Questioning Shiller:
Shilling for a New World Order
By Anne Williamson
Jun/11/2004
"The inability of citizens to evade and cheat offers opportunities for social planners. We will be able to achieve a more equitable income distribution because we will be observing it more accurately." Robert J. Shiller, Irrational Exuberance. Now if that quote gives you a sense of disease, read Anne Williamson's robust and erudite rebuttal. Never one to mince her words, Williamson refutes the good professor's arguments clearly, succinctly and. . . devastatingly. (Ms Williamson holds SRA's T.B.Sanders Chair of Polemics)
Robert J. Shiller, the Stanley B. Resor Professor of Economics at the Cowles Foundation for Research in Economics at Yale University, rocketed into the public’s consciousness with the spectacularly well-timed release of Irrational Exuberance in early 2000, just months before the Nasdaq bubble popped. The book, a psychological examination of Clinton-era bubblemania, is mostly old wine in new bottles in that the madness of crowds engaged in fevered speculation is hardly a new phenomenon.
In fact, it is a commonplace that the very embarkation point for modern finance was the very fevered playing out of Scotsman John Law’s inflationary scheme of paper assignats in pre-Revolutionary France. But Shiller was careful not to tell John Law’s story or that of the Mississippi Co., or the South Sea Bubble, or the post-Versailles German hyperinflation, preferring instead to reference Tulip mania, which had people falling about over flower bulbs, not paper transactions and hypothecated currencies as did the others. (Of all the historical bubbles, Tulip mania is the least relevant to what happened in the 1990s.)
Nonetheless, Irrational Exuberance proved prescient, and even cathartic to those observers whose years-long warnings of a liquidity-driven asset inflation had gone unheeded. Yet the connection between asset inflation and irresponsible, even exuberant , central banking was not a part of Shiller’s discussion of contemporary matters any more than it was a part of his shaved history lesson. Out of a 233-page romp through media, market theory and psychology, a mere one page and four lines are devoted to an inconclusive discussion of monetary policy and speculation, which is rather like having written a book on pyromania in which the word “match” doesn’t appear.
But why would a discussion of monetary excess — the very tool by which elites create the bubbles that target the masses for an old-fashioned soaking — be a part of Shiller’s analysis? As a quintessential figure of the establishment, who publishes frequently in prestigious journals and top shelf newspapers, regularly testifies before Congress, runs a gaggle of ambitious, cost-free (to him)
graduate students, and who was careful to thank the U.S. National Science Foundation for 20 years of financial support in Irrational Exuberance ’s acknowledgments, the author is a man obliged. Ambitious too, as his newest book, the extraordinarily-titled The New Financial Order, testifies.[1]
It is easy money that first puts scent to wind, and only then does an entirely predictable human psychology take hold among a population. The masking of this age-old reality from the cyclically swindled public is but one of the principal aims of the academic mouthpiece brigade. What John Maynard Keynes began with The General Theory — a political theory masquerading as economics which provides a rationale for systemic government intervention into markets, and, most critically, for central banking, which, in turn, is the engine of government growth — academic economists have spent the decades since World War II extending and elaborating. [2]
Behavioral Finance
The newest twist of the old dog’s tail is the emerging field of behavioral finance. Shiller, a recognized pioneer in such, explains that behavioral finance “takes into account the details of human behavior, including human psychology and sociology.” What behaviorists propose is the use of those details to manipulate a largely clueless retail investor class and to justify a further, draconian reduction of human liberty and free markets as a panacea for man’s flawed psychology and allegedly baffling (to behaviorists) sometime propensity for dicey speculation over the rewards of patient investment.
Shiller is an index man too, and given the explosion of new technology and the rise of the Surveillance State on the shoulders of the 50-year old National Security State, he’s a pretty excited index man at that. According to the author’s The New Financial Order, redemption lies in the cornucopia of personal and financial data on human beings worldwide now being amassed and delivered to U.S. authorities.
