THE Global Justice Movement Website

THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.

Friday, October 31, 2008

News from the Network, Vol. 1, No. 10

Things are starting to percolate as the election draws nearer and people begin to realize that neither of the two major candidates, both trapped in the Keynesian paradigm, has anything of substance to offer for fixing the collapsing structures of our economy.
• Former Congressman Rev. Walter Fauntroy is making a major effort to open up meetings for CESJ spokesman Norman Kurland to introduce Capital Homesteading solutions to high-level policymakers and economic advisors involved in the financial crisis.

• Michael D. Greaney's book, In Defense of Human Dignity: Essays on the Just Third Way from a Natural Law Perspective, ISBN 978-0944997024, Economic Justice Media, $20.00, has been selected as "Book of the Week" by "Catholic Ireland." Review copies (in electronic format) have been distributed to a number of blog sites, and interest has been expressed in some quarters in using the book in fundraising. If you are interested in reviewing the book for a print or internet publication, you can request a free PDF version from mgreaney [at] cesj [dot] org. The book is available in print from Amazon, and Barnes and Noble. There is a 20% discount on quantity orders placed through CESJ.

• David Walker, former Comptroller General of the United States, has scheduled a telephone meeting with CESJ president Norman Kurland, to take place in January 2009. Mr. Walker previously met both Norman Kurland and Louis Kelso, and spoke favorably of the Kelsonian economic programs. Norman Kurland will introduce Mr. Walker to new applications of Kelsonian binary theory, focusing on the Homeowners' Equity Corporation and Capital Homesteading as a means of fostering economic growth while at the same time paying down the growing national debt.

• CESJ member and libertarian Guy Stevenson has been working on getting materials on the Just Third Way to Alan Keyes. Much of what Keyes says is already consistent with the Just Third Way. Guy is trying to arrange a meeting between Norman Kurland and Keyes, who has spoken favorably in the past about expanded capital ownership as part of a justice-based U.S. foreign policy.

• A group of students and faculty advisors from William and Mary will be visiting CESJ in January 2009. The students are interested in careers in the social justice field.

• Don Killoren of the Public Revenue Education Council (a leader in the Henry George school of economics) in Webster Groves, Missouri, USA, wrote recently to Norman Kurland about his very positive impressions of the August 2008 Social Justice Collaborative organized by CESJ, to seek better understanding and support for an interfaith Abraham Federation that would unite Kelsonian binary economists, Georgists and distributists of the American Chesterton Society. Don, who mentioned that he is still studying the ideas that were discussed at the event, commented: "No doubt that was the greatest exchange of ideas of any convention I have ever been involved with. My hat is off to you and your organization. Because of these interchanges, I am working over in my thinking the vast implications of the moral concepts of strict justice and social justice, land and capital, money and capital. Nowhere in the popular press, TV presentations, and articles I have encountered is anyone (except us, of course) getting to the underlying causes of the economic problems we are experiencing. Unless we look into the possibility that our first premises are faulty, there is no way to solve the problems caused by the quicksand foundation upon which our economic house is built."

• As of this morning, the Just Third Way blog has had visitors from 33 different countries and 47 states and provinces in the United States and Canada over the past two months.
We welcome your news items and progress reports, as well as your comments (positive and not-so-positive) about these reports and blogs. If you have a SHORT item about how you are advancing the Just Third Way, or would like to submit something as a guest blogger, send us a note about it at mgreaney [at] cesj [dot] org.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).




Thursday, October 30, 2008

A Short Course on Property

Many people are confused about property, and thus why widespread ownership of the means of production — an "ownership society" — is so important. This is easy to understand, however, once we know what "property" is.

First of all, "property" is not the thing owned, but the natural right each human being has to be an owner (the right "to" property), and the socially-determined bundle of rights that define what people may own and what owners may do with their possessions. While the latter comes under prudence, it does so only to the extent that the human person's right to be an owner is not thereby unjustly infringed, inhibited, or prevented; the socially-determined rights of private property, in common with the natural right to private property, come under the virtue of justice, not prudence.

Once we understand that, we have the basis for understanding the nature of property. As the universal prohibition against theft demonstrates, the right to be an owner is a part of the natural law. As Dr. Heinrich Rommen noted,
"Thou shalt not steal" presupposes the institution of private property as pertaining to the natural law; but not, for example, the feudal property arrangements of the Middle Ages or the modern capitalist system. Since the natural law lays down general norms only, it is the function of the positive law to undertake the concrete, detailed regulation of real and personal property and to prescribe the formalities for conveyance of ownership. (Heinrich Rommen, The Natural Law, A Study in Legal and Social History and Philosophy. Indianapolis, Indiana: Liberty Fund, Inc., 1998, 59.)
That is, every human being has the right to be an owner, but how that ownership is to be exercised is determined socially by the needs of the owner, other people and groups, and the common good as a whole - but without prejudice to the underlying right to be an owner. Everyone may therefore use what he or she possesses as he or she wishes, as long as he or she does not harm him- or herself, other individuals or groups, or the common good. No one may be deprived of the exercise of property except for just cause and through due process.

