Many years ago (a lot of years ago), I had a picture book titled, How Big is Big? The point of the book was to show how "bigness" and "smallness" were all relative to the observer. A dog appears big to a flea, but small to an elephant or whale. The Empire State Building is huge compared to an elephant, but is tiny compared with the size of the earth. The earth itself appears gargantuan to us, but is virtually nothing compared with the galaxy — as is the galaxy compared with the size of the universe.
Get the picture?
All of that was pretty profound for a kid's book. Frankly, it's also pretty profound for an adult's book — such as E. F. Schumacher's Small is Beautiful, a virtual "bible" for "New Age economics," as it was originally touted. The difference is that the kid's book made it clear that a standard such as "big" or "small" is purely relative. Schumacher's book failed in that respect. By discarding or redefining fundamental natural rights such as liberty and property and advocating a "human standard," Small is Beautiful inadvertently slips into pure moral relativism.
This is where it gets deep, so don your hip waders.
In economics as in everything else, there is no such thing as objective bigness or smallness. It is all relative. Using bigness or smallness as a standard changes what it means for something to be a standard. A standard is supposed to be an objective absolute against which you measure something. Especially in economics, the size of something is whatever is most appropriate to its function. A standard that is relative to the observer or one doing the measuring is no standard at all.
As a case in point, I once saw a "gag gift" in the form of a "kit" for golfers. One of the items included in the kit was a tape measure to aid in replacing a ball after putting. One side had "inches" that were about a quarter inch long, while the other side had "inches" that were about three inches long. Obviously, if you were measuring how far your ball was from the cup, you used the "long inches," and replaced it using the "short inches." You did exactly the opposite for your opponent.
This wasn't as bad as Big Jule's "lucky dice" (with the pips removed) in Guys and Dolls and which thus came up whatever the person with the gun said they were, but it was close. In this way it becomes possible to enforce any "standard" simply by having sufficient coercive power. Absolutes cease to have any meaning at all. Paradoxically, by trying to base things on a human standard, we end up removing humanity from the equation.
How's that?
Those absolutes with which Schumacher played fast and loose, i.e., liberty and property, are discerned by reason and represent a consensus of the whole human race as to "right" and "wrong," "good" and "bad." We cannot simply insist on the opinion of ourselves or our small group without taking into account the rest of humanity. Nor can we simply project our opinion — our private human standard — on to everyone else and try to force others to go along with it. That's what Napoleon, Stalin and Hitler did. It's not a Good Thing.
Instead, what we do as reasoning creatures is attempt to discern those absolutes that characterize the absolute source of all creation, as inductive reasoning tells us must exist. From there we reason out the general consensus of all mankind as to what is right and wrong. For example, the universal prohibition against theft tells us that private property is part of human nature, that is, a natural law.
Does that, however, tell us how to exercise our property, or what we can or cannot own in certain circumstances? Of course not. That is left up to the wants and needs of specific individuals, cultures and circumstances — but the "absoluteness" of private property remains. As Pope Leo XIII reminded us, we must assume "as a principle that private ownership must be held sacred and inviolable." (Rerum Novarum, § 46.)
Can we be wrong about the conclusions we reach through the use of reason? Of course — but that does not invalidate the absolutes. That simply says we probably made an error in reasoning. As Pope Pius XII pointed out in the second paragraph of Humani Generis, "absolutely speaking, human reason by its own natural force and light can arrive at a true and certain knowledge of . . . the natural law."
This is similar to the functioning of the free market in which consensus about just prices, just profits and just wages reached by aggregating many individual opinions tends to approach the objective free market price, profit or wage. Do we know that for certain? Of course not — but the opinions of many in consensus have a greater chance of approaching justice than the opinion of a small group or single individual bent on controlling the market to achieve political or religious ends rather than economic.
How is using reason to decide what is right and wrong any different from just using our own opinion? That's simple . . . if not easy. Our own opinion, unsupported by argument or evidence, has a much higher chance of being wrong than anything discerned by the use of reason and obeying the rules of logic, primarily the "law of contradiction," that a thing cannot be both true and false at the same time.
Using reason is hard to do, because we naturally tend to believe something is true because we believe it, not because we can prove it. That inserts faith into things, and faith applies to things that are not "manifestly true," that is, that cannot be proved by the use of reason. As G. K. Chesterton quoted Aquinas in his short biography of "the Angelic Doctor,"
"Behold our refutation of the error. It is not based on documents of faith, but on the reasons and statements of the philosophers themselves. If then anyone there be who, boastfully taking pride in his supposed wisdom, wishes to challenge what we have written, let him not do it in some corner nor before children who are powerless to decide on such difficult matters. Let him reply openly if he dare. He shall find me there confronting him, and not only my negligible self, but many another whose study is truth. We shall do battle with his errors or bring a cure to his ignorance."
#30#
THE Global Justice Movement Website
This is the "Global Justice Movement" (dot org) we refer to in the title of this blog.
Monday, July 25, 2011
Friday, July 22, 2011
News from the Network, Vol. 4, No. 29
We are getting an interesting perspective on things during these few days away from the world inside the Washington Beltway. What the newspapers and other media are saying about what is going on, especially in the economy, and what is really going on in places like Lancaster, Pennsylvania, make for quite a sense of unreality when it comes to things like "economic recovery." Businesses and factories have been closing all over the county, and nothing is coming in to take the place of the lost productive enterprises . . . except for some new banks that are being built. The problem is that the new banks are not any different from the old banks, and continue to finance anything in ways that concentrates the ownership of capital, both existing and future. Clearly something along the lines of the Capital Homestead Act is needed, but the powers-that-be continue their peculiar deafness to viable and just solutions. For example --
* Former Comptroller General of the United States, David Walker, is predicting disaster unless the debt ceiling is raised in the short term . . . and even greater disaster if something isn't done to reduce the deficit and pay down some of the gargantuan public debt that has been built up. In the short run, Mr. Walker sees five immediate consequences. One, $4 billion per day will be lost to the economy. Two, there will be temporary layoffs of government workers and civilian military workers. Three, Social Security payments will be delayed. Four, there will be serious negative effects on the stock and bond markets. Five, interest rates will rise. Of these, the delay in Social Security payments is probably of most concern to ordinary people. It is, after all, difficult to feel sorry for rich investors in stocks and bonds, and there is, frankly, no reason under the Banking Principle why changes in the interest rates should have any effect at all on pure credit loans for new productive capital, the ownership of which can be spread out to generate a broad base of increased consumer demand. We agree with Mr. Walker's conclusion that the debt ceiling must be raised in the short term, and that the deficit and outstanding debt must be reduced, but simply cutting expenses isn't going to do anything except make matters worse. Norman Kurland met with Mr. Walker and presented Capital Homesteading to him. All Mr. Walker had to say was for Norm to return when he had more "traction." Why not a viable solution in lieu of "traction"?
* The obvious solution to the current dilemma is to raise the debt ceiling in the short run, and make Capital Homesteading the quid pro quo in the mid- to long term. We haven't heard anything better.
* Jimmy Griffen has scored again, and arranged a meeting this past Wednesday with an important mover-and-shaker. Since we're on vacation and haven't heard how the meeting came out, we'll withhold any analysis until next week.
* CESJ and UVM publications are now available in Australia.
* There has been a sudden spike in sales of Capital Homesteading for Every Citizen, possibly due to people searching for some real answers to the economic mess we're in (also known as "the recovery" . . . from what we've recovered is unclear).
That is all the news we have for this week. As you might expect, it's harder to get news when you're away from the center of things and out in the real world.
#30#
* Former Comptroller General of the United States, David Walker, is predicting disaster unless the debt ceiling is raised in the short term . . . and even greater disaster if something isn't done to reduce the deficit and pay down some of the gargantuan public debt that has been built up. In the short run, Mr. Walker sees five immediate consequences. One, $4 billion per day will be lost to the economy. Two, there will be temporary layoffs of government workers and civilian military workers. Three, Social Security payments will be delayed. Four, there will be serious negative effects on the stock and bond markets. Five, interest rates will rise. Of these, the delay in Social Security payments is probably of most concern to ordinary people. It is, after all, difficult to feel sorry for rich investors in stocks and bonds, and there is, frankly, no reason under the Banking Principle why changes in the interest rates should have any effect at all on pure credit loans for new productive capital, the ownership of which can be spread out to generate a broad base of increased consumer demand. We agree with Mr. Walker's conclusion that the debt ceiling must be raised in the short term, and that the deficit and outstanding debt must be reduced, but simply cutting expenses isn't going to do anything except make matters worse. Norman Kurland met with Mr. Walker and presented Capital Homesteading to him. All Mr. Walker had to say was for Norm to return when he had more "traction." Why not a viable solution in lieu of "traction"?
* The obvious solution to the current dilemma is to raise the debt ceiling in the short run, and make Capital Homesteading the quid pro quo in the mid- to long term. We haven't heard anything better.
* Jimmy Griffen has scored again, and arranged a meeting this past Wednesday with an important mover-and-shaker. Since we're on vacation and haven't heard how the meeting came out, we'll withhold any analysis until next week.
* CESJ and UVM publications are now available in Australia.
* There has been a sudden spike in sales of Capital Homesteading for Every Citizen, possibly due to people searching for some real answers to the economic mess we're in (also known as "the recovery" . . . from what we've recovered is unclear).
That is all the news we have for this week. As you might expect, it's harder to get news when you're away from the center of things and out in the real world.
#30#
Thursday, July 21, 2011
Gettysburg, 2011
There are two more years to go before the Sesquicentennial of the single biggest battle in North or South America: Gettysburg, Pennsylvania, which took place in late June, early July 1863, approximately a year after the passage of Abraham Lincoln's Homestead Act. We (my aunt and I) visited the park today, missing the annual reenactment (on purpose), and a few of the points of interest. That was not on purpose; we just couldn't find them, especially the statue of Father Corby, Catholic chaplain of the 69th New York Infantry, who later became president of the University of Notre Dame in South Bend, Indiana.
I had never been to the battlefield. Visiting it on possibly the hottest day of the year for one's initial visit gives a whole new appreciation of what the soldiers endured -- and they were in wool uniforms, carrying full packs, not light summer clothing and driving around in an air conditioned automobile.
The sheer size of the battlefield is also an eye-opener. You don't really get an appreciation of it from books or even the Ken Burns series. Almost by accident we found the Union position where Pickett's Charge was broken. Looking across the fields that the Army of Northern Virginia had to cross before reaching the Union forces, . . . indescribable.
We went to the Visitors Center first, of course, to pick up a free map and ask directions to Father Corby's statue (evidently a very popular point of interest, but not given a special number on the auto guide map). We stepped into the book and gift store on the way out, just to check it out.
There was, as you might expect, a moderately large number of books and videos about the Civil War in general, and the Battle of Gettysburg in particular. They appeared to range from the fairly decent to the excellent; we could have spent our entire budget there alone, so we spent nothing.
From a Just Third Way perspective there was, however, one book conspicuous by its absence: David Christy's 1855 Cotton is King. If, as many authorities assert, Harriet Beecher Stowe's Uncle Tom's Cabin inspired the North to end slavery, Cotton is King convinced the South that it could not survive economically without it. Christy's well-argued (but seriously flawed) case was that the economic prosperity of the United States and the British Empire depended absolutely on the slave cultivation of cotton and other agricultural commodities. Consequently the Southerners, whether or not they owned slaves, were convinced that without slavery the economy would collapse.
Obviously that was wrong. Lincoln's Homestead Act demonstrated that there was a better and more profitable way to increase production and exports, and at the same time provide a broad base of consumer demand for the rapid industrial and commercial expansion that followed the war. This, too, came to an end with the Panic of 1893 when the growing number of people dependent on wages alone began changing the character of the economy, from an ownership system to a wage system, and the role of government began expanding at an increasing rate.
The problem, of course, was that when the "free" land made available by the Homestead Act was no longer so freely available, widespread ownership of landed capital was not replaced by widespread ownership of commercial and industrial capital. The Currency Principle, in part that the only way to finance new capital formation was to cut consumption and save, virtually guaranteed that small ownership of commercial and industrial capital would deteriorate and, finally, disappear as a dominate force in the economy. Ownership of the new commercial and industrial capital, and consequently the control over money and credit, became increasingly concentrated, the wage systems spread, and the Welfare State achieved dominance as the "only" possible arrangement of the economy.
The Battle of Gettysburg, put into perspective, is not only (as Lincoln said) an affirmation of what America means. Within the Just Third Way, the passage of a Capital Homestead Act by 2012 would not only validate the sacrifice of men on both sides, but lay a solid foundation for a government of the people, by the people, and for the people.
#30#
I had never been to the battlefield. Visiting it on possibly the hottest day of the year for one's initial visit gives a whole new appreciation of what the soldiers endured -- and they were in wool uniforms, carrying full packs, not light summer clothing and driving around in an air conditioned automobile.
The sheer size of the battlefield is also an eye-opener. You don't really get an appreciation of it from books or even the Ken Burns series. Almost by accident we found the Union position where Pickett's Charge was broken. Looking across the fields that the Army of Northern Virginia had to cross before reaching the Union forces, . . . indescribable.
We went to the Visitors Center first, of course, to pick up a free map and ask directions to Father Corby's statue (evidently a very popular point of interest, but not given a special number on the auto guide map). We stepped into the book and gift store on the way out, just to check it out.
There was, as you might expect, a moderately large number of books and videos about the Civil War in general, and the Battle of Gettysburg in particular. They appeared to range from the fairly decent to the excellent; we could have spent our entire budget there alone, so we spent nothing.
From a Just Third Way perspective there was, however, one book conspicuous by its absence: David Christy's 1855 Cotton is King. If, as many authorities assert, Harriet Beecher Stowe's Uncle Tom's Cabin inspired the North to end slavery, Cotton is King convinced the South that it could not survive economically without it. Christy's well-argued (but seriously flawed) case was that the economic prosperity of the United States and the British Empire depended absolutely on the slave cultivation of cotton and other agricultural commodities. Consequently the Southerners, whether or not they owned slaves, were convinced that without slavery the economy would collapse.
Obviously that was wrong. Lincoln's Homestead Act demonstrated that there was a better and more profitable way to increase production and exports, and at the same time provide a broad base of consumer demand for the rapid industrial and commercial expansion that followed the war. This, too, came to an end with the Panic of 1893 when the growing number of people dependent on wages alone began changing the character of the economy, from an ownership system to a wage system, and the role of government began expanding at an increasing rate.
The problem, of course, was that when the "free" land made available by the Homestead Act was no longer so freely available, widespread ownership of landed capital was not replaced by widespread ownership of commercial and industrial capital. The Currency Principle, in part that the only way to finance new capital formation was to cut consumption and save, virtually guaranteed that small ownership of commercial and industrial capital would deteriorate and, finally, disappear as a dominate force in the economy. Ownership of the new commercial and industrial capital, and consequently the control over money and credit, became increasingly concentrated, the wage systems spread, and the Welfare State achieved dominance as the "only" possible arrangement of the economy.
The Battle of Gettysburg, put into perspective, is not only (as Lincoln said) an affirmation of what America means. Within the Just Third Way, the passage of a Capital Homestead Act by 2012 would not only validate the sacrifice of men on both sides, but lay a solid foundation for a government of the people, by the people, and for the people.
#30#
Wednesday, July 20, 2011
The Dangers of Interpreting Keynes
Yesterday the Washington Post had a column by Ezra Klein on "The Dangers of Misinterpreting Keynes." With all due respect to Mr. Klein, from a Just Third Way perspective the problem is not misinterpreting Keynes, but interpreting him at all. The question we have to ask ourselves is, Is the Great Defunct Economist really all that relevant?
