The problem is that government bonds are backed by a country's ability to produce and collect taxes on the income generated by productive activity. This is the one possibility on which there has been no discussion. If there are no takers, Greece and the other countries in trouble go back to square one. They are either going to have to be allowed to print more money (completely unacceptable), be forced out of the European Union (another "ain't gonna happen scenario) . . . or be bailed out.
The situation is remarkably similar to that which faced New York City in the 1980s, when the city was dangerously close to Chapter 9 (Chapter 9 is municipal bankruptcy). Interest rates on New York City obligations went sky high, with the financial commentators commentating that speculators were clearly purchasing the bonds not because they expected New York City to be able even to pay the interest, but because they expected either the state of New York or the federal government to bail out the city.
Just speculating, of course, but it seems reasonable to assume that Greece can expect the same thing. A high interest rate of 6% or more is all very well, but how is Greece supposed to pay it, much less the principal? It is therefore reasonable to assume that some international financial consortia and wealthy private speculators will purchase the bond issue, then start putting the pressure on the European Union for a bailout.
Another possibility is that China will take some of its now huge inventory of U.S. dollars that it has been using to purchase oil and mineral rights in Africa, and put a few billion into Greece, thereby gaining some powerful leverage in Europe. All of this was described by Henry C. Adams in 1898 in his book, Public Debts: An Essay in the Science of Finance, in which he warned that the surest way to surrender local, regional, and even national sovereignty was to get into debt. As he explained,
The facts disclosed permit one to understand how deficit financiering, carried so far as to result in an interchange of capital and credit between peoples of varying grades of political advancement, must endanger the autonomy of weaker states unable to meet their debt-payments. Provided only that the interests involved are of sufficient importance to make diplomatic interference worth the while, the claims allowed by international law will certainly be urged against the delinquent states, and the citizens of such states may regard themselves fortunate if they succeed in maintaining their political integrity. (Public Debts, An Essay in the Science of Finance. New York: D. Appleton and Company, 1898, 28-29.)There is only one way out: Capital Homesteading, an application of the principles of the Just Third Way. The lesson is clear: produce, and have democratic access to the means for every citizen to become productive and thereby share in the national prosperity, or go under. The best thing you can do is to bring Capital Homesteading and the Just Third Way to the attention of a prime mover, or a door opener to a prime mover. Our efforts in that direction this week are:
• A CESJ member who lives in Las Vegas requested a formatted copy of the "Ride the Pig" blog posting to distribute as a handout to individuals and groups. We edited the posting to add a few points that were left out of the original posting and typeset it for greater legibility. We plan on turning the posting into an article for submission to a print journal. If you would like a copy of the handout version in .pdf, contact CESJ, and we'll send you a copy as an attached file.Those are the happenings for this week, at least that we know about. If you have an accomplishment that you think should be listed, send us a note about it at mgreaney [at] cesj [dot] org, and we'll see that it gets into the next "issue." If you have a short (250-400 word) comment on a specific posting, please enter your comments in the blog — do not send them to us to post for you. All comments are moderated anyway, so we'll see it before it goes up.
• The Republic of Ireland (Éire) has just announced a contest to surface ideas that can be implemented to save the country from financial and economic ruin. The two top ideas will be awarded €100,000 each and given a budget of €500,000 for implementation. It appears that anyone can post an idea — at least we didn't see any restrictions during our visit to the website, and one of the contest rules is that the contest is void in countries where such contests are illegal, so we deduce that it is not void in countries where it is not illegal. A (very) brief look at some of the 400+ entries to date reveals that people appear to be stuck either in the paradigm dictated by the tenets of the British Currency School, that is, Keynesian economics, or have succumbed in whole or in part to conspiracy theory. One proposal was to increase the birth rate by offering people money to have children (the Republic already does this; the Irish entitlement bill is proportionately much higher than that of the United States, where it accounts in "normal" times to two-thirds of the annual federal budget). Another was to abolish the Seanad (Senate) and replace it with a council of elders (which is what "Senate" means). Yet another was to promote the resale of used furniture . . . and so on. There are eight categories, plus "other," which is where the Just Third Way would fall, once we condense the concept into a short proposal, register, and submit the entry.
• CESJ's monthly Executive Committee meeting was held on Wednesday, February 17, 2010. A number of important issues were discussed, notably the focus on the demonstration outside the Federal Reserve in Washington, DC, on April 15, 2010. All CESJ members, supporters, and friends, as well as everyone in the Global Justice Movement and who supports and promotes the Just Third Way should plan on attending the rally. Send an e-mail to CESJ if you want to receive an invitation to the rally or any of the subsequent events.
• This past week CESJ received the following endorsement from Mr. Chris Dorf, who at one time, we believe, worked for a period with Mark and Louise Zwick of the Houston Catholic Worker: "I have not found a group, in my 49 years, that is as honest, sincere, full of integrity, or as motivated by good will as CESJ . . . if fact, it would do well for all groups searching for a just future to exhibit the qualities that your group exhibit. I hold the integrity of your group in highest esteem; you are 'fighting the good fight' with love." This is the sort of comment that, circulated among your network(s), could help draw the attention of the public to the Just Third Way and Capital Homesteading as alternatives to current failed policies. If you think we have good ideas, tell people in your network(s) about them. If they have criticisms, refer them to us. There isn't too much we haven't heard, so a genuinely new criticism or comment is valuable, especially if it leads to sharpening our ideas or even modifying them to some degree — even, if we are presented with a better idea, abandoning the old idea and adopting the new. Don't just tell us we are wrong, tell us where we are wrong, and how to improve our proposals. Don't just say "no," say "yes" — to economic and social justice.
• Guy Stevenson, our guest blogger from a short time ago (and whose posting has taken over the number one spot in the ratings), has started his own blog (thereby drawing ratings away from the Just Third Way blog . . . ). Titled, "Expand Capital Ownership Now, ECON 1.0," the blog will cover aspects of citizen empowerment through expanded capital ownership, with emphasis on the Just Third Way.
• On Tuesday, February 16, 2010, Norman Kurland and Norman Bailey attended presentations by the Petersen-Pew Commission on Budget Reform. Both raised questions, and can be seen on the C-Span video. Briefly, the members of the Commission appear to be locked into a paradigm founded on the tenets of the British Currency School, the most important point of agreement among the Keynesian, Monetarist, and Austrian schools of economic thought — and the most damaging. This leads policymakers to look solely at either cost cutting (if you're a conservative) or more debt-backed stimulus (if you're a liberal). No one is looking at ways not to stimulate consumption or other spending or simply cut costs, but to increase production in ways that open up the opportunity for every citizen to engage in productive activity, whether through labor or through capital. Commission members, in common with the academics and policymakers with whom they allegedly find themselves in disagreement, fail to realize that 1) money, to be stable and perform the function for which it is designed must be backed 100% by the present value of existing or future production of marketable goods and services, 2) that the central bank and the commercial banking system are custom-designed to create an adequate, stable, and "flexible" currency sufficient to meet the needs of industry, agriculture, and commerce, and 3) money can — indeed, must — be created in ways that create new owners of the new capital being financed with the new money.
• As of this morning, we have had visitors from 46 different countries and 48 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, the UK, Canada, Brazil, and Ireland (Éire). People in China, Egypt, Australia, Poland, and Barbados spent the most average time on the blog. The most popular postings are Guy Stevenson's "Expanded Capital Ownership Now," "Ride the Pig," Part I of the Restoration of Property series, "Waiting for the Penny," and Part XX of the Political Animal series are the most popular postings.