Secrets of the Temple

Ananga · April 27, 2001

Book review – Secrets of the Temple, How the Federal Reserve Runs the Country, by William Greider.

I usually complete the reading of a book before reviewing it, but in this case (I am a little more than halfway through its 700 plus pages) I am making an exception considering the current economic slowdown, since it gives insight into the current situation and its causes. Although the focal point of the book is the Reagan administration, it covers the history of the Federal Reserve and its predecessors in American economics, as well as tracing the concept of money to ancient times. Mr. Greider describes in great detail the various forces that drive markets and the factions behind them, including wealthy investors, banks and corporations, small entrepreneurs and the common folk. He shows that Federal Reserve manipulation has caused recessions over and over again, mainly by keeping interest rates high for prolonged periods of time (as we have just seen in the too little too late rate cuts of the past few months). His deconstruction of the intertwining ‘plumbing’ (as he calls it), with the numerous valves that affect the flow of money in our society, is quite illuminating, to say the least.

Not only is this a valuable resource for anyone that seeks to penetrate the mystique of modern economics and come to grips with Keynesian doctrine and monetarism, but it is an excellent thesis on the perennial link between theology and commerce. From Chapter 7, the God Almighty Dollar – “The historic connection between money and religion was established in one culture after another: the temple was the first mint, where coins were sanctified by priest-kings and therefore accepted as trustworthy by members of the tribe… Greeks, Babylonians, Egyptians – virtually every early society conferred sacred qualities on its currency. Centuries later, without benefit of clergy, gold and silver maintained their own religious connotations. The association originated in a mystical correlation with the Sun and Moon, supposedly confirmed by the mysteriously stable ratio in their values – 1:13.5 gold to silver – which astrologers decided was a precise replica of the heavenly cycles. The religious quality of gold and silver endured long after the astrology disappeared and modern banking began issuing paper. The precious metals were, after all, created by God, not man. Sophisticated modernity naturally resists the notion that money still retains religious content. On rare occasions, however, the connection is still expressed in the most explicit terms. A conservative Republican congressman from southern California, Bill Dannemeyer, wrote a newsletter to his constituents in which he explained how the U.S. government had offended God when it abandoned the gold standard. ‘It is not and accident [he wrote] that the American experiment with a paper dollar standard, a variable standard, has been going on at the same time that our culture has been questioning whether American civilization is based on the Judeo-Christian ethic or Secular Humanism. The former involves rules from God through the vehicle of the Bible. The latter involves variable rules adopted by man and adjusted as deemed appropriate.’ In most circles, the congressman’s suggestion – that the gold standard was somehow derived from God’s law – would be dismissed as reactionary fantasy. In an enlightened age of high technology, it was unfashionably primitive to believe such things. Archaic civilizations may have been governed by mystical money, but surely not the rational minds of modern times. Money was only money, a medium of commerce, a store of wealth, a unit of measure, nothing more.” Greider also examines the Freudian analysis of the concept of money being somehow tainted, and having an inherent evil power.

I guess my only criticism of his discussion of the religious aspects to commerce is that money is a medium of exchange in commerce, but is not necessarily an accurate measure of wealth. Water in India has always been the standard (and not gold). The Goddess Laksmi is always depicted seated upon a lotus in the water, and for good reason. Also, historically salt was controlled by the Roman and British empires, hence the defiant act by Mohandas K. (Mahatma) Gandhi in the making of salt. Certainly the is inherent power in currency and the amassing of it by power mongers, however the natural resources that provide us with clean food, air and water and energy sources like natural gas and electricity are far more significant in our overall standard of living.

Ananga · April 27, 2001

Corrections to above post:

It is not an accident

Certainly there is inherent

Gauracandra · April 28, 2001

Hi Ananga,

Very good review. Its interesting to note that virtually every civilization on earth, from the 'new world' americas, to africa, europe, india, china etc.... all cultures have valued gold for some reason. Most people I think would be shocked to learn how little gold there actually is in the world. I did a report once in college, and while I don't recall the exact dimensions, if you were to melt all the gold in existence today and make a single block, it would be like 150ft by 150ft by 50ft or so. Maybe even less.

