Friday, February 12, 2016

News from the Network, Vol. 9, No. 06


Perhaps the most interesting thing about the current fluctuations in the world’s stock markets is the fixed — and erroneous — belief that such things have anything to do with real economic growth.  The powers-that-be can’t seem to get it into their collective heads that “money” is the result of economic growth, not its cause.  Thinking that printing more money will “stimulate the economy” is putting the cart before the horse, and turning over control of money and credit to the politicians instead of to people who actually produce marketable goods and services.

In any event, here’s what we’ve been doing to try and get people to understand how money, credit, and economic growth are related (among other things):

"But the cat CAN'T grin if you don't participate!" said Alice.
Amazon Smile program.  To participate in the Amazon Smile program for CESJ, go to https://smile.amazon.com/.  Next, sign in to your account.  (If you don’t have an account with Amazon, you can create one by clicking on the tiny little link below the “Sign in using our secure server” button.)  Once you have signed into your account, you need to select CESJ as your charity — and you have to be careful to do it exactly this way: in the space provided for “Or select your own charitable organization” type “Center for Economic and Social Justice Arlington.”  If you type anything else, you will either get no results or more than you want to sift through.  Once you’ve typed (or copied and pasted) “Center for Economic and Social Justice Arlington” into the space provided, hit “Select” — and you will be taken to the Amazon shopping site, all ready to go.

"I don't need a Just Third Way (But keep it under your hat.)"
• The CESJ core group had a very good meeting on Thursday with a professor of international political economy at Webster University.  He was referred to CESJ by a priest in the Arlington Diocese with whom we met the week before, and who was very interested in the Just Third Way as a possible means to implement and maintain an economically just social order.  We will be following up in two weeks with another lunch meeting.

• This morning we received a shipment of books from the United Kingdom.  The research materials for the project on the Easter Rising of 1916 in Dublin came in a large bag with official seals marked “Royal Mail.”  Fortunately the contents are as impressive as the container.

• A number of people have expressed interest in the current blog series, “Socialist Delusions, Capitalist Illusions,” and think it should be turned into a CESJ publication.

• As of this morning, we have had visitors from 54 different countries and 51 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, India, and Kenya. The most popular postings this past week in descending order were “The American Chesterton, XVII: Sheen v. Radical Catholicism,” “Thomas Hobbes on Private Property,” “The Purpose of Production,” “The American Chesterton, XI: The Disciple of Common Sense,” and “The American Chesterton, XVI: What is Truth?”

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#

2 comments:

Dcn. Joseph B. Gorini said...

After the essentials in the economy come “derivatives.” “The Economist has reported that as of June 2011, the over-the-counter (OTC) derivatives market amounted to approximately $700 trillion, and the size of the market traded on exchanges totaled an additional $83 trillion... [a] huge amounts of money. For perspective, the budget for total expenditure of the United States government during 2012 was $3.5 trillion, and the total current value of the U.S. stock market is an estimated $23 trillion. The world annual Gross Domestic Product is about $65 trillion.
And for one type of derivative at least, Credit Default Swaps (CDS), for which the inherent risk is considered high, the higher, nominal value, remains relevant. It was this type of derivative that investment magnate Warren Buffett referred to in his famous 2002 speech in which he warned against "weapons of financial mass destruction." CDS notional value in early 2012 amounted to $25.5 trillion, down from $55 trillion in 2008.” ~ Wikipedia (https://en.wikipedia.org/wiki/Derivative_%28finance%29)

Michael D. Greaney said...

Deacon Gorini raises an important issue. The problem is not derivatives, per se — "money" is itself a derivative, as is every form of contract. Commerce and trade could not exist without derivatives.

The problem is when what backs up the contract has no objective, measurable present value. This is why I prefer the old term, "bill." The old "Banking Principle" folks like Henry Thornton (1760-1815) in his book, "The Paper Credit of Great Britain" (1802) carefully divided the financial instruments that today we lump together as "derivatives" into "real bills" and "fictitious bills," meaning financial instruments with "real" value, and those with no value, respectively.

Today's stock market speculation is driven by what in former days was called "the greater fool theory." As long as you can find somebody to pay more for something that you paid, whether or not it has real value, you can make money. This can be refined so that you can also make money when the price of something falls. The idea that "value" must be directly linked to the present value of an existing or future marketable good or service sounds like sheer insanity to today's "financial experts" who, as a whole, don't understand money, banking, credit, finance, or (especially) private property.

Thus, Thornton would classify today's government "bills of credit" — the vast bulk of government debt outstanding — as "fictitious bills" because they are only valuable if the issuing government can collect taxes to redeem them, and can only collect taxes if the citizens are productive AND grant the government the taxes. Instead of floating more and more debt to "stimulate the economy," then, it would make more sense to create money in ways that turn ordinary people into owners of productive capital so they can produce marketable goods and services, not try to live off redistributed wealth of others or government funny money.