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Archive for October 2008

Blogging my thoughts 10/20/2008

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Blogging my thoughts

This morning in the New York Times (10/20/08 page A-5), I loved reading about the Biblioburro, the teacher in La Gloria, Colombia, who takes a lending library of books to the villages and does not lend out books until the children have listened to him read them a story. His name is Luis Soriano and he travels through the war-weary hinterlands of Northern Colombia, south of Aracataca, with his donkeys, Alfa and Beto, laden with books. In the village of El Brazil, Ingrid Ospina, an 18 year old, read from Rubén Darío’s, “Margarita”:

She went beyond where the heavens are

And to the moon said, au revoir.

How naughty to have flown so far

Without the permission of Papa.

How beautiful and courageous! I love the name “Margarita” because that was the name of a dear woman who watched over our children in Coney Island. They called her “Magalita,” because they could not yet pronounce her name.

My heart goes out with our bishop and other pastors who oppose proposition 8. It wants to deny the right for Gays to have same-sex marriage. We Lutherans should be more understanding. Look how Luther himself broke through what people considered divine law in that day and as a monk, a priest no less, married a nun, Katarina von Bora!

Did you hear the one about the fellow who sued the driver of a car that had run over him so he lost both his legs? The judge threw the case out of court, because he did not have a leg to stand on.

More seriously, Luther has the following to say about those who are on opposite sides of an issue:

My translation:

Sentence 57. “When both partners can appeal to their conscience, then forgiveness comes to both of them and one should forgive the other and bear the other’s burden.”[1]

I interpreted the burden to be that of the other’s conscience and I believe that is what Luther implied.

The sentence comes up on page 261 of Ebeling’s fine book: there is a controversy about public absolution, to which I believe Osiander is opposed. So Osiander should not be burdened with public absolution, while the other churches can practice it, until in a time when people are more calm, and differences can be set aside. For both sides Luther’s admonishment dominates, in a balanced way, asking them to wait for this time soberly, calmly, and patiently (page 261).

Indeed, in the “Freedom of a Christian” Luther goes farther than that:

“I must place even my faith and righteousness before God for my neighbor, so that they cover my neighbor’s sin, and then take that sin upon myself, and act no differently than if it were my very own, even as Christ did for all of us. That you see is the nature of love when it is genuine.”[2]

Christ who knew no sin became sin for us (2 Corinthians 5:21), dying on the wretched tree of the cross to change it into the tree of life.


[1]From „Sentences“ in Gerhard Ebeling, Luthers Seelsorge: an seinen Briefen Dargestellt, (Tübingen: J. C. B. Mohr (Paul Siebeck), 1997), page 501.

[2] Philip D.W. and Peter D.S. Krey, Luther’s Spirituality, (New York: Paulist Press, 2007), page 89-90.

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Written by peterkrey

October 20, 2008 at 5:55 pm

Posted in 1

Blogging some Thoughts on Anghel Rugina and our Financial Crisis

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Our Financial and Economic Crisis

I just reread the economics article, “Is there anything new to be said after Adam Smith, Marx, Walrus, and Keynes? Toward a third revolution in economic thinking” by my old inspiring college professor from Northeastern University in Boston, Anghel N. Rugina: International Journal of Social Economics, Vol 26 No. 10/11, 1999, pages 1227-1248.

Anghel Rugina is prescient about the failure of monetary policy in the face of the irrational features of our financial and economic system and predicts something rather similar to what we are now experiencing. He states that a “Great Transformation” is coming because unsolved accumulated basic problems in our financial system and economy cannot go on indefinitely. “Toward the passage into the third millennium or shortly thereafter, whether we like it or not, for better or worse, we are exposed to the Great Transformation, a historic event to clean the house of the errors made during the twentieth century.” (§5 in his paper, p. 1229)

He faults irrational financial mechanisms of disequilibrium, i.e., the paper-dollar, monetized credit of banks, and pure speculation that is detached from actual investment for productivity. These factors make our current financial and economic system unstable.

