(Week 18 - Wednesday, Dec. 10)
In yesterday's column I talked about the Great Law of the Iroquois Confederacy which states, "In our every deliberation, we must consider the impact of our decisions on the next seven generations," and suggested that, by our society's failure to examine the monetary underpinnings of the current financial crisis, we are by default effectively making a decision that is untenable within the seventh-generation principle. If we were to step back for a broader historical look at the situation, the case could be made that we as a nation turned our collective backs on our own monetary heritage, and in effect already made the decision, some seven generations ago.
In earlier columns (#10 - 12) I described briefly how the American Revolution arose mainly out of the determination of the Colonies to exercise their own sovereignty and set their own course, starting in 1690 when the Colonial Assembly of Massachusetts became the first government in the Western world to issue its own paper money with the intention of providing a pool of circulating currency to serve the productive enterprise of the People. The other British North American Colonies adopted the practice, which, in turn, precipitated a protracted struggle between them and the Crown over who had the right to issue the Colonies' money. This led to the Declaration of Independence, the first two itemized grievances of which are references to the stonewalling of Colonial monetary initiatives for which ratification by the Crown and Parliament was required.
The Colonies ultimately prevailed in the military phase of the struggle, but not in the monetary. This is what prompted Alexander del Mar, the great monetary historian of the 19th century, to write:
"Never was a great historical event (the American Revolution) followed by a more feeble sequel. A nation arises to claim for itself liberty and sovereignty. It gains both of these ends by an immense sacrifice of blood and treasure. Then, when the victory is gained and secured, it hands the national credit (the authority to create money) over to private individuals, to do as they please with it."
The result was that, led by Alexander Hamilton, the first Bank of the United States (effectively a private central bank, much like the Federal Reserve) was established through a corporate charter issued by the first Congress in 1791. The history of our nation since then has been a litany of the protracted struggle between the proponents of the two principles (public vs. private) for creating, issuing and controlling the nation's money. Judging by the form of our monetary system, the private-bank-money contingent has clearly prevailed, at least for now.
Sincere arguments have been put forward over the decades by both sides, but whatever their relative merits I think it fair to say that our evolution as a nation over the "seven generations" since the Revolution (assuming a generation is about 30 years) has provided a historical baseline from which the result of having turned away from our commitment to public money in favor of a gradual acquiescence to private bank money can be judged. Today's headlines would seem to indicate that the outcome has been much less than satisfactory.
To be sure, this column is for the most part a recap of thoughts that have been enumerated in previous installments, but I think it important at this critical historical juncture, especially given the current financial crisis and the changing of American political administrations, to slow down, take stock of where we are, and try to gain a fresh perspective on what is happening. The seventh-generation rule is a quintessentially American artifact of cultural/spiritual life. It is perhaps not entirely surprising to discover that it has a reflection in our own experience.
In my view, American capitalism has played out its seven-generation providence and is now making a turn towards another form; one that has immense implications for this nation and the world. With yesterday and today's installments as a basis for understanding, I will endeavor to describe what precisely I mean by that in the next column.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
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, December 10, 2008
Monday, December 8, 2008
Column #91 THE SEVENTH-GENERATION LAW
(Week 18 - Monday, Dec. 8)
The Great Law of the Iroquois Confederacy states, "In our every deliberation, we must consider the impact of our decisions on the next seven generations." This passage is often quoted and widely admired in our culture for its farseeing wisdom, especially among those who are concerned with the human and environmental "cost of doing business," but I find it dismaying that it is rarely invoked with respect to the monetary question.
Those who "invest" with the idea of making money with money (i.e. look for opportunities to buy up the contracts that secure "debt") will naturally expect to "earn a return." Otherwise, why would they "invest"? The factors that determine the "yield" (increase) will vary, but let us assume that the "market expectation" is that one should be able to double one's money (adjusted for inflation) at least once per generation to make the process worthwhile (a very modest expectation by historic standards). For simplicity of discussion let us assume that one generation is twenty-four years, which is the period of time it would require for an "investor's" money to double at a compounded three-percent rate of return.
Let us suppose that someone took out a loan of $1000 from a bank that was repayable as a "balloon payment" (principal and "interest" due all at once) of $2000 dollars in twenty-four years. The borrower brought $1000 into circulation with his loan, but he will have to gather up $2000 at that time, and remit the money to the bank. This scenario will be replicated throughout the economy with millions of loan-and-payback-with-"interest" transactions. Each will require that there be more money than was borrowed available for payments as they come due. If we assume that on-average the money supply is maintained through loans taken out at three-percent "interest," the quantity of currency in circulation must also grow at a three-percent annual rate to maintain a constant ratio between funds available and money owed. This is what is required to keep old loans from going into default, and maintain an adequate supply of circulating medium.
Banks do not lend out significant sums of money without collateral, and so the financial requirement that there be twice the money in circulation at the end of each twenty-four-year generation must be matched by twice the amount of wealth or economic activity in existence against which money can be borrowed.
We as a society have reached the point where our entire capital wealth, as measured in dollars, is roughly equivalent to the amount we "owe" to private "investors" through the banking system for the privilege of having a money supply. This means that if the "fractional reserve formula" pyramid scheme by which the monetary structure is governed is not to collapse over the next generation, the level of economic activity at the end of the next twenty-four years must be such that for every car manufactured and sold this year, there must be two in that year, for every gallon of gas burned this year there must be two burned then, for every unit of human service performed now there must be two, and so forth. It is not strictly necessary that such doubling be accomplished on a product-for-product basis, but the Gross Domestic Product (GDP) must in some way be multiplied by a factor of two.
The more germane question is, what are the implications of this monetary "necessity" for human life and the earth itself? Much human need may indeed be taken care of in the course for pursuing the satisfaction of this monetary imperative (there may even be a great deal of "green" enterprise that is included), but at what human and physical cost? It should be noted that the GDP, like bank collateral, is essentially a quantitative measure of economic activity, not a qualitative index. Ambulance rides, pollution cleanup, building prisons, and war materiel do wonders for the numbers, and that may explain, at least in part, why such "enterprise" has become a larger part of our economic picture.
