Contrary to popular belief, there is no such thing as a free market. What we are experiencing is a false market.
The "Stupid" Economists
Photo credit: Steve Consilvio
It is common for those in power to surround themselves with the best and brightest of their times. Kings had prophets, scientists and artists at their disposal, and these voices were never one. Petty jealousies and rivalries thrive wherever there is power. A leader could always find a specialist that would tell them what they wanted to hear, at least until such time as the leader changed their mind. Then, those who knew the privileges of power were subject to its wrath. From the dining table to the dungeon cell they would go. A Galileo Galilei could be feted for his intelligence, and condemned for the same. “Power corrupts and that absolute power corrupts absolutely.” (Lord Acton) It is from the petty failures of individuals with or near power that the democratic movements grew. No one seeks to overthrow a wise king, except for the unwise. The avaricious do not believe in equality or charity. It is hard to tell if the King is to blame or his advisors. A reading of the Declaration of Independence reveals that King George could not be guilty of many of the charges for which he was accused, but that does not mean that there were not real problems that needed to be solved. The tax on tea was meant to protect the nearly bankrupt tea company and secure stable government revenues. As always, any protection for one group must come at the expense of another. The Lords of Trade created a system that failed many people, including themselves, just as trade agreements today have many detractors. Sometimes the best advice is the worst advice.
George Washington had Thomas Jefferson and Alexander Hamilton in his Cabinet because their respective views of a good society were opposite. Jefferson favored a rural agrarian society of self- reliance and independence, whereas Hamilton favored the city, manufacturing, and the bustling of trade. Their differences remain in America today, and pretty much define the red-state blue-state divide, which when you dig deeper, is really a city versus country divide. Cities have forever been the marketplace hub. Goods and materials migrate from rural areas, through the city, and back out to other rural areas. In every city or town there is a dominate industry, whether it is corn, corn chips or microchips. Trade has long been recognized as an important component of a high standard of living, yet it is the issue of and disagreements about trade that clogs our courts and occupy our political landscape. Democracy has been unable to resolve the issues that led to revolution.
Complaints about taxes, inequality, injustice, monopolies, privileges, government waste and abuse are as fresh today as they were 230 years ago, or 2000 years ago. When it comes to Democrats and Republicans, maybe it is time to recognize that both sides can be right and wrong simultaneously. The challenge is to figure out where and how, because the city cannot live without the country, and the country cannot live without the city. Just as this is true domestically, it is also true internationally. We are one world, and there is no reason why we cannot be living in widespread peace and prosperity. Every revolution, and all conflicts, have economic roots. North and South America were discovered because Kings were advised of positive possible outcomes in economic terms. These promises were only partially fulfilled, just as the promises of democracy have only been partially fulfilled. Communists and Islamists have similarly promised economic liberation from a repressive and unequal economic status quo, and failed. Maybe it is time to ask what binds all these empty promises together.
Contrary to popular belief, there is no such thing as a free market. What we are experiencing is a false market. This falsity started eons ago by accepting intellectually that money is ‘real.’ Money is not real. It is an intellectual agreement. What follows is simply cause and effect, and that is where the philosophers of economics converge to attempt to explain what is happening. The President has his Council of Economic Advisors, just as Washington had Hamilton and Jefferson, and King George his Lords of Trade. The shift to paper money is relatively recent (early 1700’s), and has had a dramatic effect, but it is worth remembering that paper money was a solution to the problems caused by using precious metals. In fact, many materials have been used as money. The problem with money is not what it is made from, but how it is handled.
It will take too much space and time to explain and refute all the economic theories that people currently accept, instead let me state an alternative understanding: WE ARE STILL LIVING UNDER A FEUDAL ECONOMY!
A quick search for a definition of feudalism yields this:
“the dominant social system in medieval Europe, in which the nobility held lands from the Crown in exchange for military service, and vassals were in turn tenants of the nobles, while the peasants (villeins or serfs) were obliged to live on their lord's land and give him homage, labor, and a share of the produce, notionally in exchange for military protection.”
