Ben Bernanke: Hamburger Manipulator

Just kidding. The title of the subject article by author Mary Anastasia O’Grady is “Ben Bernanke: Currency Manipulator.”  I only offer hamburgers to make a point – where else in the economy is one person tasked with complete authority to manage a single commodity, the single-most important commodity necessary to enable our division-of-labor dependent standard of living? 

Even the OPEC cartel does not hold this much control over oil – and as important as oil is, it pales in importance to the economy relative to the importance of money, credit, and currency.

Of course, Bernanke IS a currency manipulator, but inherently that is the job description.  There is no other commodity on earth subject to the manipulation that currency is subject to – even in other areas supported by a heavy government hand, the manipulation isn’t so thorough.

I haven’t read any articles that take to task the hamburger manipulator.  There isn’t one.

The author uses this opportunity to chide Romney about his promise to take China to task on day one for manipulating its currency:

To be consistent, Mr. Romney should call out the Federal Reserve on day two for engaging in its own currency manipulation by way of "quantitative easing"….

The author goes on to identify some of the damage done by Federal Reserve currency manipulation.  Primarily, the focus for this author is the damage done to third world economies by the Fed actions.  The author dutifully suggests that Bernanke should more properly take into account the global ramifications of his actions. 

In Tokyo, Mr. Bernanke spoke to the world the way former U.S. Treasury Secretary John Connally spoke to the G-10 in Rome in 1971 after the U.S. abandoned the Bretton Woods agreement that had tied the dollar to gold: Get over it. We do what we want.

That attitude wasn't constructive for Americans or the rest of the world. If some future U.S. president intends to restore American prestige in economic leadership, restoring Fed credibility as a responsible manager of the world's reserve currency is a necessary first step.

Can adult human beings, supposedly trained in economics, write the words “a responsible manager of the world's reserve currency” without falling over in laughter?  It may not be Bernanke, but somewhere on earth there is someone knowledgeable and wise enough to be the responsible manager over the quantity and price of the singularly most important commodity ever devised by man.  The one commodity that makes life on earth as we know it possible.  The one commodity more important that energy, steel, wheat, or football (soccer to my Yankee friends).  Well, maybe not football.

Somewhere on earth there is a man wise enough to know more than all the market actors on earth combined on this subject of money.  He just hasn’t been found yet.

That such a phrase can be written with a straight face – and read approvingly by countless millions with an equally straight face – is a damnation of the level of education in society.  And it is a testament to the level of control that those in power have achieved via the purposely inept education system.

The currency manipulation is inherent in the institution.  Either the author doesn’t understand this, or the author doesn’t want her readers to understand this.  The author supports the institution of central banking – only it should be central banking without manipulation. 

Such a central bank is impossible to establish.  Inherently, when giving monopoly power to an institution – by definition, a monopoly established and supported by government force – manipulation of the commodity subject to the charter will occur. 

For what other reason is the monopoly established?  Those in power do not like the way in which the free market deals with subject X.  Therefore they establish a monopoly entity to manage subject X in a manner different than would the market.

This is manipulation.  It is inherent in any monopoly.  The author is complaining about something that cannot be “fixed” with supposedly better policy.  The flaw is in the establishment of the institution.

There is only one solution for this manipulation:  End the Fed.

A Written Constitution: Protecting the State from the People

This will be the final installment of my review of Fritz Kern’s Kingship and Law.  In the final section of his second chapter, he reviews the impact of a written constitution into the relationship of state, people and law.

In modern usage we mean by the term “Constitution” that part of the general legal order of a State which controls the powers of government and the mutual relations between the government and the subjects. 

Was there such a thing as a “constitution” in the Middle Ages?

The monarch was subject not to a specific constitutional check, but to the law in general, which is all-powerful and almost boundless in its lack of definition; he is limited by this law and bound to this law.

What we have seen of the concept of mediaeval law was described in my previous post:  the law was above both king and people.  Both were subordinate to it, and all (king and people) were bound to define it and protect it – each to his own understanding of “good” and old.”  Each person had veto power!

Such an environment, while somewhat unstable for the people, was even more so for the king.  He was only one man – a man with some form of kin-right or birth-right, eventually coming to be sanctified by the church, but still he was one man; and equally bound by and to the same law as all other men.  He was “controlled” by the law, not controller of it:

From the point of view of constitutional machinery, the control exercised in this way by the law will presumably be very incomplete and insecure – the very breadth of the mediaeval idea of law allows us to guess this.  But in theory there resulted a complete control of the monarch, a subjection to law so thorough that political considerations and reason of State were excluded and out of the question.

That the monarch faced the same insecurity and instability in the law as did the people was the most remarkable check on any potential abuse.  As opposed to modern, constitutionally defined states where it evolves that it is only the people that have to fear the law, in the mediaeval time all were equally subject to and therefore controlled by the law. 

