THE Global Justice Movement Website

THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.

Tuesday, September 30, 2008

Billionaire Bailout Bonanza: "Manie Men Feare"

"The Lord Viscount Wentworth came to Ireland to governe the kingdom. Manie men feare." — Diary of Sir Edward Denny, July 23, 1633. That brief statement by a Protestant "Planter" in 17th century Ireland should serve as a most useful warning for Messrs. Bernanke and Paulson. Thomas Wentworth, Lord Deputy (later Lord Lieutenant) of Ireland under Charles I Stuart was the most powerful man in the three kingdoms of England, Scotland, and Ireland in the 1630s. He absolutely controlled money, credit, taxation, and the courts in Ireland, and exercised his "brilliant but sinister influence" in England as Charles' chief adviser on all matters economic, military, and political.

Unfortunately, although Wentworth sought to retire quietly when Catholics and Protestants temporarily overcame their differences and combined to get rid of him, he was decapitated on Tower Hill amid great rejoicing on May 12, 1641 before a crowd estimated at around 200,000. A few months later the "Great Rebellion" started, touching off the Civil Wars in England, which led to the execution of Charles I and the dictatorship of Oliver Cromwell.

The current situation is a perfect recipe for equal outrage. People are genuinely terrified, yet the masterminds behind the proposed Billionaire Bailout Bonanza can only reassure the taxpayer that the burden will fall on him or her ("Taxpayers Will Pay Anyway"):
"By voting down the proposed $700 billion financial bailout package — and causing a spectacular stock market rout — a majority of members in the House of Representatives made a clear statement that they didn't want to put taxpayers on the hook for the failures of financial institutions.

"But there's a catch: taxpayers are already on the hook for the failures of financial institutions, and it's possible that the bill will actually be larger without bailout legislation than with it. That's because the regulators who mind the financial industry — the Federal Reserve, Treasury and FDIC — will keep doing what they've been doing: stepping in to prevent the chaotic failure of banks and other large financial institutions. This means continuing to put hundreds of billions of taxpayer dollars at risk, but in a way that adheres to no clear plan of action and doesn't require members of Congress to explicitly approve their actions."
Thus, the speculators and gamblers stand to profit twice and thrice via 1) the original profits made on sub-prime loans, 2) the bailout, and 3) their probable repurchase of the same loans in the greatest short sale in history. The taxpayer gets stuck each time, paying for someone else's losses in the biggest high stakes game ever run — and without even being permitted to get into the game.

If Bernanke and Paulson, to say nothing of the Congress, had a healthy concern for their own wellbeing (to say nothing of their responsibility to the common good), they would be looking into our Homeowners' Equity Corporation as not only a way out that benefits everyone except the gamblers and speculators, but as a way to save their own necks. "Heads will roll" is an expression that came from somewhere, and it was not always a metaphor.

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

Residential Homesteading for Every Citizen?

For quite a few years BB (in this case "Before Blog," not "Before Billionaire Bailout Bonanza") we've advocated empowering ordinary Americans with the means to acquire and possess wealth-producing assets. Abraham Lincoln's 1862 Homestead Act made it possible for thousands of people who had previously owned no land to acquire it relatively easily. As an advance on this, we've been pushing a program we originally called "Industrial Homesteading," which we changed to "Capital Homesteading." With the probable acquisition by the U.S. federal government of thousands of residential properties, we think it's time to add Residential Homesteading to the Capital Homesteading proposal through the Homeowners' Equity Corporation.

You might reasonably ask whether this is a change in our stand on using credit for nothing that does not in some way produce a good or service that results in income that can be used to pay for the asset. Not to sound flip, but that is a very good question.

Ordinarily, you'd be correct. Using newly-created money to purchase a home in which you live instead of renting out would be an explicit violation of our principles regarding money and credit. What the HEC would do, however, is use newly-created money to purchase the federal government's soon-to-be portfolio of distressed properties, and rent them out.

As "rentable space," the homes would be capital investments. That is, they would be "self liquidating," generating a service (a place to live) for which a tenant makes a monthly lease payment. Using capital credit to invest in rental property is as legitimate as any other capital investment.

The difference is not in the asset — rental properties — but in who owns the asset. Ordinarily, an owner of rental property does not live in the rental property and make lease payments to him- or herself through the real estate holding company he or she owns. Using the HEC, however, allows the tenants to build up equity, not a faceless owner somewhere upstate. The equity is not directly in the home being rented, however, but in the company (the HEC) that owns the home being rented. The home itself is a capital asset, not a directly-owned consumer item. The tenant owns part of the company that owns the home, not the home itself.

If you stop to think about it, who would make better owners of the rental properties than the people who are renting? The HEC, the commercial banking system, and the Federal Reserve could bring this about quite easily.

On the other hand, should the federal government divest itself of the properties it seems ready to acquire in the usual way, the only beneficiaries will be the Billionaire Boy's Club as they reap another windfall bonanza from one of the biggest short sales in history.

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

Monday, September 29, 2008

Billionaire Bailout Bonanza

With the panic spreading throughout Wall Street and the rest of the world's financial markets for secondhand debt and equity, it's no wonder no one is listening to our particular squeaky wheel. That being the case, we invite you to take what you want from this blog, and send it on to the proper quarters. Perhaps if enough people say something,
they might start paying attention. As a sample of something you could do, here's today's missive to the Wall Street Journal.

Dear Sir(s):

While everyone's attention is focused on the nearly $1 trillion bailout bonanza, very few people are asking what may be the most serious question of all: how is the federal government going to divest itself of this portfolio of distressed assets? From the orientation that got us into this mess to begin with, there are three possibilities:

* Sell the properties back to the speculators and gamblers at the current market value (a massive short sale).

* Sell the properties to foreign or domestic investors with cash in hand.

