News from the Network, Vol. 1, No. 7

Due to the accelerating financial crisis, our focus has become concentrated on the problems with the money and credit system. That gives us fewer, but much more critical items to report.

• Former Congressman Walter Fauntroy has co-authored an op-ed piece for the Washington Post with Norman Kurland and Dr. Norman Bailey, former chief economic advisor to the National Security Council under President Reagan. The editorial outlines the HEC and its projected effects, among which are a solution to the mortgage crisis and the initiation of a return to an asset-backed currency. If it appears, the article will appear in the Sunday edition. If not, we will run it on this blog on Monday.

• Michael D. Greaney, Director of Research for the Center for Economic and Social Justice, has just published his latest book, In Defense of Human Dignity: Essays on the Just Third Way, A Natural Law Perspective, ISBN 978-0944997024, Economic Justice Media, $20.00. Currently available on Amazon, it should be available on Barnes and Noble within the next few days. The book is a compilation of previously-published articles from Social Justice Review, the official journal of the Central Bureau, Catholic Central Union of America. Advance publication sales have been encouraging. Information about bulk orders, on which there is a 20% discount can be obtained from CESJ. In Defense of Human Dignity is the first in a planned series of books on the Just Third Way from different faith and philosophical perspectives.

• Also in the publishing arena, Universal Values Media (a Justice-Based Management Certified company) has just released a new edition of Arthur Christopher Benson's moving tribute to his brother, the noted author Monsignor Robert Hugh Benson (1871-1914). Hugh: Memoirs of a Brother, ISBN 978-1602100008, was first published in 1916. This edition features a specially-written foreword and an expanded index — as well as a cover so well designed that it is alone worth the price of the book, $18.00 from Amazon or $16.20 ("Member Price") from Barnes and Noble. Inquiries about bulk orders (again, a 20% discount) should be made to Once-and-Future Books. Either of these books might make good fund raisers for your civic group, school, or church.

• Genea Callahan, impressed with the forthright approach of Dr. James MacMillan, Scotland's premier composer, on social issues, has taken charge of an outreach effort to make contact with him and see if he would be interested in the work of CESJ.

• Jether Jacomini, Jr., our Brazil Correspondent, has opened up a "Facebook" Profile. Jether has become extremely active in promoting binary economics as it fits into the Just Third Way, and has made a number of valuable comments on this blog. He has also signed up for the Just Third Way channel on YouTube.

• We sent a short note to the "Group of Thirty," encouraging them to investigate Kelsonian mechanisms to correct the current financial meltdown in a manner consistent with the Just Third Way. According to their web site, the Group of Thirty "is a private, nonprofit, international body composed of very senior representatives of the private and public sectors and academia [including former Fed Chairman Paul Volcker]. It aims to deepen understanding of international economic and financial issues, to explore the international repercussions of decisions taken in the public and private sectors, and to examine the choices available to market practitioners and policymakers." It's located in Washington, DC, barely a phone call away.

• David Beatty has raised the possibility of doing a "syntegration" on money and credit. A syntegration is a form of non-hierarchical problem solving that can be used in a small team of 10 to 42 people. It is a business consultation product that is licensed out to consulting firms as a basis model for solving problems in a team environment.

• As of this morning, our readership covers 28 countries, including 45 states and provinces in the United States and Canada.

As usual, there are a great many other news items that we haven't heard about because you haven't submitted them. If you're tired of reading about what we're doing, let's hear from you. If you have a SHORT item about how you are advancing the Just Third Way, send us a note about it at mgreaney [at] cesj [dot] org.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

Ireland: Unnecessary Economic Pessimism

According to yesterday's Irish Independent, the decline in the housing market is expected to result in total unemployment of 300,000 by next year. ("Number of jobless will hit 300,000 next year," Breda Heffernan, Anita Guidera and Ralph Riegel, 10/08/08.) If government policymakers and prime movers throughout the world — not just Ireland — don't wake up and start to behave responsibly with respect to fiscal and monetary policy, the gloom and doom brigade could very well be right.

While projections by economic and political experts continue to show a downward spiral, the irony is that it is all completely unnecessary. The fact is that, as John Maynard Keynes declared in 1936, in his "Concluding Notes" to his General Theory,

"The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist."

The irony in that? Keynes, now defunct, is the slave master of today's "practical men," especially those locked into the absolute dogma that the only way to form capital is for the rich to save, then invest, thereby creating jobs for the rest of us . . . thereby locking in a second dogma, that full employment, rather than full production, should be the goal of national economic policy.

In consequence, all the concern in Ireland is over the potential loss of jobs, rather than concentrated on devising ways to spur economic growth and thereby put people back to work naturally, instead of creating subsidized jobs and other artificial means of generating effective demand.

