Maybe It’s Best that Trump Skip the Roasting

“Controllers, abusers, and manipulative people don’t question themselves. They don’t ask if the problem is them. They know the problem is someone else.” – Darlene Ouimet

I honestly can’t speak to the veracity of the name for the above attributed quote. It’s on the internet, so it must be valid, right? Still, the last name “we met” seems a bit much.

I had a friend post something from “the other 98%” the other day regarding the fact that President Trump skipped the White House Correspondents Dinner. It’s a traditional time where comedians give presidents (and others) grief. The image is here:

 

 

 

Now, on the one hand, it seems a legitimate jab. No, it IS a legitimate jab. You don’t skip the White House Correspondents Dinner because you’re too delicate. Just go, suck it up, laugh it off, have some fun. Say in your mind “that’s funny kid, hey – did you ever get elected president?” … that’s what everybody else does.

On the other hand, I must note that the Left demands … DEMANDS … that Donald Trump is a narcissist. Or, more pointedly, suffers from narcissistic personality disorder (NPD). They might be right. He certainly has some of the signs. A overwhelming sense of superiority coupled with an extremely fragile ego … that just screams NPD.

To these folks I simply offer the following consolation – it’s better this way. If the president is the narcissist you suppose (and perhaps he is), then it’s better that he didn’t go to the dinner. Do you know what happens when a narcissist suffers a “narcissistic injury” – a shot to their fragile ego that they cannot contain? It’s bad. It’s really, really, really bad. Soooo … maybe it’s better that he didn’t go to the dinner. Who knows what manner of narcissistic rage would have resulted? It could have gotten really ugly. When the “most powerful man in the world” feels a need to vindicate himself … I’m just saying, that’s not a good combo.

Personally, I like Donald Trump. Not in the sense of “he’s a good guy” or “he’s a good leader” or “he’s a good president” or “he’s getting some good things done” or “there are any redeeming qualities about him at all” … no, not in any of those ways. I like him because he’s at least an outsider. Not “one of the common folk” – no, he’s a rich kid. But he’s not a political insider. I guess that’s about all one can ever hope for in a politician these days – somebody who’s NOT a political insider.

The Will, The Word, and The Heart

“Since you cannot do good to all, you are to pay special attention to those who, by the accidents of time, or place, or circumstances, are brought into closer connection with you.” – St. Augustine

“This is the very perfection of a man, to find out his own imperfections.” – St. Augustine

I had a theological conversation with a friend the other day. In it I posited the following, and asked him to poke holes in it (we value when others challenge our ideas and tell us ways in which they fall short):

“You cannot separate God’s will, from His word, from His heart. These are congruous. To know one is to know the others … or at least to know the framework in which the others must exist, even if we sometimes grapple with understanding their expression rightly.”

I’m not a theologian. Never have been. Indeed I have discussed with my Christian friends how I often find differences of thought between the theological (e.g. the Apostle Paul) and the mathematical (e.g., myself). But I think the above holds. Or, at least, to a Christian must hold in some way or the whole of truth is lost to us.

We believe in the will of God – there is a thing, an outcome, a purpose, that He wills, He wants, He desires. We believe that the holy scriptures cannot run contrary to this will -otherwise we have no moorings.  And we believe that deep within the expression of His will is His heart of love for man and all mankind. And that these three must be congruous, even though they might be expressed differently under different circumstances. They all must still agree.

Thus, if we hold an issue of the will or the heart that runs counter to the word of God, we know that it is of our own will or our own heart, and not of His. Let us consider the simplest example.

Fornication. OK, maybe that’s not the simplest of examples, but it’s pretty basic. What does the word of God say about fornication – the commission of sexual acts outside of the bonds of marriage? Well, ummm, it’s pretty overwhelming. 1 Cor 6:18-20, Heb 13:4, John 8:41-42, Gal 5:19-21, 1 Cor 6:13, 1 Thes 4:3-4 … the list really could go on all night. The point is, fornication – sexual congress with someone to whom one is not married – is forbidden by the word of God.

Does this express His will? Well, maybe we would describe “will” with different words. It is God’s will that men and women only engage in sexual intimacy – the most intimate of acts amongst humanity – in the safety of a marriage covenant. Why? Because He wants us to be safe from harm. There is emotional damage in extra-marital relations when the relations end (and even before) – and God would protect us from that.