* Sell the properties to the current occupants or new buyers.

All three are essentially the same possibility, and all rely on the current or new occupants raising financing from the speculators, gamblers, or foreign or domestic investors. Since many current occupants and potential buyers lack the means to qualify for loans, we'd be right back where we started, with the taxpayer footing the bill for another, larger bailout.

That is, unless the federal government can do the same with its now near-certain accumulation of residential properties that Lincoln did with the Homestead Act of 1862. They can't be given away "free," of course — but no-cost credit (analogous to the "free" land) can be extended to ordinary people to purchase and own the homes through a proposed private sector financing and ownership vehicle called the Homeowners' Equity Corporation, or "HEC," a description of which can be found on the web site of the Center for Economic and Social Justice.

Instead of starting the cycle all over again and further weakening the U.S. economy for the benefit of speculators, gamblers, and foreign and domestic investors with money to burn, why not enact the "Residential Homestead Act of 2008"? We have nothing to lose except a deteriorating currency, hopelessness, despair, and a crumbling economy.

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

Sunday, September 28, 2008

When Wall Street Abandoned Its Mission to Finance New Investments

Thanks to Dr. Bob Crane for sending me an article by Ron Chernow, whose knowledge of the J.P. Morgan era helps us to understand the mindsets that are trying to deal with the symptoms of a fatally flawed system of global capitalism today.

Global capitalism is a system based on a flawed paradigm. In contrast to the binary economic paradigm, here are the defective concepts and policies in all capitalist societies that have caused and aggravated the current global economic crisis:

1) Problem: "Full employment"(increasingly supported, as labor-saving technology expands, by government income redistribution through non-productive "created jobs" and welfare checks).

Binary solution: "full production" directly tied to accelerated growth of advanced labor-saving technologies that are financed through "pure credit" and "asset-backed money" (the real bills doctrine and the quantity theory of money) to achieve "universal access to capital ownership" and links system growth by balancing aggregate supply and aggregate demand. (Otherwise known as the binary economic version of Say's Law of Markets).

2) Problem: Misleading Savings Limitation on Growth. Limits growth rate of new productive capital to "existing savings" (interpreted to mean current or past accumulations of earnings, which by definition favors the most wealthy citizens whose property incomes far exceed their capacity to consume and thus widens the wealth and economic power gaps between economic haves and the increasing more insecure have-not wage slaves and welfare slave majority of the population).

Binary solution: 100% leveraged financing through Capital Homesteading vehicles of newly added capital assets for growth of advanced labor- and energy saving technologies, new plant and equipment, new rentable space and new infrastructure, with private loan default insurance and designed to be repayable with "future savings." Passage of the Federal Reserve monetary, banking, tax, inheritance and other reforms under the proposed Capital Homestead Act. (

This requires a shift in the source of financing new productive capital to "new Fed-created money to be backed by and repayable with the future profits expected to be produced by new growth assets. This new asset-backed money would be converted into self-liquidating bank loans (supported by 100% reserves, rather than fractional reserves) to facilitate expanded local bank capacity to make "pure credit" based on asset- and insurance-secured promises to repay the loans out of "future savings" from the productiveness and profits added by the new assets being financed. By channeling this new money into such tax-sheltered Capital Homesteading vehicles like Capital Homestead Accounts (CHAs), Employee Stock Ownership Plans (ESOPs), multi-home Homeowners Equity Corporations (HECs), Community Investment Corporations/Citizens Land Cooperatives, regional Natural Resource Banks (NRBs), Consumers Stock Ownership Plans (CSOPs), and cooperatives, every American citizen would be on a level playing field with super-rich Americans for the "social means" to purchase newly issued shares from well-managed private sector companies of all sizes for financing their expansion assets, uniquely without reducing their current consumption incomes.

This would create a nation of dividend-earning capital owners, create many more private sector job opportunities that are competitive in global markets, reduce trade deficits, balance the Federal budget and begin to pay down the existing debt of nearly $10 trillion, supply each citizen with a growing accumulation of dividend-yielding capital accumulations for retirement, and gradually eliminate the unsustainable projected deficits in Social Security, Medicare, Medicaid and other entitlement programs now estimated at over $50 trillion over the next 75 years. Based on current rate of newly-added capital formation in the U.S. economy of roughly $2 trillion each year, with passage of the Capital Homestead Act a newborn child could accumulate after-taxes by age 65 an estate of almost $500,000, an annual dividend income of close to $50,000 at age 65, and about $1.6 million in dividends to supplement job incomes over his or her lifetime.


"A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation, by Norman Kurland (The Journal of Socio-Economics (Vol. 30, 2001) and;

The Formation of Capital by Harold Moulton (Brookings Institution, 1935);

The New Capitalists: A Proposal for Freeing Economic Growth from the Slavery of Savings by Louis O. Kelso and Mortimer J. Adler (Random House, 1961 and;

Binary Economics: The New Paradigm by Robert Ashford and Rodney Shakespeare (University Press of America, 1999);

Capital Homesteading for Every Citizen by Norman Kurland, Dawn Brohawn and Michael Greaney (Economic Justice Media, 2004); and

"How We Can Create Green Growth, Economic Prosperity and Global Peace" by Norman Kurland, Dawn Brohawn and Michael Greaney at

3) Problem: Blindness or Indifference to Institutional and Legal Monopoly Barriers to Universal Participation in Capital Ownership as a Basic Right of Citizenship in a Democratic Society and a Fundamental Human Right. (See section 17 of the UN's Universal Declaration of Human Rights.

Binary Solution: Lift the Barriers through Adoption of Comprehensive System Reforms under the Capital Homestead Act.

