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How America Embraced Lemon Socialism
America has embraced Lemon Socialism.
The federal government -- that is, you and I and every other taxpayer -- has taken ownership of giant home mortgagors Fannie and Freddie, which are by now basket cases. We've also put hundreds of millions into Wall Street banks, which are still flowing red ink and seem everyday to be in worse shape. We've bailed out the giant insurer AIG, which is failing. We've given GM and Chrysler the first installments of what are likely to turn into big bailouts. It's hard to find anyone who will place a big bet on the future of these two.
It gets worse. While Washington debates TARP II, the Federal Reserve Board continues to buy or guarantee or provide loans for a vast and growing pile of questionable financial and corporate assets, much of which are likely to be worth far less than the Fed has paid or guaranteed or accepted as collateral. We're talking big money here -- so far over $2.4 trillion. (The entire TARP -- parts I and II -- in combination with the proposed stimulus package come to just over $1.5 trillion.)
Taxpayers are on the hook for this Fed bailout money, too, of course. We have to pay the interest on the ever-growing debt used to make these payments or guarantees and loans. Yet while TARP II and the upcoming stimulus package are receiving a great deal of attention, this much larger public commitment by the Fed is not. That's partly because the media doesn't much of understand it, but also because the Fed is doing it in secret, using provisions of its charter never before utilized, and avoiding discussion before the full Board of Governors for fear such meetings would be subject to the Freedom of Information Act.
Put it all together and at this rate, the government -- that is, taxpayers -- will own much of the housing, auto, and financial sectors of the economy, those sectors that are failing fastest.
Consider too that the government already finances much of the aerospace industry, which is still doing reasonably well but depends on a foreign policy that itself has been a dismal failure. And a large portion of the pharmaceutical industry and health care sector (through the Medicare and Medicaid, the Medicare drug benefit, and support of basic research). These are in bad shape as well, and it seems likely the Obama administration will try to reorganize much of them.
What's left? Most of high-tech, entertainment, hospitality, retail, and commodities. So far, at least, we taxpayers are not propping them up. And when the economy turns up -- perhaps as soon as next year, most likely later -- these sectors have a good chance of rebounding.
But the others -- the ones the government is coming to own or manage -- are less likely to rebound as quickly, if ever. If anyone has a good argument for why the shareholders of these losers should not be cleaned out first, and their creditors and executives and directors second -- before taxpayers get stuck with the astonishingly-large bill -- I would like to hear it.
It's called Lemon Socialism. Taxpayers support the lemons. Capitalism is reserved for the winners.
Robert Reich, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, Aftershock: The Next Economy and America’s Future; The Work of Nations; Locked in the Cabinet; Supercapitalism; and his newest, an e-book, Beyond Outrage. His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org.
77 Comments so far
Show AllAll true, Robert Reich. So what have you got in mind to do about it?
Maybe asking the right questions would be a good start. For example: Q: Who is responsible for this financial crisis?
A: private financial operators engaged in massive debt-leveraging and speculation.
Q: Why has the federal government assumed responsibility for the imprudent activities of private financiers?
A: Because the consequences of the bad behavior of the financial class have a huge public cost.
Q: Why does the government underwrite a privately owned monetary system that does not operate in the public interest?
A: The political influence of the private financiers and their failed ideology is powerful. They have the money to buy influence and suppress any monetary policy not to their liking.
Q: If the operations of the Federal Reserve have such great social consequences, why is this monetary authority permitted to deliberate in secret and conceal from the public what it is doing with public money?
A: You say "... the Fed is doing it in secret, using provisions of its charter never before utilized, and avoiding discussion before the full Board of Governors for fear such meetings would be subject to the Freedom of Information Act." A simpler answer is that the Fed is a private corporation and it can do as it pleases. It has never been audited and is not by law accountable to the public for the ways in which it uses public funds. The legislation that created the Federal Reserve in 1913 was special interest legislation that handed over what was once known as the "money power" to an elite wealthy class.
Q: If money & credit are so essential to the survival of the people and their government, why is this power to create money & credit kept in private hands not accountable to the people's government?
A: Because those who own the private financial system, the 12 interlocking corporations called The Federal Reserve believe in the prerogatives of private wealth. They believe that rich people should control the money. They do not believe that money is a public utility, as necessary for the successful operation of any society as any other public utility such as water, power, transportation, and so on. The control of the public utility called money & credit, permits a relatively small number of wealthy people to control the fortunes of the great masses of not-rich people.
You are by default, Mr. Reich, a defender of the privately owned and operated monetary system called The Federal Reserve. You do not advocate the obvious fact that money & credit are a public utility and that the regulation of this essential utility should be in public hands as clearly stated in the Constitution, Article 1, Section 8, Clause 5.
You cannot see the way out of this crisis because if you were to advocate for a public monetary system and the elimination of the Federal Reserve, you would be black balled and criticized until you shut up. The rich folks do not take kindly to those who challenge their prerogatives.
This is absolutely true. The mega-rich now control everything and woe-be-onto-you who pulls the curtain away. The criminal element who started this mess will be bailed out until the monetary system collapses and the general public will wonder how it happened when such smart people were in charge.
My thought, Hotrod, is that with a proof of absolute and obligatory solution in hand, the powers that *were* have no leg left to stand on (and should be fearing for their lives once they themselves bring that curtain down).
That's why I'm hoping you folks will understand that there is one and one only solution to inflation/deflation and inherent, terminal multiplication of debt by interest. That solution is the power to nail the coffin shut. (Which of course is also why I'm willing to argue that to the death with anyone.)
