(Week 11 - Wednesday, Oct. 22)
The most common question I hear is "What can I do about money?" This is commonly meant in one of two ways, one inward looking, the other outward.
The inward looking is focused on what the inquirer can do to preserve, expedite or otherwise conduct his or her personal financial situation in a way consistent with the greater realities in the world today. The outward is aimed at determining how he or she can act in a way beneficial to the larger economic concerns of the world from his or her own unique position in it.
What I find encouraging at present is that people are asking ever more earnest questions about the nature and realities of money itself. Heretofore, it has been treated more as a given, and the main concern has been to about how to catch one's share of its currents as it passes through from wherever it came, to wherever it goes. Now people are waking up to the more fundamental questions of "What is money?", "Where does it come from?", "What is its effect?" and "What can I do about it?"
I am not a financial advisor, political pundit or ideological proponent, and have no specific answers or moral judgments to render. My inclination is to offer a conversation out of my own experience that can perhaps help others to clarify their own thoughts and feelings related to matters of money, and thereby come to a determination of what in their life is to be done with it.
This is not to say that matters of substantive personal relevance can't be talked about; only that it is incumbent upon each of us to come to our own final determination of what is to be done.
One thing that can be offered of which I have a sense of certainty is that, whatever our disposition with respect to money, any contemplation needs to begin with ourselves. In a phrase, what is called for is "soul searching". My observation is that the human race has a most disorderly and disharmonious relationship to money at present, and virtually every one of us has contributed to, and indeed continues to participate in, the problem. There is no criticism or judgment in this, in that it is a natural stage in the evolution of a soul from innocence to adulthood.
But now we are adults, and are called upon by the demands of maturity to put away childish things.
Like children looking for whom to blame, the public dialogue on our current monetary straits is filled with expressions of accusation, recrimination and denial. If only, so the thinking goes, we could find out who is responsible for this mess, then we could hold them responsible and somehow clean it up. The culprits may include bankers, the Fed, Wall Street financiers, politicians, the "conservative right", the "liberal left", communists, the media, the corporations, the mega-rich, a coddled middle class, the destitute poor, welfare moms, the Chinese, Islamic terrorists . . . The list goes on ad infinitum.
To be sure, people in each of these spheres have played a role, but the realities they live with are never simple. It would serve the situation well to hold the attitude of removing the beam from one's own eye before attempting to extract the mote from the other.
In the modern world we are all economic creatures, and the actions we take, both by commission and omission, have an economic dimension. Even to move to the woods and live like a hermit is a profound economic act. This is a condition of our age, and it cannot be avoided.
The attitude that we are all responsible, then, becomes the starting point for an intrepid introspection that will lead ultimately to a unique answer for each to the question, "What can I do about money?" I will have more specific thoughts to offer on this in the next few columns.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Wednesday, October 22, 2008
Tuesday, October 21, 2008
Column #62 THE CONCORD RESOLUTION REVISITED
(Week 11 - Tuesday, Oct. 21)
In Col. #9 (Wednesday, August 6) I reported about an initiative being undertaken by citizens of Concord, Massachusetts that seeks, in a form suited to our time and circumstances, to recreate the momentous step taken by the Colonial Assembly of Massachusetts in 1690, by which the political body that represented their social order as a whole began to issue the colony's own money supply.
I can imagine that, for the most part, the deed was not contemplated by these loyal British subjects as an act of revolution with respect the England and the Crown, notwithstanding that in time it did indeed lead to a train of events that took on that character. It was more likely conceived of as a straightforward measure that was meant to address a pressing problem of immediate import in a simpler time; the need for a circulating medium. Surely these colonists had little or no sense of the world-changing developments that would unfold from what must have seemed to them to be an audacious, but seemingly limited, act.
We live in a vastly different era, and whatever problems were manifest then are redoubled many times over. That said, we are now, like they were, faced with a stark choice. That is, should we as a society submit to borrowing our money supply from the modern equivalent of the Bank of England (Federal Reserve System) backed by the power of the state, or should it be issued publicly (out of the U.S. Treasury) backed by the sovereign political prerogative of We the People.
The primary advantage we have over our colonial forebears is being able to see the implications of this act as it played out in almost three hundred and twenty years of history. America has been a veritable laboratory for monetary development, and its lessons can now be drawn upon in the interests of serving human evolution, with transformative benefit to the individual, the nation and the world.
The Concord Resolution was originally contemplated as a grassroots educational and political initiative aimed at formulating and bringing to the Concord town meeting a Warrant Article ("resolution" in more common language) to petition the town's Congressional representatives to introduce a bill which would set up a procedure whereby counties and municipalities across the nation could, in an orderly way, apply for interest-free loans issued directly out of the U.S. Treasury to pay for essential public works. This would be in lieu of their feeling obliged to sell bonds on the private bond market to raise needed funds, which typically causes the cost of a project to double or triple due to the "interest" payments associated with the bonds. Presumably, if the idea behind the Resolution caught on across the country, that would open the door for the eventual transformation of the monetary system itself, perhaps within a few years.
What has changed since then is that there is a newly palpable sense of urgency about the condition of our economic life due to the unfolding worldwide financial crisis. I was reminded of this again today as I heard reports in the media that our representatives in Congress are considering a proposal for yet another "financial stimulus" package. This is political speak for having the Federal government borrow even more money, and passing out the proceeds as a way to mollify a citizenry that is smarting over feeling obliged to foot the bill for the $700 billion "bailout" of the "speculative financial industry." All this is after the massive monetary expansion facilitated by borrowing to fund the Iraq and Afghan wars, and the "tax rebates" sent out earlier this year.
The "debt-money system is essentially a confidence game, and confidence on the part of the public, and even the bankers, is hemorrhaging. It seems that there is no amount of new "debt"-money transfusion that can stabilize the situation. I sense that there has occurred amongst the populace a virtual acquiescence to the idea of letting the government and the Fed have their way in taking any they like to patch the system, while being in denial of the terrible price that will have to be paid in the long run for this relinquishing of our responsibility as a citizenry for our own economic life.
