Economics

[Veritate Duce Progredi]

Whiskey, if you start a podcast where you simply narrate the articles you share into audio form so that I have time to listen to them, I promise I'll join your Patreon at the Johnnie Walker Blue Label tier or whatever.

Lol, best idea I've ever seen from you Wiz. Add me to the list

 

[wizards8507]

The Bruenigs have been going off the deep end lately.

https://twitter.com/MattBruenig/status/1104842799244034048?s=19

 

[RDU Irish]

The Bruenigs have been going off the deep end lately.

https://twitter.com/MattBruenig/status/1104842799244034048?s=19

One of the comments calls it fucktardedness - I love when one word can perfectly describe something. Whiskey take note.

 

[Whiskeyjack]

One of the comments calls it fucktardedness - I love when one word can perfectly describe something. Whiskey take note.

When have I ever endorsed Bruenig's work without reservation? The only thing I can ever remember sharing of his here was the Family Fun Pack article, and I added something like "Happy to see some on the Left finally focusing on this issue."

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Matt does lots of smart work. But his ontological argument that the existence of laws, courts, police, and government make ‘private property’ a fiction is not convincing.</p>— Michael Brendan Dougherty (@michaelbd) <a href="https://twitter.com/michaelbd/status/1105117625422626816?ref_src=twsrc%5Etfw">March 11, 2019</a></blockquote>
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[NDBoiler]

When have I ever endorsed Bruenig's work without reservation? The only thing I can ever remember sharing of his here was the Family Fun Pack article, and I added something like "Happy to see some on the Left finally focusing on this issue."

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Matt does lots of smart work. But his ontological argument that the existence of laws, courts, police, and government make ‘private property’ a fiction is not convincing.</p>— Michael Brendan Dougherty (@michaelbd) <a href="https://twitter.com/michaelbd/status/1105117625422626816?ref_src=twsrc%5Etfw">March 11, 2019</a></blockquote>
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My man, I think he was referring to your tendency for posting lengthy articles.

 

[Whiskeyjack]

My man, I think he was referring to your tendency for posting lengthy articles.

Pretty sure it was a criticism of Bruenig's economics (and me for having shared one of his articles here before) instead of a paean to brevity. But RDU is free to clarify.

 

[wizards8507]

Pretty sure it was a criticism of Bruenig's economics (and me for having shared one of his articles here before) instead of a paean to brevity. But RDU is free to clarify.

Bruh you're the biggest Liz Bruenig Stan on the Internet.

 

[Whiskeyjack]

Bruh you're the biggest Liz Bruenig Stan on the Internet.

I think she's a good follow on Twitter, and I enjoy seeing her dunk on Actonite clowns. But I certainly don't stan her.

Yup. I like Breunig, but that take is indefensibly stupid. Her opinions on abortion, universal daycare, etc. are warped by the DSA creeps she keeps company with.

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">"universal affordable high-quality child care." Affordable, but high-quality. Question: who are the women working for such affordable rates, but offering such high-quality care? Oh, yes, women who don't write for The Times, so we won't hear *their* thoughts.</p>— Tara Ann Thieke (@TaraAnnThieke) <a href="https://twitter.com/TaraAnnThieke/status/1094629272369672192?ref_src=twsrc%5Etfw">February 10, 2019</a></blockquote>
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<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">That's because these proposals are about welfare for the Upper Middle Class. They're not for the good of the workers (who would prefer to be caring for their own families rather than in an institution) and it's certainly not for children (who would rather be in their homes).</p>— Tara Ann Thieke (@TaraAnnThieke) <a href="https://twitter.com/TaraAnnThieke/status/1094630055425253376?ref_src=twsrc%5Etfw">February 10, 2019</a></blockquote>
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[wizards8507]

I think she's a good follow on Twitter, and I enjoy seeing her dunk on Actonite clowns. But I certainly don't stan her.

I used to think she was brilliant, but that's been eroding quickly. I'm not sure how she doesn't see that her economic allies are the same folks who enthusiastically support abortion, euthanasia, and every other cultural and moral atrocity of the 21st century, and that those issues are not unrelated.

 

[Whiskeyjack]

I used to think she was brilliant, but that's been eroding quickly. I'm not sure how she doesn't see that her economic allies are the same folks who enthusiastically support abortion, euthanasia, and every other cultural and moral atrocity of the 21st century, and that those issues are not unrelated.

It's really not hard to see the attraction of "socialism" for our generation. It's a sort of pons asinorum that triggers our parents and immediately clarifies the lines of disagreement. And they can easily look at northern Europe and conclude that that works better, and the only reason we're not doing it is because of regulatory capture and Protestant brain worms.

But they make the same mistake as Marx. Socialism, as an ideology, is a reaction to liberalism, and to the extent that its also wrong about human anthropology (and it is very wrong there), it's bound to end in tragedy.

