Armstrong Economics
TM
There have been p l e n t y o f a r t i c l e s a s k i n g whether C a p i t a l i s m i s now dead. The problem i s t h e q u e s t i o n a l r e a d y presumes an outcome and f a i l s t o r e a l i z e t h a t we a r e s t i l l i n the m i d d l e o f the g r e a t e s t Economic T r a n s f o r m a t i o n i n the h i s t o r y o f mankind. What we f a c e i s f a r more complex than mere c a p i t a l i s m . To s e t t h e r e c o r d s t r a i g h t , c a p i t a l i s m i s a two s i d e d c o i n . F i r s t , t h e r e i s t h e f r e e market s t u f f o f which Adam Smith argued a g a i n s t t h e P h y s i o c r a t s who h e l d t h a t a l l economic w e a l t h o f a n a t i o n was i n n a t u r e and l a n d . Hence, manufacture by a b l a c k s m i t h t e n d i n g t o t h e h o r s e s o f t h e f a r m e r d i d n o t c r e a t e w e a l t h b u t e x p l o i t i t . S m i t h argued t h a t t h e w e a l t h o f a n a t i o n was i t s t o t a l c a p a c i t y t o produce and a farmer s t a n d i n g w i t h a b l a c k s m i t h who b o t h s o l d t h e i r p r o d u c t t o France, e q u a l l y returned w i t h gold c o n t r i b u t i n g to the wealth of the n a t i o n . This i s not t h e o n l y scope o f c a p i t a l i s m . The o t h e r s i d e o f t h e c o i n was t h e i n v e n t i o n o f something v e r y f o r e i g n t o t h e average p e r s o n i n t h e m i d d l e - a g e s . That money i t s e l f c o u l d work and e a r n more money w i t h o u t h a r d l a b o r o f t h e i n d i v i d u a l . T h i s d i s c o v e r y t r u l y c r e a t e s t h e essence o f c a p i t a l i s m and gave b i r t h t o f i n a n c i a l p a n i c s w i t h the " T u l i p B u b b l e " i n t h e 1630s t h a t i n t r o d u c e d t h e p u b l i c t o t r a d i n g t h e i r f i r s t o p t i o n s ( d e r i v a t i v e s ) s i n c e t h e f a l l o f Rome. T h i s was f o l l o w e d by t h e famous S o u t h Sea Bubble t h a t took p l a c e a l o n g s i d e t h e M i s s i s s i p p i Bubble i n F r a n c e t h a t b o t h c o l l a p s e d i n 1720. However, t h e s e investment booms s p a r k e d wides p r e a d s p e c u l a t i o n t h r o u g h o u t Europe. The s h a r e s i n F r a n c e o f Compagnie de Indes r o s e f r o m 500 t o 18,000 l i v r e s c o l l a p s i n g i n r u i n a f t e r g i v i n g b i r t h t o the term "millionare." T h i s i s n o t a s i m p l e q u e s t i o n o f whether C a p i t a l i s m w i l l s u r v i v e . What i s r e a l l y a t i s s u e i s S o i o a l i s r a - and t h a t embraces t h e v e r y n a t u r e o f Western Governments. T h i s i s more t h a n the demise o f j u s t l a b o r u n i o n s . L i f t i n g t h i s r o c k a l l o w s t h e s c o r p i o n s t o s u r f ace. i t i s more a k i n t o o p e n i n g Pandora's box and a l l o w i n g a swarm o f e v i l s t o escape and torment mankind. We have no c h o i c e b u t t o speak v e r y f r a n k l y , f o r u n l e s s we t r u l y understand t h e n a t u r e o f e v e n t s , t h e r e i s no way t o c l o s e t h e box and make i t a l l b e t t e r . As S a i n t Jerome s a i d o f Rome: "When Rome f e l l , the Romans were s t i l l l a u g h i n g . " They had no i d e a o f what was t a k i n g p l a c e and j u s t assumed Rome was impregnable. We can s t o p an e v e n t , i f we r e c o g n i z e i t i s happening. I f we a r e a f r a i d t o ask t h e c o r r e c t q u e s t i o n , t h e n perhaps we a r e t o o b i a s e d to comprehend what we have done and take r e s p o n s i b i l i t y f o r o u r own a c t i o n s ? To p a r a p h r a s e Edward Gibbon i n h i s memorable e p i t a p h on Rome: We were t h e c a p i t o l o f democracy, t h e c i t a d e l o f t h e e a r t h , the t e r r o r o f t y r a n t s , i l l u s t r a t e d by the f o o t s t e p s o f s o many t r i u m p h s , e n r i c h e d by t h e l e a d e r s h i p i n economic freedom t h a t was t h e beacon t o so many n a t i o n s . T h i s s p e c t a c l e , how i s i t f a l l e n ?
C o p y r i g h t M a r t i n A. Armstrong A l l R i g h t s R e s e r v e d December 1 1 t h , 2008 Comments Welcome:
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The
Great Economic Transformation
0 1200AD 1400AD• 16Q0AD1800AD 2000AD-
I t may seem s t r a n g e , b u t we have been u n d e r g o i n g a b a t t l e o f economic p h i l o s o p h y t h a t t r a n s c e n d s so many c o n c e p t s , t h a t u n l e s s we s t e p back, most have d i f f i c u l t y u n d e r s t a n d i n g t h e t r e n d . T h i s b a t t l e has o f t e n been l a c e d w i t h e f f o r t s t o c o n t r o l mankind. F o r w i t h i n t h i s b a t t l e , we w i l l f i n d r e l i g i o n , p o l i t i c s , s c i e n t i f i c i n n o v a t i o n and progress spanning technology i n a l l areas, b u t a l s o i s s u e s t h a t i n c l u d e b o t h s l a v e r y and l a b o r t h a t a l l c r e a t e what has become known as o u r economy. Sometimes we a r e t o o c l o s e t o a problem t h a t i t i s j u s t i m p o s s i b l e t o see. When man l a n d e d on t h e Moon and s e n t t h e f i r s t p i c t u r e s o f E a r t h r i s i n g , o n l y t h e n c o u l d we see what o u r w o r l d h o n e s t l y l o o k e d l i k e . We a r e f a c i n g t h e v e r y same problem. The change t h a t we now see and a r e d e b a t i n g , i s s t i l l from t h e v i e w o f a f l y on a n e l e p h a n t ' s back. We do n o t know we a r e even on an e l e p h a n t o r what i s an e l e p h a n t .
