a Puritan war against natives of Massachusetts

March 26th, 2015

By courtesy of Delancy Place, here is Karen Armstrong’s account of a 17th century war of Massachusetts Puritans against a native American tribe.

The Puritans of Massachusetts had no qualms about killing Indians. They had left England during the Thirty Years’ War, had absorbed the militancy of that fearsome time, and justified their violence by a highly selective reading of the Bible. Ignoring Jesus’s pacifist teachings, they drew on the bellicosity of some of the Hebrew scriptures. ‘God is an excellent Man of War,’ preached Alexander Leighton, and the Bible ‘the best handbook on war.’ Their revered minister John Cotton had instructed them that they could attack the natives ‘without provocation’ — a procedure normally unlawful — because they had not only a natural right to their territory, but ‘a special Commission from God’ to take their land. Already there were signs of the exceptionalist thinking that would in the future often characterize American politics. In 1636 William Bradford described a raid on the Pequot village of Fort Mystic on the Connecticut shore to avenge the murder of an English trader, contemplating the fearsome carnage with lofty complacency:

“Those that escaped the fire were slain with the sword; some hewed to pieces, others run through with rapiers, so as they were quickly dispatched, and very few escaped. It was conceived they thus destroyed about 400 at this time. It was a fearful sight to see them thus frying in the fire, and the streams of blood quenching the same, and horrible was the stink and scent thereof, but the victory seemed a sweet sacrifice, and they gave the prayers thereof to God, who had wrought so wonderfully for them.”

When the Puritans negotiated the Treaty of Hertford (1638) with the few Pequot survivors, they insisted on the destruction of all Pequot villages and sold the women and children into slavery. Should Christians have behaved more compassionately? asked Captain John Underhill, a veteran of the Thirty Years’ War. He answered his rhetorical question with a decided negative: God supported the English, ‘so we had sufficient light for our proceedings.’

Karen Armstrong, Fields of Blood: Religion and the History of Violence (Alfred A. Knopf, 2014), pp. 265-266.

British author Karen Armstrong (born 1944) is a former Roman Catholic nun best known for A History of God (1994), a book that traces the evolution of the idea of God from its ancient roots in the Middle East to modern times. TdJ circulated an earlier excerpt from Fields of Blood here.

At the time English colonists were slaughtering natives in North America, Spanish were doing the same, or worse, to natives of New Spain (Mexico), Central America and South America. Native Americans were also attacking unwelcome European intruders. In addition, various native tribes were warring with one another. All this is true but does not, in my opinion, excuse the behaviour of English settlers in the New World.

Keep in mind, also, that pacifist Quakers in the colony of Pennsylvania managed to live in harmony with native tribes. Violence breeds violence.

Robert Shiller on government bonds

March 26th, 2015

Yale University economist Robert J. Shiller asks whether the low yields (high prices) of long-term government bonds should worry investors. His answer? No, because bond-market crashes in the past have been rare and relatively mild.

The prices of long-term government bonds have been running very high in recent years (that is, their yields have been very low). ….

I have been thinking about the bond market for a long time. In fact, the long-term bond market was the subject of my 1972 PhD dissertation and my first-ever academic publication the following year, co-authored with my academic adviser, Franco Modigliani. Our work with data for the years 1952-1971 showed …. [w]hen either inflation or short-term real interest rates went up, long-term rates rose. When either fell, so did long-term rates. ….

[T]he explanation that we developed so long ago still fits well enough to encourage the belief that we will not see a crash in the bond market unless central banks tighten monetary policy very sharply (by hiking short-term interest rates) or there is a major spike in inflation.

Bond-market crashes have actually been relatively rare and mild. In the US, the biggest one-year drop in the Global Financial Data extension of Moody’s monthly total return index for 30-year corporate bonds (going back to 1857) was 12.5% in the 12 months ending in February 1980. Compare that to the stock market: According to the GFD monthly S&P 500 total return index, an annual loss of 67.8% occurred in the year ending in May 1932, during the Great Depression, and one-year losses have exceeded 12.5% in 23 separate episodes since 1900. ….

