How Leo XIII Led the Church towards a Golden Populist Age

Posted on July 15, 2011 by The Catholic Populist

Archbishop Dolan leads the American Catholic Church with Tools Bequeathed by Leo XIII

Leo XIII  wrote five great encyclicals that have defined the relationship between the three great institutions that define society — family, government, and Church — Arcanum (On Christian Marriage), Diuturnum (On the Origin of Civil Power), Immortale Dei (On the Christian Constitution of States), Libertas (On the Nature of Human Liberty), and Sapientiae Christanae (On Christians as Citizens).

Leo XIII believed that marriages were the directly under the jurisdiction of the Church, without whose grace the sacrament would fail and be left unprotected:

“Lastly, with such foresight of legislation has the Church guarded its divine institution that no one who thinks rightfully of these matters can fail to see how, with regard to marriage, she is the best guardian and defender of the human race; and how, withal, her wisdom has come forth victorious from the lapse of years, from the assaults of men, and from the countless changes of public events” (Arcanum).

Leo believed that the family was the bedrock of all society:

The family may be regarded as the cradle of civil society, and it is in great measure within the circle of family life that the destiny of the States is fostered. Whence it is that they who would break away from Christian discipline are working to corrupt family life, and to destroy it utterly, root and branch” (Sapientiae  Christianae).

Leo also believed in a Church and state mutually respecting harmony:

“The Almighty, therefore, has given the charge of the human race to two powers, the ecclesiastical and the civil, the one being set over divine, and the other over human, things.  There must, accordingly, exist between these two powers a certain orderly connection, which may be compared to the union of the soul and body in man … Whatever, therefore in things human is of a sacred character, whatever belongs either of its own nature or by reason of the end to which it is referred, to the salvation of souls, or to the worship of God, is subject to the power and judgment of the Church. Whatever is to be ranged under the civil and political order is rightly subject to the civil authority. Jesus Christ has Himself given command that what is Caesar’s is to be rendered to Caesar, and that what belongs to God is to be rendered to God” (Immortale Dei).

Leo took the populist view (greatly diverging from his highly political and influence-broker predecessors) that the Church should avoid nitty-gritty politics:

“And since she not only is a perfect society in herself, but superior to every other society of human growth, she resolutely refuses, promoted alike by right and by duty, to link herself to any mere party and to subject herself to the fleeting exigencies of politics” (Sapientiae Christianae).

However, Leo made the point that free will is only free when a human being rationally assesses two divergent courses of action with reason.  Without reason, man can have no more basis than animals:

“In other words, the good wished by the will is necessarily good in so far as it is known by the intellect; and this the more, because in all voluntary acts choice is subsequent to a judgment upon the truth of the good presented, declaring to which good preference should be given” (Libertas).

One of the main ways that reason is wounded is by the indulgence of license towards an evil end.  This allows passions to cloud the intellect.  Men indulging in license and rationally blinded become enslaved to sin and addiction and thus become less free:

“The will also simply, because of its dependence on the reason, no sooner desires anything contrary thereto than it abuses its freedom of choice and corrupts its very essence. Thus it is that the infinitely perfect God, although supremely free, because of the supremacy of His intellect and of His essential goodness, nevertheless cannot choose evil; neither can the angels and saints, who enjoy the beatific vision” (Libertas).

Thus, the preservation of liberty requires the avoidance of moral degeneracy and license.  Here, Leo argues, the state relies on the Church to keep men free.  He points out the hypocrisy of the Left, which under the banner of liberty but often attempts to suppress the Church, the true champion of liberty, in the name of freedom:

“And because the Church, the pillar and ground of truth, and the unerring teacher of morals, is forced utterly to reprobate and condemn tolerance of such an abandoned and criminal character, they calumniate her as being wanting in patience and gentleness, and thus fail to see that, in so doing, they impute to her as a fault what is in reality a matter for commendation. But, in spite of all this show of tolerance, it very often happens that, while they profess themselves ready to lavish liberty on all in the greatest profusion, they are utterly intolerant toward the Catholic Church, by refusing to allow her the liberty of being herself free” (Libertas).

He argues that the state is therefore dependent on the Church to maintain true ordered liberty.  As a result, in the emerging democratic world that Leo XIII dwelt in, Catholics had much to offer the state that serve the state that are the hallmarks of the Catholic Church in America and throughout the democratic world:

1) Defense of liberty and maintenance of social order (American founders believed that a free society had to be a moral society): “The duties enjoined are incumbent on the same persons, as already stated, and between them there exists neither contradiction nor confusion; for some of these duties have relation to the prosperity of the State, others refer to the general good of the Church, and both have as their object to train men to perfection” (Sapientiae Christianae).

