Southern Bread Blog

When I see articles like this one from Al Mohler I must admit that I get depressed. Our most vocal leaders in Christendom just don’t get it:

But, once again, not all moral principles are examples of oppression. To the contrary, human life is only possible within the context of enduring moral laws and principles that liberate all human beings to their true humanity. This is where those who support same-sex marriage and those who oppose it face each other across a huge gulf of understanding. One side sees a moral mandate to liberate marriage from its heterosexual limitation. The other side sees natural marriage as a liberating, God-given institution for human flourishing. There is precious little shared ground in this debate.

–Albert Mohler, Blog Post

While I don’t know what he means by being “liberat[ed] to” our “true humanity,” I don’t have much to argue with in his description of the situation as two side staring at each other across a gulf where they both claim that their ground is the moral one. But, when you combine his analysis in this piece with his article from last week about Obama dropping his support of the Defense of Marriage Act you get the sense that the moral aspect of this marriage debate is all he sees:

Attorney General Eric Holder informed Congress yesterday that President Obama had ordered the Department of Justice to cease all efforts to defend the Defense of Marriage Act in the courts.

In the second place, this announcement means that President Obama and his advisers now believe that the full legalization of same-sex marriage is both inevitable and without major political risk to the President and his plans for re-election. That, in itself, represents a moral earthquake. The President clearly believes that a sufficient number of Americans will either support or accept same-sex marriage — and this comes just a few years after a majority of the states passed constitutional amendments prohibiting same-sex marriage, and most by huge margins.

The President has made his decision. The Attorney General has now made his announcement. Mark your calendars for yesterday. That day now represents a tragic milestone in the betrayal of marriage.

–Albert Mohler, Blog Post

Moralism has completely blinded our church leaders to the fact that the enemy is not the immorality of homosexual marriage, but the State’s confiscation of the means of marriage. If the state had not appropriated to itself control over the institution of marriage, this whole debate would not exist. There would be no “moral earthquake.” There would not be two sides staring at each other across a chasm, because there would not be two sides. This whole moral swamp has been artificially manufactured by the simple fact that the State, through the steady passage of more marriage laws and marriage licenses, has constantly sought to make itself the decider of who can marry whom. And that fact alone has damaged the institution of marriage and allowed this debate to be born. It was inevitable.

Throughout American history, marriage licenses were used to arbitrarily restrict racial intermarriage. And while mixed race and same-sex marriage are two completely different things(one being morally inocuous and the other being morally engendered), the comparison is just too ripe not to be picked. Indeed the comparison between restricting interracial marriage and restricting same-sex marriage has “restriction” as it’s primary idea. And there’s only one institution that can grant itself the power to restrict a natural right. The State.

The percentage of the population that is homosexual and wants to be “married” is miniscule. In a free market of social interaction where nobody controls marriage from a central authority, society as a whole would just absorb this issue in the same way it handles something like alcoholism. Alcoholism is morally detrimental to the family structure. But we, as Christians, don’t see alcoholics as a moral enemy to be armed against. No, we try to reach them for Christ and convince them of their need of Him. But because the State claims control over the marriage process, society has been removed from this debate. Instead we’re left helplessly on the sidelines to watch with baited breath as the next supreme court ruling comes down. What nonsense.

So, what am I saying? Am I saying that homosexuality is moral? No. Am I saying that same-sex marriage is moral? No. I’m not saying anything about the morality of the issue at all. Instead I’m talking about the morality of the state stealing the right of society to decide for itself, without interference, what is and is not morally acceptable. I’m saying that if the State got out of the marriage business altogether, and put marital authority back into the hands of the social market where it belongs, these issues of morality could be properly addressed without resorting to the use of force. The issue would vanish.

The enemy is not same-sex marriage. The enemy is any earthly institution that tries to set itself up with monopoly power over marriage. Marriage belongs to society(for Christians, the Church. For non-christians, the family or community), not an all powerful State.

