News from the Network, Vol. 1, No. 11

An informal poll of the voting public seems to indicate that the greatest immediate advantage to the election of Barack Obama will be the end of the ads and telephone calls. The biggest problem with the election so far as this blog is concerned, however, is that virtually all news, including that from the Just Third Way network, has been dragged under by the riptide of political news and commentary. We do, however, have a few items to report, although nothing of the magnitude of a national election.

• Former Congressman Walter Fauntroy is still making great efforts to get meetings for Norman Kurland with some of the more influential people involved in the financial crisis. It is unclear at this point what effect the election will have on this initiative.

• Michael D. Greaney's book, In Defense of Human Dignity: Essays on the Just Third Way from a Natural Law Perspective, ISBN 978-0944997024, Economic Justice Media, $20.00, is being discussed as a possible addition to the "social justice curriculum" of some high schools and colleges. If you are interested in reviewing the book for a print or internet journal, request a free "two volume" copy in .pdf from mgreaney [at] cesj [dot] org. The book is available in hard copy from Amazon, and Barnes and Noble. There is a 20% discount on orders in quantity, and interest has been expressed in some quarters in using the book (and others) in fundraising.

• Michiel Bijkirk of Arcocarib in the Netherlands Antilles visited at CESJ on Sunday and Monday of this week. Michiel has been working on a proposal to finance expanded ownership technologies through some innovative techniques, and he and Norman Kurland had some very interesting discussions on the proposal.

• As of this morning, we have had visitors from 36 different countries and 44 states and provinces in the United States and Canada to this blog over the past two months.

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 support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

Keynesian Fairy Tales Cripple Irish Economy

The popular tourist image of Ireland as a fairy-ridden country with mystical and unexplainable events occurring regularly is partially true . . . in the worst possible way. According to today's Irish Independent ("Jobless rate 'will hit 320,000," 11/06/08), Taoiseach Brian Cowen predicted that the unemployment rate in Ireland could go as high as 300,000 or more by next year. Mr. Cown was quoted as saying that the projected increases in unemployment are "regrettable," but not surprising in view of the global economic situation. The solution?

"Employment creation remains a priority for the government. The creation of quality, well-paid jobs will come predominately from two sources - foreign direct investment and indigenous enterprise."

This is partly right but (in the worst way possible) is horribly wrong, although completely consistent with the entrenched Keynesian myths that have befuddled economists and politicians for most of the past century. Keynes was unalterably convinced that investment could not take place until after consumption had been cut and savings accumulated. This is a myth, as Dr. Harold Moulton proved in 1935 in his book, The Formation of Capital. Dr. Moulton proved beyond the shadow of a doubt that periods of increased investment had been preceded not by decreases in consumption (necessary to save), but by increases! Keynes thought that money could not be created for investment, but that the State could create money to spend. Moulton proved that Keynes was wrong — but politicians still assume Keynes was right!

What does Moulton's work mean for any economy? First, of course, with a properly designed and regulated financial system that integrates the commercial banking system with the central bank and a just tax system, there is no need for direct foreign investment except with regards to the importation of new technologies. Using commercial banks and a central bank properly results in as much money and credit as needed to form capital, and creates a currency backed with hard assets in the form of productive technology, farms, industries, and other goods and services.

Thus, "indigenous enterprise" can provide a domestic economy with all that is necessary for sound and stable economic growth without the need for foreign investment.

The only proviso is that, as proposed under the Capital Homesteading plan developed by the Center for Economic and Social Justice, ownership of the new productive projects must be spread broadly throughout the country — the goal should be every citizen an owner of capital, with the "four pillars of an economically just society" firmly in place to protect and enhance the dignity of each person:

Limited economic role for the State,
Free and open markets,
Restoration of the rights of private property, and
Widespread direct ownership of the means of production.

It's at least something to think about, as nothing else seems to be working.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

Change? From What? To What?

First, of course, congratulations are due to Barack Obama, the president-elect of the United States. It is a remarkable achievement for anyone. Mr. Obama has pursued that goal with a singlemindedness that heralds well for the dedication he will bring to the job of president. Our hope, of course, is that the "reality check" he is receiving this morning in his first security briefing, combined with his innauguration, will not dim his enthusiasm nor disappoint his many supporters. Mr. Obama is about to find out the true scope and magnitude of the challenges faced by George Bush from a different perspective, and it is to be hoped that the realities of the situation will not undermine his power to effect substantive change as they subverted Mr. Bush's leadership.

That being said, the election of Barack Obama as the first black president of the United States appears to be taken by many people as sufficient to indicate that the promised change will, in fact, take place. The only problem (well, not the only problem) is that it has never been entirely clear of what the "change" will consist, other than from the Republicrats to the Democrans, or from "zero" to "nothing."

From a Just Third Way point of view, however, there are definite signs of change: from bad to worse. Not that these aren't similar to the signs of change promised by Senator McCain; as noted a number of times on this blog, there doesn't appear to be any significant difference between the two. The election of Barack Obama is "worse" than that of Senator McCain due to the fact that now the Democrats will control both Houses of Congress, the Executive Branch, and have a lock on the Supreme Court.