Though Shiller deploys the now routine rhetoric of free markets, his early reference to John Rawls, the Harvard guru of “distributive justice” and icon of central planning, as his moral lodestar is a tip-off that what lies ahead is a blueprint for a new-fangled, high-tech socialism. Socialist central planning failed because no collection of human beings could ever calculate and match the accuracy and speed of the free market’s spontaneous price signals. Resources, consequently, can not be allocated effectively, and the result is ruinous waste in a world of scarcity. It is the author’s conceit and unstated premise that surveillance data married to twentyfirst century technology will do the work of the free market’s price signals.
Under Shiller’s scheme data is to be collected, stored, and made usable through the employment of many, many, many competing private indexes which modern technology only now enables. Even Joe Blow is going to have his very own index complete with his personal, financial, employment, and genetic information, a “Global Risk Information Database,” or GRID. And so are you. Me too. And each of us will carry a transponder to report our every activity so that our GRID might be kept current and our individual risk weightings adjusted appropriately for the economic arrangements Shiller references as “insurance” that are to secure risk-managed man cradle-to-grave.
Shiller states that his only purpose is to protect and liberate the public from its inborn penchant for financial self-immolation his Irrational Exuberance claims to have identified. The author further posits that the new financial institutions his scheme seeks to introduce will function so as “to ameliorate, if not eliminate risk” to what are identified as the common man’s “ordinary riches” – his job, his home, his pension.
Six Big Ideas
Unraveling the homespun, Shiller’s scheme boils down to Six Big Ideas for controlling risk:
* Livelihood insurance,
* Home value insurance,
* Income-linked loans,
* Inequality insurance,
* Intergenerational Social Security, and
* International risk control agreements.
Insurable risks are those in which an incidence of calamities in large numbers can be predicted. With a careful application of the actuar y ’s art to a given group of 60-year olds, life insurance can be a successful contract for both client and provider. But if a provider had attempted to insure those same individual’s livelihoods chosen at age 20, much less the market value of their homes purchased at age 30 while insuring a certain level of equality of income over the years of their working lives, the insurance company wouldn’t have been able to perform on all the contracts because each individual, each piece of real estate, each business, and each employment is unique in and of itself, and so are the risks to each.
What Shiller really intends to devise for the management of unique risks are derivative contracts based on mathematical formulas he and his fellows will devise and which computer programs will continually adjust; hence, the necessity of a constant flow of data from the populations’ handy, ever-present transponders.
Yet derivative contracts are able to only address a multitude of narrowly defined, highly specific risks that are in no way extinguished when transferred or redistributed no matter how they are aggregated and then split, sliced, diced, minced and swapped. More problematic for better-social-engineering-through- high-finance is that it is impossible to craft risk-diffusing contracts for a future about which we know only that things change; which specific things and what specific changes and how often, if ever, we cannot know.
The premiums required to realize any of Shiller’s proposed Rube Goldberg financial contraption would be super-sized and most unlikely to be purchased by the hard-pressed public the author is so anxious to secure. And what banker, whose own successful business planning is dependent upon a constant flow of income from money lent, is going to engage in “income-linked lending,” which would allow a borrower’s payment to decline proportionately to any decrease in income? What investor would put his capital into buying the shares of such an institution? What client would knowingly trust his savings to a profit-impaired bank?
The answer to all three questions is “none.” The realization of Shiller’s six Big Ideas in the marketplace would require that banks and insurance companies be coerced into such ruinous arrangements, and the public — both as investors and as clients — could not be allowed other banking and insurance choices.
. . . when Shiller asserts that “there is no way at all to trade the risks of a whole country,” a reader can only suggest that the author try typing “FX” into a G oogle search bar.