Regards,
mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
http://www.perfecteconomy.com/
You nailed it, cruxpuppy.
As I commented following Michael Parenti's CD article "Capitalism's Self-Inflicted Apocalypse" :
The essence of the banking elites' power is their protected monopoly as the sole legal arbiters of debt and credit. With this power they have instituted a privatized currency subject to interest - the true engine of the concentration of wealth. Since a currency subject to interest creates inherent, irreversible and ultimately terminal debt, this can be seen as the essence of our monetary system's trend toward self-destruction. Again, the core problem is that we have a privatized monetary system subject to interest.
That a currency subject to interest terminates itself in insoluble debt has been proven mathematically by Mike Montagne, who's solution, Mathematically Perfected Economy™ (MPE) therefore prohibits interest. As I wrote to Mike privately awhile ago, the essence of his solution, Mathematically Perfected Economy™, is at once an economic principle and an ethical one. The principle is that of non-intervention; a principle which is found at the heart of Democratic Theory. His is the economic corollary to the conception of civil liberties which seeks to guarantee for each individual all those freedoms which are consistent with the same guarantee for every other individual. In its economic manifestation it can be stated as follows (Mike's definition of MPE): It is every prospective debtor's right to issue their promise to pay, free of extrinsic manipulation, adulteration, or exploitation of that promise, or the natural opportunity to make good on it.
From this perspective it should be abundantly clear that bankers as usurers and faux creditors have no place in a democratic society. They are neither desirable nor necessary. They should be no more welcome than slave owners, political dictators or murderers. They have no right to insinuate themselves into economic relations as the only legal arbiters of debt and credit. But having done so, they have impaired every other freedom inherent to the democratic ideal and continue to prevent a truly free market economy from taking shape.
see www.perfecteconomy.com
Yep, and thanks for the perfect economy web site.
Researching the economy which a lot of us have been doing lately (our citizen's duty) I came across the old economic principle of Diseconomy of Scale. The reason we got for the failed bank bailouts was that they are too big to fail. Like the "economy of scale" is the principle that the bigger the company the more efficient. But I wondered at what point does it happen that companies get too big to succeed so they are doomed to fail.
Well that is where the opposite principle comes in which we never hear from economists or the government.... Called "Diseconomy of Scale"... http://en.wikipedia.org/wiki/Diseconomies_of_scale I believe that is what the big private international banking and big corporate system has become...too big to succeed and bound to fail.
Outstanding post cruxpuppy, thanks!
This is a fantastic group, intellectually (and otherwise).
Just a fine point here:
"A: private financial operators engaged in massive debt-leveraging and speculation."
This is an after-effect of the nature of the currency. The real underlying fault is the nature of the currency:
http://perfecteconomy.com/pg-no-ellen-its-not-the-derivatives-stupid.html
Regards,
mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
http://www.perfecteconomy.com/
Excellent response, dead-on accurate. A good movie about the enigmatic creation of the Federal Reserve is America, Freedom to Fascism, directed by Aaron Russo, available online, I believe on google (unless it's been put in the Memory Hole). Lemon Socialism is actually nothing new, it is the way the so called "free-market" has operated in the US for a long time, at least among the large corporations. Risk is socialized, profits are privatized. The scale is all that has changed now.
I don't understand economics, but I trust Obama to do the right thing. I have no reason to doubt his intelligence or integrity. Neither does anyone else. Give Obama a chance.
That's great, Dave. What happened to Thomas Jefferson? You wonder if 1% of the population takes "self rule" seriously any more. We've just seen the worst abuse of accountability imaginable; and still the line of reasoning is, don't reason... leave it to the guy you probably can't trust... and certainly can't trust if you don't hold him accountable for every step of *his* way.
Regards,
mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
http://www.perfecteconomy.com/
Mike,
Thanks for your input.
IMO you're making a good impression here from the posts that I've read.
I'm forwarding the reference of your website to a friend who is studying economics.
Thanks so much. I'm surprised only a little bit about crux's latest post. That happens, but no problem. The more concretely we understand an issue, the more solid our dedication and persistence becomes, and the more we can take encouragement from arguments potent enough to prevail. I've been likened to a wounded grizzly bear. That's fine. Hopefully, grizzled or whatever, we'll all be the highest kinds of friends and fellow patriots when this is all over. It's our time to resume what the founders started.
Regards,
mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
http://www.perfecteconomy.com/
Joehope, how old are you?
42
How old are you?
I am 49 joe. Don't mean to be nosy, but I guessed you were much younger based on the fact you are not anywhere near as cynical or jaded as older folks tend to be. I guessed you were in your 20s.
As for me, I am a complete cynic and I don't believe a word Obama or the Democrats say about anything. My motto: Fool me once, shame on you. Fool me twice shame on me. Don't forget the Democrats promised to end the war in 2006 if we elected them.
That's ok joe, continue on with your hope.
Funny, the most jaded people I know are young people, and the most politically active people I know are twice my age!
You say you don't believe a word Obama says. But what has he lied about? He is withdrawing troops from Iraq, ending torture, and closing all our secret prisons including Guantanamo. Even on issues you might disagree with him on, such as telecom immunity, Afghanistan, support for Israel, or the bailout, you should still be willing to admit that he has been truthful in following through with his campaign promises.
Joe,
No insults intended. It's great you're here. But never think you need an economic degree to understand economics, because the truth is "economics" is wholly bereft of formal proof or theorem. It's not even a science. Worse, it's a set of purposed lies, designed to impose and to preserve privatization of the currency for the sake of exploitation.
