It’s the most chilling headline you could read if you know
anything about defined benefit plans and the way the stock market really operates. This morning’s Washington Post blithely declared “Corporate Pension Plans at
Strongest Funding in Years” (Economy & Business, Friday, January 3, 2014,
A11). So how is this “chilling”? Isn’t this a good thing?
Increased funding sounds great until you realize where it
comes from: the astronomical rise in stock prices on the secondary market. These gains are purely speculative, and do
not reflect the health of the underlying economy.
The gains are all on paper, fueled by a veritable tsunami of
government debt backing massive amounts of new money being poured not into new
capital investment or even redistribution of existing wealth via inflation, but
into stock market gambling. Stock prices
are high because megatons of new money are being poured into the market.
You don’t have to know the Quantity Theory of Money equation
(M x V = P x Q) to know that if you have a few people with lots of money all
trying to buy the same thing, the price is going to go up. Prices aren’t going up because companies are
more profitable, companies look more profitable because gains are being
measured in dollars that are worth less . . . and may soon be worthless.
Consider this scenario: There are $1 million in the economy,
and wheat sells for $1 per bushel.
(You’re a wheat farmer.) The
government decides to monetize its debt and pours another $1 million into the
economy. Wheat rises to $2 per
bushel. You’re rich! . . . aren’t you?
No, because the people buying your wheat can only afford $1
per bushel. Their wages didn’t go up
because the new money all went into the stock market. Not only do you not sell half as much wheat
as you did before, you sell less because your customers have been hit with
price rises all around.
What if prices don’t go up?
Even then, you’re stuck, because the money is worth exactly half what it
was before. You might sell the same
amount of wheat for the same price, but you can only buy half what you did
before.
Having cheered you up to start the New Year, here are this
week’s news items:
• We received an e-mail from CESJ friend, retired Bishop
Herbert Hermes, O.S.B., in Brazil. He remarked that the dollar has fallen in
such disrepute that the place where he has been exchanging U.S. dollars for
Brazilian currency for years now refuses to accept them. They do, however, still accept Euros. Quite properly viewing this development with
concern, we explained that, as long as the powers-that-be in the United States
insist on expanding the role of the State beyond all bounds and increasing
government debt exponentially, both the economy and the currency will continue
to erode at an accelerating rate.
• As a side note to Bishop Hermes, we pointed out that the
U.S. government in conjunction with the Federal Reserve has broken the Number
One Rule for a reserve currency: it must
be asset-backed . . . and government debt
is not an asset. It is a liability. The Federal Reserve was established and went
into operation exactly a century ago to implement an elastic, stable, and
asset-backed reserve currency (the Federal Reserve Notes) for the United States
to avoid the twin evils of inflation and deflation. Financing the U.S. entry into World War I
using debt instead of taxes was the camel’s nose under the tent. Financing the New Deal the same way, and
abolishing gold convertibility transformed the asset-backed Federal Reserve
Note reserve currency into a debt-backed reserve currency, laying the
groundwork for potential hyperinflation if the politicians ever decided to try
and get out of the economic dead end imposed by Keynesian economics by printing
money.
• Sam N., a CESJ friend in Cleveland, sent us an article
about Father Heinrich Pesch, S.J., the great solidarist economist, who died in
1926. We don’t think Sam is aware of the
close ties between the Just Third Way and solidarism. The late Señor Alberto Martén Chavarría, founder
of Solidarismo Costarricense and a
highly placed official in the Costa Rican government, worked with Louis Kelso
and Norman Kurland, and believed that what we now call the Just Third Way is
fully compatible with the teachings of Pesch.
We’ve also found that the students of Pesch, especially the participants
in the Königswinterkreis discussion
group, were very close to the Just Third Way, lacking only a particular act of
social justice, the three principles of economic justice, and realization of
the potential of future savings for financing growth and expanded capital
ownership. CESJ is exploring relationships with various Jesuit universities,
including Georgetown in DC, John Carroll in Cleveland, and Canisius in Buffalo,
in part to revive the work of the solidarists and remove the socialist
accretions that have managed to infiltrate Catholic social teaching over the
years. (The primary goal is the
establishment of “Justice University,” but that can cover a broad range of
plans and projects.)
• The big news is still that Freedom Under God is available after nearly three-quarters of a
century. CESJ is now taking bulk/wholesale orders (please, no individual
sales). The per unit price for ten or
more copies is $16.00 (20% discount). Shipping
is extra. Send an e-mail to “publications [at] cesj [dot] org”
stating how many copies you want and the street address (no P. O. Boxes) where
you want them delivered. We will get
back to you with the total cost, how to pay, and estimated delivery time. All payments must be made in advance, and
orders are placed only after payment clears.
Individual copies are available from Amazon
and Barnes and Noble,
as well as by special order from many bookstores.
• CESJ offers a 10%
commission on the retail cover price on bulk sales of publications. If you broker a deal with, for example, a
school or civic organization that buys a publication in bulk (i.e., ten copies or more of a single title),
you receive a commission once a transaction has been completed to the
satisfaction of the customer. Thus, if
you get your club or school to purchase, say, ten cases of Freedom Under God (280 copies) or any other CESJ or UVM
publication, the organization would pay CESJ $3,920.00 (280 copies x $20 per
copy, less a 30% discount), plus shipping (the commission is calculated on the
retail cost only, not the shipping). You would receive $560.00. Send an e-mail to “publications [at] cesj [dot] org” for copies of flyers of CESJ and
UVM publications. (CESJ project
participants and UVM shareholders are not
eligible for commissions.)
• So Much Generosity,
the collection of essays about the fiction of Nicholas Cardinal Wiseman, John
Henry Cardinal Newman, and Monsignor Robert Hugh Benson by Michael D. Greaney,
CESJ’s Director of Research. The book is
now available on Amazon
and Barnes and Noble,
and is also available on Kindle.
Many of the essays incorporate elements of the Just Third Way. The book is priced at $20.00, and there is a
20% discount on bulk orders (i.e.,
ten or more), which can be ordered by sending an e-mail to publications [at]
cesj [dot] org.
• As of this morning, we have had
visitors from 57 different countries and 55 states and provinces in the United
States and Canada (Wyoming is still being stubborn) to this blog over the past
two months. Most visitors are from the United States, Canada, the United
Kingdom, Nigeria, and the Philippines. The most popular postings this past week
were “Thomas Hobbes on Private Property,” “Some Thoughts on Money, Part II,” “Aristotle
on Private Property,” “Voluntary Taxation? Not in a Free Society,” and “Why Did
Nixon Take the Dollar Off the Gold Standard?”
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.
#30#
