Friday, February 25, 2011

Agrarian Justice / Tom Paine

[The following is an organized series of excerpts from Tom Paine’s essay “Agrarian Justice”. A better understanding of his argument is gained from reading the essay in its entirety. I thought that this piece would be of special interest to those political Conservatives who have of late been claiming Tom Paine as one of their own.]

By Richard E. Noble

“It is wrong to say that God made rich and poor; he made only male and female; and he gave them the earth for their inheritance.”

Argument for improving the condition of the unpropertied

“To preserve the benefits of what is called civilized life, and to remedy, at the same time, the evil it has produced, ought to be considered as one of the first objects of reformed legislation ... The most affluent and the most miserable of the human race are to be found in the countries that are called civilized.

“To understand what the state of society ought to be, it is necessary to have some idea of the natural and primitive state of man; such as it is this day among the Indians of North America. There is not, in that state, any of those spectacles of human misery which property and want present to our eyes in all the towns and streets of Europe. Poverty, therefore, is a thing created by that which is called civilized life ... Civilization, therefore, or that which is so called, has operated two ways, to make one part of society more affluent and the other part more wretched than would have been the lot of either in a natural state.

“The thing, therefore, now to be done is to remedy the evils and preserve the benefits that have arisen to society by passing from the natural to that which is called the civilized state.

“Taking the matter then upon this ground, the first principle of civilization ought to have been, and ought still to be, that the condition of every person born into the world, after a state of civilization commences, ought not to be worse than if he had been born before that period. But the fact is that the condition of millions in every country ... is far worse than if they had been born before civilization began, or had been born among the Indians of North America of the present day. I will show how this fact has happened.

“It is a position not to be controverted that the earth, in its natural uncultivated state, was and ever would have continued to be the common property of the human race ... And as it is impossible to separate the improvement made by cultivation from the earth itself, upon which that improvement is made, the idea of landed property arose from that inseparable connection; but it is nevertheless true that it is the value of the improvement only, and not the earth itself, that is individual property. Every proprietor, therefore, of cultivated land owes to the community a ground rent...

“... neither Abraham, Isaac, Jacob, or Job, so far as the history of the Bible may be credited in probable things, were owners of the land. Their property consisted, as is always enumerated, in flocks and herds and they traveled with them from place to place.

“Man did not make the earth, and, though he had a natural right to occupy it, he had no right to locate as his property in perpetuity any part of it; neither did the Creator of the earth open a land office, from whence the first title-deeds should issue ... when cultivation began, the idea of landed property began with it ... It is only by tracing things to their origin that we can gain rightful ideas of them …The additional value made by cultivation, after the system was submitted, became the property of those who did it, or who inherited from them, or who purchased it. I advocate the right, and interest myself in the hard case of all those who have been thrown out of their natural inheritance by the introduction of the system of landed property, I equally defend the right of the possessor to the part which is his ... it is a right and not a charity that I am pleading for.

“To create a National fund out of which there shall be paid to every person, who arrived at the age of twenty-one, the sum of Fifteen Pounds sterling, as a compensation in part for the loss of his or her natural inheritance by the introduction of the system of landed property; and also the sum of Ten Pounds per Annum during life to every person now living of the age of fifty years, and to all others as they shall arrive at that age.

“The fault is in the system, and it had stolen imperceptibly upon the world, aided afterwards by the Agrarian law of the sword … It is proposed that the payments, as already stated, be paid to every person, rich or poor such persons as do not choose to receive it can throw it into the common fund.

“Taking it then for granted that no person ought to be in a worse condition when born under what is called a state of civilization, than he would have been had he been born in a state of nature, and that civilization ought to have made, and ought still to make, provision for that purpose, it can only be done by subtracting from property a portion equal in value to the natural inheritance it has absorbed ... it will be the least troublesome and the most effectual, and also because the subtraction will be made at a time that best admits it, which is at the moment that property is passing by the death of one person to the possession of another. In this case the bequeather gives nothing; the receiver pays nothing. The only matter to him is that the monopoly of natural inheritance, to which there never was a right, begins to cease in his person. A generous man would wish it not to continue, and a just man will rejoice to see it abolished.

“It will always happen that the property thus revolving by death every year, part will descend in a direct line to sons and daughters, and the other part collaterally, and the proportion will be found to be about three to one; that is, about thirty millions of the above sum will descend to direct heirs, and the remaining sum ... to more distant relations and part to strangers.

“It is not charity but a right - not bounty but justice, that I am pleading for ... though I care as little about riches as any man, I am a friend to riches, because they are capable of good. I care not how affluent some may be, provided that none be miserable in consequence of it. But it is impossible to enjoy affluence with the felicity it is capable of being enjoyed, whilst so much misery is mingled in the scene.

“There are in every country some magnificent charities established by individuals ... It is only by organizing civilization upon such principles as to act like a system of pulleys, that the whole weight of misery can be removed ... The plan here proposed ... (It) will immediately relieve and take out of view three classes of wretchedness: the blind, the lame, and the aged poor.

