Today we present the second half of our annual Just Third Way news roundup, with, however, a slightly more cheery current item than we had last week:
• The Greater Reset. Somewhat to our surprise, The Greater Reset — which isn’t coming out officially until March 15, 2022 — is the bestselling book from any writer connected with the Just Third Way, published or unpublished. Pre-publication sales have already broken records for CESJ, even if not for the publisher, TAN Books. Of course, we think it has the potential to do that, too, but we’ve got another two and a half months to do it in.
• Help Joe Walk Again for Economic Justice. Just a reminder, if you haven’t already done so, to visit the GoFundMe campaign and consider making a contribution and spreading word out among your social media networks. It’s off to a good start, but it’s still just a start.
July 2021
• Hobson’s Finance. President Biden’s tax proposals, succinctly stated as “soak the rich” (which will actually soak lower income people whose income and wealth is quantified in dollars, not merely measured in terms of dollars as most of the wealth of the rich is, meaning the poor and middle class who will pay the bill for the rich through price increases), presents an interesting dilemma. Should government fund its programs by issuing new debt it can’t repay, or by levying new taxes that can’t be collected? It’s actually a question of whether you want an economic meltdown now or later. If you manage to tax people out of existence, the economy goes belly up sooner than if you issue massive quantities of debt that you can’t collect taxes to repay. Of course, you could always make it possible for people to own capital that pays for itself without a government subsidy or redistribution so the economy runs without government issuing debt, but that would mean that the politicians wouldn’t control the economy that they’re already losing control of. The only real mystery is why the politicians won’t stop cutting their own throats and ours and pass the Economic Democracy Act.
• President Biden’s Economic Initiative. As reported in Yahoo! Finance (although it wouldn’t seem to merit even a small “yippee”), Biden is preparing to sign an executive order that will promote “competition across the U.S. economy — including measures that target big tech companies, aim to lower prices for consumers and call for greater scrutiny of mergers across industries.” As the article reports, “President Biden is taking decisive action to reduce the trend of corporate consolidation, increase competition, and deliver concrete benefits to America’s consumers, workers, farmers, and small businesses.” The article then describes what sounds like a program to increase government employment without doing the single most effective thing he could do for the private sector: push for the adoption of the Economic Democracy Act.
• Moldova, Socialism, and Russia. Moldova, the poorest country in Europe, is attempting to break the stalemate between native socialism, Russian influence, and overall national interest that has probably been the single largest factor holding the country back. As reported in EuroNews and the Eurasia Daily Monitor, “Moldova could break out from its cycle of political instability and economic decay, provided that President Maia Sandu’s creation, the Party of Action and Solidarity (PAS), gains an outright parliamentary majority on its own in the July 11 elections.” The socialists, however, are turning out in large numbers, while the “Russophiles” have substantial financial backing and other resources. What Ms. Sandu’s government needs — assuming she can form one after the election — is the Economic Democracy Act. Know anyone in Moldova to get the word to?
• IAED: The Just Third Way: Universalizing Capital Ownership. On Thursday, Justice University participated in a webinar hosted by the International Association for Peace and Economic Development (IAED). The topic was “The Just Third Way: Universalizing Capital Ownership.” Representing Justice University were Dr. Norman G. Kurland, president of the interfaith Center for Economic and Social Justice, Dawn K. Brohawn, CESJ’s Director of Communications, and Michael D. Greaney, CESJ’s Director of Research. The webinar was well-received. Dr. Robert Ashford of the Syracuse University School of Law said, “Congratulations! Well done! Thank you!”
• Hong Kong Advisory. The Biden administration has issued a warning to American businesses operating in Hong Kong in light of the risks associated with the crackdown on pro-democracy activists. In addition, over the past several weeks, there has been a great deal of discussion regarding the possibility of the Chinese government shutting down Hong Kong as a financial center. This is understandable in light of the massive amounts of money flowing out of China and escaping taxation through Hong Kong. Chinese economic growth, which has been fueled by massive infusions of government debt, has slowed dramatically, and not because of the pandemic. The income — and thus the tax revenue it desperately needs to service the debt it incurred — has largely been siphoned out of the country through Hong Kong into international tax havens. Instead of being the anticipated bounty for the government, the Belt and Road Initiative and the neo-colonialism have turned into a gigantic — and growing — liability supported by an eroding tax base.
• Bucks and Biden. In the early eighteenth century, the Duc d’Orleans, the Regent of France, decided that paper money was real wealth and printed massive amounts, ruining the French economy for decades. Following World War I, the Allied reparations took virtually all productive capital out of Germany and Austria-Hungary, kicking off hyperinflation that destroyed the economy, paving the way for Hitler. Now, although President Biden’s heart may be in the right place, the same can’t be said for his head. The new “family allowance” — which is what the child tax credit amounts to — will not only do the exact opposite of what it’s intended to do (decrease child poverty), it has the potential to be incredibly inflationary, possibly even in an extreme case to be hyperinflationary, the surreal condition when the price level rises faster than money can be created. The fact is that no one was ever lifted out of poverty by giving them money for consumption. Poverty is only truly ended by people becoming productive. As the old aphorism has it, give a man a fish and he eats for one day. Teach a man to fish (and make certain he has access to a fishing rod and bait!), and he eats every day. The bottom line? A sound economy instead of a Keynesian fantasy requires that if you want to consume, you must produce. You can’t run an economy on theft, redistribution, or almsgiving. As LBJ’s “Great Society” and “War on Poverty” proved, giving money to people just locks them into poverty because 1) it now pays them to be poor, and 2) it creates jobs for bureaucrats whose income depends on having as many poor people to help as possible, and thus keeping as many people as possible in poverty. The only way out is to stop focusing on making it possible for people to be good consumers and turn them into good producers. Yes, give people money in the interim, but that’s not a solution. The Economic Democracy Act is a solution.
• Social Security Misconceptions. A lot of Americans don’t really understand too much about Social Security, even according to the Social Security Administration. The SSA admits that people don’t really understand when they qualify for full benefits and so on, but from the Just Third Way perspective it’s even worse. For one thing, even the SSA thinks that there are actual assets in the Social Security Trust Fund. No, there is massive amounts of government debt. Since the SSA is run by the government, government debt in the Trust Fund represents money the government owes itself. It’s as if you claimed to be rich because you wrote yourself an IOU for a million dollars. The IOU is worthless until and unless you have a million dollars to redeem your promise to yourself. If someone originally gave you a million dollars to hold for him, and you spent it and replaced it with an IOU, you still owe a million dollars to someone else, not yourself. Then there’s the idea that the money you paid in was put into an account for you, and it’s been earning interest. No, your “Social Security Account” isn’t that kind of account. It records the money you paid in, and what benefits are scheduled to be paid to you, but there are no assets in “your account.” It’s a bookkeeping record, that’s all. Again, only The Economic Democracy Act is a solution. Yes, we need Social Security as a safety net, and the promises made must be kept, but the funding system needs to be changed, and the focus needs to be on making people productive for themselves, not merely consumers of what others produce.