CESJ's Capital Homesteading proposal is custom made for the situation in Ireland . . . and the United States, Great Britain, Germany, France, Belgium, Andorra, Laos, and downtown Suva in Fiji - in short, anywhere in the world where Keynesian economics now reigns supreme. Capital Homesteading can be kick-started painlessly by deciding to go forward with the Homeowners' Equity Corporation, or "HEC," to solve the immediate problem in the financial sectors and establish a solid foundation for future economic restructuring along more sensible lines.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

"Good Policies Can Save the Economy"

They've been let off the hook for a few days, but it's about time the Wall Street Journal received another squeak from the wheel. This one is about the return of the Federal Reserve to its original purpose (in a small way). As usual, we encourage you to write your own letters, whether to your local newspaper or to the Wall Street Journal. You don't have to include a CESJ donate button in your letter.

Dear Sir(s):

In "Good Policies Can Save the Economy" (WSJ, 10/08/08, A17), Lee E. Ohanian notes possibly the most significant policy change since the derailing of the Federal Reserve in 1917 to finance World War I. Unfortunately, he makes it sound as if the recent Fed decision to begin discounting short term qualified industrial, commercial, and agricultural paper, while necessary, constitutes a departure from the proper role of the central bank of the United States. On the contrary, the decision is a long-overdue return of the Federal Reserve to its original purpose: to provide the private sector with necessary credit and liquidity when the existing money supply proves inadequate.

Still, the decision, while a move in the right direction, is only a first step. It demonstrates that existing accumulations of savings are not necessary to finance capital formation, as Dr. Harold G. Moulton pointed out in his landmark 1935 study, The Formation of Capital. Countering the established dogmas of Keynesian economics, Dr. Moulton proved that the economic growth of the United States from 1830 to 1930 was financed not out of existing accumulations of savings, but by the expansion of self-liquidating bank credit.

Tax cuts, while no doubt welcome, are thus not necessary if the goal is to provide financing for new capital formation. Providing liquidity and credit for capital formation is the role of the Federal Reserve, which since 1917 has (contrary to the 1913 Act) largely been restricted to monetizing government deficits and providing financing for politically-determined objectives, e.g., financial institutions considered "too big to fail."

A program called Capital Homesteading for Every Citizen has been developed that would open up access to capital credit to every American for the purpose of purchasing self-liquidating assets. A first step toward establishing a national Capital Homesteading program would be the implementation of "Homeowners' Equity Corporations," or "HECs," a mechanism designed to solve the current home mortgage crisis and accelerate the return to an asset-backed currency, which the Federal Reserve's decision initiated.

HECs — like leveraged Employee Stock Ownership Plans ("ESOPs") — would obtain acquisition loans from commercial banks, which would charge a transaction fee for the service. The commercial banks would then discount the loans at the regional Federal Reserve bank, adding sorely-needed asset-backed liquidity to counter the credit crunch in local economies. Analogous to the "free" land under the Homestead Act of 1862, the Federal Reserve would provide "free" credit, with the discount rate set to reflect only transaction costs and a revised risk premium, thereby creating currency backed by income-producing assets. The homes could then be leased to their former owners or new tenants at a monthly payment sufficient to cover debt service, maintenance, taxes, and administrative costs. Tenants would earn shares in the HEC as lease payments were made. When a loan was fully paid, the tenant could exchange the HEC shares for title, or continue as a tenant/shareholder at a reduced lease payment, sufficient to cover costs.

Yes, we need good policies — but we have to make certain that they are the right good policies.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

Composer Chides Liberal Elite for Hostility to Religion

One of this blog's faithful readers sent in a news item from The Telegraph for comment ("Composer James MacMillan warns of liberal elite's 'ignorance-fuelled hostility to religion'," Martin Beckford, Religious Affairs Correspondent, 10/01/08). MacMillan, one of the conductors of the BBC Philharmonic, is considered Scotland's premier composer. In an article published last week, he took the atheistic liberal establishment to task for its "increasingly aggressive" efforts to drive religion out of the public sphere.

Predictably, most of the comments posted in response to the article avoided the main issue, which is that every human being has a civil right to practice his or her faith so long as it does not harm him- or herself, other people, or the social order. Few if any people posting discussed the merits of MacMillan's position, but got immediately into attacking believers or non-believers, depending on one's own position. The "pro" commentators insisting on citing the Bible as an absolute rule of life, while the "anti" side kept demanding empirical proof of God's existence. Both teams of contestants seemed oblivious to the main point that, whether or not God exists, does the liberal atheistic elite have a right to force its morality on everyone else?

The issue is basic civil rights. For years the liberal elite has demanded that they not be constrained by someone else's morality, while at the same time making strenuous efforts to impose theirs on others. MacMillan is to be lauded for taking a stand on this issue, even more so as he is operating within a milieu in which traditional moral standards — regardless of their source — are attacked with increasing vehemence.

Admittedly it is safer for someone in public position to take an unpopular stand, but it still requires a great deal of courage. Further, MacMillan is a Catholic, a member of a religion still viewed with deep suspicion in Great Britain, where "papist" and "Jesuit" are considered pejoratives, and have extremely sinister connotations. Every November 5th the country celebrates Guy Fawkes' Day, although most people have by now forgotten the rabid anti-Catholicism that inspired the holiday. Nevertheless, Catholicism is considered something "not quite British," and thus tinged with suspected disloyalty to God, Queen, and Country. Several commentators (predictably) dragged in the Inquisition, Hitler, Darwin, Marx, Mary Tudor . . . all the usual suspects who have nothing to do with the objective truth or falsity of religion, per se.

