In the early 17th century, Thomas Wentworth, earl of Stafford (then Viscount Wentworth), was appointed Lord Deputy of Ireland to see how much money he could wring out of the native Irish, the Anglo-Irish, the new Scots and English settlers, and anybody else who came into view. Charles I, like all the Stuarts, was perennially short of cash. He felt he could rely on his favorite to bring home the bacon. That everybody knew pretty much what to expect is demonstrated by a diary entry by Sir Edward Denny, a Protestant "planter" in the southwest of Ireland, in which he wrote, "The Lord Viscount Wentworth came to Ireland to governe the kingdom. Manie men feare."
Regular readers of this blog may have shared similar sentiments if they read yesterday's Wall Street Journal, page A5, and saw the headline, "Economists Get an Online Platform for Policy Debates." As the article relates, "A new website is assembling what it calls 'the world's best economics department'." The idea is "to give prominent academic economists a louder and unfiltered voice in key public policy debates."
Haven't we suffered enough?
The idea that "prominent academic economists" should have a "voice" "unfiltered" through the tortured minds of politicians misled by their theories but trying to force them to work at all costs, or — di imortales! — the poor boobs in the street who have to live in the wreckage that politicians and "prominent academic economists" have made of the economy, boggles the imagination. It is a little like promoting Brian Horeck or Rosellen Price for the Nobel Prize in literature. Yet academic economists get the Nobel Prize in economics for work that, in comparison, makes Horeck and Price look like actual writers.
For those of you blessed enough never to have heard of either of these two literary miscreants, Brian Horeck is the "author" (and we use the term very loosely) of Minnow Trap and Frozen Beneath. One reviewer (after he finished throwing up) described Minnow Trap as not merely bad, but incompetent. He described Horeck as the Ed Wood of literature. Frozen Beneath is worse.
Rosellen Price, "author" of Blood and Wine and two horrifyingly bad sequels, was begged by one reviewer to stop, please just stop writing for the love of God, while another wanted to slap her face for pushing her [expletives deleted] on to an unsuspecting public.
Dorothy Parker would not merely have flung these execrable "novels" against the wall with great force, she would have invaded northern Ontario to do Mr. Horeck in personally (preferably by strangulation after chewing off the hands with which he wrote), and taken out a contract on Ms. Price, a privilege for which the Mob would have paid her.
Please do not read these books in a vain effort to prove us wrong. We'll take the late James Theis's sincere, if so bad it really is funny, The Eye of Argon (written when he was 16) any day of the week. Of course, Theis was so humiliated by the ridicule heaped upon his novel (actually a short story, written in honor of Robert E. Howard's "Conan the Barbarian"), some of it undeserved, but none of it actually cruel, that he never wrote another word of fiction as long as he lived. Despite — or because of — that, he became a legend among the fen. (Plural of "fan"; if the plural of "man" is "men," then the plural of "fan," at least in the fannish community, must be "fen." Look it up if you don't believe me.)
Would that Horeck and Price followed Theis's example . . . or (better yet), the "prominent academic economists" obsessed with inflicting their demonstrably false and unworkable ideas on the world time, and time, and time (and time) again. At least if you read a Horeck or Price production you can put it out of your mind after a few years of therapy and rubbing all the skin off your hands trying to get them clean again. (Whatever your impulse, however, we do not recommend gouging out your eyes.)
The plain fact is that these very models of modern major nuisances (i.e., the "prominent academic economists") promote ideas that are not merely bad. If that was all, we could deal with it by replacing the bad ideas with better ideas. No, the problem is that the economics is profoundly incompetent, not even making a pretense at describing reality. Anything that doesn't fit in with their theories is explained away or dismissed outright, not explained. This is coupled with the snow job that for generations academia has pulled off by convincing the public at large that "prominent academic economists," as well as other denizens of the Groves of Academe unable to find honest work in the shambles they've left of the economy, actually know what they're talking about.
We could go on for days (and we have) cataloging the crimes of modern economists, notably all of them that derive their fundamental principles from the disproved (but not yet discredited) British Currency School of finance. For the sake of comparison, we can call Keynesian economics the Horeck, Monetarist/Chicago the Price, and Austrian as the Theis. (Austrians get off easy, if only because, within their framework, they strive for consistency with principles. They don't succeed, but they're at least sincere in adherence to something they think is liberty.)