When the author attempts to bring his scheme into the international arena through his Big Idea of international risk control agreements, the sheer redundancy of his effort boggles the mind. The author posits that the ruin of World War II and the debt-defaults of the post-war era could have been ameliorated had the warring and over-borrowing nations only sold claims on their own future GDPs, thereby raising money for recovery. Setting aside the question of the desirability of any state providing itself by whatever means with a war fund that can be advertised as “cost-free”, two questions come to mind. What is a public bond market, but the means by which a government raises money for its expenditures in excess of the tax rake? And what is a government bond but a claim on some government’s future income through its sovereign power to tax? Similarly, when Shiller asserts that “there is no way at all to trade the risks of a whole country,” a reader can only suggest that the author try typing “FX” into a G oogle search bar.
The End of Money
But it is the poisonous capstone of the Ivy League professor’s Big Idea scheme that demands our attention: Shiller advocates the end of money. He condemns “money” for having failed to serve “as a stable and sensible unit of measurement for financial transactions,” which has therefore, through inflation and deflation, caused “innumerable financial dislocations.” He coyly “wonders, then, why we do not have units of measurement, for our financial and other contracts, that remain stable and meaningful through time?”
Rubbish. It is not money, but fiat scrip that has failed, dramatically so. Money has served man for millennia; its invention, acceptance, and usage is what allowed for the division of labor and therefore economic development. The only thing to wonder about is the phenomenon of an economics professor at one of the nation’s most prestigious universities playing the cherry so shamelessly.
Since the 1913 establishment of the Federal Reserve, a private, unconstitutional money monopoly, by means of what was advertised as a congressional reform banking bill, the currency of the United States (Federal Reserve Notes, not dollars) has lost 96% of its value, 75% of that loss occurring since Nixon defaulted on US debt by closing the gold window in 1971. This is historical fact. Under the preceding 100-year run of the constitutional dollar, which the Coinage Act of 1792 defined as a weight of silver with the value of gold regulated in a 15 to 1 ratio (15 grains of silver to every grain of gold), the currency gained in value while the prevailing price level gently fell. This too is historical fact. The inescapable conclusion is that it is Federal Reserve Notes (FRNs), unsigned and undated promissory notes issued by a private banking cartel whose operations have never been audited, that have failed as both a store of value and a unit of account.
However, thanks to the Fed’s gargantuan credit emissions disseminated through its shareholders, commercial money center banks, and its network of international institutions such as the IMF, the World Bank, and OPIC (Overseas Private Investment Corporation), in combination with the fantastic bribery of foreign governments through multilateral and bilateral aid institutions and American military might, FRNs have proved wildly successful as units of exchange. Even better, the US has been able to assert economic and political dominance cost-free in that foreigners give us real goods and services in return for paper tickets the Fed can print at no cost ad infinitem .
But for the Yale professor mum’s the word on dollar mojo. Instead, Shiller advances the incorrect argument that people “must recognize that the problem of inflation is really fundamentally a problem of changing units of measurement, of a yardstick whose length changes randomly and unpredictably through time. It is not primarily the problem that money itself loses value” [italics added.] [3]
Of course, it was the abandoned gold standard that kept the dollar yardstick constant, while it is the very purpose of the Federal Reserve to create inflation so that its debt-based money system might flourish to the benefit of the political and financial elite through the hidden robbery of the common man. There is nothing random or unpredictable about the process that eroded the value of the dollar, yet Shiller avoids any discussion of the Fed, referencing the institution only once in the entire text and then only on page 12 in a long list of financial “innovators.”
Indexed Units of Account
What Shiller proposes as a replacement for money are “indexed units of account” (IUAs). These units are to be based on goods baskets whose value, in turn, are to be derived from consumer price indexes used for the calculation of cost-of-living costs, and “would be a new kind of electronic money for which inflation would never be a problem…You would never really have to talk in terms of currency or look in the newspaper or at a web site to find the exchange rate with the currency.”
