Thanks to a less than dismal jobs report, the stock market is again skyrocketing. At least as of this writing. Perhaps the record sales experienced by Chick-fil-A on "Chick-fil-A Appreciation Day" has contributed to the rise . . . who knows? None of this is exactly rational. Not a publicly traded company? So what? "Job creation" is — if we understand it correctly — a lagging economic indicator. (Yes, it's classified as a leading indicator . . . but that conveniently neglects the fact that new hires only occur after consumer demand warrants adding more workers, and existing workers just can't handle any more overtime,) The stock market that reacts to an increase in "job creation" is also a lagging indicator. (Yeah, yeah, yeah, it's classified as leading, but it's reacting — or is supposed to be reacting — to improvements in historical financial data from companies . . . that's a lagging indicator in our book. It only becomes leading when you factor in speculative gains, which have little or no connection with what a company is actually producing or its profitability.)
The fact is, the economic and financial experts have it exactly backwards due to their assumption that you cannot finance new capital formation unless you restrict consumption. That is, in order to finance new capital, you have to cut consumption and save. Unfortunately, if you cut consumption in order to save to have the money to finance new capital, then there is no reason to finance new capital because there is no consumer demand to justify the investment in new capital.
As Harold Moulton observed, however, periods of rapid capital formation have always been preceded not by decreases in consumption, but by increases. Financing for new capital came not from past savings, but from future savings. Remarkably, however, the chief leading economic indicator — the increase in consumption — is not even on the list of leading economic indicators! It's "sort of" on the list of lagging economic indicators in the form of the ratio of consumer borrowing to consumer income, but that reverses the actual chain of events.
And if you think that's crazy, check out these news stories:
• The whole Chick-fil-A imbroglio teaches us a lesson on the power of capital ownership. As the social order is now structured, especially the financial part of it, most people lack virtually all power because they own virtually no capital. Consequently, whatever those with ownership — and thus power — want, they can, in general, get due to the propertylessness of people who think otherwise. Nowhere has this been more evident than in the dilemma that Catholics and others who oppose artificial contraception face with the HHS mandate. Were people able to gain enough income from both labor and capital to pay for their own healthcare needs, the whole issue would disappear — as would the political power of those who seek to impose their morality on others. Instead, many people believe themselves forced to accept the mandate because they might lose the other things the State provides. So what does "Chick-fil-A Appreciation Day" teach us? That when people have economic power they will exercise it in support of what they really believe, not what the State or whoever controls the State tells them they have to accept, with the implied "or else" hanging over them. Fortunately for Chick-fil-A, a meal there costs around $5 (according to a brief and unscientific internet survey; this writer has never been in a Chick-fil-A restaurant nor eaten their product, although seriously tempted recently to break a self-imposed ban on eating in fast food restaurants . . . unless somebody else is buying), well within the reach of most people. Given the chance and the economic power to exercise their choice, people voted — and Chick-fil-A experienced its best sales ever on a single day. Thousands of people stood in line at Chick-fil-A restaurants for hours to buy a meal. In contrast, a "Kiss-Off" protest of same-sex couples meeting outside Chick-fil-A restaurants to smooch scheduled for this evening doesn't seem to be garnering the same sort of enthusiasm, despite the fact that it costs nothing to participate and the media are giving it the liberal seal of approval.
• Past Polish President Lech Walesa has endorsed Mitt Romney for president — which ought to secure him one or two votes around Chicago. The problem is that Romney is still not saying anything about the need to implement an aggressive program of expanded capital ownership as the foundation for rebuilding the economy. Significantly, when CESJ met with Pope John Paul II, it was along with members of Polish Solidarity. His Holiness encouraged CESJ in its work, but few people seem to realize just why (or how) the unique combination of the social doctrine of Pius XI and the economic justice principles developed by Louis Kelso and Mortimer Adler that we call the "Just Third Way" may very well be the "last, great hope of mankind."
• Plummeting sales of American-made goods overseas as foreign economies continue to crumble and their currencies weaken are another area of concern in the upcoming election. This, however, would not be a problem if, as Harold Moulton pointed out, the U.S. economy (and other economies throughout the world, for that matter) would concentrate first on meeting domestic needs and building mass consumption power into us ordinary folk. Unfortunately, this cannot be done by inflating and thus weakening the U.S. currency, creating artificial stimulus for consumer demand through redistribution, or by mandates. It can only be done, as Kelso and Adler pointed out, by ordinary people being empowered with the means of acquiring and possessing capital, and then using the income from that capital first to pay for the capital, then for consumption. This would restore Say's Law and solve the problem of trying to increase market share in a declining economy, or trying to get people with no money to buy things they don't need.
• As of this morning, we have had visitors from 47 different countries and 49 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 Philippines, Canada, the UK, and India. People in Nepal, Indonesia, Spain, the Netherlands and Poland spent the most average time on the blog. The most popular postings this past week were "Aristotle on Private Property," "Thomas Hobbes on Private Property," "News from the Network Vol. 5 No. 27," "Lies, Damned Lies, and Definitions, IX: The Road to Nihilism — Scotus," and "Orestes Brownson and Socialism."
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.