 

[zelezo vlk]

I found a new blog to follow: https://abrenuntio.com/why-economic-particularism-is-necessary/

The realization of an integralist government requires a sifting of the institutions and arrangements of the liberal order, a process of examination and analysis prompting questions of what may be maintained, what requires modification, and what must be discarded. While the ‘distributist’ platform sketched out by an earlier generation of integralists1 offers a workable template for a possible “third way” between total state capitalism and liberal finance capitalism, given the current state of affairs, much ground must be cleared before significant action can be taken. To the extent a distributist regime prioritizing the decentralized ownership of property is to be possible, industry must first be brought back to a scale at which it can be adequately contained and made to serve the interests of the common good. Accordingly, the disassembly of the globalized trade system should be a priority for any prospective integralist community.

In the same way that a perfect balance of private property is impossible and potentially even undesirable, so too is a wholly internalized economy; however, for any integralist government it must be a priority of the highest order. While the seductive gains of trade are an undeniable economic reality, it has long been forgotten that trade is an inherently corrosive proposition. Here, as always, the Doctor Angelicus offers profound insight:

“…[If] the citizens themselves devote their lives to matters of trade, the way will be opened to many vices. For since the object of trading leads especially to making money, greed is awakened in the hearts of the citizens through the pursuit of trade. The result is that everything in the city will be offered for sale: confidence will be destroyed and the way opened to all kinds of trickery: each one will work only for his own profit, despising the public good: the cultivation of virtue will fail, since honor, virtue’s reward, will be bestowed upon anybody. Thus in such a city civic life will necessarily be corrupted.”

Thomas Aquinas, “The Governance of Rulers” (De Regimine Principum), II c. 3, trans. Gerald B. Phelan.
While Aquinas here speaks of domestic trade in the Catholic Christian communities2 of the high medieval period, these concerns are even more acute in the age of the nation state. Accordingly, it is important to reduce the overall volume of trade, not only to minimize the moral tensions inherent to commerce, but to restrict strategic commitments to secularist regimes potentially hostile to an emerging Catholic order. As liberalism fictitiously assumes that the common good may be served by the individual pursuit of self-interest, so it posits that a community may beneficially trade with any potential rival, no matter how fundamental their theo-political opposition. Incredibly, despite decades of evidence to the contrary, it is still widely assumed that convergence towards liberal norms will inevitably ensue from increasingly inter-connected economies. Nowhere is this fallacy more visible than in the inter-dependent relationship of the United States and China; one of the world’s most atrocious abusers of human rights is now a pillar of our economic order, with a demonstrably corrupting influence on both our commercial and political classes.

The Surrender of Authority to the False God of “Efficiency”:
“Commerce is always being spoken of as the universal bond of peoples, yet never has there been a more active cause of bloodier or more intractable wars.”

Louis de Bonald, “On The Wealth of Nations”
Moreover, globalization of trade places the transnational corporation above the individual political community, allowing for opportunistic jurisdictional shopping in pursuit of favorable tax treatment, lax environmental regulation, and readily exploitable labor. In an economic system in which “public” corporations already exhibit little accountability even to their putative owners, this exacerbates the misalignment of incentives between management and citizen stakeholders, and allows the largest entities to drift out of the reach of the civil authority. As such, globalized trade magnifies economic externalities to a staggering scale and places them beyond the reach of any regulatory power. Before a more sustainable and equitable order may be instituted, it is necessary that these globally distributed entities be reigned in to a manageable scale.

Here we must note the presence of another fiction of liberalism: the notion of “free trade” is itself a fallacy of the highest order. The term conjures an image of a natural flow of goods and services proceeding according to a quasi-natural law, akin to an economic force of gravity. Here, as often is the case in matters economic, an artificial and fundamentally unjust arrangement is depicted as an inevitability. The scale and complexity of the agreements underpinning the trade system illustrate the sleight-of-hand engaged in by free market ideologues, as such deals are the result of years of opaque horse-trading between self-interested parties with asymmetrical access to information and conflicting aims. Whoever can be said to ‘win’ from these agreements, it is unlikely to be the common good.

An Opaque Regime of Imbalance & Misaligned Incentives:
As “free market” capitalism glosses over the degree to which many industries are dependent on an insidious relationship with the state, so too is the global “free trade” system an artificial creation of corporate and political manipulation. The enormous sustained imbalances between the US and China, as well as within the EU, and the attendant mountain of public debt accumulated in their maintenance, are proof positive that this is an unsustainable arrangement. Despite no shortage of evidence of the mobility of capital, production, and labor, these enormous structural imbalances persist, with no sign of a potential “equilibrium” in sight.

In this order, the Smithian “invisible hand” is explicitly guided by financial and economic interests, third-world autocrats, and their liberal allies in Western governments; meanwhile, the risks are socialized and the costs paid for by an increasingly desperate working class. When the tide goes out and these balances come due, it leads to sudden economic crisis in which financial interests are placated in order to avoid further collapse. This dynamic was visible in 2008 in the United States and elsewhere, and on a periodic basis in the EU since around 2012.