• Australia’s First Employee Ownership Trust. According to the newsletter of the National Center for Employee Ownership, Meld Studios in Australia has become the first company to transfer ownership from its three owners to all 22 employees by means of an Employee Ownership Trust. This is at least a step in the right direction, although we believe that direct ownership is much better than the beneficial ownership conferred by a trust. An Economic Democracy Act that would give individuals the same tax and financial benefits as an employee ownership trust would be of benefit to an entire economy, not just those companies savvy enough to adopt employee ownership programs.
• Meeting with Dr. Norman Bailey. This past Wednesday the CESJ Core Group and Justice University team met with Dr. Norman Bailey, visiting the U.S. from Haifa University in Israel. Dr. Bailey, who was in the Reagan White House and involved in the Presidential Task Force on Project Economic Justice, brought us up to date on recent developments and gave us his analysis of a number of key happenings in the world. We were able to put him in touch with a CESJ Fellow in Morocco who attended the first formal Justice University class series and who is interested in doing development and educational projects in North Africa.
• Federal Reserve Digital Currency. Lauded as a way of being able to print and spend money at a much faster rate than now, the Federal Reserve has been looking into employing a digital currency instead of issuing checks, debit cards, or printing banknotes. From the Just Third Way perspective, of course, the question is not how to create and spend money even faster — it’s already being done at a rate unequaled except during the hyperinflation in Germany and Austria-Hungary following World War I — but how to turn people who are not productive now into producers so that they produce and trade for what they consume instead of relying on redistribution to meet their needs. If there are no jobs, people should own capital — and the Economic Democracy Act is a way to turn every child, woman, and man into an owner of capital.
• Why Not Ownership? It seems that with the prevalence of internet commuting, the larger tech firms are finding it much easier to headhunt for talent among the smaller companies. It used to be that the smaller companies could offer non-urban settings and a friendlier cultural ambiance (or something like that) in lieu of higher pay. Now the smaller firms are even losing key management to the big boys, who can sometimes offer multiples of the salary people were making at the smaller companies, and all without having to relocate to places where they don’t want to live. In self-defense, the smaller companies are raising salaries . . . but not doing the one thing that they can do much easier than the larger firms: cut the workers in on ownership. Owning and taking a share of profits instead of higher salary keeps costs down, builds loyalty, and gives workers a direct stake in making and keeping the company profitable.
• Bob Moses. We were saddened early this week to learn of the death of civil rights activist and educator Bob Moses. CESJ and the Just Third Way have a connection with him. In the 1960s, Bob asked Norman Kurland to come to Greenwood, Mississippi to assist in the effort to open voting to Blacks. Norm, who was then with the federal government, went down to Greenwood with the Student Non-Violent Coordinating Committee, and attended a meeting at which the Mayor of Greenwood and Chief of Police were present to discuss the situation . . . after the governor said any Black person who tried to vote should be arrested. After some discussion with Norm, the Chief of Police agreed to allow everyone to vote as long as it remained peaceful, which it did.
August 2021
• Too Much Cash. According to yesterday’s Wall Street Journal, “Business Piles Up Record Unused Credit” (08/05/21, A-1, A-6), U.S. Businesses have so much cash on hand that they are not borrowing enough, and banks are not able to make money. AT the same time, the federal government is creating trillions of dollars to stimulate the economy, that is, spend money so that businesses can can make enough profits to invest in more capital and create jobs. You see the problem here? Businesses already have so much cash they’re not spending that they aren’t borrowing money to spend, so the government is creating money and spending it like a drunken sailor on leave so that businesses will have even more money they won’t spend! Here’s a crazy idea: why not distribute the unused cash to the stockholders who allegedly own it, then they can spend it instead of having the government print up new money to spend? To encourage businesses to pay dividends, make them tax deductible at the corporate level, and treated as ordinary income at the personal level. Then, at such time as corporations need financing for expansion, they can sell new shares in ways that make new owners who will use their dividends first to pay for the shares, then for consumption income. There is no need for the government to create more money backed only by its own debt when all they have to do is reform the system so that it works properly, as with the Economic Democracy Act.
• Justice University. Justice University has now started its third in an ongoing series of educational programs to orient people in the Just Third Way, with Saturday Justice University sessions now in their second week. Of course, JU has been having informal programs for some time, since about 2010, in fact, with “teams” from CESJ/JU making special presentations on a more or less regular basis. One of the better “informal programs” (in our humble opinion) has been the weekly podcast, which has covered subjects that really should be covered in much more depth in a much more formal setting, but which we have managed to present something every Monday since November 2017. To date we have almost 200 — yes, two hundred — podcasts, so just listening or watching the series is quite an education, and like all JU courses (so far) are 100% free. Where else could you get Mortimer Adler, Louis Kelso, Norman Kurland, and others, and not have to pay a cent for your education?
• Student Debt Crisis. One of the things Justice University could resolve is the student debt crisis,. Part of the problem, of course, is that people are spending incredible amounts of money to qualify themselves for jobs that don’t exist, and that would not in some cases pay for the education even if they did exist. So what’s the solution? Is it forgive all student debt as many are demanding, thereby sticking the taxpayer with the bill for something from which they received no benefit? Or do we insist on people paying debt they incurred for an education from which they derived little or no benefit? Well, it might be feasible to pass the Economic Democracy Act, enabling people to generate substantial income without necessarily having a “job,” and enabling them both to pay for an education without borrowing, and to pay down debt if they did.
• Social Security COLA. The buzz is that the Social Security Administration is getting ready to announce the largest cost of living adjustment in forty years — a whopping 6% — which raises some interesting questions. First, of course, is the need to dispel the prevalent misimpression that the money you pay into Social Security is a contribution that the government credits to your account and that earns interest, all of which is paid out to you on retirement or when you otherwise qualify for distributions. Bologna. FICA is a tax, not a contribution. It’s not “your money” anymore. There was even a case back in 1960, Flemming v. Nestor (363 U.S. 603 (1960)), in which the Supreme Court of the United States affirmed that you do NOT own what you pay in, and you therefore have no right to get anything out. Congress, in fact, very carefully reserved to itself the right to “adjust benefits” (and note the word benefits, which implies that it’s a gimmie or a gift, not a right of property) at any time . . . up or down. Technically (although it would be political suicide) Congress could suspend all Social Security payments for any reasonable cause at any time, and even terminate the program unilaterally. You could — in theory — never see one cent of that money. The most important question, however, is where are “they” going to get the money to pay for the rumored 6% increase? There is nothing in the Social Security trust fund except government debt, and it’s the government that “owes” you the money in the first place . . . if it decides to pay. The only viable solution is to shift people’s retirement income to their own investments and use Social Security as a safety net based on need. This can be done by implementing the Economic Democracy Act.