It may be no accident that, as was recently reported, attendance at Catholic services in Great Britain is greater than at those of the Anglican Communion for the first time since the Reformation. Rather than join forces with those of militant atheism, however (which MacMillan carefully distinguishes from the ethical, "live and let live" type of atheism), believers of all faiths, but especially in this day and age, Catholics, Jews, and Muslims (three religions often viewed as suspect), need to come together in support of a restoration of the natural law — an effort which should include concerned atheists as well.

Yes, how or if an individual accepts revelation is a personal matter, and should be kept within religious society. The natural law that provides the foundation for moral and ethical teachings, however, while taught by organized religion, is the basis of civil society. Organized religion's role in the world with respect to civil society is to provide a moral guide. Without this, and without a "sense of the sacred," however one defines it, society will dissolve in chaos.

This is why, in large measure, the practice of religion is a civil right, and must not be limited or infringed except where it can be shown that actual harm results to individuals, groups, or the common good as a whole — and religious belief, however distasteful it may be to some, does not constitute harm.

If James MacMillan reads this (or, subtle hint, if someone forwards this posting to him), I would urge him to read Father William Ferree's Introduction to Social Justice, available as a free download from the web site of the Center for Economic and Social Justice.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

What I am Fighting For, III

A day or so ago I received an e-mail from the Alumni Association of the University of Notre Dame, this one focusing on the Association's efforts to fund student endeavors to establish and maintain a just world economy. Since that is what I and others in the Global Justice Movement have been doing for some time, I replied with the following e-mail, directing them to our efforts. This is the third e-mail to the Alumni Association, but they haven't yet had time to respond.

Charles F. Lennon Jr. '61, '62 M.A.
Executive Director
Notre Dame Alumni Association

Dear Chuck:

Thank you for the continuing e-mails reporting on the Alumni Association's efforts to bring justice to the world. The last one was particularly appropriate, as I am Director of Research for the interfaith Center for Economic and Social Justice ("CESJ"). We have been working to establish a healthy — that is, just — economy throughout the world since our founding in 1984. I'm sorry you haven't had the chance yet to respond to any of my earlier e-mails.

Since you highlighted economics in this last e-mail, you should be extremely interested in a number of our publications, as well as the work of the Center in general. In particularly I would draw your attention to:

Curing World Poverty: The New Role of Property (1994). Co-published by CESJ and the Social Justice Review, official journal of the Central Bureau, Catholic Central Union of America in St. Louis, this book (edited by the late Rev. John H. Miller, C.S.C., S.T.D., who taught at Notre Dame) is a compendium of articles detailing a comprehensive approach to the problem of endemic world poverty.

Capital Homesteading for Every Citizen: A Just Free Market Solution for Saving Social Security (2004). Written by Dr. Norman G. Kurland (president of CESJ), Dawn K. Brohawn, and myself. While ostensibly directed to the growing specter of the projected deficit in Social Security and Medicare, the principles explained in Capital Homesteading can be applied to any economy in the world. We are working this week on arranging a meeting with the Economic Officer of the Embassy of Ireland to study the application of these ideas in that country.

In Defense of Human Dignity: Essays on the Just Third Way from a Natural Law Perspective (2008). This is my own recently-released book, containing a series of previously-published articles from Social Justice Review on social justice and economic issues. It's available from Amazon, although not yet up on Barnes and Noble.

There is, of course, a great deal more material available, both on the CESJ web site and our blog. I invite you to visit both, and if you have any questions, give us a call.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

"2,000 Jews Control the World"? Really?

According to Iranian President Mahmoud Ahmadinejad, "A small handful of Zionists, with a very intricate organization, have taken over the power centers of the world. According to our estimates, the main cadre of the Zionists consists of 2,000 individuals at most, and they have another 8,000 activists. In addition, they have several informants, who spy and provide them with intelligence information." Furthermore, these individuals are "germs of corruption," who should be targeted for liquidation, or whatever the current term for genocide happens to be.

If you've read Mein Kampf, of course, you could probably fill in the rest of the Hon. Ahmadinejad's rant yourself. Unfortunately, Ahmadinejad sounds like some people I know. It is also the mantra of Muslim extremists and the suicidal terrorists they breed. But, while I think his ideas and rhetoric are Hitlerian and evil, I think he suffers from colossal arrogance and ignorance. He must be countered at every turn with relentless justice-based and powerful enlightened opposition. Otherwise, the killing of innocent lives will never end.

What is as sad as it is counterproductive, however, is the linking of any protest against terrorism to "Neo-conservatism," and the "Neo-cons" to a vague "Islamophobia." The only thing this does is justify rejecting or ignoring any protest against terrorists who happen to use Islam to sanctify their psychotic hatred of the rest of the human race on the grounds of presumably mindless bigotry against all Muslims.