So far we have looked at only the first generation. To make it to the second while avoiding monetary collapse, the size of the physical economy must be doubled again, to four times the original level. Nor does it stop there. Taken to the seventh generation the physical economy would have to grow by a factor of 128 (2 raised to the 7th power). Is there any way one can look at the world today and imagine an economy on the earth that is, materially speaking, 128 times its present size?
I think it safe to say that this is not going to happen. Admittedly, the analysis I am running through here is in itself an abstract numbers game that correlates very imperfectly with life, but it is the game that we as a financial order are still trying to make work. The reliance on "economic growth" (i.e. the creation of collateral to borrow more money into existence) to keep the monetary system pumped up with "debt-money" is reaching its practical limits. The tragedy is that it has made "necessary" such dubious modes of "enterprise" as wasteful consumer consumption, sub-prime lending schemes, and borrowing for war as engines of money creation to keep what is essentially a pyramid scheme in the guise of a monetary system from collapsing. We have reached the point where even that is not enough; hence the spate of "bailouts."
By our society's failure to examine the monetary underpinnings of the current financial crisis, are we not by default effectively making a decision that is utterly untenable within the seventh-generation principle? Clearly, to persist on our present course will overwhelm human and environmental capacities. This is not to say that life does not still hold the possibilities for manifold growth in a multitude of directions, but to yoke that potential to the doctrine of the compounding material exploitation requisite to supporting "debt-money" expansion is, in my view, to effectively negate the possibilities for any future world we would care to contemplate.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
mailto:218-828-1366richkotlarz@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
The Great Law of the Iroquois Confederacy states, "In our every deliberation, we must consider the impact of our decisions on the next seven generations." This passage is often quoted and widely admired in our culture for its farseeing wisdom, especially among those who are concerned with the human and environmental "cost of doing business," but I find it dismaying that it is rarely invoked with respect to the monetary question.
Those who "invest" with the idea of making money with money (i.e. look for opportunities to buy up the contracts that secure "debt") will naturally expect to "earn a return." Otherwise, why would they "invest"? The factors that determine the "yield" (increase) will vary, but let us assume that the "market expectation" is that one should be able to double one's money (adjusted for inflation) at least once per generation to make the process worthwhile (a very modest expectation by historic standards). For simplicity of discussion let us assume that one generation is twenty-four years, which is the period of time it would require for an "investor's" money to double at a compounded three-percent rate of return.
Let us suppose that someone took out a loan of $1000 from a bank that was repayable as a "balloon payment" (principal and "interest" due all at once) of $2000 dollars in twenty-four years. The borrower brought $1000 into circulation with his loan, but he will have to gather up $2000 at that time, and remit the money to the bank. This scenario will be replicated throughout the economy with millions of loan-and-payback-with-"interest" transactions. Each will require that there be more money than was borrowed available for payments as they come due. If we assume that on-average the money supply is maintained through loans taken out at three-percent "interest," the quantity of currency in circulation must also grow at a three-percent annual rate to maintain a constant ratio between funds available and money owed. This is what is required to keep old loans from going into default, and maintain an adequate supply of circulating medium.
Banks do not lend out significant sums of money without collateral, and so the financial requirement that there be twice the money in circulation at the end of each twenty-four-year generation must be matched by twice the amount of wealth or economic activity in existence against which money can be borrowed.
We as a society have reached the point where our entire capital wealth, as measured in dollars, is roughly equivalent to the amount we "owe" to private "investors" through the banking system for the privilege of having a money supply. This means that if the "fractional reserve formula" pyramid scheme by which the monetary structure is governed is not to collapse over the next generation, the level of economic activity at the end of the next twenty-four years must be such that for every car manufactured and sold this year, there must be two in that year, for every gallon of gas burned this year there must be two burned then, for every unit of human service performed now there must be two, and so forth. It is not strictly necessary that such doubling be accomplished on a product-for-product basis, but the Gross Domestic Product (GDP) must in some way be multiplied by a factor of two.
The more germane question is, what are the implications of this monetary "necessity" for human life and the earth itself? Much human need may indeed be taken care of in the course for pursuing the satisfaction of this monetary imperative (there may even be a great deal of "green" enterprise that is included), but at what human and physical cost? It should be noted that the GDP, like bank collateral, is essentially a quantitative measure of economic activity, not a qualitative index. Ambulance rides, pollution cleanup, building prisons, and war materiel do wonders for the numbers, and that may explain, at least in part, why such "enterprise" has become a larger part of our economic picture.
So far we have looked at only the first generation. To make it to the second while avoiding monetary collapse, the size of the physical economy must be doubled again, to four times the original level. Nor does it stop there. Taken to the seventh generation the physical economy would have to grow by a factor of 128 (2 raised to the 7th power). Is there any way one can look at the world today and imagine an economy on the earth that is, materially speaking, 128 times its present size?
I think it safe to say that this is not going to happen. Admittedly, the analysis I am running through here is in itself an abstract numbers game that correlates very imperfectly with life, but it is the game that we as a financial order are still trying to make work. The reliance on "economic growth" (i.e. the creation of collateral to borrow more money into existence) to keep the monetary system pumped up with "debt-money" is reaching its practical limits. The tragedy is that it has made "necessary" such dubious modes of "enterprise" as wasteful consumer consumption, sub-prime lending schemes, and borrowing for war as engines of money creation to keep what is essentially a pyramid scheme in the guise of a monetary system from collapsing. We have reached the point where even that is not enough; hence the spate of "bailouts."
By our society's failure to examine the monetary underpinnings of the current financial crisis, are we not by default effectively making a decision that is utterly untenable within the seventh-generation principle? Clearly, to persist on our present course will overwhelm human and environmental capacities. This is not to say that life does not still hold the possibilities for manifold growth in a multitude of directions, but to yoke that potential to the doctrine of the compounding material exploitation requisite to supporting "debt-money" expansion is, in my view, to effectively negate the possibilities for any future world we would care to contemplate.