Our s o c i e t y i s s t i l l growing and c h a n g i n g . We a r e g o i n g through p u b e r t y where t h e y o u t h r e b e l s a g a i n s t t h e p a r e n t . The p r o f o u n d change, t h e G r e a t Economic T r a n s f o r m a t i o n , became b l u n t l y v i s i b l e back i n 1989 where t h e w o r l d economy began t o u n r a v e l w i t h t h e f a l l o f Communism. That fundamental change was t r u l y an economic t r a n s f o r m a t i o n wave a s a c o n t a g i o n and now i s s p r e a d i n g c a u s i n g t h e c o l l a p s e o f even what we v i e w as s o c i a l i s m i n t h e Western n a t i o n s . What we a r e f a c i n g i s c o n f u s i n g . N e v e r t h e l e s s , i f we want t o see t h e e l e p h a n t , i t i s time t o t a k e f l i g h t . There i s a v e r y c o r e s t r u c t u r e t o t h e economic s o c i e t y o f man. The I n d u s t r i a l R e v o l u t i o n was n o t j u s t a s l o g a n . I t i s h a r d f o r modern man t o l o o k back from where he now s t a n d s and comprehend t h e meaning o f " r e v o l u t i o n " a s i t was t r u l y e x p r e s s e d . The way o f l i f e p r i o r t o t h e I n d u s t r i a l R e v o l u t i o n remained e s s e n t i a l l y t h e same from Greek t i m e s , Rome, middle-ages, and t h e b i r t h o f t h e U n i t e d S t a t e s . The word "Economics" was a n E n g l i s h t r a n s l a t i o n o f a book w r i t t e n by a g r e a t mind and a d i v e r s i f i e d man o f tremendous e x p e r i e n c e - Xenophon (ca 431-350 E C ) . Xenophon was a b r i l l i a n t p r a c t i c a l man. He began l i f e e a r l y on a s t h e commander o f t h e e l i t e Greek f o r c e known as t h e "Ten T h o u s a n d X e n o p h o n admired S o c r a t e s p r o f o u n d l y , and d e v e l o p e d a d i s l i k e f o r extreme democracy f o r t h e v e r y c r i m e i t had committed by o r d e r i n g S o c r a t e s t o be e x e c u t e d f o r h i s i d e a s . Xenophon w r o t e t h r e e works on t h e s u b j e c t c a s t i n g S o c r a t e s i n a d i f f e r e n t l i g h t from t h a t o f P l a t o - t h e "Apology" 'Symposium" - " M e m o r a b i l i a . " y e t i n t h e f i e l d o f f i n a n c e and economics, h i s p o l i t i c a l work i s what perhaps t h e most p o w e r f u l ccmmittee on C a p i t a l H i l l i s named a f t e r "Ways and Means" w r i t t e n around 351 BC a d v o c a t i n g peace r a t h e r t h a n war between t h e Greek s t a t e s . But we owe t h e v e r y word "Economics" t o t h e t i t l e o f h i s t r u l y m a s t e r work - "Oeconomicus" t h a t s i m p l y meant i n a n c i e n t Greek - how t o r e g u l a t e t h e household.- I t was a How To Do Book f o r Gentlemen Dummies t h a t e x p l a i n e d how t o manage your e s t a t e from g r o w i n g c r o p s , managing s l a v e s , and your w i f e . What does t h i s have t o do w i t h the I n d u s t r i a l R e v o l u t i o n ? E v e r y t h i n g ! L i f e a s s o c i e t y knew i t was c o m p l e t e l y d i f f e r e n t b e f o r e t h e 19th C e n t u r y . The Romans c a l l e d them " v i l l a " and we c a l l e d them " p l a n t a t i o n s " t h a t a r e a s s o c i a t e d w i t h s l a v e r y . B u t t h i s i s how s o c i e t y o p e r a t e d . There were independent e s t a t e s t h a t were v i r t u a l l y s e l f - s u f f i c i e n t . Whether t h e work f o r c e was composed o f s l a v e s p u r c h a s e d a f t e r b a t t l e i n a n c i e n t times, o r s e r f s i n the middle-ages, o r imported A f r i c a n s l a v e s 2
a f t e r t a k i n g t h e c i t i z e n s o f a conquered n a t i o n as w o r k e r s f e l l o u t o f f a v o r . The K i n g o f E n g l a n d had even used the c r i m i n a l laws t o c r e a t e l a b o r . Any misdemeanor a l l o w e d t h e K i n g t o s e l l you as a l a b o r e r f o r a c e r t a i n p e r i o d . I n s t e a d o f p r i s o n , you were s e n t a t f i r s t t o America. When t h e American R e v o l u t i o n began, the d e s t i n a t i o n changed t o A u s t r a l i a . N e v e r t h e l e s s , i t was the same model t h a t e x i s t e d f o r thousands o f years - a s e l f c o n t a i n e d f a r m - l i k e e n c l a v e . Our C o n s t i t u t i o n f o r b i d , i n d e n t u r e d s e r v i t u d e , a s t h e K i n g once c a l l e d i t . H i s t o r y i s p u n c t u a t e d w j f b r e v o l t s and d i s t u r b a n c e s from s l a v e s . There was t h e famous s l a v e army l e d by S p a r t i c u s i n Roman R e p u b l i c a n t i m e s . What made Rome a g r e a t N a t i o n a l Empire, i s i t began t o a l t e r t h e c o u r s e o f t h i s l a b o r . Rome began t o c r e a t e the concept o f c i t i z e n s h i p and bestowed upon s e l e c t e d n a t i o n s t h e d i g n i t y o f Roman c i t i z e n s h i p . T h i s was the s t a r t o f a v e r y g r a d u a l change t o t h e l o n g - s t a n d i n g economic model where the s p o i l s o f war i n c l u d e d t h e c a p i t i v e s b e i n g s o l d as s l a v e l a b o r . T h i s i s why Rome l a s t e d as l o n g as i t d i d . The economic model o f t h e v i l l a was s u p e r i o r t o p u b l i c s e r v i c e and s e r v i c e j o b s . D u r i n g t h e 3 r d Century AD, money became r a r e f o l l o w i n g what was a h y p e r - i n f l a t i o n . T h i s caused tremendous h o a r d i n g & a economic c o n t r a c t i o n s t r e n g t h e n i n g the v i l l a model. The Roman Emperor D i o c l e t i o n (284-305AD) t r i e d , t o r e v i v e t h e empire l i k e Ronadd Reagan & M a r g a r e t Thatcher, but o b v i o u s l y c r e a t e d much o f t h e p r a c t i c e s s t i l l employed today. To be a b l e t o c o l l e c t t a x e s , p a s s p o r t s were c r e a t e d and people c o u M not move w i t h o u t p e r m i s s i o n . To t a c k l e i n f l a t i o n , he s u b s t i t u t e d wage and p r i c e c o n t r o l s as d i d R i c h a r d Nixon. He r e d e s i g n e d t h e e n t i r e monetary system, i e B r e t t o n Woods 1944. When Rome f e l l a f t e r 476AD, t h e concept o f t h e v i l l a p r e v a i l e d . L i f e s u r v i v e d because o f t h i s s e l f - c o n t a i n e d economic model. T h i s e v o l v e d i n t o f e u d a l i s m d u r i n g the 9 t h and 15th C e n t u r i e s due t o t h e i n c r e a s e i n p o p u l a t i o n and the i n a b i l i t y t o a c q u i r e w e a l t h t o e s t a b l i s h a v i l l a . Towns would form and t h e l a n d l o r d became the n o b i l i t y . C a s t l e s were c o n s t r u c t e d because o f t h e l a c k o f s e c u r i t y . Charlemagne (742-814) began t o r e c o n s t r u c t t h e o l d Roman Empire. T h i s economic model r e c e i v e d i t s f i r s t major shock t h a t not even t h e f a l l o f Rome had i n f l i c t e d , i t was t h e B l a c k P l a g u e i n t h e 13th-14th C e n t u r i e s t h a t k i l l e d about l / 3 r d o f the p o p u l a t i o n making l a b o r s c a r c e and caused l a n d l o r d s t o s t a r t t o pay wages i n a d d i t i o n t o a p e r c e n t a g e o f t h e c r o p and f r e e h o u s i n g . T h i s l e d the monarch o f E n g l a n d t o b e g i n t o t a x wages and we see t h e f i r s t l a b o r r e v o l t l e d by Wat T y l e r i n 1381 o v e r t h i s new t a x a t i o n . Yet, predominantly, the economy was s t i l l a g r a r i a n and t h e model was s t i l l t h e v i l l a . I n R u s s i a , the seeds o f t h e 1917 R e v o l u t i o n were sowed d u r i n g t h e r e i g n o f I v a n IV ( t h e T e r r i b l e ) ( 1 5 3 0 - 8 4 ) , when he c o n f i s c a t e d l a n d s o f . h i s enemies t o q i v e t o h i s s u p p o r t e r s . Ivan found t h e l a n d s w o r t h l e s s once the s e r f s f l e d . He t h e n decreed t h a t t h e s e r f s would be bound t o t h e l a n d f o r l i f e i n o r d e r t o m a i n t a i n i t s v a l u e . He made a l l R u s s i a n s on farms e s s e n t i a l l y s l a v e s o f t h e s t a t e . T h i s e v e n t u a l l y created the pool of d i s c o n t e n t t h a t f u e l e d i n t o the b o n f i r e o f R e v o l u t i o n years l a t e r . Of c o u r s e i n the U n i t e d S t a t e s , the s l a v e r y i s s u e was r e c o g n i z e d as wrong and a r e a l problem, e s p e c i a l l y a f t e r t h e language w r i t t e n by Thomas J e f f e r s o n i n the D e c l a r a t i o n o f Independence. T h i s i s s u e dominated e a r l y p o l i t i c s , and perhaps came t o a head when t h e Supreme C o u r t showed i t was i n d e e d as Judge Posner r e f e r s t o i t , t h e P o l i t i c a l C o u r t . I n 1857, t h e Supreme C o u r t h e l d t h a t b l a c k s were j u s t p r o p e r t y i n the c a s e o f Dread S c o t t who sued f o r h i s freedom when h i s master t r a v e l e d t o a s t a t e t h a t d i d not a l l o w s l a v e r y . The C i v i l War was not o v e r r a c i s m . I t was o v e r t h e c o l l a p s e o f the economic system o f l a b o r . Racism aueryed more so as a b i t t e r response by t h e South a t t a c h i n g blame f o r t h e i r demise t o t h e freedom o f the s l a v e s . There i s y e t another l a y e r t o t h i s o n i o n . We can see t h a t s l a v e r y was a v e r y a n c i e n t p r a c t i c e as o u t l i n e d by Xenophon i n "Oeconomicus" t h a t was the s u p p l y o f
l a b o r i t s e l f . I t was how t h e v i l l a model m a i n t a i n e d i t s economic v i a b i l i t y f o r thousands o f y e a r s . The treatment of s l a v e s v a r i e d g r e a t l y from humane as members o f a f a m i l y t o p e r s o n a l o b j e c t s f o r t o r t u r e . The l a t e r was more pronounced due t o t h e i n t e r v a l o f i n d e n t u r e d s e r v a n t s t h a t were c r i m i n a l s . I n Greek t i m e s , by law, i f a s l a v e was t o be a w i t n e s s , he must be t o r t u r e d f o r i t was presumed he would l i e o t h e r w i s e . I n Roman & Greek t i m e s , the economy was 90% a g r a r i a n , t h a t d e c l i n e d t o 70% i n t h e 1870s, 40% i n 1929, and f i n a l l y 3% by 1980. I t has been t h i s v i l l a model t h a t was undergoing t h e G r e a t Economic T r a n s f o r m a t i o n t o t h e I n d u s t r i a l R e v o l u t i o n . C i t y d e w e l l e r s , were o f t e n p u b l i c s e r v a n t s o r t h e poor. The G r e a t T r a n s f o r m a t i o n has been t h e growth o f s o c i e t y t h r o u g h p r o g r e s s and t e c h n o l o g i e s . We have been e v o l v i n g even i n o u r u n d e r s t a n d i n g o f economics, s i n c e t h e n a t u r e o f t h e economy i s i n f a c t c h a n g i n g w i t h each p a s s i n g y e a r . We must l o o k a t t h i s t r a n s f o r m a t i o n and understand t h a t a s t h e changes i n l a b o r have t a k e n p l a c e , e v e r y t h i n g e l s e i n o u r w o r l d a l s o changes. Had i t not been f o r t h e B l a c k Death, t h e r e would n e v e r have been a s h o r t a g e i n l a b o r g i v i n g b i r t h t o wages t h a t l e d t o p a y r o l l taxes.
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We have n o t b o t h e r e d t o n o t i c e what e v e n caused t h e b a t t l e between communism and c a p i t a l i s m . Yes, we can a t t r i b u t e t h i s t o K a r l Marx (1818-1883). T h i s does not e x p l a i n why Marx came t o t h e c o n c l u s i o n s t h a t he d i d and s e t i n m o t i o n decades o f g e o p o l i t i c a l c o n f l i c t s t h a t has c o s t t h e l i v e s o f c o u n t l e s s m i l l i o n s ! Imagine f o r one minute, somebody i n v e n t e d a new t e c h n o l o g y making p h y s i c a l l a b o r o b s o l e t e and t o s u r v i v e you need t o u n d e r s t a n d how t o make a machine move w i t h y o u r mind. The young c h i l d r e n adapt q u i c k l y and emerge as the new work f o r c e . You cannot even be now t r a i n e d t o do t h e j o b w i t h y o u r mind, and t h e r e i s no p l a c e f o r you t o e a r n any l i v i n g a t a l l . Would you h o t be angry a t t h i s new t r a n s f o r m a t i o n ? We must u n d e r s t a n d t h a t from t h e s c h o o l o f P h y s i o c r a t s who b e l i e v e d t h a t a l l w e a l t h was c r e a t e d o n l y by n a t u r e , we end up w i t h the runaway i d e a t h a t man can c r e a t e u t o p i a - t h e i m a g i n a r y w o r l d where man c o u l d l i v e i n d e f i n i t e l y under t h e p e r f e c t p l a n . T h i s i d e a was s p a r k e d by S i r Thomas More i n 1516 t h a t c r e a t e d a whole c l a s s o f t h i n k e r s who b e l i e v e d i n t h i s u p t o p i a n w o r l d was p o s s i b l e . S i r Thomas More (1478-1535) was a major i n f l u e n c e and c o n t r i b u t e d t o what we now f a c e t o d a y under S o c i a l i s m . Marx r a i l e d a g a i n s t t h e change from t h e a g r a r i a n s o c i e t y t o t h e i n d u s t r i a l r e v o l u t i o n s i d e o f c a p i t a l i s m . He d i d not see t h e s t a t e as t h e i s s u e . What he saw was t h a t t h i s new economic model would l e a d t o p a i d w o r k e r s i n f a c t o r i e s who w o u l d be e x p l o i t e d t o make a p r o f i t f o r t h e employer. Marx saw t h i s new' economic model as c h a n g i n g t h e w o r l d t a k i n g