Category Archives: Economics

Adventures in Living: Purchasing Under the Tamarined Tree

bksbacchus2019

I went to Barnes & Noble to order Rosaliene Bacchus’ novel, Under the Tamarind Tree, (rosalienebacchus.blog) but it was a humiliating and infuriating experience.  I made a special trip to B&N to order that book.  On walking in, I congratulated myself on my “pull through economics” philosophy.  As opposed to “trickle down economics,” “pull through” means using brick-and-mortar stores to assist awareness and distribution of desirable products.

I had $23 in cash plus change and wanted coffee so figured I could just barely afford the book at $16.95.  I was shocked to see a $4.99 shipping charge on the bill.  The clerk who processed the order said Barnes & Noble has recently instituted a shipping charge even on books that come to the store.  I began to wonder what is the advantage of a brick-and-mortar store if I have to pay shipping anyway?  So I went to the café to pay for the book and to get coffee.  But sales tax—which hadn’t been listed on the receipt—put me over the top.  There was a long line before and behind me.  I was ready to defer the book purchase until I had more money, but up speaks a curly-headed young guy from two people back in the line to ask how much I was short.  “Three dollars,” says the cashier.  He hands her the money, thereby rescuing B&N’s sale.  I knew he thought he was doing me a favor, and I appreciated it, but I felt trapped in a situation I would have handled quite differently on my own.  I gave the guy my $1.25 in quarters, and he got the $0.54 change, so his total investment came to about $1.25.  I thanked him and learned he is beginning to write a novel himself, a futuristic fantasy novel dealing with monotheism vs. polytheism.

Later, I realized I could have written a check, but I was too flummoxed to think of that.  There was no urgency to buy the book.  I could have held on to the receipt and paid next week.  I was actually thinking of by-passing B&N entirely and looking on Amazon for it, so annoyed I was with the shipping charge.  But there’s more to it than this, because I resent buying anything these days.  Books are falling off my bookshelves.  I’ve also virtually stopped reading novels and want to read this only because Rosaliene wrote it and Sha’Tara (ixiocali.com) raved over it

I stewed about this, and about this home delivery trend, off and on, all day.  I noted how stressful the hidden costs were.  A $16.95 book should not cost $23.48 at the cash register.  As I sat the next morning finishing the B&N coffee (in my reusable cup), I contemplated the emotional valence of this superficially insignificant experience.

Philosophically, I support brick-and-mortar.   The trend in commerce is to promote home delivery, ultimately isolating people even more.  At Kroger the other day, I spoke with an employee who was gathering groceries for home-delivery shoppers.  I asked if he tried to find the best vegetables and he said yes.  He is not allowed to choose items on sale, though.

I appreciate being able to see and touch what I’m buying, to squeeze my own tomatoes, and to have the social experience of meeting people on casual terms in public or commercial places.  Barnes & Noble is one of the very few places with easy parking that I can go to sit with coffee, air-conditioning, good light, and a plethora of interesting and stimulating reading material, and frankly, people like the guy who helped pay for my book and coffee.

The next day, I went to B&N and apologized to one of the café employees for the commotion I caused, but I also presented my case for resuming free shipping to the store.  I said that nice guy behind me in line saved B&N a sale.  I had a large audience, yet again, not intentionally.  I said she should tell her bosses the shipping charge is bad for business, that enhanced traffic into the store offsets the cost of shipping to the store.  When people come in to pick up their orders, they might buy other things, like coffee, at least, whereas home delivery prevents the browser from finding other things to buy.  In fact, I said, I might just write corporate B&N myself.

Jenique told me she believed they were sending the book to my house.  I went into a long (sort of, being aware of customers waiting) tirade about how I hate home delivery because FedEx and UPS drive all over my lawn, and why do we have stores if they don’t store things?

As an advocate of print media, I want books to flourish.  This trend to electronics may be here to stay, but I doubt it will fully supplant hard copy publishing, just as digital currency cannot replace tangible means of exchange, except in the ethereal realms of macroeconomic imagination.

Anyway, I decided I do feel some loyalty to B&N, because the staff is friendly, and coffee prices haven’t yet gone up.  I’d checked Amazon for Under the Tamarind Tree and found no advantage in buying it on-line, so the book is becoming famous locally for its contribution to my latest “pull through economics” soapbox.

Apparently Walmart is initiating drone delivery in Virginia, fueling my fears regarding the implications of commercial drones.  Must my birds now compete with drones for airspace?  How much noise will drones make in delivering pizza to neighbors?  They reputedly can go up to 70 mph.  Worse, will the USPS start using drones to deliver junk mail to my front lawn?

I hope I die before that future arrives.  I may need to get a a gun.  I can go on a shooting spree, with drones and excessive traffic turn signals for targets.

It became part of my rant to Barbara and Ed as we walked back through the mall after the coffee klatch.  Ed said Walmart is not only delivering groceries, but it will send robots into your house and put the food in your refrigerator.  Barbara expressed doubt that I will be able to avoid the drone trend but did agree there are fewer and fewer places where people can meet and interact informally.  Brick-and-mortar stores like B&N do serve a valuable but unappreciated social function.

So said I to Ned, a B&N customer service employee. I spoke with on the way out.  I wanted to make sure the book was coming to the store, even though Jenique said she would take care of it.  Yes, he said.  He explained that the book is being published on demand by a self-publishing operation that requires pre-payment of book and delivery charges, and that B&N makes no money on the deal.  I explained my “pull through economics” philosophy, how important it is to sustain brick-and-mortar stores, how loyal I am to B&N–even though it is a corporate monster– largely because of the friendly and helpful employees.  I left him all smiles.

Footnote:  The book was well worth the trouble.  It was so gripping that I read it in two sittings:  a heart-warming story about life and culture in British Guiana in the 1950s and 1960s, as it was undergoing the transition to become Guyana, independent of British rule.

Vitality and Human Capital

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“Evening in Karl Johan Street,” Edvard Munch, 1892

It is sometimes said that money is a form of energy, but it may be more appropriate to suggest that money is a symbol of vitality, or life energy.  In theory, this is the “means of production” that Karl Marx said defines capitalism.

“Capitalism” has become a sinister term in some circles, but I wonder if the term has been commandeered not by the individuals who provide the vital force that keeps “the economy” functional, but by the aggregators of human capital under institutional umbrellas.

Some claim Adam Smith, who wrote The Wealth of Nations in 1776, is the “father of modern capitalism,” but Smith never mentions the word “capitalism” in his book.  He refers a lot to “capital” and to “stocks,” without defining either term.  For a lay reader, The Wealth of Nations is tedious reading, and it comes across as a tax collector’s bible.  Smith states up front that “the late war,” which he never pinpoints, but is probably the Seven-Years War (the French and Indian War in North America) was exceedingly expensive, and the UK went into a lot of debt to pay for it.  The Wealth of Nations, which supposedly supported “free trade” also supported military protection of UK commercial interests in foreign ports and foreign trade, because it was easier to tax.  “The colonies” were great sources of raw materials, and because Britain had a monopoly on trade with its colonies, it and British investors could buy tobacco and lumber, for instance, and sell at a huge profit.  Smith tells us that growing tobacco in France was illegal, because it was too hard to tax domestic products.

Another striking feature of Smith’s book was that it was so cold-blooded regarding the value of labor.  Labor should be paid enough to raise four children, because statistically, two die before reaching majority, and the parents need to replace themselves. Rents should be as high as the tenant can afford.  Farmers are lazy because they do a variety of different things, whereas factory workers do the same thing all day and are more efficient.  He refers to the “idle” without defining them, but when he says the “idle” will spend gold to buy exotic birds and fish from remote lands, where bank-issued currency is not accepted, it becomes clear that the “idle” are rich rather than poor, and possibly associated with the court and the aristocracy.   He also noted government jobs are greatly coveted, because of the security and “perks” they provide.

It is therefore not surprising that Smith’s book was so popular that its author was appointed Customs Commissioner of Edinburgh after it was published.

When Karl Marx defined “capitalism,” as the “ownership” of the “means of production,” he didn’t specify what the “means of production” was.  It was assumed to be the machines or the land from which salable items were produced.  But nothing is produced without human effort, which leads to the idea that the “means” is the human labor itself.   “Ownership” thereof is either explicit, as in slavery, or implied, as in employment by the aggregator of human capital under a larger umbrella.

