Thursday, September 29, 2011

The Titanic - or is it Spinning Straw Into Gold?

“In the United States neither paper currency nor deposits have value as commodities. Intrinsically, a dollar bill is just a piece of paper, deposits merely book entries. Coins do have some intrinsic value as metal, but generally far less than their face value. What, then, makes these instruments - checks, paper money, and coins - acceptable at face value in payment of all debts and for other monetary uses? Mainly, it is the confidence people have that they will be able to exchange such money for other financial assets and for real goods and services whenever they choose to do so."

- Federal Reserve Board - Chicago, 1961

As you know, dear reader, I have been banging the drum for a while about economic instability and also the potential for a coming problem of availability of cheap energy.

I am sorry if your eyes glaze over about some of this stuff, but I think we are living in a moment of history which could be as significant as the period of 1911-1920 where massive social change swept the world, regimes collapsed or were toppled, and new ways of living were introduced.

Of course, I could be wrong. But my purpose in discussing this is for us to seriously confront, as Christians, what happens when we may, for economic reasons and availability of resource reasons, no longer be able to jet-set around to air-conditioned conferences and different parishes flung far about (esp. the situation or Orthodoxy in the U.S. West), and we are forced to be closed to home, often without a parish anywhere near. And I think that in turn forces us to ask - what have we been about lately, anyway? And how should we, sojourners all, be passing through our societies, or local neighborhoods, our towns and environment?

This ship (the S.S. global economy) seems to have hit the iceberg already and while the band plays on the crew is frantically trying to calm those that can see there's a problem while trying to figure out what to do. Or are they simply organizing the limited lifeboats and who will be allowed to sit in them?

The quote of the last week:

"We need to find a mechanism where we can turn one euro in the EFSF into five, but there is no decision on how we could do that yet" the [EU] official said, speaking on condition of anonymity.

The means of that sort of leverage to get a 2 Trillion Euro facility seemed to be what some are calling the "CDO Squared" or the "Liesman rumor".

If you are confused, here is a somewhat succinct summary of the idea:

The complex deal would see the EFSF provide a loss-bearing "equity" tranche of any bail-out fund and the ECB the rest in protected "debt". If the EFSF bore the first 20% of any loss, the fund’s warchest would effectively be bolstered to €2 trillion. If the EFSF bore the first 40% of any loss, the fund would be able to deploy €1 trillion.

Using leverage in this way would allow governments substantially to increase the resources available to the EFSF without having to go back to national parliaments for approval, which in a number of eurozone countries would prove highly problematic.

As quid pro quo for an enhanced bail-out, the Germans are understood to be demanding a managed default by Greece but for the country to remain within the eurozone. Under the plan, private sector creditors would bear a loss of as much as 50% – more than double the 21% proposal currently on the table. A new bail-out programme would then be devised for Greece.


Spinning straw into gold? The only way to make 1 Euro into 5 legitimately is to devalue the currency, which some claim (with good evidence) to be the way of all fiat currencies and leading ultimately to their demise. We've had several such fiat currencies in North America prior to the current Federal Reserve Note. FRNs are only about 40 years old.

Fiat currencies work because of the faith of the users that the governments backing them will maintain value. So a massive devaluation of currency essentially risks the faith of the public. In the Euro zone these frantic maneuvers could lead to a destruction of that currency and possibly the economic union. Such a destruction could have large effects on the US and other nations as the Fed, using its monopoly powers, has committed to keep huge dollar swap lines open into Europe, essentially betting on the continued value of the foreign currency holding up, or risking the future labor of US taxpayers on the gambit (for if the currency were to fail . . .).

