In Defense of the Gold Standard

Posted on July 11, 2011 by The Catholic Populist

America built its wealth on the gold standard

The gold standard is not perfect.  No monetary policy is.  Its flaws include natural monetary fluctuations of inflation and fluctuations of deflation without any control by the elites in the banking industry or the government.  Its strengths include allowing natural monetary fluctuations of inflation and fluctuations of deflation without any control by the elites in the banking industry or the government.  It is, however, the least imperfect and the most populist monetary policy.  And the need to return to it is urgent.

Why is it the least imperfect?

Under a gold standard, the free market incentivizes a balance of trade because price adjustments take place that incentivizes Americans to export and import at the same rate.

The reason for this, in shorthand, is that if a country is running a trade surplus with the United States (selling more goods to the US than buying of US goods), that country would end up with more dollars and Americans would end up with more products at the end of the transaction.  This is because that products could be made more cheaply for American consumers in this unnamed country than goods could be made in America.

The surplus of American dollars into this country would be redeemable for gold (the whole point of the gold standard).  Thus, in effect, any country running a trade surplus with the US would be increasing the amount of gold in its country.  However, a swift increase in the amount of gold in a country operating on the gold standard drastically drives up the cost of making goods in that country.  Thus, the “cheap” advantage the country would have on the US would be neutralized in the trading process itself.  The market actually anticipates this and thus creates incentives to maintain an international balance of trade.

This is why before we departed from the true gold standard under Franklin Delano Roosevelt, the U.S. was the greatest exporter in the world.  The automotive industry, the steel industry, and a thousand other “export” industries were thriving.  Towering skylines were rearing up all across the United States.  Ironically, these are the very industries where private sector unions (some of FDR’s strongest supporters) thrive.

On April 5, 1933, President Roosevelt issued Executive Order 6102 “forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the Continental United States.”  This was unprecedented federal intrusion into property rights according to many Constitutional scholars.  Why would President Roosevelt destroy the gold standard which America had ridden to become the dominant economy in the world?

The answer is simple.  Roosevelt could not afford to remain on it.

The New Deal had a vision of a deficit-based federal government that would spend America out of the Great Depression by launching on countless great projects and financing one great entitlement — Social Security.  He also believed America needed to be in a position to spend its way out future depressions.  In order to pay for his vision, Roosevelt believed that the United States would have to run a trade deficit.  When foreign merchants and governments ended up with stashes of American dollars from trade with private American merchants, the United States government would sell them American bonds.

To be fair to Mr. Roosevelt, the New Deal designed Social Security, the first entitlement (and the most well-designed of the Big 3), under the assumption that the United States would be dealing with ongoing demographic growth.  Mr. Roosevelt could not and did not envision a post Roe v. Wade America where the population was in an ongoing aging spiral.

This demographic winter has begun to hit and is forcing entitlement programs to eat up unmanageable portions of the federal budget.  The federal government is having to finance larger and larger portions of the budget with overseas bond investment.  Incentives are increasingly there for the US to run a larger and larger trade deficit.

Many American Fortune 500 companies and their investors realized that incentives were growing to export to the United States rather than to export from the United States.  Now, calling AT&T is likely to get someone in India rather than Texas.  A Nike factory would lead you to Brazil rather than Ohio.  Cashing in on this reality has benefited the investor class but harmed the wage-earning class as their jobs are outsourced.  This has created a growing gap between the rich and the poor that numerous politicians on the Left have used as the authority for exacerbating the deficit issues feeding the problem.

If we returned to the gold standard, then the market would suddenly incentivize American exports.  Hedge funds, mutual funds, and investors with mobile assets would rush to invest in a suddenly booming American export industry returned from the dead.  Fortune 500 companies would find that it was no longer in their financial interest to service American clients from overseas.  Jobs and American investment money would rush back to the United States.  Federal revenue would increase on account of export-based growth but Congress would no longer have a credit card to spend more than it took in.  Would there be periods of deflation and inflation, with little central control to fix it?  Yes.  But America can no longer afford to have its own investor class not investing in the United States.

Why is it populist?

It would benefit the populace but, more importantly, it would remove the power of the Federal Reserve.  Right now, Fed Chairman Ben Bernanke is expected to operate with both the insight and the morality to monetarily manage the entire United States economy with no check on his power.  According to populist philosophy, no man should be entrusted with that level of responsibility.  Monetary decisions should be left to the populace.