Moreover, it is in the question of trade that we may see the increasing disinterest of an oligarchical legislature in maintaining any semblance of democratic legitimacy. Given their sheer complexity, free trade deals require “fast track” provisions that finally dispense with the fiction of democratic representation, revealing the extent to which legislatures are beholden to corporate interests as well as the general sloth of the legislative class. Deals must be passed on a wholesale basis to find out what they contain, while their inordinate scale and opacity limits any intelligible analysis of potential outcomes, hiding blatant acts of self-dealing. Meanwhile, opponents of such deals are vilified as either parochial nationalists wanting to return to the past or as uneducated luddites unable to see the obvious “win-win” on offer.

Objections & Obstacles to Reform:
After decades of gorging on the profits of offshoring, corporate interests and market liberals will inevitably cry foul when the punchbowl is withdrawn. Their complaints either amount to dogmatic sloganeering lacking any substantive basis, or else express concerns about the short-term adjustment costs of such a policy, raised in ignorance of the long-term strategic benefits. Even on a narrowly liberal-economic consideration of efficiency, given the untenable nature of the current order and the sustained imbalances it has recurrently produced, these objections have purchase only on the shortest of time frames. Access to cheap imports is a chimera by which pollution is offshored to jurisdictions where those directly affected cannot complain, and where the labor abuses can be disavowed behind third-party contracting relationships. Meanwhile, the erstwhile laborer who is supposed to benefit from modestly cheaper goods is left un- or under-employed and told, actually, he can afford more cake than ever before.

More fundamentally, the nature of such persistent external imbalances demands that domestic consumption be financed by debt, insuring that our economic system is characterized by hideous imbalances encouraging the working American to engage in a speculative mania they are bound to lose from. Meanwhile, large exporters, global services businesses, and international banks are able to squirrel away their profits beyond the reach of tax authorities, all the while striking deals with any and every corrupt regime, including even criminal syndicates3. Whether it is Goldman Sachs and Morgan Stanley assisting Chinese investment banks in perpetuating what amounts to global-scale accounting fraud4, McKinsey collaborating with the South African corruptocracy to ‘restructure’ its graft-ridden state industries, or resource companies’ literal strip-mining of third-world banana republics, the looting of local economies here and abroad persists under a regime of opacity and supposed economic inevitability.

Accordingly, even the most modest attempts to roll back globalization trigger cries of outrage from liberals, now including the left-liberals who once understood that free trade was not the ‘free lunch’ it is often made out to be. This dynamic has been visible in the uproar over the limited tariff regime instituted by the Trump administration, even as it is justified by comfortably liberal-capitalist assumptions. The proposed 20% strategic tariff on Chinese goods merely offsets a yawning imbalance secured by the Chinese state due to the desperation of American legislators, keen to secure a potentially vast new market for exports. Its imposition would effectively result in a more-or-less balanced “free market” somewhat closer to the ideal existing only within the pages of economics textbooks. Less than a few quarters after the institution of even this limited tariff regime, however, we hear endless moaning about the adjustment costs supposedly inflicted on corporate exporters; costs neither visible in the profitability of S&P 500 corporations nor in their stock prices.

The Necessity of “Industrial Policy”:
However, this does lead us to a more substantive issue; industrial supply chains which organically grew over decades cannot be reconstituted on a piecemeal basis; corporations wishing to return production to the United States find a dearth of domestic suppliers able to replace their foreign partners. While free market liberals take this as validation of their defeatist assumptions, this narrowly short-term fixation on “efficiency” must be ignored. Some degree of industrial policy will be necessary to internalize production, a process of state-directed capitalism that involves inevitable tensions. The risk of exacerbating the cozy alignment of corporate interests and the civil authority, which has already made government less the prospective regulator of business than the guarantor of its legal privileges, is a serious one. However, there is no alternative to a proactive state-led initiative, neither in the immediate question of trade nor in any subsequent, more ambitious distributist scheme. To assume otherwise is to risk leaving a potentially post-secular state political community vulnerable to manipulation by fundamentally hostile interests abroad.

Lessons may be drawn from the Chinese experience, by which American and European corporations have been manipulated into enormous commitments of capital on an incredibly unfavorable basis, lured by the prospective access to a market of potentially enormous scale; both carrots and sticks will need to be employed. Despite the significant volume of global trade, most large American corporations remain dependent on the American market for the vast majority of revenue, and business must be made to choose between being a “global citizen” free of responsibilities and continued access to the American market. Once commitment has been secured, a more substantial initiative to insure great accountability and alignment to the common good becomes possible. Reconstituting an integralist political community will require a relatively self-sustaining economic order, by which economic expediency may be more effectively subordinated to the civil and spiritual authorities.

While many integralists may cry foul at such apparent “state capitalism”, it is difficult to see an alternative that allows for the containment and prospective reigning in of capitalist excess. It is important here not to be too beholden to theoretical ideals, nor to blame the failings of current arrangements solely on institutional structure; this would be to commit to the same fallacies that modern liberalism advances. To draw on Wendell Berry, a prominent critic of the dissimulating nature of globalist free-market ideology, “[the] way out of this situation is to understand [this] as a problem that is both public and private. The failure of public discipline in matters of economy is only the other face of the failure of private discipline.”5 No institutional arrangement can compensate for a lack of virtue amongst the civil authorities, and any meaningful change must combine a broader restructuring with a renewal of Christian virtue on an individual basis.

