News from the Network, Vol. 3, No. 50

Kudos to Guy Stevenson, a CESJ National Field Secretary in Iowa, who gave us a great catch phrase for this week's blogitorial . . . that we're not going to use. It was good, though: "It's a duct tape world." This brought in all the jury-rigging political and, especially, economic fixes that have been slapped on to try and remedy bad situations by covering them up and adding more complexities. We even had some notes, and that great opening sentence, courtesy of Mr. Stevenson. We were bringing in Garrison Keillor and the American Duct Tape Council . . . all kinds of clever stuff.

Yes, we were all set to run with Guy's suggestion . . . until we read this morning's Wall Street Journal, and the op-ed by Alan S. Blinder, an economics professor at Princeton, "Our Dickensian Economy." (Wall Street Journal, 12/17/10, A19.) Pitting alleged Republican greed against Democratic envy, Dr. Blinder-Than-Thou tried to juxtapose the Murdstones of the GOP with the Democratic David Copperfields. He was clearly attempting to take the high road of concern for the working poor by urging more monetary expansion by the Federal Reserve and “hinting” that employers need to pay workers more. After all, Dr. Blinder points out, productivity in nonfarm business is up 86% since 1978, while real compensation per hour is up just 37% . . . "Is that fair?" he complains.

A Binary Economist would respond with an "Absolutely not!" Where is the fairness in compensation to labor going up 37% when the increases in productivity are due almost exclusively to advancing technology, i.e., capital? How is it "fair" that labor gets what capital has earned, and which goes by natural right to the owner of capital?

Abraham Lincoln had something to say on that score. In the debate with Stephen Douglas on October 15, 1858, Lincoln declared that taking for one's self what another earns is nothing less than slavery: "It is the eternal struggle between two principles, right and wrong, throughout the world. It is the same spirit that says 'you toil and work and earn bread, and I'll eat it.' No matter in what shape it comes, whether from the mouth of a king who seeks to bestride the people of his own nation, and live by the fruit of their labor, or from one race of men as an apology for enslaving another race, it is the same tyrannical principle."

Two wrongs don't make a right. It's no more fair for "capital" to rob "labor" by withholding a just wage, than it is for workers to demand increases in pay for work done by capital owned by others. Would a black slaveholder who kept his former white master in involuntary servitude somehow be less despicable for doing what he, better than anyone, knew to be wrong?

The solution in Binary Economics, of course, would be to open up democratic access to money and credit so that owners of labor could also become owners of capital, thereby sharing in productivity growth by right rather than as the result of coercion. Dr. Blindly-Stumbling doesn't stop with hinting that what belongs to owners of capital should be redistributed to owners of labor, however. After declaring, "Our biggest problem today is the shortage of jobs" (and how, exactly, does raising the price of labor encourage job creation?), Dr. Blinder asserts,

The Federal Reserve is trying to do something about it. But having fired so much ammunition already, it is down to pretty weak weaponry. Yet the Fed's announcement that it would purchase $600 billion worth of Treasury bonds was greeted by thunderous protest from the right, which frets over inflation even as we teeter on the brink of deflation.

Uh, yeah, Kingfish . . .

Dr. Blinder does not explain how or why pumping trillions of dollars worth of fiat money into the economy, backed only by toxic, overvalued "assets" and government debt, constitutes "teetering on the brink of deflation." Huh? A few weeks ago Reuters reported that American companies have cir. $1 trillion with which they plan to buy back shares, driving up prices on the secondary market. The financial services industry has reported record profits at a time when the Obama administration has been moaning that banks are stuffed with cash that they refuse to lend. Prices of items carefully omitted from the Consumer Price Index — food and energy — continue to rise. The claim that "we teeter on the brink of deflation" could only come from the mind of an economist who accepts Keynes's re-editing of the dictionary with regard to "inflation." As the Great Defunct Economist explained,

When full employment is reached, any attempt to increase investment still further will set up a tendency in money-prices to rise without limit, irrespective of the marginal propensity to consume; i.e. we shall have reached a state of true inflation. Up to this point, however, rising prices will be associated with an increasing aggregate real income. (General Theory, III.10.ii)

In plain English, according to Keynes, "inflation" is not a rise in the price level due to more money "chasing" the same or fewer marketable goods and services. Rather, "true inflation" is a rise in the price level after full employment has been attained. By twisted Keynesian logic, then, since we clearly do not have "full employment," even by the distorted figures coming out of the Bureau of Labor Statistics, we cannot possibly be suffering from inflation. Since we're not suffering from inflation, egad! We're teetering on the brink of deflation!(!!)[!!!]{! x 10!!!} The solution is obvious, at least to a Keynesian: CREATE MORE MONEY! SPEND, SPEND, SPEND!

Really? Dickens understood quite well what happens when you spend without producing. As he had Mr. Micawber instruct Master Copperfield,

"My other piece of advice, Copperfield," said Mr. Micawber, "you know. Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and — and in short you are for ever floored. As I am!"

Whatever Keynes's and Blinder's delusions, inflation hurts the wage earner. Even Keynes admitted that his "forced savings" theory puts the wage earner into the position of never being able to catch up, and robs the poor for the benefit of the rich. (General Theory, II.7.iv) Labor earns more in aggregate, but Keynes (as von Hayek rather astutely pointed out) neglected to take into account the individuals who make up those aggregates . . . individuals who are worse off by being forced to reduce consumption to put greater profits into the pockets of producers who presumably reinvest the "forced savings," or which are taxed away to fund redistribution.

The poor are effectively taxed to support the poor. Dr. Blinder was right. This is truly a Dickensian economy. The problem is that Dr. Blinder is not a Deus ex Machina author, setting everything right in the end by chance and coincidence. Rather, he bears a startling resemblance to Uriah Heep, who honestly thought he was being a friend to David Copperfield, while engaged in doing the worst possible things to everyone for his own benefit. Frankly, rather than spending our collective heads off and end up being sent to the international equivalent of the Marshalsea debtors' prison — effective loss of national sovereignty — we'd be much better off doing what some conservative fatcats propose: shut down the Federal Reserve, stop spending, balance the budget, allow the rich to accumulate sufficient savings to finance new capital investment and create jobs, and so on.

. . . . or we could do something that actually makes sense: implement Capital Homesteading. So what have we been doing this week to advance the case for a Capital Homestead Act by 2012?

• This past Saturday, December 11, 2010, the "Fed Rally Task Force" had a telephone conference, with another scheduled for tomorrow. This may sound like a rather intensive round of "meetings, bloody meetings," but the effort is starting to build some momentum. In particular, the networking efforts of the CESJ National Field Secretaries are starting to bear fruit. Of special note are Russell Williams and his continuing efforts to reenergize the NAACP to get the venerable organization behind Capital Homesteading as the next logical step in helping all people of all colors to secure their civil — and natural — rights to life, liberty, property, and the pursuit of happiness.

• Adding to the impression that we do nothing but have meetings, on Wednesday we had the monthly Executive Committee meeting. Seeing the movement toward the establishment of the Just Third Way on a daily basis gives you a slightly distorted perspective on progress. It isn't until you see it all in one place (such as these news items) that you realize the momentum that is building up to reach the goal of Capital Homesteading by 2012.

• Russell Williams has been making great strides with the university system in Connecticut, and has opened the door there for Norman Kurland in a number of venues. Russell also has been offered a weekly radio show on the Just Third Way for six months. He still needs to find funding, but he doesn't think that will be a problem. Of course, we're morally certain that if anyone wanted to contribute something to offset production costs, it would be graciously accepted. This has not been discussed, but if the station is not a non-profit, it might be possible to make contributions to CESJ, which has 501(c)(3) status.

• A meeting (meetings, again!) has been scheduled in January with Mr. John Dondanville of Detroit (and a graduate of Notre Dame) and Mr. Robert Colangelo, Executive Director of the National Brownfield Association in Chicago, to discuss the application of the principles of the Just Third Way to the financing of the right-sizing of cities in light of the ongoing economic downturn.

• Norman Kurland has been scheduled for an interview on the "Unlock Your Wealth" radio show, hosted by Heather Wagonhals and produced by the Unlock Your Wealth Foundation, to be broadcast live on Saturday, February 19, 2011. Norm was most recently featured on "Money America" out of Cambridge, Massachusetts, to rave reviews (or as rave as you can get, talking about economics). If you know of a local (or national, or international) show, radio or television, even a local newspaper or magazine that is looking for dynamic, effective, and interesting (yes, it's possible to be interesting about economics) person to interview, put them in touch with us. We're working on a one-sheet handout describing Norm as a guest. It's a great way to spread the word about the Just Third Way, and Norm has the unique ability to turn "the dismal science" of economics into something that has the potential to deliver hope to everyone through Capital Homesteading.

