Greece Is In Trouble

Noman remembers laughing heartily as a young squirt at the lame joke a about Greece being located next to Turkey.  The possibility of it sliding out of Europe, however, is no joke as explained by Josef Joffe in this moring's European WSJ.

Greece's problem is not just liquidity, which could be solved by injections from abroad. Rather, Greece's debt crisis is rooted in its economic fundamentals, and nothing short of fundamental reform could improve its long-term prospects under the euro. Here are some telling numbers: While unit-labor costs in Greece have shot up 15 percentage points since 2005, they rose by only five points in Germany. To restore their lost competitiveness, Greeks and their government would have to agree on a new social contract between them, one that demolishes market barriers and privileges, and in particular those that coddle a bloated public sector that makes up 25% of the work force.

But how many societies could bear such a revolution, especially one ordered by foreigners? Last year, facing the prospect of even modest reforms, the Greeks answered with bloody riots to protest the demands of their supposed tormentors abroad. This year, Greeks are doubling down on their bet against their own ability to change, and are cleaning out their bank accounts and dispatching their euros to Switzerland and Britain—or to their own bedrooms, underneath their mattress.

The line about the bloated public sector being reigned in by foreigners reminded Noman of the US.  The foreigners in that case are the tea partiers, who, by all media accounts, are some weird and alien presence in the US body politic.  What could be stranger than taxpayers who are fed up with Socialist self-dealing to the point of protesting about it?  Gasp.

But, we're talking about Greece here, and implicitly about Germany.  The cushy Greek lifestyle is lived courtesy of hard-working Germans who are getting tired of footing the bill.  Sound familiar?  

At least in the German case, Greeks can buy German exports.  So, they get something back for their largesse.  What do Wisconsin taxpayers get for $106,000 per year school teachers (before medical, pension and early retirement benefits)?  They get their children turned into little Trotskyites who worship whatever Democrat happens to be in the White House, and who burn with a passion for "social justice" along the lines of bigger government and higher taxes.  Oh, and let's not forget abortion-on-demand, gay marriage, euthanasia and all those other social blessings so precious to lefties, who champion only "freedoms" that turn people into slaves.

Greece and Europe are just different fora for the same problem we have in the US.  Some people adamantly insist on having things their way, at other people's expense.

The Four Causes of the Financial Crisis

Noman is delivering a paper at a Business Ethics conference next week, and appends his abstract for your consideration:

*****

The lessons learned from the financial crisis depend on the causes identified, which in turn will affect the steps taken to prevent another such crisis from occurring.  

In the US, the President’s Financial Crisis Inquiry Commission released its findings in January of 2011.   Rather unusually, significant financial reform passed the Democratic controlled Congress in 2009 (the Dodd-Frank Act), well in advance of considering the conclusions reached by the very commission appointed to study the causes and suggest appropriate reforms.  

Thus, unlike the Pecora commission report, which led to the bipartisan adoption of the Securities Act of 1933, the Securities Exchange Act of 1934 and five other significant pieces of legislation over the ensuing seven years, the FCIC report was controversial, controverted, and politically irrelevant other than as an exercise in post hoc legislatory justification.  Financial reform passed with scant support from the opposition party.

The report featured a majority opinion reflecting the opinions of six Democrats on a commission of ten.  Three Republican commissioners dissented from the majority opinion.  A fourth Republican commissioner filed a solo dissent.  This latter commissioner’s findings have been widely dismissed as the “conservative critique,” which was explicitly rejected in the majority report.

This paper explores the various reasons for the financial crisis proposed by various commissioners and other parties, and orders them according to an Aristotelian typology of four causes: material, formal, efficient and final.  All are “causes” of the financial crisis. 

 The material cause is “that out of which” the crisis occurred.  The simple and relatively non-controversial answer to that question is “sub-prime mortgages.” 

The formal cause is “that into which” the material was formed.  Again, the answer is widely acknowledged: the securitizations and “insurance” contracts of structured finance: ABS’s, RMBS’s, CDO’s, and CDS’s to name just a few of the more significant ones.  Once detonated on the balance sheets of highly leveraged financial institutions, this toxic mix ignited a meltdown of the financial system. 