You only have to look to the government’s Consumer Price Index to understand how ripe for political and financial corruption IUAs would be. The state-produced cost-of-living index excludes the cost of food and energy in order, among other nefarious purposes, to cheat social security recipients of the increases they are due by statute as compensation for central bank-created inflation. In today’s smoke and mirrors economy all government statistics are beyond suspect; they are politicized, and are therefore misleading, and consequently unreliable, if not blatantly fraudulent.[4] IUAs, based upon baskets and derived from indexes, would allow the elite to ramp up their manipulations to a new level of constant theft while leaving the common man to sink into the domestic feudal order that would be the inevitable consequence of his being denied the use of money.
An eager Shiller explains that with the additional elimination of cash, “An electronic payment system would make the units easy to use, and so the ultimate means of payment, money or something else, would be of no concern to individuals.”
Money, or “something else”? Something what? So far as the system of state-rationed goods and services that would inevitably result goes, Shiller is correct in that the actual form of what would inevitably be in practice a ration ticket — electronic, paper, or plastic — would not really be of individual concern.
As precedent for his proposition, Shiller cites various stopgap measures and indexing contrivances hyper-inflating Latin American countries such as Chile, Brazil, Uruguay, Columbia, Ecuador, Mexico, and Venezuela have employed to stem monetary crises. While it’s not surprising that a tenured Ivy League academic economist would look to nations that have never managed to establish sound banking and monetary systems for inspiration in devising a monetary reform, it is telling. After all, each nation Shiller cites abounds in corruption, toadyism, secret initiatives, and rent seeking, as does the typical American university.
Seeking perhaps the common touch, Shiller links his idea to the “Common Hours” that circulate in Ithaca, New York. Actually, it’s not a bad parallel. Ithaca’s “Common Hours” are a local currency backed by the labor of those who transact in the currency, and are the result of an effort on the part of that particular community to cope with the very economic vagaries and injustices Federal Reserve Notes guarantee. But since participants are essentially bartering locally their personal labor denoted on slips of paper, the community currency does not solve the far larger problem of Fed counterfeiting. Shiller’s IUAs would function similarly on a national scale in that they would reduce Americans to bartering in a derivative side game while the elite’s great thieving game of fiat money rolls on unimpeded internationally. Think about it: money, no longer linked to gold, under Shiller’s “reform” would no longer even be linked to the population of the nation emitting the money.
Think about it: money, no longer linked to gold, under Shiller’s “reform” would no longer even be linked to the population of the nation emitting the money.
So enthusiastic is Shiller that he forgets all about that “changing yardstick” he earlier bemoaned in introducing his argument for moneycide. Nearly breathless, the author concludes his argument by advocating “an array of IUAs, reflecting different concepts of real values,” which calls to mind the 15 different forms of the ruble that circulated in the twilight years of the Soviet Union and which rendered pricing, contracting, and even accurate payments impossible.
And just exactly how does Shiller propose confusing the public enough to swallow his money-free derivative-o-rama? By employing all the common tools of public policy, i.e., trickery, deceit, and manipulation.
The Selling of Social Security
In passages that read like a posthumous collaboration of John Maynard Keynes and B.F. Skinner, Shiller advocates the utility of “psychological framing” through the use of “primitives.” Primitives, the author informs, are “familiar concepts”, which “are words and categorizations that come naturally to people, such as: private property, government, law, family, parents and children, kindness, sharing, charity, gift exchange, social hierarchy, religious symbols, honor, obeisance, leaders, heroes, and fairness.” The employment of primitives “in the naming of fundamental concepts, and in the forms that applications take, must be done judiciously to ensure public acceptance and compliance [italics added].”
Predictably, Shiller wheels out the progressive income tax and social security as the lead floats in his public manipulation parade, counting them as “some of the most important risk management institutions of the past.” More rubbish.