Does this express His heart? Well, maybe we would describe “heart” with different words still. God loves us. He wants only good, only joy, only hope, only peace for us. Despite our own desires He knows full well that fornication ultimately leads to emotional pain – pain from which He would protect us.

So we see that the word may give a simple truth (“thou shalt not”) while the expression of will and heart might expound the “why” of the situation.

My point is a simple one though – that the “implication” (mathematically) goes both ways. That is, one cannot claim to hold to the heart of God or the will of God while acting directly contrary to the word of God. It is the simplest of litmus tests. If the word of God clearly prohibits a matter, or clearly states a direction on a matter, then one must – by definition – assume that this framework ultimately contains His will and His heart. Otherwise we only live in confusion.

But it is the nature of fallen man, the absolute nature of fallen man – to put his own desires, his own will, his own heart, in the place of God’s. It is the most difficult struggle of the Christian life to lay down the thing one’s heart most desires, when that desire goes contrary to the word of God (and thus to the will of God and to the heart of God). We are benefited when we see this from two aspects.

First, God’s ways are not our ways. Our tendency for self-worship clearly leads us to decisions and desires that are motivated by our will, not His; our heart, not His. (It is the nature of the fall.) Second, it is invaluably instructive for us to cast the word of God into His will and His heart. To best understand truth, integrity, honesty, hope, we must rightly understand His purposes and grapple with the ways that they differ from our own (and be willing to lay down our own when the situation calls for it).

So let us consider our ways.

“Though shalt not commit murder” – does your heart contemplate the explicit harm of another? Dare not to justify it – the word, will, and heart of God are against you.

“Though shalt not steal” – does your heart contemplate the taking of something that doesn’t belong to you? Dare not to justify it – the word, the will, and the heart of God are against you.

“Love your neighbor as yourself” – “Do unto others as you would have them do unto you” – “What God has joined together, let no man separate” – “Seek first the kingdom of God” … does your heart or mind struggle against these? You are only human (as am I). But know that the perfect will of God, the heart of love of God, has expressed itself with these sayings for a reason. To justify actions that run contrary is to justify that my heart and my will is greater than His, more perfect than His. This is folly.

 

 

 

 

 

 

 

Is Now The Time for Kim?

“The oppressed peoples can liberate themselves only through struggle. This is a simple and clear truth confirmed by history.” – Kim Il Sung

Tensions have been mounting on the Korean peninsula of late. Shortly after having bombed the Assad regime in Syria, the Trump administration is sending U.S. warships to the Korea in a show of strength ahead of the DPRK’s celebration of the birth of Kim Il Sung. Sung’s grandson, Kim Jong Un – the despot who now leads the worlds most oppressive regime – has been making noise about ballistic missile tests, nuclear warhead tests, and actually attacking the United States. (And, as we saw in the remake of Red Dawn … it could happen … OK, not really.)

A show of strength by either side (or both sides) is nothing new. This is typical, pro forma muscle flexing to show that everybody is ready and willing to go to war. What makes this interesting is the recent and unexpected U.S. actions in Syria. Is Trump trigger happy enough to take a shot at the crippled and failing oppressive state that serves as a buffer between China and South Korea? I think perhaps folks aren’t so sure.

Now, chances are that nothing will come of this. The missile test has already failed. The natural response of the DPRK will be to try to pull off a nuclear warhead test next. If that fails, who knows? Losing face is a big deal in world politics.

I’ve often wondered just what it would take to topple the regime. The entire system has become so decrepit, that one has to imagine the military strength is highly overstated. I suspect half of the equipment won’t work when called on. The other half could be taken out with rather simple precision strikes. The only two real worries are the spring-loaded artillery assault on Seoul (cannons can typically be counted on) and any possible nuclear tipped ballistic missile launch. After that, if things do go hot, Kim has nothing left and his regime would be over.

Freedom for the oppressed people of North Korea, wouldn’t that be something?

People who now me know that I lean heavily Libertarian. Indeed, I hold that maximum freedom (with the defense of personal rights, such as life, liberty, and property) is the only political philosophy that is consistent with the Golden Rule for Christians living in a democracy. That last caveat is important, I think. We, as Christians, find ourselves living in a democracy – and we should apply the Golden Rule to how we use that power of government to force our neighbors to do this or that.

