How to Get Out of (National) Debt

The U.S. National Debt is now climbing upwards of $39 trillion . . . although it’s not impossible to find some experts who claim the figure is more like $100 trillion due to unbooked estimates for Social Security and Medicare.  Of course, whether we’re talking $39 trillion or $100 trillion — yes, that’s trillion — it’s in the realm of the surreal, not the real.  That’s a lot of money.

That Krazy Keynesian Math II, the Quantity Theory of Money

In the previous posting on this subject, we looked at the shaky moral foundation of Keynesian theory.  This consists of Keynes’s own assertion that his system would only work if we lie to ourselves for at least a century.  We also looked at the somewhat distorted and distorting concept of productivity as understood in economics and public policy.  In contrast, we posed Louis Kelso’s concept of productiveness, the free market-determined value each factor contributes to the overall production process.

Saving or Investing for Retirement?

 According to a recent article in Fortune magazine, “Boomers” are being forced to “unretire” due to inadequate savings.  That’s bad, of course, but the real point of the article is a wonderful (wunderbar?) new proposal in Germany.  The idea is for the government to fund retirement accounts for children between age six and eighteen.  Cash would be deposited, and the interest would compound.  As described by Fortune,

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 High Priest of Capitalism?

There is much more to Adam Smith (1723-1790), the purported high priest of laissez faire capitalism, than many today suppose.  Part of this is because few people in positions of authority, whether Church, State, or Family, understand the underlying principles of his philosophy.  Instead, they accept conventional wisdom based on the principles of a competing paradigm having little in common with Smith’s fundamental tenets.

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.

Keynesian Economics and Income Distribution

Occasionally, we get a question from a reader that forces us to think . . . what on Earth Keynes and his disciples thought they were doing and what they are still trying to do with Keynes’s backwards economics.  Recently we received the following question:

The Keynesian Fairy State

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.

One of the first things a student must learn about Keynesian economics is there are certain questions one must not ask, such as, How could Keynes reject Say’s Law of Markets when he couldn’t even define it correctly?  What did it mean when Keynes declared inflation — which means a rise in the price level — isn’t really inflation until after “full employment” is reached, and that a rise in the price level before reaching full employment is due to “other factors” and isn’t really inflation . . . meaning a rise in the price level isn’t really a rise in the price level until Keynes said it is a rise in the price level?

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.

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.

And the Money? Good Question

 

As we’ve said a number of times on this blog, we like to get questions, as answering them tends to make our lives a little easier.  For one thing, it means we don’t have to stop and think about what to write that will interest readers, as the readers have already told us what they’re interested in.

The Right Reverend New Dealer

 

To this day there are people who insist that the “New Deal” of Franklin Delano Roosevelt not only saved the United States from the Great Depression (ahem, Part III, there having been two previous phases, the first from 1873 to 1878, the second from 1893 to 1898), it was also THE perfect social program and should be duplicated today as in (for example) the so-called “Green New Deal.”

The Un-Capitalist Manifesto

       In the previous posting on this subject, we noted that the Keynesian prescription for financing economic growth was based on a fallacy: the idea that savings must be accumulated before new capital can be financed.  Examining the period from 1830 to 1930, however, Dr. Harold G. Moulton of the Brookings Institution found that in each and every case, periods of rapid economic growth had been preceded not by reductions in consumption to accumulate savings, but by increases in consumption that depleted savings!

The Formation of Capital

       In the previous posting on this subject, we looked at how financing new capital formation works with past savings and with future savings.  To recap, the past savings technique of finance means you accumulate savings by decreasing consumption in the past, while the future savings technique involves increasing production in the future.

Ricardo’s Detour

      No, we’re not talking about a Cuban band leader or even someone who plays one on television, even if we do love Lucy.  What we’re talking about today is the more-than-a-little-confusing way that the economist David Ricardo explained how to have your cake and eat it, too.

The Rights of Man

We’re tempted to begin this posting with our usual, “As we said in the previous posting on this subject”  . . . so we will yield to temptation and begin by saying that in the previous posting on this subject, we asked the question whether material wellbeing is the sole end of existence, such as the Fabians and other socialists claimed, or if there was something more.

The Economic Crimes of David Ricardo

As we closed the previous posting on this subject, we noted that David Ricardo “corrected” Adam Smith by declaring that labor alone is productive and gives value to something.  Things are not to be valued for their utility to the consumer, but in terms of what it cost in labor to produce it.

Financing Future Growth

We closed the previous posting on this subject by noting that while expanded capital ownership can restore Say’s Law of Markets and poke Keynesian economics and its unresolved paradoxes in the eye with a sharp stick, there was a problem.  It is itself a seeming paradox — or at least ironic — that the people who most need to become capital owners are the least likely to be able to afford it.