Tag Archives: money

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.

 

 

For Better or Worse

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In late 2006, ten years ago, I started reading an abridged (317 pages) version of Democracy in America, the classic work by French aristocrat Alexis de Tocqueville.  It took several years to finish it, but I noted de Tocqueville’s observations and my reactions along the way.  Below are my comments at that time, along with my retrospective on the 2016 election and its implications so far.

DEMOCRACY IN AMERICA – ALEXIS DE TOCQUEVILLE – 1832

             Democracy in America, the much quoted tome by French aristocrat and dilettante Alexis de Tocqueville, was written after a nine-month tour of the United States in 1831-2.  This 317-paged abridged version was edited by Richard D. Heffner, who wrote the introduction.  It was published in 1956.

Even in 1831, apparently, de Tocqueville recognized attitudes that have led to today’s problems in America, such as the driving greed of all layers of society, and the work-driven ethic.  At that time, class distinctions weren’t so clear, but this is shifting, and the oligarchy today consists in large part of so-called “public servants” who have commandeered public property and cordon it off against the public.

De Tocqueville also astutely observes that a comfortable populace will not revolt.  He didn’t anticipate they would not work, either, if the government makes life too comfortable, as is presumably happening now.

It bugs me that he calls this “democracy,” but I suppose it’s the closest form anyone in recent history has known.

De Tocqueville is optimistic and extremely perceptive, recognizing trends that have become so pronounced now that they are almost pathological, as the preoccupation with material things, for instance.

He was struck even then with the American love for money.  He did not see then the gradual centralization of power, but we didn’t have a democracy, either.  Slaves, Native Americans, and women were irrelevant in the political paradigms.

De Tocqueville’s observations provide perspective on America’s early ideals.  They show to some extent where we went awry.

He distinguishes, for one thing, between centralized government and centralized administration.  He says we have the former but an absence of the latter.

No more, I claim.  De Tocqueville wondered about the wisdom of the arrangement.  He said centralized administration saps initiative from local communities.

THEN AND NOW

            Democracy in America points to US priorities in the 1830s, and they are becoming ever more obvious today.  The fixation on material wealth and status stand out.  The idea that we have centralized government, and now centralized administration, too, seem particularly relevant with the president-elect’s cabinet and administrative picks.

I was one of those who stood aside during this 2016 election year, a part of the process by default but as removed as I could get.  My general belief is it doesn’t matter who the president is.  The machinery of government grinds on as if leaderless and, according to me, has been cruising downhill throughout my life.  That the pace has picked up recently, since the tech explosion, perhaps, or since 9/11, has less to do with the presidency than with general mass awareness and passive collusion with hitherto unseen forces.

Blame social media, “fake news,” the widespread sense of betrayal, and the general—albeit semi-conscious—preoccupation with money and status at all levels of society.  Blame the dissolving faith that government has answers, the disillusionment with delegated power and authority.  Passive aggression and passive resistance make for a general sense of social malaise that leads to personal and social stagnation.  What is left?

I’d like to believe we are undergoing a revolution in consciousness, a period of confusion in which we re-assess what we have believed and whether it remains valid. We are all—all of humanity and other life and non-life–in this stew pot together, for better or worse.  The fortune tellers on the payroll are busy trying to predict what disasters a Trump administration can wreak.  Even his supporters seem disgruntled over his choices of advisors and cabinet heads.

I say we got what we deserved, for better or worse, and, in retrospect it seems we have been heading along this path at least since de Tocqueville visited in 1831.

 

 

 

 

 

 

The Cosmic Improv Group initiates Dr. Kathorkian’s Robber Baron Knitting School*

Humor/satire:  Cosmic Improv Group Series

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by Dr. Kathorkian
an alter ego of katharineotto.planetearth.ind
and katharineotto.wordpress.com

Wednesday, December 26, 2007 – In the Cosmic Commune everyone is just plain folks, so it isn’t unusual for John D. Rockefeller or JP Morgan, Sr. to visit, even though they remain uncomfortable in a place where everyone ignores their pretensions.  People laugh at JP’s temper tantrums, and servants poof out of his employ when he throws food at them.

