Thursday, March 13, 2014

Vocabulary: women and confusing words

A few smaller categories of vocabulary words to close out this brief series.

"Gnomic" and "sententious" both describe someone who writes or speaks in aphorisms, while an "atticism" is a concise and elegant expression, not necessarily aphoristic.

A "sybarite" is someone devoted to pleasure, while a "feckless" person has no sense of responsibility or is just lazy.  "Otiose" can describe someone at leisure, or a lazy person; or it can mean ineffective, futile, or useless -- I'm surprised we don't see this word more often, as it seems to cover a number of common insults.

I found three words that begin with the prefix "pleo-," whose meaning I did not know before.  A "pleonasm" is the use of unnecessary words, such as "will and testament" -- which essentially mean the same thing -- or "burning fire."  "Pleochroic" describes something (often a crystal) that appears to be different colours depending on the angle from which you view it.  "Pleionosis" means exaggerating one's own importance.  As you may have inferred from these words, the prefix "pleo-" (or "pleio-") means "more."

Three words on my list refer specifically to women.  A "termagant" is a violent woman, while a "malkin" is an untidy woman.  "Malkin" can also mean a mop, a cat, or a rabbit, which seems like rather a lot for a single obscure word.  "Gamine" is the most interesting.  The definition that I originally copied (the source of which I am unable to remember) is, "a girl of ingratiating qualities, typically slight build, and a pert saucy air or a wistful elfish charm."  Considering that it originated simply as the feminine form of "gamin," meaning "urchin," the word "gamine" has come to carry quite a full load of ideas in its connotations and denotations.  It has its own entry in Wikipedia, which cites Audrey Hepburn as the archetypal gamine, although the word originated in the 1890's and was applied to actresses in early silent films.

In my vocabulary collecting, I have, of course, discovered a number of word pairs that can easily be confused.  "Procellous" means stormy, but "proceleusmatic" means inspiring or inciting to action.  "Ligneous" means woody, but "caliginous" means misty or dark.  A "recreant" is a coward or a traitor, while a "recreation" is, of course, a pasttime.  A "cormorant" is a greedy person (or a type of seabird that eats voraciously), while a "termagant," as indicated above, is a violent woman.  "Lugubrious" means mournful, but "lucubration" means laborious study or the product of such study, such as a dissertation.  With that, I will leave it to you whether these entries on vocabulary have been either lugubrious or lucubrating (which I'm pretty sure is not a word, but it seems like a logical formation), and I promise not to impose more of these for a while.

Wednesday, March 12, 2014

Vocabulary: heavenly and religious

I seem to have come across an unusual number of words associated with the heavens (literal or metaphorical) and with religion, Christianity specifically.  This is a little odd because I haven't read any theology at all -- these words all came from books on other subjects.

supernal - celestial or divine
welkin - the sky
beatific - blissful or bestowing bliss
empyrean -  the highest heaven.  (In spite of its -an ending, this word is actually a noun, not an adjective.  It was an ancient term for a region containing pure fire -- the element that rises the most -- and was adopted by Christians.)
numinous - spiritual; supernatural; mysterious; beyond comprehension
paraclete - an advocate or intercessor; when capitalized, the Holy Spirit
theophany - an appearance of a god to a person
afflatus - inspiration, especially a divine imparting of knowledge.  (This word comes from the Latin meaning "to blow on," so it has the bad association in my mind with someone's breath too close to me.)
anagoge - a spiritual or allegorical interpretation of words.  (This word has four syllables, an-a-go-jee.)
soteriology - the doctrine of salvation through Christ (unlike all the other words on this list, this one appears to have a meaning only within Christianity, although I wouldn't be surprised if it gets used metaphorically occasionally).
demiurge - the creator of the world (originally used by Plato in this sense, later adopted by the Gnostics)
hypostasis - (1) the essence or essential part of something; (2) any of the three substance of the Trinity, or Christ in his human or divine nature; (3) in medicine, the accumulation of blood due to poor circulation.