From a political perspective, yes. Keynes is very relevant politically, if only because (as Keynes himself put it), "[T]he ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas." (John Maynard Keynes, The General Theory of Employment, Interest and Money, 1936, VI.24.v.)
From the perspective of binary economics, however, the academic scribbler Keynes is irrelevant. Why? Because the Keynesian system, "voices in the air," does not describe reality. It is based on faith, not reason, and is not supported by the facts or soundly reasoned theory. Admittedly, Keynes probably unconsciously exempted himself from the ranks of defunct economists, even though he dismissed criticism of his theories in the 1920s by flippantly remarking, "In the long run, we're all dead" — a rejoinder that, while perfectly true, has nothing to do with the case.
So, what are we to do in a Keynesian world in which the Powers-That-Be insist on implementing disproved and disastrous Keynesian economic policies, and the best that the opposition can come up with is to say, "Don't do that!"?
Well, for one, we can write letters to columnists and editors expressing our concerns whenever they say something that is not in strict accordance with objectively established facts. This, of course, is absolutely guaranteed to make you extremely popular with everyone. Like King Gama in Princess Ida, you'll be a genuine philanthropist. And probably get the same reaction, i.e., "ev'rybody says I'm such a disagreeable man . . . and I can't think why!"
With this as our guiding philosophy, we sent the following to Mr. Klein in response to his column yesterday, slightly edited for publication:
Dear Mr. Klein:
The question is not whether Keynes is being misinterpreted, but (1) whether Keynes was right, and (2) if there is any viable alternative to the present system. Keynes was wrong, and there is an alternative.
Dr. Harold G. Moulton, president of the Brookings Institution from 1916 to 1952, presented an alternative to the New Deal. This was in the four-volume study he directed on "the Distribution of Wealth and Income in Relation to Economic Progress," 1934-1935, of which the third volume, The Formation of Capital (1935) is the most relevant to today's situation. Dr. Moulton analyzed the results of Keynesian programs in The New Philosophy of Public Debt
(1943), concluding that the Keynesian belief in the efficacy of "pump priming" was misplaced, and the advice of Dr. Alvin H. Hansen, "the American Keynes," that the public debt could rise to twice GDP without danger, was unsound.
What Moulton's analysis lacked was a practical means to implement an economic recovery in which ordinary people could participate as other than mere wage-workers or welfare recipients. The work of Louis Kelso and Mortimer Adler supplied this lacuna. The principles of Kelso and Adler's "binary economics," an integral component of the "Just Third Way" of the Center for Economic and Social Justice (CESJ), were presented in The Capitalist Manifesto (1958), while the mechanics were outlined in The New Capitalists (1961), a short book with the provocative counter-Keynesian subtitle, "A Proposal to Free Economic Growth from the Slavery of [Past] Savings."
Kelso and Adler's proposals were refined in Capital Homesteading for Every Citizen (2004) by Dr. Norman Kurland, et al. Capital Homesteading offers a way out of the current dilemma by accepting a raising of the debt ceiling in the short run, with the quid pro quo being immediate enactment of a Capital Homestead Act. Capital Homesteading would empower every man, woman and child with the means of acquiring and possessing private property in capital without redistribution of existing wealth or manipulation of the currency. Capital Homesteading, if enacted in its entirety, has the potential to balance the budget and pay down the debt completely within twenty to thirty years, while still ensuring as far as possible that everyone has an income sufficient to meet ordinary needs adequately.
I invite you to visit CESJ's website, www.cesj.org, and look over the materials on Capital Homesteading. If you have any questions, please feel free to telephone Dr. Kurland.
By the way — Nixon was quoting Milton Friedman when he said we are all Keynesians now. (Time magazine, December 31, 1965.) A month later Friedman "clarified" what he meant by saying, "In one sense, we are all Keynesians now; in another, nobody is any longer a Keynesian." (Time magazine, February 4, 1966.) Get Dr. Kurland to tell you how Dr. Friedman avoided a debate with him in 1971 over the merits of binary economics — and how two years later Dr. Kurland was able to help Kelso persuade the late Senator Russell Long of the necessity of implementing a program of widespread direct ownership of capital.
Yours,
Blah, blah.
#30#
From a political perspective, yes. Keynes is very relevant politically, if only because (as Keynes himself put it), "[T]he ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas." (John Maynard Keynes, The General Theory of Employment, Interest and Money, 1936, VI.24.v.)
From the perspective of binary economics, however, the academic scribbler Keynes is irrelevant. Why? Because the Keynesian system, "voices in the air," does not describe reality. It is based on faith, not reason, and is not supported by the facts or soundly reasoned theory. Admittedly, Keynes probably unconsciously exempted himself from the ranks of defunct economists, even though he dismissed criticism of his theories in the 1920s by flippantly remarking, "In the long run, we're all dead" — a rejoinder that, while perfectly true, has nothing to do with the case.
So, what are we to do in a Keynesian world in which the Powers-That-Be insist on implementing disproved and disastrous Keynesian economic policies, and the best that the opposition can come up with is to say, "Don't do that!"?
Well, for one, we can write letters to columnists and editors expressing our concerns whenever they say something that is not in strict accordance with objectively established facts. This, of course, is absolutely guaranteed to make you extremely popular with everyone. Like King Gama in Princess Ida, you'll be a genuine philanthropist. And probably get the same reaction, i.e., "ev'rybody says I'm such a disagreeable man . . . and I can't think why!"
With this as our guiding philosophy, we sent the following to Mr. Klein in response to his column yesterday, slightly edited for publication:
Dear Mr. Klein:
The question is not whether Keynes is being misinterpreted, but (1) whether Keynes was right, and (2) if there is any viable alternative to the present system. Keynes was wrong, and there is an alternative.
Dr. Harold G. Moulton, president of the Brookings Institution from 1916 to 1952, presented an alternative to the New Deal. This was in the four-volume study he directed on "the Distribution of Wealth and Income in Relation to Economic Progress," 1934-1935, of which the third volume, The Formation of Capital (1935) is the most relevant to today's situation. Dr. Moulton analyzed the results of Keynesian programs in The New Philosophy of Public Debt
(1943), concluding that the Keynesian belief in the efficacy of "pump priming" was misplaced, and the advice of Dr. Alvin H. Hansen, "the American Keynes," that the public debt could rise to twice GDP without danger, was unsound.What Moulton's analysis lacked was a practical means to implement an economic recovery in which ordinary people could participate as other than mere wage-workers or welfare recipients. The work of Louis Kelso and Mortimer Adler supplied this lacuna. The principles of Kelso and Adler's "binary economics," an integral component of the "Just Third Way" of the Center for Economic and Social Justice (CESJ), were presented in The Capitalist Manifesto (1958), while the mechanics were outlined in The New Capitalists (1961), a short book with the provocative counter-Keynesian subtitle, "A Proposal to Free Economic Growth from the Slavery of [Past] Savings."
Kelso and Adler's proposals were refined in Capital Homesteading for Every Citizen (2004) by Dr. Norman Kurland, et al. Capital Homesteading offers a way out of the current dilemma by accepting a raising of the debt ceiling in the short run, with the quid pro quo being immediate enactment of a Capital Homestead Act. Capital Homesteading would empower every man, woman and child with the means of acquiring and possessing private property in capital without redistribution of existing wealth or manipulation of the currency. Capital Homesteading, if enacted in its entirety, has the potential to balance the budget and pay down the debt completely within twenty to thirty years, while still ensuring as far as possible that everyone has an income sufficient to meet ordinary needs adequately.
I invite you to visit CESJ's website, www.cesj.org, and look over the materials on Capital Homesteading. If you have any questions, please feel free to telephone Dr. Kurland.
By the way — Nixon was quoting Milton Friedman when he said we are all Keynesians now. (Time magazine, December 31, 1965.) A month later Friedman "clarified" what he meant by saying, "In one sense, we are all Keynesians now; in another, nobody is any longer a Keynesian." (Time magazine, February 4, 1966.) Get Dr. Kurland to tell you how Dr. Friedman avoided a debate with him in 1971 over the merits of binary economics — and how two years later Dr. Kurland was able to help Kelso persuade the late Senator Russell Long of the necessity of implementing a program of widespread direct ownership of capital.
Yours,
Blah, blah.
#30#
Tuesday, July 19, 2011
"What History Teaches Us About the Welfare State"
Sometimes we get a little bit behind on all the issues we need to address. Take, for example, an article by Dr. François Furstenberg that appeared in the Washington Post on July 1, 2011, "What History Teaches Us About the Welfare State." Dr. Furstenberg, an associate professor of history at the Université de Montréal, had some interesting observations to make, many of them right on the mark . . . within the paradigm dictated by adherence to the Currency Principle.
As regular readers of this blog are aware (and, if they're not, they should be), binary economics, in contrast to the three mainstream schools of economics (Keynesian, Monetarist/Chicago and Austrian) and virtually all of the not-so-mainstream schools, adheres to the Banking Principle.
Briefly (hear, hear!), the Currency Principle is that "money" consists solely of coin, currency, demand deposits and some time deposits, and that "saving" is defined strictly as cutting consumption. This means that all other means of carrying out exchange, i.e., bills of exchange, are not considered, Say's Law of Markets is redefined or negated, and its application in the real bills doctrine is rejected.
The Banking Principle is that "money" is anything that can be used to settle a debt, and "saving" equals investment. Stretching a point almost to the breaking and including speculation — gains realized from holding an asset rather than putting it to productive use — under "investment," yes, cash stuffed in a sock and hidden in a mattress for security is, technically, an "investment" in hoarding or, at least, working capital. It's a dumb investment if carried to extremes, but still an investment, albeit one that doesn't of its nature generate a stream of income.
Under the Banking Principle Say's Law of Markets is defined in its fullness, and its application in the real bills doctrine validated. "Investment" (real investment, that is, that generates a stream of income) can thus be financed not by cutting consumption, but by drawing a bill on the present value of a future capital project, and redeeming the bill when the capital is up and running and generates profits sufficient to pay for itself.
Dr. Furstenberg's article accurately detailed the problems that occurred in the United States as ownership of industrial and commercial capital became increasingly concentrated following the Civil War. The Homestead Act staved off concentrated ownership of landed capital for a few decades, but by 1893 Frederick Jackson Turner could claim that the end of "free" land meant the end of democracy by ending easy access to capital ownership.
The Panic of 1893 and the resulting Great Depression of 1893-1898 were a graphic demonstration of the dangers to both political and economic democracy inherent in concentrated capital ownership. When most people have only their labor to sell and labor is being displaced by advancing technology, power concentrates in owners of capital, not labor. The Panic of 1893 also exposed the serious weaknesses of the financial system . . . and the concentrated control of money and credit dictated by widespread acceptance of the Currency Principle that was congealed into law in Great Britain with the Bank Charter Act of 1844, and in the United States with the National Bank Act of 1863.
As we've said a number of times on this blog, however, we adhere to the Banking Principle. Thus, one of our Faithful Readers sent us a link to Dr. Furstenberg's article with the comment,
I think we've also commented several times on how much we like it when we don't have to think up a topic for the daily blog posting. Another thing we like is when we can answer pretty much off the top of our collective head. Here goes.
Moulton did not address this issue directly. In his discussion of the Panic of 1893 and the resultant Great Depression in Financial Organization and the Economic System (1938), he only noted that Populist focus on the "silver question" during William Jennings Bryan's 1896 campaign for president derailed any efforts toward genuine reform of the financial system, while the recovery of 1897-1898 seemed to make the issue irrelevant. The failure of reform also made the Panic of 1907 seemingly inevitable as a result of the growing concentration of control over money and credit, mostly in the hands of J. P. Morgan.
Moulton did, however, address the issue of the loss of the frontier, and hinted that, contrary to Turner's thesis, it did not have to mean the end of democracy. Probably not coincidentally, Turner's thesis was seemingly confirmed by the Great Depression of the 1890s. Similarly, the Great Depression of the 1930s apparently validated the idea of the "mature economy" that sprung up after the Crash of 1929. Now, the current "Great Depression III" seems to confirm Furstenberg's claim that the Welfare State is a necessary adjunct to the growing wealth gap and the increasing disconnect of the financial markets from the productive sector. From the perspective of binary economics, of course, the real problem is lack of democratic access to capital credit to finance widespread ownership of capital.
Responding to the late 19th century claim (probably inspired by Turner) that the loss of geographical expansion meant the end of expanding markets, and the idea in the 1930s that the developed nations of the world had "mature economies" and must accept lower rates of growth unless subsidized by government, Moulton countered,
"These observers, like the present-day adherents of the mature economy philosophy, overlooked the vast continuing potentialities for intensive capital development. In the great new era of expansion which followed, intensive industrialization, together with some new industries, offered larger outlets for investment than had been furnished by the previous period of geographical expansion across wide continental areas.
"The capital requirements over the next generation loom fully as large as those of any preceding period. On the basis of projected population trends, some authorities estimate that the United States may have by 1980 as many as 187 million inhabitants [227 million, actually — Moulton used the lower rates of growth during the Great Depression for his projection]. To supply the primary needs of the additional population, and at the same time to raise the standards of living of the entire population, say, 100 per cent, would require a much larger annual capital expansion than we have had during any comparable period in the past. In making this statement allowance is made for the usual rate of increase in man-hour productivity resulting from technical progress. The realization of the production program involved in this expansion would necessitate the employment (on a 40-hour week basis) of a larger proportion of the total population than was employed in 1929." (Harold G. Moulton, The New Philosophy of Public Debt. Washington, DC: The Brookings Institution, 1943, 27-28.)
Addressing the disconnect between productive activity and the financial markets that seems inevitable within the Currency Principle framework dictated by Walter Bagehot (that is, the growth of speculation as opposed to true investment) and described in Lombard Street (1873) — and thus the presumed "independence" of private sector corporations from the capital markets — Moulton noted, "It may possibly be that dependence upon the capital market for expansion money is decreasing — that an ever-larger proportion is being obtained from undistributed earnings; but there is no evidence to support this conclusion." (Ibid., 38.)
As Moulton pointed out in The Formation of Capital (1935), it's not a question of a fixed "supply of loanable funds" determined by reductions in consumption being allocated among consumption, investment, and speculation. Rather, the problem — especially today — is that savings are being hoarded (according to a Reuters report a few months ago, nearly $2 trillion in cash is sitting idle in U.S. corporations), at the same time that new money is being created at a tremendous rate to finance consumption and speculation, while new capital formation goes begging. Within the binary framework, consistent with the Banking Principle, both consumption and speculation should be financed out of existing savings and current income, while new capital formation is financed by the expansion of commercial bank credit, discounting of bills among merchants, and the rediscounting of merchant's and banker's acceptances at the central bank.
Still, from the perspective of binary economics, there are a few things wrong with Moulton's analysis, or at least a few things are left out. We would dispute, for example, his implicit assumption that most people necessarily gain their income by selling their labor in the wage system, and the idea that technological progress increases "man-hour productivity."
There is, however, no quarrel with Moulton's conclusions: that expansion in industrial and commercial capital has the potential to more than make up for the loss of free access to landed capital, and there is no reason to finance either speculation or consumption through the creation of new money — such as provided the trigger for the Panic of 1873, the Panic of 1893, the Panic of 1907, the Crash of 1929, and the home mortgage crisis of 2007.