The presumed advantage of a two-party system is that one group is prevented from having total power, and that the mistakes of one will be stopped or corrected by the other, or (at the very least) no action will be taken due to a deadlock. It can be argued that President Bush's failure to act effectively has been due in part to a hostile legislature.

That "advantage" will no longer exist, at least for the next four years. There may even be sufficient momentum and distaste with the Republicans to keep President-elect Obama in office for eight years. The opinion of this writer is that the crises faced by Mr. Obama will, for the next four years, be blamed on the Republicans, thereby ensuring his election for a second term. After that, his lack of an effective economic, political, or social program can be blamed on the failure of Congress to vote enough money — regardless how much money is thrown into the Keynesian whirlpool, it is never enough (as Keynes asserted in the mini-depression of 1936/37), so insufficient funds is always a safe card to play.

Of course, had Senator McCain won, the situation would be almost identical, with the exception that it would not be as easy for Mr. McCain to obtain money and legislation as it will President Obama. Further, McCain wouldn't be able to blame the Democrats, except for opposing him in Congress, which, in a way, is their job.

The basic problem with both parties and platforms, of course, is that they are locked into a Keynesian paradigm that does not admit of a solution, no matter how hard they try, or how much of our or our children's money they spend. Despite the title of his 1936 treatise, The General Theory of Employment, Interest, and Money, Keynes does not appear to have understood money, credit, or banking, and (possibly at the root of the problem) private property. Without a proper understanding of property, the institutions based on property (e.g., employment, interest, and money), become a mystery open only to few initiates. Unfortunately, the initiates (as demonstrated by the monetary and fiscal policies of the last eighty years) frequently don't understand what they're doing, either.

Possibly the last well-known economist who understood money, credit, and banking (and he wasn't all that well-known) was Dr. Harold G. Moulton, president of the Brookings Institution in the 1930s. At that time, Brookings investigated alternatives to the Keynesian programs of the New Deal. What Dr. Moulton developed, added to the work of Louis O. Kelso and Mortimer J. Adler in the 1950s, can be found in the Capital Homesteading proposal of the Center for Economic and Social Justice.

Given the evident goodwill and hopes for change we see in the election of Barack Obama, it would be well if, before taking office, the president-elect gave serious consideration to the principles of the Just Third Way embodied in Capital Homesteading for Every Citizen. Otherwise, all we have to look forward to is more of the same, only more so.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

The Pitcher or the Stone

In Man of La Mancha, the musical version of Miquel de Cervantes' novel Don Quixote, Sancho Panza continually gives vent to a seemingly endless string of proverbs. Just before getting into another ridiculous situation resulting from Don Quixote's obsession with chivalry and his insistence on seeing what isn't really there, Sancho Panza states his predicament after being reassured how glorious the act will be by declaring, "Whether the stone hits the pitcher, or the pitcher hits the stone, it's going to be bad for the pitcher."

That about sums up the position of American voters today, as they go to the polls in what appear to be crowds unprecedented in recent decades. The problem is, whether Senator Obama or Senator McCain gets elected, the voters are still going to get beaned with a very hard stone of reality. Both candidates are firmly entrenched in the discredited economic theories of John Maynard, Lord Keynes, architect of the New Deal and the modern Welfare State. The only differences between them involve the selection and more or less intensive implementation of various Keynesian remedies to attempt to turn the economy around.

Rather than failed Keynesian economics, the candidates — and everyone else — should have been studying the potential of binary economics as expressed in the Just Third Way and applied in Capital Homesteading as a means of achieving economic justice, stability, and rational growth.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

Adam Smith's "Invisible Hand"

While a number of people are fond of citing or ridiculing Adam Smith's "Invisible Hand," few actually seem to understand this essentially simple concept. It was first used to distinguish between a free and open market system and a mercantilist economy where businessmen tried to get government to award them special advantages and monopolistic protections in the national and global marketplace from domestic and foreign competitors. Given such special governmental favoritism, mercantilism concentrated power in the hands of a tiny ownership elite and caused prices to be much higher, choices to be far fewer and quality to become much lower for the poor and most other consumers. Such a monopolistic environment reduced production and the supply of marketable goods and services, especially for those with limited incomes.

Within a free market, Adam Smith presumed that the rich could only satisfy their wants and needs by purchasing the labor of the poor. Thus (Smith reasoned) "ownership of the earth" doesn't matter, because an "invisible hand" operates to distribute the wealth of the world as equitably as if ownership were equally divided. Interference by the State disrupts the functioning of the "invisible hand," and thus causes injustice either for the rich or the poor, depending on which group the State is favoring. Smith did not take into consideration the possibility that the rich could satisfy their wants and needs without the labor of the poor, that is, by using technology (which displaces labor from the production process) to meet their needs, leaving the poor out in the cold.