We continue with our look into how a society evolves money. Rothbard moves from establishing the need for exchange to showing how direct exchange is impossible on a large scale:

Murray N. Rothbard

Yet, direct exchange of useful goods and services would barely suffice to keep an economy going above the primitive level. Such direct exchange—or barter—is hardly better than pure self-sufficiency. Why is this? For one thing, it is clear that very little production could be carried on. If Jones hires some laborers to build a house, with what will he pay them? With parts of the house, or with building materials they could not use?

The two basic problems are “indivisibility” and “lack of coincidence of wants.” Thus, if Smith has a plow, which he would like to exchange for several different things—say, eggs, bread, and a suit of clothes—how can he do so? How can he break up the plow and give part of it to a farmer and another part to a tailor? Even where the goods are divisible, it is generally impossible for two exchangers to find each other at the same time. If A has a supply of eggs for sale, and B has a pair of shoes, how can they get together if A wants a suit? And think of the plight of an economics teacher who has to find an egg-producer who wants to purchase a few economics lessons in return for his eggs! Clearly, any sort of civilized economy is impossible under direct exchange.

–Rothbard, What Has Government Done to Our Money?

Critical Points:

• “Indivisibility” – Some things can’t be sub-divided. For instance, if you have an extra alarm clock, but you really need some nails, you’re stuck. You can’t split the alarm clock into pieces and trade, perhaps, the volume knob or a couple of microchips out of it for a few nails. Some things just simply can’t be broken down into exchangeable parts like that. It’s only valuable as a whole.
• “Lack of coincidence of wants” – When there is no intermediary(money), each person has to have what the other guy wants. If you have an alarm clock and you want some nails, you have to go out and find an alarm clock wanting nail seller. And the nail seller has to find an alarm clock wanting nail buyer. It’s the reason baseball card shops exist.

Ok, so Bloomberg reports on what Thomas Hoenig (the President of the Kansas City Fed branch) said the other day:

Federal Reserve Bank of Kansas City President Thomas Hoenig said soaring farmland prices may be the result of an unsustainable bubble that could damage the U.S. economy when it bursts.

“My nagging concern remains that current distortions in financial markets are increasing the risk that imbalances in asset markets will catch agriculture — and the U.S. economy more generally — by surprise once again,” Hoenig told the Senate Agriculture Committee today, according to his prepared testimony.

“This run-up in farmland values has occurred, however, amid financial markets characterized by high levels of liquidity and unusually low interest rates,” he said. “It is nearly impossible to determine how much of the farmland boom may be an unsustainable bubble driven by financial markets and how much results from fundamental changes in demand and supply conditions.”

–Joshua Zumbrun, Bloomberg

Maybe I should go light on Hoenig here since he appears to be the only semi-rational person employed by the Fed at times. But he’s wrong about a farm land bubble. Guys like Jim Rogers and George Soros predicted a surge in farm land and agricultural products as far back as late 2008. Their rational was like this:

“We’re still going to eat, probably; we’re still going to wear clothes, probably. Farmers cannot get loans for fertilizers right now. So the supplies of everything are going to continue to be under pressure,” Rogers said.

He is the director of two funds which are buying greenfield land in Brazil and existing farms in Canada and starting to farm it. The funds are clearing the land, fertilizing it, irrigating it and hiring farmers and, Rogers said, some day will probably sell the land but that is a remote prospect.

“If I’m right, agriculture is going to be one of the greatest industries in the next 20 years, 30 years.”

Food inventories are at their lowest in 50 years, Rogers said, while the oil and mining sectors are also good bets.

“Even if demand goes flat or down, as it did in the 30s, as it did in the 70s, you can still have a nice market,” he told CNBC.

–Jim Rogers, CNBC Interview (Mar. 2009)

To say that the rise in agricultural prices is a speculative bubble at a time when the world is literally tossing dictators out the window because of soaring food
prices shows the depth of misunderstanding at the Fed. When there actually was a real estate bubble they told us there wasn’t one. I give you Bernanke from 2005:

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president’s Council of Economic Advisers, in testimony to Congress’s Joint Economic Committee. But these increases, he said, “largely reflect strong economic fundamentals”…

Many economists argue that house prices have risen too far too fast in many markets, forming a bubble that could rapidly collapse and trigger an economic downturn, as overinflated stock prices did at the turn of the century. Some analysts have warned that even a flattening of house prices might cause a slump — posing the first serious challenge to whoever succeeds Fed Chairman Alan Greenspan after he steps down Jan. 31.