The efficient cause is “that by which” the crisis was brought about.  The trigger of the crisis was the Federal Reserve policy of rising interest rates between 2004 and 2006.  

Chairman Greenspan’s easy money policy of the 2002-2004 is widely blamed for inflating the housing bubble.  But, the trillions of dollars of securitized and insured subprime mortgages with rate resets were the dynamite that exploded bringing down the proverbial house.  Sub-prime mortgages blew up precisely because of teaser rate originations with variable rate resets that skyrocketed 4-5% in just a couple of years due to Fed policy.

This was the handiwork of Chairman Bernanke.  Federal Reserve policy also had the affect of dampening housing prices, which triggered speculator’s defaults.

The final cause is “that for the sake of which” the crisis happened, “that without which” it couldn’t have happened.   This is the controversial cause, the one that government and media have been loathe to acknowledge.  This cause, persistently identified, and consistently predicted by commissioner Peter Wallison as early as the year 2000, is the US government’s “affordable housing” policy.  

Affordable housing goals were given to the government-sponsored entities (GSE’s), Fannie Mae and Freddie Mac, which were instructed by the U.S. Department of Housing and Urban Development (HUD) to purchase up to 42% of their multi-trillion dollar portfolios in sub-prime mortgages for package and resale to pension funds, insurance companies, financial institutions, and foreign entities—with a government (i.e., US taxpayer) guarantee. 

On other fronts, the U.S. Department of Justice and community-organizing associations (e.g., ACORN) sued banks into lowering lending standards, and making loans to communities that were traditionally poor lending risks, that is, not likely to pay them back.  The overall affect was a dramatic and marked decline in lending standards, which opened the floodgates to the subprime mortgage deluge that swamped the global economy in 2007 and 2008.

All are causes of the financial crisis of ’08.  Ironically, the critique of the Wallison position as “conservative” is apt, but for the wrong reason.  One doesn’t have to be a conservative Republican to see that US government policy from the 1970’s to the crash coerced lending decisions in ways that proved, in retrospect, to be extremely unfortunate.   (Indeed, given legislative initiatives in DC, one is tempted to say that one would have to be a liberal Democrat not to see it.)  

However, this view is essentially conservative not for modern political reasons, but because it addresses the final cause of the crisis, and final causes have been all but banished from occidental intellectual inquiry since Francis Bacon in the seventeenth century.  It is precisely a notion of reality that rests on metaphysical foundations rather than materialist empiricism or subjective volition that people labeled as conservatives are often trying to “conserve.”  

What Wallison’s analysis of the financial crisis, and the widespread dismissal of his critique—or rather, its general failure to resonate with the populace—might indicate, is the inability of society to see what it has generally ceased to look for.  

This is highly problematic for society if final causes do indeed matter.  This author is afraid that time will tell, and what it tells us won’t be good.

Note that acknowledgement of a final cause, is not a rejection of any analysis that points to the material, formal or efficient causes.  Indeed, a “conservative” critique acknowledges the other causes, while it insists on reform of all four of the crisis’s causes, not just the politically expedient ones.  

In the author’s opinion, to reform the other causes without touching the final cause—embodied in the GSE’s “affordable housing mandate”—is a prescription for disaster.   Ironically, this is precisely what has happened in the US, though discussions to reform the GSE’s are presently underway in Congress.  They were exempted from Dodd-Frank.

*****

Does anyone really believe that government will preserve us from financial crisis when it cannot acknowledge its own role in fostering it?

Noman is expecting to be widely assailed by big named tenured professors (and their untenured toadies) from American and European universities.  In twenty years of academic life, Noman has rarely seen anything as belligerently narrow-minded as a progressive, liberal professor.  Unfortunately, that is the dominant academic breed, which tenure ensures.

In a trial run of this presentation for executives last week in Vienna, the only American in the audience reacted in agitation at Noman's "overt politicization" of the topic.  He blamed the entire crisis on Ronald Reagan and his free-market ideology.  This "non-political" critique is the Barney Frank, official Democratic party line, which was nicely captured in the widely-praised movie, "Inside Job."

