is rather a measure of whether or not they can secure a loan to roll them over.  Once you realize no one refinances a debt at a higher rate - and you see interest rates hitting the zero-level-boundary - the mathematical limits of Krugman's credibility become clear.  This is why the debate now has to be about Germany's "good intentions."  Krugman's built in excuse will not fly any more.

The logical conclusion of all of this is that economic growth simply does not come from political society.  It comes from the creative enterprise of civil society when they innovate and improve things in the real economy.  When political society 'pours' economic growth, it ends up like a stein of German beer with a huge head of foam.  The head of foam makes it look like there is more beer than there is.  And when the bubbles dissipate, it isn't "deflation" - it is what happens when the bartender at the Central Bank has no idea what he is doing.  Thinking that throwing money at political society will produce economic growth is to mistake the head for the beer.

The next time I raise a toast (it will be a Bourbon barrel-aged Belgian Ale, though) it will be to the people of Greece.  So much of what is beautiful in Europe was born in Greece.  Maybe we will see there the birth of an energetic civil society and the proper restraining of political society which will then produce real economic growth and show the way for the rest of Europe.

Greece and Germany as Seen Through American Eyes

Posted on Friday, July 10, 2015 No comments

Friday, July 10, 2015

Right up front I have to admit that my headline is a bit misleading.  No one elected me spokesperson for all Americans, so really this is how I - one American - see Greece and Germany.  But I am confident a fairly large share of my country-men and -women will share most, if not all, of the sentiments I'll share here.

In a sense this my open letter to the people of these two great countries.

The Birthplace of More than Just Democracy

Greece is also the birthplace of the Christian liturgy.  Most people in the West think of Rome, and culturally this not hard to understand.  Rome was the center of what became know as the Western Church (Latin speaking/writing).  Constantinople (now Istanbul) was the original center of the Eastern Church (Greek speaking/writing).

A few years back I was finishing up my third class in ancient Greek (the Greek of the New Testament - as opposed to classical Greek).  This was about May, so the Paschal season (Easter) had just passed.  That year a Greek friend invited me to a prominent Greek Orthodox church here in San Diego, California for their Good Friday liturgy.

The Greek Orthodox have a thick "prayer book" just for Holy Week services.  It is printed in both Greek and English, with the Greek on the left and its English equivalent on the right as you turn pages.  My friend lent me his while he and his wife shared hers.  I was delighted - nearing completion of my Greek courses - to discover that I could sing the responses to the choir along with the rest of the congregation in Greek, reading from the Greek side of the book.  The English side was actually a distraction because I found myself disagreeing with its translation.

Participating like that, even in the procession around the church's neighborhood, was a remarkable experience realizing the liturgy is largely unchanged since the beginning - over 2,000 years ago.  Every Christian worship gathering derives in some sense from the Greek Orthodox liturgy.

Later, while finishing up a paper for that class, the Greek Paschal greeting "Christ is risen!" (Χριστος Ανέστι) came to mind.  For thousands of years the Greeks have used the letter Chi (X) as a shorthand for 'Christos' (this is where we get Xmas for Christmas).  The second word would be spelled 'Anesti' in the Roman alphabet.  So I took that - and as is typical of Americans and their automobiles - I checked to see if anyone had the vehicle registration plate 'XANESTI'.  Much to my pleasant surprise, no one in California had applied for a plate with those characters.  That became my graduation present to myself - and is the registration plate on my car to this day.


But Cultural Pride Cannot Overcome Math

When we realize that not only do Europe's political traditions owe their origin to Greece, but their religious traditions as well, it is not hard to understand why the Greek people feel so strongly about being a part of Europe.  The same can be said for Italy - a source of Western European polity and culture.  But in order to truly be part of something you have to own its past, its present and its future.  Greece certainly owns Europe's past.  But it has never really owned its present and is currently incapable of owning its future.  The reason for this is simple: two-plus-two will never equal anything other than four.

Greek political society has been pretending otherwise for a long time, and gained entry into the Eurozone by "cooking the books" as we Americans like to say - presenting fraudulent financial reports to European political society.  This runs partly to the heart of the problem - which is something all of Europe struggles with.

In an excellent article, Andrew Alexander shows how the European Union is an inherently subversive enterprise - subverting nationalist loyalties from being able to engage in another arms race as a prelude to another war.  The main aim of the EU is not democracy, but peace.  This helps us understand why 'mainstream' European leaders were aghast when Greek Prime Minister Alexis Tsipras called for a referendum on the terms of the recently proposed bailout (Greek's third bailout).  The whole enterprise of the EU is designed to suppress potential conflict between the democratic passions of its several members.