The progressive income tax was designed to lock in the wealth of a narrow class of robber barons by reducing competition from the lower orders; any middle class person who achieves a substantial gain soon loses much of it to taxation, as intended. In light of Shiller’s introductory exhortation that “We are prepared to accept significant inequality!” (what’s with the exclamation point, creeping reverse Maoism?), the author’s call first, for the necessity of society (who’s that?) determining how much inequality it will tolerate, and, secondly, for the urgent need to lock in the disparities that now exist 'before they get worse,' reads like an emergency extension of the same idea for a new class grown rich in the “New Economy” bubbles.
In Shiller’s enthusiastic history of the selling of Social Security, the text takes on the tone of an insiders’ playbook. He writes admiringly of the system’s creators’ “allusions to property rights, repetition of symbols, so that the concept would be reinforced that the system was a social compact in effect agreed to by the generations.” Other trickery the author highlights is the use of the phrase ‘Old Age Insurance’ for bringing into play the powerful word “insurance,” and of the use of the word “contribution” rather than “taxes,” which leads individuals to believe that they are “contributing to a fund for his or her own benefit, and thus that he or she has property rights over the ultimate benefit,” which Supreme Court decisions in 1937 and 1960 ruled emphatically not to be true.
So undisturbed is the author by his advocacy of deceit that seventy pages later in a discussion of declining birth rates, longer life expectancies, and Trust Fund shortfalls, he admits Social Security, this “most important risk management institution,” is a bankrupt swindle, saying, “Often, the public discussion of this problem [social security insolvency] is excessively formulaic because participants forget that the contributions and benefits formulas are essentially arbitrary. Often, the discussion is framed in terms of making good on our promises to the elderly, as if these were solemn promises that were entered into with a vow. In fact, the benefits and contributions formulas were merely invented by some lawmakers, and hardly anyone remembers why they set them as they did.”
Shiller, never mentioning that citizens’ “contributions” have been spent as part of general revenues since the guns-and-butter days of Lyndon Johnson, does allow that the system is in trouble — but only because of longer life expectancies. The professor notes that only a generation ago, the world was concerned with too many mouths to feed and concludes, “This new crisis is another example of the kind of surprises history produces for us.”
There’s no surprise. Demography is a predictive science; the consequences of aborting millions of babies that would have filled out the ranks of workers to support the Baby Boomers in old age have been known ever since the Roe vs. Wade Supreme Court decision over thirty years ago.
So what’s Shiller’s solution to what common sense says is a fraud and the author says is a “crisis”? Intergenerational social security, by which he means to lay off the government’s obligations onto the entire population anew. If retirees are 11% of the population, then 11% of every paycheck will be confiscated for retirees’ monthly payments after taxes and the costs of the author’s proposed inequality insurance have first been deducted; if retirees are 20% of the population, then 20% comes off every paycheck, and so on. Workers could always fall back on selling Bibles to widows too, I suppose.
The book’s many contradictions read like a bad copywriter’s sales pitch. On the one hand, “we tend to be overcautious with our decisions, sometimes avoiding opportunities because we justifiably fear having to bear the consequences of failure,” but is this not prudence? No, says Shiller, it is a psychic “bug” which results in a “depressing uniformity and lack of adventure.” As a consequence, college students look to the job market in deciding their majors instead of “developing their talents in unusual ways.” Equally dismaying are American “homes that are standardized and unexciting with the resale market in mind instead of creative designs.” If we were all just properly risk-managed, the professor implies, then our homes could be featured in Woody Allen movies, and students nationwide would be spared their parents’ tiresome pap about having to support themselves someday.
Yet, according to Shiller, we dullards simultaneously engage in “excessive speculative activity,” at great risk to ourselves without fully understanding those risks and inevitably suffer from the results of “over-confidence.” But, even if losses are realized, Shiller explains, “the reference point matters fundamentally, for with a different reference point one would experience no regret. If one has become accustomed to thinking that one has something, one may make efforts, endure hardships, take risks, or make enemies, to avoid losing it. But if one never thought of having it in the first place, one may view not having it with equanimity” [italics added].