JP Morgan appreciates my willingness to be seen in public with him, because I am so civilized.  He wants to learn how to knit.

Really?  Go buy your own knitting needles, yarn, book, and other paraphernalia, and I’ll begin to believe you’re serious.

He says he’ll do better than that.  He’ll find a group of investors to buy a knitting needle manufacturer, a couple of sheep farms, and a publishing house.  He’ll get them to buy up all the cotton farms, too, so we can make more cotton yarn.

I say thanks, anyway.  Just learn how to knit, first, and maybe you’ll know something about the businesses you’re investing other people’s money in.

I can hear JD Rockefeller chuckling on the other side of the honeysuckle hedge.  I even get a partial smile from JP, and the hint of a twinkle in his eye.  Andy Carnegie says nothing, but I can feel his intense energy and interest.  He’s seeing a market for steel knitting needles.  JD, of course, sees a future in plastic knitting needles and acrylic, but I tell him up front that plastic and acrylic are low-yield investments for knitters.  I know he wants to sell cheap petroleum products, because no one can afford to drive, but give this knitter natural fibers and metal needles, and you can sell your transparent petroleum scam elsewhere.  Individuals need gas for power tools and other tools of survival, tools they can afford without going into debt.

JP becomes upset when I say this, but I tell him to stuff it.  Debt is what got us into this mess, and it’s your fault.  People can’t be free if they are in debt.  If you’re not free, you can’t have a democracy.

He threatens to leave.  I tell him that’s fine, but I’m not invalidating his job or career.  Banks still have a role to play in the Cosmic Commune, but banks need to reestablish their own credit and credibility.  By helping people learn how to manage money and get out of debt, both banks and taxpayers prosper.  You don’t get value for money with promises, whether from bank notes, insurance, or government, so don’t take it personally.  I’m a “pay as I go” kind of person, as I am immortal and a very lazy, selfish soul who enjoys freedom.

A financial debt is a karmic debt that must be paid sooner or later.  If I pay up front, I keep the books balanced at all times, unless I am tricked or otherwise maneuvered into untenable positions.

Cut losses, say I.  Whoever obtains money from me under false pretenses has his own karmic debt to pay.  Cutting losses buys my freedom from dishonesty.

So, I tell JP he looks good if he comes clean, to a certain extent, and recognizes that a debt-backed currency steals from the present to invest in an unpredictable future.  JP appears to take this in.  He doesn’t respond.  I go back to work.

After awhile, he looks up and asks me to show him how to knit.  I demonstrate the moss stitch, saying the knit and purl stitches are the foundation for all knitting patterns.  The technique is easy, but the strings of possibilities extend in all directions.

He asks if he can try, and I hand him my work. He makes clumsy efforts, drops a needle, then begins to get upset because stitches fall off, and yarn is getting tangled around his feet.

I tell him to sit still.  “Do not move,” I say.  “I’ll rescue my knitting and you in the process.”

So I grab the work before he loses too many stitches, untangle the yarn, and stow it all away for repair later.

I hear Andy chuckling, and even JD has risen and come around the honeysuckle hedge, grinning, to watch JP knit.  JP looks sheepish, but he is also puffing up his chest, as if he has accomplished something significant.

“It takes as much skill to be a good knitter as banker,” I tell him.  “A good banker can’t afford to lose credibility with his customers, because credit is his product line, just as knitters make socks.”

JP lights a cigar, and I poof up some wind to blow smoke away from the table and us.  I make it a light breeze, just enough to rustle leaves on the plants a little, to help them sing.

All three Robber Barons look astounded.  I don’t make a big deal out of asking the wind for help, but they glance at each other and me and begin to wonder what besides knitting I can teach them.