What Adam Smith left out of his analysis was widespread ownership for the masses of the ever-more productive and labor-displacing machines and technology as a means for lifting the poor and propertyless many out of poverty — but then, so did Karl Marx and all socialists who ignore democratic access to ownership of the means of production as a means of spreading economic power and distributing profits. Widespread ownership is a way to make a market economy not only more free and just, but more democratically effective for distributing what the machines and technologies could produce in far greater abundance than in an economy with more primitive tools, technologies and advanced production systems. That is why I find Kelso's ideas so much more attractive, productive and humane than the systems advocated by either Smith or Marx or Keynes, who tried to blend the worse of capitalism and the worse features of socialism.

What Smith attempted to describe when he used the term "invisible hand" was how prices are set under ideal circumstances when there is total free choice between sellers and buyers and when no one is compelled to buy or sell and all parties are equally informed. Each person's choice and determination of value is a subjective judgment that varies according to the diverse income levels, personalities, tastes and backgrounds of that person. You can compare it to the political ballot, where it takes a majority of people each exercising their subjective judgments to determine who they value to represent them in the political arena. The majority vote is our method of converting many subjective feeling and judgments to arrive at an objective result of declaring the winner. And the votes cast by those in the minority do not count in arriving at political decisions.

In contrast, in the competitive and open economic marketplace, everyone's vote or subjective determination of the value of something placed for sale counts in determining an objective price, what Smith would call the "market price." That price tells the producer how much he should produce and it tells each potential consumer whether or not to buy that product or seek another alternative that he can afford to meet his personal needs and wants. And in this sense, the economic vote in a free market system is more democratic than one's exercise of the political ballot where only the majority's choice has an effect on who will govern their lives. But, as you know so well, free markets by themselves are not sufficient to achieve justice for the poor and middle-class.

Kelso's "Just Third Way" added the element of justice in ownership to that of a free market system, meaning that the playing field would be more level than under exclusionary, monopolistic and dehumanizing capitalism. Then all consumers, as capital owners, would be able to afford to buy what they need to live a decent life.

What we want to avoid is moving from the frying pan of monopoly capitalism (which was not advocated by Adam Smith) to the fire of State capitalism (socialism), where free choice is bureaucrats and politicians eliminate choice on the grounds that they know better than the people what the people need and want. The State, as civilization's only legitimate monopoly, was never designed to produce wealth or determine the economic choices of all its citizens, and that's why our movement has developed the Capital Homestead Act as a way to check the economic power of the State and spread out power equitably among all citizens.

Power is the key issue in determining whether we will have a free society of economically independent citizens, or a trickle-down nation of dependent wage slaves and welfare slaves controlled by a tiny elite of those who own and control all the technologies, land, natural resources, money and credit, and all the things invented over the course of human history. Everyone is free to choose what side of that line they want to be on.

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

News from the Network, Vol. 1, No. 10

Things are starting to percolate as the election draws nearer and people begin to realize that neither of the two major candidates, both trapped in the Keynesian paradigm, has anything of substance to offer for fixing the collapsing structures of our economy.

• Former Congressman Rev. Walter Fauntroy is making a major effort to open up meetings for CESJ spokesman Norman Kurland to introduce Capital Homesteading solutions to high-level policymakers and economic advisors involved in the financial crisis.

• Michael D. Greaney's book, In Defense of Human Dignity: Essays on the Just Third Way from a Natural Law Perspective, ISBN 978-0944997024, Economic Justice Media, $20.00, has been selected as "Book of the Week" by "Catholic Ireland." Review copies (in electronic format) have been distributed to a number of blog sites, and interest has been expressed in some quarters in using the book in fundraising. If you are interested in reviewing the book for a print or internet publication, you can request a free PDF version from mgreaney [at] cesj [dot] org. The book is available in print from Amazon, and Barnes and Noble. There is a 20% discount on quantity orders placed through CESJ.

• David Walker, former Comptroller General of the United States, has scheduled a telephone meeting with CESJ president Norman Kurland, to take place in January 2009. Mr. Walker previously met both Norman Kurland and Louis Kelso, and spoke favorably of the Kelsonian economic programs. Norman Kurland will introduce Mr. Walker to new applications of Kelsonian binary theory, focusing on the Homeowners' Equity Corporation and Capital Homesteading as a means of fostering economic growth while at the same time paying down the growing national debt.

• CESJ member and libertarian Guy Stevenson has been working on getting materials on the Just Third Way to Alan Keyes. Much of what Keyes says is already consistent with the Just Third Way. Guy is trying to arrange a meeting between Norman Kurland and Keyes, who has spoken favorably in the past about expanded capital ownership as part of a justice-based U.S. foreign policy.

• A group of students and faculty advisors from William and Mary will be visiting CESJ in January 2009. The students are interested in careers in the social justice field.