Bernanke’s testimony suggests that he does not share such concerns, and that he believes the economy could weather a housing slowdown.

–Nell Henderson, WaPo (2005)

Now, when there’s actual demand backing the rise in farm prices they tell us it is a bubble. There are food shortages everywhere, but somehow people buying farm land is a speculative bubble. Oh lord. It’s terrifying to see how clueless these people are who run our entire economy. We’re doomed.

I haven’t done an Econ 101 post in a long time. Let’s rectify that.

Murray Rothbard’s treatise on the nature of money in chapter 2 of What Has Government Done to Our Money? is, in my opinion, the clearest explanation or what money is and how it works in all of literary history. It’s so clear that I find it hard to believe that your average 7th grader couldn’t follow along and understand every bit. Let’s delve in to it over the next few days.

Murray N. Rothbard

To explain the role of money, we must go even further back, and ask: why do men exchange at all? Exchange is the prime basis of our economic life. Without exchanges, there would be no real economy and, practically, no society. Clearly, a voluntary exchange occurs because both parties expect to benefit. An exchange is an agreement between A and B to transfer the goods or services of one man for the goods and services of the other.

Obviously, both benefit because each values what he receives in exchange more than what he gives up. When Crusoe, say, exchanges some fish for lumber, he values the lumber he “buys” more than the fish he “sells,” while Friday, on the contrary, values the fish more than the lumber. From Aristotle to Marx, men have mistakenly believed that an exchange records some sort of equality of value—that if one barrel of fish is exchanged for ten logs, there is some sort of underlying equality between them. Actually, the exchange was made only because each party valued the two products in different order.

Why should exchange be so universal among mankind? Fundamentally, because of the great variety in nature: the variety in man, and the diversity of location of natural resources. Every man has a different set of skills and aptitudes, and every plot of ground has its own unique features, its own distinctive resources. From this external natural fact of variety come exchanges; wheat in Kansas for iron in Minnesota; one man’s medical services for another’s playing of the violin. Specialization permits each man to develop his best skill, and allows each region to develop its own particular resources. If no one could exchange, if every man were forced to be completely self-sufficient, it is obvious that most of us would starve to death, and the rest would barely remain alive. Exchange is the lifeblood, not only of our economy, but of civilization itself.

–Rothbard, What Has Government Done to Our Money?

Critical Points:

• “Obviously, both benefit because each values what he receives in exchange more than what he gives up.” This is one of the most misunderstood aspects of how exchange works. It’s so simple, yet so completely missed by most everyone. There is something inside us that confuses the idea of mutual benefit with equality of value. Absent coercion, both parties in an exchange will only trade if they feel that they came out better than they were before the trade. Otherwise, why trade? This doesn’t mean that the goods or services traded were of equal value, because value is subjective to the individual. Value is not a property of the good or service. An independent observer may see the terms of a trade and conclude that party “A” got ripped off by party “B”. Again, absent coercion, this is incorrect. The observer might not value the traded goods the same as party “A” did. But all that means is the observer isn’t party “A”. It says nothing objective about the trade.
• “Specialization permits each man to develop his best skill, and allows each region to develop its own particular resources.”
  The story of money begins with the necessity of exchange. We all need to trade sometimes. No one is completely self sufficient. The technical term for what he calls “specialization” is “The Division of Labour.” It simply means that we all have different skills and resources available to us. And because of this, trade is not optional. It’s necessary. We voluntarily exchange in order to live. In my view, this is what lends money a moral component. Whenever something is required for life to be sustained, the manipulation of that thing inherits a morality.

It might not be clear yet, but these two points eventuate money. Money in a complex society is not optional. It’s required. That will become apparent as we continue through his argument over the next few posts.

[H.T. - Classic Liberal]

* For clarity, when I say military I mean the whole kit and kaboodle: military, cia, fbi, dhs, tsa, etc. I mean that word to represent every government agency that assumes it has a right to use force against me without my consent.