Given those Libertarian leanings, one might wonder why I would even offer feint praise for prospect of U.S. involvement in toppling the DPRK. After all, Libertarians tend to be the more isolationist party – the party that demands that the use of American military might must at some point draw back to defending the rights of Americans (not just “American interests”). Fair enough. But I can tell you that I wouldn’t shed a tear if the regime did fall and the oppressed people were made free … and if a little U.S. involvement pushes it over the edge, well, maybe I wouldn’t do too much hand-wringing.

Not to worry though. The situation isn’t serious yet. When it is, we can expect that former president Jimmy Carter will come out of the woodwork in a desperate attempt to save the DPRK, just like he did in 1994.

But these are interesting times …

 

It’s A Wonderful Life … If You Have Rights to Other People’s Stuff

“Strange, isn’t it? Each man’s life touches so many other lives. When he isn’t around he leaves an awful hole, doesn’t he?” – Clarence, It’s A Wonderful Life

“Gold is money, everything else is credit” – J. P. Morgan

The pastor has been doing a series for Christmas where he incorporates a classic Christmas movie into each sermon. This week it was A Wonderful Life.

I will confess that the reference to the movie caused me to (briefly) completely lose touch with the sermon. For those familiar with the movie, there is a scene early on where George (Jimmy Stewart) has to thwart a bank run at the Building and Loan. He uses his life savings (which he was going to use on his honeymoon) in order to fund withdrawals until the Building and Loan can reopen, and hopefully survive.

In the scene George makes the ridiculous, yet accepted far-and-wide, argument that the people couldn’t have all of their deposits back because they were used to fund loans to other people. The people are afraid that they money they have deposited in the bank – in demand deposit accounts, that they have a right to at any time – won’t really be there for them if they need it back. So, they do what people should do when they fear that their savings will be lost – they move quickly to rescue it. Then, as expected, they are chastised (ever so slightly … it is Jimmy Stewart after all) for demanding what they were promised.

In the roaring 20s as today the banks have lent money at interest that wasn’t actually theirs to lend. Sure, it’s legal for them to do this, but the law represents a fundamental violation of property rights and logic. Two people cannot hold claim to the same asset at the same time. I’m obviously not talking here about joint claim – as with a business or a marriage – but dual, individual and equal claim on an asset.

The depositors own their deposits. But the bank also has rights to the deposits and can generate credit with them (not money, mind you, but credit … and as J.P. Morgan pointed out, everything other than gold is credit). When the two claims conflict with one another we find out just who has rightful claim.

Quite often, the rightful claim is determined by the “blood from a turnip” approach. If the bank cannot liquidate assets to fund deposits then the depositors will get wiped out. Their claim gets tossed.

Americans will often hear of bank runs and say “yeah, but that couldn’t happen now” – and yet bank runs are quite common in the world today. Greece 2015, Bulgaria 2014, Cyprus 2012, Iceland 2008, and even Wachovia, Washington Mutual, and IndyMac here in the US in 2008. When underlying asset prices change the banks lose money on their leveraged positions (e.g., global financial crisis). They become insolvent and nobody gets their money back (certainly not all of their money).

Could it happen again? It will happen again. Nothing is so certain as that. Who’s next? Probably some Italian bank (e.g., Monte Paschi). But the problem is systemic. The system is built on falsehood. It is built on a continually failing model. We won’t find bankers “smart enough” to avoid future banking failures – we have to overhaul the system so that it is viable.

But how? Why not outlaw fraud? Why not outlaw fractional reserve lending? In the modern day there is no reason that we have to have a link between saving and lending functions. People who want to lend (even pool funds for lending to share risk) can do so without going through the banks.

People who want to use a bank for deposit reasons only should be able to do so. Sure, it won’t be free, but the implied risk we take on now is also not free.

Of course, it wouldn’t make for a great movie scene. “Hey, remember that time there wasn’t a bank run and you didn’t have to spend your life savings to rescue the business?”

An Irresponsible Gambit for Faithless Electors

“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” – R. Buckminster Fuller

Months before the election I was riding down the road with a coworker on the way to brief a sponsor on our current program. My coworker, who I would describe as a left-leaning centrist, commented on his fear that a Clinton victory in the upcoming presidential election would result in riots from Trump supporters. Indeed, this idea was pervasive in the news media at the time – that Trump was sowing the seeds of civil unrest with his antics and “refusal to accept” an election outcome.