Richard Kotlarz
1904 1st Ave. S, #12
Minneapolis, MN 55403
218-828-1366
mailto:218-828-1366richkotlarz@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, December 5, 2008
Column #90 WHAT DO THE BIG-THREE AUTOMAKERS REALLY NEED?
(Week 17 - Friday, Dec. 5)
The "Big-Three" American automakers have come to Washington as the latest applicants for financial "bailouts," these in the form of loan guaranties in the aggregated amount of some $34 billion dollars. Much has been said about the supposed mismanagement of these corporations, the unrealistic demands of organized labor, and the effects of foreign competition as being contributing factors in the seeming inability of these companies to continue on their present course. Relatively speaking, I find merit in almost all of what has been said, but have heard virtually no dialogue (except to a minimum extent in the non-mainstream media, mostly on the internet) that goes to the heart of what has caused the financial position of such a huge industry and virtual American institution to become untenable.
The myriad issues of manufacturing efficiency, new technologies as they relate to environmental realities, model-development decisions, arriving at Senate hearings via corporate jets, executive compensation, workforce benefits, and the increasing ambivalence about automobiles in the culture as a whole, are, to be sure, all worthy topics for discussion, but there is one aspect of the automotive question that, in my view, is conspicuously missing from the discourse. That is, how is the industry's financial crisis affected by the very nature of the money that is the life's blood of its financial life?
The fundamental problem at the heart of the apparent insolvency of the automotive industry is the fact that the money that finances its operations is issued in the form of loans from a private banking system, to which is attached a compounding "interest" charge. This means that the executives and workforce who are responsible for bringing the wares of industry as a whole (of which the automotive industry is a major part) to market are losing buying power out of their profits and paychecks before they can spend them, to "interest" payments on bank loans, for which they receive no value. This means that the "cost of production" for goods brought to market, which consists entirely of money paid to people responsible (directly and indirectly) for bringing those goods to market, is not matched in the marketplace by consumer buying power.
This sets up a chain of cause and effect whereby goods will pile up as unsold inventory, orders for new goods will be reduced, and workers will be laid off. Fewer goods will be produced in the next round, but even this reduced level of production will not be able to be sold because the paychecks of those fewer workers also will have their purchasing power depleted by interest payments before they can spend them, and so will not be able to purchase even the reduced equivalent of what they produce. This causes a further reduction in orders for new goods, creating more layoffs, and so forth. The tendency for the economy, then, is to sink into a spiraling economic contraction.
The way this can be counteracted is for the economic players in society (whether private individuals, corporations, or civic bodies) to take on ever increasing amounts of "debt." Until recently the citizenry has been, for the most part, able and willing to do that, but the numbers associated with that "debt" have become astronomical, their ability to take on more has been tapped out, and their confidence in being able to pay off even what they owe now (let alone after taking on more) has declined precipitously.
For the automotive industry this has had a particularly devastating affect because cars are what economists call "durable (long term) goods" that are for the most part not in immediate need of replacement (one can almost always get a few more miles out of the car one already has), and replacement for most people requires the taking on of major new "debt." Their reluctance to do this has been exacerbated by other factors, such as the sudden disinclination of the public to buy the large fuel-thirsty vehicles the industry is offering in this time of ballooning gas prices. It is true that gas prices have plummeted recently, but confidence that they won't come back in the long term has been shaken.
Added to this is that the almost utter dependence upon the automobile that we have effectively cultivated has come into question. This society has now lived through the effects of a century of automotive proliferation, and many people are asking fundamental practical and moral questions about that dependency.
The upshot of these and other converging factors is that the Big Three of the American automotive industry are experiencing great difficulty in selling their wares. This has become, not only a business problem of unsold automotive inventory, but also a financial crisis that threatens to draw the larger economy into an imploding monetary vortex. Financing for new vehicles is one of the great mechanisms for "debt-money" generation, and when people decide for a time to make do with their old vehicles and concentrate on paying off their loans at the bank, this causes a net contraction of the money supply, which in turn fuels a deepening crisis of confidence.
The question is, what can be done to halt this vicious spiral? Much of the discourse that is going on related to efficiency, new technologies, model choices, executive compensation, workforce benefits, and the reliance of our society on automobiles is healthy and will lead to new answers in many respects, but the monetary question needs to be brought into the dialogue. In my view, there is no resolution without it. If all the other factors are addressed effectively, but the monetary question is not, then the industry will be back again asking for more money. The syndrome of inadequate-purchasing-power-available-to-cover-the-cost-of-production-caused-by-"interest"-payments-on-the-money-supply will not be broken.
What the Big Three automakers really need, I suggest, is precisely what all segments of the economy need (including the auto executives, the automotive workforce, and the customers they serve); that is, a return of the money-creation franchise to the public sector so that the pool of money upon which we all rely will not be drained of value by "interest" payments, with the result that we as a community of participants in the economy cannot buy what we produce. With a publicly-issued money supply, an adequacy of funds to cover the aggregate cost of producing goods will be guaranteed, and the more specific problems of the automotive industry raised in the public dialogue at present can be addressed in a truly effective manner.
Richard Kotlarz
1904 1st Ave S, #12
Minneapolis, MN 55403
218-828-1366richkotlarz@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
The "Big-Three" American automakers have come to Washington as the latest applicants for financial "bailouts," these in the form of loan guaranties in the aggregated amount of some $34 billion dollars. Much has been said about the supposed mismanagement of these corporations, the unrealistic demands of organized labor, and the effects of foreign competition as being contributing factors in the seeming inability of these companies to continue on their present course. Relatively speaking, I find merit in almost all of what has been said, but have heard virtually no dialogue (except to a minimum extent in the non-mainstream media, mostly on the internet) that goes to the heart of what has caused the financial position of such a huge industry and virtual American institution to become untenable.