• Don Killoren of the Public Revenue Education Council (a leader in the Henry George school of economics) in Webster Groves, Missouri, USA, wrote recently to Norman Kurland about his very positive impressions of the August 2008 Social Justice Collaborative organized by CESJ, to seek better understanding and support for an interfaith Abraham Federation that would unite Kelsonian binary economists, Georgists and distributists of the American Chesterton Society. Don, who mentioned that he is still studying the ideas that were discussed at the event, commented: "No doubt that was the greatest exchange of ideas of any convention I have ever been involved with. My hat is off to you and your organization. Because of these interchanges, I am working over in my thinking the vast implications of the moral concepts of strict justice and social justice, land and capital, money and capital. Nowhere in the popular press, TV presentations, and articles I have encountered is anyone (except us, of course) getting to the underlying causes of the economic problems we are experiencing. Unless we look into the possibility that our first premises are faulty, there is no way to solve the problems caused by the quicksand foundation upon which our economic house is built."

• As of this morning, the Just Third Way blog has had visitors from 33 different countries and 47 states and provinces in the United States and Canada over the past two months.

We welcome your news items and progress reports, as well as your comments (positive and not-so-positive) about these reports and blogs. If you have a SHORT item about how you are advancing the Just Third Way, or would like to submit something as a guest blogger, send us a note about it at mgreaney [at] cesj [dot] org.

Donations to CESJ support our Capital Homesteading projects and Just Third Way initiatives, and are tax deductible in the United States under IRC § 501(c)(3).

A Short Course on Property

Many people are confused about property, and thus why widespread ownership of the means of production — an "ownership society" — is so important. This is easy to understand, however, once we know what "property" is.

First of all, "property" is not the thing owned, but the natural right each human being has to be an owner (the right "to" property), and the socially-determined bundle of rights that define what people may own and what owners may do with their possessions. While the latter comes under prudence, it does so only to the extent that the human person's right to be an owner is not thereby unjustly infringed, inhibited, or prevented; the socially-determined rights of private property, in common with the natural right to private property, come under the virtue of justice, not prudence.

Once we understand that, we have the basis for understanding the nature of property. As the universal prohibition against theft demonstrates, the right to be an owner is a part of the natural law. As Dr. Heinrich Rommen noted,

"Thou shalt not steal" presupposes the institution of private property as pertaining to the natural law; but not, for example, the feudal property arrangements of the Middle Ages or the modern capitalist system. Since the natural law lays down general norms only, it is the function of the positive law to undertake the concrete, detailed regulation of real and personal property and to prescribe the formalities for conveyance of ownership. (Heinrich Rommen, The Natural Law, A Study in Legal and Social History and Philosophy. Indianapolis, Indiana: Liberty Fund, Inc., 1998, 59.)

That is, every human being has the right to be an owner, but how that ownership is to be exercised is determined socially by the needs of the owner, other people and groups, and the common good as a whole - but without prejudice to the underlying right to be an owner. Everyone may therefore use what he or she possesses as he or she wishes, as long as he or she does not harm him- or herself, other individuals or groups, or the common good. No one may be deprived of the exercise of property except for just cause and through due process.

Property is important because, except for human labor itself, nothing connects a person to the common good in a more intimate or secure fashion. By denying (abolishing) private property, the human person is cut off from the "ability for doing" that property confers, that is, "power." "Power," as Daniel Webster observed, "naturally and necessarily follows property." Without property, the human person is in the power of whoever possesses property, and is subject to control, more or less complete, depending on the will of who owns.

This is because property is not the thing owned, but the set of social relationships that define how an "owner" relates to the thing owned, and to other people with respect to the thing owned. Property confers power because in all codes of law property is the right of control. When the right of control is taken away, property is abolished, that is, socialism is established.

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

What's Good About Derivatives

It's enough to give gambling a bad name. While the mere existence of derivatives did not cause the current financial crisis, their misuse had a tremendous impact. The cries for increasing levels of government regulation not only lock the barn after the horse has been stolen, it turns out that the horse was stolen from the stable, not the barn. (By that I mean, more government regulation is not the answer, but a restructuring of the financial system to reinstitute checks and balances that function as part of the system itself, with the government to police abuses — deviations from desired behavior — not force desired behavior.)

Once upon a time derivatives — contracts to deliver a specific asset, good, or service in a particular quantity at a particular price by a certain date — had a useful purpose. They permitted issuers of financial instruments to gauge how much of what to issue and to whom, just as commodity futures helped producers and purchasers lock in a price and quantity, stabilizing prices and guaranteeing a market.

It wasn't long, however, before speculators realized that they could make money buying and selling not the company or the goods and services to which derivatives give a right to purchase, but dealing in the right itself. This separates the actual asset, good, or service to which the right entitles the holder of the contract, from the right to buy or sell it — a separation of ownership from control. Rather than stabilizing prices and guaranteeing quantities for delivery at the proper time, speculating in derivatives has resulted in wild fluctuations in the future (as opposed to the current) price of the asset, good, or service to which the derivatives give a right.

So, is there anything good about derivatives?

Used as originally intended, of course there is. The commodities markets could hardly function without them. Without futures contracts, farmers and other producers would be strapped for cash at critical times and unable to obtain credit to finance operations. This is obvious, and, as the financial system is currently structured, virtually the sole justification for derivatives.

