28 June 2010
Europe May Cause a Third Depression
In his OpEd article in the June 28, 2010, New York Times, Paul Krugman is right to warn that the European (and, to some extent, American) policies of mistakenly carrying water for investors in government debt is likely to deflate the world economy to an extent comparable with the Great Depression and the Long Depression before it. What Mr. Krugman fails to acknowledge is that it is only when the public deceives itself into thinking that good times will last forever—when it inflates a bubble—that the economy grows and people improve their standards of living.
In fact, economists from the days of Adam Smith and earlier (when they were known as soothsayers) have always claimed that theirs was the realm of reality and that those who had figured out the truly ephemeral nature of abstract principles of finance and investment were only out to defraud the rest of us. The Europeans and the Fed have swallowed totally the economists’ rationalization without recognizing that it takes a measure of fantasy to keep funding sources confident that returns on their investment will continue into the future.
Mr. Krugman may call the danger to the world economy deflation. What he really means is that without constantly inflating expectations through deficit spending, at a rate that does not get out of control, the world’s national leaders will inevitably disappoint financial markets and condemn their societies to prolonged torpor.
In his OpEd article in the June 28, 2010, New York Times, Paul Krugman is right to warn that the European (and, to some extent, American) policies of mistakenly carrying water for investors in government debt is likely to deflate the world economy to an extent comparable with the Great Depression and the Long Depression before it. What Mr. Krugman fails to acknowledge is that it is only when the public deceives itself into thinking that good times will last forever—when it inflates a bubble—that the economy grows and people improve their standards of living.
In fact, economists from the days of Adam Smith and earlier (when they were known as soothsayers) have always claimed that theirs was the realm of reality and that those who had figured out the truly ephemeral nature of abstract principles of finance and investment were only out to defraud the rest of us. The Europeans and the Fed have swallowed totally the economists’ rationalization without recognizing that it takes a measure of fantasy to keep funding sources confident that returns on their investment will continue into the future.
Mr. Krugman may call the danger to the world economy deflation. What he really means is that without constantly inflating expectations through deficit spending, at a rate that does not get out of control, the world’s national leaders will inevitably disappoint financial markets and condemn their societies to prolonged torpor.
25 June 2010
Islamism vs. Secularism
As described by Pankaj Mishra in his survey article, “Islamismism,” in the June 7, 2010, New Yorker, Ayaan Hirsi Ali symbolizes the problem of disorientation caused by major philosophical shifts in a person’s thought patterns. Her capture by Western civilization, most emphatically through her collaboration with Theo van Gogh and its tragic apotheosis when he was assassinated, is in fact a rapture that mirrors the mindless conversion of other seemingly confirmed members of Western culture to unquestioning belief in fundamental Islamism. Take, for example, the personal histories of Faisal Shahzad, Maj. Nidal Malik Hasan, the Washington, D.C. and Buffalo, N.Y conspirators, etc. They all fell prey to seductive preaching by extremist evangelists of jihad and abandoned, even demonized, their former American lifestyles in search of an inner peace that came only in the form of bitter rejection.
Just as extremist adherence to a religious belief often leads to antisocial behavior and criminal violence, so extreme renunciation of spiritual faith creates antagonisms that invite violent responses from those who place little importance on material values. “Live and let live” is a better guide for peaceful coexistence in today’s borderless world than martial promotion of the tenets either of religionist creeds or of Randian rationalism.
As described by Pankaj Mishra in his survey article, “Islamismism,” in the June 7, 2010, New Yorker, Ayaan Hirsi Ali symbolizes the problem of disorientation caused by major philosophical shifts in a person’s thought patterns. Her capture by Western civilization, most emphatically through her collaboration with Theo van Gogh and its tragic apotheosis when he was assassinated, is in fact a rapture that mirrors the mindless conversion of other seemingly confirmed members of Western culture to unquestioning belief in fundamental Islamism. Take, for example, the personal histories of Faisal Shahzad, Maj. Nidal Malik Hasan, the Washington, D.C. and Buffalo, N.Y conspirators, etc. They all fell prey to seductive preaching by extremist evangelists of jihad and abandoned, even demonized, their former American lifestyles in search of an inner peace that came only in the form of bitter rejection.
Just as extremist adherence to a religious belief often leads to antisocial behavior and criminal violence, so extreme renunciation of spiritual faith creates antagonisms that invite violent responses from those who place little importance on material values. “Live and let live” is a better guide for peaceful coexistence in today’s borderless world than martial promotion of the tenets either of religionist creeds or of Randian rationalism.
