Economic Doubletalk, III: The Monetary and Credit Critiques

In our previous posting on this subject, we looked at the theoretical complaints of economists the AI engine “Claude” gave to explain why economists reject Louis Kelso’s Binary Economics.  While there was some validity to the theoretical complaints, they were fairly easy to deal with once we identified the differences in assumptions between Kelso’s Binary Economics and mainstream economics.  There was quite a bit of confusion, but that is only to be expected because many of the critics don’t really know too much about Binary Economics . . . and some of them aren’t too clear on their own paradigm, either.

Who Will Own America?

Back at the dawn of the 20^th century, Judge Peter Stengar Grosscup (one of Theodore Roosevelt’s “Trust Busters”) published a series of articles on the importance of ordinary Americans becoming owners of the commercial, industrial, and agricultural productive wealth.  One of these articles was titled “Who Shall Own America?”, published in the December 1905 issue of The American Magazine.

Going for the Gold

At first glance, it seems a trifle odd.  At second glance, it gets a bit surreal.  At third glance . . . well, judge for yourself.  The same people that came up with the idea of creating a strategic reserve of cryptocurrency (which makes you wonder if they know what a strategic reserve actually is) are now obsessed with the idea of auditing the gold in Fort Knox.

Who REALLY Owns the Federal Reserve?

On paper, the Federal Reserve System, the central bank of the United States, is owned by its member banks.  Member banks are required to purchase a special form of preferred stock paying a minimal dividend but carrying a meaningless vote.  This is not, however, true ownership.  As Louis O. Kelso once pointed out, control means ownership in all codes of law, and as we will see below, the federal government, while it does have “legal title” to the Federal Reserve System, controls it by having the president of the United States appoint the Chairman of the Board of Governors, and by receiving all revenue in excess of what is expended in operations.

The Rich are Different . . . Now

It is probably apocryphal, but Ernest Hemmingway allegedly replied to F. Scott Fitzgerald’s statement that “the rich are different” — “Yes, they have more money.”  Mmmmm . . . that was true at one time, but no longer.  Once upon a time, all the rich had was more and better of what everyone else had.  Nowadays what the rich have is not more money, but access to money and credit to become the owners of productive technology which is closed to those of us without similar access.

Central Banking, III: The Role of a Central Bank

Despite all the conspiracy theories floating around, central banking is essential in a modern technologically and economically advanced economy.  Allowing government to fill the role of a central bank is a serious mistake on so many levels that we won’t get into it.  We’ll focus instead on the mechanics.  So, what is a central bank all about?

Central Banking, II: Commercial Bank Problems

In the previous posting on this subject, we noted that a single commercial bank is always riskier than several commercial banks acting together as part of a system.  There is also the problem that, however sound an individual bank may be and stable its issues with respect to their value over time, the banknotes of one bank will never have the same value as the banknotes of another bank which is independent of the first bank.

Central Banking, I: Commercial Banks for Commercial Banks

Conspiracy theory to the contrary, central banks are not a plot by the bankers to conquer the world by controlling access to money and credit.  Government got into central banking by an accident of history.  King William III of England needed money and demanded a bribe in the form of the specie reserves of the newly organized Bank of England in exchange for “government stock” (i.e., government debt) for the bank to obtain a charter.

Central Bank Funding, II: Traditional Solutions to the Twin Threats

Today’s posting is the second half of “Central Bank Funding of Economic Growth and Economic Justice Through Expanded Capital Ownership” By Norman A. Bailey, Ph.D., presented at the Capital Ownership Group Conference on Globalization, Four Points Sheraton Hotel, Washington, D.C., October 9-11, 2002.

The first half of this article,“The Twin Threats,” can be found here.

Central Bank Funding, I: The Twin Threats

Today’s posting is the first half of “Central Bank Funding of Economic Growth and Economic Justice Through Expanded Capital Ownership” By Norman A. Bailey, Ph.D., presented at the Capital Ownership Group Conference on Globalization, Four Points Sheraton Hotel, Washington, D.C., October 9-11, 2002.