• Dave Kelly (another graduate of Notre Dame), who is spearheading the Harris Neck effort to recover land taken from its owners during the Second World War, has been making many significant contacts. He has also invited Norm to speak before the boards of advisors and directors of the Harris Neck initiative in February.

• Michiel Bijkerk, an attorney in the Netherlands Antilles, is running for a seat in the legislature. He hopes to sponsor an initiative to implement the Citizens Land Bank concept as far as possible within existing legal structures. The interim vehicle would be called a "Community Investment Center."

• Pollant Mpofu, a CESJ friend in London (originally from South Africa) has been making great strides in his efforts to introduce religious and political leaders in England, Ireland, and South Africa to the ideas of the Just Third Way and its potential to revitalize the global economy. He hopes to have Norman Kurland and Michael Greaney invited to meet with David Cameron, as well as the Anglican Archbishop of Canterbury and the Catholic Archbishop of Westminster. He has also reached out to Jimmy Kelly, a Regional Secretary in Ireland of the Unite trade union. Pollant is also working on having Norm invited to meet with the president of South Africa.

• As of this morning, we have had visitors from 53 different countries and 49 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, Canada, Brazil, and Ireland. People in Japan, Canada, Pakistan, the United States, and Venezuela spent the most average time on the blog. Possibly due to the growing perception that something is wrong with the basic assumptions of Keynesian economics (as well as other schools of economics based on the Currency School of finance), the most popular posting by far is one from a while back, "Thomas Hobbes on Private Property," that briefly explains the similarities in the way Keynes and Hobbes abolish private property. This is followed by "Aristotle on Private Property," Norman Kurland's tribute to Bob Woodman, "Part I" of "How to Save the Global Economy" from last month, and "Keynes, Bernanke, and Private property," also from last month.

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

#30#

Games People Play

It's become painfully obvious that the world's most popular sport isn't soccer, baseball, or even texting. It's jumping to conclusions after warming up playing word games. On today's swampy intellectual and moral playing field shadowed over with a heavy positivist cloud cover, even understanding the idea of absolutes of the natural moral law and discerned as far as human capacities permit through the use of reason is virtually unthinkable. People waste their time twisting themselves and their thoughts into moral and intellectual pretzels — and you know what happens if you try to untwist a pretzel.

This makes it all the more difficult to explain the Just Third Way, especially as the principles of the Just Third Way are applied in Binary Economics and compared with today's "mainstream" schools of economics. We've spent the last couple of years on this blog explaining in great detail the philosophical framework of the Just Third Way, its principles (especially as they relate to money and credit, banking, and finance), and how these principles might be applied in Capital Homesteading to bring about a more economically (and politically) just and human(e) future for all.

A major part of the groundwork involved in this effort is surfacing or developing accurate definitions of terms and concepts. One of the more difficult terms to define, for example, is "money." Economists and even banking experts muddy the waters on this one by insisting on defining money by its function, that is, what money does or can be made to do, rather than by its nature, that is, what money is, or the basic principle(s) of money.

Almost as difficult as defining "money" is defining the terms "capitalism" and "socialism." Money has a lot of emotional and historical "baggage" that gets in the way of gaining a true understanding, but capitalism and social certainly give it a run for the, well, money. Call something "socialist," for example, and it seems that nobody actually tries to understand what you mean. Instead, people immediately assume that you're using a pejorative just to score off an opponent, rather than giving an objective and accurate description.

Case in point: a couple of days ago we stated that chartalism, a theory originated by Georg Friedrich Knapp and detailed in his book, The State Theory of Money (1924), is socialist. In its purest form, chartalism puts total control over money and credit in the hands of the State. Today's chartalists modify the form of chartalism by permitting some private control (under State guidance, of course), but this does not change the substantial nature of the theory.

Emphasizing form over substance, a chartalist (or, at least, someone claiming to understand chartalism better than we do) responded by claiming that the modifications and changes introduced by modern chartalists into the application of the pure theory have, in effect, rendered it non-socialist. The debate then continued by claiming that the principles underpinning the Banking School of finance — Say's Law of Markets and the real bills doctrine — are, essentially, hogwash, and the relevant framework is that of the Currency School of finance.

On the contrary! As we have attempted to explain over and over (and are now forced to close the debate with this final posting), you can change the form or application of something, you can even redefine something to suit your personal opinion, but the thing remains what it is. If you change the definition of something, you are either abolishing the thing for what it was and making it something different, or claiming that the thing never was what it was. In either case you are only playing games.

Further, it is a bad argument to try and claim that the financial principles of the Just Third Way, notably Say's Law of Markets and the real bills doctrine, are bad because they are not the principles of the Currency School. Heavy sigh. As G. K. Chesterton explained,

It is no good to tell an atheist that he is an atheist; or to charge a denier of immortality with the infamy of denying it; or to imagine that one can force an opponent to admit he is wrong, by proving that he is wrong on somebody else's principles, but not on his own. After the great example of St. Thomas, the principle stands, or ought always to have stood established; that we must either not argue with a man at all, or we must argue on his grounds and not ours. We may do other things instead of arguing, according to our views of what actions are morally permissible; but if we argue we must argue "on the reasons and statements of the philosophers themselves." (G. K. Chesterton, St. Thomas Aquinas: The "Dumb Ox." New York: Image Books, 1956, 95-96.)

To settle the matter once and for all, then, let's examine what "the authorities" are actually saying. In the Wikipedia, "chartalism" is described as, "a monetary standard in which government-issued tokens are used as the unit of money. In such a system, fiat money is created by government spending. Taxation is employed to reclaim the money and control the total amount of fiat money in existence. Reclaiming most of this issued money via taxation is essential to maintaining its value in exchange." The entry goes on to explain,

Modern Chartalism theory states that under a fiat money system, net currency is created by government through deficit spending. Because the issued currency is not tied to or backed by a commodity, currency can only be created when the government spends. Government may, or may not, ask for that currency back in taxes. The demand to hold and acquire this government issued currency is driven by taxes levied by the state — which typically can only be paid in the state-issued fiat currency.

The theory was developed by economist G.F. Knapp into the 1920s, with important contributions by Alfred Mitchell-Innes also. It was influential on the 1930 Treatise on Money by John Maynard Keynes — Knapp and Chartalism are cited approvingly on its opening pages. Chartalism experienced a revival under Abba P. Lerner, and has a number of modern proponents, who largely identify as post-Keynesian economists.

And what did Keynes say in his Treatise on Money?

It is a peculiar characteristic of money contracts that it is the State or Community not only which enforces delivery, but also which decides what it is that must be delivered as a lawful or customary discharge of a contract which has been concluded in terms of the money-of-account. The State, therefore, comes in first of all as the authority of law which enforces the payment of the thing which corresponds to the name or description in the contract. But it comes in doubly when, in addition, it claims the right to determine and declare what thing corresponds to the name, and to vary its declaration from time to time — when, that is to say, it claims the right to re-edit the dictionary. This right is claimed by all modern States and has been so claimed for some four thousand years at least. It is when this stage in the evolution of money has been reached that Knapp's Chartalism — the doctrine that money is peculiarly a creation of the State — is fully realized. (John Maynard Keynes, A Treatise on Money, Volume I: The Pure Theory of Money. New York: Harcourt, Brace and Company, 1930, 4.)

If we understand private property (to say nothing of money and credit, banking, and finance), we are forced to the conclusion that, remonstrate as you will, call us whatever names you like, chartalism is, as we stated, a form of socialism. A State that issues money without backing and eliminates the necessary private property stake is socialist — no ifs, ands, or buts.  Thus chartalism — "the doctrine that money is peculiarly a creation of the State" — is, without question, a form of socialism.

#30#

What is "Socialism"?

As regular readers of this blog are aware, the Just Third Way uses definitions of terms consistent with an Aristotelian "natural law" approach, rather than the definitions that popular culture or even academia may currently assign to the terms. Thus, we have had extended (and re-extended) and involved discussions concerning such basic concepts as money and credit, banking, finance, even the natural law and its application within the confines of the common good . . . to which we assign a special meaning that may elude the casual reader.

All of this is no doubt great fun. Nevertheless, despite our inordinate appetite for proving us right and everyone else in the world wrong, it does little to advance the Just Third Way. As you know (or, at least, as we hope you know), we present the Just Third Way as the only viable alternative to both capitalism and socialism, a free market, private property-based approach to economic and social development.