Several of us at CESJ have viewed the one-hour version of a DVD I received in the mail, "Obsession: Radical Islam's War Against the West." We tried to find any evidence of Islamophobia in the presentation, and none of us came to the anti-NeoCon conclusion that many people seem to take for granted. Yes, I agree that "Islam" as a religion can and probably has been perverted by Muslim radicals, including Ahmadinejad, but, except by the unfortunate semantic use a religious term in the title, none of the Neo-Cons in the video attacked Islam. The Neo-Cons interviewed all seemed to agree that the Muslim radicals and extremists represented a small percentage of Muslims in the countries with significant Muslim populations. But the same could be said of Hitler's supporters among the German people, before those extremists gained power over the German government. The same can be said of the Taliban in Afghanistan. And, as the DVD effectively demonstrated, scores of millions of innocent lives have been lost in consequence by the rhetoric of preachers of hate, like Hitler, Ahmadinejad, Syeb Qutb, and Osama bin Laden.

Without any better evidence than the usual mere assertion I don't think anyone will convince me that Neo-Cons (whose motivations seem to be based on half-baked defensive strategies and legitimate concerns for survival, not based on a strategy to use force and violence to dominate others) are as dangerous as radical Muslims like Ahmadinejad or Osama bin Laden. As anyone who is even marginally familiar with the economic paradigm and language of the Just Third Way should be fully aware, I reject the short-sighted Neo-Con's "democratic capitalist" Keynesian paradigm underlying their policies, as much as I oppose the compassionate but soft-headed paradigm of leftists.

The counter to any dangers of any economic power of the Neo-Cons and their backers is political transformation of the economic infrastructures and money systems of the world, as described on a number of Just Third Way websites, various writings on the American Muslim www.theamericanmuslim.org, and in the website of the International Quranic Center at www.ahl-alquran.com.

Short of total chaos in the world, I have confidence that the poor and propertyless multitudes of the world will wake up and new leaders will emerge through the power of the political ballot to gain political power to change the laws and institutions affecting money power and ownership power. Then and only then can nations apply justice to turn have-nots into haves without taking away property rights from current haves. I don't see any of those in today's money power elite as our main opposition. (I think academia, with its flawed ideas in the law, economics, political science and other soft sciences, is what perpetuates monopoly capitalism.) It is the silence of good people who know of our alternative that perpetuates the deficiencies in academia that are blind to the power-concentrating barriers in current economic systems of the world. This, not the Neo-Cons, hold back the reforms needed to implement the Just Third Way's free enterprise version of economic democracy. Those who now hold a monopoly of money power cannot stop the advance of Justice when the people wake up to demand it. (http://www.cesj.org/thirdway/paradigmpapers/jtw-greengrowth.pdf) Nor can academia. (In my lecture this week at American University no one raised a single point in opposition to this analysis, and I have been invited back to lecture before a bigger audience in November.)

Those Muslims or any others who use the language of violence should be rejected and their advocacy of violence against those who do not advocate violence against non-violent people should be countered with all the instruments of counter-force, especially a justice-oriented vanguard in the war of ideas to counter the extremists. If we win the war of ideas, the breeding grounds of terrorism will be eliminated all over the world.

More Muslims should join true leaders and human rights activists in the war of ideas within the Muslim world like Sheikh Dr. Ahmed Mansour and Saad Edin Ibrahim who have agreed to form the religiously pluralistic Abraham Federation that you and other advocates of the Just Third Way conceived. You have decided to spend your time in other ways, and that's your prerogative. Much of my hope for future victory in the global war against religious extremists rests with clear-sighted leaders like Drs. Mansour and Ibrahim and followers of other faiths who support the Just Third Way.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

Federal Reserve Moves to Restore Original Purpose

According to an Associated Press report ("Fed to buy massive amounts of short-term debt," Jeannine Aversa, AP Economics Writer, 10/07/08), the Federal Reserve has announced that it will purchase massive amounts of short-term loan paper. This is a startling reversal of the near-century long use of the Federal Reserve as lender of first resort to the government, and a long-overdue return to its primary function as lender of last resort to the private sector.

While described as "radical," there is nothing radical or even new in the proposal. Discounting of short-term (up to 90-day) commercial paper for qualified industrial, commercial, and agricultural purposes is one of the reasons the Federal Reserve was established in 1913. Existing accumulations of savings supplemented with the gold- and silver-backed currency was considered the primary money supply.

The Federal Reserve was to provide liquidity in the form of "pure credit" whenever the existing liquidity in the system was insufficient to meet the needs of commerce, industry, and agriculture. This would avoid the twin evils of inflation and deflation, and finance the formation of capital to reach "full production." Full production would result in full employment of all resources, not just labor, without the need for government intervention or subsidies. The Federal Reserve operated in this way until 1917, when politicians decided to finance America's entry into World War I primarily through borrowing rather than by raising taxes.

As we have proposed it, Capital Homesteading would improve certain features of this restoration of the Federal Reserve's original purpose:

• Cut the federal government off completely from the discount window by forbidding the Federal Reserve to deal in any kind of government securities, primary or secondary.

• Prohibit the Federal Reserve from extending credit for anything other than qualified industrial, commercial, and agricultural projects that generate income to repay the credit.

• Institute a 100% reserve requirement for commercial banks, reserves to be in the form of cash or government securities.