There isn't even a general principle to pursue true economy. It's about unearned taking; and the losers are the subjects of the system.
I'm already saluting Obama for the prison closures and torture ceasure.
On the bailout, I have a slight disagreement; but I still basically agree with what you say, only because he didn't really promise anything. But he *did* infer that Main Street would be represented; and instead he has installed Wall Street, which has not only never advocated solution, but which certainly is disposed only to preserve the system of exploitation.
That isn't a direction which engenders or deserves faith. It spells disaster as surely as disaster is the inevitable consequence of perpetual, irreversible multiplication of debt in proportion to a vital circulation -- a debt Obama will add to more than anyone before him merely because that's the nature of the system; and because the only solution therefore is to solve the system.
The thing you're asking us to have faith in then is that we can survive the soon-to-be far greater debt, while in fact we cannot survive the present.
Regards,
mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
http://www.perfecteconomy.com/
Joe,
If Mr. Obama indeed possesses the intelligence and integrity you hope for, you can and must still hold him absolutely accountable for it, for to do anything less is to forfeit a republic. To run on "change," not even declaring what the change was or how it was to succeed, and to exalt Main Street only to hire Wall Street, is not a good sign (not necessarily that there was a more reasonable alternative).
I had lower regulars in the Obama Campaign just this past September arrange for me to submit a proposition of mathematically perfected economy to the Obama Economic Policy Team (I wanted to send it to the President/candidate directly). Why would you suppose Joe, that requested and arranged package was returned by the so called economic policy team, purportedly for security reasons -- and none of something like a hundred attempts to connect with the President have been met since by only silence?
Regards,
mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
http://www.perfecteconomy.com/
Maybe you can hold Obama accountable, maybe you have an economics degree, but it's over my head. If I can trust Obama to run the country, I'm comfortable trusting him on this issue. What else can I do? We can't be experts on everything. Some level of trust is necessary. Why is it wrong to trust those people who have better knowledge of a subject yourself? It's like trusting a doctor or a lawyer or an auto mechanic.
Educate yourself
I can't say I know Obama too well but I do agree that he needs to be given a chance. He has 4 years to correct at least some of the mess although I already know he's gonna need 8 plus 8 for Biden to correct 70% of the mess Dubya left behind. God I hope Obama and Biden can each have their two terms ! If he panders to the conservative Republicans for the next 4 years, then I'll give it up but right now, it's too early to judge him. Besides, why aren't the folks on this forum nailing the Republican obstructionists and why no word on the Blue Dogs?
In 1776, a writer published the number 1 tenet for citizens of a democratic republic to hold (paraphrased, the direct quote is in Gordon Wood's "Radicalsim of the American Revolution"): Trust NO politician; rather, sit on the shoulder to oversee actions as much as possible--ALWAYS. As far as my historical researching can devine, that maxim IS what is meant by the Spirit of '76.
For those like JoeHope, please read Bernard Bailyn's "Ideological Origins of the American Revolution," as well as Wood's book cited above--and those are just starting points. Educate yourselves, as both books are better than spending a semester in a post-grad seminar.
One of the major reasons the USA is in such a pickle is that citizens no longer perform their duties. And the major reason for that is they are NOT educated/informed of just what those duties entail. Nader spoke of this problem a lot during his 2000 campaign. As alluded to above, the numer ONE duty of the citizen is to hold his/her numerous representatives accountible for their acts, preferably before they enact legislation. This is just as important as holding a job and providing for the kids; some will say moreso. Why do you think so many hedonistic diversions are available, and others like religion that impede independent thought and reasoning?
Over time, if a politician proves trustworthy, it then becomes possible to be less vigilent; but that then presents the potential for forming a bad habit, for it is highly likely that the only reason the politician gained trust in the first place was because of citizens doing their job by not letting their representative do anything more than represent them.
It's not Obama I'm worried about. It's the people that surround him.
International Capitalism will win nothing!
Most sectors are either dying or dead.
Take away the military industrial complex, the medical incustrial complex, the prison/police industrial complex, and the mostly irrelevant education system (all of these paid for by whom?) and you've got a moribund over-supply side economy and automobile culture.
It's (oil)well past time (pun intended)to totally rearrange the way we allocate resources to and within communities.
Viva Socialism!
Mike Morin
www.peoplesequityunion.blogspot.com
Mike Morin,
Most of your observations/reservations are fine, Mike. They respond to faults of what we call capitalism, sometimes fascism, perhaps, more accurately, a plutocracy wed to a central banking system which can only multiply debt (and dispossession by indebtedness) into terminal debt.
You're right, at least implicitly (if I understand you), in your evident (correct me if I'm wrong) objection to how resources are distributed/utilized/consumed by associated obfuscations, and particularly (implicitly as well) by inherent, irreversible multiplication of indebtedness, which of course conveys all title and wealth to an unassented "banking system" which only publishes our promises to pay, at no cost to itself, and to eternally multiplied cost to us, who could and should publish our own promises to pay, free of their exploitation.
So that's where we differ, unless your exaltation of socialism is tongue in cheek.
The inherent and inevitable failure of what we call "capitalism," subject to a currency which is solely an intended vehicle of exploitation does not disprove free enterprise, or implicitly, or by inference, prove socialism. All the present circumstances prove in fact is that interest inherently and irreversibly multiplies debt in proportion to a vital circulation, as we can only maintain a vital circulation by perpetually re-borrowing principal and interest paid out of the general circulation, as subsequent sums of debt, perpetually increased so much as periodic interest on an ever greater sum of debt.
Yep. Ultimately that process is terminal, as we see everywhere around us.
