Nevertheless, in spite of the growing gargantuan Keynesian deficits, the "fine turning" of the economy (so fine that the market keeps going up and down in greater and greater swings), and the fine tuning of the fine tuning . . . whether or not you can stomach the dissonance of the economic orchestra . . . the economic experts and policymakers keep assuring us that the recession is over, and the recovery is right on target.
We agree: the recession is over. We are now in a depression. That's because only in Keynesian Deficitland can going deeper and deeper into debt, inflating then devaluing the currency, diverting critical financial resources to prop up failed companies, funding gambling and speculation on the secondary markets, and starving the productive sector for financing — the primary market — be termed "recovery." Their song is ended, but the malady lingers on.
As Mark Spitznagel commented on the current monetary policy of the Federal Reserve in the Wall Street Journal this morning, "All in all, it seemed like an impressively engineered recovery. In reality, it was an ephemeral illusion caused by distorting investors' assessment of risk. Despite what zero interest rates were signaling, savers flush with cash weren't flooding the capital markets and credit wasn't expanding." (Mark Spitznagel, "The Fed and the May 6 'Flash Crash'," The Wall Street Journal, 05/28/10, A17.)
Well . . . credit wasn't expanding for productive purposes. Credit expanded at an incredible rate — a minimum of $1.2 trillion — to finance the purchase of toxic, "mortgage-backed securities" by the Federal Reserve. This was an egregious misuse of the money creation powers of the central bank. The Federal Reserve was established in 1913 to get the control over money and credit out of the hands of gamblers and speculators, keep the money power out of the hands of the politicians, and provide an "elastic currency" that expands and contracts according to the needs of the private sector, not the State. The currency, linked to gold to provide stability and a standard measure of value, was supposed to be backed not by massive government debt and toxic assets, but by private property rights in the present value of properly vetted and qualified industrial, commercial, and agricultural assets.
The gold isn't strictly necessary, but backing the currency with hard assets in the form of financially feasible (i.e., that pays for itself out of future profits) capital is essential. If you're keeping up with the new "Out of the Depths" blog series that we started this week covering various French financial experiments, you'll soon see what happens when the State cranks up the printing presses under the illusion that spending increasing amounts of money backed only by the State's promise to pay instead of hard assets in the form of productive capital. The only possible outcome is, and will always be, disaster.
So why aren't we sharing in the general rise in the fear level? Because we have a solution: the Just Third Way. It only requires that we get the word out into quarters where it will do the most good. That means you opening doors and presenting people in power with an alternative to the insanity of Keynesian deficits and "solutions" that promise to get us out of a sinkhole by digging us in deeper. To help you open doors, we have the CESJ website, and a growing amount of material presenting parts of the Just Third Way. For example,
• Hold your fingers and cross your breath. We expect to have our edition of Dr. Harold G. Moulton's The Formation of Capital out in the next couple of weeks. We'll let you know immediately how much, where, bulk/wholesale discounts, etc. Moulton was the first president of the Brookings Institution, Washington, DC's first "think tank," serving from 1916 to 1952 in that capacity. In 1934 and 1935 Brookings published a four-volume series on recovery from the Great Depression. Of the four-volume set (America's Capacity to Produce, 1934, America's Capacity to Consume, 1934, The Formation of Capital, 1935, and Income and Economic Progress, 1935), The Formation of Capital is the most relevant in our day and age and to the present economic situation. For one thing, Moulton's book shows how new capital can be financed without relying on the existing accumulations of the rich. Let the rich spend their money and have some fun. They can benefit the rest of humanity by giving Adam Smith's invisible hand a good, firm shake by increasing effective demand in the economy. For another, . . . actually, the most important thing at this point, new money can be created without running up government deficits à la Lord Keynes, the world's leading defunct economist to whom most of the world is enslaved. Income and Economic Progress, the "sequel" to The Formation of Capital, is insightful and interesting, but something of a "period piece." A more advanced and comprehensive proposal to "free economic growth from the slavery of savings" can be found in the two books co-authored by Louis O. Kelso and Mortimer J. Adler, The Capitalist Manifesto (1958), and The New Capitalists (1961). Not surprisingly, The New Capitalists cites Moulton's work at great length, and has the subtitle, "A Proposal to Free Economic Growth from the Slavery of Savings." Sound familiar? A specific program applying these principles can be found in Capital Homesteading for Every Citizen (2004).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.
• As usual, a number of very good meetings took place this week. Unfortunately, the nature of these meetings is such that until they start to bear fruit, there really isn't too much to say other than "Some meetings took place . . ."
• In the "Small is Beautiful" department, it is quite common for people who are baffled by today's economic and financial meltdown (which class includes pretty much anyone who lacks a working knowledge of binary economics and Capital Homesteading) to recommend a program of breaking things up, bringing them down to something vaguely termed "human scale" — which begs the question if you don't first define what you mean by "human." What they usually mean, of course, is that anything that is too big for a single individual to handle alone is beyond "human scale." This, however, contradicts Aristotle and his observation that "man is by nature a political animal" (The Politics, I.ii.) That means that people naturally join together to undertake tasks that are too big for one person. That is the whole point of "social justice." To promote the idea that "small is beautiful," supporters often insist that consumers should be prepared to make a sacrifice and pay more for goods and services provided by individuals and small companies, eschewing the less expensive products of big companies. We disagree, but if somebody else wants to pay more to get less, that is his or her choice. You can imagine our surprise, then, when a "small is beautiful" supporter chastised us rather severely recently for not being able to offer our publications at the standard industry discount of 55%. We use print on demand technology, which triples or quadruples the individual unit cost. That's fine — it also means that we don't tie up c. $50,000 or more in working capital in inventory that might not sell (and where would we store it?), and what would ordinarily be a fixed cost is now a variable cost. Print on demand technology is significantly more cost effective than regular printing for a small operation — with the downside that you can't beat the wholesale or bulk prices demanded or offered by the Big Boys. That's fine, too. They have their niche, which is volume sales of popular books. Smaller operations like think tanks with extremely specialized publications also have their niche . . . and must make up for the lack of volume with higher prices in order to cover costs.
• Nevertheless, we have a number of publishing projects in the pipeline (unfortunately not including a handbook on how to cut down on alliteration, thereby putting period to a possibly profitable publishing program). Among these are Supporting Life, an economic agenda for the Pro-Life and genuinely Pro-Choice movements, The Political Animal, a brief look at the place of the human person in society from a Just Third Way perspective, The Restoration of Property, an examination of the role of private property in the means of production in securing and protecting personal sovereignty, The Single Rate Tax, an outline of proposed tax reforms that would, if adopted, allow a "typical" family of four to avoid ALL taxes on income (including Social Security and Medicare) until aggregate income exceeded $100,000, and the current series on French Financial Experiments that focuses on disproving the weird Keynesian belief that you can get out of financial difficulties by making them worse. (Actually, the point of the series is that the only real way to get out of debt is to start producing — and producing in a way in which everyone can participate as owners of both labor and capital. Keynes may have believed otherwise, but you can't keep dividing up a shrinking pie by inflation and government deficits forever.)
• As of this morning, we have had visitors from 43 different countries and 43 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, Brazil, and India. People in Belgium, Egypt, Romania, Maldives, and the United States spent the most average time on the blog. The most popular posting is the weekly "News from the Network" with three of the top five spots, followed by "Thomas Hobbes on Private Property," and the "Prologue" to the new "Out of the Depths" series on French financial experiments (it has a happy ending and an object lesson for the United States on how to get out from under a crushing burden of debt).
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