Economics of tide
Not much has altered in the mind of the human being
since Plato wrote his cave parable 2350 years ago.
Most honest individuals prefer reality, theories on the other hand are base on a sum of simple/reality-fitting/often cunning selected assumptions from which you deduce often blind logical ending up with still a thought reality. That is the reason why theories always match the whole setup, but never match reality. A figment of imagination can serve as a tool for capture and for fail.
To understand a chart is one thing, to capsize a ship …and survive another.
The economic science could very early have been approximated much more to natural science thanks to Friedrich von Hayek, Milton Friedman, Ludwig von Mises and Laurids V. Birck among other who have collected and created knowledge on economics.
It suites so well that most economic actions, states and results described in economics have both a real economic and a financial side, and at the same time money, finances and banking are not just theoretical and intangible concepts. Nevertheless those were the first that were used to form that cyberspace-reality that has developed to such an extent that it is literaly impossible to describe.
Reality suites payments, credit balances, interest, debt, capital very well. When it comes to monetary subjects, amount of money, and interest rate is included here reality obvious does not fit the voluminous thoughts and models containing even the smallest throught detail in mathematical analytical expressions.
By adding a monetary, financial and capital interpretation we are at best able to understand, and then perhaps forecast measures of balance and of period using numbers and amounts describing the consequences of the economic actions. My ambition limits to this.
[Just the first few sections are dominated by numbers and amounts]
January the 11th 2002 Allan Greenspan told us from San Francisco that
September 11th 2001 is the date of which everything is turning. He talked about an unstabled stock market, the failing increase of demand that prevents the growth of the economy worldwide.
December 12th the Federal Reserve lowered the interest rate with 0.25% to 1.75%. That was the 11th lowering of the interest rate in 2001 and the lowest
in 40 years. The Danish TV : “Even though the employment has not reacted the housing market and the car sales are effected.”
[Our spontaneous reaction: employment effected by investments does cer-tainly not react like your-jack-in-a-box at home, little girl. It even does not re-act as we shall see below]
“Important quotations to the public”:
”Deflation: Lasting general fall in prices. Deflation makes wages, prices, inco-mes, production and employment fall more and more…the power of the de-flation in the world is stronger right now that anything else we have seen since the Great Depression”, Grek Jensen, Bidgewater Associtates; Barrons, announced 09/04/98.
“…somewhere the psycology turns to the ruling of “do not buy now”, because it will be more unexpensive later on”, Barton Biggs, Strategist, Morgan Stanley, Barrons 06/29/98.
“Everytime the comsumption decreases, the revenue cannot cover the pay-ments on debt. Therefore the burden of debt gets worser and worser”, John Rocca, Land of the Rising Sun, February 1999.
Since second quarter of 1998 we have been listening to the harangues of the
the world’s dominating, but practical expressed ignorant commentators of the media: ”Collapse, Deflation”, like an unevitable fate we have to live through.
First Asia (Japan: ”Kakadu hakai”), then USA and Europe. A few among the
the so-called enlightened individuals among the common people have per-haps, if not before, then made it to a question of belief now, a little in the line of the Ten Commandments, if the questions are asked at all.
“This problem obvious remains a question of priority higher in the decision-hierarchy”.
The explanation is clear as the day
Since midd 1980s questions on economic policy have been removed from the Danish TV. Things are not in such a bad way anywhere else in the civilized world. In addition we have not been allowed to learn on the subjects. If we have tried we were indoctrinationated with John Maynard Keynes’ odd
considerations right from the youth. These considerations or his context a-mong other things have lead us to where we are, first of all the Keynesian
was lead to work for his masters.
John Maynard Keynes Historical accuracy by the way
Let me remove every doubt at once and straightforward: Deflation must be created in the world of today. The responsibles know more or less how to prevent it. It is not an inevitable fate. I shall not reject that there might be interests concerning creation of stagflation, stagnation, deflation, perhaps war, and then more centralization of power as the final result.
A centralization or integration of the decisions as those concerning a com-mon European currency Euro leads to further centralization of the visible
power. EURO EURO2
Why develop some economic declines further? Simply because what has
been done officially to turn the tide is fundamental wrong. If the objectives are the declared ones. So simple is this.
