The Gift of Hopelessness

Most expressions of hope, such as “I hope so,” are statements which reflect our foolishness. We believe that we can go on doing what we are doing, or try something different which reflects only a slight modification of what we are doing, and somehow the outcome will be different.

Perhaps you have heard this parable. One evening while out for a walk, a person sees her neighbor looking under a streetlight for something. She stops and asks, “Can I help you?”

“I’m looking for my keys,” replies the neighbor. They search and search under the streetlight and find nothing.

Finally, the person asks, “Are sure you dropped your keys here?”

“Actually,” the neighbor replies, “I don’t think I dropped them here, but I thought I’d look here because here is where light is.”

This little parable has universal meaning, because it reflects an aspect of the universal condition—at times, each of us has looked for something where it could never be found.

Albert Einstein understood our universal condition when he wrote, “The world we have made, as a result of the level of thinking we have done so far, creates problems we cannot solve at the same level at which we created them.”

President Obama writes of the “audacity of hope.” Audacious is derived from the Latin audere, “to dare.” Audacity means having boldness where others fear to go. I have met many people who have the audacity to believe they can go on thinking and behaving as they always have and yet, at the same time, believe that somehow things will magically change.

Consider Secretary Geithner’s latest Congressional testimony in which he again assured us that his latest plan will work: “Congressman, this plan will work…It just requires will; It’s not about ability. We just need to keep at it.” Now that is the “audacity of hope.” Geithner believes his mind is so powerful that he has designed a plan so perfect that all he has to do is “keep at it” and his goals will be accomplished. Perhaps he also wills beating Tiger Woods in a round of golf.

Far better to be hopeless. Then, out of despair, the mind readies itself to accept fresh alternatives. If Geithner, Obama, and the American people felt hopelessness about our economic crisis, they might be ready to consider real alternatives such as abolishing the Fed, slashing spending and taxes, and returning to the gold standard. The Campaign for Liberty has a page with many fine links concerning sound economic policy, as does the Ludwig Von Mises Institute.

The other day I was talking to a colleague who remarked, “Well, something they are doing is bound to work.” The fact that so many have this view—that we can keep doing more of what hasn’t worked but hope that the outcome will be different—is a sign of how very far we are from beginning the process of real change.

Invasive Species

Lyn Gerner is a film maker who specializes in documentaries. Her short documentary Trouble in the Tropics: Invasive Lionfish is a visually beautiful and educational film.

No one is sure how the lionfish, “venomous and voracious, “was introduced to the Bahamas; but with no known natural predators, the lionfish has the potential to do grave damage to the ecosystem of the western Atlantic.

What to do is unclear. However, no one is proposing that the solution to too many lionfish is to introduce even more lionfish. No one is proposing introducing more lionfish, because everyone understands that would be absurd. If only our collective knowledge of economics was as high as our collective knowledge of the natural world.

Consider the powers of the Federal Reserve. Unlike the lionfish dilemma, many in the public believe that the solution to problems caused by the Fed is to give the Fed even more powers. The public accepts these expanded powers because they do not yet understand that, like the lionfish, the Federal Reserve is an invasive species.

Did the Fed evolve as part of the natural order of the market or, like the lionfish, was it unnaturally introduced into a stable “ecosystem”? Supporters of the Fed argue that it is an essential intervention designed to stabilize inherently unstable financial markets.  But is it? First, consider the origin of money as explained by Murray Rothbard in The Case Against the Fed:

It is impossible to understand money and how it functions, and therefore how the Fed functions, without looking at the logic of how money, banking, and Central Banking, developed. The reason is that money is unique in possessing a vital historical component. You can explain the needs and the demand for everything else: for bread, computers, concerts, airplanes, medical care, etc;  solely by how these goods and services are valued now by consumers. For all of these goods are valued and purchased for their own sake. But “money,” dollars, franks, lira, etc; is purchase and accepted in exchange not for any value the paper tickets have per se but because everyone expects that everyone else will accept these tickets in exchange. These expectations are pervasive, because the tickets have indeed been accepted in the immediate and more remote past…

Money, did not and can never could begin by some arbitrary social contract, or by some government agency decreeing that everyone has to accept the tickets it issues. Even coercion cannot force people and institutions to accept meaningless tickets that they had not heard of or that bore no relation to any other pre-existing money. Money arises on the free market, as individuals on the market try to facilitate the vital process of exchange.

Historically, gold and silver displaced other commodities—such as tobacco, sugar, copper, and tea—as the universal medium of exchange. The dollar, the pound—paper currencies—were paper tickets but they did signify a certain weight of gold or silver. In the United States until 1933, there was paper currency in the form of gold certificates that were redeemable in gold; and until 1964, there was paper currency in the form of silver certificates that were redeemable in silver. Now, all U.S. currency is fiat currency and cannot be redeemed for gold or silver; it has value only because the public continues to believe it has value.

In the past year, the Fed has rapidly expanded the supply of money in an attempt to add more credit into the market. As I have pointed out in many previous posts, the cure to correct a bursting credit bubble cannot be more credit. In his book Meltdown, Thomas Woods observes that, “The Fed has no real resources to inject into the economy. Credit has to derive from real, saved resources. Nothing can be lent that someone has not first saved.”

In other words, real growth occurs when savings increase. Yet, we are told by President Obama, Fed chair Bernanke, and Secretary Geithner that we need to spend rather than to save. I’m sure we will soon be told that savers are unpatriotic. Yet ignorance proclaimed behind the bully pulpit is still ignorance. As Woods puts it, “All the monetary manipulation in the world cannot defy the constraints mercilessly imposed by reality.”

Like lionfish multiplying in the western Atlantic, the Fed is multiplying paper in the economy—neither is native to their respective environments. The results will be equally catastrophic.