Under a reform of the financial system, however (as in the Capital Homesteading proposal), the wide variety of financial derivatives would serve another useful purpose: to determine the market price of the underlying asset, good, or service, as well as the risk associated with the sale or purchase of that underlying asset, good, or service. Inasmuch as one provision of Capital Homesteading is to replace the "universal collateralization requirement" of financial institutions with insurance, a solid risk assessment of every conceivable investment is an absolute necessity.

Let the gamblers and speculators have their fun — but include the rest of us out. If someone has the accumulated savings to risk, he or she should be free to speculate, gamble, purchase luxuries, increase consumption, build pyramids, or anything else he or she desires. The one caveat, however, is that at no time should money ever be created or credit extended to engage in this activity. Derivatives do not, in and of themselves, generate income, and therefore cannot be regarded as meeting the requirements for "qualified paper" for which money can be created and credit extended without the necessity of first accumulating savings.

By gambling in this way, the rich will provide a valuable service for the economy, in addition to giving themselves all the thrills and excitement they want. Further, anyone who wants to engage in that activity should be allowed to do so on the same terms: sufficient accumulated wealth to enter the casino, and agreement to abide by the basic rule to use your own money, not someone else's.

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

The Keynesian Liquidity Trap Trap

If the news reports are to be believed ("White House to banks: start lending money," Associated Press, 10/28/08) we may be seeing the first stages of a Keynesian "liquidity trap" similar to that which contributed immensely to the Great Depression.

According to Keynesian theory, a "liquidity trap" is when the interest rate approaches zero. Investors do not expect high returns, so they keep assets in short-term cash bank accounts or hoards rather than investing. This makes a recession worse, and can result in deflation, or an insufficient money supply.

The usual Keynesian remedy for stimulating the economy is to lower the interest rate — as the Federal Reserve has been doing. The other Keynesian approach is to increase the rate of inflation, which (because of the presumed tradeoff in Keynesian economics between unemployment and inflation) is not considered feasible at this time when the unemployment rate is increasing. The only hope, then, of avoiding the "liquidity trap" is for banks to lend for political rather than economic or financial reasons — regardless of the credit-worthiness of the borrower . . . which is precisely what got us into the current financial crisis in the first place.

The inevitable conclusion is that the situation is hopeless, regardless who is elected president. Both candidates are operating from within a Keynesian economic paradigm, and thus neither can offer anything other than a vague promise of "change." With Keynesian economics, however, the only change can be for the worse.

So, is there no hope at all? Not at all. Banks will not lend unless they can obtain adequate security for their loans — and if they don't have to worry about risking the savings of depositors. Security, however, can be provided by "capital credit insurance," as outlined in CESJ's Capital Homesteading proposal, while money can be created at will with 100% reserves by opening up the discount window of the Federal Reserve as originally intended in the Federal Reserve Act of 1913.

Thus, although Keynes assumed the contrary as an "iron law" of economics, it is not necessary to cut consumption in order to invest. Cutting consumption actually inhibits or prevents the financial feasibility of new capital formation, again making it less likely that banks will lend.

With all the wasted resources, excess capacity, and idle people in the economy, the only thing missing is a sound approach to money, credit, and banking. Money is a means to an end, not an end in itself, and should never be a barrier to full participation in the economic common good.

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

In Praise of Roosevelt . . . No, the Other One

Today is the Sesquicentennial of the birth of Theodore Roosevelt. For those of you not "up" on the latest in archaic terminology, that means "Teddy" was born 150 years ago today. While many liberals view Theodore Roosevelt as the quintessential "Jingo," i.e., imperialist warmongering America-worshipper who hunted defenseless animals for food and sport, the fact is that during his life he was widely known as a "progressive." He espoused causes that were extraordinarily unpopular with the controlling wealthy elite, such as J. P. Morgan and other financial powers-that-be. For example, on whether any class has a special claim to virtue or consideration:

"We judge each man by his conduct, and not by his wealth or his social station; and we hold it to be our bounden duty to strive steadily to make and to keep this great American Commonwealth as a true democracy, and steadily to endeavor to shape our legislation and our social conditions so that there shall be a far nearer approach than at present toward equality of opportunity among men." (From the address given as temporary chairman of the New York Republican State Convention at Saratoga, September 27, 1910.)

What about worker ownership? While clearly pro-union, Roosevelt would have had no sympathy for many of today's unions that actively work to prevent workers from becoming owners, and in that way bringing together property rights and human rights:

"One of the prime objects which the Progressives have in view in seeking to secure the highest governmental efficiency of both the National and the State Governments is to safeguard and guarantee the vital interests of the wage-workers. We believe in property rights; normally and in the long run property rights and human rights coincide; but where they are at variance we are for human rights first and for property rights second." ("Nationalism and the Working Man," 1911)

We could quote Roosevelt at much greater length, but these bits are enough to give a flavor of his speeches and writings — and the blog format doesn't really do him justice. These quotes were taken from an obscure collection of Teddy's speeches and essays in his "collected works" compiled in 1926, "Volume XVII: Social Justice and Popular Rule," which CESJ has in its extended queue to republish as soon as it can be edited and annotated to explain the topical references that might puzzle the modern reader.