Property is important because, except for human labor itself, nothing connects a person to the common good in a more intimate or secure fashion. By denying (abolishing) private property, the human person is cut off from the "ability for doing" that property confers, that is, "power." "Power," as Daniel Webster observed, "naturally and necessarily follows property." Without property, the human person is in the power of whoever possesses property, and is subject to control, more or less complete, depending on the will of who owns.

This is because property is not the thing owned, but the set of social relationships that define how an "owner" relates to the thing owned, and to other people with respect to the thing owned. Property confers power because in all codes of law property is the right of control. When the right of control is taken away, property is abolished, that is, socialism is established.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Wednesday, October 29, 2008

What's Good About Derivatives

It's enough to give gambling a bad name. While the mere existence of derivatives did not cause the current financial crisis, their misuse had a tremendous impact. The cries for increasing levels of government regulation not only lock the barn after the horse has been stolen, it turns out that the horse was stolen from the stable, not the barn. (By that I mean, more government regulation is not the answer, but a restructuring of the financial system to reinstitute checks and balances that function as part of the system itself, with the government to police abuses — deviations from desired behavior — not force desired behavior.)

Once upon a time derivatives — contracts to deliver a specific asset, good, or service in a particular quantity at a particular price by a certain date — had a useful purpose. They permitted issuers of financial instruments to gauge how much of what to issue and to whom, just as commodity futures helped producers and purchasers lock in a price and quantity, stabilizing prices and guaranteeing a market.

It wasn't long, however, before speculators realized that they could make money buying and selling not the company or the goods and services to which derivatives give a right to purchase, but dealing in the right itself. This separates the actual asset, good, or service to which the right entitles the holder of the contract, from the right to buy or sell it — a separation of ownership from control. Rather than stabilizing prices and guaranteeing quantities for delivery at the proper time, speculating in derivatives has resulted in wild fluctuations in the future (as opposed to the current) price of the asset, good, or service to which the derivatives give a right.

So, is there anything good about derivatives?

Used as originally intended, of course there is. The commodities markets could hardly function without them. Without futures contracts, farmers and other producers would be strapped for cash at critical times and unable to obtain credit to finance operations. This is obvious, and, as the financial system is currently structured, virtually the sole justification for derivatives.

Under a reform of the financial system, however (as in the Capital Homesteading proposal), the wide variety of financial derivatives would serve another useful purpose: to determine the market price of the underlying asset, good, or service, as well as the risk associated with the sale or purchase of that underlying asset, good, or service. Inasmuch as one provision of Capital Homesteading is to replace the "universal collateralization requirement" of financial institutions with insurance, a solid risk assessment of every conceivable investment is an absolute necessity.

Let the gamblers and speculators have their fun — but include the rest of us out. If someone has the accumulated savings to risk, he or she should be free to speculate, gamble, purchase luxuries, increase consumption, build pyramids, or anything else he or she desires. The one caveat, however, is that at no time should money ever be created or credit extended to engage in this activity. Derivatives do not, in and of themselves, generate income, and therefore cannot be regarded as meeting the requirements for "qualified paper" for which money can be created and credit extended without the necessity of first accumulating savings.

By gambling in this way, the rich will provide a valuable service for the economy, in addition to giving themselves all the thrills and excitement they want. Further, anyone who wants to engage in that activity should be allowed to do so on the same terms: sufficient accumulated wealth to enter the casino, and agreement to abide by the basic rule to use your own money, not someone else's.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Tuesday, October 28, 2008

The Keynesian Liquidity Trap Trap

If the news reports are to be believed ("White House to banks: start lending money," Associated Press, 10/28/08) we may be seeing the first stages of a Keynesian "liquidity trap" similar to that which contributed immensely to the Great Depression.

According to Keynesian theory, a "liquidity trap" is when the interest rate approaches zero. Investors do not expect high returns, so they keep assets in short-term cash bank accounts or hoards rather than investing. This makes a recession worse, and can result in deflation, or an insufficient money supply.

The usual Keynesian remedy for stimulating the economy is to lower the interest rate — as the Federal Reserve has been doing. The other Keynesian approach is to increase the rate of inflation, which (because of the presumed tradeoff in Keynesian economics between unemployment and inflation) is not considered feasible at this time when the unemployment rate is increasing. The only hope, then, of avoiding the "liquidity trap" is for banks to lend for political rather than economic or financial reasons — regardless of the credit-worthiness of the borrower . . . which is precisely what got us into the current financial crisis in the first place.

The inevitable conclusion is that the situation is hopeless, regardless who is elected president. Both candidates are operating from within a Keynesian economic paradigm, and thus neither can offer anything other than a vague promise of "change." With Keynesian economics, however, the only change can be for the worse.

So, is there no hope at all? Not at all. Banks will not lend unless they can obtain adequate security for their loans — and if they don't have to worry about risking the savings of depositors. Security, however, can be provided by "capital credit insurance," as outlined in CESJ's Capital Homesteading proposal, while money can be created at will with 100% reserves by opening up the discount window of the Federal Reserve as originally intended in the Federal Reserve Act of 1913.

Thus, although Keynes assumed the contrary as an "iron law" of economics, it is not necessary to cut consumption in order to invest. Cutting consumption actually inhibits or prevents the financial feasibility of new capital formation, again making it less likely that banks will lend.

