Economics

[Circa]

"You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before."

Rahm Emanuel.

Right on. It's amazing that these things are so publicly spoken and not abhorrently demonized.
I was thinking Cheney said that... I was hedging on Scooter but you nailed it.

 

[NDRock]

"You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before."

Rahm Emanuel.

Exactly. People use conspiracy theories for reasons why things occur when often it's just the government taking advantage of a situation, IMO.

I don't think for a second 9/11 was an inside job but I do think we used it as a way to vastly expand our presence in the Middle East. Same with mass shootings and gun control or this virus and trying to paint Trump in a bad light.

 

[Circa]

Exactly. People use conspiracy theories for reasons why things occur when often it's just the government taking advantage of a situation, IMO.

I don't think for a second 9/11 was an inside job but I do think we used it as a way to vastly expand our presence in the Middle East. Same with mass shootings and gun control or this virus and trying to paint Trump in a bad light.

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See how I just did that... I'm working on being an anchor for any news agency that will hire me.

 

[Legacy]

Risky U.S. Mortgages Face Reckoning in Market Spooked by Crisis
Bloomberg, March 25, 2020

As America heads into a deep recession, the $11 trillion residential-mortgage market is in crisis. Investors who buy home loans packaged into bonds are dumping even those with federal backing because of panic that millions might not make their payments.

Yet one risky sector had started to show cracks long before the coronavirus pandemic sparked the worst financial meltdown in 12 years: the federal government’s largest affordable-housing program, whose lenient terms are geared toward marginal borrowers.

As real estate prices soared in recent years, working-class adults everywhere have increasingly relied on mortgages backed by the Federal Housing Administration — and U.S. taxpayers. Since 2007, the FHA’s portfolio has tripled in value to more than $1.2 trillion, almost 11% of the market. While private lenders make these loans, they are packaged into Ginnie Mae bonds, common in mutual funds and pensions.

FHA borrowers are likely to struggle even more than other homeowners. Before Covid-19 started roiling China, a November FHA report found that 27% of borrowers last year spent more than half their incomes on debt, a level it describes as “unprecedented.” The share of FHA loans souring in their first six months has doubled over the last three years to almost 1%. Borrowers’ credit scores are growing weaker. (cont)

The $2 trillion stimulus will slam the mortgage industry -- unless the Fed comes to the rescue (CNN Business)

The federal government is determined to prevent the coronavirus pandemic from setting off another mortgage meltdown.

The $2 trillion stimulus package that passed the US Senate Wednesday will allow homeowners hurt by the health crisis to postpone mortgage payments for up to 12 months. That mirrors moves announced last week by mortgage giants Fannie Mae and Freddie Mac.

The goal is to make sure the millions of job losses caused by the social distancing restrictions imposed by governments don't spark a wave of foreclosures. That domino effect would crash the real estate market, amplifying the considerable economic pain inflicted by the health crisis.

American homeowners are going to be hit like never before. This is unprecedented."

But that wave of missed mortgage payments threatens to spark a crippling cash crunch in the real estate finance industry unless the Federal Reserve steps in with even more emergency lending. Analysts expect the Fed to step in soon after the stimulus package becomes law. The House of Representatives is expected to pass the stimulus bill Friday.

The problem is that mortgage servicers, even after granting homeowners forbearance, are still on the hook with investors to continue paying principal and interest on the mortgages. They also must make payments to mortgage insurers, property insurers and local tax authorities.

And that could be a hefty sum given the economic carnage caused by the coronavirus pandemic. Initial claims for unemployment benefits skyrocketed to record highs. Mortgage servicers don't have enough cash to cover the coming wave of missed mortgage payments. And a series of defaults by servicers would cripple a key part of the economy.
"It would be complete contagion. It would turn into a housing crisis," Jay Bray, CEO of mortgage servicing firm Mr. Cooper, told CNN Business.

Mr. Cooper (COOP), one of the nation's largest nonbank mortgage servicers, expects that one in four Americans could ultimately request mortgage payment deferrals.

The mortgage industry, like many others, is turning to the Fed to invoke emergency powers and serve its role as the lender of last resort. In this case, the US central bank would provide a line of credit mortgage servicers could draw on to make the payments to mortgage investors on behalf of borrowers.

"It can't come fast enough. We need a solution now. People are going to stop making their payments as early as April," Bray said. "American homeowners are going to be hit like never before. This is unprecedented."

The Mortgage Bankers Association, the industry's lobby group, said it has held talks with the Fed and the Treasury Department for the past few weeks on this request for help.

"They have been very understanding of this issue and the need for liquidity," Robert Broeksmit, CEO of the MBA, told CNN Business.
The MBA estimates that if one-quarter of borrowers request forbearance for six months or longer, advancing requirements on mortgage servicers could exceed $75 billion.

Fed doesn't want 'chaos'
The Fed has made clear it's willing to invoke emergency powers to prevent a credit crisis.

The US central bank has already agreed to buy commercial paper, short-term debt issued by large companies. And the Fed announced plans to set up an entity to buy corporate bonds. And it has promised to buy an unlimited amount of mortgage bonds.

Analysts expect the Fed will announce a facility to lend to mortgage servicers soon after the stimulus bill is enacted.

Someone on the Covid 19 thread pointed out that there has been a liquidity crisis and the Fed expanded its balance sheet in Oct/Nov, if I remember correctly, and we were verging on recession before the coronavirus. At the time the Fed said it was not quantative easing, but says its latest move is QE. At this point, the Fed has used up its fiscal stimulus power with interest rates at zero and has less ammo on the fiscal side. Deficits are definitely going to widen faster than projected. But we still have Dodd-Frank, right?

