In case you were wondering how
people are benefiting from all the presumably wonderful economic growth (e.g., the stock market booming, falling
unemployment, protection of America’s infant industries, etc.), it’s a good idea to keep in mind that there is a difference
between the collective and the individual human person. In the aggregate — the collective sense —
things may be going great, per capita
income is $1 million . . . except that means one person gets $300 million a
year, and the other 299,999,999 people get zip.
And why not redistribute by abolishing private property for one guy so
the 299,999,999 can have it? Because
abolishing private property for one means abolishing it for all. Why not just figure out a way to make
everybody productive instead of just one person? Or you end up with what we have today:
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| Henry Simons |
• Federal Reserve Rate Raises. The Federal Reserve is once again raising
rates, the stated reason being the need to put a damper on inflation. Although this is by now the “classical”
Keynesian counter-cyclical approach, it is difficult to see how raising the
cost of doing business is supposed to prevent the price level from rising. A much better — if still inadequate —
suggestion came from one commentator in this past Tuesday’s Wall Street Journal: raise the reserve
ratio to a more reasonable level, one sufficient to allow banks to hold enough
in reserves to meet a sudden downturn and demand for liquidity (“The Fed Should
Raise Rates, but Not the Ones You’re Thinking,” WSJ, 08/21/18, A15). This
would improve the “capital-asset ratios” of commercial banks, which the Federal
Reserve has the power to do by up to 2.5% without getting special
permission. Here’s an idea, however,
dating from the 1930s that was never implemented, primarily because in the form
it was proposed it didn’t really address the underlying problem and had the
added danger that there were no safeguards to prevent a government takeover of
the monetary and credit system . . . since it was essentially a proposal to
give government complete control over the monetary and credit system. It was Henry Simons’s “Chicago Plan,” which
called for the abolition of commercial banking, the transformation of all
commercial banks into pure banks of deposit, government control over the amount
of money to be created, and 100% reserves in the form of government debt. Simons himself refused to endorse his plan
because it gave a monopoly over money and credit to government, and he was
completely opposed to monopolies. What
interests us is the 100% reserve requirement, which need not be in the form of
government debt, and in fact should definitely not be. So, what should back the currency? Private sector hard assets in the form of
sound, financially feasible capital projects and existing inventories of
marketable goods. The Federal Reserve
System was, in fact, instituted to create money by “accepting” commercial paper
and non-speculative asset-backed private sector securities which would be used
to back new issues of currency and the creation of demand deposits. The provision permitting the Federal Reserve
Banks to deal in “secondary government securities” on the “open market” was
intended to retire all currency backed by government debt so it could be
replaced with currency backed by private sector assets. If all loans made by commercial banks were
restricted to business loans, and all loans were immediately rediscounted to
the Federal Reserve, all new money created by commercial banks would
automatically have 100% reserves behind it.
That, of course, still leaves the question of what to do about the
massive money creation by consumer finance institutions, but that is another
issue.
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| Hmmm. Perhaps not entirely accurate. |
• Food Stamps and the Work Requirement. While it is more than easy to sympathize with
people who are outraged at other people who receive food stamps and appear to
eat better than those who work and pay full price for everything, to demand
that people “work” in order to qualify for assistance because they have
inadequate or zero wage income sort of misses the point. While it will always be possible to find
people who know how to work the system — they’ve been around from the dawn of
time; free riders are nothing new — most people would prefer to gain income
legitimately, through labor, ownership, or both than be dependent on the
dole. Instead of trying to figure out
ways for people to “earn” charity, then, it would be far better to have a
program where they can earn ownership of self-liquidating capital, become
productive, support themselves, and contribute to the support of those less
fortunate without worrying whether or not they “deserve” it. A program like Capital Homesteading
would go a long way to reducing redistribution through the tax system almost to
the vanishing point, which is a better response than either demanding that
people “earn” charity or condemning people whose sense of justice is outraged
by what looks like some people taking advantage of others.
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| Do you suppose there's anything to "No such thing as a free lunch"? |
• End of the Greek Bailout. Alexis
Tsipras, the Prime Minister of Greece, has declared the end of the bailout,
proclaiming a “day of liberation.” In a
sense it is, but the problems underlying the need for the string of bailouts
continue and bode well (or ill) to cause more bailouts in the future unless
corrected. And the chief problem is the
fact that consumption for the average Greek far exceeds production for the
average Greek, and the slack has to be made up somewhere . . . and that “somewhere”
has been government debt, just as it has for almost every country on
earth. In a collective sense, this doesn’t
make any difference; Keynesian economics is built solidly on the assumption
that there is no difference between the individual human person and the
collective. As far as actual human
beings are concerned, however, it makes a great deal of difference. If A produces twice what he consumes, and B
doesn’t produce anything, collectively there is enough to go around. In the real world where actual people live, A
can have all he wants and set aside something for tomorrow A produced it, so A
owns it and can do with it what he likes) and B can go take a hike . . . unless
A feels charitable or the government steps in and takes A’s presumed surplus
and gives it to B. Of course, if the
government does that, then A might decide not to produce that surplus for B’s
benefit instead of his own, unless the government figures out a way to take
from A to give to B without A catching on, at least too quickly. Unfortunately, the As in the Greek economy
caught on, and stopped producing, leaving the Bs hanging out to dry. Of course, the real solution is to make B as
well as A productive so that each produces for himself. Given the power of the ordinary person to be
productive, it’s astonishing how productive they can be. For example, in France following the
Franco-Prussian War the country produced its head off and paid off an indemnity
specifically intended to destroy France economically forever in less than three
years. Of course, ownership of the means
of production in France was broadly owned so that ordinary people could be
productive. If Greece instituted
something along the lines of a Capital Homestead Act
and put forth a comprehensive national effort to retire the debt — an all-out “war
on debt” — it is entirely possible that the economy would be on a sound footing
within three to seven years, and the debt be repaid without austerity in less
than a century (with a great deal of pain, give it a generation, say less than
a quarter of a century).
• 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 30 different
countries and 47 states and provinces in the United States and Canada to this
blog over the past week. Most visitors are from the United States, Peru, India,
and Australia. The most popular postings
this past week in descending order were “The
Accountable Capitalism Act,” “The
Birth of Social Catholicism,” “The
Rise of Democratic Socialism,” “The
Unusual Suspects,” and “News
from the Network, Vol. 11, No. 33.”
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#