**A swap may be described thus: foreign central bank draws on its swap line with the Federal Reserve, the foreign central bank sells a specified amount of its currency to the Federal Reserve in exchange for dollars at the prevailing market exchange rate. The Federal Reserve holds the foreign currency in an account at the foreign central bank. The dollars that the Federal Reserve provides are deposited in an account that the foreign central bank maintains at the Federal Reserve Bank of New York. At the same time, the Federal Reserve and the foreign central bank enter into a binding agreement for a second transaction that obligates the foreign central bank to buy back its currency on a specified future date at the same exchange rate. The second transaction unwinds the first. At the conclusion of the second transaction, the foreign central bank pays interest, at a market-based rate, to the Federal Reserve.

Europe has largely thumbed their noses at this extreme idea, but they are still hoping for half-measures in bumping up the firepower of the EFSF - so some form of money "printing" may happen, unless some of the member states fail to ratify the changes.

Alright. Now your eyes are really glazed over. But friends, this is important. If you watch the world news (CNN World Edition, BBC, Reuters - etc. - forget Fox News and CNN domestic, it's drivel) you will quickly see that the economic elite are making statements nearly every day about this and that measure to shore up below decks. This is not normal. They are panicked.

And again, why should we care, as Christians? Well, big events have a way of restructuring whole societies - sometimes sweeping across the globe. If you were enjoying the summer of 1912, telephones and electric lights were barely coming in, as were motor cars. Could you have predicted that by 1918 there would have been a cataclysm of war, that three great world empires (Ottoman, Russian, and Austro-Hungarian) would have collapsed and entirely new and radical social structures arisen in their place? What effect did that have on Christians in Russia? On peoples in Germany? On the social mores of peoples in England and France? What continuing effects has the legacy of that collapse, only 100 years in remove, had on us today?

1912. 100 years ago. The reasons for massive social change potentially facing us are different today, but the rumblings of change itself are all around - the Arab Spring, the economic crisis, the after effects of 9/11, the rise of China and India as potential great powers. We should be prepared to think that things will not remain as they were, although how they will be is not entirely knowable.

However, I think, in rough outline we might see these sorts of things:

1. A collapse of the European monetary union as we know it now - whether to new drachmas and Deutschmarks or to some other type of currency is unknown.

2. A strong possibility of a loss of faith in the Federal Reserve Note in this country to the erection of another type of currency.

* I think such changes in money faith are always painful economically and socially

3. A possibility that the US currency will no longer be the de facto world reserve currency in which key products (oil, other commodities) are priced and traded

4. A rise in harsh and autocratic regimes in places where we might not have thought it possible in years past

5. A general lowering of the standard of living for a lot of people living in the West.

6. On a not-too-distant horizon, a concentration of life to more local concerns and reduction in travel using cars as transportation fuels relative to available money/wages becomes more expensive (note - absolute $ cost not issue here - gas could be $2.50/gal but if I'm unemployed, it's still expensive).

In the end, our economic woes may only be addressed by use of a fairly old idea - the idea of Jubilee, or something similar - where creditors are forced to take haircuts on their claims and debtor's debts are released. As always the question becomes "who gets relief." If it's primarily the wealthy, businesses and banks, then such things may only exacerbate misery for millions.

Here is a prescription to address the economic crisis.
I doubt that any politico has the guts to try to get such plans put to consideration, and I doubt that creditors would be willing to accept it. The Hebrews and the Mesopotamians had the decree of the Divine to enforce such actions. Who could speak with such force now?


Wednesday, September 28, 2011

There you go, bringing class into it again!

There's a lot of talk about "class warfare" going 'round about these days among politicos, and among Christians of this or that sort.

While it is sometimes useful to speak in shorthand about "oligarchies" or "elites" or the "poor" or "the working class" or "middle class" some such, I think too much adherence to such classifications is dehumanizing in our speech and outlook.

Thus, hurling epithets that someone or some group is a "fascist" or "bourgeois" or "capitalist pig" or "commie" or "tea-partier" (or the more cruel and crass "tea-bagger") is to abstract humans, especially when applied to individuals and small groups of people.

