Finny
01-11-2008, 09:59 AM
Labor Leaders should issue a Mayday call
Summary for the busy executive
Labor vitally depends on the state of industrial capital. Wage rates cannot increase except in consequence of an increase in the per capita quota of invested capital. Conversely, a decrease in that quota means capital decumulation that lowers wage rates, ultimately leading to unemployment.
The regime of fiat currency has destabilized the interest-rate structure with the result that bond speculators can siphon off capital from the balance sheet of productive enterprise surreptitiously. There are laws against computer-hacking. There are no laws against hackers entering the balance sheet of industrial enterprise surreptitiously, and making off with illicit gains through risk-free profits in bond speculation.
The resulting insufficiency hurts labor even more than it hurts capital. Owners of capital can protect themselves through exporting their remaining funds to low-wage countries. The trouble is that well-paid industrial jobs are exported along with capital, never to return. American labor is stuck with low-paid service jobs such as flipping hamburgers. The outlook is even bleaker. As interest rates keep falling, even hamburger-flipping may go the way of steel-making. Mass unemployment, directly attributable to fiat currency destabilizing the interest-rate structure, is a real threat.
Invisible arson
If a part of your industrial plant burns down, you have to report the capital loss in the balance sheet and charge the loss against future earnings. Intangible capital loss is caused by falling interest rates, because it reveals that past investment in physical capital has been made at too high a rate as shown by lower rates now available. There is no way getting around the fact that the cost of servicing debt, contracted earlier at a higher rate, is made more onerous by the falling interest-rate structure. The present value of outstanding debt rises, because capitalizing the same stream of payments at a lower rate of interest results in a higher capital value. Yet nobody is reporting a capital loss when falling interest rates decimate the value of industrial capital, and nobody makes provision for replenishing impaired capital by charging the loss to future earnings. Society lives in a fool’s paradise thinking that it can eat into capital, no tightening belts is necessary, and the day of reckoning will never dawn.
Why is there no requirement to report capital losses due to falling interest rates, and why is the firm allowed to get away without putting aside a loss reserve to compensate for losses arising out of the falling of interest rate structure? Why is a loss caused by real fire treated differently from a loss caused by invisible fire? Could it be part of the “invisible arson” to cover up the footprint of the central bank’s counter-productive monetary policy, namely, open-market purchases of bonds?
To be sure, the introduction of out-and-out fiat money in 1971 was invisible arson, without flames and smoke, but all the greater devastation of the capital of productive enterprise. Mainstream economists have „forgotten” to investigate the untoward consequences of the regime of fiat money, especially the damage it has caused through the destabilization of interest rates.
It is incumbent upon labor leaders to demand that damage caused by capital losses be repaired whether they were caused by real fire or by the invisible arson of falling interest rates. In either case capital supporting laborers in production has been impaired and unless the loss is charged to future earnings, wage rates will be squeezed and ultimately the economy will succumb to unemployment. Owners of capital should not be allowed to bolt for greener pastures, leaving labor behind in the lurch.
Silent textbooks
Textbooks on accounting do not mention the need for setting aside loss reserves to repair capital in the wake of falling interest rates. Hundreds of codes that have been written since Luca Pacioli invented double-entry book-keeping are silent on this subject as well. Why? The answer to this question is found in the fact that a move in the rate of interest used to be akin to continental drift: it would take decades before changes were noticeable. There is an additional problem. The decline in interest rates, if it ever occurred, was necessarily limited under the gold standard. Savers would never let interest rates fall indefinitely. They would step in, sell the overpriced government bond and would not buy them back until the trend in interest rates were reversed.
A rapid decline of interest rates that was unthinkable previously has been made possible after the introduction of global fiat currency in 1971. Moreover, beforehand the decline could not continue indefinitely as gold withdrawals would sooner or later put an end to it. But this obstruction had been removed by the global regime of fiat currency. Bondholders and depositors could no longer withdraw gold. The lack of obstruction to stop the fall of interest rates means that businessmen, once lethargic, stay lethargic. They understood what the threat of interest rates falling further meant for them. No matter how low interest rates were, they would not look attractive as further fall would make their investment fail. This is the conundrum of the deflation in Japan, where interest rates still keep falling from very low levels. Mainstream economists say that it is a reflection of the high saving propensities of the Japanese people. This is, of course, nonsense. It is the reflection of the lethargy of the Japanese businessmen. They do not see the light at the end of the tunnel. They do not see the end to the decline of interest rates.
