Most of what is happening in the world still reflects continuing confusion over what to do about the economic, civil and political chaos ostensibly caused by the Covid-19 pandemic. Unfortunately, what obscures the real problems and thus developing a solution is the failure to realize that the roots of the problem go back a few centuries earlier than the pandemic and have been building up for some time. The so-called “new normal” is no more adequate than the “old normal” when it comes to respecting the dignity of every child, woman, and man. What is needed is a complete restructuring of the social order in conformity with the principles of the Just Third Way, not a “Great Reset”:
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| Dr. Harold G. Moulton |
• The New Philosophy of Public Debt. In 1943 Dr. Harold G. Moulton, president of the Brookings Institution, published a little pamphlet, The New Philosophy of Public Debt. Moulton’s purpose was to show how, over the course of the previous decade under the influence of Keynesian economics, the understanding of government debt, especially “bills of credit,” had changed dramatically. Formerly, government debt was viewed as something only to be used in a dire emergency, or when there was no other recourse. As Henry C. Adams explained in 1898 in Public Debts: An Essay in the Science of Finance, when a government got into debt, it endangered its sovereignty. Bills come due, and creditors have been known to declare war to collect. Under Keynesianism, however, any danger was dismissed, as were the effects of inflation, Keynes and his followers having learned nothing from what happened in Germany and Austria-Hungary following World War I. As a result of Keynesianism, bills of credit representing nothing other than the government’s future ability to collect taxes, began to be the primary source of government revenue (and borrowing is not actually revenue, as any accountant can tell you, but a liability), while taxation began to be used for “social engineering,” i.e., to compel people to act in ways the government deemed desirable. The result of this has been to destabilize the economy, debauch the currency, lock the economy into “the business cycle,” endanger sovereignty, promote consumerism and materialism, and generally degrade everyone’s quality of life.
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| John Maynard Keynes |
• Unstimulating Stimulus. The massive amounts of money being issued backed by bills of credit to “stimulate the economy” are a modern version of Keynes’s “pump-priming.” Interestingly, even Moulton cautiously noted that pump-priming might be need once to get things going, but that using it as a normal policy tool would only lead to disaster. One of the most serious problems with today’s stimulus is that almost none of it is being used to stimulate the economy — the primary, productive economy, that is. The vast bulk is being used in very non-productive ways, most of ti pouring into the stock market, with prices rising to unheard-of highs in response. What goes to consumers is being used to purchase existing goods, not in financing new capital formation, or being banked . . . to be poured into the stock market.
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| Bills of Credit are not permitted. |
• What is a “Bill of Credit”? We’ve been using the term “bill of credit” in this report, but what is it? A bill of credit is a financial instrument emitted or uttered (what in the private sector would be called “issued”) backed only by the government’s future ability to pay. It does not represent existing wealth owned by anyone, although that is the myth spread by Keynes, i.e., that government bills of credit are backed by the general wealth of the economy. No, that is only true in socialist countries, where the State owns or controls all productive wealth. Bills of credit are backed by the government’s ability to tax the general wealth of the economy, not the general wealth of the economy itself. Keynes did not understand finance or basic bookkeeping. Bills of credit, by the way, are forbidden to the states under the Constitution, and were specifically deleted from the enumerated powers of Congress (and thus the federal government) under Article I, Section 8 of the Constitution. They are unconstitutional, and are emitted only because definitions of certain terms were changed during the Civil War.
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| Alexander Hamilton |
• What Hamilton Really Meant. Experts who insist that public debt is a public benefit and that there is no danger like to quote Alexander Hamilton, first Secretary of the Treasury, to that effect. Unfortunately for them, Hamilton’s legacy, and the country at large, they don’t know what they are talking about. In its early years and up through the Civil War, the United States was plagued with a scarcity of circulating media. It was very difficult for people to carry out daily business. Many people outside of cities never saw cash from year-in, year-out. Virtually everything was done on credit. Hamilton reasoned that if government had to borrow, it would do so only from existing savings, not by emitting bills of credit. Government bonds would be purchased for cash by the public — usually banks — and the government would, of course, spend the money back into circulation, since that was the reason it was borrowed in the first place. If the bonds were purchased by commercial banks, the banks would be able to hold the bonds as an asset and use them to back the bank’s own issues of notes. These banknotes would be loaned out and used in commerce, thereby increasing the amount of circulating media to the great benefit of the country at large. Of course, once the economy of the United States began to grow and the private sector expanded, the banks could replace the government bonds backing their banknotes with private sector mortgages and bills of exchange. There would no longer be any need for currency backed with government debt, and there would never be any need for a currency backed with bills of credit.