For this reason the modern state feels free to create laws that run roughshod over private rights.  No list need be created to demonstrate this reality of every modern state.  Not in the Middle Ages:  “Nieman ist so here, so daz reht zware,” or “No one is so much lord that he may coerce the law.”

But in the Middle Ages, with their purely conservative idea of law, with their rejection of politics, their fusion of law and morals, and of ideal and positive law, could not recognize at all any law of the State which modified or destroyed these private rights.

The limitations thus placed on the mediaeval prince were, in theory, much greater than limitations placed on any constitutionally-enabled monarch or president:

For the latter can establish new law in conjunction with the other supreme constitutional organs, but the mediaeval monarch existed for the purpose of applying and protecting the good old law in the strictest imaginable sense. 

No one was “legislating” in the sense we understand that term today.

The mediaeval State, as a mere institution for the preservation of the law, is not allowed to interfere for the benefit of the community with private rights.

The State itself had no rights….  It can, for example, raise no taxes, for according to the mediaeval view, taxation is a sequestration of property.

It was the preservation of this good, old law that guaranteed the ruler security in his position and dominion. 

Eventually, through influence of the re-discovery of Roman law, through the introduction of oath taking in front of the bishop on the occasion of the new crown, the ideas behind mediaeval law slowly gave way.  In its wake arose absolutist states, ruthlessly encroaching on private rights.  This encroachment is what brought forward the idea of a written constitution – one designed to keep the state in check.

The mediaeval system, in theory, sounds fine – significantly better than the “theory” behind modern, constitutionally-enabled states.  The author, though sees the flaws of the mediaeval system in the execution – “the technical execution is defective.”

I keep in mind that this book was written in 1914.  The author did not have the luxury of seeing how defective the “technical execution” of constitutionally-enabled law would become.  Given the choice of one theory vs. the other, and each to come with some difficulty in execution, it would seem the mediaeval idea would result in a better condition for the people.  The time in which the author wrote this book can explain why he held the following belief about the security one held in a constitutionally-enabled state:

Today, the subject knows only two securities….  The one is that some rules of morality stand so firm that in the long run they can be abrogated by no State….  The other is participation in the government by popular representatives….

Suffice it to say that neither security survived long after the writing of the book.  Nothing stands in the way of the state and the abuse of morality, and “popular representatives” have created ways to profit from the system of government largesse.  Again, no list of abuses is necessary, I believe.

The written constitution has placed the state above the law – the state self-defines and self-interprets the constitution; this places the state in a position to decide what is law and what isn’t law. The only hope one has to influence this is to turn a minority into a majority.  Such a concept was unknown to the mediaeval mind – each individual held a form of veto.  No majority was necessary, and minority rights were fully protected – even for the minority of one.

It would seem, for this difference alone, one can conclude that society was not so “dark” in the Middle Ages, and one has only more reason to be saddened as to the place where modern “law” has taken society today.

As mentioned, with this I conclude my look into the book by Fritz Kern.  It was tremendously eye-opening for me, as I had virtually no understanding of the law as it was understood in the Middle Ages.  I anticipate I will look further into this as time goes by.

The Law (No, Not THAT One)

Here I do not refer to Frederic Bastiat’s classic work, but the law as understood in mediaeval times after and absent Rome, and before development of anything even modestly resembling today’s nation-state.

Fritz Kern explains this in the second and final section of his book, “Kingship and Law in the Middle Ages.”  The section is entitled “Law and Constitution in the Middle Ages.”  Here I will review his comments regarding the mediaeval law.

He begins by contrasting this historic law with what is defined as law today:

For us law needs only one attribute in order to give it validity; it must, directly or indirectly, be sanctioned by the State.  But in the Middle Ages, different attributes altogether were essential; mediaeval law must be “old” law and must be “good” law….If law were not old and good law, it was not law at all, even though it were formally enacted by the State.

Consider how pathetic our society would seem to someone coming from this past time that Kern describes.  He comes from a place that held that law was grounded in something more than the whims of the king.  He comes to a place where law is defined as anything goes.  And he sees a society beholden to this.

This mediaeval time traveler looks back to his time, and considers that for law to be law, it must be “old”:

Law was in fact custom.  Immemorial usage, testified to by the eldest and most credible people; the leges patrum, sometime but not necessarily proven by external aids to memory, such as charters, boundaries, law-books, or anything else that outlived human beings: this was objective law.  And if any particular subjective right was in dispute, the fact that it was in harmony with an ancient custom had much the same importance as would be given today to the fact that it was derived from a valid law of the State.

Further, he considers that the law to be law must be “good”:

Where we moderns have erected three separate alters, to Law, to Politics, and to Conscience, and have sacrificed to each of them as sovereign godheads, for the mediaeval mind the goddess of Justice is enthroned, with only God and Faith above her, and no one beside her.