2) Charity (Catholic Charities, Catholic Hospital systems, etc.): “It is, however, urgent before all, that charity, which is the main foundation of the Christian life, and apart from which the other virtues exist not or remain barren, should be quickened and maintained” (Sapientiae Christianae).

3) Education (Catholic parochial system and college system): “Where the right education of youth is concerned, no amount of trouble or labor can be undertaken, how great soever, but that even greater still may not be called for. In this regard, indeed, there are to be found in many countries Catholics worthy of general admiration, who incur considerable outlay and bestow much zeal in founding schools for the education of youth” (Sapientiae  Christianae).

4) Beneficial political advocacy (State Catholic Conferences, USCCB): “Whence it is clear that, in addition to the complete accordance of thought and deed, the faithful should follow the practical political wisdom of the ecclesiastical authority” (Sapientiae Christianae).”

5) Evangelization to multiply these great effects: (EWTN, Catholic Answers, FOCUS, Ave Maria Radio): “So soon as Catholic truth is apprehended by a simple and unprejudiced soul, reason yields assent” (Sapientiae Christianae).

This new vibrant vision of a populist Catholicism has helped carry the US to the vanguard of the movement to return America back to her founding principles.

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On the Incompetence of Ben Bernanke

Posted on July 13, 2011 by The Catholic Populist

Is any man fit to manage the global economy?

To be fair, Ben Bernanke seems like a nice guy.

But his policies have been nothing short of disastrous.

Those of us who come from a neo-scholastic or Austrian viewpoint on economics already believe that no one man has the insight and the moral strength to run the economy.  We believe that insofar as possible the populace should be entrusted with their own affairs including in the area of monetary policy.

Instead the Federal Reserve — a Big Bank and Big Government hybrid — is making the decision on what interests rates should be in this country and how much liquidity this country should have.

The United States has the obvious blessing and the not so obvious curse of managing the reserve currency of the world.  The dollar is the backbone of every economy in the world and the value of the dollar is determined solely by fiat — the belief that pictures of George Washington and Benjamin Franklin have value.  As a result of this privileged position, demand for the dollar spans the globe.  As volatile as the US dollar has been, it still remains far more stable than any alternative country, which in many cases have made even more incompetent decisions with their currencies than we have.

The United States will never become like Greece as some conservatives hyperbolically claim.  Instead, the United States can continue to run on ever-mounting deficits as far as the eye can see.  If no foreign creditor wants to buy our bonds any longer, our own central bank (the Fed) will buy them for us.  Of course, this causes inflation, which serves as the greatest tax on savings ever devised.

Because the Fed is printing dollars that all economies rely on for stability, in many respects the Fed is managing monetary policy for the globe.  Of course, the problem is that the Fed is managing with American interests first and foremost so it is not as inherently concerned with its outsized global influence as it would be if it was officially the reserve bank of Planet Earth.

The Fed is already infamous for over-managing the economy and pushing it towards the housing and .com bubbles.  The Fed typically creates bubbles by artificially doing something to the money supply.  Currently, the Federal Reserve is making huge artificial interventions in the market that are going to surface (and have already begun to surface) in unexpected parts of the economy.  The more “interventionist” the Fed is (the more they change things from the way they would be without interference) the more bubbles there are.

What is the Fed doing right now?

The Fed is artificially driving interest rates to zero by launching QE1 and QE2, two quantitative easing programs that conjure up a combined $1.85 billion to spend on federal bonds.

What is the Fed’s goal with this action?

The Fed is driving down long-term interest rates.  Short term interest rates were already being artificially held at 0.  This is supposed to make it easier for people to assume the risk of taking out loans.  People with home mortgages can refinance, slowing foreclosures.  It also helps the United States stock market weather difficult times.

What unforeseen consequences does this have?

Many.

1) When long-term interest rates are 0, banks have very little incentive to lend money out to entrepreneurs because they will be making very little profit if the business is successful.  This means less startups are being created and job creation is pitiful.  It drives forward a jobless recovery, which benefits investors but not wage-earners.

2) Bubbles are created.  This is a huge intervention in the market.  Somewhere, an ENORMOUS bubble is being created.  It will not be perfectly clear where this bubble is until it pops.  This is exactly the Fed policies that helped create the .com bubble burst in the early 2000s and the housing bubble burst in 2008.  But this interference is much greater and the bubble will be MUCH larger.