• Raising the Debt Ceiling. If you want to know what happens when you fall victim to the greatest financial hoax in history (Keynesian economics and MMT), take a look around you. If that’s not enough to convince you that something is wrong, consider the fact that the government has created such an incredible amount of money backed with its own debt — none dare call it counterfeiting — that the situation has become surreal. The projected deficit is now 128% of GDP, which be scaring the pants off of everyone, but instead of trying to figure out ways to stop spending and reduce the debt (such as the Economic Democracy Act), all they can do is make it a question of “patriotism” to spend more! (“Raise the Debt Ceiling,” The Washington Post, 08/11/21, A-23.) In other words, if you don’t destroy the country with debt, you’re a traitor.
• The “Death Knell” Tax. Distributists and Localists Arise! You have nothing to lose but your ownership! Senator Chuck Grassley of Iowa has altered people to the dangers inherent in the current proposal to add additional “death taxes” on to the current inheritance tax law by denying a “stepped-up basis” for inherited assets such as family farms and businesses. This means that assets are taxed at the difference between the original price and the current value . . . which given the way the government has issued its counterfeit currency has artificially inflated values of many things, dramatically increasing the so-called “capital gain” on sale of assets held for years . . . when there might not be any real gain at all. (“A ‘Death Knell’ Tax Threatens Family Farms and Businesses,” The Wall Street Journal, 08/12/21, A-17.) Here’s a simple solution that would satisfy justice, if not government greed: inflation index all capital gains. For example, suppose a farm cost $100,000 originally, and the dollar has inflated 1,000% in the interim, i.e., $1 when the farm was purchased is “worth” $10 today. Suppose the farm is sold for $500,000 and the taxes are levied at a rate of 50%. Not adjusting for inflation, the seller owes $200,000 in taxes on the “gain” ($500,000 - $100,000 x 50% = $200,000). Now let’s inflation index that transaction. The selling price and the taxes due remain the same, of course — we’re adjusting the original cost upwards to show what really happens in real value terms. The seller still owes $200,000 in taxes, of course, but it’s not on any imagined gain, it’s in addition to a huge loss, $500,000, to be exact. ($500,000 - $1,000,000 = -$500,000.) Given that the inflation-adjusted real value of the farm at the original purchase price, the seller has lost 70% of the total value of the asset by being taxed on the inflationary “gain.” The government has stolen from the taxpayer twice, once by inflating the currency and again by taxing a loss.
• A Condition of Dependency. One definition of slavery is a condition of permanent dependency. That’s why Aristotle (not Marx) called nominally free workers who own nothing but their labor “masterless slaves.” Marx just borrowed the concept and applied to the industrial system. Now there appears to be a move to force as many people as possible into a permanent — and costly — dependency on the State, at least according to Nick Stehle in The Wall Street Journal (“Hooked on Federal Checks,” WSJ, 08/19/21, A-17). According to Stehle, once the government makes the program of giving out what amounts to a family allowance to “middle class” families, they will vote to keep the money coming in, turning themselves into “mere creatures of the State,” accepting anything the government chooses to dish out to keep the cash coming in. Who, after all, is going to ask the government NOT to give them “free” money? The sad part is that some of the people most insistent on having the government create endless amounts of funny money (i.e., what amounts to legal counterfeiting with money issued by the government backed only by government debt) are firmly opposed to creating new money backed by private sector hard assets (i.e., something with actual value instead of empty promises) to finance expanded capital ownership by every citizen so they can support themselves through their own efforts without government assistance, except perhaps in an emergency. That is what the Economic Democracy Act is intended to do, and it is based on sound principles of finance as well as natural law, not on some politician’s wishful thinking and vote buying.
• Saving Too Much for Retirement? First, they keep telling you people aren’t saving enough for retirement . . . but then they warn us that if you try to save enough you will be penalized! Instead of thinking this is all a Catch-22 to ensure your continuing dependency on the State and the politicians so that they can count on your vote to secure your income, we might want to take a step back and re-think this whole retirement schtick. Prior to the Industrial Revolution — and, actually, for quite some time after — hardly anyone thought in ways that we today think of as “normal,” i.e., go to school to qualify for a “good job,” work for forty years, and then retire with a pension supplemented with whatever you might have managed to save up for your old age. Instead, most people thought in terms of owning productive assets, such as a farm or a business, which would either keep on generating income all their lives, or if sold, would provide the proceeds to purchase other income-generating assets to provide a living income. “Saving for your old age” was what non-owning workers did. We need to get back to thinking in terms of investing for life instead of saving for retirement, and the Economic Democracy Act is one way to do it.
• Reversing Stimulus “Harmful”. According to Federal Reserve Chairman Jerome Powell, reversing the on-going stimulus could be “particularly harmful.” He’s absolutely right. You don’t cut addicts off cold turkey without anticipating some rather horrifying withdrawal symptoms. Of course, what Powell isn’t considering is a phase-out instead of cut-off. If the Economic Democracy Act were to be passed and implemented at the earliest possible date, there would be the best form of stimulus going straight to the people who need it, in a way that would be self-liquidating. Instead of stimulus being an economic drain, it would be an economic boon leading to a sound economy.
• Biden Administration in Trouble? It’s not for us to judge, but President Biden might find himself in need of something big and dramatic to turn matters around at home and abroad. We suggest the Economic Democracy Act. Had its provisions been implemented from the beginning in, say, Afghanistan, there is an excellent possibility that the U.S. presence could have been ended years ago, and the country have achieved a stable liberal democracy and security from threats both internal and external. It wouldn’t be a bad idea for the United States, either.
September 2021
• The Wrong Fight. With all due respect, President Biden is picking the wrong fight: the Texas abortion law. Frankly, the pro-abortion lobby is strong enough without the assistance of the President of the United States who is supposed to work for every American, not just those with the loudest voices or the most money or votes. He should be concentrating on what to do about Afghanistan, and, no, it’s not going away. If President Biden believes making the Texas situation a presidential issue will divert attention away from the Afghan debacle, he’s got another think coming. If he doesn’t come up with something BIG in capital letters that benefits everybody at no cost to anyone, and do it soon, he will simply be handing the Oval Office back to ex-president Trump. We “suggest” that President Biden forget about Texas (at least in this context) and make passage of the Economic Democracy Act his absolute top priority.
• Canadian Worker Ownership. According to the e-Bulletin of the National Center for Employee Ownership, the Conservative Party of Canada is including in its platform a provision for capital gain deferrals for owners who sell the company to their workers. The Liberal Party was already pushing for some similar proposals.
• Australian Expanded Ownership. Also according to the NCEO, Australia is investigating expanding its encouragement of worker ownership. The investigative committee’s report didn’t get all their facts straight, but “‘recommends that the Productivity Commission investigate how the use of employee ownership trusts can be facilitated and encouraged’ and also that the Committee explore the use of stock plans in other countries.” It’s at least a step in the right direction.
