Allan Carlson The Family Centered Economy

Alexander Chayanov?s emphasis on a farm?s sexual division of labor ?turns marriage into a necessary condition of fully-fledged peasantship.? The family itself is a ?work unit,? with family members fundamentally bonded to each other: husband and wife need each other to survive and prosper; and they, in turn, need children to prosper and survive. Shared labor in a common enterprise binds the family together. Mark Harrison summarizes: Peasant economy reproduces itself through the family. The family is the progenitor of the family life-cycle and of population growth. It is the owner of property. As such, it expresses the fact that the aim of production is household consumption.

Quoting Pitirim Sorokin

Now families are small, and their members are soon scattered?. The result is that the family home turns into a mere ?overnight parking place'.

Quoting Wendell Berry

"We are going to have to gather up the fragments of knowledge and responsibility? that have been turned over to governments and corporations during the 20th Century and ?put those fragments back together again in our own minds and in our families and households and neighborhoods.?

Over the last century governments have believed it to be their job to promote economic efficiency. Efficiency is achieved by reducing costs, the chief of which is salaries and pensions, so we attempt to reduce the number of people we employ. But whether the nation is served well solely by efficiency of labour, with the resulting concentration of economic power, is an interesting question. The concentration of power is precisely the effect of every government intervention in industry. Reducing costs tends to mean externalising them, so that they are not borne by that industry itself, but by someone else, such as the nation as a whole at some later time. It may that alongside efficiency, a nation also needs a certain level of economic resilience for too much efficiency may leave us exposed as global economic conditions change.

Take farming. Farming is the most fundamental industry of all. It produces food. You are the one who wants to eat three times day after all. In the good old days when we said ?Grace? before meals we made our daily acknowledgement of those who work in this industry. That is when it was socially acceptable to acknowledge that others work for us, and we may express gratitude in public to them for their work. After decades of improving efficiency we have stopped thanking anyone. Now food appears before us by magic.

There are two trends at work in the British agriculture. One is that the government continues promotes the centralisation of agriculture that began in the Second World War, adopted as the country struggled to feed itself. The aim then was simply to maximise the amount of food produced. Raising production has been the aim of government policy ever since, so our agricultural economy is in this respect is still on war-footing. The other aim is to do so ?efficiently?, by which is meant, with an efficiency of labour, by reducing the number of people employed to produce that food. We do this by importing our food from which ever part of the world can produce it most cheaply. Cheap food sourced from all points of the world makes British farming appear less competitive. After all farmers are also responsible for the way the countryside looks.. In response to this, we have put all farmers on subsidies, which for reasons of national embarrassment we attribute to the European Common Agricultural Policy (CAP).

You will have noticed right away that these two policies are contradictory. We make agriculture more labour efficient by reducing the number of people employed in it. But there are unintended consequences to labour efficiency. Each form of work and industry creates its own culture and a population familiar with it. Reduce the number of people employed in an industry and you reduce our familiarity with that industry and its products. The nation becomes a ignorant of its own agriculture and rural land-use, and so a stranger to the stuff it puts in its own stomach. We have no sense of involvement or achievement in this food. The nation that is disconnected from its own food and that agriculture that produces it, cannot relate the food that its eats, and the health of their own bodies and wider sense of well-being. These two apparently opposite trends have made the British estranged from the food that they eat and the land they live in.

And yet some small, mixed and labour-intensive agriculture might be a good thing. Agriculture does not have to take place solely on an industrial scale. To allow a more mixed economy between the large and the small scale though would mean softening the policy of labour efficiency which has created large agriculture and a large role for government in agriculture.

The initial outlay for anybody entering agriculture at however small a scale is massive. The most valuable thing is the house and outbuildings with land. This sort of agriculture requires that the farmer live on site. He or she doesn't have one single task to perform through one block of time, after which they can leave the site. He has many small tasks to perform. They have livestock that require feeding and perhaps also milking twice daily, and other forms of care on and off throughout the day and sometimes the night. The price of a house with land, which is the entry price for the smallholder, has been inflated out of reach of most by the rest of the housing market. That price is effectively the cost of buying planning consent and so of keeping the planning authorities at bay. No matter how old and derelict that bungalow may be, it represents the right to reside on this land, and outbuildings represent the right to house animals, store animal feed and perhaps even do some of the processing that adds value to your produce. You are paying this initial high cost just so that the planning authorities do not forbid the link between work on site and your 24-hour a day presence on site on which this enterprise is based. The result is that a very few hardy souls engaged in agriculture, needing to protect their farm from animal or human intruders, live in caravans and face constant interrogation and legal action from council planning departments. I know one small farmer who has lost a substantial part of his crop this year because he is unable to stay on site to keep down the predations of birds. But there is one major obstacle to this sort of small scale agriculture. This is the issue of how to afford the piece of land on which there is both some kind of dwelling and some outbuildings. This combination has been all but driven out of existence by the British fixation with the houses as store of value.

Over many years the policies of governments have brought about a separation of life and work, and so between housing and employment. Living takes place in the house you bought: a house is simply a residence and its garden. To work you have to leave the house and travel elsewhere. You will of course be using oil in order to travel between these two places, and an increasing proportion of that oil has to be imported, and paid for by selling things to oil-producing countries. This will continue for only as long as other countries value what we have to sell them more than they value their oil. If they ever decide that they need that oil themselves, and have none left over to export to us, every place in this country will suddenly find that it is a very long way from every other place. We will wonder then why we decided to place work and houses so far away from one. We may not find it so easy to bring productive work back to the places in which people live. A country that has no small scale agriculture has no buffer against those sudden movement of oil and other inputs, that might knock farmers out and leave just when food imports become much more expensive for the country as a whole.

There is a complete gap between life and work. We live, together as families, and we work, as individuals, without the family. We have made it near impossible for a family to work to together. We have made it difficult for anyone to produce even a small proportion of their own requirements. We have made impossible any kind of self-sustenance that might give each household a little buffer of economic independence. We have made the peasant life impossible. We have made it impossible to live any life but the middle-class life, working in offices or the working class life, working in distribution centres. Both these forms of existence rely on importing most of what this country needs and so rely on one most implausible thing, a steady oil price. When food is cheap and unemployment is high, it is not obvious that we need labour-efficient agriculture. What we need is labour-intensive agriculture. Labour-intensive agriculture does mean that someone works such long and variable hours that they have to live and work in the same place. Then we would have to concede that those engaged in it will have to live and work in the same place.

Government polices the division between residing and working, dwelling and work-place. The house that unites dwelling and work-place achieves a level of autonomy that means less opportunity for the supermarkets and other corporations, and less role for government. Of course this is not because just the state is attempting to do too much, but because the British demand that it constantly step in. Every economic policy in Britain is about the housing market and so about credit. The house is the great British deity. It is my neighbours who ask the planning officers to decide whether I have permission to do things that might spoil the view from their window and threaten the value of their house. The planning system sees to it that a house cannot be a work place, and that a place of work cannot be lived in. The planning system protects this division by enforcing the regulations that has removed work from home. You cannot work where you live, so you cannot work together with your family. A family cannot be engaged in a common work. Different generations may not work together, so your children will not learn about work, what to do and how to do it, directly from you.

So the smallholder has to haul himself over many obstacles, and so is bound to be exhausted, not by the physical labour of farming but by the demand that they present themselves as unpaid off-site employees of the government, responsible to other employees of the government, of each other whom has their own reasons to demonstrate how indispensible their arbitration is. The smallholder is always up on charges of having breached regulations, most of which could only be relevant to much larger businesses. But perhaps most small business men think themselves as counter-cultural too. Since so much legislation is limits the amount of labouring that actually takes place, it looks as though the British just don?t like labour and are determined to save one another from it. The result is that the British have a poor diet and an agriculture and food industry that are vulnerable to the movements of global markets over which the British government is powerless. Concentrating the regulative power of government to disconnect of life from work, particularly in the countryside, may not be the right policy.