In fact, among residents of Shiller’s Big Rock Candy Mountain not only will private property rights and financial losses be perceived as trivial, but “the precautionary need to save will be reduced.” What will be the source of the private sector’s investment capital? Shiller doesn’t say, but since citizens will no longer have money, the only possibility is government-provided and/or government-mandated financial sector “investment.” Full Metal Corporatism, in other words.
War and State Coercion
It’s a pity that when the author put Americans on the couch he didn’t consider a lie down himself. The number of comments referencing war and state coercion are not only legion, they are upbeat.
War, for instance, is a most advantageous time to raise taxes, Shiller informs us because it “seems fair that the rich should pay more,” citing the 77% marginal rates of 1918, and a top rate of 94% during World War II, as if draconian taxation were one of civilization’s most significant achievements. True, the author does bemoan World War II’s government price and profit controls, but only because they “came too late,” and consequently corporations made money! Most alarming especially considering the prevailing zeitgeist is the repeated idea that if only nations would adopt his risk management schemes war would not be so destructive and costly.
Among the benefits of new technology, our Yale knuckle-buster enthuses, is that fines for traffic citations issued by police cameras will someday be “automatically “ added to the offender’s income tax bill or debited from “his or her savings account.” The author is invigorated at the thought that “evading taxes by paying in cash and keeping no records will be harder and harder.” He’s all for ongoing criminalization of the “inappropriate” use of both cash and encryption, which he assures us will destroy the underground economy. In reality, the way to explode the underground economy is to make government approval of all transactions a legal requirement, a situation that is rapidly being realized due to the requirements of the Patriot Act.
Here’s the money quote:
The inability of citizens to evade and cheat offers opportunities for social planners. We will be able to achieve a more equitable income distribution because we will be observing it more accurately.
Funny, but I don’t remember crowds of middle class taxpayers, who heretofore have been kept peacefully on the federal plantation by virtue of having the opportunity of becoming more unequal than they are at birth, demanding a mandate for the Ivy League to redistribute their income equitably, or otherwise. But, as a matter of fact and history, Ivy League social planners did get a congressional mandate to restructure and reform an entire nation in 1992 when Harvard’s agents in the Clinton Administration successfully privatized on Harvard’s behalf the USAID contract for Russia. How di d that go?
The Harvard-designed reform process worked marvelously to squander billions of US taxpayers’ dollars while relieving the Russian people of their national legacy in favor of Westerners and their selected Russian allies, a catastrophe with which Shiller had more than a passing acquaintance. A perusal of the book’s footnotes reveals he collaborated on a taxpayer-funded study of the Russian peoples’ concepts of economic fairness with Maxim Boyko, one of the native looters who collaborated with Harvard’s agents in the rape of Russia.[5]
Additionally, subsequent to the U.S. Attorney’s filing of a $120 million civil suit against Harvard’s agents — Jonathan Hay and Andrei Shleifer — and the President and Fellows of Harvard University over conflict-of-interest dealings in Russia’s Harvard-designed privatization and the Russian bond market, which collapsed in August of 1998, Yale University’s Endowment was revealed to have been a player in the same game. Both universities even had the same individual running their money in Russia, then-Harvard economist Andrei Shleiffer’s wife Nancy Zimmerman of Farrallon Capital [6] Who or what will guard against the cupidity of social planners? Shiller doesn’t say.
In fact, nowhere in the text does the author address the issue of unintended consequences. That’s ironic because Shiller’s own private business is a vivid — and for him serendipitous — example of the phenomenon.[7]
Having carved out a particular niche of expertise in real estate, the author and his partners, Alan Weiss, a former student, and Wellesley economist Karl Case, formed Case Shiller Weiss, Inc. (CSW) in 1991 as a housing index in an effort “to create new measures of price appreciation by zip code and home-value tier in the U.S. to facilitate devices to manage risks to our homes.” But that’s not how the firm developed.