• Massachusetts and Worker Ownership. Finally, we note that the NCEO also reports that the Democratic Party of Massachusetts “strongly endorses” worker ownership: “At its recent convention, the Massachusetts Democratic Party gave a full-throated endorsement to employee ownership, joining the national Republican and the Texas Republican party in adding employee ownership to its party platform.”
• Savings Wars. As usual, the financial sections of the media are telling people to save . . . but not too much! Actually, all of this would be a completely moot point if the Economic Democracy Act is passed.
• The “Evergrande Moment”. China has been fueling its economic growth in infrastructure and production of marketable goods and services with massive amounts of government debt, but Chinese citizens are putting their savings into real estate, according to today’s Wall Street Journal (“America Risks an Evergrande Moment’.” WSJ, 09/24/21, A-17). This has a double whammy in traditional Keynesian terms, as it 1) diverts savings from reinvestment in productive capital 2) to a speculative investment that doesn’t create jobs. In Just Third Way terms, it makes five mistakes: 1) it diverts income from consumption, 2) ties economic growth to what was not consumed in the past, 3) does not use future increases in production to finance growth, 4) limits investment opportunity only to those with savings, and 5) shifts from real growth to speculation. Of course, China isn’t the only economy in the world making these same mistakes. It is, however, making them faster, and with a lot less to back them up if things blow up. Of course, the U.S. is looking at a similar situation, as the article states, but the solution is not to redirect people’s savings from real estate investment to marketable goods and services. Rather, it’s to get out of the past savings game entirely, as proposed under the Economic Democracy Act.
• Good Old-Fashioned Pension? Why are the retirement plans of “Millennials” (as opposed to the rest of us?) in danger? According to a Yahoo! Financial News article, it’s because most of them do not have “good, old fashioned pension plans” that offer absolute security for all eternity and establish the Klingdom of Glue on Earth . . . you know, the kind of pension plans that have forced sponsoring private sector companies into bankruptcy, bankrupted the Pension Benefits Guarantee Corporation, and saddled local, state, and federal governments with gigantic unfunded pension liabilities. As for Social Security, Millennials can’t rely on it, as the non-existent trust fund (the vehicle exists, but it’s “funded” with government debt issued by the government that owes the benefits. . .) is expected to be able to pay full benefits only until 2033, and Medicare is due to start its downward slide in 2026. So, what’s the solution? Rethink the whole save-for-retirement-by-cutting-consumption-now shtick. Instead, shift from a wage, welfare, pension-based economy, to a productive, investment-based economy in which everyone can participate. The Economic Democracy Act is designed to do just that.
• Lazy Worker Test. We’re not sure if this particular neologism is going to stick. As the additional money paid to the unemployed dries up, the idea is that people who were making more money by not working will now rush to fill jobs. If not, they’re lazy. It’s an interesting conceit at the heart of Fabian socialism and Keynesian economics that the only way for most people to have income is a wage-system job. It also assumes that people have only one incentive to work: money. If you don’t care about money, you’re obviously lazy. There are, however, quite a few employment situations in which industrious workers are penalized to protect those who really are motivated by money and only took a job to get it. In those situations, it’s not unusual to find grounds for eliminating anyone who does more or better work than the average worker, but protect to the death (or at least a strike) those whose work is sub-standard. What would happen, however, if people could work not because they had to, but because they wanted to, if everyone had a base income sufficient for daily needs? No, we’re not talking the Universal Basic Income, as that is simple redistribution. You already know where we’re going with this. The Economic Democracy Act would provide a basic income to most people based on justice, not coerced charity or welfare.
• Federal Reserve Policy. According to the experts, the Federal Reserve is in deep trouble because its policy isn’t working. This raises the question as to what Federal Reserve policy might be . . . besides trying to figure out ways for the politicians to have the money they want to spend. In the Just Third Way of Economic Personalism, however, we know what the policy of the central bank of the United States should be: 1) Rediscount qualified paper from commercial banks, with the definition of “qualified” expanded to include a requirement that the new money be created for expanding ownership of new capital. 2) Stop monetizing government debt and limit open market operations to qualified private sector securities. In other words, the Federal Reserve should not have a policy per se, but a function: to provide an adequate, elastic, uniform, asset-backed currency for private sector commerce, growth, and development, not be a money machine for the government.
• Rethinking Poverty. It’s a little misleading, to say the least. As the headline read, “Government Stimulus Kept Millions of Americans Out of Poverty Last Year.” Of course, a lot depends on how you define “poverty.” The U.S. government defines poverty as, “Following the Office of Management and Budget’s (OMB) Statistical Policy Directive 14, the Census Bureau uses a set of money income thresholds that vary by family size and composition to determine who is in poverty. If a family’s total income is less than the family’s threshold, then that family and every individual in it is considered in poverty.” The dictionary does it a bit differently, “1) the state of being poor, 2) a lack of something, 3) the state of one who lacks a usual or socially acceptable amount of money or material possessions. The “Investopedia” defines poverty as “Poverty is a state or condition in which a person or community lacks the financial resources and essentials for a minimum standard of living.” Common to all these definitions is the idea that lack of income defines poverty. From a Just Third Way perspective, it would seem more accurate to define poverty as including some aspect of lack of access to the means of generating an adequate and secure income. Doing that would mean that mere adequacy of income is still a form of poverty if that income is not secure. A welfare or stimulus check would thus not keep someone out of poverty, but relieve need without eliminating poverty as it either is temporary or depends on creating a condition of dependency in which income is not inherently secure, but relies on the goodwill of others. We can see, therefore, two types of poverty: 1) Destitution, in which material needs are not met, and 2) Dependency, in which material needs are met, perhaps even abundantly, but continuance depends on others, e.g., a politician or an employer.
• The Real Solution to Poverty. Back in 1994, CESJ and Social Justice Review published a compendium, Curing World Poverty: The New Role of Property. The concept was simple: restructure key institutions to make it possible for every child, woman, and man to own a capital stake sufficient to provide an adequate and secure income. A program of expanded capital ownership, such as the Economic Democracy Act, would remove the causes of systemic poverty ion the most efficient and just way possible.
• The Stock Buyback Scam. According to the Wall Street Journal of Thursday, September 16, 2021, Microsoft is planning a large “buyback” of its own shares (“Microsoft Plans $60 Billion Stock-Repurchase Program,” WSJ, 09/16/21, B-1). What’s wrong with that? By right of private property, those profits already belong to the shareholders of Microsoft. Essentially what Microsoft proposes is buying shares from its owners with money that belongs to them in the first place! It’s as if I borrow money from you to buy your business, then claim I owe you nothing because I paid you the money. The net effect is obviously that I stole your business from you by paying for it with your own money.