people from t h e t r a d i t i o n a l f a r m and t u r n i n g them i n t o consumers o f p r o d u c t s manufactured, but t h a t t h e i r e m p l o y e r s w o u l d be s o greedy, t h e y w o u l d d e c l i n e t o pay the w o r k e r and e v e n t u a l l y t h i s new system t h a t was c h a n g i n g t h e w o r l d would c o l l a p s e because the g r e e d o f t h e e m p l o y e r w o u l d suppress t h e income o f t h e l a b o r e r , and t h a t would r e s u l t i n t h e c o l l a p s e o f t h i s new e v i l e x p e r i m e n t - i n d u s t r i a l c a p i t a l i s m . The b a t t l e begun by Marx between h i s Utopian i d e a l o f Communism v. C a p i t a l i s m i s not o v e r . The Communistic system t r a n s f e r s power t o t h e s t a t e as does S o c i a l i s m . T h i s has s a n c t i o n e d t h e power o f a c e n t r a l government a t t h e expense o f t h e economic freedom o f C a p i t a l i s m . What we are r e a l l y saying when we ask whether C a p i t a l i s m i s dead, i s s h o u l d we abandon freedom and run b e h i n d the walls o f t h e c a s t l e s i n c e the s t a t e i s the modern-day l a n d l o r d ? Do we r e v e r s e t h i s G r e a t Economic T r a n s i t i o n , o r u i i d e r s t a n d what i s g o i n g on f o r j u s t once? A
Ml o — I
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1787 1857 1886 1887 1890 1892 1894 1896 1897 1902 1905 1922
Shay's R e b e l l i o n Dred S c o t t D e c i s i o n Hay Market R i o t f o r (8 h r day) I n t e r s t a t e Commerce A c t Sharman A n t i t r u s t A c t Homestead S t i l l M i l l S t r i k e Pullman S t r i k e W i l l i a m J e n n i n g s B r y a n Speech Coal S t i k e Bureau o f Census formed I n t ' l Worker Union Coal S t r i k e
1935 WPA & S o c i a l S e c u r i t y Formed 1946 S t e e l S t r i k e (750,000) 1946 Mine Workers S t r i k e (400,000) 1947 T a f t - H a r l e y Labor A c t
Marx began a c l a s s - w a r f a r e t h a t c o u l d y e t t a r e t h e v e r y f a b r i c o f our s o c i e t y t o s h r e d s . A t r a d i t i o n a l 72 y e a r c y c l e o f p o l i t i c a l t r e n d s shows t h a t from t h e f i r s t r e a l l a b o r r i o t i n 1886 t h a t t o o k p l a c e on May 4 t h , 1886 known as the Haymarket R i o t , 72 y e a r s l a t e r we come t o 1958 t h a t t r u l y marked t h e b e g i n n i n g o f the end f o r t h e l a b o r u n i o n movement. The T a f t - H a r l e y Labor A c t o f 1947 was d e s i g n e d t o take away t h e power o f the u n i o n s . By t h e 1960s, we have t h e i n c i d e n t o f Jimmy H o f f a and t h e u n i o n s a r e t h e n c a s t i n t h e l i g h t as b e i n g e v i l and c o n t r o l l e d by o r g a n i z e d c r i m e . T h i s c r i t i c a l s h i f t i n p e r c e p t i o n , c u r t a i l e d t h e u n i o n movement a f t e r j u s t one 72 y e a r p o l i t i c a l c y c l e . T h i s was the c u l m i n a t i o n o f t h e U t o p i a n P h i l o s o p h i e s o f c r e a t i n g the p e r f e c t w o r l d t h a t even Marx a s c r i b e d t o by e s s e n t i a l l y t a k i n g a l l t h e t o y s away from t h e £>eople and t r a n s f o r m them i n t o one g i a n t c l a s s l e s s s o c i e t y . T h i s s t a n d s as a c l e a r warning t h a t we cannot j u s t r u n t o w a r d i d e a s w i t h our eyes c l o s e d . We must l o o k a t an i d e a f r o m a l l p e r s p e c t i v e s and w i t h an u n b i a s e d eye. That i s so h a r d t o do f o r i t r e q u i r e s the " d i s t i n t e r e s t e d " mind t h a t can see the w o r l d f o r what i t i s , n o t from a p e r s o n a l p e r s p e c t i v e . The c o l l a p s e o f G e n e r a l Motors i s t h e c o l l a p s e o f t h e l a s t v e s t i g e o f Marxism t h e l a b o r u n i o n s . T h i s i l l u s t r a t e s t h a t we a r e not s e e i n g t h e c o l l a p s e o f c a p i t a l i s m , but we a r e i n t h e f i n a l s t a g e o f t h e d e a t l i o f s o c i a l i s m . Governments w i l l r a i l f o r i t has been t h e s o u r c e o f t h e i r power - v o t e f o r me a/id you g e t something. We a r e i n t h e f i n a l P h a s e - T r a n s i t i o n t a k i n g the form o f a tsunami o f spending t o make i t a l l b e t t e r . What we must be concerned about, w i l l be who get s blamed when i t f a i l s ? The f o r e i g n a u t o - m a n u f a c t u r e r s have s e t up shop i n t h e South where the l a b o r laws were f a r more f a v o r a b l e t o c r e a t e non-union work f o r c e s t h a t have been q u i t e s u c c e s s f u l . 5
The f o r e i g n c a r m a n u f a c t u r e r s have demonstrated t h a t u n i o n s a r e a bad i d e a from the dreams o f Kark Marx t h a t u n l e a s h e d c l a s s - w a r f a r e . The union movements had t h e i r p o i n t s from t h e o u t s e t . B u t w o r k i n g c o n d i t i o n s s h o u l d have been a t t a c k e d i n a p o l i t i c a l c o n t e x t (democracy). Onions assumed t h e mantle o f ccmmunism c r e a t i n g c o n f r o n t a t i o n and t r a n s f e r r e d t h e power from management t o l a b o r . I t d i d n o t s o l v e t h e problems and o n l y became l i k e a drunk who t h e n had t h e k e y s t o t h e l i q u o r s t o r e - s e l f - d e s t r u c t i v e . The r e a s o n why u n i o n s were a bad e x p e r i m e n t , was because they merely t u r n e d the employer i n t o a s l a v e and a l t e r e d t h e f r e e markets t h a t was c o n t r a r y t o t h e n a t u r e o f mankind. H i s t o r i c a l l y when t h e c r o p s f a i l e d i n a a g r a r i a n model, p e o p l e s i m p l y m i g r a t e d . The P h i l i s t i n e s o f t h e B i b l e were most l i k e l y Greeks who m i g r a t e d due t o c r o p f a i l u r e s a t t h e F i r s t H e r o i c Age. I n v a s i o n s o f t h e Goths,Germans,and even A t t l i a t h e Hun were a l l caused by t h e g r a s s i s g r e e n e r on t h e o t h e r - s i d e b e l i e f . Unions•jj.ust promoted i n c r e a s e d wages r a t h e r t h a n s k i l l s d i m i n i s h i n g t h e i n d i v i d u a l m o t i v a t i o n t o l e a r n new s k i l l s and m i g r a t e between j o b s . T h i s i s t h e same r e a s o n why Communism d i e d . C r e a t i n g a system where o n e - s i z e - f i t s - a l l , promotes a d e c l i n e i n human growth t h a t i s t h e n m a n i f e s t w i t h i n t h e economic d e c l i n e . We have t o u n d e r s t a n d , t h a t t h e f a t a l f l a w i n Crmnunisra was t o d i m i n i s h t h e e s s e n c e o f mankind. They s a y n e c e s s i t y i s t h e mother o f a l l i n v e n t i o n . That i s s o t r u e . I