What’s Wrong with the World

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What’s Wrong with the World is dedicated to the defense of what remains of Christendom, the civilization made by the men of the Cross of Christ. Athwart two hostile Powers we stand: the Jihad and Liberalism...read more

Escher on Credit Default Swaps


I've suggested in a number of places that it is possible - I am not committed to it being definitely true - that much of the circulation of abstracted risk which led up to the current crisis took the form of something like a horizontal Ponzi scheme. It is horizontal because it involves circulation of abstracted risk among peers, and it is like a Ponzi scheme because it involves selling something which doesn't exist. We know that Aquinas thought charging interest on a loan was usury, and therefore morally wrong, precisely because he believed that it involved selling what does not exist.

All that discursive abstractness isn't everyone's cup of tea. But if you can just imagine the Escher waterfall lined with investment bankers, lenders, homeowners, and who knows who else all dipping in their goblets for a nice deep drink, I think you'll get the basic picture.

Comments (2)

Not sure about the physics!
But I do like the imagery - very "Tower of Babel"ish (reminds me of what Rabbi Daniel Lapin said towards the close of his lecture here:
http://mises.org/media.aspx?action=author&ID=1192 )

The problem is one of property rights, and the usurpation of the valuation thereof (the Fed gets to decide what YOUR dollars are worth, and soon the few we have left will be worth a lot less because of the SIN of monetary policy masquerading as inflation). Those who want to deny gravity (a debt doesn't get lighter wherever you move it on the balance sheet) by interfering in the money supply are "brickmakers" (right or left, conservative or liberal) who reduce man's uniqueness in the image of God's free will to mere "consumption units" of mercantilism or marzism. Both evils are predicated on the labor theory of value... denying man's free will.

Listen in to Huelsman on the ethics of money production here:

Not sure about the physics!

If you assume a water source at the top of the waterfall, it becomes apparent what the deceit of the columns achieve. In that case you would have two downstream water flows. The columns confuse this to make it appear instead as if the zigzag was more distant and perfectly level in its path.

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