Borio, Erdem, Filardo and Hofmann on the Costs of Deflation

Claudio Borio, Magdalena Erdem, Andrew Filardo and Boris Hofmann have a nice paper, "The costs of deflations: a historical perspective"

Deflation remains the looming zombie apocalypse of international monetary commentary.  Before we argue too much about cause and effect, it's nice to get the correlations straight. And the correlation between deflation and poor growth is much weaker than most people think:

The authors:

...Price deflations have coincided with both positive and clear negative growth rates (Graph 2). And a comparison of all inflation and deflation years suggests that, on balance, inflation years have seen only somewhat higher growth (Table 2). The difference in average growth rates is highest and statistically significant only during the interwar years, particularly in the period 1929-38 that includes the Great Depression (some 4 percentage points), and much smaller at other times.... Indeed, in the postwar era, in which transitory deflations dominate, the growth rate has actually been higher during deflation years, at 3.2% versus 2.7%.

Really, the concern at the moment is not a sharp large deflation, such as occurred in the 1930s and is felt by many to epitomize the demand or debt deflation story. Rather, the concern is over a moderate but persistent deflation, such as Japan has experienced. (One in which each individual is likely to never experience a wage decline, more here.)

To summarize the historical record surrounding persistent deflations, the authors organize the data around the peak in CPI before a deflation episode, and show average CPI and GDP around that peak:

The authors:

 While mean growth rates are mostly lower in the five years post-peak, the difference is large, 3.6 percentage points, and clearly statistically significant (i.e.cannot be attributed purely to chance) only in the interwar years, when the Great Depression took place...The difference during the classical gold standard period is 0.6 percentage points but it is not statistically significant. In fact, in the postwar era, average growth was even 0.3 percentage points higher in the five years after a price peak, although the difference is not statistically significant. Moreover, only in the interwar years did output actually fall post-peak.

In a multiple regression sense, does variation in output correlate better with falls in the overall price level, or with falls in house prices or equity prices that accompany deflation?

The graph presents regression coefficients. Read it as the partial correlation, if (blue) property prices go down but consumer and equity prices do not, how much output gain or loss does that event signal?House price or stock price "deflation," not overall price deflation matters. Of course, stock prices and property prices are strong symptoms of economic trouble, so don't be quick to read causality into correlation and ask the Fed to punch up stock and house prices.

The introduction offers a corrective that every financial journalist should take with morning cappuccino. Any price change can come from supply or demand, and is as likely a symptom as a cause:

Concerns about deflation - falling prices of goods and services - have loomed large in recent policy discussions. The debate is shaped by the deep-seated view that deflation, regardless of context, is an economic pathology that stands in the way of any sustainable and strong expansion. 

The almost reflexive association of deflation with economic weakness is easily explained. It is rooted in the view that deflation signals an aggregate demand shortfall, which simultaneously pushes down prices, incomes and output. But deflation may also result from increased supply. Examples include improvements in productivity, greater competition in the goods market, or cheaper and more abundant inputs, such as labour or intermediate goods like oil. Supply-driven deflations depress prices while raising incomes and output.

Conversely, note the simultaneous worry in the US about "wage inflation" and that wages have stagnated. Wage inflation with stable prices is a good thing!

A minor quibble: Asset price "inflation" and "deflation."

Moreover, while the impact of goods and services price deflations is ambiguous a priori, that of asset price deflations is not. As is widely recognised, asset price deflations erode wealth and collateral values and so undercut demand and output.

First, "asset price inflation" sounds sexy, but our first duty as economists should be to help readers understand that relative price changes are not inflation. All relative price changes, including asset prices, are relative price changes, not inflations and deflations. Health cost "inflation," wine "inflation" and chewing gum "inflation" are not inflation. Don't encourage misuse of the word, misunderstanding of relative prices vs. price level, and consequent policy mistakes like using anti-inflation tools to manipulate relative prices.

Second, asset price "deflations" are in large part a transfer of wealth, not a loss of wealth. House prices go down. The houses are still there. This is a qualitatively different fact than if houses wash in to the ocean. If you are young, live in an apartment, and have a job, a house price decline is a great thing. If you plan to buy the same size house as you want to sell, a house price decline is a wash. If you are young, a bond price decline is a great thing. You get the same future payments at a lower price. To some extent the same is true of many stock price movements.

Levine on the Keynesian Illusion

David Levine has a very nice post on the Keynesian Illusion.

David Levine's analogy for Stimulus

Some big themes: Standard Keynesian economics violates budget constraints. He explains it well, but it is sure to occasion the usual venom from with the "Say's law fallacy" brigade that has a lot of trouble understanding the difference between budget constraints and equilibrium conditions.

