Yup. Unemployment claims just increased by another
4.4 million . . . and the stock market is up!
Exactly who (or what) is supposed to be producing the goods and services
that make a profit that is allegedly reflected in the value of a company’s
shares we don’t know, but, hey, who needs to work when your shares increase in
value? Unless, of course, you happen to
undergo a reality check:
• Paycheck Protection Program. As reported by a “small”
business owner in the Wall Street Journal (“PPP Loan Terms Amount to
Legalized Fraud,” 04/21/20, A-15), echoing an earlier article in the Washington
Post (“DOJ Anticipates Stimulus Will Be a Major Target for Fraud,” 04/23/20,
A-11),the “Paycheck Protection Program” is so loosey-goosey that it actually
encourages businesses not to repay “loans.”
This, of course, simply adds to the mountain of unserviced debt being
assumed by the U.S. government, which is getting close to topping $30 trillion,
no, that’s not a misprint. The weird
part is that the author of the article owns a food processing plant that has
record production and sales and is in no need of assistance at all, either now
or in the foreseeable future. Yet his
company qualified for a $3.4 million SBA loan that will likely be forgiven . .
. just for doing the things his company has been doing anyway. Still, the owner took the money and put it in
a separate account, intending to pay it back in full, but wanting the security
of having a “just in case” fund. (Of
course, it’s to be wondered if business owners are aware that forgiveness of
debt counts as income. If you can’t
repay a loan, how are you going to pay the taxes on loan forgiveness? . . .) A better use of the loan program would be to
automate and modernize production facilities while the workforce is idle, make
the workers into owners of the new plant and equipment, and treat assistance to
the workers as straight welfare or a loan to be repaid, as described in this
short paper CESJ recently released.
 |
| This is SORT OF how it works; it's new money creation. |
• Small Banks Not Lending. We forgot to note the cite for the short
article, but the gist was that small banks are not lending to their customers
for fear of putting their depositors’ money at risk. This is a situation that could be fixed in a
matter of minutes, believe it or not, the moment commercial bankers, insurance
companies, and the Federal Reserve understand how money should be created,
instead of the way they’re doing it.
One, commercial banks shouldn’t be lending out their depositors’ money
in the first place. It is illegal to
loan funds in demand deposits, and time deposits don’t have enough in them to
mean anything. Commercial banks shouldn’t
be lending out of reserves at all, but issuing promissory notes (“creating
money”) to purchase qualified securities from borrowers, which are used to back
new demand deposits. This new money is
cancelled when the loan is repaid. Two,
with adequate collateral, the money is not at risk, anyway. If a borrower lacks adequate collateral, a
capital credit insurance policy should be purchased to take the place of
traditional collateral. Louis Kelso
recommended this for loans made to expand ownership of capital, but some
insurance companies already do this for regular business loans. Three, the size of a bank, whether small or large,
is a matter of indifference, if the bank rediscounts its qualified loans at the
Federal Reserve, resulting in (potentially) 100% reserves. Commercial banking and central banking were
actually invented to ensure that there would always be enough money and credit
in the system for industry, commerce, and agriculture.
 |
| Yeah, pretty much. |
• Inflation or Deflation? How
About Neither?. Tim Congdon, chairman of the Institute of
International Monetary Research at the University of Buckingham, England, in an
op-ed piece in the Wall Street Journal (“Get Ready for the Return of
Inflation,” 04/24/20, A-15), assumes we cannot escape a new round of
inflation. On the contrary, if all new
money is created as described above for new capital formation or backed by
existing private sector inventories and wealth, and all money backed by
government debt is retired and replaced with private sector asset-backed money
as the government debt is paid down, there would be neither inflation nor
deflation. The problem is that Congdon
takes for granted the assumption that Keynes embedded in the subconsciousness
of the financial world, that money must first exist before it can be lent out,
where the fact is that money can be created BY lending it out, as described
above.
 |
| "I swear by Apollo" |
• Legal Precedent. In a
vaguely related op-ed in the Washington Post (“Precedent Should Rule
Usually — But Not Always,” 04/24/20, A-18), there is a feeble attempt to
dethrone the God of Precedent, who in the modern age has replaced Apollo,
revered for his truthfulness and integrity, hence the god by whom oaths were
sworn. We say, “feeble attempt,” as the
anonymous author(s) of the piece admit that validity of precedent in most
cases. The problem is that in ancient and
medieval times, and even up to the last 200 years or so, precedent was used as
a guide, not a legislator. The old
jurists were fully aware that judges and courts make mistakes. In ancient Rome, jurists spoke of “discovering
the law” by studying previous decisions and (assuming that they deemed the
decision a just one) use it as a guide in delivering justice, not as a way of
creating law the way it is today. The
legislature is supposed to make law, not the courts.
• Executive Gravy Train. A short article in the Wall Street Journal
“Companies Revamp Executive Pay With Less Cash, More Stock,” 04/21/20, B-1, B-2,
says just what the title suggests, that executives are getting an ownership
stake instead of more moolah. Why,
however, is this only offered to “executives” instead of to the people who
actually “execute” the orders of the executives, i.e., the workers? Why not give workers a stake in the company’s
future, too, especially since executives will usually sell the shares for a
one-time gain, while workers should retain the shares for the dividend income
as described in this
recent CESJ paper.
• 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 36 different
countries and 44 states and provinces in the United States and Canada to this
blog over the past week. Most visitors are from the United States, India, the
United Kingdom, Spain, and Canada. The
most popular postings this past week in descending order were “Pope
Francis and UBO,” “Social
Justice, IV: The Characteristics of Social Justice,” “Pope
Francis and the UBI,” “News
from the Network, Vol. 13, No., 16,” and “Versus the
Virus.”
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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