Ultimately, such changes need not entail an economic regression, although such a return to austerity would do wonders for reforming the habits of a people grown fat through an insatiable appetite for useless baubles; it would, in any case, likely fall mostly on those least able to bear it. The American market is of sufficient scale to support an extraordinarily high standard of living, and was until relatively recently marginally dependent on trade. Economic globalization only began on a significant scale after around 1990, reaching critical levels only after the reconfiguration of China’s financial system in the early ‘00s. What was disaggregated over a period of decades may be put back together again over a similar time-scale, and here, as elsewhere, it is important not to expect immediate results nor anticipate a significantly more equitable economic order in the immediate future. A largely internalized economy capable of shaping its own destiny is, however, no impossibility, and a necessary first step towards the reconstitution of a balanced political community oriented towards man’s highest good.

 

[Whiskeyjack]

Here's the conclusion from a short article titled "Why the distribution of wealth has more to do with power than productivity":

All statistics tell a story, but stories can be told from different perspectives. Embedded in the definitions of all economic statistics are value judgements about what is desirable and what is undesirable, which in turn shape the way we think about the economy. At the moment, the way we measure the wealth of nations mainly reflects the fortunes of capitalists and landowners rather than workers and tenants. Britain looks wealthier than Germany on paper, but this does not reflect the lived reality for most people. While it’s important not to overstate the extent to which statistics can influence the real world, this is important for at least three reasons.

Firstly, it illustrates how seemingly objective metrics often have ideological assumptions baked into them. While there is already a well-established literature on alternatives to GDP, many economic metrics are used in economic analysis and policy appraisal without any critical appraisal of their underlying ideological assumptions. This needs to change.

Second, it highlights how paper wealth has in many places become decoupled from productive capacity, and how conflating the two can be highly misleading. This is particularly the case where zero sum rentier activity is widespread, as in the case of Britain. Such discrepancies raise the question of whether the way that we currently measure wealth is really the most sensible.

But most importantly, it illustrates that the distribution of wealth has little to do with contribution or productivity, and everything to do with politics and power. As J.W. Mason states: “It’s bargaining power, it’s politics, all the way down.”

For economists who see their discipline as a ‘value free’ science which is separate from politics, this is uncomfortable territory. But if the aim is to understand the economy as it really exists, then analysing power beyond the narrow concept of ‘market power’ is essential. Among other things, this means grappling with the power dynamics that underpin ownership and property relations, as well as those that that drive inequalities between different social groups and identities.

It’s been 200 years since David Ricardo described the “principal problem” of political economy. Perhaps it’s time to revisit it.

 

[Irishize]

It's really not hard to see the attraction of "socialism" for our generation. It's a sort of pons asinorum that triggers our parents and immediately clarifies the lines of disagreement. And they can easily look at northern Europe and conclude that that works better, and the only reason we're not doing it is because of regulatory capture and Protestant brain worms.

But they make the same mistake as Marx. Socialism, as an ideology, is a reaction to liberalism, and to the extent that its also wrong about human anthropology (and it is very wrong there), it's bound to end in tragedy.

Nicely stated. In the Leftist mind, Socialism is for the people, not the Socialist.

 

[RDU Irish]

My man, I think he was referring to your tendency for posting lengthy articles.

This

And a shot at my own short attention span.

 

[RDU Irish]

Pretty sure it was a criticism of Bruenig's economics (and me for having shared one of his articles here before) instead of a paean to brevity. But RDU is free to clarify.

I would love to see your synopsis/key take aways of the articles you post with a link rather than the mile long novel reposted. Think you have great points/insights in there somewhere but I am too lazy to dig through it completely. Not all of us have the personal liberty to toke on a pipe all day pontificating on life like you.

 

[Legacy]

 

[Whiskeyjack]

I would love to see your synopsis/key take aways of the articles you post with a link rather than the mile long novel reposted. Think you have great points/insights in there somewhere but I am too lazy to dig through it completely. Not all of us have the personal liberty to toke on a pipe all day pontificating on life like you.

I'll try to remember to bold the parts that I thought most relevant so those with little time can quickly figure out whether they want to read the rest of the article.

 

[Whiskeyjack]

Jordan Bloom just published an article in The Daily Caller titled "Sharia Law: As American as Apple Pie":

Two of the world’s great financial regimes are diverging. Not the Chinese and the Americans — these are converging. Rather, the regimes of the West and the Islamic world. And you’ll have to forgive me for preferring the Islamic model.

Let’s start with a basic outline of Islamic finance. Islamic finance is not too different from most moralistic approaches to finance. It views money as a neutral mediator of transactions. For that reason, it views the ability to acquire more money by simply lending money (riba, in Islamic parlance) as a barren and hence sinful activity – it is proclaimed haram (prohibited) under Sharia law.