The myriad issues of manufacturing efficiency, new technologies as they relate to environmental realities, model-development decisions, arriving at Senate hearings via corporate jets, executive compensation, workforce benefits, and the increasing ambivalence about automobiles in the culture as a whole, are, to be sure, all worthy topics for discussion, but there is one aspect of the automotive question that, in my view, is conspicuously missing from the discourse. That is, how is the industry's financial crisis affected by the very nature of the money that is the life's blood of its financial life?
The fundamental problem at the heart of the apparent insolvency of the automotive industry is the fact that the money that finances its operations is issued in the form of loans from a private banking system, to which is attached a compounding "interest" charge. This means that the executives and workforce who are responsible for bringing the wares of industry as a whole (of which the automotive industry is a major part) to market are losing buying power out of their profits and paychecks before they can spend them, to "interest" payments on bank loans, for which they receive no value. This means that the "cost of production" for goods brought to market, which consists entirely of money paid to people responsible (directly and indirectly) for bringing those goods to market, is not matched in the marketplace by consumer buying power.
This sets up a chain of cause and effect whereby goods will pile up as unsold inventory, orders for new goods will be reduced, and workers will be laid off. Fewer goods will be produced in the next round, but even this reduced level of production will not be able to be sold because the paychecks of those fewer workers also will have their purchasing power depleted by interest payments before they can spend them, and so will not be able to purchase even the reduced equivalent of what they produce. This causes a further reduction in orders for new goods, creating more layoffs, and so forth. The tendency for the economy, then, is to sink into a spiraling economic contraction.
The way this can be counteracted is for the economic players in society (whether private individuals, corporations, or civic bodies) to take on ever increasing amounts of "debt." Until recently the citizenry has been, for the most part, able and willing to do that, but the numbers associated with that "debt" have become astronomical, their ability to take on more has been tapped out, and their confidence in being able to pay off even what they owe now (let alone after taking on more) has declined precipitously.
For the automotive industry this has had a particularly devastating affect because cars are what economists call "durable (long term) goods" that are for the most part not in immediate need of replacement (one can almost always get a few more miles out of the car one already has), and replacement for most people requires the taking on of major new "debt." Their reluctance to do this has been exacerbated by other factors, such as the sudden disinclination of the public to buy the large fuel-thirsty vehicles the industry is offering in this time of ballooning gas prices. It is true that gas prices have plummeted recently, but confidence that they won't come back in the long term has been shaken.
Added to this is that the almost utter dependence upon the automobile that we have effectively cultivated has come into question. This society has now lived through the effects of a century of automotive proliferation, and many people are asking fundamental practical and moral questions about that dependency.
The upshot of these and other converging factors is that the Big Three of the American automotive industry are experiencing great difficulty in selling their wares. This has become, not only a business problem of unsold automotive inventory, but also a financial crisis that threatens to draw the larger economy into an imploding monetary vortex. Financing for new vehicles is one of the great mechanisms for "debt-money" generation, and when people decide for a time to make do with their old vehicles and concentrate on paying off their loans at the bank, this causes a net contraction of the money supply, which in turn fuels a deepening crisis of confidence.
The question is, what can be done to halt this vicious spiral? Much of the discourse that is going on related to efficiency, new technologies, model choices, executive compensation, workforce benefits, and the reliance of our society on automobiles is healthy and will lead to new answers in many respects, but the monetary question needs to be brought into the dialogue. In my view, there is no resolution without it. If all the other factors are addressed effectively, but the monetary question is not, then the industry will be back again asking for more money. The syndrome of inadequate-purchasing-power-available-to-cover-the-cost-of-production-caused-by-"interest"-payments-on-the-money-supply will not be broken.
What the Big Three automakers really need, I suggest, is precisely what all segments of the economy need (including the auto executives, the automotive workforce, and the customers they serve); that is, a return of the money-creation franchise to the public sector so that the pool of money upon which we all rely will not be drained of value by "interest" payments, with the result that we as a community of participants in the economy cannot buy what we produce. With a publicly-issued money supply, an adequacy of funds to cover the aggregate cost of producing goods will be guaranteed, and the more specific problems of the automotive industry raised in the public dialogue at present can be addressed in a truly effective manner.
Richard Kotlarz
1904 1st Ave S, #12
Minneapolis, MN 55403
218-828-1366richkotlarz@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, December 3, 2008
Column #89 MONEY – THE PARADOX OF OUR TIME
(Week 17 - Wednesday, Dec. 3)
Charles Dickens opened his classic novel A Tale of Two Cities with perhaps the most famous of all literary curtain risers (after "In the beginning . . ." that is); i.e. "It was the best of times, it was the worst of times . . ." He was referring specifically to the nascent-industrial England of the late 18th century, but the same can be said of the present epoch. Indeed, contemporary global civilization has stretched this dichotomy to the most extreme polarity possible.
It can be said that a large portion of humankind at present lives in a cornucopia of unfolding progress, possibilities and richness that fairly beggars the imagination. In the historically-brief last century or two it has plumbed the depths, spanned the heavens, opened the floodgates of material abundance, developed vast technological capabilities, shrunk the world into a global village, exploded the boundaries of artistic expression, enacted sweeping social and political reforms, unlocked the atom, mastered incredible techniques for healing, and approached the mysteries of the creation of life itself.
Yet, in spite of all of that, it may be fairly asked if we are not approaching the brink of the incomprehensible suicide of civilization, or even the destruction of earth itself, through any number of possible avenues; be it the spontaneous unraveling of the ecosystem; the overwhelming of the last barriers to infectious pandemics; the revitalization of class, ethnic, racial or religious intolerance; the grinding realities of agricultural, industrial and service labor; snowballing monetary indebtedness; the ever more maddening pace and dehumanization of modern life; the exhaustion of material resources; the collateral consequences of an imperialist New-World-Order hegemony; nuclear holocaust; or the wrath of an angry creator.