4) Problem: Misleading definition by academic economists of "productivity," which attributes growth due to advanced technologies to the productiveness of human labor, rather than the ever-advancing productiveness of capital, resulting in government-induced distortions in market values of labor contributions, wasteful and conflict-inducing income maintenance policies, dangerous American trade imbalances caused by the outsourcing of jobs and transfer of critical industries and technologies to low-wage countries.

Binary Solution: Separate the Declining Relative Productiveness of Labor and the Rising Productiveness of Productive Capital in the Interdependent Process of Creating Marketable Goods and Services, for National Income Maintenance Policy. Thus, as American workers gain rising capital incomes from the productive contributions of their growing capital accumulations, pressures to increase artificially the costs of labor contributions will be reduced and the prices of American goods, technologies and services will again become more competitive in global markets, increasing the stability of incomes from the American private sector. Labor unions can increase their constituencies from 7% of the private sector work force to virtually 95% of the population by being in the vanguard of this transformation of the U.S. economy, transforming themselves from democratic labor unions to bottom-up democratic ownership unions and beginning to negotiate and protect rights of all shareholders as well as workers in the economy.

Just before his untimely death in an airplane crash, Walter Reuther, the head of the United Auto Workers and the last of the great labor statesmen, confirmed this point in his testimony to the Congress:

"Profit sharing in the form of stock distributions to workers would
help to democratize the ownership of America's vast corporate wealth
which is today appallingly undemocratic and unhealthy. The Federal
Reserve Board recently published data from which it is possible to
estimate the degree of concentration in the ownership of publicly
traded stock held by individuals and families as of December 1962.
Preliminary analysis of these data indicates that, despite all the
talk of a "people's capitalism" in the United States, little more
than one percent of all consumer units owned approximately 70
percent of all such stock. Fewer than 8 percent of all consumer
units owned approximately 97 percent—which means, conversely, that
the total direct ownership interest of more than 92 percent of
America's consumer units in the corporation-operated productive
wealth of this country was approximately 3 percent. Profit sharing
in a form that would help to correct this shocking maldistribution
would be highly desirable for that reason alone.… If workers had
definite assurance of equitable shares in the profits of the
corporations that employ them, they would see less need to seek an
equitable balance between their gains and soaring profits through
augmented increases in basic wage rates. This would be a desirable
result from the standpoint of stabilization policy because profit
sharing does not increase costs. Since profits are a residual,
after all costs have been met, and since their size is not
determinable until after customers have paid the prices charged for
the firm's products, profit sharing as such cannot be said to have
any inflationary impact upon costs and prices." [Testimony before
the Joint Economic Committee of Congress on the President's Economic
Report, February 20, 1967.]

5) Problem: Failure to Distinguish between Credit for Investment and Credit for Non-Productive Uses and Speculation.

Binary Solution: Under Capital Homesteading, national credit policy would establish a two-tiered credit system, encouraging through interest-free, asset-backed, privately-insured, self-liquidating productive capital credit ("pure credit") the funds to finance non-inflationary green growth to the American economy and broad-based ownership of the wealth-producing assets needed to restore the global competitiveness of a more economically just American free enterprise system, while reducing the burdens of the public sector. By focusing on future growth through pure credit, a social good that in a just free market economy should be equally accessible to all, Capital Homesteading would make have-nots into haves without threatening the property rights over existing capital assets owned by current owners of capital.

Credit for non-productive uses, such as consumer loans, government deficits and loans for projects that could be developed more efficiently through the private sector, and loans for speculation and gambling, loans to the already affluent (in other words, loans that are not procreative and pay for themselves or loans that do not increase the productive assets and capital incomes for the 95% of non-affluent Americans) would have to financed exclusively out of past savings, at interest rates reflecting the alternative market yields from the uses of past savings. This would protect the property rights of those who have accumulated savings. Under a Capital Homesteading economy, the poor and middle-income would have less need for consumer loans often at usurious rates as a faster growing private sector generated more jobs and distributed labor as well as ownership incomes. Because of the historic problems associated with the law of compound interest associated with consumer loans -- the foundation of usury condemned by all traditional religions and the cause of indentured servitude, debt slavery and inhuman pressures on propertyless family in many countries -- the government should consider policies that discourage consumer loans for those whose incomes are insufficient to meet their debt obligations.

Dr. Robert Crane, wrote:

Old style capitalism operating out of the hip pockets of moguls concentrated wealth but for a hundred years it also facilitated the creation of asset-backed money and vast sums of real wealth. Then came 1913 and the issuance of money for debt, which survived for another century and dismantled America's global power base. What is coming next? A new global currency based on binary economics and the return to pure credit and the return to real wealth? Too bad we can't go into a time machine and emerge in 2108 to see the answer. Or maybe we'd rather not.

New York Times, September 28, 2008
Op-Ed Contributor
The Lost Tycoons By RON CHERNOW

With breathtaking speed, the world of large Wall Street investment banks has vanished. Fabled firms, some more than a century old, have been merged out of existence (Bear Stearns, Merrill Lynch), gone bankrupt (Lehman Brothers), or sought asylum as commercial bank holding companies (Goldman Sachs, Morgan Stanley).

Why on earth did this happen? The death of Wall Street has been a long-running, slow-motion crisis, barely discernible to participants who had still booked huge profits in recent years. Beneath the razzle-dazzle of trading desks and the wizardry of esoteric finance lay the inescapable fact that these firms had shed their original reason for being: providing capital to American business.

The dynastic power exercised by Wall Street tycoons in the late 19th and early 20th centuries was premised on scarce capital. Only a handful of European countries and their private bankers had surplus capital to finance overseas development. In this cash-poor world, J. Pierpont Morgan and other grandees exerted godlike powers over American railroads and manufacturers because they straddled the indispensable capital flows from Europe.

With their top hats, thick cigars and gruff manners, these portly tycoons scarcely qualified as altruists. As Morgan liked to warn sentimental souls, “I am not in Wall Street for my health.” Yet he and his ilk rendered America an invaluable service by reassuring European investors that they would receive an adequate return on their investments, securing an uninterrupted flow of capital.

