Comments on: Breath Some Fresh Air

By: Anthony Cowley

Anthony Cowley — Tue, 27 Nov 2007 18:40:03 +0000

One other inflationary factor these days seem to me to be the ethanol craze. The farmers in Kansas at my old Church had a great year - all the prices are up. Wheat is up, probably because Corn is up. And corn is way up because of Ethanol, is what I hear. There were also many other contributing factors, draught in many areas, poor harvests here and there. But, because prices were so high, even a decent harvest, like they had in Minneola, was a boon to the farmers this year. But, Ethanol is having its consequences, sadly, it does not appear that one of them is a better and more healthy ecological situation, which is what its supposed to have helped solve in the first place. Though, the energy crisis may warrant the use of bio fuels in the medium/long term until the oil situation is resolved by an American Hegemony in the middle east :-). Go SURGE, go.

By: MarkPele

MarkPele — Tue, 27 Nov 2007 17:24:42 +0000

If it were cheaper to hire someone than to buy a dishwasher, I’d have a servant. Thus, the market has placed a higher value on human labor outside of dishwashing. Technology makes people more productive, and thus there are a broader range of things that can be made. 50 years ago, you could get most jobs without a college education. Now, there are few that don’t require a degree. That also means that the expertise required to do modern jobs is significantly higher. I think they’re in reverse of criticality - government monetary policy is the leading contributer, followed by natural resources, then technology, but they all have effects.

By: Josh M.

Josh M. — Thu, 22 Nov 2007 06:25:10 +0000

Thanks, Mark. Veeering way off topic, I suppose …

Although your definition of “inflation” is fairly standard in common discourse, one must ask how prices rise so quickly. How, for instance, have they doubled over the last twenty years? Why is the dollar worth 4 cents in terms of the dollar of 1913?

It is difficult to attribute this to your #1 and 2. In fact, I think #1 is false because increased productivity should lead to cheaper products, and therefore lower prices. Yes, labor costs might go up (not necessarily though), but the overall costs to produce products with increased productivity is naturally going to fall. It is not a necessarily inflationary scenario. #2 is possible in today’s commodity bull market, but we’ve seen bear markets as well during times of price increases.

As for #3, exactly what are these “inflationary mechanisms”? We all know that the central bank gets to create money out of nothing, which is what you mean by “manipulate the prime rate” (if that rate is to be lowered). Isn’t that theft? In theory, it lowers the value of money because the total supply of money has increased. I am, of course, arguing Ron Paul’s Austrian viewpoint.

As to your last paragraph though, spot on.

By: MarkPele

MarkPele — Tue, 20 Nov 2007 17:58:46 +0000

Sorry, Josh, I didn’t see your comment. We must disagree on what inflation is. I consider inflation to be any broad rise in the price of goods. In that sense, government monetary policy is not the sole contributor to inflation. I see a number of contributions:
1) Technological efficiency - I don’t need to hire servants to wash my dishes because I have a dishwasher. Those “servants” are freed to find more useful and productive jobs. The cost of labor, therefore, goes up because the “easy”=”cheap” jobs are done with machine now. This is one reason why employees should get raises, because it is expected that each year they are more efficient and effective at the jobs they do.
2) Scarcity of natural resources - We can debate oil and energy, but right now, oil is more and more expensive to produce. Venezuelan oil, which was not cost-effective to drill in the 1970’s is now being drilled extensively, despite an expensive conversion process. It is harder to find oil reserves, requiring many man-hours in geotechnical analysis and speculative drilling, and thus the price of the finished product must be higher. The cost of energy, therefore, goes up and that has a ripple effect through the economy as people re-balance their mental equations to determine their new quality of life requirements.
3) Government monetary policy - modern macroeconomic principles say that the central bank should directly “correct” the economic situation through manipulations of the money supply. Inflationary mechanisms tend to lower unemployment and increase capital spending, which deflationary mechanisms tend to raise unemployment and decrease capital spending. The Fed does this through manipulating the prime rate to “balance” employment and inflation rates. However, these corrections also happen through Keynesian deficit spending (e.g. expanding the national debt to arbitrarily improve the economy) which is occuring today.

So, I think that we’re starting to see external corrections to our financial manipulations. As the U.S. borrows to maintain a false economy, other countries are keeping up with real economic forces. This means that the U.S. must borrow and spend more to keep the economy comparable to others. As the capital spending market heats up worldwide, the U.S. must pay a premium for its debt and that translates to higher taxes to pay the interest, but with exports declining and no real economy to pay those taxes, the system will eventually collapse.

By: Andrew Matthews

Andrew Matthews — Wed, 14 Nov 2007 00:08:08 +0000

Sorry, Bill, the last sentence of my comment should read:

“The purpose of the Assembly was to complete the task of reformation in the English national church.”

Thanks,
Andrew

By: Andrew Matthews

Andrew Matthews — Tue, 13 Nov 2007 23:58:26 +0000

Actually, I've been using W2K to refer to the Westminster Seminary (California) Two Kingdoms view which totally rejects any obligation on the part of society to pay homage to Christ. This permutation of 2K theology was developed by Meredith Kline in his biblical theological works and is currently being promoted by Michael Horton and our own Darryl Hart here at De Regno. Their view differs substantially from the 2K held by the majority of Westminster divines. Kline taught that the original cultural mandate (Gen. 1:28) was fractured into two separate programs after the Fall, one cultic and the other cultural. In a recent article, Horton argues that any cooperation between the Church and larger socety in kingdom work is Pelagian works-righteousness. This is assuredly not taught by the WCF and is contrary to how the Westminster Assembly understood its own work, which was to compose a confession for the Church of England restructured as a Presbyterian organization. The purpose of the Assembly was to complete the task of reformation in the English national church according to Puritan socio-religious ideology.

By: CBrown

CBrown — Tue, 13 Nov 2007 20:16:09 +0000

C2K = Covenanter Two Kingdoms view
W2K = Westminster Two Kingdoms view

By: A

Tue, 13 Nov 2007 18:51:35 +0000

What do C2K and W2K stand for? I’ve not seen those acronyms before.

By: Josh M.

Josh M. — Thu, 08 Nov 2007 23:10:06 +0000

MarkPele, there are probably a number of causes more significant than the minimum wage increase that account for rising oil prices. See here: http://globaleconomicanalysis.blogspot.com/2007/11/oil-is-set-to-hit-100-barrel-is-this.html

I’ll mostly agree with your monetarist assumptions though.

By: stevez

stevez — Thu, 08 Nov 2007 18:45:06 +0000

Inasmuch as you have proclaimed devotions to so-called â€œC2K,â€ no, properly speaking, your post was not in my purview. It just got me thinking about what I think I might witness amongst those with ostensibly W2K devotions. Hence, my cue that efwakeman might be inclined to pipe up and call me on my hallucinations.

That said, I have to admit, Paul is indeed an interesting phenomenon, no doubt.