Friday, April 9, 2010

News from the Network, Vol. 3, No. 14

It's unofficial: the unemployment rate in March 2010 at 17.5% was higher than the unemployment rate in September 1932 at 17.4%. Of course, the official figure still hovers around 9.7%, so the alleged recovery from the Great Recession is still going strong. It's just that a lot of people don't know it yet. They don't have jobs, and they're not reading the good news: they need that newspaper to keep off the rain because they lost their homes to foreclosure.

The problem, of course, is that the powers-that-be insist on applying Keynesian solutions when Keynesian economics does not describe reality. A much better framework, and one that actually makes sense without a lot of confusing graphs and econometric doubletalk, is binary economics, also called (as we might expect) "the economics of reality."

That being said, there hasn't been much going on this week that is reportable, but this is what we've been doing:
• Our research into the work of Harold Moulton reveals what can only be described as frightening parallels between the situation in the early 1930s and today. Just as then, there was a moderate recovery from 1931 to 1932. Just as then, the economy was suffering from 17.5% real unemployment. The financial system outside of Wall Street (i.e., the real economy) was flooded with "toxic assets" that had lost a great deal of value, so that businesses lacked adequate collateral, and commercial banks had seen their asset portfolios shrink rapidly. Consequently, what should have been only a slight dip in the recovery — inability to meet debt service payments throughout the productive sector — caused widespread failure throughout the banking system. Lack of collateral prevented widespread rescheduling to bring the interest rates down to more reasonable levels, while the failure to meet the payments meant that the banks themselves went into insolvency. The situation is little different today.

• One of the problems noted by Moulton that both contributed to the Great Depression and made recovery slower was the "capital flight" from many countries seen to be in trouble . . . just as is the case in Greece (and Spain, Portugal, Ireland, and Italy) today. Investors are pulling money out of Greece, just as they pulled money out of the shaky economies in the early 1930s, and hoarding it rather than trying to find replacement investments.

• One mistake that was not made in the 1930s was to jettison systemic internal controls on the financial system and then attempt to try and fix things by State mandate. Glass-Steagall helped stabilize the financial system in 1933, just as its repeal in 1999 helped set the stage for the current economic crisis..

• Plans are proceeding apace for the peaceful demonstration outside the Federal Reserve on Thursday, April 15, 2010. Please visit the "Own the Fed" website for details, and plan to attend.

• This week's activities have largely been in preparation for next week, so there isn't much news to report. We have been making outreach efforts as opportunities present themselves, but — as always — we rely on you to open doors for us to help get the message across.

• We received word this past week that the home of Gary Davis, First World President, burned to the ground recently. Checking out his website,, there was no information available, and what was there was somewhat out of date. We do know that contributions are being solicited to help Gary out. We should have more information in a future posting.

• As of this morning, we have had visitors from 48 different countries and 46 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, the UK, Brazil, and Ireland. People in Venezuela, Maldives, Rwanda, Finland, and France spent the most average time on the blog. The most popular posting continues to be "Thomas Hobbes on Private Property," followed by Guy Stevenson's "Expanded Capital Ownership Now," "The Crash of 1929" in the "Own the Fed" series, "Full Employment" and "Henry Ford and John Maynard Keynes," also in the "Own the Fed" series.
Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.


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