But the solution is eradication of interest/exploitation; and if you do that, practically every state apparatus most of us would object to can be eliminated. That doesn't leave socialism any inherent advantage; and worse, unless the same solution is implemented in socialism by preservation of every individual's right to issue their own promises to pay, free of extrinsic manipulation, adulteration, or exploitation of those promises, or the natural opportunity to make good on them, socialism suffers the same terminal problem.
But it is certainly not allocation of resources then which is the problem; au contraire, the problem is dispossession to an ever escalated degree, manifested irreversibly by interest, even inevitably, to a degree which is terminal.
Regards,
mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
http://www.perfecteconomy.com/
Jim Eldon January 24th, 2009 8:07 pm : Thanks for your remarks. Will check out Mike Montagne's MPE. I suspect he's a believer in commodity money, a goldbug, maybe.
Back in the 1840's, an American businessman, Edward Kellogg, investigated interest rates. His book "Labor & Other Capital" was in Abe Lincoln's library. Kellogg argues convincingly that interest is necessary to create the dynamism of money, the power to accumulate value. The problem was how much power to accumulate should money have? He arrived at a rate of 1.2%, I believe, which would permit producers to retain profits from their productive activity while allowing investors to realize gains from investment. This rate would be fixed by law.
A rate that is too high ultimately confiscates the wealth of producers in a few hands.
Interest free money, on the other hand, actually destroys the value of money. Since money is the measure of value, it has to have the power to reflect growth in value. Without this dynamism in money, there wold be no incentive for people to save or invest.
I am not familiar with no-interest money arguments, but I'm not impressed with mathemetical models. The financial disaster we're in has been built on the mathematical models of "finance economics" developed by Nobel Prize winning economists. That is proof to me that economics is not a science and Nobel Prizes prove nothing.
No, commodity-based currency (e.g. gold) doesn't work. The volume of the commodity can't accommodate industry/commerce creation of wealth without necessitating fractional reserve banking. But then you're back to manipulation of value, invariably leading to inflation/deflation. See the pages at www.perfecteconomy.com regarding the gold standard.
As for Kellogg, see Mike's comments in response to Adrian Kuzminski's article at OpEdNews "A Solution to the Financial Crisis" at http://www.opednews.com/articles/A-Solution-to-the-Financia-by-Kuzminski-090108-292.html. In short, it doesn't work. ANY rate of interest eventually results in terminal debt; sooner if the rate is higher, later if the rate is lower.
What we're talking about here is not mathematical models, but a mathematical proof. The proof is that a currency subject to interest leads to terminal debt.
You guys are into it pretty heavy and this is great...I wish the White House was analyzing it as closely as Common Dreams and probably bloggers and Posters all over the planet right now!
Here is a thought on Where is the Money and if a gold standard would help...Who has the Gold?
The last I checked nobody in government knows or will say how much gold is in Fort Knox.
Could it be in Secret vaults in Europe?
The Fed is unaccountable...the TV Talk is even goin WHAT?
Another thing to remember in discussions of nationalizing the banks which they are talking about now on the Sunday talk Shows is that the Fed Banks are part of the interconnected international private banking systems of central banks and they are overseen by the International Bank of Settlements. It is this secret bank in Switzerland that determines what the international currencies are worth compared to each other which makes all the secret decisions of the Federal Reserve and all the Worlds Central Banks dependent on the Central bank of all Central banks. In other words if we the people took ownership of our own currency (the FED) or got rid of the FED, the Bank of Settlements would have to be dealt with...any suggestions?
Somebody is gonna have to talk to the Queen and David Rothschild sooner or later.
Jim, I can hardly believe how eloquently you articulate the principles. I'm still getting emails commending your immediate mastery of the issues.
Regards,
mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
http://www.perfecteconomy.com/
PART 1/2
Hi, cruxpuppy.
I was just getting to your article. Good piece.
I see you're a thinking person and a student of history.
My monetary disposition revolves about an original thesis a) that any purported economy subject to interest ultimately terminates itself under insoluble debt; and b) that there is one and one only integral solution to 1) inflation and deflation, 2) systemic manipulation of the cost or value of money or property, and 3) inherent, irreversible multiplication of debt in proportion to a vital circulation, engendering inevitable systemic failure at a finite system lifespan defined by an inevitable, terminal sum of insoluble debt. Since 1975, we've referred to that solution as mathematically perfected economy™, the original proofs of which were formally published in 1979.
My disposition toward gold is neutral, or merely fundamental regarding and toward sustaining its natural role. My 1979 work and all work since invalidates the gold standard insofar as i) all cases where it is necessary to sustain circulations exceeding monetary reserves (no capacity exists to sustain industry requiring circulations exceeding reserves); ii) providing/ensuring nominal stability (no perpetuation of constant ratios between production/wealth and circulation is provided); and iii) insofar as arresting inherent multiplication of debt by interest.
This may at first or on its surface seem possibly adverse to holders of gold. But so disposed I am not; and in fact you might be greatly interested in a paper I posted just this morning regarding the prospective affects of establishing mathematically perfected economy™ on the effective value of gold. The page is already receiving substantial traffic and positive reception:
http://perfecteconomy.com/wp/2009/01/25/how-mathematically-perfected-economy-shakes-out-for-gold/
You write:
"The problem was how much power to accumulate should money have? He arrived at a rate of 1.2%, I believe, which would permit producers to retain profits from their productive activity while allowing investors to realize gains from investment. This rate would be fixed by law. A rate that is too high ultimately confiscates the wealth of producers in a few hands."