One of the most frustrating aspects of talking to conservatives about liberty is getting them to see the inherent contradiction between “small government” and “big military.” You can either have large both or small both but you can’t have a mix of one small and one large. Government and the military are one and the same. Where you see big government, you see a big military. The slight exception is Japan, which maintains a small military since they are technically not allowed to even have one according to their constitution(which we wrote after WWII). But, that is the exception and not the rule. On the whole, big government needs big military. Otherwise they wouldn’t stay big for long, or they would never get big in the first place.

I am sympathetic to the modern “Rush Limbaugh” conservative in this respect. The media and government are extremely effective at cherry picking information and delivering it in such a way as to make it seem as if government and military can remain somehow independent. After all, they use this same technique to feign the Fed’s independence from politics as well. I used to believe in this myth myself. Just look at this blog post I wrote back in June of 2006:

With North Korea threatening to do a test fire on it’s newest ICBM that could reach the US mainland and the US activating the missile shield, it reminds me of how important it is to have military bases spread out over the globe. Our bases in the Asian Pacific region have been invaluable at testing the missile shield against a simulated North Korean ICBM. It’s those kinds of tests and strategic placements that ensure the security of this country and we need more of them elsewhere like the middle east. A permanent base in Iraq is a must have. The strategic value of such a base can’t be overstated. Anyone who says otherwise is just being political.

–Dave Jones, Southernbread.org

I read that now and I just shake my head. I had no idea what I was talking about. But, notice how I had a mental separation in my mind between military and politics: “A permanent base in Iraq is a must have. The strategic value of such a base can’t be overstated. Anyone who says otherwise is just being political.” As if being in Iraq in the first place was somehow not political. As if we had any right whatsoever to go in and take over that country and kill thousands more than Saddaam ever dreamed of killing. But, I digress.

Here is the bottom line that finally opened my eyes to what is really going on and made me face reality. Here’s what’s been going on for the last 50 years. The Fed inflates the money supply by buying the U.S. government’s debt, in the form of treasury bonds, with printed money. The money received by the government from these purchases gets spent on gigantic military projects both official and off-budget. In this way, the “military industrial complex,” as Eisenhower called it, feeds off the U.S. citizenry. Not in the form of taxation. But, in the form of inflation. In other words, the Federal Reserve slowly erodes the value of your money over time to fund U.S. military actions around the world. It’s what Robert Higgs calls “death fuel.”

Lew Rockwell says eloquently:

The U.S. central bank, called the Federal Reserve, was created in 1913. No one promoted this institution with the slogan that it would make wars more likely and guarantee that nearly half a million Americans would die in battle in foreign lands, along with millions of foreign soldiers and civilians. No one pointed out that this institution would permit Americans to fund, without taxes, the destruction of cities abroad and overthrow governments at will. No one said that the central bank would make it possible for the U.S. to be at large-scale war in one of every four years for a full century. It was never pointed out that this institution would make it possible for the U.S. government to establish a global empire that would make Imperial Rome and Britain look benign by comparison.

–Lew Rockwell, LRC

Conservatives love to criticize how much money is spent on the welfare state, and that is true. Theft is theft. But, the cost of welfare simply pales in comparison to the size of the theft taking place when it comes to our gargantuan global military empire. Has it not peaked anyone’s curiosity that during WWII our government was literally begging Americans to “buy war bonds,” but now days it magically seems as if we can fight war after war lasting decades on end with no need for special financing? Odd huh. Well, not if you understand the Federal Reserve’s role as I explained above. They print up the money and the Executive branch spends it on war. Simple as that.

As you watch prices rise over the next 20 years to the point where your retirement nest egg you worked 50 years for barely covers your car payment, just remember, you sacrificed your retirement so that we could blow some stuff up and kill tens of thousands of people whom you’ve never met, in a far away land you’ll never visit. What a deal!

Just a follow up. When I say “there are no more gold backed currencies in the world,” I mean gold redeemable. Sure, there are some central banks like India and China that are buying gold. But, that’s not the same thing as being a true “gold backed” currency. If I can’t walk up to a Fed counter and exchange my paper notes for an equivalent amount of bullion then that is still fiat money.