With all the wasted resources, excess capacity, and idle people in the economy, the only thing missing is a sound approach to money, credit, and banking. Money is a means to an end, not an end in itself, and should never be a barrier to full participation in the economic common good.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Monday, October 27, 2008

In Praise of Roosevelt . . . No, the Other One

Today is the Sesquicentennial of the birth of Theodore Roosevelt. For those of you not "up" on the latest in archaic terminology, that means "Teddy" was born 150 years ago today. While many liberals view Theodore Roosevelt as the quintessential "Jingo," i.e., imperialist warmongering America-worshipper who hunted defenseless animals for food and sport, the fact is that during his life he was widely known as a "progressive." He espoused causes that were extraordinarily unpopular with the controlling wealthy elite, such as J. P. Morgan and other financial powers-that-be. For example, on whether any class has a special claim to virtue or consideration:
"We judge each man by his conduct, and not by his wealth or his social station; and we hold it to be our bounden duty to strive steadily to make and to keep this great American Commonwealth as a true democracy, and steadily to endeavor to shape our legislation and our social conditions so that there shall be a far nearer approach than at present toward equality of opportunity among men." (From the address given as temporary chairman of the New York Republican State Convention at Saratoga, September 27, 1910.)
What about worker ownership? While clearly pro-union, Roosevelt would have had no sympathy for many of today's unions that actively work to prevent workers from becoming owners, and in that way bringing together property rights and human rights:
"One of the prime objects which the Progressives have in view in seeking to secure the highest governmental efficiency of both the National and the State Governments is to safeguard and guarantee the vital interests of the wage-workers. We believe in property rights; normally and in the long run property rights and human rights coincide; but where they are at variance we are for human rights first and for property rights second." ("Nationalism and the Working Man," 1911)
We could quote Roosevelt at much greater length, but these bits are enough to give a flavor of his speeches and writings — and the blog format doesn't really do him justice. These quotes were taken from an obscure collection of Teddy's speeches and essays in his "collected works" compiled in 1926, "Volume XVII: Social Justice and Popular Rule," which CESJ has in its extended queue to republish as soon as it can be edited and annotated to explain the topical references that might puzzle the modern reader.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Friday, October 24, 2008

News from the Network, Vol. 1, No. 9

The not-unexpected wild swings in the stock market and currency valuations due to the alternating euphoria and despair as candidates, policymakers and politicians run after whichever shiny object distracts them, are the big news items of the week. Much of the emotionalism over the current economic situation could be reduced (if not eliminated entirely) if serious consideration would be given to the Just Third Way. Here are some of our efforts to bring the Just Third Way to the attention of the current power elite.
• Former Congressman Walter Fauntroy is still working on placing his op-ed piece on the Homeowners' Equity Corporation. Right now, however, he is making great efforts to get meetings for Norman Kurland with some of the more influential people involved in the financial crisis.

• Reception of Michael D. Greaney's latest book, In Defense of Human Dignity: Essays on the Just Third Way from a Natural Law Perspective, ISBN 978-0944997024, Economic Justice Media, $20.00, has been encouraging. A number of people have expressed enthusiasm for the book, which has been characterized as meeting a definite need in our society with respect to the revival of natural law. Amazon, and is up on Barnes and Noble. As we noted previously, there is a 20% discount on orders in quantity, and interest has been expressed in some quarters in using the book (and others) in fundraising.

• Joseph Recinos recently met with the daughter of the late Herman Kahn, the futurist and founder of the Hudson Institute, and gave her copies of material relating to the "Doctors' Plan" for health care and, especially, the Homeowners' Equity Corporation.

• This past Sunday, October 19, Norman Kurland had a 2-hour interview on a show conducted by Paula Gloria and Posr Posr. The first hour included participation by Dr. Robert H. A. Ashford, co-author of Binary Economics: The New Paradigm (1999). In the second hour, Norman Kurland started talking about the three principles of justice so that it could be seen as the moral basis of binary economics. Paula Gloria has a pretty good audience over the internet. She was recently on the Howard Stern Show and mentioned binary economics, and got a number of angry comments from callers to the effect that binary economics is nonsense.

• Wednesday October 22. Invited by the newly-formed, D.C.-based Ayn Rand Center for Individual Rights, Norman Kurland attended a presentation at the National Press Club by Dr. Yaron Brook, president of the Ayn Rand Institute in Irvine, California. The followers of Ayn Rand pose their philosophy as a revolution against socialism based on "selfishness" and "greed" as moral virtues, giving "capitalism" moral superiority over altruistic goals. During the session Norman asked Dr. Brook two questions: "1. Have you ever heard of Louis Kelso's Capitalist Manifesto" (he had not) and 2. "Why aren't you taking into consideration semantics, especially the negative connotations of such words as 'selfishness,' 'greed' and 'capitalism'?" Norman Kurland later asked for a meeting with Dr. Brook the next time he visits Washington, handing him a package, of material consisting of his 1971 exchange with Milton Friedman, the 6/29/79 TIME magazine article on Kelso where Friedman declared Kelso "is Marx turned on his head," the matrix comparing the Just Third Way to Capitalism and Socialism, the book flyer, and Michael Greaney's recent letter to the Washington Post (posted below on this blog as "Why Keynes is Wrong for America — or Anywhere Else"). In the reception following the talk, Norman gave materials to other individuals and had a positive exchange with Fred Smith, president, and Sam Kazman, general counsel, of the Competitive Enterprise Institute.