You next reiterate a common Austrian (etc.) deduction:
"Interest free money, on the other hand, actually destroys the value of money. Since money is the measure of value, it has to have the power to reflect growth in value. Without this dynamism in money, there wold be no incentive for people to save or invest."
I group these so to raise the necessary principle:
We can readily prove Kellogg wrong (and the idea of a permissible/conducive/serviceable rate of interest preposterous); and you can readily understand that disproof from a case of a static population producing all its needs with say, minimal (and therefore consistent) effort:
When we subject this purported economy to *any* rate of interest, what happens?
No matter the rate of interest, you are compelled to maintain a circulation which allows you to continue to servicing your obligations comprised of principal and interest from a circulation comprised of only the principal. To do that, you are compelled to re-borrow principal and interest paid out of the general circulation in the way of servicing your original obligations; and so, the sum of debt increases perpetually and irreversibly so much as periodic interest on an ever greater sum of debt, until a terminal sum of debt is engendered.
What's a "terminal" sum of debt?
It's a sum of debt which you can no longer afford to service, which of course you inevitably accumulate merely by maintaining a vital circulation. Because you cannot afford to service that debt, you cannot of course qualify to borrow further. So your "credit-worthiness" is inherently destroyed at this juncture of terminal insoluble debt; and, because you are obligated yet to continue servicing the existent sum of debt; and because it is impossible for you to qualify to borrow further as is necessary to sustain the vital circulation... all that you service the terminal sum of debt depletes the circulation with no way to maintain a vital circulation; and your commerce can only collapse.
Sound familiar?
PART 2/2
I've provided proofs of all this to every U.S. President since and including Gerald Ford. Could have written Nixon of course (as I produced the proof in high school [1968]). But never trusted him.
You also write:
"I am not familiar with no-interest money arguments, but I'm not impressed with mathematical models. The financial disaster we're in has been built on the mathematical models of "finance economics" developed by Nobel Prize winning economists. That is proof to me that economics is not a science and Nobel Prizes prove nothing."
We have a problem which mathematics, ethics, morality, justice... whatever facet you want to analyze will resolve. The only thing which gives your arguments credence against the fallacious position of the Nobel Laureates you rightly object to is just such mathematic invalidation. Faulty models are always wrong.
But only if we understand the mathematic faults of the models and assertions of the pseudo science the ignorant call "economics," have we the fodder to toss the whole mass of it where it belongs, and construct a true discipline with the capacity to produce a pure, unexploited currency which serves the common interests and objects of the remainder of humankind.
Mathematically Perfected Economy™ therefore is the singular (one and one only) integral solution to 1) inflation and deflation, 2) systemic manipulation of the cost or value of money or property, and 3) inherent, irreversible multiplication of debt in proportion to a vital circulation, engendering inevitable systemic failure at a finite system lifespan defined by an inevitable, terminal sum of insoluble debt. Mathematically Perfected Economy™ is every prospective debtor's right to issue their promise to pay, free of extrinsic manipulation, adulteration, or exploitation of that promise, or the natural opportunity to make good on it.
You're absolutely right that Nobel Prizes prove nothing, except on the scale of positive to negative which such a badge represents. The Nobel Laureate of all Laureates to now in fact, has been awarded a badge which represents their opposition to monetary justice. Everyone wearing those badges to this day, is actually an enemy of all the rest of mankind.
What is mathematically perfected economy™? It's simply the right of the individual, of every prospective debtor, to issue their promise to pay, free of extrinsic manipulation, adulteration, or exploitation of that promise, or the natural opportunity to make good on that promise.
Kellogg came just a step short of ascertaining the real and singular nature of money, and thus realizing that there is no place for interest in this world. Under mathematically perfected economy™, we issue our own promises to pay, certified by a common foundry, and paid at the rate of depreciation/consumption (which are to be understood to be equivalent). MPE™ is the only mathematic prescription by which we can pay for each others' production with whatever we deem to be equal measures of our own production. Thus a $100,000 home with a hundred-year lifespan costs us $1,000 per year or $83.33 per month. There is no inflation or deflation because eradication of interest in conjunction with this (minimal) schedule of payment alone maintains a circulation which is both always equal to the remaining value of the related property, and the remaining, respective debt. This constant, perpetual 1:1:1 ratio between remaining circulation, remaining debt, and remaining value of the respective property alone ensures the perpetual value of every unit of currency; the redeemability of all debt (even in default); and the capacity to pay all obligations with no detrimental consequence whatever.
As Jim wrote:
As I wrote to Mike privately awhile ago, the essence of his solution, Mathematically Perfected Economy, is at once an economic principle and an ethical one. The principle is that of non-intervention; a principle which is found at the heart of Democratic Theory. His conception appears to my mind as an economic analog to the conception of civil liberties which seeks to guarantee for each individual all those freedoms which are consistent with the same guarantee for every other individual. In its economic manifestation it can be stated as follows (Mike's definition of MPE): It is every prospective debtor's right to issue their promise to pay, free of extrinsic manipulation, adulteration, or exploitation of that promise, or the natural opportunity to make good on it.
From this perspective it should be abundantly clear that bankers as legally sanctioned usurers and faux creditors have no place in a democratic society. They are neither desirable nor necessary. They should be no more welcome than slave owners, political dictators or murderers. They have no right to insinuate themselves into economic relations as the only legal arbiters of debt and credit. But having done so, they have impaired every other freedom inherent to the democratic ideal and continue to prevent a truly free market economy from taking shape.
