With everyone
obsessed with the effects of bad monetary and economic decisions, very few
people (if any of them) are paying attention to what is causing the problem in
the first place: lack of productive capacity on the part of ordinary people. If that can be fixed, then a major obstacle
to the establishment and maintenance of a just and sustainable economy has been
removed. Unfortunately, that is not what
the powers-that-be have been busy doing:
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| Carter Glass, Lynchburg, Virginia |
• Modern Monetary Theory. The
Federal Reserve wants to “loosen” the Volcker rule. This will allow banks — especially the
mega-banks — to engage in risky financial and securities transactions without
oversight until after the damage has been done.
The problem is that regulations like the Volcker Rule replaced the
internal controls of the system, such as the separation of functions between
commercial and investment banks. With
the repeal of Glass-Steagal, the internal controls were removed, and in less
than ten years the system imploded with the euphemistic “Great Recession”
(so-called to save the faces of the economists who say a depression is
impossible). With what is to all intents
and purposes wildcat banking all over again, it will be only a matter of time
before the system again implodes.
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| Adam Smith |
• Italy and the Stock Market.
The stock market “rallied” as fears waned that the latest Italian
crisis, now allegedly resolved with the formation of a government, however
tenuous. Italy’s withdrawal from the
Eurozone would, it was believed, destroy the European Union. This is ironic, because the nature of the
Euro as a completely managed currency backed exclusively with government debt —
meaning the ability of the various governments to squeeze money out of the
taxpayers if they happen to be productive — is such that it is
unsustainable. To tie the existence or
viability of the European Union to the frail reed of an inherently unstable
currency based on Modern Monetary Theory (MMT) might seem like a bad idea . . .
and it is. Unfortunately, financial
mavens everywhere seem convinced that the world can safely ignore fundamental
principles such as Adam Smith’s first principle of economics (“Consumption is
the sole end and purpose of all production”) or Say’s Law of Markets
(production = income), in favor of an economy in which the government controls
the economy by manipulating the currency.
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| Jean-Baptiste Say |
• Global Debt Crisis. The
key to the global debt crisis is first to realize that it is not, ultimately, a
debt crisis, but a lack-of-ability-to-produce crisis. In order to generate demand artificially to
try and sustain the economy, governments issue increasing amounts of debt or,
in the words of Jean-Baptiste Say, “multiply barren consumptions” that enable
people to consume without producing. The
real solution to a debt crisis is not to issue more debt, whether you’re a
government or a consumer credit institution, but to make actual, individual
people productive and link all new money creation to production. This creates both supply (production) and
demand (income), keeping the economy in balance without creating demand
artificially. The problem is that few
people own the technology that is doing most of the producing these days, so a
means must be found that would allow ordinary people without savings to
purchase capital and pay for it out of the future earnings of the capital
itself. This is the idea behind the proposals
of Louis Kelso, embodied in the Just Third Way.
• Shop online and support CESJ’s work! Did you know that by making
your purchases through the Amazon Smile
program, Amazon will make a contribution to CESJ? Here’s how: First, go to https://smile.amazon.com/. Next, sign in to your Amazon 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.
• Blog Readership. We have had visitors from 39 different
countries and 41 states and provinces in the United States and Canada to this
blog over the past week. Most visitors are from the United States, France, the
United Kingdom, Peru, and Canada. The
most popular postings this past week in descending order were, “The
First Problem Principle of MMT,” “New
Freedom? Or Old Slavery?” “Thomas
Hobbes on Private Property,” “Populism
v. Progressivism,” and “News
from the Network, Vol. 11, No. 21.”
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.
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