Unemployment claims last week were 3.3 million - the highest in history. No estimates on how many are home-owners, though Mr Cooper (above) estimates one in four Americans could request mortgage payment deferrals through the stimulus package (CARES).

 

[Luckylucci]

Verging on recession before the virus? Didn’t we have 2.1% GDP growth in Q4? 2.3% for the year. Basically matching the average of GDP growth from 2010-19’.

 

[Legacy]

Verging on recession before the virus? Didn’t we have 2.1% GDP growth in Q4? 2.3% for the year. Basically matching the average of GDP growth from 2010-19’.

I was remembering these statements in the Covid-19 thread by NDAccountant on 3-24-20 on the background behind whatever economic pain may be headed our way:

Not to be overly dramatic, but the economic pain was going to happen one way or another. The seeds for this were planted over the last 20 years, was just a matter of "what" sprouted it to life. I am not going to say it was some grand illusion, but there is merit in saying all was not what it seemed.

The underlying liquidity issues have been on-going for 6 months, well before this. Any recession was going to trigger a dramatic reversal, no matter the cause.

EDIT...I should be more clear. The Fed's balance sheet grew by 10% in Q4 last year, as repo lending froze. This is nearly $400 Billion. To put that into perspective, that is more than half the amount the Fed purchased with their initial QE launch between Nov of 2008 and Mar of 2009. Of course, the Fed ended up being more over time, but that gives you the appreciation for the magnitude of the action a few months ago.

The scramble for cash happened again this past month, hence the oft reported "margin calls" and the forced liquidation of securities to cover.

But from four days ago (prior to the unemployment numbers):
US unemployment could surge to 30% next quarter and GDP might plunge 50%, Fed's Bullard warns

That GDP drop is more than Goldman estimates of 24% in the second quarter of 2020 due to the coronavirus pandemic. A drop of 24% would be a record, nearly two-and-a-half times the largest drop of 10% seen in 1958.

 

[Legacy]

Some new programs from the Federal Reserve Bank:

March 23, 2020 - Federal Reserve announces extensive new measures to support the economy

March 27, 2020 - How the Fed's Magic Money Machine Will Turn $454 Billion Into $4 Trillion

 

[Ndaccountant]

https://www.cnbc.com/video/2020/04/...hedge-funds-billionaires-during-pandemic.html


Bravo!!

 

[Legacy]

The Fed Chairman reports that 40% of those making less than $40K lost their jobs in March. Not only were low income and Americans of color had higher rates of job loss and probably disproportionately lost employer-sponsored health insurance, but have been more exposed to the effects on their health of the pandemic.

Why Recovery from the Great Recession Favored the Wealthy: The Role of Public Policy (Non-Profit Quarterly, March 25, 2020)

All demographic groups experienced a loss of wealth during the 2007–2009 recession, but lower- and moderate-income populations and people of color suffered the greatest economic damage. The Pew Research Center estimates that between 2007 and 2013, median net wealth for Latinx and Black households fell 44.3 percent and 47.6 percent, respectively. Non-Latinx white wealth fell by 26.2 percent.11 Percentage losses in wealth, however, understate the negative economic impact of the Great Recession on Black and Latinx households relative to non-Latinx white households. In 2013, the median wealth of non-Latinx white households was $142,000—thirteen times the median net worth of Black households ($11,000) and ten times that of Latinx households ($13,700).12

Disproportionately greater unemployment rates for Black and Latinx folks during the Great Recession contributed to higher wealth losses for those populations relative to non-Latinx whites. Unemployment for Blacks and Latinxs peaked at 16 percent and 12.5 percent, respectively. Non-Latinx white unemployment peaked at 8.7 percent. Although Asian Americans lost substantial wealth during the recession, their unemployment rate remained below that of non-Latinx whites, at 7.5 percent.13 (See Figure 1.)

About Half of Lower-Income Americans Report Household Job or Wage Loss Due to COVID-19
Only 23% say they have emergency funds that would last them three months (Pew, APRIL 21, 2020)

As the economic toll from the coronavirus outbreak continues to mount, a new Pew Research Center survey finds the impact is falling more heavily on lower-income adults – a group that was feeling significant financial pressure well before the current crisis. Overall, 43% of U.S. adults now say that they or someone in their household has lost a job or taken a cut in pay due to the outbreak, up from 33% in the latter half of March. Among lower-income adults, an even higher share (52%) say they or someone in their household has experienced this type of job upheaval.

In addition to being among the hardest hit by the economic fallout from COVID-19, lower-income adults are less prepared to withstand a financial shock than those with higher incomes. Only about one-in-four (23%) say they have rainy day funds set aside that would cover their expenses for three months in case of an emergency such as job loss, sickness or an economic downturn, compared with 48% of middle-income and 75% of upper-income adults.1 And while 53% of lower-income adults say they will have trouble paying some of their bills this month, about a quarter of middle-income adults and 11% of those in the upper income tier say the same. (cont)

Approximately a quarter of black U.S. adults say they personally know someone who has been hospitalized or died due to having COVID-19, whereas only 13 percent of both white and Hispanic U.S. adults said the same.