Regards,
mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
http://www.perfecteconomy.com/
(Hopefully, others will tag their comments onto this second half of my post to make for less confusing navigation)
mike_montagne
1. I believe that Islamic banks do not charge interest.
2. I believe also that C.H Douglas devised his "Social Credit" system as an attempt to overcome the fact that a business that borrows, with interest, to finance a product cannot pay its workers enough to buy all the products that it produces. Every business is in the same boat and so buyers have to go into debt to purchase all the goods produced. Ever more debt - just as you explain.
Good Luck from another Mike (and mathematician)
Parallax January 26th, 2009 2:51 pm wrote:
"I believe also that C.H Douglas devised his "Social Credit" system as an attempt to overcome the fact that a business that borrows, with interest, to finance a product cannot pay its workers enough to buy all the products that it produces."
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If you read Douglas, that's not his thesis at all. I'll tell you how I know (directly from the Social Credit circle):
Some 15 years ago I received an email from one William B. Ryan, who gave the impression to be the founder/moderator/main person of the so called Social Credit (Douglas A + B Theorem group).
He cordially invited me to join and introduce myself to their forum, leading me on to think it was because he respected my material. I did so, and immediately received a dozen irate emails, in part brandishing ideas held likewise/in common with the so called Austrians: Who did I think I was to analyze economics with math? Didn't I realize you can't do that, because economics involves indeterminate human behavior which you can never account for? Etc. I explained that my thesis involved no contingency in ostensibly indeterminate human behavior -- that it didn't matter what happened within the circulation (explicitly how it didn't matter, etc.) -- that my thesis involved the very mathematic process that banks regularly employ to calculate your interest on your debt; that the thesis of inherent failure involves no dependence whatever on whatever happens within and by the general circulation.
Furthermore of course, neither does this thesis of a solved cause disprove mathematically perfected economy™, which is a separate thesis altogether.
I was immediately deluged with further angry mails before I could answer the first few; and this went on for weeks, with Douglas' material submitted to me, and with careful attendance to every detail.
Douglas does not actually identify or prove his identification of a problem; although his simple A + B theorem may be viewed as a faulty proof. It asserts that because industrial profit/income differs from the costs of production, that more and more must be earned by labor (more or less) and that government has to make up for this growing disparity by guaranteeing labor measures which he deems to be protective. I'm not sure, come to think of it, if Douglas even mentions interest (particularly in the causative sense); and certainly he doesn't recommend its eradication or a schedule of payment which solve all issues of mathematically perfected economy™.
In any case, none of these folks wanted to allow mathematic discussion, except a few brighter souls who commended me off to the side. Two days into this I was answering angry emails all day long from a hundred or so people. I answered all their questions, they never disproved MPE™ or my thesis of inherent failure, but in their failures to do so, only became more enraged.
Ultimately I made my final summary of all the arguments, and exited their forum.
Years down the road, I'm analyzing our site traffic and investigate a fair stream of page reads coming from links in material at Kent State University, Capital Ownership Group Forum. Well, the same William B. Ryan has a post there, purporting to invalidate my thesis of mathematically perfected economy™ by invalidating its semi-independent thesis of inherent failure under interest.
Discovering this, I published my invalidation of Mr. Ryan's proposition, which for several recent years has been one of our most popular pages:
http://perfecteconomy.com/pg-william-b-ryan-ad-hominems-disprove-mpe.html
Note that Mr. Ryan is attempting to invalidate any fault of interest whatever (assumably according to whatever needs to defend Douglas' A + B / Social Credit thesis).
Since this discredit of the Social Credit thesis of Douglas, a complete turnaround/revision is evidently transpiring, in which even the most vehement and insulting members of the forum, against my thesis, are attempting to read my thesis into what Douglas was after. He neither identified the problem however, or of course its solution.
I've been kind to Social Creditors since. Maybe too kind, as now they're stealing from me. They've got a lot of archives to purge to rid the trail to my work, and there's a hard drive I know of which puts this idea that Douglas had the same idea to shame -- at least based on the material these folks provided themselves, and the thorough distaste they expressed for my thesis that interest inherently and irreversibly multiplies debt into terminal debt.
There's far too much information on the net however to sustain that Douglas never proposed mathematically perfected economy; and the extremely ambiguous arguments he makes about his presumed fault (A + B) (versus interest compelling perpetual re-borrowing to maintain a vital circulation) hardly compare either to my thesis of inherent collapse.
Douglas went no such place; and I pay no attention to Social Creditors any longer; but certain diligent readers/supporters of our pages do inform me of these developments (even recently).
Regards,
mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
http://www.perfecteconomy.com/
PS.
Mike (Parallax),
Mathematically Perfected Economy™ is probably the actual edict of Islam (Judaism and Christianity as well), in that it eradicates interest and sustains unlimited prosperity without impediment or extrinsic cost.
Islamic Banking involves (as it's been explained to me), "rent," whatever that is which is so different from interest/Riba (I don't know/recognize). Islamic Banking is further handicapped by requiring money from investors (which is the ultimate course of capitalism under usury); and a further fault of this of course is that the same circulation is actually asked to double, to service multiple debts and sustain multiple industry which is obligated to do so.
Mathematically Perfected Economy™ effectively on the other hand is every prospective debtor's right to issue their promise to pay, free of extrinsic manipulation, adulteration, or exploitation of that promise, or the natural opportunity to make good on it. This means not only *complete* eradication and explicit observation of the law shared in fact by all three major religions; but it also means we don't have to borrow from each other, and that a maximal circulation is generated and sustained without devaluation, and at no cost whatever -- eliminating the industrial restriction/impediment of operating perpetually on deficient circulation, serving multiple purposes despite a capacity to serve only one at once.
