Financial Repression and the Congregational Veto
There is Another Veto That Must be Exercised
Our political schizophrenia, democratic in some areas, representative in others, and downright shadowy and kabbalistic in perhaps the most important ones is corrosive to the foundations of our culture and exacerbates the need for population replenishing beyond the simple electoral replacement motives. Our structures disincentivize the recognition of the people and propel us towards a flat propositional state, hollowing out the former and fattening the elite of the latter.
While in democratic settings (in all its differing flavors) politics has always been a rough-and-tumble business, modern politics has morphed from the quest for the better “Polis” on the hill to total war among incompatible factions in a more substantial way, certainly exhibiting an accelerative transformation over the last generation. The way money is regulated and changes hands is an integral part of how this transformation in American politics works. And this, only very indirectly, is subject to voter oversight.
The centrality of politics as a point of focus for the average citizen is lamentable, as it is an unnecessary distraction. Would that it be that the average American could, for the most part, ignore the political world beyond his horizon. Perhaps the Roman Catholics have their internal politics correct. The Pope is who he is, and the average Catholic has little or nothing to do with who is picked for the role; that is the job of the Cardinals. A representative federal republic, indeed! Well, perhaps a little lite on the republic part. However, if you don’t like this pope, he will sooner or later die. Another will come along. Don’t worry about it. Be involved locally in making the world a better place by submitting to the Christ.
I say this as a committed Presbyterian. Instead of Bishops, we have Church Courts. They are usually sleepy affairs but, as Presbyterians, we will make an existential argument over the color of the carpet…and then organize a church split about it. Wouldn’t it be better if we just didn’t have to worry so much about all this? People I really admire make this very argument. They aren’t all wrong.
However, that isn’t the American way. We have a rich tradition in accountability. That’s really the basis of the American understanding of a “res publica”. I am not a democrat, and raw democracy induces my gag reflex. But, I do very much want a veto, expressed collectively and enjoyed together with my peers. You don’t need to be a philosopher to know when the toilet needs flushing.
This sentiment is the hallmark of American politics, the congregational veto. This collective check and balance, the admission that factions are an aspect of reality, and the call to put their Brownian Motion to work in holding the whole together, is unabashedly American. The musings on the right which question this are perhaps good exercises, but without a revolutionary despot, we are where we are. High fives for Madison.
However, in the applied politic that doesn’t involve a parliamentary circus or the grand moves of presidential electoral maneuverings, things are very different. We have left the American way. In these mysterious areas behind the veil, the country is unrepublican, the people have no veto, and even if suddenly “we the people” did, there is no one person for such a veto’s power to be applied to.
The veto has a modern alternative, some would argue. In many ways, modern American politics reflects the fruit of applied libertarianism: a culture, a body politic, that has divided along wholly incompatible lines. People tend to sort in the same way oil and water do. Just look at church services and social gatherings. This is evident in the population movement where the movement of the more traditionally minded towards red states is a concentrating function, save for the full-to-the-left spigot of immigration designed specifically to mitigate this. Veto with your feet! I find little solace in this, as I am one who finds “home” very comforting. I am Texan. I want to die a Texan. Don’t tell me to express a veto by uprooting my family and my livelihood.
And, from a practical standpoint, how can a sorted people be governed as one? Federalism is an easy answer but one which the elites, those professors of the post-war(s) consensus won’t allow. Don’t even mention it. Take the zero, report to your academic advisor. And while I agree deeply with the type of new, robust Federalism that was championed by Angelo Codevilla, it doesn’t address the deeper issue of the goings-on behind the veil. I don’t just want the bread, I want the wine (Angelo’s was excellent, I still have two bottles). Wine implies rule. It is a royal drink of rest, enjoyed from the throne. It is the symbolic blood of the enemy. It makes sense that in a political sense, the priestly class wants us to subsist on bread.
Each era has sought to impress a false unifying principle, some version of left-liberal unitarianism. Now, it is the Bolshevism rooted not in class but of sexual preference and identity. In the late 1960s, the joke (variously attributed to Richard Nixon and Milton Friedman) was that “We’re All Keynesians Now”. And, so it is for the investing elite, although Keynes himself would blanch at the largesse of both monetary and fiscal policy. Where Keynes argued for under and over spending to smooth out the business cycle, the current system is one of simply “never a hint of deflation”, that necessary cleanser of the economy. A monetary veto, if you will.
The contemporary version of the ubiquitous union of Keynes is “Modern Monetary Theory”, an insidious demon of mathematical trickery which substitutes the “store of value” function of money with “velocity”. This is only slightly sounder than the labor theory of value, which means, not sound at all. If people just spent more, and more often, we would drive the arrow up. Oh, did I show you my perpetual motion machine? Why is it plugged in to the wall outlet? Don’t ask rude questions.