What are we to think of this impossibly contradictory state of affairs? The juxtaposed "best" and "worst" of times is in actuality not a contradiction, but rather an expression of the poles of the overarching paradox. What, then, is the paradox? This may be expressed many ways, but in an outward sense it surely is reflected in the reality that humankind, in this era of vastly expanded financial activity, has not mastered money. In what life does money not exist as the most polarized of love/hate, embraced/condemned, or sought/feared elements? It is indeed the essential riddle of our time.
The fact that the subject is money dictates that the discipline of banking be brought most particularly under the green shade of scrutiny. The problem, though, is by no means limited to those involved overtly in the banking or financial professions. In this modern era, we are all economic creatures, and do in fact mould the form of the economic life with our thoughts, feelings and actions. If the economic cake were sliced along a different cross section, any number of other walks or categories of life could be held up for similar treatment.
If there is a 'bottom line' to this story it is that, while different "classes" (a divisive word, to be sure) of society may indeed have their respective economic issues, there is ultimately no us-vs.-them factor in their resolution. This premise is held forth adamantly in the fullness of the narrative represented by the unfoldment of these columns. As fellow sojourners in the earth we are all in this together; both as agents for the problem, and as hopes for the cure. If there is any distinction to be said for people of finance it is that theirs is a special calling in an age when the full blossoming of the economic life is coming providentially to the fore.
In the course of performing any economic activity within the present system I suspect that we virtually all experience on some level an existential split, and stand in our respective ways in the need of liberation and healing. In this time of great historical reckoning and economic unfoldment, the chasm occasioned by matters of money, both between people and within them, can no longer be accommodated. It behooves each of us to engage in soul-searching as to our truest and deepest relationship to money. The space for a free dialogue between people of finance and the body of the social order must be opened up for a bracing, but empathetic discourse. Clearly, the truth cannot be spared, but in our quest there can be no place for attitudes of condescension or recrimination.
Rather, it is our task in this time to seek in brotherhood the transformation of the economic order from one premised on scarcity (i.e. there is only so much money because someone has to borrow it into circulation, and pay the "interest" on the loan), to one of abundance (i.e. we as a people and a civilization can do as much as we in freedom elect, and the money to finance it is available in whatever quantity needed out of our sovereign power to issue it). This will change everything.
Richard Kotlarz
1904 1st Ave S, #12
Minneapolis, MN 55403
218-828-1366 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
Charles Dickens opened his classic novel A Tale of Two Cities with perhaps the most famous of all literary curtain risers (after "In the beginning . . ." that is); i.e. "It was the best of times, it was the worst of times . . ." He was referring specifically to the nascent-industrial England of the late 18th century, but the same can be said of the present epoch. Indeed, contemporary global civilization has stretched this dichotomy to the most extreme polarity possible.
It can be said that a large portion of humankind at present lives in a cornucopia of unfolding progress, possibilities and richness that fairly beggars the imagination. In the historically-brief last century or two it has plumbed the depths, spanned the heavens, opened the floodgates of material abundance, developed vast technological capabilities, shrunk the world into a global village, exploded the boundaries of artistic expression, enacted sweeping social and political reforms, unlocked the atom, mastered incredible techniques for healing, and approached the mysteries of the creation of life itself.
Yet, in spite of all of that, it may be fairly asked if we are not approaching the brink of the incomprehensible suicide of civilization, or even the destruction of earth itself, through any number of possible avenues; be it the spontaneous unraveling of the ecosystem; the overwhelming of the last barriers to infectious pandemics; the revitalization of class, ethnic, racial or religious intolerance; the grinding realities of agricultural, industrial and service labor; snowballing monetary indebtedness; the ever more maddening pace and dehumanization of modern life; the exhaustion of material resources; the collateral consequences of an imperialist New-World-Order hegemony; nuclear holocaust; or the wrath of an angry creator.
What are we to think of this impossibly contradictory state of affairs? The juxtaposed "best" and "worst" of times is in actuality not a contradiction, but rather an expression of the poles of the overarching paradox. What, then, is the paradox? This may be expressed many ways, but in an outward sense it surely is reflected in the reality that humankind, in this era of vastly expanded financial activity, has not mastered money. In what life does money not exist as the most polarized of love/hate, embraced/condemned, or sought/feared elements? It is indeed the essential riddle of our time.
The fact that the subject is money dictates that the discipline of banking be brought most particularly under the green shade of scrutiny. The problem, though, is by no means limited to those involved overtly in the banking or financial professions. In this modern era, we are all economic creatures, and do in fact mould the form of the economic life with our thoughts, feelings and actions. If the economic cake were sliced along a different cross section, any number of other walks or categories of life could be held up for similar treatment.
If there is a 'bottom line' to this story it is that, while different "classes" (a divisive word, to be sure) of society may indeed have their respective economic issues, there is ultimately no us-vs.-them factor in their resolution. This premise is held forth adamantly in the fullness of the narrative represented by the unfoldment of these columns. As fellow sojourners in the earth we are all in this together; both as agents for the problem, and as hopes for the cure. If there is any distinction to be said for people of finance it is that theirs is a special calling in an age when the full blossoming of the economic life is coming providentially to the fore.
In the course of performing any economic activity within the present system I suspect that we virtually all experience on some level an existential split, and stand in our respective ways in the need of liberation and healing. In this time of great historical reckoning and economic unfoldment, the chasm occasioned by matters of money, both between people and within them, can no longer be accommodated. It behooves each of us to engage in soul-searching as to our truest and deepest relationship to money. The space for a free dialogue between people of finance and the body of the social order must be opened up for a bracing, but empathetic discourse. Clearly, the truth cannot be spared, but in our quest there can be no place for attitudes of condescension or recrimination.
Rather, it is our task in this time to seek in brotherhood the transformation of the economic order from one premised on scarcity (i.e. there is only so much money because someone has to borrow it into circulation, and pay the "interest" on the loan), to one of abundance (i.e. we as a people and a civilization can do as much as we in freedom elect, and the money to finance it is available in whatever quantity needed out of our sovereign power to issue it). This will change everything.
