Our world lurches from financial crisis to financial crisis yet very few academics, reporters or commentators point out the fatal flaw in current orthodox economic theory which is the central force behind these crises. The flaw relates to the general LACK OF PURCHASING POWER in contemporary society. This weakness in classical economic theory is not new and many scholars have explained the problem however, increasingly, the issue is being conditioned out of people’s consciousness. The collapse of the international banking system, as a result of the Sub-Prime; “Originate to Distribute” catastrophe, has brought this Achilles heel of Keynesian economics into sharp focus. The elite fear that the prospect of a “greater depression” is forcing change that will eliminate their position of control and privilege. Hence the current “spin” emanating from controlled media outlets. The growth of the “tea party movement” is a case in point. Should this political revolution gain in power the possibility of real change in US economic policy will become increasingly probable thus the perceived need to crush it or at the very least gain ownership and control over it. The end objective of this grass root movement should be the dismantling of FED interest bearing credit policy in favour of treasury cash, the abolition of the “open door” Chinese trade policy and the redistribution of true purchasing power to the average American citizen for the following reasons:
A. The current American national debt stands at 14 trillion dollars and change. Average rate of interest on this debt is 2-3% per annum. Thus if constitutionally allowed zero coupon treasuries were used to systematically replace this debt, over say a decade, approximately 280-420 billion dollars per year would be saved for the American tax payer by the year 2021.
B. China is a tyrannical state. For example every year over 40 million forced abortions are carried out on women due to this state’s repressive “one child per family policy”.
Over the last decade approximately 200,000 American jobs, per annum, have been out-sourced to this tyranny.
Morals matter. This “favoured nation” policy must be reversed because a communist state that pays an average wage of 50 cents per hour to “national” teams of forced labour should not be allowed to compete on a level playing field with a free democracy. Such mis-guided policy is effectively destroying the productive base of America. Obtaining cheap goods through Wall-Mart for an economy is one thing. National self-destruction is another.
Congress must act and remove this “most favoured nation” status. The successful implementation of the fiscal policy mentioned in note A. above would negate any retaliation that the Chinese elite could muster should they threaten to cease purchasing America bonds, thus collapsing the American dollar.
C. Without general purchasing power effective demand is neutered. This basic fundamental economic fact is not being addressed by current American fiscal policy. The substitute policy we mean is not based on a Zimbabwe type action where money is simply released to an economy in an ad hoc manner resulting in rampant inflation. No what we are talking about is a well documented and comprehensively researched theory that binds real productive resources in a developed economy with an effectively distributed money supply so that the total capability of that economy is fully realised for the benefit of all the community.
Quantitative Easing does not do this. It does not reach down to the average American where it would stimulate real demand. This existing QE policy is being used to bail out insolvent institutions but it is nor filtering down to “main street” where it would really give “bang for the buck”. To achieve this QE funds could be spent on American schools, freeways, bridges, jobs training, port re-construction, light-rail systems construction, broadband communications roll-out, youth skills training and research & development.
Fairly remunerated American citizens with real purchasing power need to replace mechanical robots. Capital investment needs to be replaced by human investment. Robots do not buy cars, raise families, and care for the well being of elderly parents. Robots do not use shampoo, eat fast food or watch base ball. They do not watch TV nor change diapers. They do not munch a mars bar nor scoff a pizza slice. Americans must stop looking on their nation simply as a mechanical economy and start to see it in human societal terms. Americans must wake up and smell the coffee.