• El Salvador and Legal Tender Bitcoin. Not too long ago El Salvador made the Bitcoin cryptocurrency legal tender, the idea being that it would bring stability and allow Salvadoreans working abroad to send money home more easily. Over the last couple of days, however, the country has erupted in violent protests over the move, with people fearing that the cryptocurrency’s noted volatility as a virtual commodity with no real assets behind it would further destabilize the country and possibly lead to national bankruptcy. As reported on Euronews and the BBC, people demonstrated in the streets holding signs reading “Dice NO al Bitcoin!” and similar sentiments. Of course, the noted problems and others could easily have been solved by rebuilding the domestic economy and financing it with an asset-backed currency issued through El Salvador’s own banking system and backed up with its central bank. The Economic Democracy Act would work well in El Salvador, not to mention the United States, and would let people build decent lives in their own countries instead of immigrating, especially when the motives to do so are entirely or primarily economic.
October 2021
• Retirement Plan Mandate. One of the features of the Democrats’ plan to make America Great Again is to mandate that all workers save a minimum of 6% of their pay to fund their retirement. To keep the plan from being a financial burden on lower-paid workers, there is an intricate and convoluted system of tax credits proposed that would be applied across the board even if someone didn’t owe any taxes, i.e., someone who paid in nothing could still get a refund. Of course, the problem is that this automatically results in an across the board reduction in consumption income — and thus consumer spending — of 6%. This doesn’t sound like much . . . until you realize that a 6% drop in consumer demand from the group that does the bulk of consuming would be a disaster for the American economy. The fact is, the higher the savings rate, the lower domestic demand, something with which Japan has contended for decades as it requires massive exports to keep the economy running, and China and India are cutting deeply into Japanese exports, while the U.S. has been a net importer for quite some time now. A country whose exports and imports are out of balance is in trouble in the mid- to long-term, although it might keep going for some time on inertia and accumulated wealth. At some point, however, redistribution by taxation or inflation is going to give out, and the economy will go into decline. The basic rule is that if people are saving in a country, they must export to other markets to keep up demand, and if people are not saving, they’d better be producing what they consume.
• Debt Ceiling Debacle. Whichever way it goes on the whole debt ceiling debate, it’s a disaster. Why? The quick and easy — and misunderstood — answer is, “They don’t understand money.” The powers-that-be take something called “the Currency Principle” for granted, which means that they think of money and credit as a commodity. They’re not. Money and credit (using the singular, as money and credit are simply different aspects of the same thing, cf. Henry Dunning Macleod) are social tools, by means of which people measure what they exchange. At the most fundamental level, “money” is simply the means or medium by which I exchange what I produce for what you produce, the essence of Say’s Law of Markets. Thus, the whole idea of making up shortfalls in spending by creating ever-increasing amounts of money is completely wrong headed. Production (income) doesn’t come from money, money comes from production.
• Cost Cutting. The other side in the deb debate also goes in the wrong direction. One thing you’re supposed to learn in accounting is that cost cutting generally is self-defeating. If you’ve cost costs that you didn’t need to incur, you’re already in trouble. Cutting those costs means stopping what you shouldn’t have been doing in the first place. If you start cutting costs of essential things, then you harm your productive capacity and thus your revenue. Cost cutting doesn’t solve the underlying problem. What is needed is not cost cutting or funny money creation, but “revenue enhancement.” That is, if the government wants more money to spend, it had better rebuild the tax base by opening up access to the opportunity and means for everyone to be productive through both labor and capital. And that doesn’t mean “creating jobs,” but passing the Economic Democracy Act.
• Creation Money Backwards. As a result of thinking that “money” is a special creation of the State (Keynes’s Treatise on Money, 1930), people tend to think that you must have money before you can do anything. When spending gets too high, then, they automatically think of cutting expenses. If, however, more money brings about more production, the more money you create, the more production and thus income you will have. This, however, is what the late Richard Feynman called “Cargo Cult Science,” i.e., create the outward form of something, and you have created the substance. Thus, since lots of money is a sign of prosperity, then creating lots of money creates prosperity . . . right? Wrong. If you want to create prosperity you don’t create a derivative of prosperity (money) but encourage prosperity by making it possible for as many people as possible to be productive. You create money by lending it for productive purposes, which is what commercial and central banks were invented to do. You don’t first get a lot of money and then lend it.
• Global Corporate Tax. According to reports coming out of the European media, talks on imposing a global corporate tax are advancing. A few questions come up, such as, “Who has the right to collect a global corporate tax?” Is some entity claiming sovereignty — and thus the tax right — over the entire world? Has a world government been formed that somebody forgot to tell us about? Have Kang and Kodos taken over the world? And then there’s the issue that corporations don’t really pay taxes. Their customers do. When a tax is imposed on a corporation, the cost is added to the corporation’s products and passed on to the consumer. A better way to handle the matter would be to make all dividends tax-deductible at the corporate level but treated as ordinary taxable income for the recipient of the dividends. That way prices can stay low(er) and more taxes collected by the State that otherwise would have been out of their reach. After all, if an American living in the U.S. receives income from China, he or she pays income tax to the U.S. government, even if the entity that paid out the money to the American is totally tax exempt.
• Financing the Future. If all dividends are paid out to shareholders, however, where do corporations get the money to finance growth? From selling new shares. This expands the base of owners in the economy, reduces the burden on government, and rebuilds the tax base.
• The Great Worker Shortage. Buzz in business and government circles these days seems to be focused on the inability of businesses to find enough workers who want to — work, that is. Newspapers are carrying page upon page of analyses trying to explain how or why people aren’t returning to work. We don’t have space (or the inclination) to go over the arguments, but we do have something we don’t think any of the experts have considered. That is, people have been conditioned for the last century or so to think of income solely in terms of either a private sector job or government redistribution. (Or the idea: a government job.) The problem is that technology is displacing private sector jobs, and the diminishing tax base combined with increasingly almost cosmic demands on government assistance render continuing redistribution as the primary source of income for a significant number of people is unrealistic. So why aren’t people returning to work? In our opinion, it’s because they are waiting to see how much the government is going to give them out of the multi-trillion-dollar budget. This, of course, will prove ephemeral, because there’s no way it can be sustained. No one considers the option that Louis Kelso presented more than half a century ago: build capital self-sufficiency into everyone, so that ownership income from self-liquidating assets generates a core income that is non-redistributive and non-inflationary, relieves pressure on the government to redistribute and the private sector to create unnecessary jobs, and businesses can pay the true market value of labor without having to worry whether it’s enough to live on. (In our opinion, wages would rise dramatically as people found it possible to live comfortably without a wage system job, but that’s another issue.) A program that would do all this and more is the Economic Democracy Act.
