What with the beating the stock market took yesterday, there is still nothing to disabuse us of the notion that we’re seeing a replay of 1929: wild swings in the stock market in the first half of the year, slightly steady increases in the beginning of the third quarter, then skyrocketing increases and a crash in October.
|First Bank of the United States|
This led to the Great Depression when banks stopped lending as collateral lost its value. There were other factors, of course; we’re talking about the immediate cause, not the causes behind the cause. There is one significant difference between then and now, however, that no one seems to be paying any attention to: the amount of non-productive and government debt in the economy.
|Your Friendly Neighborhood Usurer|
Back in 1929, government debt was negligible compared to today, and consumer debt on the scale we see now unheard-of. Only the rich and the poor used consumer credit as a rule; the rich because it was convenient, the poor because they didn’t have the cash. Loan sharking was a serious problem, as the hundreds of magazine and newspaper articles, to say nothing of the usury laws, reveal.
Yes, installment sales were driving the market in consumer durables to some extent, and home mortgages were, as today, the most common way of purchasing a house, but consumer credit was not otherwise a significant factor in overall consumer demand the way it is today. That came in with the “invention” of the credit card in the latter half of the twentieth century.
|Say's Law: the Economy in 1873, 1893, 1929, or 2007.|
The economy of the 1930s was inherently strong, as was revealed when it became necessary to gear up for World War II. Had not the government started spending like a drunken sailor on leave to finance the New Deal and assuming a mountain of debt, it is highly likely that the country would have pulled out of the Great Depression in three to five years, as had happened in previous depressions, e.g., that of 1873-1878, and 1893-1898.
Instead, the government started manipulating the currency, expanded debt, took away gold convertibility, all of which helped make an unstable situation even worse, and doubled the length of the downturn . . . which was ended by the war, not by government programs. To prevent us having to rely on a war that we can’t afford to fight, here’s what we’ve been doing to put things back on a solid basis:
• Mark the annual “Rally at the Fed” on your calendar for the middle of April. This year’s could be a pivotal event, as the Federal Reserve did not begin operation until November of 1914, making this year the “real” centennial of the central banking system of the United States. What with the obvious need for an asset-backed and elastic reserve currency to secure the foundations of the global financial system, more attention should be paid to the original purpose of the Federal Reserve. It was not established to finance government, but (you guessed it) provide an elastic and asset-backed reserve currency to promote private sector growth and development.
|Some Good Meetings|
• We had a number of very good meetings this week. This was encouraging, especially after the previous two weeks of meetings getting cancelled or rescheduled at the last minute. All the meetings were very productive, and blazed a trail for possible future collaborations.
• Members of the CESJ core group met with a faculty member at the National War College to discuss the application of Just Third Way principles in sensitive areas to avoid armed conflict. The ideas were very well received, and CESJ was asked to put together a proposal to make a presentation to the faculty to introduce them to these ideas, possibly with an eye toward getting the Just Third Way into the curriculum.
|Commerce and Industry|
• The long-delayed meeting with Deacon Joseph Gorini, Chairman and CEO of Evangelization Enterprises Inc. and Apostolic Action Inc., finally came off. Due to illness of one of the expected attendees, the meeting was held in Arlington, Virginia, instead of Pennsylvania. The day-long meeting was, despite what could have been some serious glitches, extremely productive. Outreach to prime movers was discussed, some specific targets identified, and some prospective joint projects surfaced, especially involving media programing. Surfacing companies as models to test and demonstrate the feasibility and effectiveness of the application of Just Third Way principles by Equity Expansion International, Inc., was also discussed.
• The CESJ core group met with a representative of Tradition, Family, and Property, a Catholic lay organization dedicated to the restoration of sound values in society. While CESJ as a non-religious organization does not go into many areas in which TFP operates, or necessarily agree with some of its principles and motivations, we did see a number of areas in which collaboration could be fruitful.
• We have developed some “concept papers” for specific Justice University projects that, while they need work, could develop into something viable.
|R. H. Benson|
• Amazon has been using CESJ Director of Research Michael D. Greaney’s book, So Much Generosity, a survey of the fiction of Cardinals Wiseman and Newman, and Monsignor Robert Hugh Benson, as a “loss leader.” Last week the price for the $20.00 book was as low as $4.81. Today it is up to $12.83. While you might have missed the best deal, that is still nearly a 50% savings off the cover price. The book is published by Universal Values Media, Inc., which has a co-marketing arrangement with CESJ.
• As of this morning, we have had visitors from 56 different countries and 57 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 United Kingdom, the Philippines, and Germany. The most popular postings this past week were “Thomas Hobbes on Private Property,” “Aristotle on Private Property,” “The Fulton Sheen Guy,” “News from the Network, Volume 7, No. 7,” and “Henry George v. Cardinal Gibbons.”
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.