The problem is Europe has never had an appropriate cultural construct to channel those democratic passions.  We in America would call that construct "civil society."  And those among us like myself - conservatives - believe civil society to be superior to political society for almost all of the challenges that cannot be faced by individuals on their own.  There are a number of reasons for this - and I'll cover some of them below - but not only for Greece but for all of Europe as well, the birth of an energetic civil society is the only thing which will save Greece, and ultimately the Euro itself, from an otherwise mathematically inevitable collapse.

Thirty Year Old Students and Fifty Year Old Retirees

The problem Greece faces is - on its face, at least - purely mathematical.  Tax revenue is and always will be a function of transactions in the economy.  When a motorist buys a liter of petrol, the government will assess an 'excise tax'.  The filling station will add this excise tax to the price of the petrol, so it all looks like one price to the motorist.  But the excise tax is actually not part of the price of the petrol; it is the price of the transaction.  If taxes are assessed  on income it is the exchange of time and skills that is charged.  If a 'sales tax' is assessed on the sale of groceries, that percentage (the sales tax rate) is the price of that grocery store transaction - not the food that is bought.

Therefore an increase in tax revenue is a function of an increase in the volume and value of transactions in the economy.  This means the more people are engaged in economic activity - transacting - the more revenue is generated.  The opposite is also true: the fewer people engaged in economic activity, less revenue is generated.  And here is where the problem stops being a math problem and becomes a cultural problem.

To simplify the cultural problem we can divide our lives into three basic phases: We are students; we are workers; and we are retirees.  Generally speaking, we can all agree that it is better for children to be in a classroom than in a factory or field.  And it is obvious to us that as we age we are less able to be productive in the economy.  So even if not formalized in a political arrangement, in just about every human society those in the middle - those who are working - provide for the younger (students) and care for the elderly (retirees).

But when we formalize this sort of thing politically, it falls to political society (government and its constituent bureaucracies) to make and fund these arrangements for the young (public education) and the old (public pensions).  This is where it gets tricky: Political society is led by politicians, and their first objective has nothing whatsoever to do with either educating children or caring for the elderly. Their first aim is to get elected.

And so if they can get away with making promises which otherwise cannot be kept, they will do so.  This is an immutable truth of human nature - trying to either deny this or change it is futile. The question, then, is how the damage from this sort of thing can be mitigated.  This is where an energetic civil society comes in.

But before we get into exactly what that is, we have to get our heads wrapped around the math problem.  The retirement age in Greece is ostensibly 67 years.  But like any rule, when you bury it in a compost pile of exceptions, after a while when you dig through the compost pile you realize the rule itself has decomposed into meaninglessness.  So - for all of the exceptions like hairdressers being considered an arduous profession - Greece's retirement age might as well be 50.

For every person on a public pension, that is a person who is no longer transacting their time and skills in the economy, and therefore those transactions are lost as a source of tax revenue.  To maintain the compost pile which has become public pensions in Greece, the government has to increase the tax burden on the middle - those working and running businesses.  Every Euro taken from them is a Euro not being deployed toward economic innovation and creativity (more on that in a moment).  It is economic innovation and creativity which creates jobs, so now there are fewer jobs for Greece's young people.

This, then, leaves those young people - who might otherwise transition from that first phase (student) to the second (worker) to remain longer as a student.  Where they might otherwise make the transition in their early 20's, they now have to wait until they are 30.  And so now you have 50 year old retirees and 30 year old students.  The math problem now becomes obvious: there will never be enough workers between 30 and 50 to transact in the economy in support of the public expense of such a large population of students and retirees.

Growth vs. Austerity: Mistaking the Head for the Beer

The answer, though, is not 'austerity'.  It is 'growth', but that will not come by having German savers sacrifice their purchasing power to inflate away Greek debt.  Growth that is 'poured' by political society (printing money for bailouts) is like the 'head' on a glass of German beer.  It only makes the glass look full.  Once the bubbles dissipate, there isn't quite as much beer as you thought.  Looking to political society for economic growth is to mistake the head for the beer.  And when the bubbles dissipate, it isn't "deflation" - it is what happens when the bartender (the ECB - or the Federal Reserve for that matter) doesn't know what he's doing to begin with.  It isn't only the Greeks who need to learn this - all of Europe needs to realize this before it is too late.  America is not quite as far down this road as Europe. But we, too, are headed in the same disastrous direction. 