The intrinsic value of human capital has never been fully appreciated.  Both Ayn Rand and Milton Friedman mentioned human capital, but neither took the idea far enough to assert that only individuals can be “capitalists” in the purest sense of the word.  Human beings, by their individual efforts provide the means, through the application of their vitality, to produce commercial goods.  This is what translates into money, the tangible result of the applied effort.

This may sound like a petty point, but it has far-reaching ramifications.  In the United States, it is said that all taxes ultimately fall on the individual.  This means that the individual in this country is supporting taxes imposed by federal, state, county, and sometimes city governments, and is expected to obey laws enacted by all four levels of government.

The system is a hierarchical, patriarchal one of “government over the people” that was set up intentionally by an elite group of landowners, lawyers, businessmen, bankers, and other conspirators who met in secret, locked in a room in Philadelphia for three months, drafted the US Constitution, and by-passed state legislatures to have it ratified by special assemblies.  Thomas Jefferson and John Adams, who are considered among the “founding fathers,” were both out of the country at the time.  Thomas Jefferson was appointed Secretary of State and approved by the Senate without his knowledge or consent.

Alexander Hamilton, who was an ideological protégé of Adam Smith and a British subject, was New York’s only standing delegate to what became known as the Constitutional Convention.  Suffice to say that he had a heavy hand in the drafting, forming strong alliances with George Washington and James Madison, and was probably instrumental in insuring certain provisions, including federal control of all “economic narrows,” such as roads, waterways, the postal service, coastlines, money, patents and copyrights.  Ultimately, the Constitution is an economic document that assumes all taxpayers are federal government property.  Undoubtedly, Hamilton made sure the federal government could assume debt, because as Treasury Secretary later, he pushed through the first tariff, the Hamilton Tariff Act of 1789, and the whiskey tax in 1791.  The whiskey tax was in advance of his creating the first US central bank.  Stock shares in this bank and the Bank of New York, which Hamilton had previously started, were among the first stocks traded in what would become the New York Stock Exchange.

So all the hype US citizens and taxpayers have been sold all these years about “freedom” and “democracy,” and “capitalism” and all the noble values people assume the “founders” intended, are the result of masterful marketing, a talent now well developed by New York’s Madison Avenue.  The bottom line is the US is and always has been an economic machine in the tradition of British imperialism.

So this “government-over-the-people” mentality has been carefully cultivated over the US’ 245 year history, based on this implicit notion that everyone must work to support “the economy,” which is an amalgamation of the federal bureaucracy in Washington DC, Wall Street, the bankers—and of course the military– but it is a perverse, upside down system that is now collapsing from its own weight.

The undervalued human capital that has been conscripted and seduced into this arrangement is catching on, resentful and angry at the betrayal of those whose version of “protection” translates into higher and more painful costs and increasing restriction of individual freedom.  The hoi polloi are not “rising up,” as the revolutionaries might wish.  Instead, they are “beaten down,” giving up, flunking out, doing drugs, both legal and illegal, going bankrupt, committing suicide in shockingly increasing rates, getting sick and tired of the stresses and strains in living in such a “wealthy” society.

While the nation and world are increasingly “de-vitalized” by the expectations and hoops that the “ruling class” have set for them, the human capital that churns the wheel is getting crushed under it.

The idea of  “capitalism” has been twisted and perverted into its opposite by those who would enslave the “human capital,” the vital life forces that provide not only the “means” of production but are also the purchasers of the goods produced.

The healthiest and most vital people may or may not have money, but they excel at self-determination because they only answer to the wealth between their ears.   These are the “capitalists” we can respect and emulate.

 

 

Is Debt Good?

I don’t understand how anyone can believe debt is good.  Certainly bankers believe other peoples’ debt to them is good.  It is a means of control.  But debt to anyone restricts freedom.  No country can claim freedom if it’s in debt.  Even the US government’s presumed debt to the Federal Reserve implies obligations.  The US Constitution–as an economic document enslaving taxpayers to the federal government–reveals itself more clearly as this economic drama plays out.  The US monetary system is based on debt, essentially to the Federal Reserve, which creates money out of thin air to lend to the US government at interest, based on appropriations by Congress. The Fed has no obligation to the federal government except to keep this fraud going.  The federal government has no obligation to taxpayers, except the ones it tells taxpayers they need or want, like military “defense.”  It presumes a right to collect taxes on every transaction and has a monopoly (which it has delegated to the Fed) on the currency it considers legitimate.  Franklin D. Roosevelt made using gold as currency illegal.

The debt-backed dollar creates an upside-down system with perverted incentives to spend beyond one’s means and live in perpetual debt, just like the government.  The debilitating outcome is wasteful spending that leads to over-expanding the money supply, “create jobs” and otherwise bloat the federal government’s reach, without adding anything of value.

There are warnings that this “debt bubble” will soon burst, even though “the economy” continues to “expand.”  By “expansion” the fortune tellers on the payroll most probably are relying on interest rates, stock prices, reported corporate profits, low rates of unemployment, and “consumer” spending.  Meanwhile, “predictors” of recession include the “inverted yield curve,” in which the yield on 10-year treasuries is lower than that on three-month ones.  Who would tie up their money for ten years under that scenario? Maybe the purchasers don’t need their money or expect to need it anytime soon.  Are they expecting deflation?  Is a recession merely deflation?  Isn’t deflation good for people who have more money than debt?

As long as I’m exploding myths, like the one that inflation is good and expected (if you’re a debtor, like the government), or that an “expanding economy” and “economic growth” are desirable. I contest the general assumption that government spending—especially deficit spending—is good for “the economy.”  The excuse is that it creates jobs, but the underlying purpose is to widen and deepen the tax base.  In order to get “consumers” to spend, you must put money in their pockets, or a semblance of money that can be used to pay taxes, and keep the money wheel spinning.

So people work make-work jobs to get fake money and “benefits” to buy cheap plastic junk made by slave labor in China to pay tariffs to the government that maintains its crop of economic slaves to cater to the Fed and Wall Street.  The bankers lick their chops and conspire to create more mayhem and destruction so that they can invent more money to create even more artificial need for themselves.

The US government’s brain child, the Machiavellian first Treasury secretary Alexander Hamilton, must be well satisfied by now, because the masses really have been put in their place, except it’s not working.  The latest way for the poor to take advantage of the rich is to become so disabled that they can’t even work, so require more for upkeep than the rich can afford (or want to afford), and they won’t go to war, as in the good ole days, or be considerate enough to die off by disease.  Instead, they burden the “health care industry” with their chronic diseases obtained from living in this “wealthy,” industrialized nation that can afford to saturate the land, water, and air with fat, other oils, and their waste.  We’re having trouble starting wars, although we’re trying.  Big bad China has the nerve to sell more than it buys and is ganging up with our other enemies, like Russia, to provoke us into using our war toys and selling them to all our fair-weather friends.

Collapse of the debt bubble may be the best thing that could happen to the country and the world.

 

 

If I Were in Charge . . .

If I were in charge of things, I would have more enemies than Donald Trump.  I would discriminate against everyone equally.  I would start with the budget and eliminate deficit spending.  Last year’s revenues would be this year’s budget limit.  This would infuriate everyone except the unborn children who are expected to pay for ballooning government debt.

Under the premise that government exists to fund itself, the next obvious bugaboo is taxes.  For people to pay taxes, they either have to be bullied or conned into thinking they will get returns on their investment.  This is why there are so many government jobs, government contractors, and government programs.  “Hire the opposition” is an ancient method of reducing competition and getting cooperation.  If you can’t hire the opposition, you can compromise the competition by making laws against them or throwing them in jail.

Of course, jail costs money, but the cost of competition is higher.  If you’re a monopoly, like the US government, you claim a monopoly over all “economic narrows,” such as the money supply, and over the laws, like drug laws, so that you can create bureaucracies to enforce the laws everywhere in the world.  This is why we have wars, which cost unborn children lots of future money.  This is why we have drug cartels, too, that create enormous competition for governments, unless they buy governments and then protect each other.  This is not only about El Chapo, who just got convicted, but about Pfizer, and all the other government-sanctioned drug cartels that trade so profitably on Wall Street.

If I were in charge, then, I would quit funding wars, bring the military home, and re-write their job descriptions to do the jobs we now hire government contractors to do.  That government competes with the private sector for skilled labor is a given.  Releasing government employees from their monopolistic responsibilities would free the government from doing both its job and that of the private sector, too.  This would save unborn taxpayers lots of future money.