• Guy Stevenson is working to introduce Capital Homesteading and the other ideas to Alan Keyes, Ron Paul, Cynthia McKinney and others with an eye toward bringing together the Keyes' America's Independent Party, Paul's Revolutionary Party, McKinney's Green Party and other third parties for a mass demonstration at the Federal Reserve on Wednesday, April 15, 2009 attacking Keynesian tax slavery and pushing for reforms to our money and credit system based on the American Revolutionary Party's "Declaration of Monetary Justice."

• Republican Congressional candidate for Ohio's 11th District Thomas Pekarek's debate with Democratic contender Marcia Fudge was reported by Fox News and WCPN News. Fudge was given most of the coverage, while Pekarek, who has made Capital Homesteading the cornerstone of his campaign, seems not to have been taken seriously. On reading the news reports, it appears that the reporters may not have understood the Capital Homesteading concept and, unwilling to spend the required time to grasp this essentially new economic framework, treated Pekarek dismissively and did not pay sufficient attention to something they might not have been in a position to grasp without effort.

• As of this morning, we have had visitors from 32 different countries and 47 states and provinces in the United States and Canada to this blog over the past two months.
As usual, there are a great many other news items that we haven't heard about because you haven't submitted them. If you're tired of reading about what we're doing, let's hear from you. If you have a SHORT item about how you are advancing the Just Third Way, send us a note about it at mgreaney [at] cesj [dot] org.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Thursday, October 23, 2008

The Economics That Dare Not Speak Its Name

The Associated Press reports that there will be a November 15 summit of world leaders in Washington, DC to deal with the worldwide financial crisis ("World leaders to meet on economy in Washington," Deb Riechmann, Associated Press, 10/22/08). A White House spokesman said that, "the first meeting will focus on the underlying causes of the financial crisis, the global response and the principles that should guide any reforms."

Despite the evident goodwill that will bring together leaders from "Japan, the United Kingdom, France, Germany, Italy, Canada and the United States, the European Union China, Brazil, India, Russia, South Korea and other major economies," as well as whoever "wins" (a term we use advisedly) the U.S. presidential election, it is clear that none of them has either the framework or principles with which to address the situation. We therefore feel it is reasonably safe to predict that a number of critical issues — and solutions — will not be raised or discussed. Although there are many, here are seven:
1. Growing gap between rich and poor. Keynesian economics depends on a small class of extremely wealthy people who cannot consume all of their income and thus (in Keynes' view) are absolutely necessary to provide investment capital. When push comes to shove (as in the current financial crisis) the poor are going to have to fend for themselves in the interests of preserving the overall economy, the rationale being that without a sound economy, the poor won't have anything, anyway. The Just Third Way, with its reliance on creating new money for investment instead of relying on existing accumulations of wealth to finance new capital formation, makes reducing the gap between rich and poor a primary consideration instead of a throwaway for the sake of expedience.

2. Instituting proper internal controls. The powers-that-be are frantically trying to come up with some quick fix that will restore the status quo. This necessarily orients them toward trying to impose the desired result by controlling people and institutions with either the carrot or the stick, both wielded by the State. Socialism (whether or not you call it that) consists of State ownership or control of the means of production. "Control" is "property" in all codes of law, so that State control abolishes private property. On a more "practical" note, the imposition of desired results has never worked, as it is directly contrary to human nature. The Just Third Way, on the other hand, advocates restructuring our institutions (including our financial institutions) so that they operate as intended with self-regulation and self-control; the structure of the institutions themselves making the desired acts or ends optimal, not coerced. The role of the State is limited to policing abuses when individuals or institutions violate their own rules.

3. Restoration of private property. Private property and ownership, especially for people who own a small or moderate amount of income-generating assets, is generally irrelevant in Keynesian economics. When considered at all, it seems to be viewed as an impediment to the efficient functioning of the capital markets. Keynes believed that most people could only gain income from wages, not ownership. Thus "full employment," not "full production" becomes the focus of Keynesian economic policy. In contrast, the Just Third Way (consistent with the natural law) advocates that owners actually own what they own. That is, people have a natural right to the full stream of income from what they own. Again, in "practical" terms, income from capital can supplement, even in cases replace what people earn from selling their labor, especially when the value of labor as an input to production is falling in the market in competition with capital (technology).

4. Reform of the currency. At present, virtually the entire money supply of the United States is backed by government debt. The Federal Reserve was established in concert with the Internal Revenue Service to prevent the government from being able to do this. That is, the Federal Reserve would create money as needed to finance private sector investment, and the IRS would raise the money necessary to keep the government running without borrowing. The Just Third Way proposes that the original purposes of both institutions be restored.