Evidently trapped by the wage system assumption (instead of the past savings assumption), Moulton did not make the leap that Louis Kelso did and observe that, if land was no longer freely available . . . why not open up equally free access to the means of acquiring and possessing private property in industrial and commercial capital — financed by expansion of commercial bank credit? In this, the analysis of Goetz Briefs is more useful, and more consistent, both with Kelso and with Pope Pius XI. Briefs was a labor economist who was a student of Father Heinrich Pesch, S.J., and a member of the Königswinterkreis discussion group headed by Father Oswald von Nel Breuning, S.J., who ended up as chairman of the economics department of Georgetown University.
In The Proletariat: A Challenge to Western Civilization (1937), Briefs's contention was that the operation of laissez faire capitalism stripped workers of ownership, making them dependents of their employers. To try to maintain the status quo, the Welfare State came into being, forcing the great mass of people into a condition of wage slavery and dependency on the State, at the same time gradually eroding standard of living as the State tried to make up for the loss of the value of labor by redistribution and manipulating the currency.
Moulton's analysis did not take into account the effect of the loss of small ownership of capital. He viewed the economy in aggregate as a macro-economist and, in common with every other Banking Principle adherent with the exception of Kelso (e.g., Law, Smith, Thornton, Say, Fullarton), apparently didn't see the importance of widespread ownership, even though he described in detail the means to finance it.
On the other hand, Briefs, like von Thünen, Cobbett, Morrison, Leo XIII and Pius XI saw the importance of widespread ownership of capital . . . but had no idea how to finance it except by cutting consumption and accumulating money savings.
The Keynesians, like Alvin H. Hansen, "the American Keynes" who helped engineer the New Deal, see no problem with increasing public debt in order to finance welfare and entitlements. For their part, both Moulton and Briefs saw ultimate disaster in spending without producing — but never came together to come up with a sound and lasting solution.
Kelso's genius, in part, lay in combining two strains of thought that seem almost unbelievably obvious to any binary economist . . . once Kelso pointed it out.
#30#
As regular readers of this blog are aware (and, if they're not, they should be), binary economics, in contrast to the three mainstream schools of economics (Keynesian, Monetarist/Chicago and Austrian) and virtually all of the not-so-mainstream schools, adheres to the Banking Principle.
Briefly (hear, hear!), the Currency Principle is that "money" consists solely of coin, currency, demand deposits and some time deposits, and that "saving" is defined strictly as cutting consumption. This means that all other means of carrying out exchange, i.e., bills of exchange, are not considered, Say's Law of Markets is redefined or negated, and its application in the real bills doctrine is rejected.
The Banking Principle is that "money" is anything that can be used to settle a debt, and "saving" equals investment. Stretching a point almost to the breaking and including speculation — gains realized from holding an asset rather than putting it to productive use — under "investment," yes, cash stuffed in a sock and hidden in a mattress for security is, technically, an "investment" in hoarding or, at least, working capital. It's a dumb investment if carried to extremes, but still an investment, albeit one that doesn't of its nature generate a stream of income.
Under the Banking Principle Say's Law of Markets is defined in its fullness, and its application in the real bills doctrine validated. "Investment" (real investment, that is, that generates a stream of income) can thus be financed not by cutting consumption, but by drawing a bill on the present value of a future capital project, and redeeming the bill when the capital is up and running and generates profits sufficient to pay for itself.
Dr. Furstenberg's article accurately detailed the problems that occurred in the United States as ownership of industrial and commercial capital became increasingly concentrated following the Civil War. The Homestead Act staved off concentrated ownership of landed capital for a few decades, but by 1893 Frederick Jackson Turner could claim that the end of "free" land meant the end of democracy by ending easy access to capital ownership.
The Panic of 1893 and the resulting Great Depression of 1893-1898 were a graphic demonstration of the dangers to both political and economic democracy inherent in concentrated capital ownership. When most people have only their labor to sell and labor is being displaced by advancing technology, power concentrates in owners of capital, not labor. The Panic of 1893 also exposed the serious weaknesses of the financial system . . . and the concentrated control of money and credit dictated by widespread acceptance of the Currency Principle that was congealed into law in Great Britain with the Bank Charter Act of 1844, and in the United States with the National Bank Act of 1863.
As we've said a number of times on this blog, however, we adhere to the Banking Principle. Thus, one of our Faithful Readers sent us a link to Dr. Furstenberg's article with the comment,
Here is an historical perspective on our current financial downturn, from an apologist for the welfare state. Furstenberg views the rise of the welfare state as the natural and necessary response to the Great Depression/s of the late 1800s, brought on by the same kind of monopolist and speculative activities in the banking and securities industries as brought on our present day global financial meltdown. Just curious, how does his analysis jibe with Harold Moulton's study?
I think we've also commented several times on how much we like it when we don't have to think up a topic for the daily blog posting. Another thing we like is when we can answer pretty much off the top of our collective head. Here goes.
Moulton did not address this issue directly. In his discussion of the Panic of 1893 and the resultant Great Depression in Financial Organization and the Economic System (1938), he only noted that Populist focus on the "silver question" during William Jennings Bryan's 1896 campaign for president derailed any efforts toward genuine reform of the financial system, while the recovery of 1897-1898 seemed to make the issue irrelevant. The failure of reform also made the Panic of 1907 seemingly inevitable as a result of the growing concentration of control over money and credit, mostly in the hands of J. P. Morgan.
Moulton did, however, address the issue of the loss of the frontier, and hinted that, contrary to Turner's thesis, it did not have to mean the end of democracy. Probably not coincidentally, Turner's thesis was seemingly confirmed by the Great Depression of the 1890s. Similarly, the Great Depression of the 1930s apparently validated the idea of the "mature economy" that sprung up after the Crash of 1929. Now, the current "Great Depression III" seems to confirm Furstenberg's claim that the Welfare State is a necessary adjunct to the growing wealth gap and the increasing disconnect of the financial markets from the productive sector. From the perspective of binary economics, of course, the real problem is lack of democratic access to capital credit to finance widespread ownership of capital.
Responding to the late 19th century claim (probably inspired by Turner) that the loss of geographical expansion meant the end of expanding markets, and the idea in the 1930s that the developed nations of the world had "mature economies" and must accept lower rates of growth unless subsidized by government, Moulton countered,
"These observers, like the present-day adherents of the mature economy philosophy, overlooked the vast continuing potentialities for intensive capital development. In the great new era of expansion which followed, intensive industrialization, together with some new industries, offered larger outlets for investment than had been furnished by the previous period of geographical expansion across wide continental areas.
"The capital requirements over the next generation loom fully as large as those of any preceding period. On the basis of projected population trends, some authorities estimate that the United States may have by 1980 as many as 187 million inhabitants [227 million, actually — Moulton used the lower rates of growth during the Great Depression for his projection]. To supply the primary needs of the additional population, and at the same time to raise the standards of living of the entire population, say, 100 per cent, would require a much larger annual capital expansion than we have had during any comparable period in the past. In making this statement allowance is made for the usual rate of increase in man-hour productivity resulting from technical progress. The realization of the production program involved in this expansion would necessitate the employment (on a 40-hour week basis) of a larger proportion of the total population than was employed in 1929." (Harold G. Moulton, The New Philosophy of Public Debt. Washington, DC: The Brookings Institution, 1943, 27-28.)
Addressing the disconnect between productive activity and the financial markets that seems inevitable within the Currency Principle framework dictated by Walter Bagehot (that is, the growth of speculation as opposed to true investment) and described in Lombard Street (1873) — and thus the presumed "independence" of private sector corporations from the capital markets — Moulton noted, "It may possibly be that dependence upon the capital market for expansion money is decreasing — that an ever-larger proportion is being obtained from undistributed earnings; but there is no evidence to support this conclusion." (Ibid., 38.)
As Moulton pointed out in The Formation of Capital (1935), it's not a question of a fixed "supply of loanable funds" determined by reductions in consumption being allocated among consumption, investment, and speculation. Rather, the problem — especially today — is that savings are being hoarded (according to a Reuters report a few months ago, nearly $2 trillion in cash is sitting idle in U.S. corporations), at the same time that new money is being created at a tremendous rate to finance consumption and speculation, while new capital formation goes begging. Within the binary framework, consistent with the Banking Principle, both consumption and speculation should be financed out of existing savings and current income, while new capital formation is financed by the expansion of commercial bank credit, discounting of bills among merchants, and the rediscounting of merchant's and banker's acceptances at the central bank.
Still, from the perspective of binary economics, there are a few things wrong with Moulton's analysis, or at least a few things are left out. We would dispute, for example, his implicit assumption that most people necessarily gain their income by selling their labor in the wage system, and the idea that technological progress increases "man-hour productivity."
There is, however, no quarrel with Moulton's conclusions: that expansion in industrial and commercial capital has the potential to more than make up for the loss of free access to landed capital, and there is no reason to finance either speculation or consumption through the creation of new money — such as provided the trigger for the Panic of 1873, the Panic of 1893, the Panic of 1907, the Crash of 1929, and the home mortgage crisis of 2007.
Evidently trapped by the wage system assumption (instead of the past savings assumption), Moulton did not make the leap that Louis Kelso did and observe that, if land was no longer freely available . . . why not open up equally free access to the means of acquiring and possessing private property in industrial and commercial capital — financed by expansion of commercial bank credit? In this, the analysis of Goetz Briefs is more useful, and more consistent, both with Kelso and with Pope Pius XI. Briefs was a labor economist who was a student of Father Heinrich Pesch, S.J., and a member of the Königswinterkreis discussion group headed by Father Oswald von Nel Breuning, S.J., who ended up as chairman of the economics department of Georgetown University.
In The Proletariat: A Challenge to Western Civilization (1937), Briefs's contention was that the operation of laissez faire capitalism stripped workers of ownership, making them dependents of their employers. To try to maintain the status quo, the Welfare State came into being, forcing the great mass of people into a condition of wage slavery and dependency on the State, at the same time gradually eroding standard of living as the State tried to make up for the loss of the value of labor by redistribution and manipulating the currency.
Moulton's analysis did not take into account the effect of the loss of small ownership of capital. He viewed the economy in aggregate as a macro-economist and, in common with every other Banking Principle adherent with the exception of Kelso (e.g., Law, Smith, Thornton, Say, Fullarton), apparently didn't see the importance of widespread ownership, even though he described in detail the means to finance it.
On the other hand, Briefs, like von Thünen, Cobbett, Morrison, Leo XIII and Pius XI saw the importance of widespread ownership of capital . . . but had no idea how to finance it except by cutting consumption and accumulating money savings.
The Keynesians, like Alvin H. Hansen, "the American Keynes" who helped engineer the New Deal, see no problem with increasing public debt in order to finance welfare and entitlements. For their part, both Moulton and Briefs saw ultimate disaster in spending without producing — but never came together to come up with a sound and lasting solution.
Kelso's genius, in part, lay in combining two strains of thought that seem almost unbelievably obvious to any binary economist . . . once Kelso pointed it out.
#30#
Monday, July 18, 2011
Economic Recovery, Part XII: The Formation of Capital (7)
The current debt crisis, perhaps oversimplified somewhat as a conflict between raising the debt ceiling v. cutting costs, reveals the weakness inherent in the Currency Principle of finance. The Currency Principle defines "money" as a general claim on all the wealth in the economy. Keynesians, Monetarists and Austrians disagree on the source of money (e.g., the State or the private sector) and how or if it should be managed, but all agree that coin, currency, demand deposits and some time deposits constitute the money supply.
There are a number of problems with the Currency Principle. As regular readers of this blog are aware, we've been attempting to deal with these problems, but keep coming up against the problem of definition. Nevertheless, let's make another attempt to clarify matters.
First, let's look at the definition of money used: "a general claim on all the wealth in the economy." The most obvious error here is the evident confusion between "general" and "fungible." Currency Principle adherents mistake the fact that one unit of currency is legally indistinguishable from any other unit, with the belief that the terms of the contract that creates money does not have any specific "matter" — that the terms of the contract presumably change with circumstances surrounding a particular transaction.
We can deal with this confusion easily enough. The fact that a financial instrument can be conveyed to a holder in due course in a transaction without indorsement (as is the case with a coin or banknote) in no way negates the obligation of the original issuer of the instrument to make good on that instrument when presented for redemption by a holder in due course. Depending on the specific terms of the contract, the issuer must redeem the instrument in some way when it is presented.
Even the U.S. government pledges to accept Federal Reserve Notes, that it backs with its "full faith and credit," in payment of debts. The notes are not convertible, that is, the holder in due course does not have the right to demand the specific "assets" (government debt paper) that back the notes and demand deposits. Nevertheless, the United States government, the de facto issuer of the notes and creator of the demand deposits, must accept its own obligations to redeem debts due to it, although the specific form — i.e., Federal Reserve Note, personal check, or credit card — may vary. The form is irrelevant, as long as whatever instrument is used is redeemable (if not necessarily redeemed) in Federal Reserve Notes that are backed by government debt.
The case is slightly different under the Banking Principle, where private sector hard assets instead of government debt back the notes and demand deposits. In that case, the original issuer is obligated to "make good" on the notes by repaying the loan — redeeming the bill of exchange — that created the money in the first place. In a sound and properly run economy, the note is redeemed out of the profits realized by producing marketable goods and services with the capital that was financed with the proceeds of the loan.
Thus, currency is not "general," but "fungible" — something entirely different, but which evidently confuses a great many people. No issuer of a currency or anything else used as money can enter into the contract unilaterally — that is, impose a general obligation on persons who are not parties to the original contract. The issuer of a currency can, however, make the obligation fungible, that is, every promise, regardless who the holder in due course may be, must be redeemed by the issuer when promised.
#30#
There are a number of problems with the Currency Principle. As regular readers of this blog are aware, we've been attempting to deal with these problems, but keep coming up against the problem of definition. Nevertheless, let's make another attempt to clarify matters.
First, let's look at the definition of money used: "a general claim on all the wealth in the economy." The most obvious error here is the evident confusion between "general" and "fungible." Currency Principle adherents mistake the fact that one unit of currency is legally indistinguishable from any other unit, with the belief that the terms of the contract that creates money does not have any specific "matter" — that the terms of the contract presumably change with circumstances surrounding a particular transaction.
We can deal with this confusion easily enough. The fact that a financial instrument can be conveyed to a holder in due course in a transaction without indorsement (as is the case with a coin or banknote) in no way negates the obligation of the original issuer of the instrument to make good on that instrument when presented for redemption by a holder in due course. Depending on the specific terms of the contract, the issuer must redeem the instrument in some way when it is presented.
Even the U.S. government pledges to accept Federal Reserve Notes, that it backs with its "full faith and credit," in payment of debts. The notes are not convertible, that is, the holder in due course does not have the right to demand the specific "assets" (government debt paper) that back the notes and demand deposits. Nevertheless, the United States government, the de facto issuer of the notes and creator of the demand deposits, must accept its own obligations to redeem debts due to it, although the specific form — i.e., Federal Reserve Note, personal check, or credit card — may vary. The form is irrelevant, as long as whatever instrument is used is redeemable (if not necessarily redeemed) in Federal Reserve Notes that are backed by government debt.
The case is slightly different under the Banking Principle, where private sector hard assets instead of government debt back the notes and demand deposits. In that case, the original issuer is obligated to "make good" on the notes by repaying the loan — redeeming the bill of exchange — that created the money in the first place. In a sound and properly run economy, the note is redeemed out of the profits realized by producing marketable goods and services with the capital that was financed with the proceeds of the loan.