This has driven the meat of the citizen bell curve, the hoi polloi, to become de facto Schmittians (though certainly not knowing the concepts as such, nor the man). It is all friends and enemies now. This has been thrust upon them. Gone are the simple debates over flat vs progressive taxation, or whether we should send commandos to battle communists in our hemisphere. Now the politics are existential. “Can I live as a committed Christian in the public square, sending my children to public schools?” My dear friend Darryl Cooper said recently that “The utopian impulse to displace God is as old as time, but the nihilistic one can only gain purchase among the detritus of a society devoid of shared meaning – that is, it flourishes in the crash site after the utopian left’s projects fall to earth.” The shared meaning that can transcend culture has been substituted for a naked, cheap humanism that is ironically anti-human. There is no room for God, or transcendence at all for that matter. And the nihilistic landscape is punctuated with mass killings. But hey, nothing is as real as death.
How did this come to pass? How did we get to a mutated and “modernized” Keynesian monetary and fiscal policy, “gay race communism” in the culture, and Libertarianism everywhere else? How is it that the debt and unfunded liabilities have grown to nearly $200 trillion, more than the cumulative GDP of world history? How is it that the culture of the public square no longer reflects the cultural heritage of even 1990s America? The libertarians have long argued that freedom will sort out the divisions, but why were these divisions brought upon the people in the first place? Why were they imposed upon the people? These arguments aren’t over who is the best dogcatcher, but of basic questions of what it means to be human.
The right in America is growing because of these impositions, not upon procedure, but upon a way of life and the means to live it. No longer is it simply those who decided that the Socratics and Strauss were interesting, or that Nietzsche was an edgy indulgence. No, the right has been growing because when enemies arise, armies gather. A self-conscious right is a culture’s immune response. And, as we look around, the white blood cell count of the body politic is “elevated”, as the pathologist might say.
Now, with any immune response, there is the danger of self-harm. COVID killed many by causing the infamous “cytokine storm”. My own mother died of complications from Lupus, an auto-immune disorder in which often the treatment is worse than the disease. Many of us suffer from the histaminic response to allergens. Our human bodies teach us about the Body of Humans. The Christian Bible has a famous section comparing the Church to a body with individual members. The Body Politic functions similarly. As such, the immune response is both important and dangerous.
So it is now, among some. A primacy of loyalty of the ruling class to its own citizens is good. However, a body needs outside elements to survive. Air and food are by nature “alien”. Open, or even hypothetically-managed-but-large, immigration is rightly derided as destructive to civilizational cohesion as well as having a myriad of other deleterious effects. But some have turned derision of a harmful policy into the dehumanization of anything “other”. We must be careful. But this response is understandable given the circumstances.
A reform movement in the Catholic Church turned into a splintering Protest, counter-protest, counter-counter-protest, radical protest, culminating in more denominations than regular churchgoers. When the people know it is time to flush, and cannot find the toilet handle, the situation gets messy.
Similarly, we have some on the right decrying all trade. Trade has been a managed charade, an exploitative clown show for many years, but exasperated with NAFTA. “North American Free Trade Agreement”, an agreement which by its length reveals it is anything but “free”. A free trade agreement would be remarkably short. So, it is worth remembering that the right isn’t against trade, it is against unwise trade. “Unwise” you say? How do you define that? You cannot “managerialize” your way through it, it takes wise people. Comparative advantage is real, but isn’t binary. At best, it is a very complicated optimization in multiple dimensions. Let’s fire up the LINDO. And don’t call something what it isn’t. If you want managed trade, or limited trade, call it that. But don’t so unashamedly manage it for the purposes of exploiting your own people.
With regard to the above, if one were to try and turn multidimensional optimization into a set of rules, we would soon find that it is iterative. The problem is, real life is struggles with iterative solutions. We want to learn from the mistakes from the past, not game them out repeatedly in real time. Some try this in relationships, and become the hollowed-out shells walking the halls of offices everywhere like a late-season The Walking Dead extra. Linear programming is possible in a mathematical simulation. In real life, we need wisdom to weed out the null sets ahead of time.
However, this strikes against liberal universalism and is hierarchical at its root assumption. It takes wise and moral people to rule. A set of rules cannot do it. Byzantium is dead. But the urge to do this is not. Even now we are functionally ruled by a robed priestly caste that is devotedly skilled in the art and science of rules interpretation, when the heart of it is clear for all to see. And with regard to trade, “free trade” doesn’t exist, even among the nations of NAFTA or its replacement, the USMCA. Simply looking up the document reveals wheels within wheels of complexity and layers of regulation. What is the function of such? Surely all this isn’t needed to allow Fred in Nebraska to sell tractor parts to Jacques in Quebec? So why does it exist? What is the necessity of the reams of paper filed with rules, impossible for any ordinary citizen to sort out?
It creates a priestly caste, scribes who “know”, and more importantly who can gate keep and allocate. Liberalism isn’t free, naturally. We must have an unaccountable class of managers who make sure the elite stay elite, and the kulaks unable to even know a veto of accountability is missing. These rubes can’t know the true wisdom! Liberals say this is a necessity, the removal of the need for wisdom (who is to say what is wise?) and of morality (who is to say what is right and wrong?) and therefore of the religions which inform us of such, religions to which the aforementioned kulaks are attached, so irrationally. The liberal bent of all being equal is fundamentally the guarantor of inequality, for a privileged priestly class is needed to maintain the class structure which only apes equality. True equality is equal scales, not subsummation into a gnostic priestly order opaque to all but the Emerald Citizens.
