A new wave of euphoria is causing the stock market to rise after last week's gloom and doom about the unavoidable "double dip" recession. This is based on the fact that consumer spending is up, presumably signaling an increase in consumer "confidence" (or at least spending).
Of course, this is countered by the fact that there were "lots of jobs" "created," and yet the unemployment rate stayed about the same; that "consumer spending" and "actual consumption" should be adjusted for the rate of inflation — real inflation, not the government figures — and other factors, such as the anticipated flood of bills of credit with which the current administration hopes to stimulate the economy.
Consider this fact, though. The demand for capital — and thus sustainable job creation once the subsidies and artificial stimuli have been taken away — is derived not from consumer spending, but from actual consumption. If, due to inflation, you can charge a higher price for your products, garnering a greater proportion of real purchasing power by charging more for the same amount of marketable goods and services, there is no incentive to invest in new capital formation and hire more people. Why bother? You're making more money without putting in any additional effort or investment.
And what are you going to do with that extra money? Invest it in new capital and job creation? No, we already said there's no incentive to do that. Pay it out to your shareholders? No — again, there's no incentive to do that, and a great deal of disincentive if you think you'll need that money in the future to invest in new capital and new hires if the economy ever really picks up.
So where does all this "excess cash" go? To the stock market, where it fuels the violent swings we've been seeing since this whole mess began. You have to park the money somewhere, and it might as well be in the only sector of the economy where there is the possibility of gains whether the market goes up or down, through long or short sales, respectively.
Two problems. One, the secondary market produces no marketable goods and services for consumption, an absolute necessity for economic recovery, as Harold Moulton pointed out in 1936. Two, the effect of the cash flowing into Wall Street as a result of Keynesian "forced savings" and the operation of the Keynesian "liquidity trap" is the same as if you still had the low margin requirements that fueled the 1929 Crash. The source of the money is irrelevant. What matters is that the gigantic infusions of cash are distorting even the "normal" operation of the secondary markets in debt and equity, and setting things up for a worse crash than 1929.
So what are we doing to try and forestall the seemingly inevitable? Pass a Capital Homestead Act by 2012. And this week:
• Work is almost completed on the William Thomas Thornton book, A Plea for Peasant Proprietors. The text should be finalized next week, and advance publication review and endorsement copies should be available soon after in .pdf.
• We are collecting endorsements now. Consider requesting a .pdf of the text to write a review or endorsement. (Avoid words like "zombie" and "potato head," please . . . Guy.) Right now endorsements from the U.S. outnumber those from other countries two to one.
• Pre-publication bulk purchases of the book (ten or more copies) can be made now. Send an e-mail to publications [at] cesj [dot] org to enquire. Special prepublication quantity discounts are in effect until December 31, 2011, although we expect to get the book printed long before then. NO PREPUBLICATION ORDERS FOR LESS THAN TEN COPIES CAN BE ACCEPTED. Sorry for screaming, but we've got good reasons for that . . . which we won't waste your time listing.
• Universal Values Media has agreed to make some of its recent publications available on the same terms.
• Bill Conway sent us an e-mail in response to his request for ways to spend his money to create jobs with a canned statement that indicated he (or the secretary who got stuck reading the thousand or so e-mails) hadn't read or understood our e-mail.
• As of this morning, we have had visitors from 56 different countries and 48 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, the Philippines, and Bulgaria. People in Poland, Australia, Egypt, the United States, and the United Kingdom spent the most average time on the blog. The most popular postings this past week were "Thomas Hobbes on Private Property," "The Perils of Ignoring History," "Aristotle on Private Property," "A Plea for Peasant Proprietors, Part III," and "A Plea for Peasant Proprietorship, Part IV."
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.