Genuine economic growth comes in only one way. Creative people innovate and improve things.  In America we like to call this the "better mouse trap."  If you can invent a better mouse trap, you might file a patent and then take out a loan to set up a factory and hire workers to make and sell your better mouse trap. The creation of wealth comes from the increase in value because you improved the mouse trap - it is not because the bank lent you money to set up the factory.  Economic growth is about the better mouse trap, not the loan.

Creativity in political society is about looking for new ways to spend the peoples' money - and then new ways to tax them after they have run out of the peoples' money.  When this is unrestrained by an energetic civil society, the creativity of civil society is misdirected away from wealth creation and invested instead in tax avoidance.  If the Greek people put even half the energy into wealth creation as they put into tax avoidance, Greece would be rich beyond imagination!

American professor Jeffrey Sachs took note of this (arguing for another bailout) in a recent article:
In 2013, for example, resident inventors in Germany filed some 917 patent applications for every million inhabitants. Resident inventors in Greece, by contrast, filed just 69 patent applications for every million.
Sachs has, probably without even realizing it, explained in just two sentences why another bailout will not solve the problem.  This kind of innovation cannot be lent by a central bank or legislated by political society.  It must be born in the hearts and minds of the Greek people (civil society) who then demand that political society step aside so the adults in the room can actually get to work solving problems, improving things, and growing the economy.

An Energetic Civil Society: Ownership, Responsibility, Community & Dignity

An energetic civil society is one that pursues a four-fold dynamic: The first is ownership: Energetic civil society does not wait for the government to fix something that is broken. Philosophers describe a dynamic known as "the tragedy of the commons."  This is simply a way of noting that when something is broken and nobody owns it, fixing it is always someone else's job.  Energetic civil society refuses to pass off problems to political society; they seek to own the problems themselves.

The second dynamic is one of public responsibility.  When one owns public problems, they naturally develop a sense of public responsibility to fix the problem.  As they pursue public responsibility they discover their neighbors who share this same sense of ownership and responsibility; in doing so they have discovered the third dynamic: community.  As they band together, if they are not first suffocated by regulations dreamed up by political society, they then enjoy the dignity of seeing problems fixed by the work of their own hands. Political society, on the other hand, will always be more concerned about fixing the blame (on someone else, of course) rather than fixing the problem.

Political society is also animated by inevitable rivalries between bureaucracies.  These rivalries will always boil down to money.  This means that political society will always be looking for something else to do in order to justify their budget.  Without energetic civil society to push back - in essence to tell the government to get lost - the scope and expense of government expands without restraint.  This dynamic, more than anything else, is the difference between America and Europe.

In Europe it seems civil society only does those things political society allows them to do.  In America it is (or has historically been and should be) the opposite.  Civil society assumes first responsibility, and then looks to political society for help with the things which we cannot otherwise do for ourselves.  It is a dictum of American conservative philosophy that the role of government is to do for us what we cannot do for ourselves - and to otherwise leave us alone.

Civil Society and Social Responsibility

But by "leave us alone" I expressly do not mean everyone is on their own.  We all agree - throughout human history and under just about every form of government - that those in the middle who can work are responsible to provide for the young and to care for the old.  By "leave us alone" I mean leave us free to ensure those who are in need know the dignity of being lifted up by someone who knows their name.

And because among civil society we know each others' names, we will always be superior to political society when it comes to meeting most social needs.  In order to do this we need to be free to innovate and improve things in the real economy - not the political economy.  In Greece this need is acute because of the relatively large number of aging retirees.  It is crucial that the Greek people be free to grow their economy so they can provide for their aged.  But that freedom requires a single public pension program (rather than the numerous programs - each with their own bureaucracy) with rules that actually mean something the Greek people can agree on - without a compost pile of exceptions.

If the number of the working can be enlarged by sound pension reform, and an energetic civil society can assume much of the social responsibilities they now look to political society to meet, the tax burden on the working people of Greece can be lessened, freeing up resources for innovation.  It will be this innovation - not the next bailout - which will create wealth, create jobs, and save Greece.  It will be what allows a 21 year old to graduate from college and actually find a job.  And it might be what actually shows the rest of Europe the only way the Euro itself can ever survive.

