Wednesday, October 22, 2008

The Crash Course

As we close in on The Most Important Election Ever, it has become like every other presidential election: long, repetitive, painfully boring, and about the economy. Both candidates claim to have the fix and purport that the other’s plan will only perpetuate the troubles, but do either really understand the problems? We’re often told our economy is strong because debt-to-GDP is low or inflation-to-GDP is low. Well, here are some things I didn’t know before last week:

When the Fed calculates inflation, three subjective factors are present: the craziest and most influential of which is hedonic adjustments. They measure pleasure/utility: paying the same price for a better product is really like paying less for the same (your wallet disagrees). These lower the calculated value of inflation more than twofold.

When the Fed calculates GDP, two subjective factors are present: hedonic adjustments and imputed values. Hedonic adjustments are now made in the opposite direction and imputed values estimate what you get without paying, e.g. you don’t pay yourself rent on your house and free checking is free so you’re not paying what those could cost you. None of this money is ever transacted nor does it ever exist, yet it is 35% of our reported GDP.

Total credit market debt has historically been below 200% of GDP with a spike to 270% during the Great Depression. Today it’s pushing 350%. At the same time this debt shot up, the personal savings rate plummeted. Prior to its decline, the average American household was saving about 9% of their income. Today it’s less than 1%. By comparison, Europe saves 10% and China saves 30%. But it’s not just private citizens that don’t save; all levels of government and corporations have a combined shortfall of at least $55 trillion. Everyone is spending money they don’t have.

With inflation understated, GDP overstated, and debt mounting, it’s no wonder the US economy functions like one that doesn’t have low debt-to-GDP and inflation-to-GDP levels.

Where does all this debt and inflation come from? Well, since banks loan a single dollar many times, there is much more debt than dollars. If it all gets paid back, everything’s cool. But that old sin of usury means that more money is needed to zero the balance. When you don’t have that money, a default happens and you lose your house. For the Federal Government, the situation is a little different: enter fiat currency. Whenever the Fed needs money, it writes a check, and thus creates money out of thin air (would that we all had that option). The result is rampant borrowing, which creates lots of debt, and a huge money supply, which creates lots of inflation. To wit: it took until 1973 to have $1 trillion of money. That means everything ever done in the US up to 1973 was done with less than $1 trillion in money supply. Our 13th trillion took just the last few months. This all adds up to your dollar buying less and you needing to borrow more.

Hopefully these few facts and statistics shed some light on the larger economic troubles facing the US and how the rampant borrowing over the past few weeks is likely to exacerbate the situation. I wish I had learned all this by visiting a campaign website, but I didn’t and I’m afraid that’s not possible. Neither candidate seems aware of these problems as both call for more spending of money that we don’t have. I urge all of you to visit and take The Crash Course to get the full story (FREE!). It will entirely change your way of thinking about the economy and better prepare you to deal with the future you will inherit.

Sunday, October 19, 2008

In Which We Unexpectedly Learn a Thing or Two Concerning War

It is interesting to note that while Christian fantasy has become a distinct sub-genre of literature, most of the early writers of fantasy were not only Christians, they also tended to produce distinctly Christian works. The most obvious examples are, of course, J.R.R. Tolkien's The Lord of the Rings and C.S. Lewis's Chronicles of Narnia, though credit should be given to yet another Christian for inventing the genre of fantasy altogether—namely George MacDonald with his book Phantastes. In this sense, Theodore Beale's Summa Elvetica is a recent addition to a long tradition. But what gives Beale's work its peculiar appeal is that he has added to the usual fantasy world, resplendent with orcs, trolls, goblins and elves, an institution very similar to the medieval Catholic Church. Thus emerges the unusual plot: the protagonist, a potential candidate to the cloth and a learned if youthful philosopher named Marcus Valerius, is sent as the eyes of the Sanctiff, the head of the Amorran Church, to help determine whether or not the elves have souls. If the inquiry determines that the elves are lacking, it will be holy war, and possibly the extermination of the elvish race.

The story follows the journey of Marcus and those who accompany him to Elebrion, the home of High King Mael and his elf kingdom. On the journey, in addition to his slave Marcipor and his Dwarf bodyguard Lodi, Marcus travels and converses with a number of Michaelene warrior-priests, as well as two erudite scholars, Father Aestus and Bishop Claudo, who are also to weigh in on the theological dispute at hand.

But the priestly contingent is not the only one concerned with the elves. For there are parties that will benefit immensely from a crusade. Marcus is intellectually honest, if a bit naive, and is therefore genuinely interested in the answer to the philosophical dilemma. Before being sent on his way, his worldly father reminds him, "There are fortunes to be made in war, and not only by those who lead the legions... And for the great, the temptations are even more sweet. There are commands to be sold, territories to be governed, slaves to be gathered—and above all, glory to be gained." On the journey itself one of the Michaelenes points out, "[T]here’s a fair number of captains who make a living turning foolish young farm boys into corpses every summer."

These words are worth dwelling on, because they provide a key to one of the more interesting aspects of the book. To understand them, it helps to know that Mr. Beale is also "an occasionally controversial political columnist" who writes under the pseudonym Vox Day. Under this nom de plume he has recently penned a book titled The Irrational Atheist, in which he examines the various fallacies disseminated by some of the so-called New Atheists. One of these fallacies, chiefly propagated by one Sam Harris, is that religion is a major cause of war. In The Irrational Atheist, Vox lays this myth safely to rest: only seven percent of wars can be reasonably attributed to religious causes.

Theodore Beale takes up this theme in Summa Elvetica. When it is claimed that religion causes war, the crusades spring instantly to mind. If we read the prospective holy war against the elves as a parallel to one of the crusades of the middle ages, a complicated picture begins to emerge. The pious may be more likely to support a war if urged on to do so by their spiritual leader, but the war profiteers aren't going to be moved by indulgences and red crosses. In short, a variety of motives lead men to go to war, even an ostensibly holy one. Blame resides with fallen man, not with religion which serves to ameliorate his depravity.

Beale is not likely to join the company of Tolkien and Lewis—at least not yet—but he gives evidence of a lucid imagination and demonstrates that he can tell a good story. Its unusual subject matter may suggest merely an amusing novel, but Summa Elveticacreates a world in which the middle ages, its wars and its theological disputes, come roaring back to life.