Tuesday, March 11, 2014

Vocabulary: sounds and substances

For today, I have some words that describe sounds, and others that are adjectival words, mostly derived from substances -- common substances, but uncommon words.

ululate - to howl
pule - to cry in the thin voice; whimper
sough - to make a rushing, rustling, or murmuring sound.  (I imagine the sough of wind in the boughs.)
sursurrus - a whispering or rustling sound
vagitus - the cry of a newborn.  (I can think of all kinds of metaphorical applications for this.)

ligneous - woody
flocculent - wooly
coriaceous - leathery
margaritaceous - pearly
velutinous - velvety
horrent - bristly
lacustrine - of lakes
telluric - terrestrial
chthonic - infernal or ghastly

Monday, March 10, 2014

Vocabulary: immature and superficial

Years ago, I decided that if I was going to learn foreign language vocabulary, I should also put some effort into learning more English vocabulary.  Therefore, I started writing down words that I didn't know when reading.  The first book for which I did this, "Empire of the Inca" by Burr Cartwright Brundage, provided a good start -- I got a good 20 words out of that book.  (It was as difficult to read as the vocabulary was obscure.)

After I had accumulated more words, I started noticing that they fell into categories, which I suppose is inevitable.  I present to you, therefore, some vocabulary words describing immature and superficial people:

"Callow" and "sophomoric" both mean "immature."  "Jejune" means childish or unsatisfying.  It is the key word in a great exchange between Woody Allen and Diane Keaton in "Love and Death":
- That is incredibly jejune.
- That's jejune? 
- Jejune! 
- You have the temerity to say that I'm talking to you out of jejunosity?
I am one of the most june people in all of the Russias.

"Sciolism" means superficial knowledge (from Latin "scius," "knowing").  A "philosophaster" is a person with superficial knowledge or who feigns more knowledge than he has.  A "pieriansipist" is a superficial learner, one who has sipped from the Pierian spring (sacred to the Greek muses) but not drunk deeply enough for real understanding.  That is a $3 word for superficial if I ever heard one.  But my favourite word in this category is "deipnosophist," meaning someone skilled at dinner table conversation.  Deipnosophist does not imply shallow or superficial, but it always makes me think of the type of person who spins out theories that sound plausible to most of his audience, but which are actually nonsense to the sort of people who would actually know something about the subject.

Saturday, March 8, 2014

Help me understand how money is created via lending

I have a new idea for a business:  I will borrow tractors from farmers when they don't need them, paying them a small fee.  Then, I will lend them out to farmers who do need them, collecting enough to cover the fee I pay plus to make a profit for myself.  After borrowing one tractor, I don't think it will be safe to lend it out, because I don't know if the owner will want it back in a short time or a long time.  Therefore, I will just store the first tractor I borrow, and lend out the next nine, keeping the one in reserve.

Question:  after I have borrowed ten tractors and lent nine, how many tractors are in existence?  The answer seems obvious:  ten, one in my reserve and nine out on loan.  But while this seems obvious when dealing with tractors, when it comes to money I get a quite different answer.  After borrowing $10 and lending $9, I am told that there are $19 in existence.  This troubles me.

I used to think I understood the creation of money through borrowing, partly because I had seen it explained through the example of goldsmiths.  The story goes (I am told this is true) that people would leave their gold with goldsmiths for safe keeping.  In exchange, the goldsmith would give them a piece of paper entitling the bearer to however many ounces of gold had been deposited.  The gold's owner could keep the paper and collect his gold later, or he could trade it away like money for whatever the current price of gold entitled him.  Any bearer could redeem the paper.