Trying to Control the Uncontrollable

Over the weekend I read the following two news items:

U.S. Treasury Secretary Timothy Geithner is practically alone on the job, working night and day to cope with the worst economic downturn in decades.

Barack Obama’s offhand approach to Gordon Brown’s Washington visit last week came about because the president was facing exhaustion over America’s economic crisis and is unable to focus on foreign affairs. Sources close to the White House say Mr. Obama and his staff have been “overwhelmed” by the economic meltdown and have voiced concerns that the new president is not getting enough rest.

Yes, but what are they doing when they work hard? Do the literally trillions of transactions that take place every day in the United States have to come across their desks for approval? Are they falling behind in their paperwork, and the trains have stopped running? Of course, they are not doing any of that. If they went to bed earlier, the supermarket shelves would still be stocked tomorrow; and we would have more money in our pocketbook.

It is still winter up North; and last night, sitting by the woodstove, I reread Stephen Mitchell’s excellent translation of the Tao Te Ching. Lao-tzu had much to say about governing:

When the Master governs, the people are hardly aware that he exists.

The Master does his job, and then stops. He understands that the universe is forever out of control, and that trying to dominate events goes against the current of the Tao.

Stop trying to control. Let go of fixed plans and concepts, and the world will govern itself.

Perhaps Geithner and Obama have never heard of the Tao, or perhaps they think Lao-tzu’s venerable words are just ancient Chinese nonsense—not applicable to those with Ivy League educations? Perhaps they might be more impressed by the words of Friedrich Hayek, a Nobel laureate in economics:

To the naive mind that conceives of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order and adaptation to the unknown can be achieved more effectively by decentralizing decisions.

In other words, let the multitude of market participants by their independent decisions resolve the questions of which automakers will survive, which loans will be restructured, and which consumers and businesses will get new credit. Hayek instructs us that spontaneous orders, like the free-market, have a “degree of complexity (that) is not limited to what the human mind can master.” In other words, no matter how many sleepless nights they endure, no matter how many more staffers Obama and Geithner hire, the problems they’re trying to solve cannot be solved by their “superior” minds.

In his book Dialogues in Metapsychiatry the late psychiatrist Thomas Hora relates this story:

Last week I asked a physician: “Where do your intelligent ideas come from?” And he promptly answered: “From my forebrain.” So I asked him: “Where does your forebrain get it from?” He didn’t know. Then I asked him: “Have you ever heard of God?” He said: “I am not religious.”

Hora goes on to explain that as human beings, we have the quality of consciousness which allows us to be aware of ideas. We can be aware of creative and intelligent ideas, but Hora tells us these ideas do not come from the brain:

This brain cannot produce an intelligent idea. Consciousness does not produce ideas, just as a radio does not produce music, it receives the music. Man receives ideas. The flower receives the sunbeam directly from the sun. The sun is the source of that vital energy, which makes the flower blossom. There is a direct connection between the sun and the flower. Similarly, there is a direct connection between God and that consciousness which man is. Man cannot reach up to God, man is connected with God and inseparable from God as consciousness. Another name for God is Cosmic Consciousness.

Man cannot demand inspired ideas; man is capable of receiving inspired ideas. Staying up late or trying to do what no man can do will not produce inspired ideas. For all of their “efforts” Geithner and Obama have become open channels for what Hora calls the Sea of Mental Garbage—this is the sea where our ego lives; the place we go when we think we can control what is forever uncontrollable.

Does Everyone Know?

The great conductor Bruno Walter once said that conductors should not be allowed to conduct Mozart until they were 50—they simply didn’t, in his view, have the depth of experience or understanding to appreciate the complexities of the music before then. Walter didn’t say this directly, but I would add, that without that experience, they would likely impose their ego on the music and, in so doing, diminish the music.

Perhaps Walter’s rule should be applied to Presidents, Secretaries of the Treasury, and other wannabe masters of the universe. Barack Obama and Timothy Geithner were born with two weeks of each other in August 1961.

Today, as I listened to Secretary Geithner testify before the House Ways and Means Committee, I heard a man who was in far over his head and had not one shred of humility to realize it. Almost every sentence was peppered with phrases such as “There is no alternative,” “Everyone agrees,” “No choice,” and “Absolutely, the right judgment.” He pulled every trick in the playbook to stifle dialogue. He appealed to authority (Obama); he appealed to predictability (absolutely will work); and he appealed to unquestioned agreement (who wants to be the one who doesn’t know?).

In all, his was a disgraceful performance. Now, it could be that some unschooled in logic are taken in by such verbal tricks. Perhaps. But those that are have already been convinced that Geithner and Obama can do the impossible—namely, control what is forever uncontrollable. They have been convinced that the cure for the drugs of credit and budget deficits is still more credit and budget deficits. The rest of us can only shudder that such “talent” has been given the power to wreck the economy—perhaps for a generation.

Those who defend such incompetence are reduced to saying “we must try something” or “give him a chance.”  Give him a chance? Would you give your supermarket check-out clerk a chance to perform heart surgery on you? Would you give the neighborhood boy down the street a chance to play center field for the Yankees (they could use a good one)? Would give your child’s junior high school classmate a chance to design a new bridge over the Hudson River?

These are unfair comparisons. There is at least some chance that the neighborhood boy could catch a ball in center field; there is no chance that a human being can ever have the knowledge to direct the uncontrollable, modern, market economy. That is why in the place of real logical arguments, we will be hearing many more “everyone knows.”

Poor Caroline Kennedy! She was roasted by the press for saying “you know” too often in interviews during her attempt to be appointed to the Senate seat of Hillary Clinton. If only Kennedy was coached better—she could have substituted “everyone knows” and been lionized by the media.