To safeguard those returns, old-line investment bankers became all-powerful overlords of their exclusive clients. When they issued company shares, they retained a large block for themselves. Some clients chafed at these gilded shackles, while others gloried in their servitude. As the head of the New Haven railroad, a Morgan client, boasted to reporters, “I wear the Morgan collar, but I am proud of it. If Mr. Morgan were to order me tomorrow to China or Siberia in his interests, I would pack up and go.”

In the sunless maze of Lower Manhattan, the old Wall Street houses were miniature temples of finance. Elite, all-male and lily-white, rife with snobbery and bigotry, they didn’t bother to hang a shingle outside, and the tacit message to pedestrians was clear: keep on walking. This reflected the banks’ patented formula of serving only the most creditworthy clients: industrialized nations, blue-chip corporations and wealthy individuals. In London, these small partnerships were called “issuing houses” because they issued stocks and bonds but didn’t trade or distribute them.

In their risk-averse culture, J. P. Morgan and his breed considered the stock market a faintly vulgar place, better left to Jews and assorted ethnic groups outside the top ranks of investment houses. This bias would later give predominantly Jewish firms like Lehman Brothers and Goldman Sachs a marked competitive edge.

Even in the 1920s, patrician Wall Street firms stayed somewhat aloof from the stock market mania. Securities laws during the New Deal, mandating fuller disclosure of corporate accounting, eroded the Wall Street moguls’ power. The new transparency reduced the need of many companies for a banker’s imprimatur to certify their soundness.

The Glass-Steagall Act of 1933, which forced full-service banks to choose between commercial and investment banking, further shrank the investment houses’ influence. After World War II, as capital markets revived, Wall Street investment banks remained tiny partnerships with outsize power over corporate America.

Morgan Stanley demanded exclusive banking relations with the cream of corporate America: AT&T, General Motors, United States Steel, General Electric, DuPont, I.B.M. and Standard Oil of New Jersey. The essence of the business was still the traditional underwriting of stocks and bonds. The era’s emblem was the solemn, rectangular “tombstone” ad in newspapers for share offerings, listing the dozens of firms involved, with Wall Street’s rulers in the top tier.

Underwriting bred a sociable culture of “relationship” banking in which a smooth golf swing, Ivy League credentials, glib patter over a martini and family connections counted for more than financial ingenuity. Firms didn’t advertise and paid publicists to keep them out of the press. They disdained hostile takeovers, stock trading and other activities that might threaten their coveted underwriting business. And they enforced more rules of etiquette than a debutante’s ball. It was considered bad form to poach an employee or raid another firm’s client. Whatever their flaws, these elite firms still played a vital role in the economy, floating stocks and bonds to create new factories and businesses.

The old Wall Street began to die a lingering death in 1979 when I.B.M. told Morgan Stanley that it wanted to have Salomon Brothers co-manage a $1 billion debt issue. Fearing that its stable of captive clients would likewise revolt, Morgan partners insisted on sole management of the issue. They were flabbergasted when I.B.M. sent back word that Salomon Brothers would be lead manager for the issue.

What accounted for this startling shift? For the first time since the heyday of J. P. Morgan, traditional corporate clients had outgrown their bankers. With Europe and Japan devastated by World War II, American companies had enjoyed unrivaled supremacy in world markets. They had grown big enough to finance expansion from retained earnings and had many more borrowing options than before. Many had developed their own financial subsidiaries with triple A credit ratings and scarcely needed Wall Street bankers to vouch for their solvency.

Trading firms like Salomon Brothers and Goldman Sachs were using their prowess to cultivate relations with powerful institutional investors like pension funds and insurance companies, eating into the profits of white-shoe houses. Underwriting deteriorated into a low-margin business as traders trumped blue-blooded bankers in the Darwinian struggle.

The demise of traditional underwriting would create in the coming decades a vacuum filled by a host of volatile, risky businesses. The cozy world of relationship banking yielded to the brutal world of “transactional” banking. Stock, commodity and derivatives trading, hostile takeovers, leveraged buyouts and prime brokerage for hedge funds required ever-larger balance sheets, forcing investment houses to become huge, publicly traded companies. Firms that once remained distant from the stock market were now its storm-tossed creatures, as investors demanded ever-higher profits amid cutthroat competition, forcing bankers to take risks that would have horrified their Wall Street ancestors.

Where the old Wall Street stuck to the most prestigious clients, the new Wall Street engaged in an unseemly rush to the bottom. Investment houses that once dealt only in grade-A bonds became swept up in junk bond mania in the 1980s. Firms that once snubbed companies beyond the Fortune 500 flocked to Silicon Valley in the 1990s, eager to take fly-by-night companies public. And, in the final reductio ad absurdum, Wall Street during the past decade gorged on mortgage-backed securities, tying its fate to America’s least creditworthy borrowers.

Addicted to colossal amounts of leverage, the onetime arbiter of scarce capital had become the most profligate borrower. The large investment banks that once allocated precious capital now exist in a world awash with money, crisscrossed by capital flows from many continents, with financial markets deep and liquid as never before.

Once the current crisis is past, investment banking services will eventually flourish again inside diversified financial conglomerates. Stripped of excess leverage and more tightly supervised by regulators, investment bankers may even rediscover the old-fashioned virtues of corporate finance. And small boutique firms will continue to offer trusted advice as of old. But the storied investment houses of Wall Street, trailing their glorious past, have now earned tombstone ads of a very different sort.

Ron Chernow is the author of “The House of Morgan” and “Alexander Hamilton.”