For today, however, we will content ourselves with the definition of money, the bad definition of which is the economic root of all evil. (More fundamentally, it's the bad definition(s) of private property that abound that cause most of the trouble, but "money" is, in part, an application of the rights of private property as well as liberty.)
A long time ago, in a galaxy far, far away (before the Great Depression of the 1930s), people had not yet bought completely into the erroneous idea that all money comes from the State. No — money comes from actual, flesh-and-blood people who produce a marketable good or service, not votes to keep some politician who (if he or she feels generous) will redistribute a tiny amount to you from somebody else's wealth (after a rake off, of course), or mortgage future taxes — to be collected (if the government hasn't spent its way into bankruptcy) in the future out of what you and others might produce if you have any initiative left after being a degraded wage and welfare serf for so long.
"Money" is not some mysterious, mystical thing. It is simply a contract to deliver the present value of some marketable good or service on demand or on the occurrence of some future event. Issuing some kind of order doesn't make something money. What makes something money is accepting it in settlement of a debt. You can do this with a handshake, or just your word.
You don't need government to tell you that you can enter into a bargain — a contract — with someone else, and keep that promise. You need government to enforce that contract if one of you tries to get out of it, and to set standards so that everybody agrees on what an inch, a pint, or a dollar is, but government can't create any of these things.
Well, if government doesn't create these things . . . who does?
We do. And, by our natural rights of private property and free association ("liberty" or "contract"), we can exchange what we produce amongst ourselves with no interference, as long as what we're exchanging isn't illegal, although it can be immoral or fattening. The mechanism — the "medium" — by means of which we carry out these exchanges, that is, make promises to deliver marketable goods and services now or in the future, is called "money."
Even today, when the government (for our own good, of course) has taken over so much of the economy (and doing such a great job of it!), more than 60% of the money supply is not "created" by government in the U.S., that is, is not backed by government debt, but by private sector assets: the present value of existing and future marketable goods and services. This type of money is called "bills of exchange." It is better money, because it's asset-backed, than that Federal Reserve Note we hope you have in your pocket. (Federal Reserve Notes were also supposed to be backed by private sector assets, but that's another story.)
What this country needs is not more money imposed by fiat by the government, but genuine money that people create and use themselves, out of their own productive potential as owners of labor and as owners of capital. What kept many people alive in the second Great Depression (that of the 1930s — the first was in the 1890s when the "free land" from the Homestead Act ran out) was ownership of some capital that produced enough to provide them with food, clothing and shelter — after a fashion. The New Deal destroyed all but a few remnants of small ownership in America, and forced many people into dependence on State welfare, including Social Security.
Despite all the gloom and doom you hear these days about the economy, however, there is a relatively simple solution, and one that can be implemented with the stroke of a pen, just as the original Homestead Act was in 1862 over Abraham Lincoln's signature. It's called "Capital Homesteading," and it would empower every child, woman and man in the United States with the ability to create money to purchase new capital, the income from which would first be used to pay for the capital, and after that as consumption income.
In other words, instead of cutting consumption and saving in order to produce, people could produce, and then save. This makes much more sense, if you think about it. How can you cut consumption in order to produce something out of which you can save, if you don't first produce something?
With Capital Homesteading, the consumer demand that drives the economy would not have to be "created" by government with "stimulus packages" that only stimulate the greed of bureaucrats and corporate drones in failed companies, but be sustained naturally. As an economist named Jean-Baptiste Say explained in a letter to the Reverend Thomas Malthus (whose theories of economics are responsible for turning economics into "the dismal science"), we don't really purchase what others produce with this thing called "money."
No, we purchase what others produce with what WE produce. "Money" is just the medium by means of which we carry out the exchange if we don't want to cart our bushels of wheat or flocks of chickens around with us in a wallet. Thus, if goods remain unsold — that is, there is productive capacity but nobody is buying — it's because the people who want to buy aren't producing. As Say concluded, if we want what others produce, we must offer them what we produce, or there can be no exchange. Capital Homesteading is designed to turn everyone into a producer by being an owner of capital as well as labor.
Join the Coalition for Capital Homesteading. Capital Homesteading in 2012!
Otherwise the experts — the “prominent academic economists” — are going to set the rules and dictate what can, and cannot be done.
Manie men feare.