The Financial Revolution

Today’s blog posting is adapted from the book, Economic Personalism, which you can get free from the CESJ website, or from Amazon or Barnes and Noble.

Few people — at least those of us who are not wealthy — would argue that there is something seriously wrong with the money system in the world today.  Most people, however, either dismiss matters as “the way things are (and whatcha gonna do ’bout it?)” or assume it’s due to some conspiracy or other.

Five Levers of Change: Money and Credit

Today’s blog posting is adapted from the book, Economic Personalism, which you can get free from the CESJ website, or from Amazon or Barnes and Noble.

As we have seen in the previous postings on this subject, the meaning and purpose of life — becoming virtuous to become more fully human — requires that people have power. As a rule, to have power, people must have private property. In order to have private property and be secure in its possession, people must have access to the means of acquiring and possessing private property, and that requires access to the just and responsible use of money and credit.

De-Dollarization Diplomacy

Economists and their political stooges . . . or maybe that’s politicians and their economic stooges (it’s so hard to keep that straight these days in a Keynesian plutocracy) profess to be terrified and worried and even a trifle concerned about the possibility of the U.S. Dollar losing its place as the primary global reserve currency.

Analysis of the Panic of 1907

In the previous posting on this subject, we closed by noting that the financier J. Pierpont Morgan saved the country from the “Panic of 1907” . . . which he had caused in the first place.  Observant readers of this blog will not be slow to realize that a similar thing has happened with the recent bank failures.  The federal government has been quick to assure the public that it will guarantee that the rich people who had money in the bank will be rescued from wanting to have their cake and eat it, too . . . and coincidentally take more control over the financial system.

The Panic of 1907

The recent bank failures have once again raised questions not only about the safety of the financial system, but its role in the economy.  What goes on in the world’s financial centers seems to have no connection to people’s daily lives and the need to secure food, clothing, shelter, and the other essentials of life.  What happens on Wall Street, stays on Wall Street . . . except when it seeps out to the real economy and destroys lives.

A Keynesian Contradiction

The first principle of reason is that nothing can both “be” and “not be” at the same time under the same conditions.  This law or principle of (non) contradiction simply means that something cannot both exist and not exist at the same time, e.g., nothing can be a little bit dead.  Something is either dead or alive; Schrödinger’s cat is only half dead and half alive because there’s a fifty percent chance it’s either one, which is known for certain when the box is opened.

You Can Bank On It

Most people, when they think of what a bank is, imagine a giant metal vault, something on the order of Uncle Scrooge McDuck’s Money Bin, where people with money deposit cash and the bank lends it out to other people.  Well, it turns out that banking is substantially different from the image it has in the popular mind.

Standard Value and Price Level

In the previous posting on this subject, we looked at what can happen if you impose a uniform monetary standard when the price of the standard is not uniform.  Of course, before any standard at all is considered, it is essential that the reserve currency be 100% or at least predominantly asset-backed . . . and “asset” does not include debt issued by the issuer of the reserve currency.

Federal Reserve Follies

On Halloween, the Wall Street Journal reported the frightening news that the government’s money machine, the Federal Reserve, has been losing money.  “How is this possible?” you ask in wonder.  How can an institution that creates money out of thin air for politicians to spend like drunken sailors on leave be losing money?

How to Become President

On Monday, July 25, 2022 (halfway to Christmas), Senator Elizabeth Warren of Massachusetts published an article on page A-17 of the Wall Street Journal, “Jerome Powell’s Fed Pursues a Painful and Ineffective Inflation Cure.”  We can agree with the title, and even several things Senator Warren says, but end up disagreeing with the article taken as a whole.  Warren identifies a part of the problem, but then analyzes it using a very flawed paradigm, and offers exactly the wrong solution, or (more accurately) non solution.