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

Friday, September 26, 2008

"The Revolution Devours Its Children," from the horse's mouth, by Schleifer

Yours is an excellent posting with the Kelso Binary Economics Discussion Group (KELSO_BINARY_ECONOMICS@LISTSERV.KENT.EDU). It points out the distinction between revolutionaries of ideas and those who would use violence to push ideas based on hate rather than the dignity of every person. Your writings should be read globally by all who recognize that there is a war of ideas within the Muslim world as well between those working to imbed universal principles of economic and social justice into the economic and political infrastructures of global civilization (i.e., those committed to a Culture of Life) and the Muslim extremists who have recruited suicide bombers in their declared ideological and terrorist war against America, America's democratic allies, and Western civilization generally (those who have hijacked Islam for justifying a Culture of Death).

You can do that by posting your messages relevant to the Just Third Way, binary economics and Capital Homesteading to our new blog site at

Michael Greaney's daily letters and commentaries (and a few of mine) are posted on this new blog and your perspective as a global strategist and Islamic scholar will deepen people's understanding of the religiously pluralistic nature of the Just Third Way. In the future, if you have a comment that you think should go out to a wider audience, I highly recommend that you post it to our blog. The Just Third Way blog site and our Just Third Way channel on YouTube reach a far greater and highly sophisticated audience than the one you connect up to through the members of the Kelso Binary Economics Discussion Group. As of early this morning and we're just getting started, we've had visitors from 23 countries and 41 states and provinces in the U.S. and Canada. (One Brazilian reader has translated all our postings into Portuguese on his blog site, and I expect such an outreach will increase exponentially around the world in the coming weeks, given our unique and effective alternative to "making the world work for 100% of humanity in the shortest possible time through spontaneous cooperation and without ecological damage or the disadvantage of anyone.") All other solutions of which I am aware fail the synergy test.

Not surprisingly, our most popular postings are on the current financial crisis and what can be done about it. Visit the blogsite and you'll see what I mean. You might also encourage Abdallah Schleifer and other potential Just Third Way revolutionaries to do the same. All other solutions of which I am aware fail the synergy test.

I'll post this one. I encourage you to post others on the blog site.

In Peace, Prosperity and Freedom, only through Compassionate Justice,

Robert Crane ( wrote:
> As a follow-up to an earlier posting, this email from Abdallah Schleifer gives some valuable information on the background of the Weathermen, America's only homegrown Al Qa'ida-type movement, which my daughter, Marietta Crane, joined as the leader of a march to destroy downtown Evanston, Illinois, in conjunction with the Days of Rage movement in 1969. She was the treasurer and member of its five-person Politburo when it succeeded in shutting down the U.S. government for a few hours before thousands of its members were captured by a mammoth special forces operation (an incredibly impressive show of brute power which I watched from the office of the Deputy Secretary of State).
> The Weathermen bombed 200 banks, none of which operations have ever been publicly acknowledged (because the news media were instructed not to cover them), as well as many high profile sites ranging from the Harvard Center for International Affairs to FBI offices and the Pentagon.
> When I read a front-page story in the New York Times about her hitting a policeman on the head with a lead bar, my immediate reaction as a counter-terrorism professional (and former leader of a homegrown terrorism operation against the Communists in Eastern Europe) was immediately to fly out to Chicago because it was clear that this would qualify her to manufacture bombs. I abducted her only a few hours before she was to drive to New York to join the Weathermen's bomb factory. This saved her life because two days later the bomb factory blew up. The death of the bombmakers put a crimp in the Weathermen tactics and led eventually to the dissipation of the movement after the defeat of Washington's ill-fated attempt to occupy Vietnam, which removed the terrorists' rationale for recruitment.
> According to my daughter, the dissolution of the Weathermen resulted in part from the corruption among its leaders. One member of the Politburo stole its treasury, which prompted my daughter to conclude that there is no point in killing the pigs in the White House if the result would be only to install bigger pigs. She eventually accepted my wisdom that Jesus, Muhammad, and Buddha were the real revolutionaries in human history, not Trotsky, Che, and Mao.
> Incidentally, she voted for Ronald Reagan in the 1980s and now is voting for John McCain, because she thinks that Obama is naive. In fact, in my opinion, McCain far outshines Obama in naivete, because he focuses on effect rather than on cause. In domestic economic policy, both are equally naive, but perhaps the McCain-Palin combo would have more courage in acting once they appreciate the fundamental Islamic wisdom that money created without real assets behind it is prone to eventual self-destruction.
> Wikipedia has a good account of the Weathermen phenomenon, but it is incomplete. Perhaps Abdallah Schleifer's current project to write his own autobiography will provide more insight into the unique intellectual ferment of the 1960s leading to America's first and hopefully only Al Qa'ida phenomenon and will shed more light on what actually happened and why it failed when the Revolution Devoured Its Children.

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

News from the Network, Vol. 1, No. 5

The worse things get for the economy, the better they get for news — especially when it's news about a viable solution. The crisis has spurred a great deal of interest in our proposals, most notably the Homeowners' Equity Corporation, and Capital Homesteading in general. Here's what's been happening this past week:

• Third party presidential candidate Alan Keyes has evidently been hearing what we've been saying. Guy Stevenson reports that on Tuesday night, 09/16/08, a participant in a conference call asked Dr. Keyes about the possibility of putting the assets of Fannie Mae, Freddie Mac, or any of the other nationalized companies into the Social Security Trust Fund. Dr. Keyes responded by stating that there is no "Social Security Trust Fund"; that the system is bankrupt. After some other statements, Dr. Keyes declared that, in contrast to what was being offered by others, "there is a Just Third Way," a third choice in this year's election. Own it or be owned." We can't prove that Dr. Keyes got his terminology or slogan from us (ours is "Own or be owned," slightly different), but the juxtaposition of "Just Third Way" with a (near) echo of our catch phrase may not be coincidental.