Regards,
mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
http://www.perfecteconomy.com/
I was not suggesting that Douglas (who was following the ideas of Jean C.L.S. Sismondi) came anywhere near the conclusion that interest was the cause of the problem. On the other hand I could never understand how his social credit system would overcome the problem. However, Sismondi certainly saw that the purchasing power of the workers did not keep abreast of production.
Economics courses were always considered to be "soft options". I didn't pay much attention to those accusations until I took a look at an economics textbook many years later and discovered that mathematics was nowhere to be found within its pages. The whole subject seemed to be a case of accepting declarations of a priesthood.
The underpinnings of the subject must be mathematical, but no one seems to have undertaken the task of rigorous study of the structure of the discipline or the implications of experiments with a large proportion of the population of the world - or have they (they being the bankers)?
.I would offer that Mr. Reich's inference that what is going on is "lemon socialism" says volumes about his loyalty to capitalism and little in the way of accuracy about socialism itself.
What is happening here is simply the public disclosure of the fact that our nations' governance is owned by the corporations and that our tax money, and our legislators in fact, belongs to them and not to us. This is rather far from socialism, all the way over the spectrum to fascism in fact.
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We see things, not as they are, but as we are.
Anais Nin
Excellent point. There are a lot of folks talking about socialism these days who don't have a clue as to what socialism is.
I also wonder why no real economists are calling for the abolition of the Federal Reserve.
"It's called Lemon Socialism. Taxpayers support the lemons. Capitalism is reserved for the winners."
The first two sentences are wrong. No, we don't support the lemons but are lied into thinking they're something special. And the last sentence is not necessarily correct. The current system is rigged. What Reich should have said was this.
Socialism for Wall $treet, Capitalism for Main Street.
I've got it! Marx Brothers Lemonism!
The US economy was built with hard work, market discipline, and fossil fuel. When the market discipline was lost, the hard work and fossil fuel then made the train wreck ever more spectacular. Some think we have to regain the market discipline, but this will only set us up for another cycle of spectacular destruction. If instead we cut the fossil fuel and hard work addictions, the economy might stabilize at a sustainable level, with market discipline.
These addictions are pushed on us by the "pusher man", the elite, to enslave us to help fulfill HIS addiction: extreme zero-sum wealth/power. The economy that benefits the people is built with moderate work, no fossil fuel, and market discipline. This is a natural law, not open for debate. Until the economy is rebuilt in this way, the USA will repeat the cycle of gargantuan plunder/waste/destruction as it has for decades.
We can simplify the problem description by expanding the term "market discipline" to mean market demands made by the people in their own better interests. Given this type of discipline, all the parameters are covered, i.e. moderate work, no fossil fuels, and maximum general benefits for the people. What does moderate work mean? 15 hour work weeks. What does no fossil fuel mean? Locally owned/operated zero carbon energy production at a volume of about 1/4 current consumption.
>>The US economy was built with hard work, market discipline, and fossil fuel. When the market discipline was lost, the hard work and fossil fuel then made the train wreck ever more spectacular.
I would disagree with the "hard work" part and the "market Discipline" part.
Claiming such implies that the peoples of other nations who did NOT prosper as Americans did was because they were "lazy" or not as hard working.
My grandparents emigrated to Canada at the turn of the century and they did not suddenly become HARD workers by virtue of having moved here while the family they left behind were somehow lazy.
The same is true of all those emigrants who moved to America. Many of those people became "wealthy" because an entire country, rich in all manner of natural resources was created by stealing the land away from others and turning it into "Private Property" which could then be monetized and exploited.
Great fortunes were built out of that theft of wealth.
Through the 200 years of American History, when one examines the market cycle of booms and busts, it is not market discipline that creates that wealth. It a manipulation of that market wherein artificial bubbles are created by a few and then popped by the same.
This cycle is repeated over and over again and leads to the same small group acquiring ever more wealth. These bubbles date right back to Americas founding as can be seen by such artificial bubbles created when Kentucky and Illinois first settled.
1. I don't believe in pure socialism.
2. I don't believe in pure capitalism.
3. The reason we have corporate fascism is because the corporate fascists own the media.
4. Is there no one who can take on the talk radio thugs and media tygoons, most of whom are rich corporate fascists? It is they who are making sheep of the people.
"All Nature's difference keeps all Nature's peace." Alexander Pope
ted:
we can!! don't tune in..take your tube and place it by the road for the next trash pickup..before the internet i got all my news from the headlines as i purchased my daily pack of pall mall's..i could hold my end of a conversation with my contemporaries without a tv or newspaper..well i guess i did listen to music!!
ken
Good point, ken.
Thing is, many Americans get their information from talk radio. Yes, it's scary, but it's true! These people see no reason to shut off their radios and teevees 'cause they think they are enlightened by these media.
I'd love to see the Fairness Doctrine reinstated, but until then, corporate fascists will have their way because they own the MSM, and most Americans get their (dis)information through that media.
I would love to hear Obama or someone of a high moral standing start calling these talk radio thugs on their own lies. The more the public hears the lies spewed across the airwaves, the harder it will be for this country to progress.
"All Nature's difference keeps all Nature's peace." Alexander Pope
ted: there is hope as yesterday i saw a cnn interview (via email) with my eldest child whom i considered a radical right winger..he has finally caught a glimpse..a few yrs. ago i saw his best friend growing up whom had also seen the light..i expect these 2 went the radical republican route cause we gave them nothing to rebel about..i believe in the circle and eventually talk radio will go to sleep..
ken
The two requisites of taking them on are:
1. arguments which ascertain solution (and prevail on no less than that merit);
2. and getting on the show.