David does a lot without equations. That broadens the appeal, but equations can be useful. For example equations clarify that crucial difference between budget constraints and equilibrium conditions. Equations can put to rest silly controversies. We might not still be writing papers, books, and blog posts about what "Keynes really meant," 80 years after the fact, or using "Say's law" as rotten tomatoes, if Keynes had written some equations.  Cynically, maybe the lesson is that lack of equations -- or even an equations appendix or citation -- keeps debate going and your name in the papers.

I also fear that his lovely anecdote about people each of whom wants what others produce will lead readers a bit astray. Keynesian economics is about lack of "demand," sticky prices not absent prices. It's not about absence of money, double coincidence of wants, and so forth.

David goes beyond the usual IS/LM formalism, to explain some of the "coordination failure" interpretations of Keynes. He also references Axel  Leijonhufvud's "great and famous work" describing a mismatch between saving, a desire for generic future consumption, and the demand for specific goods that firms need to invest.

He has a nice personal story of his Keynesian upbringing, which reminds me of my own. And

Knowledge of Keynesianism and Keynesian models is even deeper for the great Nobel Prize winners who pioneered modern macroeconomics - a macroeconomics with people who buy and sell things, who save and invest - Robert Lucas, Edward Prescott, and Thomas Sargent among others. They also grew up with Keynesian theory as orthodoxy - more so than I. And we rejected Keynesianism because it doesn't work not because of some aesthetic sense that the theory is insufficiently elegant.

The constant refrain that critics "don't know" Keynesian economics is an ingorant (I mean that not an insult, but in its literal meaning, ignoring the facts) calumny. Sargent's first book "Macroeconomic Theory" is a great example of a modern economists wrestling hard with Keynes.

The last paragraph is a gem:

Keynes own work consists of amusing anecdotes and misleading stories. Keynesianism as argued by people such as Paul Krugman and Brad DeLong is a theory without people either rational or irrational, a theory of graphs pulled largely out of thin air, a series of predictions that are hopelessly wrong - together with the vain hope that they can be put right if only the curves in the graphs can be twisted in the right direction. As it happens we have developed much better theories - theories that do explain many facts, theories that provide sensible policy guidance, theories that work reasonably well, theories that are not an illusion. The current versions of these theories are very unlike caricature theories of hopelessly rational people who are all identical. Current theories are not perfect - but unlike the Keynesian theory of perpetual motion machines they explain a great deal and have a great deal of truth to them. A working macroeconomist reading Krugman and DeLong feels as a doctor would if the Surgeon General got up and said that the way to cure cancer was to draw blood using leeches. 

Arezki, Ramey, and Sheng on news shocks

I attended the NBER EFG (economic fluctuations and growth) meeting a few weeks ago, and saw a very nice paper by Rabah Arezki, Valerie Ramey, and Liugang Sheng, "News Shocks in Open Economies: Evidence from Giant Oil Discoveries" (There were a lot of nice papers, but this one is more bloggable.)

They look at what happens to economies that discover they have a lot of oil.

An oil discovery is a well identified "news shock."

Standard productivity shocks are a bit nebulous, and alter two things at once: they give greater productivity and hence incentive to work today and also news about more income in the future.

An oil discovery is well publicized. It incentivizes a small investment in oil drilling, but mostly is pure news of an income flow in the future. It does not affect overall labor productivity or other changes to preferences or technology.

Rabah,Valerie, and Liugang then construct a straightforward macro model of such an event.

Utility comes from consumption and work. The production function has an oil sector and non-oil sector. There are adjustment costs to investment and to reallocation of capital between oil and non-oil sectors. The consumption good is tradeable, and the economy sells oil internationally to get it as well as to produce it.

They compute impulse-response functions to big oil discoveries, and compare the model dynamics to the response functions. It's a nice fit and an intuitive story. After the shock hits, during the period of investment, the current account declines -- borrow money, buy oil investment goods and also borrow to finance higher consumption now. GDP is basically flat, as oil investment is a small fraction of the economy. Savings also declines. Consumption goes up right away, and then stays up in permanent income fashion. (You have to look closely at the green line, because the vertical scale is too small.) Investment rises, to build those oil wells.

Employment declines, as there is a wealth effect encouraging leisure but no higher productivity of labor to encourage work. This is why productivity shocks, emphasizing a temporarily higher marginal product of labor, are important in real business cycle models.

Once oil comes on line, the current account changes sign, as the economy exports oil and pays back debt. GDP, including the oil, rises. Consumption stays were it was, by permanent income logic. And investment returns to zero.

Valerie, presenting the paper, was a bit discouraged. This "news shock" doesn't generate a pattern that looks like standard recessions, because GDP and employment go in the opposite direction.

I am much more encouraged. Here are macroeconomies behaving exactly as they should, in response to a shock where for once we really know what the shock is. And in response to a shock with a nice dynamic pattern, which we also really understand.