The obvious way to go for the smallholder is to aim for crops that will earn cash. Many present themselves as any other farmer, simply on a smaller scale. Falling prices have made agriculture technology-dependent, more heavily capitalised so that that individual farmers are often precariously over-borrowed and one harvest away from losing the farm. But every crop requires an outlay, and it is difficult to make this outlay without borrowing. But this leaves them exposed to movement of stock prices. If you borrow, you give yourself little chance of surviving a sudden drop of price for your products. Like any medium and large highly-capitalised farmer may find within a single season that he cannot afford to buy the inputs (seed, fertiliser, irrigation) or the services of the agricultural contractors and so either cannot get a crop in the ground or he cannot harvest and dry it. But if perhaps for reasons that have nothing to do with us, other countries cannot sell oil at the prices we have got used to, this long settlement, which is the policy of governments over many decades may come unhitched. Perhaps if you aim for survival, and try a number of products without high start-up costs, you may give yourself a better chance. For years livestock prices have been dropping. But as the pound weakens imports will become more expensive and our own produced lamb and beef seem likely to fetch better prices. The Chinese are eating the lamb that the UK used to import from New Zealand so our own lamb-producers are doing better than they have. But who knows? Perhaps it is better to aim for a range of low value products and survival rather than cash. If you produce your own you will not be quite so exposed to rising food prices, and may even benefit from them. You will be on the right side of the curve, as they say.

Because of the centrality of credit to our economy, we define work by its relationship with money and debt. Work is only ever about doing A in order to gain the medium by which to obtain Z. We almost never manage any closer connection between our own output and our own requirements, between what we create and what we consume. Money must reign supreme. Wicked the man who attempts to provide anything for his family that has not been procured through the market by the earning and spending of money. If we managed to avoid earning and spending money how would be it be possible for governments to raise taxes? How would it be possible to create new jobs in government for those who believe that the rest of us need their supervision? This gap between living and houses on one hand, and work and the appropriate location for it on the other can never be closed. All power to the centre!

The British Government is right to make the austerity effort ? even if it is hopeless. But accepting the relatively generous debt forgiveness that might eventually attract, the gaping hole in Camerlot?s plans still remains the same as that of Tory economic strategy since Thatcher: no creativity in terms of marketing, diversification and self-sufficiency is being applied to the problem. With Conservative ministers, the problem as always is, they simply don?t get out enough.

The Cabinet watches an appalling traffic accident taking place in the eurozone, and continues to trot out drivel about our future being ?inextricably linked? to that disaster area. Is that the best they can offer? It looks on as banks spit in the face of entrepreneurial business risk, too scared to so much as mention the word regulation, when the rest of us are thinking more in terms of castration. It presides over a farming community on its uppers, when a major part of our problem is the enormous mountain of food we import?and a major part of our EU contribution involves the obscene feather-bedding of French agriculture. And above all, it fails to grasp the obvious reality of Britain?s plight: that our current economic balance and structure stands zero chance of ever employing, on a full-time basis, the citizens we have to support in this tiny island. (Disgracefully, it is backing away from immigration pledges, and bowing meekly to potty Leftist and CBI arguments about needing to import ?trained? labour while we have 2.4 million unemployed). Since the latter part of the Victorian era, occupations in Britain have been wiped out one by one: domestic service, skilled tradesmen, miners, factory workers, farming, independent shopkeepers, roadsweepers, clerks, secretaries, soldiers, policemen, and a thousand other jobs: all have been sacrificed on the altar of mechanisation, multiple supermarkets, shareholder demands, DIY sheds, IT and ? the worst cancer of all ? the ridiculous aim that everyone must have a University degree, however useless. Exacerbating this job shrinkage is the staggering trend towards full-time working women, nil-time working benefit cheats, and a tiny, electronically-driven banking community of some 50,000 adults driving over 60% of the economy. Who but a congenital idiot would imagine that Britain could support an adult population of a hundred times that number with an economy more suited to a ritzy suburb of Zurich?

John Ward Where Are The Ideas?

I have six children. I sat with them, read with them, worked with them, encouraged them, imparted wisdom to them, nurtured their intellects, fed their ambitions, opened their minds, instructed them in life, all its failures and successes. I conversed with them, poured over dictionaries with them, pointed and showed them the world around them, explained their rights and their responsibilities to them. I cared for them because I am their father, it is my job. If the State wants to assume all of the above, then 500,000 Fabians are the very WORST people to do it. All they have been taught is dependency, entitlement, compliancy, uniformity and slavery, the very WORST education a child can receive. My children deserved better. So I made sure they received it. They thrived in spite of the State, something we all need to learn. But don?t expect to be taught it by anyone employed by the State.

Old Holborn

There was a short but brutal drought in the East of England this year. It is over now, but from March to May, there was no rain, at all. But the problem is not so much that there wasn?t any rain, but that the condition of the soil means that it cannot hold onto winter rain and make it available to crops through dry months. This spring was particularly bad because we had had a dry winter, and this after last year?s dry spring. We will have to dig the field drains up, so that less winter rainfall runs into the ditches. Our field is protected only by its own hedges, so there is little shelter from the wind that blows across the much larger fields all around. The wind draws what moisture there is out of the soil, and the water level drops faster than our crops can grow roots to find it. We have planted a belt of trees round the whole field, but not many survived the drought.

This brought home what I suppose we already knew in some intellectual way. It is difficult to do small-scale agriculture in the East of England. One reason why the land is difficult farm on the small-scale is that for many decades no one has kept animals on it. There is no mixed farming in the Eastern counties anymore. All farms are arable: most have a five year rotation of two wheat, two rape and a year of beans. No organic matter from animal manure returned to the soil to help it hold on to that water or prevent it from becoming so compacted that plant roots cannot develop properly.

In the East of England in particular the expectation is that all land has to be farmed on an increasingly large scale by fewer farmers with larger machines. All nutrients are dosed and applied to the specific crop, and the soil is just there to hold that crop up. Farmers take on more borrowing in order to do this, and some are always being forced out when they cannot borrow any more. The process of concentration is beginning to resemble the collectivisation of agriculture. All power to the kolkhozy!

The logic of vertical streaming means that large scale agricultural enterprises, agrochemical companies and food giants and supermarkets want to, if not to integrate, at least to achieve more control over it than is good for the market or for national health. Supermarket chains will increase loyalty incentives for their customers until the supermarkets effectively divide up the customers available between them. Supermarkets will be the farmers and consumers their livestock. The problem is that this makes for a population with such low earning power that it will be unable to purchase what these collectives can produce. Supermarkets will respond by reducing the nutritional value of the food they sell. Never underestimate the technological ability of the food industry to dilute real nutritional value whilst loudly informing us of the many individual supplements that provide the health benefits of their products. They will be dosing the nutrients into the customers, and the population will be kept on an increasingly poor diet. Long live our agricultural corporations! Truly they provide for us like a loving mother.

More agriculture in the next post. So much easier than theology.

There are many pacts of mutual dependency, some good, some not so. Let's have a look a couple that are not so good, and which are vaguely related. We'll start with the global, then look at the local.

The Middle East supplies us with cheap oil. There is oil elsewhere in world, but it hasn?t come onto the market yet because it is too expensive for us to extract. Over many happy decades our industry, and our societies, have got used to this cheap oil. So used to it that it is now a question whether we could convert to the more expensive stuff, which is soon to be the only oil there is. Without oil, we are capable of no economic activity at all. The West is on a petroleum dole, which the Arabs (and Russians and Venezuelans) are kind enough to supply. So far, we do not resent being on this dole, and they do not resent supplying it.

But this is another dole which flows the other way. The Middle East does not feed itself. Both the rich oil-exporters, with their smaller populations, like Saudi and the Gulf States, and the poor oil-importers with their larger populations, like Egypt and Syria, import their food. The Middle East relies on the grain dole from grain exporting countries, which chiefly means from the United States. In Egypt and Syria, food makes up more than half household budgets, so rises in the price of bread and other necessities can quickly create panic. Rising grain prices, caused by some poor harvests and by China?s growing demand and exacerbated by speculation, will continue to cause upheaval in the Middle East. Political instability would keep the oil price volatile. Then there is the fact that there is no more cheap oil to pump. We have reached the ceiling ? at least of the cheap oil. Not even Saudi Arabia, that Western stooge, can increase the amount it is pumping to save us the West from economic implosion. Its rulers know that if the West suffers a depression there will be less demand for the oil and so reduced revenues to pay for domestic peace in Saudi Arabia.

