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Confused Language, Confused Thinking
According to the teachings of the Greek philosopher Parmenides, language
illustrates human thinking (and reasoning); confused language is thus
tantamount to confused thinking; confused thinking, in turn, provokes
unintended acts and undesired outcomes.[1]
"Doublespeak" — a term that rose to prominence through
the work of Eric Blair (1903–1950), more famously known as George
Orwell — is a conspicuous form of confused language and thought. The
term doublespeak was actually derived from the terms "newspeak" and
"doublethink," which Orwell used in his novel Nineteen Eighty-Four,
published in 1949.[2] While under suppressive Party
instruction, the mind of the protagonist, Winston Smith slid away into the
labyrinthine world of doublethink. To know and not to know, to be conscious
of complete truthfulness while telling carefully constructed lies, to hold simultaneously
two opinions which cancelled out, knowing them to be contradictory and
believing in both of them, to use logic against logic, to repudiate morality
while laying claim to it, to believe that democracy was impossible and that
the Party was the guardian of democracy, to forget, whatever it was necessary
to forget, then to draw it back into memory again at the moment when it was
needed, and then promptly to forget it again: and above all, to apply the
same process to the process itself. That was the ultimate subtlety:
consciously to induce unconsciousness, and then, once again, to become
unconscious of the act of hypnosis you had just performed. Even to understand
the word "doublethink" involved the use of doublethink. [3]
A euphemism is a form of doublespeak: it is a rhetorical device used
sometimes intentionally and sometimes unintentionally — a linguistic
palliation, amounting to a distortion of the truth — in many cases
applied to avoid offending people. In real life, euphemisms can be used by
some to try and legitimize actions that run counter to the interests of
others. In that sense, euphemisms are a "manipulation of language"
and a "manipulation through language."
Euphemisms
in the Wake of the Credit Crisis
Since the outbreak of the so-called international-credit-market
crisis, euphemisms have risen to great prominence. This holds true in
particular for monetary-policy experts, who are at great pains to advertise a
variety of policy measures as being in the interest of the greater good,
because they are supposed to "fight" the credit crisis. Consider the following
examples.
1.
The expression "unconventional monetary
policy" casts central-bank action in a rather favorable light.[4] The adjective
"conventional" stands for "hereditary" and
"outdated," while unconventional might suggest something along the
lines of "courageous" and "innovative" action.
2.
Using the expression "aggressive monetary
policy" works in the same way.[5] It often refers to, for example, a drastic cut in
official interest rates toward record low levels, or a strong increase in the
base money supply in light of an approaching recession, conveying the notion
that policy makers take "bold" and "daring" action for
the greater good.
3.
The term "quantitative easing" makes it
increasingly difficult, even impossible (for the public at large), to see
through what such a monetary policy really is — namely, a policy of
increasing the money supply (out of thin air), which, in turn, is equal to a
monetary policy of inflation.[6]
4.
Talking about a "low-rate monetary policy"
glosses over the fact that monetary policy pushes the market rate of interest
below the natural rate of interest (the societal time-preference rate),
thereby necessarily causing malinvestment rather
than ushering in an economic recovery.
5.
Speaking of "neutralizing the increase in base
money" is clearly misleading, as a rise in the money stock is never, and
can never be, neutral. It is necessarily accompanied by redistributive
effects — irrespective of whether the receivers of the injection of
additional money (which was created out of thin air) hold these balances as
"excess reserves" or in the form of, say, time deposits.[7]
6.
Referring to "ample liquidity" (as a
contributing factor to the "credit crisis") tends to cover up the
fact that central banks have inflated the money supply (through
bank-circulation credit expansion).[8] The term "liquidity" tends to disguise
the fact that unfavorable monetary conditions are a result of central-bank
action.
A good example of a recent euphemism in the field of monetary policy
was the announcement by the Governing Council of the European Central Bank
(ECB) on May 10, 2010. It said it would
conduct interventions
in the euro area public and private debt securities markets (Securities
Markets Programme) to ensure depth and liquidity in
those market segments which are dysfunctional. The objective of this programme is to address the malfunctioning of securities
markets and restore an appropriate monetary policy transmission mechanism.[9]
Such a monetary policy can be seen as subsidizing the bond prices of
some government issuers in the euro area — namely, those that are
increasingly viewed as unsound by investors — thereby favoring some
issuers (and investors holding their bonds) at the expense of others.
Such a policy will actually amount to something like a minimum-price policy[10] for the bonds of certain government issuers if and
when the central bank makes purchases that keep certain bond prices above
levels that would otherwise have prevailed.
Confused
Language, Undesired Results
With monetary-policy experts making increased use of confused
language, the corrective counterforces against a
damaging monetary policy are greatly diminished. This is because confused
language — and its result, confused thinking — makes it
increasingly difficult for the public to understand the medium- to long-term
consequences of policy measures; and that knowledge is clearly needed to resist
damaging policies.