They also begin plotting how they can control the wind for profit.  I see them operating in boardrooms and Congress to build huge wind turbines, manipulating public resources with their misguided motives.

“You don’t control the wind,” I tell them.  “The wind is free.”  I say it will go where it will.  It only does your bidding if you approach it respectfully and in a cooperative spirit.  Ask the leaves on the trees to intercede, better to energize them into a flutter and explore their greater environments.

JP’s eyes begin to glaze over, and I realize I’ve said enough.

Fast forward to next day, and all three Robber Barons have bought expensive knitting needles, yarn – gold yarn by JP – and pattern books galore.  Andy wants to knit an Irish sweater, with complicated cables, and Scottish wool.  JP wants to make a vest out of gold thread.  JD wants a bright red crew neck sweater, simple but big, but he’s having trouble deciding between that and a pair of argyle socks.

While out shopping, they also bought a few knitting stores, textile manufacturers, farms, and other knitting tools.  Andy bought another shipping line.

The knitters are hot to trot, vying with each other to dominate knitting.  I try not to show my amusement, because so far, not one of them knows how to cast on the first stitch.

Meanwhile, they have brought so much stuff to the table that there’s no room to spread out, so I poof us a larger table and conjure up a coffee stand for me, to avoid spilling my coffee and damaging their stuff.

I suggest they start by knitting a swatch, and I try to show them how to cast on.  Andy catches on quicker than the others, because he grew up working with his hands and has more manual dexterity.

JD, who has now joined the table, sits next to JP.  Both have large hands and are clumsy, but JD manages to cast on 20 stitches first, then starts jostling JP’s elbow. This makes JP drop a needle and lose more stitches.  He explodes in rage and tosses everything on the ground.

By now we’ve drawn a crowd, and everyone starts to twitter and point fingers.  JP blushes and poofs himself away, leaving his assets behind.

*Inspired by The Robber Barons, Matthew Josephson, 1934, 1962

 

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Dr. Jekyll visits Bethesda

The Creature from Jekyll Island: Notes and Thoughts

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The Creature from Jekyll Island:  A Second Look at the Federal Reserve
by G. Edward Griffin, first published 1994.
Notes and Thoughts on the first three chapters.

           The Creature from Jekyll Island is astounding in its implications.  It reveals that the money lending game is essentially between banks, with debt fueling the pump.  Powered by individual as well as government debt taken on in  taxpayers’ names, it makes me wonder whether unborn taxpayers can be obligated by federal debt.  Also, if the Fed were abolished, might all this artificial debt cancel itself out?

The book starts with a cameo of a secret meeting on Jekyll Island, Georgia, in 1910 that led to the Federal Reserve Act in 1913.  Nelson Aldrich, Senator from Rhode Island and father-in-law to John D. Rockefeller, Jr., hosted the private rail trip for six other movers and shakers in the banking and finance industries.  These men were to arrive at the train station separately, go by first names only, and say they were going duck hunting.  The regular staff at JP Morgan’s Jekyll Island Club was given a vacation.  Carefully selected others served the men while they were there.

The men were: 1.  Aldrich, who was also Republican “whip” in the Senate, chair of the National Monetary Commission, and a business associate of J. P. Morgan; 2.  Abraham Piatt Andrew, Assistant Secretary of the US Treasury;  3.  Frank A. Vanderlip, president of the National City Bank of New York, the most powerful bank at the time, and representing William Rockefeller and the international investment banking house of Kuhn, Loeb, and Company;  4.  Henry P. Davison, senior partner at JP Morgan Company;  5.  Charles D. Norton, president of JP Morgan’s First National Bank of New York;  6.  Benjamin Strong, head of JP Morgan’s Trust Company;  7.  Paul M. Warburg, partner in Kuhn Loeb and Company, a member of the Rothschild banking dynasty in England and France, and brother of Max Warburg, head of the Warburg banking consortium in Germany and the Netherlands.

