Summary of 2005 posts

Three Constitutional Amendments

There are three constitutional amendments that we need, to keep our Republic strong and our liberty from being undermined.

1. Economic Republic: Since money is power too, we need to divide the social product equally between the three classes: 1/3 kept by Capital, currently less than 20% of the profits of capital are retained by capital for reinvestment. 1/3 to the people, currently social security and the medicare stuff total to just over 1/5 of the social product. 1/3 for government - they take about 60% of the profits of capital to invest in aggrandizing political power = the use of force. If this balance were reestablished strictly out of the military budget, we would still have a larger military budget than China and Russia combined.
   
2. Real Republic, Simple Math: To set up campaign finance law so that a Representative, who's job is supposed to be to represent the common people can take no more that the equivalent of $100.00 per head. A Senator can take all the corporate money they like, as the Senate is historically the branch held by the aristocracy. All presidential candidates must use their own fortunes but also get an equal amount given to each plausible candidate out of theFederal budget - with no other contributions.
3. The Problem with Interest, How Arbitrary is Interest: Since we've switched to a fiat money back in the 1970s, money is no longer backed by capital, which is what the gold thingy was about, but rather is backed by the credit of the United States Government alone. Well, we have a capitalist economy. Why is it that only some people have a right to profit, as interest payments, on the "credit of the United Stated Government", and avoid all that messy stuff having to do with actually producing wealth? I suggest a third constitutional amendment banning interest on any fiat money and also establishing a monetary policy that holds the money supply in proportion with functional capital. to prevent all this inflation crap. For instance, what is the stock market worth after correcting for inflation? Interest on fiat money undermines real capital directly... what's the big idea?

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Real Republic

In a real democratic republic, there would be a mechanism for ensuring that the proper classes dominated in their respective branches of government. Where there is nothing but free election for any branch, it doesn't matter whether there are three branches or fifty, the power will accumulate to one center and the tyranny of the majority will prevail as it always has. Throw reason out the window. Tyranny has been and always will be the emergence of specious and arbitrary rules and laws that defy reason and the well functioning of society. The majority will always pick idols and icons as their leaders and reasoning individuals will be excluded from political power. We know this from our own experiences.

As John Adams said: "That the majority will oppress the minority is proven on every page of the history of the whole world".
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Economic Republic

The thesis of a republic is to balance the power between all three classes that comprise a nation or commonwealth. To do this requires first that the legislative power be divided between the three classes by dividing it between a House of Representatives, a Senate and an Executive. In this way, the people, capital and the government class all have the opportunity to agree or disagree with the legislation. That which negatively impacts one third or more of the mechanism of society will have a difficult time becoming the law of the land. The constitution is also equipped with checks and balances to prevent all power from accumulating in one branch or another. This, however means political power.

Today, there is a more popular power than political power, and that is financial power. Money goes a long way to influencing political power, it shapes the landscape and usually has the final say in decision making. To balance all power between the three classes of society, the social product, that is the money left over to do stuff with after all costs are taken care of, needs to be divided equally between the three classes as well. The social product in our capitalist economy is the sum of all profits taken before any taxes and minus any taxes taken from wages as well.

Using data from 1996, and rounding it all off, gives us a pretty clear picture of what we have now and what we would have with this Republican economy.

• Corporate profits for that year were about 650 billion dollars.
  
• Corporate taxes paid were about 171 billion dollars.
  
• Corporate social security taxes were 233 billion dollars.
  
• Individuals paid 655 billion in taxes
• Individuals paid a total of 232 billion in social security, Medicare and Medicaid taxes.

Now, to see how much social product there actually was before any taxes, we need to add 650 billion onto the 655 billion, along with 232 billion plus 233 billion. We ignore the corporate tax paid, since it is already included in the profit number. The sum is 1.77 trillion. Now, the total of all taxes is 826 billion dollars, which originates from profits, so, the total take home profit minus only the monarchy's (government's) portion is 944 billion dollars. The total dispensation (social security and hospital) taxes were 465 billion, 232 from labor + 233 from capital, and the total profit then, was 479 billion.


If we subtract from the government taxes a rate of 10% for the basic functioning of government itself, we must subtract out 83 billion, leaving them with 743 billion dollars of the social product. This is clearly not a balance of power. The difference went to military expenses.

Take the sum of 1.77 trillion dollars, subtract the 83 billion of legitimate cost, gives 1.69 trillion dollars of pure social product, one third of that is 562 billion dollars.

To give each class one third of the surplus value produced by our nation, would lower the government's share by 743 billion - 562 billion = 181 billion, which if it came out of the military budget, would still leave us enough military to conquer all the world's largest countries. It would raise social security by an additional 97 billion, which ought to be enough to keep seniors solvent ad infinitum. The remaining money would go back into corporate profits, which would add an additional economic stimulus package to the tune of 83 billion.