Take the American economy, the decline is being deepened all the time. At the end of October you could read from the official accounts that the indu-strial production decreased with 5.8% in September after a decrease of 4.6% in the month before. The yearly rate of growth in retail sales decreased to 0.2% in September from 3.7% in August. The rate of GDP-growth decreased to 0.3% yearly in Q2 from 1.3% in the quarter before. In addition the employ-ment outside the agriculture was reduced by 200,000 in September 2001.
The economy-commentators are not sure now if that point to a further weakening in the coming month (they surely listened to Allan Greenspan
January the 11th 2002). You should not be surprised. Did the commentators
catch some random numbers and amounts from some random months or did they concentrate on collecting the relevant information?
Does the numbers and amounts tell anything important, it must be clear to anybody that Allan Greenspan’s easy-money-policy or discount-monetary-policy has gone totally wrong, if we maintain the expressed/expected objective. 11 times he has lowered the rate of interest in a year. And it did not work? Perhaps it turns out to have worsen things.
NAPM’s (National Association of Purchasing Mannagement) latest report
(11/26/01) shows that the economic activity in the production sector decrea-sed (in index) from 50.3% to 40.9% in October, and a decrease for the last 15 consecutive month. That is presented with a yearly GDP still increasing, and NAPM-sales-index falling from 47% in September to 39.8% in October. The index of employment of the NAPM-organization fell 6.1 points to 35.1 in the same period. Not one of the 20 industries in the manufacturing sector reported growth in October. Mr. Ore, the NAPM-organization (and latest mr. Greenspan 01/11/02) reported that September 11th was to blame for this.
“Perhaps they will be talking about the new bachward-bending-effect later on.” My proposal: ”Falling stars in August 2002 in Denmark”
One thing is worrying me: In October we find retailsales increasing 7.1% and at the same time employment and industrial production went down. A few maintained that it was caused by reduction of stocks. It is certainly true, but
on the other hand cars and expensive luxurious products must be paid.
If you return to page1 of this article now, you will not doubt for a second that it was here Greenspan entered the stage. He has for the 11th time overswim-med the market with discount-credits, and that is the reason why the stocks are being emptied.
But what should play a part is not the fact that stocks are being emptied or the comsumption is increasing further.
As things look like investment in production and production aught to have first priority for a responsible President of Federal Reserve Board.
The index of consumer-prices rose 0.3% in October 2001 while the index of producer-prices droped about 1.6%.
Deflation, was shouted in chorus. The mistake sticks out a mile.
General falls in prices are not deflation, and general prices-falls in one month or two or a quarter perhaps two certainly are not deflation.
The rulers possibly work for deflation, but the conclusion is pure false, and the indicators here are not those of deflation.
When I add that the amount of money has been increased with $800 billions
for the last 12 months in advance, and the amount was increased by $240
billions entirely in October and November, every talk of deflation for the time is nonsence. *)
Deflation is simply caused by a reduced amount of money, and not by anything else. Here it is the oposite. Because two phenomenons or states appear at the same time there do not appear to be a coherence between them just for this reason, but to some people the coherences lights from everything happening or not happening at the same time. Essential things and more vital coherences often appears the final result several months later.
Few hundred years ago people of my country maintained that the swallows lived under water in lakes during the winter. Every year they had seen them for the last time in the late summer flying close to the surfaces of lakes catching insects. And suddenly one morning they were gone.
Now you could ask why the low-rate of interest offered by Fedral Reserve does not work or why it work in the wrong way.
The commentators of the day will simply report about consumer-confidence
and the comsumption. It means nothing. If the consumers use more money, the commentators will report that this a sign of the increasing employment and surely a sign of growth. It is not. If the consumption declines, the public shall know how this has negative effects on the employment and on growth.
Nonsense. “The viewer is right, tell him this, and he will choose your channel to look at your spots and buy your products”.
It means nothing that economists 180 years ago stamped out the rumour,
in the 1930s John Maynard Keynes rediscovered the beast with a special potent brew very good inoculated with such a mutual inconsistent bogus couched that it appeared as an orginal profound thinking.
It was nothing. His mistakes among other much more serious things have brought us into this ridiculous situation with growth and savings dealt with like the hen-egg-question. Some people still maintain, and try to argue that saving is dange-rous for the economy.
Let us state clearly that consumption does not make growth begin. Absolutely not, in spite fact that something might have been filtered from the universities, and perhaps has partly been taken in by the daily indoctrinators of the time, or other shallow good people.