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Leo XIII: Launching the Catholic Crusade against the Left

Posted on July 7, 2011 by The Catholic Populist

Pope Leo XIII

The Church’s loss of temporal power armed it with great power against the Left, which was greatly manifested in the fall of the Soviet Union (and the ongoing culture wars in the United States).  But who launched the Catholic Church on its Crusade against the Left?

Pope Leo XIII (1878 – 1903) was the first Pope to postdate the temporal strength of the Catholic Church.  The Catholic Church was not granted the sovereign Vatican City until the Mussolini Administration granted by the Lateran Treaty of 1929.  And the Lateran Treaty never restored any temporal strength to the papacy, merely its political independence

Prior to Leo XIII, most papal encyclicals dealt to some extent with papal foreign policy, often plunging into rather mundane details of ambassadors from Emperors and Kings, papal ultimatums, the threat of force or diplomatic action, specific policy recommendations, etc.  Amid the shifting political landscape of Europe, the diplomacy of the papacy had been unable to focus on the rise of the left — from the French Revolution to Napoleon to Karl Marx.  However, the Left had not ignored the Catholic Church.  From the French Revolution’s execution of thousands of priests to Napoleon’s decision to put priests on government salaries so as to better control the Catholic Church to Karl Marx’s vision of a post-religious society, anti-Catholic strategy had always been part of the Left’s playbook.

Leo XIII, unfettered by the dependency on the Napoleonic Empire, struck back … hard.

In the first encyclical of his papacy, Inscrutabili Dei Consilio (On the Evils of Society), Leo XIII called out the Left for its hollow playbook (which can still be viewed on the New York Times Editorial page): “The enemies of public order, being fully aware of this, have thought nothing better suited to destroy the foundations of society than to make an unflagging attack upon the Church of God, to bring her into discredit and odium by spreading infamous calumnies and accusing her of being opposed to genuine progress.”

He responds that the Church has been the greatest instrument to deliver civilization out of barbarism: “Further, who will deny that the Church has done away with the curse of slavery and restored men to the original dignity of their noble nature; and — by uplifting the standard of redemption in all quarters of the globe, by introducing, or shielding under her protection, the sciences and arts, by founding and taking into her keeping excellent charitable institutions which provide relief for ills of every kind — has throughout the world, in private or in public life, civilized the human race, freed it from degradation, and with all care trained it to a way of Living such as befits the dignity and the hopes of man?”

He identifies education as the great battle-ground: “The more the enemies of religion exert themselves to offer the uninformed, especially the young, such instruction as darkens the mind and corrupts morals, the more actively should we endeavor that not only a suitable and solid method of education may flourish but above all that this education be wholly in harmony with the Catholic faith in its literature and system of training, and chiefly in philosophy, upon which the direction of other sciences in great measure depends.”

If his first encyclical played defense against the Left, his next encyclical, Quod Apostolici Muneris (On Socialism) was even more pugnacious as it eviscerated the Left in an offensive foray: “You understand, venerable brethren, that We speak of that sect of men who, under various and almost barbarous names, are called socialists, communists, or nihilists, and who, spread over all the world, and bound together by the closest ties in a wicked confederacy, no longer seek the shelter of secret meetings, but, openly and boldly marching forth into the light of day, strive to bring to a head what they have long been planning — the overthrow of all civil society whatsoever.”

He critiques the Left on marriage (ongoing: see New York): “They debase the natural union of man and woman, which is held sacred even among barbarous peoples; and its bond, by which the family is chiefly held together, they weaken, or even deliver up to lust.”

He also critiques the attack on property rights: “For, while the socialists would destroy the “right” of property, alleging it to be a human invention altogether opposed to the inborn equality of man, and, claiming a community of goods, argue that poverty should not be peaceably endured, and that the property and privileges of the rich may be rightly invaded, the Church, with much greater wisdom and good sense, recognizes the inequality among men, who are born with different powers of body and mind, inequality in actual possession, also, and holds that the right of property and of ownership, which springs from nature itself, must not be touched and stands inviolate.”

He even directly attacks equality of result philosophy: “Thus, as even in the kingdom of heaven He bath willed that the choirs of angels be distinct and some subject to others, and also in the Church has instituted various orders and a diversity of offices, so that all are not apostles or doctors or pastors,(10) so also has He appointed that there should be various orders in civil society, differing in dignity, rights, and power, whereby the State, like the Church, should be one body, consisting of many members, some nobler than others, but all necessary to each other and solicitous for the common good.”

