Scott Sumner has an interesting post critiquing Noah Smith’s critique of the conservative tight money bias and Marcus Nunes has one which is similar, but instead critiques the bubble fear mongering rhetoric of a Mr. Janjuah, macro strategist at Nomura. On the surface they may not appear to be similar, butit seems that they are linked by the nuance between being conservative personally and utilization of government to force conservatism.
I am not necessarily a Thomas Jefferson worshiper but I do find quite a high volume of quotable material in his work that appears applicable to many of today’s problems, therefore, I discuss his material often. The time during which he lived is also quite fascinating, a period of military and political revolution, and subsequently of a young nation struggling for a cohesive political definition among diverse and competing world views and interests. In the area of crafting public policy, in which he was intimately involved as Governor of Virginia and as Secretary of State, he rarely strayed from principles of erring on the side of preserving basic freedoms.
In the matter of incidences of rebellion under the Articles of Confederation, Jefferson had a fundamental and multi-faceted disagreement with George Washington who suggested that the central government needed to be strengthened in order to preserve civility and calamity among and within the several states. One of the facets of the disagreement had to do with the nature of the rebellion in Massachusetts (notably Shay’s – but that was far from the only one). In Jefferson’s understanding, the economic crises that formed the basis of rebellion had its origins in the repudiations of revolution era currency, and the political problems were a direct result of the effects of the repudiation on the citizenry. It is exactly why he feared and opposed the creation of a central bank, being of the opinion that inappropriate management of it would be a source of economic and political instability. In other words, he did not view the situation of rampant bankruptcies, subsequent property confiscations and confinements to debtor’s prison as the result of lack of government, a situation to be blamed on individuals, but rather the result of poor governance; and he once made the remark that he’d prefer chaos arising from too much freedom to chaos arising from too little.
There is a huge difference between being conservative and behaving conservatively in whatever aspect of life one prefers, and using government to force that pattern of behavior on others. It matters not if it is in matters of finance, religion, personal behavior or world view. When we do that, we are most certainly to be facially incorrect in diagnosis of the specific problem to be solved, apply the wrong medicine, and end up worse off than if we had done nothing. We do not have the responsibility or even the right to save other people from themselves by imposing a belief or pattern of behavior, which in our own opinion is best, upon them; and being able to cope with what is viewed as, based on our own opinion, errant or irresponsible behavior on the part of others is a necessity of living in a free society – otherwise, it is no longer free.
And yes, freedom can be chaotic at times, but there is also a natural order to society itself which I believe is highly overlooked and underappreciated by arrogant pontificators who believe they can solve the world’s problems by forcing conformity to their preferred pattern of behavior. One example of natural order is that it is legal in the State of New York, and has been legal for at least twenty years, for women to go topless in public as long as it is not for sexual purposes – and look as one might, topless women are quite a scarcity in the Big Apple and elsewhere within state borders. Another example, a mirror image of the previous, is that it’s illegal to possess and consume controlled substances, such as narcotics, and I know of almost no one who wishes to partake of controlled substances who cannot get them, all the while we’ve been filling prisons to brim with people who are genetically disposed to addiction and attempting to deal with the calamity of organized and unorganized crime arising from black market activity in controlled substances for decades – a horror all its own that would not otherwise exist.
These pontificators, such as those criticized by Noah Smith and Marcus Nunes, spread the rather wild idea that if only money were to remain tight, or indeed to become even tighter, everyone would be saved from themselves and each other, and the world would prosper. I would like to think that unicorns actually exist; but that doesn’t mean that forcing unicorns to exist will somehow change basic human behavior. If money exists, any money at all, stupid people will do stupid things with it – especially when it is someone else’s’ money.
Specifically to point, at the very least, we are not dealing with an economic crisis arising from average people doing stupid things with their own money. Most average people did not know what a MBS is until they were the sensational news of the day, and most average people do not understand basic macro concepts like MV=PY. It was the supposed highly skilled money managers and high finance people, people who claim to have at least a greater than average understanding of macro, who devised the MBS scheme, while those at the central bank said “We’re not touching that,” or “We need to make an example out of somebody,” when the entire thing unraveled. And of course those at the central bank did stupid things all their own, but that is a somewhat different topic. There is absolutely no evidence that a different stance of monetary policy would have prevented the unraveling of a poorly devised and executed financial scheme or would have kept any of the money managers from doing stupid things with other people’s money; while there is plenty of evidence that the failure of the central bank to deal with the situation allowed the fallout to spill over and negatively impact average people with a forced downward price level adjustment on the broader economy.
Given the facts of the crisis, there is plenty of reason to view the claims of people like Mr. Janjuah as rather dubious because it appears to be a basic survival instinct to save one’s reputation when there is considerable social and political power that comes with having large pools of capital at one’s disposal. And I would not be surprised if, even unknowingly, Mr. Janjuah believes his primary interest is to preserve his own interests with the spread of highly inaccurate information, inaccurate information that I prefer to label as propaganda. And it does not matter how the persistence of tight money would impact average people, those in much the same position as Mr. Janjuah have little to fear and will still come out on top – which is what really matters to them. They get to deflect the real source of economic instability while shielding themselves from any possibility of appropriate political intervention that may be required to restore nominal stability while average Joe struggles to survive financially. It is an untenable situation that could not be farther from being solved by implementation of those particular recommendations.
It seems as if the power that comes with the management of large pools of capital is really the main problem with political leadership within the ranks of conservatism. Management of public policy in the interests of those with or in control of wealth is really nothing new. I’ve written about an example of that problem arising in the new nation of the United States concerning the matter of the Whiskey Rebellion here; and there other examples in US history and indeed world history too numerous to count. To me, it appears as a default political setting rather than an exception; and as sad as it is, it is likely the main problem we have concerning the current economic tragedy.
It is doubles that there are insiders who have at least some idea of the influence being peddled and information about why certain things are put to print for public consumption – like perhaps someone close to Mr. Warsh – who remain silent. And it is quite regrettable because, regardless of the circumstances, most conservatives I know who are worth regarding are indeed quite reasonable; only they have not been told the truth in a way that they understand.
I, unfortunately, do not possess the skill or knowledge of the appropriate venue to explain it as evidenced by the fact that I am still here writing after a years of trying to provide information about how subscribing to the propaganda of the money managers hurts themselves and those around them, and how perpetuating the fear of inflation and bubbles hinders their own economic freedom to the benefit of the those with power. I am well past the point of endurance, having written them off as lost to the wilderness and economic servitude of those who care nothing about them.
I am sorry – but I truly do weep for the republic and for my former political friends who seem to be perpetually caught up the superficially plausible, far too distracted by it to see the real damage being wrought on humanity itself. I pray that truth will eventually prevail, but I don’t necessarily hold much hope that it will before the worst of the situation is upon the doorstep.