“When a young couple begin in the world, the difference is exceedingly great, whether they begin with nothing or with fifteen pounds apiece. With this aid they could buy a cow and implements to cultivate a few acres of land; and instead of becoming burdens upon society, which is always the case where children are produced faster than they can be fed, they would be put in the way of becoming useful and profitable citizens.

“The great mass of the poor in all countries are become an hereditary race, and it is next to impossible for them to get out of that state of themselves. It ought also to be observed that this mass increases in all the countries that are called civilized. More persons fall annually into it than get out of it.

“It is from the overgrown acquisition of property that the fund will support itself ... War ... has already laid on more new taxes to be raised annually upon the people ... than would annually pay all the sums proposed in this plan.

“Land, as before said, is the free gift of the Creator in common to the human race. Personal property is the effect of society, and it is as impossible for an individual to acquire personal property without aid of society as it is for him to make land originally. Separate the individual from society, and give him an island or a continent to possess, and he can not acquire personal property. He can not become rich ... All accumulation, therefore, of personal property, beyond what a man’s own hands can produce, is derived to him by living in society; and he owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came ... if we examine the case minutely, it will be found that the accumulation of personal property is, in many instances, the effects of paying too little for the labor that produced it.
“It is, perhaps, impossible to proportion exactly the price of labor to the profits it produces; and it will also be said, as an apology for injustice, that were a working man to receive an increase of wages daily, he would not save it against old age nor be much the better for it in the interim. Make then society the treasurer to guard it for him in a common fund; for it is no reason that because he might not make a good use of it for himself, that another shall take it.

“When wealth and splendor, instead of fascinating the multitude, excite emotions of disgust; when instead of drawing forth admiration, it is beheld as an insult upon wretchedness; when the ostentatious appearance it makes serves to call the right of it in question, the case of property becomes critical and it is only in a system of justice that the possessor can contemplate security. When the more riches a man acquires, the better it will be for the general mass; it is then that the antipathies will cease and property be placed on the permanent basis of natural interest and protection.”

Friday, February 18, 2011

This is a book review about a book from our Eastpoint area. It is an interesting and entertaining read. Check out my book "The Eastpointer" while you are looking. For more information on "Potluck" you will have to go to Amazon but for info on "The Eastpointer" click on book cover to right on this page.


By Jack Rudloe

Book Review

By Richard E. Noble

My wife and I live in Eastpoint Fl. Eastpoint is known as the oyster capital of Florida. My wife and I caught oysters for our livelihood for over a decade. We were “oyster people” or seafood workers. Our neighborhood is filled with shrimpers and crabbers and seafood workers of all types and kinds. The characters in this book are my neighbors and fellow workers.

Mr. Rudloe does an excellent job in capturing us seafood workers as we really are. And I know why he was able to accomplish this. He lives in Panacea which is just east of Eastpoint where I live and write my books. He works hand in hand with seafood workers. He has worked as a shrimper on shrimp boats. He has spent much of his life in this seafood district, living and working side by side with seafood workers. He knows the people that he has described in this work. I am sure that every character in this book is based on a real life person that Jack has known from the neighborhood.

Mr. Rudloe has established a marine laboratory in Panacea. He is a scientist by occupation and a fiction writer by avocation. He and his wife write books of a technical nature on marine biology. I have read and reviewed a few.

What I enjoy most about Mr. Rudloe’s books is his ability to speak to the common man. He makes science and marine biology fun to read. And in his fiction, likewise, I admire his ability to create down to earth, recognizable regular folks, living and playing in true to life fashion. This book is a perfect example of his “common” touch.

The book is a work of fiction. But there was a time in this area when events such as those described in this work by the author were commonplace. Smuggling drugs in from the Gulf waters by shrimpers and seafood workers, even oystermen, went on. Bales of marijuana were found floating around in Apalachicola Bay, just outside my door.

Everybody around this neighborhood knows about it and can give you many, many justifiable reasons why their cousin Floy, Roy or Coy may have been involved in this illegal practice. There are many adventure stories of this type and nature that can be told by many a small boat captain, now retired, living around here. I could write a few myself.

I thought this book was great fun. For me it was hardly fiction and some of the stories and scenes described by the author, in my humble opinion, could warrant investigation by the proper authorities. I’m just kidding, of course. This is a work of fiction but written in such a manner that it is more than believable.

I know this author and have met him personally. I had always considered him to be a scientist and a very knowledgeable person. I did not expect his fiction to be so entertaining, creative, realistic, and down right enjoyable.

This is a good one to read, lots of fun and entertainment and actually a little real history to boot. Things like this did happen around here. They sure ‘nuff did.