Thus, currency is not "general," but "fungible" — something entirely different, but which evidently confuses a great many people. No issuer of a currency or anything else used as money can enter into the contract unilaterally — that is, impose a general obligation on persons who are not parties to the original contract. The issuer of a currency can, however, make the obligation fungible, that is, every promise, regardless who the holder in due course may be, must be redeemed by the issuer when promised.
#30#
Friday, July 15, 2011
News from the Network, Vol. 4, No. 28
Most of the attention this week has been focused on the battle over raising or not raising the debt ceiling. From a Just Third Way perspective, of course, the solution is to implement Capital Homesteading at the earliest possible date, rebuild America's (and the world's) economic base, and start getting rid of all the debt. In the interim, yes, raise the debt ceiling — but then work like the dickens to lower it again. In that direction, this is what we've been doing for the past week:
• A major CESJ publication, Supporting Life: The Case for a Pro-Life Economic Agenda, is now available on Kindle in a special 99¢ edition. It's been up only a few days, and, according to Amazon, is already beginning to sell.
• Universal Values Media, Inc., a for-profit CESJ supporter, has published three works (two "novellas" or short novels and a collection of short stories) in Kindle and that are currently available on Amazon, all three for 99¢ each. The author, Matt Gray, is donating all royalties from the sale of these books to CESJ. They are The Missteps of Melanie: A Chapter Play
(novella), There's One Reborn Every Minute
(novella), and Diamonds in the Sky with Lucy and Other Stories
(short stories). For some reason the cover images aren't showing up for these books, but the books can still be purchased. CESJ will receive approximately 35¢ for every sale.
• Norman Kurland was up on the Hill yesterday for some meetings arranged by Jimmy Griffin, who is also working to organize a CESJ chapter in Connecticut. Norm reported that the meetings were very positive, with no negatives being expressed. One of the goals of the meetings was to get key people in Washington to realize that Capital Homesteading as a quid pro quo for raising the debt ceiling may be the most realistic solution to the current stalemate.
• CESJ friend the Reverend C. John McCloskey III is celebrating his thirtieth anniversary of his ordination next week. CESJ extends the congratulations of its core group and all members in recognition of Father McCloskey's long service.
• On Tuesday and Wednesday of this week the CESJ core group had a series of meetings with renowned cartoonist Bert Dodson and his friend David Kelly to discuss some possible projects involving the promotion of the Just Third Way and Capital Homesteading. Bert expressed great interest in the ideas and stated that he has been given a great deal to think about.
• As of this morning, we have had visitors from 46 different countries and 47 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Australia, the Philippines, Canada, and the UK. People in Portugal, India, Mauritius, Mexico and Canada spent the most average time on the blog. The most popular posting this past week was "Aristotle on Private Property." "Thomas Hobbes on Private Property" was next, followed by "Nader Kindles Fires of Revolt," "Why the Old Jobs Aren't Coming Back," and the sixth posting on "Economic Recovery."
Those are the happenings for this week, at least 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 anyway, so we'll see it before it goes up.
#30#
• A major CESJ publication, Supporting Life: The Case for a Pro-Life Economic Agenda, is now available on Kindle in a special 99¢ edition. It's been up only a few days, and, according to Amazon, is already beginning to sell.
• Universal Values Media, Inc., a for-profit CESJ supporter, has published three works (two "novellas" or short novels and a collection of short stories) in Kindle and that are currently available on Amazon, all three for 99¢ each. The author, Matt Gray, is donating all royalties from the sale of these books to CESJ. They are The Missteps of Melanie: A Chapter Play
(novella), There's One Reborn Every Minute (novella), and Diamonds in the Sky with Lucy and Other Stories (short stories). For some reason the cover images aren't showing up for these books, but the books can still be purchased. CESJ will receive approximately 35¢ for every sale.• Norman Kurland was up on the Hill yesterday for some meetings arranged by Jimmy Griffin, who is also working to organize a CESJ chapter in Connecticut. Norm reported that the meetings were very positive, with no negatives being expressed. One of the goals of the meetings was to get key people in Washington to realize that Capital Homesteading as a quid pro quo for raising the debt ceiling may be the most realistic solution to the current stalemate.
• CESJ friend the Reverend C. John McCloskey III is celebrating his thirtieth anniversary of his ordination next week. CESJ extends the congratulations of its core group and all members in recognition of Father McCloskey's long service.
• On Tuesday and Wednesday of this week the CESJ core group had a series of meetings with renowned cartoonist Bert Dodson and his friend David Kelly to discuss some possible projects involving the promotion of the Just Third Way and Capital Homesteading. Bert expressed great interest in the ideas and stated that he has been given a great deal to think about.
• As of this morning, we have had visitors from 46 different countries and 47 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Australia, the Philippines, Canada, and the UK. People in Portugal, India, Mauritius, Mexico and Canada spent the most average time on the blog. The most popular posting this past week was "Aristotle on Private Property." "Thomas Hobbes on Private Property" was next, followed by "Nader Kindles Fires of Revolt," "Why the Old Jobs Aren't Coming Back," and the sixth posting on "Economic Recovery."
Those are the happenings for this week, at least 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 anyway, so we'll see it before it goes up.
#30#
Thursday, July 14, 2011
Eye . . . or Nay of the Tiger?
In this morning's Wall Street Journal, David C. McCourt, Economist in Residence at the University of Southern California and who is on the board of University College in Dublin, Éire, published an op-ed relating to the recent downgrade of Irish government bonds to "junk" grade. ("Let the Celtic Tiger Roar Again," WSJ, 07/14/11, A17.)
According to Dr. McCourt, all that is necessary (okay, not all, we don't want to make his proposal sound simplistic) is for Éire "to recapitalize its banks and cut their debt burden." The idea is to emulate what was done following the savings and loan crisis in the U.S. in the 1980s . . . brought on by the partial repeal of Glass-Steagall: "require the European Central Bank — the Irish banks' largest single creditor — to work with the Irish government, maybe even accepting a debt-for-equity swap. In other words, the EU needs to bet on Ireland's future by becoming a shareholder."
This is close enough to the real solution to be credible. There are, however, two things wrong with it, both of them directly opposed to fundamental principles of sound finance and the Just Third Way. Debt for equity is a viable strategy. It's used in bankruptcy all the time, where existing shareholders lose most if not all of their ownership, and creditors take over, exchanging their debt for equity. So what's wrong with the European Union taking equity in exchange for the near-worthless debt?
Plenty.
First, if we understand the situation, much if not all the debt is Irish government bonds. If restricted to its proper role, government produces no marketable goods or services. A debt-for-equity swap in a bankruptcy is consistent with the goal of keeping an otherwise viable business going so that it can produce marketable goods and services in the future, hopefully turning it back into a profitable enterprise. Since a government doesn't produce anything, it cannot be construed as a "profitable enterprise," and can only repay out of future taxes levied on productive citizens. A debt for equity swap under these circumstances is illegitimate since there is no viable business to keep going.
Second, government is not in business to make a profit. Government is an expense of the citizens. That's why they pay taxes — to meet the legitimate costs of government. As John Locke reminded us in his Second Treatise on Government (1689), "'Tis true, Governments cannot be supported without great Charge, and 'tis fit every one who enjoys his share of the Protection, should pay out of his Estate his proportion for the maintenance of it." (§ 140.) The problem is that debt financing by government by means of emitting bills of credit instead of borrowing from existing private sector savings induces inflation, a "hidden tax" by means of which, as Henry C. Adams pointed out in Public Debts: An Essay in the Science of Finance (1898), politicians are able to evade their responsibilities and undermine the political foundations of the State:
"As self-government was secured through a struggle for mastery over the public purse, so must it be maintained through the exercise by the people of complete control over public expenditure. Money is the vital principle of the body politic; the public treasury is the heart of the state; control over public supplies means control over public affairs. Any method of procedure, therefore, by which a public servant can veil the true meaning of his acts, or which allows the government to enter upon any great enterprise without bringing the fact fairly to the knowledge of the public, must work against the realization of the constitutional idea. This is exactly the state of affairs introduced by a free use of public credit. Under ordinary circumstances, popular attention can not be drawn to public acts, except they touch the pocket of the voters through an increase in taxes; and it follows that a government whose expenditures are met by resort to loans may, for a time, administer affairs independently of those who must finally settle the account." (22-23.)
Thus, as Locke continued § 140 in the Second Treatise, "But still it must be with his own Consent, i.e., the Consent of the Majority, given it either by themselves, or their Representatives chosen by them. For if any one shall claim a Power to lay and levy Taxes on the People, by his own Authority, and without such consent of the People, he thereby invades the Fundamental Law of Property, and subverts the end of Government. For what property have I in that which another may by right take, when he pleases to himself?" (Second Treatise, loc. cit.)
We necessarily conclude that emitting bills of credit allows a government to finance operations without resorting to taxation. This renders the government unaccountable to the people who eventually are stuck paying the bill. As a case in point, the United States government has not been out of debt since 1835 (Harold Moulton, The New Philosophy of Public Debt. Washington, DC: The Brookings Institution, 1943, 51). The politicians who, during the administration of Andrew Jackson, spent the money that is still not repaid, are completely unaccountable to the taxpayer of today. True, the national debt from the 1830s is, compared to the $14 trillion plus we're faced with today is a drop in the bucket — but we still have to pay for what people long-dead spent.
Third and finally, this is not a real plan to turn things around. What is needed is something to get the government out of debt, and the citizens — not the State — put into the position of equity owners. This will allow ordinary people to produce marketable goods and services for a profit, not the State to manipulate the economy for political ends. To this end, pundits like Dr. McCourt should be investigating Capital Homesteading, not proposing even greater growth of the public sector at the expense of the private sector.
#30#
According to Dr. McCourt, all that is necessary (okay, not all, we don't want to make his proposal sound simplistic) is for Éire "to recapitalize its banks and cut their debt burden." The idea is to emulate what was done following the savings and loan crisis in the U.S. in the 1980s . . . brought on by the partial repeal of Glass-Steagall: "require the European Central Bank — the Irish banks' largest single creditor — to work with the Irish government, maybe even accepting a debt-for-equity swap. In other words, the EU needs to bet on Ireland's future by becoming a shareholder."
This is close enough to the real solution to be credible. There are, however, two things wrong with it, both of them directly opposed to fundamental principles of sound finance and the Just Third Way. Debt for equity is a viable strategy. It's used in bankruptcy all the time, where existing shareholders lose most if not all of their ownership, and creditors take over, exchanging their debt for equity. So what's wrong with the European Union taking equity in exchange for the near-worthless debt?
Plenty.
First, if we understand the situation, much if not all the debt is Irish government bonds. If restricted to its proper role, government produces no marketable goods or services. A debt-for-equity swap in a bankruptcy is consistent with the goal of keeping an otherwise viable business going so that it can produce marketable goods and services in the future, hopefully turning it back into a profitable enterprise. Since a government doesn't produce anything, it cannot be construed as a "profitable enterprise," and can only repay out of future taxes levied on productive citizens. A debt for equity swap under these circumstances is illegitimate since there is no viable business to keep going.
Second, government is not in business to make a profit. Government is an expense of the citizens. That's why they pay taxes — to meet the legitimate costs of government. As John Locke reminded us in his Second Treatise on Government (1689), "'Tis true, Governments cannot be supported without great Charge, and 'tis fit every one who enjoys his share of the Protection, should pay out of his Estate his proportion for the maintenance of it." (§ 140.) The problem is that debt financing by government by means of emitting bills of credit instead of borrowing from existing private sector savings induces inflation, a "hidden tax" by means of which, as Henry C. Adams pointed out in Public Debts: An Essay in the Science of Finance (1898), politicians are able to evade their responsibilities and undermine the political foundations of the State:
"As self-government was secured through a struggle for mastery over the public purse, so must it be maintained through the exercise by the people of complete control over public expenditure. Money is the vital principle of the body politic; the public treasury is the heart of the state; control over public supplies means control over public affairs. Any method of procedure, therefore, by which a public servant can veil the true meaning of his acts, or which allows the government to enter upon any great enterprise without bringing the fact fairly to the knowledge of the public, must work against the realization of the constitutional idea. This is exactly the state of affairs introduced by a free use of public credit. Under ordinary circumstances, popular attention can not be drawn to public acts, except they touch the pocket of the voters through an increase in taxes; and it follows that a government whose expenditures are met by resort to loans may, for a time, administer affairs independently of those who must finally settle the account." (22-23.)
Thus, as Locke continued § 140 in the Second Treatise, "But still it must be with his own Consent, i.e., the Consent of the Majority, given it either by themselves, or their Representatives chosen by them. For if any one shall claim a Power to lay and levy Taxes on the People, by his own Authority, and without such consent of the People, he thereby invades the Fundamental Law of Property, and subverts the end of Government. For what property have I in that which another may by right take, when he pleases to himself?" (Second Treatise, loc. cit.)
We necessarily conclude that emitting bills of credit allows a government to finance operations without resorting to taxation. This renders the government unaccountable to the people who eventually are stuck paying the bill. As a case in point, the United States government has not been out of debt since 1835 (Harold Moulton, The New Philosophy of Public Debt. Washington, DC: The Brookings Institution, 1943, 51). The politicians who, during the administration of Andrew Jackson, spent the money that is still not repaid, are completely unaccountable to the taxpayer of today. True, the national debt from the 1830s is, compared to the $14 trillion plus we're faced with today is a drop in the bucket — but we still have to pay for what people long-dead spent.
Third and finally, this is not a real plan to turn things around. What is needed is something to get the government out of debt, and the citizens — not the State — put into the position of equity owners. This will allow ordinary people to produce marketable goods and services for a profit, not the State to manipulate the economy for political ends. To this end, pundits like Dr. McCourt should be investigating Capital Homesteading, not proposing even greater growth of the public sector at the expense of the private sector.
#30#
Wednesday, July 13, 2011
The Money is There . . . Maybe
Since the Social Security Administration was instituted in 1935, participants have been told that the monies collected are deposited in a trust fund. When the time comes for them to retire, the money that they have paid in, plus the earnings on that money, will be used to pay their benefits. The impression given is that your Social Security Account is similar to a bank account, into which you deposit money, the money earns interest, and then is paid out when you become eligible for benefits. Whenever some pundit or politician claims that the Social Security system is bankrupt, or might not be able to meet its future obligations, we are instantly assured that "the money is there."
When President Obama stated that Social Security checks might not be paid, he may not have realized what he said, but he burst the bubble that has been keeping the system going for the past three-quarters of a century. By saying that the checks might not go out, the president contradicted what we've been told over and over again: that the Social Security Administration couldn't possibly be in trouble. The Trust Fund is intact. The money is there.
So, Mr. Obama . . . if the money is there, why are you threatening to withhold payments until your demands are met? Your statement is blackmail, an admission that the money is not there, or a little bit of both. What's the story?
Frankly, the money is not there, despite the fact that we have reassured of the contrary for nearly three generations. Instead, what is there is a pile of government debt, which was used to replace the cash that was collected. To make a long story short, in order to pay out the Social Security benefits that have been promised — and which the government has assured the American people for decades is absolutely safe — the government is going to have to go further in to debt, start collecting taxes to redeem the debt that the Trust Fund already holds, or sell the debt to China . . . if they would buy it. As we've said on this blog before, for every dollar paid out in Social Security benefits, at least two dollars, probably more to pay the interest, have to be collected in taxes.
This is not a bargain.
