Naturally many people this week are
obsessing about the drop in the stock market as if it actually means
something. It is, of course, useless to
point out that if you buy a share of stock at $10, and it goes up to $100, and
then drops to $50, you haven’t lost $50.
At the same time, you haven’t made $90 or $40, either. You haven’t made or lost one cent, and won’t
until you actually sell your share of stock.
It would be different, of course, if you had purchased your shares on
the margin and had to come up with the money to repay the acquisition loan or
meet the margin call, but that doesn’t happen too much any more, since the
minimum required margin these days is 50%, not the 1-3% sometimes required prior
to the Crash of 1929. In any event, most
of what goes on in the stock market is speculation, not true investment, as
recent events once again demonstrate:
• Bonds versus Equity. What
many have regarded as a phenomenal and completely unexpected drop in the stock
market this past week is hardly phenomenal — except in the sense that it is,
strictly speaking, a phenomenon! — and should have been expected. With stock prices so high and dividends so low,
and interest rates so low, even a miniscule change in interest rates has an
effect all out of proportion to what would be the case if shares were valued
logically and interest rates were market-determined. Three primary factors account for this. One, with ultra-low dividend rates on equity,
a tiny change in interest rates means that for the same invested principal, investment
income will be higher. For example, if
the dividend rate on a stock is 1% and the interest rate is 1%, an investor
will likely invest in equity in the hope of getting capital gains in addition
to income (unless the investor’s goal is income and risk aversion, then debt is
preferred to equity). If interest rates
rise to, say, 2%, the smart investor will instantly get out of equities and in to
debt, doubling the income for the same invested principal. Two, when interest rates rise, the discount
on debt issued at the lower rate of interest increases. (N.B. this is not the same thing as the
discount on bills of exchange, it’s just the same word for a similar concept,
and can be confusing.) Thus, if the old interest
rate on a bond with a face value of $1,000.00 is 1% and the interest rate rises
to 2%, the discount on the bond will be 50% because no one will buy a bond for
$1,000.00 that yields $10.00 per year when for the same $1,000.00 they can buy
a bond that yields $20.00 per year. To
make the effective yield on the old bond equal to that of the new bond, the
price of the old bond must fall to $500.00.
If investors assume that stocks will recover and interest rates will
fall to their former level, they will realize capital gains when the bond they
bought for $500.00 can be sold for $1,000.
Three, regardless of the interest rate, a bond with a $1,000.00 face
value will be worth $1,000.00 at maturity when it is presented for
redemption. An investor will realize
capital gains on a bond purchased for $500.00 and redeemed for $1,000.00.
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| Fr. William J. Ferree, expert in social justice. |
• Understanding Social Justice. Promoting social justice
is difficult when people fail to grasp (or even notice) the underlying
principle: that social justice is not a substitute for individual justice or
charity, but a way of making individual justice and charity possible. Nor is social justice a way of saying that
charity can now be coerced because it is now justice. No, those ideas of social justice are not
social justice because, one, they are not social, and two, they are not
justice. They are ways people have
devised to try and get around not merely natural rights, but the whole of the natural
law itself by asserting that actual human beings only have such rights as the
collective permits them to have. Worse (because
many people feel in their hearts that the collective cannot be greater than
actual human beings), there is a fixed belief that no one can change the
institutions of the common good through acts of social justice so that
individual virtue once again becomes possible.
That seems to be the premise behind a lot of the gloom and doom good
people are enmeshed in these days, and why they are tempted to elect or submit
to leaders who, however terrible or disgusting they may be as people, come across
as strong enough to impose their vision of the ideal society on a country or
institution, and reject leaders who are perceived as incapable or weak. People think they are faced with the choice
of submitting to tyranny, electing a tyrant more to their liking, or separating
from society, going off into the wilderness to found their “city on the hill.”
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| Louis Kelso, expert in economic justice. |
• Understanding Economic Justice. The only thing worse than
the widespread misunderstanding of social justice is the widespread
misunderstanding of economic justice.
Far too many people combine these misunderstandings and assume that
economic justice means everyone gets what he or she needs as an
entitlement. If other people refuse to
be “socially just” according to the will of the strongest, the State forces
them by redistributing their wealth and mandating certain behavior.