Richard Kotlarz
1904 1st Ave S, #12
Minneapolis, MN 55403
218-828-1366 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
Monday, December 1, 2008
Column #88 THE ECONOMIC IMPERATIVE OF CHRISTMAS SHOPPING
(Week 17 - Monday, Dec. 1)
Every year about this time, it seems, the mavens of economic prognostication hold their collective breath until the returns begin to come in on how willing and able people are to show up at retailers, money in hand, ready to engage in Christmas shopping. This year in particular, they are waiting with bated breath. Will the people flock to the stores, and thereby demonstrate a "show of confidence" in the economy (despite losing jobs, savings and home equity), or will their malaise and beggared circumstances be too great for the usually festive air (or patriotic spirit of shopping) to overcome?
This year the early returns are, it seems, "encouraging." A few minutes ago I heard a newscaster on Public Radio report that retail sales on Black Friday (the shopping day after Thanksgiving) were reportedly up three percent from last year. The next benchmark will be "cyber-Monday" when the initial wave of shopping over the Internet is expected to take place.
That this is good news for the retailers and suppliers who produce the profusion of gift items is obvious, but holiday shopping is also billed as a bellwether for the overall economy. If sales are up, so the thinking goes, then the economy is sound; if they are down, it is an indication of "structural weakness." If the grim economic indicators that we have been hearing in the news belie any notion of soundness in the economy, the willingness to shop, especially for non-essential items, is taken as a barometer of "consumer confidence," which in the end, supposedly, is the key to turning the overall economic situation around. Within the context of the present monetary system and culture, there is perceived to be an effective economic imperative for Holiday shopping.
This raises the question, how does this seeming need for shopping reflect upon real economic health? Is it a sign of a genuinely robust economy, or the reckless indulgence of a narcissistic consumerism?
The question needs to be answered in the context of the monetary realities that influence overall consumer behavior. In a "debt-money" based economy there is a constantly felt need for "economic growth" (i.e. borrowing more money into circulation) to expand the economic base against which more money can be borrowed. Without it, an imploding monetary spiral can indeed set in, and present a threat to the economy as whole. The perception of such a need, therefore, is not entirely without cause. If not enough merchandise is sold during the annual shopping binge, the effect will be to cause a net contraction of the economy, and the unpleasant effects of that will indeed ripple out, in whatever relative measure, through all sectors.
Monetarily speaking, the system does not care who does the borrowing, or for what purpose. It could just as well be for the citizenry taking out a Holiday Season loan or laying their credit cards on the store counter for Christmas gifts, as for municipalities building schools, the Federal government requisitioning tanks or the well-healed consumers purchasing luxury vehicles. Holiday shopping is a major factor in the Gross Domestic Product (GDP), and if it is down the economy as a whole does indeed take a hit, the fact that much of the shopping does not make sense in terms of human welfare, or even true giving, notwithstanding.
The question arises, "What sense does this all make in terms of genuine economic life?" I would answer, "None!" As in virtually all other areas of economic life, the imperatives imposed by "debt"-based money have turned genuine economics on its head. From a common sense perspective, it is most advantageous in terms of human life to accomplish the most with the least expenditure of resources. Within a system where money is created and borrowed into existence from private banks, that logic is reversed; i.e. the economy is deemed the healthiest when it does the least with the greatest expenditure of resources.
To illustrate, common sense would say that an automotive vehicle is most economical when it goes the greatest distance on the least fuel. The "problem" is that this is also the condition that contributes the least to the GDP. If a given vehicle burned twice as much gas to go the same distance, that activity would produce, monetarily speaking, twice the economic activity, and therefore contribute twice the amount to the GDP, and therefore cause economic indicators to rise. The net effect of our society's dependence on "debt-money" is to encourage a wasteful use of resources. Indeed, as the amount of "debt" increases the "health" of our economy comes to rely in a peculiar way on gratuitous consumption. That is why, for example, the proliferation of vehicles that cover people's transportation needs via a maximum consumption of resources has been encouraged by the financial order.
Of all patterns of spending, holiday shopping tends (arguably) to be among the most frivolous, and yet it is widely touted as a great engine of consumption that is counted upon to give the economy a yearly boost. This has nothing to do with real human welfare, or even genuine gift-giving, but everything to do with the monetary "need" to borrow more money into circulation so that "interest" payments required to maintain the money supply and keep it growing can be satisfied.
My purpose here is not to be a Scrooge. Indeed, much seasonal shopping is conducted mindfully in the spirit of true gift-giving and satisfying each other's needs. Many people, if not most, would likely agree that this laudable intent has given way to a rampant materialism that has overtaken the original spirit of the seasonal observance. This is a complex issue, and it can be looked at from many perspectives, but I would suggest that the monetary imperative for people to continuously take on more "debt" is major factor that has driven it in the "rampant materialism" direction.
If we were to adopt a public monetary system, the "debt-imperative" fuel would be removed from the holiday-shopping fire. To be sure, merchants and suppliers would still be interested in peddling their wares, but even for them lower overall levels of "debt," much of which they now account for as a cost of doing business, would reduce the urgency of their situation. This would open the door to seasonal celebrations that were sane and not nearly as driven by the need to sell superfluous goods.
Concerning the monetary soundness of the economy as a whole, the yearly holiday-shopping boost itself would become a non-issue. With adjustments in the quantity of money in circulation, the society's buying and selling could be allowed to expand or contract according to real human needs and desires, including whatever level of holiday shopping and gift-giving people might deem to be good and natural for its own intrinsic reasons.
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
Every year about this time, it seems, the mavens of economic prognostication hold their collective breath until the returns begin to come in on how willing and able people are to show up at retailers, money in hand, ready to engage in Christmas shopping. This year in particular, they are waiting with bated breath. Will the people flock to the stores, and thereby demonstrate a "show of confidence" in the economy (despite losing jobs, savings and home equity), or will their malaise and beggared circumstances be too great for the usually festive air (or patriotic spirit of shopping) to overcome?