In this way, it is pretty much the same as the anti-usury laws in force during the Middle Ages in Europe. This view of usury was aptly summarized by the great Catholic theologian and saint Thomas Aquinas when he wrote, “to take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality which is contrary to justice.”

This remains the basic position of the Catholic Church, albeit with some modification. It did not even take monotheism to recognize that usury was wrong. Aristotle saw it as being against the natural law and lumped usurers in with “those who ply sordid trades, pimps and all such people.” And despite the anti-Semitic trope that Jews have a tendency to lend money, the Old Testament is skeptical at best (Exodus 22:25).

Usury is not just haram under Sharia Law. It is haram under most serious systems of moral philosophy and theology.

Contemporary Islamic finance favors financing investment through part ownership. In financial speak, this is called ‘equity financing.’ That is, projects are financed through the selling of public shares. When you buy a public share, you get partial ownership of the project and you get some of the profits in the form of dividends – but since you have a stake in the company you are less likely to exploit it, as you may exploit someone in your debt.

Sounds pretty good, doesn’t it? Equity-financing seems like a model for the sort of rugged capitalism that Americans favor. Perhaps it is. But it is the Islamic world that is moving in this direction with their ban on usury, whereas America is moving more and more toward debt-financing instead.

In the past 25 years, the number of stocks listed on U.S. stock exchanges has fallen by about half. The number of companies launching on public markets has fallen. The following chart shows this.

In addition to this, companies that are already listed are buying their shares back. Interestingly, they do this by borrowing in the debt markets. What they are doing is swapping equities for debt. They borrow from Peter to buy their stock back from Paul. The result is that there is more debt in the markets and less equities. See the following chart.

According to American Affairs, Goldman Sachs estimated that $1 trillion would be spent on stock buybacks in 2018. Much of the corporate windfall from Trump’s tax cut has gone into stock buybacks as well. What we are seeing is the American economy – together with the economies of many other non-religious countries – becoming less and less reliant on ownership by the public through the stock market. Fewer and fewer people have a stake in American capitalism.

At the same time as the market for equities shrinks, the market for debt skyrockets.

American capitalism is becoming American usury. Maybe this is what all those great moral philosophers and theologians had in mind when they said that we should be wary of money-lending?

The irony of ironies, of course, is that the Islamic world is the one offering a better alternative, with a system of finance that encourages equity ownership and discourages large build-ups of debt. In this respect, at least, Sharia law is as American as apple pie.

On a deeper level though, this is not that surprising. Islamic countries are, for the most part, the only ones that take their religious principles seriously enough to allow them to inform their structure of laws. The countries of the West used to do so, but increasingly politicians shy away from moral judgements, instead falling back on utilitarian arguments. They talk about ‘maximizing economic growth’ or raising the GDP.

Maybe the old philosophers and theologians were wiser than our new administrator-politicians. Maybe they saw something much deeper and, in their skepticism of usury, recognized a timeless moral truth – one that can and should be applied to government.

In 1515 Pope Leo X wrote that usury “is not a sin because it is prohibited; rather it is prohibited because it is in itself sinful, for it is contrary to natural justice.” Perhaps he knew something that we didn’t.

On a more serious note, a credit union that avoided all usurious lending and screened its investments according to Catholic doctrine would be very successful. I've been talking to some well-positioned people at the Diocese of Phoenix about getting something like that off the ground. We'll see what happens.

 

[wizards8507]

On a more serious note, a credit union that avoided all usurious lending and screened its investments according to Catholic doctrine would be very successful. I've been talking to some well-positioned people at the Diocese of Phoenix about getting something like that off the ground. We'll see what happens.

Let me give all of my money to Scott Malpass in a mutual fund that tracks the Notre Dame endowment. The University can take a management fee of 0.5%.

 

[Whiskeyjack]

Let me give all of my money to Scott Malpass in a mutual fund that tracks the Notre Dame endowment. The University can take a management fee of 0.5%.

I'd love to see ND take the lead on this. I think (hope?) our endowment already screens its investments according to Catholic doctrine, but I haven't been able to find anything concrete on the subject. And all lending isn't usurious:

I’ve contended that usury is quite a bit simpler a subject than it is usually understood to be, and that preventing most of it as a practical matter would be rather straightforward. What I haven’t done though is give you a simple test to check to see if a given proposed lending contract is usurious. I intend to do that here.

In order to determine if a proposed contract is usurious, we need to ask the following:

1. Is profitable interest charged on the loan?
2. Has the borrower posted collateral providing security on the loan? (Note: a corporation or partnership counts as collateral).
3. Is the lender’s recourse for recovery of principal and interest, in a case of default, limited to the named collateral and only the named collateral?

If all three of these are true, it is not usury. If (1) is true and either (2) or (3) are false, it is usury.

I'd think it shouldn't be too difficult for a credit union to avoid this kind of thing.