 

[NorthDakota]

The Fed Chairman reports that 40% of those making less than $40K lost their jobs in March. Not only were low income and Americans of color had higher rates of job loss and probably disproportionately lost employer-sponsored health insurance, but have been more exposed to the effects on their health of the pandemic.

What happened with the Great Recession of 2007-09
(Source: Why Recovery from the Great Recession Favored the Wealthy: The Role of Public Policy)

Pew, APRIL 21, 2020
About Half of Lower-Income Americans Report Household Job or Wage Loss Due to COVID-19
Only 23% say they have emergency funds that would last them three months

I'm shocked...shocked I tell ya...that poor folks in cities are more likely to get sick from a contagious virus than people in literally any other situation.

 

[Legacy]

Looking back at the first page of this Economics thread, here's one post:

Stop letting executives be paired with stock options.

End the carried interest and capital gains loopholes so if you make a million or more you pay the top rate not the capital gains rate. Americans should be able to invest and build up their money but the super rich using money to exponentially increase their wealth does not seem right to me. I don't think the founders would think so either.

Roll back the Reagan tax cuts on the rich.

By rich I don't mean where top rate is today at 400k. But we do need to decide what a good CEO to average worker pay is. 30 to 1 like it was back in 1968? 40 to 1? 50 to 1? Certainly not 500 to like it is now. So say decide 50 to 1 then the tax rate at $2.5 million should be so high the people say screw this I ain't these types of taxes I'll keep the money in the company and pay the employees. Which is buy the way what we did from post WW2 to 1982. I seen a lot of opinion pieces saying I am wrong about this but I haven't seen anyone show me the macro economic data and hard numbers that suggest I am wrong. Income grew across the board from post WW2 to Reagan because we allowed the best of capitalism to work while offsetting the negative effects.

TEAM = Together Everyone Achieves More

 

[zelezo vlk]

Dang I forgot that Whiskey was spitting hot fire back in 2014 too

Insofar as politics is the "art of the possible", I'm for it. Assuming it would replace all other entitlement programs, a Basic Income would be a significant improvement over the inefficient and often inadequate patchwork we currently have.

But that wouldn't do anything to address the fact that capitalism has eroded and may (eventually) completely destroy all of our intermediate institutions, leading the widespread anomie. It would probably exacerbate it, in fact.

 

[zelezo vlk]

And here's Matthew Walther on Bezos' impending coronation of the world's first trillionaire. https://theweek.com/articles/914473/jeff-bezos-unreality-money

would like to offer you a job. In this job you get paid a million dollars every time you listen to "Kung Fu Fighting" by Carl Douglas. That's the whole job. You can listen to it on YouTube or Spotify, on a CD, a cassette, LP: whatever. You can also do this job whenever you want, wherever you want, any time of day, any day of the week, absolutely up to you. It takes about three minutes and fifteen seconds to listen to Carl. If you devoted an hour a day to listening to Carl, you could make $18 million a day. If you did it like a regular nine to five, five-day-a-week job and gave yourself an hour-long lunch break, you'd make $129 million a day. I know what you're thinking: at that rate you would be as rich as Jeff Bezos soon.

The thing is, you wouldn't though, because it would take you three decades of hearing about Funky Billy Chan and Little Sammy Chung and the Big Boss at a million bucks a listen to earn a trillion dollars.

A trillion is how many dollars the founder and CEO of Amazon is expected to have by 2026 if his fortune keeps growing at the same rate. I sketch the above hypothetical not because I am under the impression that whatever Bezos does with his time is as undemanding as playing a novelty song on repeat but because I want to convey something that I think millions of Americans must be experiencing acutely these days: the unreality of money.

I say "unreality" deliberately. About 70 percent of Americans have less than a thousand dollars in savings. A million is a thousand thousands, which is why for centuries "millionaire" has been a synonym for "rich person." If you have a million dollars saved, you have as much as a thousand normal people. If you have a billion dollars lying around, congratulations, you have as much as a million of us schlubs. Just imagine: ten Big Houses lying next to each other, each of them with a sold-out Saturday Wolverines crowd, and your piggy bank is bigger than all of theirs put together. But even that is nothing in comparison with a trillion, which is to say a million millions, a billion thousands. A billion! There aren't even close to that many Americans. You could give a thousand dollars each to one seventh of the world's populations and still be worth billions, more than a dollar for every single living human being.

These numbers are unreal. They are not human-scaled. They aren't even earth-scaled. The earth's circumference is less than 25,000 miles. The distance between the earth and the moon is 238,855 miles, which is less than were on an old farm truck I used to drive occasionally. Mars is only 140 million miles away. Hell, from here to Pluto it's a meager 4.67 billion miles. The most distant human object of which we are aware is the Voyager I spacecraft, which is 13 billion miles away.

The idea that there is even one person worth one dollar for every mile between here and the hunk of metal we launched as far as we could into space more than 40 years ago is crazy. There are actually 90 of them. Air travel costs roughly 11 cents per mile. At that rate Bezos could afford to travel to Mars more than once (66,666 times, in fact). He could make it halfway to Alpha Centauri, and perhaps further if one assumes he has been accumulating frequent flyer miles on all those Martian getaways. He could agree to pay four dollars per star and easily afford the entire Milky Way.

The point of all this bar-napkin math is not to provide some reasonable sense of scale. It is to demonstrate the impossibility of doing so. What does it mean to say that anyone is worth billions or even a hundred billion, much less a trillion, dollars? More important, why is it the case that sometimes figures like these are the unbelievable amounts they seem to be and other times they are simply headlines about emergency legislation — or casual projections of a single person's net worth?