When Griffin says the Fed creates money out of nothing, he is not entirely accurate.  Rather, the Fed creates debt out of nothing to lend to Congress and calls it money, because it is backed by congressional promises of future taxpayer earnings (through the income tax, established earlier the same year, 1913).  The incredible credit is then passed off as currency, and no one is the wiser.

Until now.  The lie continues that US taxpayers are obligated by congressional guarantees, but we are not morally obligated to pay that debt.  Unfortunately, since their strategy has included putting everyone on the payroll—in one form or another—everyone is implicated in the scam and terrified of its inevitable unraveling.

Obviously the easiest solution is for individuals to get out of debt.  When debts are paid off, the money vanishes into the red hole it came from, the money supply shrinks, and deflation gives everyone except banks, debtors, and governments—the biggest debtors of all–more buying power.

Griffin gives a good summary at the end of each chapter, thereby simplifying this 600 page tome.

Chapter 1:  “The Journey to Jekyll Island” tells how the skeleton of the Federal Reserve System was worked out at Jekyll Island in 1910 by RI Senator Nelson Aldrich and six other men representing the most powerful banking interests in the Western world.  These included US banks under JP Morgan and John D. Rockefeller; English and French banks under Kuhn, Loeb and Company, representing Rothschild interests in Europe; and Germany and Netherlands banks by the powerful Warburg family.

Author Griffin refers to it as a banking cartel, in which powerful competitors align to prevent other competition and use the government’s police power to enforce their monopoly.  Griffin hints without actually saying that descendants of these five banking dynasties still control the Fed.  These are Morgan, Rockefeller, Rothschild, Warburg, and Kuhn-Loeb.

He says the Jekyll Island meeting had five objectives:  1. Stop the growing competition from the nation’s other banks;  2.  Obtain a franchise to create money through debt;  3.  Get control of all the banks’ reserves so the more reckless ones would not be exposed to currency drains and bank runs;  4.  Get taxpayers to cover the cartel’s losses;  5.  Convince Congress the purpose was to protect the public.

Chapter 2:  “The Name of the Game is Bailout.”  The crucial point is that all the money created through the banking system since the Federal Reserve Act is backed only by debt, primarily by Congress’ obligating taxpayers’ future earnings.  A defaulted loan, thereby, costs the bank little in tangible value.  Therefore, the goal is to continue receiving interest on the loan by lending more (future) money to cover it.  This is especially true with large loans.  With extremely large loans the cartel gets the federal government to guarantee the loan, should the borrower default.  If this tactic fails and the bank is forced into insolvency, the FDIC is used to pay off depositors.  Small banks pay disproportionately for this “insurance” and are least likely to be bailed out, should disaster hit.

Because money is created out of nothing for the purpose of lending, huge sums are dispersed through the economy, devaluing the existing currency and causing inflation.

Griffin does not say that the income tax, passed earlier in the same year, 1913, was the funding source by which the federal government would pay perpetual interest to the Fed on the national debt.  This method mirrored the 1790-1791 creation of the whiskey tax and the nation’s first central bank, a double whammy on taxpayers, devised by Alexander Hamilton and George Washington.  (This from Alexander Hamilton, by Ron Chernow, 2004)

Chapter 3:  “Protectors of the Public.”  This chapter gives multiple examples of previous federal bailouts, beginning with Penn Central in 1970, Lockheed in 1970, the Commonwealth Bank of Detroit in 1974, New York City in 1975, Chrysler in 1978, the First Pennsylvania Bank of Philadelphia in 1979, and Chicago’s Continental Illinois in 1982.  Continental was the first electronic bank run.  It was the nation’s seventh largest bank at the time, with $42 billion in assets, with multiple loans out to high-risk business ventures and foreign governments.  Here the Federal Reserve becomes the “lender of last resort,” meaning it creates money out of nothing to cover, in this case, $4.5 billion in bad loans, and passing costs on to taxpayers in the form of inflation.

And this book has 26 chapters.  Stay tuned . . .