• Extend the term of the qualified paper discounted at the Federal Reserve from the current short-term to a maximum 20-year term.

• Most important, all credit extended by the Federal Reserve must only be done in ways that makes new owners out of people who have previously owned nothing.

By agreeing to restore their original function to provide short-term, asset-backed liquidity to the financial system, the Federal Reserve has taken a giant step in the direction of reestablishing an asset-backed currency, providing financing for America's economic growth and expansion, and assisting average citizens to exercise their natural right to acquire and possess private, income-generating property.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

Europe's Banks Worse Off than those in U.S.

According to a story last week in The Telegraph ("Europe's banks more leveraged than U.S.
Banks," Ambrose Evans-Pritchard, 10/02/08), German Finance Minister Peer Steinbruck in the space of one week flipped from asserting that the meltdown was solely an American problem, to orchestrating the Bundesrepublik's biggest bank bailout. Belgium followed suit by bailing out the 300-year old Fortis, assisted by the Dutch, and then Dexia, with French aid. Ireland then moved into first place in the financial crisis sweepstakes and issued a blanket guarantee for the six largest banks in the Republic. France soon displaced Ireland, while Italy and Spain are growing increasingly nervous.

Naturally, everyone is joining in the "Blame Game" instead of seeking a genuinely viable solution. What is most astounding is that Germany, which benefited from the "miracle" wrought by Dr. Hjalmar Schacht in the 1920s to stop the hyperinflation, should be so blind to the obvious way out: stop extending credit for consumption and government debt, and back the currency with hard assets.

Because the meltdown started with residential real estate, the solution should also start there. It would take very little for the affected countries to study and implement our Homeowners' Equity Corporation proposal, thereby putting a stop to the situation that triggered the current crisis. Rather than repeat what has been stated in so many postings on this blog already, any interested reader can link to the concept paper here, and send this posting via e-mail to those in their countries' governments who are desperately seeking a realistic solution to the crisis.

You really don't have anything to lose.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

Capital Homesteading the Only Viable Option

In another story in the Irish Independent from yesterday ("Lenihan planning a stealth Budget," Fionnan Sheahan, 10/06/08), "The disastrous €11.5 [billion] black hole in the public coffers last week has thrown everything open as an option."

Everything? Then may we suggest — as we have once or twice previously — that the government of Ireland take a close look at the Capital Homesteading proposal of the Center for Economic and Social Justice?

The following figures developed for the United States suggest that similar results can be expected for any country that adopts Capital Homesteading as a national policy. Ireland, in fact, would be particularly suited for such a move, as it shares a common language with the U.S., where Capital Homesteading has been developed, a similar legal system, and a similar cultural heritage.

If Capital Homesteading were to be enacted today in the United States, we estimate that a child born today would by the age of 65 have accumulated nearly $500,000 in income-generating assets, be enjoying annual consumption income from dividends of $45,000, and have a lifetime aggregate dividend income through age 65 of $1.6 million.

Capital Homesteading is designed to provide industry, commerce, and agriculture with credit and liquidity on easy terms at the same time it builds direct ownership of the means of production into ordinary people who previously lacked the means to acquire and possess private property. At the same time that it increases the tax base, it reduces financial demands on the State. Once the current load of debt of a country is retired, taxes can be reduced and social services actually increased for those in need as their number diminishes.

If "everything is an option," isn't it time to consider an option that's viable?

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

Make the Company Redundant, Not the Workers

According to the Irish Independent ("Minister denies he was told of Dell plan to shut plant," Patricia McDonagh and Kathryn Hayes, 10/06/08) Defense Minister Willie O'Dea emphatically denied that he was told of a proposal to "wind down" Dell's 3,000-worker Limerick operation. Amidst the usual accusation and counter-accusation of who plans to do what, when, and to whom, spokesmen for Fine Gael and Labor are urging the government to do whatever is necessary to save jobs.

We agree — with a few qualifiers. The company should not shut the plant and lay off the workers. On the contrary, the workers might want to consider buying the plant and (in effect) lay off the company. By spinning off the Limerick facility as an independently-owned subcontractor, Dell could probably cut costs substantially. For their part, if the workers would agree to replace a portion of the usual fixed wage and benefits package due them as employees, with profits due them as owners, fixed costs could be lowered, competitiveness enhanced, and jobs saved — a "win-win" situation for both Dell and the workers.

A worker buyout on these terms would require some enabling legislation in the Dail. "Model" ESOP ("Employee Stock Ownership Plan") legislation is available for free on the web site of the Center for Economic and Social Justice, while a leading expert in restructuring economies along more just lines — Dr. Norman Kurland — can be contacted by picking up the telephone or sending an e-mail to the contact information given on the CESJ web site or the for-profit site of Equity Expansion International, Inc. It costs nothing to ask, and Ireland has nothing to lose . . . except 3,000 jobs.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

How the Federal Government Can Bailout the Taxpayer

I was tempted to title this posting, "Everything Old is New Again." Frankly, the situation faced now by the U.S. federal government (and, if my information is correct, the government of the Republic of Ireland, at least in part, which just bailed out the six largest banks in the country) is analogous to that which faced the United States in 1862: a seemingly senseless and increasingly unpopular war, a crumbling economy, high taxes, eroding national credit, inflation of the currency . . . the list could go on endlessly.