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

News from the Network, Vol. 1, No. 9

The not-unexpected wild swings in the stock market and currency valuations due to the alternating euphoria and despair as candidates, policymakers and politicians run after whichever shiny object distracts them, are the big news items of the week. Much of the emotionalism over the current economic situation could be reduced (if not eliminated entirely) if serious consideration would be given to the Just Third Way. Here are some of our efforts to bring the Just Third Way to the attention of the current power elite.

• Former Congressman Walter Fauntroy is still working on placing his op-ed piece on the Homeowners' Equity Corporation. Right now, however, he is making great efforts to get meetings for Norman Kurland with some of the more influential people involved in the financial crisis.

• Reception of Michael D. Greaney's latest book, In Defense of Human Dignity: Essays on the Just Third Way from a Natural Law Perspective, ISBN 978-0944997024, Economic Justice Media, $20.00, has been encouraging. A number of people have expressed enthusiasm for the book, which has been characterized as meeting a definite need in our society with respect to the revival of natural law. Amazon, and is up on Barnes and Noble. As we noted previously, there is a 20% discount on orders in quantity, and interest has been expressed in some quarters in using the book (and others) in fundraising.

• Joseph Recinos recently met with the daughter of the late Herman Kahn, the futurist and founder of the Hudson Institute, and gave her copies of material relating to the "Doctors' Plan" for health care and, especially, the Homeowners' Equity Corporation.

• This past Sunday, October 19, Norman Kurland had a 2-hour interview on a show conducted by Paula Gloria and Posr Posr. The first hour included participation by Dr. Robert H. A. Ashford, co-author of Binary Economics: The New Paradigm (1999). In the second hour, Norman Kurland started talking about the three principles of justice so that it could be seen as the moral basis of binary economics. Paula Gloria has a pretty good audience over the internet. She was recently on the Howard Stern Show and mentioned binary economics, and got a number of angry comments from callers to the effect that binary economics is nonsense.

• Wednesday October 22. Invited by the newly-formed, D.C.-based Ayn Rand Center for Individual Rights, Norman Kurland attended a presentation at the National Press Club by Dr. Yaron Brook, president of the Ayn Rand Institute in Irvine, California. The followers of Ayn Rand pose their philosophy as a revolution against socialism based on "selfishness" and "greed" as moral virtues, giving "capitalism" moral superiority over altruistic goals. During the session Norman asked Dr. Brook two questions: "1. Have you ever heard of Louis Kelso's Capitalist Manifesto" (he had not) and 2. "Why aren't you taking into consideration semantics, especially the negative connotations of such words as 'selfishness,' 'greed' and 'capitalism'?" Norman Kurland later asked for a meeting with Dr. Brook the next time he visits Washington, handing him a package, of material consisting of his 1971 exchange with Milton Friedman, the 6/29/79 TIME magazine article on Kelso where Friedman declared Kelso "is Marx turned on his head," the matrix comparing the Just Third Way to Capitalism and Socialism, the book flyer, and Michael Greaney's recent letter to the Washington Post (posted below on this blog as "Why Keynes is Wrong for America — or Anywhere Else"). In the reception following the talk, Norman gave materials to other individuals and had a positive exchange with Fred Smith, president, and Sam Kazman, general counsel, of the Competitive Enterprise Institute.

• Guy Stevenson is working to introduce Capital Homesteading and the other ideas to Alan Keyes, Ron Paul, Cynthia McKinney and others with an eye toward bringing together the Keyes' America's Independent Party, Paul's Revolutionary Party, McKinney's Green Party and other third parties for a mass demonstration at the Federal Reserve on Wednesday, April 15, 2009 attacking Keynesian tax slavery and pushing for reforms to our money and credit system based on the American Revolutionary Party's "Declaration of Monetary Justice."

• Republican Congressional candidate for Ohio's 11th District Thomas Pekarek's debate with Democratic contender Marcia Fudge was reported by Fox News and WCPN News. Fudge was given most of the coverage, while Pekarek, who has made Capital Homesteading the cornerstone of his campaign, seems not to have been taken seriously. On reading the news reports, it appears that the reporters may not have understood the Capital Homesteading concept and, unwilling to spend the required time to grasp this essentially new economic framework, treated Pekarek dismissively and did not pay sufficient attention to something they might not have been in a position to grasp without effort.

• As of this morning, we have had visitors from 32 different countries and 47 states and provinces in the United States and Canada to this blog over the past two months.

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):

The Economics That Dare Not Speak Its Name

The Associated Press reports that there will be a November 15 summit of world leaders in Washington, DC to deal with the worldwide financial crisis ("World leaders to meet on economy in Washington," Deb Riechmann, Associated Press, 10/22/08). A White House spokesman said that, "the first meeting will focus on the underlying causes of the financial crisis, the global response and the principles that should guide any reforms."