It is true that extraordinarily low long-term bond yields put us outside the range of historical experience. But so would a scenario in which a sudden bond-market crash drags down prices of stocks and housing. When an event has never occurred, it cannot be predicted with any semblance of confidence.

Robert J. Shiller, “How Scary Is the Bond Market?“, Project Syndicate, 16 March 2015.

I would add that, while nominal bond yields are low, so is expected inflation. Real yields (nominal yields less inflation) are not so low by historical standards. I warn TdJ readers though, that this is not my field of expertise, and I have not examined the historical data.

Robert Shiller (born 1946) is a 2013 Nobel laureate in economics and co-creator of the Case-Shiller Index of US house prices. He is author of Irrational Exhuberance (Princeton University Press, 3rd edition, 2015) and Finance and the Good Society (Princeton University Press, 2012)

violence and corruption in emerging markets

March 26th, 2015

[Gavin] Serkin confirms what Wolfgang Fengler wrote in beyondbrics a few months ago: The biggest difference between the developed and developing worlds is the likelihood of being confronted with death. Serkin tells us how he saw a man being beheaded in Saudi Arabia “for possessing alcohol”, how he got arrested in Egypt for taking pictures of a man who appeared to lay lifeless in the streets, and how he saw his Nigerian cab driver being beaten until he bled for refusing to pay bribes to a police man.

But for emerging market investors, as long as such aggression remains at a fairly contained level below that of civil war, it forms an acceptable part of the investing reality. State repression, it turns out, is just another risk to factor in when assessing a market. ….

Even the fact that corruption and violence seem to go together in Nigeria doesn’t stop it from being the most promising market. And Sanusi Lamido Sanusi, the suspended Nigerian Central Bank governor who is now Emir of Kano, tells Serkin why: “As a moral issue everybody condemns corruption,” he said. “But corruption hasn’t stopped growth in China or India.”

Peter Vanham, “bb review: is Nigeria really the most attractive frontier market?“, beyondbrics, FT blog, 24 March 2015 (ungated – free registration required).

Mr Vanham is reviewing Gavin Serkin’s Frontier – Exploring the Top Ten Emerging Markets of Tomorrow, (Bloomberg Press/Wiley, 2015).

secularism (laïcité) in France

March 26th, 2015

FT columnist Anne-Sylvaine Chassany warns from Paris that the attack on Charlie Hebdo, counter-intuitively, has weakened support for laïcité in the French republic.

The attack on satirical magazine Charlie Hebdo has unleashed an ideological war over laïcité — the strict version of secularism that underpins laws banning headscarves at school and face-covering veils in public areas. ….

The crime of blasphemy was abolished not long after Chevalier de La Barre was tortured, beheaded and burnt in 1766 for not removing his hat in front of a Catholic procession. Today’s secular republic has a duty to protect all citizens, including those who do not believe in God. Prime Minister Manuel Valls was quick to announce a plan to bolster the teaching of those principles at school.

But the debate that ensued has highlighted deep divisions, pitting intellectuals who call for the return to stricter observance of secularism against those who argue that this version of laïcité is racism in disguise, directed at a Muslim population that already faces discrimination.

Anne-Sylvaine Chassany, “Secularism splits opinion in France“, Financial Times, 25 March 2015 (metered paywall).

China’s Asian Infrastructure Investment Bank

March 24th, 2015

FT columnist Martin Wolf urges the United States to join the Chinese-led Asian Infrastructure Investment Bank (AIIB).

[T]he fact that China wishes to invest a part of its $3.8tn in foreign exchange reserves in the AIIB is good news. That it wishes to do so via multilateral institutions, in which its voice, however loud, will be one among many, is still better. The bank would have a global staff, which should make it less politicised than if China provided the money on its own.

For all these [and other] reasons, the US should also join. ….

Jack Lew, US Treasury secretary, has voiced American concerns that the Asian bank would not live up to the “highest global standards” for governance or lending.