By 1971 accounting was politicized. It was not in the interest of the powers that be to alarm people about dangers threatening them by virtue of fiat currency. Book-keeping rules were relaxed accordingly. The transition from the gold standard to irredeemable currency was hailed as a positive development, all benefits and no setbacks. The greatest con-job in all history was to foist the fiat dollar on an unsuspecting world.
Anti-industrial revolution
Labor leaders should also demand an answer to the broader question: in whose interest does the U.S. government maintain a reactionary monetary regime, that of fiat currency with a one-hundred percent mortality rate, as proved by history? The introduction of this regime could be described, in the words of Ayn Rand’s Atlas Shrugged, as the “anti-industrial revolution,” the effect of which is the de-industrialization of America as shown by the disappearance of the apparel industry, shoe industry, steel industry, VCR and TV set manufacturing industry, with the auto industry not too far behind.
It is no use trying to explain the demise of these industries in America with „progress” in the international division of labor. It is no use trying to compare it to the demise of the horseshoe industry and candle-making in the 19th century. When horseshoe production was abandoned, no American jobs were exported. In the present instance steel jobs are exported and now steel has to be imported. Why? Because the “paper aristocracy” of America finds the export of paper (read: paper money) more profitable than the export of steel.
The government and politicians take credit for “job-creation”. But the truth is that the jobs created are mostly make-believe jobs. What has been hailed as a heroic job-creation program appears, in the present light, a miserable effort at damage-control by the same government that has destroyed well-paid industrial jobs in the first place through the introduction of an unconstitutional and anti-labor monetary regime.
“Thou shalt not push this crown of thorns on the brow of labor”
This regime was originally promoted as a savior of labor. „Thou shalt not push down this crown of thorns on the brow of labor; thou shalt not crucify mankind on this cross of gold!” cried William Jennings Brian, condemning the gold standard, during his failed presidential election campaign in 1896. These words have reverberated until 1933 when F.D. Roosevelt hit the war-path to knock out gold money for once and all. He sabotaged the constitutional monetary regime of the United States by grabbing people’s gold. It is important to understand why Roosevelt’s monetary tinkering was anti-labor, in spite of it being promoted as a move to raise prices and to restore full employment.
By 1932 there were signs that the severe recession was over. During the presidential election campaign rumor-mongers spread the word that Roosevelt, once elected, was planning „to go off gold”, following the 1931 example set by Britain. Roosevelt never issued a denial and, after elected, he made himself unavailable for direct questioning. Apparently he was relishing the prospect of a banking crisis that was developing in the wake of those rumors. He could grab much dictatorial power if the country lay prostrate financially on Inauguration Day, which is exactly what has happened. Was it all planned? Be that as it may, after inauguration he railroaded unconstitutional monetary legislation through a servile Congress, including the incredible measure of confiscating the gold of the people and writing up its value afterwards.
“Legal and moral chaos”
The ‘profit’ from the government’s arbitrary measure of marking up the value of confiscated gold was taken right out of industrial capital. In 1935 Supreme Court justices McReynolds, Van Devanter, Sutherland, and Butler wrote their minority opinion criticizing the majority in the case Nortz v. the United States, re: reneging on the promise of gold certificates issued by the U.S. Treasury.
“These were contracts to return gold left on deposit; otherwise to pay its value in currency… We conclude that, if given effect, the enactments here challenged will bring about confiscation of property rights and repudiation of national obligations. Acquiescence in the decisions just announced is impossible; the circumstances demand a statement of our views. To let oneself slide down the easy slope offered by the course of events and to dull one’s mind against the extent of danger… that is precisely to fail in one’s responsibility.
“Just men regard repudiation and spoilation of citizens by their sovereign with abhorrence; but we are asked to affirm that the Constitution has granted power to accomplish both. No definite delegation of such power exists; and we cannot believe that the far-seeing framers, who labored with hope of establishing justice and securing the blessings of liberty, intended that the expected government should have authority to annihilate its own obligations and destroy the very rights which they were endeavoring to protect. Not only is there no permission for such actions; they are inhibited. And no plentitude of words can conform them to our charter.
“The federal government is one of delegated and limited powers which derive from the Constitution. It can exercise only the powers granted to it. Powers claimed must be denied unless granted… The fundamental problem now presented is whether recent statutes passed by Congress in respect of money and credits were designed to attain a legitimate end. Or whether, under the guise of pursuing a monetary policy, Congress really has inaugurated a plan primarily designed to destroy private obligations, repudiate national debts, and drive into the Treasury all gold within the country, in exchange for inconvertible promises to pay, of much less value.