Not long ago, as recently as the beginning of February in fact, we were being confidently assured by Joe Biden and Amy Klobuchar and Pete Buttigieg that the United States could not afford to forgive a trillion dollars of outstanding student loan debt, much less expand Medicare to all Americans. In the last month we have spent 2 trillion dollars on emergency coronavirus aid alone. This will almost certainly not be the last such expenditure: indeed, unless we intend to impoverish two generations of Americans, it will likely represent only a small portion of the amount of money we will have to spend on economic relief in the coming months and years.

What does it mean to say that we as a country cannot afford something? Why is it that we cannot feed and clothe and house not just our own population but the world's? The answer cannot be money. Whether this is comforting or terrifying is an open question.

 

[zelezo vlk]

Here's an enlightening article about Doordash economics: https://themargins.substack.com/p/doordash-and-pizza-arbitrage

And here's Matt Stoller talking a bit about the food delivery services (and a few other things) https://mattstoller.substack.com/p/uber-grubhub-how-the-pandemic-is

 

[yankeehater]

This probably can go is several different threads.

Friend of mine works in corporate for a large restaurant group on the West Coast. They finally reopened all of their locations a little over a week ago and brought most employees back. After the riots this past weekend, three of their restaurants were completely destroyed and several others suffered extensive damage. On Monday, they had to once again lay off all of their employees from those locations. If you look at data from past riots, the cities affected had still not recovered more than two decades later.

 

[zelezo vlk]

This probably can go is several different threads.

Friend of mine works in corporate for a large restaurant group on the West Coast. They finally reopened all of their locations a little over a week ago and brought most employees back. After the riots this past weekend, three of their restaurants were completely destroyed and several others suffered extensive damage. On Monday, they had to once again lay off all of their employees from those locations. If you look at data from past riots, the cities affected had still not recovered more than two decades later.

Yeah it's gonna be awful without direct attempts to rehabilitate the areas.

Y'all wanna hear a crazy stat I just heard? As of right now 1/2 of all African American adults are without a job right now. That is insane.

 

[Legacy]

From an exchange on posts six years ago on this thread which began with Whiskey posting an article (#5) - The Protestant Deformation

A better understanding of how we got here might be helpful in this discussion. The Protestant Deformation by James Kurth (himself a Presbyterian elder) describes how our national ideology is a debased and secularized version of Protestantism. Here's an excerpt on the bit about how it affected our economic system specifically:



(I'd encourage you to read the whole thing. It primarily focuses on foreign policy, but I've found it very useful in understanding American culture.)

Thus, having swept aside most of the institutions-- tradition, custom, guilds, etc.-- that had historically mediated between individuals and the "Economy", many Protestants came to believe that work is an end instead of a means, and that success was evidence of God's favor. All of this was wide-spread at America's founding, and is baked into our national DNA. It's no surprise that we've ended up with social Darwinism and capitalism "red in tooth and claw".

It's tempting to argue that if the Anti-Trust Division just started doing its job, and if our entitlement programs were a bit more generous and efficient, etc., that we'd be just fine. But that doesn't sound like a recipe for human flourishing to me. Even in the early 1800s, de Tocqueville predicted how the radical individualism of the Protestants would eventually destroy all the intermediate institutions described above, leading (ironically) to a certain kind of collectivism-- everyone isolated from his fellow man, and utterly dependent on the State.

The Catholic answer has long been Distributism, which works wonderfully on small scales, but, to the best of my knowledge, has never been tried on a national level. I'm currently exploring ways to make this work in my community, but I don't have much hope for the national economy.



Capital-ism, after all, favors those with capital. No amount of tinkering with the status quo is going to produce social justice. We need an entirely new system.

What about society?




Okay let me first say that what I am about to say aint personal as you where doing a job, making income for yourself and your family. So don't mind me saying God Bless you.

Now let me say this, bingo! This is statement is what is wrong with America. See I think companies should have many objectives and responsibilities. I think companies have responsibility to pay their workers decent wages, and to treat their workers humanely (which many transnational don't as evidence by factory conditions overseas). I think companies have a responsibility to somehow better their local communities. Many business do these things but a lot don't.

Corporations to exist still have to have charters with state governments. However state governments used to demand some sort of public good in their mission statements and would revoke corporations charters if they thought say a railroad company was behaving detrimentally to the state and the community. We don't do this any more in fact you got guys like Rick Perry kissing as much corporate rear ends as possible trying get as many jobs as possible to his state, which I don't completely blame him for.

Finally let me say that I think this may prove Whisky's assertion right and me wrong. We are not that we are all that far off in our end objectives and visions. Whisky though has long noted the unequal and what many would consider unjust distribution of wealth root causes are social and culture not economic. My mind works in a very analytical fashion so I tend to think that there is always a concrete plan or answer to a given problem. So I tend to think if we replaced a bad tax code loaded with corporate welfare/special interest loopholes, and bad economic policies with better policies that more people would have a greater share in the wealth of capitalism creates; and maybe we would.

I'll say though it looks like I am wrong. Because I think Tussin is right the only objective companies see themselves having is enhancing share holder value. There is no corporate objectives toward society. Even though government research has help many corporations, even though corporations use workers educated by their state's public school system, even though corporations use infrastructure paid for by we the people the only objective is to enhance shareholder value.

I'll ask the question socially/culturally has America lost its soul?