Why is purchasing power so important? It is fundamental because without money no exchange can take place. In order to understand what I am talking about let us look at the historical example set by Henry Ford. He completely redefined "classical" economics through the policies undertaken by the Ford Motor Company in the 1920's. Under "normal" theory it was assumed that a corporation could only maximise profits by increasing price and limiting supply. Ford did the exact opposite because he had a more holistic view of the role of the corporation in society. He understood the synergetic relationship between money and goods. He doubled the wages of his workers, decreased the price of the Model T and in the process remade the Ford Motor Corporation. (This policy was not inflationary because he knew he could at least double production through increased efficiencies when he doubled wages. This is the essence of the enlightened policy of credit for communities rather than for monopoly elites). The company boomed. How did this happen. It was axiomatic for he understood the importance of money and purchasing power in communities. With Ford's workers able to make a good living, their financial anxiety ceased and staff turnover dropped by a multiple of five in one year. This dramatically decreased management expense and increased productivity. Workers finally had peace of mind. With the increased disposable income in the Detroit area the general economy boomed. All classes of economic sectors expanded. As a result more workers, new business owners, company managers, insurance brokers, real estate brokers, bankers, salesmen, craftsmen, delivery men, builders, farmers and retailers could afford Ford cars. Demand for the model T doubled through the increased buying power WHICH HE HAD CREATED. Accordingly profits at the Ford Motor Company dramatically improved as a result of his innovative policy.
Ford understood economics and he understood the issue of PURCHASING POWER. FOR HIM PURCHASING POWER WAS NOT CREDIT BUT CASH. HE REASLIZED THAT WITHOUT THE MONEY TO PURCHASE HIS CARS POTENTIAL DEMAND WAS IRRELEVANT. THEREFORE HE REDISTRIBUTED DIVIDENDS FROM THE OWNERS TO THE WORKERS. THIS BRILLIANT INSIGHT MADE THE FUTURE FOR THE COMPANY. It built up the economy of Detroit and it helped define America as a country where a factory worker was respected and well paid, not exploited, as had been the case throughout the English industrial revolution. The American dream was Ford’s vision made manifest. It was a dream brought to fruition not through political fantasy but through the laws of accounting, finance, production and marketing. As Ford said:
“Power and machinery, money and goods, are useful only as they set us free to live. They are but means to an end. For instance, I do not consider the machines which bear my name simply as machines. If that was all there was to it I would do something else. I take them as concrete evidence of the working out of a theory of business, which I hope is something more than a theory of business—a theory that looks toward making this world a better place in which to live. The fact that the commercial success of the Ford Motor Company has been most unusual is important only because it serves to demonstrate, in a way which no one can fail to understand, that the theory to date is right. Considered solely in this light I can criticize the prevailing system of industry and the organization of money and society from the standpoint of one who has not been beaten by them. As things are now organized, I could, were I thinking only selfishly, ask for no change. If I merely want money the present system is all right; it gives money in plenty to me. But I am thinking of service. The present system does not permit of the best service because it encourages every kind of waste—it keeps many men from getting the full return from service. And it is going nowhere. It is all a matter of better planning and adjustment.” Henry Ford "My Life and Work"
Compare for one moment the circumstances in Detroit in the 1920's and mainstream America today. The exact opposite is occurring. Meaningful wage levels are being destroyed and thus the required American buying power is contracting due to systematic out-sourcing of real jobs and the mis-use of capital investment to destroy human action. This system cannot hold. Society is being hollowed out from the inside. Folk do not fully understand the total implications of what is happening due to "dumbed down" educational policies. To replace falling money (wage) levels to facilitate exchange between goods produced for consumption and potential purchasers the banking elites have tried to substitute credit availability. This credit switch to compensate for real wages is an unstable arrangement because debt is very expensive and is non-liquidating other than through bankruptcy or lotto wins or death. This is no way to run nations. It creates constant anxiety and eventual destitution and depression among citizens and society. It is particularly ineffective now that most banks are actually insolvent and are no longer in the position to provide credit in the form of business loans, credit card facilities, car loans, overdrafts or home equity draw-downs.
Thus in essence the “solution” to "the problem" in America and for that matter in Europe, is enlightened redistribution of purchasing power other than through increasingly non existent credit. Currently too much power over such redistribution is controlled by banks and associate entities. This money centralization is stagnating the system and the fact that this arrangement failed to regulate itself, and caused a credit collapse, has accentuated the speed of failure by multiples. It is time to change. Society must move on. The intellectual framework to effect this change, as demonstrated by Ford, has been known for over 80 years. Its successful implementation today would bring a renaissance to American commerce and societal development. There is no more important function for Academia today other than to disseminate this vital economic truth.