Urgency does not mean panic. Our monetary house is indeed burning, but there is still time and opportunity to put out the fire and save the structure essentially intact. The moment is now, however, when we must be about facing what needs to be reckoned with, or the whole question will become catastrophically moot.
Over the last two months what seemed like the revolutionary scope of the Concord Resolution is now shown to be inadequate in the context the financial tsunami that has swept over the global financial order. A more direct and transformative approach is called for. Accordingly, the focus of the Concord Resolution has moved from funding infrastructure, to changing principle by which the monetary system operates; i.e. restoring the monetary franchise to the public sector.
Truth be told, the Massachusetts colonists who in 1690 initiated the first publicly issued paper money in the Western world founded on the free enterprise and backed by the sovereignty of We the People did (whatever may have been their conscious thoughts on the matter) nothing less, and that has made all the difference.
Richard Kotlarz
richkotlarz@gmail.com
Postscript:
For more information on the Concord Resolution go to http://www.concordresolution.org/
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
In Col. #9 (Wednesday, August 6) I reported about an initiative being undertaken by citizens of Concord, Massachusetts that seeks, in a form suited to our time and circumstances, to recreate the momentous step taken by the Colonial Assembly of Massachusetts in 1690, by which the political body that represented their social order as a whole began to issue the colony's own money supply.
I can imagine that, for the most part, the deed was not contemplated by these loyal British subjects as an act of revolution with respect the England and the Crown, notwithstanding that in time it did indeed lead to a train of events that took on that character. It was more likely conceived of as a straightforward measure that was meant to address a pressing problem of immediate import in a simpler time; the need for a circulating medium. Surely these colonists had little or no sense of the world-changing developments that would unfold from what must have seemed to them to be an audacious, but seemingly limited, act.
We live in a vastly different era, and whatever problems were manifest then are redoubled many times over. That said, we are now, like they were, faced with a stark choice. That is, should we as a society submit to borrowing our money supply from the modern equivalent of the Bank of England (Federal Reserve System) backed by the power of the state, or should it be issued publicly (out of the U.S. Treasury) backed by the sovereign political prerogative of We the People.
The primary advantage we have over our colonial forebears is being able to see the implications of this act as it played out in almost three hundred and twenty years of history. America has been a veritable laboratory for monetary development, and its lessons can now be drawn upon in the interests of serving human evolution, with transformative benefit to the individual, the nation and the world.
The Concord Resolution was originally contemplated as a grassroots educational and political initiative aimed at formulating and bringing to the Concord town meeting a Warrant Article ("resolution" in more common language) to petition the town's Congressional representatives to introduce a bill which would set up a procedure whereby counties and municipalities across the nation could, in an orderly way, apply for interest-free loans issued directly out of the U.S. Treasury to pay for essential public works. This would be in lieu of their feeling obliged to sell bonds on the private bond market to raise needed funds, which typically causes the cost of a project to double or triple due to the "interest" payments associated with the bonds. Presumably, if the idea behind the Resolution caught on across the country, that would open the door for the eventual transformation of the monetary system itself, perhaps within a few years.
What has changed since then is that there is a newly palpable sense of urgency about the condition of our economic life due to the unfolding worldwide financial crisis. I was reminded of this again today as I heard reports in the media that our representatives in Congress are considering a proposal for yet another "financial stimulus" package. This is political speak for having the Federal government borrow even more money, and passing out the proceeds as a way to mollify a citizenry that is smarting over feeling obliged to foot the bill for the $700 billion "bailout" of the "speculative financial industry." All this is after the massive monetary expansion facilitated by borrowing to fund the Iraq and Afghan wars, and the "tax rebates" sent out earlier this year.
The "debt-money system is essentially a confidence game, and confidence on the part of the public, and even the bankers, is hemorrhaging. It seems that there is no amount of new "debt"-money transfusion that can stabilize the situation. I sense that there has occurred amongst the populace a virtual acquiescence to the idea of letting the government and the Fed have their way in taking any they like to patch the system, while being in denial of the terrible price that will have to be paid in the long run for this relinquishing of our responsibility as a citizenry for our own economic life.
Urgency does not mean panic. Our monetary house is indeed burning, but there is still time and opportunity to put out the fire and save the structure essentially intact. The moment is now, however, when we must be about facing what needs to be reckoned with, or the whole question will become catastrophically moot.
Over the last two months what seemed like the revolutionary scope of the Concord Resolution is now shown to be inadequate in the context the financial tsunami that has swept over the global financial order. A more direct and transformative approach is called for. Accordingly, the focus of the Concord Resolution has moved from funding infrastructure, to changing principle by which the monetary system operates; i.e. restoring the monetary franchise to the public sector.
Truth be told, the Massachusetts colonists who in 1690 initiated the first publicly issued paper money in the Western world founded on the free enterprise and backed by the sovereignty of We the People did (whatever may have been their conscious thoughts on the matter) nothing less, and that has made all the difference.
Richard Kotlarz
richkotlarz@gmail.com
Postscript:
For more information on the Concord Resolution go to http://www.concordresolution.org/
The complete set of columns from this series is posted at the following websites.
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Monday, October 20, 2008
Column #61 AMERICAN MODE OF CREATING & ISSUING MONEY
(Week 11 - Monday, Oct. 20)
We the People of the United States need a public money supply with which to conduct our commerce. Under the current Federal Reserve System, our money is issued via loans from a private banking system.
When a private person, corporate entity or government body borrows money from a bank, the banker creates the money he is loaning when he writes the check for the loan or credits the account of the borrower. That is the rule upon which the Federal Reserve System is founded. In a booklet published by the Fed, "Everyday Economics", the section titled "How Banks Create Money" states as its opening sentence -"Banks actually create money when they lend it."
The borrower then goes out and spends that money for whatever purpose he took out the loan to fulfill. The money from the loan (principal proceeds) thereby enters into general circulation.