If I haven’t been assassinated or impeached by this point, I would issue a currency that would compete with the Federal Reserve Note.  I would allow the new currency to be used in paying taxes.  People could still use their Federal Reserve Notes to pay income and payroll taxes, which are set up to pay the Fed perpetual interest on federal debt.  If the government is no longer borrowing money to support a deficit, the Federal Reserve would become superfluous. It could collect its Federal Reserve Notes in perpetuity and cost the US government nothing.  Since the income tax pays for stupidity, many people may opt out of paying the Fed to finance government insanity.  Not to stigmatize the mentally ill.  Not all insane people are stupid, and not all stupid people are insane, but, like lawyers, there seems to be a disproportionate percentage of both in elected positions.

I would not waste money on border walls or border security.  The way to stem illegal immigration is to give the immigrants no reason cross the border.  If there were no drug laws, there would be no drug cartels, and no need for CIA, DEA, FDA, DOJ, and the international deep state financial system of commodity drug money.  All those escapees from Guatemala and Honduras could return home safely.

If I haven’t alienated everyone by now, I would make payroll taxes for Social Security and Medicare optional, both for employees and employers.  This would free up today’s money for today’s needs and asset building.  As things stand, the fiat money we have now represents government debt, so the more you have, the more federal debt you have assumed.

The government knows that the best way to control people is to borrow from them or to lend to them.  If you lend something that is valueless, backed only by the “full faith and credit of the federal government,” you are counting on promises made on behalf of those unborn taxpayers to work for future money to pay a debt on nothing.  Thus all investments, except those with practical value–like a debt-free home you live in–are investments in government debt, so “Rah, rah, America,” if you want your old-age nest egg to survive in the Ponzi financial system that depends on future money to pay for present excesses.  Anyone wonder why the US dollar has lost 97% of its value since the Federal Reserve Act was passed in 1913?  The “full faith and credit of the United States,” isn’t worth much anymore.

If I were in charge of things, I would acknowledge that government can barely afford to be in the government-over-the people business, much less in the war business, the agriculture business, the health care business, the social-consciousness business or the business business, so I would dismantle all the government “help” and its corresponding regulation and force people to find their own answers to their own problems, without the Nanny State to tell them what to do and how to do it.

If I were in charge, then, I would make life as easy as possible for myself by divesting myself of responsibility for making decisions for everyone else.  By then everyone would probably be an enemy, but who needs friends when you have peace?

 

It’s All About the Money

Dave Volek, on WriterBeat.com, wrote an article January 12, 2019 on The Money Masters, a 3.5-hour YouTube presentation on historical manipulators of wealth.  Volek’s article and the subsequent comment thread were enlightening, with contributions from people apparently well versed on the subject.  My own interest in how all this works rests on readings such as The Creature from Jekyll Island:  A Second Look at the Federal Reserve, by G. Edward Griffin, Wealth of Nations, by Adam Smith, The Robber Barons, by Matthew Josephson, Confessions of an Economic Hit Man, by John Perkins, and Hamilton, by Ron Chernow, among others, as well as business news in various periodicals and newspapers for a couple of decades.  Commentators on Dave’s article linked to other on-line videos, some of which I also watched, but I ended up with more questions than answers.

These are the links to the article and videos referenced below:

Dave Volek:  http://writerbeat.com/articles/28727-The-Money-Masters

The Money Mastershttps://www.youtube.com/watch?v=gFj_cqNBaZY

Money as Debthttps://vimeo.com/131985511

America:  Freedom to Fascismhttps://www.youtube.com/watch?v=O6ayb02bwp0&app=desktop

THE MONEY MASTERS

The Money Masters, made in 1996, gave an overview of historical attempts to own and control wealth.  The usual culprits were mentioned: Alexander Hamilton, the Rothschilds, the banking cartels, including the Federal Reserve, among others.  It mentions the link between central banking and the income tax.

But there was an agenda, because the makers stressed reform of the banking system in favor of the government’s printing its own money and bypassing debt and the Fed.  I believe Mefobills on WriterBeat advocated the same, calling it “sovereign finance,” and according to him, that’s how Canada financed its transcontinental railroad debt-free.  As William Still, the creator of The Money Masters confirmed, anything that can be accepted in payment of taxes constitutes legal tender.  If I remember right, that’s how states in the early days (before the Constitution) gave legitimacy to their currencies.  Apparently, that’s how Maduro in Venezuela plans to legitimize his block-chain petro, backed by oil.

The documentary is spotty and ultimately unsatisfying. It hinted at things I knew; and tied concepts together in a time line that was instructive; and it served the purpose of showing how the international bankers manipulated historical events to create wars, for instance, and to determine the winners and losers.  Napoleon’s battle at Waterloo was given as an example, and the Bolshevik revolution in Russia.  The documentary claims that in WWII, the Rothschild branches in England, France and Germany, respectively, loaned money to those governments, and of course profited from all.  It said the arrangements were that the war’s winners would cover the debts of the losers.  The reason given for overthrowing the Tsar in Russia was that he refused a central bank.

While I can accept all this so far, I question the premise that a government has any better financial sense than a banker.  Both are profiting from other people’s energy/money and have theoretically infinite power over it.  The documentary says—correctly—that a debt-based dollar with the Federal Reserve as go-between has no more value than a dollar created by the government, except the latter is interest free.  It suggests the federal government could lend its own dollars to states and localities interest-free for local projects.  The problem, says the documentary, is the usury of interest—especially to profiteers like the Fed.  It also condemns fractional reserve banking and gives a good explanation of how that works.

But who’s to say government-determined projects are in taxpayers’ best interests?  It still constitutes a debt to the government, even if your property is flooded by a dam the government deems necessary.  Would Savannah borrow from the federal government as liberally as it sells bonds to finance its replacement of school gym floors or to replace grass with astro-turf on the sports fields?  Wouldn’t taxpayers be just as obligated, even if the loans carried no interest?  That would give the taxing powers license to borrow for ever more wild-eyed projects.

MONEY AS DEBT

A commentator on Dave Volek’s article, Logical Man, recommended Money as Debt, so I watched that 45-minute video, too.  It had the same theme as The Money Masters and the same agenda.  Essentially both denounced interest and claim the government should issue interest-free money to lend to smaller governments (states and municipalities) for infrastructure projects and the like.

Money as Debt (which should be “Debt as Money”) gives a good scenario of why interest on principal perpetrates an ever-increasing debt bubble.  If principal is created as bank credit, where does interest come from?  All those debtors must scramble to pay interest or go bankrupt and lose their assets.  A typical strategy for the bankers is to generate new loans to cover the interest on old loans, thus including old interest in new principal.  The Creature from Jekyll Island describes this in some detail.

Money as Debt claims that without debt there would be no money, an argument I’ve heard before.  That’s only because we live in a stupid system built on living beyond one’s means, starting with the government(s).  Second, the government exists to fund itself through extortion and war, so it spends a goodly portion of its income creating mayhem around the world that it then extorts more money to repair.

While The Money Masters disparages the gold standard—it’s too easy to corner the gold market—I believe some kind of standard is necessary to keep government within limits.  What’s to stop any government at any level from printing or borrowing unlimited funds to justify government contracts to friends and business associates, as now?  The specious argument that gold is too easy to corner assumes a fixed price.  Even if the central banks hold most of the gold now, it does them no good sitting in vaults, especially if they’re not allowed to print IOUs instead of selling the gold itself.

If the federal government decides to go to war, or wars, as now, who could stop it?  Would states and localities be required to pay for it, as now?

The pundits make a distinction between government finance and individual finance.  They presume that’s okay, even though all acknowledge the government is corrupt.  But to spend without permission, and especially to go into debt in other people’s names, is a reprehensible practice and symptomatic of the autocratic paternalism of all governments today.  Those who buy bonds collude with the deception and become willing conspirators in exchange for their purchased position in the “ruling class.”  I could say the same for stock purchasers, who also understandably want something for nothing in the form of dividends.  Here we have people actively contributing to destruction of the planet to “grow the economy” while actually depleting it.

But no one addresses such sticking points as the effect of the petrodollar or that paying off a debt contracts the money supply, as does writing off a debt, as happens in bankruptcy.  No one can know how much money is out there, especially as every country has its own.  China and Russia are talking about (and may have enacted) gold-backed currency.  This may be a factor in US demonization of these two governments.