Noman doesn't buy it.  Or, rather, he buys it only up to a point, which, incidentally, is not a reasonabe starting point for financial reform.

Now you know some of what's been keeping Noman from posting.

The Return of Meatless Fridays

Francis X. Rocca, a Vatican correspondent for Religion News Service pens this interesting Op-ed in today's European WSJ.  The bishops of England and Wales have upped the cost of belonging starting this September.  Rocca notes:

The English and Welsh bishops specified that they were instructing their flocks to resume Friday abstinence "as a clear and a distinctive mark of their own Catholic identity," adding that the "best habits are those which are acquired as part of a common resolve and common witness."...

Sociologists such as Roger Finke and Rodney Stark, who study the behavior of "religious economies," have observed that churches tend to lose vigor when they relax demands on adherents, especially those tenets and practices that cut against the grain of wider society. In economic terms, lowering the "costs" of membership in this way ends up diminishing its benefits, among other ways by loosening the bonds of community.

Noman wonders if the bishops of the US can be far behind?  A little obligatory abstinence on a regular basis might be just the thing to remind America's faithful that we are called to something greater than falling into conformity with whatever everyone else is doing.

Barca 3, Manchester United 1

For the third time in five years (2006, 2009 & 2011) Futbol Club Barcelona, or simply Barca, is the champion of Europe.  Former player Pep Guardiola's squad outclassed Alex Ferguson's club for the second time in the last three finals.  Given Spain's win in the world cup with a team full of Barca players, Noman would be safe in saying that this has been the world's best team, with the greatest talent, for much of this glorious run.

Noman has had the pleasure of watching Barca play over the last 20 years, and he has seldom seen a club so dominate the time of play and ball handling the way recent Barca teams have.  They are both elegant and explosive.  The other team rarely has a chance to score.  This exciting group is loaded with players who know what to do with the ball around the net, none moreso than the electrifying Argentine striker Lionel Messi.  This guy is dangerous whenever he touches the ball: think of Maury Wills or Lou Brock on the basepaths, or Magic Johnson on a fast break, or Barry Sanders in open field.  Barca signed him when he was 14 years old and brought him to their "cantera" or minor league team.  He's been playing on the big club since he was 17.

Noman had his doubts about this one going into the final because Barca had to crybaby their way to victory over arch rival Real Madrid in the semi-finals.  You might remember the way basketball was almost destroyed in the 1970's by players posturing to take the charge, and feigning being run over in order to get a call from the referee.  The soccer equivalent is guys throwing themselves on the field and grabbing their faces in feigned agony in order to get a guy on the other side thrown out of the match.  As you may know, in soccer, an expelled player isn´t replaced, and the team has to play shorthanded.  That's what happened to Madrid, and Barca had an easy time of it after some spectacular belly-aching, whining and academy-award-caliber acting.  Conclusive video evidence demonstrated that there was no contact on this controversial and pivotal play.  But, alas, the referee was swayed by Barca's histrionics.

In any event, they didn't need it tonight.  The first half was close.  But Messi drove a dagger through Man U's heart with a spectacular second-half goal in the 55th minute, which was followed by Villa's coffin nail.  It is Barca's 4th European Cup overall.  That's still a far cry from Madrid's record nine, but it goes a long way towards establishing Barca's dominance of contemporary futbol.  ¡Visca Barca!

Leftist Demise in Spain

In case you missed it, Spain held municipal elections on Sunday.  And, the Socialists were routed even in traditional strongholds such as Barcelona and Seville.  That is big news, as it replicates the 2010 US midterm elections, and augurs poorly for world-wide Socialism.  Had the results been the opposite, the US media would be heralding them as a portent of things to come at home.

The Spanish political landscape is littered with regional parties that exert an enormous influence whenever the most voted party fails to achieve an absolute majority, and hence needs to pact to govern.  The two major parties roughly parallel the Democratic and Republican parties in the US.  In Spain, Socialists are not afraid to call themselves what they are, or go by that name.  The Socialist Party (PSOE) is the Democratic party of Spain.  Republicans go by the name of the Popular Party (PP).

