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.

Wednesday, June 12, 2013

Private Sector Money, III: The Same Story

We’ve already seen how in the American Civil War and World War I, the politicians decided to finance the war effort using debt instead of taxes.  In the 19th and early 20th centuries following the wars, however, the government made a concerted effort to pay down the war debt.  This put the economy and the money supply back on a more or less sound basis.

The new ideas of money and credit that Keynes promoted, however, ensured that following World War II, a large and rapidly expanding debt was seen as essential to national prosperity.  World War II, while it got the country out of the depression, also got the country deeper into debt, ironically against the explicit advice of Keynes, who advocated financing the war on taxes because full employment had been reached.

By 2008, government debt-backed money accounted for about 40% of GDP.  The last figure we saw from the Wall Street Journal was that by the end of this fiscal year, government debt will account for 75-80% of GDP.  This means that the private sector — the sector that produces the marketable goods and services the government taxes to support its spending — will account for 20-25% of GDP.

In other words, we will be baking a fifth or a quarter of a pie, while the government eats the whole thing.  We think Lincoln said something about that in his debates with Stephan Douglas:

“That is the real issue.  That is the issue that will continue in this country when these poor tongues of Judge Douglas and myself shall be silent.  It is the eternal struggle between these two principles — right and wrong — throughout the world.  They are the two principles that have stood face to face from the beginning of time; and will ever continue to struggle.  The one is the common right of humanity and the other the divine right of kings.  It is the same principle in whatever shape it develops itself. It is the same spirit that says, “You work and toil and earn bread, and I’ll eat it.”  No matter in what shape it comes, whether from the mouth of a king who seeks to bestride the people of his own nation and live by the fruit of their labor, or from one race of men as an apology for enslaving another race, it is the same tyrannical principle.

What was missing from the original Federal Reserve Act and Moulton’s recommendations during the 1930s was expanded capital ownership.  Had Kelso’s ideas been implemented in 1913 or 1930, to improve or counter what was actually done, respectively, you can imagine what the world would be like today.