My comment was something to the effect of "this paper is much more important than you think. You match the dynamic response of economies to this large and very well identified shock with a standard, transparent and intuitive neoclassical model. Here's a list of some of the ingredients you didn't need: Sticky prices, sticky wages, money, monetary policy, (i.e. interest rates that respond via a policy rule to output and inflation or zero bounds that stop them from doing so), home bias, segmented financial markets, credit constraints, liquidity constraints, hand-to-mouth consumers, financial intermediation, liquidity spirals, fire sales, leverage, sudden stops, hot money, collateral constraints, incomplete markets, idiosyncratic risks, strange preferences including habits, nonexpected utility, ambiguity aversion, and so forth, behavioral biases, nonexpected utility, or rare disasters. If those ingredients are really there, they ought to matter for explaining the response to your shocks too. After all, there is only one economic structure, which is hit by many shocks. So your paper calls into question just how many of those ingredients are really there at all."

Thomas Philippon, whose previous paper had a pretty masterful collection of a lot of those ingredients, quickly pointed out my overstatement. One needs not need every ingredient to understand every shock. Constraint variables are inequalities. A positive news shock may not cause credit constraints etc. to bind, while a negative shock may reveal them.

Good point. And really, the proof is in the pudding. If those ingredients are not necessary, then I should produce a model without them that produces events like 2008. But we've been debating the ingredients and shock necessary to explain 1932 for 82 years, so that approach, though correct, might take a while.

In the meantime, we can still cheer successful simple models and well identified shocks on the few occasions that they appear and fit data so nicely. Note to graduate students, this paper is a really nice example to follow for its integration of clear theory and excellent empirical work.

Duffie and Stein on Libor

Darrell Duffie and Jeremy Stein have a nice paper, "Reforming LIBOR and Other Financial-Market Benchmarks" I learned some important lessons from the paper and discussion.

Libor is the "London interbank offering rate." If you have a floating rate mortgage, it is likely based on Libor plus a percentage.

In its current form, LIBOR is determined each day (or “fixed”), not based on actual transactions between banks but rather on a poll of a group of panel banks, each of which is asked to make a judgmental estimate of the rate at which it could borrow.

As soon as money changes hands, there is an incentive to, er, shade reports in the direction that benefits the trading desk.

Revelations of widespread manipulation of LIBOR and other benchmarks, including those for foreign exchange rates and some commodity prices, have threatened the integrity of these benchmarks.. 

or report a rate that makes your bank look better (lower rate) than it really is:

During the financial crisis of 2007-2009...Some banks did not wish to appear to be less creditworthy than others... The rates reported by each of the panel of banks polled to produce LIBOR were quickly published, alongside the name of the reporting bank, for all to see. As a result, there arose at some banks a practice of... understating true borrowing costs when submitting to a LIBOR poll. 

An important point as we get in to security design mode:

many of the documented cases of LIBOR manipulation...involved only very small rate distortions, with the guilty parties often misstating their borrowing costs by just one or two basis points. 

OK, what to do? Rather obviously, publishing the individual bank quotes and not just the average is not a good idea, and I gather will end.

In Darrell and Jeremy's view, we really need two indices for the two separate purposes of Libor.

Libor is used as an index for banks who issue adjustable rate mortgages. For that use, an index of bank borrowing costs is appropriate. But bank borrowing from each other has dried up considerably. Interbank borrowing is really no longer a marginal source of funds. And the market is so small these days that a transactions-based index would be unreliable -- and also open to manipulation.

They suggest an index based on a larger set of securities more representative of actual borrowing costs,

LIBOR ... fixing must be broadened so as to be based on unsecured bank borrowings from all wholesale sources—not just other banks, but non-bank investors in bank commercial paper and large-denomination CDs.

There is an important (very stylized, and likely inaccurate) story here. Why do we have indices anyway?  In the old days, you went to the bank to borrow money. It was like going to a car dealer in the 1950s. Each bank might quote you a price, but you don't really have a good idea if you're getting a good deal without a lot of shopping. In this environment, you can't really have variable rate loans where the bank just announces a new rate.

A better system: The bank quotes you "prime" rate plus some percentage points. But what's "prime?" Well, at least you know it's the basis for the bank's lending to all its other customers. If they say "prime went up you have to pay a higher rate on the loan" you know they're doing the same to all their customers, not just you. That makes variable rate loans more possible and reduces haggling and shopping.

Better yet: The dealer shows you his invoice (the real one, not the phoney one at car dealers!) That's the Libor idea. It's an index of the rates banks pay for funding at the margin. So if Libor goes up, it's much more transparent that the bank is just passing costs on to you.

Don't banks like the obscure system to charge higher profits? Well, not necessarily, which is another important lesson. Haggling over each item and dealing with customers who feel like they're in the 1950s Chevy showroom from "Tin Men" turns out to be less profitable than running a large volume transparent Car-Max operation.