Comparing the economic difference between the classes for the years 1996 to 2001 we see the money taken:

Year:		1996 (millions)		1998 (millions)		2000 (millions)		2001 (millions)
GOV (G)		826,041,404		970,087,125		1,242,729,393		1,054,648,264
Capital (C)		469,219,050		481,840,382		556,360,546		468,545,428
Labor (L)		490,109,550		556,349,751		638,834,880		671,579,948
G-(C+L) =		-133,287,196		-68,103,008		47,533,967		-85,477,112
G/C =		1.7		2.01		2.23		2.25
G/L =		1.68		1.74		1.95		1.57

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How Arbitrary is Interest?

Interest is an arbitrary term in the first place, as mentioned in a previous post, it was once considered as compensation for the loss in value that the wear on the gold or silver removed. It has also been considered a compensation for taking the risk of lending out of the gold or silver, back when highway robbery was actually considered lawful in places... Some authors even considered interest in the sense of a bond, where there is an obvious net sharing in profit and ownership, the venture capitalist approach. It certainly is not a form of punishment, since in the United States, everyone has a right to a jury trial where the amount in question exceeds $20.00 (Amendment 7 of the United States Constitution).

Some of the arbitrary, unreasonable and unpredictable excuses for perpetuating the myth of interest:

• Credit risk - the risk of default on the loan due to bankrupcy. This risk should be set to zero if the individual has debt insurance.
• Maturity/Term risk – the risk involved in a long-term investment: This risk is forfeit by the lender when the investment is not made in the real capital market, that of business and industrial growth. When an investor chooses to invest in, say, consumer loans, it must be due to the fact that they have no other option and the loss of future opportunity is their own and must be borne by them. The equivalent is; if I invest in a stock and it goes down, I do not get any compensation for that, so what magical incantation priviledges the monied class over the commoner class in the United States when it comes to loans?
• Liquidity risk – the need of compensating the illiquidity of the debt: This 'risk' is borne by both the lender and the borrower and is not a real risk unless viewed from the perspective of an illegal priviledging of a class of people. Ultimately, such a priviledging does not include profit making capitalists, only old leisure class money and corrupt bankers. And this "compensation" comes directly out of the profits of working capital, whether via labor costs or loss of consumer power.
• Inflation risk; Is the most disengenuous of the excuses, since it is unbridled debt and illegitimate interest charging that are most responsible for inflation. With a fiat money, inflation is 100% manageable by the government that backs the money's value and hence, to charge for this nature of 'risk' is to fail to trust in the government and the money's value itself, which is absurd. That the propagation of this inflation is by these very same lenders who fein to doubt the value of the money is in fact treachery against the government and could readily be viewed as treason. Obviously there is also corruption within the U.S. Treasury Department to allow ot this sale of individual liberty, which needs to be removed and harshly dealt with.
  
• The fluctuation of a currency due to the currency exchange rate is normal economics and it is irrational to ground any excuse to charge interest on this notion of risk. The value of a money is due to the quantity of money in circulation. If there is an imbalance in international trade, where there is a sound monetary system, the value of the money will in fact fluctuate, but such fluctuation in a large economy is minimal, and were it to occur it would represent an increasing in the wealth of the nation, and an increase in the purchasing potential of all money. If the loan were large and the value of money increased, that is that much more wealthier the banker becomes as the loan is repaid. If the value of money decreases due to a revolution in productivity and international sales, that is all the more insignificant the magnitude of the loan becomes. In neither case is there a genuine 'risk'.
  

Other excuses for charging of interest today are:

• Time value of money: having money now is more valuable than having it at some future time because interest is earned; Obviously this is the profit earning motive for lending money. It is also the very reason why there is a prime lending rate. The investment incentive should be to investing in industry, stocks and bonds and not proffering loans. John Maynard Keynes ("The General Theory of Employment Interest and Money",1936) very ably showed that there is no market limit to the rate of interest and that if it can find a way to exceed the rate of profit it will do so to the detriment of industry, and employment. Allowing of this excuse for the charging of interest should occasion the elimination of Ben Bernache's job. As it stands, the prime lending rate should be the only allowed lending rate for any and all loans made in the public or private sectors, since all interest payments ultimately derive from the profits of capital, and protecting the right to profit is the very point of setting a prime lending rate in the first place.
  
• Interest is the value borrowers place on having money now; Wants are unlimited, hence by this excuse, interest should be unlimited. This is the very justification of the need not to have interest. And when money is of the fiat nature, and does not represent any form of real capital, it is in direct competition with real capital for the right of profit... under any name.
• Opportunity cost: The cost in terms of options no longer available once one particular option is chosen; Again, this is the 'want' factor. Wants are unlimited. If another individual has the means to make the purchase, they are the rightful purchasers. If there is no one capable of making the purchase, by the law of supply and demand, the price must come down. If it is a profit making venture, say during the course of business competition, then the sharing in the profit through the tool of a bond is justified, but the term interest, due to it's current state of corruption might be changed to profit, which the 'interest' in a bond represents.

The United States Constitution, Article 1 section 9 states that: No title of nobility shall be granted by the United States.
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The Problem with Interest

David Ricardo wrote his "Principles of Political Economy and Taxation" in 1817. Of the many enlightening things he discusses in the book is taxation. He shows with clear reason that all taxes except taxes on 'landowners' are taxes on the profits of capital.