The mediaeval mind did not separate justice from law – the law was to serve no other purpose, no other objective, no other god.

The law, in its majestic, inviolate simplicity, seemed to the people to be one great whole, which like Righteousness, was “God’s handmaid,” “giving to everyone what is his own.”

Giving to everyone what is his own.  A novel concept.  The monarch remained free to bestow privileges…

…so long as no one thereby suffers wrong.  He can, for example, make grants from his own possessions, so long as the community does not thereby suffer.

Consider the simplicity and justice of this moral sentiment.

As an example of an old custom that was not good – therefore not “law”, consider slavery: this was certainly old – it predated mediaeval times by countless centuries.  To the mediaeval mind, this was not sufficient to make such a custom valid.  Such custom was old, but not good.  The "laws" were born in force and unjust power.  They were custom, but unlawful.

The law, on the other hand, was always there, either discovered or waiting to be discovered.  That bad practice at times overtook the law does not change or replace the underlying “good” law.  This did not require a new law – law was not new, it was old.  It only required the discovery of the law – discovery in its most simple and direct sense; something that previously exists, waiting to be found.  “The old law is the true law, and the true law is the old law.”  One cannot be separated from the other.

In contrast, Kern offers further views on the law as it is today:

For us, the actually valid or positive law is not immoral but amoral; its origin is not in conscience, God, nature, ideals, ideas, equity or the like, but simply in the will of the State, and its sanction is the coercive power of the State.  On the other hand, the State for us is something holier than for mediaeval people….

What a miserable concept.

Every Individual Vested with Veto Power

Imagine the liberty in such a world.  Even if weighed down by a republican or democratic form of government, imagine if every legislator had such power.  Imagine no more: there was a time and place where this was quite true!  And no, the outcome was not chaos, but a true check on kingly abuse.

In the conclusion of the first part of his book Kern has written a summary of the major points he has raised.  I will freely make use of this summary, as he has organized the points far better than I could.

The relationship between monarch and subject in all Germanic communities was expressed by the idea of mutual fealty, not by that of unilateral obedience.

Especially in the time of the early Middle Ages, there was no concept of the king as sovereign.  There was also no concept of the people as sovereign. 

The king is below the law….if the monarch failed in these duties – and the decision of this question rested with the conscience of every individual member of the community – then every subject, every section of the people, and even the whole community was free to resist him, to abandon him, and to seek out a new monarch.

Both king and people had a duty to the law; the duty was not to each other.  Kern offers an example of King Clovis, who wished to retain a costly vase over and above his due in order to donate it to the church.  All agreed to this except one, who ended up enforcing his objection by smashing the vase.   It should be noted, the king found an indirect manner to exact revenge; this had to wait one year, based on an equally exaggerated instance where the king’s opponent stumbled in his duty and obligation. 

Note, neither the king nor the majority had authority to punish this act directly.  The only recourse was to find some other failure in the opponent and use this as a pretext for revenge.  It strikes me as a demonstration that the unyielding approach taken by the king’s opponent was not always the best idea.  More importantly, it was left open to each individual to decide where the line should be drawn.

As time passed, the right of each individual to object evolved into the right of the community.  But in no way did this change the fact that the king was held to be below the law.  Can you imagine if a single congressional representative (for example Ron Paul) had the authority to kill any proposed legislation?  While not the authority of the individual, still the idea that it takes unanimity for the state to act is a powerful idea.

Onto this secular element in mediaeval monarchy, the ecclesiastical theory of magistracy was grafted….the Church is authorized to declare the judgment of God.

The introduction of the Church into the relationship between king and people slowly began to change and somewhat diminish the authority of the people – it would seem to the benefit of both king and bishop.  The view of the church went from one of passive obedience to a sacramental consecration.

Any steps taken to sanctify the king, make him God’s chosen, would begin to diminish the role and manner the people had to resist the king’s authority – at the same time, increasing the church’s power.  In this, one can find the beginnings of what would become known as the divine right of kings.

Alexander McCobin at The Daily Bell

I have posted the following at The Daily Bell today.  Quoted (indented) items are all Mr. McCobin’s:

[Debate] teaches critical thinking, writing skills, speaking ability, a broad understanding of current and philosophical issues and a love for ideas….[After attending McCobin’s private debate camps] Students would write to us, "I learned more in one week at this debate camp than in all of my years at school."

Many schools don't have debate programs at all….

Do you think there might be a connection here?  Is it by design, or merely an accident that a) schools don’t teach critical thinking, and b) virtually every school gets a majority if not the entirety of its funding from the state?  More on this later….

Perhaps creating dummies is the objective.