So far so good, but now a second lesson comes to the fore. Libor, as constructed, was a lot better than "prime" announced by each bank. But once markets and contracts settle on Libor, it's awfully hard to move to something better yet.

This gives a role for policy, as Jeremy and Darrell point out, in setting standards, or moving markets to another focal point. We can all use feet or meters, miles or kilometers, dollars or euros.

Being a popular interest rate index, Libor was the natural choice for interest rate derivatives. For example, a swap is a contract in which I promise to pay you $x dollars per year, and you pay me a floating rate. What's a good floating rate... Well, the banks are all using Libor, let's use that!

So now we are in this puzzling point that a huge amount of money changes hands based on a tiny market.

...Unfortunately, there are surprisingly few actual loan transactions between banks that could be used to fix most of the IBORs...

At the commonly-used three-month tenor, transactions in the underlying market for unsecured bank funding are roughly on the order of a billion dollars on a typical day, while the volume of gross notional outstanding in the swap market that references LIBOR at this tenor is on the order of $100 trillion, or 100,000 times larger. [See Table 1 and Table 2.]

And Libor really isn't the right index here. Most derivatives traders are interested in hedging the overall level of rates. They don't mostly care about the bank credit spreads. If treasury rates go down but bank rates go up, because people get scared about banks as in 2008, these traders want an index that goes down.

...IBORs have been heavily used in contracts whose purpose is to transfer risk related to general market-wide interest rates. These “rates trading” applications are not specifically tied to the borrowing costs of banks. It is a self-reinforcing choice by market participants, however, to trade in more liquid high-volume markets, all else equal. In part through an accident of history, this desire to belong to the high liquidity club has led to a massive agglomeration of trade based on the IBOR benchmarks.

So, Darrell and Jeremy propose a second, transactions-based index to be used for derivatives contracts. They have a brilliant idea. Currently, most derivatives are based on three month rates. So, in January 1, we look at the rate for borrowing and lending from January 1 to March 31, and settle derivatives. But there is very little volume in three month rates. Instead, watch the general collateral overnight rate, which has tremendous volume, and pay off contracts on March 31, based on the average of the one-day rates in the quarter.

They have a lot of useful thought on implementation and transition, of course.

A Sitting with Slate-Writing Medium Mr. P. O. Keeler 1911

 

Glimpses of the Next State (1911) is W. Usborne Moore's autobiographical account of his investigation into 'spiritistic phenomena.'  He dedicated the book to his "spirit companion and guide" Iola.   At the conclusion of Moore's third trip to America, a sitting with slate-writing medium Mr. P. O. Keeler resulted with Moore considering the nature of the transcendental communication finding diverse modes of manifestation in the presence of different mediums.  The following passage is the concluding portion of the ninth chapter of Glimpses of the Next State.

 

Pierre Louie Ormond Augustus Keeler (1855-1948)

 

The last experience I had before leaving America was with Mr. P. O. Keeler, the well-known medium for slate-writing, who lives in 1362 Parkwood Street, Washington, D.C.  He was, at that time, paying a visit to Brooklyn.  The interview was on Friday, February 24, 1911, 3 to 4 p.m.  The window near which the table was placed has a western aspect; the sun streamed in and flooded the table and room with light.

We sat opposite to one another at a small table two feet broad.  After cleaning the slates together, Keeler asked me to take a pad off the table, tear off slips, and write the names of spirits on five or six of the papers; each little slip was to be folded up in any way I thought best, and the names were to be written as I would address a person in earth life.  I rose from the table, turned my back to the medium, and wrote seven names—five of women, two of men; two of the pellets contained the name of one spirit, my guide, one giving her earth name and the other her spirit name, "Iola"; only six individuals, therefore, were indicated.  These pellets I laid in a heap on the centre of the table.  Keeler said: "Nothing will happen for a quarter of an hour or so, as the spirits have to be summoned."  After an interval of ten minutes he touched the outside of each pellet with the tip of his finger, but did not handle them nor draw them closer to his side of the table.  Five minutes or more passed, and he seemed worried that nothing happened, and became restless and jerky.  It must have been twenty-five minutes from the time I had put the pellets on the table when he was impressed to say: "Add the names of one or two gentlemen; they say that, among these names, there is more than the right proportion of ladies."

Following my invariable custom of not purposely deceiving a medium, I had already told Keeler that two of the pellets contained names of the same individual, my guide; I added that, as I had talked with her in the morning, I had reason to believe that she was present (which I have since heard she was).

In my lap, as I sat facing the medium, out of his view, I wrote the names of two men, and added these pellets to the others on the table; before doing this I had drawn the heap of pellets closer to me than they were to the medium.  Keeler did not have his hands on the table while I wrote the two extra names.