• The Benedict Option. This
past week we received a copy of Rod Dreher’s The Benedict Option (2017).
No, it’s not about Pope Emeritus Benedict XVI, although he is cited in
the book. Rather, the book relates
Dreher’s analysis of the decline of the institutions of western civilization as
these “social habits” drifted away from Christian and natural law
principles. We haven’t finished reading
it yet, but so far (except for some technical details) the analysis appears to
be consistent with that of the Just Third Way.
The main difference — and where there could be a fruitful discussion —
is that Dreher seems to hold by the “Pre-Pius XI” concept that the institutions
of society are not directly accessible by ordinary people, and that people with
traditional moral values are at the mercy of the institutions, and increasingly
so as institutions become more and more corrupt and distanced from traditional
values. Given that the only way under
Pre-Pius XI social doctrine that people can affect the common good (and that
only indirectly) is to be personally virtuous, and since today’s institutions
in general inhibit or prevent people from acting virtuously, the person
attempting to be virtuous is therefore trapped in a Catch-22 situation. If we
understand it correctly, Dreher’s “Benedict Option” is for people to come
together in communities founded on love — caritas,
not eros — whether within the larger
community or going off in the wilderness (so to speak), thereby gaining the
power through organization and coming together in solidarity to resist the
corrupt surrounding culture. That is, of
course, an option and should always be available for those who freely choose to
isolate themselves from the rest of society in one form or another. It is not, however, social justice — or, more
accurately, it is only the first step in social justice: coming together in
solidarity with like-minded others.
That
is an act of individual charity, as it is directed at the individuals who make
up the community or institution, not at the institution itself. Social charity, the next step, is to love our
institutions (not just other individuals) as we love ourselves — and that means
loving even the corrupt surrounding culture enough to want to correct it, not
abandon it to those who have taken it over.
And that leads to the third step, the “act of social justice.” Social justice is not an attempt to make up
for the failure of individual virtue as so many suppose. It is not a replacement for individual
justice or charity. Rather, social
justice is the virtue that directs us to organize with like-minded others and
work to reform corrupt or flawed institutions so that they once again become “structures
of virtue” instead of “structures of sin.”
That, of course, requires that ordinary people have power, and since (as
Daniel Webster pointed out) “power naturally and necessarily follows property,”
the first act of social justice that needs to take place (as both Leo XIII and
Pius XI noted) is to make it possible for every child, woman, and man to own
capital, but without at the same time violating anyone else’s rights. That, of course, is the whole point of the
Just Third Way: restoring human sovereignty and dignity so that people can lead
the good life of virtue.
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| Daniel Webster: power follows property. |
• Shop online and support CESJ’s work! Did you know that by making
your purchases through the Amazon Smile
program, Amazon will make a contribution to CESJ? Here’s how: First, go to https://smile.amazon.com/. Next, sign in to your Amazon account. (If you don’t have an account with Amazon,
you can create one by clicking on the tiny little link below the “Sign in using
our secure server” button.) Once you
have signed into your account, you need to select CESJ as your charity — and
you have to be careful to do it exactly this way: in the
space provided for “Or select your own charitable organization” type “Center for Economic and Social Justice
Arlington.” If you type anything
else, you will either get no results or more than you want to sift through. Once you’ve typed (or copied and pasted) “Center for Economic and Social Justice
Arlington” into the space provided, hit “Select” — and you will be taken to
the Amazon shopping site, all ready to go.
• Blog Readership. We have had visitors from 39 different
countries and 38 states and provinces in the United States and Canada to this
blog over the past week. Most visitors are from the United States, the United
Arab Emirates, the United Kingdom, India, and Canada. The most popular postings this past week in
descending order were “Thomas
Hobbes on Private Property,” “The Romish
Menace,” “News
from the Network, Vol. 11, No. 40,” “Non-Christian
Christianity,” and “Halloween
Horror Special: Regulation v. Internal Control.”
Those are the happenings for this
week, at least those that we know about.
If you have an accomplishment that you think should be listed, send us a
note about it at mgreaney [at] cesj [dot] org, and we’ll see that it gets into
the next “issue.” If you have a short
(250-400 word) comment on a specific posting, please enter your comments in the
blog — do not send them to us to post for you.
All comments are moderated, so we’ll see it before it goes up.
#30#