The feudal system seemingly collapsed with the rise of mercantilism and the expansion into the New World, with democracy being the final nail in the coffin of hereditary privilege, but that is not true. Feudalism migrated and morphed. We are still ‘obliged to live on their lord’s land’ but the terms of payment have changed. A paper currency system requires homage in cash, rather than with a share of the harvest.
Almost every personal and public economic collapse in the brief history of The United States has been related to land speculation, mortgages and the inability of deficit financing to sustain itself. Sure, some people spend money faster than they can steal it, but in general, the economic blueprint encourages risk and the capitalistic structure is inherently volatile and unsustainable. The money always runs out, bust follows the boom, and half-hearted and illogical measures repeatedly follow which vainly promise a chicken in every pot. If an ounce of prevention is worth a pound of cure, then the $18 Trillion pound gorilla in the room (The National Debt) would indicate the need for a pretty massive tranquilizer just to begin to subdue the beast. During the collapse of the 2008, over $900 Billion was transferred to the banking industry in a single night! The Lords of Trade were at it again. That was enough money to forgive almost every mortgage in the nation, but instead the failure of deficit financing was reapplied yet again to keep the poor poor, and the rich rich. It is not just the banks that are too big to fail, but that economists are so indoctrinated to marketplace theory that they cannot see the feudalistic foundation. They have been trained to see facts that do not exist. Like alchemists, flat-earth believers and astronomers with the Earth at the center of the universe, they see only what their prejudices allow them to see. They give advice that is patently false, but is widely accepted as informed.
Modern bankers control both the land and the money, in much the same way that the feudal lords had controlled the land and food. The housing market is dominated by the thirty year mortgage. People pay banking corporations for most of their working life. When they pass on, the property transfers to someone new, who will pay again for years. Excluding brief breaks, the banks own most property in perpetuity, and they always have control of the cash. If you sell your property, then you put the money into a bank, which is lent to the same person who purchased your property. The banks profit not just on the interest, but also all the appreciation value! Since these are just numbers recorded on a ledger, there is no need for gold or paper currency to exchange hands. What has moved is the bondage from one person to another. Corporations are our feudal masters; people are serfs to corporate charters, through both debt and employment. Corporations are not people, but privileges granted by the state to an inanimate belief. The same intellectual fallacy that makes money ‘real’ also makes corporations ‘real.’
The National Debt is primarily a result of land appreciation and the interest costs associated with borrowing to fulfill speculative booms. The government created a fiat currency out of thin air, and all the debt must return to the source. Like a business balance sheet, the valuation of public and private assets and liabilities must match. The laws of mathematics explain all instances of cause and effect in the physical science, it it time we used math to explain the man-made science of economics and fiat currency. Deficits represent a massive and repeated miscalculation. The banality with which economists accept public and personal deficit financing is in direct proportion to their incompetence. How can there be a shortage of that which we invented?
The force of the law and military threat are no match against the laws of mathematics. I am not saying that we should abandon money, but clearly the system is mis-regulated to an abhorrent extreme. Directly or indirectly, everyone will suffer if we do not respect the laws of mathematics. If we truly value democracy and a classless meritocracy, then we need to do something about the feudalistic banking system. Our long period of relatively domestic tranquility has had an unwelcome side effect. Numbers double in a geometric sequence. What was once $22 Million is now $18 Trillion, and will eventually be $36 Trillion and then $72 Trillion. The swings will be faster, deeper and more frequent.
In a global economy revolution is global, too. The wars by terror are an expression of the economic structure. The Islamists fight over interest, communists fought over profits, and the colonists fought over taxes. What everyone is really fighting is the lingering math of feudalism and the false market of real estate. Interest, profit and taxes are all percentages that compound. All three yield the same impact on fiat currency.
Revolutions usually yield a new currency and most debt balances get reset back to zero, but only at the cost of the destruction of society. The promise of democracy is that we can solve the problems that we have created. When new leaders are advised no better than the old leaders, revolutions are for naught. The skills it takes to kill or win elections are not what is needed to govern. We must end feudalism once and for all, willingly and consciously, and replace the false market with a market where everyone is free of debt and fear.