“Considering all the circumstances, we must conclude they show that the plan disclosed is of the latter description and its enforcement would deprive the parties before us of their rights under the Constitution. Consequently the Court should do what it can to afford adequate relief… The end or objective of the Joint Resolution [of June 5, 1933] was not “legitimate”. The real purpose was not ‘to assure uniform value to the coins and currencies of the United States’, but to destroy certain valuable contractual rights…
“It was not intended to give Congress the power under the law to repudiate the obligations in question… No such power was ever granted by the framers of the Constitution. It was not there then. It was not there yesterday. It is not there today. We are confronted with a condition in which the dollar may be reduced to 50 cents today, to 30 cents tomorrow, to 10 cents the next day, and to 1 cent the day after…
“Under the challenged statutes it is said that the United States has realized profits amounting to $2,800,000,000. But this assumes that gain may be generated by legislative fiat. To such counterfeit profits there would be no limit; with each new debasement of the dollar they would expand. Two billions might be ballooned indefinitely ― to twenty, to thirty, or what you will.
“Loss of reputation for honorable dealing will bring us unending humiliation. The impending legal and moral chaos is appalling.”
Savior or saboteur?
Prophetic words! As a consequence of gold confiscation the recovery of 1932 aborted and the economy was plunged into the deepest depression ever. The value of government bonds shot up and interest rates started plunging. Industrial capital was decimated. The value of productive capital did not disappear without a trace. It was illicitly transferred to financial capital in the form of risk-free profits from bond speculation. It was arson that burnt down the industrial landscape, and made laborers fugitives on their home ground. Roosevelt was the invisible arsonist, as sentenced by the minority of dissenting justices on the Supreme Court of the United States in 1935. Today the saboteur is celebrated as the savior.
Roosevelt’s duplicity is unprecedented. In a Memo he stated: “Speculation, where [participants] could earn money without work, was the pipe dream… which led to growth of special interest that did not coincide with the interest of the nation as a whole. We cannot allow economic life to be controlled by a small group of men… tinctured by the fact that they can make huge profits, not from production but from lending money and marketing securities… we cannot tolerate this opportunistic, selfish attitude…”
Summary for the busy executive
Labor vitally depends on the state of industrial capital. Wage rates cannot increase except in consequence of an increase in the per capita quota of invested capital. Conversely, a decrease in that quota means capital decumulation that lowers wage rates, ultimately leading to unemployment.
The regime of fiat currency has destabilized the interest-rate structure with the result that bond speculators can siphon off capital from the balance sheet of productive enterprise surreptitiously. There are laws against computer-hacking. There are no laws against hackers entering the balance sheet of industrial enterprise surreptitiously, and making off with illicit gains through risk-free profits in bond speculation.
The resulting insufficiency hurts labor even more than it hurts capital. Owners of capital can protect themselves through exporting their remaining funds to low-wage countries. The trouble is that well-paid industrial jobs are exported along with capital, never to return. American labor is stuck with low-paid service jobs such as flipping hamburgers. The outlook is even bleaker. As interest rates keep falling, even hamburger-flipping may go the way of steel-making. Mass unemployment, directly attributable to fiat currency destabilizing the interest-rate structure, is a real threat.
Invisible arson
If a part of your industrial plant burns down, you have to report the capital loss in the balance sheet and charge the loss against future earnings. Intangible capital loss is caused by falling interest rates, because it reveals that past investment in physical capital has been made at too high a rate as shown by lower rates now available. There is no way getting around the fact that the cost of servicing debt, contracted earlier at a higher rate, is made more onerous by the falling interest-rate structure. The present value of outstanding debt rises, because capitalizing the same stream of payments at a lower rate of interest results in a higher capital value. Yet nobody is reporting a capital loss when falling interest rates decimate the value of industrial capital, and nobody makes provision for replenishing impaired capital by charging the loss to future earnings. Society lives in a fool’s paradise thinking that it can eat into capital, no tightening belts is necessary, and the day of reckoning will never dawn.
Why is there no requirement to report capital losses due to falling interest rates, and why is the firm allowed to get away without putting aside a loss reserve to compensate for losses arising out of the falling of interest rate structure? Why is a loss caused by real fire treated differently from a loss caused by invisible fire? Could it be part of the “invisible arson” to cover up the footprint of the central bank’s counter-productive monetary policy, namely, open-market purchases of bonds?
