Monday, April 18, 2016

More Monetary Madness

If it looks as if we’re focusing a lot on money lately . . . it’s because we are.  With the annual Rally at the Federal Reserve only a few days away, it’s a good idea for people to know what money is and why we think monetary (and tax) reform are key to the implementation and maintenance of an economically just society.

A properly run central bank is essential to an advanced economy.
And when we say reform, we mean reform, not abolition or deform.  “End the Fed”?  Hardly.  A central bank is essential to an economy that has moved beyond subsistence.  The problem is that central banks have been egregiously misused from the very beginning to finance growth of government instead of private sector growth.
Governments’ control of future savings to finance itself left private sector initiative for economic growth with the rich who by definition control past savings.  This is capitalism, a system in which a relatively small private élite control capital.
In reaction, people demanded that some form of the State take over control of capital — keeping in mind that, as Louis Kelso said, ownership and control are the same in all codes of law.  This is socialism, the abolition of private property in capital.
Kelso: ownership and control are the same in all codes of law.
In both capitalism and socialism, a relatively small élite controls capital, leaving most people with wages and welfare as their only source of income.  Both capitalism and socialism are direct results of relying on past savings to finance new capital formation.  Both systems concentrate capital ownership, and both offend against the dignity of the human person.
By changing the way we finance new capital formation, however, we can get away from the slavery of past savings that capitalism and socialism impose.  We can do this by shifting to future savings: instead of using past reductions in consumption to finance new capital, finance with future increases in production, creating new capital that pays for itself out of its own future profits.  In this way, everybody can own capital without taking anything from anybody else, because anybody with a financially feasible project can own new capital, not just the rich.
That is why Capital Homesteading is so important, and why we are demonstrating at the Federal Reserve this Friday.

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