What paved the way for the economic rebirth of the United States after the Civil War was Abraham Lincoln's 1862 Homestead Act. This "privatized" the immense holdings of federal land in the west, and provided both the resource base and market for the industrial expansion of the eastern states. This led to the United States, which in the early 19th century was a very minor player in commerce and industrial development on the global stage, eventually becoming a world leader in industry, commerce, and agriculture.

Our proposed "Homeowners' Equity Corporation," or "HEC," would do much the same, only more. A HEC is a proposed for-profit, professionally-managed stock corporation whose shareholders would be homeowners in danger of foreclosure. HECs — and there should be many, to provide redundancy, lower risk, and ensure competition in a community — would purchase distressed properties at their current market values.

HECs — like leveraged ESOPs — would obtain acquisition loans from commercial banks, which in turn would discount the loans at the local Federal Reserve under Section 13 of the Federal Reserve Act at a rate reflecting transaction costs and a revised risk premium, thereby creating an asset-backed currency. The homes could then be leased at a realistic market rate to their former owners or new tenants.

The tenant would earn shares in the HEC as lease payments were made sufficient to cover debt service, maintenance, and taxes. The shares could be retained within the HEC in segregated, directly-owned accounts, or accumulated in a "Capital Homestead Account." When the acquisition loan for a particular property was fully paid, the tenant could exchange his or her HEC shares for title, or continue as a tenant/shareholder at a reduced lease payment, sufficient to cover maintenance, administration, and property taxes. Financing the purchase of properties through the Federal Reserve System and its member banks would cost the taxpayer nothing and be the first step in restoring a currency backed by hard assets instead of government debt.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

"Not Everyone Should Own a Home"?

The following is an open letter to Ms. Janet Albrechtsen, who (as I have verified), writes a weekly column for The Australian. Ms. Albrechtsen appeared in today's Wall Street Journal in an editorial titled, "Not Everyone Should Own a Home."

Dear Ms. Albrechtsen:

With all due respect, I believe that either you or an editor mis-titled your column in today's Wall Street Journal ("Not Everyone Should Own a Home," WSJ, 10/06/08, A19). Rather than make a case that there are people who by nature cannot own homes (a contradiction of basic principles of the natural law, of which private property is a major part), you present an excellent case that there are some people who shouldn't be selling homes, or fiddling around with the free market in an effort to achieve political goals and limited special interests of selected groups. This, as you point out, is an absolute disaster.

You are, however, correct in your statement that no one in Washington seems to be talking about fixing the financially counterproductive, even suicidal policies that got the United States and the rest of the world into its present position — although it might be more accurate to say that no one is Washington is listening to viable solutions.

Since February of this year, volunteers at the interfaith Center for Economic and Social Justice ("CESJ"), www.cesj.org, have been attempting to gain the ear of someone who will listen to the short term solution we have worked out to address the housing situation, as well as the long term program that would prevent it from happening again.

By actual count as of Friday of last week, I personally have sent 92 letters and e-mails on this subject, more than half of which went to the Wall Street Journal. Others in the CESJ network have either copied selected letters to their Congressman and Senators, or sent them as e-mails to their own networks. Twenty-seven of these letters have been slightly modified and posted on our blog, as will this letter.

Former Congressman Walter Fauntroy has been making great efforts to bring these ideas to the attention of various Senators and Congressman. We expect to hear this week whether or not he has been successful.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

How to Restore Credit and Sound Currency Globally

There was so much in today's Wall Street Journal demanding a response that we got swamped. All we managed to get out was this squeak from the wheel and the above letter to one of the columnists. This proves beyond a shadow of a doubt that we need your help! Send some letters! Wake somebody up! If you're doing a lot of complaining ... make it effective. Send a solution along with the complaint, if only by linking to one of these blog postings.

Dear Sir(s):

There is a calm and reasonable response to the wave of financial panic spreading across the globe ("Europe Races to Shore Up Banks as Crisis Spreads," WSJ, 10/06/08, A1). The banking systems of the world should be restructured in accordance with the principles of prudent finance and, frankly, common sense. The subprime mortgage crisis, which initiated the current hysteria, is actually the best opportunity the economies of the world have had to put matters on a sound basis since the U.S. federal government privatized its immense holdings of land in the 19th century with Abraham Lincoln's 1862 Homestead Act.

The first step is to restore the faith and credit of government — all governments. This can only be done by restoring an asset backing to the currencies of the world. Beginning in the United States, steps should be taken immediately to establish "Homeowners' Equity Corporations," or "HECs." A HEC is a proposed for-profit, professionally-managed stock corporation whose shareholders would be homeowners in danger of foreclosure. HECs — and there should be many, to provide redundancy, lower risk, and ensure competition in a community — would purchase distressed properties at their current market values.