But Germany has a role to play.  Throughout the entire Western world - starting here in America where we insisted on having "guns and butter" - an entire generation has bought political promises which cannot possibly be kept.  The political sector has leaned on the financial sector to print money to buy sovereign debt so that the truth about these false promises could be hidden from civil society. That money printing and lending enterprise has run its course and born its fruit.  As the International Monetary Fund has pointed out, their really is no future for Greece that does not involve a "haircut" on the part of its creditors.  Irresponsible borrowing is not possible without irresponsible lending, and irresponsible lending is inevitable with "fiat money."

A "haircut" for Greece's creditors will teach us all this lesson now, before an economy like Italy's or Spain's fails and makes the lesson exponentially more painful.  Some will warn of disaster.  But the disaster will really only be for political society.  With an energetic civil society to fill the eventual vacuum, we can take care of each other when it becomes clear that political society can no longer rely on free money to make false promises.

The future of Greece is not in the hands of Frau Merkel, the German people, the ECB or the insufferable bureaucrats in Brussels.  It is squarely in the hands of the Greek people themselves.  If they can give birth to an energetic civil society which can then take the social reigns from Greek political society (and demand a smaller government), the Greek government can actually lower overall taxes and free Greek civil society to actually begin creating wealth again.  This has to begin with meaningful pension reform which disposes with the compost pile of exceptions.  Tax code simplification - focusing on a Value Added Tax (remember the better mouse trap?) will free the Greek people to transact honestly and create incentives for political society to simply get out of the way of wealth creation.

The people of Greece must own more than just Europe's past. They must own its present as well.  But even more importantly - not only for them but for all of Europe, the people of Greece have the opportunity to both own and lead Europe's future. So much of what is beautiful in our world was born in Greece.  Europe's only hope is an energetic European civil society - and the prosperity it will bring.  Hopefully this will be born in Greece as well.

The Federal Reserve and "New Economic Thinking"

Posted on Tuesday, July 7, 2015 No comments

Tuesday, July 7, 2015

In a MarketWatch.com story we learn the International Monetary Fund (IMF) is now advising the Federal Reserve on the timing of its expected hike in interest rates.  What caught my eye first, though, was the backdrop for the photo op with the first ladies of finance (with apologies to Frau Merkel).

It seems there is "New Economic Thinking" out there.  My first reaction was: "Oh, let me guess, it's different this time..."

The story goes on to note the supposedly low rate of inflation and how the Fed should wait until they have "clear signs of wage and price inflation."  Even under normal circumstances - and I am not talking about economics but about data, statistics and reporting - if the Fed waits until the data shows wage and price inflation, the pressures have already built up in the system.  The only question is how much lag there will be between the building pressures and the explosion.

This brings me to something I have written about before.  John Williams shows convincingly that the Executive branch (in the departments of Commerce and Labor) are gaming the stats on inflation.  Because the inflation rate then affects just about every other economic 'headline' stat (including GDP, the reported rate of economic growth), the 'data' on which the Fed depends is GUBAR'd (gimmicked-up beyond all recognition).  This only makes it all but certain that by the time real inflation overcomes gimmicked stats, and the government will no longer be able to put a smiley face on the harsh reality, it will be way too late for the Fed to do anything.

Yup, that's "New Economic Thinking" for you...

But these "institutes" have always intrigued me...  Here we have some form of organization hosting the heads of the Federal Reserve and the IMF.  Who are they?  Where does their money come from?

So I went to the IRS website, and put their name in double-quotes in the 'Name' field (that would be "Institute for New Economic Thinking" - the double-quotes are important to restrict the search to that exact name).  The reader can try that for themselves and will discover the IRS record, along with the tax id number.

From there I went to the Foundation Center's page where you can find IRS Form 990 filings for non-profit organizations.  Entering their tax id number (without the dash) produced their filings beginning in 2011.  I started there and read through their 2011 tax filings.  Because I have helped run non-profits before, I know my way around these filings and - after being shocked at how well capitalized this particular organization was right out of the gate, I immediately went to page 24 on the PDF, or Part I of Schedule B, where you find info on the contributors.

This was pretty boring reading other than seeing Paul Volcker on the list ($1,000,000), but the real story was the entry right before Volcker.  The "Open Society Institute" is listed as donating no less than $25,000,000.  Yes, that is 25 million...  Seeing as their total grants received for the year is reported as $26,342,823, that one $25M gift is 95% of the first year's money.  Boy, wouldn't I love to run a non-profit with that kind of "seed" money!