I pointed out to my coworker that he had it exactly backwards. While the hypothesis is untestable (we can’t see what happens with both outcomes – we will only get one or the other), it was my opinion that Trump supporters are not the type to riot, they are the type to rebel. Clinton supporters, on the other hand, are far more likely to riot.

Well, Trump pulled off the impossible and sure enough, Clinton supporters (or anti-Trump protestors) rioted across the country. We’ll never know about the other proposition … or will we?

Of late we’ve seen a continued call for so-called “faithless electors” to undo the Trump win in the electoral college (a win in “pledged delegates” anyway). The movement doesn’t appear to be getting much traction – and doesn’t even appear to be directed at getting Hillary Clinton elected. No, they seem to want to find a “compromise candidate” that they can all vote for. A centrist Republican, most likely.

The call strikes us as irresponsible. It’s not terribly difficult to imagine what would happen across middle America if faithless electors ousted Donald Trump. There would be a movement towards outright rebellion. I suspect it would start with an organized refusal to pay taxes (some Liberals are already proposing this because of the impending Trump presidency). Not long after I suspect we’d see several states looking for the exits and considering secession. Would they get there? I don’t know, it’s a high bar to pass.

My point is that you cannot “save America” from Donald Trump by threatening to destroy America. Attempts to influence 37 Trump electors to change their votes are doomed to fail anyway (I *think*) but would likely not have anything like the intended outcomes even if they were successful.

The Anti-Fragile Politics of Trump vs Clinton

“As iron sharpens iron, so one person sharpens another.” – Prov 27:17

“Better is open rebuke than hidden love.” – Prov 27:5

I was scrolling through the twitter feed not that long ago and saw something from Nicholas Taleb about anti-fragile systems. I haven’t read his book on the subject, but I’ve read enough to get the gist. There are some systems that are strengthened by adversity and weakened by ease.

We can apply the concept to quite a few systems …

Office talk of the political laity

I’ve long held that this concept describes the political argumentation for blue state conservatives and red state liberals (anti-fragile). When you are surrounded by people who only agree with you, your thinking becomes atrophied. Nobody pushes back, so you assume your position must have been logical and well defended. This is what many red state conservatives and blue state liberals face.

The counter argument holds for blue state conservatives and red state liberals. Being constantly challenged by the majority of your peers, you become more adept at defending your positions, and you abandon arguments (and positions) that don’t work.

Central planning versus free market economies

Price discovery is the invisible hand of the free market. When everybody decides for themselves what is valuable and what is not, it spurs the producers (which can be just about everybody) to make things that are valued and abandon things that are not. Bad ideas fail, good ideas succeed. The system gets stronger.

The central planning economy is quite the opposite. Production goals and prices are set by fiat with little tie back to the actual (population relative) value of things. Those quotas and prices are then shielded vigorously from competition. The system drags on for a while until the obvious wastefulness becomes too much. Then comes collapse.

The cocoon of the political left and Trump vs Clinton

To my mind the recent election provided a classic case of the failure brought on by shielding bad ideas from difficulty.

In 2008 when Barack Obama won the democratic nomination, he did so as an outsider. He inspired the left (and some on the center-right) and won against one of the most feared political machines – the Clintons.

After losing in 2008 it was all but decided that Hillary Clinton would be the nominee in 2016. It was “her turn” – the idea was given full protection of the left. The Democratic National Committee was on board. The mainstream media (90% left leaning) was on board. They protected her at every turn.

When she stumbled through the failures of Benghazi and the comical hearings afterward, she should have been finished politically. Nope – the machine went to work to defend her, to save her career, to protect her from difficulty.

When socialist Bernie Sanders caught fire and inspired the far left she should have been forced to stand and fight. Nope – the DNC planted questions for her with CNN contacts and gave her dirt to use on Sanders.

The list could go on and on. The point is, had she been allowed to face adversity somewhere in the last 16 years of politics, she would have either (a) been exposed as a weak candidate unworthy of such a high nomination or (b) adapted to become a strong candidate capable of winning an office that wasn’t handed to her on a silver platter.

This nonsense stands in stark contrast to the Trump candidacy. He was an outsider from day one. The Republican machine was out to get him from day one. He was attacked up and down the line, and do you know what happened? He got better. I’m not saying he got principles, he just got better as a politician. He got better at not doing stupid stuff. He got better at not taking every little dig personally and trying to at least act like the bigger person.