The weight of the electorate is on the left, with the Communist Party (the Bernie Sanders left), the United Left (IU)(the Nancy Pelosi left), the Green Party (the Al Gore left) and others tilting further to that side than the dominant Socialists (the Barack Obama left).  The Spanish right tends to favor patriotism along Madrid-centric lines, free-market economics, the traditional family, etc.

In Catalunya (where Barcelona is), the predominant alternative to Socialist rule is Convergence and Union (CiU).  Socialists have held the government of Barcelona since free elections have been held following the transition from Franco's decades-long rule to democracy, while CiU generally holds power in the autonomous region of Catalunya (roughly equivalent to a state in the US; think of Democrats controlling Chicago, while the Taxpayer Party controls Illinois).  The big news around here is that CiU was the most voted party in the Barcelona elections for the first time in the 32 years of its voting history.  CiU now controls Catalunya (the state), and will pact with another party to control Barcelona.  The obvious partner would be the PP (Partido Popular), except for the fact that most Catalans hate its nationalist (Madrid-Centric) tendencies.  This promises to be interesting.

In the '90's, Josemaria Aznar's center-right PP (nationalist party) swept to power in natiional elections, but not by an absolute majority.  It had to pact with Jordi Pujol's CiU (Catalan party) in order to govern.  It wasn't a pretty sight, as Aznar was forced to make humiliating gestures and meaningful concessions to Catalunya.  He even said publicly that the Catalan language was a thing of beauty.  (Language is a big issue here!)

If this sounds strange to your American ears, consider it as if New York and Boston were locked together in an East Coast country, and NY kept hogging all the tax resources and getting all the glory.  Bostonians would be ticked off, right?  Add centuries of bad history, and you get the idea.

The signs are ominous for Socialists in sunny Spain.  They came to power in 2004 though the PP was expected to retain its absolute majority, because terrorists detonated several bombs in the Madrid subway system during morning rush hour, three days before the election.  Though Spanish law prohibits demonstrations in the days prior to voting, Socialists demonstrated before gleeful "news" reporters to protest Spain's involvement in the Iraq conflict.  Responsibility was hastily attributed to Al Qaeda, and Spaniards punished the PP at the polls.  Evidence was quickly destroyed, and the Socialists assumed power promising to remain humble.  (The complaint about Prime Minister Jose Maria Aznar and the PP was that they involved Spain in George Bush's Iraq mess because they were drunk with pride and power.)

When the Socialists took over, Spain was enjoying unprecedented growth, a rapidly declining unemployment rate, the benefits of privatizing major segments of the economy, low interest rates and a rising profile among EU nations.  What a difference seven short years make.  Spain's unemployment rate is back near 20%, young people can't find work, all the traditional leftist spigots of dependence and abuse have been opened wide, and the populace is back in free-rider mode.  (Demoralized Spaniards, however, did get the social blessings of gay marriage and liberalized abortion!)  Americans had better get used to seeing this pattern, because it seems to recur everywhere, all the time.  (As in America, Spanish lefties blame the "Republican" Aznar government for all of the country's ills.)

It's a pity, but ironic, that people are upset with austerity measures made to quiet fears in debt markets, and concessions made to the EU designed to get Spain's house in order.  Angela Merkel figures (with justice) that if Germany has to pick up the tab for countries where the work ethic falls short of German standards, she has the right to demand sacrifice from the beneficiaries of EU/German largesse.  Jose Luis Rodriguez Zapatero, a demoniac if Noman has ever seen one, has been forced to act responsibly, and is paying the political price.  Spaniards demonstrated into the elections, in contravention of Spanish law, and are still demonstrating to protest lousy government.

Jose Luis Rodriguez Zapatero and Spanish Socialists: Hoist by their own petard.  Live by the sword, die by the sword.   It's as if Barack Obama were thrown out of office by voters clamoring for hope and change.