Thursday, February 17, 2011

Tevye the Dairyman and the Railroad Stories

Tevye The Dairyman
The Railroad Stories

By Sholem Aleichem

Book Review

By Richard E. Noble

In the Jewish community Sholem (Rabinovich) Aleichem is considered a classic. His character, Tevye the Dairyman, is the very same character we encounter in that wonderful musical “Fiddler on the Roof.” It is this group of stories by Sholem Aleichem on which the musical play is based.

I have enjoyed the music and the play, Fiddler on the Roof, for years. It just recently occurred to me that this great tale immortalized in the play must have had an author. I then discovered Sholem Aleichem.

Sholem Aleichem is a pseudonym used by the author to protect himself and his job as “crown rabbi,” a state appointed clerical position for a Jewish community in the Russian Ukraine. In Yiddish it translates to “Hello There.”

I must say that the story of Tevye the Dairyman and his wife and daughters may be the most impressive bit of fiction story writing that I have ever read. I have been trying to think of some great American writers to compare this man to, but no one comes to mind. This author stands out as a one of a kind.

The manner in which the author presents hope and despair simultaneously is only equaled by his ability to provoke laugher and tears also simultaneously.

I suppose some might be turned off by the “ethnic” nature of the stories but the stories were, in fact, written originally in Yiddish and were directed to a Jewish audience. Only via the efforts of the translator, Hillel Halkin, are we, the general audience, provided the privilege of enjoying this joyous celebration of the tragedy of life – in specific, the quite unique life of the historical Jewish community.

The “Jewish Experience,” as it is often called, is an unfortunate experience that is mimicked over and over for every generation of Jew and millions of non-Jew around the world. It is, of course, the all too familiar story of bigotry, prejudice, persecution and perseverance.

How the author incorporates, God, religion, politics, wealth, poverty and the day to day trials and tribulations of the everyday existence of a poor, struggling family man is an accomplishment certainly deserving of classical praise. All this and it is very, very funny too. Writers around the world dream of having this capacity. This kind of writing is what writing is all about. Enough said.

This is two books in one. In “The Railroad Stories” we go from the sublime to the prejudice. We leave the wonderful universal character of Tevye and we go commuting on the railroad. These stories display openly every imaginable type of prejudice existing at the time. Every main character is a “Jew.” There are tall Jews, short Jew, pompous ass Jews, well-off Jews … Jew after Jew after Jew. But then, of course, this is a book written by a Jew in Yiddish for consumption by other Jews. But I doubt that in today’s world this attitude would be considered acceptable even within the Jewish community.

We see the stereotypical conniving, manipulative male Jewish character, and their overbearing and demanding wives – often referred to as “cows,” their obnoxious children, useless relatives and so on. We are continually faced with the dumb goy, the brick-headed Russian, and the obnoxious, hypocritical Christians.

But if the modern, reader can get past all of this and understand the history of it all, it becomes a cleaver study in the evolution of divergent cultures.

The narrator introduces the reader to each new train car passenger and then the passenger narrates his tale. Difficult for an editor to punctuate but easy to read.
Being my age, I associate the style and attitude of each narrator with older stand-up Jewish comedians like Alan King and then Molly Goldberg. But Alan and Molly are ethnic but universal. They are heavy on style or even sarcasm but avoid the roughness of Sholem Aleichem in these railroad tales.

Many of the stories are truly hilarious – but there is always that underriding crudeness and bigotry. I don’t know what the younger audience would think of these type stories today. I’m left with very mixed emotions.

Tevye the Dairyman I give five stars. I would give it more if there were more available to award. The Railroad Stories get only three stars. I liked them but … but they are difficult. Clearly the other is attempting to bond with the Jew of his era and local. The bonding is obvious and the author makes his case clear in the last story. This is a book directed at “third class” Jews.

Wednesday, February 02, 2011

Banking and Money

By Richard E. Noble

Despite comments to the contrary by John Kenneth Galbraith in his book,” Money: Whence it Came and Where it Went,” I have found Money And Banking very perplexing. Mr. Gaibraith said that money was very simple and that anyone could understand it. I don’t think so. Not only that, I have come to the conclusion that the whole Banking thing was a scam, almost, from the beginning. Let me explain my confusion.

In the beginning, there came about the first Bank. This first bank was basically a vault. People who had accumulated large amounts of gold, and silver got tired of trying to hide it under the floor boards of their cabins, or in a secret place behind the fireplace. So, when they heard that some guy had opened up a Bank where they could put their gold and silver and have it guarded and protected, they were very pleased.

These wealthy people with surplus gold and silver took their money down to this Bank and “deposited” it. The Bank owner gave these people a receipt. This receipt was a certificate of deposit. It affirmed that “So and So” had “X” amount of gold or silver stored in this Bank. Up until this point everything seems to be on the up and up.

The people who had the receipts began to trade these receipts as if they were actually gold or silver. This became accepted as legal and legitimate by most people. To have this certificate of deposit in your possession was as good as having the actual gold or silver. Up to this point I think everything is still legitimate. This next evolution is where things begin to go haywire.

