This past week we came across another reference to the "Panic of 1825" and the fact that one of the contributing factors to the panic was the issuance of securities by the Republic of Poyais in South America . . . a country that never existed except in the mind of "Sir" Gregor MacGregor, who claimed to have been created Cacique (Prince) of Poyais by the native king George Frederic Augustus I of the Miskito Tribe, an indigenous people in what is now Honduras.
"His Highness" (as he called himself), in what has been described as "the most audacious fraud in history" (David Sinclair, The Land That Never Was. Cambridge, Massachusetts: Da Capo Press, 2003), printed currency (Poyais Dollars), emitted bills of credit, and made land grants and accepted investors. Similar to what had happened with the "South Sea Bubble" a century before, nearly three hundred colonists were lured to the Mosquito Coast, largely on the strength of a book by "Thomas Strangeways, Knight of the Green Cross" (a probable pseudonym of Gregor MacGregor), Sketch of the Mosquito Shore, published in Edinburgh in 1822. There they found nothing as described in the book. Fewer than fifty returned alive to England.
The ensuing "Panic of 1825" is considered the first financial downturn caused by the new phenomenon of "economic cycles." From the perspective provided by binary economics, however, "economic cycles" themselves have two causes.
One, there had been a shift away from Say's Law of Markets and its application in the Banking Principle and the real bills doctrine. The backing of the currency shifted from private sector hard assets represented by bills of exchange, to government securities (bills of credit) representing the present value of future tax collections — from assets to debt. This broke the essential link between the money supply ("demand") and production. Governments began believing they could create or reduce demand simply by manipulating the currency, a demonstrably false belief that has affected monetary and fiscal policy down to the present day.
As we have seen in the current global economic crisis, however, when a government that issues bills of credit finds itself unable to collect enough in taxes to make good on its promises, the currency falls in value, and can become worthless. In that case, the bills are termed "fictitious bills." When the government that issues bills of credit doesn't even exist (as in the case of the "Republic of Poyais"), the worthlessness of the currency should be even more obvious.
Two, as capital ownership becomes concentrated and technology advances, replacing human labor with capital in the production process, Say's Law ceases to function because income from capital goes to people who can't possibly spend it all on consumption, and are virtually "forced" to invest the excess in new capital formation. (Do not confuse this with Keynesian "forced savings," which is something different.) Production outstrips the capacity of people who own no capital to consume, resulting in the phenomenon of "economic cycles" as the economy readjusts for what superficially comes across as "over-production."
Thus, in 1825 matters came to a head and caused the first "economic cycle." Both the financial system and the distribution of ownership combined to ensure that Say's Law and its applications would not function. Capital Homesteading reforms address these issues, as we continue to work for the adoption of a Capital Homestead Act in 2012:
• CESJ had its December Executive Committee meeting on Wednesday. If you wish to be notified of future meetings, please send an e-mail to dbrohawn [at] cesj [dot] org. You can participate by telephone as well as attend in person.
• Guy S. out in Iowa has been sending information on Capital Homesteading to the Buddy Roemer campaign Facebook page. He asks that anyone who has names or contacts of politicians who should know about the Just Third Way to send him information via e-mail, or have it forwarded from CESJ.
• Russell Williams has obtained space for an Economic Justice Summit to take place in Waterbury, Connecticut, in January. Norman Kurland may attend as a speaker.
• Monica and Jackie in Cleveland, and now their brother Mark, have been moving things forward there. Great interest has been expressed by Empowering and Strengthening Ohio People ("ESOP") in the Citizens Land Bank and the Homeowners Equity Corporation.
• We received the footage of Norman Kurland that had not been included in the movie Thrive. Rowland B. is editing it as a series of short segments. Norm's interviews include many things that a number of reviewers have found lacking in the final version of the film, e.g., financially feasible options for monetary and tax reform that can advance rapid economic growth in a manner consistent with the four pillars of an economically just society and the three principles of economic justice that will enable people to thrive materially and spiritually.
• Bert Dodson, the award-winning cartoonist, is working on putting together 40 segments on the Just Third Way and Capital Homesteading, in which "Joe Lunchbucket" asks questions about Capital Homesteading and how it will benefit him, the environment, and the country (and the world).
• Norman Kurland has been interviewed on the Meshorn Daniels radio show out of Louisville, Kentucky, and on Tuesdays with Tormala out of Grand Rapids, Michigan. Both hosts have been very receptive and open to the Just Third Way message.
• Russell Williams reports that his radio show, The Challenge out of Hartford, Connecticut, has been getting a larger audience, and there has been a lot of "buzz" about the show.
• Dawn B. says that the CESJ website upgrade is proceeding apace. We have hit some important milestones in the process.
• The revision of Curing World Poverty is on track. We have made it nearly halfway through the first step, which is highlighting possible sections for rewrite, making minor editorial changes, and suggesting alternate text.
• Publicity for CESJ's latest publication, William Thornton's A Plea for Peasant Proprietors (1848, 1874, 2011) is starting to make some headway. Cover thumbnails have been posted on both Amazon U.S., Amazon U.K., and Barnes and Noble, where the book can be ordered retail. Information on bulk wholesale quantities (10 or more copies) at a 20% discount off the cover price is available on the book's website, where you can also download a review copy in .pdf. Send the website link around to your network, and post it on your LinkedIn and Facebook pages as well as tweeting it. People are also encouraged to post (positive) reviews on Amazon and Barnes and Noble, particularly if you purchase the book from one of those outlets (they give priority to actual customers).
• Dave Kelly testified before a House subcommittee regarding the return of the land in Harris Neck, Georgia, to its rightful owners. Dave reported that the hearing went very well.
• An article on the Just Third Way by Norman Kurland is appearing in The ABCs of Harmony put together by Dr. Leo Semashko and published by the Global Harmony Association.
• Larry Walker has been contributing some good comments to the blog postings on taxation and cross-posting them on his blog. You might want to make a visit to his blog, "Natural Born Conservative."
• If Leisa B. in Günzburg am Rhein is reading this — you're not getting e-mails because your allotted capacity has been filled and they're being returned to sender. Empty a few folders and compact them. Otherwise you will continue to miss our immortal writings.
• As of this morning, we have had visitors from 65 different countries and 53 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, Ireland, and Bulgaria. People in Trinidad and Tobago, Russia, Australia, Germany, and Argentina spent the most average time on the blog. The most popular postings this past week were "Thomas Hobbes on Private Property," "It's the Academics v. the Politicians . . . v. Economic Reality, Part I: Accounting," "Orestes Brownson and Socialism, I: The Evil," "Aristotle on Private Property," and "Orestes Brownson and Socialism, II: The Civil War."
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.