The following post was made to the Return to Order site and can be viewed at the following address: http://www.returntoorder.org/2013/12/rush-twitter-economics/?utm_source=sm-rto&utm_medium=email&utm_content=RTOE0234&utm_campaign=rto_newsletter#comment-2857329929
There appear to be some very serious misconceptions about the nature of our financial and economic system. From a metaphysical or philosophical aspect the problem arises from an erroneous assumption that salvation is to be found in work--an assumption diametrically opposed to the Christian Doctrine of Salvation through Grace, which is not earned but a Gift. Our financial and economic system is firmly based upon the false Doctrine of Salvation through Works. It is technically and mathematically defective and as has been said, even an army of angels could not administer it successfully. In order to achieve a balanced society it is necessary to have a balanced price-system.
(1) The purpose of a rational economy is not to create work, i.e, “jobs”, but rather to produce goods and services for society as, when and where required with maximum efficiency and an absolute minimum of inconvenience for all concerned. Perverting the economy to create work, rather than eliminate it, is irrational, entrenches inefficiency and derives from the false and domineering philosophy known as “Puritanism”, i.e., the desire for power over individual human activity. At worst it is the basis of tyranny; at best it is pure superstition.
(2) It is sometimes wrongly implied that profit is the source of our problems and that a form of profit-sharing from the proceeds of industrial sales under existing conventions of price-making will ensure that labour derives its “fair” recompense for effort expended on the manufacture of goods or provision of services. This a major and fatal error insofar as it is based upon the false assumption that the price-system is essentially balanced, i.e., that the act of production distributes in each costing cycle sufficient consumer income to liquidate the financial costs of that cycle. This is a scientific, technical or analytic error. The financial price-system is not only not self-liquidating but increasingly not so as the economy is made more efficient by means of labour saving and eliminating technology and improved “tools” or real capital. The rate of flow of industrial costs and prices increasingly exceeds the rate of flow of consumer incomes which are required to liquidate the costs of production. Re-distribution of an increasing insufficiency cannot make a sufficiency.
(3) Labour does not create all wealth and works with tools originating in past discovery and development to create both more consumer wealth and real capital or “tools”. Indeed, in the modern economy labour or human energy plays an increasingly diminishing role in production, per se. The notion that all wealth derives from labour is grossly in error and is Marxist in nature. The production of consumer and capital goods derives from the interplay of energy provided by nature, materials provided by nature, capital tools provided from past production and decreasingly from the current input of human energy. This productivity is enormously enhanced by knowledge and technique which has accumulated from the dawn of history and has become what we call the “cultural heritage”, which cannot be claimed by any individuals or classes and belongs to society as a whole. Labour from the past becomes crystallized capital which itself takes on over the passage of time a productive force of its own and becomes a much greater factor in production relative to human labour.
(4) The assumed fact that “labour” is insufficiently rewarded is true only insofar as it is true also of all citizens which are entitled in aggregate to access the full flow of consumer goods as these emerge from the production line. Labour deserves it own remuneration but all citizens including labour are entitled to an inalienable and equal share or inheritance in the wealth that has been made possible by the “cultural heritage”. The existing financial methods of industrial costing and national accountancy have no mechanisms by which to deliver this inheritance or what we might call the “wages of the machine” to the community at large.
(5) Currently, distribution is partially effected by means of earned incomes which are grossly and increasingly insufficient to purchase the product of industry in any given costing cycle. Costs and prices continue to spiral in excess of wages, salaries and dividends. We endeavour to overcome this difficulty by creating new purchasing-power in the form of bank loans extended to consumers, by increasingly irrelevant, wasteful and even destructive production such as war materials and excess real capital–and by promoting exports in excess of imports. While loans allow goods to be claimed, being a debt they do not finally liquidate the costs of production but merely transfer these as an increasing and inflationary mortgage on future production, which is no liquidation at all. The fundamental economic flaw is that the financial price-system is not self-liquidating and every genuine advance in efficiency which increases the capital component of cost and prices relative to labour costs make it evermore non-self-liquidating.
(6) The primary cause of the economic problem is that the banking system claims ownership of the credits which they create to monetize the wealth of the nation, which wealth they do not create but will foreclose upon in the case of non-performance of a loan. The technical name for this is counterfeiting and governments legalize the process by issuing charters to the banks to create and issue the nation’s money in this manner as debt only.
(7) Banks do what banks do. This results in accumulating private and public debts which increasingly burden society. What is required is that the Government must issue sufficient money without debt to bridge the widening chasm between consumer prices and incomes. The banks are doing this all the time, although in an irregular manner which causes cumulating debt and pendulum swings in the economy wherein they make large foreclosures when they contract credit and bankrupt both producers and consumers in an alleged attempt to slow or eliminate the inflation which they have caused in the first place by their wrongful claim to ownership of the community’s credit. What has happened is that the banks have appropriated the communal capital which actually belongs to society at large. The consumer is being quite properly charged with capital depreciation but wrongfully not credited with capital appreciation, which greatly exceeds capital depreciation. The solution to the economic conundrum lies in recovery of the communal capital and its restoration to each citizen as an inalienable inheritance.
(8) The new consumer credits must be issued without debt, merely being debited from a properly and actuarially determined National Credit Account, being an estimation of the real credit of the nation, i.e, the available natural, capital and human resources which constitute its ability to produce goods and services and which if used might result in prices. These consumer credits must be issued:
1. as National (Consumer) Dividends equally and unconditionally as an inalienable inheritance to all citizens, and
2. to finance Compensated (lowered) Retail Prices at point of sale. Compensated Prices would be determined by application of a universal factor applied to all consumer sales, derived from the ratio of national consumption to national production in any given accounting cycle.
(9) In this manner consumers at large would always have access to all final production as it flows from the production line, all retailers would be able to recover their costs and repay their outstanding production loans with the banks. Falling prices would reflect actual lowering of real costs through increasing efficiency. Having balanced price-systems would eliminate the need for increasing personal and public debt. Nations would no longer seek to compensate an increasing deficiency of domestic purchasing-power by producing an evermore superfluous and unnecessary volume of capital and consumer goods merely to distribute incomes available to purchase goods made in previous production cycles--nor would they be forced to compensate their internal lack of purchasing-power by engaging in futile efforts in increasingly competitive foreign markets to export more than they import–a practice which is the major cause of international friction and war.
If we want "balanced" societies and a peaceful world, we must establish balanced price-systems. "Good intentions", in and of themselves, will not suffice. Indeed, as the saying goes, they often pave the road to hell.