The man who owns the Bank has a bright idea. He thinks that it is a shame to have all this gold and silver sitting in his vault when there are so many good, trustworthy people out there in the world who could put it to good use – and would be willing to pay for that opportunity. He talks with his certificate of deposit holders and suggests to them that if they would be willing to loan out their accumulated assets, instead of paying a service charge for the privilege of having their gold and silver protected in his vault, they could actually receive a dividend.
This is, in my opinion, where everything goes coo-coo. Without getting into the obvious problems involved in the recording of assets and debits and who has what, and just sticking to the basic principles involved, I see a big problem here.

The problem stated simply is this: Mr. Jones has deposited, $1,000 in gold. He has a certificate to prove it. Mr. Smith has borrowed Mr. Jones’ $1,000 and he has a loan contract to prove it. But the Bank now has nothing in its vault but a promise. Now this all would have been okay if Mr. Jones understood that until his loan was paid back by Mr. Smith, he didn’t have access to his $1,000 anymore. But as we all know, this did not turn out to be the eventual case.

So, as time rolled on and people deposited money and others borrowed that money, the Bank recorded assets into the millions, and all the while it could really not have a cent or an once of gold in its vault. The Bank could have nothing but a ledger full of promises and no gold at all. When you think about all of this it begins to sound like that old Abbot and Costello routine – quick here’s two tens, gimme a five.
So, was all of this legal?

Well, legal or not legal, most people didn’t really understand what was going on. And because of this lack of understanding, we had Jimmy Stewart standing on the top of the counter at his local bank trying to explain to the bank customers that there was nothing wrong in the fact that the bank had no money to give to its depositors.

Jimmy explained that the depositors money had been reinvested in their own communities. This knowledge satiated the riotous crowd in the movie. That fact really didn't solve the problem but it made the depositors feel better. Today even this is no longer true. Depositors invest in American banks. American banks invest in the stock market which invests in the global economy or directly overseas.

American savings are thus being used to support overseas competitors. Americans are paying for their country's financial undermining, it appears to me.

In the movie everyone understood what Jimmy was saying, but in real America nobody got it. They called this phenomena “The Bank Run.”

The Bankers tried everything that their cleaver little imaginations could come up with, but nothing seemed to work – the people still didn’t get it – and one might ask: What was there to get?

Banks got together and formed coalitions. They each kept a percentage of their deposits in reserve and if one of their coalition experienced a run – they ran to its rescue with bags of money in temporary loans. This worked for awhile for small runs, but when large numbers of people began to panic about the whereabouts of their life’s savings, whole coalitions were “bank-rupted.”

So, at this point, we have a good many problems with Banks. This problem could have been solved by not allowing banks to loan out other people’s money; or by turning a bank into some sort of investment fund – like the stock market – where the risks were explained to the depositors and they were given the choice to participate or not participate. I would have to say that what the banks were doing if not illegal, it was certainly morally suspect. They were promoting the unsubstantiated notion that they had people’s money when, in truth, they did not. This is similar to the well known Ponzi scam today. There was another guy by the name of Say – but he was not as obvious as Ponzi.

Ponzi’s idea was to get people to invest in him today on the promise of a large return on their investment tomorrow. The fact is that he had no investment program whatsoever and he simply manipulated the large sums of money coming in with staggered payments going out. As long as more money was coming in than was going out, Ponzi was rich and his investors were happy. The whole thing became a matter of bookkeeping.

Now you might say that the bank is not a Ponzi scam because it has legitimate investments. This is true, but if those legitimate investments prove to be unreliable then you have the same situation as with Ponzi, nevertheless. Then we have borderline elaborations on Ponzi – gold mines out west, swamp land in Florida, the Panama Canal fiasco, and last year’s failed corn crop.

Banks have gone out of business, over the years, because they were outright Ponzi scams with no investments at all; because they made false claims about their investments; because they made legitimate investments that failed. But the problem that bothered bankers was not the morality of their initial idea but what to do about banks that made good investments but were driven out of business by a sudden lack of confidence on the part of their depositors – the bank run. How they could have their cake and eat it too. Clearly a bank could not loan out its money to entrepreneurs and still have it on hand to return to its depositors on demand.

Now, it is at this point that the system has become an impossibility. It clearly and simply does not work, and there is no solution. You can not loan out the money and still have that money readily on demand for the depositors. This is impossible. One thing can not be in two places at the same time.

But, this slight-of-hand idea was so advantageous to society because it provided money for investment, expansion and growth, that those involved in profiting from this idea wanted to devise an acceptable method for promoting what was clearly an impossibility. And thus has evolved today what we call the central banking system – and here in the U.S. – “The Federal Reserve.”