He couches his critique in a holistic social economic approach, but sees the factors for disequilibrium making rational, really effective economic, monetary policy, and even business decisions impossible.

His description of equilibrium is comprehensive:

§3: How can we realize in real life and maintain over

time (dynamic process) not just maximum profit for entrepreneurs, as customarily assumed, but the optimum allocation of available human and natural resources so that we may have simultaneously price stability (equilibrium prices with simple and finite fluctuations), full employment (with no large pockets of involuntary unemployment), a balanced public budget every legislative period, a normal rate of economic growth to satisfy the effective demand of active population, a normal rate of profit to cover the real cost of management (equal to the opportunity cost), a foreign exchange rate to assure a balance of international payments in order and not less important, a most equitable distribution of national income and taking care of those who are really handicapped.” (p. 1228)

Paper money, he argues, fluctuates too much and he argues for what he calls Numeraire-currency which harks back to some constant magnitude of a certain commodity (gold, silver, etc.) (page 1233).

I would add, the value of the dollar relates to our government, economy, and country’s standing behind our currency. When our standing in the world falls, the faith in the symbolic value of our dollar can fall as well. In these institutional matters believing something to be of value gives it value. Believing it doesn’t (like rubles in Russia a good while ago) can make people use cigarettes as currency.

Rugina argues: “The business of ‘monetized credit’ [by banks] is nothing but a form of pure speculation in lending something you do not have (‘empty figures’ in the books of a bank) which is accepted on the market because we trust that the bank in question possesses the amount in question but in reality the bank does not have it! And this lending of ‘empty figures’ is done for an additional profit by charging regular interest rates! Further, the same opportunity to monetize credit means financial power.” (p. 1232)

He first sees a moral problem in lending what the bank does not have and charging interest to boot. But strictly economically, it again makes currency and credit unstable. I believe he may well be explaining the credit freeze in the banks, because each bank knows that the other does not have the capital behind the loans they have given. In a boom, it can go by unnoticed. In a bust it exposes the insolvency of the bank. Thus the plan has become to inject capital in banks and to guarantee their loans to other banks. This new approach seems to provide evidence for Rugina’s theory of destabilizing monetized bank credit.

He argues that real investment enhances productivity, but the money set aside for pure speculation is actually responsible for our lack of full employment, because it could have brought more production by actually being invested in it. By pure speculation, money is received in a completely irrational way unrelated to real production and service. It gives financial power to a small elite, makes mergers possible that short change the workers, and redistributes money to the top. Financial transactions that go into production bring equilibrium, while those for mergers and pure speculation are disequilibrium transactions and bring about disequilibrium prices (page 1234). (That means wildly fluctuating prices.)

I would ask: What are these disequilibrium prices but pure speculation infecting regular prices? The housing boom here put handy-man specials, houses that you could not live in, at half a million dollars! Speculative irrationality I would argue infected housing and caused that bubble, just the same way that it produced the dot.com bubble, and the Dutch tulip bubble when the “Bourse” was young, to reach into history.

I have heard an opposing argument to Rugina next argument. He uses a distinction between real buying and selling, where the seller is handing the real object in question and where it is make believe, i.e., where no object exists.

The latter are pure speculations or genuine gambling, where the buyer puts an order to buy (future delivery) but with no intention to take possession of the item in question. He just believes that the price will go up and if so on delivery day he will liquidate the contract and reap a differential profit. This is a bullish spectator. Simultaneously a bearish speculator who believes that the price of the same item will go down will put a different order to sell short and if indeed the price goes down then he will be the one to reap the differential profit (page 1233).

For the opposing argument: a farmer needs capital in advance and receives it from futures to plant his crop. I believe Rugina would not call that speculation but actual investment in production. But the whole futures market goes well beyond helping production with advance capital, thus most likely bringing the instability and irrationality that Rugina warns us about.