Better Than I Remembered

There Be Dragons, by Roland Joffe, premiered this weekend.  Noman saw it months ago at a pre-screening on a large television set, and walked away thinking it was a good movie.  What a difference a big screen, and a few key edits, makes.  Noman saw it today at the theater and left emotionally moved, and thinking that this was a very good movie, with higher aims than merely being a biopic about a saint.  The story drew him in, as did the cinematography and acting performances.  Wes Bentlley's Manolo seemed much more complex to Noman this time around, as did his son, Roberto.  And a few edits at the end of the movie brought it full circle to the beginning, both of the movie and of the relationship between Manolo and Josemaria.  It's not a pretty story as it's set during the Spanish Civil War--as bloody and bitter a conflict as the 20th century produced.  But it's an emotionally charged tale that points in the direction of the good, which shares in unity with beauty and truth.  The film does a very good job of setting forth the basic outlines of Opus Dei's spirituality, and of depicting the glory of both priestly and lay dedication to God.  Noman highly recommends it.

Do You Know Where Your Children Are - 3

No-children ## 2 & 3 were in a sterling performance this weekend of that rousing tale of daring-do set in revolutionary France, and England.  What a story.  What heroism.  What pathos.  Noman would post a video, but his iPhone's Achilles heel is that videos don't cooperate when one tries to post them.  Take Noman's word for it, this was a great show put on by the Home School Connection--one of the several home-school cooperatives in Ann Arbor.

Who says that home-schoolers don't get sufficiently socialized?  Leftist ideologues hell bent on keeping the public schools' clutch on the public purse, that's who.  

Only a "school" free from the grip of political correctness would take on this story in the first place.  A daring English nobleman takes up the cause of freeing French aristocrats destined to have their necks kissed by Madame Guillotine.   Baroness Orczy's version of events in France rips the facade off the romantic notion of liberte-egalite-fraternite-seeking Frenchmen breaking a few eggs in order to make a glorious omelette.  There are a couple of phenomenal numbers in the musical, and at least one star was born in this performance.  All in all, a good time was had, especially by the players, who learned a little history while they were at it.

Off to Europe

It's that time of year again, when Noman flies to Europe for business.  Posts should be taking on a decidedly Continental flavor.  Perhaps the Euro will provide grist for the mill.  It seems about time for Greece to go its own way, as the country doesn't seem to be serious about getting its financial house in order.   It would be ironic for the seedbed of occidental intellectual culture to be thrown out of the European Union.  Stay tuned.

If you don't know Barcelona, or haven't been to the Sagrada Familia temple (Church of the Holy Family), you don't know what you're missing.  If the dollar recovers, as it's threatening to do, you could do much worse for an adventure vacation spot.

Glitz, Grace & Gore

Noman resists the gravitational pull of the news cycle, though he sometimes falls prey to it.  It was an unusually arresting weekend.  Noman isn't sure what to think about the triumvirate of mega-stories that emerged between Friday and Sunday, but he's sure that God has something Trinitarian in mind.  

First, the royal wedding--not to be confused with the Fred Astaire movie of the same title (which, incidentally, features several spectacular dance routines, including a famous one on the ceiling and walls, and one of No-family's favorite movie dances: "How Could You Believe Me").

A lot has changed in the intervening 64 years since Queen Elizabeth and Prince Philip wed.  For one, the bride (and groom) need not even pretend to virginity.  That's lucky for Princess Kate and Prince William, who have been living as "man and wife" for at least seven years.  I guess they thought that they might as well celebrate the arrangement with a bash.  Commoners around the globe lapped it up as if something important had just happened, though it's hard to say why.  At this rate, it wouldn't be long before a "bastard" could assume the throne, anyways, undoubtedly to favorable comment by the media--the arbiter elegantiarum of what constitutes legitimacy.

One constant is that royal nuptials generate frenzy.  As for the British, Noman presumes the enthusiasm stems from an innate sense of belonging to a people and tradition that the institution of monarchy represents.  A marriage points to new life, and signifies that the people will perdure.  As for Americans, and others, Noman doesn't get it.  He didn't wail when Diana and Dody met their violent demises.  He didn't flinch when Prince Charles married his long-time paramour, adulteress and divorcee Camilla Parker Bowles.  Still, one can't help hearing about these things for all the buzz they generate.