So far this system has served to perpetuate and impossible idea. For example, if when Mr. Ponzi had run into his short fall – the point at which his payments going out were greater than his payments coming in – J. P. Morgan or the Rothchilds saw in his scam enormous long term potential and therefore decided to loan him money to carry him over his temporary cash flow problem, the Ponzi scam may have continued indefinitely. But, it would have finally collapsed when Ponzi had finally reached the saturation point. That point being when there was just not enough money available in the world to make the interest payments on all of his promises. In effect Ponzi’s system was a “Designed to Fail” system.

The Central Banking System is similar but much more sophisticated and self-perpetuating. The Central Banking System does not create money from nothing as many people suggest. If it did then this system would self-destruct when the supply of money exceeded the world’s ability to absorb the funding. Would this ever take place considering expanding populations and expanding economic growth throughout the world, and product diversification and artificial demand creation for “wants” in addition to needs? Maybe not.

Inflation is simply the release valve on this money generating steam boiler. If the supply of money comes onto the world faster than the population and the various demand growth factors – you will have inflation. If inflation is allowed to grow too fast or without proper regulation then the bubble of public confidence could burst and economic collapse would be the result.

But this is not the situation which exists with the Central Banking System concept. This present system is based on debt creation. Governments borrow via a system of notes and bonds which are handled for a fee by their Central Banking systems. The central banks collect the vigorish. They handle the sales for the government for a fee – vigorish. [The vigorish is not the problem when we talk of the National Debt. The problem with the National Debt is the interest being collected by the Bond purchaser. The Federal Reserve Bank is just the salesman for the government bonds. It charges a small “commission” which is negligible.]

As I see it this system has more potential points of destruction than does the politically unappealing Creating-Money-from-Nothing System. This system can also destruct from the same causes stated in the non-debt creating system mentioned above. But in addition to this possibility this debt system can also self-destruct from other factors.

It can also self-destruct when and if the interest payment on the created debt obligations becomes greater than the government’s money supply sources. This would be much the same as if your basic payment on your credit card exceeded your income.
Will that ever happen? I don’t know. The inflation safety valve would compensate or, as above, explode due to lack of public confidence. And, of course, there is that same notion of infinite world economic expansion as mentioned above. And then, of course, the government can simply keep creating more and more debt even to pay impossible debt.

How long could such a process go on?

I don’t know. But paying debt with added debt can only go on for so long, before something negative would happen.

The vigorish could also become a problem. In other words the Central Banking fee could become so bloated as to create a debt problem in itself. In other words, the cost of the loan transaction could eventually outweigh any gain from creating the debt in the first place. Right now that fee is 7% as I understand it. If due to inflation that cost were to escalate to 20% or 30%. But by that time the monetary system would probably have already collapsed due to inflation. So maybe that is a specious argument.

An added problem with the Central Banking System is that it has been partnered by the various national governments of the countries who have such systems – which may be every country in the world as far as I know. So instead of the banking system backing itself up via a conglomerate of banking institutions and becoming the bank of last resort for all banks – as is the claim – the government becomes the bank of last resort. The problem here is that in such a system if the bankers decide that they are tired of making money “the old fashioned” way and they would rather do it the easy way. They can simply steal their depositor’s funds, and loan them out by fraudulent and deceptive transactions and then petition the treasury to fund them out of their financial difficulties.

To put this simply, if an unscrupulous banker or group of bankers can figure out a method of divesting their banks of its capital yet still create what appears to be a legitimate paper trail of investments, they can double their personal wealth rather cleverly, simply by ripping-off their Federal or National Government.

The same thing can be done on an international basis via the IMF and the World Banking System. And I am of the opinion that this type of thing has already been done several times over – not only in the historical past, but in the recent past. And it can work both ways in a world system. Not only is it possible for the world banking system to bankrupt individual nations if it so chooses; it is equally possible that cleaver national bankers can swindle the world system. [I think that this technique was used in the U.S. S&L failure and the Commercial bank failure; and in the recent stock market crash; and most recently in the real estate boom and bubble. It is my personal opinion that this is the current method for bankrupting the U.S. Treasury. It began seriously under Reagan and has been escalating under every succeeding Republican administration.

And what is the answer to all of this?

I don’t know.

Tuesday, February 01, 2011

The National Debt

With a “Noble” Solution

Richard E. Noble

A few presidents ago the National Debt was the most pressing thing that our political leaders and political hopefuls had on their minds. Ronald Reagan in his campaign for the presidency in 1980 told us all about a stack of dollar bills stretching from the planet earth to the moon. This stack of paper money was to represent the one trillion dollar mark in our advance to national bankruptcy. Our National Debt had not yet reached this benchmark in fiscal irresponsibility and Ronald Reagan was to be our knight in shining economic armor who would stop this catastrophe from happening.

Today this stack of dollar bills is probably bumping up against the planet Pluto but we hardly hear a murmur of the once prophesied impending catastrophe. I wonder why? Was the National Debt not really a legitimate problem? Was the Great Communicator merely communicating greatly or grandiosely? What the heck is the National Debt anyway?

