My best friend in life and adopted brother is Fr. Lance Krzywicki. Before becoming a Catholic Priest, Fr. Lance was a Wall Street Attorney and Financier. While in New York he became friends with Cardinal John Joseph O’Conner. On Holy Saturday of 1987 I became a member of the Catholic Church after undergoing ” The Rights of Christian Initiation for Adults” administered by Fr. Lance. Archbishop O’Conner traveled to Iceland and was part of the ceremony that welcomed me and 12 others into the Catholic Church. Fr. O’Conner was a revolutionary and at the forefront of modern-day Biblical Justice Theory. His was a classical liberal (today we would say conservative). His ideas about equality and justice, economic responsibility, the sanctity of life, sin, forgiveness and redemption, and God’s gift of free will” and liberty inspire me as I review his writings twenty years after his death. Over the years Fr. Lance and I met with the Archbishop several times over lunch.
Like me Cardinal O’Conner fancied himself an amateur economist. Fr. Lance was a disciple of the Austrian School. The good Cardinal was more of a Keynesian. What interested me most about our discussions was how their economic theories were both grounded in Biblical principles. What I have opined about before is that the “modernists” and progressive movements of today are not grounded on moral or ethical predicates, but rather on emotion and a statist-paternalism. In the July 15th, 2022, Wall Street Journal an article written by Dylan Pahman from the Acton Institute and Alexander Salter makes the point that sound money is crucial for economic justice. They justify their positions with Biblical predicates:
“Scripture is replete with teachings about the importance of sound money. The Torah, the first five books of the Bible, contains 25 references to the “shekel of the sanctuary,” a coin of a fixed weight placed in the Tabernacle of the Lord to ensure that all commercial transactions took place on the basis of “a perfect and just weight” (Deuteronomy 25:15).
Sound money is crucial for economic justice. Without a stable currency, the wages of laborers are “kept back by fraud” (James 5:4). This is a form of theft, prohibited by the Ten Commandments. While landed magnates were usually behind ancient wage deprivations, the modern culprits are monetary technocrats and budget-busting politicians.”
Several years ago, I read a book of collected homilies from Fr. O’Conner. In one homily he opined about keeping rent controls in place in New York City. His Keynesian instincts prevailed but, as any Austrian Economist would predict, the values of the properties decreased over the years as landlords couldn’t afford the cost of maintaining their properties and the people who were supposed to be helped by the price controls had to leave their neighborhoods when the properties were condemned, and new high rent condos were built. Rent and price controls never work. But the point of the story isn’t about ceiling and floor prices, but rather that understanding the fundamentals of a market isn’t sufficient to design a solution to the problem. What is most needed is a framework to understand how prices work in all markets.
Not applying fundamental principles to a problem—the misapplication of deductive and inductive reasoning, have become common place. It is exactly what happened in the Covid crises when “clinical models” from statisticians replaced the fundamentals of clinical science grounded in years of experience. In the 15,000 years of modern man an airborne upper respiratory tract virus has never been able to be contained with type 2 isolation techniques. In the history of the world ceiling and floor prices artificially applied to an unfettered market only hurts those it is supposed to help the most. We keep making the same mistakes. Maybe it is because critical thinking is no longer a valued commodity.
The merit of a discipline like clinical medicine, public health, and to a lesser extent economics, is that if and when a hypothesis is properly applied, it may have more universal relevance. Our leading economists at the Fed told us that inflation would be “transient”. The “experts” at the CDC and NIH and public Health specialists told us the dreaded Covid could be “contained” and mitigation strategies that had never been tested would be successful. The predicates upon which many of these promises were based were false or at least untested. In both cases a political narrative became more important than the principles that would ground decisions moving forward. The experts in both cases knew or at least should have known that their pronouncements were at least untested and lacked a valid premise in theory or in history.
I am not a conspiracy theorist but let’s look at who has benefited from Covid economic policies. Mises predicted the outcome 80 years ago:
“If relative demands and prices change, they will change much more in the course of real-world increases in the supply of money. For, as Mises showed, in the real world an inflation of money is alluring to the inflators precisely because the injection of new money does not follow the Angel Gabriel(it is not redistributed equally across all parts of the economy…jl) model. Instead, the government or the banks create new money to be spent on specific goods and services. The demand for these goods thereby rises, raising these specific prices. Gradually, the new money ripples through the economy, raising demand and prices as it goes. Income and wealth are redistributed to those who receive the new money early in the process, at the expense of those who receive the new money late in the day and of those on fixed incomes who receive no new money at all. Two types of shifts in relative prices occur as the result of this increase in money: (1) the redistribution from late receivers to early receivers that occurs during the inflation process and (2) the permanent shifts in wealth and income that continue even after the effects of the increase in the money supply have worked themselves out. For the new equilibrium will reflect a changed pattern of wealth, income, and demand resulting from the changes during the intervening inflationary process. For example, the fixed income groups permanently lose in relative wealth and income.2
As the velocity of money increases, wealth is transferred from those at the bottom of the socioeconomic pyramid to those at the top. Who benefits the most? —Government, as inflation ramps up, wages fall behind the rate of inflation, but taxes are based on nominal and not real income? Banks charge higher interest rates. The makers of goods and the providers of services—think of the new money created by Covid economic strategies that were used by large hospital systems and pharmaceutical companies.
In the end it is all connected. Milton Freidman stated 60 years ago “when too much money is chasing too few goods and services inflation is the result.” Just like the laws of supply and demand, and marginal utility and theories of price and value, when properly applied the answers are always the same. If one is an expert, they should know and understand this. Maybe the experts have a vested interest in an inflationary redistribution of wealth? Or maybe they are just ignorant or conceited.
I am not a conspiracy theorist, but it all seems to be connected. Covid spending and economic policy and inflation are connected. Fr. Lance and Archbishop O’Conner would I believe agree with my positions.