Had the Republican machine just backed off a little bit, not refined Trump, not sharpened him, he probably couldn’t have won the presidency. But, so intense was the firestorm chasing this guy that he was able to morph into a winning candidate – which almost nobody thought possible.

 

Setting Modest Goals for a Trump Presidency

“Leadership is the art of getting someone else to do something you want done because he wants to do it.” – Dwight David Eisenhower

I’ve seen quite a bit of banter since the election about the way things will be under a Trump presidency. The Right believes that things will be great – that Trump will undo the “bad deals” of the Obama era and lead us toward brighter days. The Left believes that Trump will abandon everything he campaigned on and work to enrich his friends.

I think a safer path is to set more modest goals, more reasonable outcomes, and judge the “success” based on those. Consider, for instance, my two goals from years ago for the Obama presidency. The first was that an African American presidency would improve race relations, bringing blacks into the mainstream of American politics (just as the Kennedy presidency did for Catholics, and the Carter presidency did for southerners). The second, was that Obama’s support for a college football playoff would indeed result in the end of the BCS.

Here’s where I would say “one out of two ain’t bad” – but the four team playoff we currently have isn’t quite what I had hoped – we need eight teams at least. So perhaps it’s more of a “0.75 out of 2 ain’t bad” … or maybe it is.

The point is, the Right will be less disappointed if they set reasonable goals, and the Left will be less outraged at every little thing if they set the bar low and look for tangible measures. There will always be time to give a reactionary flail about all of the things that are bound to happen over the next four (or eight!) years. At least we have a playoff.

So what would “good” look like? I have some thoughts …

• The repeal of Obamacare. Whether you like universal healthcare or individual liberty (i.e. make your own decisions about healthcare), it’s hard to deny that Obamacare is a disaster. A bill written by insurance company lobbyists mandating that everybody has to buy insurance … what could go wrong?
• Monetary freedom (or at least a step in that direction). I doubt we’ll see the end of the Fed in the next presidency, but perhaps we’ll see capital gains taxes go away (i.e., people can store their excess production in any asset form they choose without loss).
• Shakeup of the status quo. The current “deep state” grafting order has it far too easy. I’m not saying that I think Trump will end the “access” of the corporate-fascists, merely that the deal-maker-in-chief won’t keep the simple-as-can-be nepotistic gravy train rolling. He’ll demand more before he gives them what they want. That’s likely a good thing.

Perhaps I’m a bit too hopeful. Does anything really change for the better? Do we ever really see an upending of the power structures? Obama was “hope and change” – but he just turned out to be a servant of the machine. Bush was “compassionate conservatism” – but he just turned out to be a servant of the machine.

Will Trump end the same way? Probably. He promised to drain the swamp. We’ll see. I think it safer to set more modest goals. If we could just take baby steps away from oppression of the many for the purposes of the privileged, then that would be a worthwhile adventure.

I’m reminded of a scene out of The Great White Hype, where a boxing commission member (Cheech Marin) uncovered some dirt on his “boss” – the promoter (Samuel L. Jackson – the Don King type character). Marin lays out his information and the conversation goes roughly like this:

Marin: “I’ve got this dirt on you”

Jackson: “So what do you want? Money, sex, drugs?”

Marin: “Not good enough this time”

Jackson: “What then? Power???”

Marin: “Yeah – power”

Jackson: “You’re fired”

Marin: “OK, OK, OK – drugs, sex and money”

Marin thought he had something that could change the equation. He realized quickly that he didn’t when Jackson threatened to fire him.

Politicians have generally been a dime a dozen since Reagan. They promise this, that, and the other – but they all seem to roll over for the “deep state” interests. This time around, the deep state, the machine, came out big time for Hillary Clinton and lost. Trump is in position to change the equation, to demand something more. He’s also (I suspect) a good enough negotiator to know it.

I can’t even tell you right now what that would look like – but I’ll certainly be looking for it.

Violent Charity and the Trouble With Minimum Tips

“People who can’t imagine order without imposition always end up favoring power over liberty.” – Jeffrey Tucker

I had a conversation with a friend not too long ago about the nature of violence in taxation, and how that violence stood in contrast to any charitable end one might hope to achieve through the state.

“Who said anything about violence?” she responded.