Noman wishes the couple (and nation) well, though the odds are steeply against them.  As a child of divorce, William is statistically likelier to have one himself.  One can imagine the deleterious affect on the human heart, and capacity to believe in enduring commitments, that a parents' divorce must inflict.  The same dour fate applies to co-habitating couples that wed.  Despite the intuitive appeal of the premise that a trial marriage helps winnow out the wheat from the chaff, the statistics point in the other direction.  Apparently, when one is used to living in a relationship with one foot out the door, one doesn't adjust one's habits by simply walking down an aisle and uttering words of fidelity in public.  At least, not since the social blessings of no-fault divorce were imposed upon society.  William and Kate aren't slaves of statistics, however, and will make their own reality.  May God bless them.

Speaking of God, the second story was the Sunday morning beatification of Blessed Pope John Paul II.  What a Shepherd.  He's been gone for 6 years, and he's still leading his flock.  Noman was amazed at the praise heaped by journalists on JP II when he died.  After being a stupid Polack to them for decades, they showed that even sexual revolutionaries and other social progressives recognize greatness when they see it in an opponent, and are capable of a magnanimous gesture.  John Paul II was the greatest enemy of the philosophical fashions of his times: relativism, consequentialism, proportionalism, utilitarianism, nihilism, atheism, scientism, secular humanism and the rest.  He was an exemplar of faith, hope and love, and a tireless champion of truth in an age that had ceased to believe in it.

When Karol Wojtyła ascended to the throne of Peter, he brought with him a deep understanding of the difference between Marxism and Christianity, based on their respective visions of man. This was his message: man is the way of the Church, and Christ is the way of man. With this message, which is the great legacy of the Second Vatican Council and of its “helmsman”, the Servant of God Pope Paul VI, John Paul II led the People of God across the threshold of the Third Millennium, which thanks to Christ he was able to call “the threshold of hope”. Throughout the long journey of preparation for the great Jubilee he directed Christianity once again to the future, the future of God, which transcends history while nonetheless directly affecting it. He rightly reclaimed for Christianity that impulse of hope which had in some sense faltered before Marxism and the ideology of progress. He restored to Christianity its true face as a religion of hope, to be lived in history in an “Advent” spirit, in a personal and communitarian existence directed to Christ, the fullness of humanity and the fulfillment of all our longings for justice and peace.

Though he wrote faster, and more, than many wanted to read, Noman especially revered five encyclicals composed during the '90's, and believes they are a beacon for people of the 21st century,and beyond in their search for the way, the truth and the life.  Centesimus Annus (1991) addressed the Social Doctrine of the Church; Veritatis Splendor (1993) addressed moral philosophy; Evangelium Vitae (1995) addressed the culture of life; Ut Unum Sint (1995) addressed ecumenism; and Fides et Ratio (1998) addressed the interrelation of faith and reason.  Had he written or done nothing more, he would have been a great man, and Pope.  But, of course, he did and wrote much more, which is why many considered him to the greatest man of the 20th Century, and why the faithful referred to him as John Paul the Great even during his lifetime.  The Church now proclaims what many, including Pope Benedict XVI, knew to be the case: he is with God in heaven, which is the greatest honor to which any mortal can aspire.

The third story involved a different kind of prophet, one who preached conquest rather than dialogue; domination rather than service; and death rather than life.  Noman speaks of Osama bin Laden, who met his maker later in the day on which John Paul was beatified.  Live by the sword, die by the sword.  Ironically, bin Laden seemed to be living in semi-retirement squarely in the military nerve center of Pakistan--surprise!  There's not much to say, other than congratulations to the navy seals who brought him to rough justice and settled accounts.  As of the present writing, President Obama is basking in the glory of the moment.  To listen to the coverage, one might think that the President is the wisest and bravest man of all time--a cross between Solomon and Churchill--for deciding to send troops in to kill bin Laden.  The Detroit News headlined its account "Daring Raid Changes History."  Really?  The Democratic party and media have once again discovered the joys of militarism, just as they did when President Clinton was trying to evade responsibility for philandering in the oval office with a junior employee, and to lift his poll numbers.  Pooh, pooh to Cindy Sheehan, and all that.  Can it be long before President Obama orders the bombing of a Sudanese aspirin factory?