Soon after this the medium warned me that, when the slate writing began, it would go on continuously and rapidly.  He touched the new pellets with the tip of his finger, and after a few minutes was impressed to write a name on a spare slate.  He said, "What is this?"  I looked, and saw the name of my brother, Alldin; then, one after another, he wrote six names on this slate.  Each name he wrote I had to search for among the pellets, which I did in my lap, where it was impossible for him to see the writing.  When made up again, each pellet that had been opened and re-closed was put upon a pair of slates, kept ready for the purpose between us (with a bit of slate pencil inside), and these were not fingered in any way by the medium.

In time six pellets, containing the names of six individuals, were collected on top of the pair of slates.  We had sat for about forty minutes, when Keeler suddenly lifted the pair of slates with one hand at each of the two corners nearest to him, thumbs on top and fingers below, and gave me the other end to hold, which I did in like manner, pinching the two slates together.  The writing began immediately, and could be heard plainly; there was no downward pressure while it was going on.

As soon as he was impressed that one slate was full, the medium put it down on his right without looking at it, picked up another, placed on it a bit of slate pencil, covered it with the original top slate upon which the pellets were lying, and gave me the other end to hold; the writing again was heard proceeding very rapidly.  Precisely the same happened to this slate; a third was taken up, and so on, until five slates were covered with writing by eight individuals.  The medium was then impressed to write the word "All" on a spare slate.  He told me this meant that the séance was over.

The following points must be noted:—

One spirit manifested who was not named at all.  It was the son of the gentleman who had made the appointment for me the previous afternoon.

One spirit manifested whose name was in a pellet on the table, but not on the slates.

One slate, full of close script, had two letters on it at right angles to one another in different handwritings.  When one of these was finished, Keeler was impressed to move the slate to a rectangular position; we seized the slates at opposite corners, my left hand being where his right had been, and so on.  The letters on the slates are very close together.

One slate had a letter from my sister Catherine; in the upper left-hand corner there was a carefully-finished picture of a man's head and shoulders, and underneath it the drawing of a forget-me-not.  I do not recognize the man's face.

One letter had two signatures—viz., the earth name and spirit name of my guide.  In a postscript was an allusion to our meeting in the morning.

The names given in the signatures were all correct, except one.  This I had written as Miss Bowman; the signature was Mary Bowman.  The Christian name of the lady was not Mary.  This note was on the same slate as that which contained a letter from my brother-in-law, who lived in the same house with her for some years.

All the letters were very commonplace.  I attach them below.  There are no proofs of identity in any of them.  I am certain that my guide did not write the letter over her signature.  The work was unquestionably that of invisible and intelligent beings who heard the conversation, read the names and short sentences inside the pellets, and wrote the replies.

We held the slates about nine inches above the table; Keeler's hands never moved when holding them.  Throughout the whole hour the psychic only rose from his chair once—to pull the blind down a foot, to shade our eyes from the glare of the western sun.

In all, the slate writing contained 474 words written, and two pictures drawn, in a period not exceeding ten minutes, including the four delays necessary for taking up a new slate.

I have seen evidence of identity obtained by others in slate-writing through the mediumship of Mr. P. O. Keeler; but the only signs I got were the letters of Henry Usborne and Miss Bowman on the same slate.  That is not enough to establish the point, for the lady's Christian name is incorrect, and the association of the names of the two individuals may have been accidental.

 

THE CONTENTS OF THE SLATES.

(1)

Good afternoon, dear Admiral, I am so very

pleased that papa has come to know you so well.  I hope you will be of mutual aid and companionship.  I am heartily glad to greet you.  I am quite familiar with this coming.

Truly,

Bailey Slayden.

(2)

Good afternoon.  Is it not delightful to meet in this way?  So many persons think me dead and I presume they are forgetting me.  I shall meet them when they come over and surprise them.  I am glad I can do so well with this little piece of pencil.  I feel about as I felt during my life in the physical body.  Let me come again sometime when I may write better.  You have a great usefulness of life before you in this field of work.

Henry Usborne.

I will always help you.

Mary Bowman.

(3)

This is about the most remarkable experience one can have. I feel as much myself as formerly I felt.  I am not changed to another person by this wonderful translation from the earth to the spirit state.  Your visit here to-day will make me happier than I have ever been.  I shall come again.  Your book will be a great success in all ways.

Affectionately,

Septimus P. Moore

Note.—The medium was aware (and, consequently, his familiar spirits were aware) that I was collection material for a book.  At right-angles to the above, and in a very different handwriting, was the following letter:—

My Charge

   Oh do not be lonely, for time cannot sever

   The charm that unites us in memory's chain,

   E'en though death the sweet voice seems to

         silence for ever

   In spirit its accents will waken again.