Rugina insists that there needs to be institutions and a legal framework commensurate with the kind of mixed economy that exists. I remember in class how he would chant that the free enterprise system spelled freedom! Freedom! Freedom! He would actually chant that phrase. But he said the capitalist system needed to monitored and have gauges and dials and instruments (let’s face it, fair regulation) like the cockpit of an airplane for it to give us the smooth flight into the equilibrium he described and I quoted here at first.

Rugina writes a very rich and important article to which I do little justice here, especially because I don’t understand many of the issues involved. Hope I’ve shed some light on our crisis, however.

Now to think about the mortgage default and foreclosure problem:

In terms of the continuing bleeding and hemorrhaging of bank capital, because of mortgage defaults, I imagine that when the prices of the houses go down below the amount of the loan mortgaged, rather than the debtor just walking a way from the house and allowing it to become foreclosed, a deal could be struck with the debtor for a mortgage equal to the market price of the house at an affordable monthly rate. When the price of the house rises again, the equity would be shared by the bank and the debtor up to the amount of the first mortgage with 5% interest. When those holding a mortgage walk away from their house and the foreclosure becomes necessary, the losses to the banks decapitalize them, far beyond the value of all their assets forcing them into merger or bankruptcy.

With defaults, the derivatives developed from these mortgages also lose their value and these derivatives evidently represent a 535 trillion dollar, unregulated market!

When the hemorrhaging is stopped, the derivatives could fluctuate in equal proportion to the percentage of the new mortgage to the first one, making it possible to determine the value of the derivatives, and they too could include recovery of value when housing prices increase again.

I wonder if this could work. Some way has to be found to prevent the vicious circle of downward spiraling housing prices, mortgage loans exceeding the market price of the house, defaults, and foreclosures.

Written by peterkrey

October 11, 2008 at 4:40 am

Posted in 1, Economics

More Family Sayings 10/6/08

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34. „Aller Anfang ist schwer.” (“All new beginnings are difficult.”)

35. „Mit Sorgen und mit Grämen und mit selbsteigner Pein

lässt Gott sich garnichts nehmen, es muss erbeten sein.“

(„With groans and self castigation, we won’t get anywhere with God. We’ll only receive it by prayer.”) This is a beautiful Paul Gerhardt verse from his song: „Befiehl du deine Wege.” Charles Wesley has a translation of some verses of this song in the old red Service Book and Hymnal, # 579, but not of this verse. What is so daunting in Gerhardt’s verses is the acrostic, where the first word of every verse reads: “Commit your way to the Lord, trust in Him, He’ll do it all.” Psalm 37:5. To work on it a bit:

“With groans and heavy grieving, self-torture and despair,

we will not be receiving, what God only grants by prayer.”

36. „Studiere nur und raste nie, du wirst es nicht begreifen. Ende alle Philosophie, ist dass wir galuben müssen.”

(Keep on studying and do not rest. But after all our Philosophy we end up having to believe.)

37. „Wer einen Pfennig nicht ehrt, ist einen Taler nicht wert.” (”Whoever doesn’t value a penny will also not be worthy of a dollar.”) I thank Priscilla for this one!

38. „Du hast kein Sitzefleisch!“ (How to translate that? “You have no flesh to sit on!” Father would say this when we squirmed on a chair and could not remain still and seated.

39. „Ich muss mal gehen wo der Kaiser selbst zu Fuss geht.“ (“I have to go, where the kaiser himself has to walk and do it himself,“) that is, go to the bathroom.

40. My father would stroke his mustache, sein Schnurrbart, and say, „Nur eine Kleinigkeit!” (“Just a detail!”) I’m not sure what he meant by it.

41. „Noch einen Spatenstich!“ (“Dig one spade more!“) My father always said this when my youngest brother was digging the garden and he didn’t dig a full row.

42. „Acht Tage Schwanheim!“ (“Eight days of Schwanheim!“) Whenever we did not like our food and complained or did not eat it all, someone would say that. We starved so much in that UNRA camp in Schwanheim, that baby James died, and we would eat anything we could get our hands on. I remember eating apple peals thrown into a hole behind the guard house at the entrance of the camp.