Over time, the borrower will be required to pay back the loan. The terms of the loan contract, however, will state that he will be required, not only to pay back the money he borrowed, but also pay a compounding fee described as "interest on the loan". A problem arises because the money from the loan entered into circulation and is therefore available to be paid back, but the money to make the interest payments was never created and issued. It can only be obtained by taking it out of the money from other loans that are still in circulation.
This means that there will not be enough money in circulation for others to pay their loans. The only way this shortfall can be coped with in practice is for people to borrow more-and-more money into circulation on a continuously increasing basis, both to service the principal and interest payments on old loans, plus bring enough newly borrowed money into circulation to maintain an adequate money supply. People almost certainly will not think of what they are doing as being motivated by maintaining an adequate money supply, but as the amount of money in circulation drops, people are progressively less able to pay their bills, and so will tend to resort to borrowing from banks to make their financial ends meet, which, in turn, has the effect of filling up the monetary pool.
Eventually, the amount of outstanding indebtedness becomes so great that people are simply not able to pay it, and a wave of financial defaults results. This temporarily relieves pressure on the money supply relative to the amount of "debt" it is being called upon to service, but at great cost in personal trauma to those who are obliged to bear the resultant bankruptcies.
As a domino-like default phenomenon gains momentum, a psychological state takes over whereby people become more prone to consolidate their financial position by paying off old "debts" (as opposed to taking on new "debts"), and even banks become reluctant to create and lend more money. The net effect is that the money supply goes into a contraction, which, if not arrested, can lead to economic depression.
One further effect is that the "investments" (bonds, mortgages and other "debt" contracts) bought up by financial speculators are in jeopardy of becoming worthless paper. Technically this is not really a danger to the economy, as the collapse of such paper would relieve pressure on the existing money supply to service "debt", but it does create a great disorder and confusion of interests because many ordinary people also are significantly invested in "debt" paper (as held in money-market accounts, retirement portfolios and the like). In any case there will be voices from the academic, political and financial arenas that will try to convince the public that their distress can only be relieved by rescuing the "investments" of the "speculative industry".
Complicating the whole picture is the fact that the "fractional reserve formula" that governs the banking system will start to break down, sending the banks themselves into technical "bankruptcy".
The upshot of all this financial mayhem is that there arises a general fear in the populace that the monetary system is in danger of "collapsing" if it is not "rescued" with a massive injection of freshly-borrow private-bank money. In truth there is such a danger, but mainly because widespread belief in such a scenario makes it self-fulfilling. This fear, plus the lack of realization concerning what to do about the situation, is precisely what is driving the headlines announcing a general monetary meltdown at present, and the promulgation of a $700 billion "bailout" plan.
Such a plan may (or may not, if a degree of confidence and order cannot be restored) stave off near total disruption of the economy in the short run, but it will inevitably result in the citizenry taking on an ever greater amount of "debt", in this case indirectly through government borrowing. An increasing portion of tax receipts will be diverted into making more hundreds-of-billions of dollars of "interest" payments on a ballooning "national debt", until even the Federal government will not be able to borrow enough new money into circulation to meet its operating expenses.
The churning of the monetary system will continue amidst increasingly unbearable complications. We live in unprecedented times, and where this all may lead is difficult to envision, but the end thereof, and the rough ride getting there, can only be catastrophic in the extreme.
Turning the leaf over, the remedy to the crisis is simple, straightforward and quintessentially American; that is to restore the authority to create our money to the public sector (as stipulated in Art. 1, Sec. 8, Par. 5 of the U.S. Constitution). Money is created "out of thin air", whether this function is performed by a public body that serves the people as a whole (the U.S. Treasury), or a corporation that serves the interests of private gain at the expense of the whole (the Federal Reserve).
If the public's money is borrowed at "interest" from a private corporation, the social order as a whole cannot help but fall increasingly into "debt" to the financial interests that that corporate entity serves.
If, on the other hand, our money supply is issued publicly out of the U.S. Treasury, We the People issue it to ourselves, and no "debt" of the economy as a whole to private financial interests can result.
This was the very monetary principle the Founding Fathers incorporated into the U.S. Constitution, which would, if reinstated, resolve the crisis of crushing "debt" that is today plaguing individuals, the nation, and the world.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Postscript: I have attached to this column a note from a colleague, Stuart Weeks, who has in many ways played a vital role in helping me to produce these columns. It introduces the matter of possible audience participation in the greater ongoing effort of which the columns are but one part. For my part, I thank you for your considerate interest in the journey through this most critical subject of money so far. (second link listed)
We the People of the United States need a public money supply with which to conduct our commerce. Under the current Federal Reserve System, our money is issued via loans from a private banking system.
When a private person, corporate entity or government body borrows money from a bank, the banker creates the money he is loaning when he writes the check for the loan or credits the account of the borrower. That is the rule upon which the Federal Reserve System is founded. In a booklet published by the Fed, "Everyday Economics", the section titled "How Banks Create Money" states as its opening sentence -"Banks actually create money when they lend it."
The borrower then goes out and spends that money for whatever purpose he took out the loan to fulfill. The money from the loan (principal proceeds) thereby enters into general circulation.
Over time, the borrower will be required to pay back the loan. The terms of the loan contract, however, will state that he will be required, not only to pay back the money he borrowed, but also pay a compounding fee described as "interest on the loan". A problem arises because the money from the loan entered into circulation and is therefore available to be paid back, but the money to make the interest payments was never created and issued. It can only be obtained by taking it out of the money from other loans that are still in circulation.
This means that there will not be enough money in circulation for others to pay their loans. The only way this shortfall can be coped with in practice is for people to borrow more-and-more money into circulation on a continuously increasing basis, both to service the principal and interest payments on old loans, plus bring enough newly borrowed money into circulation to maintain an adequate money supply. People almost certainly will not think of what they are doing as being motivated by maintaining an adequate money supply, but as the amount of money in circulation drops, people are progressively less able to pay their bills, and so will tend to resort to borrowing from banks to make their financial ends meet, which, in turn, has the effect of filling up the monetary pool.