From buyers’ and sellers’ points-of-view there is no particular value in housing indexes. Real estate — like politics — is local, very local, and indexes are not going to displace the great American weekend ritual of driving the neighborhoods “just to see what’s on the market”. In point of fact, there is no national housing market; there are only statistics regarding sales, pricing, and turnover on a national level. However, there is a national mortgage market organized around what is an illiquid property market.
So for whom exactly does CSW’s index scheme actually benefit? The lenders! According to CSW’s promotional website, the cost of inspecting and appraising collateral on offer is mooted by the firm’s “automated property valuation service,” which enables lenders to extend “instant loan” approvals online while insuring “quality control and fraud detection.” [8] Initially the firm parlayed their proprietary indexes into marketable criteria for home equity loans, but the bulk of CSW’s work today is in marketing their technology and indexes to primary mortgage lenders. How many of those lenders are hawking potentially deadly adjustable rate mortgages and/or are pumping the sub-prime market, no one knows. Nonetheless, so useful was the firm’s role in Alan Greenscam’s industrial-scale “Great Reflation” through the mortgage re-finance market that Fiserv, Inc., a financial services provider with 21,000 employees serving over 13,000 financial institutions worldwide, bought the firm in 2002 for an undisclosed sum.
But having gotten rich thanks to the Fed-induced bubbles in real estate and mortgage debt that succeeded the stock market bubble his work red-flagged earlier has in no way deterred the author’s keen desire to level the rest of us. In partnership with Alan Weiss, Shiller established Macro Securities Research LLC , whose objective is to devise indexes that will allow the principals to extract income streams from what are certainly “difficult to trade interests” in that they are statistics: the gross domestic product, consumer or producer price indexes, interest spreads between government and corporate bonds, and unemployment rates. Investors will be offered pairs of long and short securities tied to an index and can therefore go long or short the index, which can be composed of anything — an index of medical and assisted living costs, or an index of prices of single-family homes in a certain geographic region, taxes, or education costs — “anything that can be tracked.”[9 ]
Shiller labels these proposed index bets a form of “hedging.” Critically, the funds are to be collateralized by a fund of Short-Term Treasuries and not the profits or assets of productive businesses, meaning “investors” will be diverted into a low-yielding side game on a par with the weekly office football pool that could easily be bankrupted in a collapsing market, thereby hedging no one’s risks.
Overall, The New Financial Order is not so much an exercise in central planning as it is one in planning ahead . The book is a curious echo of Edward Mandell House’s 1912 Phillip Dru, Administrator , a draft of our current system of permanent government plunder, to which Shiller gives a trendy, quant jockey, post-modern twist. But the object of both reformers’ schemes was and is the creation of an international pool of money politicians, bureaucrats and academics can consume continually while diverting an additional hefty stream of cash to Wall Street.
The present version of this system, whose legal and banking infrastructure was put in place in the course of Colonel House’s lifetime spent at the side of Woodrow Wilson and FDR, evolved further with the establishment of the Bretton Woods institutions in 1944, and was topped off with the closing of the gold window in 1971, and which Shiller now proposes to update, has been a great success. So successful that the demands of international finance capitalism has slowly crowded out the productive economy. (Financial companies comprise nearly 30% of the S&P, and their activities 22% of the national economy.)
The United States doesn’t produce much of anything for export today, other than scrap metal, Hollywood movies, weapons, paper dollars and a financial system that has devolved into sanctimonious racketeering. (Even the export of technology has fallen into deficit.) But then it’s a lot easier to swindle the value from paper assets than it is to steal the family farm. (It is the illiquidity of residential real estate the author set out to remedy with his first indexes in 1991.) And to think Milton Friedman once argued against the gold standard because he calculated the gold mining industry would be a waste of resources, costing up to 1.5% of GNP each year!