Yet if a man stops paying taxes he finds that he is summonsed by the courts and ordered to pay. If he again refuses he finds that armed men eventually come to his house and take everything he has under threat of violence.

Taxation by the state – the appropriation of one man’s life and production for the purposes of “the whole” – is fundamentally a violent act.

Note that I do not mean to imply here that violence is always evil, or always uncalled for. Did not Jesus drive the money changers from the temple with violence? Do we not believe that a man can take up arms in defense of his neighbors – indeed he should do so to protect the innocent?

But when it comes to charity, to helping those in need, there would seem to be an inherent incompatibility with violence. The idea that we could commit violence against one, who has done no wrong by simply rising in the morning and working hard all day, and somehow justify it by accomplishing a benevolent act towards another is, well, perverse.

I say this to point back to my longstanding position – social benevolence programs run by the state (i.e., via taxation) are immoral. The benevolence may itself be a good thing, but the violence committed to accomplish it through the state undoes any good that was hoped for. (There may be pragmatic reasons for those programs, but the justification must then be pragmatic in nature, not moral.)

As I laid this position out to a different friend some time ago, she responded with an interesting order of events. “I agree with you, and as soon as the church is answering the call on all of these various needs then we should end the government programs.”

The statement honestly took me by surprise. It was an acceptance (by someone who I would consider liberal on a political scale) that the state’s benevolence failed to be charitable. However, the order of outcomes seems to be only a half-step to acceptance, and fails on two fronts.

First, it suggests that failing to meet the human needs of some is a greater sin than the violence we commit in taxation. I reject this idea.

I will not tread down the road of “no big or small sins” – when we are talking about sins committed against one another there are bigger and smaller sins. The Golden Rule alone tells us that we can weigh the severity of outcomes by putting ourselves in the position of the other. I’d rather you steal my wallet than kill me. Both are sins, but one is worse in the eyes of the victim, and so one is a greater sin.

In our situation, I hold that the violence of taxation is the greater sin. The sin of violent commission, of seizing a man’s life for the benefit of another man’s life is greater (in my mind) than the sin of failing to willingly meet the needs of others.

The second issue is systemic in nature. It is the problem of the minimum tip. Have you ever been to a restaurant with a large party and found that the server included a minimum 15% gratuity? I understand why they do this – large parties have a way of seeing the absolute dollar amount of a percentage-wise small tip and saying “that’s big enough”. Servers have been burned by this so they started a minimum percentage for large parties.

Every time there is a minimum gratuity there is also a line for “extra gratuity” – you can always pay more than 15%, just not less. I always, always, always refuse to pay extra, even if the service was great.

At its root it’s a feedback problem. Bad service does not get punished in the face of the minimum, so the tip has lost its function.

The allegory is not perfect, mind you, but the idea is still there. Christians across this country will look at their annual tax bill – money they are told they must pay or go to jail, and much of it devoted to “benevolent” programs – and rightly ask “why do I need to do more?”

We were not given the opportunity to do less if doing less was warranted (sometimes needs should go unmet in order to induce a change in behavior). We were not given the opportunity to direct our monies toward the most effective means of helping (some legislator or bureaucrat who has no idea of the situation on the ground made those decisions). We were handcuffed from the start – you took a sizable portion of our available resources.

The idea that, inside this system, there is any way that the free will benevolence of the church (which always has conditions of grace – but not cheap grace) will rise above the no-strings-attached giveaways of the state and eliminate the “need” for those programs is a bit silly.

So how do we get there? Well, I would love to think we could simply make the argument to a country that claims to be 70%-80% Christian and let the democratic process work it out. Alas, we saw how well that worked at eliminating slavery (when the percentages were much higher).

I think the answer, if there is one, lies in decentralization. In response to the recent “Calexit” post, a friend noted that California pays far more into the Federal coffers than it gets out, and that this is unfair. I agree – but no centralized system of generalized tax code intake and entitlement outflow will result in the states getting out exactly what they put in (in aggregate). The only way to do that would be to let all programs be administered at the state level by state taxation and entitlement processes.

This solution has another benefit – it allows ideas to compete with one another and free men to choose what works best for them (and even vote with their feet if they don’t like the local situation). I suspect that localities that eliminate the most superfluous giveaways – the free money for nothing handouts – will find that the best and brightest and most productive want to live and work there. The rest will take care of itself, and the church will have its opportunity to answer the call.