Eventually, the amount of outstanding indebtedness becomes so great that people are simply not able to pay it, and a wave of financial defaults results. This temporarily relieves pressure on the money supply relative to the amount of "debt" it is being called upon to service, but at great cost in personal trauma to those who are obliged to bear the resultant bankruptcies.
As a domino-like default phenomenon gains momentum, a psychological state takes over whereby people become more prone to consolidate their financial position by paying off old "debts" (as opposed to taking on new "debts"), and even banks become reluctant to create and lend more money. The net effect is that the money supply goes into a contraction, which, if not arrested, can lead to economic depression.
One further effect is that the "investments" (bonds, mortgages and other "debt" contracts) bought up by financial speculators are in jeopardy of becoming worthless paper. Technically this is not really a danger to the economy, as the collapse of such paper would relieve pressure on the existing money supply to service "debt", but it does create a great disorder and confusion of interests because many ordinary people also are significantly invested in "debt" paper (as held in money-market accounts, retirement portfolios and the like). In any case there will be voices from the academic, political and financial arenas that will try to convince the public that their distress can only be relieved by rescuing the "investments" of the "speculative industry".
Complicating the whole picture is the fact that the "fractional reserve formula" that governs the banking system will start to break down, sending the banks themselves into technical "bankruptcy".
The upshot of all this financial mayhem is that there arises a general fear in the populace that the monetary system is in danger of "collapsing" if it is not "rescued" with a massive injection of freshly-borrow private-bank money. In truth there is such a danger, but mainly because widespread belief in such a scenario makes it self-fulfilling. This fear, plus the lack of realization concerning what to do about the situation, is precisely what is driving the headlines announcing a general monetary meltdown at present, and the promulgation of a $700 billion "bailout" plan.
Such a plan may (or may not, if a degree of confidence and order cannot be restored) stave off near total disruption of the economy in the short run, but it will inevitably result in the citizenry taking on an ever greater amount of "debt", in this case indirectly through government borrowing. An increasing portion of tax receipts will be diverted into making more hundreds-of-billions of dollars of "interest" payments on a ballooning "national debt", until even the Federal government will not be able to borrow enough new money into circulation to meet its operating expenses.
The churning of the monetary system will continue amidst increasingly unbearable complications. We live in unprecedented times, and where this all may lead is difficult to envision, but the end thereof, and the rough ride getting there, can only be catastrophic in the extreme.
Turning the leaf over, the remedy to the crisis is simple, straightforward and quintessentially American; that is to restore the authority to create our money to the public sector (as stipulated in Art. 1, Sec. 8, Par. 5 of the U.S. Constitution). Money is created "out of thin air", whether this function is performed by a public body that serves the people as a whole (the U.S. Treasury), or a corporation that serves the interests of private gain at the expense of the whole (the Federal Reserve).
If the public's money is borrowed at "interest" from a private corporation, the social order as a whole cannot help but fall increasingly into "debt" to the financial interests that that corporate entity serves.
If, on the other hand, our money supply is issued publicly out of the U.S. Treasury, We the People issue it to ourselves, and no "debt" of the economy as a whole to private financial interests can result.
This was the very monetary principle the Founding Fathers incorporated into the U.S. Constitution, which would, if reinstated, resolve the crisis of crushing "debt" that is today plaguing individuals, the nation, and the world.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Postscript: I have attached to this column a note from a colleague, Stuart Weeks, who has in many ways played a vital role in helping me to produce these columns. It introduces the matter of possible audience participation in the greater ongoing effort of which the columns are but one part. For my part, I thank you for your considerate interest in the journey through this most critical subject of money so far. (second link listed)
Saturday, October 4, 2008
Column #60 KINDLING A FLAME
(Week 10 - Saturday, Oct. 4)
This is the last of the first sixty columns before I, and those readers that have accompanied me on this journey, take a two-week hiatus. I plan to resume the series on October 20. It is time, not only for a chance to catch our breath, but also for inner reflection on what has been said.
The writing has had its satisfactions, but it is a poor substitute for meeting in person. If it were possible I would have each of you in front of me for a face-to-face conversation. That goal is not attainable realistically, but it can be realized in part through voice-to-voice conversation over the phone. Accordingly, I am herein listing my phone number: 218-828-1366 (many of those on my distribution list have it already). I invite critiques, questions and commentaries. I also welcome the many written responses I have been receiving, but often I can see in them subtle, but important, issues of understanding that can only be addressed in voice-to-voice conversation.
The tenor of these articles might, if one is not fully attentive, seem to be a broadside against bankers and banking. Let me be clear; the enemy is not bankers or banking. Rather, it a powerfully perverse principle that has gotten a hold on the human heart and mind. To be sure, bankers have often played their unfortunate part, and the institution of banking has to a great extent been the agent for the devil's work, but they are by no means unique in that status. In this modern age we are virtually all economic players, and have in our own particular niches contributed to the difficult circumstances that are unfolding in our financial life at present. I had intended to speak to greater depth upon this subject, but that idea was overtaken by events in the financial world that had to be addressed.
I have worked at this monetary "obsession" for going-on three decades, and have encountered a receptiveness, and even hunger, that has grown over the years for the conversation about money. There is a palpable impulse for change emerging in the people I meet. Many times the discussion is animated and the demeanor eager. Often, there is a reluctance to let the epiphany of the encounter come to an end. The next time we meet the personal warmth and enthusiasm is still there, but that special moment of recognition of the fatally flawed nature of the present monetary system, and the way out, has not taken root.
I have seen the flame of awakening on the subject of money kindled many times, but it has been, for the most part, a kindling of green wood. It will burn as long as the flame of my or other's speaking in person to the matter is held to it, and perhaps a while after, but the awareness needed for it to sustain itself is not yet arrived, and so it goes out. Still, something remains. A glowing ember from the moment of recognition when the hearer could peer through the veil of the present malaise and see that there is indeed an answer remains deep in the hearer's memory, but is not sufficient to re-kindle the flame on its own.