So, if they don't grow their own food, don?t have an adequate agriculture (and certainly not an adequate industry) what do these Middle Eastern countries do? You know the answer to that. They have babies. This the advantage of Islam: it is unashamed and easily-enforced patriarchy. Women are unable to say no to it, so child-bearing is their lot. The Western grain dole to the Middle East has subsidised a decades-long population explosion. Unfortunately these large poor populations are so undeveloped economically that they are unable to buy our services, so we cannot help them and they cannot help us to grow out of our dependencies. If these countries don't have oil, or can't pump more oil, and don?t have other industrial sectors, and aided by this Western grain dole their ideological patriarchy creates rising populations with no experience of civil society or economic self-reliance, what is to stop these populations from sinking further into destitution. More upheaval will make the oil price even more unpredictable for us, and so make it less easy to make the transition from the present cheap oil to the more expensive stuff of the future? Doles are not good for them. And their failure to establish a mature political culture is not going to be good for us.

But it could be that the United States and the rest of us are now so dependent on oil that is cheap, that we also vulnerable to sudden price movements. Could we adapt in time to the steep climb in oil price that would make US shale oils become economical to extract? The disappearance of the cheap oil could be so sudden that we cannot make the technological switch quickly enough to bring the more difficult, more expensive to extract, reserves on line. If price rises take oil beyond the reach of a large proportion of the population, they will be out of work, and soon living a much more hand-to-mouth existence. Even if oil became cheaper again, there would not be equivalent return of demand through re-investment and re-hiring. The damage would have been done. If the Middle East had a stronger political culture, the oil price might have been pushed up so steadily over a long enough period that we could all have reduced our dependence on it.

Closer to home there is another one-way dependency is at work. Here in the UK every corner shop is owned and run by Pakistanis, Indians, or in my part of London, by Turks. These Muslims (together with Hindus and Sikhs to be sure) keep those corner shops open. Every evening you will see the British going out to buy their alcohol from Muslims. Those who despise alcohol sell it. It is another of those self-hatred pacts that have turned into a mutual-contempt pact. They sell this alcohol to single white men who, having no family of their own, live alone, and need the alcohol in order to experience a few hours escape from possessive individualism into the solidarity of the tribe. If you are still on your own, or on your own again, in your forties you need a certain amount of alcohol. You have control the feeling that everyone else is part of a family, that you have been discarded and are the only one who is on their own. A few beers keep at bay that dread sense that you are either repugnant or invisible to everyone else in the street.

So we here in the UK are entirely dependent on the extended family, albeit the extended Asian family that runs the corner shop that sells you the booze that takes you out of isolation and into the great tribe of the happy. Without these corner shops, therefore, many British people would never experience any sense of being members of the group. Unlike the rest of us, Asians live and work in extended families. In the three-generation household, grandparents look after grandchildren, freeing up parents so that they can keep these shops open all hours. In the extended family every adult works without taking a wage out of the business, and this is what allows these corner shops to remain open. The British nuclear family, made of husband and wife alone, cannot keep up the eighteen hour days, cannot afford to pay staff from these small takings, and probably cannot endure the boredom of taking a large number of very small value transactions from the drunk or disturbed. So, since they are dependent on staying happy through the services of corner shop, which is manned by them, the British are entirely dependent on the extended family. They are not dependent on their own family, but someone else?s.

Now back to that other dependency. What happens if we consume our way through all the cheap oil? Remember it is the political weakness of the Middle East, not unrelated to Islam?s inability to allow developed political institutions, that has meant that oil has been kept so cheap for so long. This means that we will not experience a long slow rise in the price of oil, but a sudden and rapid one, perhaps too rapid to give our economy time to adjust. Many will be thrown out of work. What happens to this out-of-work population? If they think that this is all the fault of other people, of capitalism and government, there will be political upheaval, and lawlessness and violence. Each of us will find a new family in the mob. But mostly, each of them will believe that their circumstances are the result of their own personal inadequacy. Then each will retreat to the chair before the TV and drink themselves to death, drink becoming more important in home or food, so that they disappear individually, and no one notices.

Everyone is talking about default and forgiveness. Debt forgiveness means debt cancellation. We could write down one another?s mortgages, or, if we delay because we realise what this will cost us, that debt will be defaulted on and repudiated entirely anyway. This would mean that all our savings and pensions disappear at a stroke, large numbers of us become destitute and the country goes into economic depression. So, for those who are closer to the end of their careers than the beginning, forgiveness is not without cost.

We have put one another on two sets of doles. The older have put the young into more debt than they can carry, and making unlikely that the young will succeed economically, and more likely that they will default on their debts to the old. By placing such levels of debt onto the young the old have put themselves into danger. The Westerners have give up the extended family, but have made their own children dependent on the liquid comfort provided by our corner shops, thereby ensuring that those extended Asian families will inherit the high street ? though theirs may also be the only business still open there. And Westerners have made it more difficult to take their cheap oil dole from the Middle East. They have subsidised and supported populations which are so weak politically that they could not push up the price enough in order to hang onto their oil reserves, and so weak economically that they could not prevent even what agriculture they did have from being destroyed by cheap imported grain. So doles are not good. They make dependent populations even more dependent. This is as true for oil-dependent Western nations as it is for bread-dependent Arab ones.

You can see where I am going with this. Let us all learn from the Asians. A three-generation family keeps more of the product of its labour in house and so is less exposed to volatile prices, of oil in particular. Let us go back to our parents, and say ?Parents, I have sinned against you and am no more worthy to be called your son.? Indicate that you have nowhere else to go, and that you will be relieved if they let you live in the garden shed. You have to explain the new economic conditions to them, and hint that your circumstances are not just a result of your own fecklessness. Over time it might even occur to them that they could ask for your forgiveness, since they have granted themselves pension entitlements that have shoved their own offspring into debt bondage, so that the world of opportunity, which we all so recently took for granted, has now disappeared.

I have been a life-long beneficiary of forgiveness myself. But I do know that to get forgiveness you will have to apply for the garden shed. If we can crawl back together to become three-generation families we will not be quite so exposed as all these various doles come to an end. The three-generation family is the future. I hope you find your own.

Credit at very low rates of interest is treated as ?free money,? for that?s what it is in essence. Recipients of free money quickly become dependent on that flow of credit to pay their expenses, which magically rise in tandem with the access to free money. Thus when access to free money is suddenly withdrawn, the recipient experiences the same painful withdrawal symptoms as a drug addict who goes cold turkey. Free money soon flows to malinvestments as fiscally sound investments are quickly cornered by State-cartel partnerships and favored quasi-monopolies. The misallocation of capital is masked by the asset bubble which inevitably results from massive quantities of free money seeking a speculative return... credit-poor economies are suddenly offered unlimited credit at very low or even negative interest rates. It is ?an offer that?s too good to refuse? and the resultant explosion of private credit feeds what appears to be a ?virtuous cycle? of rampant consumption and rapidly rising assets such as equities, land and housing...everyone and his sister can suddenly afford to speculate in housing, stocks, commodities, etc., and to live a consumption-based lifestyle that was once the exclusive preserve of State Elites... the addictive substance is credit and the speculative and consumerist fever it fosters. The ?too big to fail? Eurozone banks ... could loan virtually unlimited sums to the weaker sovereign states or their proxies. This led to over-consumption by the importing States and staggering profits for the TBTF Eurozone banks. And all the while, the citizens enjoyed the consumerist paradise of borrow and spend today, and pay the debts tomorrow. Tomorrow arrived, and now the capital foundation - housing and the crippled budgets of post-bubble Member States -has eroded to the point of mass insolvency.