The National Debt is the total amount that the government currently owes from all of its past borrowing. I guess that we could safely say that it is the mortgage that our governments, past and present, have borrowed on the United States of America. A budget deficit, on the other hand, is the amount by which expenditures exceed receipts in a single year. Today there is a simple way for the lay person to distinguish between these two things - the deficit is tabulated in Billions and the National Debt is now tabulated in Trillions.

In the two hundred years B.R. (before Ronald Reagan) the entire accumulated debt of all of our previous presidents amounted to 909.1 Billion dollars. So B.R., our country’s National Debt had not yet reached one trillion dollars - that stack of dollar bills had not yet reached the moon. Now, remember, that figure included all the debt accumulated from George Washington through Jimmy Carter. That 909.1 Billion dollars included all the monies borrowed for the American Revolution, the Civil War, World War I, World War II, Korea and Vietnam.

By the time that Ronald Reagan left office in 1988 the National Debt was 2,601.3 Billion or 2.6 Trillion. In just eight years Ronald Reagan had more than doubled what all the previous presidents from Washington through Carter had accumulated in the prior 200 years.

Okay, let’s give Ronnie a break. Let’s kick it up a notch. Let’s go to George H. W. Bush - Number Forty-One, as he is so lovingly referred to today.

Number Forty-One is the Yale graduate who accused Ronald Reagan of advocating Voodoo economics. By the time Number Forty-One left office in 1992 the National Debt was 4,002.1 Billion or approx. 4.0 Trillion dollars. If Ronald Reagan was practicing Voodoo, one must hesitate to ask what Number Forty One’s economic principles were based on. And, you know, these presidents today have a Council of Economic Advisers. The only problem with the Council of Economic Advisers is that when a Council member disagrees with the president or speaks out publicly against a president’s economic policy, he suddenly finds himself in search of a new Council to counsel.

But this is all beginning to sound like Republican bashing. Let’s go to B. J. Clinton. In my neighborhood B. J. stood for something other than Billy Jefferson, but we won’t get into that. So B. J. came into office in 1992 and by the time that he left, the National Debt was 5,606.1 Billion or 5.6 Trillion dollars. So Reagan gave us 2.6 Trillion, Number Forty-One gave us 4.0 Trillion, and B. J. gave us 5.6 Trillion.

Everyone says that what B. J. accomplished was good. Well, when it is compared to what Ronnie and Number Forty-One did, I suppose? Sounds to me like saying; Well, my Grandfather was hanged, my Daddy got the electric chair and now I’m serving life in prison. Guess that I am doing better than they did, huh? - I suppose, but most of us wouldn’t consider life in prison all that much of an accomplishment.

Today we have Bush Number Forty-Three.

Number Forty-Three has the debt up to somewhere between 7 and 8 Trillion. It is estimated that by the time that Number Forty-Three leaves office the National Debt will be somewhere around 10 Trillion dollars - give or take a Trillion. Like some famous politician once said; “A billion here and a billion there and pretty soon you’re talking some real money.” Billions no longer matter, it’s trillions now.
So there you go. And what does this all mean? I was listening to one economist on the TV the other day and he said;

“Economically, we are like the man who just jumped off the top of a one hundred storey building. The falling man passes the eightieth storey and a guy sticks his head out of a window and screams to the falling man; ‘How’s everything going?’
‘Everything is O.K. so far,’ the falling man replies.”

But, let’s not be pessimistic about this - you know - is the glass half-empty or is it half-full. Let us be “half-full” about all of this. It does no good to be half-empty because we are a lot worse off than half-empty. If we were only half-empty that would mean that we would still have something in our glass. At 10 Trillion dollars in debt we don’t even have a glass anymore. But whatever - let’s be positive.
Some politicians claim that the National Debt doesn’t really matter because it is money that we owe to ourselves. So even when the federal government just pays the interest on the National Debt it is infusing dollars into our economy - like giving a tax cut to the rich. But since Reagan, unfortunately, this is no longer true.
Before Reagan our government’s borrowing was financed by Americans. After Reagan our National Debt became so enormous that Americans didn’t have enough money to finance the Government’s borrowing - so we borrowed from foreign countries. Or would it be more economic to say that we sold our debt to foreign countries. In other words, we sold the mortgage, or foreigners bought our mortgage. Now countries like Saudi Arabia, Japan, China, the U.K etc. own a good part of our mortgage. If in the last few decades, it has appeared to you that your government has been acting like a foreign country, this may be a part of the reason.

But certainly, one day, we will pay off this mortgage and the American people will once again own their country?

This does not even seem to be in the realm of possibility. Politicians talk of balancing the budget as they did in the year 1999 for the first time in many decades. By the way, this supposed surplus that we had, momentarily, was only accomplished by pilfering money from the Social Security Trust Fund. Excess monies had been accumulated in the Social Security Trust Fund because of an increase in the Social Security tax in 1983. An increase was mandated to compensate for the baby boomers. From that year on, the Social Security had a surplus but everybody from Reagan to Clinton used the Social Security surpluses for other general fund spending purposes.

