Archive for April, 2015

Days of Future Past

April 20, 2015

International Interest Rate Weekly’s Washington Watch published a report in 1995 entitled: “The Enemy Within”. The report argued the clash between liberalism (defined as feminism and multiculturalism) and conservatism (i.e. the religious right and Dead White European Males) are sowing the seeds that will topple the international economic and military superiority enjoyed by the U.S. As Pogo said, ‘We have met the enemy and he is us’.”

Smith’s review in 1995 suggested readers might do well to visit to the City Hall in Siena to ponder the allegory of good and bad government which is painted on the walls. Created for the powerful city-state at the dawn of the Italian Renaissance, it portrays the symptoms of tyranny (bad government) versus an enlightened monarchy (a town council).

The dark landscape of tyranny features fields in ruin due to ceaseless wars being waged, debauchery of all forms (male and female), and parentless children in idle, starving poverty.   At the center is a cross-eyed demon.

In contrast, the town of Siena is portrayed in peace and prosperity under the enlightened monarchy, with working fields, clean streets, strong bridges, busy stores, churches, and schools. At the center of this picture is a town council meeting in the city hall.

The Renaissance Man or Woman would not confuse the symptoms with the causes of bad and good government (or interest rate movements).

Indeed, good government provides the people with a strong infrastructure that promotes the pursuit of economic prosperity, while maintaining peaceful relations that ensure healthy commerce.

Good government means lending is less risky, so interest rates remain relatively stable and modest compared to economic activity (cash funds expansion). Alas, those were simpler times.

Municipal governance in America still has much in common with the city-state of Renaissance Siena. But, how would a citizen of 14th century Siena view today’s city-states?

Would the failure of 50% of the high school students to matriculate in some States be a cause for concern? How would the water taste? Do you think he or she would notice a large disparity in the quality of housing stock? Could we explain the ramshackle system of child care? What would explain the recidivism rate among the prison population? Why would we pay people who do not work? A lawyer for every 300 individuals?

Ultimately, these are credit concerns and they do affect interest rates. ‘”Tis wondrous strange. Nay, ’tis pity.”