• Rowland Brohawn has developed some promotional material for any candidate in the United States who is willing to make Capital Homesteading a plank in his or her platform. If you're a candidate for public office, send CESJ an inquiry about this unique "stock certificate" that can be exchanged for a piece of the action once a Capital Homestead Act is passed. Three candidates from across the political spectrum have already expressed a great deal of interest in this item.

• Last Saturday Michael D. Greaney attended a presentation by Mr. Laurence Simms of the Irish Embassy in Washington, DC. The Virginia State Board of the Ancient Order of Hibernians in America sponsored the talk, which was reported on this blog.

• On Tuesday, Norman G. Kurland attended a presentation at the New America Foundation. Afterwards he visited a number of Congressional and Senatorial offices, leaving material about the Just Third Way.

• On Wednesday, Norman G. Kurland attended a meeting of concerned Republicans in Northern Virginia and presented the Homeowners' Equity Corporation ("HEC") concept, in addition to Capital Homesteading. Both concepts aroused a great deal of interest.

• Economic Justice Media, CESJ's publishing imprint, has received the proof copy of its latest publication, In Defense of Human Dignity, by Michael D. Greaney. We expect that the book will be available from Amazon and Barnes and Noble sometime after mid-October, while bulk orders in quantities of 25 or more copies can be placed at any time with CESJ, to be shipped when printed. Send inquiries about bulk orders (again, minimum of 25 copies) to Michael D. Greaney at mgreaney [at] cesj [dot] org. The cover price is $20.00 (US), with a 20% discount on bulk orders, plus shipping.

• Jether Jacomini, Jr. in Saõ Paulo, Brazil, has created two new blogs: "Os Novos Capitalistas" and "A Justa Terceira Via." He plans on translating and posting selections from this blog, to which we've invited him to add anything he sees of interest on the CESJ web site, or that of the Global Justice Movement. We've also asked him to send news items that relate to the Just Third Way or a JTW solution . . . if he can send them in English.

• As of this morning, we've had visitors from 23 countries and 41 states and provinces in the U.S. and Canada. Not surprisingly, our most popular postings are on the current financial crisis and what can be done about it.

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)

It's Official: Ireland is in a Recession

The Irish may be depressed about being in an officially-declared recession ("It's official — Ireland has entered a recession," Irish Independent, 09/25/08), but they can at least take comfort in the fact that, unlike American politicians, Irish politicians have enough of a spinal column to admit the truth — a truth that is half the battle. Having acknowledged the situation, they can now stop trying to emulate their American counterparts to see how deep they can bury their heads in the sand, and take effective action instead of assuring everyone that all will be well . . . if someone is given total control over both money and credit, and the State.

What should be done? Readers of this blog should know the answer to that, already. The previous boom of the "Celtic Tiger" was fueled first by increased exports and then extended by an unprecedented expansion of the housing market, according to Fergal O'Brien's article in the Independent. It therefore makes sense to start with something along the lines of the "Homeowners' Equity Corporation," or "HEC." This should be much easier to accomplish in Éire, if only because the scale of the problem is somewhat smaller than in the United States, and therefore easier to handle and move expeditiously.

Once HECs have been established, Dáil Éireann can follow up with a "Capital Homestead Act," designed to build direct ownership of the means of production into everyone in a country. From there it's a short step to total fiscal sanity: a nation of owners, an asset-back currency, and a balanced budget with built-in debt reduction.

It only takes a little study to get the ball rolling. If you're Irish, why not refer your TD to this blog for a few tips? Better yet, go to 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)

Wall Street Journal: Paulson Plan a Winner (for Some)

That squeak from the wheel is starting to turn into a grinding noise. What else can you say when the Wall Street Journal itself, the unofficial official journal of the free market, begins espousing socialism? What's next? Discovering that Karl Marx made a fortune as a hedge fund manager? Anyway, here's the latest missive to the Wall Street Journal. As always, feel free to take what you want to write your own letter(s).

Dear Sir(s):

Mr. Andy Kessler's opinion column in yesterday's Wall Street Journal ("The Paulson Plan Will Make Money for Taxpayers," WSJ, 09/25/08, A21), while accurate, is slightly misleading. The Paulson Plan will make money for some taxpayers . . . taxpayers like Mr. Kessler. Even more misleading is the unstated assumption that taxpayers somehow "own" what government possesses.

While common in socialist circles, this assumption betrays a complete misunderstanding of the institution of private property, as well as the free market, the proper role of the State, and the importance of control over money and credit. Of this list, the two most critical (although all are important) are the role of the State, and the importance of control over money and credit. Both are extremely useful — and extraordinarily dangerous — tools.

Being tools, the State and money and credit are best employed when controlled by the people for whose benefit they exist, not when they do the controlling. Putting the State and the money power together is, in essence, to give unlimited power to both: the State is now backed up by the might of the money power, while the money power now has access to the State's monopoly on the instruments of coercion. The only thing more dangerous is an established church, where the State claims jurisdiction over the next life as well as absolute power in this one.

Frankly, while a successful hedge fund manager, Mr. Kessler needs to go back to school, or at least realize that there are a few things he doesn't know — like a correct understanding of property and the proper role of the State. A good place to start might be a course in Capital Homesteading for Every Citizen, with an elective in "A New Look at Prices and Money."

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

Thursday, September 25, 2008

Bernanke & Paulson: "No One Can Breathe Against Their Will"

Yes, the squeaks from the wheel are getting louder. How could they not when the Wall Street Journal, presumably the champion of free markets, endorses what is a short road to socialism, if not socialism itself? Please feel free to borrow pieces of this letter to compose your own — who knows what might get the Journal to wake up?