5. Reform of the banking system. This is a subset of no. 2 above. Issue banking (banking that creates money) needs to be separate from deposit banking (banking that lends money deposited by savers), and financial institutions need to be restricted to the function for which they were designed. The most common form of "issue bank" is the commercial bank, which creates money for private sector investment, taking a fee for the service. The most common form of "deposit bank" is the investment bank, which "intermediates" between people with money ("savers") and investors, putting the two together and taking a fee for the service. Combining commercial banking with investment banking, and either one with brokerage services, is a certain recipe for disaster. The Just Third Way advocates that strict controls be instituted preventing one type of financial institution from filling a function for which it was not designed.

6. Limiting the economic power of the State. This has already been hinted at in the above points, but it is useful to reiterate the fact that the State is a very specialized tool designed to maintain the common good . . . not everyone's individual good. This means the State ensures equal opportunity and polices abuses, making it possible for people to solve their own problems. The State should be extremely careful at all times about going beyond this narrowly-circumscribed role, especially the temptation to interfere with the natural right of free association that underpins the free market in an effort to ensure equality of results — thereby bringing private sector growth and entrepreneurship to a grinding halt.

7. Free and open markets. Again, this is implied above, but it bears repeating. By "free and open market," of course, the Just Third Way does not mean a market in which "anything goes," but a market within a strict juridical order to which all have free and equal access. The competition within a justly regulated free market is one of the strongest checks and balances we mentioned in point no. 2.
Obviously, this only scratches the surface of what needs to be done. Without these and other structural reforms, however, the only thing that will result from yet another "Financial Panic Summit" will (not surprisingly) be more panic, more financial chaos, and less hope that anything substantive will ever be accomplished.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Wednesday, October 22, 2008

Almost Desperate Enough for a Good Idea

Lawmakers are starting to panic in light of the refusal of the financial markets to obey the media's premature hints about the end of the financial crisis. They are starting to listen to just about everything except common sense. If things get much worse, they might even be willing to listen to that (i.e., read this blog).

A CNN report on October 21 on CNNMoney.com ("Ideas for 2nd Stimulus Cover Broad Swath," Jeanne Sahadi) stated, "The drumbeat for lawmakers to do more to boost the economy is growing louder. And the chances have increased that Congress could pass a second stimulus package during its lameduck session following the presidential election."

Unfortunately, those in power are still stuck in the Keynesian paradigm. This limits the choices to tax-and-spend, or print-and-spend. They are ignoring the possibility of creating money through a properly regulated banking system for productive purposes, thereby putting currently wasted resources, excess capacity, and idle people back to work doing something worthwhile.

What is a "properly regulated banking system"? A system that embodies structural "checks and balances" (i.e., what an accountant would call "internal controls"), policed first by the industry itself, and then by the State when self-policing fails to maintain separation of function and democratic access to money and credit.

Our "Capital Homesteading" proposal would, in part:
• Use the Federal Reserve (the central bank of the United States) to finance all future capital formation through the private sector.

• Amend the definition of "qualified industrial, commercial, and agricultural paper" to include an extended term of the loan and a requirement that paper does not qualify for discounting unless extended through expanded ownership mechanisms, such as Capital Homestead Accounts, Homeowners' Equity Corporations, Community Investment Corporations, Consumer Stock Ownership Plans, Employee Stock Ownership Plans, and similar vehicles.

• Abolish the Open Market Committee and prohibit the Federal Reserve from future dealing in government bonds, whether primary or secondary.

• Abolish fractional reserve banking and mandate a 100% reserve requirement for all commercial banks.

• Prohibit State ownership of productive assets of any kind, or from owning shares in financial institutions.
Specifics about Capital Homesteading can be found in the book, Capital Homesteading for Every Citizen. An examination of the monetary theory underlying Capital Homesteading can be found in "A New Look at Prices and Money."

With lawmakers running around and stating that they are willing to try anything, it's probably about time that they decided to try something that will actually work.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Tuesday, October 21, 2008

Why Keynes is Wrong for America — or Anywhere Else

This squeak from the wheel went to the Washington Post earlier today in response to the announcement that Chairman Bernanke had given his imprimatur to a second stimulus package. People will wonder how, if the first one didn't work, a second will be of benefit (except to buy votes for whoever can spout the line closest to Keynesian Political Correctness). The answer is simple: when something doesn't work the first time, throw money at it until it works (which it can't) or you're broke. This is similar to the dictum I learned working on an assembly line: You can fix anything with a hammer; if it breaks, it needed replacing anyway. (Naturally, the hammer we used to whack things until they worked, a solid chunk of steel bar stock, itself finally broke.) For what it's worth, then:

Dear Sir(s):

The headline in today's Washington Post ("Economic Stimulus Gains Traction," Washington Post, 10/21/08, A1), while no doubt giving a measure of hope to some people, indicates that Keynesian economics is as bankrupt of ideas as the world will soon be financially. The only puzzle is why, since the first stimulus package failed to work (and was, in fact, followed by the financial meltdown), is another proposed?