Balancing the budget - or having a year in which the government does not produce a deficit by spending more money than it receives - only manages to pay the interest on the National Debt. A balanced budget pays nothing on the principal or the debt itself. In order to pay down the debt itself, the government must create a surplus - spend less money than what it takes in every year. And then use those surplus monies to buy back Debt (treasury bonds).

Is this a possibility? Seems not. I have never heard a politician in my lifetime talk of paying down the principal on the National Debt. The political answer to the National Debt seems to be like our policy towards gays in the military - don’t ask; don’t tell.

So, I was thinking, why don’t we sell all of our mortgage to foreign countries and then claim bankruptcy. The only way these countries could get their money is if they have a bigger army than ours.

Or maybe these foreign countries who own our debt would forgive our debt like the World Bank sometimes does for under-developed countries - or like we did after World War II for a number of countries. But, of course, this is all ridiculous - we’re the richest country in the world, remember? Well, if we are the richest country in the world, why don’t we just pay everybody off?

Because we don’t have the money. So we are the richest country in the world but we don’t have the money to pay our debts - our mortgage anyway. I have many friends who are rich in a similar manner. How can we be rich and, at the same time, be the biggest debtor nation in the world? Are we rich, or aren’t we?

But don’t despair, I have more realistic solutions to this problem than depending on the charity of the rest of the world. I wouldn’t expect or hold my hope out for a European Marshall Plan for the U.S.A. either folks. My solutions are dynamic and they don’t involve raising taxes.

Today we have approximately 200 million working people, or tax paying people in America. These 200 million people pay about 1.2 trillion dollars in taxes each year. If we can increase the working population of the United States about 10 times its present number and we tax them all at the present rate, we would have a national income of 10 or 11 trillion a year. So then, if we could get our government to put one trillion aside each year, we could pay off the National Debt in about 10 or 11 years. I admit, this solution has its problems but, come on - is the glass half-empty or is it half-full? This would take care of any Social Security short fall also, I might add.

My second idea is even better. We don’t need any new taxes or new workers. This idea is a classic.

We simply continue with Number Forty-Three’s borrow and spend policies. As all of us economists know this can do nothing but increase the rate of inflation - but that’s good. If we can get the inflation rate to rise faster than the rate at which Number Forty-Three and his successors can borrow, one day we will have more pieces of paper with pictures of dead presidents on them than we have debt to pay.

This is that same idea that they told you about a few years ago. Remember they said; Buy yourself a big house that you can barely afford now, and pay off your balloon mortgage – twenty years later - with cheap, inflated money from your naturally escalating high paying job.

The Germans tried this print-more-money idea after World War I. It worked real well. They had a few minor problems. Like trying to figure out how many wheelbarrows full of paper money it would take to buy a loaf of bread. But so what, I mean, look at Germany today? They’re doing all right.

So there you go - is the glass half-empty or is it half-full. What me worry? Just call me Alfred E. Newman. To tell you the truth when I look at the past illegal immigration rate and the true rate of inflation over the last few decades, I think that my two suggestions are the government’s plan - or has been anyway. In 1974 I bought a Chevy van for $3,400, today a similar van sells for $34,000. I think that the inflation rate has been somewhat greater than the presently claimed 2.2%.
My advise to the next two generations of Americans is - buy wheelbarrows.
I have one other idea.

When the government spends more than it collects every year - it borrows. It prints up Treasury Notes and Bonds etc. Then it has the Federal Reserve - its personal banker - sell them to Americans and foreigner investors and foreign countries, at a specified interest rate. This is what makes our National Debt. This puts the government in a catch-22 situation. It can’t raise taxes - nobody likes that. It can’t charge tariffs on products coming into the country and put the cost of our government onto foreign countries and foreign manufactures. It could do this, especially when one considers that we now import 80% of what is sold here domestically - but it can’t, because we believe in “free trade”. Besides, most of our imports are from American based companies who went over seas to avoid paying taxes and hire cheaper labor in the fist place. Raising tariff rates would spoil their whole plan. So then how else could the government earn some money to pay its bills?

It could rent out rooms at the White House - but that is how we finance our political campaigns. So what can the government do?

Well, how about just printing up so much money every year and buying back some reasonable portion of our debt, without going through the debt making process of selling Treasury Notes, Bonds and Bills etc. via the Federal Reserve?

The first thing that everybody yells and screams about this idea is that it is inflationary. Yeah? And borrowing and creating more debt via the Federal Reserve and selling our country to China is better and un-inflationary? I suggest that we pass a law allowing only a certain percentage to be printed up in this manner - taking into consideration GNP and Inflation and the predictable population and economic growth.
The second problem with this idea is that it is against the Constitution. Yeah! So who gives a flying flip? This hasn’t stopped the last five or seven administrations from doing anything. Why should it stop us on anything as important as this? Besides, the Constitution on this particular point could very easily be reinterpreted - we wouldn’t even be forced to change anything or seek a Constitutional Amendment.