Charles Hugh Smith Why the EU is doomed

Forthcoming at the Saint Augustine Institute

THE FUTURE OF MONEY

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May 12th 2011

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Edward Hadas Re-Setting Money Edward Hadas is Associate Editor of the Financial Times Lex column. His Human Goods and Economic Evils: A Moral Approach to the Dismal Science is published by ISI. Here is a snippet from his Economics, Finance and the Good

The genius of the modern financial system is that it relies on and develops the human desire to work together for the common good but takes the human inability to be perfectly generous into account. For the system to work well, the rewards for sharing must be neither too small to entice or so large that greed is encouraged to grow. Further, unless those who labour within the financial system are carefully supervised, the large sums of money (representing large claims on resources) which pass through their hands will nourish the noxious forces of greed and recklessness.

I do not think the current financial crisis will destroy industrial economies. They are built on too firm a foundation of trust for that. The reconstruction of the financial economy can, however, be an opportunity for economists to make more room in their discipline for a pearl of great price ? the good.

June 9th 2011

Paul Mills Time to give Gold a Chance? ? What the Bible really says about money and debt Paul Mills works as an economist for the IMF and is on the board of the Cambridge Papers, published by Jubilee Centre. His Should Christians support the Euro? is here and you can see him on video here and here

Both at 6.15pm on Thursdays at St Margaret Lothbury (map)

Despite daily streams of data and calculation showing that banks are undercapitalised and overlent, the stock markets are ludicrously overvalued and gold undervalued, nobody in authority has any new ideas at all ? and those out of favour are dismissed and/or smeared ? the choo-choo train of it is alright it is alright it is alright chuffs along on its journey across the detonating bridge... Which brings me to the final reason: culture. Just about every cultural fault that could get in the way of reform is present at every level of this unholy mess. A banking culture driven by selfish greed and testosterone. An economic culture with so few ideas, it invented the jobless recovery. A consumer culture ready and willing to accept the irresponsible credit sold to it in return for material benefits. A media culture more interested in bread and circuses than issues, and too lazy to look beyond the spin of briefing packs. An energy exploration culture devoid of ethics, and prepared to do any deal with any rogue on behalf of the shareholders. And a political culture in every one of the States involved that long ago stopped listening to the complaints, needs and aspirations of its citizens. John Ward The Slog

Other financial commentators I am reading are Jesse, Automatic Earth, Zero Hedge, Mish Shedlock, Gonzalo Lira, Charles Hugh Smith, Naked Capitalism, and Alasdair Macleod

Here's the gist of Saving Time - the Economic Consequences of Hurry

Bad theology comes from the bad conscience of one generation in the West which has determined to separate itself from its own sources in its inherited culture, and to grasp the present so that no unknown or new thing may ever interrupt it. This bad theology generates the agendas which control an increasing proportion of our national economic product. The fear that as individuals we cannot cope with the responsibility for our own public action and economic relationships, and contrive agendas that delegate this responsibility onto the state institutions from which a large proportion of the population receives their identity and income. This secularist theology can load new burdens on the economy, and it can pay for them for a while by asset-stripping that culture, but it cannot support an open public square or healthy economy for its has no resources of its own. Good, Christian, theology creates a culture in which we are open to other people and to new encounters with what we cannot control or know in advance, in which we concede our own transience, identify ourselves with those who will come after us and we get on with making the investments that will give them the same hope of prosperity we had. A healthy economy is embedded within and driven by a healthy culture with a healthy public square. A society is healthy when the current generation acknowledges its obligations to its own progenitors and its duty to its successors and so recognises its place in the transmission of life and does not attempt to out-live its welcome. Christianity creates secularity (wide tolerance) and cultural confidence. Left to itself, secularity tends to become ideological secularism (tolerance narrowing towards conformity and centralisation). Secularity remains secular only when the public square can receive the contribution of Christianity

The full version is at Scribd and there is more at the Saint Augustine Institute

Next Economy Working Group Events

March 10th Edward Hadas Re-Setting Money May 5th June 6th Paul Mills Give Gold a Chance? ? What the Bible really says about money and debt

'Economy' means management and nothing more; and it is generally applied to the affairs of a house and family, which affairs are an object of the greatest importance, whether as relating to individuals or to a nation. A nation is made powerful and to be honoured in the world not so much by the number of its people as by the ability and characteristics of that people; and the ability and character of a people depend, in great measure, upon the economy of the several families, which, all taken together, make up the nation. The man who by his own and his family?s labour, can provide a sufficiency of food and raiment, and a comfortable dwelling-place, is not a poor man?. But it is necessary to the very existence of a people, that nine out of ten should live wholly by the sweat of their brow; and is it not degrading to human nature, that all nine-tenths should be called 'poor'; and what is worse, call themselves poor and be contented in that degraded state? The laws, the economy or management, of a state may be such as to render it impossible for the labourer, however skilful and industrious, to maintain his family in health and decency; and such has, for many years past, been the management of the affairs of this once truly great and happy land.

William Cobbett Cottage Economy

Let's start by asking about the causes of our present economic crisis and look at three long-term changes that might have something to do with it.

1. Finance and the real economy First, is it basically a financial crisis or an economic one? Has the relationship between the financial services and the wider economy got out of balance? If so, why? It is the job of the banks to allocate capital to the rest of the economy. They have to get money to the place in which it can be most productively used. How successful is the banking industry at allocating capital to industries other than itself? The financial sector has been growing as a proportion of the economy, and has grown spectacularly over the last ten years. What is behind that? Surely it has not grown at the expense of other industries? Surely other industries have not receded as a result of the expansion of banking? What is cause and what effect in this relationship between the financial sector and the economy? Then there is another thing. Debt with compound interest is a threat to individuals, corporations and to the long-term stability of the economy as a whole since demands for interest payments grow faster than the economy can. The curious thing is that this appeared to have been forgotten, and restrictions that every society must place on debt abandoned until very recently.

2. Older and more worried A large population of 50-70 year olds is looking for places to put its savings, and can't find enough places. Then individual members of this age-group realise that their savings won't be enough to keep in them the style they were hoping for right to the end. They start to look for increasingly speculative ways of getting ahead of the crowd, so speculation becomes the norm. The children of the baby-boomers have been loaded with obligations because their own parents have been unwilling to adjust their expectations downwards. The future is that a large dependent population is cared for by a smaller population, but the more that prospect emerges, the smaller the future population becomes as people find other things to do than have children. Can you even have a growing economy if you have a declining population?

3. Not as fiercely independent as we used to be We have exporting our industries, and with them has gone some of the culture of work and sense of community that those old industries sustained. Work gives you confidence, perhaps enough of it to do that most public-spirited thing, settle down and start a family with someone, and then stick with them through thick and thin. If you give the children your undivided attention they have a good chance of becoming the dynamic creative economic agents of the future. As it creates more legislation the state inadvertently takes away individual responsibility and takes away the incentive to exercise it. There been a corresponding loss of willingness to start families and for partners to sustain their marriages in order to bring their children up and create that next generation of motivated economic agents. If you delegate too many of those responsibilities to the state, they and you have a good chance of slipping into a dependency culture without an easy way out. Oops. Now we have been transferring liabilities to the state so fast that some nervous people wonder whether our government can continue to meet them. Can states go bankrupt too? So there you are - three candidates for underlying cause of the crisis. These do not show that a financial storm blew up out of nowhere because some bankers got careless. They show that the emergence of the distended financial sector is the manifestation of an underlying crisis in inter-generational relationships and the culture that is supposed to encourage one generation to bring the next into existence. This inter-generational economics is the new wave. You heard it here first.

