Evidently, the powers-that-be in the world of economics and finance haven't quite figured it out yet. Today (at least as of 1:00 pm EDST) the Dow is crashing and burning. Cue meaningless announcement from some politician, business human, or central bank talking head that will instantly reverse the downward trend due to irrational optimism.
The ostensible cause is a disappointing earnings report for the last quarter. What no one seems to be suggesting is that (just maybe) the earnings aren't quite as disappointing as the hopes of speculators were overblown. The so-called growth that the rise in the stock market has been signaling is the result not of sustainable increases in actual, non-inflationary growth, but of pouring money into the stock market instead of either paying it out to shareholders or (much less desirable, but at least semi-rational) using it to finance new capital formation.
Added to that is the so-called "stimulus" money that appears only to be stimulating stock market speculation. At least during the New Deal of the 1930s the money was actually paid to people who used it for consumption, thereby stimulating consumer demand directly, albeit in an unsustainable fashion. These days, the only increase in demand we see is for some place for the recipient corporations to park the cash in the most profitable way — the speculative stock market.
Of course, the best use for any of the cash received by a business is to pay it out to its owners. The purpose of production is, as Adam Smith may have mentioned, is consumption. It's not reinvestment. If corporations paid out all their earnings in the form of tax deductible dividends and financed expansion and growth by issuing new equity shares purchased on credit by people who currently own no capital, we would see a rather steep increase in both sustainable demand and the production to meet that demand. Stock market speculation? Let the rich lose their money that way. (Know how to make a small fortune on Wall Street? Start with a large fortune.)
To help establish that happy state of affairs (the poor getting rich, not the rich getting poor), here's what we've been doing over the past week:
• We have increased outreach to "midlevel" media figures and venues. This week a concerted effort is being made to connect with one such individual, the founder of a religiously oriented e-zine that has been successful since its founding two years ago. Our goal is to get the editor to interview Norman Kurland, publicize our ideas and books, and anything else that might come to mind. Do not overlook the mid-level bloggers who tend to be more open to the ideas of others than the "name" bloggers who tend to be more concerned with promoting themselves.
• Mitt Romney's talk at the annual Al Smith Dinner in New York might just have been the most carefully crafted and highly nuanced speech of the entire campaign. Mr. Romney seems to have been studying Ronald Reagan's delivery, not to mention doing a lot of rehearsing. The only thing missing was a realization that what this country needs is (as Reagan pointed out) is a [Capital] Homestead Act. (Reagan called it an "Industrial Homestead Act," but we think that "Capital Homestead Act" is a better term.)
• Despite a number of unexpected factors that interfered with sales, there was a respectable number of book sales at a church choir bake sale this past Sunday. The choir earned 20% of gross sales, which may suggest to schools and churches a fundraiser that might do more good and be more beneficial than wrapping paper or cookie dough: CESJ publications.
• As of this morning, we have had visitors from 57 different countries and 47 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 United Kingdom, Australia, Canada, and South Africa. People in Slovenia, Taiwan, Estonia, Portugal, and Australia spent the most average time on the blog. The most popular postings this past week were "Thomas Hobbes on Private Property," "Aristotle on Private Property," "The Theory of Quantitative Easing," "What Really Happens in Quantitative Easing," and "Own the Fed, Part I: Introduction."
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.