The next complaint with this idea is that when the American people and the other nations of the world find out about this shenanigans they will lose faith in our government.

I don’t think so - no one understands economics anyway. And if you think that will be the case, don’t tell them. As the debt miraculously goes down gradually every year, just tell everybody that it is because of good business management on the part of that particular administration - cook the books; or just add it to the total of taxes collected, nobody will know the difference; or tell everybody that it is a miracle. Everybody believes in miracles these days. When the press investigates and discovers that what is happening is economically impossible - just lie to them, like we do on everything else. What is the problem here?

As for the American people? What the heck do they care? They’re too busy trying to make a living to start trying to comprehend economics - least of all the Federal Reserve System. And need I point out that at this point in world economics – if the U.S. currency fails – the entire world economy fails. U.S. dollars are now used around the world in place of Gold. The U.S. dollar is today’s gold.

The bottom line is this: Printing money and skipping the Federal Reserve will no doubt create some inflation. But, using that money to buy back Treasury Bonds (Debt.) will be anti-inflationary. On the one hand, we are printing money to put into circulation, but using it to take money out of circulation by reclaiming debt on the other. If it is done properly - with due diligence - the one will cancel out the other and America will one day be debt free and it will cost nobody anything. This will not be a loss or gain - it will simply be a monetary transfer. We will transfer a bunch of one type of paper for another type of paper. If it is done right, nobody will know the difference. And if we want to add an additional check on inflation, when we start buying back our treasury bonds from the Federal Reserve with our “free paper”, temporarily raise the required reserve security demands. In other words, if the banks are required to hold 10% in reserve - raise that requirement to 12% or whatever. Then as time goes on and we see that inflation is under control, lower the requirement.

The last criticism that I can think of is that this idea would be putting trust in our government to do the right thing and keep things under control. In other words, somebody has to be sure that they don’t print up too much money every year. So set up an oversight committee - with the Federal Reserve Board, if that will make you happy. They will not like the basic idea in the first place - but they will just have to deal with it. As it is now, they (the Banks) are the only ones who profit from this National Debt business - so they like it; but if the debt is allowed to continue growing, it will mean possible bankruptcy for them and everybody else. As it is now the only hope for the world economy is continued projected economic growth, coupled with reasonable inflation. Today we have inflation and debt. With this suggestion we will still have the inflation - but we will eliminate the debt. And it is the Debt that will eventually kill us, not the inflation. The world can live with a controlled inflation - it has for centuries. And if this is done correctly we will have no more inflation than what is currently being created. Besides, there aren’t any good choices here; you can trust your government or you can trust the Federal Reserve and the International Banking community.

As I said earlier, facetiously, Germany did this but failed and bankrupted their country after World War I. But the Germans wanted to bankrupt their currency. They didn’t want to pay off their war debts and the smart money wanted to turn the middle class against the occupation government. So they simply printed up paper until it filled wheelbarrows. They did not use due diligence and have proper controls. They didn’t care. What they did was not an accident. It was a planned bankruptcy. You can be sure that the big boys in German currency had all their cash in something other than the Mark. Of course, there is the possibility that our National Debt is also planned. The design of the plan being to keep the general population thinking that they are broke, so that they won’t be suggesting any “free” social programs for the “welfare” state. I mean, you must have noticed that no matter how large the National Debt, we always have enough money for another war.

Post Script: Quantitative Easing:

If I am understanding this concept correctly, the FED is now “creating” debt free money and using it to buy back interest bearing notes from China and elsewhere. So the FED is doing what I suggested in the above article that the Government do. Now, the FED should burn these interest bearing notes that they are purchasing with this FREE money. Eventually the entire National Debt could be done away with in this manner with no cost to the government or the taxpayers and no budget cuts. My guess is that the FED will not do this. It will hold those notes and then resell them at a better time, thus giving any possible profits to the banking system and not the taxpayers. I don't think the FED is allowed to collect interest on its purchase and sales for the government. It collects a fee to cover its expenses.

But buying Treasury Notes with cash or increased non-interest bearing currency and destroying them would reduce the debt burden of the country but the increase in currency will be inflationary (initially to China or whoever). But as long as we are in a deflationary cycle this should be fine. But if inflation raises its ugly head (if China dumps the cash on the market for example) the fractional reserve rate could be raised or the money supply tightened here at home or by others with an economic stake in U.S. Dollars. But inflation is not a problem at this point in time and the current tight bank policy is guarding the inflation more than necessary.

None of this though helps create new jobs here at home. This all saves the banks and increases their credibility. The banks are doing what is necessary for the banking industry but whether or not what is good for banks will be good for America is not clear.