As a former staff member of the World Bank, I must smile. ….

It would be good if China’s lender were as pure as the driven snow. But this is a fallen world. At the least, it would be better with a broad membership than without it.

Martin Wolf, “A rebuff of China’s Asian Infrastructure Investment Bank is folly“, Financial Times, 25 March 2015 (metered paywall).

China and other Asian countries, by design, will dominate the AIIB. Participation of non-Asian members will be limited to 25% of shares. The United Kingdom, France, Germany, Italy, Switzerland and Luxembourg have already applied for membership. Australia, Japan and South Korea have not decided whether to join or not.

fiscal austerity in Britain and Greece

March 23rd, 2015

The UK Prime Minister claims that because the hard-working British embraced austerity, they are now better off than the lazy Greeks. This blatant attempt to rewrite history angers Oxford economist Simon Wren-Lewis.

In his novel 1984 George Orwell wrote: “Who controls the past controls the future: who controls the present controls the past.” We are not quite in this Orwellian world yet, which means attempts to rewrite history can at least be contested. A few days ago the UK Prime Minister in Brussels said this:

“When I first came here as prime minister five years ago, Britain and Greece were virtually in the same boat, we had similar sized budget deficits. The reason we are in a different position is we took long-term difficult decisions and we had all of the hard work and effort of the British people. I am determined we do not go backwards.”

In other words if only those lazy Greeks had taken the difficult decisions that the UK took, they too could be like the UK today.

This is such as travesty of the truth, as well as a huge insult to the Greek people, that it is difficult to know where to begin. ….

The real travesty … is in the implication that somehow Greece failed to take the ‘difficult decisions’ that the UK took. ‘Difficult decisions’ is code for austerity. A good measure of austerity is the underlying primary balance. According to the OECD, the UK underlying primary balance was -7% in 2009, and it fell to -3.5% in 2014: a fiscal contraction worth 3.5% of GDP. In Greece it was -12.1% in 2009, and was turned into a surplus of 7.6% by 2014: a fiscal contraction worth 19.7% of GDP! So Greece had far more austerity, which is of course why Greek GDP has fallen by 25% over the same period. A far more accurate statement would be that the UK started taking the same ‘difficult decisions’ as Greece took, albeit in a much milder form, but realised the folly of this and stopped. Greece did not get that choice.

Simon Wren-Lewis, “Controlling the past“, Mainly Macro, 22 March 2015.

HT Mark Thoma.

inflation and deflation

March 23rd, 2015


That’s an American propaganda poster from WWII advertising the merits of the Office of Price Administration, which was in charge of setting nominal costs [sic], as well as rationing to prevent shortages. ….

The argument in the poster is simple and elegant: people spend less when things get more expensive, which encourages businesses to run down their inventories and cut back on capital expenditures, and, eventually, causes them to start firing their workers. The implied corollary is that falling prices ought to make people spend more, which would be good for business and lead to vigorous hiring.

That is the exact opposite of today’s consensus. ….

Of course, it’s entirely possible that the consensus among today’s academics and policymakers is wrong, while the WWII propaganda may be closer to the truth. ….

Matthew C Klein, “Economists agree: deflation is either good, or bad, or irrelevant“, FT Alphaville, Financial Times, 23 March 2015 (unrestricted access; free registration required).

Recent research, Klein explains, suggests that falling asset prices – especially housing prices – damage the economy, whereas falling prices of goods and services have little effect – positive or negative – on national output and employment.

Alphaville is an FT blog. Free registration is required, but blogs do not count toward download limits imposed by FT on non-subscribers. Here is an alternative link to FT Alphaville.

modern dictators

March 22nd, 2015

Economist Sergei Guriev and his co-author, political scientist Daniel Treisman, examine new forms of dictatorship that are based on manipulation of information rather than mass violence. The full Working Paper “How Modern Dictators Survive: Cooptation, Censorship, Propaganda, and Repression” (March 2015) can be downloaded here. A summary can be viewed at the link below. Both versions are ungated, so can be accessed without registration or payment of fees.