This year the early returns are, it seems, "encouraging." A few minutes ago I heard a newscaster on Public Radio report that retail sales on Black Friday (the shopping day after Thanksgiving) were reportedly up three percent from last year. The next benchmark will be "cyber-Monday" when the initial wave of shopping over the Internet is expected to take place.
That this is good news for the retailers and suppliers who produce the profusion of gift items is obvious, but holiday shopping is also billed as a bellwether for the overall economy. If sales are up, so the thinking goes, then the economy is sound; if they are down, it is an indication of "structural weakness." If the grim economic indicators that we have been hearing in the news belie any notion of soundness in the economy, the willingness to shop, especially for non-essential items, is taken as a barometer of "consumer confidence," which in the end, supposedly, is the key to turning the overall economic situation around. Within the context of the present monetary system and culture, there is perceived to be an effective economic imperative for Holiday shopping.
This raises the question, how does this seeming need for shopping reflect upon real economic health? Is it a sign of a genuinely robust economy, or the reckless indulgence of a narcissistic consumerism?
The question needs to be answered in the context of the monetary realities that influence overall consumer behavior. In a "debt-money" based economy there is a constantly felt need for "economic growth" (i.e. borrowing more money into circulation) to expand the economic base against which more money can be borrowed. Without it, an imploding monetary spiral can indeed set in, and present a threat to the economy as whole. The perception of such a need, therefore, is not entirely without cause. If not enough merchandise is sold during the annual shopping binge, the effect will be to cause a net contraction of the economy, and the unpleasant effects of that will indeed ripple out, in whatever relative measure, through all sectors.
Monetarily speaking, the system does not care who does the borrowing, or for what purpose. It could just as well be for the citizenry taking out a Holiday Season loan or laying their credit cards on the store counter for Christmas gifts, as for municipalities building schools, the Federal government requisitioning tanks or the well-healed consumers purchasing luxury vehicles. Holiday shopping is a major factor in the Gross Domestic Product (GDP), and if it is down the economy as a whole does indeed take a hit, the fact that much of the shopping does not make sense in terms of human welfare, or even true giving, notwithstanding.
The question arises, "What sense does this all make in terms of genuine economic life?" I would answer, "None!" As in virtually all other areas of economic life, the imperatives imposed by "debt"-based money have turned genuine economics on its head. From a common sense perspective, it is most advantageous in terms of human life to accomplish the most with the least expenditure of resources. Within a system where money is created and borrowed into existence from private banks, that logic is reversed; i.e. the economy is deemed the healthiest when it does the least with the greatest expenditure of resources.
To illustrate, common sense would say that an automotive vehicle is most economical when it goes the greatest distance on the least fuel. The "problem" is that this is also the condition that contributes the least to the GDP. If a given vehicle burned twice as much gas to go the same distance, that activity would produce, monetarily speaking, twice the economic activity, and therefore contribute twice the amount to the GDP, and therefore cause economic indicators to rise. The net effect of our society's dependence on "debt-money" is to encourage a wasteful use of resources. Indeed, as the amount of "debt" increases the "health" of our economy comes to rely in a peculiar way on gratuitous consumption. That is why, for example, the proliferation of vehicles that cover people's transportation needs via a maximum consumption of resources has been encouraged by the financial order.
Of all patterns of spending, holiday shopping tends (arguably) to be among the most frivolous, and yet it is widely touted as a great engine of consumption that is counted upon to give the economy a yearly boost. This has nothing to do with real human welfare, or even genuine gift-giving, but everything to do with the monetary "need" to borrow more money into circulation so that "interest" payments required to maintain the money supply and keep it growing can be satisfied.
My purpose here is not to be a Scrooge. Indeed, much seasonal shopping is conducted mindfully in the spirit of true gift-giving and satisfying each other's needs. Many people, if not most, would likely agree that this laudable intent has given way to a rampant materialism that has overtaken the original spirit of the seasonal observance. This is a complex issue, and it can be looked at from many perspectives, but I would suggest that the monetary imperative for people to continuously take on more "debt" is major factor that has driven it in the "rampant materialism" direction.
If we were to adopt a public monetary system, the "debt-imperative" fuel would be removed from the holiday-shopping fire. To be sure, merchants and suppliers would still be interested in peddling their wares, but even for them lower overall levels of "debt," much of which they now account for as a cost of doing business, would reduce the urgency of their situation. This would open the door to seasonal celebrations that were sane and not nearly as driven by the need to sell superfluous goods.
Concerning the monetary soundness of the economy as a whole, the yearly holiday-shopping boost itself would become a non-issue. With adjustments in the quantity of money in circulation, the society's buying and selling could be allowed to expand or contract according to real human needs and desires, including whatever level of holiday shopping and gift-giving people might deem to be good and natural for its own intrinsic reasons.
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, November 28, 2008
Column #87 "NOT WORTH A CONTINENTAL"?
(Week 16 - Friday, Nov. 28)
On June 22, 1775, the Second Continental Congress meeting in Philadelphia assumed the power of sovereignty by issuing the first currency that was common to all the Colonies, the "Continental Currency". This act could be deemed to be the effective break with England, though it preceded the Declaration of Independence by slightly over a year. This was a publicly-issued currency, not tied to precious metals, commodities, land banks, or other forms of "backing".
There is a common "wisdom" that assumes that the eventual failure of the Continental Currency proves that the issuance of money should be left to private banks. In fact, the oft-repeated phrase "not worth a Continental" arises from this period. This phrase is, in turn, routinely picked up and repeated by those who argue against the public issuance of currency. The historical record, however, indicates quite a different story. The Continental Congress authorized and printed $241 million, but after accounting for the redemption of worn bills, there were never more than about $200 million in circulation at any one time. The British spared no efforts at trying to render the currency worthless by counterfeiting and distributing this amount many times over (estimated at one to two billion).