Dear Sir(s):

While I can understand the mindless desire to "do something . . . anything" that is driving the current push to write Messrs. Bernanke & Paulson a blank check and put a virtual monopoly over money and credit in their hands, there is a viable alternative to the panic-stricken reaction. In yesterday's "Review & Outlook" ("The Paulson Sale," WSJ, 09/24/08, A28) you opine, "We wish there were a way around this outcome, but the price of doing nothing now is likely to be far higher both for taxpayers and the cause of free markets."

There is "a way around this outcome," a way I have been repeating for months, and (at the risk of repeating myself) will continue to state until someone wakes up and begins paying attention. First, however, it would be very useful for the Wall Street Journal to explain, in clear and simple language, how handing over near-total control of the financial markets and the creation of money and credit to the State is in any way promoting "the cause of free markets." Your dictionary may be more up-to-date than mine, but mine states that State ownership or control is socialism, not "free markets."

You are correct, however, that "doing nothing now" is likely to carry a high cost for taxpayers and further undermine the free market. Nevertheless, you fail to realize that doing the wrong thing can carry an even higher price. Given a choice between something that concentrates power in the State, and something that returns power to individual people, reason dictates that we choose the latter.

A better choice than State socialism is for the federal government to make it possible for people to solve the problem, rather than attempt another clumsy and counterproductive program that further erodes private property and establishes a condition of society in which, as Pope Pius XI explained, a pair of unelected bureaucrats "regulate the flow, so to speak, of the life-blood whereby the entire economic system lives, and have so firmly in their grasp the soul, as it were, of economic life that no one can breathe against their will." (Quadragesimo Anno, "On the Restructuring of the Social Order," 1931, § 106.) The federal government should therefore immediately begin studying the feasibility of an innovative "rent to own" vehicle that would be called the "Homeowners' Equity Corporation" or "HEC."

Assuming appropriate legislation could be passed, a HEC would be a for-profit 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 the current market value. HECs would obtain acquisition loans from commercial banks, which in turn would discount the loans at the local Federal Reserve at a rate reflecting transaction costs and a revised risk premium to spread the risk and pool it, similar to the manner in which conventional insurance operates. 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 sufficient to cover debt service, maintenance, and taxes were made. 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 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 — to say nothing of taking care not to add another $5 trillion or so of unserviceable debt to the already staggering burden of the federal government.

This innovative alternative would require some enabling legislation from Congress to give it powers similar to those currently enjoyed by leveraged ESOPs. Then let the private sector HECs take over the whole mess in a way that delivers the greatest good to the greatest number of people at no cost to the taxpayer without creating another government agency or burdening taxpayers with more debt.

Every community with homes subject to foreclosure that will be acquired by the federal government or the Federal Reserve could establish a "Community Auction Board" (CAB). Each CAB would be chartered by the State Government, have a balanced board of directors made up of leaders from the real estate industry, lawyers, accountants, and bankers. The CAB would hire or contract with professional auctioneers to determine the new fair market value of the loan in default through an open bidding process among competing HECs organized by local real estate management professionals.

The "winning" HECs would negotiate a new 100% leveraged loan to purchase the auctioned home mortgages with the commercial banks serving the community, with the acquired property serving as collateral at its real fair market value. The commercial bank would in turn bundle all HEC loans and sell them at the regional Federal Reserve's discount window in exchange for new, asset-backed money. The cost of the loans to the HEC borrowers would be on a service fee plus risk premium basis.

Rental agreements would reflect the debt service costs, home mortgage insurance premiums, real estate management fees and profits of the HEC, plus any maintenance contracts with the renter of each home. This would allow the overall rent-to-equity process (auctions and real estate management functions) to be expedited efficiently at the community level rather than dealing with a bureaucracy within the national entity now holding the defaulted mortgage paper.

The benefit to the State, the Federal Reserve, and (especially) the taxpayer is that the State and the central bank would be able to unload the foreclosed properties quickly, and use the money-creation power of the Federal Reserve to keep most, if not all occupants in their homes. Due to the lower cost of the loans and the acquisition of the properties at a realistic market value, rent payments would be less than the mortgage payments they would otherwise have had to pay. Those families in need could be offered a sliding scale of rental vouchers in amounts necessary to make the new rental payments affordable, as under the Section 8 program of HUD.

To the extent such a strategy requires time to organize at the federal, state, or community level, the Congress can pass a moratorium of 3-12 months on foreclosures of Federally-acquired mortgages in default while the HEC and CAB entities are being formed throughout the nation.

Once this program is up and running, the Congress can take steps to enact the Capital Homestead Act, which contains structural reforms to inhibit and, in most cases, prevent anything like the current crisis from happening again.

The alternative, as you point out, is to hand over control over the life's blood of the economy — money and credit — to the State in the persons of Bernanke and Paulson, an arrangement known to every economics student as "socialism." While the urge to do anything that promises to "save" us from the current predicament is strong, we should do well to remember the warning of Dr. Benjamin Franklin that, "Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety."

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

Irish Economy: Bright Hopes, But Cause for Concern

On Saturday, September 20, 2008, the Virginia State Board of the Ancient Order of Hibernians in America ("A.O.H.") was host to a most interesting and insightful presentation by Mr. Laurence Simms, Economic Officer at the Embassy of Ireland. Mr. Hugh P. O'Brien, Chairman of the A.O.H. State "Buy Irish" committee, arranged the talk. The presentation was given at the Knights of Columbus hall in Arlington, Virginia. The morning talk followed the State Board meeting, and was attended by members of the A.O.H. and L.A.O.H. (Ladies Ancient Order of Hibernians).

According to Mr. Simms, the Irish economy has been enjoying an economic rebirth, attributing this to upgrading education, and membership in the European Economic Union. This helped detach the Republic from the British economy, resulting in a more diversified economy for Ireland. As a result, the "Celtic Tiger" has been experiencing significant growth over the past few years, and has enjoyed one of the higher rates of growth in the European Union.

