Sorry, John Howard, the Curmudgeon Disagrees!

Every time this Curmudgeon turns on the TV he finds the beaming face of our Prime Minister saying the economy is booming, while his mate President George W. Bush says democracy is winning in Iraq and Afghanistan. Howard could save us time by just saying 'ditto'.

Is this the J-for-John) Curve that always points economically upwards?

Things have never been better.

The Curmudgeon has a lot of trouble relating to this because every three metres he walks in Sydney he encounters an Aussie beggar.

He wonders how long before broken vets from Iraq join them? On the streets of America it will be worse. Post-Vietnam U.S. will be a picnic in comparison.

How soon before we can't hear Bush over the thunder of dollar-printing presses as he says things are fine and dandy, you betcha?

Now, as you probably know, the best thing you can give a beggar is a little bit of yourself, your time. Learn his or her name. You'll get a smile in return next time you pass by even if you do not drop a coin.

This, however, does not entitle you to start giving lectures on lifestyle or choices, or for that matter, the economy. Don't mention the war.

Despite what the PM and his 'economy' might tell you that man or woman is not generally 'on the street' because of poor choices.

A lot of factors have come into play here, including Capital's pragmatism that some people are useful, some have their use-by date, and some will never be useful and are expendable. Life's a bitch, and then you die. Is that the motif?

One of the very appealing messages from Jesus of Nazareth to the multitude that followed him was that nobody in God's Kingdom is expendable. He looked at the image of Caesar the God on the coin with scorn, with ridicule.

In the Roman Empire in which he was speaking this was treachery.

Everybody was expendable, even at times, the Emperor himself.

Look at a Roman statue.

It is not like the Greek marble figure with its grace and its direct gaze.

The Roman statue is stiff and it looks fearfully into the distance.

Someone is coming to get you!

Many people had been made expendable and taken up arms in the provinces so that was often true.

The Empire was very vulnerable despite the supposed military invincibility of Rome.

In our time, we are dependent upon vanishing oil in countries run by puppets in American 'provinces' or jittery madmen who may be bribed or coerced militarily.

Military, imperial Rome was dependent upon the grain crop of fertile, conquered Egypt.

If it failed or was not delivered Rome descended into violence.

Panem et circenses. Bread and Circuses. It was more than merely a Machiavellian strategy. Unless you gave the mob bread and distraction you were in big trouble.

There are parallels.

In our time the TV gives us our 'circuses'. Our credit card, often pressed hard, gives us the booze and the burger so we can click from rock to train bomb blast to World Cup to PM welcomes back war veterans to Saddam on trial to Deal or No Deal (the commercial game, not the political). Distraction is our gigantic industry.

We may become as insensate as those who watched with fascination the bloody contests in the Colosseum.

Sensation. It can be an addiction. A World Cup of violence, mayhem?

It is to be moved deeply to read St Augustine's Confessions and how obsessed he had become with the bloody Games, the roar of the crowd – an addiction.

The problem with addiction, is that it always wants more – a stronger fix.

Back to the beggars.

It is not hard for any of us to join them.

One slip, and you're gone.

Despite what Jesus says, Capital can still claim that you're expendable.

You just 'made the wrong choices'?

Or have others made choices on your behalf?

Urban people today are very vulnerable, perhaps much more than their rural ancestors.

For example, the greatest transfer of money, power and land in England's history, apart from that after the Norman Conquest, came with King Henry VIII's confiscation of the monasteries.

At a stroke he tore the heart out of the economic and spiritual fabric of the nation.

The common people had no say. Parliament just nodded.

It is a commonplace that Henry inherited an overflowing treasury from his father and bequeathed an empty one to his son.

In 1540 he debased the currency.

How could this happen although he had seized the Church's gigantic treasury?

In a word, War.

The dissolution of the monasteries had brought to the Crown property worth well over one hundred thousand pounds a year, and in capital value it made Henry a wealthier king than his father had ever been.

Yet his closing years were full of wars and rumours of wars, none of them worthwhile in a material sense.

Does this Curmudgeon hear you say, What's this got to do with me?

Then, as now, common people had little say in what happened to them economically, or in the wars.

Henry's debasement of the currency caused a sharp rise in prices. To increase the volume of money in circulation, as Henry (and perhaps President George W. Bush has now) had done with no increase in the volume of goods produced is infallibly to send up the price level.

At Henry's death prices had risen by one-quarter; two years later under the influence of further debasement, they had nearly doubled.

Today we call this process 'inflation'.

Surely those people would be harder hit than us? No credit cards, for a start.

Not necessarily so.

S.T. Bindorff says in Tudor England (Pelican, 1950, p 120) that money played a much smaller part in the ordinary man's life than now. Whereas now most people earn their living in return for salary or wages, in Tudor England the bulk of the population derived its livelihood, at least in the matter of necessities, direct from the soil and to that extent remained unaffected by changes in the market-value of their produce. Even the lowliest remained both physically and economically near enough to the soil to supplement earnings by raising crops or livestock.

Something to think about next time you take the lift from the 20th floor and pull out six credit cards (to select the least bruised) to pay up at the convenience store.

While we can decide rural ancestors might have had cushions against the direct impact of price rises, in the longterm they proved little protection for those divorced from the soil, and in a metropolis like London people would find themselves vulnerable as they are today. Merrie England was on the way out, Capitalist England on the way in.