No one but me suggests that credit is destructive, whether it charges interest or not.  Unlimited credit provides unlimited opportunity to do stupid things, and if you’re a government, those stupid things cost everyone and benefit only a few.  Then there are the government contractors, which in my ideal society would not be allowed.

AMERICA:  FREEDOM TO FASCISM

I ended up watching a 2.5-hour video by Aaron Russo entitled America:  Freedom to Fascism, made about 2006.  This was also recommended by a commentator, Jeffry Gilbert, on Dave Volek’s The Money Masters post.  Russo’s video is about the income tax and goes into some detail refuting the belief that there’s a law requiring wage earners to file.  The 16th amendment, he claims, imposed no new taxes, something affirmed in at least five Supreme Court rulings since 1913.  According to the Constitution, two types of taxes are allowed:  direct and indirect.  Direct taxes must be apportioned by population.  The Supreme Court has defined “income” as profits from a corporation, not wages, which it defines as receipts from sale of time or labor.

Russo interviewed people like former US Congressman Ron Paul, several former IRS agents, a restaurant owner who was targeted by the IRS for presumed drug dealing, and several people from an organization called “Tax Honesty.”  Most interesting was an interview with a former commissioner for the IRS, who wrote the tax code and who now works for a high-powered law firm.  This guy could not or would not answer whether there’s a specific law requiring people to file.  He essentially said Supreme Court rulings saying the 16th imposed no new taxes were obsolete and irrelevant.  Yet the IRS code says it’s a voluntary tax.

All this was linked to the Federal Reserve, and the video’s ultimate agenda was to abolish the Fed, which Congress has the power to do.  Russo raised the question of whether there is any gold left in Ft. Knox.  Some believe the gold is being held as collateral in the Fed’s New York office basement against the national debt.

Russo also mentioned the federal government’s obligation/responsibility to coin and issue its own money.

In any case, I surprise myself by piercing other peoples’ (and general) assumptions, on which the whole authoritarian power structure rests.  The primary assumption is that the masses are stupid, childlike, and don’t know what’s good for them.

 

How Did It Happen?

Does anyone ever wonder how we got the income tax?  This tax has become so universal, on international, federal, state and even local levels, that it is taken for granted, but few people seem to question its legitimacy, history, or even its purpose.

An internet search suggests a form of “wealth tax” or income tax existed in the Roman Republic, ancient Egypt, and China, but the form we know, usually imposed to finance wars, began in England in 1188, by Henry II, for the “Saladin tithe” to fund the Third Crusade.

In his landmark book, Wealth of Nations, in 1776, Adam Smith, a Scott, suggested even the King of Britain could not get away with an income tax.  Tax on interest or money is difficult to calculate without extraordinary “inquisition” into every man’s private circumstances and “would be a source of such continual and endless vexation as no people could support.”  However, a mere nine years after Smith died in 1790, British Prime Minister William Pitt the Younger formally implemented the income tax, designed to pay for the French Revolutionary War, to purchase weapons and equipment.  It was a progressive income tax and in place between 1799 and 1816, but for a short reprieve following the Peace of Amiens in 1803.  It was reintroduced in Great Britain in 1842 by Prime Minister Sir Robert Peel, who was seeking revenues for the government’s increasing budget deficits.

“A heavy progressive or graduated income tax” is the second major tenet of the The Communist Manifesto, as delineated by Karl Marx and Friedrich Engels in 1848.  The fifth tenet advocates “Centralization of credit in the hands of the State by means of a national bank with State capital and an exclusive monopoly.”

In the United States, President Abraham Lincoln instituted the first US income tax in 1861 to pay debts from his war.  It was repealed by Congress in 1872.

The Socialist Labor Party pushed for an income tax in 1887.  The Populist Party demanded it in its 1892 platform, and the Democrats, led by William Jennings Bryan, advocated for the progressive income tax law passed in 1894.   Called the William-Gorman Tariff Act (Revenue Act), it reduced tariffs and imposed a two percent income tax but only on the top ten percent of earners.  In 1895, in Pollock v. Farmers Loan and Trust Co., the Supreme Court declared the tax unconstitutional, based on the constitutional requirements that taxation be apportioned by a state’s population.

Republican Rhode Island Senator Nelson W. Aldrich, who served between 1881 and 1911, was probably the single most influential individual in creating the financial structure we know today.  As chairman of the Senate Finance Committee–which oversaw bank regulation and monetary policy–he was possibly the most powerful man in the nation from 1898 to 1911. The financial Panic of 1907, (which some believe was engineered by banker and Aldrich friend/business associate, J. Pierpont Morgan) led to the Aldrich-Vreeland Act in 1908, which was designed to make the monetary supply more elastic.  It also established the National Monetary Commission with Aldrich becoming chairman.  As chairman, he led a team of “experts” to European capitals to study their banking practices, and returned as a proponent of a national banking system.  He worked in secret with powerful bankers to develop the “Aldrich Plan,” which eventually formed the basis of the Federal Reserve Act of 1913.  The secret dealings that began in 1910 and led to the creation of the Federal Reserve system is well documented in The Creature from Jekyll Island:  A Second Look at the Federal Reserve, by G. Edward Griffin.

Aldrich, who apparently had a habit of publicly opposing things he wanted, then voted in Congress for the corporate income tax in 1909, claiming this was to insure the personal income tax would not be passed.  Ten years before, he had called the income tax “communistic.”  However, later he and President William J. Taft then agreed that a constitutional amendment would be more effective in overriding the Supreme Court’s objections the 1894 law.  Aldrich claimed he believed the 16th amendment would never be approved.

The relationship between the Federal Reserve System and the new income stream generated by the income tax is not well documented, but it resembles that of the Whiskey Tax and the nation’s first central bank in 1791.  At that time, Treasury Secretary Alexander Hamilton introduced legislation for the whiskey tax on December 13, 1790 and for the central bank the next day, on December 14, 1790.

A common thread in the two bank/taxing schemes was that they gave the federal government the authority, if not the right, to investigate every taxpayer’s personal property and bank accounts searching for infractions, and to seize property it decides has been obtained illegally.  This has set the precedent for the federal invasion into private lives that has become so prevalent today.

In the “Gilded Age,” Nelson Aldrich was well known for his close and unsavory ties to business, by which he had become personally wealthy.  He believed his power base would successfully defeat the income tax amendment.  Indeed, while they were opposed, their solidarity had broken down, so individuals like Andrew Carnegie and John D. Rockefeller (whose son John Jr., married Aldrich’s daughter Abby) formed tax-exempt foundations to shelter their wealth before the tax went into effect.

At that time the income tax was promoted as a “class tax,” with only the upper income earners affected, so the idea of wealth re-distribution appealed to lower income earners.  Only later did President Franklin D. Roosevelt expand the “class tax” to a “mass tax,” according to former IRS historian Shelley L. Davis in her book, Unbridled Power: Inside the Secret Culture of the IRS.

Proponents of the income tax used other arguments, too.  It was proposed as a more reliable method than tariffs for raising federal revenues, and gave President Woodrow Wilson justification for reducing tariffs.  Also at that time the idea of Prohibition was in the air, and advocates of Prohibition recognized the government would lose income from excise taxes on alcohol.

The 16th Amendment reads, “The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”  It was passed by Congress on July 2, 1909 and sent to the states for ratification.

It was supposedly ratified by the requisite number of states by February 13, 1913.  However, there is some question about whether it was ever properly ratified.  In 1985, William J. Benson published The Law that Never Was about the income tax.  Here, Benson claimed that in 1984 he had visited national archives and all 48 state capitals looking for records of ratification.  Not only had he found variations in wording and punctuation from the congressionally approved amendment, but he claimed some states which were certified as ratifying never did or voted against the amendment.  He said only two to four states had ratified as written.

Constitutional amendments require ratification by three-fourths of states.  In 1913, there were 48 states, so 36 would have had to ratify.  Benson found that seven states had not ratified at all.  1913 Secretary of State Philander Knox had claimed Kentucky and Tennessee ratified, but Benson said they did not.  Eight states were reported as having ratified, but Benson found no evidence of it.  Six more states did approve, but the governors or other officials required to sign did not sign.  Twenty-five states violated provisions of their own constitutions in ratification, and 29 violated state procedures.  Twenty-two states changed the wording to ratify, one state changed spelling, and 26 states changed punctuation.   Oklahoma changed the wording to say the opposite of what the amendment said.  Tennessee law required a delay until the next session but ignored it.