It has long been recognized that to debauch their currency is an effective way to undermine the power and will of an adversary, and the Revolutionary War period was not the only time that this principle was used by the British to further its interests. In the 1790's they engaged in a counterfeiting campaign to destroy the Assignats, a publicly-issued currency of the French Revolutionary period. When contesting the Dutch over New Amsterdam (New York) they even flooded the colony with Indian wampum (beaded sea shells used for ceremonial purposes), which the Dutch had adopted as currency.
The British counterfeiting campaign was massive and sophisticated. Benjamin Franklin, an advocate of paper money, noted:
"The artists they employed performed so well that immense quantities of these counterfeits which issued from the British Government in New York, were circulated among the inhabitants of all the states, before the fraud was detected. This operated significantly in depreciating the whole mass."
They ran an ad in a British-occupied New York paper which read:
"Persons going into other Colonies may be supplied with any Number of counterfeit Congress-Notes, for the Price of the Paper per Ream. They are so neatly and exactly executed that there is no Risque in getting them off, it being almost impossible to discover, that they are not genuine."
This "unparalleled piece" prompted George Washington to comment, "... no Artifices are left untried by the Enemy to injure us." In spite of this, Continental Currency continued to function reasonably well. After three years of war it was still exchanged at $1.75 against $1.00 of coinage. This led and exasperated General Clinton to complain to Lord Germaine (cabinet secretary in charge of war in the American colonies), "The experiments suggested by your lordships have been tried, no assistance that could be drawn from the power of gold or the arts of counterfeiting have been left untried, but still the currency . . . has not failed." The currency did finally collapse, but not before seeing the new nation through its birth pangs, prompting Thomas Paine to write, "Every stone in the bridge that has carried us over, seems to have a claim upon our esteem. But this (Continental Currency) was a cornerstone, and its usefulness cannot be forgotten."
Evidently its usefulness has largely been forgotten, and what remains in the culture to commemorate its critical importance is the phase "not worth a Continental". The eventual collapse of the Continental Currency is very frequently cited as evidence that the issuance of money cannot be trusted to the government, and should instead be left to private banks, but these sources virtually never mention the massive counterfeiting of the currency by the British (as well as private counterfeiters encouraged and protected by the British). How often this is a willful omission is hard to say, but I have many times heard it repeated reflexively even by those whose intention of the moment was evidently not to make a monetary argument. This is an example of how our culture and founding national mythology has been co-opted into an effective, though largely unconscious, conspiracy to cause us to forget our true monetary heritage.
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
On June 22, 1775, the Second Continental Congress meeting in Philadelphia assumed the power of sovereignty by issuing the first currency that was common to all the Colonies, the "Continental Currency". This act could be deemed to be the effective break with England, though it preceded the Declaration of Independence by slightly over a year. This was a publicly-issued currency, not tied to precious metals, commodities, land banks, or other forms of "backing".
There is a common "wisdom" that assumes that the eventual failure of the Continental Currency proves that the issuance of money should be left to private banks. In fact, the oft-repeated phrase "not worth a Continental" arises from this period. This phrase is, in turn, routinely picked up and repeated by those who argue against the public issuance of currency. The historical record, however, indicates quite a different story. The Continental Congress authorized and printed $241 million, but after accounting for the redemption of worn bills, there were never more than about $200 million in circulation at any one time. The British spared no efforts at trying to render the currency worthless by counterfeiting and distributing this amount many times over (estimated at one to two billion).
It has long been recognized that to debauch their currency is an effective way to undermine the power and will of an adversary, and the Revolutionary War period was not the only time that this principle was used by the British to further its interests. In the 1790's they engaged in a counterfeiting campaign to destroy the Assignats, a publicly-issued currency of the French Revolutionary period. When contesting the Dutch over New Amsterdam (New York) they even flooded the colony with Indian wampum (beaded sea shells used for ceremonial purposes), which the Dutch had adopted as currency.
The British counterfeiting campaign was massive and sophisticated. Benjamin Franklin, an advocate of paper money, noted:
"The artists they employed performed so well that immense quantities of these counterfeits which issued from the British Government in New York, were circulated among the inhabitants of all the states, before the fraud was detected. This operated significantly in depreciating the whole mass."
They ran an ad in a British-occupied New York paper which read:
"Persons going into other Colonies may be supplied with any Number of counterfeit Congress-Notes, for the Price of the Paper per Ream. They are so neatly and exactly executed that there is no Risque in getting them off, it being almost impossible to discover, that they are not genuine."
This "unparalleled piece" prompted George Washington to comment, "... no Artifices are left untried by the Enemy to injure us." In spite of this, Continental Currency continued to function reasonably well. After three years of war it was still exchanged at $1.75 against $1.00 of coinage. This led and exasperated General Clinton to complain to Lord Germaine (cabinet secretary in charge of war in the American colonies), "The experiments suggested by your lordships have been tried, no assistance that could be drawn from the power of gold or the arts of counterfeiting have been left untried, but still the currency . . . has not failed." The currency did finally collapse, but not before seeing the new nation through its birth pangs, prompting Thomas Paine to write, "Every stone in the bridge that has carried us over, seems to have a claim upon our esteem. But this (Continental Currency) was a cornerstone, and its usefulness cannot be forgotten."
Evidently its usefulness has largely been forgotten, and what remains in the culture to commemorate its critical importance is the phase "not worth a Continental". The eventual collapse of the Continental Currency is very frequently cited as evidence that the issuance of money cannot be trusted to the government, and should instead be left to private banks, but these sources virtually never mention the massive counterfeiting of the currency by the British (as well as private counterfeiters encouraged and protected by the British). How often this is a willful omission is hard to say, but I have many times heard it repeated reflexively even by those whose intention of the moment was evidently not to make a monetary argument. This is an example of how our culture and founding national mythology has been co-opted into an effective, though largely unconscious, conspiracy to cause us to forget our true monetary heritage.
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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