A while back, Alan Greenspan made a comment about
“irrational exuberance” and the market, or something like that. Seeing the Dow soar today after this week’s
wild fluctuations (below) and you start to question your own sanity — are the
experts really believing what they’re telling us about being in a “recovering”
economy? Are Happy Days really here again?
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| Panic of 1873: "I Told You So" |
Recovery following the Panic of 1873 and the Great
Depression of 1873-1878 took a year.
Recovery following the Panic of 1893 and the Great Depression of
1893-1898 took two years . . . but only if you count 1897, which some people
include in the Great Depression — call it a year, too.
The Homestead Act allowed consumption power to catch up to
productive power to end the Great Depression of 1873-1878. Crop failure in Europe and bumper crops of
wheat in the U.S. in 1897 and 1898 provided the consumption and the production
to end the Great Depression of 1893-1898.
 |
| William Jennings Bryan, 1896: An honest man with a bad idea. |
There was no government stimulus or other assistance in
either case. The issue was the money and
credit system, and the need to supply the country with adequate liquidity and
an elastic, asset-backed reserve currency to enable the economy to respond quickly
and adequately to economic downturns.
The “equipment” to do this was put in place with the Federal Reserve Act
of 1913.
. . . which was hijacked first to finance World War I, and
then the New Deal. As a result, the
Great Depression of 1930-1940 took a decade to end, despite massive government
involvement, and it was World War II, not the government, that ended the
Depression. It also dismantled the key
instrument essential to a sound economy: an elastic, asset-backed reserve
currency to foster growth, and it’s replacement with a debt-backed reserve
currency that inhibits growth.
We now see the results of Keynesian theory becoming
ever-more apparent:
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| Dow, September 3, 1929: $381.17; July 8, 1932: $41.22. 89.18% drop. |
• Earlier this week,
the Dow fluctuated wildly, a spread of nearly 400 points. No one seems worried about the increasing
volatility of the stock market, the sort of thing that was going on about this
same time of year in 1929. The fact is,
the gamblers are able to make vast amounts of money on the fact that the stock market
has such fluctuations. By hedging, it
becomes irrelevant to them whether it’s up or down. It only needs to move, and the broader the
swings, the better. Did you know that from September 3, 1929, to July 8, 1932, the Dow went down 90%? A similar decline today would mean the Dow would be at $1,800. Short sellers and hedge fund operators would make an incredible fortune. Ironically, short sellers were blamed by some for the 1929 Crash, but it was the speculators creating vast amounts of money who caused the bubble, and they didn't have hedge funds to cover themselves. A crash now would benefit the speculators instead of ruining them.
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| "These shares are marked, pardner." |
• The Federal Reserve
is, according to one authority, “out of control.” Here’s an interview given by David Stockman
on “Why We Need to Get
the Debt Under Control.” All the
money that’s been created for stimulus (or most of it) has been funneled into
speculation, driving the stock market up to ridiculous highs . . . with nothing
behind it. Caution: Stockman thinks
we’re in recovery, and yet thinks things have reached a critical state. He’s right about things getting critical, but
he’s delusional if he thinks we’re in an economic recovery. He also underrates the terrorist threat. Be that as it may, the only solution is Capital Homesteading
— as soon as possible.
• The crash might not be in the future. It may be going on right now. On Tuesday, analysts pointed out that the
“blue chips” in the Dow have been lower than normal, a “hidden bear market”
that is threatening all stocks, while the speculative issues are keeping it up. In other words, the stocks that actually have
value are down in the dumps, while those without something behind them are
skyrocketing. On the plus side, when the
market crashes it will drain excess liquidity out of the system. On the bad side, because the money is backed
by government debt, the debt will remain even after the money is gone — upwards
of $18 trillion. This cannot be repaid
except by rebuilding the tax base — without
more government debt money — and becoming sufficiently productive to generate
government budget surpluses to retire the debt, and that will never happen without Capital Homesteading.
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| "Please, Sir: they took Pa's pension to fund welfare, so we're on welfare." |
• Last Friday, the
U.S. Treasury “tapped” into the TSP federal retirement fund to get around
the debt ceiling. We’ve said it before,
but wouldn’t it be a great idea to start worrying about how to get the U.S.
productive again so that there’s something to tax, and the government doesn’t
have to create money? The government
could actually live within its means — and there would be means to live within.
• We heard back from
the editor of the journal that published an article that misrepresented CESJ’s
position. He is giving us the
opportunity to submit an article explaining CESJ’s actual position. We’ll keep you posted as to the progress we
make, especially if the article is accepted.
• We finished the
first draft of the book we’ve been working on, and hope to have the first
run-through of the indexing and bibliography completed by next week, when we
hope to send it off to a prospective publisher.
• The first draft of
the revision of Capital Homesteading for
Every Citizen has been turned over to the CESJ core group for review and
editing.
• As of this morning, we have had
visitors from 46 different countries and 44 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, Canada, Columbia, and Keyna. The most
popular postings this past week were “Thomas Hobbes on Private Property,” “Lord
of the World, I: The Papal Reading List,” “Lord of the World, VI: Reformation
and Transformation of Truth,” “The Purpose of Production,” and “Lord of the
World, V: Benson, Money, and Modernism.”
Those are the happenings for this week, at least those 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, so we’ll see it before it goes up.
#30#