Now, we're not saying that Social Security should be terminated. Promises have been made, and they must be kept. What we're saying is that Social Security isn't quite as secure as it might be. Nor is it — or has it ever been — adequate to provide more than a near-base subsistence for people who have paid into it for decades.
The real problem is that the government can no longer continue to run on debt. The bill is coming due, and the president himself, for all he doesn't seem to realize it, has admitted that the Social Security system has been bankrupt from the beginning. You don't collect money for one purpose, borrow it from yourself and spend it for something else, and then claim that the money is still there.
True, President Obama is clearly using this as a threat that he cannot make good on, but the implications of it go far beyond the usual political blackmail. The stalemate over the debt is such that anything done within the current framework can only be a temporary stopgap. The problem is not going to go away, nor will it be solved simply by continuing to do what has been done before.
So what's the real solution? If you're a regular reader of this blog, you already know the answer, and it's an answer both to the bankruptcy of Social Security and the debt crisis: Capital Homesteading by 2012.
#30#
When President Obama stated that Social Security checks might not be paid, he may not have realized what he said, but he burst the bubble that has been keeping the system going for the past three-quarters of a century. By saying that the checks might not go out, the president contradicted what we've been told over and over again: that the Social Security Administration couldn't possibly be in trouble. The Trust Fund is intact. The money is there.
So, Mr. Obama . . . if the money is there, why are you threatening to withhold payments until your demands are met? Your statement is blackmail, an admission that the money is not there, or a little bit of both. What's the story?
Frankly, the money is not there, despite the fact that we have reassured of the contrary for nearly three generations. Instead, what is there is a pile of government debt, which was used to replace the cash that was collected. To make a long story short, in order to pay out the Social Security benefits that have been promised — and which the government has assured the American people for decades is absolutely safe — the government is going to have to go further in to debt, start collecting taxes to redeem the debt that the Trust Fund already holds, or sell the debt to China . . . if they would buy it. As we've said on this blog before, for every dollar paid out in Social Security benefits, at least two dollars, probably more to pay the interest, have to be collected in taxes.
This is not a bargain.
Now, we're not saying that Social Security should be terminated. Promises have been made, and they must be kept. What we're saying is that Social Security isn't quite as secure as it might be. Nor is it — or has it ever been — adequate to provide more than a near-base subsistence for people who have paid into it for decades.
The real problem is that the government can no longer continue to run on debt. The bill is coming due, and the president himself, for all he doesn't seem to realize it, has admitted that the Social Security system has been bankrupt from the beginning. You don't collect money for one purpose, borrow it from yourself and spend it for something else, and then claim that the money is still there.
True, President Obama is clearly using this as a threat that he cannot make good on, but the implications of it go far beyond the usual political blackmail. The stalemate over the debt is such that anything done within the current framework can only be a temporary stopgap. The problem is not going to go away, nor will it be solved simply by continuing to do what has been done before.
So what's the real solution? If you're a regular reader of this blog, you already know the answer, and it's an answer both to the bankruptcy of Social Security and the debt crisis: Capital Homesteading by 2012.
#30#
Tuesday, July 12, 2011
An Old Philosophy of Public Debt and Taxes
One of the points stressed in Dr. Harold G. Moulton's The Formation of Capital (1935) is that the demand for capital — which presumably creates the jobs that allegedly keep the economy running . . . such as it is . . . is derived from consumer demand. In English, that means that if people like you and me aren't buying things like food, clothing and shelter, there is no incentive for other people to provide food, clothing and shelter, and thus no reason to invest in new capital formation to keep the supply of marketable goods and services coming.
The obvious conclusion to this observation is that anything that causes the real value of personal income to decline — such as inflation, job loss, debt service for past expenditures, and anything else that does not yield a direct, new benefit when the money is spent or the value held by the consumer otherwise diminished — consumption also declines. This requires either new or additional sources of income (additional production, since "production = income"), or manipulation of effective demand by inflating the currency to increase aggregate effective demand, but reducing it individually.
Thus, for example, the Keynesian concept of "forced savings" is a way that forces ordinary consumers to reduce consumption for the benefit of producers in the (false) belief that the only way to finance new capital formation. Individual wage earners and others on fixed incomes find their purchasing power reduced, but the slack is (presumably) taken up by the new jobs created as the result of the new capital formation. Thus, individual purchasing power is decreased, but in the aggregate is increased; an indirect redistribution of wealth from consumers to producers, and from producers to other consumers . . . after deductions along the way to meet costs.
In the Keynesian paradigm if insufficient new jobs are created by the process of new capital formation, the State steps in and redistributes wealth directly through the tax system, as Moulton explained in his 1943 book, The New Philosophy of Public Debt. Given that, with a permanently expanding — and non-repayable — public debt, taxation should (allegedly) not be necessary, the powers-that-be will still insist on taxing people. Why?
Were Moulton any less eminent, we might suspect him of sarcasm. Still, to make certain that the reader knows full well that he is not advocating the abolition of taxes in favor of a permanently expanded public debt and that the whole paradigm is fraught with contradictions, Moulton hastens to add, "These objectives, as we shall see, might be realized on a very low plane of taxation." (Ibid.) This tends to hint that Moulton knew very well that (1) meeting government expenditures by borrowing in anything but an emergency is a very, very bad thing, and (2) if borrowing were as sound and as good for the economy as the Keynesians made it out to be, why would it be necessary to continue to tax in order to fix everything that goes wrong because of debt financing?
The fact is that even if the whole of the money supply was made up of currency, bills and notes backed only by government debt created at will by the State, redistribution of existing wealth through the tax system is absolutely essential in the Keynesian paradigm. Keynesian economics requires concentrated ownership of the means of production in order to ensure that the rich — or the State — can accumulate sufficient savings to finance new capital formation. This, however, means that there will be insufficient demand existing in the economy unless (1) the currency is inflated, and (2) the tax system redistributes wealth. At the same time, the tax system has to be finagled to ensure that the rich retain enough wealth to finance new capital.
Nobody ever said any of this makes sense.
Anyway, all of this highlights the horror (speaking economically) of a news item that appeared in yesterday's New York Times: "Economy Faces a Jolt as Benefits Checks Run Out." As the article opens,
Thus, right in the middle of the current "recovery" (evidently fueled by government spending), the economy is going to take it right on the chin in the form of a decrease in effective consumer demand of $37 billion.
Recall that, as Moulton pointed out in The Formation of Capital, the demand for new capital — and thus job creation — depends on consumer demand. If consumer demand takes a nosedive, then no new capital formation takes place, and there are fewer, if any, new jobs. With the release of the "net new jobs" data for June last week (18,000, or, statistically, zero, the same as for May, with 25,000 new jobs), this will likely translate into more jobs lost as workers are laid off in response to the decrease in consumer demand.
The effects could be much worse than the 1936-1937 "Depression within the Depression" that hit the country with the failure of the New Deal and before the need for war production increased demand — and employment — dramatically. War production (against Keynes's advice) was financed by borrowing (actually, printing money), but even despite the increased debt of the New Deal, the country at that time still had substantial productive capacity to back up the government debt. Now, we're borrowed to the hilt and beyond, and productive capacity has, in many cases, shifted overseas.
It may be time to do more than "eat your peas." It may be time to start growing some.
Capital Homesteading by 2012.
#30#
The obvious conclusion to this observation is that anything that causes the real value of personal income to decline — such as inflation, job loss, debt service for past expenditures, and anything else that does not yield a direct, new benefit when the money is spent or the value held by the consumer otherwise diminished — consumption also declines. This requires either new or additional sources of income (additional production, since "production = income"), or manipulation of effective demand by inflating the currency to increase aggregate effective demand, but reducing it individually.
Thus, for example, the Keynesian concept of "forced savings" is a way that forces ordinary consumers to reduce consumption for the benefit of producers in the (false) belief that the only way to finance new capital formation. Individual wage earners and others on fixed incomes find their purchasing power reduced, but the slack is (presumably) taken up by the new jobs created as the result of the new capital formation. Thus, individual purchasing power is decreased, but in the aggregate is increased; an indirect redistribution of wealth from consumers to producers, and from producers to other consumers . . . after deductions along the way to meet costs.
In the Keynesian paradigm if insufficient new jobs are created by the process of new capital formation, the State steps in and redistributes wealth directly through the tax system, as Moulton explained in his 1943 book, The New Philosophy of Public Debt. Given that, with a permanently expanding — and non-repayable — public debt, taxation should (allegedly) not be necessary, the powers-that-be will still insist on taxing people. Why?
That a reorientation of thought with respect to tax policy would be necessary is suggested in a statement already quoted: "Once freed from the obsolete concept of the balanced budget, the larger uses of federal taxes can be creatively explored." The suggested creative purposes are: (1) To regulate the distribution of income; and (2) to prevent inflation in periods of full employment. (Harold G. Moulton, The New Philosophy of Public Debt
Were Moulton any less eminent, we might suspect him of sarcasm. Still, to make certain that the reader knows full well that he is not advocating the abolition of taxes in favor of a permanently expanded public debt and that the whole paradigm is fraught with contradictions, Moulton hastens to add, "These objectives, as we shall see, might be realized on a very low plane of taxation." (Ibid.) This tends to hint that Moulton knew very well that (1) meeting government expenditures by borrowing in anything but an emergency is a very, very bad thing, and (2) if borrowing were as sound and as good for the economy as the Keynesians made it out to be, why would it be necessary to continue to tax in order to fix everything that goes wrong because of debt financing?
The fact is that even if the whole of the money supply was made up of currency, bills and notes backed only by government debt created at will by the State, redistribution of existing wealth through the tax system is absolutely essential in the Keynesian paradigm. Keynesian economics requires concentrated ownership of the means of production in order to ensure that the rich — or the State — can accumulate sufficient savings to finance new capital formation. This, however, means that there will be insufficient demand existing in the economy unless (1) the currency is inflated, and (2) the tax system redistributes wealth. At the same time, the tax system has to be finagled to ensure that the rich retain enough wealth to finance new capital.
Nobody ever said any of this makes sense.
Anyway, all of this highlights the horror (speaking economically) of a news item that appeared in yesterday's New York Times: "Economy Faces a Jolt as Benefits Checks Run Out." As the article opens,
Close to $2 of every $10 that went into Americans' wallets last year were payments like jobless benefits, food stamps, Social Security and disability, according to an analysis by Moody's Analytics. . . . By the end of this year, however, many of those dollars are going to disappear, with the expiration of extended benefits intended to help people cope with the lingering effects of the recession. Moody's Analytics estimates $37 billion will be drained from the nation's pocketbooks this year.
Thus, right in the middle of the current "recovery" (evidently fueled by government spending), the economy is going to take it right on the chin in the form of a decrease in effective consumer demand of $37 billion.
Recall that, as Moulton pointed out in The Formation of Capital, the demand for new capital — and thus job creation — depends on consumer demand. If consumer demand takes a nosedive, then no new capital formation takes place, and there are fewer, if any, new jobs. With the release of the "net new jobs" data for June last week (18,000, or, statistically, zero, the same as for May, with 25,000 new jobs), this will likely translate into more jobs lost as workers are laid off in response to the decrease in consumer demand.
The effects could be much worse than the 1936-1937 "Depression within the Depression" that hit the country with the failure of the New Deal and before the need for war production increased demand — and employment — dramatically. War production (against Keynes's advice) was financed by borrowing (actually, printing money), but even despite the increased debt of the New Deal, the country at that time still had substantial productive capacity to back up the government debt. Now, we're borrowed to the hilt and beyond, and productive capacity has, in many cases, shifted overseas.
It may be time to do more than "eat your peas." It may be time to start growing some.
Capital Homesteading by 2012.
#30#
Monday, July 11, 2011
"I'm Against It!"
In the epic 1932 film Horsefeathers, Groucho Marx plays the new president of Huxley College (after Thomas Henry Huxley), Quincy Adams Wagstaff. Groucho begins his career in academia by informing the assembled professors and students that, regardless what they are for, he's against it.
Sound familiar? It should. The ongoing debates over the debt ceiling and the bizarre arguments being presented all have one thing in common: they're all against something. They're against raising taxes, cutting spending, lowering benefits, whatever. It's very hard to determine just what anyone is for, much less what the solution is supposed to be. They talk about everything except how to get out of the hole they (and we) are in.
In this they're a bit like the four-page 1932 Time magazine review of Horsefeathers. Only a couple of paragraphs of the piece had anything to do with the plot of the movie or anything remotely connected with it. We get a lot about the Marx Brothers' private lives and careers, but no reason why we might actually want to see or not see the movie.
The rather strange Time magazine review of Horsefeathers does, however, have one great advantage over the current debates in Congress. A bad decision about viewing a movie will cost you, at most, a couple of bucks and a few hours of your time that you would probably have wasted, anyway. A bad decision about government spending and the failure to adopt a sound program of sustainable development like Capital Homesteading can destroy the country.
#30#
Sound familiar? It should. The ongoing debates over the debt ceiling and the bizarre arguments being presented all have one thing in common: they're all against something. They're against raising taxes, cutting spending, lowering benefits, whatever. It's very hard to determine just what anyone is for, much less what the solution is supposed to be. They talk about everything except how to get out of the hole they (and we) are in.
In this they're a bit like the four-page 1932 Time magazine review of Horsefeathers. Only a couple of paragraphs of the piece had anything to do with the plot of the movie or anything remotely connected with it. We get a lot about the Marx Brothers' private lives and careers, but no reason why we might actually want to see or not see the movie.
The rather strange Time magazine review of Horsefeathers does, however, have one great advantage over the current debates in Congress. A bad decision about viewing a movie will cost you, at most, a couple of bucks and a few hours of your time that you would probably have wasted, anyway. A bad decision about government spending and the failure to adopt a sound program of sustainable development like Capital Homesteading can destroy the country.
#30#
Friday, July 8, 2011
News from the Network, Vol. 4, No. 27
Panic in the streets — the financial, political, and academic powers-that-be were taken completely off-guard by the poor jobs data released this morning . . . after only years of consistently prating that the jobs situation is not going to get better any time soon. Of course, none of this was remembered during the usual stock market surge earlier in the week in anticipation of an allegedly improving jobs picture.
Of course, we could get away from this jobs and stock market obsession just by enacting a Capital Homestead Act . . . but if we did the sensible thing, what would we have to complain about, and who would we blame when things go wrong? We'd have no one but ourselves, and finally have to take responsibility for our own actions.
We're a great believer in personal responsibility — when something happens around here, we're usually responsible. So here's what we've been doing to advance the adoption of a Capital Homestead Act by 2012:
• We finished and sent off our response to the criticisms of Supporting Life: The Case for a Pro-Life Economic Agenda. Perhaps not surprisingly, the rebuttal of the items raised in the critique is almost half again as long as Supporting Life! Why? There were a number of fundamental issues raised that required going back to the root of the criticism — and that required in-depth analysis to a degree that would ordinarily not be the case. When we get the chance, we're planning on editing the response for release as a CESJ publication, but, as the response was written in the form of a letter, we have to remove some references to specific individuals to depersonalize it.
• At the same time, we expect to have the "Kindle" version of Supporting Life ready for submission to Amazon by early next week. If this experiment works, expect to see a lot more short pieces available in this popular format at a very low price.
• Today we submitted the paperwork to get CESJ publications distributed in Australia through our print on demand subcontractor.
• We've been re-reading Harold Moulton's 1943 essay, The New Philosophy of Public Debt. It's interesting to see how the justifications for an ever-increasing public debt have changed over the years, sometimes to the extent of directly contradicting the previous justification. Reading some of Moulton's sarcastic (for him) comments, however, we get the sense that the powers-that-be will say anything if the end result justifies what they want to do anyway.