Personally I support going back to the gold standard. If every dollar of money had to be backed by a certain amount of gold (or any other commodity for that matter), it would greatly reduce the power of the Fed to monkey around with the economy. The Federal reserve only adds instability in the market, as we all wait with baited breath trying to guess what Alan "I am God, worship me" Greenspan is going to do next. In fact, Milton Friedman did a great analysis once and showed that the Great Depression was caused by the Fed, which reduced the money supply by about 1/3 in a span of a few months.

It is also worth noting that India is the largest consumer of gold in the world. And they don't take the cheap, watered down gold as in the U.S. I'd be curious if anyone had any scriptural references to the value of Gold (be it Vedic, or other traditions as well).

Gauracandra

Ananga · April 28, 2001

That is a good question: Is the gold standard indeed obsolete, and if not, would returning to it solve any problems?

Then there is the larger question when one considers a fair distribution of wealth among the populace - at what point does the earth's population of human beings begin to tax the available land and other resources? It is amazing, I guess, that the nations of world are managing to feed the people despite the exploding birth rate. However, unless there is some ingenious scheme devised, at some point Thomas Malthus's theorem comes into play and mass starvation is going to result. I just read a report the other day that the larger the farm the less productive per acre it is. That is an alarming statistic.

Without resorting to complete socialism, I believe we could revamp our exising political systems to ensure the bare minimum for every person: a roof over one's head, food, water, clothing and a livelihood. Any excess earnings could then be applied to luxury items and recreation. That anyone needs to struggle to subsist is not the least bit humane. Poverty is still a formidable enemy, along with rampant disease. What comes across in Secrets of the Temple is the need for some measure of sacrifice to achieve economic goals on a grand scale. Do we want the powers that be to make decisions along those lines for us, or do we want some say in the matter?

Religious doctrine supplies an ethical infrastructure upon which a fair and just government can be built. We seem to be evolving as a race towards that ideal, but there are many issues that still hold us back. Whether a varnashrama system, a democratic republic, a monarchy, or some other form of organizing principle is the optimum remains to be seen. We can see from recent history that so many experiments, such as Marxism in the Soviet Union, have failed miserably. We have also seen that what might have worked well in past millenia, such as the caste system, have only fostered horrible injustices in recent times.

Gauracandra · April 28, 2001

Very cool. Several months back I was trying to get a discussion going on the role of religion on economic development. But the discussion just went nowhere. Personally I am fascinated by economics (I have both an undergraduate degree and a masters degree in finance but I have always thought that if I should go back for a Ph.D. it would definitely be in developmental economics).

Just so you know where I am coming from, I would say I am a believer in neoclassical economics. While I acknowledge that capitalism does have its excesses, I believe that fundamentally as society grows more and more complex, the decision making authority must be pushed down lower and lower to the individual. The beauty of capitalism is that it is in a constant process of destroying itself and recreating itself, thus allowing for the old processes to die, and new processes to take shape and take us forward.

<BLOCKQUOTE>quote:<HR>Then there is the larger question when one considers a fair distribution of wealth among the populace - at what point does the earth's population of human beings begin to tax the available land and other resources?<HR></BLOCKQUOTE>

This may be a problem. One statistic I read stated that by 2050 Nigeria will have more people than all of Africa does today. This statistic is a bit old, but the point is clear. The rule of 72 is an old math trick. Basically if you want to see how quickly something will double, then take its current growth rate and divide 72 by it. This will give you an approximate estimate of how many periods it will take to double. Lets say world population is growing at 2% per year. Then, since we are currently at 6 billion people, in 36 years we will have 12 billion people. While I don’t think the Malthusian economic scenario will play out in developed countries, it definitely has the possibility of ravaging many parts of the world. This is going to sound harsh, but I’m not saying it in a mean way simply my honest opinion, but I truly believe that AIDS will flourish around the world, decimating many populations, so I don’t think we will get to that point. Right now Africa is being wiped out by AIDS, with in some countries one out of four people being infected.

As for the question of poverty and the equitable distribution of wealth, I think we must remember that was is now called poverty in countries like the U.S. would have been called luxury only 100 years ago. There is a difference between absolute poverty and relative poverty. 100 years from now the standard of living may be such, that I today will be considered impoverished.

<BLOCKQUOTE>quote:<HR>Do we want the powers that be to make decisions along those lines for us, or do we want some say in the matter?<HR></BLOCKQUOTE>

Personally I don’t want some bureaucrat to be in charge. This is why I don’t like the idea of Alan Greenspan being able to manipulate the economy. If one person can control such matters, and even assuming he has good intentions, if he makes bad policy then we all suffer collectively. By keeping the decision making at its lowest levels, we at least can adjust our individual decisions to compensate for changes in society.