The Notre Dame Federal Credit Union, which isn't actually affiliated with the University, is expanding into Arizona currently. I wonder if they'd be interested in this.

 

[wizards8507]

I'd love to see ND take the lead on this. I think (hope?) our endowment already screens its investments according to Catholic doctrine, but I haven't been able to find anything concrete on the subject. And all lending isn't usurious:



I'd think it shouldn't be too difficult for a credit union to avoid this kind of thing.

The Notre Dame Federal Credit Union, which isn't actually affiliated with the University, is expanding into Arizona currently. I wonder if they'd be interested in this.

"In 2014, Mr. Malpass was part of the founding group for Catholic Investment Services, Inc., a not-for-profit offering top tier investment solutions to Catholic organizations nationally that comply with the USCCB Guidelines on Socially Responsible Investing."

Not definitive, but a pretty solid indicator.

 

[zelezo vlk]

A Medici Pope railing against usury. A bit ironic, eh?

 

[Whiskeyjack]

A Medici Pope railing against usury. A bit ironic, eh?

God obviously has a sense of humor.

 

[ACamp1900]

God obviously has a sense of humor.

 

[zelezo vlk]

God obviously has a sense of humor.

Tbf, the Italian banking families always seemed to understand that what they were doing wasn't always kosher. Hence the Scrovegni chapel in Padua amongst others.

Sent from my SAMSUNG-SM-G900A using Tapatalk

 

[Legacy]

Speaking of usury...

The Law-School Scam
For-profit law schools are a capitalist dream of privatized profits and socialized losses. But for their debt-saddled, no-job-prospect graduates, they can be a nightmare. (Atlantic, Sept 2014)

David Frakt isn’t easily intimidated by public-speaking assignments. A lieutenant colonel in the Air Force Reserve and a defense attorney, Frakt is best known for securing the 2009 release of the teenage Guantánamo detainee Mohammad Jawad. He did so by helping to convince a military tribunal that the only evidence that Jawad had purportedly thrown a hand grenade at a passing American convoy in 2002 had been extracted by torture.

By comparison, Frakt’s presentation in April to the Florida Coastal School of Law’s faculty and staff seemed to pose a far less daunting challenge. A law professor for several years, Frakt was a finalist for the school’s deanship, and the highlight of his two-day visit was this hour-long talk, in which he discussed his ideas for fixing what he saw as the major problems facing the school: sharply declining enrollment, drastically reduced admissions standards, and low morale among employees.

But midway through Frakt’s statistics-filled PowerPoint presentation, he was interrupted when Dennis Stone, the school’s president, entered the room. (Stone had been alerted to Frakt’s comments by e-mails and texts from faculty members in the room.) Stone told Frakt to stop “insulting” the faculty, and asked him to leave. Startled, Frakt requested that anyone in the room who felt insulted raise his or her hand. When no one did, he attempted to resume his presentation. But Stone told him that if he didn’t leave the premises immediately, security would be called. Frakt packed up his belongings and left.

What had happened? Florida Coastal is a for-profit law school, and in his presentation to its faculty, Frakt had catalogued disturbing trends in the world of for-profit legal education. This world is one in which schools accredited by the American Bar Association admit large numbers of severely underqualified students; these students in turn take out hundreds of millions of dollars in loans annually, much of which they will never be able to repay. Eventually, federal taxpayers will be stuck with the tab, even as the schools themselves continue to reap enormous profits.

There are only a small number of for-profit law schools nationwide. But a close look at them reveals that the perverse financial incentives under which they operate are merely extreme versions of those that afflict contemporary American higher education in general. And these broader systemic dysfunctions have potentially devastating consequences for a vast number of young people—and for higher education as a whole.

Florida coastal is one of three law schools owned by the InfiLaw System, a corporate entity created in 2004 by Sterling Partners, a Chicago-based private-equity firm. InfiLaw purchased Florida Coastal in 2004, and then established Arizona Summit Law School (originally known as Phoenix School of Law) in 2005 and Charlotte School of Law in 2006.

These investments were made around the same time that a set of changes in federal loan programs for financing graduate and professional education made for-profit law schools tempting opportunities. Perhaps the most important such change was an extension, in 2006, of the Federal Direct plus Loan program, which allowed any graduate student admitted to an accredited program to borrow the full cost of attendance—tuition plus living expenses, less any other aid—directly from the federal government. The most striking feature of the Direct plus Loan program is that it limits neither the amount that a school can charge for attendance nor the amount that can be borrowed in federal loans. Moreover, there is little oversight on the part of the lender—in effect, federal taxpayers—regarding whether the students taking out these loans have any reasonable prospect of ever paying them back.

In the class that Florida Coastal admitted in 2013, more than half the students were unlikely to ever pass the bar.