This is the issue I have with many ideological arguments, such as Marxism. It takes humans and crams them into a classification system to an extreme and tries to explain all of human history through the lens of this system in rigid terms.

I am not denying the existence of class structures - and in times and places such structures were given force of law. But this ought not mean that we should use the language of such classifications in our daily discourse - for it dehumanizes our neighbor.

In my day-to-day life, I do not constantly evaluate the neighbor across the fence or the neighbor up the road as to whether he is a "prole" or a "liberal democrat," or a "toff" or some such. We talk and we look out for the other's animals. We may not agree on politics or religion or a whole host of other things. Our differences may be the result of the inculcation of mores and worldview that come about because of social norms and tendencies causing us to move in socio-economic groups which, however veiled, are class lines in our society. But a man is more than that, and is not so bound to his class (even if there is a law assigning him to a caste) that the entire tide of history is inexorably set but such classifications.

So I think we would do well to have care in our ease of use of classifications. Let us use them when we must, but always with recognition that, like a photo made of dots of color, when viewed up close such things lose meaning.


Friday, September 23, 2011

Known knowns, known unknowns, and unknown unknowns

O day and night, but this is wondrous strange!

And therefore as a stranger give it welcome.
There are more things in heaven and earth, Horatio,
Than are dreamt of in your philosophy.

+ + + + + + + + + + + +

So scientists in the ivory tower (well, tunnel, er . . .) have been launching neutrinos at a target deep underground and far away and have noticed an odd thing . . . neutrinos seem to be arriving faster than C, the speed of light (remember, E=MC^2?), that speed which is supposed to be, according to the Standard Model of physics, the immutable law of physics, and one that has held up quite well in its application to all sorts of things that now enrich our daily lives, from synthetic aperture radars to transistors to microchips and fiber optic lines.

The bright folks at CERN are now mulling these findings to see if there's a flaw in the research or an explanation that is due to some sort of statistical error or what not. If the findings hold up, people are going to really have to reconsider the foundation of physics, which can be exciting for a scientist.

Of course, such things (if the research holds up), remind us that a theory which is damn-near-held-as-fact sometimes turns out to be just a convenient shorthand that is not at all accurate at the margins and does not really explain things, however elegant the model. You know -- like that quaint orbital model of the atom we used to like to draw as kids in the 60s and early 70s with electrons orbiting the nucleus like some sort of miniature planetary system.

Kinda makes you wonder what other scientific theories are useful tools, but not quite right as to how things really work.


Tuesday, September 20, 2011

The Village

Old man: People get too used to convenience. They think convenience is better. They throw out what's truly good.

Young man: But what about lights?

Old man: We've got candles and linseed oil.

Young man: But night's are so dark!

Old man: Yes, that's what night's supposed to be. Why should night be bright as day? I wouldn't like nights so bright you couldn't see the stars.

- An exchange between the young man and the old man in Kurosawa's Dreams

+ + +

In western lands beneath the Sun
the flowers may rise in Spring,
the trees may bud, the waters run,
the merry finches sing.
Or there maybe 'tis cloudless night
and swaying beeches bear
the Elven-stars as jewels white
amid their branching hair.

Though here at journey's end I lie
in darkness buried deep,
beyond all towers strong and high,
beyond all mountains steep,
above all shadows rides the Sun
and Stars forever dwell:
I will not say the Day is done,
nor bid the Stars farewell.

- J.R.R. Tolkien, Return of the King


Friday, September 16, 2011

On Patience in a Troubled World

"Take your rest in the Lord, and wait for him; do not give way to anger when evil prospers, and seems to achieve its wicked ends." Psalm 37:7

Thursday, September 15, 2011

The Efficacy of a Scythe for the Smallholder

Exercise, quiet, meditative work - and actually quite efficient up to a point, with proper equipment and technique.

This is essentially a modern European scythe - quite a bit better tool than the American scythes you see in the antique stores, and with high quality blades from Austria.