Despite the evident goodwill that will bring together leaders from "Japan, the United Kingdom, France, Germany, Italy, Canada and the United States, the European Union China, Brazil, India, Russia, South Korea and other major economies," as well as whoever "wins" (a term we use advisedly) the U.S. presidential election, it is clear that none of them has either the framework or principles with which to address the situation. We therefore feel it is reasonably safe to predict that a number of critical issues — and solutions — will not be raised or discussed. Although there are many, here are seven:

1. Growing gap between rich and poor. Keynesian economics depends on a small class of extremely wealthy people who cannot consume all of their income and thus (in Keynes' view) are absolutely necessary to provide investment capital. When push comes to shove (as in the current financial crisis) the poor are going to have to fend for themselves in the interests of preserving the overall economy, the rationale being that without a sound economy, the poor won't have anything, anyway. The Just Third Way, with its reliance on creating new money for investment instead of relying on existing accumulations of wealth to finance new capital formation, makes reducing the gap between rich and poor a primary consideration instead of a throwaway for the sake of expedience.

2. Instituting proper internal controls. The powers-that-be are frantically trying to come up with some quick fix that will restore the status quo. This necessarily orients them toward trying to impose the desired result by controlling people and institutions with either the carrot or the stick, both wielded by the State. Socialism (whether or not you call it that) consists of State ownership or control of the means of production. "Control" is "property" in all codes of law, so that State control abolishes private property. On a more "practical" note, the imposition of desired results has never worked, as it is directly contrary to human nature. The Just Third Way, on the other hand, advocates restructuring our institutions (including our financial institutions) so that they operate as intended with self-regulation and self-control; the structure of the institutions themselves making the desired acts or ends optimal, not coerced. The role of the State is limited to policing abuses when individuals or institutions violate their own rules.

3. Restoration of private property. Private property and ownership, especially for people who own a small or moderate amount of income-generating assets, is generally irrelevant in Keynesian economics. When considered at all, it seems to be viewed as an impediment to the efficient functioning of the capital markets. Keynes believed that most people could only gain income from wages, not ownership. Thus "full employment," not "full production" becomes the focus of Keynesian economic policy. In contrast, the Just Third Way (consistent with the natural law) advocates that owners actually own what they own. That is, people have a natural right to the full stream of income from what they own. Again, in "practical" terms, income from capital can supplement, even in cases replace what people earn from selling their labor, especially when the value of labor as an input to production is falling in the market in competition with capital (technology).

4. Reform of the currency. At present, virtually the entire money supply of the United States is backed by government debt. The Federal Reserve was established in concert with the Internal Revenue Service to prevent the government from being able to do this. That is, the Federal Reserve would create money as needed to finance private sector investment, and the IRS would raise the money necessary to keep the government running without borrowing. The Just Third Way proposes that the original purposes of both institutions be restored.

5. Reform of the banking system. This is a subset of no. 2 above. Issue banking (banking that creates money) needs to be separate from deposit banking (banking that lends money deposited by savers), and financial institutions need to be restricted to the function for which they were designed. The most common form of "issue bank" is the commercial bank, which creates money for private sector investment, taking a fee for the service. The most common form of "deposit bank" is the investment bank, which "intermediates" between people with money ("savers") and investors, putting the two together and taking a fee for the service. Combining commercial banking with investment banking, and either one with brokerage services, is a certain recipe for disaster. The Just Third Way advocates that strict controls be instituted preventing one type of financial institution from filling a function for which it was not designed.

6. Limiting the economic power of the State. This has already been hinted at in the above points, but it is useful to reiterate the fact that the State is a very specialized tool designed to maintain the common good . . . not everyone's individual good. This means the State ensures equal opportunity and polices abuses, making it possible for people to solve their own problems. The State should be extremely careful at all times about going beyond this narrowly-circumscribed role, especially the temptation to interfere with the natural right of free association that underpins the free market in an effort to ensure equality of results — thereby bringing private sector growth and entrepreneurship to a grinding halt.

7. Free and open markets. Again, this is implied above, but it bears repeating. By "free and open market," of course, the Just Third Way does not mean a market in which "anything goes," but a market within a strict juridical order to which all have free and equal access. The competition within a justly regulated free market is one of the strongest checks and balances we mentioned in point no. 2.

Obviously, this only scratches the surface of what needs to be done. Without these and other structural reforms, however, the only thing that will result from yet another "Financial Panic Summit" will (not surprisingly) be more panic, more financial chaos, and less hope that anything substantive will ever be accomplished.

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

Almost Desperate Enough for a Good Idea

Lawmakers are starting to panic in light of the refusal of the financial markets to obey the media's premature hints about the end of the financial crisis. They are starting to listen to just about everything except common sense. If things get much worse, they might even be willing to listen to that (i.e., read this blog).