f we t r y t o c r e a t e u t o p i a , we d e s t r o y t h e v e r y e n g i n e t h a t c r e a t e s p r o g r e s s . T h i s i s t h e same f l a w t h a t had l e d t o t h e d e s t r u c t i o n o f American j o b s . Do n o t f o r one minute t h i n k t h a t a l a b o r u n i o n i s any d i f f e r e n t t h a t t h e Communistic M o d e l . I t i s n o t . Where i n a normal economic model, t o e a r n more one improves h i s s k i l l s , t h e Communistic M o d e l promotes advances i n income w i t h o u t improvement i n s k i l l s . When t h a t s h i f t i n power became t o o o b v i o u s , even t h e Government t u r n e d a g a i n s t t h i s t r e n d i n 1947 w i t h t h e passage o f t h e T a f t - H a r l e y L a b o r A c t . T h i s system i n d e e d s t y m i e d n a t u r a l economic p r o g r e s s and c r e a t e d much damage t o t h e b e n e f i t s o f t h e I n d u s t r i a l R e v o l u t i o n . I t f r o z e t h e n a t u r a l economic e v o l u t i o n and began a t r e n d toward t r a n s f e r r i n g j o b s o v e r s e a s . T h i s was o n l y a c c e l e r a t e d by t h e i m p o s i t i o n o f t h e p a y r o l l t a x t h a t e s s e n t i a l l y i n c r e a s e d t h e c o s t o f l a b o r . Where h i s t o r i c a l l y mankind m i g r a t e d i n an a g r a r i a n s o c i e t y c a u s i n g him t o p o p u l a t e t h e w o r l d , t h i s v e r y same t r e n d s t i l l t a k e s p l a c e today. I n s t e a d o f t h e work f o r c e m i g r a t i n g t o b e t t e r l a n d s , t h e Communistic M o d e l r e v e r s e d t h e r o l e s and caused t h e employer t o m i g r a t e . What government d i d n o t n o t i c e , was t h i s t r e n d was n o t caused by t h e " g r e e d " o f t h e employer, b u t by t h e I n v i s i b l e Hand o f Adam S m i t h - L a b o r demanded t h e h i g h e s t wages w i t h t h e l o w e s t p r o d u c t i v i t y , and consumers demanded t h e l o w e s t p r i c e w i t h t h e h i g h e s t r e l i a b i l i t y . The employer m i g r a t e d t o s u r v i v e . Throughout h i s t o r y , human n a t u r e has n e v e r m i g r a t e d f o r no r e a s o n . M i g r a t i o n s t a k e p l a c e when prodded by t h e f i c k l e finger of necessitity. Communism, when implemented a s a government p o l i c y , l a s t e d o n l y one 72 year p o l i c t i c a l c y c l e . I n 1917, we f i n d t h e R u s s i a n R e v o l u t i o n a n d Sun Y a t - s e n s e t up t h e r i v a l government i n C h i n a a t Guangzhou a s t h e N a t i o n a l i s t s . 72 y e a r s l a t e r , we come t o 1989 and Tinananmen Square f o l l o w e d a b o u t 5 months l a t e r b y t h e f a l l o f t h e B e r l i n W a l l . These changes were e c o n o m i c a l l y d r i v e n . The s t a g n a t i o n o f t h e human s p i r i t l e d t o t h e s t e a d y d e c l i n e i n p r o d u c t i v i t y . T h i s i s t h e same t r e n d we have s e e n i n t h e American l a b o r u n i o n s . What we must u n d e r s t a n d i s t h a t o n l y when p e o p l e l o s e t h e i r s e c u r i t y , t h e n and o n l y then do we see p o l i t i c a l u n r e s t . J u s t a s humans d i d n o t m i g r a t e w i t h o u t r e a s o n , a l l p o l i t i c a l u n r e s t i s u n l e a s h e d f o l l o w i n g economic i m p l o s i o n s . The c o l l a p s e o f t h e M i s s i s s i p p i B u b b l e s e t i n m o t i o n a i r r e s p o n s i b l e government p o l i c y r e g a r d i n g t h e money s u p p l y - t h e i n v e n t i o n o f paper money. T h i s c o l l a p s e o f a European-wide s p e c u l a t i v e boom i n 1720, s e t t h e s t a g e f o r t h e g r e a t wave o f r e v o l u t i o n s t h a t t o p p l e d t h e l a s t v e s t i g e o f F e u d a l i s m - Monarchy. I t was n o t j u s t t h e American R e v o l u t i o n ^ w i t h i t s s l o g a n , "No T a x a t i o n W i t h o u t R e p r e s e n t a t i o n , " b u t a l s o 72 y e a r s l a t e r we come t o 1792 and t h e o v e r t h r o w o f t h e F r e n c h monarcy. 6
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S i n c e the u n i o n s f a i l e d because they d i m i n i s h e d progress i n the same way as d i d Communism, can even S o c i a l i s m s u r v i v e ? Once t h e s t a t e g a t h e r e d t h e power as i f i t were t h e l a n d l o r d s i t t i n g i n h i s c a s t l e , t h e r e became a v e s t e d i n t e r e s t s o t l i a t t h e s t a t e w i l l always argue i t i s the s o l u t i o n . T h i s s e t s up t h e danger o f a c o n f l i c t t h a t would once a g a i n r e t u r n t o R e v o l u t i o n i f the economy f a i l s i n the hands o f the s t a t e . The p l a y e r s may change, but today we have e l e c t e d m i n i s t e r s r a t h e r than t h e t i t l e o f monarchs. S t i l l t h e i n t e r e s t s a r e no d i f f e r e n t ! I t a l w a y s b o i l s down t o "he who has the power, makes the r u l e s . " L e t me s e t t h e r e c o r d s t r a i g h t . I do n o t approach t h i s s u b j e c t from a p o l i t i c a l p e r s p e c t i v e . I do not s u b s c r i b e t o the extreme r i g h t nor t h e extreme l e f t . I f u l l y u n d e r s t a n d t h a t the o n l y r e a s o n humans group t o g e t h e r i n t o h e r d s l i k e any v a s t body o f many mammals w i t h few e x c e p t i o n s , i s f o r p r o t e c t i o n , companionship, and t o a c t c o l l e c t i v e l y t o c r e a t e a w o r k i n g s o c i e t y . I f a i l t o see why i f t h e s e a r e the v e r y b a s i c reasons why we group t o g e t h e r , then t h e r e s h o u l d be no d i s p u t e t h a t t h e r e i s a n a t u r a l c o l l e c t i v e b e n e f i t from such a g r o u p i n g p r a c t i c e . We can c o n t r i b u t e t o c r e a t e a m u t u a l l y b e n e f i c i a l system o f r o a d s , communications, h o s p i t a l s , s c h o o l s , and t h i n g s l i k e a f i r e company as w e l l as u t i l i t i e s . T h i s i s a common good and t h e c o r e r e a s o n why we g a t h e r t o g e t h e r . Thus, we presume t h e r e i s a n a t u r a l o b l i g a t i o n t o c o n t r i b u t e c o l l e c t i v e l y t o f u r t h e r t h o s e ends. What i s e q u a l l y dangerous, however, i s t h e assumption, thanks t o Marrx, t h a t t h e government i s our p a r e n t and i t w i l l always be t h e r e t o take c a r e o f us. We w i l l be f o r c e d t o f a c e t h e f a c t t h a t p o l i t i c a n s have made a l o t o f p r o m i s i e s . They liave not a l w a y s funded those p r o m i s e s . I t has been: " T r u s t me. When t h e day comes, we w i l l be h e r e ! " The