That, of course, sends me back to the IRS site, now to put in "Open Society Institute" into the 'Name' field.  Sure enough, there they are, tax id number and all.  Plug in the tax id number in the Foundation Center's 990 finder, and the last three years filings are listed.  Again, I start with the 2011 filing - I am interested in finding out who throws $25M into a brand new non-profit.  I start on page 1 and see they granted out a little over $100M.  So the Institute for New Economic Thinking is fully 25% of their grant distribution.  (The INET 990 does not specify an accounting year other than the calendar year for 2011 and the OSI expressly states the calendar year, so I know I am comparing equivalent accounting periods.)  Curiously, Part IX-A requires a report of the four largest charitable contributions.  The $25M to the INET does not show up... the largest recipient got a paltry $9.4M (poor folks). Hmmmm....

Both organizations report as 501(c)(3) non-profits.  These are supposed to be even more tightly regulated than the 501(c)(4) organizations that have been in the news related to IRS targeting of conservative organizations.  In both cases, they answer "No" to Part VII(a) questions 1(a) and 1(b) - asking if they are involved in political activities.  I guess advocating for "old" economic thinking (e.g. a gold standard) is political when done by a grass-roots Tea Party organization, but "new" economic thinking is not - go figure.

So I scroll down to Part XV to see who is involved... by now I have my suspicions.  And sure enough, there he is: George Soros.

Mr. Soros has been the subject of a lot of conspiracy theories on the conservative blogosphere.  I tend strongly toward skepticism, so I am not going to be one to parrot sensationalist rhetoric.  But there is enough of Soros in his own words to present cause for concern.  In particular this:
If truth be known, I carried some rather potent messianic fantasies with me from childhood which I felt I had to control, otherwise I might end up in the loony bin. But when I made my way in the world I wanted to indulge myself in my fantasies to the extent that I could afford.
Soros is the man who dumped $10B worth of British Pound Sterling in 1992, effectively breaking the Bank of England, forcing a devaluation of the Pound and booking $2B in profits (nearly $1B in one day) - all at the expense of ordinary British savers who saw their purchasing power disappear overnight.

And there they are - the first ladies of finance sitting on a dais back-dropped by a non-profit all but unilaterally stood up and funded by Soros.  In 2012 Open Society gave INET $12.5M out of $20,132,887 (62%) and another $6.5M (for a total of $19M or 91% from the two combined) came from an organization named the Pyewacket Foundation. In 2013 INET took in $20,945,965 and reported $6,646,585 in grants - $6,307,971 from Open Society (95%).

Criously, Pyewacket's 2012 Form 990 only shows $290,000 in grants paid (and $648,948 in total expenses/disbursements).  One wonders where the $6.5M gift is accounted for.  Indeed, across 2011-2013 Pyewacket's total grants reported is only $2.14M, and INET does not appear on any of these three filings' Section XV listings of grant recipients.  Yet INET reports having received $6.5M from them in 2012.

One wonders what the messiah has in mind for the dollar as he whispers in the ears of Ms. Yellen and Ms. Legarde.

Marriage and our Gay Neighbors: The Way Forward

Posted on Sunday, July 5, 2015 No comments

Sunday, July 5, 2015

It was after a funeral service and my wife and I were on our way to my parents' grave site.  We dropped into a small grocery to see if they had flowers we could bring.  The clerk who helped me - if I were to judge his affect and speaking - was probably a gay man.

I have always been uncomfortable with homosexuality.  I believe in what I call the "heterosexual complement of nature."  For me, this really isn't a point to make in argument; it is descriptive of nature.  At the risk of sounding crude, you cannot look at the anatomy of the man and the anatomy of the woman, and then claim not to know what goes where. Even if we reason that humans evolved by way of strictly natural processes, that design is still right in front of us.

What I wish my gay gay neighbor understood about me - and my fellow Christians who share my relatively conservative outlook - is that we do not believe this because some old man with a flowing white beard in a temple on a mountain somewhere scribbled it on an ancient scroll.  Indeed, the heterosexual complement of nature isn't really something that is taught to us.  It is something that was obvious in nature before there was anything at all to believe and teach.

But if I want my gay neighbor to entertain my perspective, it is only right than I entertain his.  I'll try to do that a little here, and I also want to challenge the dominant socially conservative perspective as well.  But let me conclude my little story about looking for flowers. I simply wanted that moment with the gay cashier to be something he would look at as a positive moment in his day - not one bogged down by cultural controversy. The more this issue is in the news, the more uncomfortable I become with how my fellow Christians respond.  I think it is almost to the point where our response is more discomfiting than homosexuality itself (because we really ought to know better).