The time approaches in the progression of human evolution where a living consciousness about money can, and indeed must, be sustained on its own. It has been the conscious purpose of this series of treatises to expedite that transformation. The idea has been to break down a subject that is bewilderingly vast, complex and immersive into daily digestible bites that can be taken in as an antidote to what is, in my view, misguided, misleading and depressing media fare. My hope is that whatever merit is contained in these tomes will serve as lessons that will, over time, season the inner timber of mindfulness on the subject of money.
The success or failure of this initiative will be measured by how much it encourages and inspires people to take up spontaneously the seeking of truth about money in the context of their own life experiences, and their own original thoughts. Only then can the flame of understanding be said to have been lit. From there it can be shared with others until it kindles a mighty conflagration of realization that no force on earth can hold back.
At least that is my idea. If it is my delusion, let it be so, but I can't spend the day worrying about what others think. There is too much to do. The headlines, of late, have sewn a seed of urgency in many I have met or who have contacted me. Humankind has come a long way without coming to a deep realization of "what is money", the sophisticated world-encompassing financial structures we have built up notwithstanding. But the question can no longer be put by. It demands an answer, or fearful forces out of our control will impose one on us.
In my perception, all the signs of the times converge in a worldly sense upon the same reckoning, and that is what to do about money. If we would see it, the very occurrence of the present world financial chaos is a priceless opportunity. Whether we seize upon it for good or ill will make all the difference. I suggest that this is something to contemplate until we resume.
Thank you all for your interest.
Respectfully and lovingly submitted, Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
This is the last of the first sixty columns before I, and those readers that have accompanied me on this journey, take a two-week hiatus. I plan to resume the series on October 20. It is time, not only for a chance to catch our breath, but also for inner reflection on what has been said.
The writing has had its satisfactions, but it is a poor substitute for meeting in person. If it were possible I would have each of you in front of me for a face-to-face conversation. That goal is not attainable realistically, but it can be realized in part through voice-to-voice conversation over the phone. Accordingly, I am herein listing my phone number: 218-828-1366 (many of those on my distribution list have it already). I invite critiques, questions and commentaries. I also welcome the many written responses I have been receiving, but often I can see in them subtle, but important, issues of understanding that can only be addressed in voice-to-voice conversation.
The tenor of these articles might, if one is not fully attentive, seem to be a broadside against bankers and banking. Let me be clear; the enemy is not bankers or banking. Rather, it a powerfully perverse principle that has gotten a hold on the human heart and mind. To be sure, bankers have often played their unfortunate part, and the institution of banking has to a great extent been the agent for the devil's work, but they are by no means unique in that status. In this modern age we are virtually all economic players, and have in our own particular niches contributed to the difficult circumstances that are unfolding in our financial life at present. I had intended to speak to greater depth upon this subject, but that idea was overtaken by events in the financial world that had to be addressed.
I have worked at this monetary "obsession" for going-on three decades, and have encountered a receptiveness, and even hunger, that has grown over the years for the conversation about money. There is a palpable impulse for change emerging in the people I meet. Many times the discussion is animated and the demeanor eager. Often, there is a reluctance to let the epiphany of the encounter come to an end. The next time we meet the personal warmth and enthusiasm is still there, but that special moment of recognition of the fatally flawed nature of the present monetary system, and the way out, has not taken root.
I have seen the flame of awakening on the subject of money kindled many times, but it has been, for the most part, a kindling of green wood. It will burn as long as the flame of my or other's speaking in person to the matter is held to it, and perhaps a while after, but the awareness needed for it to sustain itself is not yet arrived, and so it goes out. Still, something remains. A glowing ember from the moment of recognition when the hearer could peer through the veil of the present malaise and see that there is indeed an answer remains deep in the hearer's memory, but is not sufficient to re-kindle the flame on its own.
The time approaches in the progression of human evolution where a living consciousness about money can, and indeed must, be sustained on its own. It has been the conscious purpose of this series of treatises to expedite that transformation. The idea has been to break down a subject that is bewilderingly vast, complex and immersive into daily digestible bites that can be taken in as an antidote to what is, in my view, misguided, misleading and depressing media fare. My hope is that whatever merit is contained in these tomes will serve as lessons that will, over time, season the inner timber of mindfulness on the subject of money.
The success or failure of this initiative will be measured by how much it encourages and inspires people to take up spontaneously the seeking of truth about money in the context of their own life experiences, and their own original thoughts. Only then can the flame of understanding be said to have been lit. From there it can be shared with others until it kindles a mighty conflagration of realization that no force on earth can hold back.
At least that is my idea. If it is my delusion, let it be so, but I can't spend the day worrying about what others think. There is too much to do. The headlines, of late, have sewn a seed of urgency in many I have met or who have contacted me. Humankind has come a long way without coming to a deep realization of "what is money", the sophisticated world-encompassing financial structures we have built up notwithstanding. But the question can no longer be put by. It demands an answer, or fearful forces out of our control will impose one on us.
In my perception, all the signs of the times converge in a worldly sense upon the same reckoning, and that is what to do about money. If we would see it, the very occurrence of the present world financial chaos is a priceless opportunity. Whether we seize upon it for good or ill will make all the difference. I suggest that this is something to contemplate until we resume.
Thank you all for your interest.
Respectfully and lovingly submitted, Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Friday, October 3, 2008
Column #59 WHY WE CANNOT HAVE ANOTHER DEPRESSION
(Week 10 - Friday, Oct. 2)
In these last three weeks I have heard from voices in the media and people I have conversed with much speculative talk about whether the current financial emergency indicates that we are entering into another "Great Depression" of a nature similar to what the world endured in the 1930's. That such a comparison would arise is natural, given that many of the same factors that attended that crisis seem to be present in this one also. Many elders still living among us have a vivid memory of that time.
People are free, of course, to engage in any musings they feel moved to express, but I would suggest that, absent critical thinking, such speculations are effectively loose talk that pose a danger of becoming self-fulfilling prophecies. The depression of the 30's was a real historical occurrence for which a relatively good picture can be formed. The term "depression", as it is somewhat uncritically used now, is, in my view, an abstraction that can distract our thinking from a real perception of what is happening now, and what needs to be done.
