Guest Post: Snowden, Jesus And Interest Rates

Submitted by Martin Sibileau of Popular Macro,

With the Snowden saga, it seems that suddenly, the idea that there should be a limit to governments has resuscitated; wherever the governments and whatever the limits are. But there is indeed a limit and the global collective mind is trying to figure it out.

I will not discuss either governments or limits, but the history of the idea… This idea and its global context are not new. Jesus was born during the times of Tiberius (14 AD- 37 AD), and although one could say that his predicament was shaped on the Greek notion that there is an ideal and reality, it was nonetheless robust and original. He promoted the concept that there are two kingdoms: A material and a spiritual one.

Perhaps the relevance of this separation, which spread like wildfire, was due to the fact that inhabitants and citizens of the Roman Empire were desperately seeking to escape the tax man. The spiritual kingdom was the refuge.

When the Fariseans mischievously interrogated Jesus on the legitimacy of paying tribute to the Caesar, Jesus asked to be shown a denarius (the coin used to pay said tribute). He then posed the question: “Whose image is this and whose inscription? “Caesar’s”, the Fariseans replied. “Then give Caesar what is Caesar’s and God what is God’s” (Matthew 22:15-22).

Christians therefore spread the notion that somewhere there is a place for one’s intimacy, for one’s soul, which is out of reach for government magistrates. Their success in this endeavour was complete.

What made early Christians successful back then and what makes people even doubt today, at the notion that there should be a limit to government? Like with any other revolutionary thesis, the Christian thesis had a strong element of dogma. Early Christians understood and accepted that they would most likely suffer, but that such suffering in this world was going to be rewarded in the next one. Their mission transcended their earthly lifetime.  In other words, Christians back then dogmatically believed in the existence of a negative discount rate and a very long-term curve. It was negative because future happiness was preferred to present pleasures; and it was a very long-term horizon because said happiness would be obtained in the after life. 

Of course, nobody could manipulate such discount rate like central banks do today. It was going to take fifteen centuries before a banker and pope, Leo X, born Giovanni di Lorenzo de Medici, would  manage to do just that, changing the relative terms between present and future with leverage. Leo X sold “paper” redemptions in the form of so called “indulgences”, which dramatically diminished the cost of earning forgiveness in the other world. He even contracted the Fugger’s bank for the collection of the indulgences. And that marked the end, for Reformation was triggered.

Is it therefore possible that with zero interest rates the success of Snowden’s message be negated? I think so, which leaves the burden of the protest to the younger generations. They will end up paying the cost today’s consumption.

    

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