day has now a r r i v e d . I t i s t i m e t o see i f t h e promises made t h a t a r e now o b l i g a t i o n s , a r e even v i a b l e . Can t h e r e be any way t o h a n d l e what i s u n f o l d i n g w i t h o u t the economic i m p l o s i o n ? T h i s s h o u l d n o t be a endorsement f o r any p o l i t i c a l p a r t y f o r t h i s has been t h e b y p r o d u c t o f b o t h p a r t i e s w i t h e q u a l blame t h a t t r a c e s back t o t h e unfunded promises t h a t began w i t h FDR, and t h e rampid s p e n d i n g o f decades w i t h o u t c o n s i d e r i n g j u s t once, we were on a g o l d s t a n d a r d and t h a t meant we c o u l d n o t j u s t p r i n t money a t w i l l f o r we had t o pay i n g o l d . T h i s i s what caused t h e g o l d s t a n d a r d t o c o l l a p s e . A s i x - y e a r - o l d w i t h a p o c k e t c a l c u l a t o r c o u l d have made t h a t f o r e c a s t . I f you c o n t i n u e t o i n c r e a s e t h e s u p p l y o f paper c u r r e n c y t h a t you a r e c l a i m i n g i s backed by g o l d at. a f i x e d r a t i o , something has t o g i v e . Even t h e c o l l p a s e o f t h e B r i t i s h pound f r o m i t s f i x e d exchange r a t e t o the Deutsche mark b e f o r e t h e Euro t h a t everyone a t t r i b u t e d t o S o r o s , was the same problem. The o f f i c i a l o v e r v a l u a t i o n o f the pound t h a t c o u l d n o t l a s t . R e a l i t y always causes r e a d j u s t m e n t . That i s what we must f e a r t h e most. 7
U n d e r s t a n d i n g the M i s s i s s i p p i Bubble & t h e F r e n c h B a i l o u t t h a t s e t i n motion^ t h e Age o f R e v o l u t i o n A t f i r s t , you m i g h t ask: Why l o o k a t something from 1720? W e l l the answer i s s i m p l e . The F r e n c h Government was i n p a r t r e s p o n s i b l e f o r t h e M i s s i s s i p p i Bubble and c o n t r i b u t e d t o t h e e x p o n e n t i a l r i s e a t t h e end t h a t i n v o l v e the Government b a i l o u t t h a t had t o be p a i d by t a x e s n o t so d i f f e r e n t from c u r r e n t e v e n t s . The M i s s i s s i p p i B u b b l e was a f i n a n c i a l scheme n o t s o d i f f e r e n t f r o m t h e w i l d unbacked d e r i v a t i v e s c r e a t e d by AIG and o t h e r s . The scheme was a t f i r s t e n g i n e e r e d by J o h n Law who was an e a r l y economic t h e o r i s t , who was f r i e n d w i t h t h e Duke d ' O r l e a n s . I n 1716, J o h n Law founded Banque G e n e r a l e , w i t h t h e a u t h o r i t y t o i s s u e n o t e s t h a t were the e a r l i e s t form o f p a p e r c u r r e n c y . The f o l l o w i n g y e a r , he founded Compagnie d ' O c c i d e n t ("Company o f t h e West") w i t h the e x c l u s i v e d e a l t o d e v e l o p t h e new French t e r r i t o r i e s i n t h e M i s s i s s i p p i R i v e r v a l l e y . T h i s e n t e r p r i s e began t o m o n o p o l i z e d t h e t o b a c c o and A f r i c a n s l a v e t r a d e as w e l l . By 1719, he t h e n formed t h e Compagnie des Indes t h a t was e s s e n t i a l l y j u s t renaming t h e Company o f t h e West t o t h e Company o f t h e Indes w i t h a c o m p l e t e monoply o v e r a l l F r e n c h t r a d e . T h i s new e n t i t y a l s o assumed t h e powers as i f i t were a Roman g o v e r n o r s h i p , w i t h t h e power t o b o t h c o l l e c t t a x e s and t o c o i n money. I n r e a l i t y , t h i s o p e r a t i o n assumed c o n t r o l o f b o t h t h e t r a d e and f i n a n c e s o f t h e F r e n c h government. I t was t h i s l i n k and e x c l u s i v e power w i t h t h e F r e n c h government and t h e v a s t e x p a n s i o n o f u n l i m i t e d p r o f i t s i n t h e New World, t h a t c r e a t e d t h e image o f t h e b e s t p o s s i b l e i n v e s t m e n t . The p u b l i c were n a i v e but e x p l o r i n g how c a p i t a l c o u l d be used t o a c t u a l l y work and make more money. T h i s had been a n o v e l i d e a f o r s i n c e t h e f a l l o f Rome, d u r i n g t h e M i d d l e - A g e s , t h e r e was no n a t i o n a l o r g a n i z e d s t a t e t h a t promoted i n t e r n a t i o n a l i n v e s t m e n t . T h i s was a k i n t o t h e f a l l o f Communism and t h e i n t e r e s t i n i n v e s t i n g i n a new w o r l d o f p r i v a t e i n v e s t m e n t i n C h i n a and R u s s i a . I t was t h i s e x p e c t a t i o n o f p o t e n t i a l p r o f i t s t h a t c r e a t e d perhaps what may s t i l l r e m a i n as t h e w i l d e s t s p e c u l a t i v e boom perhaps i n h i s t o r y . Between t h e d i s c o v e r y o f America i n 1492 and 1700, t h e m a j o r i t y o f i n v e s t m e n t was p r o f e s s i o n a l o r s o l e l y by t h e s t a t e . T h e r e was no o p p o r t u n i t y f o r t h e p u b l i c t o g e t i n v o l v e d on a s p e c u l a t i v e n a t u r e . So t h i s was t h e f i r s t t r u e e x p e r i e n c e o f a l l o w i n g t h e p u b l i c t o p a r t i c i p a t e i s t h e new f r o n t i e r . As t h i s c y c l e u n f o l d e d , i t s d u r a t i o n w o u l d be 224 y e a r s from t h e d i s c o v e r y t o t h e r e a l b u s t t h a t s e t i n m o t i o n R e v o l u t i o n . The s h a r e s o f t h e l e a d e n t e r p r i s e , Compagnie de Indes, r o s e from 500 l i v r e s t o 18,000. By 1719, 625,000 s h a r e s had been i s s u e d . T h i s boom gave r i s e t o t h e t e r m " m i l l i o n a r e " and t h e n t h e boom was so p r o f o u n d , Compagnie de Indes was merged t h e r e a f t e r w i t h Banque G e n e r a l e . The scheme then was expanded, l i k e t h a t o f the South Sea B u b b l e i n E n g l a n d , t o r e t i r e t h e n a t i o n a l d e b t o f F r a n c e by e x c h a n g i n g s h a r e s f o r t h e bonds. T h i s l e d t o a monumental s p e c u l a t i v e b u b b l e t h a t s p r e a d t h r o u g h o u t Europe. I t was s o s u c c e s s f u l w i t h o u t r e a l l y p r o d u c i n g p r o f i t s b u t was a e a r l y d e m o n s t r a t i o n o f how f u t u r e e x p e c t a t i o n s can c r e a t e v a l u e i n a n t i c i p a t i o n o f p r o f i t s ( v e n t u r e c a p i t a l ) , t h a t t h e F r e n c h government began t o get i n v o l v e d . The F r e n c h government began t o i s s u e paper money i t s e l f . T h i s was a form o f d e r i v a t i v e f o r i t was w i d e l y a c c e p t e d o n l y because i t was c o n v e r t i b l e i n t o s h a r e s o f t h i s new company. The t r u t h o f t h e m a t t e r was t h a t t h e v a s t e x p a n s i o n was f u e l e d by t h e u n l i m i t e d i s s u e o f p a p e r c u r r e n c y between l a t e 1719 and t h e f a t e f u l t i m e o f t h e y e a r - September /October 1720. I t was t h i s l i n k a g e between t h e s h a r e s and t h e government f i n a n c e s t h a t c r e a t e d a b u s t t h a t was t h e c l o s e s t t h i n g t o a mushroom c l o u d i n f i n a n c e . The b e a r market c o l l a p s e was so s i g n i f i c a n t , by December 1720, John Law had t o f l e e F r a n c e . The F r e n c h government was f o r c e d i n t o a b a i l o u t assuming a l l t h e d e b t s o f t h e company, and t h e n t o pay f o r t h e i r own f o l l y , t h e y began t o r a i s e t a x e s . T h a t s e t i n m o t i o n the r e s e n t m e n t that l e d t o the French Revolution. 8