The American Law Division of Congress’ Congressional Research Service responded in May, 1985 to Benson’s claims.  “While it didn’t rebut Benson’s factual claims,” it said the amendment had been ratified “because Knox said it had been ratified,” says one internet source.

In 1990 Benson went to prison for tax evasion.  He served 15 months before a federal appeals panel overturned the conviction, saying a government witness had given improper testimony in the 1987 trial.  This occurred less than one month before Benson was scheduled for parole.

Benson’s book caused quite a stir, and he was selling packages based on his book to help individuals fight the Internal Revenue Service.  However, those who have used his arguments have not fared well in court.  Also, Benson himself was the loser in court rulings in 2007 and 2009 that determined his “Reliance Defense Package,” which he sold for $3500 to tax protesters, was fraudulent.

Courts have denied requests for evidentiary hearings and have refused to hear the arguments against the 16th amendment itself, claiming “Secretary Knox’ decision is now beyond review.”

In an interview in 2013, Benson remained an income-tax evader and bragged he has never gone back to prison, despite his continued outspoken crusade against the 16th amendment.

 

 

 

Wealth of Nations Synopsis

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Adam Smith’s landmark book, Wealth of Nations, published in 1776, is a 500-plus page treatise on economics, oft cited bur rarely read, except by economists and masochists like me.  If you can overlook Smith’s sing-song style, his tediousness, repetition, generalizations, vague and archaic terminology, and inconsistent reasoning, the book is worth reading, especially as a social history.  It is important to recognize that Smith writes as a spokesman for the monarchy and the wealthy stock holders, landowners, and mercantilists who made the book an immediate hit and won him a position as Commissioner of Customs in Edinburgh, Scotland.  His “commercial society” has enshrined him as the “first modern economist,” or “father of modern capitalism.”

A confluence of factors contributed to the conditions of Smith’s time.  The “industrial revolution” began in Britain with the invention of the steam engine in 1712, first used for pumping water out of coal mines.  Other inventions quickly followed, eventually leading to the growth and dominance of the British Empire, through manufacture, trade, and colonization. Another feature of 1700’s Britain involved war and military conquest.  As an island nation, with England, Scotland, and Wales united as the United Kingdom, or “Great Britain,” in 1707, it developed its sea power and had established dominance in the seas and in trading routes by the time Smith wrote Wealth of Nations.  Competition with other powers brought war and its heavy costs.

Wealth of Nations refers repeatedly to the “late war,” which presumably was the Seven Years’ War, fought between 1756 and 1763.  One of the book’s primary aims appears to be exploring the various modes of taxation the king could use to pay debts from that war.

Meanwhile, the industrial revolution was bringing a rapid shift in social and cultural dynamics, as Great Britain went from predominantly agrarian, rural society to one of urban and industrial predominance.  The textile industry was probably the first to be affected in a major way, with the invention of the spinning jenny–“jenny” is a nickname for “engine”–by Englishman James Hargreaves in 1764.

The iron industry also underwent fast transformation, and with it, the transportation industry.  Communication and banking adapted accordingly.

Because industrialization necessitated large capital investments, business ownership shifted from individuals to groups, including partnerships and corporations.  The banking industry grew by leaps and bounds after the Bank of England was first chartered in 1694.  The London Stock Exchange boomed after the Seven Years’ War.  The government became increasingly dependent on it to finance wars.

Like many of his contemporaries, including Benjamin Franklin, Thomas Jefferson, Alexander Hamilton, and George Washington, he was fascinated by machinery and its commercial potential.

In the first pages of Wealth, Smith presents the plan for the book, summarizing that the real wealth of a nation comes down to the “annual produce of the land and labor of the society.”

He then distinguishes between towns and agriculture and glorifies machines for facilitating division of labor, thus efficiency and productivity.  He uses pin-making as an example, with speed of production due to division of labor the only criterion.

Smith claims farmers are lazy, because as one-man operations, they waste time changing tasks, whereas a group of men in a “workhouse,” each doing one small task repeatedly, are able to produce much more in the same time period.

He says “Cochin-china” is one of several Asian countries that have sea access as well as extensive canals inland, but most of their trade is internal.  He wonders why they have not sought to trade outside their own countries.

Wealth emphasizes the enduring value of labor, despite the fluctuations in metal money.  The discovery of gold and silver in the Americas caused a glut in Europe that reduced the value to a third of what it was before.  A man can only do so much labor, but that labor holds its value through all the ups and downs of markets.

Wealth gives a multiplicity of examples of how labor costs rise and fall in relation to cities versus rural, or demand—such as North America, where labor was in great demand and food relatively inexpensive—and how much a laborer must be paid to sustain himself and children to replace him.  Since 50% of children die before reaching adulthood, says Smith, we need to calculate the cost of feeding four children in every family.  Smith acknowledges that all the laws favor the employers, should the laborers strike for higher wages.

While he presses the point that nothing happens without labor, Smith is happy to squeeze the laborer into a bare subsistence wage, better to keep him working hard to make ends meet.

He cites numerous examples of relationships between labor and stocks. New land, like the colonies, attracted lots of stock capital because it was cheap, full of natural resources, and soil was rich.

Early on “corporations” restricted competition, with the king’s (or queen’s) support.  Smith says 5th of Elizabeth formalized the “Statute of Apprenticeship” that restricted practice of craft or trade to those who had apprenticed seven years.  Church wardens, mandated by the king to provide for the poor in their parishes, did everything possible to keep the poor from moving in.

Corn was the major food crop in Europe.  Smith says tobacco grows well enough in parts of Europe, but it is illegal because it’s too hard to tax individual farmers, so tobacco is imported from (primarily) Virginia and Maryland, warehoused, and resold at profit.  Sugar is in great demand, and is very expensive, imported from Caribbean colonies.  In “Cochin-china” sugar is no more expensive than ordinary food crops and is cultivated alongside them and apparently not exported much.

Labor and landlords benefit from policies that also serve the public.  Stockholders, however, are loud, moneyed, and invested in reducing competition, so they generally work against the public good.

Smith explains how money is not the same as circulating capital.  It is the “wheel” of the economic engine but has no intrinsic value.  A coin is not used up when it is exchanged for goods or services, so the same coin, each time it changes hands, buys its face value for the purchaser, who gets his coin’s “worth” in product.

He also writes about the banks, primarily of Scotland, that used paper money promissory notes in excess of gold deposits for lending.  80% paper to 20% backup.  Merchants could also get lines of credit, so were encouraged to accept that bank’s paper in trade, to promote it to friends and associates, and to spend it.  However, paper was no good in foreign countries, so gold was exported to import foreign products.

“No equal capital puts into motion a greater quantity of productive labor than that of the farmer,” says Smith.  Also, farms stay put, like retail shops, and can’t be outsourced.

He discusses how the American trade is financed by merchants in Great Britain.  He uses the example of hogsheads of tobacco from Virginia and Maryland as commodity money that is bought in excess by England and resold in other places.

But the “great commerce of every civilized society” is between country and town.  In fact, the home trade, by far the most important, was considered subsidiary to foreign trade, based on Man’s book, England’s Treasure in Foreign Trade.  Smith says the mercantile system works in many ways against the enrichment of the country.  It selectively encourages exportation and discourages importation.

He says it is a mistake to politically favor exports over imports.  Restraints on imports consist of high duties and absolute prohibitions.  Exports were encouraged by “drawbacks” (tax relief), “bounties (subsidies), advantageous treaties, and the establishment of colonies.  Smith is down on bounties.  He specifically mentions corn, because it, to him, is the commodity by which the price of everything else is measured.

He claims restraints on importation and prohibitions may be good for the home manufacturers but not for the population or the economy as a whole.  The famous “invisible hand” comes up on page 300, in which Smith mentions the folly of “statesmen” who try to control private enterprise.  He says the market will determine what is needed without government help.

Merchants and manufacturers derive the most benefit from monopolies, says he, whereas farmers and populace derive little and undoubtedly lose by them.  Corn merchants benefit more from subsidies than corn farmers.

