Thursday, June 24, 2010

Have Mercy, I Say, Mr. Obama!

In the 1947 film Life With Father, Clarence Day, Sr. remonstrates with God over his wife's illness. "Have mercy, Sir, I say, have mercy!" he thunders. We are tempted to implore President Obama in the same words, although, perhaps, with less vehemence and more bewilderment. After all, Mr. Day, as played by the inimitable William Powell, was clearly certain that God would hear him. We cannot say the same for Mr. Obama, who is much less accessible than the Deity portrayed in Clarence Day, Jr.'s God and My Father (New York: Alfred A. Knopf, 1932), on which parts of the film were based. Still, we have to keep trying to reach him. There are just too many problems cropping up, the majority of which could be solved by the application of Just Third Way principles. To take a few examples,

The Economy

According to today's Wall Street Journal ("Fed Grows More Wary on Economy," A2), the nation's central bank "offered a subdued assessment of the U.S. economy." This is due in large measure to "developments abroad" and "signs that the U.S. economy hasn't built much momentum after turning around in mid-2009" — a "turnaround" that most of us seem to have missed. That is, countries and consumers aren't going into debt fast enough to generate the effective demand necessary to inflate the earnings of companies that want to use cuts in consumption to finance new capital formation, rather than Kelsonian pure credit and expanded capital ownership to do the same thing on a more financially sound, rational, and sustainable basis.

European Debt Crisis

Europe wants to get out of the current debt crisis by cutting costs. Obama wants them to get out of it by increasing debt. ("Merkel Rejects Obama's Call to Spend," Wall Street Journal, 06/24/10, A10.) While we've more sympathy with spending less rather than spending more, neither does anything to restructure the system so that productive activity takes the place of redistribution through inflation and the tax system. The underlying problem remains unresolved: speculation, gambling, and government spending are preferred over productive activity in which people can participate as direct owners of both labor and capital.

Confidence in the Executive

"Americans are more pessimistic about the state of the country and less confident in President Barack Obama's leadership than at any point since Mr. Obama entered the White House." ("Confidence Waning in Obama, U.S. Outlook," Wall Street Journal, 06/24/10, A4.) The Oil Aneurism — for which BP is now blaming the U.S. government! — that the pundits are now claiming is much worse than Katrina, with less response and effectiveness than Bush, the economy (vide, supra), immigration, the upcoming election, manipulation of unemployment figures, the escalating housing crisis, etc., etc., etc. People are still waiting for the change for the better Mr. Obama promised, not this constant stream of change for the worse.

Derivatives

In 1907, the president of the Knickerbocker Bank and Trust in New York City used the bank's assets to speculate in copper shares. The result was the "Panic of 1907" that almost destroyed the world's financial system. Consequently, commercial banks were prohibited from owning anything other than their own shares or government securities. In the 1920s, massive money creation by commercial banks to finance speculation by their investment banking divisions led to inflation of the value of shares on Wall Street and the Crash of 1929. Consequently, the Banking Act of 1933 — "Glass-Steagall" — separated commercial banking from investment banking. The partial repeal of Glass-Steagall in the 1980s gave us the Savings and Loan debacle. The full repeal in the 1990s gave us the current "economic downturn."

Congress is now valiantly trying to retain the ability of commercial banks and other financial institutions to "invest" in speculative instruments and promote consumer debt ("Negotiators Ease Finance Rules," Wall Street Journal, 06/24/10, A8), evidently to make certain that the gamblers and speculators continue to make huge profits from the increasingly wild swings in the stock market and promote the ephemeral "Jobless Recovery." ("Volcker and Derivatives," Wall Street Journal, 06/24/10, A20.)

Why not implement Capital Homesteading so that all new money created is linked directly to the present value of existing and future marketable goods and services through widespread direct ownership of the means of production? Let those with existing accumulations gamble and spend to their heart's content, increasing effective demand without redistribution by using savings — unconsumed production — to consume unconsumed production.

Please, Mr. Obama, have mercy, I say!

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