The reasons being that first, a tax on wages diminishes the wage. If the laborer is to survive and maintain a normal lifestyle, any taxes out of their wage must be made up by the capitalist out of profits. Failing this, the labor quality will diminish and consumer potential will also diminish in proportion that the laborer's liquidity diminishes due to taxes.

A tax on commodities is an indirect tax on wages, since it raises the effective price of the commodity by the amount of the tax. The tax on wages, again must be made good by the capitalist out of profits. Failing this, we get the negative effects of Marx's first contradiction of capital again.

Okay, so I jump around a bit... it's usually to provide a parallel mechanism or an example. Sometimes its a simple tangent. This time, however it is to show a clear parallel. Taxes and interest have identical properties.

Interest on commodities via consumer credit, are a direct cost to productive capital, since the difference the interest payment represents must be compensated by future wage increases. That's increases above the rate of inflation, or the laborer's standard of living will fall and they will look for other work, lose morale or give up.

On the first point. The more money that is lent out, the more money there is in the money supply, since lending money, especially through credit cards, adds money. The more money there is in an economy, the less it is worth, because the volume of exchange stays relatively the same. Even with gold, the rate of circulation of the currency is the limiting factor in the exchange of goods and services. The less money there is in the economy, the more each coin must be worth, since it has to do more work. The opposite is also true, the more money there is in an economy, the less each piece has to do, so the less each piece is worth. This leads immediately to inflation unless the supply of money is tied strictly to the quantity of productive capital. One should consult Milton Friedman's "Capitalism and Freedom" for a more thorough discussion of this.

I suspect that the purpose for charging interest is in FACT that out of the fear of losing access to oil, the oligarchical types bending the ears in government made the decision to reestablish slavery.

Now I will discuss the Keynesian angle on interest, in short, the market does not find any level for interest, which is why we have Ben Bernache (sp?) setting the prime lending rate. If he did not, the lending rate would exceed the profits of capital and capital could not function profitably, or at all where any need for borrowing occurs e.g start-ups. This is what led to the long series of depressions and recessions so ably described by Edward Chancellor in his "Devil Take the Hindmost, A History of Financial Speculation", 1999. To guard against depressions, the government was charged with the responsibility of establishing the interest rate. This is what John Maynard Keynes really wrote about in his work "The General Theory of Employment, Interest and Money", 1936. As shown above, however, interest paid on consumer credit is in fact interest stolen from capital.

In addition, the interest rate is based on the GDP, which does not see that it is its own basis of inflation. Hence it attacks capital two ways, by worming through an interest loophole and by inflating prices such that capital sales diminish internationally and often neoclassically.
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Simple Math

The knee jerk response to a "U.S. Capitalist Party" by a general reader will probably be "whatever", but that is the general response to most anything that differs from the status quo. In Harriet and John Stuart Mill's work "On Liberty" published in 1859, they explain that the benefit of liberty in a society is to enable progress to be made. Change happens and when we try to prevent it from happening, it still happens. One of the effects of change is that ideas that were true or 'just' at one point in time become untrue or injust due to some physical, cultural, political, economic, technological or environmental change beyond governmental control. Liberty is the capacity within a society to tolerate and consider new ideas and new behaviours to adapt to those changes, not only those perceived as rational, but those as well that could be rational, but that are currently not part of the popular perspective. Ideas such as abandoning interest to correspond with the abandonmnent of the gold standard is one such solidly principled idea that is not part of the current social habit of thought.

Now, simple algebra, which every American should learn in school shows us that one cannot solve for three unknowns with only two equations. To solve for three unknowns requires three equations. In the United States, we have always had two political parties to differentiate three branches of government. This appears to be an intentional error, but we must look back to the time period to see what was going on in the late 18th century to see if there is an explanation, and there is. This was the dawn of the industrial age, and Capitalism was gigantic. There was no need of a third party because the entire purse (finances) of government came from the pockets of a handful of wealthy industrialists.

Siding with the Democratic party, we get excessive unionizing, which effectively undermined the true democratic power of the people, concentrating it in the hands of a few thug unionists. Any rational debate and regulation over Marx's one contribution to society, the first contradiction of capital; that labor and consumers are one and the same, so should wages be low or high? , can never come under public discussion where a functional solution can be arrived at and enforced. Instead we see SOME people earning great wages and excellent benefits and the rest of us supporting their dead weight.

Siding with the Republican party, we get all kinds of militarist favoritism and their brand of economic dogma, which is readily shown to degrade the wealth of any nation, despite whether money is spent or not (the GDP lie), since the products made are not for consumption or of use to any individual, but the wages earned by these weapon's manufacturers sure do go to boosting the price of domestic goods and the consequent wages of every other industry necessary to purchase them, which also leads to job emigration... oh yea and more consumer indenture.

So, as you can see, we do not need a second Democratic party or a second Republican party (whose job it is to keep all power from accumulating in one center or to one party... choke!). We need a U.S. Capitalist party to emerge.
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