Christian responses So much for causes of the crisis. The much more interesting part of this discussion is about the responses that Christians can make to it. Here are some hints: 1. Christians look forward to an alternative economy which they call the kingdom of God, though they could equally well call it the economy of God. 2. Modern economics makes it unnecessary for us to judge for ourselves, for we can delegate our responsibility. Ethics is over, for the market can make our decisions and if it can't the state will take care of them for us. 3. But Christians operate a different account of human being in which no one can be stripped of responsibility. This can make life rather awkward, though also more rewarding. 4. Christians suggest that you can't get to forgiveness without going through judgment. It looks as though we all have to be a little judgmental after all. 5. Christians pray Forgive us our trespasses. They are talking about their own trespasses, but maybe they are talking about other people's trespasses as well. They are interceding for others. Maybe they are even bearing the punishment for others too. The secret of Christian economics is the Christian view of human being, and the secret of the Christian view of human being is Jesus Christ. The priestly and sacrificial work of Christ who, by removing our trespasses, paying our debts and taking down all obstacles to it, restores the functioning of the human economy. It is not primarily the free market that is on our side, nor even the modern welfare state. It is God who is on our side, and who, if asked, can give us the forgiveness, the resources and the new start we need.

If you are interested and in London, come along to this Saint Augustine Institute event on Friday 19th November -

There is an easy solution to the financial crisis, but it involves exposing a problem that governments and economists have ignored for decades. Much of the poverty in the world is due to the design on the banking system used in most countries, which allows 97% of money to be created by profit-making banks, and only 3% of money to be created by the government. Money created by the banks benefits the banks; money created by the government benefits everyone. This might sound difficult to believe at first, but it is accurate. If we change this system so that money can only be created by the government (acting on behalf of the people), we could:

phase out national debt and significantly reduce corporate and consumer debts (in both the US and the UK) reduce taxes by around 30%, permanently, or increase government services with no increase in taxation find the money needed to solve the energy crisis enjoy higher disposable income, or take more time off from work avert the oncoming pensions crisis wipe out the debt of poverty-stricken nations Save 60% on the cost of public infrastructure projects (such as schools, hospitals and public transport), by removing the need to borrow this money and pay interest over 30 years

We are currently standing at a fork in the road. One road leads to poverty for almost everyone, while the other leads to greater wealth for everyone. Politicians and economists are taking us down the road to poverty, because they don’t know that any other option exists. If we want them to change track, and do everything that is listed above, then we – the public – need to show them that the other road does exist. Start by reading A Quick Introduction to the Real Cause of the Crisis for a beginner-friendly explanation of the problem, the consequences, and the solution to the recent financial crisis and our current financial problems The (proposed) Bank of England Act 2010 And see Ben Dyson and James Robertson

The problem is made worse still because of the way the tax burden will be distributed. For some older people – such as those in retirement – there isn’t much problem at all. They benefit from the government’s commitments, but are unlikely to have to pay much towards their cost. For young people, it is the other way round: they are expected to pay large amounts into the system and get little back in return; and the younger the person, the worse the deal. So we have an average, per person, tax burden of £73,000 if we are feeling optimistic and nearly £117,000 if we are feeling pessimistic – but in either case possibly much higher, and certainly rising – that is distributed very unevenly across the population: younger people paying much more, and older people less, if anything at all. One recent estimate suggested that a UK citizen born in 2011 will inherit, on birth, a debt of perhaps £200,000, and it could easily be much more. It is simply inconceivable that debts on this scale will be paid off in full.

Nor should they. These were not debts that youngsters freely took on, but obligations incurred on their behalf in many cases before they were even born. The uncomfortable moral question then naturally arises: at what point does the debt become so large that our future children will be born into a new form of slavery, entering the world shackled by the debts of their forbears?

This highlights the underlying moral as well as fiscal bankruptcy of the system. For years, politicians yielded to the temptation to increase spending commitments and put off the costs of those decisions into the future, when it would be someone else’s problem.... In so doing, our political system created a huge intergenerational Ponzi scheme, passing the buck from one generation to the next, until the whole rotten system inevitably collapses under its accumulated weight. The long-term, even medium-term, outlook is therefore deeply unpleasant. Taxes will rise, sharply, but these rises will not be enough, and will leave younger people with little incentive to work or to save. Benefits across the board will be cut, massively: the government will renege big-time on many of its commitments, breaking its health, pensions and other promises on a huge scale. The social and economic consequences don’t bear thinking about. And of course there is the very real danger that even these draconian measures will not be enough: that the government will lose all control of its finances and end up printing money to pay off its debts, so leading to hyperinflation and economic collapse.

Kevin Dowd The UK is Broke Cobden Centre

They are still more worried over at the Automatic Earth - 40 Ways to Lose your Future

Here for your delectation are three cracking new Christian analyses of economics:

John Médaille Toward a Truly Free Market: A Distributist Perspective on the Role of Government, Taxes, Health Care, Deficits, and More . You'll find some of John Médaille's papers at his website, and at the Distributist Review and Front Porch Republic.

At long last it seems that John D Mueller’s Redeeming Economics: Rediscovering the Missing Element is about to appear. Mueller gives a very significant re-telling of economics’ history with Augustine and Aquinas set in their foundational place, from which I have borrowed. You’ll find some of Mueller's stuff at the EPPC

And there are some classic Wendell Berry essays in his new What Matters?: Economics for a Renewed Commonwealth.

If you are looking for long-term causes of our ongoing financial crisis, these three are a fine place to start

Let me tell you exactly what is going on "out there." The so-called developed world is watching two giant forces race each other to put an end to business-as-usual for industrial civilization. These two forces are the catastrophe of debt and predicament of oil supplies. They had been running neck-and-neck for a few years, but now the catastrophe of debt is pulling slightly ahead. But even this is an illusion because these two forces are actually hitched in tandem, with the rickety cart of civilization bouncing perilously behind them, and whatever one of these forces does will affect the other. Bad debt will eventually cripple the global oil industry's ability to perform, and the failures of the oil industry will only amplify the killing force of debt. It's that simple. And the simple moral of the story is that the only sane thing America can do is simplify itself, de-complexify its dangerously hyper-complex organs of daily life. I've stated them before but, briefly, this means simplifying the way we do farming, commerce, transportation, inhabiting the landscape, schooling, medicine, and banking. Everything we do to add additional layers of complexity to these already tottering systems will guarantee an eventual orgy of blood and material destruction to this land. Everything we do to prop up the unsustainable instead of reconstructing the armatures of everyday life will make American life a nightmare in a very few years ahead. Jim Kunstler In the headlights

If you are up to it, a gentle review of the issues is always available from the Automatic Earth

Introduction to 'Gospel and Economy'

Unregulated finance, the ideology of unfettered free markets, and state capture by corporate interests are what ended up undermining democracy both in North America and in Europe. All industrialized countries are at risk, but it’s the eurozone – with its vulnerable structures – that points most clearly to our potentially unpleasant collective futures.

As a result of the continuing euro crisis, European Central Bank (ECB) now finds itself buying up the debt of all the weaker eurozone governments, making it the – perhaps unwittingly – feudal boss of Europe. In the coming years, it will be the ECB and the European Union who dictate policy. The policy elite who run these structures – along with their allies in the private sector – are the new overlords.

We can argue about who exactly are the peasants, the vassals, and the lords under this model – and what services exactly will end up being exchanged. But there is no question we are seeing a sea change in the post-war system of property, power, and prosperity across Western Europe, just as Hayek feared. An overwhelming debt burden will bring down even the proudest people.

Simon Johnson The European Road to Economic Serfdom

Our own red-tory Philip Blond’s Respublica publishes The Venture Society – A small state, big (civil) society, please. It’s a mess of pottage but you have got to wish them luck. Curious how the Front Porch Republicans, of whom the excellent Patrick Deneen is the latest, have taken him to heart. Meanwhile my own account of these matters is nearly presentable enough to be shown to good friends.

Spread out before the early settlers of this continent was incredible untapped wealth in the form of vast unsettled lands filled with natural resources—all for the taking. Now that the Frontier is mostly tapped out, we are seeing the long, slow, decline from prosperity to scarcity...and with it the loss of individual freedom. How long will it be before we see masses of government-dependent Americans protesting in the streets of our urban centers because the messiah state can no longer provide them with the handouts they have grown to depend on; that they feel they have earned and have a right to? The taking and the giving and the borrowing by government is unsustainable. We all know this. And we know the day of reckoning is coming. The best that messiah government can do is obscure the reality and delay the inevitable.