Goldsmiths realized that this gave them an excellent opportunity to make money.  If someone needed cash, they could give the person a piece of paper exactly as though he had deposited gold, which the person could then spend like money.  (Of course, the goldsmith also kept an IOU from the borrower requiring repayment with interest of the gold's value.)  Since no one wanted to carry around actual gold, the certificates issued by the goldsmith were essentially money.  And since he could write certificates for more gold than he actually had in storage, he was effectively creating money by lending.  Of course, he was subject to a run on his "bank" if too many certificates were redeemed at the same time.  It would be a matter of chance whether he could collect from his borrowers and buy enough gold to refill his stores before going bankrupt.

This scenario makes perfect sense to me, but it is not the same scenario that we have with modern banking, at least as far as I can tell.  The "demand deposits" (checking accounts) that banks hold are not like the goldsmith's gold, because the bank does not issue certificates redeemable for money.  Instead, a person writes a check to draw on his deposits.  This check is made payable to a specific person and is valid only for a specific time.  Once the recipient cashes or deposits the check, the money is withdrawn from the person's checking account and deposited elsewhere.  The bank can, therefore, lend more money than it has in reserve, but the depositors cannot spend their money without affecting the bank's reserves.  In the goldsmith's case, the certificates can circulate indefinitely and never affect the goldsmith; in a modern bank, once a depositor spends his money, it is gone from the bank and is not available to be loaned to anyone else.  Or, to look at it another way, a borrower can spend the money the bank gives him only so long as depositors leave enough cash for the bank to cover the loan.  If they don't, there is a run on the bank -- but in a very different sense from a run on the goldsmith's bank.  In the goldsmith's case, he does not actually have reserves to cover the demands, and never did.  In the bank's case, the money is attached to specific borrowers whose loans can be called in.  The classic explanation from "A Wonderful Life" is that the depositors' money is not at the bank, it's on loan to their neighbours in the form of mortgages.  The money for the depositors exists, but it is already being used.

In one sense, you could say that banks and goldsmiths are doing the same thing:  both have books that balance, because the amount they owe in deposits is equal to the amount they are owed in loans.  The crucial difference is that banks must gets the deposits before it makes the loans.  The goldsmith makes the loans first, and is thus creating money where it didn't exist previously.

There are a couple of ways I can see how the modern scenario could be the equivalent of the practice of goldsmiths.  One is if bank notes circulated just like cash.  That's the goldsmiths' situation:  their notes that say "pay bearer X ounces of gold" are as good as cash (or close to it), and since no one wants to carry actual gold around, there is no reason for the notes to be redeemed under normal circumstances.  That's not how modern banking works, however.  If you write a check, it gets deposited at a different bank and the money withdrawn from your bank almost immediately.

There is, admittedly, a period when you have purchased something with a check but your bank has not yet handed over the money, and in that sense there is extra money in circulation for a period of time:  you purchased something, but your bank still had the cash to lend on the money market overnight -- the money effectively exists in two places.  This might be what people are talking about, but I don't think so.  First, the time that a check has to wait to be processed is short and getting shorter all the time.  Automated clearing houses have cut it down to a couple of days in most cases.  Second, only a small amount of money is normally in this transitional state.  You write a check for $100, even though you may have several thousand in your bank; by the time you write another check, your first check has cleared.  This is the case for all but the largest purchases (cars, down payments on houses), where you will pull most of the money out of your checking account.

Credit cards function similarly.  In their case, the money is transferred from the issuing bank to the merchant in a short period of time, I assume faster than checks since it is all electronic.  You don't pay the money back until the end of the month, but the time between your purchase and the transfer of money is quite short.  The bank forwards you the money in exchange for fees from the merchant, plus the chance to charge high interest rates if you don't pay off your balance.

There are some rare cases in which bank notes can circulate much like cash.  Traveller's checks, for instance, work that way if I understand correctly.  You can pay someone with a traveller's check, and that person can, in turn, sign it over to another party, and so on indefinitely.  I don't think this happens very often, and it certainly isn't a major part of the money in the economy, but the principle works.

Theoretically, other bank notes can also circulate.  Treasury bills are so safe that they can be used much like cash, and I believe they are sometimes exchanged in financial transactions by major corporations.  Again, I don't think this is a major part of the money supply, and it certainly has little to do with the creation of money through lending as explained in my college Money and Banking textbook.