A CNN report on October 21 on CNNMoney.com ("Ideas for 2nd Stimulus Cover Broad Swath," Jeanne Sahadi) stated, "The drumbeat for lawmakers to do more to boost the economy is growing louder. And the chances have increased that Congress could pass a second stimulus package during its lameduck session following the presidential election."

Unfortunately, those in power are still stuck in the Keynesian paradigm. This limits the choices to tax-and-spend, or print-and-spend. They are ignoring the possibility of creating money through a properly regulated banking system for productive purposes, thereby putting currently wasted resources, excess capacity, and idle people back to work doing something worthwhile.

What is a "properly regulated banking system"? A system that embodies structural "checks and balances" (i.e., what an accountant would call "internal controls"), policed first by the industry itself, and then by the State when self-policing fails to maintain separation of function and democratic access to money and credit.

Our "Capital Homesteading" proposal would, in part:

• Use the Federal Reserve (the central bank of the United States) to finance all future capital formation through the private sector.

• Amend the definition of "qualified industrial, commercial, and agricultural paper" to include an extended term of the loan and a requirement that paper does not qualify for discounting unless extended through expanded ownership mechanisms, such as Capital Homestead Accounts, Homeowners' Equity Corporations, Community Investment Corporations, Consumer Stock Ownership Plans, Employee Stock Ownership Plans, and similar vehicles.

• Abolish the Open Market Committee and prohibit the Federal Reserve from future dealing in government bonds, whether primary or secondary.

• Abolish fractional reserve banking and mandate a 100% reserve requirement for all commercial banks.

• Prohibit State ownership of productive assets of any kind, or from owning shares in financial institutions.

Specifics about Capital Homesteading can be found in the book, Capital Homesteading for Every Citizen. An examination of the monetary theory underlying Capital Homesteading can be found in "A New Look at Prices and Money."

With lawmakers running around and stating that they are willing to try anything, it's probably about time that they decided to try something that will actually work.

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

Why Keynes is Wrong for America — or Anywhere Else

This squeak from the wheel went to the Washington Post earlier today in response to the announcement that Chairman Bernanke had given his imprimatur to a second stimulus package. People will wonder how, if the first one didn't work, a second will be of benefit (except to buy votes for whoever can spout the line closest to Keynesian Political Correctness). The answer is simple: when something doesn't work the first time, throw money at it until it works (which it can't) or you're broke. This is similar to the dictum I learned working on an assembly line: You can fix anything with a hammer; if it breaks, it needed replacing anyway. (Naturally, the hammer we used to whack things until they worked, a solid chunk of steel bar stock, itself finally broke.) For what it's worth, then:

Dear Sir(s):

The headline in today's Washington Post ("Economic Stimulus Gains Traction," Washington Post, 10/21/08, A1), while no doubt giving a measure of hope to some people, indicates that Keynesian economics is as bankrupt of ideas as the world will soon be financially. The only puzzle is why, since the first stimulus package failed to work (and was, in fact, followed by the financial meltdown), is another proposed?

Keynesian economics, the entrenched economic philosophy of both parties, is based on the demonstrably false assumption that the State can continue to create money backed by nothing but government debt, and somehow avoid paying the bill when it comes due. One of the most damaging myths to come out of the 20th century is the fixed belief that Keynes' programs brought the United States out of the Great Depression. On the contrary: the New Deal began faltering badly in the "mini-depression" of 1936-37 when the Keynesian stimulus package began having its predictable counterproductive effect. What brought the U.S. out of the Depression was not the inflation-induced false prosperity of Keynes, but the increasing real demand created by the war in Europe.

The irony is that neither the New Deal nor the war was necessary to bring the country out of the Depression. Had the reforms recommended by Dr. Harold Moulton in his book, The Formation of Capital (1935) been implemented, the financial integrity of the country would have been restored, real production would have taken place, and jobs created naturally in response to the increase in real demand.

As president of the Brookings Institution and a leading authority on money, credit, and banking, Dr. Moulton was fully aware of the fallacy of Keynes' basic assumption: that the State could create money at will to finance deficits, but that the private sector could not do the same thing to finance capital formation. The former results in an inflationary, debt-backed currency, while the latter creates an asset-backed, appreciating currency.

Further, the capacity may not exist in the American economy to sustain Keynesian programs. According to the Federal Reserve's "Flow of Funds Report" for the first quarter of 2008, total debt in the United States (business, consumer, and government) is $50 trillion. This is 350% of GDP. In 1929, total US debt was approximately 140% of GDP — and the country's productive capacity was completely intact; jobs and industries had not moved overseas.

In contrast to the Keynesian New Deal or some variant thereof is a proposal called Capital Homesteading for Every Citizen. By focusing on providing credit for ordinary people to become owners of the means of production, thereby creating and maintaining their own jobs, Capital Homesteading eliminates reliance on unproductive government spending, bailouts, and endless stimulus packages, and replaces them with productive money creation that builds ownership into ordinary people, putting wasted resources, excess capacity, and idle people back to work.

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