The one argument I get is private charity. Personally I don't buy the private charity argument some make. There is a small few that would seriously rather don't to private charity and believe that is better than government programs. I think must just don't see any responsibility to community or society. I got say it sure looks a lot of times like there is no obligation to community or society.

So the net of this is that Whisky is right the problems are social and cultural not simply a matter of economic policy.

 

[Irish#1]

I got my monthly statement for a small investment account that jumped 7% in May. Economy recovering already or just good investments?

 

[Whiskeyjack]

Daniel Walden just published a review of Trent Horn's new book Can a Catholic be a Socialist?:

The recent volume Can a Catholic Be a Socialist? by Trent Horn and Catherine Pakaluk (hereafter: H&P) purports to be a defense of unchanging and infallible magisterial teaching about economic organization on the scale of entire societies. What it really amounts to is a seemingly endless exercise in proof-texting and rhetorical sleight of hand, one that might go over well in an insular high school debate circuit populated by creationist homeschoolers whose peppy, clean-cut coaches display the kind of enthusiasm and illiteracy that bodes well for future careers in car sales or the ministry. It is less a book to be read and considered than an intellectual teddy bear, full to bursting with fluff and capable of providing comfort to children or the childish who have yet to develop the courage to face the world as it is.

H&P’s introduction seems to make their project clear. After the industrial revolution, “Christians...had access to more wealth and political power than they had ever possessed in the history of the world, but it wasn’t clear how those things should be used to help the poor” (H&P 8). This motivated the publication of Rerum Novarum, Pope Leo XIII’s encyclical that is commonly cited as the beginning of Catholic Social Teaching. It is this social teaching that H&P propose to apply, first to the theoretical underpinnings of socialism and then to the historical development of socialist thought and practice before, so they say, turning that same attention to capitalism. This is, in a way, a useful project, because it ultimately demonstrates the inadequacy of Catholic Social Teaching as a response to the great evils of the 20th century, revealing it to be a series of strategic compromises that articulate the Catholic tradition’s gentlest criticisms of liberalism and profiteering while failing to take seriously its much older, more radical, and more realistic articulation of the civic and moral dangers of wealth stratification.

H&P begin their argument with an account of the early years of the Plymouth Colony settled by the Puritans. By their telling, “in the spring of 1621 the Plymouth colonists were in danger of starving to death and, despite what you were told in elementary school, it wasn’t harsh weather or ignorance about farming that led to these circumstances. Instead, it was the pilgrims’ policy of sharing communal plots of land that nearly led to their ruin” (H&P 19). This is an old right-wing tale that became prominent during the heyday of the Cold War, but it suffers from several glaring omissions that will become paradigmatic for their argument as a whole. The first and most alarming is that the colonists had just emerged from an epidemic that killed half of their number and left many of them incapacitated during February and March; that H&P trace the colonists’ dire economic circumstances to collectivization rather than mass death and a prolonged labor shortage suggests a strong tolerance for distorting the historical and scholarly record in favor of their argument, so long as they do not print outright falsehoods and merely withhold vital information. This sort of casuistry seems more appropriate to the most licentious 17th-century Jesuits than to a supposedly straightforward primer of Catholic political theology, but the diligent apologists at Catholic Answers will doubtless be able to apologize for this as well.

The second paradigmatic omission in H&P’s account is that the Plymouth colonists were not utopian dreamers attempting collective farming out of a belief in universal harmony. On the contrary, there was no “collective ownership” at all: the land, houses, and farming tools were all the property of a joint-stock company that had invested in their expedition in the hope of turning a profit. It was this corporate owner that imposed a counterproductive and inefficient farming system that had very little “collective” character at all. Rather, all farming profits remained private, but the plots of land farmed by each household rotated annually, so that improvements did not really benefit the community as a whole, but only improved the private harvest of the families who later cycled through the improved plots. This was not sound farming practice, as many colonists well knew: even before their contact with the Abenaki and Wôpanâak peoples, they had come from villages and towns in England that had practiced both tenant and communal agriculture for centuries. But H&P ignore both the history of collective agricultural management in England and the actual origin of the Plymouth Colony’s farming arrangement, inaugurating a pattern of argument in which they consistently refuse to hold capitalism responsible for the various crises and disasters that have arisen due to its systemic contradictions.

These systemic contradictions are, in fact, entirely lost on H&P, as it is evident that they have not made a serious attempt to understand the socialist criticisms of capitalism. “According to [Marxist socialists], inequalities are the source of all conflict between human beings and so, once classes like rich and poor are a thing of the past, then conflict between human beings will cease as well” (H&P 28). They would do well to take their cues from that great exponent of contemporary Thomist thought, Fr. Herbert McCabe. As McCabe clearly explains,

"The class struggle is not, in the first place, a struggle between the haves and the have-nots. It has very little to do with what people in England call ‘class distinctions,’ meaning a peculiarly English kind of snobbery. It is not differences of wealth that cause class differences, but class differences that cause differences of wealth. The worker by his labor creates a certain amount of wealth, only part of which is returned to him in the form of wages, etc. The rest is appropriated by the employer, or capitalist, so called because his function is to accumulate capital in this way. The capitalist receives from a great many workers the extra wealth which they produce but do not need for their subsistence and minimal contentment, and bringing all this wealth together he is able to invest, to provide the conditions under which more work may be done — and so on."