3) Inflation.  Money was conjured out of thin air on a computer screen.  Ben Bernanke hates when people use the term printing money but that is essentially what is happening.  We are monetizing the debt — printing money to pay our bills.  This is BAD for inflation.  Inflation is already striking all over the US economy.  It is hitting the gas pump first but it is going everywhere.  The international food index has doubled.  Other commodities are racing up.  The inflation hit hard internationally first but it is coming here very soon.

4) International conflict.  The citizens of many poorer nations could not afford to feed their family when rates went up.  Many rose up in armed rebellion against the status quo.  This sudden inflation-driven hunger helped launch the Arab Spring, which needs its own post.

What does Barack Obama have to do with this, if anything?

It is radically inadvisable for fiscal policy to create monetary policy.  Barack Obama’s federal budget was so big and so unmanageable that Congress essentially had to go across the street to the Fed in order to pay its bills.  There may be no new taxes but inflation is coming.  As long as Congress has the limitless credit card of the Fed sitting across the street, they use the credit card and print the money to pay the bills.  And no dollar in America on the fiat system is safe.

Ronald Reagan once famously said, “Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man.”  It is time for the American people to seize back control of their monetary policy and make the dollar as good as gold.

 

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Clearing Up Misconceptions About the Gold Standard

Posted on July 12, 2011 by The Catholic Populist

Would a gold standard result in Chinese plundering of American gold reserves?

Generally speaking, monetary policy and the gold standard is not something that people give a lot of thought to so there are some very common responses that need to be sorted through for people who have not yet been exposed to it.

Objection 1) There is not enough gold in the United States to operate a gold standard because American gold reserves do not match the money currently in circulation.

Answer 1) America operated the gold standard for over a century without having enough gold in its reserves to match a prospective demand from every holder of American dollars to cash in for the appropriate amount of gold.  You can cash in your dollars for gold but you could not do it if everyone else did it at the same time.

Objection 2) If there is not enough gold in the system to redeem dollars at 100%, that is putting the entire system into unnecessary risk.

Answer 2) If every Bank of America customer went to Bank of America simultaneously to demand their savings, Bank of America would file Chapter 11 bankruptcy.  They, like all banks — including the Federal Reserve — are leveraging assets by lending more money than they do in fact have.

Objection 3) Gold is a commodity.  Its values fluctuate and it is not inherently valuable.

Answer 3) If gold is not inherently valuable, what does that say about cloth pictures of Benjamin Franklin?  They do not seem to have much inherent value.  Gold, in fact, has the exact same level of value in 2010 as 1930.  You could get a family car for the exact same amount of gold in 1930 as you could in 2010.  The same is true of a button-down shirt.  The dollar has gone to pieces losing 80% of its value just since the 1970s.

Objection 4) The Great Depression hit countries worse on the gold standard because central bankers and government planners were unable to mobilize liquid monetary assets.

Answer 4) During World War I, the British Empire went off the gold standard in order to finance the deficits it was running to pay for World War I.  During the war, there was real inflation in the British economy.  After the war, the British Empire set the price of gold artificially low in order to cause deflation that would bring British monetary policy back to where it had been before the war.  This was a violation of the principle of the gold standard.  The gold standard is designed to prevent any central monetary control by any power whatsoever.  When the British Empire attempted to use the gold standard to effect certain monetary goals, they set a false standard.  Because they were then the reserve currency of the world, this caused a worldwide Great Depression.  It was actually more manipulative to have a falsely priced gold standard than not to have one at all because the post WWI Gold Standard was an attempt to have centrally planned interference in the market.  Thus, increased monetary interference caused the Great Depression and created a century-long misconception about the need for strong centralized monetary control.

Objection 5) The gold standard cannot be returned to because of the global economy and the negative effect that such a radical change would have.

Answer 5) The US Dollar is currently the reserve currency of the world.  If the dollar was switched onto the gold standard, then all other currencies would automatically be linked to the dollar and therefore to gold as well.  It would be instant and seamless monetary transition to the global gold standard.  This would curtail the power of central banks (in addition to the Fed itself) across the world.

Objection 6) China will benefit by making a huge run on our gold reserves.

Answer 6) The US is currently in no position to ever pay back our debt.  We need to restore exports, recapture the revenues resulting from taxing our Fortune 500 companies, hedge funds, and mutual funds here at home.  Only then will the US be able to address our debt problem.  Once the gold standard is proposed, the US will need to make arrangements with foreign creditors to pay back the debt that is owed just as a family with a bad financial situation will renegotiate a mortgage.  Protections have to be in place before the switch to prevent China from getting our gold reserves immediately.  It is important to note that China will be hesitant to even desire a giant run on US gold because it would remove their global economic advantage that results from cheap manufacturing.  They will be very amenable to striking a deal that will allow a gradual repayment of US debt.

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