Overall, the Just Third Way is based on the inherent dignity of the human person. In its economic aspect (which also brings in politics in the Aristotelian sense), the Just Third Way integrates the "four pillars of an economically just society." We've listed them countless times before on this blog, but it might be useful to do so again:

1. A limited economic role for the State,

2. Free and open markets within a strict juridical order as the best means of determining just wages, just prices, and just profits,

3. Restoration of the rights of private property, particularly in corporate equity, and

4. Widespread direct ownership of the means of production, individually or in free association with others, especially as it relates to access to money and credit as the chief means by which property is acquired and possessed.

This last, the "fatal omission" from the three mainstream schools of economics (Keynesian, Monetarist/Chicago, and Austrian), as well as pretty much all the others, is what causes the most trouble with acceptance of the principles of the Just Third Way. Not the least of the problems is found in the definitions of socialism and capitalism that we juxtapose with the Just Third Way. Both socialism and capitalism, as defined in the Just Third Way paradigm, concentrate ownership of the means of productions — both of them for reasons that seem good to the adherents of each system, but that render each of the systems fatally flawed. The problem is that the failure to realize the strict definitions used in the Just Third Way inserts a degree of confusion into the discussion.

Let's take capitalism first, for it is the easiest to define. "Capitalism," as that term is used in the Just Third Way, means a system in which ownership of the means of production is concentrated in the hands of a private elite, and the great mass of people subsist solely or predominantly on wages.

Superficially, "socialism" is just as easily defined: a system in which ownership of the means of production is concentrated in the hands of a public elite, i.e., the State, and the great mass of people subsist solely or predominantly on wages.

Problems immediately crop up. Many people, for example, claim that unless the State holds title, the system is not socialist. They fail to take into account that "ownership" and "control" mean the same thing in law. You may hold title, but if you can only exercise your presumed right of control of what you own or enjoy of the fruits thereof at my behest, then I, not you, am the real owner, regardless who has nominal title.

What about where the State permits private owners to both own and control what they possess without undue interference from the State? Is that socialism?

Many people are surprised to learn that the answer is "yes" — such a system is socialist. Why? Because in such a system the State does not recognize the natural right of private property as inhering in the human person. The right of ownership is construed as a grant from the State, not the Creator. The State permits owners to own and exercise their ownership, it does not protect as inalienable a right that is recognized as belonging by nature to each human being. Rights are viewed as coming from the State, not from God. This puts the State in the place of God.

Is it any wonder, then, that while capitalism comes in for some well-deserved castigation from religious authority, such as the heads of the Catholic Church, it is not condemned within an Aristotelian framework. This is because in capitalism natural rights are not alienated, but badly distorted. The result is to deny the effective exercise of inalienable rights, but without denying them outright.

Socialism, however, effectively denies the inalienability of the natural right itself. This overthrows the basis of the natural moral law. As the natural moral law is the foundation of the social teachings of Christianity, Judaism, Islam, and every other ethical system, it comes as no surprise that religious authorities condemn socialism as inherently contrary to a religious worldview. Nowhere is this better seen than in the careful analysis accompanying the condemnation of socialism issued by Pope Pius XI in the 1931 encyclical, Quadragesimo Anno. As the pope explained,

116. Yet let no one think that all the socialist groups or factions that are not communist have, without exception, recovered their senses to this extent either in fact or in name. For the most part they do not reject the class struggle or the abolition of ownership, but only in some degree modify them. Now if these false principles are modified and to some extent erased from the program, the question arises, or rather is raised without warrant by some, whether the principles of Christian truth cannot perhaps be also modified to some degree and be tempered so as to meet Socialism half-way and, as it were, by a middle course, come to agreement with it. There are some allured by the foolish hope that socialists in this way will be drawn to us. A vain hope! Those who want to be apostles among socialists ought to profess Christian truth whole and entire, openly and sincerely, and not connive at error in any way. If they truly wish to be heralds of the Gospel, let them above all strive to show to socialists that socialist claims, so far as they are just, are far more strongly supported by the principles of Christian faith and much more effectively promoted through the power of Christian charity.

117. But what if Socialism has really been so tempered and modified as to the class struggle and private ownership that there is in it no longer anything to be censured on these points? Has it thereby renounced its contradictory nature to the Christian religion? This is the question that holds many minds in suspense. And numerous are the Catholics who, although they clearly understand that Christian principles can never be abandoned or diminished seem to turn their eyes to the Holy See and earnestly beseech Us to decide whether this form of Socialism has so far recovered from false doctrines that it can be accepted without the sacrifice of any Christian principle and in a certain sense be baptized. That We, in keeping with Our fatherly solicitude, may answer their petitions, We make this pronouncement: Whether considered as a doctrine, or an historical fact, or a movement, Socialism, if it remains truly Socialism, even after it has yielded to truth and justice on the points which we have mentioned, cannot be reconciled with the teachings of the Catholic Church because its concept of society itself is utterly foreign to Christian truth.

118. For, according to Christian teaching, man, endowed with a social nature, is placed on this earth so that by leading a life in society and under an authority ordained of God he may fully cultivate and develop all his faculties unto the praise and glory of his Creator; and that by faithfully fulfilling the duties of his craft or other calling he may obtain for himself temporal and at the same time eternal happiness. Socialism, on the other hand, wholly ignoring and indifferent to this sublime end of both man and society, affirms that human association has been instituted for the sake of material advantage alone.

In other words? Socialism is not condemned because it abolishes private ownership — it may or may not do that — but because it abolishes the basis of private ownership.  This makes "private" property a grant from the State, not inherent in human nature as a reflection of God's Nature, self-evident in His Intellect.

Consequently, if the State giveth, the State can also taketh away; only God's gifts are irrevocable. Socialism abolishes private property, even in those instances where it "permits" private ownership of the means of production. As John Locke pointed out in his Second Treatise on Government, you cannot truly be said to own anything if someone else can take it away from you when he wills.

Thus a system like chartalism, in which the State issues money backed by the general wealth of the economy, is a socialist system — even if it "permits" private sector money. Why? Because the right to issue money — that is, to draw a bill on the present value of existing or future wealth — presumes ownership of the wealth on which the bill is drawn. In chartalism, as in Keynesian economics, the State issues money backed by wealth to which the State does not have title, but is presumably in private hands.  It doesn't matter whether the State allows private individuals to issue money; the key is that the State does not recognize this as a natural right.

By issuing money in any amount or to any degree, the State exercises property in what somebody else nominally owns, thereby abolishing private property through control of money and credit, and establishing, as Keynes admitted, an absolutist State. As Meyer Anselm Rothschild is reputed to have said, "Give me control over money and credit, and I care not who makes the laws."

#30

Why Government Debt is REALLY "Bad"

Yesterday's posting on why government debt is a bad idea was supposed to be a "one-shot" deal. We had intended today to post something on how wages tend toward subsistence in a system in which most people are denied access to the means of acquiring and possessing private property. Among other things, there's no "competition" among sources of income, so the wage payer has a virtual monopoly and thus control over wage earners' income.

We'll get to that — eventually — but we received a comment on yesterday's posting that demands a response. Why? Because the comment revealed that people can be reading the postings on this blog, especially on the nature of money and credit, and still remain trapped within the existing paradigm. (We're not talking about Dr. Norman Kurland's posted comment.  We liked that one.  This is one that was sent to us rather than submitted as a posted comment.)

This is a serious problem. The whole point of the Just Third Way is that it takes as a given that the existing paradigm is based on seriously flawed principles. When applied to the design and maintenance of a political or economic system, these flawed principles can have only one result: disaster. This is because the Just Third Way derives from application of the essential precepts of the natural moral law, that is, from human nature itself, reflected from the Creator and discernible by the use of reason. The refusal or inability to base the institutions of society on these precepts within acceptable parameters virtually guarantees failure.

What are the essential precepts of the natural moral law? We find them listed in, e.g., the Universal Declaration of Human Rights and the Declaration of Independence, but perhaps most succinctly in George Mason's draft of the Virginia Declaration of Rights of June 12, 1776: life, liberty (freedom of association/contract), access to the means of acquiring and possessing private property, and the acquisition and development of virtue ("pursuit of happiness and safety"). The last of these, best understood as "becoming more fully human," while most important, is supported by the essential triad of life, liberty, and property.