Calexit – Everyone Has Principles When It Goes Horribly Wrong

“Whoever wishes peace among peoples must fight statism” – Ludwig Von Mises

I’ve seen quite a bit of post-election hand-wringing by the California Left over the notion of “Calexit” – California’s proposed secession from the union. We don’t want to harp on the utter unworkability of this plan, as there are deeper issues at play. But for a moment, consider:

• To be recognized by the US government (i.e., not an act of war) the secession would require a constitutional amendment and ratification of 3/4 of the states (hint: no liberal states/representatives would vote for the plan as it would put them in the continual minority)
• Succession of a state likely sparks a run – why would Texas, New Hampshire, or South Carolina stick around if breaking away were this easy? Would 3/4 of the states grant the “black swan” moment of the union?
• Much of California (especially southern California) is dependent on water that comes from rivers in the rest of the United States (which could quite easily be cut off in the event of a secession)

These are just a few of the practical issues. I for one am more interested in what the urge for Calexit means in regards to a democracy.

It has been noted in times past that people are generally OK with tyranny, as long as the tyrant acts and thinks like them. In the case of Calexit, the California Left was fine with imposition of liberal will on conservatives and conservative states. But, as soon as the role is reversed (not that I think Donald Trump to be a conservative), they start to wonder why they have to put up with it.

Why should Californians have the “majority rule” (or “majority of electoral college rule”) of Michigan, Pennsylvania, and Wisconsin forced on them? Of course, when the roles were reversed, why should South Carolina, Alabama, and Utah have the “majority rule” of New York and Washington forced on them?

It’s not just Calexit, of course. My liberal friends all seemed to accept majority rule when Obama was in power and the House & Senate were held by Democrats. (“It’s majority rule and we can’t make everyone happy” – direct quote.) But now that Republicans will soon control the White House and both houses of Congress they have suddenly discovered their love for individual liberties.

My conservative friends, of course, played the game with exactly reversed roles. Individual liberties were all the rage when one-party rule by Democrats was the way of things. Now they seem to be fine with Donald Trump’s day-by-day decision to browbeat otherwise free companies into staying in the US or get “punished” for going overseas.

It seems folks have principles – a deep seeded belief in individual liberty and the rights of man – when those rights are threatened by democracy. But, alas, when it is democracy that is oppressing the “other” – the “deplorable” – the one with whom we most disagree – then, well, that’s just fine … perhaps even good.

For my part, I hold that individual liberty is the very expression of the Golden Rule acting within a democracy. For me to enforce on you anything more than collective defense of individual rights (e.g., the democratically enacted law prevents you from stealing or killing) is for me to say that you, though created in the image of God, are not entitled to fully exercise your humanity. That you, though created in the image of God, are somehow rightly subjugated to me if I can convince others to join me in the vote. That you, though created in the image of God, have no right to live your own life, to love who you will, to fail as you will, to seek out your own salvation with fear and trembling  – even though He gave you every right to make your own choices and your own mistakes in life.

Your love of Him is of little value if you did not choose it freely. And nothing can be taken as more trustworthy, than that the majority of fallen men will reject God, and therefore should be limited in their power over others as much as possible.

Castles in the Air over the Eccles Building

“If you have built castles in the air, your work need not be lost; that is where they should be. Now put the foundations under them.” – Henry David Thoreau

Last week the Federal Reserve Open Markets Committee (FOMC) held its September policy meeting in its usual haunt – the Eccles building on the corner of 20th and Constitution in DC. At the time we were guessing that they would raise rates by some smidgen (see “Clutch Time at the Fed“) and that the market would respond violently. Why raise rates? Because to not do so when “inflation” (by the Fed’s preferred but clearly flawed measure) is running at 1.8% (target of 2.0%) and unemployment sits at 5.1% (a rate not seen since April 2008) would be tantamount to admitting that the emperor has no clothes. If the “goals” of the committee have been fully met, why are they still in an emergency policy mode? I have my theories … back to that in a moment.

It has been pointed out in many places (and we’ve certainly discussed it here before) that the fractional reserve banking system is fundamentally built on fraud. In a society with legitimate property rights, no two people can hold sole claim to the same asset at the same time. Yet that is exactly what we have with fractional reserve lending. My deposit in a demand account is available to me on demand. And yet the bank lends these deposits (at interest) to borrowers who do not have to return them to the bank on demand. Q.E.D.