15 June 2010
Alien Ideologues
As Dorothy Rabinowitz writes in the June 9, 2010 Wall Street Journal, a distance is being revealed between the President and the people whose sentiments are increasingly shaped by jingoist right-wing ideologues. To remain true to his office, must a President be prey to the same misconceptions that have captured the most vocal of the public?
We are not at war against an “indisputable Islamist” enemy. As was shown by the 1995 Oklahoma City bombing attack and the first World Trade Center bombing in 1993, this country’s liberal democratic system has always struggled to protect its domestic tranquility from disturbance by disaffected outlaws. Advances in communications and freedom of association have allowed them more easily to arm themselves with terrifying weapons. Even the Fort Hood shooter would not have been able to go berserk in such a harmful way in a repressive society.
Modern civilization is vulnerable to life-threatening screws in the works. We must stiffen our vigilance against these anomalies—not by demonizing unfamiliar beliefs or the champions of our better natures, but by remembering not to relax our guard against those among our neighbors who do not share in the benefits of our economic and social progress.
As Dorothy Rabinowitz writes in the June 9, 2010 Wall Street Journal, a distance is being revealed between the President and the people whose sentiments are increasingly shaped by jingoist right-wing ideologues. To remain true to his office, must a President be prey to the same misconceptions that have captured the most vocal of the public?
We are not at war against an “indisputable Islamist” enemy. As was shown by the 1995 Oklahoma City bombing attack and the first World Trade Center bombing in 1993, this country’s liberal democratic system has always struggled to protect its domestic tranquility from disturbance by disaffected outlaws. Advances in communications and freedom of association have allowed them more easily to arm themselves with terrifying weapons. Even the Fort Hood shooter would not have been able to go berserk in such a harmful way in a repressive society.
Modern civilization is vulnerable to life-threatening screws in the works. We must stiffen our vigilance against these anomalies—not by demonizing unfamiliar beliefs or the champions of our better natures, but by remembering not to relax our guard against those among our neighbors who do not share in the benefits of our economic and social progress.
Old News
The news about Afghan mineral wealth is a clumsy attempt by the
U.S.Pentagon to justify additional military activity in Afghanistan. It's
been known for years that there are a lot of mineral deposits in
Afghanistan, but the country has never been politically stable enough, for
thousands of years, to allow the investment to be made there that is needed
to develop those deposits. That will not change anytime soon.
The news about Afghan mineral wealth is a clumsy attempt by the
U.S.Pentagon to justify additional military activity in Afghanistan. It's
been known for years that there are a lot of mineral deposits in
Afghanistan, but the country has never been politically stable enough, for
thousands of years, to allow the investment to be made there that is needed
to develop those deposits. That will not change anytime soon.
03 June 2010
Moody’s, Appraisers and Markets
Warren Buffett’s defense of Moody’s reminds me of the business plan of antiques appraisers—they charge the owners/sellers of the old pieces for their service because they are providing an expert opinion of value. That value, however, is only relative to other antiques, the monetary worth of which can go up and down. It depends, of course, on the relative value of money, i.e. inflation or consumer expectations.
Moody’s and antiques appraisers are expert in assessing fundamental value relative to other assets. However, they are not expert in predicting market valuations which can vary wildly with psychological factors that affect the willingness of investors and consumers to take risks and to disregard history.
AAA is not an absolute rating. It only places an asset on a sliding scale that is subject to universal movements relative to measures of monetary value. It also is vulnerable to changes in investor and consumer judgments of the relation of each asset class to liquid monetary value, and of the importance of liquidity itself.
Warren Buffett’s defense of Moody’s reminds me of the business plan of antiques appraisers—they charge the owners/sellers of the old pieces for their service because they are providing an expert opinion of value. That value, however, is only relative to other antiques, the monetary worth of which can go up and down. It depends, of course, on the relative value of money, i.e. inflation or consumer expectations.
Moody’s and antiques appraisers are expert in assessing fundamental value relative to other assets. However, they are not expert in predicting market valuations which can vary wildly with psychological factors that affect the willingness of investors and consumers to take risks and to disregard history.
AAA is not an absolute rating. It only places an asset on a sliding scale that is subject to universal movements relative to measures of monetary value. It also is vulnerable to changes in investor and consumer judgments of the relation of each asset class to liquid monetary value, and of the importance of liquidity itself.