The fight has been long but this great Pope began to use the newfound nonpolitical influence of the Church to fight the Left in the heart of the culture in a battle for the soul of civil society.  And social conservatism — and Catholic philosophy — is advancing.

 

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The Rise and Fall of Ultramontanism

Posted on July 1, 2011 by The Catholic Populist

 

Joseph de Maistre was a Leading Ultramontanist Theorist

In Against the Murderous, Thieving Horde of Peasants, Martin Luther made the revolutionary set of statements that Romans 13: 1 – 7 has inherent within it the idea that Political Might Makes Right: “For a prince and lord must remember in this case that he is God’s minister and the servant of his wrath (Romans XIII), to whom the Sword is committed … Here, then, there is no time for sleeping; no time for patience and mercy.”

Martin Luther makes the cardinal Biblical interpretation error of ignoring those to whom the statement is addressed.  Paul is telling the Christians to obey civil law when it does not conflict with divine law and urging the Christians to view the civil law as legitimate even though it does not come from Christ.  Paul is endorsing good citizenship.  Martin Luther takes the comment and applies it to the rulers, assuming that they have divine authorization to exercise their power devoid of mercy (rather against Christian orthodoxy).  In the tract, Luther even declares that for civil rulers, the ends justifies the means — a direct violation of the dignity of the human person and basic natural law theory.

Luther took his logic to its natural extension, arguing that the princes and the nobles ought to control the Church.  Luther found many willing adherents to this idea among the nobles of Europe — from the princes of Germany to the nobles in England to the Huguenots in France.  Throughout Europe, this caused a chain reaction:

1) Nobles ceased paying the tithe to the Catholic Church that was typically used for Church administration and charitable activity.

2) Nobles began to be able to lend with more usury, a practice that had in Medieval times been reserved to Jewish merchants.

3) Nobles seized the wealth of monasteries, guilds, and churches, gaining access to the Church’s more liquid assets.

4) Nobles throughout Europe began to grow much more wealthy and more powerful than they had been, both in relation the commoners and to the King.

Predictably, the French King, concerned that his own nobles — particularly the Huguenots — would buy into this theory, began to patronize theorists who took the Political Might Makes Right and converted it into the more narrowly-defined Divine Right of Kings.  The French Crown smiled particularly on Jean Bodin and Jacques-Benigne Bossuet, the leading Divine Right of Kings theorists.  Once the French Crown put down the Huguenot uprisings (led by Nobles quite interested in Luther’s theory), Cardinal Richelieu put the theory into practice, immensely centralizing power into royal hands by his crafty statesmanship.  While the nobles grew stronger and the Kings grow weaker in the Protestant countries, in the Catholic countries the Kings grew stronger in relation to the nobles and to the papacy.

The papacy had long been the dominant political power player in Europe and it was alarmed at its growing political weakness.  The papacy no longer had the strength to shape the secular policy of Europe by traditional political methods (allies, diplomacy, and might).  The powerful Jesuit order, who swore an oath of personal loyalty to the Pope, mostly began to believe that the solution was for the papacy to issue an ultramontane declaration.  Such a declaration would announce that papal foreign policy was essentially infallible.  To be a Catholic, in other words, would be to have political allegiance to the Pope.

In order to issue such a declaration, there needed to be a Council.  The Jesuit push for an ultramontane-focused Council was curtailed by their suppression from 1767 to 1815 under pressure from indignant European monarchs.  In 1819, philosopher Joseph de Maistre published a well-received tract arguing for an ultromontane decree.  The ultramontanes were finally able to convene the desired Council — the First Vatican Council — in 1868.

At the Council, the ultramontane goal was to make two declarations of papal infallibility — one on faith and morals and one on secular affairs.  However, Blessed John Henry Newman and Lord Acton led the populist wing in the Council and, though badly outnumbered, they were fierce opponents of the ultromontanes at the Council.  The populists attempted to prevent a vote on papal infallibility — desiring to delay in the face of overwhelming ultromontane strength.  Finally, Cardinal Newman successfully convinced the Council to adopt a very narrow definition of papal infallibility (the ex cathedra definition).  When the ultramontanes began to push for a vote on papal infallibility in matters relating to secular affairs, the walls of Rome were breached and Vatican I was roughly ended.

The Lord works in mysterious ways and perhaps Vatican I was ended in the nick of time.

The ultramontane wing of the Church never recovered and, in Vatican II, were outmaneuvered by the populists in a Council emphasizing the universal call to holiness.

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