• As of this morning, we have had visitors from 46 different countries and 46 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, the Philippines, Australia, and the UK. People in Venezuela, Portugal, Greece, India and Canada spent the most average time on the blog. The most popular posting this past week was "Aristotle on Private Property." "Thomas Hobbes on Private Property" dropped to second place, followed by "Nader Kindles Fires of Revolt," "Why the Old Jobs Aren't Coming Back," and the sixth posting on "Economic Recovery."
Those are the happenings for this week, at least 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 anyway, so we'll see it before it goes up.
#30#
Of course, we could get away from this jobs and stock market obsession just by enacting a Capital Homestead Act . . . but if we did the sensible thing, what would we have to complain about, and who would we blame when things go wrong? We'd have no one but ourselves, and finally have to take responsibility for our own actions.
We're a great believer in personal responsibility — when something happens around here, we're usually responsible. So here's what we've been doing to advance the adoption of a Capital Homestead Act by 2012:
• We finished and sent off our response to the criticisms of Supporting Life: The Case for a Pro-Life Economic Agenda. Perhaps not surprisingly, the rebuttal of the items raised in the critique is almost half again as long as Supporting Life! Why? There were a number of fundamental issues raised that required going back to the root of the criticism — and that required in-depth analysis to a degree that would ordinarily not be the case. When we get the chance, we're planning on editing the response for release as a CESJ publication, but, as the response was written in the form of a letter, we have to remove some references to specific individuals to depersonalize it.
• At the same time, we expect to have the "Kindle" version of Supporting Life ready for submission to Amazon by early next week. If this experiment works, expect to see a lot more short pieces available in this popular format at a very low price.
• Today we submitted the paperwork to get CESJ publications distributed in Australia through our print on demand subcontractor.
• We've been re-reading Harold Moulton's 1943 essay, The New Philosophy of Public Debt. It's interesting to see how the justifications for an ever-increasing public debt have changed over the years, sometimes to the extent of directly contradicting the previous justification. Reading some of Moulton's sarcastic (for him) comments, however, we get the sense that the powers-that-be will say anything if the end result justifies what they want to do anyway.
• As of this morning, we have had visitors from 46 different countries and 46 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, the Philippines, Australia, and the UK. People in Venezuela, Portugal, Greece, India and Canada spent the most average time on the blog. The most popular posting this past week was "Aristotle on Private Property." "Thomas Hobbes on Private Property" dropped to second place, followed by "Nader Kindles Fires of Revolt," "Why the Old Jobs Aren't Coming Back," and the sixth posting on "Economic Recovery."
Those are the happenings for this week, at least 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 anyway, so we'll see it before it goes up.
#30#
Thursday, July 7, 2011
If Obama Knew More History . . .
In The Student Prince (at least the film version), Prince Karl Franz and his tutor are shaken out of bed in the middle of the night without a word of explanation and escorted to the private chambers of the King, the Prince's grandfather. As they make their way through the palace in their dressing gowns, Karl Franz remarks to his tutor, "Well, they can't do anything to me — I'm the Heir Apparent." His tutor gives him a Look and says, "If you knew more history, you'd be more worried."
We might make the same remark to President Obama — if we were convinced he was listening. The current push by flocks of lawyers to try and make the case that the Fourteenth Amendment empowers the Executive to raise the debt ceiling, even that the debt ceiling is unconstitutional, should be making the president sweat bullets . . . if he knew more history. The second most dangerous thing an executive can do is figure out a way to finance government operations without the consent of the legislature. The most dangerous? Rub their faces in it.
Take, for example, the case of Charles I Stuart. Having figured out ways to raise money for his pet projects without the consent of parliament, he thought he had the world as his oyster. After all, who would dare do anything to a divine right king, the elect of God, Defender of the Faith, the Lord's Anointed, King of England, Scotland, Ireland and France? (Yeah, France — the rulers of England didn't surrender their claim to the throne of France until the 19th century — they fought the 114-year long Hundred Years War over something.)
Parliament disagreed. Maybe the king ruled by divine right . . . but parliament controlled the tax and fiscal system. The king — as king — could not levy taxes or borrow money without the consent of parliament. Charles's theory of divine right, however, made no distinction between Charles the man, and Charles the king. He found he could borrow money as a private person without the consent of parliament, and use the funds to run the government as a public person in spite of parliament.
Unfortunately for Charles, parliament ultimately decided that, if Charles was going to merge the character of Charles the man with that of Charles the king, so could they. Ordinarily, the maxim of the law is that the king can do no wrong. This is usually interpreted as meaning that an office holder cannot be prosecuted for acts performed in carrying out the duties of his office, however badly. Nor can he be prosecuted as an office holder for acts committed as a private person. He can, however, be removed from office for poor performance, but not otherwise harmed, or removed from office for "high crimes and misdemeanors" and then prosecuted as a private person.
Thus, the demands, for example, to impeach past president Bush for prosecuting a presumably illegal war because he allegedly lied are empty rhetoric. It may have been the worst thing he could do, it may have been morally wrong, it may have been a great many things — but it was not illegal. Lying is, in and of itself, neither a high crime nor misdemeanor. Nor can an office holder be prosecuted for being mistaken, or taking bad advice. He can't even be prosecuted because you hate his guts or think he's the reincarnation of Adolph Hitler.
Parliament arrested Charles and put him on trial. His defense (which he never actually made, refusing to defend himself on the grounds that parliament had no right to try him) was that he was king and could do any damned thing he pleased, as long as he obeyed God's law . . . as he understood it as God's Anointed and personally chosen vicegerent of God on earth. Parliament's case was a bit less esoteric. The king had figured out a way to circumvent the power of parliament over the purse strings, by whose authority as representatives of the people Charles ruled (in theory). This led to armed conflict — war with parliament (and thus the people . . . in theory) — and the defeat of the king.
The formal charge was treason, that Charles had used his [money] power to pursue personal ends rather than the good of the nation: "for accomplishment of such his designs, and for the protecting of himself and his adherents in his and their wicked practices, to the same ends hath traitorously and maliciously levied war against the present Parliament, and the people therein represented . . . [that the] wicked designs, wars, and evil practices of him, the said Charles Stuart, have been, and are carried on for the advancement and upholding of a personal interest of will, power, and pretended prerogative to himself and his family, against the public interest, common right, liberty, justice, and peace of the people of this nation." Charles was therefore a traitor, and they cut off his head.
President Obama hardly faces the loss of his head — but he is coming up for reelection, we understand. By thumbing his nose at Congress by making the case that the Congress has no effective power over the purse strings that he cannot circumvent, he would risk alienating the whole of Congress, especially his supporters. Why, after all, does a politician support another politician? Because he thinks he needs the other to gain his own objectives. Also, everyone likes to feel needed, and nowhere is this more true than in politics. The best way to gain political support is for an influential person to convince a potential supporter that he counts, or, better, is irreplaceable.
If President Obama goes along with the argument that Congress has no effective power to control how much money the government spends, he would, in effect, be telling the members that he doesn't need them. He would be invoking something akin to Charles I's "personal rule," during which the king governed without calling a parliament. Congress would be effectively redundant in name as well as in fact. All power would be split between the Supreme Court and the President. Members of Congress could go home and get honest jobs . . . if there were any.
#30#
We might make the same remark to President Obama — if we were convinced he was listening. The current push by flocks of lawyers to try and make the case that the Fourteenth Amendment empowers the Executive to raise the debt ceiling, even that the debt ceiling is unconstitutional, should be making the president sweat bullets . . . if he knew more history. The second most dangerous thing an executive can do is figure out a way to finance government operations without the consent of the legislature. The most dangerous? Rub their faces in it.
Take, for example, the case of Charles I Stuart. Having figured out ways to raise money for his pet projects without the consent of parliament, he thought he had the world as his oyster. After all, who would dare do anything to a divine right king, the elect of God, Defender of the Faith, the Lord's Anointed, King of England, Scotland, Ireland and France? (Yeah, France — the rulers of England didn't surrender their claim to the throne of France until the 19th century — they fought the 114-year long Hundred Years War over something.)
Parliament disagreed. Maybe the king ruled by divine right . . . but parliament controlled the tax and fiscal system. The king — as king — could not levy taxes or borrow money without the consent of parliament. Charles's theory of divine right, however, made no distinction between Charles the man, and Charles the king. He found he could borrow money as a private person without the consent of parliament, and use the funds to run the government as a public person in spite of parliament.
Unfortunately for Charles, parliament ultimately decided that, if Charles was going to merge the character of Charles the man with that of Charles the king, so could they. Ordinarily, the maxim of the law is that the king can do no wrong. This is usually interpreted as meaning that an office holder cannot be prosecuted for acts performed in carrying out the duties of his office, however badly. Nor can he be prosecuted as an office holder for acts committed as a private person. He can, however, be removed from office for poor performance, but not otherwise harmed, or removed from office for "high crimes and misdemeanors" and then prosecuted as a private person.
Thus, the demands, for example, to impeach past president Bush for prosecuting a presumably illegal war because he allegedly lied are empty rhetoric. It may have been the worst thing he could do, it may have been morally wrong, it may have been a great many things — but it was not illegal. Lying is, in and of itself, neither a high crime nor misdemeanor. Nor can an office holder be prosecuted for being mistaken, or taking bad advice. He can't even be prosecuted because you hate his guts or think he's the reincarnation of Adolph Hitler.
Parliament arrested Charles and put him on trial. His defense (which he never actually made, refusing to defend himself on the grounds that parliament had no right to try him) was that he was king and could do any damned thing he pleased, as long as he obeyed God's law . . . as he understood it as God's Anointed and personally chosen vicegerent of God on earth. Parliament's case was a bit less esoteric. The king had figured out a way to circumvent the power of parliament over the purse strings, by whose authority as representatives of the people Charles ruled (in theory). This led to armed conflict — war with parliament (and thus the people . . . in theory) — and the defeat of the king.
The formal charge was treason, that Charles had used his [money] power to pursue personal ends rather than the good of the nation: "for accomplishment of such his designs, and for the protecting of himself and his adherents in his and their wicked practices, to the same ends hath traitorously and maliciously levied war against the present Parliament, and the people therein represented . . . [that the] wicked designs, wars, and evil practices of him, the said Charles Stuart, have been, and are carried on for the advancement and upholding of a personal interest of will, power, and pretended prerogative to himself and his family, against the public interest, common right, liberty, justice, and peace of the people of this nation." Charles was therefore a traitor, and they cut off his head.
President Obama hardly faces the loss of his head — but he is coming up for reelection, we understand. By thumbing his nose at Congress by making the case that the Congress has no effective power over the purse strings that he cannot circumvent, he would risk alienating the whole of Congress, especially his supporters. Why, after all, does a politician support another politician? Because he thinks he needs the other to gain his own objectives. Also, everyone likes to feel needed, and nowhere is this more true than in politics. The best way to gain political support is for an influential person to convince a potential supporter that he counts, or, better, is irreplaceable.
If President Obama goes along with the argument that Congress has no effective power to control how much money the government spends, he would, in effect, be telling the members that he doesn't need them. He would be invoking something akin to Charles I's "personal rule," during which the king governed without calling a parliament. Congress would be effectively redundant in name as well as in fact. All power would be split between the Supreme Court and the President. Members of Congress could go home and get honest jobs . . . if there were any.
#30#
Wednesday, July 6, 2011
The Bank of North Dakota
As regular readers of this blog are aware, every once in a while we get a question that is easy to answer. Other times something pops up where we can use somebody else's work for a posting, rather than slave over a hot keyboard struggling to come up with a piece that won't make people say, "What is this, er, stuff?" Today we got lucky. We not only got an easy question, we can use somebody else's work (mostly) to answer.
Late yesterday Dr. Norman Kurland, president of the Center for Economic and Social Justice (CESJ) came into this office and asked if we had seen a broadcast out of Tehran, Iran, featuring an interview with Professor Rodney Shakespeare of London, England, on "Press TV," which appears to be an Iranian government sponsored and funded program. With Dr. Robert H. A. Ashford of the University of Syracuse Law School, Professor Shakespeare is the co-author of Binary Economics: The New Paradigm (1999), and appears to be the chief author of the "Wikipedia" article on binary economics.
Therein lies the tale.
We have a few issues with the content of the binary economics article, a concern shared by some of the Wikipedia editors (and which we'll do our best to rectify . . . just as soon as we get that case of round tuits we ordered a couple of decades ago). Today's issue has to do with Professor Shakespeare's (mis)understanding of money, credit, finance and, especially, banking.
During his "Press TV" interview, Professor Shakespeare made some statements regarding the debt crises that seem endemic everywhere, but claimed that, while America is generally lousing things up throughout the world, the government of one U.S. state, North Dakota, had avoided the debt problem by using its state-owned bank in accordance with what Professor Shakespeare claims are the principles of binary economics (a contention with which we disagree). This didn't sound right, so early this morning we sent the following e-mail to the bank:
Dear Sir(s):
In an interview on "Press TV" out of Tehran on July 4, 2011, Professor Rodney Shakespeare of London, England, asserted that the Bank of North Dakota creates money to lend to the state government at zero interest. This, in Professor Shakespeare's opinion, is why North Dakota is the only state in America without a deficit, thereby avoiding coming under what he terms the "bankers' occupation" that is allegedly taking over the country.
I can find no evidence on your website to support Professor Shakespeare's claim. I would be surprised if I did, as this would violate Article 1, Section 10 of the United States Constitution that prohibits states from emitting bills of credit.
In case I missed something, however, let me ask specifically, Does the Bank of North Dakota create money to lend to the state government at no interest?
Thank you.
Yours,
Blah, blah.
Listen. If you're thinking of doing business in North Dakota, go right ahead. Not even bankers keep "banker's hours," if the speed of the response is any indication of their get-up-and-go. (This writer is favorably inclined to North Dakota anyway, since an old Mensa friend lives in Valley City and has always published every article submitted to her various newsletters.) Anyway, the answer was fast and right to the point. With names omitted to protect the innocent, here it is:
"The answer is no. We are a normal financial institution that is held to normal accounting practices."
That's the story in brief. You know, however, that we can never be brief. Besides, the Bank of North Dakota is, frankly, fascinating, and should probably be better known. Had we known about the institution when submitting our "bids" for entries in Mesa Verde Publishing's Encyclopedia of Politics in the American West (planned for 2013), we might have suggested a dedicated entry. As it is, we got the entry on banking, and we should be able to squeeze in mention without exceeding the word length. Not like this blog.
First, some general background on money, credit, finance and banking. You've seen this stuff before on this blog, so we'll just quickly review. First, all of our readers are aware that we base our understanding of money on the "Banking Principle," that is, "money" is anything that can be used to settle a debt. Thus, all money is, in a sense, a contract, and all contracts are money. This is best stated in "Say's Law of Markets," and applied in the "real bills doctrine."
Bills of exchange are the oldest form of money, dating back thousands of years before the appearance of coined money, the latter being most convenient form of currency until banknotes became widespread in the 17th century (and checks in the mid-20th, followed by credit cards). Again, in a sense, all money consists of bills of exchange, even "barter money," for a bill of exchange is nothing more than a contract by means of which a property right is conveyed and a debt is settled — and a contract can take any form by means of which there is a "meeting of the minds," even the spoken word or a handshake. A "bill of credit" is simply the "constitutional term" for a bill of exchange, that is, a bill of exchange drawn by a government.