This is the basic framework of the Just Third Way, a fundamental respect for the dignity of each person. That being the case (and recalling the number of times we've covered this topic in postings on this blog), the comment we received was, well, discouraging:

Since the treasuries of sovereign governments that issue their own currencies are not depository institutions, to speak of such sovereign governments as being in debt is largely meaningless. If government debt is bad, you ought to see just how bad budget surpluses are.

The only way to respond to this dogmatic assertion is to explain again, as briefly as possible, the nature of money — not its function. Because we've explained this so many times before and gone into a great deal of depth on the subject, this is going to come across as a string of dogmatic assertions. If a new reader wants more explanation, there is much more information over to your right under "money and credit," in which there are more than eighty individual postings.

"Money" IS anything that can be used in settlement of a debt. What "money" DOES is serve as the medium of exchange, a standard of value, a unit of measure, and a store of value.

By definition, all money constitutes a contract, and all contracts are money.

"Currency" is a specific form of money, "current money," that may or may not have legal tender status, and may or may not be sanctioned or regulated by the State.

The State's proper role with respect to money is to set the standard of value and enforce contracts when necessary. Anything else interferes with freedom of association (liberty/contract) and undermines the institution of private property where it does not abolish it outright.

A treasury of a sovereign government that issues its own currency is not a "depository institution," but is functioning as a "bank of issue."

A bank of issue only properly emits banknotes and creates demand deposits when the banknotes and demand deposits are backed by the present value of existing and future marketable goods and services or the capital instruments used to produce the future marketable goods and services, in which the issuer (emitter of the banknotes or creator of the demand deposits) has a private property right secured by a bill of exchange or a derivative of a bill of exchange in the form of a draft, a promissory note, or other financial instrument — a "real bill."

An emitter of banknotes or a creator of demand deposits that does not have such a private property right is engaged in theft, that is, is drawing "fictitious (fraudulent) bills." When the emitter/creator is the State, the issuance of banknotes or creation of demand deposits that are not construed as debts secured by future tax collections ("anticipation notes") constitutes effective socialism.

The form of socialism in which the State issues all money backed solely by its "faith and credit" and is not required to make good on the promise(s) conveyed by the currency to holders in due course of the currency is called "chartalism." Lauded by John Maynard Keynes in his Treatise on Money (1930) as the perfect monetary system within and for an absolutist State, chartalism was pioneered by Georg Friedrich Knapp in The State Theory of Money (1924).

Like all socialism, chartalism is based on the belief that private property is illegitimate, and that the State, whether or not it holds actual title, is the real and ultimate owner of everything in the economy. This belief was posited in modern political theory as the "divine right of kings," and articulated in Thomas Hobbes's manual for totalitarian government, Leviathan (1651).

Hobbes was a primary source for Walter Bagehot, whose The English Constitution (1867) and Lombard Street (1873), the latter based on the British Bank Charter Act of 1844, are virtual "bibles" for the structuring of the modern financial system and government monetary and fiscal policy. Bagehot, contradicting A. V. Dicey's emphasis on the "rule of law," presumed rule of the State by a financial elite, a "despotic economic dictatorship" who "often are not owners but only the trustees and managing directors of invested funds which they administer according to their own arbitrary will and pleasure." (Quadragesimo Anno, § 105)

This dictatorship is being most forcibly exercised by those who, since they hold the money and completely control it, control credit also and rule the lending of money. Hence they regulate the flow, so to speak, of the life-blood whereby the entire economic system lives, and have so firmly in their grasp the soul, as it were, of economic life that no one can breathe against their will. (Ibid., § 106.)

The bottom line is that basing the financial system on the tenets of the British Currency School of finance (that money is arbitrarily defined and re-defined by the State at will, and that freedom of contract is abolished along with private property), is directly contrary to the natural law foundation of the British Banking School of finance, expressed in Say's Law of Markets and applied in the real bills doctrine. The Just Third Way uses the Banking School definition of money, while the commentator is evidently using the Currency School definition. This makes it difficult-to-impossible to respond to such comments without lengthy posts such as this one, for we are clearly not speaking the same language, or analyzing the situation using the same principles.

#30#

Why Government Debt is "Bad"

From the perspective of the Just Third Way, the good thing about accumulating massive amounts of material from the past ("Long past?" "No, your past.") is that it becomes glaringly obvious that the local, national, and global economies are sliding swiftly down the skids — and why. This contradicts the modern delusion that the sum total of human knowledge became self-evident only this morning, and anything antedating your 6:30 am wake-up call is either completely wrong, totally outdated, or, like, so totally yesterday, Dude, that it isn't worth considering.

So . . . like, how is this relevant to the title of this posting? Well, Dude, like a lot of policymakers and academics are ridiculing the "Tea Party Types" for being concerned about too much taxation and the huge deficits that result from the misuse of the Federal Reserve by monetizing government debt. After all, His Defunct Majesty Lord Keynes proved beyond the shadow of a doubt that we don't need to worry about deficit financing of government. Debt is good. This is because, in Keynesian theory, you're not actually creating money when you monetize government deficits. Rather, you're just chopping up existing wealth into smaller and smaller bits for easy (re)distribution.

Unfortunately for today's monetary and fiscal policy, Keynes was wrong. Monetizing government deficits isn't simply a case of chopping existing wealth into smaller and smaller pieces until the guppies eat the treasury. It's pledging future taxes collected out of wealth that hasn't yet been produced. The present value of what exists in the economy is not based on what currently exists. That would limit the value of the "general wealth of the economy" to the book value of existing inventories of marketable goods, and the salvage or disposal value of capital goods.

Every accountant knows, however, that the real value of productive capital is not its salvage value, but the present value of what that capital will produce in the future — but that does not yet exist in the form of inventory. This means that the "general wealth of the economy" — what the policymakers and academics appear to believe backs the money supply — consists not only of the present value of existing inventories of marketable goods and services and capital, but of the present value of existing and future marketable goods and services.

Thus, when the government monetizes its deficits, it's not simply cutting up claims on existing wealth into smaller and smaller pieces the better and easier to undermine private property and redistribute wealth. Rather, by issuing currency and creating demand deposits backed by future tax collections, the government is promising to redeem the claims it is issuing in increasing numbers out of wealth that hasn't yet been produced — and becomes less likely to be produced the more the government erodes private property by manipulating money and credit. Hence we have the analysis of Henry C. Adams in the late 19th century, in which he concluded that government deficit spending was a fast track to loss of personal sovereignty on the part of the citizens:

As self-government was secured through a struggle for mastery over the public purse, so must it be maintained through the exercise by the people of complete control over public expenditure. Money is the vital principle of the body politic; the public treasury is the heart of the state; control over public supplies means control over public affairs. Any method of procedure, therefore, by which a public servant can veil the true meaning of his acts, or which allows the government to enter upon any great enterprise without bringing the fact fairly to the knowledge of the public, must work against the realization of the constitutional idea. This is exactly the state of affairs introduced by a free use of public credit. Under ordinary circumstances, popular attention can not be drawn to public acts, except they touch the pocket of the voters through an increase in taxes; and it follows that a government whose expenditures are met by resort to loans may, for a time, administer affairs independently of those who must finally settle the account. (Henry C. Adams, Public Debts, An Essay in the Science of Finance. New York: D. Appleton and Company, 1898, 22-23.)

But, you say, so what? We don't have any real sovereignty left, anyway. With the growing concentration of ownership of the means of production, and the growing State control of what remains, that isn't far from the whole truth. Still, loss of personal sovereignty is only half the problem. Deficit financing leads directly into loss of national sovereignty as well:

The facts disclosed permit one to understand how deficit financiering, carried so far as to result in an interchange of capital and credit between peoples of varying grades of political advancement, must endanger the autonomy of weaker states unable to meet their debt-payments. Provided only that the interests involved are of sufficient importance to make diplomatic interference worth the while, the claims allowed by international law will certainly be urged against the delinquent states, and the citizens of such states may regard themselves fortunate if they succeed in maintaining their political integrity. (Ibid., 28-29.)

As the American economy becomes increasingly weaker, and as that of China, the single largest holder of American debt paper, continues to experience explosive growth, we are seeing the beginning of the end — unless steps are taken immediately, such as enacting the Capital Homestead Act by 2012. And it can be done. In the early 1870s, France managed to repay an indemnity deliberately designed to destroy its economy forever in less than three years by producing massive amounts of quality goods, facilitated by sound money and extension of credit to business — not government.

It can be done. The time to do it is now.  The alternative is to sit idly by while China increasingly throws its weight around, and North Korea and Russia take advantage of the situation.