The one place where lending clearly acts as a form of creating money is lending to sell a product.  Whether you take out a loan from the car dealer, the furniture store, or purchase groceries on store credit (rare now but apparently common in the past), you are spending money that doesn't exist.  No one has to give up money for you to make the purchase; instead, the store itself is providing you with a good on the promise of future payment.  (I'm not actually sure if this is even how store credit works any more; car dealers may need to procure actual cash to pay for the car which is it only borrowing.  But it certainly could theoretically sell you a car without getting any actual money up front.)  This may actually be a major part of the economy for all I know, but it is completely different from the model of banks creating money by lending to people.

The second way I can see borrowing as a way to create money is in the case of a bank that can actually print the money that it lends out -- i.e., the Federal Reserve.  Most of its loans don't involve physical cash, but rather theoretical accounts, but the premise is the same.  A Federal Reserve bank can credit a private bank on its books, creating a debit and credit out of thin air, and that is certainly a form of creating money.  This is much like the goldsmiths' case.  It is as though you go to the bank and ask to borrow money, and the bank, instead of securing deposits to lend you, simply goes in the back and prints a stack of bills.  Voila!  You can borrow money, and the bank doesn't need to worry about a run on its assets.

This, the example of the Fed, is probably the simplest and clearest explanation of how lending creates money.  I understand it clearly.  The problem is that it only works for the Federal Reserve, and not for private banks.  That is not how the creation of most money comes about, and it is not how the textbook explains it, since the textbook refers specifically to private banks.

So I am still confused.  I understand how money can be created by lending in various circumstances -- goldsmiths, store credit, and the Federal Reserve -- but none of it corresponds to the way I have seen it explained, either in my college course or anywhere on the internet that I have looked.  Those explanation look to me like we are conjuring tractors from thin air.  If anyone can help clear up my confusion, I would be glad to get your help.

Thursday, March 6, 2014

The Limitations and Insights of Atlas Shrugged

"Atlas Shrugged"
by Ayn Rand

I knew about Ayn Rand a long time ago, and I read "The Virtue of Selfishness" in high school. I wasn't too impressed with it, and Objectivism seemed a fringe movement, so I didn't make an effort to read her more famous works. Two things changed my position. The first was reading an article in which the author criticized Rand's followers for misreading her (he was completely wrong, it turns out). The second was the discovery that Alan Greenspan and Paul Ryan are both big fans of Ayn Rand. If major public figures are influenced by her thought, I wanted to know more about it.
So I read "Atlas Shrugged," her largest and most famous novel. The first thing you would notice about this book, whether you read it or not, is that it is extraordinarily long. It is estimated at 645,000 words. By comparison, "Les Miserables" is only 531,000 words. "War and Peace" is 587,000. The Old Testament is 593,000, almost ten percent shorter than "Atlas Shrugged." This is a really, really long book. You would have to think it would take a lot of ego to write a book longer than Victor Hugo or Leo Tolstoy. Or God. Surveys have shown this book to be one of the most influential in modern America, which astounds me because I have a hard time believing that that many people have read it. Did they really plough through all 1100 pages of this book? Or did they just read a summary and say they were influenced by it?

Maybe Rand just has a lot to say? There is a lot of stuff in this book, I admit: things happen, action progress, the plot unfolds. But I'm pretty sure she could have written the book in 500 pages and still covered the plot comfortably. Most of the extra verbiage is taken up by long monologues. I understand that she is trying to expound a philosophy, and that is obviously easier to do when people just say what they think rather than having the reader infer it from the action. In fact, she does both; the action reinforces the speeches, and vice versa. But the speeches are like lectures. In any work of fiction, people don't talk like they do in real life; I understand that. They talk longer and more coherently than real people do, and their listeners listen longer and more patiently than real people. Even so, Rand had stretched this exception well past the breaking point. I don't even have to sit and listen to the self-righteous people in the novel pontificate for 15 or 20 minutes at a time, and I still want them to shut up. I can't imagine how the characters in the story would behave, but I'm sure they wouldn't just sit there and take it (and agree, most of the time).