How then shall people who are cognizant of this eventuality live? Disengage as much as possible from these dependencies. Simplify your wants and needs. Steer clear of the bondage of debt. Provide for your needs of food, heat, and shelter as much as you can with your own hands and backbone. And, most fundamentally, turn your eyes from the false messiah state to the true Messiah. This response is as much spiritual as it is physical. What I am talking about is a return to the American pioneer spirit, characterized by a firm reliance on the God of the Bible, hard physical work, thrift, self-reliance, subsistence, and the family economy. While it is true that the Great Frontier, with all its uninhabited land and untapped natural resources is now, for all practical purposes, gone, the land remains. And if properly husbanded, the land can still sustain pioneer families in this new century, fraught as it is with impending shortages and instabilities.

Living on a section of land and working to make it productive will not bring wealth sufficient to satisfy the average modern American who is conditioned by our culture to spend, borrow, consume, and spend, borrow, waste. But in the days ahead, those people who have returned to the land, have equipped themselves with the tools and knowledge to make the land productive, and who are secure and content with little, these people will provide a valuable example for the helpless, discontent, and confused all around them. Pioneering is totally contrarian to the spirit of this age, but it is a positive, refreshing, satisfying course of action. It is the only appropriate personal response in the midst of the crisis we find ourselves in. Herrick Kimball The Deliberate Agrarian

Here is a draft of the first chapter of the Economics book for your inspection. 1 Man and Economy

I have been both a central banker and a market regulator. I now find myself questioning whether my early career, largely devoted to liberalising and deregulating banking and financial markets, was misguided. In short, I wonder whether I contributed - along with a countless others in regulation, banking, academia and politics - to a great misallocation of capital, distortion of markets and the impairment of the real economy. We permitted the banks to betray capital into â??hopelessly unproductive worksâ??, promoting their efforts with monetary laxity, regulatory forbearance and government tax incentives that marginalised investment in â??productive worksâ??. We permitted markets to become so fragmented by off-exchange trading and derivatives that they no longer perform the economically critical functions of capital/resource allocation and price discovery efficiently or transparently. The results have been serial bubbles - debt-financed speculative frenzy in real estate, investments and commoditiesâ?¦. While the problem is usually expressed as one of confidence, a more honest conclusion is that credit extended in the past has been employed unproductively and so will not be repaid according to the original terms. In other words, capital has been betrayed into unproductive works. The credit crunch today is not destroying capital but recognising that capital was destroyed by misallocation in the years of irrational exuberance. If that is so, then we are entering a spiral of debt deflation that will play out slowly for years to come.

London Banker

The unfolding debt drama in Russia, Ukraine, and the EU states of Eastern Europe has reached acute danger point. If mishandled by the world policy establishment, this debacle is big enough to shatter the fragile banking systems of Western Europe and set off round two of our financial Götterdämmerung. Austria's finance minister Josef Pröll made frantic efforts last week to put together a €150bn rescue for the ex-Soviet bloc. Well he might. His banks have lent €230bn to the region, equal to 70pc of Austria's GDP."A failure rate of 10pc would lead to the collapse of the Austrian financial sector," reported Der Standard in Vienna. Unfortunately, that is about to happen.The European Bank for Reconstruction and Development (EBRD) says bad debts will top 10pc and may reach 20pc. The Vienna press said Bank Austria and its Italian owner Unicredit face a "monetary Stalingrad" in the East. Mr Pröll tried to drum up support for his rescue package from EU finance ministers in Brussels last week. The idea was scotched by Germany's Peer Steinbrück. Not our problem, he said. We'll see about that. Stephen Jen, currency chief at Morgan Stanley, said Eastern Europe has borrowed $1.7 trillion abroad, much on short-term maturities. It must repay – or roll over – $400bn this year, equal to a third of the region's GDP. Good luck. The credit window has slammed shut. Not even Russia can easily cover the $500bn dollar debts of its oligarchs while oil remains near $33 a barrel. The budget is based on Urals crude at $95. Russia has bled 36pc of its foreign reserves since August defending the rouble."This is the largest run on a currency in history," said Mr Jen.

Whether it takes months, or just weeks, the world is going to discover that Europe's financial system is sunk, and that there is no EU Federal Reserve yet ready to act as a lender of last resort or to flood the markets with emergency stimulus.

Ambrose Evans-Pritchard Failure to save East Europe will lead to worldwide meltdown

Industrial economies are still at the mercy of peak oil. This basic fact of life means that we can't expect the regular cyclical growth in productive activity that formed the baseline parameters for modern capital finance - meaning that we can't run on revolving credit anymore because growth simply isn't there to create real surplus wealth to pay down debt. The past 20 years we've seen the institutions of capital finance pretend to create growth where there is no growth by expanding financial casino games of chance and extracting profits, commissions, and bonuses from the management of these games - mortgage backed securities, collateralized debt obligations, credit default swaps, and all the rest of the tricks dreamed up as America's industrial economy was shipped off to the Third World. But that set of rackets had a limited life span and they ran into a wall in October 2008. Since then it's all come down to a shell game: hide the giant pea of defaulted debt under a giant walnut shell.

The sad truth of the matter is that we face the need to fundamentally restructure the way we live and what we do in North America, and probably along the lines of much more modest expectations, and with very different practical arrangements in everything from the very nature of work to household configurations, transportation, farming, capital formation, and the shape-and-scale of our settlements. This is not just a matter of re-tuning what we have now. It means letting go of much of it, especially our investments in suburbia and motoring - something that the American public still isn't ready to face. They may never be ready to face this and that is why we may never make a successful transition to whatever the next economy is. Rather, we will undertake a campaign to sustain the unsustainable and sink into poverty and disorder as we fight over the table scraps of the old economy... and when the smoke clears nothing new will have been built.

James Howard Kunstler Forecast 2010

James Featherby is calling for Christian responses to the Credit Crunch

The structure of the banking and financial markets are complex, and the transactions within it equally so. This often calls for nuanced judgement calls to be made between a variety of issues and the balancing of one set of competing duties against another. It is difficult to discern the moral issues involved. It can be even more difficult to weigh the competing issues once they have been identified.

The whole gamut of human weakness has contributed to the credit crunch. This includes much that is morally culpable, but also much that is not. Simple lack of knowledge and foresight has been a major factor.

Filling the values gap is not the only answer on offer, and many will not see it as the solution. We will need to compete with the other remedies on offer. I would suggest that we need to do three things:

• First, rediscover God's values in the areas of economics, business, personal finance and consumption.

• Second, rediscover our confidence in these values as being best for us, our neighbours and our children.

• Third, find the right 'voice' to communicate these values - a voice that offers life and not condemnation.

The credit crunch has delivered a profound shock to the foundations upon which the Western economic model was built. But will our financial institutions and governments simply weather the storm, make few minor regulatory adjustments and carry on as before? Can we take this perhaps once in a generation opportunity to consider the values that drive the system and reflect on what values should be driving the system?

James Featherby has produced the pithy twenty-page The White Swan Formula (PDF 2.9 MB)

F?rst, let us not rush past the moment in which we now stand. We will not learn lessons unless we engage fully with the consequences of our mistakes. A key part of that is a proper engagement with the pain caused by our shortcomings.

For too long, for example, the f?nancial community has denied responsibility for the effects of the capital that it raises and allocates. So let us pause and recognise the personal and f?nancial pain, close at hand and further af?eld, caused by this crisis.

Second, we must determine to understand and apply these values ourselves.

Unless we personally seek to serve, rather than be served, we will simply be hypocrites, and our arguments will remain hollow. Each of us needs to believe that these values work in practice for us individually, as well as for others, and then act accordingly. We need, quite literally, to put our money where our mouth is.

Third, we can join the debate and make our contribution. Everywhere the question is being asked ‘What sort of economy do we want?’ Let us engage in the discussion. We must not be satisf?ed with conventional wisdom that says change cannot happen. It is better to blow the trumpet beforehand than reach for the whistle afterwards. Let us be for something, not just against something. One can never tell when the tipping point of opinion will be reached, and without the last straw the camel’s back remains intact.