[While at Cato] the leading thinkers developing libertarian public policy…

“…libertarian public policy…” This seems quite the contradiction in terms and objectives. 

This is the most libertarian generation that has ever existed….

For us old guys, that would be nice to believe.  However, it is rather a bold statement when considering the sweep of recorded and unrecorded history.  More on this later….

[Regarding the possibility that the world is headed toward a depression] Given the growing commitment of my generation to fixing the problems given to us by older generations, I remain optimistic that we can correct things before they get to that point.

We face a future of either an inflationary depression or a deflationary depression (arguably, we are in a depression already).  To the extent there is an ounce of truth in Austrian economics, this is unavoidable.  Things will certainly get to that point before they get any better (or worse).

It's contradictory to argue that the government is both generally incompetent and inefficient and then argue it's capable of pulling off the greatest cover-up in history. I also think that if you assume the enemies of liberty are doing evil intentionally your misrepresentation of them will lead you to improper solutions. We have to understand that the enemies of liberty do so with good intentions and require responses with good intentions.

This one statement is enough to dismiss Alexander as a critical thinker.  First, he confuses “government” with those above government pulling the strings (as suggested in DB’s question).  But even looking at those in “government” – I will avoid the non- U.S. enemies of freedom – the pickings are way too easy.  Let’s stick to just the U.S. based enemies of just the last decade – do they really have good intentions: Hillary Clinton, Tim Geithner, Dick Cheney, Nancy Pelosi, Harry Reid, George W. Bush, Barack Obama, Donald Rumsfeld.

The authors of the Patriot Act, NDAA, FATCA.  Lying the people into war.  Authorization of murder by drone.  Killing Americans without trial or jury.  Those building the spy center in Utah.  Initiating several wars throughout the Middle East and Central Asia.  Central banking.  Public funding of education.

His affiliations with Cato and Reason speak volumes of his positions.  See Walter Block here:

His view on war and the military is one big (and un-asked) question.  This comment (when writing elsewhere about some of the differences of opinion amongst libertarians) gives a hint:

While many libertarians opposed the invasion of Iraq, Randy Barnett wrote a strong, libertarian defense of pre-emptive intervention.

That he remains open to a discussion on this issue is…troubling, to say the least.

The other troubling issue is no mention of central banking (nor do I find any via a quick search of outside resources).

No comment on central banking; seems that the war in Iraq (and presumably other overseas adventures) are at least questions properly open to debate (certainly consistent with a Randian view); can’t link public funding of education and the lack of critical thinking in students; and sees no evil intent in those who implement these and other policies.

If this represents the greatest libertarian generation in history, you can have it.

Jack Welch and Unemployment

Jack Welch, retired CEO of General Electric, has made big waves since he suggested that the recent unemployment print was manipulated for Obama’s political benefit.  I haven’t seen much reaction from the media, but what I have seen is enough – all some version of “do you really believe the employees of government would do such a thing?” 

A senior Treasury Department official said Friday that any suggestion the figures had been manipulated for political gain is “simply absurd.”

Welch suggests he is just using facts to come up with his assertion – the numbers don’t add up:

Here are Mr. Welch’s facts. To hold the unemployment rate even as the population grows, he said, the economy needs to add between 150,000 and 200,000 jobs a month.

I have heard similar numbers from many others, so I expect Welch is not far off on this view.

“We haven’t reached those numbers at all,” Mr. Welch said. Employers added a seasonally adjusted 114,000 jobs in September, down from a revised 142,000 jobs in August. The economy, however, has added 143,000 jobs a month after revisions this year.

Welch has a point.  But wait, the macro-economists are quick to impress with their magic:

Still, several economists have pointed out exactly how the unemployment rate can diverge on a month-to-month basis from nonfarm payroll growth.

Figures don’t lie, but manipulators figure.   This statistic is regularly pushed and pulled in dozens of ways before it is published. 

Much of the data used by macro-economists is useless, certainly the unemployment data falls into this category.  It isn’t just that the numbers are manipulated – it is that they are meaningless on their face.  What does the number of jobs say about the quality of the jobs?  How many of these jobs are truly a result of transactions freely arrived at – the only method by which wealth can be created? 

The only objection one might make about Welch’s comment is the timing.  This figure is manipulated in every which way on a regular basis.  Why raise the objection now?  Of course, his timing was political.

But perhaps the real reason all actors are lining up in attack mode is the thought underlying Welch’s critique - Welch crossed a line when he suggested that civil servants might be acting in a manner other than for truth and accuracy.  This truth flies in the face of the myth that people enter low-paid civil service jobs purely for the altruistic reason of wanting to help their fellow citizens and their country.  They have no personal agenda in anything they do.  They do not succumb to political pressure by their superiors – many of whom are political appointees or elected officials.

One of many myths of state.

(h/t EPJ)