<BLOCKQUOTE>quote:<HR>Religious doctrine supplies an ethical infrastructure upon which a fair and just government can be built. We seem to be evolving as a race towards that ideal, but there are many issues that still hold us back. Whether a varnashrama system, a democratic republic, a monarchy, or some other form of organizing principle is the optimum remains to be seen.<HR></BLOCKQUOTE>

Now this is where it gets fascinating. To what degree does religion play in economic development? Let me give one example. In the U.S. today there is great emphasis that ‘diversity’ is a strength. And I think to some degree this is true. But it can also be a great weakness in that it is harder to reach consensus for various key decisions. I have often believed that one of the reasons (one, because certainly there are many that can be discussed) that European civilization became so wealthy was due to the expansion of Christianity across Europe. This created a common platform on which trade, relationships, economic transactions could take place, as opposed to various distinct factions with their various distinct interests. In addition, the philosophy of Christianity tends to be very much about trying to recapture the utopia that was lost. It has a large degree of “lets build heaven on earth again” to its philosophy. The manipulation of the material environment was practically a commandment by God. Compare this to many eastern philosophies which emphasize detachment from worldly affairs.

To bring this to India, while I am not an expert on India, I do think that India has been severely harmed by bad economic policy. The best thing in my opinion that India could do would be to privatize various state run monopolies, from energy, transportation, and telecommunications. The whole information technology industry can be a major boon to India. There is always this discussion that China is the future for technology etc…. Let me put this straight, and excuse the jargon, but China “doesn’t stand a snowballs chance in hell” of taking away the information technology sector away from India, if India plays its cards right. The first, and most important thing is to deregulate and free up the hands of Indian entrepreneurs. A few months ago I was watching a program where an Indian computer programmer tried to build a company in India, but there was so much regulation and red tape that he eventually went under. Then he came to the U.S. set up the same company and became a millionaire. He wanted to stay in India but there was just too much bureaucracy. In fact, Indians in the U.S. are the wealthiest minority group in America, believe it or not. Wealthier than Japanese Americans, Chinese Americans etc…. There are more Indian American doctors, engineers, and software programmers per capita, than for any other minority group in the U.S. So it is definitely not Indians, it’s the economic policies of India. The second most important thing is to create proper infrastructure in India, especially a constant supply of electricity in order to feed the information technology boom. With shrinking borders, due to the internet, India has a great opportunity to really capitalize on its strengths which are a highly skilled, and trained workforce (computer programmers, engineers, mathematicians) and the fact that English is spoken by almost everyone (and since English is the language of international business, China will find it very difficult to ever capture that edge). Just so you know, the company I work for is one of the largest financial companies in the U.S. (over 30,000 employees) and they recently signed a contract to have ALL of their computer programming done in India, rather than at home. And this is only 1 company. I guarantee you that every financial institution will follow suit just to remain competitive.

Gauracandra

Ananga · April 30, 2001

GC: Do you think the trend of offshore software development is completely beneficial to the U.S. economy? Isn’t there a danger of harm to IT professionals locally in terms of the threat of competition from cheap labor overseas? Also I have heard reports of complaints from large corporations about the poor quality of such services.

Gauracandra · April 30, 2001

Ananga,

Absolutely this will harm U.S. tech professionals as well as all white collar jobs. The Internet is going to radically change the way business is done. This period right now is only the beginning. With the internet the borders between countries will virtually diminish for all white collar occupations. In a few more years, when teleconferencing becomes readily available at affordable prices, I could just as easily do my job in India or out in Montana where land is plentiful and inexpensive. But at the same time there will be highly skilled finance professionals around the world who will be competing against me. We'll all do our work at home, no more commute, and simply upload, download the data, and email our results. Already at my company I can take a day or two off and work at home and log onto our mainframe systems to get whatever data I need. The only question now is one of data security, which can be reasonably solved. So all white collar wages will probably see a downward pressure. Service may be harmed but all companies will take that into account when judging the cost-benefits of taking various actions. The next 10 years should be real interesting. Personally I'm looking forward to it. If I can live in Montana, out in the country with 20 acres of land, and a nice log cabin, and still do the same work, it will be great.

Gauracandra