The notion of “balance of trade” is “absurd,” and he enumerates reasons.  Smith also states that it is silly for nations to try to improve their wealth at the expense of other nations.  This leads to hostilities rather than friendly exchanges.

Smith asserts again that all wealth comes from the land, with farmers the most productive workers and everyone else subsidiary.  Those who bring raw materials to more useable form, like wool manufacturers, do not add as much value as the farmer does by cultivating the land.

Smith cites the duties of the sovereign.  He claims the sovereign does not have the duty or right to regulate commerce.  At the same time, he says the king’s first duty is to protect the country from other governments.

He makes the case for a standing army and says this is the only way the sovereign can maintain peace and order.  Now “civilized” societies can conquer “barbarous” societies, which don’t have the advantage of gun power.  He believes, therefore, that gun power equals civilization.

Smith mentions highways, bridges, navigable canals, coinage, and the post office as public institutions that facilitate commerce.  Post offices everywhere, he says, are valuable revenue sources for the government, with steady and immediate cash flow and low maintenance costs.

Obviously, a glaring inconsistency in Smith’s premise is between his views on free trade and his belief in the importance of a standing army.  Here we have our pseudo proponent of free trade justifying forts and garrisons in foreign countries to protect merchants’ stores.  Where these countries do not allow forts, it has been necessary to send ambassadors.  Smith believes most ambassadorships were created to protect trade.

He goes into “regulated companies,” which are open to anyone with the money, willing to submit to the rules, and trading his own stock at his own risk.  These are opposed to “joint stock” companies, which sound like publically traded companies today.  Pooled resources and pooled profits.  He says only four types of joint stock companies seem valid.  He cites:  1. The banking industry; 2. Fire and sea-risk insurance companies; 3. Canal or navigable channel companies; and 4. Those bringing water by pipe or otherwise to a great city.  He notes the Bank of England doesn’t have exclusive privilege, except that no other bank in England can employ more than six people, and the Bank of England lends to the sovereign.

The last hundred pages of the book are devoted to taxes and other potential sources of revenue for the commonwealth or sovereign.

He floats the concept of a central bank, calling it a “public bank to support public credit, and upon particular emergencies to advance to government the whole produce of a tax, to the amount, perhaps, of several millions, a year or two before it comes in.”

Smith asserts the king should be wealthier than anyone, with grand style and pomp to support his “dignity.”

He distinguishes between direct and indirect taxes, saying the former, as on land, are easily assessed.  Tax on interest or money is difficult to calculate without extraordinary “inquisition” into every man’s private circumstances and “would be a source of such continual and endless vexation as no people could support.”

“There is no art which one government sooner learns of another, than that of draining money from the pockets of the people.”

Wages on the “inferior classes of workmen” are regulated by demand for labor and the price of provisions.  As taxes on labor go up, wages must go up more, to cover the additional tax.  Manufacturers can pass these costs on to the consumer, but farmers’ landlords must absorb them.  This leads to a decrease in the demand for labor.  “Absurd and destructive as such taxes are, however, they take place in many countries.”

Smith goes into government jobs, which are much sought after, because they are highly paid and carry perquisites (perks).  Taxes on luxuries do not raise the price of other commodities, but those on necessities do, so should not be taxed. He mentions alcohol taxes as by far the most productive.

Excise taxes are generally on home goods destined for home markets and imposed on only certain items of the most general use. Excise laws discourage smuggling more effectively than customs laws.

He acknowledges that poor people, because there are more of them, consume the most, not only in quantity, but in value.

He mentions that war has required even the most frugal republics to contract great debts to maintain independence.  He says it is incorrect to assume money lent to government increases capital, because it is generally wasted, and that money would otherwise be spent on productive labor.  Also, foreigners often buy in.

“When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid.”

Wealth ends rather abruptly on the subject of public debt, saying that when it exceeds taxpayers’ ability to pay with reasonable measures, government uses unreasonable measures, such as issuing interest-free bonds for immediate expenses, or interest-only bonds that are never intended to be repaid.  He says this has “enfeebled” multiple governments.

When governments reach the point where they can’t pay the debt, they either inflate the currency or declare bankruptcy.  He says the latter is more honest, but says the entire system of debt-backed government is “pernicious.”

My take is the tradition of monarchs and overlords has led to societies in which unearned wealth is glorified and held in high esteem.  The most highly respected and emulated are those who have done the least to acquire what they have, in general terms. The very idea, The Wealth of Nations, presumes the nations own the individuals who live within their borders.

 

 

 

Hamilton’s Legacy

As the rich get richer and the poor get poorer, pundits and philosophers theorize about the problems of income inequality, social stratification, and legal injustice.  Proposed solutions flow thick and fast, most advocating government intervention or denouncing government de-regulation since the Great Depression.

The American myth of freedom, democracy, and capitalism dies hard, but the United States has never been free, democratic, or even capitalistic, unless it was before the Europeans arrived.  Stratification of society was built into the system with the arrival of the English and their traditions of monarchs and minions, the French and Spanish, and their long histories of battle and inbreeding among themselves on the European continent.

The American experiment may have represented a break from the past, but it carried with it the same patriarchal patterns of its forebears.  The “Founding Fathers” ultimately adopted a government structure that varied only slightly from that of its British progenitors.

Many US citizens don’t know the difference between the Declaration of Independence, which we celebrate on July 4 every year, and the Constitution, which was drafted in secrecy and signed on September 17, 1787, over eleven years after the Declaration announced the United States’ independence from Britain.

In that eleven year gap, the Revolutionary War had been fought and won.  The now free colonies were struggling with debts to soldiers, domestic, and foreign investors.  The individual states had taxing power, but the loosely formed union did not.  Some states were paying off their debts, but others were lagging.  John Adams had been sent to London to negotiate credit for the fledgling country, and Thomas Jefferson had been sent to France for the same purpose, to replace Benjamin Franklin, who was aging and ill.

James Madison of Virginia and Alexander Hamilton of New York led the effort to revise the Articles of Confederation with a new Constitution that would create a strong central government, supersede state governments, and have the taxing power to pay war debts.  Once gathered at what became the Constitutional Convention in Philadelphia, though, each delegate learned the intent was to completely re-write the Articles and was sworn to strict secrecy. George Washington was unanimously elected president.  Madison sat by his side taking notes and was later acknowledged as having written the Constitution.  Alexander Hamilton was a strong advocate for a centralized government, brilliant and opinionated, an open admirer of the British model, including the monarchy, and wanted to reproduce the British system in the states.  He also extolled wealth and privilege, claiming the masses could not be trusted to manage their own affairs.  Madison was of the same general opinion.

While he initially opposed the Constitution, Hamilton later became its strongest advocate and promoter.  He induced Madison and John Jay to write with him what became the Federalist Papers, a series of anonymous essays distributed to newspapers to promote ratification by the states.  For ratification, the Philadelphia conventioneers chose to bypass state legislatures and rely on specifically convened  ratification conventions.

Hamilton played an early and profound role in shaping the early American government.  According to his biographer, Ron Chernow*, he was an illegitimate child of a dissolute couple, born in 1755 or 1757 on the British island of Nevis in the West Indies.  After his father abandoned the family and his mother died, he was employed at age 13 as a clerk and bookkeeper for wealthy British traders on St. Croix, also in the West Indies.  His employers traded in a variety of goods, but at least one shipment a year was of African slaves.  Those employers eventually financed Hamilton’s migration to the New York colony in 1773, where periodic shipments of slave-produced sugar covered his expenses.

Hamilton, who was dashing and gifted, quickly made his way into New York society, courting and marrying a daughter, Elizabeth, of the prominent Philip Schuyler.  He enlisted in George Washington’s Continental Army, gained Washington’s confidence and became his personal secretary during the Revolutionary War years.  Later, Washington granted him his one and only command, at the battle of Yorktown, where Continental and French forces defeated British General Cornwallis to win the Revolutionary War.

After the war ended, Hamilton practiced law in New York City and involved himself in politics.    He also involved himself in banking, writing the constitution for the Bank of New York in 1784, as agent for his brother-in-law, John B. Church, who was in Britain acting as a member of Parliament.  It was New York’s first bank and exists today as BNY-Mellon, billed as having the longest continually traded stock on the New York Stock Exchange.

After the Constitution was ratified, George Washington became the first US president, elected in 1788.  John Adams was elected vice president, and Hamilton became Washington’s first Treasury Secretary.  Thomas Jefferson, who was still in France, was appointed Secretary of State and confirmed by the Senate before he knew of his appointment.

