Luther on big business

Thanks to Tom Hering for this quotation from Martin Luther, On Trading and Usury, 1524:

Of the companies I ought to say much, but that whole subject is such a bottomless abyss of avarice and wrong that there is nothing in it that can be discussed with a clear conscience. For what man is so stupid as not to see that companies are nothing else than mere monopolies? Even the temporal law of the heathen forbids them as openly injurious, to say nothing of the divine law and Christian statutes. They have all commodities under their control and practice without concealment all the tricks that have been mentioned; they raise and lower prices as they please and oppress and ruin all the small merchants, as the pike the little fish in the water, just as though they were lords over God’s creatures and free from all the laws of faith and love …

… How could it ever be right and according to God’s will that a man should in a short time grow so rich that he could buy out kings and emperors? But they have brought things to such a pass that the whole world must do business at a risk and at a loss, winning this year and losing next year, while they always win, making up their losses by increased profits, and so it is no wonder that they quickly seize upon the wealth of all the world, for a pfennig that is permanent and sure is better than a gulden that is temporary and uncertain. But these companies trade with permanent and sure gulden, and we with temporary and uncertain pfennigs. No wonder they become kings and we beggars!

via Comments ‹ Cranach: The Blog of Veith — WordPress.

Now I don’t think this means Luther would Occupy Wall Street if he were here today, but there is quite a bit here:  He opposes monopolies, which are always anti-free-market.   (The paradox that the free market will create businesses that try to prevent the free market from working against them by establishing monopolies was noted by Marx, but I believe conservatives agree with this problem.)  He also seems to want “strong money,” as opposed to inflationary and easily-manipulated soft currency.

Luther speaks as a theologian, not as an economist, as if that field existed then as it does today, but doesn’t this strike a chord?

Congress fails again

Back in August, Congress averted a government shutdown at the last minute by kicking the can to a “Supercommittee” that was assigned to find $1.2 trillion in savings.  The incentive was a provision that if the bipartisan task force failed to do so, $1.2 trillion would automatically be cut, with half from social programs (to get the liberals to co-operate) and half from defense (to get the conservatives to co-operate).  The deadline for an agreement would be Thanksgiving.

Well, that would be this Thursday and it is evident that no agreement is likely, with the sticking points being the same ones that stymied Congress back in April:  Democrats want not only cuts but new revenue, and Republicans won’t agree to any tax increases.

But doing nothing will be just as good, given the automatic cuts that will take place (though not until 2013).  Right?  You would think so.  That was the agreement.

But now the word is that Congress will renege on that deal by adding back what would have been cut out of  social programs and national defense!

Supercommittee Expectations Wane on Tax Divide – Bloomberg.

Would Calvin have Occupied Wall Street?

Would even liberal Lutherans say this of Martin Luther?

The cause of demonstrators involved in the “Occupy Wall Street” movement would have been supported by John Calvin, the 16th century church reformer who helped shape modern-day Protestantism, says the General Secretary of the World Communion of Reformed Churches (WCRC).

“I am sure he would have been in the streets of New York or London with a placard,” says Setri Nyomi of the French lawyer and theologian who wrote extensively about social and economic justice.

Nyomi makes his comments in a lecture delivered Tuesday at Princeton Theological Seminary in the United States. The Ghanaian theologian and Princeton graduate is delivering three lectures this week on the role of the church in the 21st century.

“Calvin expressed opposition to all forms of social oppression resulting from money”, Nyomi says. “Today, it is the global economic systems and practices that have more sophisticated forms of effects.”

Nyomi believes Calvin’s words resonate with life today. “The church of the 21st century needs to align itself with voices of justice … even if it means being out there in the streets,” he writes.

via John Calvin would have been in the Occupy Wall Street movement, says Reformed church leader | Bringing together 80 million Reformed Christians worldwide.

HT: Jordan Ballor

Can natural gas ignite the economy?

New technology is unlocking vast amounts of natural gas in the United States, enough to have a huge economic impact.  Yes, it involves “fracking,” the controversial practice of pumping chemical-laced water into shale deposits, but improvements in that technique are starting to satisfy all but the most zealous environmentalists.  I’m glad to see companies from my native Oklahoma are leading the way.  Businessweek has a big story on the topic with the deck below the headline, “Unlocking vast reserves of shale gas could solve the energy crisis, the jobs crisis, and the deficit.”