The e n t i r e s p e c u l a t i v e boom of t h e e a r l y 1700s had such a p r o f o u n d impact upon the p o l i t i c s , i t i s d i f f i c u l t t o f i n d WDrds t o convey the s i g n i f i c a n c e . The South Sea Bubble a l s o t r a n s f o r m e d i n t o a scheme t o r e t i r e the n a t i o n a l debt of England i n r e t u r n f o r s h a r e s . That e n t i r e i n c i d e n t was between l a t e 1711 and b u r s t a l s o i n l a t e August 1720. The e n t i r e c o l l a p s e was a l s o a c o n t a g i o n t h a t swept a l l o f Europe. The l a s t s t a g e s o f t h e s p e c u l a t i v e boom saw t h e s h a r e s r i s e from 128£ pence t o 1,000 between J a n u a r y and August 1720. The c o l l a p s e was f i e r c e because t h e r e was no market-makers, middle-men, o r a mature t w o - s i d e d market. The concept o f puts and c a l l s had developed i n t h e e a r l i e r s p c u l a t i v e b u b b l e known as the T u l i p m a n i a (1634-1637) i n N e t h e r l a n d s . But t h i s d i d not i n v o l v e a d e b t c r i s i s o r t h e government i s s u i n g d e r i v a t i v e forms of money c o n v e r t i b l e i n t o s t o c k s h a r e s . The l a c k o f s o p h i s t i c a t e d market f u n c t i o n s l e d t o a o n e - s i d e d c o l l a p s e i n both t h e South Sea B u b b l e and t h a M i s s i s s i p p i B u b b l e c o n t a g i o n w i t h i n 3 months. The E n g l i s h share c o l l a p s e d from 1,000 t o 124 by December 1720 though t h e company d i d s u r v i v e u n t i l 1853. I t was t h e c o l l a p s e i n d e b t t h a t d e v a s t e d t h e economy.
The F r e n c h B a i l o u t & The
Revolution
(the B o n f i r e o f
Discontent)
Most o f us have seen the p l a y about t h e F r e n c h R e v o l u t i o n , y e t I doubt t h a t most o f us can r e l a t e t o the p l i g h t o r u n d e r s t a n d a r e v o l u t i o n . The B l a c k Death t h a t s t r u c k Europe w i t h such d e v a s t a t i n g f o r c e between 1347-1351, a l s o c r e a t e d a economic pandemic by the m a s s i v e d e p o p u l a t i o n o f s o c i e t y . By 1400, t h e r e was about h a l f t h e p o p u l a t i o n of 1300 i n E n g l a n d . The m o r t a l i t y o f t h e p l a g u e v a r i e d g r e a t l y between 1/8th t o 2/3rds w i t h t h e o v e r a l l mean b e i n g about 1/3rd. T h i s c r e a t e d an economic e a r t h q u a k e f o r c i n g t h e end o f s e r f s and t h e b e g i n n i n g o f wages f o r the common man sowing t h e seeds o f c a p i t a l i s m t o come. T h i s a l s o caused a c o l l a p s e i n revenue and thus t h e i n t r o d u c t i o n o f p e r s o n a l t a x e s once a g a i n t h a t d i e d w i t h Rome. T h i s caused the f i r s t t a x r e b e l l i o n i n E n g l a n d l e d by Wat T y l e r i n 1381 t h a t was b r u t a l l y c r u s h e d by t h e K i n g . T h i s l e d t o a d e c l i n e i n wars as w e l l as t r a d e . T h e r e f o r e , the B l a c k Death s e t t h e s t a g e f o r modem economic growth by n e c e s s i t y s e t t i n g i n motion t r u l y t h e G r e a t e s t Economic T r a n s f o r m a t i o n t h a t i s s t i l l underway. Thus t h e Bubbles o f 1720 come a t t h e end o f a 224 y e a r c y c l e - t h e f i r s t t h a t t r u l y embraced a l l o f s o c i e t y post-1492 and t h e B l a c k Death. The i n v o l v e m e n t o f t h e F r e n c h government i n the s p e c u l a t i v e boom, a l s o p l a c e d t h e f o c u s o f r e s p o n s i b i l i t y f o r i t upon t h e K i n g . The r a i s i n g o f t a x e s t o pay f o r t h e b a i l o u t s e t i n m o t i o n the F r e n c h R e v o l u t i o n f u e l i n g t h e b o n f i r e o f d i s c o n t e n t . The R e v o l u t i o n began w i t h t h e s t o r m i n g o f t h e j a i l , B a s t i l l e Day (7/14/1789) as i t i s remembered t o d a y . T h i s l e d t h e k i n g t o f l e e t o h i s p a l a c e a t V e r s a i l l e s i n October 1789, which t h e p e o p l e l a t e r stormed on J u n e 20th, 1792. At t r i a l , t h e y r e f e r r e d t o him now a s " C i t i z e n Capet" and t r i e d him f o r t r e a s o n on December 1792 o n l y t o be executed on J a n u a r y 21, 1793 f o l l o w e d l a t e r t h a t year by h i s w i f e , M a r i e - A n t o i n e t t e . The F i r s t R e p u b l i c was d e c l a r e d on September 21, 1792. T h i s c i t i z e n government s i m p l y f a i l e d w i t h 5 d i r e c t o r s i n s u c c e s s i o n f a l l i n g i n t o the hands i n Napoleon i n 1799, who e v e n t u a l l y crowned h i m s e l f emperor i n 1804. Consequently, i t was the d i r e c t i n v o l v e m e n t o f t h e F r e n c h Crown and i t s v e r y c o s t l y b a i l o u t t h a t r e s u l t e d i n r a i s i n g t a x e s and o p p r e s s i n g the p e o p l e t h a t l e d t o t h e c o l l a p s e o f t h e F r e n c h economy e n d i n g i n R e v o l u t i o n . L o o k i n g a t government t o b a i l o u t t h e f o l l i e s o f the Investment Banks i s a dangerous c o u r s e o f a c t i o n . I t now s h i f t s t h e blame to the Government and r a i s e s the r i s k o f p o l i t i c a l i n s t a b i l i t y i n t h e l o n g - r u n s h o u l d t h e Governement f a i l to r e v e r s e t h e t r e n d . What i f we end i n h y p e r - i n f l a t i o n because of massive p r i n t i n g and s t i l l t r y i n g t o f u n d a l l t h e d e b t (new and o l d ) t h a t w i l l d r i v e I n t e r e s t r a t e s h i g h e r competing w i t h t h e common man d e s t r o y i n g h i s a b i l i t y to s u r v i v e e c o n o m i c a l l y ? If we to t u r n to t a x e s to make t h o s e wlio d i d not c a u s e the c r i s i s pay f o r e v e r y t h i n g l e t t i n g the i n v e s t m e n t bankers o f f the hook once a g a i n , t h e n how can we j u s t i f y t h i s v a s t t r a n s f e r o f w e a l t h ?