This is as good a summary of the Marxist critique as anyone has ever written, from a respected and orthodox theologian. Note how H&P have dramatically mistaken both the definition of “class” and the central problem with capitalism. Class is not simply having more wealth than another person, but having a different relationship to economic production: this relationship means that those who own things and enter the market as capitalists have, in fact, no choice but to behave in the most immoral and scandalous way toward their workers, in because that is the only way to keep the process of capital accumulation going. In order for a capitalist to compete in the market, they must cut their costs to the maximum extent that the law and the economy will allow.

H&P employ a similarly ham-fisted reading strategy when approaching the various encyclicals that make up Catholic Social Teaching. The base of their criticism is that socialism abridges a natural right to private property, and they understand this as roughly encompassing the contemporary liberal legal regime of absolute use. For any Catholic, this ought to be alarming: what we understand as private property only came into existence in 1788, when Steel v Houghton was decided by the British House of Lords and empowered landowners to ban gleaning, the practice of foraging crops left over from the harvest that had been a right of the poor under Biblical and common law for over a thousand years.

The unrestricted right of use or disposal has never been part of the teaching of the Church, and when ecclesiastical sources say “private property” it is absolutely vital to take this into account. Rather than being a natural individual right of unrestricted use, it is instead a right rooted in the common good, as H&P acknowledge, and is therefore always a secondary concern. Aquinas specifically defines private property as a right of use: “In this way the human being has a natural dominion over exterior things, since by reason and will he is able to use exterior things for his own benefit as things made for him” (IIa-IIae q. 66 a. 1 co.). This right is always subordinate to human need, since “things which belong to human right cannot set aside natural right or divine right” (IIa-IIae q. 66 a. 7 co.), and therefore “if...the need is so urgent and obvious that the present need must obviously be met by whatever means happen to be at hand (for instance, when a person is in immediate danger and cannot otherwise be helped), then someone may lawfully meet their own need out of someone else’s property, whether they take that property secretly or openly, and this action does not properly have the character of theft or robbery” (ibid.).

With this understanding in mind, one of the distinctions employed by socialists and anarchists becomes much clearer and more useful: the distinction between personal and private property. It is personal property—the things we use to carry out the immediate tasks of our day to day life, to make our living, and to satisfy our basic needs for food, shelter, company, and play—that hews most closely to the right of property outlined by Aquinas. What the left calls “private property” is distinguished from personal property precisely by a lack of use: its owner neither uses it themselves nor turns it toward the benefit of others, but rather keeps others from it except on the condition that those others use that property primarily for the owner’s benefit. That is the absolute doctrine of private property that was only fully realized in 1788, and this is the form of property that socialists want to abolish while emphatically preserving people’s right to the necessities and enjoyments of life.

This distinction is vital, because H&P’s defense of private property rests on a reading of Leo XIII which attempts to import an alien understanding of property into the foundational documents of Catholic Social Teaching. They quote his letter on socialism, which complains that socialists “assail the right of property sanctioned by natural law” (Quod Apostolici Muneris 1). This, they contend, means that “he condemned socialism because of its lack of respect toward the natural right to private property” (H&P 65, emphasis original). But private property as private use is not a natural right: it arises out of human law and is not contrary to natural law but supplementary to it (ST IIa-IIae q. 66. a. 2 ad 1). And indeed, Leo does not refer to a natural right to property, but rather to “the right...sanctioned by natural law,” that is, the sort of private right of use that natural law neither forbids nor mandates. This cannot be underscored enough: the natural right that socialists supposedly disregard does not exist in the Catholic tradition. This essential fact is obscured sometimes by the language in which Leo XIII articulates his definition of property:

"Truly, that which is required for the preservation of life, and for life's well-being, is produced in great abundance from the soil, but not until man has brought it into cultivation and expended upon it his solicitude and skill. Now, when man thus turns the activity of his mind and the strength of his body toward procuring the fruits of nature, by such act he makes his own that portion of nature's field which he cultivates - that portion on which he leaves, as it were, the impress of his personality; and it cannot but be just that he should possess that portion as his very own, and have a right to hold it without any one being justified in violating that right." (Rerum Novarum 9)

This draws heavily on Locke’s justification for liberal private property rights, in which one acquires an absolute right to property precisely by “mixing” one’s labor with the land, although what it means to “mix” one’s labor is left wildly unspecified. This is, however, an articulation of property rights formulated explicitly in contrast to Catholic natural law, and it would be extremely dangerous to assume that a pope was breaking with centuries of established doctrine in order to align himself with a deliberately anti-Catholic formulation. Hence, we must read Leo as perhaps poorly articulating but maintaining traditional doctrines of property: the right to property belongs to human law and must always be circumscribed by human needs and the common good, both of which belong to more fundamental tiers of law. The criticism of socialists is that capitalist property arrangements, whereby vast quantities of property can be held by someone who uses it neither personally nor in common with others, do not serve the common good and must therefore be abolished. One can dispute the truth of the premise, but the reasoning is the very soul of Catholic orthodoxy.

And H&P do attempt to contest this premise and argue that capitalist doctrines of property and the ensuing social arrangements serve the common good. They make this argument primarily through a fairy-tale description of capitalism that resembles nothing so much as a children’s book published by the Cato Institute, replete with such tawdry libertarian canards as “in a free market, no one can force you to buy what a business is selling; the business has to persuade you to enter freely into a mutually beneficial exchange” (H&P 117-8) or “capitalism also flows from our natural human creativity” (ibid.).