Since the 1930's the world has changed so fundamentally that, I would suggest, the litany of events of that period offers only minimal potential for guidance as to how the current crisis might unfold. To be sure, there are lessons from that episode that need to be learned, but the present crisis is happening in a world that is in many respects so changed as to be almost unrecognizable. The nation was able to survive the Depression of the 30's relatively intact (albeit with great hardship), and emerge stronger than ever on the world scene. In my estimation, such an outcome would not be certain if such a catastrophic monetary contraction were to occur today. Why do I say that?
In the decade of the 30's a quarter of the population still lived on the land, and a farm still, typically, had chickens and hogs for meat, a garden which was augmented by extended storage capabilities (canning & root cellaring), a woodlot for heat, a diverse mix of "organic" crops, simple equipment, and a limited need for cash flow. Farms were still embraced by a network of small rural towns, and communities where people knew and supported each other on a personal basis. This was true also of the town banker.
Now less than two percent of the populace remains on the farm, and the average age of the farmer is about sixty. Increasingly he is no longer an independent operator, but a manager who produces on contract to a corporation. The farmstead chickens, hogs, gardens, woodlots, crop diversity, and simple equipment are virtually gone. The limited need for cash flow has been supplanted by a huge appetite for money to buy seed, fertilizers, fuel, equipment, and other inputs.
The upshot is that if the monetary economy ceases to function to the degree that it did in the 30's, even the few farmer's who remain will for the most part be in the food line almost as quickly as the urban dweller. Where would our food come from? One can easily imagine the implications of such a situation for the cities.
In the manufacturing sector most products have gone hi-tech, and the capacity to produce real sustaining goods has been dismantled and shipped abroad. In the transition a wide range of practical manual and mental skills have not been passed on to the next generation. During the depression of the last century the skills most in demand, even in downtown office towers, were relatively basic. They depended largely on manual and mental dexterities that are rarely practiced anymore. They have been supplanted by highly specialized computer software routines that would be useless as survival skills if the money to finance their capital-intensive workstations stopped flowing.
The big growth area of the last few decades, it seems, has been in the service sector, but many of these jobs are essentially "doing the paperwork" on each other's lives (albeit in a software mode). Now many of these "service" jobs have disappeared to other shores in the endless search for "cheap labor". In any case, the service sector cannot be materially sustaining. We have to produce something. We can survive only so long by selling each other insurance, while borrowing more money to have foreigners make our products and do our work.
My purpose here is not to recite a litany of how much better life was in the good old days, as opposed to how untenable it has become now. Truth be told, many of these changes represent the impelling forces of human evolution, and embody in themselves their own virtues. My point here is simply to say that the times have changed. The economy is now high-tech, high-cash-flow, and global. Hardly anyone survives on their own efforts anymore, or even on the labors of their local, regional or national communities.
The division (or should I say atomization) of labor has become virtually utter, and globally dispersed. Like it or not, in this new socio/economic order people do not work for themselves anymore. They work to do their bit in supplying the needs of others who live often half-a-world away, and whose language they do not speak. The transformed conditions since the time of the last great global economic upheaval I am describing here is, of course, relative, but in essential ways it is effectively a "world turned upside down".
The web of relationships that holds all this together works through the monetary system. If that goes down, unlike in the last depression, we do not have the subsistence capabilities by which a modern civilized society can survive, save at unthinkable human trauma (if even then).
We as a nation, and as a global community, have no good option except to redeem the monetary system by transforming it, if it is not to implode, taking us and our civilization with it. There is an argument that can be made for going for the $700 billion "bailout" in the hope that we can buy some time before the final reckoning, but it is the same self-delusional reasoning that courses through the being of an addict who wants to stave off the inevitable by indulging in his weakness just one more time. The "bailout" may (or may not) keep the system going for a time, but there is no doubt that in the end the price we will pay will be more certain and ruinous for our having put off coming to terms with our addiction to "debt" money.
But, life is a leaf; turn it over. Unless we will it so, this crisis is not the end of the world. On the contrary, it may be our opportunity to step up and emerge into a bright new morning. There has been a lot of tragedy and suffering that has transpired in the course of getting to this juncture, but we can choose how events will unfold from here. Indeed we must.
There is a silver lining of grace in the dark cloud that looms over the financial world right now. The present crisis is not our grim chastiser (unless we refuse to understand it otherwise), but our teacher. If only we could behold the lesson it has to reveal (the necessity of returning, in the spirit of service (not gain), the monetary franchise to the public domain), a breathtaking vision of a new world would open up on the other side.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
In these last three weeks I have heard from voices in the media and people I have conversed with much speculative talk about whether the current financial emergency indicates that we are entering into another "Great Depression" of a nature similar to what the world endured in the 1930's. That such a comparison would arise is natural, given that many of the same factors that attended that crisis seem to be present in this one also. Many elders still living among us have a vivid memory of that time.
People are free, of course, to engage in any musings they feel moved to express, but I would suggest that, absent critical thinking, such speculations are effectively loose talk that pose a danger of becoming self-fulfilling prophecies. The depression of the 30's was a real historical occurrence for which a relatively good picture can be formed. The term "depression", as it is somewhat uncritically used now, is, in my view, an abstraction that can distract our thinking from a real perception of what is happening now, and what needs to be done.
Since the 1930's the world has changed so fundamentally that, I would suggest, the litany of events of that period offers only minimal potential for guidance as to how the current crisis might unfold. To be sure, there are lessons from that episode that need to be learned, but the present crisis is happening in a world that is in many respects so changed as to be almost unrecognizable. The nation was able to survive the Depression of the 30's relatively intact (albeit with great hardship), and emerge stronger than ever on the world scene. In my estimation, such an outcome would not be certain if such a catastrophic monetary contraction were to occur today. Why do I say that?
