Whether it's baited or bated, the global financial markets are waiting with it to see how the elections in Greece will either reinforce or counter the poor jobs report that came out this morning. Whichever way it goes, you can bet on one thing: everyone will miss the significance of a leading economic indicator (stock prices) reacting to another leading economic indicator (unemployment) that in Keynesian economics depends on the rate of capital investment, which in turn depends on the interest rate that has an inverse relationship with stock prices and which is determined by the rate of inflation (unless the interest rate is held artificially low or high) . . . stop me if any of this makes sense.
The bottom line here is that, if you follow the train of conventional reasoning from start to finish, it pulls into the same station from which it left. You end up right where you started. Stock prices rise because they rise. People are unemployed because they can't find work. And so on. In logic we call this a "circular argument." It's the sort of thing people say when they have no idea what they're talking about . . . like today's economists and politicians.
We won't even address the issue of categorizing the value of outstanding commercial and industrial loans as a lagging economic indicator.
Okay, you've convinced us. In binary economics, based on the banking principle (Say's Law as applied in the real bills doctrine), the amount of financing for new capital investment with future savings should be a leading, not a lagging economic indicator . . . but that would require abandoning the idea that capital can only be financed out of past reductions in consumption, not future increases in production.
In the past savings paradigm, you can only finance new capital if you or someone else has already produced more than others can consume, and the excess can be invested in new capital formation. That is, you can finance new capital because somebody did well enough to be able to save by cutting consumption and lent you the money, or the savings were transferred to you through the magic of inflation that forced others to pay you a higher price for less value, thereby increasing your profits that you can invest in more capital (Keynesian "forced savings"). Thus, in that Krazy Keynesian Paradigm, the amount of financing for new capital investment is a sign that the economy has done well.
In binary economics, an increase in outstanding commercial and industrial loans is an indication that investors think the economy will do better in the future, not that it has necessarily done well in the past. In the real world, investors finance new capital formation because they see consumer demand rising, not because they see people cutting consumption to save. The demand for new capital is derived from consumer demand for goods and services, not the other way around.
That being the case, increasing investment in new capital, and ensuring that the ownership and the full rights of property are vested in people who will use the income from the capital first to pay for the capital, then for consumption, should be a leading, not a lagging economic indicator. Binary growth is, in a sense, a self-fulfilling prophecy, not an indication of past performance.
Obviously it would be much more rational to examine the principles of the Just Third Way (the Kelso-Adler principles of economic justice, the four pillars of an economically just society, etc.) especially their proposed application in Capital Homesteading. The problem there, of course, is that the practitioners of Hysteria Journalism wouldn't have anything to write about, and would be limited to actually reporting the news — as we will now proceed to do:
• Dawn B., CESJ's poet laureate, had better look to her laurels. CESJ member Mark Reiners has just come out with A Kind of Speaking, The Metaphysic of Listening. Obviously we haven't had a chance to read it, and at 274 pages we're not going to be getting to it any time soon. This is just an announcement that the book is available from Café Press in trade paperback for $19.22. We encourage our readers to buy the book. If you want to review it, we'll consider publishing the review on this blog if you keep it under 500 words. You might, however, first want to explore getting a review into your local newspaper to get more exposure. For some reason, print book reviewers seem to have a greater credibility than bloggers.
• We're starting to get a little intellectual ferment and action from the annual Rally at the Fed and the CESJ celebration. Everyone tends to look a little like a deer in the headlights after it's over for another year, then wilts for a week before the energizing renewal starts to take root and the action can begin. We hope to have a short guide for advancing the Just Third Way drafted by the next Executive Committee meeting in a couple of weeks.
• After many years of service, Harriet Epstein has announced her retirement from the CESJ Board of Directors. While there is certainly no dearth of board members who work daily to advance the Just Third Way, Harriet will be sorely missed.
• The article by CESJ's Director of Research, Michael D. Greaney, in this month's Inside the Vatican, "Catholic Teaching and the Elections," seems to have generated quite a bit of positive comment and feedback. There has, in fact, only been one negative comment from a disgruntled economist seemingly wedded irrevocably to the discredited Keynesian past savings paradigm, and it was painfully obvious that he either hadn't read or didn't understand the article! The editor of Inside the Vatican has requested four more articles that, if accepted, will appear over the summer.
• As of this morning, we have had visitors from 63 different countries and 51 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, the UK, India, and Australia. People in the Netherlands Antilles, Mexico, the Philippines, France, and the United States spent the most average time on the blog. The most popular postings this past week were "Thomas Hobbes on Private Property," "Guide to Capital Homesteading," "Aristotle on Private Property," "The Keynesian Cargo Cult: Rot Bilong Keynes," and the Network News from February 4, 2011.
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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