It seems almost incredible, but the
situation today and that of two hundred years ago are so similar as to make it
look as if we’re replaying the past with a vengeance. Society is dissolving in chaos, socialism is
being offered as a panacea, and a very bad, even destructive understanding of
money and credit virtually rules the world:
 |
| "I'm Irving Fisher. I'm great. Just ask me." |
• Pump With Trump. When the Dow Jones Industrial Average fell by
another 2,000 points or so earlier this week, President Trump vowed to
stimulate the market by pumping half a trillion dollars to save the gamblers of
Wall Street. As of this writing, Dow futures are moderately up in response to the favorable reaction in the
European markets. Looking back at the
financial history of the United States, it is interesting to note that Irving
Fisher, considered by Milton Friedman to be the greatest economist ever (with
the possible exception of himself), called for something similar following the
1929 Crash. It seems Fisher was heavily
invested in the market and kept insisting that it could only go higher and
higher, even after the Crash. To try and
ensure that it would (and recoup his losses), Fisher advocated “reflating” the
currency by pumping billions of dollars into the economy to raise the prices of
shares on Wall Street. The government
refused (although it did effectively the same thing when John Maynard Keynes
ordered it), and Yale University had to bail out Fisher. To his dying day Fisher insisted that his
plan had been correct and the government creates wealth by printing money
backed with its own debt, even though the equivalent scheme implemented at the
behest of Keynes caused “the Depression within the Depression.” What brought the U.S. out of the Great
Depression? World War II, not Keynesian
or Monetarist economic policies or currency manipulation.
 |
| "I'm Peter Lynch and I'm one up on Wall Street." |
• The Downer Dow. Perhaps a little reminder is in order about what
a stock market is — and what it is not.
A stock market does not create wealth.
It is a secondary market for existing equity shares and debt
instruments. It is not a leading
economic indicator or an indicator at all, but at best a gauge of how confident
the stock speculators are that prices will go up (go long) or down (go
short). It’s not even very useful as a
determinant of fair market value of debt and equity (although legally accepted
as such), as the prices of the instruments on Wall Street often have little to
do with the actual value of the “underlying,” i.e., the asset behind the
instrument. Peter Lynch made a fortune
by being able to gauge the probable real value of a publicly offered company
and correlate it with the behavior of the speculators on the Street. Read carefully, his books are manuals of how
to do this — if you manage to distance yourself from the speculative
frenzy.
 |
| Lack of credit for Main Street, not for Wall Street, caused the Depression. |
• Capital Credit Insurance. Not
to dwell on the Crash of 1929 too much, but many people are unaware that the
Crash didn’t cause the Great Depression.
What did? The drying up of credit
for the productive sector. As the “fair
market value” of shares on Wall Street plunged, all assets became valued lower,
especially those pledged as collateral for loans for industry, agriculture, and
commerce. When the value of collateral fell,
companies found their coverage ratios on their loans were suddenly
inadequate. Loans were called or not
renewed, and new loans were not made.
This is not because the commercial banks were evil, but because they
were legally required to do so, even when they didn’t want to. Businesses that had been blue chip found
themselves in receivership due to lack of credit. While the speculators were screaming for the
Federal Reserve to prop up share prices on Wall Street, the real problem was
lack of credit on Main Street. What was
needed was an emergency program of government loan guarantees for business to
be replaced as soon as possible with private sector capital credit insurance to get banks lending for
productive purposes again, not money to bail out the speculators. What the country needed was collateral and
sound money backed with private sector hard assets. What it got was Keynes and funny money backed
with government debt.
 |
| Étienne Cabet |
• Icarian Socialism. Our research over the past several years has
revealed a startling fact or two about the rise of socialism. Although the rise of capitalism caused many
problems in society, the early socialists were — at first — more concerned with
blaming existing institutions and people for the problems besetting society
following the French Revolution. Almost
without exception, early socialists targeted private property, marriage and
family, and organized religion, especially the Catholic Church as institutions
that must be either reformed or abolished if society was to be justly
structured. The Second Estate, the political
leaders and order, had already demonstrated its weakness and inadequacy with
the French Revolution. The First Estate,
the Church, now came under fire, with socialism proposed as the Democratic
Religion or New Christianity to replace existing forms of Christianity that had
clearly failed, at least in their opinion.
In 1832 the Catholic Church issued the first social encyclical, Mirari
Vos, condemning the new things that eventually became known as socialism,
modernism, and the New Age. It had some
effect, and convinced some socialists that organized religion should not simply
be replaced, but completely eliminated from society. Étienne Cabet was one of the first (if not
the first) of the early socialists to propose what in the hands of Karl Marx a
generation later became known as “Atheistic Communism.” Calling his system “Icaria,” Cabet shifted
the focus from socialism as a replacement for Christianity, to a replacement
for capitalism, which he identified as the real villain: “The first and second
estates were no longer formidable; Louis Philippe was the king of the bourgeoisie. Money was the new tyrant. Capital controlled the electorate. The government was in league with bankers,
manufacturers, and the mercantile classes.
Democracy now meant the movement of the proletariat against the bourgeoisie. Society was breaking into two more and more
clearly defined classes: the rich and prosperous, the capitalized class,
numbered by the thousands; and the laboring class, numbered by millions. Oppression was no longer conceived of as
political [or religious], but as industrial.” (Albert Shaw, Icaria: A Chapter
in the History of Communism. New
York: G.P. Putnam’s Sons, 1884, 8.)
• 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 35 different
countries and 43 states and provinces in the United States and Canada to this
blog over the past week. Most visitors are from the United States, India, Canada,
the United Kingdom, and Spain. The most
popular postings this past week in descending order were “Did
C.S. Lewis Approve of Socialism?”, “Thomas
Hobbes on Private Property,” “Fulton
Sheen Again!”, “The
Problem of Social Justice,” and “Social
Justice IV: The Characteristics of Social Justice.”
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.” Due to imprudent
language on the part of some commentators, we removed temptation and disabled
comments.
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