To be sure, the introduction of out-and-out fiat money in 1971 was invisible arson, without flames and smoke, but all the greater devastation of the capital of productive enterprise. Mainstream economists have „forgotten” to investigate the untoward consequences of the regime of fiat money, especially the damage it has caused through the destabilization of interest rates.
It is incumbent upon labor leaders to demand that damage caused by capital losses be repaired whether they were caused by real fire or by the invisible arson of falling interest rates. In either case capital supporting laborers in production has been impaired and unless the loss is charged to future earnings, wage rates will be squeezed and ultimately the economy will succumb to unemployment. Owners of capital should not be allowed to bolt for greener pastures, leaving labor behind in the lurch.
Silent textbooks
Textbooks on accounting do not mention the need for setting aside loss reserves to repair capital in the wake of falling interest rates. Hundreds of codes that have been written since Luca Pacioli invented double-entry book-keeping are silent on this subject as well. Why? The answer to this question is found in the fact that a move in the rate of interest used to be akin to continental drift: it would take decades before changes were noticeable. There is an additional problem. The decline in interest rates, if it ever occurred, was necessarily limited under the gold standard. Savers would never let interest rates fall indefinitely. They would step in, sell the overpriced government bond and would not buy them back until the trend in interest rates were reversed.
A rapid decline of interest rates that was unthinkable previously has been made possible after the introduction of global fiat currency in 1971. Moreover, beforehand the decline could not continue indefinitely as gold withdrawals would sooner or later put an end to it. But this obstruction had been removed by the global regime of fiat currency. Bondholders and depositors could no longer withdraw gold. The lack of obstruction to stop the fall of interest rates means that businessmen, once lethargic, stay lethargic. They understood what the threat of interest rates falling further meant for them. No matter how low interest rates were, they would not look attractive as further fall would make their investment fail. This is the conundrum of the deflation in Japan, where interest rates still keep falling from very low levels. Mainstream economists say that it is a reflection of the high saving propensities of the Japanese people. This is, of course, nonsense. It is the reflection of the lethargy of the Japanese businessmen. They do not see the light at the end of the tunnel. They do not see the end to the decline of interest rates.
By 1971 accounting was politicized. It was not in the interest of the powers that be to alarm people about dangers threatening them by virtue of fiat currency. Book-keeping rules were relaxed accordingly. The transition from the gold standard to irredeemable currency was hailed as a positive development, all benefits and no setbacks. The greatest con-job in all history was to foist the fiat dollar on an unsuspecting world.
Anti-industrial revolution
Labor leaders should also demand an answer to the broader question: in whose interest does the U.S. government maintain a reactionary monetary regime, that of fiat currency with a one-hundred percent mortality rate, as proved by history? The introduction of this regime could be described, in the words of Ayn Rand’s Atlas Shrugged, as the “anti-industrial revolution,” the effect of which is the de-industrialization of America as shown by the disappearance of the apparel industry, shoe industry, steel industry, VCR and TV set manufacturing industry, with the auto industry not too far behind.
It is no use trying to explain the demise of these industries in America with „progress” in the international division of labor. It is no use trying to compare it to the demise of the horseshoe industry and candle-making in the 19th century. When horseshoe production was abandoned, no American jobs were exported. In the present instance steel jobs are exported and now steel has to be imported. Why? Because the “paper aristocracy” of America finds the export of paper (read: paper money) more profitable than the export of steel.
The government and politicians take credit for “job-creation”. But the truth is that the jobs created are mostly make-believe jobs. What has been hailed as a heroic job-creation program appears, in the present light, a miserable effort at damage-control by the same government that has destroyed well-paid industrial jobs in the first place through the introduction of an unconstitutional and anti-labor monetary regime.
“Thou shalt not push this crown of thorns on the brow of labor”
This regime was originally promoted as a savior of labor. „Thou shalt not push down this crown of thorns on the brow of labor; thou shalt not crucify mankind on this cross of gold!” cried William Jennings Brian, condemning the gold standard, during his failed presidential election campaign in 1896. These words have reverberated until 1933 when F.D. Roosevelt hit the war-path to knock out gold money for once and all. He sabotaged the constitutional monetary regime of the United States by grabbing people’s gold. It is important to understand why Roosevelt’s monetary tinkering was anti-labor, in spite of it being promoted as a move to raise prices and to restore full employment.