Hamilton went to work immediately to take control of the nation’s finances.  The day after his confirmation as Secretary of the Treasury, he arranged for a $50,000 loan from the Bank of New York—of which he was a director–to pay salaries of Washington and Congress.  He then arranged for another $50,000 loan from the Bank of North America.  The Hamilton Tariff Act of 1789 was Congress’ second official move, after establishing rules for taking oaths of office.

By 1790, Hamilton was busy working on a plan for the federal government to assume state debts from the Revolutionary War.  In the Constitutional Convention the question of assumption had split—like the slavery issue—essentially along North-South lines, because Southern states had paid off much of their debt, while northern states, like New York, had not.  The issue dovetailed with questions about the ultimate location of the nation’s capital.  Madison, silently backed by George Washington, negotiated for a Potomac River location near Washington’s Mount Vernon plantation in exchange for agreeing that the federal government would assume the states’ debt.

Meanwhile, Hamilton was busy creating the First Bank of the United States, a central bank that could issue credit, capitalized at $10 million, 20% owned by the government and 80% owned by shareholders.  He was also looking for other sources of income and convinced Washington and Congress to support an excise tax on whiskey.  He introduced legislation for the whiskey tax on December 13, 1790 and for the central bank December 14, 1790.  At that point, Washington’s main source of income came from whiskey distillation.

Both James Madison and Thomas Jefferson vigorously opposed the central bank, calling it unconstitutional.  Madison and Hamilton had been allies before, but this difference in interpretation of the Constitution caused a rift that never healed.  Jefferson and Madison wrote letters back and forth condemning the mad stock speculation that greeted the public offering of central bank stock, and the fact that people in the Northeast could talk of nothing else.  Once again, critics claimed Hamilton demonstrated a preference for rich Northerners, as he only offered the stock through three banks, in Boston, New York, and Philadelphia.  Also, opponents pointed to the fact that three-fourths of investors were foreign.  Thirty of the approximately 85 Congressmen bought shares.

Hamilton’s assistant Treasury Secretary, William Duer, could be called one of the nation’s first inside traders.  Philip Schuyler, who would become Hamilton’s father-in-law, had previously done business with Duer and had encouraged him to move from Antigua to New York.  Duer became an early friend when Hamilton immigrated to the continent.  But Duer turned out to be an inveterate gambler and stock speculator who was blamed for causing the Panic of 1892 through debt-backed stock speculation in First Bank of the United States stock. His method was to borrow heavily to make trades, hoping to sell at peak prices, but he ran out of cash and couldn’t make payments on his debts.  People panicked and started selling stock.  Hamilton then used the Treasury’s sinking fund to buy government securities anonymously, to stem the panic.

As a result of the crisis, to restore confidence, and to encourage people to start investing again, 24 stock brokers and merchants formed the New York Stock Exchange in May, 1792, by signing the so-called “Buttonwood Agreement,” under a buttonwood tree on Wall Street.  The signers agreed to trade only with each other, and to charge one-quarter percent commission on trades.  Available stock was limited to insurance companies, the Bank of New York, the First Bank of the United States, and Hamilton Bonds that Hamilton had decided to issue to pay Revolutionary War debt.

The United States has operated as a triumvirate of government, banking, and the stock market ever since.  The “Framers” of the Constitution were wealthy businessmen, planters, bankers, lawyers, and merchants, who designed a structure for exerting control over the population through laws and taxation.  While the Declaration of Independence set the states free, the Constitution bound them in economic slavery to a new taxing authority.  The links to the banking system and the New York Stock Exchange initiated the “public-private partnerships” that define the United States today.

If, in the 21st century the rich are getting richer and the poor getting poorer, it’s probably fair to say it was designed that way.  The Framers knew what they were doing.

 

*  The recent Broadway hit Hamilton is based on Chernow’s book, Alexander Hamilton, 2004.

Who Owns the Land?

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I’m so glad authors like Fred Pearce are paying attention.  I’d never heard of Pearce until his book, The Land Grabbers:  The New Fight Over Who Owns the Earth, jumped from the library shelf into my hands.  Published in 2014, the book reads like a world-wide travelogue, except the sights are disheartening.  Until the end, it made me wonder if every plot of arable soil on the planet has been razed, plowed under, polluted, and subjected to rampant, monolithic, mechanized agriculture for export.

The Land Grabbers premise is that “soaring grain prices and fears about future food supplies are triggering a global land grab.”  The super-rich, would-be rich, and governments are scouring the world looking for productive investments; and land—especially arable land—reigns supreme.

In chapter after chapter, the reader learns of how formerly communal land has been privatized, with drastic changes in ecosystems and eviction or undermining of subsistence-level, indigenous people.  In the first chapter, we learn about government “villagization” in Ethiopia, the collecting of dispersed populations like the farmer/fisher Anuaks and the livestock herding Nuer into state-designated villages, ostensibly to provide better services, like schools, hospitals, and water wells. But locals claim the government is stealing their traditional lands to turn over to foreign agribusiness.

The second chapter takes the reader to the Chicago Board of Trade, the home of commodity trading.  We learn commodity speculation in 2008 may have contributed to the sharp spike in worldwide food prices that year.  The food price bubble was first noticed in early 2007 in Mexico, where the cost of tortillas quadrupled in two months.  Subsequent months brought food riots across North and West Africa.  In Egypt, the world’s largest food importer, bread prices tripled.

Pearce says grain shortages could not be blamed, since grain production was up five percent that year.  However, at least one-third of the world’s grain goes to feeding livestock.  Also, 2007 saw a boom in the biofuels industry, and was the year the ethanol mandate was passed in the United States.  The US earmarked half of its corn for ethanol, diverting surpluses from export markets.

In Saudi Arabia, fear of dependency on food imports prompted billionaires to pump water from a mile beneath the desert to irrigate wheat and grazing grasses for dairy cattle.  Within a few years it had depleted four-fifths of its underground water reservoir–formerly the size of Lake Erie–and realized this tactic was unsustainable.  It turned to acquiring large tracts of land in foreign countries, especially impoverished Muslim countries in Asia and Africa.  Qatar and other Persian Gulf countries are also acquiring foreign farmland or concessions to produce food for their people.

The book repeats the story of dispossession in South Sudan and Kenya. In South Sudan the new government has promised vast tracts to Arab interests, with land rights signed over by questionable spokesmen for the people, without surveys or other demarcations showing where the properties begin and end.  Tradition has it that whole communities must participate in communal land decisions, but purchasers find ways around this.  In several cases, the land has been leased out with great promises of agricultural development, but nothing has been done on the ground.

There’s the story of the American Christian evangelist who made his money running private prisons in the US.  He has leased 17,050 acres in the Yala swamp in Kenya.  It drains into Lake Victoria.  Calvin Burgess claims he has permission to drain the swamp, clear the papyrus and cultivate, primarily, rice for export.  He sees his huge agribusiness as a means to bring Christianity to the poor, as well as drag them out of poverty.  His farm is named “Dominion.”

Locals tell a different story.  Before Burgess, everyone had cattle and used the swamp, taking papyrus as needed to make mats, baskets, roof thatch, and other useful items.  Now, because Burgess has raised a weir several feet, the swamp overflows and floods regularly, destroying locals’ crops and bringing crocodiles and hippos to their front doors.

Pearce describes the general political scenes in several African counties, including Liberia.  Liberia had recently emerged from a 14-year civil war.  I read about the Firestone rubber “fiefdom” in Liberia since 1926.   “International law” favors the investors; and investor claims supersede individuals, communities, and countries.  I have to wonder who is the arbitrator of “international law.”  UN “peace keepers” dominate in Liberia.

Pearce writes a lot about the palm oil industry, which has grown exponentially over the years.  It started back in the early 1900s, with the tyrannical King of Belgium in the Democratic Republic of the Congo, but later came under the control of the Lever Brothers, and then Unilever.

Also in Africa, the grabbers have claimed large concessions to create hunting reserves, “eco-tourism,” including safaris, and conservation areas that have squeezed indigenous Massai tribes and run them off traditional lands.  This in Tanzania, primarily, but also in Kenya.  I guess they have had domestic cattle for centuries, in concert with wildlife, yet moderns believe the two are incompatible and want to remove the people and their cattle from their traditional lands.

