With everyone obsessed with the effects of bad monetary and economic decisions, very few people (if any of them) are paying attention to what is causing the problem in the first place: lack of productive capacity on the part of ordinary people. If that can be fixed, then a major obstacle to the establishment and maintenance of a just and sustainable economy has been removed. Unfortunately, that is not what the powers-that-be have been busy doing:
|Carter Glass, Lynchburg, Virginia|
• Modern Monetary Theory. The Federal Reserve wants to “loosen” the Volcker rule. This will allow banks — especially the mega-banks — to engage in risky financial and securities transactions without oversight until after the damage has been done. The problem is that regulations like the Volcker Rule replaced the internal controls of the system, such as the separation of functions between commercial and investment banks. With the repeal of Glass-Steagal, the internal controls were removed, and in less than ten years the system imploded with the euphemistic “Great Recession” (so-called to save the faces of the economists who say a depression is impossible). With what is to all intents and purposes wildcat banking all over again, it will be only a matter of time before the system again implodes.
• Italy and the Stock Market. The stock market “rallied” as fears waned that the latest Italian crisis, now allegedly resolved with the formation of a government, however tenuous. Italy’s withdrawal from the Eurozone would, it was believed, destroy the European Union. This is ironic, because the nature of the Euro as a completely managed currency backed exclusively with government debt — meaning the ability of the various governments to squeeze money out of the taxpayers if they happen to be productive — is such that it is unsustainable. To tie the existence or viability of the European Union to the frail reed of an inherently unstable currency based on Modern Monetary Theory (MMT) might seem like a bad idea . . . and it is. Unfortunately, financial mavens everywhere seem convinced that the world can safely ignore fundamental principles such as Adam Smith’s first principle of economics (“Consumption is the sole end and purpose of all production”) or Say’s Law of Markets (production = income), in favor of an economy in which the government controls the economy by manipulating the currency.
• Global Debt Crisis. The key to the global debt crisis is first to realize that it is not, ultimately, a debt crisis, but a lack-of-ability-to-produce crisis. In order to generate demand artificially to try and sustain the economy, governments issue increasing amounts of debt or, in the words of Jean-Baptiste Say, “multiply barren consumptions” that enable people to consume without producing. The real solution to a debt crisis is not to issue more debt, whether you’re a government or a consumer credit institution, but to make actual, individual people productive and link all new money creation to production. This creates both supply (production) and demand (income), keeping the economy in balance without creating demand artificially. The problem is that few people own the technology that is doing most of the producing these days, so a means must be found that would allow ordinary people without savings to purchase capital and pay for it out of the future earnings of the capital itself. This is the idea behind the proposals of Louis Kelso, embodied in the Just Third Way.
• Shop online and support CESJ’s work! Did you know that by making your purchases through the Amazon Smile program, Amazon will make a contribution to CESJ? Here’s how: First, go to Next, sign in to your Amazon account. (If you don’t have an account with Amazon, you can create one by clicking on the tiny little link below the “Sign in using our secure server” button.) Once you have signed into your account, you need to select CESJ as your charity — and you have to be careful to do it exactly this way: in the space provided for “Or select your own charitable organization” type “Center for Economic and Social Justice Arlington.” If you type anything else, you will either get no results or more than you want to sift through. Once you’ve typed (or copied and pasted) “Center for Economic and Social Justice Arlington” into the space provided, hit “Select” — and you will be taken to the Amazon shopping site, all ready to go..
• Blog Readership. We have had visitors from 39 different countries and 41 states and provinces in the United States and Canada to this blog over the past week. Most visitors are from the United States, France, the United Kingdom, Peru, and Canada. The most popular postings this past week in descending order were, “The First Problem Principle of MMT,” “New Freedom? Or Old Slavery?” “Thomas Hobbes on Private Property,” “Populism v. Progressivism,” and “News from the Network, Vol. 11, No. 21.”
Those are the happenings for this week, at least those 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, so we’ll see it before it goes up.