They contend that “it’s also a fallacy to compare real-world capitalism...to an idealized socialism that never has and never can exist because of our fallen human nature” (H&P 121-2), but the reverse is apparently fair play, because the many genuine abuses of humanity that have been carried out by regimes calling themselves “socialist” receive detailed (though still unreliable) coverage, while the horrors of capitalist industrialization and the atrocities committed in the name of economic liberalization (e.g. the ongoing environmental and human catastrophes of coal mining, the production of bottled water at the expense of nearby communities’ access to running water, or police responding to small-scale property crimes with state-sanctioned murder) are brushed aside as individual moral aberrations. This is not the approach of people attempting a serious exposition of Catholic thought, or indeed of people attempting thought at all: it is a series of comforting stories couched in pre-digested clichés, designed to reassure people who buy cheap coal power, consume cases of bottled water, and call police when they see a Black person that nothing is wrong with them and nothing needs to change. It is a moral soporific for the idolatry of Mammon.

To take the question seriously would mean asking why capitalism refuses to be humanized and continues to be an engine of misery. Answering that question demands a serious and systemic critique of capitalism, and since H&P largely limit their doctrinal sources to the encyclicals that lay out Catholic Social Teaching (setting aside their mercifully brief foray into biblical philology, a field in which they display little training and less aptitude), this is not something their volume can accomplish, because Catholic Social Teaching itself does not, except in rare instances, offer systemic critiques of social systems. As T&H note in their introduction, it was articulated as a series of responses to contemporary social problems, reminding Catholics of the moral issues and principles that must guide any Catholic response and providing contemporary guidance. But these responses exhaust their use when capitalism itself stymies our attempts to impose the principles of justice demanded by our faith on the economic order, and we must look beyond them to see our world as it is now in order to formulate a truly Catholic response.

Pope Francis has begun some of this work in decrying the “structurally perverse” economic relationship of wealthy countries to the economies and resources of countries in the Global South, in which “developing countries...continue to fuel the development of richer countries at the cost of their own present and future” (Laudato si’ 52). His encyclical draws on the work done in social and natural sciences that illuminates how closely connected our economic and environmental problems are and how far-reaching the necessary changes will need to be. Most importantly, it warns those of us living at the heart of global capitalism that our personal acts of piety are not enough. By contrast, H&P suggest in their final chapter that a moral existence within capitalism can be accomplished by occasional fasts from shopping and a few half-hearted attempts at paying more than the minimum wage; if this is impossible (and on page 137 they admit that paying a just wage in all occupations is impossible under modem capitalism), then they seem content to write it off as the consequence of someone else’s sin.

This book was written and printed in response to the growing and unavoidable awareness that our economic system does not serve the common good, and its project is to quell this uneasiness by assuring its audience that nothing is fundamentally wrong. In doing so, it asks readers to defy their basic moral sense and to close their eyes and hearts to the suffering of the poor on which American prosperity depends. It offers lip service to labor unions but says nothing about the duty of Catholics to oppose union-busting measures by employers or the state, and rejects out of hand the possibility of even a strong welfare state to temper capitalism’s excesses. Its treatment of history ranges from shoddy to flatly dishonest, and it spends an unconscionable number of pages covering people with whom Trent Horn has fought on Twitter rather than grappling with the serious critiques of capitalist order from within the Catholic tradition.

Prospective readers will receive a far more thorough and humane education in Catholic social and economic doctrine from putting in regular shifts serving and talking with guests at their parish soup kitchen, and they will be doing work to ameliorate some of the evil of capitalism, rather than trying to convince themselves that God has made the suffering of the poor somebody else’s problem.

 

[zelezo vlk]

Great rebuttal!

 

[Bluto]

Daniel Walden just published a review of Trent Horn's new book Can a Catholic be a Socialist?:

Very interesting.

 

[Legacy]

Some great articles recently, Whiskey. The quote from above struck me:

Fr. Herbert McCabe. As McCabe clearly explains,

Quote:

"The class struggle is not, in the first place, a struggle between the haves and the have-nots. It has very little to do with what people in England call ‘class distinctions,’ meaning a peculiarly English kind of snobbery. It is not differences of wealth that cause class differences, but class differences that cause differences of wealth. The worker by his labor creates a certain amount of wealth, only part of which is returned to him in the form of wages, etc. The rest is appropriated by the employer, or capitalist, so called because his function is to accumulate capital in this way. The capitalist receives from a great many workers the extra wealth which they produce but do not need for their subsistence and minimal contentment, and bringing all this wealth together he is able to invest, to provide the conditions under which more work may be done — and so on."

I think you've said something like "Capitalism is favored by those with capital." Favoring Distributism and a basic universal income, for instance, doesn't make one a Socialist. Andrew Yang favored UBI.

G.K. Chesterton and Dorthy Day and the Catholic Workers movement were called socialists. To ask the question can someone be a Socialist brings class divisions into it instead of the morality regardless of wealth.

 

[Cackalacky2.0]

I need someone with economic intelligence to explain the current market contraction in Q2 versus the stock market increases to me please. It seems completely unrelated. Seems like I should prepare for a big hit

 

[NDBoiler]

I need someone with economic intelligence to explain the current market contraction in Q3 versus the stock market increases to me please. It seems completely unrelated. Seems like I should prepare for a big hit

Where are you seeing a Q3 contraction? All the GDP estimates for Q3 I’ve seen are 20%+ growth. Granted, it may still be down a little overall for the year because Q2 was a big contraction, but Q3 should be a big rebound.