The discussion is needed on multiple levels... Let us also look long and hard at solutions to the current crisis that simply try to return things to how they were, at least for those of us in the West, by borrowing more and saddling the next generation with the burden of paying the price that we decided not to bear ourselves.

Yup, but will talk about values do it? Or will it require processes of public judgment and public repentance which is, I think, what is meant by 'engage fully with the consequences of our mistakes' and 'proper engagement with the pain caused by our shortcomings'?

Karl Denniger at Market Ticker - The fact of the matter is that you have been lied to for the last decade about our economic state, and if we do not divert from the road we are on our economy, our monetary system and our government WILL COLLAPSE.

The correct action to take in 2000 was to force the bad credit from the system and accept the impact on GDP. It would have caused about a 10% contraction in GDP at that time - a mild Depression (or a really nasty recession, depending on how you count it.) Now, having instead blown another credit bubble, we essentially doubled the debt in the system over the last ten years, while GDP grew by about 40%. The result of this was a horrible stock market crash, 6.7 million jobs lost (and underreported), personal income tax receipts are down 21%, corporate tax receipts are down 58%, the deficit is tracking at $1.8 trillion this year alone (and $9 trillion more predicted over the next decade), government is now spending nearly 200% of taxes taken in, 13% of mortgages are either delinquent or in foreclosure, more than 20% of all FHA loans are delinquent or in foreclosure, home prices have fallen by half in many places and are not done declining and the rest of the world is wondering if we're going to try to hyperinflate and destroy our currency. If we try to double our debt once again over the next ten years we won't make it there. The available free cash flow cannot support the interest payments now, and won't be able to if we add more debt to the system.

For a clear and patient explanation of the results of this widening gulf between slow-growing GDP and rapidly-growing compound debt interest see Chris Martenson's Crash Course (chapter transcripts beneath each video)

The mission (of Bernanke and Geither) is clear: to convince the world of two things at the same time... both impossible and mutually exclusive! The Chinese vigilantes must believe that the feds wonâ??t undermine the dollar... and the rest of the world must believe that they will! Inflation is necessary for recovery and growth in the US... or so everyone believes.

It was French economist Jacques Rueff who revealed the scam more than half a century ago. The whole idea of Keynesian stimulus, he explained, was to cause inflation... which would reduce the real price of labour. In a modern democracy, politics prevents wages from falling. But in a correction, if wages donâ??t fall people donâ??t get jobs. Keynesâ?? didnâ??t mention it, but the only reason his stimulus works is because it pulls the wool over the eyes of the working classes â?? reducing their wages by inflation so employers can afford to hire them again. Ergo, no inflation... no recovery in the job market. No recovery in the job market... no recovery in the economy.

But inflation will cost the Chinese plenty. And theyâ??ve let it be known they wonâ??t sit still for it. Geithner promised a â??durable recovery led by private demand.â?? In other words, it wonâ??t be government spending that pulls the US out of its slump, he told the Chinese.

Stimulus will not produce genuine prosperity. You canâ??t cure a credit-caused crisis by offering more credit; it just wonâ??t work. But rather than let the system correct itself, the feds are determined to â??do something!â?? What can they do? They can only destroy the dollar â?? or try to â?? thereby destroying the value of Chinaâ??s $1.5 trillion treasure.

Now, why private demand is going to weaken, not increaseâ?¦ As the boom of the post-war period continued, consumer spending played a larger and larger role in the economy. It averaged 64% of the GDP during most of the period, but increased to 70% in 2007. Likewise, debt service as a percentage of disposable personal income rose too â?? from less than 5% in the â??50s and â??60s to over 14% now. If, as we suspect, the trend towards more and more consumer debt has finally peaked out; consumption should have peaked out too. We should now see the percentage of the economy devoted to consumption go down... year after year... until it reaches the â??normalâ?? level. Private debt too should go down, until it is at a more â??normalâ?? level.

We calculated that, during the last 7 years of the Bubble Epoque, consumers added $1.4 trillion in debt per year. That was the spending that made the old mare go. But now what? They are now adding no debt â?? zero. In fact, they are paying off debt. This alone removed $1.4 trillion in private demand from the economy. The only thing that would cause consumer spending to go would be a substantial increase in real wages. This would allow Americans to buy more â?? while simultaneously paying down debt. But it will be a long time before real wages increase at all... let alone substantially.

Bill Bonner Daily Reckoning

Events have already forced Irish Premier Brian Cowen to carry out the harshest assault yet seen on the public services of a modern Western state. He has passed two emergency budgets to stop the deficit soaring to 15pc of GDP. They have not been enough. The expert An Bord Snip report said last week that Dublin must cut deeper, or risk a disastrous debt compound trap... Education must be cut 8pc. Scores of rural schools must close, and 6,900 teachers must go. The Garda (police), already smarting from a 7pc pay cut, may have to buy their own uniforms. Hospital visits could cost £107 a day, etc, etc. "Something has to give," said Professor Colm McCarthy, the report's author. "We're borrowing €400m (£345m) a week at a penalty interest."

No doubt Ireland has been the victim of a savagely tight monetary policy given its specific needs. But the deeper truth is that Britain, Spain, France, Germany, Italy, the US, and Japan are in varying states of fiscal ruin, and those tipping into demographic decline (unlike young Ireland) have an underlying cancer that is even more deadly. The West cannot support its gold-plated state structures from an aging workforce and depleted tax base.

As the International Monetary Fund made clear last week, Britain is lucky that markets have not yet imposed a "penalty interest" on British Gilts, given the trajectory of UK national debt – now vaulting towards 100pc of GDP – and the scandalous refusal of this Government to map out any path back to solvency.

The imperative for the debt-bloated West is to cut spending systematically for year after year, off-setting the deflationary effect with monetary stimulus. This is the only mix that can save us. My awful fear is that we will do exactly the opposite, incubating yet another crisis this autumn, to which we will respond with yet further spending. This is the road to ruin.

Ambrose Evans-Pritchard

So at last some theology. About time this blog posted some theology, I know. Covenant, Hope and Human Future - Theological Economics Covenant, Hope and Human Future - Theological Economics Douglas Knight This paper sets out a Christian theological economics for which the concepts of self-gift, generosity and public service and the distinctive vocation of the Church are central. it identifies economics as the expression of the Modern assumption that man is incapable of relationship alone so ultimately alone, and contrast the Christin account of man in which, because God is with man, man is truly with his fellow man. The paper suggests that marriage is the basic form of true economics, and modern economics is a form of parody marriage.

Publish at Scribd or explore others: Humanities Research culture marriage

Ah well, it took me away from shouting at the television, for a while at least. To read it in Scribd, click Mode (top left of screen), View Mode then Book Mode. You can download and leave comments. The Related Documents are not mine. For more by me, see here

Everyone's situation is different, but overal this looks like an especially treacherous bear market, made doubly difficult by the actions of the Treasury and the Fed in bankrolling malinvestment, imbalances and corrupted price discovery. When in doubt, get out. Don't get hooked by greed. This rally 'could' have some legs if it becomes a determined effort to reflate the credit bubble supported by the power of the Treasury and the Fed, as we saw in 2003-6, which was a reckless and disgraceful abuse of the Fed's economic responsibilities. We doubt they can do it again, but never underestimate the power of greed and fear over memory and prudence….

Today reminds me of the briefly sunny period in 1930-1 when most economists and public officials agreed that the Depression was already over and the economy was back on track. President Hoover dismissed a delegation of businessmen who came to Washington with ideas on stabilizing the economy with "Too late gentlemen, the slump is over." There are few things from my childhood that I remember more vividly than grandmother's comments regarding this false recovery. "If we knew what was coming, we would have killed ourselves." This from as strong a person as I have ever encountered, with a faith that would break rocks. The Great Depression left an indelible mark, or more accurately scar, on her entire family, and my father's as well. And I never heard the name "Franklin Roosevelt" from her lips without it being preceded by "God bless" followed by "he saved my family." Not all of her children unfortunately. She said she cried so much and so often that she was never able to cry again. And she did not, even at the end.

