Friday, March 21, 2014

News from the Network, Vol. 7, No. 12


It is interesting to see how the stock market reacts to news.  What news is irrelevant, or whether it’s good or bad.  The fact is that with the speed of trades increased through the use of electronic media, the market can react instantly to anything and everything, and the gamblers and speculators are, of course, experts at making money whichever way it goes.

This makes sense.  Investors who are in for the long haul are (up to a point) indifferent to the day-to-day swings in the market.  Their goal is a steady and stable rise in the value of the “underlying” reflected in a steady growth of the value per share, a steady and predictable income stream from dividends, or both.

Gambling for fun and profit.
A gambler or speculator can’t wait that long.  He or she needs instant returns to be able to continue placing bets.  With the speed of electronic trading, it’s easier to spot a trend and take advantage of it, and go “long” or “short” depending on which way the smart money is betting.  It’s much better than betting on the dogs or horses, because you can place bets as to which stocks will win or lose competing against themselves, not other stocks!  You don’t have to worry about which comes in first or last, or by how much, just whether they’re going up or down.  With volume, a tiny change can mean huge profits, and with electronic trading, profits can be realized instantly.

No production, no consumption.
The problem the global economy faces in light of the easy money attitude of the markets and government, is how to promote not only production of marketable goods and services, but to make certain that everyone can participate in that production.  This is consistent with Say’s Law of Markets, to say nothing of St. Paul, who reminded the Thessalonians that anyone who refused to work (produce) shouldn’t expect to eat (consume).  So what are we doing to try and give everyone the opportunity to be productive?

• Mark the annual “Rally at the Fed” on your calendar for April 11, 2014.  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 provide an elastic and asset-backed reserve currency to promote private sector growth and development.

• We had some more interesting meetings early this week with people who are interested in exploring the application of Just Third Way principles in the insurance industry and community development.

• Discussions continue with Deacon Joseph Gorini, Chairman and CEO of Evangelization Enterprises Inc. Due to some unforeseen circumstances things are not moving as fast as any of us would like, but (as they say) “stuff happens.”  Given the massive inertia of bad ideas throughout the world, any progress or even signs of progress are both hopeful and gratifying at this point.

At least the tulip bulbs existed.
• Illustrating the dangers of dealing in virtual commodities (specifically Bitcoins) that have no inherent connection with the present value of existing or future marketable goods or services in the economy, the Mt. Gox bankruptcy, caused by the “disappearance” of something that didn’t really exist in the first place, now has a new twist: the owners “found” 180,000 or so Bitcoins in an old format “wallet” . . . and started moving them around after filing for bankruptcy.  Oops.  You’d think they’d be more clever at hiding non-existent assets from their creditors.

Hjalmar Horace Greeley Schacht
• Speaking of funnymoney, the recent “stress tests” of the U.S. banking system revealed that they have enough “capital” (i.e., currency backed with government debt instead of hard assets) to withstand a national or global economic downturn. Assuming, of course, that the U.S. currency retains its place as the global reserve currency, which is increasingly unlikely.  The Number One Rule for a reserve currency is that it must be asset-backed.  Not “may,” or “it would be nice.”  MUST.  And (surprise) government debt is not an asset.  It’s a liability.  A government can’t back its own currency with its own liabilities for any sustained length of time, or (especially) if it is not convertible on demand into an asset-backed reserve currency.  Elasticity of the reserve currency is a good idea, too, but is not (strictly speaking) essential, as Hjalmar Schacht proved with the Rentenmark.  That, however, is only one problem.  The other is the current mindset that assumes that government regulation, and not proper internal controls, is sufficient to ensure a sound financial system.  As long as financial institutions continue to combine incompatible functions, such as both investment and commercial banking, there is the potential for disaster.  This violates basic principles of internal control, which all the good will and government regulation cannot overcome.

• Amazon is still 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.”  Today it’s down a few more dollars to $10.93.  While you might have missed the best deal, that is still almost 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 53 different countries and 56 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, Australia, and Germany. The most popular postings this past week were “Thomas Hobbes on Private Property,”  “Aristotle on Private Property,” “The Fulton Sheen Guy,” “Economic Emancipation, III: Why NOT Capital Homesteading?” 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.

#30#

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