Keynesian economics, the entrenched economic philosophy of both parties, is based on the demonstrably false assumption that the State can continue to create money backed by nothing but government debt, and somehow avoid paying the bill when it comes due. One of the most damaging myths to come out of the 20th century is the fixed belief that Keynes' programs brought the United States out of the Great Depression. On the contrary: the New Deal began faltering badly in the "mini-depression" of 1936-37 when the Keynesian stimulus package began having its predictable counterproductive effect. What brought the U.S. out of the Depression was not the inflation-induced false prosperity of Keynes, but the increasing real demand created by the war in Europe.

The irony is that neither the New Deal nor the war was necessary to bring the country out of the Depression. Had the reforms recommended by Dr. Harold Moulton in his book, The Formation of Capital (1935) been implemented, the financial integrity of the country would have been restored, real production would have taken place, and jobs created naturally in response to the increase in real demand.

As president of the Brookings Institution and a leading authority on money, credit, and banking, Dr. Moulton was fully aware of the fallacy of Keynes' basic assumption: that the State could create money at will to finance deficits, but that the private sector could not do the same thing to finance capital formation. The former results in an inflationary, debt-backed currency, while the latter creates an asset-backed, appreciating currency.

Further, the capacity may not exist in the American economy to sustain Keynesian programs. According to the Federal Reserve's "Flow of Funds Report" for the first quarter of 2008, total debt in the United States (business, consumer, and government) is $50 trillion. This is 350% of GDP. In 1929, total US debt was approximately 140% of GDP — and the country's productive capacity was completely intact; jobs and industries had not moved overseas.

In contrast to the Keynesian New Deal or some variant thereof is a proposal called Capital Homesteading for Every Citizen. By focusing on providing credit for ordinary people to become owners of the means of production, thereby creating and maintaining their own jobs, Capital Homesteading eliminates reliance on unproductive government spending, bailouts, and endless stimulus packages, and replaces them with productive money creation that builds ownership into ordinary people, putting wasted resources, excess capacity, and idle people back to work.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Monday, October 20, 2008

According to the Associated Press, Chairman Bernanke and the White House are "open" to a new stimulus package ("Bush, Bernanke open to new stimulus package") The White House has reportedly been "cool" to a new stimulus package, but the Democrats have been pushing hard. Consequently, Bush has been coming around to the idea of printing up and sending out some more cash to deserving citizens.

The problem is that these economic stimuli are nothing more than a rehash of Major Douglas' "social credit," but without any of the checks and balances Douglas attempted to build into his system. Consequently, these "packages" the government puts through are thinly-disguised socialism.

If Bush would go along with a stimulus plan based on real growth and sound credit, neither he nor the Democrats would have anything to worry about — nor would anyone else. Such a plan is found in Capital Homesteading for Every Citizen, as we've been saying since the presidency of Ronald Reagan.

Previous postings on this blog have made it pretty clear what needs to be done, and why. The only thing missing is a way to get these ideas to people like the candidates, Bush, Bernanke, and Paulson. If you have any ideas, let us know.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Friday, October 17, 2008

News from the Network, Vol. 1, No. 8

Despite the three-day weekend here in the United States (or, possibly, because of it), the stock markets continue their wild swings, while conspiracy theorists add gasoline to the flames of hysteria. Nevertheless, we continue our work to bring word of the Just Third Way to the quarters where it will do the most good.
• Former Congressman Walter Fauntroy's op-ed piece on the Homeowners' Equity Corporation is still making the rounds. We won't post it on this blog until either it is published, or Reverend Fauntroy gives the word.

• A press release went out for Michael D. Greaney's latest book, In Defense of Human Dignity: Essays on the Just Third Way from a Natural Law Perspective, ISBN 978-0944997024, Economic Justice Media, $20.00. It has already registered sales on Amazon, and is up on Barnes and Noble. Review copies are starting to be requested. As we mentioned last week, there is a 20% discount on orders in quantity, and interest has been expressed in some quarters in using the book (and others) in fundraising. We're preparing a "fundraising kit" in .pdf that should soon be ready for interested churches, schools, and other organizations. The currently-available list has a strongly "Catholic" bent, but we hope to have a more diverse series of publications developed soon.

• Harold Channer, host of the eponymous Harold Channer Show in New York, sent us notice of a posting on binary economics by Giorgio Gomelsky on his blog, "Crooked Myths." Mr. Gomelsky's highlighted Louis Kelso's contribution to economic theory, and titled his posting, "Discovering Louis Kelso." After relating his thoughts on the problems with both capitalism and socialism, Mr. Gomelsky says, "Luckily, others continued to look for solutions, often at considerable cost to their personal well-being. It goes without saying that once on the road to exploration it becomes well-nigh impossible to turn back and, hold and behold, unimagined rewards are garnered. One such reward has been discovering the work of lawyer, author and economist Louis Kelso (1913-1991). Among other things, he came up with the concept of BINARY ECONOMICS which I think IS the answer to conventional Capitalism and its endlessly cyclic crisis as exemplified this last week."

• We got a phone call this morning from Deacon Patrick, who has two blogs, "We Catholic," for business, and "Husband, Father, Deacon, Man," relating more personal items. We've been sending out "blog releases" for our new book, In Defense of Human Dignity (above), and this initiated Deacon Patrick's visit to the CESJ web site and this blog. Evidently you only need to bring the ideas of the Just Third Way to people and, once they find out that something is actually possible, it opens up virtually endless avenues of new thought and hope. Even if you don't feel like promoting In Defense of Human Dignity, you can still promote the Just Third Way by referring people directly to the CESJ web site, that of the Global Justice Movement, and the others listed in our sidebar.