“The United States,” [energy company CEO Aubrey] McClendon boasts, “has the capacity to become the Saudi Arabia of natural gas.”

A tall man who wears his wavy silver hair long by CEO standards, McClendon, 52, exudes the confidence of someone who’s certain he’s seen the future. Exploitation of newly accessible supplies of gas embedded in layers of what’s known as shale rock, he predicts, will help revive domestic manufacturing and change the terms of debate about global warming. “It’s a new industrial renaissance,” he says. . . .

Encouraged by the availability of inexpensive and cleaner domestic gas, some electric utilities are replacing their coal-burning capacity with gas-fired units. Energy-intensive manufacturers of chemicals, plastics, and steel are beginning to bring home operations that they exported years ago. “We believe natural gas must be part of any discussion on strengthening our country’s long-term economic health,” Mulva said in Detroit. “It should also be part of any discussion on improving energy security, protecting the environment, and, yes, creating jobs.”

On the economic potential of the nascent shale revolution, even some career environmentalists sound impressed, if cautious. “This thing is a potential game-changer,” says Fred Krupp, president of the New York-based Environmental Defense Fund (EDF). Shale production in the U.S. has increased from practically nothing in 2000 to more than 13 billion cubic feet per day, or about 30 percent of the country’s natural gas supply. That proportion is heading toward 50 percent in coming years. The U.S. passed Russia in 2009 to become the world’s largest producer of natural gas. An Energy Dept. advisory panel on which Krupp sits estimated in August that more than 200,000 jobs, both direct and indirect, “have been created over the last several years by the development of domestic production of shale gas.” At a moment of 9.1 percent unemployment nationally, additional decently paid work is just one potential benefit. “Natural gas burns cleaner than coal, emits less in the way of greenhouse gases, and avoids mercury and other pollutants from coal,” Krupp points out. “So this could be win-win, if—and this is a big ‘if’—we do it the right way.”

via Could Shale Gas Reignite the U.S. Economy? – Businessweek.

The commodities bubble

Economics columnist Steven Pearlstein describes how high finance is distorting the commodities market and warns that speculation and “financialization” is blowing up a big bubble:

Silly you.

You actually thought companies existed to make products and profits.

You thought houses were meant to provide a place for people to live and office buildings a place for people to work.

You thought food was meant to be eaten, oil and gas to be turned into energy, and metals to be turned into cars, bridges and downspouts.

You weren’t sophisticated enough to realize that these really are just different “asset classes” meant to give investors around the world something to speculate in and to diversify their portfolios.

Even worse, you actually believed all that stuff about prices being set based on market fundamentals. Little did you know that it’s no longer the supply and demand for companies, houses, office buildings, natural gas or wheat that sets prices. More likely it’s the supply and demand for the futures, swaps and other derivative instruments linked to those things.

Maybe they thought we wouldn’t notice that the financialization of the economy brought with it higher prices and a more volatile economy, along with higher profits for the financial services industry.

The latest example is the market for commodities: corn, wheat, cotton, silver, copper, oil, natural gas. In the past decade, hundreds of billions of dollars have flooded into the market, largely through swaps contracts and commodities index funds, ETFs and mutual funds.

These markets have long since outgrown their original function of providing producers and consumers of these commodities with a way to hedge their risks by guaranteeing supply and locking in prices. All futures markets require a certain number of “speculators” to take the other side of the contracts from commercial users and producers. Typically, these speculators would represent 30 percent of the participants in a healthy futures market.

But today, because of a sudden desire to earn higher returns and diversify investment portfolios, there are more people wanting to invest in corn and copper and oil than there is corn and copper and natural gas produced and consumed. But no problem. The financial wizards on Wall Street have magically conjured up synthetic corn and copper and West Texas oil so that speculators can provide hedging opportunities for other speculators. Instead of 30 percent of the market, these “passive investors” typically account for 70 percent or more. . . .

