Friday, May 7, 2010

News from the Network, Vol. 3, No. 18

The precipitous decline in the stock market yesterday — blamed on someone entering a few extra zeros in a transaction (yeah, right) — illustrates probably better than most things the dangers inherent in the peculiar modern idea that the secondary market for debt and equity ("Wall Street") is actually the primary market and, in fact, drives the whole economy. This is a little like saying that Goodwill and Salvation Army stores are the backbone of the retail market, and that outdated mis-sized clothing and Reader's Digest Condensed Books are the Holy Grail of consumer demand.

It is becoming increasingly clear that far too many people consider the secondary market — which produces nothing — the key to a sound economy. The problem is that the secondary market is on a hair-trigger, ready to go plunging a thousand points in minutes, or regaining presumably lost ground in half as many months as it took years for Wall Street to recover from the Crash of 1929. Needless to say, such volatility argues ill for either economic or political stability at a time when the world is badly in need of both.

We can add to the antics of the stock market the exultant cries that more people were hired in April than at any time in years . . . and (whisper) the unemployment rate (the official one, anyway, several percentage points below the real one) increased. How could that happen? Easy. You fire or lay off a bunch of expensive people with lots of seniority and high wage and benefits packages, then hire fewer people who will work cheaper to replace them. You 1) get more work for less money, 2) increase productivity when production is falling by using one disposable person to do two or more jobs (remember, "productivity" doesn't measure production, but production per labor hour when the bulk of production is due to capital, not labor), and 3) bolster the price of your company shares on Wall Street until people begin to catch on or somebody enters too many zeros into the computer.

Oh, yes. We also noted that the politicians are pleading with the banks to start lending to businesses, presumably to finance capital formation since everything is going into rebuilding inventories. In English, that means that businesses are forgoing long-term capital investment to try and cash in while they can on whatever consumers have left to spend. Harold Moulton said something about the foolishness of that after pointing out that the two keys to economic recovery are employment (real employment, not boondoggling) and production.

In accordance with Say's Law of Markets as refined by the application of binary economics, the way to build both consumption and investment is to build ownership of capital into as many people as possible, thereby generating both employment (as opposed to "job creation") and production of marketable goods and services.

In any event, here's what we've been doing this week to try and convince the powers-that-be that there is a sane alternative to the antics we've been seeing over the past week:
• On Monday the CESJ core group had a very good meeting with a local clergyman. A student of the natural law, he was interested in how the Just Third Way applied the precepts of the natural law to the problems of the economy, especially how every individual can participate in production through ownership of labor and ownership of capital. He asked a number of insightful questions. In response to "How would sum up the Just Third Way in three points?" Norman Kurland replied with the three principles of economic justice, 1) participation, 2) distribution, and 3) harmony or social justice. The clergyman agreed that the precepts of the natural law applied to everyone, although most clearly expressed in the three great monotheistic religions, Judaism, Christianity, and Islam. We hope to be invited to meet and make presentations to key members of his congregation and groups.

• Consistent with our ongoing outreach efforts, work proceeds apace on the republication of Harold Moulton's The Formation of Capital (1935). The new introduction is in final review stages, and the indexing manuscript is scheduled for completion this coming week.

• Earlier today we had a very good telephone conference with Lydia Fisher, author (I refuse to say "authoress" . . . maybe "writrix"? . . . feh) of Cinderella of Wall Street. A number of good possibilities for door opening surfaced, most of them linked to the potential synergy between Lydia's book, which offers a diagnosis of the problem, and the Just Third Way, especially as applied in Capital Homesteading. You might want to read the book, then drop Lydia a line or two, particularly if you see how to tie in the Just Third Way solution with efforts that pinpoint the problem. A special bonus today was Lydia's take on yesterday's drastic plunge of more than $1,000 that ended by being $350 down (today, eh, a mere $140 or so by COB). As someone who survived a working generation in the Belly of the Beast, her insights were as valuable as they were entertaining.

• With the completion of the second "Own the Fed" series, we have the most important pieces for CESJ's survey of the Federal Reserve and the reforms necessary to bring about an ethical and morally sound restructuring of the commercial and central banking system, first of the United States, and then the world. We are considering publishing the two parts in two volumes as soon as possible. The overall plan is to put together a series on the background of the Federal Reserve for the first volume, including an analysis of the Panic of 1907 and the true story behind the meeting on Jekyll Island in November 1910 (it's not what you think — whichever side you take), but the background isn't absolutely necessary, so, since they're completed (at least in draft form) and they might help offer insights to what's going on as well as outline a possible solution.

• As of this morning, we have had visitors from 42 different countries and 47 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, Canada, India, and Australia. People in Norway, Guatemala, Venezuela, Maldives, and Pakistan spent the most average time on the blog. The most popular posting continues to be "Kemp Harshman, Soldier of Justice," followed by "News from the Network," "Thomas Hobbes on Private Property," "The Great Society" in the "Own the Fed" series, and "Aristotle on Private Property."
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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