#BTColumn – Cause and effect or cause and deflect?

Disclaimer: The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.

“You see, there is only one constant. One universal. It is the only real truth. Causality. Action, reaction. Cause and effect.” — (The Merovingian, The Matrix Reloaded)

by Adrian Sobers

The Matrix: Resurrections was terrible; script should have been left for dead. It certainly didn’t match Reloaded for quote quality. Cause and effect; so powerful, little wonder it is the source of much confusion (and abuse).

A recent case in point are politicians who wash their hands like Pontius Pilate and pin (high) prices on the pandemic, Putin, and petrol.

Jesus’ response to Pilate, “My kingdom is not from this world” (John 18:36), is a potential response to current events and politicians’ professed innocence (but that is another story).

For now I offer a gentle reminder to be wary of when cause and effect gets twisted into cause and deflect.

Jews have won several Nobel prizes in physics because they are obsessed with cause and effect. One does not have to be a physicist to see why.

Take the accident chain from Jewish author David Mamet: “The mother was about to drive her small child to school. She started buckling her into the car seat when she heard the teakettle whistling in the house. She went back into the house to turn off the teakettle. She’d neglected it because, when she was making the tea, the phone rang.”

“When she got off the phone, she was late, and so she rushed her child into the car, forgot she’d left the kettle on, and returned inside to turn it off. She was driving her toddler to school, the kid started to climb into the front seat because the mother had forgotten to buckle her in. The mother turned around to secure the kid and ran into a tree. Where did the accident chain begin?” Kettle? Caller? Eden?

(Minor digression, the accident chain that started with disobedience in the Garden of Eden was fixed with obedience in the Garden of Gethsemane. Which garden do you tend to most?)

There is a similar accident chain, if you will, in the global economy that can be traced to the monetary policy response to the last crisis. The distortions from that response will be precursor to the next.

This fact has been lost along the causal chain as false narratives from the powers that be twist cause and effect into cause and deflect. Josh Ascough clarifies this confusion in Inflation Is Here, But There’s Also A Shortage Game In Town.

He writes: “The general increase in the price level definition, defines inflation by its symptom; or effect, rather than defining it by the cause.” But surely our monetary masters (especially those of impeccable academic pedigree) know better. They do. In an interview from 2010 discussing his book Basic Economics, Thomas Sowell made the point that Bernanke’s quantitative easing (monetary inflation) would lead to inflation of the consumer price variety.

Sowell made an equally important point when asked if Bernake doesn’t know better. There is a big difference, in the form of incentives and constraints, between Ben Bernanke the Princeton professor and Ben Bernanke the Chairman of the Federal Reserve.

If consumers still take central bank “indepencence” seriously in 2022, to borrow Paul’s phrase from the famous resurrections chapter, “we are of all people most to be pitied” (1 Corinthians 15:19).

Ascough cites Nicolas Cachanosky, Associate Professor of Economics, “This confusion can eventually lead to errors in monetary policy. More accurate would be to define inflation by its cause rather than its effect.”

This is a hint as to why twisting cause and effect into cause and deflect has consequences for consumers. Fiscal and monetary masters play fast and loose with the politically expedient definition of inflation (and by extension the strings of the public purse).

By focusing on the effect, it portrays them as hapless onlookers at the mercy of nefarious factors (Greed Inc.) and nefarious actors (Putin).

In the real world, new money always enters the economy through specific channels. More often than not through the credit channel that is abused by goverments (to finance deficits while reducing our purchasing power).

Now is a good time to remind readers of the other distortions that the collective squeezing of the throats of the working poor (quantitative “easing” [QE]) has created since the previous crisis.

QE: increased the much talked about economic inequalities; led to malinvestment; is the reason why the Fed’s lone dissenter (Thomas Hoenig) dissented. Despite what central banks say it is hard to stop (QE is a monetary drug that requires larger and larger doses to achieve the effects of the first/previous high (or is it “stimulus”?). Finally, QE, like this article, cannot go on forever.

The withdrawal, as is the case with other drugs, will be painful (especially for the working poor and middle classes). Resurrections didn’t live up to my expectations but there were a few good quotes. Here are two. The first from a scene worthy of sleep, Niobe (played by you know who) tells Neo: “It’s so easy to forget how much noise The Matrix pumps into your head until you unplug.” The other from the final scene, hopefully the last of the series.

“Just remind people what a free mind can do”. Resurrections is done (hopefully the series is properly buried); but the plot in our Monetary Matrix is set to thicken even more as the effects of QE and “transitory” inflation becomes permanent (and higher).

Do not be duped when they turn cause and effect into cause and deflect. Better yet, do not be discouraged for there is another resurrection that puts all of this in its proper perspective. Politicians pulling a Pilate is as old as it gets.

The plebs (people) feel the pinch more because Pilate (politicians) done benefit from the new money.

Nicolas Cachanosky (Monetary Equilibrium and Nominal Income Targeting) explains: “This sequence continues until the new money supply reaches the last of all economic agents. Whoever is last in line is in the opposite situation to that of the government. The last recipient of the new money supply can spend his share of new money after prices have increased.”

What happens in Washington doesn’t stay in Washington, or Hollywood for that matter. The thing about the slap for me was the part when governments who showed zero fiscal restraint for years now urge unions to show said restraint they disregarded.

A slap heard around the world indeed. Cause and effect meet cause and deflect. Get up good hear, even if by foot.

Adrian Sobers is a prolific letter writer and commentator on social issues.