• The first CESJ Board Meeting since the beginning of this blog takes place tomorrow, October 18, 2008 at CESJ headquarters in Arlington, Virginia. If you are interested in receiving a notice for future board and executive committee meetings, please let Dawn Brohawn, CESJ Director of Communications, know by sending her an e-mail at dbrohawn [at] cesj [dot] org. Participation is possible both in person, and by taking part in a telephone conference call that is hooked up at all meetings when arrangements are made in advance.

• Dan Parker, editor and publisher of the White Court Advisor in Canada, a print and internet publication, has reached a print circulation of 8,000. Dan, who maintains a web site for the Global Justice Movement, is also working on establishing a printing business in White Court.

• As of this morning, we have had visitors from 28 different countries and 46 states and provinces in the United States and Canada to this blog over the past two months.
As usual, there are a great many other news items that we haven't heard about because you haven't submitted them. If you're tired of reading about what we're doing, let's hear from you. If you have a SHORT item about how you are advancing the Just Third Way, send us a note about it at mgreaney [at] cesj [dot] org.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Thursday, October 16, 2008

Creating Wealth Out of Equations

Dawn K. Brohawn, Guest Blogger

In his recent essay, "Economic Dis-Equilibrium: Can You Have Your House and Spend It Too?" published in Edge.org (9/24/08), technology historian George Dyson (son of renowned mathematician and theoretical physicist Freeman Dyson) reveals a root cause of the impending implosion of our global financial system:
"The unlimited replication of information is generally a public good. The problem starts, as the current crisis demonstrates, when unregulated replication is applied to money itself. Highly complex computer-generated financial instruments (known as derivatives) are being produced, not from natural factors of production or other goods, but purely from other financial instruments."
What we see today is how something good and useful can be corrupted into something very harmful. All it takes is for hubris and greed to replace moral purpose and sound principle, not to mention a basis in reality.

The undisciplined securitization of debt, and the hyper-proliferation of derivatives born out of complex financial algorithms devised by Wall Street's best minds, have taken the rational management of risk and turned it into a gambling spree. As we know, gambling can become another form of addiction — so now we have ended up with gambling on gambling on gambling.

Louis Kelso, father of binary economics, predicted the present mess as the consequences of a system of monopoly capitalism enslaved to past savings, which mistakes financial symbols for real goods and services, channels money and credit for production to the haves and money and credit for consumption to have-nots, and keeps government in rising debt with future generations footing the bill. Kelso also provided the way out. (See "A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation," by Norman G. Kurland.)

Rather than "eliminating" money and the banking system, as some are calling for, we need to return to the original purpose for which these things were created. These are "social inventions" that are part of the "common good" to which every individual human being is entitled to have access. The problem is that power and access to social goods have become so concentrated that the "good" has been misused for the benefit of a few. Our money and credit systems have become debauched.

The plummeting (and rebounding) stock market is not what really worries me. It's when the real productive economy that feeds, shelters and clothes us, grinds to a halt for lack of sound money and credit.

We should be wary of throwing out the baby with the bath water, ere we wreak even greater havoc upon ourselves. Hopefully the Just Third Way message will be heard, that money must represent something real, that it is a promise that is meant to be kept, and, if created and used properly, is a social good that can turn powerless have-nots into economically liberated haves.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Wednesday, October 15, 2008

Reaching Bottom with the Washington Post

Do squeaky wheels ever get greased? Stay tuned, and we'll find out. We've been letting the Washington Post off the hook for a while, but today's edition had a well-written and insightful column by Steven Pearlstein that was, unfortunately, based on a disproved Keynesian dogma: that capital can only be formed out of existing accumulations of savings. Fortunately, we're working on getting out a new edition of Dr. Moulton's book, which should prove invaluable to people like Mr. Pearlstein, and help the powers-that-be start using money, credit, and banking as designed and intended.

Dear Sir(s):

While I agree with Steven Pearlstein that we have yet to "reach bottom" in the financial crisis ("Buckle Up — We Haven't Reached Bottom Yet," Washington Post, 10/15/08, D1), his analysis of what is needed for recovery is based on an incomplete understanding of money, credit, and banking, as well as the process of capital formation. Contrary to Mr. Pearlstein's implicit assumption, we do not need to cut consumption and save before investing. This is a Keynesian dogma disproved by Dr. Harold Moulton of the Brookings Institution in his 1935 monograph, The Formation of Capital.

Mr. Pearlstein is absolutely correct that, should matters proceed along Keynesian lines, the already-weakened financial system will only get weaker. The solution, however, is not to bite the bullet and cut consumption. Rather, we need to reorganize the financial system along more rational lines to enable more people to realize Keynes' "effective demand" without the need for the government to create more debt-backed currency with its consequent inflation.