The Context of the Biblical View

When the Apostle Paul wrote his letter to Christians in Rome there was a well-settled culture which surrounded the pagan temples of the Roman Empire.  As part of pagan "worship" just about every imaginable form of sexual activity accompanied every imaginable form of intoxication.  When the New Testament speaks against drunkenness, for example, it is this drunken carousing that is most in mind.

The first part of St. Paul's letter to Rome is where we find the most strident rhetoric against homosexuality.  But today's gay community has pointed out that it is no longer associated with the kind of pagan temple cults of biblical times, and in many cases not even with the intoxicated carousing seen in those ancient temples. It is a valid point and one worth considering.  But it does not really change the underlying reasoning.

In his letter, St. Paul could easily have argued from his Hebrew Bible.  But he doesn't.  He appeals to nature and makes a claim that applies to everyone (Jews and Gentiles, heterosexuals and homosexuals): The nature of things is right in front of us such that we cannot say we do not know what is natural.  That he has the larger context of pagan ritual in mind is clear in how he refers to how 'images' replaced God as the object of worship.

If we start with the idea that we are created in the 'image of God' and that (from the Ten Commandments) we are not to make carved 'images' for worship, we might note that the same word is used in both cases for 'image'.  It leads me to a simple conclusion: An 'idol' is anything we set up that prevents us from seeing the image of God where He has created it to be seen - in each other.

This means we are called to present the image of God in the world around us.  Paul's reasoning, it seems, is that this is done in part by upholding the order of His creation - and this includes the heterosexual complement of nature. In this sense Paul is not teaching us anything new as much as he is appealing to what nature has already taught us.  And so the biblical perspective is less an argument against homosexuality as something we have been taught, and more an appeal to that which was obvious in nature before there was anything to believe and teach.

The Universality of the Biblical View

But we - and I mean socially conservative Christians like myself - are equally without excuse and every bit as much under St. Paul's diagnosis of the human condition.  At least if I were to gauge these things by the 'Christian' response to the SCOTUS decision on gay marriage - we need to be reminded of these things.

We are nothing if not 'experts in the law'.  The points I make above are essentially points of what philosophers call 'Natural Law'.  We are not the first to seek out a hope in our expertise in the law.  We are not the first to be blinded to a more important imperative as we return constantly to our arguments.

St. Luke tells us of an 'expert in the law' who rose to 'test' Jesus.  He asked him what he had to do to gain eternal life.  To be a bit cheeky with the paraphrase, Jesus' response was: "You're the lawyer, you tell me!"  And the lawyer was ready with his brief: "Love the Lord your God with all your heart, all your soul, all your strength and all your mind, and love your neighbor as yourself."

And the lawyer was right: "Do this and you will live," Jesus responded.

But - and this is the second time Luke opens a window into this lawyer's intentions and motives - he felt the need to justify himself, so he asked Jesus: "Who is my neighbor?"

The parable of the Good Samaritan we all know well is what follows.  What is fascinating is how in the parable we see the outward, compassionate intentions and motives of the Samaritan in contrast with how Luke portrays the inward, self-justifying intentions and motives of the 'expert in the law'.

Half of me wishes to disavow any offense that might be taken to the following questions - but half of me also is simply willing to own it: Why, again, are we arguing about homosexuality and gay marriage?

Why are we arguing a point obvious in nature?  Why are we trying to establish a 'truth' by way of rhetoric that has for all time been established by way of an observation of nature?

Are we trying to 'test' the bona fides of other Christians?  Or are we trying to justify our bona fides in our own eyes?  Are we, like the expert in the law, looking to being right as the source of our hope?

The parable teaches us nothing if not that being right is not always the most important thing. The lawyer was right, but his being right was decidedly not up to the hope he was seeking.

The Perspective of the Biblical View

The perspective of the Samaritan is the perspective commended to us with a simple command: Go and do likewise.  And that perspective was not one built around self-justifying arguments.  It was built around an outward-motivated compassion for others.  Or to put it another way, it was a redemptive perspective.

This does not mean we do not judge between right and wrong.  The Bible is clear on homosexuality because it follows from what is obvious in nature.  What it does mean is that as our engagement in civil society becomes more and more uncomfortable to our moral sensibilities, it only becomes more and more important that we seek out ways to invite our gay neighbors into meaningful belonging, that in being the image of God before them - and seeing that image in them - we might proclaim something worth believing.

The SCOTUS decision should be showing us that making a good argument and being a good neighbor are going to clash more and more frequently.  It only makes it more and more important that we decide which one wins when we have to choose: We need to be a good neighbor before we make a good argument.
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