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I really enjoyed your big-picture commentary, and I agree with you that centralized control has been growing inappropriately (i.e., out of balance). In my opinion, the game is going to change significantly when the futures market can no longer control the spot market for the price of gold, and the rehypothecation game unwinds in a disorderly manner. Until then, the manipulation of financial markets (and the exertion of excessive centralized control) will likely continue in an unbalanced/unethical manner. Best wishes for 2015.

Yes James, the case of gold is interesting, and the regular price slams indicate to me that those who issue our Federal Reserve Notes do not want the people to run to gold as an alternative, more legitimate form of money than the shrinking dollar. All the central banks, especially Russia, China and others in Asia, are buying up gold as much as they can. The Germans asked for their gold back from the NY Fed in 2013 and got basically nothing but promises to pay it back within seven years. Why would the US do that if the German gold had not been lent out or sold? Most likely the German gold is gone, and whatever would be repatriated to them would have to be bought on the open market. This makes me and many others doubt that the gold supposedly in Fort Knox is actually there. Why not permit an audit of Fort Knox if it is there? If US public learned that the gold is gone, they might lose faith in the dollar and flee to hard assets. Certainly gold is the money that people have fled to across civilizations for six thousand years, and it will probably happen again once the present fiat system implodes. Another way that could happen is if the bond market bubble pops. But interest rates cannot be raised, because then the interest on the national debt would explode. Basically our debts can never be repaid, and new debt will have to be reissued to pay off old debts coming due. It will eventually either be defaulted on or inflated away. Right now the Fed is monetizing our debt by buying Treasuries. I wish I could do that! I could run out of money and just write myself a check. The system is becoming unstable and faith in dollar paper may disappear sooner than you think. Complex systems tend not to evolve linearly. One day we may wake up and gold may be over 3k an ounce in value, and everyone would be trying to get out of paper dollars. Personally I have put my money into things that cannot be printed out of thin air such as the 100 acres of Vermont timberland I bought a few years ago to grow red oak trees on. Something like that that will continue to have value even if people lose faith in pieces of paper, as they always have historically. I have advised all my friends to get out of stocks and plow profits into assets, whether an apartment that pays rent, or timberland, or gold.

That said, let's keep in mind that the greatest wealth is one's health of body and mind, one's knowledge and understanding, and real friendships and family.

I share your worries about how institutions can bend us to their "will" with disastrous results. Here's another excellent thinker exploring the same topic:

That piece was very interesting and artful Paul. In some ways the present problems are indeed old ones. As that article points out, there is the old problem of the commons and the problem embodied in the prisoner's dilemma (namely, the global cost incurred by local gain maximization). But computerization has greatly exacerbated these old problems, affording a much greater concentration of power and wealth than possible in the past, much more effective means of surveillance and of stifling dissent, and much more effective means of capturing regulators and the government than previously possible.

How does a society move from one where players operate in a way that locally maximizes their gain (at a global cost to society and themselves), to one where players operate in a way that globally maximizes their gain and that of everyone else?

Here is an example of the problem: I was once traveling in India by bus with a professor. Everyone tried to get on the bus and off the bus at the same time, with lots of shoving and sneaky cutting in front of the 'line.' This gummed the whole process up at every major stop. I asked my friend 'why don't people just wait till everyone gets off, wait in line in the order in which they showed up at the busstop, and then get on? Wouldn't everyone benefit?' He said that while that was true and in fact obvious to everyone, if you were the only one to shift to a global maximization strategy, you would never get a seat.

Similarly, traffic in India is gummed up because everyone is driving in a way to maximize their local gain, ignoring the most basic of rules, like stopping at a red light. Meanwhile, in a country like Singapore or Switzerland, people take a hit to their local gain by stopping and waiting at red lights, but because of that everyone gets to their destination much more quickly and safely than in India.

How does a society move to one where a culture of global gain maximization is the norm? Religion once kept people in line because they feared burning in hell. Religion has declined to a point where that check on human greed and selfishness is largely gone. Another way is to have a benevolent dictator. The best example of that I can think of is Lee Kuan Yew who, in his one human lifetime, has taken an island state from third world status to one having a per capita income greater than that of the U.S. or Switzerland. He did it by ruthlessly enforcing laws designed to foster global gain maximization. But benevolent dictators are hard to come by, since most become corrupted, as power makes it too easy to act selfishly and get away with it. How many leaders are there who can resist that temptation? How many are like George Washington, who when offered a kingship said 'I did not fight George the third to become George the first'?

So what are we to do? The metaphor in that article of the need for an immune system to ward off the growth and metasticization of cancer cells is an apt one. A society's immune system is the law and the enforcement of the law. The rule of law eliminates players who locally and selfishly maximize gain against laws designed to accomplish global gain maximization. Such players go to jail or are so severely punished that they stop breaking the law. In the absence of such an immune system the cancer cells grow, eventually killing the body. We are now in a stage where a cancer of greed and fraud has shut down the immune system of society (by capturing regulatory agencies like the SEC etc., and changing or gutting laws, like Glass-Steagall, that once stopped the cancer from growing). Our society has a cancer of mafioso bankers, and our civilization will rot unless we the people can reinstate the rule of law and send the cancerous bankers to jail and break up their metasticizing institutions.

Oops, bad spelling, I meant *metastasizing* institutions. It won't help in speaking truth to the Jamie Dimons/JPMs of this world if I can't spell!

Speaking of Dimons, a deeply immoral piece of legislation passed last month because of his inordinate power over 'our' representatives. Read this and mourn for what is happening to the American republic before our very eyes.

Imagine what Jefferson, Washington, Madison and Adams would have to say about what is happening. They are no longer here to lead us against tyranny. We will have to find a way out of this mess ourselves.

And to see Obama push for this despite it gutting his very own signature success, the 2010 'Dodd-Frank Wall Street Reform and Consumer Protection Act,' is very eye-opening and makes you realize who Obama is really working for: Wall Street. To ponder what could have been, if Obama had had the courage to live up to his lofty rhetoric, and to see what he has in fact done, is, for me, grounds for sadness, disappointment and moral disgust.

This new legislation places you and me on the hook for the vast derivatives gambles of big banks, and places people with checking and savings accounts in big banks at the end of the line in getting reimbursed, in case the derivatives timebomb should explode (say if interest rates had to be raised quickly). If you now have money in one of the too-big-to-fail banks, don't be surprised if that money is someday used to 'bail in' a bank that gambled badly. Being made whole on bad derivatives bets now takes precedence over you getting your money out of your account. Or you can remove your money from these banks and put your money someplace safer, whether assets that the tbtf banks cannot touch, or a local credit union or local bank.

Philosophers, is there an existing philosophy of institutional morality? Have any philosophers written on the influence that institutions have on human decision-making, and the ethical consequences of such influence? The closest I have read is John Rawls concerning the kind of institutions that players would create before knowing the hand that they would be dealt in a society. Is there a branch of ethics that specifically looks at what I have called the 'metaevil' of institutions?

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