Seeing inflation is harder than you think. When prices rise by small amounts over long periods of time, we tend to not even notice. It’s as if most people, mistakenly, consider a steady, long-term rise in prices as a natural part of any economic system. But, when prices increase or decrease at a larger percentage, or at a faster rate, we look for a cause. And it’s at this point that it’s most easy to misunderstand the problem.

There are only two possible explanations for a price increase. Either the purchasing power of the money has declined, or the value of the products being purchased have risen. There isn’t a third option. Unfortunately, the decline in the value(i.e. purchasing power) of the currency itself is usually the last thing considered, even though it’s the most dangerous of the two by a large margin.

This has been on my mind a lot lately with the seemingly endless boom in commodity prices. It’s my belief that commodities(gold, oil, sugar, wheat, cotton, copper, etc.) are rising across the board because of a diminishing confidence in the dollar. And the reason that we see them rising against other currencies as well, is because of how closely tied and dependent the other major world currencies are on the dollar. In essence, the dollar is taking the other currencies down with it.

Investors are fleeing to real goods by buying commodities, and that’s pushing their price up. But, it’s a very specific sort of investment. It’s a hedge investment against falling currency value so that they can continue to invest in stocks. That might seem convoluted, but think about it. In this market you have to invest to make any interest. Bank savings is fruitless since the Fed has interest rates at zero. Right now, putting your money in a savings account is little better than sticking it in your mattress. Interest rates are so low that you are losing money to inflation by doing that. Therefore, you must invest to make anything on your money and keep up with inflation. Leaving out bonds and currencies because of volatility, this leaves commodities and stocks for most people.

The best strategy is to split the two and have part invested in a commodity hedge and the rest invested in stocks. This explains why commodities and paper stocks have both been gaining. The Dow Jones currently stands at 12,229 as I write this. That’s back to pre-crash 2008 levels. Surprised? Don’t be. This isn’t out of the ordinary for hyperinflationary situations. In the Wiemar hyperinflation of the 1920′s the German stock market absolutely boomed, rising from 100 in 1914 to 26,890,000 in 1923. People flocked to it as the only place left where they could actually make money. Of course, the problem with that is the stocks are being driven by inflation themselves and will ultimately collapse along with the currency.

So which is it? Are commodities climbing or are currencies falling? I think currencies are falling. There is no more gold backed currency in the world today, so when people flee to real goods they are going to go to commodities first. Where else would they go? And, it’s going to get worse folks. Much worse over time. The flight to real goods can only be slowed by another boom. And the next boom will be the dreaded crackup boom I’m afraid.

We’ve been doing the Atkins diet for about a month now after reading Gary Taubes excellent research on the link between highly processed carbs and fat storage. His book really lays out the science behind why the Atkins diet works. Anyway, it’s actually a pretty easy diet to stick with after you get out of the induction phase. But, there are always those foods that seem impossible to low-carbify. Stuff like sugar in your coffee (splenda won’t cut it) and ketchup. Have you ever had low carb ketchup? Yuck!

Well, one of those things is BBQ sauce. BBQ sauce is supposed to have a sweetness to it. Even the vinegar based sauces call for some sugar. As much as half a cup. So I set out to build a low carb BBQ sauce that wouldn’t taste nasty. Here is what I came up with:

• 1 Cup – juice from a jar of banana peppers
• 1 Cup – yellow mustard
• 1/4 Cup – Jack Daniels whiskey
• 3 Tbsp – bacon grease
• 1 Tbsp – liquid smoke
• 4 Tbsp – stevia or splenda
• 2 Tbsp – chili powder
• 1 tsp – paprika
• 1 tsp – black pepper
• 2 tsp – onion powder

Stir this all together in a sauce pan and bring to a boil. Then reduce the heat and let simmer for about 15 minutes, stirring occasionally.

Since most of the alcohol cooks out of the sauce, this will yield a sauce with approximately 5 carbs per half cup. And it tastes delicious. Since your meat will have very few carbs, you can really slather this stuff on. It’s great on pulled pork.