The d e b t c r i s i s i s a l w a y s d i s t i n g u i s h e d from t h e mere s p e c u l a t i v e b u b b l e . The T u l i p m a n i a d i d n o t change t h e c o u r s e o f h i s t o r y a s d i d t h e B u b b l e s o f 1720. L i k e w i s e , the e x c e s s i v e b o r r o w i n g by S p a i n and t h e d e s p e r a t e a t t e m p t t o i n v a d e E n g l a n d t o pay o f f t h o s e d e b t s w i t h i t s Armada i n 1588, r e s u l t e d i n t h e c o l l a p s e o f S p a i n t a k i n g w i t h i t I t a l y who was i t s banker. I n the end, S p a i n and I t a l y l o s t t h e i r a b i l i t y t o be any s o r t o f a w o r l d power. I t i s a l w a y s debt t h a t d e s t r o y s a n a t i o n . I t d e s t r o y e d even Rome. What we must u n d e r s t a n d i s t h a t we have been e v o l v i n g as an economy f o r a v e r y l o n g t i m e . Communism and s o c i a l i s m a r e a mere b l i p on a s c r e e n . Because t h e governments have s t e p p e d i n t o b a i l o u t t h e c r i s i s , t h i s r a i s e s some c o n c e r n . F o r had we j u s t l e t t h e Investment Bankers f a i l and s t o o d b e h i n d t h e p u b l i c d e p o s i t s 100% i n Commercial Banks, we would have been b e t t e r - o f f . Sometimes, i t i s h o n e s t l y b e s t t o l e t t h e f r e e markets s o r t o u t t h e weak from t h e s t r o n g , because i t i s q u i t e f r a n k l y , f a r t o o c o m p l i c a t e d t o a n t i c i p a t e c o r r e c t l y - t h i s i s why Communism a l s o f a i l e d . We have been g r a d u a l l y e v o l v i n g from t h e v i l l a economic model and i t has t a k e n a v e r y l o n g t i m e . E v e n d u r i n g t h e l a t e r y e a r s o f t h e B y z a n t i n e E m p i r e , t h e r e was a g r o w i n g resentment between t h e v i l l a s and t h e c i t i e s , whereby t h e y were s e l f - c o n t a i n e d and f e l t e x p l o i t e d t o s u p p o r t t h e u n r u l y poor i n t h e c i t i e s and t h e p o l i t i c i a n s . T h e r e was a m a s s i v e f l i g h t from the c i t i e s t h a t even a l t e r e d t h e economics ( t a x base) i n what became t h e f e u d a l i z a t i o n o f the B y z a n t i n e Empire (we have a l s o seen t h e same f l i g h t from c i t i e s t o t h e s u b u r b s , a word t h a t i s handed down from t h e l a t i n , "subu r b i u m . " T h i s t r e n d o f p r o m i s e s and e x c e s s i v e s t a t e d e b t , l e d t o t h e G r e a t Monetary C r i s i s o f 1092, and t h e v i r t u a l c o l l a p s e o f t h e monetary system. T h i s l e d t o A l e x u s I (1081-1118AD) t o p e t i t i o n f o r h e l p from t h e West t h a t gave b i r t h t o t h e C r u s a d e s . I t has always been t h e s t a t e debt t h a t d e s t r o y s s o c i e t y f o r n e v e r w i l l any p o l i t i c i a n l i s t e n no m a t t e r what f o r m o f government i s i n p l a c e . Marx r a i l e d a g a i n s t t h e ccming age o f t h e I n d u s t r i a l R e v o l u t i o n . He saw e v i l and was b l i n d t o t h e e v o l u t i o n o f t h e economy as a whole. We a r e s t i l l c a u g h t - u p i n t h e p h i l o s o p h y o f Marx. Phase one was t h e c o l l a p s e o f communism. Phase two, w i l l be the c o l l a p s e o f s o c i a l i s m - s t a t e promises t h a t a r e unfunded y e t seek t o s t i l l c r e a t e t h e w o r l d o f Marxism t o a l e s s o r degree. Somehow t h e r e i s not much d i f f e r e n c e between t h e s t a t e t a k i n g t i t l e t o t h e l a n d , o r a l l o w i n g you t o k e e p t h e t i t l e b u t d i c t a t e how i t i s t o be used. Labor c a n no l o n g e r m i g r a t e , o n l y c a p i t a l . The C t o m m u n i s t i c / S o c i a l i s t i c t h e o r y o f Marx i s c o l l a p s i n g . Our s o c i a l i s t i c l i f e may be coming t o an end because a g a i n our p r o m i s e s e x c e e d o u r r e s o u r c e s and t h i s b a i l o u t i s l i k e l y t o push t h e government o v e r t h e edge. I f we c a n n o t see how we make t h e same m i s t a k e s o v e r and o v e r a g a i n , what hope do we have? We can s u r v i v e as a s o c i e t y o n l y when we open o u r eyes. I f we c a n n o t do t h a t , t h e n we may be headed i n t o a new d a r k age o f f e u d a l i s m w i t h the break-up o f o r g a n i z e d s t a t e s . Such a p o s s i b i l i t y would be f o r t h e 2030-32 area o r a s l a t e as 2071. We have t o s t o p t h e debt and i n s a n e t a x e s b e f o r e i t i s too l a t e once a g a i n . w h i l e l a b o r has been s t i l l undergoing t h e t r a n s f o r m a t i o n t o g r e a t e r s k i l l s , at t h e same t i m e we c o n t i n u e t o m i g r a t e from the c i t i e s as p l a g u e d B y z a n t i u m . T h i s s u b u r b i z a t i o n o f s o c i e t y i s o n l y enhanced by t h e i n t e r n e t - t h e n e x t g r e a t l e a p i n the o v e r a l l t r e n d o f t h e I n d u s t r i a l R e v o l o u t i o n . C i t i e s w i l l c a l l f o r h e l p f o r t h e y l a c k t h e t a x base t o s u r v i v e o r the wisdom t o manage i t . We a r e i n t h e l a s t d e a t h throws o f Marx's i d e a s o f Communism/Socialism. He r a i l e d a g a i n s t t h e G r e a t Economic T r a n s f o r m a t i o n , because he remained j u s t a f l y on an e l e p h a n t ' s back. We c a n s u r v i v e i f we a r e r a t i o n a l and o b j e c t i v e . We need t o r e s t r u c t u r e o r we w i l l l o s e i t a l l . M a r t i n A. Armstrong
December 1 1 t h , 2008