• Inflation is Good for You. Not. Or so sayeth the Great God Keynes . . . and only if you’re rich enough to take advantage of the opportunities for fun and profit offered by inflation. You see, Keynes believed that concentrated wealth is a great good, for how else can new capital formation be financed and jobs created? That’s why virtually everything in Keynesian economics is designed to help the rich get richer, and keep the non-rich on wages and welfare . . . and one of the best ways to do this is by inflation. Inflation shifts value from non-producers to producers by cheapening the value of the money received by wage and welfare recipients and making products more expensive. This concentrates wealth in fewer and fewer hands. For example, if someone is paid $1 an hour for work performed when bread is $1 a loaf, but at the time the bread is purchased is $2 a loaf because the government inflated the currency, the bread cost 2 hours instead of one hour, even if the wage rate increased to $2 per hour in the meantime. The wage earner’s real pay was 50¢ per hour. Where did the money go? To the producer of the bread, who doubled his profits without having to increase production.
• (Potential) Energy Crisis, Anyone? The powers-that-be are getting worried about yet another potential energy crisis as the fossil fuels which are under the control of other powers-that-be might not be available for the people that want or need them. Of course, we could switch to hydrogen as a fuel source, hydrogen being the most common element in the universe . . . and thus not under the control of anyone and is relatively easy to extract from water. That, however, would require that someone come up with a handy-dandy home hydrogen producer, that it be installed in every hydrogen-powered vehicle, or that gas stations be retrofitted with hydrogen stations to supplement the gas pumps. The fuel source would be plain, old water, and it wouldn’t even have to be particularly clean, since the goal is to extract hydrogen, leaving oxygen behind. All three could done, thereby easing the shift from fossil fuels to a cheap and virtually endless fuel source. It’s not such a crazy idea. Henry Ford’s original idea was to power his car on industrial grade alcohol, a renewable resource that can be made on virtually any farm from organic waste, such as corn stalks, straw, weeds, etc. It’s not something you really want to drink, but the fact is that hydrogen fuel should be even easier and cheaper to make at home, and you don’t have to worry about the kiddies getting into the fuel cabinet. Of course, new types of hydrogen fuel would have to be developed and the cost efficiency increased dramatically, but that’s a technical problem that some high school student will solve the moment he or she is told not to do it. And, despite the usual chants of Hindenburg-Hindenburg-Hindenburg, hydrogen fuel is much safer than gasoline. And biodiesel is do-able right now for anyone frightened of hydrogen, and it, too, can be made in your own home.
• Unrealized Capital Gains Tax. An idea that is now being bruited about is to impose a tax on unrealized capital gains of the superrich, which “they” say will only apply to the thousand richest people in the U.S. This is one of those really, really, really bad ideas that only gets worse the closer you look at it. First off is a problem with the idea itself. An “unrealized gain” is a gain that has not been realized (duh). It’s all on paper. In order to pay a tax on an unrealized gain the taxpayer will either have to realize the gain (or enough of it to pay the tax) or take the tax out of other income. This can have devastating effects on the global economy. For example, the twenty-five richest people in the U.S. have a combined net worth of $1.6 trillion, plus a few hundred billion or so, virtually all of which is in the form of corporate equity. Let us assume that the cost basis is 25% of that . . . which is incredibly high and totally unrealistic, but it will make our point, “capital gain” being the difference between cost and current value. The proposal is for a 28% tax on unrealized capital gains, which we’ll lower to 25% for ease of computation. This means that (at least in aggregate), there is $1.2 trillion and change in unrealized capital gains to be taxed. 25% of that is $305 billion. The single largest daily trading value on the New York Stock Exchange was $169 billion in 2013. Dumping nearly twice that amount — or even threatening to — would cause a financial firestorm throughout the world that would make the Crash of 1929 look like a bull market in comparison. A far better idea would be to rebuild the tax base with the Economic Democracy Act.
• Monitoring Bank Accounts. Here’s how it seems to go. A new funding proposal is bruited about that sounds okay until you actually think about it, then a modified version is presented that sounds a bit better, but still has the same basic flaws; as the original proposal, the idea is finally scrapped, and we’re back to Square One with trying to figure out how to keep the Keynesian fantasy universe running when it constantly contradicts reality. That seems to be the problem with the proposal to require banks to report all transactions over $10,000 to the IRS . . . which would mean that the IRS would be able to “search” anyone’s bank accounts without having to show probable cause. In effect, everyone who has transactions in excess of $10,000 (the original proposal was $600 . . .) would be considered guilty until proven innocent, the presumption of the IRS being that you must have obtained the money illegally until and unless you can prove otherwise. Of course, a better idea might be to use commercial banks as intended . . . to create money for self-liquidating projects, and do it in a way that creates new owners instead of new criminals, such as with the Economic Democracy Act.•.
• Rethinking Saving for Retirement v. Investing for Life. Congress is once again looking at ways to help workers save for retirement and encourage people to retain savings in qualified plans. Currently, participants in most qualified plans are required to take a distribution after an appropriate Break in Service, whether or not they have reached retirement age. There is a provision in retirement law that permits recipients to “rollover” a distribution into another qualified plan such as an IRA or 401(k), but many people receiving a distribution will often just spend it. One proposal is to permit Plan Participants to remain in a plan as long as they like . . . which means that, even if no additional contributions go into the Participant’s account, the sponsor (usually the company) still pays the administrative cost for somebody who isn’t even employed at the company, adding to costs without generating revenue. This also comes up against the need for people to spend the bulk of their income for current consumption instead of investing and reinvesting for retirement. It’s a Catch-22 situation that can only be resolved if the paradigm shifts from “saving for retirement” by reducing current consumption, to “investing for life” by providing a way that everyone can purchase self-liquidating capital assets that generate an adequate and secure income for current and future consumption needs — the Economic Democracy Act.
• It’s Do or Die for Socialism — and It’s Completely Unnecessary. If President Biden really wants to be a unifying force for the United States, he should stop being so divisive by making the socialist agenda the defining theme of his presidency. It’s almost as if he wants to alienate most of the people in the country permanently instead of finding a way to bring people together. President Biden seems to be becoming almost desperate as virtually every action could have been dictated by the 2024 Trump campaign. It’s almost as if he wants Trump to retake the White House. Yet President Biden could go from Zero to Hero very quickly. The Economic Democracy Act would turn things completely around within a very short time, and restore not only the U.S. economy, but American prestige as it showed the rest of the world the way to go. Of course, it would also give moderates and conservatives the ability to resist the progressive agenda . . . and the progressives the ability to resist the moderate and conservative agendas, but that seems to be a small price to pay.
November 2021
• Outreach to China? It appears that President Biden’s primary effort in the struggle against climate change is the People’s Republic of China. Unfortunately, when attempting to do anything with a bully state like Xi’s China, you don’t want to start from a position of weakness — and right now Biden is viewed as very weak, indeed, as is the U.S. economy. If Biden tries to get anything with things the way they are, the best he will do is vague promises now, and complete contempt in the future. Just ask Pope Francis how much the Catholic Church got after giving away the farm. Ask the people of Hong Dong how well China keeps its word and its respect for fundamental human rights. Ask . . . well, you get the idea. If Biden wants anything from China, he has to argue from a position of strength, especially in two key areas: energy policy and the economy. In brief, there needs to be a shift away from fossil fuels and toward a viable mix of other energy sources to avoid dependence on a single one, and the Economic Democracy Act needs to be adopted as soon as possible. Anything less, and China will continue to laugh in Biden’s — the U.S.’s — face.