In the decade of the 30's a quarter of the population still lived on the land, and a farm still, typically, had chickens and hogs for meat, a garden which was augmented by extended storage capabilities (canning & root cellaring), a woodlot for heat, a diverse mix of "organic" crops, simple equipment, and a limited need for cash flow. Farms were still embraced by a network of small rural towns, and communities where people knew and supported each other on a personal basis. This was true also of the town banker.
Now less than two percent of the populace remains on the farm, and the average age of the farmer is about sixty. Increasingly he is no longer an independent operator, but a manager who produces on contract to a corporation. The farmstead chickens, hogs, gardens, woodlots, crop diversity, and simple equipment are virtually gone. The limited need for cash flow has been supplanted by a huge appetite for money to buy seed, fertilizers, fuel, equipment, and other inputs.
The upshot is that if the monetary economy ceases to function to the degree that it did in the 30's, even the few farmer's who remain will for the most part be in the food line almost as quickly as the urban dweller. Where would our food come from? One can easily imagine the implications of such a situation for the cities.
In the manufacturing sector most products have gone hi-tech, and the capacity to produce real sustaining goods has been dismantled and shipped abroad. In the transition a wide range of practical manual and mental skills have not been passed on to the next generation. During the depression of the last century the skills most in demand, even in downtown office towers, were relatively basic. They depended largely on manual and mental dexterities that are rarely practiced anymore. They have been supplanted by highly specialized computer software routines that would be useless as survival skills if the money to finance their capital-intensive workstations stopped flowing.
The big growth area of the last few decades, it seems, has been in the service sector, but many of these jobs are essentially "doing the paperwork" on each other's lives (albeit in a software mode). Now many of these "service" jobs have disappeared to other shores in the endless search for "cheap labor". In any case, the service sector cannot be materially sustaining. We have to produce something. We can survive only so long by selling each other insurance, while borrowing more money to have foreigners make our products and do our work.
My purpose here is not to recite a litany of how much better life was in the good old days, as opposed to how untenable it has become now. Truth be told, many of these changes represent the impelling forces of human evolution, and embody in themselves their own virtues. My point here is simply to say that the times have changed. The economy is now high-tech, high-cash-flow, and global. Hardly anyone survives on their own efforts anymore, or even on the labors of their local, regional or national communities.
The division (or should I say atomization) of labor has become virtually utter, and globally dispersed. Like it or not, in this new socio/economic order people do not work for themselves anymore. They work to do their bit in supplying the needs of others who live often half-a-world away, and whose language they do not speak. The transformed conditions since the time of the last great global economic upheaval I am describing here is, of course, relative, but in essential ways it is effectively a "world turned upside down".
The web of relationships that holds all this together works through the monetary system. If that goes down, unlike in the last depression, we do not have the subsistence capabilities by which a modern civilized society can survive, save at unthinkable human trauma (if even then).
We as a nation, and as a global community, have no good option except to redeem the monetary system by transforming it, if it is not to implode, taking us and our civilization with it. There is an argument that can be made for going for the $700 billion "bailout" in the hope that we can buy some time before the final reckoning, but it is the same self-delusional reasoning that courses through the being of an addict who wants to stave off the inevitable by indulging in his weakness just one more time. The "bailout" may (or may not) keep the system going for a time, but there is no doubt that in the end the price we will pay will be more certain and ruinous for our having put off coming to terms with our addiction to "debt" money.
But, life is a leaf; turn it over. Unless we will it so, this crisis is not the end of the world. On the contrary, it may be our opportunity to step up and emerge into a bright new morning. There has been a lot of tragedy and suffering that has transpired in the course of getting to this juncture, but we can choose how events will unfold from here. Indeed we must.
There is a silver lining of grace in the dark cloud that looms over the financial world right now. The present crisis is not our grim chastiser (unless we refuse to understand it otherwise), but our teacher. If only we could behold the lesson it has to reveal (the necessity of returning, in the spirit of service (not gain), the monetary franchise to the public domain), a breathtaking vision of a new world would open up on the other side.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
Thursday, October 2, 2008
Column #58 MONETARY CRISIS – TAKING STOCK OF WHERE WE ARE NOW
(Week 10 - Thursday, Oct. 2)
With respect to the "debt"-based monetary system, we have reached a tipping point, and which way the situation will fall is uncertain. While the productive capacity of the physical economy has virtually ceased to grow (or declined), the economic expansion it has heretofore generated is slowing, and financial ledgers burgeoning with new "debt" can no longer be balanced with new money secured by actual production. That is why, for example, state budgets across the nation have gone from being balanced, or even flush with extra money a decade ago (in my state, Minnesota, they even sent out a rebate to taxpayers), to huge-cash flow deficits now, with little visible sea change in physical reality to account for it.
The stock market is in precipitous decline. Housing prices are no longer supportable in real terms, and are falling. Good paying jobs have been systematically shipped abroad or replaced with minimum wage positions. The newest crop of college graduates, already saddled with student loans and credit card debt, face a declining job market, and will not be able to provide the economy with the upwardly mobile spending impetus that has traditionally driven its growth. People's ability and willingness to go into new debt has in the aggregate been maxed out. Old debts, obligations and entitlements (both private and public) made under expectations of ad-infinitum exponential economic growth are coming due. The environment is being depleted. The infrastructure is crumbling. The baby-boomers are entering retirement.
The net effect of all these factors is that the "debt" load can no longer be serviced adequately with new borrowing within the constraints of the domestic market. Federal Reserve banker John Exter warned, "the Fed is locked into this continuing credit expansion. It can't stop. If ever bank lending slows . . . the game is up, and the scramble for liquidity starts." and "The Fed will be powerless to stop a deflationary collapse once it starts."
Judging by the strident stories in the newspapers, it would seem that the "deflationary collapse" has begun. Clearly there is a danger of such a thing happening, but as a nation and a world, we are entering an unprecedented time and it is difficult to say what scenario might play out.
The proponents of the "rescue plan" may indeed get their $700 billion dollars, and "save the financial system". What that means is that the obligation will be added to the "national debt". This "debt" is a ruse in the sense that it is never paid down anyway, but it does cause a further escalating of "interest" charges to be taken out of tax revenues to "service the national debt"; until, that is, these charges grow large enough to eat up the whole budget, and the government has to borrow every dollar it needs to fund its operations. This is a theoretical extreme, of course, and it is hard to imagine the situation getting to that point before the system breaks down completely.