By 1932 there were signs that the severe recession was over. During the presidential election campaign rumor-mongers spread the word that Roosevelt, once elected, was planning „to go off gold”, following the 1931 example set by Britain. Roosevelt never issued a denial and, after elected, he made himself unavailable for direct questioning. Apparently he was relishing the prospect of a banking crisis that was developing in the wake of those rumors. He could grab much dictatorial power if the country lay prostrate financially on Inauguration Day, which is exactly what has happened. Was it all planned? Be that as it may, after inauguration he railroaded unconstitutional monetary legislation through a servile Congress, including the incredible measure of confiscating the gold of the people and writing up its value afterwards.
“Legal and moral chaos”
The ‘profit’ from the government’s arbitrary measure of marking up the value of confiscated gold was taken right out of industrial capital. In 1935 Supreme Court justices McReynolds, Van Devanter, Sutherland, and Butler wrote their minority opinion criticizing the majority in the case Nortz v. the United States, re: reneging on the promise of gold certificates issued by the U.S. Treasury.
“These were contracts to return gold left on deposit; otherwise to pay its value in currency… We conclude that, if given effect, the enactments here challenged will bring about confiscation of property rights and repudiation of national obligations. Acquiescence in the decisions just announced is impossible; the circumstances demand a statement of our views. To let oneself slide down the easy slope offered by the course of events and to dull one’s mind against the extent of danger… that is precisely to fail in one’s responsibility.
“Just men regard repudiation and spoilation of citizens by their sovereign with abhorrence; but we are asked to affirm that the Constitution has granted power to accomplish both. No definite delegation of such power exists; and we cannot believe that the far-seeing framers, who labored with hope of establishing justice and securing the blessings of liberty, intended that the expected government should have authority to annihilate its own obligations and destroy the very rights which they were endeavoring to protect. Not only is there no permission for such actions; they are inhibited. And no plentitude of words can conform them to our charter.
“The federal government is one of delegated and limited powers which derive from the Constitution. It can exercise only the powers granted to it. Powers claimed must be denied unless granted… The fundamental problem now presented is whether recent statutes passed by Congress in respect of money and credits were designed to attain a legitimate end. Or whether, under the guise of pursuing a monetary policy, Congress really has inaugurated a plan primarily designed to destroy private obligations, repudiate national debts, and drive into the Treasury all gold within the country, in exchange for inconvertible promises to pay, of much less value.
“Considering all the circumstances, we must conclude they show that the plan disclosed is of the latter description and its enforcement would deprive the parties before us of their rights under the Constitution. Consequently the Court should do what it can to afford adequate relief… The end or objective of the Joint Resolution [of June 5, 1933] was not “legitimate”. The real purpose was not ‘to assure uniform value to the coins and currencies of the United States’, but to destroy certain valuable contractual rights…
“It was not intended to give Congress the power under the law to repudiate the obligations in question… No such power was ever granted by the framers of the Constitution. It was not there then. It was not there yesterday. It is not there today. We are confronted with a condition in which the dollar may be reduced to 50 cents today, to 30 cents tomorrow, to 10 cents the next day, and to 1 cent the day after…
“Under the challenged statutes it is said that the United States has realized profits amounting to $2,800,000,000. But this assumes that gain may be generated by legislative fiat. To such counterfeit profits there would be no limit; with each new debasement of the dollar they would expand. Two billions might be ballooned indefinitely ― to twenty, to thirty, or what you will.
“Loss of reputation for honorable dealing will bring us unending humiliation. The impending legal and moral chaos is appalling.”
Savior or saboteur?
Prophetic words! As a consequence of gold confiscation the recovery of 1932 aborted and the economy was plunged into the deepest depression ever. The value of government bonds shot up and interest rates started plunging. Industrial capital was decimated. The value of productive capital did not disappear without a trace. It was illicitly transferred to financial capital in the form of risk-free profits from bond speculation. It was arson that burnt down the industrial landscape, and made laborers fugitives on their home ground. Roosevelt was the invisible arsonist, as sentenced by the minority of dissenting justices on the Supreme Court of the United States in 1935. Today the saboteur is celebrated as the savior.
Roosevelt’s duplicity is unprecedented. In a Memo he stated: “Speculation, where [participants] could earn money without work, was the pipe dream… which led to growth of special interest that did not coincide with the interest of the nation as a whole. We cannot allow economic life to be controlled by a small group of men… tinctured by the fact that they can make huge profits, not from production but from lending money and marketing securities… we cannot tolerate this opportunistic, selfish attitude…”