• Workers Leaving Workforce. According to a Yahoo! Finance news story, instead of going back to work, many Americans are choosing to stay out of the workforce, making it difficult for employers to find enough people to fill jobs. At the same time, the number of job openings is starting to decline! None of the analysts bother to say how this apparent paradox is happening, but we have a theory. A company needs to produce a marketable good or service to stay in business, at least normally it does. If it can’t get a product to market using human labor, it must find some substitute: technology. Implementing advanced technology reduces the number of jobs available. It makes sense that if human beings won’t fill jobs, companies are going to start filling the need with advanced technology. This raises the question as to how former workers are to have an income. Louis O. Kelso answered that question many decades ago. As he was quoted in an editorial in Life magazine in July of 1954, “If the machine wants our job, let’s buy it.”
• “They” Aren’t “Poor” But. . . . According to another Yahoo! Financial news article, many workers aren’t “making it” on what they’re paid (which might also explain why so many workers are opting out of the workforce), even though they’re well above the official poverty level. Of course, the objective value of labor —economically speaking — has been falling for some time in competition with advancing technology, and income has only kept even inadequate pace by artificially forcing up wages, which ultimately works to the disadvantage of the worker by making his or her replacement by technology or cheaper foreign labor more attractive to employers. What’s the real solution? As Walter Reuther noted more decades ago than we care to ponder, “The breakdown in collective bargaining in recent years is due to the difficulty of labor and management trying to equate the relative equity of the worker and the stockholder and the consumer in advance of the facts…. If the workers get too much, then the argument is that that triggers inflationary pressures, and the counter argument is that if they don’t get their equity, then we have a recession because of inadequate purchasing power. We believe this approach (progress sharing) is a rational approach because you cooperate in creating the abundance that makes the progress possible, and then you share that progress after the fact, and not before the fact. Profit sharing would resolve the conflict between management apprehensions and worker expectations on the basis of solid economic facts as they materialize rather than on the basis of speculation as to what the future might hold…. If the workers had definite assurance of equitable shares in the profits of the corporations that employ them, they would see less need to seek an equitable balance between their gains and soaring profits through augmented increases in basic wage rates. This would be a desirable result from the standpoint of stabilization policy because profit sharing does not increase costs. Since profits are a residual, after all costs have been met, and since their size is not determinable until after customers have paid the prices charged for the firm’s products, profit sharing as such cannot be said to have any inflationary impact upon costs and prices…. Profit sharing in the form of stock distributions to workers would help to democratize the ownership of America’s vast corporate wealth.”
• People Baffled By Inflation. The sudden rise in inflation is astounding many people. They can’t understand why, after pumping trillions of dollars “worth” of counterfeit money into the economy, the price level is rising faster than it has for over thirty years! Of course, a few basic facts about economics and finance, not to mention monetary theory, would resolve their bafflement, but it might also increase the level of anger directed at academics and politicians determined to take what was once the strongest economy in the world down before Communist China. The simple fact that even John Maynard Keynes admitted — although he tried to explain it away — is that when you flood an economy with mega-amounts of worthless cash (i.e., backed only by the government’s promise to pay), the price level is going to rise. Then, the moment people realize that the government cannot make good on its promises, the price level starts rising faster than the money can be created, and you have hyper-inflation. At that point, you usually have someone like Hitler come in to restore order.
• A Better Way to Fund Relief and Stimulus. If you wanted another reason for monetary reform, it’s the California couple who stole millions in COVID-19 relief funds. This is a problem when your idea of financing involves first getting a lot of money and then spending it. There is no fool-proof metheod of tying the money to the project. As Dr. Harold G. Moulton, ten-president of the Brookings Institution, proved in 1935 with his book, The Formation of Capital, there is a much better way to finance economic growth and development, and — as Louis Kelso and Mortimer Adler showed in 1961 in The New Capitalists — it can be done in a way that benefits every child, woman, and man directly, rather than letting them drown in the rising tide that is lifting boats when they don’t even have a life preserver. It’s really quite simple. You ONLY create new money when there is a project to be financed, AND you back the new money with the present value of the project itself. You NEVER, REPEAT NEVER, create money for consumption, only for financing future production. (What about the “money market” you ask? When central banks “create” money to buy from the money market to increase the amount of money in circulation, they’re not really creating new money. What they’re doing is breaking big pieces of money into little pieces of money that are more useful in commerce. After all, who is going to carry around even one $1 million banknote and expect to be able to buy a cup of coffee? Remember Mark Twain’s story, “The £1 million Bank Note”?)
• Rethinking Work and Retirement. Not too long ago, not more than a century or so, the idea of working for a set period of time, then “retiring” was a completely alien idea to most people. The old Biblical injunction of “He who does not work neither shall he eat” was a simple fact of life for everyone, regardless of faith or philosophy. Then, somehow, people got the idea that everyone is due what he or she needs to lead a decent material life, and — in extreme cases — to expect people to work for it was inhumane. Part of this is the result of advancing technology, which makes direct human labor less and less of an input to production each year, thereby disconnecting direct labor from income. Another factor has been the concentrated ownership of advanced technology under capitalism, and the abolition of ownership (at least as a right) under socialism, disconnecting income from capital ownership. This is a disaster, for the two usual ways of producing and thus gaining income to meet one’s material needs is ownership of labor, ownership of capital, or both. What we need is an social revolution in which instead of armed resistance to the system or entrenched power, we resist the continuation of flawed systems, especially the money, credit, and tax systems, that prevent or inhibit most people from becoming owners of capital and thereby reconnecting to the common good of all humanity. One such revolutionary program is the Economic Democracy Act.
• The Greater Reset. As many people are aware, Klaus Schwab and the World Economic Forum are proposing a “Great Reset” to get the world back on the right track. We agree that the world needs to get back on the right track, and that many of the measures proposed by the World Economic Forum are essential now, in the short term until we can get things back on an even keel. For all their good intentions, however, what Schwab and the WEF propose is not a solution, but a social and financial tourniquet, so to speak. It is needed now, but if left in place a moment longer than necessary can — and will — “kill” the global economy and destroy society. That is why our book, The Greater Reset, scheduled for release in March, presents what we believe is a viable, long-term solution to the global situation, and a feasible means to end systemic racism, poverty and war.