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| Bill of Exchange |
• Mortgages v. Bills of Exchange. We mentioned mortgages and bills of exchange above. What are they? After all, the financial historian Benjamin Anderson stated that the first principle of finance is to know the difference between a mortgage and a bill of exchange. A mortgage is a financial instrument backed by assets currently owned by the issuer. That is why in a home mortgage, the type with which most people are familiar, title to the home is held by the borrower, not the lender. Mortgages are thus “past savings” instruments. A bill of exchange is a financial instrument backed by the issuer’s “creditworthiness,” i.e., the issuer’s ability to redeem the promise on the due date. The assets are not in the possession of the issuer at the time the instrument is issued, but whoever accepts the bill reasonably expects the issuer to be able to make good on the promise, or obviously would not accept the bill! Bills of exchange are “future savings” instruments. Given this understanding, it becomes clear why past savings (existing wealth) should back money used for consumption, while future savings (future wealth) should back money for capital investment — money should be linked to, and used for only what backs it. It also becomes evident why bills of credit (above) should not be used at all, if it can possibly be avoided. When a government emits bills of credit it is, in a very real sense, an act of desperation.
• Dr. Jane James. Dr. Jane James of the University of Southern California was unanimously appointed to the CESJ Board of Directors.
• Justice University. The second series of Justice University courses is currently in progress. The ten participants all express enthusiasm for the opportunity to learn more about the Just Third Way.
• Building People Power. Attention was drawn during the last CESJ Community Forum to the need to educate people to push for adoption of the Economic Democracy Act. CESJ cannot engage in lobbying activities, but it can educate and encourage people to identify prime movers to meet with the CESJ core group and learn about the potential of the EDA for really resetting the future.
• Community Outreach. Rick Osbourne is putting together a PowerPoint presentation to show Chambers of Commerce and other community groups to introduce business and community leaders to the Just Third Way and the need for the Economic Democracy Act.
• Native American Outreach. Rudy Wrobel has gotten in touch with an individual
in Kansas that is working to establish an institution to teach justice to
Native Americans. The individual has expressed interest in learning more about Justice
University.
• Economic Personalism Landing Page. A landing page for CESJ’s latest publication, Economic Personalism: Property, Power and Justice for Every Person, has been created and can be accessed by clicking on this link. Everyone is encouraged to visit the page and send the link out to their networks.
• Economic Personalism. When you purchase a copy of Economic Personalism: Property, Power and Justice for Every Person, be sure you post a review after you’ve read it. It is available on both Amazon and Barnes and Noble at the cover price of $10 per copy. You can also download the free copy in .pdf available from the CESJ website. If you’d like to order in bulk (i.e., ten or more copies) at the wholesale price, send an email to publications@cesj.org for details. CESJ members get a $2 rebate per copy on submission of proof of purchase. Wholesale case lots of 52 copies are available at $350, plus shipping (whole case lots ONLY). Prices are in U.S. dollars.
• Sensus Fidelium Videos, Update. CESJ’s series of videos for Sensus Fidelium are doing very well, with nearly 150,000 views in total. The latest available Sensus Fidelium video is still “A Theory of Human Dignity,” as this week’s recording was postponed. The video is part of the series on the book, Economic Personalism. The latest completed series on “the Great Reset” can be found on the “Playlist” for the series. The previous series of sixteen videos on socialism is available by clicking on the link: “Socialism, Modernism, and the New Age,” along with some book reviews and other selected topics. For “interfaith” presentations to a Catholic audience they’ve proved to be popular, edging up to 150,000 views to date. They aren’t really “Just Third Way videos,” but they do incorporate a Just Third Way perspective. You can access the playlist for the entire series The point of the videos is to explain how socialism and socialist assumptions got such a stranglehold on the understanding of the role of the State and thus the interpretation of Catholic social teaching, and even the way non-Catholics and even non-Christians understand the roles of Church, State, and Family, and the human person’s place in society.
• 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 33 different countries and 37 states and provinces in the United States and Canada to this blog over the past week. Most visitors are from the the United States, India, Canada, United Kingdom and Finland. The most popular postings this past week in descending order were “Aristotle on Private Property,” “News from the Network, Vol. 14, No. 10,” “Corporatism versus Distributism,” “JTW Podcast: Economic Personalism, Something Missing,” and “More of the Same.”
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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