Bills of exchange can either be "sold" to a bank, or used directly as money. As late as 2008, private sector bills of exchange made up approximately 60% of all transactions in the U.S. This is down from an estimated 80% in 1916, and at least 95% in the 1830s, according to Congressman George Tucker in The Theory of Money and Banks Investigated (1839).
There are two types of bills of exchange. There are "mortgages," which are bills backed by and conveying property in the present value of specific marketable goods and services (usually goods), and bills of exchange proper, backed by the general creditworthiness of the drawer and conveying property in the present value of future marketable goods and services. There are, of course, all kinds of different forms of these two types of instruments, such as promissory notes, checks, drafts, letters of credit, and so on, that we don't need to get in to here.
There are also two types of bank: the "bank of deposit" and the "bank of issue." Banks of deposit are defined as financial institutions that take deposits and make loans. Thus, a bank of deposit can only make loans to the amount of its capitalization and deposits, less required reserves. The most common types of banks of deposit are investment banks, credit unions and savings and loans.
Banks of issue are defined as financial institutions that take deposits, make loans, and issue promissory notes. A bank of issue can, of course, make loans out of its capitalization and deposits — but that is not its chief function. Banks of issue are by far the older type of bank, filling an essential economic function by converting different forms of money into other, more usable or acceptable forms. The most common type of bank of issue today (once also called a "bank of circulation"), is the commercial or mercantile bank.
Banks of issue don't create money. People or businesses create money by drawing bills — creating contracts — on the present value of an existing or future marketable good or service that they promise to deliver to the holder in due course on a specified date or on the occurrence of some specified event. A bank of issue exchanges this individual and particular promise for a bank-issued promissory note backed by the general creditworthiness of the bank, which is in turn backed by the creditworthiness of the original drawer of the bill, with collateral thrown in for insurance. The bank's promissory note can in turn be used to back small denomination promissory notes called "banknotes" (not too common since the British Bank Charter Act of 1844 and the U.S. National Bank Act of 1863), or (more usually) a demand deposit — a checking account. In this way (in theory, at least) the region served by a bank of issue will always have sufficient "money" available to finance all transactions that have a sound present value.
We'll omit a discussion on reserve requirements, convertibility, clearinghouse operations, and all the other stuff we've covered before in greater detail. We want to get to the Bank of North Dakota (and you have no idea how hard it is not to write "Bank of North America," which was Robert Morris's 1781 creation as the first U.S. central bank under the Articles of Confederation). Per the bank's website (did we mention how much we like it when somebody else does all the work for us on this blog?),
In the early 20th century, North Dakota's economy was based on agriculture. Problems with the in-state financial system inhibited buying and selling crops and financing farm operations. Grain dealers outside the state suppressed grain prices; farm suppliers increased their prices; and interest rates on farm loans climbed. By 1919, there was a demand for state ownership and control of marketing and credit agencies. In response, the state legislature established the Bank of North Dakota and the North Dakota Mill and Elevator Association.
If we can editorialize a bit, the philosophy of the Just Third Way is that the State should never do more than it is absolutely required to do, thereby avoiding "functional overload." The formation of a state-owned enterprise in this instance does appear to have been justified, but we still think that there was probably a better, private sector way to go about the business. (You knew we were going to say that.)
Fortunately, the Bank of North Dakota appears to adhere strictly to sound banking principles. It is not, as Professor Shakespeare asserted, a means whereby the state government issues interest-free money to itself by emitting bills of credit to finance the construction of infrastructure, thereby avoiding accountability to the citizens through the tax system and appropriations process. (We've commented before on Henry C. Adams's warnings about the dangers of that in his 1898 Public Debts: An Essay on the Science of Finance.) On the contrary, just as in the case of the original Federal Reserve Act of 1913 (the language was later deleted from the Federal Reserve Act), the Bank of North Dakota is charged with promoting industry, commerce and agriculture. It is a member of the Federal Reserve, but the state insures deposits, not the FDIC.
While we object on philosophical grounds to state ownership of anything that can be privately owned, in this case there was at least no intention of establishing a State-owned monopoly. As the website clearly states, "It was never intended for BND [the Bank of North Dakota] to compete with or replace existing banks. Instead, Bank of North Dakota was created to partner with other financial institutions and assist them in meeting the needs of the citizens of North Dakota."
We're ambivalent about the transfer of bank profits to the state's General Fund, although recently earnings have been retained to increase the bank's lending capacity. On the one hand, if it's truly a public enterprise, then the citizens of the state have the right to those profits as dividends. Direct transfer of profits to the General Fund circumvents the tax system. On the other hand, it would probably cost more than it was worth to pay out the profits equally to all citizens (and what qualifies someone as a citizen?), and then turn around and tax the dividends to fund the operations of government. Until something like the Citizens Land Bank becomes a reality, the arrangement in North Dakota should be okay (we're sure they were waiting with bated breath to hear that), although not consistent with the Just Third Way.
Another quibble we have is that the bank provides funding to other commercial banks for consumer loans and makes student loans. We believe that all loans for consumption purposes (and, yes, education is consumption, not investment) should come out of existing accumulations of savings. A bank of issue should not be monetizing anything other than the present value of financially feasible capital that will repay itself by producing marketable goods and services — "future savings" — and doing so in a way that results in creating new owners out of people who previously lacked capital ownership.
The chief mission of the Bank of North Dakota, however, is and always was "to promote the development of agriculture, commerce and industry in North Dakota." Thus, in our opinion, the institution should have no trouble at all adapting to the situation that will prevail once we convince the powers-that-be in Washington (North Dakota's government already seems to have the right idea) to enact a Capital Homestead Act. Maybe the bank would even consider signing on to the Coalition for Capital Homesteading.
Maybe we'll ask them . . . once those round tuits get here.
#30#
Late yesterday Dr. Norman Kurland, president of the Center for Economic and Social Justice (CESJ) came into this office and asked if we had seen a broadcast out of Tehran, Iran, featuring an interview with Professor Rodney Shakespeare of London, England, on "Press TV," which appears to be an Iranian government sponsored and funded program. With Dr. Robert H. A. Ashford of the University of Syracuse Law School, Professor Shakespeare is the co-author of Binary Economics: The New Paradigm (1999), and appears to be the chief author of the "Wikipedia" article on binary economics.
Therein lies the tale.
We have a few issues with the content of the binary economics article, a concern shared by some of the Wikipedia editors (and which we'll do our best to rectify . . . just as soon as we get that case of round tuits we ordered a couple of decades ago). Today's issue has to do with Professor Shakespeare's (mis)understanding of money, credit, finance and, especially, banking.
During his "Press TV" interview, Professor Shakespeare made some statements regarding the debt crises that seem endemic everywhere, but claimed that, while America is generally lousing things up throughout the world, the government of one U.S. state, North Dakota, had avoided the debt problem by using its state-owned bank in accordance with what Professor Shakespeare claims are the principles of binary economics (a contention with which we disagree). This didn't sound right, so early this morning we sent the following e-mail to the bank:
Dear Sir(s):
In an interview on "Press TV" out of Tehran on July 4, 2011, Professor Rodney Shakespeare of London, England, asserted that the Bank of North Dakota creates money to lend to the state government at zero interest. This, in Professor Shakespeare's opinion, is why North Dakota is the only state in America without a deficit, thereby avoiding coming under what he terms the "bankers' occupation" that is allegedly taking over the country.
I can find no evidence on your website to support Professor Shakespeare's claim. I would be surprised if I did, as this would violate Article 1, Section 10 of the United States Constitution that prohibits states from emitting bills of credit.
In case I missed something, however, let me ask specifically, Does the Bank of North Dakota create money to lend to the state government at no interest?
Thank you.
Yours,
Blah, blah.
Listen. If you're thinking of doing business in North Dakota, go right ahead. Not even bankers keep "banker's hours," if the speed of the response is any indication of their get-up-and-go. (This writer is favorably inclined to North Dakota anyway, since an old Mensa friend lives in Valley City and has always published every article submitted to her various newsletters.) Anyway, the answer was fast and right to the point. With names omitted to protect the innocent, here it is:
"The answer is no. We are a normal financial institution that is held to normal accounting practices."
That's the story in brief. You know, however, that we can never be brief. Besides, the Bank of North Dakota is, frankly, fascinating, and should probably be better known. Had we known about the institution when submitting our "bids" for entries in Mesa Verde Publishing's Encyclopedia of Politics in the American West (planned for 2013), we might have suggested a dedicated entry. As it is, we got the entry on banking, and we should be able to squeeze in mention without exceeding the word length. Not like this blog.
First, some general background on money, credit, finance and banking. You've seen this stuff before on this blog, so we'll just quickly review. First, all of our readers are aware that we base our understanding of money on the "Banking Principle," that is, "money" is anything that can be used to settle a debt. Thus, all money is, in a sense, a contract, and all contracts are money. This is best stated in "Say's Law of Markets," and applied in the "real bills doctrine."
Bills of exchange are the oldest form of money, dating back thousands of years before the appearance of coined money, the latter being most convenient form of currency until banknotes became widespread in the 17th century (and checks in the mid-20th, followed by credit cards). Again, in a sense, all money consists of bills of exchange, even "barter money," for a bill of exchange is nothing more than a contract by means of which a property right is conveyed and a debt is settled — and a contract can take any form by means of which there is a "meeting of the minds," even the spoken word or a handshake. A "bill of credit" is simply the "constitutional term" for a bill of exchange, that is, a bill of exchange drawn by a government.
Bills of exchange can either be "sold" to a bank, or used directly as money. As late as 2008, private sector bills of exchange made up approximately 60% of all transactions in the U.S. This is down from an estimated 80% in 1916, and at least 95% in the 1830s, according to Congressman George Tucker in The Theory of Money and Banks Investigated (1839).
There are two types of bills of exchange. There are "mortgages," which are bills backed by and conveying property in the present value of specific marketable goods and services (usually goods), and bills of exchange proper, backed by the general creditworthiness of the drawer and conveying property in the present value of future marketable goods and services. There are, of course, all kinds of different forms of these two types of instruments, such as promissory notes, checks, drafts, letters of credit, and so on, that we don't need to get in to here.
There are also two types of bank: the "bank of deposit" and the "bank of issue." Banks of deposit are defined as financial institutions that take deposits and make loans. Thus, a bank of deposit can only make loans to the amount of its capitalization and deposits, less required reserves. The most common types of banks of deposit are investment banks, credit unions and savings and loans.
Banks of issue are defined as financial institutions that take deposits, make loans, and issue promissory notes. A bank of issue can, of course, make loans out of its capitalization and deposits — but that is not its chief function. Banks of issue are by far the older type of bank, filling an essential economic function by converting different forms of money into other, more usable or acceptable forms. The most common type of bank of issue today (once also called a "bank of circulation"), is the commercial or mercantile bank.
Banks of issue don't create money. People or businesses create money by drawing bills — creating contracts — on the present value of an existing or future marketable good or service that they promise to deliver to the holder in due course on a specified date or on the occurrence of some specified event. A bank of issue exchanges this individual and particular promise for a bank-issued promissory note backed by the general creditworthiness of the bank, which is in turn backed by the creditworthiness of the original drawer of the bill, with collateral thrown in for insurance. The bank's promissory note can in turn be used to back small denomination promissory notes called "banknotes" (not too common since the British Bank Charter Act of 1844 and the U.S. National Bank Act of 1863), or (more usually) a demand deposit — a checking account. In this way (in theory, at least) the region served by a bank of issue will always have sufficient "money" available to finance all transactions that have a sound present value.
We'll omit a discussion on reserve requirements, convertibility, clearinghouse operations, and all the other stuff we've covered before in greater detail. We want to get to the Bank of North Dakota (and you have no idea how hard it is not to write "Bank of North America," which was Robert Morris's 1781 creation as the first U.S. central bank under the Articles of Confederation). Per the bank's website (did we mention how much we like it when somebody else does all the work for us on this blog?),
In the early 20th century, North Dakota's economy was based on agriculture. Problems with the in-state financial system inhibited buying and selling crops and financing farm operations. Grain dealers outside the state suppressed grain prices; farm suppliers increased their prices; and interest rates on farm loans climbed. By 1919, there was a demand for state ownership and control of marketing and credit agencies. In response, the state legislature established the Bank of North Dakota and the North Dakota Mill and Elevator Association.
If we can editorialize a bit, the philosophy of the Just Third Way is that the State should never do more than it is absolutely required to do, thereby avoiding "functional overload." The formation of a state-owned enterprise in this instance does appear to have been justified, but we still think that there was probably a better, private sector way to go about the business. (You knew we were going to say that.)
Fortunately, the Bank of North Dakota appears to adhere strictly to sound banking principles. It is not, as Professor Shakespeare asserted, a means whereby the state government issues interest-free money to itself by emitting bills of credit to finance the construction of infrastructure, thereby avoiding accountability to the citizens through the tax system and appropriations process. (We've commented before on Henry C. Adams's warnings about the dangers of that in his 1898 Public Debts: An Essay on the Science of Finance.) On the contrary, just as in the case of the original Federal Reserve Act of 1913 (the language was later deleted from the Federal Reserve Act), the Bank of North Dakota is charged with promoting industry, commerce and agriculture. It is a member of the Federal Reserve, but the state insures deposits, not the FDIC.
While we object on philosophical grounds to state ownership of anything that can be privately owned, in this case there was at least no intention of establishing a State-owned monopoly. As the website clearly states, "It was never intended for BND [the Bank of North Dakota] to compete with or replace existing banks. Instead, Bank of North Dakota was created to partner with other financial institutions and assist them in meeting the needs of the citizens of North Dakota."
We're ambivalent about the transfer of bank profits to the state's General Fund, although recently earnings have been retained to increase the bank's lending capacity. On the one hand, if it's truly a public enterprise, then the citizens of the state have the right to those profits as dividends. Direct transfer of profits to the General Fund circumvents the tax system. On the other hand, it would probably cost more than it was worth to pay out the profits equally to all citizens (and what qualifies someone as a citizen?), and then turn around and tax the dividends to fund the operations of government. Until something like the Citizens Land Bank becomes a reality, the arrangement in North Dakota should be okay (we're sure they were waiting with bated breath to hear that), although not consistent with the Just Third Way.
Another quibble we have is that the bank provides funding to other commercial banks for consumer loans and makes student loans. We believe that all loans for consumption purposes (and, yes, education is consumption, not investment) should come out of existing accumulations of savings. A bank of issue should not be monetizing anything other than the present value of financially feasible capital that will repay itself by producing marketable goods and services — "future savings" — and doing so in a way that results in creating new owners out of people who previously lacked capital ownership.
The chief mission of the Bank of North Dakota, however, is and always was "to promote the development of agriculture, commerce and industry in North Dakota." Thus, in our opinion, the institution should have no trouble at all adapting to the situation that will prevail once we convince the powers-that-be in Washington (North Dakota's government already seems to have the right idea) to enact a Capital Homestead Act. Maybe the bank would even consider signing on to the Coalition for Capital Homesteading.
Maybe we'll ask them . . . once those round tuits get here.
#30#
Tuesday, July 5, 2011
"Replacing Property"
Every so often we get a softball thrown at us — and we don't mean those cannon shots thrown by real softball players. You see one of those coming, duck and cover. No, we mean an enquiry or a published piece that fails to define basic concepts properly, especially our natural rights to life, liberty and property. Messing up on any one of these is fatal, and people usually go for three out of three.