Dictatorships are not what they used to be. The totalitarian tyrants of the past – such as Hitler, Stalin, Mao, or Pol Pot – employed terror, indoctrination, and isolation to monopolise power. Although less ideological, many 20th-century military regimes also relied on mass violence to intimidate dissidents. ….

However, in recent decades new types of authoritarianism have emerged that seem better adapted to a world of open borders, global media, and knowledge-based economies. From the Peru of Alberto Fujimori to the Hungary of Viktor Orban, illiberal regimes have managed to consolidate power without fencing off their countries or resorting to mass murder. Some bloody military regimes and totalitarian states remain – such as Syria and North Korea – but the balance has shifted.

The new autocracies often simulate democracy, holding elections that the incumbents almost always win, bribing and censoring the private press rather than abolishing it, and replacing comprehensive political ideologies with an amorphous resentment of the West. Their leaders often enjoy genuine popularity – at least after eliminating any plausible rivals. State propaganda aims not to ‘engineer human souls’ but to boost the dictator’s ratings. Political opponents are harassed and defamed, charged with fabricated crimes, and encouraged to emigrate, rather than being murdered en masse.

Sergei Guriev and Daniel Treisman, “The new authoritarianism“, VoxEU, 21 March 2015.

Sergei Guriev is Professor of Economics at Sciences Po-Paris. Daniel Treisman is Professor of Political Science at UCLA.

freedom of choice vs secure pensions

March 21st, 2015

Senior Investment Columnist John Authers writes that governments often allow too much freedom of choice for old age pensioners and workers saving for retirement. This surprising admission comes from a journalist who has 25 years of experience reporting for the Financial Times.

My own instinct after decades covering the issue … is that it is best to look after people. I say it with some discomfort, but my experience tells me that freedom of choice is less important.

Back in the early 1990s I had to cover the fallout from the disastrous move to “personal pensions” in the UK, which saw unscrupulous salesmen persuade people like firefighters and miners to contract out of plans that guaranteed them a solid income at a young age, in favour of unit-linked pensions at the mercy of the stock market.

In the US in the early 1990s I watched as pension providers offered dozens of different options within their “401(k)” pension plans, in what were known as fund supermarkets. Savers could switch at will. The result: many chased hot tech stocks, bought at the top of the bubble and suffered grievous losses.

Readers’ correspondence over the years is also revealing. Even highly intelligent, wealthy professionals and executives can be clueless about investment.  [Emphasis added.]

John Authers, “Freedom of choice is less important than a pension free of risk“, Financial Times, 21 March 2015 (metered paywall).

women in the world of finance

March 18th, 2015

British economist John Kay thinks that banks would improve if more women were in charge.

The most powerful posts in the financial world are held by women. Janet Yellen chairs the US Federal Reserve, and Christine Lagarde is managing director of the International Monetary Fund. Mary Jo White heads the US Securities and Exchange Commission, and was preceded in that job by Elisse Walter and Mary Schapiro. America’s new Consumer Financial Protection Bureau is directed by a man — but the reason is that the industry feared Senator Elizabeth Warren would fill the role too effectively.

All of these posts are public appointments. …. Senior jobs in private-sector finance are taken almost exclusively by men. ….

Simple justice, and the folly of excluding any qualified person, argues against discrimination on grounds of gender (or anything else). But perhaps men and women bring rather different qualities to finance. Cambridge neuroscientist John Coates (himself a former Wall Street trader) emphasises the link between testosterone and risk taking. The surges of testosterone and cortisol he observes as traders are gripped by excitement and depressed by loss are not observed in the same way in women.

This is perhaps a hormonal explanation of why men are drawn to the risk-taking functions in finance while women are engaged in regulating and organising. We might have better banks if there was rather less male risk taking and more female regulating and organising. Time, perhaps, for more women to be employed in executive roles in financial institutions.

John Kay, “Banks might improve with more women in charge”, Financial Times, 18 March 2015 (ungated link).

Published by FT with a different title.