I am pleased that you do not relegate me to the oblivion of the tomb, I have life, the immortal spark, the spirit cannot perish.  I am living and happy and contented.  I wish you could be here with me.  Do not ever mourn me as dead.

(Signed)       [The earth name of Iola.]

Iola.

Did not we have a delightful talk this forenoon?

(Considering the close communication that I had enjoyed with my guide throughout the previous two months, this letter is nothing short of idiotic.  It afford no evidence of identity whatever; but it is a clear proof of the presence of invisible beings, or being, in the room who had heard our conversation, seen the name, and written the script.)

(4)

I feel grateful to the powers that be for the beautiful privilege of meeting you and communicating in even this brief way. I cannot soon [sic] write a great deal but even a few words will express my existence.  Endeavour to in some way establish means of communication when you get back.  I should prize such a privilege there.  I am at rest and I do not suffer the pains and vexations and troubles so common to mortal life.  I am so glad that you came on here.

Devotedly,

Catherine Moore.

(It was in the upper left-hand corner if this slate that the drawing if a head appeared, with a stalk of forget-me-nots underneath.  On the left side of the head there is a shadow of the same face, which is very remarkable.)

(5)

Dear Brother

Now, is not this great that I can write on this slate with this bit of pencil?  I am not in the slate, I am on the outside of it.  I write this through the law of the fourth dimension in space.  Sit with the slates in your own room.  I might write then for you.  I am at rest and contented here.  I am often near you.  Brother     .

Alldin Moore.

Underneath, in red pencil, and a different handwriting:—

I salute you.

Uncle Major.

I have no doubt that Mr. Keeler genuinely believed that evidence would be forthcoming of the identity of the spirits summoned; but it did not happen that I obtained it as others have done.  This sitting was a most striking exhibition of spirit power; and that, in my opinion, is all that can be reasonably expected of this particular phase.  The atmospheric conditions were perfect.

My readers must bear steadily in mind (1) that there was full light, (2) that the slates were held above the table, with no cloth or covering of any sort over them.  I have read the reports of past slate-writings through Eglinton, Davey, and others.  No explanation I have read will meet the case of possessing a faculty which enables those who work through him to demonstrate in a convincing manner the presence and activity of the invisible intelligences which surround us.

I left for England the following morning.

 
Moore noted about his sitting with P. O. Keeler:

At the end of May, 1911, I asked my guide if she was present on this occasion.  She said she was, but the alleged letter over her name was not hers at all.  All the letters were written by Keeler's control, as I had thought.  "But," Iola added, "Mr. Keeler is a wonderful psychic."  I cordially agree.  The absence of identity in the letters does not take away from their value as proofs of spirit action.  It was certain (a) that the slates were clean; (b) that he had nothing to do with the writing; (c) that a quantity of writing was accomplished in a short time, all audibly to me, without any pressure being brought upon the slates in my hands.

 

The puzzling message and Moore's imprecise description of Iola's commentary about the letters present an instance of transcendental communication that was beyond his understanding.  Unlike Moore, people with little knowledge about Keeler's circumstances sometimes labeled him as fraudulent or regarded him with suspicion.  One example of a critical perspective of Keeler that may be read online is the 1885 Seybert Commission Report that shows denialist assumptions and aspersions.  An affirmative frame of reference concerning Keeler's sittings was offered by Alfred Russel Wallace in the "Spiritualistic Experiences" chapter of the second volume of My Life: A Record of Events and Opinions (1905).  Here is the passage.

In Washington, where I resided several months, I made the acquaintance of Professor Elliott Coues, General Lippitt, Mr. D. Lyman, Senator and Mrs. Stanfield, Mr. T. A. Bland the Indians' friend, and Mrs. Beecher Hooker, all thorough spiritualists, as well as many others unknown to fame.  With the three former gentlemen I attended the séances of a very remarkable public medium, Mr. P. L. O. A. Keeler, and both witnessed phenomena and obtained tests of a very interesting kind.  The medium was a young man of the clerk or tradesman class, with only the common school education, and with no appearance of American smartness.  The arrangement of his séances was peculiar.  The corner of a good-sized room had a black curtain across it on a stretched cord about five feet from the ground.  Inside was a small table on which was a tambourine and hand-bell.  Any one, before the séances began or afterwards, could examine this enclosed space, the curtain, the floor, and the walls, as I did myself, the room being fully lighted, and was quite satisfied that there was absolutely nothing but what appeared at first sight, and no arrangements whatever for ingress or egress but under the curtain into the room. The curtain, too, was entire from end to end, a matter of importance in regard to certain phenomena that occurred. Three chairs were placed close in front of this curtain on which sat the medium and two persons from the audience. Another black curtain was passed in front of them across their chests so as to enclose their bodies in a dark chamber, while their heads and the arms of the outer sitter were free. The medium's two hands were placed on the hands and wrist of the sitter next him.