Jesse's Café Américain

Still on the subject of money, have you met Thomas Greco, David Boyle, Ellen Brown, David Korten and Richard Douthwaite ? A clear victory for the popularisers over the academics. Though there is a flash of genius from Willem Buiter (you'll need to persevere).

Whatever governments do for the banks, credit will be a lot harder to obtain for businesses...we have now entered the period of an unprecedented convergence of the four planetary issues - financial instability, climate change, unemployment and the financial consequences of an aging society - that was described in the 2001 book, The Future of Money. To avoid a domino effect of massive layoffs and bankruptcies, the most urgent action for businesses to take is the initiative of creating a Business-to-Business (B2B) mutual credit system at whatever scale makes sense to them. The WIR system is a successful precedent of this strategy implemented in Switzerland since 1934. The degradation of the environment due to short-term financial priorities can similarly be addressed with pragmatic money innovations. Short-term thinking is shown not to be due to human nature, but to the prevailing money system. It is also possible to reverse this process, by using a currency designed specifically for multinational trade and contracts which would make long-term thinking a spontaneous process, focusing the attention on long-term sustainable solutions without the need for regulations or taxation.

Bernard Lietaer

It is apparent now there remains only one way for ordinary Americans who love their country and want at least some of what's good about it to be preserved for future generations: We must kill the FIRE Economy beasts (FIRE: Finance, Insurance and Real Estate). We're the victims in a hostage situation, if you didn't know, held captive and mesmerized by the soft, flat-panel-TV glow of the FIRE Economy, which depends on our sheep-like conformity and Stockholm-syndrome-like admiration of our captors, but it's NOT too late to regain our senses, if only for the benefit of our children and grandchildren. Even if it is only wildly exaggerated - and it isn't - that the Systemically Important Too Big To Fail (SITBTF) institutions completely have captured our flag, our capital, our political parties, our "democracy" and our very lives, we as regular, hard-working, country-loving J6Ps have only this one remedy remaining, as all others woefully have failed. Anecdotal Economics Starve the Beasts and read everything by John Médaille at the Distributist Review And here's Willem Buiter:

The long-term pain of higher taxes and lower public spending is not the result of public debt and deficits incurred because of a war fought by a united nation against a hated external enemy. It is the result of an economic civil war, a massive systemic peacetime economic failure, with a large domestic component. It is therefore not clear that the necessary social and political cohesion - readiness to accept joint fiscal burden-sharing - will be present. If the necessary fiscal tightening is not forthcoming because different groups and vested interests are engaged in a war of attrition aimed at shifting the fiscal burden to the other guy, markets could easily panic and Britain could face an emerging market-style â??sudden stopâ??, with the rest of the world withholding financing from its public and private sectors.

Our current crisis is due to the fact that we have, as a civilization, refused to live within our means - and the means afforded us by the natural world - over roughly the past 50 years. Mistaking a temporary glut of post-war wealth and resource plenty as a permanent condition, we are told by our leaders - indeed, we demand of them that they tell us - that we can continue to have it all, costless plenitude. Yet these past thirty-odd years of our â??economyâ?? have been one in which we have maintained our wealth simultaneously by transferring the accumulated national wealth abroad, importing oil and debt, while refusing to face the mounting costs of this exercise...Meanwhile we continue to dismantle those cultural institutions that once taught restraint and limits - many of them religious, since they are an offense, above all, to our sense of sexual entitlement - in an effort to achieve ever more perfect individual autonomy....Yesterday the President told us that we were going to have to become again a nation that worked - and my ears perked up - until he described precisely what he meant. By work, more of us are to become scientists and engineers. That is, more of us are to become the kinds of workers who make it possible for the rest of us not to work, to engage in the sort of work that lies at the heart of the modern project, namely of extracting from a recalcitrant nature its secrets so that we can enjoy the â??relief of the human estate.â?? More of us are to engage in that project that is being taken up readily by our Chinese and Indian competitors, to transform our world ever more into a useful commodity for our pleasure and enjoyment. Americans must cease trying to make easy money at the casinos of Wall Street and instead seek to extend the mastery and dominion of nature so that the rest of us will not have to work or think too hard about what makes living possible or even worthwhile. Fewer traders, more lab coats. Above all, no jobs that actually demand work. Top scientists are working to eliminate any possible drudgery from our lives, especially the need to do things with our hands, make or repair our own stuff, understand for ourselves how the world works and how we can best live in it.

Patrick Deneen

Those expecting this deleveraging to result in a stronger dollar could not be more mistaken. The Obama Administration is scrambling to obtain relief from Europe and Asia, getting them to inflate their own currencies through 'stimulus,' in order to continue to hide the unalterable truth - the US must partially default on its debt as expressed in the dollar and the Bond. This is the inevitable outcome of all Ponzi schemes. Several smaller, private schemes already have collapsed. The big one is yet to come down. And when it does, the foundations of democracy will shake, several governments will fall, and we will once again experience the kind of uncertainty more familiar to those who lived in the first half of the twentieth century. The sad truth is that the Obama Administration has barely begun the real work of rebuilding the economy. Everything to date is simple looting, paper-hanging, and the rewriting of history. Until the median wage improves significantly in real terms, and the economy is put back on a productive basis without relying on the unsupported expansion of credit, there will be no recovery. The middle class is particularly hard hit as they exchange their remaining real assets in an increasingly corrupted financial system. They are dulled by falling from crisis to crisis. We seem to be at the stage where the wealth transfer from the many to the few has it last parabolic gasp before the collapse.

Jesse's Cafe Americain

There is only one mistake to make when talking about economics. That is to talk about economics first and the Christian faith second. If we put them this way around, nothing we say is either Christian or useful. When we do not put the gospel first, we are only repeating what all others say, and are not able to make any distinctive contribution to the discussion. What we say is this. Christian baptism makes us self-controlled persons, no longer entirely propelled by our passions. The ability to say ‘no’ to our own immediate desires is the irreplaceable gift given to Christians. It is the first step to freedom. God, the true judge, is able to release us from our sin and give us mastery of our passions. Through baptism we are freed to love and to act. When we achieve this elementary self-mastery, we can begin to act well towards one another. Only through Christian baptism, and within this Christian community and its discipleship, are we able to acquire this self-control. This baptism has a positive economic outworking, both long-term and immediate. This is what we failed to say at the ‘My Word is My Bond’ G20 meeting in St Paul’s Cathedral this week.

I have written two sets of Lent talks, for different audiences, on this subject and you can see them both at Scribd. The first and longer set 'Long way to Easter' contain the moral theology and economics, along with discussions of covenant, marriage, cultural confidence and demography. The shorter 'Walbrook talks' set out the theology and ecclesiology. But we need to spell out some of the theology, in particular baptism and the distinctive calling of the Church, before we talk about the world and economics.

A few of the money-center banks, some insurance companies and many hedge funds made a series of bad bets. They are insolvent. There is a procedure for insolvency. The banks should be go into receivership and be broken up. The losses should be written off, and that's that. Nothing new or radical in that solution, it happens time and again...

Even if the [bail-out] plan works, it will fail, because it doesn't address the underlying problem. And that problem is that we no longer make what we consume. Unless we restore the real economy, the economy that makes real things and provides real services, we cannot restore the banks. Even solvent banks require productive enterprises to which they can lend money. But we ran out of these a long time ago. There simply isn't enough demand, even in good times, for loans from our diminishing productive sector. Hence, the banks turned to lending it for houses people couldn't afford and credit they shouldn't be using, but must because the wages are too low. Making the big banks solvent again will not provide them with solvent customers. That can only come from a restructuring of the economy that shifts us back to real production rather than financial black magic. If we restore the economy, restoring the banks will be a trivial problem. If we do not restore the economy, it simply will not matter how â??soundâ?? the banks are.

John Médaille Worst Bailout Ever

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