#30#

News from the Network, Vol. 3, No. 49

As we get closer to year-end, it seems that "action" slows down, while meetings and regulatory requirements speed up . . . just as you need the time to prepare for the holidays (or, depending on your preference, hide from them). Consequently, this has been a week of meetings (boring to read about, but critically important), and report preparation (boring to read about and important only in the eyes of the bureaucrats who impose the requirements).

That being the case, we might as well jump right in and list what we've been able to accomplish this week to advance the Just Third Way:

• On Tuesday of this week we had a very good meeting with Mr. Dave Kelly (and it's "Kelly," not "King" as this writer for some reason insisted on calling him in a couple of e-mails). Mr. King is involved in the effort to restore the land around Harris Neck, Georgia, to its original owners or their heirs. The land was originally taken during the Second World War for an airstrip, found to be unsuitable, and eventually turned over to the Fish and Wildlife Commission. The F&WC is now asserting that to return the land to the people who owned it before it was taken away — most descended from former slaves — would irreparably harm a critically needed feature in the local ecology. It is unclear how a proposed airstrip would not have done so, or how returning the land to its original owners and use would.

• On Wednesday, Norman Kurland and Michael Greaney attended an Atlas/FreedomWorks function on Capitol Hill on "Sound Money and America's Global Economic Leadership." We were able to speak to a few people afterwards and distribute some copies of Dr. Harold Moulton's book, The Formation of Capital (1935), but it is not certain if or to what extent, if any, the message got through.

• The president of the Catholic Radio Association has invited a CESJ "delegation" to a reception on January 21, 2011 at the Catholic University of America, at which producers and radio station owners will be present, so that CESJ can help introduce its principles of economic and social justice to a broader audience.

• The president of the Catholic Radio Association also gave us the name of a possible contact in the media in Georgia who might be interested in the Harris Neck project.

• As of this morning, we have had visitors from 60 different countries and 50 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, Canada, Brazil, and Ireland. People in Japan, the United States, Pakistan, Finland and Venezuela spent the most average time on the blog. The most popular posting remains Norman Kurland's tribute to Robert P. Woodman, followed by Aristotle on private property, "Thomas Hobbes on Private Property," "Preventable Disasters" about the Irish crisis, and News from the Network.

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

#30#

Do Absolutes Exist? Absolutely!

A few days ago we posted our response to a reader who wondered whether he was right in thinking that it is possible to know the nature of things such as truth, love, justice, and the existence of God — in other words, whether such things as absolutes exist and if they can be known through the use of reason. In response we gave (as you might expect) the standard Aristotelian/Thomist/Maimonidean/Ibn Khaldûnian (I'm not sure some of those are real words, but you know what I mean) response that, yes, absolutes exist and they are discernible by the use of human reason, that is, they are "knowable." To get as much mileage as possible out of the response, we posted it in a number of LinkedIn groups that indicated an interest in the subject of absolute moral values, whether it is possible to know right from wrong, and so on.

Not surprisingly, the relativists were not slow in responding. One individual posted the presumably crushing comment that, "there may very well be 'absolutes', but due to our human condition, it is likely impossible for any of us to truly know them."

There are some interesting issues raised here. The comment, "there may very well be 'absolutes', but due to our human condition, it is likely impossible for any of us to truly know them" brings in the question as to whether it is truly possible to know anything — even whether it is possible to know that you don't know, which is also knowledge and thus truth. Taking as a starting point the assumption that we can know something, even if the extent of our knowledge is that we know nothing other than that we know nothing, we can resolve the question by applying a little common sense.

When we examine this statement, we realize that it is precisely because of our "human condition" that we are able through the use of reason to discern absolutes and apply them in various ways to meet human wants and needs — especially the human need to develop more fully as persons by acquiring and developing virtue, that is, by conforming ourselves ever more closely to our own nature. Humanity is made in the image and likeness of God; our human nature is a "reflection" of Divine Nature. Human nature thus incorporates an "analogously complete" capacity to acquire and develop that virtue of which God is the fullness, that is, absolute good, truth, love, beauty, justice, and so on by definition, that is, by our substantial nature or essence; our capacity to acquire and develop virtue is what defines us as human. To deny that is to deny our humanity.

The argument is fairly straightforward. First, we must understand that the first principle of reason — of existence itself — is that nothing can both "be" and "not be" at the same time. Whatever is, is, while whatever is not, is not. Whatever is in the category of "A" is by that fact excluded from the category of "Not-A." This is the "law (or principle) of contradiction," or (less frequently, but perhaps more accurately) the "law (or principle) of non-contradiction."

Second, we have to understand that the claim that there are no absolutes, or that there may be absolutes, but that it is not possible to know what they are, is the same as saying that it is not possible to know whether a thing is true or untrue, good or evil, right or wrong — or (more concisely) that it is impossible to know right from wrong. Lacking an absolute standard, however dimly perceived by the use of human reason, against which to measure something, it becomes impossible to measure that thing.

(We can reject as meaningless the statement that there may be absolutes, but that it may or probably not be possible to know them. "May not be" implies "may be" as an equally valid conclusion. It is thus simply a way of avoiding committing yourself one way or another; a way of asserting the unknowability of absolutes without actually saying so.)

Third, given that it is possible to perceive or discern absolutes, whether or not "through a glass darkly," we necessarily conclude that it is possible to "know" — that is, to distinguish right from wrong, or truth from untruth. Every injustice implies a standard of justice against which the injustice is measured and found wanting. Every wrong implies a right, every untruth implies a truth.

For example, the prohibition in the Decalogue, "Thou shalt not steal" necessarily implies private property as an absolute, that is, as pertaining to the natural moral law. If private property were not based on an absolute right of every human being to be an owner, then theft could not possibly be wrong — yet every society that has ever existed has proclaimed theft to be wrong. Different societies may define theft differently, even incorrectly, and thus apply the natural right of property differently or erroneously, but the basic principle, that private property is part of the natural moral law, remains unchanged and unchangeable.

Thus, "knowing" (participating in some measure in God's Intellect by acquiring and developing virtue) — distinguishing right from wrong, truth from untruth — necessarily implies absolutes, such as truth, love, justice, and so on. The concepts of good and evil, right and wrong, necessarily imply the existence of absolutes from which we derive our idea of right and wrong. As Mortimer Adler explained,

The reason why I say that everyone, as a matter of common sense, understands truth and falsity is that everyone knows how to tell a lie. Every one of us has told lies on one occasion or another, and everyone understands the difference between telling a lie and telling the truth. (Mortimer J. Adler, "Man the Knower," Aristotle for Everybody. New York: Macmillan Publishing Company, Inc., 1978, 151-152.)

Fourth and finally, the declaration that it is impossible to discern the existence of absolutes and come to know them is contradictory. That is, you cannot claim that it is impossible to know absolutes . . . and state it absolutely. It defies reason; it implies that something can both "be" and "not be" at the same time; you cannot state absolutely that there are no absolutes or that knowing them is impossible. Nor can you claim that someone is wrong for maintaining that it is possible to know right from wrong . . . for, if you cannot tell the difference between right and wrong, how do you know that someone else is wrong on anything — and how do you know that you are right?

"This way lies madness." Asserting that there are no absolutes or that it is impossible to know them are statements in the same category as, "Everything I say is a lie," or, "If God can do anything, then He can make a weight so heavy He cannot lift it." These are word games and simplistic logic puzzles for children, not reasoning adults. The only rational course of action is to realize that there is a contradiction somewhere in the statement, identify it, and reject the entire statement as inconsistent with reality, that is, with nature. We otherwise run the risk, as Rommen pointed out, of descending into pure moral relativism, positivism, even, ultimately, nihilism. Insanity becomes the only escape.

#30#

Sound Money and America's Global Economic Leadership

Yesterday (Tuesday, December 7, 2010), Dr. Norman G. Kurland and Michael D. Greaney, President and Director of Research for CESJ, respectively, attended the launching of Dr. Judy Shelton's pamphlet, A Guide to Sound Money, sponsored by the Atlas Economic Research Foundation and FreedomWorks. The midday event, "Sound Money and America's Global Economic Leadership," featured brief presentations by Matt Kibbe, President and CEO of FreedomWorks Foundation, Alejandro Chafuen, President of the Atlas Economic Research Foundation, Representative Mike Pence of Indiana, Dr. Judy Shelton, Co-Director of the Atlas Foundation's Sound Money Project, Representative Paul Ryan of Wisconsin, Dr. Lawrence White of the Economics Department of George Mason University, an unscheduled presentation by Jimmy Kemp, son of the late Jack Kemp, and closing remarks by Brad Lips, CEO of Atlas.