43. „Nichts ist schwerer zu ertragen als eine Reihe von guten Tagen.“ (“Nothing is harder to endure than a series of good days.”) This saying my father said often. It’s a little like Lake Woebegone.

44. „Studenten Jahren sind keine Herre Jarhen.“ (“Student years are not the years of Lords.”) My father said this to emphasize that being a student was hard work, drudgery, poverty, slavery. In graduate school they said, “If you live like a lawyer when you are a student, then you’ll live like a student when you’re a lawyer.” That referred to taking out student loans. What happens if you take out such loans and you remain unemployed? Sigh!

45. „Ich bin ein geplagter Eheman!“ (“I am a tormented husband!“) When my father had to do housework or deal with criticism from my mother. I say this to myself when I do the dishes.

46. „Andrer Leuten Fehler sind angenehme Lehrer.” (I’m not sure of the wording on this one.) (“The mistakes of others are precious instructors.”)

The mistakes of others are pleasant teachers, because they suffer and we get instruction from them.

47. Wie ist dein Wettkampf gegangen?“

Sehr gut. Bald lag er oben, bald lag ich unten.“

“How did your wrestling match go?”

“It went very well. Sometimes he was on top and sometimes I was on the bottom.” This was one my father’s jokes.

48. Another one. Student comes into his dorm room, while the other is already in bed.

„Du, schloppst Du?“ “Hey, are you sleeping?“

„Nein, ich schlopp nicht.“ “No, I’m not.“

„Kannst Du mir ein Dollar Pumpen?“ “Can you lend me a dollar?“

„Nein, nein. Ich schlopp.“ “No, no, I’m sleeping!“

49. A beggar has a sign saying,

“Please help me. I’m deaf.”

A fellow, putting something into his cup, asks,

“How long is it you’ve been deaf?”

“Since my birth.” He answers. „Seid meiner Geburt.“

50. „Er /sie hält kein Blatt vor dem Mund!“ 
            (This means a person is very outspoken, blunt.)
 

51. „Bestellt aber nicht abgeholt.” (“Ordered but not picked up.”)

(When people or children just stand there somewhat forlorn and in disarray.

52. „Nun hat die liebe Seele Ruh!“

(“Now finally your soul will get some rest.”)

When you finally received something you really wanted, but my father resisted your getting it until he gave in.

53. „Bist Du nicht recht beim Trost?“ (“Are you crazy?“)

54. „Da bleibt einem die Spuche weg!“ (“That takes away a body’s spit!”)

i.e., it’s so outrageous, you can’t believe it.

55. „Von links nach rechts ist schlecht, von rechts nach links gelingst.“

(“From left to right is blight, from right to left is deft.”)

Evidently this is about superstition. When a cat crossed your road
from the right to the left, what you set out to do would be
successful. When the cat went from left to right, you would not,
so you might as well return home.
 
56. „Bist du nicht ein Strampelman?" One of Mom's little sayings 
to babies, when she exercised them and they threw their arms and
 kicked their legs with delight. How would I translate “Strampelman?”
 
57.   Hop, hop Reiter,
       Wenn er fählt - ‚er’ schreit er.
       Fählt er in den Graben, so fressen ihn die Raben,
       Fählt er in den Sumpf, dann macht der Reiter plumps.“
 
This was a poem my mother recited while bouncing one
of her children up and down on her knees and then letting
them fall backward, holding their hands, of course,
for the thrill, which was pure delight.
It is of course problematic in content, like “Rock-a-bye baby”.
“If he falls in the ditch, then the ravens will eat him!”
Maybe part of it is mindless rhyming („Reim dich oder fress dich!”)
when one rhymed simply for the sake of rhyming, even if it made
no sense.
 
58. “Just think that everybody out there has cabbage heads.”
Mom said this when we did public speaking and had stage-fright.
 
59. „Das sind Geschichten des Lebens, die im Tode nicht mehr 
vorkommen.“ My father would say.
(These are stories in life that no longer take place in death.)

Written by peterkrey

October 6, 2008 at 6:09 pm

Posted in 1, Family, Sayings