This is, for a private-equity firm, a remarkably attractive arrangement: the investors get their money up front, in the form of the tuition paid for by student loans. Meanwhile, any subsequent default on those loans is somebody else’s problem—in this case, the federal government’s. The arrangement bears a notable resemblance to the subprime-mortgage-lending industry of a decade ago, with private equity playing the role of the investment banks, underqualified law students serving as the equivalent of overleveraged home buyers, and the American Bar Association standing in for the feckless ratings agencies. But there is a crucial difference. When the subprime market collapsed, legislation dedicating hundreds of billions of taxpayer dollars to bailing out the banks had to be passed. In this case, no such action will be necessary: the private investors have, as it were, been bailed out before the fact by our federal educational-loan system. This situation, from the perspective of Sterling Partners and other investors in higher education, comes remarkably close to the capitalist dream of privatizing profits while socializing losses.

From the perspective of graduates who can’t pay back their loans, however, this dream is very much a nightmare. Indeed, it’s easy to make the case that these students wind up in far worse shape than defaulting homeowners do, thanks to two other differences between subprime mortgages and educational loans. First, educational debt, unlike mortgages, can almost never be discharged in bankruptcy, and will continue to follow borrowers throughout their adult lives. And second, mortgages are collateralized by an asset—that is, a house—that usually retains significant value. By contrast, anecdotal evidence suggests that many law degrees that do not lead to legal careers have a negative value, because most employers outside the legal profession don’t like to hire failed lawyers.

How much debt do graduates of the three InfiLaw schools incur? The numbers are startling. According to data from the schools themselves, more than 90 percent of the 1,191 students who graduated from InfiLaw schools in 2013 carried educational debt, with a median amount, by my calculation, of approximately $204,000, when accounting for interest accrued within six months of graduation—meaning that a single year’s graduating class from these three schools was likely carrying about a quarter of a billion dollars of high-interest, non-dischargeable, taxpayer-backed debt.

And what sort of employment outcomes are these staggering debt totals producing? According to mandatory reports that the schools filed with the ABA, of those 1,191 InfiLaw graduates, 270—nearly one-quarter—were unemployed in February of this year, nine months after graduation. And even this figure is, as a practical matter, an understatement: approximately one in eight of their putatively employed graduates were in temporary jobs created by the schools and usually funded by tuition from current students. InfiLaw is not alone in this practice: many law schools design the brief tenure of such “jobs” to coincide precisely with the ABA’s nine-month employment-status reporting deadline. In essence, the schools are requiring current students to fund temporary jobs for new graduates in order to produce deceptive employment rates that will entice potential future students to enroll. (InfiLaw argues that these jobs have “proven to be an effective springboard for unemployed graduates to gain experience and secure long-term employment.”)...

 

[NDBoiler]

That sounds a bit under-handed, like they’re taking a lot of students who probably aren’t ready for law school. I don’t think the student loan amounts seem out of line with what the average law school would be though.

Here’s an alternative way of thinking about getting through college and the issue of student loan debt:

https://www.daveramsey.com/blog/pay-for-college-without-student-loans

It’s not a very popular concept nowadays given the self-induced student loan crisis, but if you are disciplined and stick it out, you can be successful with it. I wish I had known about this when I was in high school and getting ready for college, but at least I know I won’t let my kids make the same mistakes I made.

 

[Whiskeyjack]

Here's the last two paragraphs of a longer article by slatestarcodex on Cost Disease:

IV.

I mentioned politics briefly above, but they probably deserve more space here. Libertarian-minded people keep talking about how there’s too much red tape and the economy is being throttled. And less libertarian-minded people keep interpreting it as not caring about the poor, or not understanding that government has an important role in a civilized society, or as a “dog whistle” for racism, or whatever. I don’t know why more people don’t just come out and say “LOOK, REALLY OUR MAIN PROBLEM IS THAT ALL THE MOST IMPORTANT THINGS COST TEN TIMES AS MUCH AS THEY USED TO FOR NO REASON, PLUS THEY SEEM TO BE GOING DOWN IN QUALITY, AND NOBODY KNOWS WHY, AND WE’RE MOSTLY JUST DESPERATELY FLAILING AROUND LOOKING FOR SOLUTIONS HERE.” State that clearly, and a lot of political debates take on a different light.

For example: some people promote free universal college education, remembering a time when it was easy for middle class people to afford college if they wanted it. Other people oppose the policy, remembering a time when people didn’t depend on government handouts. Both are true! My uncle paid for his tuition at a really good college just by working a pretty easy summer job – not so hard when college cost a tenth of what it did now. The modern conflict between opponents and proponents of free college education is over how to distribute our losses. In the old days, we could combine low taxes with widely available education. Now we can’t, and we have to argue about which value to sacrifice.

Or: some people get upset about teachers’ unions, saying they must be sucking the “dynamism” out of education because of increasing costs. Others people fiercely defend them, saying teachers are underpaid and overworked. Once again, in the context of cost disease, both are obviously true. The taxpayers are just trying to protect their right to get education as cheaply as they used to. The teachers are trying to protect their right to make as much money as they used to. The conflict between the taxpayers and the teachers’ unions is about how to distribute losses; somebody is going to have to be worse off than they were a generation ago, so who should it be?