What’s clear from this tale is how little the financial services industry has really changed since the crisis of 2008. The financialization of the economy continues undeterred, creating a bubble in commodities just as it did with houses and office buildings.

via Steven Pearlstein: You bet it’s another bubble – The Washington Post.

Does this kind of speculation serve an economic purpose?  Is it just an example of free market economics?  Or does it actually distort and thwart the free market?

The Occupy ideology

I went into Washington yesterday and stumbled upon the Occupy D.C. folks.  They were in a little green space on Pennsylvania Avenue, which they have filled up with tents.  I was surprised to see how few of them there were.  Estimates have been a couple of hundred–which in itself is an unusually tiny demonstration by D.C. standards–but even that number seems high, based on the little tent village that I saw.  Also, they don’t really look like 99% of America!  I didn’t notice any working class folks–no truck drivers, factory workers, or farmers–despite the unions coming out in their favor.  (That’s always what’s frustrating to the American left:  the proletariat just never comes out for their causes!)  It was pretty much the usual cast of counter-culture radicals whom I remember so well from my college days back in the early 1970s.

The media has been fawning all over these folks, and Democrats–including the president–have declared their support.  That might come back to bite them, according to Michael Gerson, who describes the ideology at work in the seemingly unfocused protests:

But there is some ideological coherence within OWS. Its collectivist people’s councils seem to have two main inspirations: socialism (often Marxist socialism) and anarchism. The two are sometimes in tension. They share, however, a belief that the capitalist system is a form of “institutionalized violence,” and that normal, democratic political methods, dominated by monied interests, are inadequate. Direct action is necessary to provoke the crisis that ignites the struggle that achieves the revolution.

And we are beginning to see what direct action means. Occupy DC protesters recently assaulted a conservative gathering, then took over a public intersection to prevent the passage of luxury cars. Blocking the path of one driver and his 2-year-old son, an activist shouted, “Sorry, but you have no power right now.” That is the opposite of participatory democracy — the use of power to intimidate a fellow citizen on a public street. It is the method of British soccer thugs.

In Oakland, protesters have been playing at the Paris Commune — constructing barricades, setting fires, throwing concrete blocks and explosives, declaring a general strike to stop the “flow of capital” at the port. Here, OWS seems to be taking its cues from both “Rules for Radicals” and “A Clockwork Orange.”

Defenders of OWS dismiss this as the work of a few bad apples. But the transgressors would call themselves the vanguard. And they express, not betray, a significant ideological strain within the movement. Since the 1960s, some on the political left have sought liberal reform through the democratic process and nonviolent protest. Others have sought to hasten the crisis and collapse of fundamentally illegitimate social and economic systems. Both groups can be found within OWS, but the latter is ascendant.

OWS has, in fact, provoked a crisis of credibility for many American institutions. News coverage of the movement has been both disproportionate and fawning. The two encampments of Occupy DC, for example, have a couple of hundred inhabitants. If they moved to a nearby convention hotel, the group would probably be smaller than a meeting of the American Apparel and Footwear Association. During the Tea Party’s rise to national attention, the press scoured the country for any hint of rhetorical incitement to violence. OWS protesters smash windows, assault police officers and wear Guy Fawkes masks — a historical figure known for attempting to bomb the British Parliament.

City governments have also begun to look hapless for their accommodation of squalor, robberies, sexual attacks, drug use, vagrancy and vigilantism.

And what must Democratic leaders — who rushed to identify with a protean political force — now be thinking? OWS is not a seminar on income inequality — not the Center for American Progress on a camping trip. It is a leftist movement with a militant wing.

Will Americans, looking for jobs, turn in hope to the vandalization of small businesses and the promise of a general strike? Will citizens, disappointed by a dysfunctional government, be impressed by the endless arguments of anarchist collectives? Will people, disgusted by partisanship and rhetorical rock-throwing, be attracted to actual rock throwing?

This seems to be the desperate political calculation of the Democratic Party. Good luck with that.

via As radicalism creeps in, credibility retreats from OWS – The Washington Post.

OK, they have TWO encampments in D.C., so that explains how they might have 200 protesters, despite the mere handful that I saw.   Gerson’s point is a good one:  Radicals, whether Marxists or Anarchists, WANT the collapse of our economic system, which is understood as the prerequisite for the revolution.