Now, I've had stations, both radio and TV from all over the world in which regulars want to do a program on mathematically perfected economy™. What happens? The top guys don't want to make the waves that will pull the rug out from under the whole thing.
Courage? Integrity? Lots of potential obstructions exist. Ego. Money. There's many who could do this if they could just relax about the ramifications so long as to see down the road that solution is the biggest thing that can happen on their stage as well, particularly if they do their business in such a way as ensures that's where this goes. Alex Jones could do that. His main man, Paul Joseph Watson, is a member of our newsletter recipients.
Alex is supposed to be the main reason Ron Paul had any support at all. Our objectives are the same. Now I'm not suggesting we should give up on Alex. But if conclusive arguments won't abate his terminal pursuit of a gold standard which has no power to arrest terminal multiplication of debt by interest (already upon us), and which even if we eradicate interest, cannot sustain industry requiring circulations exceeding monetary reserves... Alex is not the way to solution. I've written him I don't know how many times. Not even an answer. Not even willing to debate.
Somebody will do it. You just press on. Alex casts his lot with a gold standard that will only fail us, and even do those who have invested in gold and count on his assertions to serve them... will be done in by utter failure of the economy. How you get their attention? I don't know. It seems I've tried everything. But you still try to connect somehow. That's the positive thing about the net. Folks who can read can visit the material that counts and send others there. As copycats of solution (who yet adulter solution) abound moreso every day, if we tarry long, we won't even find solution amongst all the lesser things out there.
Regards,
mike montagne — founder, PEOPLE For Mathematically Perfected Economy™, author/engineer of mathematically perfected economy™ (1979)
http://www.perfecteconomy.com/
LEMON "SOCIALISM" IS AN INSULT TO THE WORD. FOR NOW, LET'S JUST TAX THE RICH.
Government ownership of production is STATE CAPITALISM. Socialism, as the name implies, is control of the economy by SOCIETY - not the same thing as control by government. And social control means that cooperatives of workers and communities control production. The role of a socialist government is merely to protect and assist democratic cooperation.
But even if we agree with the popular understanding of socialism as state ownership and control, the current TARP "Lemon Socialist" investments are simply absurd. The government has paid more money to prop up banks and insurance companies than those companies are currently worth, but has been careful to acquire non-voting stock. Which means that the government is powerless to force the banks to make loans to refloat the economy (the alleged reason for the "bailouts'), and powerless to replace failed executives or even to reign in their obscene salaries and bonuses. This is not socialism or ownership. It is a subsidy to an incompetent and corrupt oligarchy. With the same amount of money the government could have bought active control of the banks, and could then have renegotiated failed mortgages and issued new loans. Now that might have partly deserved the name of socialism, since it would have served a social purpose.
Short of government control or (much better) the redistribution of corporations to their workers, however, there is something the government can do which would improve our social functioning. And that is to tax our corporate multi-millionaires at a decent rate: not the pre-Bush rate of 39.5%, but the pre-REAGAN rate of 70% or more. (And "stock options" should count as income.)
Here are 5 reasons to tax the rich.
1. Metastasizing inequality, started by the Reagan tax giveaway, is the root cause of our economic meltdown, since it destroyed working class purchasing power and stoked up their debt.
2. Tax money from the rich would create public works and public service jobs for workers, who spend it much faster than millionaires, and create more economic stimulus.
3. When executives pay a high income tax it makes economic sense for the corporation to hire more mid level workers rather than pay more to CEO's. More jobs and, again, more stimulus.
4. Taxing the rich means less need to borrow to fund public works, reducing the risk of inflation and currency collapse.
5. Less money in the hands of CEO's means less power to control and distort the government for their own benefit.
So Mr. Reich. Let's forget about socialism for now (hardly anyone knows what it means anyway), and start a drive to tax the rich.
OK?
Laurenceofberk@aol.com
I agree with you regarding socialism, but the problem with your proposal to go back to the pre Reagan rate is that in today's world, the rich are just going to move their money to other countries. A high tax rate might not increase government revenues at all. It might even decrease them.
Hello rfloh,
There are very few countries today with a lower effective tax rate on the rich than the US. True there are those tax havens, the Bahamas et. al. But they only work because US law, designed by our oligarchs, lets it happen. If we tax income not according to where the corporation is registered, but according to where the money is made, then there will be no problem. And if we don't give Federal contracts to corporations who have fled to tax havens, even Cheney's Haliburton might feel the need to return from the United Arab Emirates.
When our Congress works for the people who elect it and not for the corporations who pay it, we can solve all of these problems. Making that little switch, of course, won't be easy. Somehow we have to convince people that real democracy is no longer a luxury. It is the key to our survival, in more ways than can be easily listed.
I'm not saying that top rate taxes should not be raised. The only thing I'm saying is that you have to be careful how high you raise it to.
Look at this way: suppose you have some banker getting $100M this year. And let's say you propose to put in a tax that would have him paying $70M, 70%, in taxes. Now, let's say there are financial advisers who will help him avoid paying taxes on that $100M, but they want a cut on it, say 30%, $30M. Where do you think the money is going to end up?
You can tighten the laws on tax avoidance, certainly. You can make doing so more difficult. More expensive. Definitely. I'm not convinced however that it is possible to eliminate all the loopholes. And the rich whom you are targeting will certainly have the resources, and with a very high top rate, the motives, to find and exploit those loopholes.