Dr. Shelton's pamphlet is being widely distributed in an effort to educate as many people as possible about the dangers of deficit spending in general, and current monetary policy in particular. The orientation is that of the "Austrian school" of economics, which — of the three "mainstream" schools of economics — is the closest to the natural law principles of the Just Third Way, the "four pillars of an economically just society":

1. A limited economic role for the State,

2. Free and open markets within a strict juridical order as the best way of determining just wages, just prices, and just profits,

3. Restoration of the rights of private property, especially in corporate equity, and

4. Widespread direct ownership of the means of production, especially through democratic access to money and credit creation for productive purposes.

This last — widespread direct ownership of capital — is the "fatal omission" from all mainstream economics and finance, including the Austrian school. Sadly, the few schools of economics that do recognize the importance of widespread ownership (with the notable exception of Binary Economics), tend to undermine one or more of the other natural law pillars. Usually this is by redefining the natural right to be an owner ("private property"), but freedom of association (liberty/contract) comes in for its share of redefinition, as does individual sovereignty through the tendency to give the State far too great a role. Primarily the State gains increasing power these days by exercising its alleged "right" (in the words of John Maynard Keynes) to "re-edit the dictionary" (A Treatise on Money, Volume I: The Pure Theory of Money, 1930). This "right" allows the State to abolish presumably inalienable rights to life, liberty, property and the pursuit of happiness on anything other than the State's own terms by redefinition of these basics of human existence.

This highlights the one problem we found in Dr. Shelton's pamphlet. There was practically nothing said with which we could disagree — except for the claim on page 7 that, "Free market capitalism depends on people's willingness to forego consumption today to provide the resources that will enable a greater standard of living in future years."

Regular readers of this blog will instantly recognize the problem here. It is, after all, the main "selling point" for Binary Economics, and the underpinning of the monetary and fiscal reforms found in "Capital Homesteading" and highlighted in the subtitle of Louis Kelso and Mortimer Adler's second collaboration, The New Capitalists: "A Proposal to Free Economic Growth from the Slavery of [Past] Savings."

Dr. Shelton's statement strikes at the heart of Say's Law of Markets implicit in Adam Smith's "invisible hand" concept, and that finds its application in the real bills doctrine. Not surprisingly, it is based on the partial understanding of money and credit found in the tenets of the British Currency School of finance, that "money" consists of coin, banknotes, and demand deposits . . . although some Currency School purists reject as "money" anything that is not coin or banknotes backed by specie (gold or silver).

The Currency School understanding of money fits into the standard economic definition of money (very briefly, the medium of exchange and a store of value). It does not, however, fit into the legal or accounting definition of money: anything that can be used in settlement of a debt. Precisely stated, the economic definition of money describes money by its function, while the legal and accounting definition of money (the Banking School of finance) defines money by its nature.

This distinction is critical. For thousands of years before the invention of coined money, trade was carried out by means of bills of exchange and derivatives of bills of exchange, such as promissory notes and drafts. These were contracts into which parties to the transaction entered freely. The State could enforce or arbitrate contracts and to a certain extent dictate what constituted legal or allowable matter of a contract, but it could not in general dictate the terms of a contract or unilaterally change the terms of a contract to which it was not a party. The idea of "contract" is important in this discussion, because all money constitutes a contract, and all valid contracts in a sense constitute money.

"Money" properly defined, then, is anything — repeat, anything — that is used in settlement of a debt. Even today, when the State has extended its power to virtually the whole of economic and political life, the bulk of the money supply consists of private sector bills of exchange in various forms, not State-issued coin, currency, or demand deposits. Dr. Shelton hints at this on page 5 ("Transactions take place only if that piece of paper means something to both parties. The individual who receives it must be just as aware of the paper's value as the one who gives it; when the paper has been exchanged, both parties know that a deal has been struck at a specific price."), but the point gets buried under the functional definition of money.

The fact is that the State discovered very soon after the invention of coined money and the State's assumption of the regulatory and certification authority over money that it could alter the terms of any contract simply by manipulating the "underlying," or asset behind the derivative. That is, all money is a derivative of the issuer's (or contract maker's) private property right in something of value that is being conveyed by means of the money. Broadly, "money" thus represents a private property stake in the present value of an existing or future marketable (exchangeable) good or service — a "derivative" or (in older parlance) a "real bill." "Currency" is a specific form of money, a derivative of a real bill, or a derivative of a derivative. This is legitimate and sound as long as the underlying at each stage is not itself used as money . . . and it actually exists at or greater than the value conveyed in the derivative.

Unfortunately, the State quickly found that it could make a "profit" (actually, incur a liability — the confusion results from people who don't understand the balance sheet or the income statement) by saying that there was "X" amount of gold or silver in a coin, but put "X - Y" worth of gold or silver in the coin. Today, matters have reached such a pitch that the State issues countless certificates announcing how many "dollars" each certificate represents, but without having a private property stake in the present value of existing and future marketable goods and services that the certificates represent. This robs possessors of wealth denominated in units of currency by decreasing the value of the currency through inflation, and transfers that value to the issuer of the currency — the State.

The effect of recognizing only State-issued certificates backed by nothing other than future tax revenues ("anticipation notes") as money has a number of very bad effects. One, it limits the "supply of loanable funds" to existing accumulations of monetary savings. These being a monopoly of the rich by definition, the State feels compelled either to redistribute wealth directly, or through inflation, by both means undermining private property.

Two, money and credit become viewed as a commodity in and of itself, in limited supply, while "interest" changes from an owner's enjoyment of the natural right to enjoy the fruits of ownership by participating in profits, to a charge for the use of money. The State is rarely able to keep itself from manipulating the interest rate, either by taxing away "unjust" or "excess" gains for redistribution, or by imposing a desired rate of return directly.

Three, the amount of new investment is limited not by available resources, effective demand, or financially feasible projects, but by the amount of existing savings in the system. This infringes on freedom of association (liberty), for (money being a contract) to require that investment in new capital only be financed out of the present value of existing marketable goods and services saved out of consumption means that people are prevented from making contracts involving the present value of future deliverables.

Four (and most critically), since (as we noted) existing savings are a virtual monopoly of the wealthy, and all financing for new capital presumably comes out of existing savings (it actually doesn't, but that's a story for another day), those who are most in need of capital ownership to supplement or replace the declining value of their labor as technology advances are shut out of ownership.

There are many other problems associated with reliance on existing accumulations of savings to finance new capital formation, but that's enough for now. The question we need to address is how best to supply money to the economy so as to ensure an adequate amount that at the same time retains its value and fills all the other necessary functions of the medium of exchange, so well covered in Dr. Shelton's pamphlet. (Yes, it may appear as if we're picking on her, but we're just pointing out a serious flaw that we feel undermines the value of her important work.)

As described in The Formation of Capital (1935) by Dr. Harold G. Moulton, the best way to finance new capital formation that respects the free market as well as individual rights of private property and free association (liberty) is by expansion of commercial bank credit backed by financially feasible capital projects on which private sector enterprises and entrepreneurs have drawn bills of exchange. Backed up by a central bank to ensure uniformity and stability, as well as spread risk, currency and demand deposits backed by discounted and rediscounted bills of exchange results in an asset-backed, private sector issued (if State regulated), stable money supply that expands and contracts directly with the needs of the economy.

#30#

Does Education Exist?

Not having internet access on the weekend does have its downside. Of course, we have to measure this against the obvious benefits that it does leave you a little time for yourself in which you can accomplish such frivolous things as cooking, cleaning, going to church, sleeping, eating, and so on. (We won't mention that many of these take a backseat when a "concert hell weekend" comes along, as it did this past weekend, and you get stuck singing four concerts in 24 hours.)

Anyway, we wrote yesterday's response to RW before we saw a comment on the Just Third Way blog on this past Friday's post and followed the URL (it's not a link, unfortunately — but THIS is) to its source. The poster is an educator in Fairfax County, Virginia (USA) who is in the process of completing a temporary teaching assignment at a grade school.

As we mentioned yesterday, we like responding to questions, because it lets us off the hook for writing a separate blog posting. For today, then, we're just cutting and pasting yesterday's response to the teacher:

Dear Teach:

As they say, evidently great minds do run in the same channel. (Of course, they also say, "Fools think alike.) Your efforts to inculcate basic principles of existence into your students, however temporary your position, are one of the few bright lights in an otherwise dim prospect for public schooling, and (increasingly) even in private schooling. This is in accordance with your career decision not to continue working for a company that violated the most basic precepts of justice — thereby giving the lie to the claim that we cannot know the nature of justice. Within the framework dictated by moral relativism, your act and your subsequent career choice were those of a fool. Within the framework of the Just Third Way based on the absolutes of the natural moral law, they were those of a hero - that is, a normal human being. This you communicate to your students, both by precept and by example.