Mr. Simms noted that Ireland has many factors that make it attractive to American investment, including a highly educated workforce, a common language, and openness to international trade. A low corporate tax rate is also a strong incentive to foreign investment. There has been between 4% to 15% growth on the average, and there has been a great deal of investment in physical infrastructure, especially roads.

The recent financial meltdown in the United States, however, initiated by the sub-prime mortgage crisis, has had a serious effect on the Irish economy, as well as many others throughout the world. Growth rates are slowing, although the fundamentals remain strong.

There is thus a great deal of concern, particularly with the fluid situation in the U.S. Housing prices are still in a slide, and this has resulted in a significant decrease in government revenue. The new budget reflects this downturn, and there will be substantial cuts in all sectors, even in the face of the need to lower debt. Spending habits built up during years of surpluses must be changed in light of the projected deficits. The government is working to bring together unions and workers, and coming up with national wage programs, with the goal of reaching a national wage agreement.

It thus seems evident that the government of Ireland would benefit greatly from a study of the proposed "Homeowners' Equity Corporation" to address the immediate situation, and work to implement a Capital Homestead Act in the mid- to long-term.

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

Wednesday, September 24, 2008

McCain Endorses Worker Ownership, Obama Remains Silent

Louis Kelso and I met for four hours with Senator Russell Long on November 27, 1973. The next morning Senator Long started the process of getting the ESOP officially adopted into law. Afterwards, the New York Times described me as a "one-man lobbying campaign for Kelsonian ideas."

Now, through the ESOP Association (a true Washington lobbying group with many members), and with 11 million American workers in over 11,000 U.S. companies benefiting from this social technology, we have a presidential candidate who endorses this radical populist innovation in leveraged corporate finance in his campaign.

Admittedly, most ESOPs have not yet matured to run according to principles of Justice-Based Management, this economic tool points in the right direction and offers a growing potential constituency for Kelso's "big picture": the Capital Homestead Act.

I wonder if Obama — who attacked the goal of an "ownership society" in his acceptance speech — will see the light and match McCain. Better yet, when will these candidates and their advisers wake up to the Just Third Way and our radical centrist overhaul of the Big Money/Big Government alliance controlling both parties that threatens a collapse of the American economy in ways worse than in the Great Depression?

Everyone who reads this posting should read the theoretical blueprint for making a market system work, "A New Look at Prices and Money: The Kelsonian Binary Model for Achieving Rapid Growth Without Inflation." If you like it, send it to every academic economist you know and every open-minded politician, banker, entrepreneur, and labor leader you can reach.

We are in a "War of Ideas." America and the people of the world cannot afford to lose to the power-concentrating ideas of the Big Money/Big Government elite who now rule the world. If you listen carefully, those in control of money power and economic policy follow the flawed paradigm of Keynes, which offers a wide array of fine-tuning gimmicks based on "full employment" as a national goal. This perpetuates concentrated ownership, wage slavery, and welfare slavery.

In sharp contrast, Louis Kelso's ownership-based paradigm (which Milton Friedman snidely described as "Marx turned upside-down") was geared to a new national goal of "full production" through a high-tech, just market economy, where every citizen's wage/welfare incomes would become supplemented by profits distributed through widespread ownership of society's ever-proliferating "energy slaves."

Now is the time for all Kelsonians and other architects for justice-based change to come together to win the war of ideas. Let's turn this crisis into the opportunity we've been looking for, in the words of futurist Buckminster Fuller, "to make the world work for 100% of humanity in the shortest possible time through spontaneous cooperation and without ecological damage or the disadvantage of anyone."
As Edmund Burke said, "When bad people combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle." Thoughts on the Cause of the Present Discontents, April 23, 1770.

Own or Be Owned, Capital Homesteading Now.

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

Bernanke & Paulson: The Hard Sell

We realize that the "hard sell" is traditional in real estate dealings. After all, ya gotta move the property to make that commission and win the blazer, and who's to say that the apocryphal "couple from Kansas City" might not actually exist, somewhere? As customary as the hard sell is in real estate or used cars, however, it has no place in politics or national monetary and fiscal policy. An entire country simply cannot afford to buy a pig in a poke, regardless of the alarming rhetoric spread by "the nation's top two economic leaders," as Benjamin Bernanke and Henry Paulson are described in an AP news report ("Bernanke & Paulson: Congress must move now," 09/23/08)

Frankly, the fact that the two individuals who would have the most power to gain by controlling money and credit are urging speed should make people extremely suspicious. If Bernanke and Paulson are so smart, why didn't they see the crisis coming? There has been a demonstration outside the Federal Reserve building in downtown Washington, DC every April for a couple of years now, and each year a warning about the dangerous financial situation of this country has been passed along "through channels" to Mr. Bernanke. Do you really think that someone who can't see what is happening right under his nose should be entrusted with an amount of money equal to nearly 7% of annual GDP, or almost a third of the total annual federal budget?

If you think that, I have a bridge in Brooklyn you might be interested in . . . you'll get rich off the tolls! Just send me a non-refundable deposit of $1 trillion; you'll make it back in no time. Just ask the federal government to bail you out, and I'm sure that Messrs. Bernanke & Paulson will be happy to approve and administer the funds.

Send my deposit in gold or silver, though. I'm not sure I'd trust any Federal Reserve Note bearing the signature of Paulson and issued by Bernanke — or any other bank note or demand deposit until Congress enacts the Capital Homestead Act and restores an asset-backed currency.

If Bernanke & Paulson want to urge speed on something, they should very quickly start looking at something we've been proposing for nearly a year now: the Homeowners' Equity Corporation, or "HEC," that we've described ad infinitum on this blog and in a series of letters to the Wall Street Journal, the New York Times, and the Washington Post.

They'd better hurry and download the material from the CESJ web site, though. There was that couple from Kansas City here the other day . . .

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