Commercial and central banking (as opposed to "deposit banking") were invented to allow people to obtain credit and finance capital formation without first saving. Keynes, however, dismissed the idea that money could be created through the banking system to finance industrial, commercial, and agricultural projects that would pay for themselves out of future earnings. This is a process called "forced" or "future" savings. Keynes believed that only the State could create money in this way, backed by debt instead of assets, to redistribute wealth and thereby generate effective demand.

Dr. Moulton demonstrated that demand for capital ("investment") follows consumer demand; that from 1830 to 1930, periods of increased investment were preceded in every case not by saving — cuts in consumption — but by increases in consumption! The money to finance new capital formation in response to the increased consumer demand did not come from existing savings, but from the extension of bank credit for investment in sound capital projects.

Further, Dr. Moulton proved that by cutting consumption in order to finance economic recovery, recovery is actually slowed, if not halted altogether, as in the "mini-depression" of 1936-37 when the false stimulus of inflation and currency devaluation started to wear off. The real increase in effective demand caused by the war in Europe, not the artificial demand created by the Keynesian programs, brought America out of the Great Depression.

Do we need a war to bring us out of the current crisis? No. We need simply create money for capital formation in ways that make new owners of that capital out of people who previously owned little or nothing in the way of income-generating assets. These new owners will use the income from their capital first to force savings to repay the acquisition cost (a process called "self-liquidation"), and then use the income for consumption, not reinvestment. This will generate real effective demand instead of the "phony" effective demand of inflation.

A program to achieve this much more rational goal is called "Capital Homesteading for Every Citizen," from the book with the same title. It is well worth considering when the alternative is more of the same, only worse.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Tuesday, October 14, 2008

Is the United States Now Socialist?

Judging from the screaming banner headlines and the self-serving justifications of politicians and financiers being given for the semi-nationalization of a number of banks in the United States, socialism is well on its way to being established as national policy. The continuing stream of bailouts is bad enough. To have the State take over even a portion of the direct ownership of the means of acquiring and possessing private property (money and credit), however, is even more dangerous.

The powers-that-be probably regard this as a "temporary" measure to meet the current emergency. You don't have to be a very good student of history, however, to know how frequently "temporary" solutions have a way of becoming permanent, whether you're talking the expedient of the living wage to meet workers' income needs while presumably on the way to becoming owners, to the State itself that supposedly withers away under socialism. (For the record, we do not view the State as anything other than a necessary tool that, because of humanity's essential political nature, will never wither away. The problem is using the tool of the State properly, not abolishing it or making it supreme.)

The only way to justify what the federal government has announced is to regard it as an extreme measure to meet an equally extreme emergency — but that is not enough. In order to allow such an inroad on private property by the State, there must be a mechanism put in place to divest the government of ownership before the nationalization takes place. Anything less means that the bureaucrats will make continuing excuses to avoid surrendering control.

Such a mechanism has been proposed many times already on this blog: Capital Homesteading for Every Citizen. Before the federal government takes control, there should be a specific and timely plan to surrender control. Anything else is to virtually guarantee that socialism is here to stay.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):





Friday, October 10, 2008

Ben Stein: "How Not to Ruin Your Life"

The other day actor/economist/monotone Ben Stein published a short article on the financial crisis. Since we agree with just about everything he said (except for the fact that he strangely omitted any reference to our proposed solutions), we thought we'd send him a note, reproduced here. Please feel free to track down his contact information and send your own missive. (We did NOT include the "donate" button in our e-mail to Mr. Stein.)

Dear Mr. Stein:

Thank you for your article on the current run of financial fiascoes. I hope that more people pay attention to you than have been listening to us for the past year and more.

In light of that hopefully not ephemeral hope, I think it would be of great mutual benefit if you were to investigate the work of our "Center for Economic and Social Justice," ("CESJ"), a good introduction to which can be found on the web site, www.cesj.org, while running commentary can be found on our blog. Our "Just Third Way" consists of four essential "pillars" that we believe provide the foundation for an economically (and thus politically) just social order:

1. Limited economic role for the State,

2. Free and open markets,

3. Restoration of the rights of private property, particularly in corporate equity, and

4. Widespread direct ownership of the means of production.

Dr. Norman G. Kurland, president of CESJ, is a graduate of the Law and Economics program at the University of Chicago. Previously active in the Civil Rights movement, as Washington Counsel for Louis O. Kelso (inventor of the ESOP, or Employee Stock Ownership Plan, and co-author with Mortimer J. Adler of The Capitalist Manifesto, 1958 and The New Capitalists: How to Free Economic Growth from the Slavery of Savings, 1961), Dr. Kurland was instrumental in persuading the late Senator Russell Long of Louisiana to champion the enabling legislation for the ESOP in 1973. Dr. Kurland later served as Deputy Chairman for the Presidential Task Force on Project Economic Justice under President Reagan, the goal of which was to counter Marxism in Central America and the Caribbean Basin by implementing Kelso's ideas.

Our immediate, short term (partial) solution to the current situation is to implement the "Homeowners' Equity Corporation," or "HEC." Rather than go into it here, I invite you to follow the link. Our long term solution is Capital Homesteading for Every Citizen, ditto. More information about CESJ can be found on the web site. I invite you to look over the material and, if you have any questions or comments, give Dr. Kurland a call.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):