Once again we've managed to fall behind on the writing for the series on Say's Law of Markets and the real bills doctrine. Our excuse this time is that the next scheduled posting in the series is on the Panic of 1893 and the ensuing Great Depression — yes, Virginia, there was a Great Depression before the 1930s, much greater in scope than that which ran from 1930 to 1938. While there were calls to inflate the currency and devalue the dollar in the 1890s, as well as for massive job creation, the federal government did none of these things. In consequence, the (first) Great Depression dragged on from 1893 to 1897, while that of the 1930s was over as soon as the Second World War was able to put the economy back on its feet. If they had had experts willing to end either the first or second Great Depression sooner by announcing that fact, of course, they would have enjoyed benefits commensurate to what we have today.
In any event, we'll get to that when we get to it. (We're pushing hard on an unrelated project to get it out before Christmas, and it's taking a bit of time away from this blog and other non-profit matters.) What we'd like to look at briefly today is a recent article that appeared on Yahoo! News: "10 Signs The U.S. Is Losing Its Influence In The Western Hemisphere." We won't bother going down this rather grim "Top Ten"; even Letterman's turgid humor is more amusing. You can read the article for yourself, but evidently the new destiny that is manifest for the United States is to sink permanently into the status of third rate power, going hat-in-hand to the new top dogs in the world.
What you should keep in mind as you read it, however, is that there is not one single "sign" that the United States is "losing its influence" that Capital Homesteading would not only reverse, but put the United States permanently in the "Number One" spot for "influence." How? By exporting justice instead of competing in an artificial "lose-lose" global economy in which it is impossible for anyone to "win." The "comers" among the economies listed in the article are not really moving into the number one spot(s) by anything other than default, for the advantages they currently have are just as ephemeral as those presumably enjoyed by the U.S. after the land frontier closed down in the 1890s (vide the Great Depression of 1893-1897, above).
So, what is to be done? To replace the limited land frontier, we need to open up the industrial and commercial frontier. That's fine, you say, but how are we supposed to finance the acquisition of capital by people who don't have existing accumulations of savings, and who can't afford to cut consumption to start saving?
If you have to ask, you haven't been paying attention to the last three years of postings on this blog. As Dr. Harold Moulton explained in 1935 in The Formation of Capital — written to propose a financing strategy to get America out of the second Great Depression — new capital formation can be financed without recourse to existing accumulations of savings. By expanding commercial bank credit to finance new capital formation and releasing existing accumulations of savings to finance consumption, an economy can experience explosive rates of growth without being tied to the Keynesian "production possibilities curve" that takes the limits of growth imposed by past savings as a given.
Tie in Louis Kelso and Mortimer Adler's insights about the necessity of widespread direct ownership of the means of production, financed with "pure credit" as described by Moulton and collateralized with capital credit insurance and reinsurance, and you have a solid and sound proposal for putting America back on top — and keeping it there. Further, it doesn't have to be exclusive to the United States. Why shouldn't everybody in the world come along for the ride?
Why should America settle for being anything other than "Number One" — especially when we can make everyone else Number Ones as well?
#30#