So why doesn’t the system collapse? Well, as long as we don’t all go down to the bank and demand our deposits back, then the fraud isn’t uncovered in any meaningful way. The system can churn along and the banks can survive with these massively leveraged loan books drawing in some interest and paying hefty salaries. But as soon as there is a serious demand to get cash out the whole thing unwinds.

It’s happened here before. We’re not just talking 1929 and the It’s a Wonderful Life scenario. In 2008 the US saw bank runs on Wachovia, IndyMac, Washington Mutual, and Bear Stearns (yes, even investment banks can suffer a run). More recently the entire country of Cyprus saw a bank run and had to shut the whole financial system down, leaving depositors to eventually be “bailed-in”. That is, when the dual claim fraud was finally unraveled, it was the depositors who realized that their claim on their assets (i.e. money in the bank) was not real.

When you build castles in the air, you’d better get the foundations under them fast …

Of course the fractional reserve principle isn’t confined solely to the modern banking system. Financial derivatives have ensured that people can take leveraged bets on asset price movements. That is, with $1000 one can take out a position worth $10,000 or $100,000 (in some extreme cases). If the price only moves by a small amount then the gains and losses don’t exceed the $1000 initial stake. But if prices collapse badly in the wrong direction, said “investor” is wiped out and the counter-party has yet to collect their full payment.

It is this latter part that is the more disconcerting for the system. Those of us who are old enough remember the Long Term Capital Management (LTCM) debacle of the 90s. These guys used leverage to make significant returns early on, but when things went south they went south quickly. Before the end LTCM had over $100 billion in open positions, but only $400 million in actual capital. That means that a 0.4% move in aggregate asset prices would wipe out all remaining capital, and a 0.5% move would mean that somebody out there was owed $100 million but there would be no money to pay up.

So what happens to businesses when they are owed money but not paid? Well, you can bet that the vendors to whom they in turn owe money will also not be paid. Eventually the whole “daisy chain” of credit comes crashing down, all because the guy at the end of the line couldn’t make good. The same is true in the financial markets and banking. When you build fragility into the system (by allowing and encouraging leverage) one little bobble, one little “Black Swan” – and the whole thing unwinds.

OK, back to the Fed. Why would they hold rates at near zero even though their official goals have essentially been met? Nobody wants to take the blame. Consider the following two charts of the S&P 500. The first is year-to-date, the second is the past 10 years.

 

Say what you will about “Technical Analysis” – I may well say worse – but there is at the very least an inherent recognition that fundamentals don’t drive prices, the buying and selling decisions of the masses drive prices. In a perfect world fundamentals will drive those buying and selling decisions, but in a massively contorted, over-financialized, free-money, margin-driven world … who knows. The technicians would see the recent price action as a collapse and consolidation; a closing wedge pattern that clearly points towards a “big decision” in the very near future. By the way, the final “spike and collapse” in the chart is the momentary euphoria after the Fed’s decision. Not much follow-through there.

(Side note: in the world of algorithm and high-frequency trading, I’d bet dollars to doughnuts that if there is a collapse it will hit a positive feedback cycle and things will go pear-shaped faster than we’ve ever seen before.)

In terms of overall price action, the recent move is rather small. But what if there’s more to come? If everything was fine the S&P wouldn’t have dropped like a rock when things got sideways in China. If everything was fine we wouldn’t need emergency interest rates. If everything was fine, everybody wouldn’t be so frantic to explain that everything is fine.

So is this the next great stock market collapse? How should I know? My point is simply that if the Fed had hiked rates and the market collapsed then the Fed would have taken the blame. (Rightly so, of course, it is their fault that the market is so far removed from fundamentals anyway.) Nobody wants to take the blame.

Not to worry though, Janet – the scapegoat approaches. In just eight calendar days there is a very real chance that the Federal government will shutdown over a budget impasse. You only have to hold on until then. Will a shutdown cause the market to collapse? No – the market should cheer such an outcome. But, if the government shuts down and the market collapses then Ms. Yellen will have her scapegoat. “It’s those darn Republicans in Congress. If they had just kept the deficit spending going everything would have been fine. My central planning of interest rates has been clearly flawless. Yet those malcontents and scapegraces in Congress couldn’t hold it together and now everybody will suffer.” … or something like that.