Not surprisingly, the most widely ignored story was that of Pope John Paul II's beatification.  But, those who see clearly know that his pontificate is the event that truly changed history, much to the chagrin of those that worship at the altars of conspicuous consumption, pomp and circumstance represented by the royal wedding, or violent liberation represented by bin Laden's entire career.

Rapping Economics

Good things stand the test of time.  These two titans have been tilting at each other for nearly a century.  And, a very clever video of actors rapping out their respective political economies has been circling the globe for over a year.  A friend reminded Noman of it the other day, who appends it for your viewing enjoyment.

The number of views for this essentially intellectual entertainment encouraged the responsible parties to reprise their earlier success with Round Two.  It's worth the ten minute investment in time.

Noman has read a lot more Hayek than he has Keynes.  But, like all students of economics, he's read a lot of Samuelson, and Galbraith, and thus imbibed Keynesianism.  To his mind, Hayek gets the better of it in nearly every regard.  Keynesianism rests on the naive assumption, or fatal conceit, that experts sitting in a room with a blackboard can suspend all conflicts of interest, limitations on human knowledge and reasoning, and affects of original sin, to dictate solutions to socioeconomic problems.  Only a Keynesian, or a straight-up totalitarian, could be an ardent environmentalist, for instance.  Hayek's theory ultimately rests on the virtue of humility.  People can only know so much, and governments should not pretend to an omniscience to which bureaucrats and experts cannot possibly attain.

On the substance of the debate, bottom-up v. top-down, it seems to Noman that the former is the only suitable political economy for a free people.  Lap dogs, boot licks and other dependents might live comfortably in a top-down society, but not free persons.  The ideal it seems would be a bottom-up society that affords free reign to human creativity, initiative and choice; provides a stimulus to effort; and creates ample space and encouragement for people to pursue moral formation along the lines of natural and theological virtues.  A bottom-up economic system alone, without commitment to moral formation, would be insufficient to provide for the people that operated within it, despite its superior understanding of the wealth creation process.  The human heart, as well as belly, must be freed and instructed to pursue what will genuinely feed it.  This caveat is nevertheless preferable to the pretensions of individual persons who congratulate themselves on their superior compassion, merely because they favor public mechanisms that rob Peter in order to pay Paul--especially when they are Paul.

Reading these combatants, or even just watching the videos, indicates why a political class would prefer Keynes to Hayek.  In a Hayekian system, free actors determine the allocation of resources through their cumulative, spontaneous decisions.  For example, capital flows to highest return commensurate with acceptable risk depending on investors' preferences.  What you know is paramount in an economy like this.  In a Keynesian system, however, less money is left in the hands of spontaneous actors, and more is put into the hands of the cognoscente.  So, for instance, capital flows to a subsidized industry that receives redistributed dollars.  Naturally, those dollars might wind up in the hands of people whose expertise is lobbying, rather than producing whatever is being subsidized.  Just as naturally, some of the redistributed funds are diverted to the pockets of the redistributors themselves, and those with claims on them.  Thus, corruption, cronyism, conspiracy and waste are the watchwords of a Keynesian system, which favors who you know rather than what.

Noman hopes that you like the videos, and encourages you to read Hayek's last word on his thinking, "The Fatal Conceit."  It's a good place to begin thinking about these matters.

  

"Birthers," and the Disordered Soul

The Economist weighs in with some interesting commentary regarding President Obama's birth certificate.

A large number of Americans simply believe, at a gut level, that Barack Obama is so far outside of the mainstream to be un-American. They are invested in this idea and, in the same way folks watch Fox News or MSNBC, they seek out information that confirms their opinion, while ignoring contradictory evidence. Witness the odd dismissal of Mr Obama's short-form birth certificate, a document accepted by the State Department. Or the popularity of fanciful stories about Mr Obama's birth in Kenya and secretive journey back to America (because his parents knew he would one day be president!). As David P. Redlawsk of Rutgers University wrote recently in the New York Times, "Feelings come first, and evidence is used mostly in service of those feelings. Evidence that supports what is already believed is accepted, that which contradicts it is not."