The séance began with purely physical phenomena.  The tambourine was rattled and played on, then a hand appeared above the curtain, and a stick was given to it which it seized.  Then the tambourine was lifted high on this stick and whirled round with great rapidity, the bell being rung at the same time.  All the time the medium sat quiet and impassive, and the person next him certified to his two hands being on his or hers.  On one occasion a lady. a friend of Professor Elliott Coues and a woman of unusual ability and character, was the sitter, and certified at all critical times during the whole séance that the medium's hands were felt by her.  After these and many other things were performed, the hand would appear above the curtain, the fingers moving excitedly.  This was the signal for a pencil and a pad of note-paper (as commonly used in America); then rapid writing was heard, a slip of paper torn off and thrown over the curtain, sometimes two or three in rapid succession, and in the direction of certain sitters.  The director of the séance picked them up, read the name signed, and asked if any one knew it, and when claimed it was handed to him.  In this way a dozen or more of the chance visitors received messages which were always intelligible to them and often strikingly appropriate.  I will give some of the messages I thus received myself.

On my second visit a very sceptical friend went with us, and seeing the writing-pad on the piano marked several of the sheets with his initials.  The medium was very angry and said it would spoil the séance.  However, he was calmed by his friends.  When it came to the writing the pad was given to me over the top of the curtain to hold. I held it just above the medium's shoulder, when a hand and pencil came through the curtain, and wrote on the pad as I held it. It is a bold scrawl and hard to read, but the first words seem to be, "Friends were here to write, but only this one could. . . . A. W."  Another evening, with the same medium, I received a paper with this message, "I am William Martin, and I come for Mr. William Wallace, who could not write this time after all.  He wishes to say to you that you shall be sustained by coming results in the position you have taken in the Ross case.  It was a most foul misrepresentation."

This, and other writing I had afterwards, are to me striking tests in the name William Martin.  I never knew him, but he was an early friend of my brother who was for some time with Martin's father to learn practical building, the latter being then engaged in erecting King's College.  When I was with my brother learning surveying, etc., he used often to speak of his friend Martin, but for the last forty-five years I had never thought of the name and was greatly surprised when it appeared.  About a month later I had the following message from the elder Martin, written in a different hand:—

"Mr. Wallace,

"Your father was an esteemed friend, and I like to come to you for his sake.  We are often together.  How strange it seems to us here that the masses can so long exist in ignorance.  Console yourself with the thought that though ignorance, superstition and bigotry have withheld from you the just rewards to which your keen enlightenment and noble sacrifices so fully entitle you, the end is not yet, and a mighty change is about to take place to put you where you belong.

"William Martin."

I have no evidence that this Mr. Martin was a friend of my father, but the fact that my brother William was with him as stated (which must have been a favour), renders it probable.  On the same evening there were a number of messages to about a dozen people all in different handwritings, several of which were recognized.  My friend General Lippitt had a most beautiful message which he allowed me to copy, as it was a wonderful test and greatly surprised and delighted him.  His first wife had died twenty-seven years before in California. She was an English lady and he was greatly attached to her.  This is the message:—

"Darling Francis,

"I come now to greet you from the high spheres to which I have ascended.  Do you recall the past? Do you remember this day?  This day I used to look forward to and mention with such pride?  This, my darling, is my birthday anniversary.  Do you not remember?  Oh how happy shall we be when reunited in a world where we shall see as we are seen and know as we are known.

"Elizabeth Lippitt."

General Lippitt told me it was his first wife's birthday, that he had not recollected it that day, and that no one in Washington knew the fact but himself.

A German gentleman who was present had a message given him, which was not only written, as he declared, in excellent German, but was very characteristic of the friend from whom it purported to come.

On this evening most wonderful physical manifestations occurred.  A stick was pushed out through the curtain.  Two watches were handed to me through the curtain, and were claimed by the two persons who sat by the medium.  The small tambourines about ten inches diameter, was pushed through the curtain and fell on the floor.  These objects came through different parts of the curtain, but left no holes as could be seen at the time, and was proved by a close examination afterwards.  More marvellous still (if that be possible), a waistcoat was handed to me over the curtain, which proved to be the medium's, though his coat was left on and his hands had been held by his companion all the time; also about a score of people were looking on all the time in a well-lighted room. These things seem impossible, but they are, nevertheless, facts.

Alfred Russell Wallace (1823-1937) also wrote about anomalous phenomena in Miracles and Modern Spiritualism (1896). 

W. Usborne Moore identified Glimpses of the Next State (which he subtitled "The education of an agnostic") as "a duty discharged"; however, he acknowledged that the majority of people in the world were unprepared and ignorant for what is related in his book.  He wrote that those who read his book can expect that "it will prepare them for what they may experience themselves if they go forth on the quest; if they do not, it only indicates they are not yet in that condition which enables them to assimilate a new idea . . . The fact that the world is round was known to the few a thousand years before the Christian era, but many centuries had to pass before the truth was accepted by the inhabitants of the West as a whole. . . ."