America’s tragedy is that when the emerging economy of services and the phenomenon of globalization was taking shape people didn’t understand it. It wasn’t that Americans would cut each other’s hair and file one another’s law suits. No, not at all. Globalization of the “new economy” means some very few people are going to do everybody’s banking.
While reading the author’s argument for moneycide, I couldn’t help but think that Shiller was attempting, albeit awkwardly, to design a sequel to the dollar. After all, who’d want to lose the brand name much less the franchise? A “Dollar II” based on an internal and an external manifestation of the same currency could potentially solve a big part of the government’s problem by relieving it of the burden of its over-indebted electorate. Today the public has no gold available for confiscation as it did when FDR declared his infamous “bank holiday” in 1933, and the US Federal government is essentially bankrupt with a paper dollar devalued to 4% of its gold-standard value. What then might the government and the public trade today? Different paper, I suspect.
Could it be there has been method in Greenscam’s madness of reflation through mortgage refinancing? Millions of households converted their assets into liabilities over the last several years, and more Americans than ever before write tax-deductible checks to bankers each month. When America’s T-bill market is no longer able to live on the kindness of strangers, the Fed might have a neat trick up its sleeve. Imagine: The Federal Government offers the public a one-time opportunity — mortgage forgiveness in return for first switching their dollar-based wealth (or remaining liabilities!) into domestic digital chits.
Could this be the way in which the consequences of having based the dollar, and therefore the US financial system, upon a lie finally crush the last vestiges of American liberty?
The New Financial Order ’s single grace note is the front piece’s quote of a particularly lyrical passage from Ecclesiastes, which cautions mankind that “time and chance happeneth to them all.” Indeed, but why increase the odds of certain calamity, a diligent Bible student might well respond, by failing to honor God’s command in Deuteronomy that “Yea shall have honest weights and measures.”
[1] The Smith Richardson Foundation, chock-full-o'cash thanks to sales of Vicks Vaporub, financed the writing of The New Financial Order .
[2] Keynes himself admitted in the introduction to the 1936 German edition of The General Theory that his ideas were far more suitable to 'the conditions of a totalitarian state' like National Socialist Germany than to 'conditions of free competition and a large degree of laissez-faire.'
[3] The very definition of inflation is that money loses value; the phenomenon is most usually stated as “too much money chasing too few goods.” Either way, it’s the same thing.
[4] Financial analysist Kurt Richebacher reports that the Labor Department is now using a computer program called X-12-AIRMA to “capture” statistically the jobs that new firms presumably generate during an economic recovery. More than 90% of the 288,000 new jobs BLS claimed in March 2004 were owed to the labors of X-12-AIRMA, meaning they were not reported by any firm.
[5 ] A careful perusal of the author’s footnotes shows that along with other interested academics he is attempting to rewrite history by shifting the responsibility for the Russian debacle from the Harvard-designed voucher privatization of 1992-93 to the 1995 Loans-for-Shares swindle the newly-emerged oligarchy and their Western collaborators designed. The ethnicity of Russian and Western “reformers” is important to note since handing the country and its property to Jewish interests to be looted through a maze of Israeli and Swiss bank accounts and corporations made concrete every Russian nationalist’s nightmare. Vladimir Putin is a Russian nationalist who by virtue of occupying the Kremlin now controls Russia’s oil and gas assets.
[6] Yale Insider, Special Reports: Yale Connection to Harvard Russian Fraud Case, yaleinsider.org
[7] Though Shiller does address the issue of moral hazard (the encouragement of undesirable behavior by insuring against the consequences of that undesirable behavior) his solutions are various requirements, mandates, creaking levers and rolling balls non-state parasites would perpetually outmaneuver.
[8] cswv.com and fiserv.com
[9] Mehta, Nina, Wall Street Confidential, Five Finance Visionaries Discuss Risk and Innovation , Financial Engineering News, May/June 2003.
|