We learn about the Inner Niger Delta, in Mali, which is being dried out by irrigation rights upstream.  Here four foreign concessions have been given enormous prior claims on Niger water, complete with canals.  Two are for sugar cane—British and Chinese—which is a huge water hog; one is a US concession for rice; and the fourth, possibly the largest, is for food for Libya.

In the Ukraine, the story is similar to the others.  Individuals form companies, get investors, buy or lease large tracts of land with grand plans to grow this or that.  In the Ukraine or Russia, a number of formerly collective farms have been abandoned.  There are many household farms, but the people don’t have the money to grow for more than their own needs.

The cerrado in Brazil, and the chaco in Paraguay both hosted indigenous tribes.  Now the tribes have been squeezed, killed, compromised, or absorbed, and the foreign investor mono-agriculturalists are encroaching ever closer, destroying biodiversity, rendering many species extinct, obliterating and polluting habitat.

The conservationists are either weak, compromised, or circumvented.  In South America, the main industries are cattle ranching, sugar for ethanol, and soy, but also other grains like corn and wheat.  Rubber.

In Sumatra and Papua, New Guinea thousands of acres of rain forest and peat bogs have been destroyed, for two Chinese-owned paper mills.  Once again, locals who depended on the forest for rattan and rubber, as well as fishing and shrimping have been displaced, in some cases violently, and their water polluted.  Their government has favored foreign investors over them, despite presumed legal protections. The IMF was happy to advise the Sumatra government to give away even more forestry concessions to bail out the Chinese paper mills when there was a recession in Asia.

Overall, the book gives an impression of the sheer size of the earth, and its many and varied lands.  But the land grabber strategy seems similar the world over.  The international concerns are deeply intermingled, with lots of names, re-names, countries, and corporations, hedge funds, pension funds, and university endowments involved.  Tax havens.  Companies awash in subsidiaries, controlled by individuals and families, with holdings in multiple countries, and assisted by weak or corrupt governments, rape the land, displace subsistence locals–who generally have depended on communal sharing of resources, like forests and rivers–turn them against each other and the police/government against them.  They bring in bulldozers and chain saws to replace rotation farming and biodiversity with mono-agriculture for export.

It’s enough to make me a Communist, if it would mean a return to communal land holdings.  Reading The Land Grabbers reveals the de facto pervasiveness of communism, in the shared, or communal land sense.   It is the undercurrent that modern property-owning society is built on.   That land grabs are happening all over the world to so many indigenous and until now isolated people shows how the perpetrators have depended on the isolation to pull the same stunt over and over.

I liked the way The Land Grabbers ended.  Pearce claims most of the world’s food is still produced by smallholderrs.  Most land is still held and used in common.  In Africa a half-billion smallholders produce 90 percent of the food.  Pearce writes that in India large dairy cooperatives have propelled the country from 78th to first in the world in milk production.  The coop provides for daily milk pickups from the members.

Bottom line is all is not lost.  Pearce says that despite myth, smallholders take better care of their ecosystems than large mechanized industry.  They farm every corner of their small spaces, use crop rotation, animal manure for fertilizer, expand and contract grazing and growing spaces depending on need.  They grow diverse crops and have animals, like cows, goats, and chickens.  The idea of “tragedy of the commons” doesn’t hold.  Without written rules, communal holders manage to work out among themselves fair balances so that land does not become over-grazed or reduced to desert.

After reading The Land Grabbers:  The New Fight Over Who Owns the Earth, I believe more strongly than ever that no one owns the earth.  The earth owns us.

 

 

Sermon on the Mound

CHURCH OF THE HOLIER THAN THOU, INCORPORATED

A for-profit religion where nothing is sacred, and human sacrifice is obligatory

 SERMON ON THE MOUND
Eve of 2007

The following sermon was delivered at a 2007 New Year’s Eve bonfire

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Dear Worried Souls:

Take Heart! the Worst is yet to come.  Witness this miserable mound of machine age offal.  Wasted resources compounded daily–advertising, packaging, junk mail, paperwork, broken equipment—a sorry heap of worthless Trash reviled by all.  The costs have become unbearable.

It does not live so cannot die.  We must dispose of it anyway, and we aim for the Sky.  We plead for help from the great Mother Earth and Father Sun. Open our senses to the stench of Burning Plastic.  Burn our Lungs with Particulates and Smoke. Singe our eyes with the Motes we scatter.  Spread sparks of Common Sense wherever Smog may go.

On this eve, the Church of the Holier than Thou, Incorporated ignites this sacrificial pyre, in humble apology to the Planet we call Home.  As long as we can live and breathe on this speck of Cosmic Dust, we give Thanks for our Success and Vow to Make Sin Pay.

Thank you, Mother Earth, for deflating false profits and reducing their costs. Our debt to you is incalculable.

Thank you, Father Sun, for your clean nuclear power, the solar system’s eternal source of centralized energy output.

The Loving Lambs of Church of the Holier than Thou, Inc. have watched in Horror as the TechnoDemons befouled the Earth.  Their numbers numbed us.  Their profits (er . . . prophets) preached Winning by Losing, and promised Eternal Hell.  Machine Noise rocked the planet and rattled the Tectonic Plates.  We Bleated in Horror, Fear, and Rage, but there was Nowhere to run, nowhere to hide.   We prayed for Peace and Quiet.

We sighed as they Drowned Porpoises, Paved Neighborhoods, Spilled Oil, Dumped Chemicals, Bulldozed Wildernesses, Polluted Oceans, Pipelined Tundra, Gobbled up Farms, Obscured the Stars, and Obliterated the Sounds of Birds and Breeze.  We cried for Mercy as Global Temperatures Rose, Tempers Flared, Ice Caps Melted, the Ozone layer dissipated, and Dynamite collapsed mountains and hills.  We watched Mutations and Health Problems Created for Profit and spreading like Cancer.  We searched in Vain for Recycling centers, Compost piles, and Locally produced goods.

This Mound of Refuse–papers, plastics, boxes, wraps, junk mail, bubbles, baubles and bills–represents countless Murdered Trees and Earthly Treasures that died for junk mail, propaganda, advertising, photo-ops, cellophane, and disposable containers.  Swallowed in the glut (er  . . . gut) of Human Consumption, these plundered assets Writhe in Pain.  Their pitiful Pleas reach us from Roadsides and Garbage cans, raising Taxes for waste removal.  “Stop this Plague upon our Souls,” they cry in tortured sobs.

We at the Church of the Holier than Though, Incorporated, know a Natural Solution when we see one.  We will find a way to uplift this junk into Something Useful, so we can Make Sin Pay.

Yes, the Savvy Saints of the Church of the Holier than Thou, Incorporated have lit the solar flares, at last, but we are weary, wary of yet another trick, a Light too Bright to be Natural.  But Fear no longer.

The TechnoDemons’ Hot Stocks have Cooked their Geese.  The Gold weighs heavy in their Stomachs and Blocks their Bowels.  Take Pity, and sell them fresh Vegetables.

We at CHT, Inc. mean Business.  We will grow the Economy to Scale.  Green leaves and Roughage will prevail.  Put methane in cars, corn in stomachs, trans fats in wheel bearings, and soy in tofu.  Put the mercury back in thermometers and the lead back in batteries.  Shade roofs with solar panels. Generate energy from Landfill. Triple postage rates on junk mail. Clean the ditches with tax collectors. Hire prisoners instead of illegals.  Transform scrap metal to passenger trains.  Make synthetic hormones from oxidized plastic.  Sift sand for silicon.  Collect rain on roofs, or whatever it takes, to Make Sin Pay.

We Lobby you, great Mother Earth and Father Sun, to grant our request for Survival Skills Technology.  Light our way through the Sewers of Human Degradation, as we seek Natural Markets for these discarded Treasures.  We pray for a Healthy Return.

May Sparks from the Fire of this Pyre seed new Trees of Knowledge, wherever particulates drift.  Too cumbersome to be mulched, too poisoned to nourish, too diseased to be safe, this Trash has no Market Value, no place to Go but Up.

With a Match and a Blessing, the Church of the Holier than Thou, Incorporated–where nothing is sacred and human sacrifice is obligatory– sets this Sacrificial Offering ablaze.  We Pray this Fire will spread Sparks of Enlightenment wherever the Smoke may Blow, and dispel the Mind Pollution that hides the Bottom Line.