And the same is true to greater or lesser degrees in the various debates over health care, public housing, et cetera.

Imagine if tomorrow, the price of water dectupled. Suddenly people have to choose between drinking and washing dishes. Activists argue that taking a shower is a basic human right, and grumpy talk show hosts point out that in their day, parents taught their children not to waste water. A coalition promotes laws ensuring government-subsidized free water for poor families; a Fox News investigative report shows that some people receiving water on the government dime are taking long luxurious showers. Everyone gets really angry and there’s lots of talk about basic compassion and personal responsibility and whatever but all of this is secondary to why does water costs ten times what it used to?

I think this is the basic intuition behind so many people, even those who genuinely want to help the poor, are afraid of “tax and spend” policies. In the context of cost disease, these look like industries constantly doubling, tripling, or dectupling their price, and the government saying “Okay, fine,” and increasing taxes however much it costs to pay for whatever they’re demanding now.

If we give everyone free college education, that solves a big social problem. It also locks in a price which is ten times too high for no reason. This isn’t fair to the government, which has to pay ten times more than it should. It’s not fair to the poor people, who have to face the stigma of accepting handouts for something they could easily have afforded themselves if it was at its proper price. And it’s not fair to future generations if colleges take this opportunity to increase the cost by twenty times, and then our children have to subsidize that.

I’m not sure how many people currently opposed to paying for free health care, or free college, or whatever, would be happy to pay for health care that cost less, that was less wasteful and more efficient, and whose price we expected to go down rather than up with every passing year. I expect it would be a lot.

And if it isn’t, who cares? The people who want to help the poor have enough political capital to spend eg $500 billion on Medicaid; if that were to go ten times further, then everyone could get the health care they need without any more political action needed. If some government program found a way to give poor people good health insurance for a few hundred dollars a year, college tuition for about a thousand, and housing for only two-thirds what it costs now, that would be the greatest anti-poverty advance in history. That program is called “having things be as efficient as they were a few decades ago”.

V.

In 1930, economist John Maynard Keynes predicted that his grandchildrens’ generation would have a 15 hour work week. At the time, it made sense. GDP was rising so quickly that anyone who could draw a line on a graph could tell that our generation would be four or five times richer than his. And the average middle-class person in his generation felt like they were doing pretty well and had most of what they needed. Why wouldn’t they decide to take some time off and settle for a lifestyle merely twice as luxurious as Keynes’ own?

Keynes was sort of right. GDP per capita is 4-5x greater today than in his time. Yet we still work forty hour weeks, and some large-but-inconsistently-reported percent of Americans (76? 55? 47?) still live paycheck to paycheck.

And yes, part of this is because inequality is increasing and most of the gains are going to the rich. But this alone wouldn’t be a disaster; we’d get to Keynes’ utopia a little slower than we might otherwise, but eventually we’d get there. Most gains going to the rich means at least some gains are going to the poor. And at least there’s a lot of mainstream awareness of the problem.

I’m more worried about the part where the cost of basic human needs goes up faster than wages do. Even if you’re making twice as much money, if your health care and education and so on cost ten times as much, you’re going to start falling behind. Right now the standard of living isn’t just stagnant, it’s at risk of declining, and a lot of that is student loans and health insurance costs and so on.

What’s happening? I don’t know and I find it really scary.

Read the whole thing if you have time.

 

[RDU Irish]

Jordan Bloom just published an article in The Daily Caller titled "Sharia Law: As American as Apple Pie":

On a more serious note, a credit union that avoided all usurious lending and screened its investments according to Catholic doctrine would be very successful. I've been talking to some well-positioned people at the Diocese of Phoenix about getting something like that off the ground. We'll see what happens.

Interesting concept.

Bit of a tangent but our diocese essentially runs a bank forcing all churches to run their books through the diocese and only allowing loans from the diocese. They end up with a million or two of annual interest rate spread used to fund diocesan operations. Horribly flawed in that we are a fast growth area that ends up growth constrained based on the diocese functionally needing more cash on the books than loans outstanding at all times. Not to mention the structural risk of the whole mess with the bishop owning everything. One lawsuit or bad actor embezzling could put it all on fire.

But good luck taking seven figures quietly from a hidden interest rate spread that would have to be made up in the "tax" levied on the collection plate.

 

[zelezo vlk]

<blockquote class="twitter-tweet" data-lang="en"><p lang="en" dir="ltr">Recent statistic I’ve been obsessed with is that in the 50’s the average rent in NYC was **10-15%** of the average income. In 2016, it’s **+65%**</p>— &#55349;&#56598;&#55349;&#56610;&#55349;&#56606;&#55349;&#56619; &#55349;&#56592;&#55349;&#56620;&#55349;&#56619;&#55349;&#56606;&#55349;&#56613;&#55349;&#56606;&#55349;&#56619; (@folksy_sean) <a href="https://twitter.com/folksy_sean/status/1108892253253222400?ref_src=twsrc%5Etfw">March 22, 2019</a></blockquote>
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