The photo at the beginning of this article shows a Keeler slate presenting a script signed "Abraham Lincoln" (exhibited at the Lily Dale Museum).  The chalk message states:

We come to you Sir because

we see you are spreading the truth

in the right way.  I understood this

phenomenon while in earth life, and had

I lived, should of proclaimed it

to the world.  Press forward

My Brother.  Never let thy step

stray from the path of progress

and truth.  Your Friend

                              Abraham Lincoln

 

"We" and the Mediums of Oneness

"We are present": John Dee (1527-1609) is among the men and women who have chronicled transcendental communication where the word "we" is found.

 





After documenting his investigations into Spiritualism in two books, W. Usborne Moore (1849-1918) in the concluding chapter of The Voices (1913) reflected about the spiritual quandary of humanity.  He referred to himself as a "collector of facts," wondered "What is a medium?," and understood human beings to have "a physical body and a spiritual body."  Moore was left to contemplate the metaphysical ramifications of the 'marvels' and 'revelations' he'd witnessed and was able to express his predominant insight: "It is my conviction that spiritism is a Divine institution permitted by the Almighty . . ."

More than a hundred years after the publication of Moore's books, the investigator of unexplained phenomena finds a diverse assortment of more recent cases for analysis and comparison; along with easier access to sources from previous centuries via the Internet.  I've previously mentioned the noticeable consistency in the use of the pronoun "we" (and sometimes "us") in transcripts of transcendental communication.  In this article, I am offering a selection of 22 examples from preceding articles.  (An asterisk indicates an English translation.)

"We can come, but you are wrong in thinking that Mr. Moore is a relative, or that he is any old acquaintance."
"The Automatic Mirror Writing of Mrs. Georgia"


"You will understand that there is always a crowd of spirits ready here to show themselves to their friends—a great many more than we can allow to appear."
"Florence Marryat's Account of John and Katie King"


"We use Paulina who uses us."
"Paulina Peavy Interview on Long John Nebel Radio Show 1958"


"Tsar-region we must springtime speak about . . ."*
"Metaphorical Correlations Among 'Paranormal' Cases"
 
 
"It is so important that the students have the benefit of the manuscripts, that We must discontinue the Instruction until they are completed; for according to their ability to accept that which is illustrated in the manuscripts, will the 'Great Judge' determine what shall next be given."
"The Other Ascended Masters"


"Sleep and we may help you."
"Case Profile: Edgar Cayce"


"We see ahead an age that's upside down.
Of monks and whores they shall the roles reverse:"*
"Nostradamus Today"


"Our planet Earth is a learning stratum and we never stop . . ."
"The Paranormal In Perspective"


"We mean no harm."
"The Maureen Puddy Case"


"We bring great love and peace with us."
"Warnings from Flying Friends"


"We revealed it to warn mankind, on a night when every precept was made plain as a commandment from Ourself."*
"Muhammad: His Life Based on the Earliest Sources by Martin Lings"


"Then we sought out Mark Probert."
"Excerpts from Lecture Transcripts of the Inner Circle Through Mark Probert"


"We are one, yes, we're one . . ."
"Rosemary Brown Channeled Songs from John Lennon"


"We taught man to speak before the tongue knew syllables."
"The Coming of Seth"


"We wish to give you the . . . Key to the mystery."
"Trance Communication and D. D. Home"


"We are Nine Principles and Forces, personalities if you will, working in complete mutual implication."
"Case Study: Uri by Andrija Puharich"


"Incidentally, you can quit worrying about your instrument panel.  You did turn it off this afternoon, but we had to persuade you to come out here for a talk without mentioning it to anyone else."
"Beyond The White Sands Incident"


"Ask no longer why we have chosen you."
"Orfeo Angelucci's Second Contact Experience"


"We are not coming for conquest or strife,
Or to steal someone's husband or wife!"
"The Letters from Aboard a Flying Saucer"


"You may misunderstand us, are more than likely to do so, for our language must always be more or less that of parable and suggestion, when treading upon forbidden ground; we have our own peculiar modes of expression and what lies behind the fence of words is even more important than what you read."
"The Mahatma Letters"


"We are present"*
Some Further Observations about the 'Michael' Pattern"


"We are an ancient entity that comes to all who ask."
"Messages from Michael"

Marginal Revolution on Kleptocracy

I don't often just post links, but sometimes a post is so good, and so complete, it just needs reading without comment.

Marginal Revolution on Kleptocracy

Ok, one comment. The mainstream media are focused on the racial element. This problem is much deeper than race.