The latest news is that “the government” (meaning desperate politicians) are considering pumping another $3 trillion so people have something to spend. Of course, we’re still baffled why an additional $3 trillion backed by government debt that is rising skyward is more secure than the $2 trillion backed by private sector hard assets we propose for Capital Homesteading, but then, we’re not politicians or academics. All we can do is talk what seems to be common sense:
• What, Exactly, Are They Stimulating? We’re tempted to start this item with, “Riddle me this. If the economy isn’t running because people aren’t allowed to go to work and produce marketable goods and services, how is giving out money to purchase existing goods and services supposed to stimulate anything? Here’s a crazy solution: if human beings can’t work, why not lend them money to purchase automated machinery to replace their labor. This would generate income first to repay the acquisition loan, and then consumption income to purchase the newly produced goods and services, and all without the use of direct human labor.
|"Can you believe those dumb Yanks fell for it?"|
• Inflation v. Deflation. Within the Keynesian monetary framework, inflation is somewhat vaguely defined. In contrast, in the Austrian school of economics, inflation is any increase in the money supply, regardless whether the price level rises, falls, or stays the same. In the Chicago/Monetarist school, inflation is an increase in the money supply that causes a rise in the price level. Deflation is defined similarly, i.e., for Austrian economists (who don’t necessarily live in Austria, by the way), deflation is any decrease in the money supply, regardless whether the price level rises, falls, or stays the same, while for Monetarist economists, deflation is a decrease in the money supply that leads to a decline in the price level. Keynes didn’t bother with being consistent or logical. To Keynes, “inflation” meant a rise in the price level after reaching full employment. Rises in the price level before reaching full employment were due to “other factors” and are not “true inflation.” (General Theory, III.10.ii, V.21.v.) Deflation — to Keynes — meant a decline in the price level for any reason (ibid., V.20.iv), although the only reason he cited was an increase in supply that lowers prices. (Ibid., VII.22.vii.) Translation: in the Keynesian universe, inflation and deflation are whatever Keynes said they were, whether or not it makes sense. How do we define inflation and deflation in the Just Third Way? Regarding inflation, there are two types, cost-push, and demand-pull. Cost push inflation is a rise in the price level due to a decrease in the supply of a good or service, or an increase in the wants or needs on a good or service in limited supply. Demand-pull inflation is a rise in the price level due to an increase in the money supply. As for deflation, that is only a fall in the price level due to a decrease in the money supply. All other declines in the price level should be considered “currency appreciation,” meaning that the unit of currency will purchase more than it did before, e.g., an increase in supply or a fall in demand. Of course, the Just Third Way understanding of inflation and deflation assumes as a given that money is created only by backing it with the present value of existing and future marketable goods and services, thereby linking the money supply directly to what it is used to buy.
|How Hitler rewarded Schacht|
• Hyperinflation. Many people think that “hyperinflation” means simply high inflation. No, it means the surreal situation in which people have lost faith in the currency and consider it worthless or nearly so. As a result, the price level rises faster than money can be created; the bizarre situation occurs that money can’t be created fast enough to keep up with the price level. The only way to stop hyperinflation, as Hjalmar Schacht demonstrated in Germany following the First World War, is to implement a standardized, asset-backed currency and restore public confidence in it.
|Pope Leo XIII|
• Rerum Novarum. A hundred and twenty-nine years ago today, Pope Leo XIII issued the landmark encyclical Rerum Novarum, “On Labor and Capital.” Most people think that Rerum Novarum was the first social encyclical. No, it was the first social encyclical to present a positive program to counter the "new things" of socialism, modernism, and the New Age of which Pope Gregory XVI had spoken in the second social encyclical, Singulari Nos (“On the Errors of Lamennais”) in 1834. The new things were intended to replace all existing forms of Church, State, and Family and establish “the New Christianity.” What triggered Rerum Novarum specifically was the conversion of many Catholics to the theories of the agrarian socialist Henry George and the renegade priest Father Edward McGlynn in the late 1880s, sowing massive confusion about the social teachings of the Church. Unfortunately, despite Leo XIII’s strong advocacy of widespread capital ownership by “as many as possible of the people,” he did not present a financially feasible way for people to acquire capital without redistribution. In addition, the socialists and modernists moved quickly to nullify the encyclical and declare it a new socialist manifesto. At the same time, the capitalists took it as affirming capitalism. It would not be until 1958 that a financially feasible method of acquiring capital without cutting consumption was presented to the public (and only partially implemented in 1973) that the problem would be solved, even though it still awaits full implementation. Pope St. John Paul II voiced his approval of this “Just Third Way” above and beyond socialism and capitalism, and recommended it on a number of occasions, but was ignored.
|"BUY MY KEYNESIAN SNAKE OIL, NOT CESJ BOOKS!"|
• 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 https://smile.amazon.com/. 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 36 different countries and 40 states and provinces in the United States and Canada to this blog over the past week. Most visitors are from the United States, Canada, the United Kingdom, India, and Argentina. The most popular postings this past week in descending order were “The Theory of Happiness,” “A Measure of Reform,” “News from the Network, Vol. 13, No. 19,” “Dignity of Work or Labor v. Human Dignity,” and “The Purpose of Production.”
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.” Due to imprudent language on the part of some commentators, we removed temptation and disabled comments.