If the rescue plan, as conceived, were implemented, it would, in the short run, inject a huge fresh stream of cash into circulation. When combined with the fact that a lot of "debt" that the money supply had been supporting will have been wiped out through bankruptcies (mostly in the productive sector), the freed-up "liquidity" (cash flow) may allow the economy to revive for a time. Politicians who voted for the scheme will boast about how it "worked", and the country will be setup for a round of "debt"-money expansion that is more crushing to its citizens than before.
It would certainly not be long, however, before the economy is back at the same impasse. By this time even more massive "interest payments on the debt" will consume public revenues. The productive capacity of the economy would almost certainly have deteriorated due to the supposed need to pour ever greater portions of its financial capital into "servicing debt", more and more buying power would have been lost to snowballing consumer "debt", and we would have become a nation that is even more dependent on living off borrowed money, while those abroad work for inadequate compensation to supply our material needs.
What is more, much greater control will have been invested in a small click of power brokers who would increasingly run our society in exchange for keeping the monetary spigot turned on. Already there are widespread reports in the media of proposals to "reform" or "streamline" the system by concentrating ever more power and authority in the Fed. It will become an unaccountable de facto government to an even greater extent than it is now.
Inevitably, at some point the journey down this path of "compounding-debt" will not be sustainable. The economy will "collapse" anyway. Are we there now, or can the reckoning be put off again until some time in the future? I don't know. Civilization has never been in this position before. In a world in which subsistence skills have been largely sacrificed to the mixed benefits of technology, and mutual global dependency has become the norm, one can only imagine what a "collapse" of the monetary system might look like. I will offer some sobering, as well as hopeful, thoughts on this in tomorrow's column.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
With respect to the "debt"-based monetary system, we have reached a tipping point, and which way the situation will fall is uncertain. While the productive capacity of the physical economy has virtually ceased to grow (or declined), the economic expansion it has heretofore generated is slowing, and financial ledgers burgeoning with new "debt" can no longer be balanced with new money secured by actual production. That is why, for example, state budgets across the nation have gone from being balanced, or even flush with extra money a decade ago (in my state, Minnesota, they even sent out a rebate to taxpayers), to huge-cash flow deficits now, with little visible sea change in physical reality to account for it.
The stock market is in precipitous decline. Housing prices are no longer supportable in real terms, and are falling. Good paying jobs have been systematically shipped abroad or replaced with minimum wage positions. The newest crop of college graduates, already saddled with student loans and credit card debt, face a declining job market, and will not be able to provide the economy with the upwardly mobile spending impetus that has traditionally driven its growth. People's ability and willingness to go into new debt has in the aggregate been maxed out. Old debts, obligations and entitlements (both private and public) made under expectations of ad-infinitum exponential economic growth are coming due. The environment is being depleted. The infrastructure is crumbling. The baby-boomers are entering retirement.
The net effect of all these factors is that the "debt" load can no longer be serviced adequately with new borrowing within the constraints of the domestic market. Federal Reserve banker John Exter warned, "the Fed is locked into this continuing credit expansion. It can't stop. If ever bank lending slows . . . the game is up, and the scramble for liquidity starts." and "The Fed will be powerless to stop a deflationary collapse once it starts."
Judging by the strident stories in the newspapers, it would seem that the "deflationary collapse" has begun. Clearly there is a danger of such a thing happening, but as a nation and a world, we are entering an unprecedented time and it is difficult to say what scenario might play out.
The proponents of the "rescue plan" may indeed get their $700 billion dollars, and "save the financial system". What that means is that the obligation will be added to the "national debt". This "debt" is a ruse in the sense that it is never paid down anyway, but it does cause a further escalating of "interest" charges to be taken out of tax revenues to "service the national debt"; until, that is, these charges grow large enough to eat up the whole budget, and the government has to borrow every dollar it needs to fund its operations. This is a theoretical extreme, of course, and it is hard to imagine the situation getting to that point before the system breaks down completely.
If the rescue plan, as conceived, were implemented, it would, in the short run, inject a huge fresh stream of cash into circulation. When combined with the fact that a lot of "debt" that the money supply had been supporting will have been wiped out through bankruptcies (mostly in the productive sector), the freed-up "liquidity" (cash flow) may allow the economy to revive for a time. Politicians who voted for the scheme will boast about how it "worked", and the country will be setup for a round of "debt"-money expansion that is more crushing to its citizens than before.
It would certainly not be long, however, before the economy is back at the same impasse. By this time even more massive "interest payments on the debt" will consume public revenues. The productive capacity of the economy would almost certainly have deteriorated due to the supposed need to pour ever greater portions of its financial capital into "servicing debt", more and more buying power would have been lost to snowballing consumer "debt", and we would have become a nation that is even more dependent on living off borrowed money, while those abroad work for inadequate compensation to supply our material needs.
What is more, much greater control will have been invested in a small click of power brokers who would increasingly run our society in exchange for keeping the monetary spigot turned on. Already there are widespread reports in the media of proposals to "reform" or "streamline" the system by concentrating ever more power and authority in the Fed. It will become an unaccountable de facto government to an even greater extent than it is now.
Inevitably, at some point the journey down this path of "compounding-debt" will not be sustainable. The economy will "collapse" anyway. Are we there now, or can the reckoning be put off again until some time in the future? I don't know. Civilization has never been in this position before. In a world in which subsistence skills have been largely sacrificed to the mixed benefits of technology, and mutual global dependency has become the norm, one can only imagine what a "collapse" of the monetary system might look like. I will offer some sobering, as well as hopeful, thoughts on this in tomorrow's column.
Richard Kotlarz
richkotlarz@gmail.com
The complete set of columns from this series is posted at the following websites:
http://economictree.blogspot.com/
http://www.concordresolution.org/column.htm
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