Today's annuitant, stockholder, pensioner who finds it difficult to make ends meet can find their sixteenth-century counterpart in the ex-monk pensioned off after the Dissolution, the widow living out of a small rent-charge, or other fixed-income people such as the schoolmaster allotted a stipend when his school was disendowed in 1548.

In this every-man-for-himself climate wealthy landlords were able to hack their way out of insolvency by putting aside outworn customs and putting their affairs on a strictly commercial basis.

Converted monasteries, spacious and built to last till Judgement Day became the first 'factories' even though they had to rely upon human, not steam, energy.

Thus we can see the rise of Capitalism.

Eventually the gentry would come into their own.

Capitalist economic practices became institutionalized in Europe between the 16th and 19th centuries. In the 19th and 20th centuries capitalism provided most of the means of industrialization throughout much of the world.

Catholicism has had a critical view of capitalism. Pope Leo XIII declared the mutual obligations for capital owners and workers to cooperate rather than engage in class strife.

Some of the principles he enunciated, however, are difficult to apply in a world dominated by faceless globalization where the threat of capital flight brings fear into the hearts of governments whose power may be far less than a corporation. Capital is faceless.

Appeals to Capital to obey moral obligations may make as much sense as appealing to a robot. Capital just is. It is omnipresent. The means of production are privately owned, capital is invested, and it receives a profit. Corporations are 'legal persons' who can trade capital, goods, labour and money in a free market.

Capital just is. Putting an 'ism' on the end wrongly suggests a philosophy or 'denkart, (Germ.) a way of thinking. You do not need a philosophy, just Capital.

Australia's Prime Minister John Howard is probably the most optimistic man in the country. Rising interest rates? Do not worry. Diminishing world oil supplies and rising petrol prices? Global warming? Leave it with me. Australia's rising cost of involvement in Iraq and Afghanistan linked to American inflation and a falling US dollar? It's OK, the economy is fine. Less education and health money? It's the fault of the States.

His vision is of a country with minimal government ownership of anything – the Snowy, built by near slave labour by migrants, was saved from sale only by a whisker.

His other vision is of a country of shareholders, people able to 'make the right choices' (not like those beggars I mentioned at the outset).

I do not share his optimism. I see people boasting of their half-million dollar houses while their children will never be able to find the money for such expensive premises.

I see people planning their overseas jaunt while their children are working at two or even three casual jobs. Children are a luxury, like the boat or the four-wheel drive.

Everything has become a commodity, particularly labour.

Assuming that John Howard is right, and we are all becoming shareholders, what does the average person know about economics? Not much, I suggest.

Someone once said that if all of the world's economists were laid end to end they would all point in different directions.

We do know that the world's only superpower, the United States, is running its dollar-printing presses red hot to pay for its wars. We do know that it is out-sourcing much production.

We do know that China, and many European countries for that matter, have oodles of U.S. dollars and American bonds, but they will not claim on them lest they rock a very shaky boat.

And we know Australia is hanging on the economic coat tail of Uncle Sam.

This Curmudgeon wants an economist who is prepared to look out of his window and see empty shipping containers on the shore, closed factories and yards full of motor vehicles impossible to sell.

I want someone to explain the 'ations' - inflation, deflation, stagflation.

I am very grateful to The Daily Reckoning in the U.S. for providing a description of the latter, and I'll leave it with you, and bid farewell till the next time, with the hope that you can enjoy a future turnip and lentil diet:

Do you know how stagflation works, dear reader? If not, we are happy to supply you with an explanation. Remember how the Fed 'stimulates' the economy? It does it by inflating the money supply. More money makes people think they have more wealth, leading them to make more mistakes. They borrow, they buy, they build, they spend, they invest...and whee! Oh, what a beautiful boom!

But after a while, people begin to realize that all this crisp fresh money is a fraud. Prices rise, and the consumer finds he has no more spending power than before. The businessman has expanded capacity, but finds he has no more customers than before. The investor looks at his returns, adjusts for inflation, and discovers that he has no more money than before. Once the humbug is unmasked, it no longer works. The Fed continues to introduce more 'money,' prices rise, but there is no boom anymore. The party is over. That, dear reader, is stagflation.

And thus we remind you, dear reader, of an Essentialist Economic Principle: A slump is opposite and equal to the fraud that preceded it. The recession of the '70s was the worst one since the Great Depression.

But in the '70s, America still had a few things going for it. It was still a major creditor, one that was able to finance its own consumption. Back then, the rest of the world owed us money, not the other way around. American mortgages were relatively low and the typical family could still pay its bills without mortgaging the house. The U.S. government ran its last real surplus during the Nixon years. Back in the 70s, we still bought and sold from overseas at a net surplus.

But then, following our bright thread, we move on and find that since 2001, 73% of all new government borrowings have come from overseas. And the imbalance between what is sold to foreigners and what is bought from them is so great that empty containers are piling up in southern California. They come bearing goods from Asia. But America has nothing to send back. So, the empty containers pile up in storage lots - so high that the locals are complaining that they block the view. As for the rest -mortgages, debt, deficits and all - you have heard the story often enough already.

All of which suggests that the next war will a tough one. But a war against what? Inflation? Deflation? Stagflation? Or will it be some new kind of "flation" that hasn't even been invented yet?

What are your thoughts on this commentary? You can contribute to the discussion in our forum.

Cliff Baxter can be contacted at:
Cliff Baxter <cliffbaxter@catholica.com.au>

©2006 Clifford Baxter

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