As you engage in a search for another, possibly more permanent position, now that the temporary assignment is completed, remain confident in your principles, and do not be discouraged by the antics of the educational establishment. Keep in mind that, especially in these harsh economic times, many people in presumably secure positions feel extremely insecure in their jobs. To the scarcity/Malthusian mentality, any and every newcomer is a threat to job security. Add to this the fear and mistrust of "new" ideas such as truth, love, and justice, and what may come across as hostility or indifference is simply evidence of people who are baffled by modern life, and who have yet to come to terms with what Pope Leo XIII called "new things," much less Pope Pius XI's breakthrough in moral philosophy and the act of social justice.

Whether they realize it or not, most people remain trapped in an idealized and extremely artificial 18th century attitude similar to that which paralyzed Henry Adams as related in his navel-gazing autobiography, The Education of Henry Adams. There is no more perfect recipe for individual and social disaster. Can you truly blame them for not grasping the significance of Louis Kelso and Mortimer Adler's principles of economic justice? Their educational and social thinking is centuries out of date. How can their political, economic or even financial thought be any different?

You therefore face a most difficult task. You have to present the truth about life to people who are badly frightened by it before you can even begin to convince them to allow you to teach children. They will resist. Always, however, keep in mind number 17 of the CESJ Code of Ethics: "There are three keys to gaining acceptance of revolutionary ideas: Persistence, Persistence, and Persistence."

#30#

Do Absolutes Exist?

Over the weekend we received a question from a reader of this blog. We like questions even more than comments, because 1) it shows that people are reading and thinking about what we write instead of merely reacting, and 2) by responding to a substantive question we have our next blog posting already written. You have no idea how much time and effort this saves. (We're not lazy, though, just "thrifty" and "efficient.") Anyway, "RW" asked,

In "Nation" of November 29, 2010, author Benjamin R. Barber, in his article "America's Knowledge Deficit" states:

"There are, of course, many issues that cannot be judged by empirical evidence or objective truth. The existence of God is one of them; the nature of justice is another. These are normative rather than empirical claims."

I have been reading Mortimer Adler's autobiographies; this assertion, with respect to "Justice", seems somehow incorrectly stated. Barber later references Aristotle in the paragraph, which concerns the political sphere.

Am I misunderstanding something?

You aren't misunderstanding anything, RW. It appears, however, that Barber is. He is clearly approaching absolutes from a different direction than Adler, Aquinas, or Aristotle, and is twisting (probably without even realizing he is doing so) things to fit within his assumptions, the "small error" from which larger errors grow.

Over the past several years, I have come to the conclusion that the most basic problem in our society is the tendency to base the natural moral law — the absolutes the capacity for which defines us as human — on the will of something we believe to be God. Ultimately, as Dr. Heinrich Rommen pointed out in his book on the natural law, this leads to positivism, moral relativism, and, finally, to nihilism. In effect, by basing our personal interpretation of something on what we have decided is God's Will, we are making ourselves God. The only absolute turns out to be that there are no absolutes. There is a "knowledge deficit" because you cannot know anything for certain. Even the rank materialist cannot be sure that what he is seeing, touching, or even thinking is "real" in the sense of being absolutely real. Something might, after all, be fooling his senses; all truth becomes "normative," i.e., subjective.

A will-based orientation necessarily confuses applications of an absolute principle with the principle itself. Since applications even of an absolute principle cannot be absolute (society, as Pope Pius XI explained, being in a state of radical instability, and is always in a state of flux), will-based thinkers necessarily conclude that there can be no such thing as an absolute, such as God or justice.

In contrast, Adler, Aquinas, and Aristotle, as well as Maimonides and Ibn Khaldûn base the natural moral law on God's Essential Nature (Substance) which is self evident in His Intellect. In the belief of the three main monotheistic faiths, Judaism, Christianity, and Islam, humanity is created in God's image and likeness, i.e., we share somehow in God's Nature, which is based on absolutes, God Himself being the ultimate Absolute. This is manifested in our "analogously complete" ("equal" — although that's not a good way of putting it) capacity to acquire and develop virtue. Man, while not perfect, is perfectible, becoming more fully human as he acquires and develops virtue, the "habit of doing good." Man being a "political animal," we acquire and develop virtues ("pursue happiness"), among which the chief "temporal" virtue is justice, by exercising our natural rights to life, liberty (freedom of association/contract) and property within a just social order. Of these, property is not the most important, but it is the most basic, as it gives us the power to exercise our rights to life and liberty without being dependent on others.

Within the framework of the natural moral law based on the Will, Barber is absolutely (if you'll excuse the expression) correct: because each individual necessarily has a different opinion of what constitutes God's (or whatever we've substituted for God) Will in a particular situation, and this Will always appears to be changing, we cannot know for certain the nature of absolutes such as justice. The existence of God or justice becomes a matter of opinion, not a reasoned conclusion; it is based "on documents of faith" (usually faith in one's own godhood), not "on the reasons and statements of the philosophers themselves."

Barber's basic assumption, however, is in error. The merest child can tell you the nature of justice: it's rendering to each what each is due. If, for example, you proclaim to your ten children that you are going to "treat them all equally" (we'll ignore for the sake of the argument that 1) it's impossible to treat all your children equally and be just, since each has different needs at different times in his life and 2) treating everybody exactly the same is rarely just — do you punish or reward everyone for what one has done?), and you give ten dollars to nine of them and one dollar to the youngest, the youngest will immediately inform you that you've been unfair, that is, unjust. Why? Because you announced what each was due, and then didn't deliver. The nature of justice is clear: render to each what each is due.

The existence of God is a little more complicated — although the virtue by which we render to God what God is due also comes under "justice." It's called the virtue of "religion." By the process of inductive (not deductive) reasoning, we can prove God's existence. All around us we see effects, e.g., creation itself, humanity's concepts of good and evil, etc. Since there can be no effect without a cause, we necessarily conclude that every effect we see must have had a cause. Each cause must, in turn, itself have a cause, and so on, back to the beginning, to an "uncaused cause." We call this absolute — that is, un-dependent on anything else — source of all subsequent effects "God."

Stephen Hawking recently tried to assert that gravity is the "uncaused cause," but gravity is defined as the attraction between bodies (the natural force of attraction between any two massive bodies, which is directly proportional to the product of their masses and inversely proportional to the square of the distance between them.) . . . and gravity did not cause the bodies from which it derives its existence. Gravity does not, therefore, meet the definition of an uncaused cause. Hawking begged the question, failing to realize that you cannot prove — or, more especially, disprove — the existence of an immaterial Being by material means, or by deductive reasoning. It is not that God and justice are "normative rather than empirical claims." It is a question as to which method of reasoning applies, inductive or deductive, and whether or not you can reason logically.

Recently the Catholic Church celebrated its annual "Feast of Christ the King." Pope Pius XI instituted this feast in 1925 and put it at the start of the Church's liturgical year to emphasize the importance of the restructuring of the social order in conformity with the precepts of the natural moral law based on God's Essence, achieved by organizing and carrying out "acts of social justice," as Father William Ferree, S.M., Ph.D., "America's greatest social philosopher" and CESJ co-founder described in his 1941 doctoral thesis, The Act of Social Justice (1943), and summarized in Introduction to Social Justice (1948), a short pamphlet written for high school students to orient them for participation in "Catholic Action."

CESJ works to carry out the program of Catholic Action from an interfaith orientation. In the long run, we seek to effect reforms in education to bring it back into conformity with what Adler and others have called "the philosophy of common sense," i.e., Aristotelian/Thomist philosophy (or Maimonides or Ibn Khaldûn if you're Jewish or Muslim, respectively). Most immediately, we work to reform the tax and monetary systems as detailed in "Capital Homesteading," thereby addressing humanity's material needs in a more just manner so that each individual can then be free to develop more fully as a person, that is, to acquire and develop virtue and so fit him- or herself for his or her final end.

#30#

News from the Network, Vol. 3, No. 48

Action that most people would regard as obvious has been a little thin this week, but we've been making great strides in developing our outreach. A number of outreach and door-opening initiatives have begun, while we're following through on others. Bottom line: given the current world situation, this may be the "Just Third Way 'Moment'" by means of which we finally get our message out to where it will do the most good: the people forgotten or discarded by the system, and the frenzy to promote "economic recovery" in which the only thing recovered is the mountain of paper profits by the rich. Ordinary people are still left holding the bag.

