Philadelphia Reflections

Euro unification

New topic 2015-02-08 19:47:28 description

2015 As Predicted from Pittsburgh

Stuart A. Hoffman

For the past 14 years, LaSalle University has featured an economics meeting at the Union League in January, usually with an economist predicting the local outlook for the year. Increasingly, the luncheon in Lincoln Hall has been packed and sponsored by some local firm. This year, the speaker was Stuart A. Hoffman, the chief economist of PNC Bank, who turns out to be quite a witty fellow. The lunch itself was gourmet, although a little on the feminine side for a mostly male audience. And because the place was filled with an audience, the waitresses of the League were taking it away faster than the eaters could eat it. It's hard to say what the audience might have felt about that, because most of them could afford to lose a few pounds, just like the Chef himself.

Dr. Hoffman feels the big news this year is OIL. It sort of fell out of heaven at the right moment, but even the politicians who opposed it are forced to acknowledge it was a very good thing, indeed. Its international effect, in creating oil independence, was especially powerful and undeniable. However, there are winners and losers. Our North American neighbors in Canada and Mexico may feel some painful effects, for example. In any event, the discovery and exploitation of fracking seem very likely to bring the recession to an end, sooner than we deserve, at least.

So the prediction for the year is rather bright for wages, unemployment, and housing, perhaps even banking. The relevant parts of the stock and bond market will prosper -- undeservedly, as always. But at the end of the year, we are likely to see that recovery as historical only, as we begin to see the long term gloom inherent in health care and educational costs, and the rest of the world begins to affect us more than we affect them. How's that for a January prediction, largely revolving around unexpected events in OIL. We'll try to remember to compare this January prediction with the subsequent December retrospective realities, later in this volume. We'll even see if Dr. Hoffman has to eat his words since today he had very little time to eat his lunch.

Mario Draghi Chairman of the European Bank

In the Question period, it was particularly interesting to hear a short description of what recently happened to the Swiss franc. The Swiss never joined the monetary union, but they did peg their currency to the Euro. As time went on, it was increasingly painful for Swiss exporters to have the franc suppressed by the lagging Euro, and when the Chairman of the European Bank announced his intention to start buying bonds, the Swiss bank capitulated and cut the tie of the Swiss franc to the Euro. The franc promptly rose, and that's all there is to the matter. Except if it isn't. The Germans are in much the same position within the Eurozone, and the English are restless, outside of it. So, if the prosperous parts of Europe decide to follow the Swiss example, the whole European monetary scheme may be in trouble. And if Europe has a monetary convulsion, it is trading partners in Africa and South America may follow, dragging in China, and -- who would be so brave as to suggest the USA could remain unaffected? Especially if Putin and the Arabs misbehave, pulverizing Israel in the process. When all you have is a hammer, you treat everything as a nail. Central Asia used to have two things, oil, and ruffians. And now they have apparently lost their dominance in oil.

Andy Mellon

Well, that's about the size of it, from Pittsburgh. Pittsburgh was largely settled by going West on the Erie Canal, so they never liked being attached to the Quaker end of the state. Philadelphia dominated with its banks, to Andy Mellon's great distaste, and largely controlled the shift of steel production from Eastern anthracite to Western bituminous coal. So now, Philadelphia scarcely has a bank to its name and has to hear the News of the World in Review -- from the other end of the state.

Appealing the Constitution to a Higher Authority

Justice Robert H. Jackson

According to Justice Robert H. Jackson, "We" (The Supreme Court) "are not final because we are infallible, we are infallible because we are final." Scoop Jackson was the last Justice who never went to college or graduated from Law School, so his viewpoint concentrated on the practical outcome of a situation. In fact, the father of our constitution, James Madison, was learned in the history of many constitutions, and was well aware of allusions to divinity in the construction of our governing document, particularly when the sources of strong beliefs couldn't be grounded in evidence. However,the Age of Enlightenment was highly religious, so they gave credit to divine guidance when they really were imitating the Legal profession.The lawyer's system of progressive appeal to a hgher court of appeals was a very clever adaptation of recognition that most problems are pretty simple andcan be handled without much training.The Constitution is an attempt to reconcile our culture to the needs of government and the revelations of controversy. Composed by Enlightenment rationalists within a highly religious environment, the Founding Fathers were careful to use the metaphors of Religion, even though many were personally skeptics about the substance. Indeed, the Penman of the Constitution who ultimately wrote most of the words was Gouverneur Morris, a flagrant libertine. It had been the tradition of Constitutions to describe their culture by allusion to epic poems, drawing inferences about Right and Wrong from what had subsequently happened to ancient heroes after similar situations unfolded. Some would put the plays of Shakspere in that role in 1787, but the evidence is stronger for Roman writers, like Cato and Cicero. In my own view, this leap of faith was only divine in the sense it was a one-way street. A citizen might try to emulate the ancients, but appealing back to them was not likely to work.

Although the Constitution can be viewed as bridging a gap between Culture and Common Law, or perhaps as placing a guardhouse between them, this relationship is not spelled out and therefore, in theory, might be changed. Other cultures, perhaps the native Indian, or the Catholic Church of Central Europe, might be substituted, or other legal structures resembling the Napoleonic Code might serve on the opposite side of the bridge. These substitutions were a legal possibility, but there is little doubt the American leadership intended for an Anglo-Saxon culture, linked with Francis Bacon's legal system, to prevail under a distinctively American flag. Because of our debt to France for then-recent assistance, there was once the possibility of French coloration to our culture, but the excesses of the French Revolution soon ruled that out. Some modern observers have capsulized the scene: First, we got the British to help throw out the French in 1754; and then in 1776, we got the French to help us throw the British out. Both our allies thought we played their game, but we were playing our own. The new Constitution specified no laws, but with little doubt the Framers intended the states to adopt British Common Law without the infelicity of saying so.

Bill of Rights

And then there is the Bill of Rights. Madison had great faith in the ability of structure (separation of powers, term limits, etc.) to command predictable outcomes, and initially resisted any need for a Bill of Rights. But the Ratification Conventions in the states showed him the need to yield. The First Congress soon enough confronted over a hundred proposed rights in petitions from the states, especially the four big ones. If anyone else had been in Madison's position, our Bill of Rights would resemble the European one today, fifty pages long and growing. That outcome would have greatly weakened the Legislative branch since after protests about Mother Nature subside, the legal fact emerges that Rights are merely laws which no majority can overturn. They might even be characterized as a contrivance for transient majorities to promote the permanence of their viewpoint.

The Founding Fathers

But they are not the only contrivance in politics. Enshrinement of the Founding Fathers elevated their political positions into near divinity, whereas debunking the Founders personally undermines their symbolism as statues and myths. There was too much of this during the romance period of the Nineteenth century, but also in von Ranke's later marginalization of History into mere scholarship and footnotes, which was a reaction to it. The Founding Fathers themselves now supplant Achilles and Cincinnatus in our lexicon, and we have little choice but to accord more weight to their original intent in the Constitution, than to contemporary reasonings. Indeed, we are forced to acknowledge more similarity between George Washington's fictitious cherry tree than to his relations with Peggy Fairfax, when we interpret his thundering "Honesty is the best policy" in the second inaugural address. It is admittedly a difficult choice, but Justices now need to consider what his audience widely believed was his original intent, more than what later archeological discoveries uncover. Justice Scalia is correct in placing more weight on the original intent of the Founding Fathers than contemporary reactions to the same words. But in occasional conflicts between myth and reality, it seems safer to consider what the audience then widely believed, than what modern audiences would guess at.