Perpetual use of confused language may result in social outcomes that
few actually intended. Consider the case of an ever-greater expansion of
government. The reason that the state apparatus keeps growing at the expense
of the private sector is in large part the government's acquisition of full
control over money production. Holding the money-supply monopoly, government
can increase the supply through credit expansion without any real savings
supporting it.
With fiat money, government can and does increase its
spending well beyond the amount taxpayers are prepared to hand over to the
state. As a result, more and more people become dependent on government
spending (some voluntarily so) whether as civil servants, government
contractors, or recipients of state-run pensions, health insurance,
education, and security.
Sooner or later the dependence of the people on government handouts
reaches, and then surpasses, a critical level. People will then view a
monetary policy of ever-greater increases in the money supply as being more
favorable than government defaulting on its debt, which would wipe out any
hope of receiving benefits from government in the future. In other words, a
policy of inflation, even hyperinflation, will be seen as the policy of
lesser evil.
Thanks to the doublespeak of monetary-policy experts, the launch of
monetary policy leading to high inflation may not be discernible by the
public at large. A monetary policy can thus be unleashed that the public
would presumably not agree to if it were informed of the medium- and
long-term consequences.
As a result, there is strong reason to fear that confused, Orwellian
language and the confused thought it produces pave the way to high inflation.
Notes
[1] Editor's Note:
The birth and death dates of Parmenides are the subject of debate. He
probably did most of his writing before 500 BC.
[2] Note that this
the term "doublespeak" does not appear anywhere within Orwell's Nineteen
Eighty-Four.
[3] Orwell, G.
(1989 [1949]), 1984, Penguin Books, pp. 37–38.
[4] The expression
can be found frequently in the financial media. However, it is also used in
academic literature. See, for instance, Curdia, V.,
Woodford, M. (2010), Conventional and Unconventional Monetary Policy, in:
Federal Reserve of St. Louis Review, July/August, 92(4), pp. 229–264.
It should be noted that in the latter article the authors do not provide any
definition of what is actually meant by unconventional monetary policy.
A definition of sorts can be found in Bini Smaghi, L., Conventional and unconventional monetary
policy, keynote lecture at the International Center for Monetary and Banking
Studies (ICMB), Geneva, 28 April 2009: "The unconventional tools include
a broad range of measures aimed at easing financing conditions."
However, such a definition basically includes all kinds of policy measures:
"Having this menu of possible measures at their disposal —
which are not mutually exclusive ones — monetary policy-makers have to
clearly define the intermediate objectives of their unconventional policies. These
may range from providing additional central bank liquidity to banks to
directly targeting liquidity shortages and credit spreads in certain market
segments. The policy-makers then have to select measures that best suit those
objectives".
[5] See, for
instance, Bank for International Settlement, 80th Annual Report, 28 June
2010, p. 36.
[6]
"Quantitative easing" is an increase in the base money supply, a
monetary policy action taken if and when official interest rates have hit
zero percent. The term was made public by the Bank of Japan, which adopted a
policy of "quantitative easing" from March 2001 to March 2006. See,
for instance, Ugai, H., Effects
of the Quantitative Easing Policy: A Survey of Empirical Analyses, Bank of
Japan Working Paper Series, No. 06, July 2006.
[7] For instance,
ECB president J.-C. Trichet said before the
European Parliament's Economic and Monetary Affairs Committee on 21 June
2010,
As the aim of the programme is not to inject
additional liquidity into the banking system, we fully neutralise
the bond purchases by means of specific re-absorption operations. As a
result, the prevailing level of liquidity and the money market rates are not
affected by the programme. In other words, our
monetary policy stance is not affected, and there are no inflationary risks
related to this programme.
[8] "Ample
liquidity" has become a widely-used term. See, for instance, Bank of
France Bulletin Digest, No. 158, February 2007, pp. 1–2; also Hirose,
Y., Ohyama, S., Taniguchi, K., Identifying the
Effect of Bank of Japan's Liquidity Provision on the Year-End Premium: A
Structural Approach, Bank of Japan Working Paper Series, No. 09, E6, December
2009.
[9] ECB press
statement: "ECB decides on measures to address severe tensions in financial
markets," 10 May 2010.
[10] Note that
there is a reverse relationship between a bond price and the return on the
bond: if the market interest rate rises (falls), the price of the bond
declines (rises). So a minimum-price policy is essentially the same as a
maximum-interest-rate policy.
Thorsten Polleit
Thorsten Polleit is Honorary Professor at
the Frankfurt School of Finance & Management.
This essay was originally published in www.Mises.org. By authorization.
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