When I first started the novel, I was impressed with its attention to detail and its characterization. It has more literary merit than I had expected; some scenes are quite good. By the end, I had been disillusioned by the lack of anything resembling complex characters. There are exactly two kinds of characters in the book. One is the intelligent, driven hero who knows what he wants and goes after it. The other is the incompetent, whining person who keeps repeating "it wasn't my fault; there was nothing I could do." There are no highly motivated, honest, but stupid people who try and fail, and no highly intelligent people at all who disagree with individualism. Again, in the service of a polemical novel, I can understand the value of these omissions, but they do detract from its literary value -- not to mention the pleasure one gets from reading it.

Ayn Rand is to be credited for considering the impact of her ideas beyond the merely economic realm. If you haven't read it, you might think this is just a book about government interference in the economy, but that is only a corollary to the central theme of people doing what's best for themselves. For Rand, it isn't just an observation that people are self-interested; it is a moral code. The heroes have to wrestle with government forces that interfere with their work, but equally with their own desire to do something -- anything -- for the sake of anyone else. Rand believes in love, but only to the extent that two people happen to admire each other. At one point, a character says, "I love you as I love my work," and proceeds to expand upon how his love for the woman and the job are close parallels, as though this were the way to her heart. (It is, in the book, but I doubt it would work anywhere outside of it -- probably not even with Rand herself.) Any other reason for love besides self-interest is irrational and must be discarded.

Rand's philosophy is therefore very broad, but it is not very deep. Her characters talk a lot about rights and responsibilities; "I have no right to ask you," for instance, or "he knew he had to do it." It's not clear where these rights are supposed to come from, however. Sometimes it seems as though the absolute devotion to self-interest means that everyone has a responsibility to say exactly what he means, but at other times a mysterious sort of merit is required before one is allowed to speak about some things. Sometimes characters are honest because they gain from it, but at other times they are honest because it is the right thing to do. One gets the feeling that Rand thinks she has a fully-developed, comprehensive system, but I doubt it would withstand a routine consistency check on the part of a graduate student looking for a dissertation topic.

Whittaker Chambers wrote a contemporary review of "Atlas Shrugged" in which he condemned it: "From almost any page of Atlas Shrugged, a voice can be heard, from painful necessity, commanding: 'To a gas chamber — go!'" It is a bit unfair to take this sentence out of the context of the complete review (which is, on the whole, excellent, and can be read online at Even so, and even though I am a great admirer of Whittaker Chambers, I think he was wrong on this point. It is possible that a full and thorough examination of all the implications of the ideas in "Atlas Shrugged" might lead one to this conclusion, but it is certainly not the case that Rand herself would have sanctioned any such message, nor would any of the characters in the book. It is a book about leaving people alone, after all. One wonders what would happen to the incompetent in such a world; I can certainly understand that people might be left to die. But I can't see how the philosophy or any of its immediate implications could lead to genocide.

Chambers admitted that he shared certain of Rand's antipathies but saw little relation between their philosophies because of Rand's thoroughgoing materialism. And while I agree with him, I don't think it's a good idea to dismiss Rand entirely, because "Atlas Shrugged" does include some important truths -- truths that are rarely acknowledged, let alone celebrated, in public discourse. The most obvious is that running a business is a real job that requires talent. Politicians often talk as though CEO's milch massive salaries in exchange for doing no real work. While I wouldn't want to assume that every CEO is effective or earns his salary, Rand's perspective is closer to the real truth. It is not trivial to manage a team of employees, much less a massive corporation. It is meaningless to distinguish management from those who do "real work," because management is real work -- very different from technical tasks, of course, but still requiring a great deal of skill.