Armed with this knowledge for how long do we allow the folly of present economic “orthodoxy” to continue? To me this situation is akin to an adult perceiving the behaviour of wild and immature teenagers, wondering when the “penny will drop” and wisdom will prevail. To the elites, who must know the truth, this monopoly credit based boom-bust phenomenon is obviously allowed to continue because they have control. Their ownership motivates them to disregard consequences provided they are protected through privilege.
However, I believe that the truth is too obvious to ignore anymore. The end result of the current regressive financial policies is the on-going development of a new modality which I call: “Techno-Feudalism”. This “Techno-Feudalism” is bringing with it vast disparities in wealth, ownership and opportunity. It will lead to the eventual obliteration of the middle classes in developed nations. It will allow global corporations engineer the slow Fabian demise of effective democratic institutions as increasingly corporate boardrooms rather than governments will define people’s destinies. Untamed it will break traditional social cohesion and lead to mass unrest, criminality and despair. Is this not exactly what we are witnessing in Portugal, Spain, Ireland and Greece? But the future does not have to be so bleak. The monetary solution of increasing actual purchasing power for average Americans and European is so obvious it is “madness” not to sort it out. The truth must be allowed to break free.
“The organism has a right in natural law to draw sustenance from its environment. We cannot with impunity abstract humanity from the natural world. …
Unfortunately, the present financial system creates an ever greater deficiency of effective and unattached purchasing power giving the illusion, through a distorted financial lens, of actual or physical scarcity in the midst of actual and potential abundance…
We are trying to pass from one type of civilization into another in which the possibilities are such that we cannot begin to imagine. That transition, I believe, will best be facilitated in an environment which provides maximum freedom (immanent sovereignty) for the individual in the context of absolute economic security.” Wallace Klinck
In the 1930’s the engineer and self-taught economist Major Clifford Douglas claimed that society was intellectually hypnotized and that only a drastic de-hypnotization and re-education could save it. Douglas believed in people. He felt that individuals had far more goodness and potential than society was allowing them for. He reckoned that if common folk were given enough freedom and leadership they could move society and civilization into a new golden age. An age of extended liberty, discovery, art and culture. The alternative he felt would be booms, busts, over-consumption, under-consumption, excesses, depressions and wars. Eighty years later this is exactly what the world has experienced and is continuing to experience. However, the period between each stage is narrowing and the level of debt, instability and inequality are exploding beyond comprehension. To followers of Douglas this situation is not happening by accident; it is happening inevitably because the conceptual flaws of the monopoly of credit and the fabricated scarcity of money was allowed to be perpetuated by a privileged banking class.
The monetary and economic policies of such people as Henry Ford, Clifford Douglas, E.C. Riegel and E. F. Schumpeter et al are heartfelt attempts to bring about “steady state” change to historical economic orthodoxy. It is incumbent on all interested parties who desire to solve this problem of problems to become educated and aware of the available solutions and to actively participate. Not to do so will allow the current “greater depression” to expand and gain a greater grip on economic activity. History shows that such a development will eventually lead to escalating strife as sure as night follows day. For us who wish to reject regression in favour of progress we must strive to free contemporary economic policy from its death waltz with outmoded Keynesian monetarism. We must help economic orthodoxy must move on, sanity demands it. The knowledge is there let’s utilise it.
"Flight from Inflation" E.C.Riegel The Heather Foundation, Los Angeles.
"My Life and Work" Henry Ford In Collaboration with Samuel Crowther
“Small Is Beautiful” E. F. Schumacher
"Social Credit" Major Clifford Hugh Douglas Mondo Politico.Com
Wally Klinch Social Credit Archivist