This liberal universalism assumes all non-priests, “normal” people, are fungible. Even the status of citizen, especially if the city of the citizen is in flyover country, that place where food and second-rate human capital is grown, with similar status. Trade is simply the math exercise of getting assets distributed most efficiently. See again our LINDO example. Arrow go up. We should have monthly referendums on the Supreme Court docket. Oh, we can’t do that…we need the experts. The experts KNOW. To be fair, sometimes the experts do know. Who decides who the experts are? What is the dividing wall of hostility between the washed and unwashed, between the normal and the expert, between the sinner and the priest? How democratic is this priestly democracy?
You cannot escape the need for wisdom, but the liberal impulse is to increase managerial complexity and every step to hinder the impact of the wise. Even now, if Left power continues to grow in the US, the goal is the increase in the numbers of SCOTUS justices. Increase the complexity, blunt the wisdom, extinguish the veto.
I am mystified. As Curtis Yarvin states, “everyone loves democracy, everyone hates politics.” The experts get to decide the difference. Democracy is ultimately rule by them. We simply ratify their choices in Soviet Splendor. Foreseeably, and by necessity, this severs the covenantal bond of rule and ruled. The rulers can hide behind the rules, they can set up administrative frameworks which do the ruling. Running like clockwork, devoid of accountability.
This reality intrudes into the realm of money. Money, that store of value and medium of exchange, is at the heart of a traditional life. It is traditionally saved, and protected. When “spent” it is transacted, at arms-length, for a good or service. This serves both parties. It is the essence of mutual benefit. It is dependent upon “free price discovery”, among self-interested parties wanting to maximize their marginal utility. In capitalism, where these transactions might involve credit and/or long distances, this “free price discovery” should extend to the cost of the capital, the pricing of money itself.
The problem is, we can’t have that. As Jesus discovered when strolling through the Court of the Gentiles in Herod’s Temple, money-changing is an occupation best done by a monopoly, or at least an oligopolic cabal. “Usury! Egads, we don’t do THAT. Now, don’t worry about that exchange rate.” As the Gentiles and non-priestly classes were fleeced when trying to draw near to the Hebrew God, they got whipped for their efforts by the One claiming to be the embodiment of that God. May Jesus come quickly, as we turn our sights to the Federal Reserve.
In the USA, our “price of money” is not set by free price discovery. It is set by a priestly caste, the curia of which is the Federal Open Market Committee. While the relative time value is subject to market forces, the anchor of the absolute level is the Federal Funds Rate. If the market were to set the rate, it would be much higher over the vast majority of time.
This practice of keeping interest rates lower than the market would set them — by the aforementioned free price discovery that is the bedrock of capitalism — is known as Financial Repression, a term coined by Edward S. Shaw and Ronald I. McKinnon in the early 1970s. Their work highlighted the ways in which governments implement policies to channel funds to themselves that in a deregulated market would go elsewhere. These policies include measures such as caps on interest rates, capital controls, and the creation of captive domestic markets for government debt. Financial repression stifles financial development and economic growth by distorting the financial system and reducing the efficiency of investment. Furthermore, their research showed it hampers financial deepening—the process by which financial institutions and markets become more effective at mobilizing savings and allocating investment.
But the key thing it does is by lowering interest rates artificially; it creates a transfer mechanism from savers to the elite investing class. Because savings earn a lower return, the cost hurdle for risky investments is lower. Money that would rightly be earning hefty interest by Joe and Julie Saver is funneled into the pockets of Brandon P. Equity. But wait, there’s more.
Because of this, the entire capital structure of risk is modulated to a higher plane. Savers become investors. Investors become speculators. Speculators become traders. Traders set their hair on fire with leverage. Cue the Can Can.
This entire charade is also inflationary, as the cost of financing the government debt is artificially low, removing the natural disincentive to plunder the Treasury both present and future, turning the economy into a fiscal ouroboros, only this self-eating snake is too numb with cheap dollars to feel its tail being digested.
This multistage robbery of the middle class, those who faithfully follow the Instruction to save, since they are told in the Psalms that “The rich rules over the poor, and the borrower is slave of the lender.” Somehow, a system has been created where the first part is true, and the second part is reversed. In our day, the saver is slave to the borrower who rules over him.
The political costs of such a circus are the massive incentives for open immigration and heightened (yet underreported) inflation. We must “grow our way out of the problem” by importing more people, and increasing inflation, which reduces the real costs of the debt. Who pays for the inflation? Normal folks, who aren’t participating in the ever-increasing private equity multiples the elite investing class enjoys.
The American People, the citizens to whom loyalty is owed, are being squeezed and robbed, disenfranchised and replaced. The managerial construct is beyond the citizen veto, ruled by a tiered elite, a priestly caste of the real participants of Democracy. The system is unamerican, for it does not honor the accountability of the veto of the congregation, the basis of self-determination, and is fed by the most unbalanced of scales.
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