On a related note, Rand takes on the notion that businesses have plenty of money and can absorb arbitrary government exactions without skipping a beat.  In the real world, the enormous profits that sometime materialize are balanced by risks, poor decisions, and losses at other times.  The same people who are quick to levy windfall profits taxes are also the first to criticize businesses that make poor decisions that result in great losses, as though management could make a small profit consistently if only it weren't so greedy.  Rand sets up realistic scenarios in which relatively small government exactions lead to future business problems and thus to more calls for government intervention to fix what businessmen have messed up.  (It isn't realistic that her scenario end in economic collapse, of course, but the mechanism is credible.)  This is highly relevant in our own time, when many people believe they can raise the minimum wage indefinitely or impose new regulatory burdens with impunity because, after all, businesses have plenty of money and won't adjust their behaviour to account for marginal changes.
Another valuable lesson of "Atlas Shrugged" is that it is a myth to assume that government officials are disinterested players in economic decisions. Even the best set of laws and regulations is open to wide interpretation, and the more the government regulates, the more difficult it is to make meaningful rules. In questionable cases, decisions will be made based not on general economic benefit but on individual gain. A bureaucrat is a person, after all, with his own interests and goals. Just because he might not have a financial stake in a particular decision doesn't mean there aren't other things he can get out of it. And, since every government decision benefits some and hurts others, the interested parties become supplicants to the bureaucrat, willing to trade whatever currency he demands to get their way. A major part of "Atlas Shrugged" consists of showing that government regulation results, not in greater equality or better performance, but in a new "aristocracy of pull" -- people who are not good at making things, but are good at trading favours. At a time when Democratic Party donors have benefited from major government "investments" while those opposed to the government find themselves targeted by the IRS and the Justice Department, it is especially important to remember that removing the economic incentive from private individuals to the government does not remove individual greed; it only transfers it from citizens to government officials, with predictable results.

Chambers criticizes Rand's in-your-face use of the dollar sign as the symbol of her protagonist's community.  The dollar sign means materialism, and surely there is little more confrontational than asserting that materialism is the root of a philosophy.  In this, however, Chambers misses the point.  We think of the dollar sign as a symbol of materialism, but what it represents to Rand is freedom -- the freedom to earn money by selling goods and services, as well as the freedom to acquire things by trading away money.  People don't do something for nothing, at least not very often; even humanitarians, if they are not already independently wealthy, have to make a living.  The question is, will they be free to do what they want, or will the government dictate what they must do?  Will exchange be voluntary, or forced?  This is the essence of the debate over a free economy, not greed vs. altruism, and Rand is very effective in marking it.

The last point that strikes me about "Atlas Shrugged" is how characters become increasingly afraid to take decisions as the government's influence expands. Characters who are acting on their own behalf are free to act and live with the consequences, good or bad. When the government is in charge and companies have to be run by following rules rather than by seeking profit, every action is a potential excuse to blame someone for failing to adhere to the rules, regardless of whether the result of the action is success or failure. While our economy as a whole is nowhere near this point, I'm afraid that a mass of laws, prosecutorial discretion, and erratic court decisions are increasingly putting people in a position where taking decisive action is more dangerous than not acting. Helping a distressed animal can get you in trouble; a company that finds a potentially dangerous defect in its product has incentive to pretend it doesn't know, because it opens itself up for lawsuits prior to its discovery of the defect (because of strict liability laws). There are so many laws and rules that even a Supreme Court justice has declared that it is difficult to know what is legal or illegal in advance. This is not the result of a bad law or three or three hundred, but an inevitable consequence of trying to regulate everything. And when anything can be illegal, the government can find some reason to prosecute you. Your only hope is to avoid doing anything too conspicuous, and not to annoy anyone in the government who might be in a position to hurt you.

I am sceptical of Rand's philosophy as a whole, and her morality is repugnant in some ways.  "Atlas Shrugged," however, remains a valuable book that opens up some economic truths that many people would otherwise never hear about.