If you’re concerned with investing, remember that you (should) be playing the long game, especially if you are talking about retirement investing and you’re basically under the age of 50-55. For example, if you would have knee jerked and gotten out of the market in March/April when it dropped 1/3 from the February highs, you would’ve lost a ton of money over the subsequent 3-4 months where all those losses have virtually been wiped out. The market is a roller coaster at times, just enjoy the ride. The only way you get hurt on a roller coaster is if you jump off in the middle

 

[Cackalacky2.0]

Where are you seeing a Q3 contraction? All the GDP estimates for Q3 I’ve seen are 20%+ growth. Granted, it may still be down a little overall for the year because Q2 was a big contraction, but Q3 should be a big rebound.

If you’re concerned with investing, remember that you (should) be playing the long game, especially if you are talking about retirement investing and you’re basically under the age of 50-55. For example, if you would have knee jerked and gotten out of the market in March/April when it dropped 1/3 from the February highs, you would’ve lost a ton of money over the subsequent 3-4 months where all those losses have virtually been wiped out. The market is a roller coaster at times, just enjoy the ride. The only way you get hurt on a roller coaster is if you jump off in the middle

Sorry. Q2. 33% contraction in GDP yet stock market seems to be detached. I cant believe a 33% contraction is unconcerning. Might be my ignorance.

 

[Wild Bill]

Sorry. Q2. 33% contraction in GDP yet stock market seems to be detached. I cant believe a 33% contraction is unconcerning. Might be my ignorance.

Capital is sucking the fed off. I've given up on the market. Been "working from home" in a pair of man panties and trading crypto. I'm going to be rich or my wife is going to leave me when I go broke. Either way, I win.

Go to bitcoin thread and listen to wildman.

 

[NDBoiler]

Sorry. Q2. 33% contraction in GDP yet stock market seems to be detached. I cant believe a 33% contraction is unconcerning. Might be my ignorance.

Sure it’s a little concerning, but consider the circumstances - pandemic, record unemployment, panic, etc - it would be much more odd if Q2 was not a contraction. You have to also consider the big picture and not get hung up on the short term swings. If you do prefer to focus on short term results, then crypto or day trading might be more your investing style.

 

[TheRealLynch51]

Sorry. Q2. 33% contraction in GDP yet stock market seems to be detached. I cant believe a 33% contraction is unconcerning. Might be my ignorance.

Couple of points here.

1. The 33% contraction is if the drop in GDP in Q2 was annualized. So the contraction was actually 1/4 of that 33%. Media likes to jump on the 33% number for the scare factor.

2. Stocks are always forward thinking. Anything that gets reported publicly about unemployment, GDP, etc. are lagging economic indicators, not leading economic indicators. Being that there is a realistic possibility that a working vaccine could be finished by year end, the market is going to be positive. Also, think about how much things can really get worse from here going forward. We've already had the worst happen economically from COVID about 4 months ago. When states are seeing spikes, local governments are enacting mask ordinances and closing bars to help slow the spike. I've seen it first hand here in Texas.

3. While the market may be positive now, there is a realistic possibility as well that all these vaccines being developed and aren't effective. If that happens, then the forward looking positivity the market sees will dissipate. At that point, you'll see a correction like pullback in the market most likely.

 

[Cackalacky2.0]

Sure it’s a little concerning, but consider the circumstances - pandemic, record unemployment, panic, etc - it would be much more odd if Q2 was not a contraction. You have to also consider the big picture and not get hung up on the short term swings. If you do prefer to focus on short term results, then crypto or day trading might be more your investing style.

I’m less concerned about the small swings but the the larger catastrophic ones. Seems volatility is up as well and with the real possibility our current system is smoke and mirrors It just seems dissonant with a stock market at record highs. I guess I am trying to get an understanding so I can make wise decisions.

Also I am staring to see layoffs at work, no raises, consolidation of duties and all kinds of other things indicative of employers preparing for a downturn.

 

[TheRealLynch51]

I’m less concerned about the small swings but the the larger catastrophic ones. Seems volatility is up as well and with the real possibility our current system is smoke and mirrors It just seems dissonant with a stock market at record highs. I guess I am trying to get an understanding so I can make wise decisions.

Also I am staring to see layoffs at work, no raises, consolidation of duties and all kinds of other things indicative of employers preparing for a downturn.

Yes, I'd agree volatility is up. But thats whats going to happen in a pandemic with a bear market 4 months ago. People forget that the definition of volatility is how much an investment veers from the mean price. So if you're up 20%, thats good volatility. If you're down 20%, thats bad volatility. Markets haven't been volatile for a few months with steady growth. And to play devil's advocate, the investment firm I work at has re-ramped internal transitions, which they wouldnt do if there was a bearish outlook.

Investors also forget that the average bull market over history has run 7 years and shows gains of 160%. Whereas the average bear market shows a loss of 40% over a 1-1 1/2 year period. And what always comes after every bear market? A bull market. It doesn't make sense to worry about the big drops long term because if you stay invested during them, you'll be positioned to reap all the benefits from being invested from day one of a new bull market. And in doing so, you'll get the full 160% average gain you see in a bull market. The 160% average gain in a bull market is what saves you from the 40% loss you're going to have during a bear. As NDBoiler said above, focus on the long term for investing. Not the short term trends you see from month to month. If you stay invested over a long period of time, the S&P 500 has annualized close to 10% since inception. And getting that 10% annually will leave your portfolio great for retirement in the long term. Bear market drops of 40% included.