Be that as it may, and although we're tempted to start a lengthy discourse on how is it possible to have "economic recovery" when jobs are disappearing left and right, and even the phony "official" unemployment rate is rising, here's the "short list" of what we've been doing to try and wake up the powers-that-be to some sense of reality and responsibility:

• We sent out letters to Reinhard Cardinal Marx of Munich and Freising and Archbishop Diarmuid Martin of Dublin drawing their attention to the potential of Capital Homesteading as a possible solution to the latest European debt crisis.

• Mr. Pollant Mpofu of London has sent letters and e-mails to key political figures in Éire and the U.K. in an effort to present them with the possibilities inherent in Capital Homesteading.

• Mr. Mpofu is currently working to meet with a number of ambassadors of African countries to communicate the potential of Capital Homesteading to their respective heads of state.

• Mr. Guy Stevenson of Iowa has been sending links to postings from this blog around to his network, stirring up a great deal of discussion and interest in the Just Third Way.

• This morning we sent, via Mr. Mpofu, a letter to Mr. Jimmy Kelly, Irish Regional Secretary of Unite, a trade union in Éire and the U.K., suggesting an initiative to push for Capital Homesteading as an alternative to the union's call for a national strike.

• As of this morning, we have had visitors from 59 different countries and 50 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, Brazil, Canada, and India. People in Japan, the United States, Pakistan, Argentina and Venezuela spent the most average time on the blog. The most popular posting remains Norman Kurland's tribute to Robert P. Woodman, followed by "Keynesian Economics is Socialism Lite," "Thomas Hobbes on Private Property," "Preventable Disasters" about the Irish crisis, and Aristotle on private property.

Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.

#30#

How to Save the Global Economy, Part IV

Probably no newspaper in the world has a greater degree of prestige than The London Times (the actual name of the journal is The Times of London). If not precisely at the cutting edge of exciting (i.e., "yellow") journalism, the "Letters" column in particular is noteworthy for printing missives that range from the sublime to the ridiculous — but that always receive some degree of consideration.

That being the case, it seems obvious that our final posting in this series of door opening initiatives that you can take at home to introduce the Just Third Way to prime movers and the world at large without quitting your day job should focus on following up on yesterday's urging to send a brief note to Mr. Grant Shapps, State Minister of Housing and Planning, with a suggestion that you might want to consider writing to The Times. (And — just think — if it gets published, you will be able to strut for the rest of your life and have bragging rights at every cocktail party you attend — e.g., "Did I tell you about my letter to The Times? Well, as I said to The Times — and which was printed in The Times . . . no, Jeeves, 'shaken, not stirred' . . . The Times published my letter, y'know, and, as I said to The Times . . .", etc.) So, here goes:

Heading:

DATE

Letters
The Times of London
1 Virginia Street
London E98 1XY
letters@thetimes.co.uk

Suggested Text:

(1)

Dear Sir(s):

Mr. Pollant Mpofu, a local official with the Labour Party in London, recently sent a letter to Mr. Grant Shapps suggesting that Mr. Shapps give serious consideration to "Capital Homesteading," a proposal developed by the Center for Economic and Social Justice ("CESJ"), as a possible means to implement Mr. David Cameron's "Big Society."

Capital Homesteading is a free market, private property-based approach to economic and social development that respects the dignity of each human person. Embodying the precepts of the natural moral law that underpin the social teachings of the world's great religions, and integrating sound economic, financial, and political principles, Capital Homesteading has the potential not only to reestablish the British economy, but that of the European Union and the world on a firm and sustainable foundation.

Sincerely,

YOUR NAME AND TITLE

(2)

Dear Sir(s):

While he and other world leaders are at their wits' end about a solution to the economic crisis, Mr. David Cameron has presented his initiative to create the "Big Society." One possible means of implementing the Big Society, "Capital Homesteading," in my opinion, should be given serious consideration. I believe that Capital Homesteading has the potential to restore the British economy in a manner that not only allows full participation in benefits of growth by every man, woman, and child in the United Kingdom, but shows the way for the rest of the world.

Mr. Pollant Mpofu of London recently sent Mr. Grant Shapps a letter outlining the potential of Capital Homesteading for Great Britain. Mr. Shapps may want to study the concept and forward it to Mr. Cameron for application.

Yours,

YOUR NAME AND TITLE

#30#

How to Save the Global Economy, Part III

While the two previous postings in this brief series have focused on Ireland — necessarily so, as that is where disaster seems imminent — Mr. Pollant Mpofu has also been working to present Capital Homesteading to leaders in the United Kingdom, notably Mr. David Cameron, the Prime Minister, and Mr. Grant Shapps, Minister of State for Housing and Planning. Both of these individuals have indicated a high degree of concern for those affected by the current economic crisis. Mr. Cameron in particular has made efforts to develop a program, "the Big Society," that has room for everyone, not just those fortunate enough to choose the right parents or latch on to a more or less stable wage system job.

Mr. Mpofu recently sent a letter to Mr. Shapps (and is currently working on a petition), recommending that he give serious consideration to Capital Homesteading as a means of laying the foundation of the Big Society and building a sustainable and participative economy for all. There is no particular reason why Mr. Shapps should pay attention to Mr. Mpofu's suggestions — Mr. Mpofu has neither the money nor votes that constitute the usual political currency, and he's in a different party. All he has is the idea . . . but as the late Senator Russell Long of Louisiana put it during his dinner with Louis Kelso and Norm Kurland, "I don't care who's right, I care what's right — and this is right."

All that may be necessary for Mr. Shapps — and thus Mr. Cameron — to give serious consideration to Capital Homesteading is for a few (hundred. . . thousand) people to sent brief e-mails to Mr. Shapp in support of Mr. Mpofu's initiative (and no one says you can't still send something to Mr. Cowen or the Irish media). Politicians usually multiply each e-mail by some factor, since most people, even those who feel deeply about a subject, don't write letters or send e-mails. Even if the e-mails do not come from constituents, evidence of support for Capital Homesteading from members of the global community should have a positive effect.

Mr. Shapps's e-mail is grant@shapps.com. He also has a forum, http://www.shapps.com/forum/, on which you can register to post items, but we suggest waiting to see if he does anything for Capital Homesteading before committing yourself as a supporter.

Suggested Subject Lines:

Capital Homesteading

Adopt Capital Homesteading

Capital Homesteading Now

Capital Homesteading for the Big Society

Capital Homesteading = Big Society

Restore the UK as a World Leader through Capital Homesteading

Suggested Heading:

DATE (may be omitted)

Mr. Grant Shapps
Minister of State for Housing and Planning

Dear Mr. Shapps:

Suggested Texts:

(1)

I support Mr. Pollant Mpofu's recommendation that you give serious consideration to Capital Homesteading as a potential means to implement the Big Society and as a foundation for growing a sound economy in the future.

Sincerely,

YOUR NAME AND TITLE

(2)

Mr. Pollant Mpofu recently sent you a letter regarding adoption of Capital Homesteading as a way of implementing the Big Society. I support this initiative and believe that it merits serious consideration, both for the United Kingdom and as a model for the rest of the world.

Yours,

YOUR NAME AND TITLE

(3)

Kindly add my voice to those suggesting that you give serious consideration to Capital Homesteading as a possible means to implement the Big Society.

Sincerely yours,

YOUR NAME AND TITLE

[N.B.: The Irish and the English use "kindly" where Americans tend to use "please," and vice versa.]

(4)

The United Kingdom has the opportunity to lead the world in showing the way to a sound solution for the current economic crisis by giving serious consideration to the adoption of Capital Homesteading to implement the Big Society. I support this initiative by Mr. Pollant Mpofu.

Respectfully,

YOUR NAME AND TITLE


If you want to compose your own note, keep a couple of things in mind:

Keep it short.

Be respectful.

Mention the "Big Society." This is Mr. Cameron's initiative to reduce the size of government and giving people more power over their own lives.

You're not recommending or endorsing Capital Homesteading, only suggesting that Mr. Shapps take a look at the concept and judge it on its own merits. Thus, even if you don't fully support or agree with Capital Homesteading, you can state in all honesty that it is a proposal that should be given serious consideration.

Avoid any phrases such as, "While I disagree completely with Capital Homesteading, the Just Third Way, truth, love, and justice, . . ." We need to get Mr. Shapps to look at Capital Homesteading and get the idea to the Prime Minister, Mr. David Cameron.

#30#