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.
|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.”
|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.
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.
|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 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 “,” “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.