Wednesday, September 14, 2011

Shape of Things to Come

Well it's late in the hour and a few more grains of sand will fall.
On the colorful flowers grown upon the dust and moss.
Now I feel the worst is near,
I hold them close and count their years.
And pray a ray of light appears
To shine down on us here

Breakdown in the shape of things to come
But I'm moving on like a soldier.
And I say now when all is said and done:
It's not ours to break, the shape of things to come.

There's a crack in the clouds, but only for a moment now
Like an owl looking out, the blue sky spies the roads we will go down.
I wonder what they hold for us? I hold my family to my breast,
I feel the worst and hope the best will come to see us blessed.

Breakdown in the shape of things to come
But I'm moving on like a soldier.
And I say now when all is said and done:
It's not ours to break, the shape of things to come.
Hey! Hey!

Give me one more try in what I'll change.
I won't deny the thought is strange.
I've done my best and now will lay no blame myself.

Breakdown in the shape of things to come
But I'm moving on like a soldier.
And I say now when all is said and done:
It's not ours to break, the shape of things to come.

The shape of things to come.
The shape of things to come.

Lyrics to song by Audioslave - c. EMI Music - here for fair use.

Headlines from today

If you don't think things are going badly . . .

Headlines on the Reuters page

EU Warned of Credit Crunch Threat

Obama gets slight boost from jobs speech: poll

Chances of another recession increasing

Number of poor hits record 46 million in 2010

Kabul siege shows Taliban strength

Protect your portfolio from a baby boom bust

Tuberculosis spreads at an alarming rate in Europe

World Bank chief says world economy in danger zone


But, neither death, nor life, nor angels, nor principalities, nor powers, nor things present, nor things to come, nor height, nor depth, nor any other creature, shall be able to separate us from the love of God, which is in Christ Jesus our Lord.

Nevertheless, many people will be in fear in these coming days, I think - and fear drives people to do evil deeds sometimes. Take care out there.


Sunday, September 11, 2011

In Memoriam 9/11

Image from Times Mirror - credited to Rex Features - posted here for fair use only

That Tuesday morning, I was at Naval Air Station Pensacola receiving training as a recently commissioned officer as to a variety of duties and obligations, customs and traditions. One of my fellow officers came rushing back from the break room during our first class break of the morning to say something was going on in New York. The news spread quickly, as things are won't to do on a military base - the Nation was under some sort of attack. Without orders, spellbound, class was abandoned as we gathered at the breakroom television and watched in horror as one and then the other tower collapsed.

I returned to military service at a time of relative peace, in 2000. Certainly there was a possibility of future conflict, but only like distant clouds on the horizon that might or might not portend a squall overhead later in the day.

But on that Tuesday morning in 2001, all of that changed and events were set in motion that would find me in the Middle East 3 times and, one way or another, for the last decade involved in a global war on Al-Qa'ida and its associated movements.

I make no commentary on the unintended consequences to our world and to our nation of the response and counter-response to those events, except to say that we will look back and perhaps identify that time as a moment when the world shifted and a new age dawned on global society, and not particularly with regard to trans-national terrorism, but rather with the social, economic and political order.

But whatever history may show us in retrospect - many lost their lives and others were cast into the fear of the uncertainty of existence on that day. In the years to come, other lives were lost and wrecked in the rippling choices from that evil day.

One cannot but wonder at the souls, above the flames of those burning buildings, as they considered their options. No doubt some helped and comforted others who were scared and hurt; some said prayers; some, to our horror, fell to their deaths, whether to escape a more horrifying manner of death or because of they were blown out only God knows; perhaps some cursed God. Yet all of us, I think, in some secret place, wonder what would be our own actions when faced with such a turn - waiting perhaps in hope of a miracle rescue - or despairing of such and recognizing the awful truth . . . .

For those who suffered, and lost their lives on 9/11 - rest in peace, in a place of verdure, whence no sickness nor sighing comes.