•Raising Wages v. Replacing Labor. Recently someone opined that if raising wages is supposed to raise prices, why doesn’t replacing human labor with technology reduce prices? The answer is that in some cases, it does. More often, however, what happens is that a rising wage level suddenly makes labor-displacing technology financially feasible. To take a crude and simplistic example, suppose a job is being done by human beings at $7.50 per hour, which works out to an employer cost of $11.25 per hour (a “rule of thumb” is to add 50% to salary and wages to allow for the cost of benefits and employer shares of Social Security, etc.). A machine could do the job more efficiently, but costs $12.50 per hour once all costs are factored in. The hourly minimum wage rises to $15.00, which translates into $22.50 per hour for the employer. Suddenly that new technology is very profitable, indeed, and workers lose their jobs — saving the employer $10.00 per hour. Will the prices go down? No, they will go up, but not as much as they would have had the employer been forced to pay human labor $11.25 more per hour, total, than before. The employer is faced with a cost increase whichever way you look at it, but $1.25 per hour increase is much less than a $11.25 per hour increase.
• President Biden and Inflation. President Biden is being urged to think more about, and focus on inflation. We think that’s a great idea. Step one: stop printing money and spending it like a drunken sailor on leave. Step two: Enact the Economic Democracy Act. The problem isn’t solved immediately, but it will start going away.
December 2021
• Abortion and Business. No, we’re not talking about the business of abortion, although it is pretty big business, but the fears being expressed that if Roe v. Wade is overturned, it will be a “business nightmare.” It seems that the pundits are worried that abortion supporters will start boycotting corporations who do business in states where abortion would be declared illegal. The idea seems to be that the threat of acting in restraint of trade will force the Supreme Court to make it illegal to make abortion illegal . . . or something like that. The fact that all someone would have to do is cross the state line to procure an abortion doesn’t seem at all relevant. Having to jump through some hoops to commit a morally repugnant act doesn’t seem like too great a burden when the alternative is forcing your morality on people who have democratically decided they don’t want abortion.
• Rising (Official) Inflation. Even the somewhat artificial measure of inflation used by official sources is starting to show the problems. The official “over the year” amount as of November was almost 7% — the highest in almost forty years. What baffles the experts is how, after pumping trillions of dollars “worth” of counterfeit money into the economy (Irving Fisher called money backed by government debt “legal counterfeiting” . . . and approved of it!) the price level is rising! From the perspective of economic personalism it’s very easy to understand. If you view money and credit as a commodity, then some mystical divine being called the State or the computer creates money, and people use this “money” to produce other wealth. Somehow, however, it never seems to work, and the mystical divine being has to create even more “money” . . . and people wonder why things keep getting worse. If you view money and credit simply as a means by which I exchange what I produce for what you produce, however, then you realize it’s not a commodity at all, and when the State or the computer creates “money,” all it’s doing is creating artificial claims on production that doesn’t exist, so it forces up the prices of actual production.
• Where Should Money Come From? Under the principles of binary economics, it is not necessary to have money (savings) before financing new capital. Commercial and central banking were invented to create a kind of “self-financing” out of feasible commercial, agricultural, and industrial projects. The proposals of Louis Kelso take full advantage of this. If a project has value, a commercial bank can create money backed by the value of the project. This new money is used to “form” (purchase or build) the new capital. When the new capital becomes profitable, the money is repaid to the bank and cancelled. The borrower pays an additional amount over and above the amount of new money created by the bank that represents the bank’s revenue and that is not cancelled.
• Defined Contribution v. Benefit Plans. Dave Richardson, head of the “TIAA Institute,” the research arm of one of the country’s leading providers of retirement plans, the TIAA — a for-profit financial institution that provides pension, insurance, and investment services, mainly for teachers and their families, has come down on 401(k) plans as they do not provide for fixed payments to participants. His idea is that the 401(k), which (like the ESOP) is a “defined contribution plan” should be reformed so that it is a “defined benefit plan,” an entirely different form of retirement plan. The 401(k), ESOP, and IRA are ways that workers can save and accumulate assets for retirement on a tax-deferred basis. Richardson objects to this. He thinks that all 401(k)s — and presumably ESOPs, IRAs, and SEPs — should be converted to defined benefit plans to ensure the presumed absolute security of a traditional pension plan . . . like those the PBGC has been taking over as more and more of them go bankrupt. From 1975 to 2017, the number of defined benefit plans dropped by more than half in the U.S., while over the same period defined contribution plans increased by over 300%. In 1975, there were an estimated 103,000 defined benefit plans and 207,700 defined contribution plans, while in 2017 there were 46,700 defined benefit plans and 662,800 defined contribution plans . . . most in companies that could not afford a defined benefit plan. By demanding that defined contribution plans become defined benefit plans, Richardson would likely force the termination of hundreds of thousands of retirement plans in the U.S., potentially leaving millions of workers with no retirement benefits, or at least no easy way to save for retirement.
• China, In Reserve. According to an article in Thursday’s Wall Street Journal (“Chinese Economic Activity Bogs Down,” WSJ, 12/16/12, A-10), a reduction or lag in consumption in China is the result of declining investment and economic activity. This could be a serious problem . . . for China as well as everyone else caught in the trap of Keynesian economics. As has been known for a few millennia, it is not the demand for new capital or production that drives an economy, but consumers’ demand for marketable goods and services — consumer demand drives the demand for new productive capacity, not the other way around. By engaging in massive spending on productive capacity and infrastructure for which no demand exists now or in the foreseeable future, China could be setting itself up for a massive downturn.
• Looking Glass Land. In almost exactly the opposite case from China, the United States continues to stimulate demand . . . for all the wrong things. This is in many respects as bad as what the Chinese are doing, but the U.S. is still in a better position to pull out of it. The Chinese problem is to turn people who are producing into consumers without changing the very power structure that prevents them from getting effective consumer power into people’s hands, while the U.S. problem is how to make ordinary people who are consuming but not producing into producers. As some of the legal framework and the financial infrastructure to do just that already exists in the U.S., it would actually be a relatively simple matter to implement reforms like the Economic Democracy Act that has the potential to turn the entire picture around in (opinion) less than two years, while China’s whole system could take decades to shift gears and ideology.
• Hortense and Her Whos. In case you’ve been wondering how you might advance the Just Third Way by introducing it to legislators at any and all levels of government, we’ve made it easy for you, with the “Hortense Hears Three Whos“ initiative. Visit the explanatory website, and consider downloading the postcard to send to people in government. Don’t worry if you think they won’t be open to it, as the postcard is intended to get them to open their eyes.
• 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 over 155,000 total views. The latest Sensus Fidelium video is “The Five Levers of Change.” 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 38 different countries and 39 states and provinces in the United States and Canada to this blog over the past week. Most visitors are from the United States, United Kingdom, Canada, Argentina, and Spain. The most popular postings this past week in descending order were “The Very Model of a Modern Chestertonian,” “Slavery and Moral Relativism,” “Dorothy Day, Catholicism and Communism, Part II,” “China’s Contradictory Messages,” and “News from the Network, Vol. 14, No. 51.”
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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