The Economist seems to be mixing up different issues.  The "large number" of Americans who believe that President Obama is "so far outside of the American mainstream to be un-American," may believe it for good reasons, in their heads, as well as for visceral ones in their "guts."  The President fairly epitomizes the anti-Americanism of Continental socialists, the 60's generation, liberationist black churches, and Ivy League academics.  His Presidency is the culmination of the long march through the institutions, a march with the purpose of destroying America's system of political economy.  As President, he has bowed to foreign dictators, received the compliments of America's enemies, rolled the middle class and opportunistically imposed a social welfare agenda on the country without popular support.  President Obama has followed his party's custom of purchasing votes with redistributed dollars, and fostered a culture of dependence.  All of this cuts against the American grain.  The media convinced Americans with eight years of perpetual harping, attacking, disrespect bordering on treason and the pharisaical rending of garments, that they hated George Bush.  The didn't convince anyone to pine for the return of Jimmy Carter.  

That is not tantamount to denying that President Obama was born in Hawaii, which is a separate issue.  He has proven that his mother gave birth to him in Hawaii.  He has shown, however, that he is a disaffected malcontent harboring a grudge against political concepts he mistakes for America's failings, in whose name he feels compelled to apologize whenever and wherever.  This makes people doubt his Americanism.  (Love of country is still a virtue here; and criticism of everything it does is not yet considered a sincere expression of it.) Their hackles are further raised by the realization that this typical, "well-educated," and capable anti-American is a man with (1) a plan for redressing the evils he attributes to America, (2) a thespian prowess that enables him to preach shared sacrifice while he picks your pocket, and (3) the grace and charm to pull it off politically--with the invaluable help of a protective media that covers for his follies while it scours for dirt on his opponents.

People did not trust his short-form evidence for a variety of reasons, not least of which is that he is not trustworthy.  He is a disciple of Saul Alinsky who preached that the ends of power justify the means, any means.  To reiterate, he says one thing and does another; he postures as a patriot and acts like a traitor; he is too clever by half, and too smooth by even more; he assumed the Presidency under crisis conditions and proceeded to use Americans' fear and desperation as an "opportunity" to impose a foreign agenda on domestic soil.  (Americans are not Continentals, and don't want to be.)  In short, they don't trust his intentions, and fear the competence with which he and his czars are sapping America of its strength.  That is the deeper significance of the controversy. The President is widely distrusted for presenting himself as what he is not: a freedom loving, free-market patriot.  As the Economist points out, his place of birth simply became proxy for a deep distrust.  Unlike the Economist, Noman believes that this distrust is warranted, and may prove life-saving.

With respect to David P. Redlawsk's thesis, Noman found it highly indicative of 21st Century social discourse.  Moreover, it reminded Noman of an observation he made decades ago while studying law at Harvard--at the same time, incidentally, as a seemingly thoughtful classmate named Barack Obama.  (In case you're wondering, Noman thought better of him then, before he moved on to the Chicago finishing school for young radicals.)  The observation was that American law, and its political uses, exhibited the disease of a disordered soul.  In classical (philosophical) anthropology, the intellect leads the will, or rational appetite.  Reason serves to guide desire; deliberation and judgment precede choice in human action.  Departures from this natural operation of the person's soul, or psyche, can only lead to deformed beings. Modern law--from the legal realists, forward--on the contrary, manifested nothing so much as the will on a rampage, with reason serving only to justify positions already reached before intellection had informed volition.  Such is the nature of prejudice and bigotry, which the left has always projected onto the middle class it hates.  This disorder struck Noman as dangerous then, and does even more so now.  In human nature, reason is the will's protection against being swallowed up by the passions.  Having rejected the role of reason, the post-modernists so fashionable on campuses in the 80's and 90's ushered in a bastard offspring: citizens of uninstructed feelings who utilize evidence in support of unconsidered "beliefs."  Barack Obama, our head-swiveling, teleprompter-reading, finger-wagging posturer-in-chief, is at once the paragon and paladin of this new emotive class, whether it is ultimately for him or against him.  Should this type of person choose to insist against all evidence that the President was born elsewhere, he  merely reaps what his party has sown for generations.