HECs — like leveraged ESOPs — would obtain acquisition loans from commercial banks, which in turn would discount the loans at the local Federal Reserve under Section 13 of the Federal Reserve Act at a rate reflecting transaction costs and a revised risk premium, thereby creating an asset-backed currency. The homes could then be leased at a realistic market rate to their former owners or new tenants.

The tenant would earn shares in the HEC as lease payments were made sufficient to cover debt service, maintenance, and taxes. When the acquisition loan for a particular property was fully paid, the tenant could exchange his or her HEC shares for title, or continue as a tenant/shareholder at a reduced lease payment, sufficient to cover maintenance, administration, and property taxes. Financing the purchase of properties through the Federal Reserve System and its member banks would cost the taxpayer nothing and be the first step in restoring a currency backed by hard assets instead of government debt.

The second step is to cut all governments off from the money creation powers of their countries' central banks. A government must live within its means, and its means are determined by a country's tax base. In an emergency, the State can borrow at market rates from the existing accumulations of savings — but by doing so endangers its sovereignty and the liberty of its citizens, as Henry C. Adams pointed out in 1898.

The third step is to finance all new capital formation through loans from commercial banks discounted at the central bank. To ensure the optimal spread of economic power through the economy and provide a sound basis for economic growth, these loans should be made in a way that creates new owners of the capital in formation, leaving current owners with their accumulations intact, but opening up opportunity for those who currently lack ownership of the means of production. These loans can be collateralized by using the standard risk premium charged on all loans to purchase "capital credit insurance" covering 75% to 90% of the total amount of the loan. To make this even more secure, there should be a capital credit reinsurance pool, composed exclusively of cash, government securities, and the soundest of blue chip investments.

The fourth step is to limit the involvement of the State in the economy.

The fifth step is to establish free and open markets, in which every person can participate as a provider of labor, of capital, or both, within a just system of regulation that provides equality of opportunity, not results.

The sixth step is to restore the rights of private property, especially in corporate equity, most particularly in the right to receive the income from what is owned.

More about the Homeowners' Equity Corporation can be found here. The other steps are part of a proposal called "Capital Homesteading for Every Citizen," from the book with the same title. We can't continue to blame a vague and generalized "them" for our troubles. If we want things to get better, it's up to us to demand changes consistent with the principles outlined above.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

News from the Network, Vol. 1, No. 6

Some interesting things have been happening. Of course, we should always remember the Chinese curse: "May you live in interesting times."

• Matters appear to be moving forward in East St. Louis and the "Metro-East Citizens' Land Cooperative," spearheaded by Laura Zacher. Dale Ahlquist of the American Chesterton Society reports that he raised the subject of a television series on social justice with EWTN, to include what is being done in East St. Louis, and believes they might be interested.

• Joseph Recinos, a member of the Board of Directors of the Union Solidarista Guatemalteca and Central America sent an e-mail out to his network on Tuesday expressing support for the Just Third Way as applied in Capital Homesteading.

• As can be seen from the bottom of this posting, we have figured out how to add a "Donate button" to all postings, which we are slowly doing retroactively. All donations will go directly to the Center for Economic and Social Justice, and are tax deductible in the United States under Section 501(c)(3) of the Internal Revenue Code. If you are not a U.S. taxpayer, check with your government representative or tax advisor to see if you can get a tax deduction in your own country for contributions made to a qualified non-profit in the United States.

• Just Third Way advocate Walter Fauntroy, former Congressman for the District of Columbia, has been spreading the concept paper and graphics for the Homeowners' Equity Corporation around Capitol Hill. A number of influential people have expressed interest in the idea as a viable way to divest the federal government of the residential properties it will probably soon acquire, but without costing the taxpayer anything, and beginning the process of restoring an asset-backed, instead of debt-backed currency.

• On Thursday, Norman Kurland gave a talk on the Just Third Way before a class at American University. The talk was well received, and Norm was invited back in November to give another talk, this time in the auditorium, where members of more than one class could come and participate in the lively session.

• We've seen steady growth in the number of blog readers. We've had visitors from 27 countries, and 44 states and provinces in the U.S. and Canada. This week's awards for the "Most Time Spent on Blog" (aside from the authors and webmaster) go to (in order) Venezuela, Egypt, and Brazil. The United States ranks fourth, right before the Philippines.

• Of our "Top Ten Postings," 8 deal with the current financial crisis, one with employee ownership (and the financial crisis), and one the "News from the Network" . . . in which we report efforts to bring our proposals to the attention of the powers-that-be. Obviously people are interested in what we have to say about the financial crisis. The problem is how to get the word out. You can help by sending links to the blog in general, and specific postings in particular in order to let people know that there is a viable solution available. They just have to look.

As usual, there are a great many other news items that we haven't heard about because you haven't submitted them. If you're tired of reading about what we're doing, let's hear from you. If you have a SHORT item about how you are advancing the Just Third Way, send us a note about it at mgreaney [at] cesj [dot] org.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

Union Solidarista's Reaction to the Billionaire Bailout Bonanza

Open Letter to the American Public and Powerbrokers in the United States:

I have been waiting 30 years for this moment. It is time America woke up. Perhaps the current financial crisis (and coming depression?) will inspire the powers-that-be to listen to the only sound economic advice that makes sense: Binary economics and a fast track to Capital Homesteading.