Anyway, today we got off a carronade at a columnist who tripped up on the role that private property played in the political thought of the Founding Fathers of the American Republic. The writer seemed to think that "the guys" didn't have private property in mind when putting together the new country. You just know we had to say something about that. So we did:
Dear Sir and/or Madam as the Case May Be:
Your column, on replacing property as a source of wealth creation that appeared last week is a cause for some concern. While well-written, I believe it gives misleading information about property and the role that ownership of the means of production played in the founding of this country — and why the lack of widespread direct ownership is at the root of many of today's economic, social and political problems.
First, it must clearly be understood that "property" is not the thing owned. Rather, property is, one, the natural right that every human being has to be an owner, simply because he or she is a human being endowed with inherent (inalienable or absolute) rights. Two, property is the bundle of socially determined rights that define how one's ownership is to be exercised in certain circumstances or conditions of society. Three, we cannot limit our understanding of "property" to land and real estate. We must include industrial and commercial assets as well as land — and clearly distinguish between income-generating assets and consumer assets such as a primary residence.
Second, the Founding Fathers relied heavily on the political thought of John Locke and Algernon Sidney, whose writings were specifically directed toward demolishing the "divine right of kings" theories of Sir Robert Filmer and Thomas Hobbes. Locke and Sidney based their theories in part (Locke almost entirely) on the natural right of every person to be an owner, both of his or her labor, and of land and capital, and to control and receive the income generated by what is owned.
In contrast, a fundamental precept of divine right theory is that "the sovereign" is the ultimate owner of everything in the country. This effectively abolishes private property. As Locke observed, "For if any one shall claim a Power to lay and levy Taxes on the People, by his own Authority, and without such consent of the People, he thereby invades the Fundamental Law of Property, and subverts the end of Government. For what property have I in that which another may by right take, when he pleases to himself? (Second Treatise on Government, § 140.)
As George Mason of Gunston Hall stated in his draft of the Virginia Declaration of Rights of June 12, 1776 (which served Thomas Jefferson as a model for the Declaration of Independence less than a month later), "That all men are by nature equally free and independent and have certain inherent rights, of which, [when they enter into a state of society,] they cannot, by any compact, deprive or divest their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety."
The bracketed phrase, "when they enter into a state of society," was added later over Mason's protests because "all men" included slaves — and the plantation owners, while they wanted liberty and security of property for themselves, were not anxious to lose their property in human beings. Thomas Jefferson probably left property out of his list of inalienable rights in the Declaration of Independence because he wanted to avoid the slavery issue.
Thus, "a property holders' democracy" was far from being, as you state, "not something the Founders originally advocated." On the contrary, it was at the heart of everything they were trying to do.
Third, as Daniel Webster observed in the Massachusetts Constitutional Convention of 1820 during the debates over whether the franchise should be extended to non-owning white males, "power naturally and necessarily follows property." As Benjamin Watkins Leigh concurred in the Virginia Convention, "Power and Property can be separated for a time by force or fraud — but divorced, never. For as soon as the pang of separation is felt . . . Property will purchase Power, or Power will take over Property."
Fourth, lack of access to ownership of capital, whether in the form of land or industrial and commercial assets, created a situation in the early 1890s when for the first time in American history a determinant number of people did not own capital, and gained income only by selling their labor. This, as far as Frederick Jackson Turner was concerned, meant the end of democracy ("The Frontier in American History," a paper delivered at the Columbian Exposition in Chicago in 1893).
Fifth, Judge Peter Stenger Grosscup of the United States Court of Appeals for the 7th Circuit Court (one of Theodore Roosevelt's "Trust Busters") pointed out in a series of lectures and articles between 1900 and 1914 that the loss of small ownership of land and artisan workshops was not being made up by widespread ownership of corporate equity with the rights of property, and this endangered the survival of democracy. What was needed was something along the lines of an "Industrial Homestead Act," as Ronald Reagan called for in a speech to the Young Americans for Freedom in July 1974.
Sixth, in 1919 in the landmark case Dodge v. Ford Motor Company (204 Mich. 459, 170 N.W. 668) Henry Ford used his political and economic power to strip minority owners in the Ford Motor Company of virtually all rights, especially the all-important right to receive dividends. This made "ownership" a farce for most people, and disconnected the benefits of ownership from ownership, vesting control in what one authority termed a non-owning economic dictatorship.
In The Communist Manifesto (1848), Karl Marx defined socialism as "the abolition of private property." If you are interested in a viable proposal that would restore meaning to private ownership and vest all Americans with "the means of acquiring and possessing property" as well as securing the rights of existing owners, you might want to investigate "Capital Homesteading," a proposal of the Center for Economic and Social Justice (CESJ), a think tank located in Arlington, Virginia.
#30#
Anyway, today we got off a carronade at a columnist who tripped up on the role that private property played in the political thought of the Founding Fathers of the American Republic. The writer seemed to think that "the guys" didn't have private property in mind when putting together the new country. You just know we had to say something about that. So we did:
Dear Sir and/or Madam as the Case May Be:
Your column, on replacing property as a source of wealth creation that appeared last week is a cause for some concern. While well-written, I believe it gives misleading information about property and the role that ownership of the means of production played in the founding of this country — and why the lack of widespread direct ownership is at the root of many of today's economic, social and political problems.
First, it must clearly be understood that "property" is not the thing owned. Rather, property is, one, the natural right that every human being has to be an owner, simply because he or she is a human being endowed with inherent (inalienable or absolute) rights. Two, property is the bundle of socially determined rights that define how one's ownership is to be exercised in certain circumstances or conditions of society. Three, we cannot limit our understanding of "property" to land and real estate. We must include industrial and commercial assets as well as land — and clearly distinguish between income-generating assets and consumer assets such as a primary residence.
Second, the Founding Fathers relied heavily on the political thought of John Locke and Algernon Sidney, whose writings were specifically directed toward demolishing the "divine right of kings" theories of Sir Robert Filmer and Thomas Hobbes. Locke and Sidney based their theories in part (Locke almost entirely) on the natural right of every person to be an owner, both of his or her labor, and of land and capital, and to control and receive the income generated by what is owned.
In contrast, a fundamental precept of divine right theory is that "the sovereign" is the ultimate owner of everything in the country. This effectively abolishes private property. As Locke observed, "For if any one shall claim a Power to lay and levy Taxes on the People, by his own Authority, and without such consent of the People, he thereby invades the Fundamental Law of Property, and subverts the end of Government. For what property have I in that which another may by right take, when he pleases to himself? (Second Treatise on Government, § 140.)
As George Mason of Gunston Hall stated in his draft of the Virginia Declaration of Rights of June 12, 1776 (which served Thomas Jefferson as a model for the Declaration of Independence less than a month later), "That all men are by nature equally free and independent and have certain inherent rights, of which, [when they enter into a state of society,] they cannot, by any compact, deprive or divest their posterity; namely, the enjoyment of life and liberty, with the means of acquiring and possessing property, and pursuing and obtaining happiness and safety."
The bracketed phrase, "when they enter into a state of society," was added later over Mason's protests because "all men" included slaves — and the plantation owners, while they wanted liberty and security of property for themselves, were not anxious to lose their property in human beings. Thomas Jefferson probably left property out of his list of inalienable rights in the Declaration of Independence because he wanted to avoid the slavery issue.
Thus, "a property holders' democracy" was far from being, as you state, "not something the Founders originally advocated." On the contrary, it was at the heart of everything they were trying to do.
Third, as Daniel Webster observed in the Massachusetts Constitutional Convention of 1820 during the debates over whether the franchise should be extended to non-owning white males, "power naturally and necessarily follows property." As Benjamin Watkins Leigh concurred in the Virginia Convention, "Power and Property can be separated for a time by force or fraud — but divorced, never. For as soon as the pang of separation is felt . . . Property will purchase Power, or Power will take over Property."
Fourth, lack of access to ownership of capital, whether in the form of land or industrial and commercial assets, created a situation in the early 1890s when for the first time in American history a determinant number of people did not own capital, and gained income only by selling their labor. This, as far as Frederick Jackson Turner was concerned, meant the end of democracy ("The Frontier in American History," a paper delivered at the Columbian Exposition in Chicago in 1893).
Fifth, Judge Peter Stenger Grosscup of the United States Court of Appeals for the 7th Circuit Court (one of Theodore Roosevelt's "Trust Busters") pointed out in a series of lectures and articles between 1900 and 1914 that the loss of small ownership of land and artisan workshops was not being made up by widespread ownership of corporate equity with the rights of property, and this endangered the survival of democracy. What was needed was something along the lines of an "Industrial Homestead Act," as Ronald Reagan called for in a speech to the Young Americans for Freedom in July 1974.
Sixth, in 1919 in the landmark case Dodge v. Ford Motor Company (204 Mich. 459, 170 N.W. 668) Henry Ford used his political and economic power to strip minority owners in the Ford Motor Company of virtually all rights, especially the all-important right to receive dividends. This made "ownership" a farce for most people, and disconnected the benefits of ownership from ownership, vesting control in what one authority termed a non-owning economic dictatorship.
In The Communist Manifesto (1848), Karl Marx defined socialism as "the abolition of private property." If you are interested in a viable proposal that would restore meaning to private ownership and vest all Americans with "the means of acquiring and possessing property" as well as securing the rights of existing owners, you might want to investigate "Capital Homesteading," a proposal of the Center for Economic and Social Justice (CESJ), a think tank located in Arlington, Virginia.
#30#
Friday, July 1, 2011
News from the Network, Vol. 4, No. 26
Here's a prediction: the Greek government is going to fall, followed soon after by that of Great Britain — or at least a "no confidence" vote in the latter. No one is coming to grips with the real issue: what is money? How is it created? Until those questions are answered, no discussion will go anywhere, no solution will be effective, and things will continue to get worse until they collapse.
What should be done, e.g., in Greece? First, impose an immediate moratorium on all payments of interest and principal. Second, immediately stop spending for all non-essential services — all of them. Third, immediately implement the essential elements of Capital Homesteading. Fourth, reschedule all outstanding non-productive debt. Fifth, anyone who took a reduction in pay or benefits should receive a pro rata additional capital credit allocation.
Obviously no one has done any of these things . . . yet. That being the case, here's what's really been going on:
• Shocking news (and confirmation of the fact that you can't copyright a title). A recent search on Amazon revealed thirty books with the title "Capitalist Manifesto," albeit including about a dozen duplicate listings and different editions of the same book. Most shocking was A Capitalist Manifesto from 1954, a 30-page self-published pamphlet by L. L. B. Angas, an English- (we think) born (1893) investment analyst and financial consultant, who wrote at least two other, lengthier books, Investment for Appreciation (1936) and The Problems of Foreign Exchanges (date unknown). The Capitalist Manifesto pamphlet is not listed among his works. Nobody appears to have a copy. We're guessing that it's probably not significant. L. L. B. Angas retired to the U.S. in the 1930s, and maintained residences in New York and London. Given the paucity of information, it's highly unlikely Kelso and Adler were even aware of the pamphlet.
• We have finished what looks as if it might be the almost final version of our response to the non-reviewer of Supporting Life. With any luck, it will go out next week.
• We had a follow-up meeting today with two prospective interns — doctoral candidates — from one of the area universities (that's the DC metro area, which seems to have almost as many universities and colleges as lawyers). They are in economics, so it will be interesting to see how far things go before the contradictions inherent in the Currency Principle begin to have their due effect.
• We're investigating getting some of CESJ's materials out in inexpensive "Kindle" editions, and (with a great deal of luck) might have something ready next week so that we can kick the tires. If successful, this initiative will enable us to issue CESJ "Green Papers" almost as fast as we can write them, and sell them on Amazon for less than it would take us to print them up and mail them out — and we wouldn't have to ask for postage reimbursement or an additional contribution to cover costs. This would be a much less expensive proposition all around for everyone, and speed up production of our educational materials. We're estimating that, in many cases, the cost to the buyer would be less than the postage reimbursement, as we're looking at the lowest price: 99¢.
• There will be no posting on Monday, July 4, 2011.
• We have submitted an article on "Economic Development" to an up-coming encyclopedia focusing on the American experience.
• As of this morning, we have had visitors from 43 different countries and 43 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, the UK, Australia, and India. People in Portugal, Venezuela, Greece, Canada and India spent the most average time on the blog. The most popular posting this past week was yet again "Thomas Hobbes on Private Property," followed by "Aristotle on Private Property," "Nader Kindles Fires of Revolt," the sixth posting on "Economic Recovery," and "A CESJ Orientation in Brief."
Those are the happenings for this week, at least 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 anyway, so we'll see it before it goes up.
#30#
What should be done, e.g., in Greece? First, impose an immediate moratorium on all payments of interest and principal. Second, immediately stop spending for all non-essential services — all of them. Third, immediately implement the essential elements of Capital Homesteading. Fourth, reschedule all outstanding non-productive debt. Fifth, anyone who took a reduction in pay or benefits should receive a pro rata additional capital credit allocation.
Obviously no one has done any of these things . . . yet. That being the case, here's what's really been going on:
• Shocking news (and confirmation of the fact that you can't copyright a title). A recent search on Amazon revealed thirty books with the title "Capitalist Manifesto," albeit including about a dozen duplicate listings and different editions of the same book. Most shocking was A Capitalist Manifesto from 1954, a 30-page self-published pamphlet by L. L. B. Angas, an English- (we think) born (1893) investment analyst and financial consultant, who wrote at least two other, lengthier books, Investment for Appreciation (1936) and The Problems of Foreign Exchanges (date unknown). The Capitalist Manifesto pamphlet is not listed among his works. Nobody appears to have a copy. We're guessing that it's probably not significant. L. L. B. Angas retired to the U.S. in the 1930s, and maintained residences in New York and London. Given the paucity of information, it's highly unlikely Kelso and Adler were even aware of the pamphlet.
• We have finished what looks as if it might be the almost final version of our response to the non-reviewer of Supporting Life. With any luck, it will go out next week.
• We had a follow-up meeting today with two prospective interns — doctoral candidates — from one of the area universities (that's the DC metro area, which seems to have almost as many universities and colleges as lawyers). They are in economics, so it will be interesting to see how far things go before the contradictions inherent in the Currency Principle begin to have their due effect.
• We're investigating getting some of CESJ's materials out in inexpensive "Kindle" editions, and (with a great deal of luck) might have something ready next week so that we can kick the tires. If successful, this initiative will enable us to issue CESJ "Green Papers" almost as fast as we can write them, and sell them on Amazon for less than it would take us to print them up and mail them out — and we wouldn't have to ask for postage reimbursement or an additional contribution to cover costs. This would be a much less expensive proposition all around for everyone, and speed up production of our educational materials. We're estimating that, in many cases, the cost to the buyer would be less than the postage reimbursement, as we're looking at the lowest price: 99¢.
• There will be no posting on Monday, July 4, 2011.
• We have submitted an article on "Economic Development" to an up-coming encyclopedia focusing on the American experience.
• As of this morning, we have had visitors from 43 different countries and 43 states and provinces in the United States and Canada to this blog over the past two months. Most visitors are from the United States, Canada, the UK, Australia, and India. People in Portugal, Venezuela, Greece, Canada and India spent the most average time on the blog. The most popular posting this past week was yet again "Thomas Hobbes on Private Property," followed by "Aristotle on Private Property," "Nader Kindles Fires of Revolt," the sixth posting on "Economic Recovery," and "A CESJ Orientation in Brief."
Those are the happenings for this week, at least 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 anyway, so we'll see it before it goes up.
#30#
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