I am now waiting for the tidal wave to hit Latin America. It is a wake up call. It is very unfortunate that so many people have been hurt economically and emotionally due to the continued greed of some CEOs, Wall Street brokers, and traditional economists. While not all CEOs, brokers, and economists are blind, there are enough who have not been able to see or will see that their best interests lie in a healthy economy achieved through broadening capital ownership and real economic and political economic justice. All of them, "free market" or Keynesian alike, prefer to protect their vested interests rather than use their power to bring about change.

The times, however, they are a-changin'. It would be catastrophic if we did not have the answer . . . but we do. The answers are eloquently expressed on the web site of the Center for Economic and Social Justice ("CESJ"). Wake up America — take a look! Unfortunately it may take a loss of another $2-3 trillion and a total freeze on commercial credit to hammer home the need for profound change and implementation of Capital Homesteading.

Does it really have to come to that? I have been through several revolutions and have seen many people die in Latin America because power elites did not, and do not listen! Let us pray it does not come to this in the United States — and it won't, if you read CESJ's website!

Joe Recinos
Union Solidarista Guatemalteca and Central America
Board of Directors
(representing over 750,000 workers and 3,000 companies with $3 billion dollars of investments at risk in Central America)

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):

The Just Third Way Solution to the Financial Crisis

Antonio Betancourt, Guest Blogger

The economic and financial crisis we are witnessing is nothing less than the end of the system as we know it. The economic systems we inherited from the 18th and 19th centuries are dying; they are in state of coma, and they will not recover. Both the capitalist paradigm behind the so-called market economy, with the glorification of individual greed, and the socialist paradigm behind the so-called communist or command economies, with the glorification of envy, are based on vices that will never lead to justice. These two systems were deficient from the very beginning. These two systems fulfilled whatever promise they had within the limits of their principles. Neither is equipped to address the demand of the masses of today's world for participation as new owners in the new global economy.

Capitalist and socialist economic paradigms lead (perhaps unintentionally) to two kinds of monopolies: political power, and financial and economic-money power. The capitalist system creates great concentrations of economic and financial power in a few representatives of the private sector. Capitalism renders the majority of the population dependent on that minority, for wages for hire, salaries, employment, price setting, credit, etc.

The socialist model is even more monopolistic. Socialism creates concentrated power in the bureaucracy of the State or government. This concentration of political power with economic, and financial power, control over the money supply and the economy, is carried out by a much tighter monopoly than in the capitalist system by the State bureaucracy. In socialism the majority of the population depends on a tiny minority for their economic "empowerment."

Neither system was designed to empower the masses. Half of the 20th Century and the beginning of this 21st century witnessed the necessity of empowerment and participation of the masses in the economy as well as in the political, technological and cultural affairs of the countries, regions and ultimately the world. History is characterized by an enlightened, educated minority who led the rest of the population who were kept ignorant, and lacked the education and enlightenment to lead. Today we have a situation in which the masses are enlightened and educated: they want to lead, and take responsibilities for their lives and that of their surroundings. In other words, economically speaking, the people of the world are demanding not just employment and wages, but participation in the way capital and wealth is created, and credit is allocated. There is a necessity to retire the two present systems of economic monopolies and create a real expanded "Market Economy for the Masses."

To do this, the Wall Street Model is powerless and so is the New Socialist Model represented by Chavez of Venezuela and the new radical left. The world economy — beginning with the US and the industrialized nations — needs to adopt the ideas of Louis Kelso (the founder of the ESOP) and his followers since the 1960s. (KelsoInstitute.org, cesj.org, or widp.org,). The world needs a total democratization of the economy by democratizing access to money and credit for the masses. Since the 1970s, the financial and legal instruments have been created for the economic transformation of the world, to a true democratic, justice-based economy.

If we want a real political democracy, we must first create a foundation of real economic democracy. Today we have a dysfunctional political democracy that has resulted in economic plutocracy. This is the reason democracy is not working and expanding in the developing world, whether Iraq, the Middle East, Africa, and Latin America. The masses have to become the owners of the new wealth that will be created now and into the future, not just wage-workers for hire. This is plagued with insecurity in today's economy. Only ownership is the solution. "One person, one vote/one person, one owner." This will be "real representative democracy."

The $700 billion of the bailout plan should not be given to the monopolies that created and are an intrinsic part of the problem. This money should be allocated to the masses following Binary Economic Principles that are proven to bring economic empowerment to ordinary citizens. This will harness the wealth creative power, the productive ingenuity of people everywhere. Democratizing $700 billion in the US would allow people to access credit for economic activities, and repay that credit with the profits and revenues of their enterprises. Access to self-liquidating loans that would move the masses to participate in the economy of the country and in the economy of the world will create new owners of corporate assets that are producing wealth everywhere.

For more information on what I am talking about please log onto the web site of the "Center for Economic and Social Justice." They are the gurus in the Economic Justice, Own or be Owned Movement.

Donations to CESJ are tax deductible in the United States under IRC § 501(c)(3):