Consumption and confidence of the consumer has never been a problem, but production, employment and debt are problems. Even this was already
realized by the classical economists. I have to mention that every important
relation especially on value, prices and costs were not clarified by the classi-cal economists.
The so-called prosperities, booms or recoveries also origine from one of the Keynesian myths saying that “the total aggregated demand has to be pumped, in the typical cases by extending the monetary amount”.
Unfortunately the expansion of the amount of money reduces employment
by reducing the wagecosts relatively more than the value of the result of production (inflation). What happens is: if the price on the work is 110 and the value of the corresponding result of production is just 100, production
are not profitable, and therefore unemployment has to rise. Then you can remove the too high price on work by increasing the amount of money and then (reason) let the price of product be 110 or more.
Factory production has been falling (11/01/2001) for the last 12 months.
Nevertheless the commentators insist that concentrating on demand of the consumers is decisive. Not even the classical economists even if we (false) include Karl Marx, were so bad enlightened. In 1930s a lot of these did argue that expenses of the consumers had to be increased to recover the econo-my.
A few others as for an example Stagg Lawrence underlined that the consumption would be maintained, even though the producing industries
had the recession. This is exactly what has happened the last year.
If this ”school of consumption” – of which we could call Allan Greenspan some kind of a senior teacher – was right, the contrary would have happened
to the economic recession.
To encourage the consumption by low-rate-loans directs the resources away from investment, and to activities of consumption. In this way the savings are being spent on consumption.
The jungle of public subsidies meaning taxation-financed subsidies or transfers to productions that would not succed with low or no margens of
profit, has the same effect in the end. Resources are transfered away from
the natural order: Productions that would have been profitable without the competitive public or fund-financed subsidy to other productions are removed in favour of those productions that would not make a positive result without the subsidy.
Every dollar that is directed towards consumption is a dollar lesser to spend on production in the future.
Every malinvestment that are being done in deficit-businesses as a bad result of subsidies granted by the government or artificial low-rate-of- interest-suppliers have to be removed again, before recovery is possible. Without removing these delusions the artificial economic life of dead investments will prevent other profitable investments from creation.
The essence or the perspective is centralism and slavery.
Nothing new under the sun
Two days before Christmas 1913 Congress with Woodrow Wilson as the American President passed the Federal Reserve Act that privatized the money issuing in USA. The first act of these private individuals outside the circle of legaly elected were to reduce the claim of reserve in the banks. Later on the claim of reserve was reduced even further so USA could go unfinanced into WW1 – people do not want to finance a war they don’t want.
Easy-money-credit-creation of first degree :
When an individual deposit $100, and the claim of the reserve decided normally by government is 10%, the bank will keep $10 but lend out $90. Perhaps those $90 end up in another bank. Now the same happens, $9 kept in reserve, but $81 are lended out again a.s.o. The final result is that a deposite of $100 may lead to a credit of $990.
After WW1 inflation was started with 40% more credit [or about $4 billions in the beginning of the 1920s].
This meant “A new epoch”, “a new era”, they declared, like today. People thought the party never ended.
The bank supplied more credit than the businesses were able to invest, so the banks was requested to lend out to the devastated Europe too. Until then it had been nearly impossible to get dollars for the Europeans caused by the fact that dollars had to be exchanged for exported European product. But the import-tariffs of USA strongly prevented this exchange.
We will go further into this, when we come to Europe below.
Back to “the new era” in real terms of the 1920s:
Investment in the capital structure of about 6.4% a year got manufactory productivity per worker increase with 43%. The prices remained rather stable, and more stable than today. About 1929 USA actually produced as many cars as in 1953, the sales of electrical products were tripled, sales of radios rised tremendously from $10.7 millions in 1920 to more than $411 millions in 1929. An extended boom of building made it possible for millions of Americans to move into their first house. Those that understood the background of an economic boom and saved, lost their savings. That the period was marked by quickly growing consumption was not discussed.
While we are waiting for another crash on:
Like in the 1890s there was a drawback to this story of succes however.
In spite of the increase in productivity a lot of workers found it difficult keep
the purchasing power of their income received by wages. There was a begin-ning accession of women to the workingforce that further supported this fact. Even though the 1920s are looked upon as the greatest boom-period in US-history, we have to say that the period 1896-1903 clearly overtook it, in any case what concerns physical production, but certainly not concerning financial stupidities.
The accounts show that nearly the half of the increase in productivity in the
1920s refers to the period 1921-1923. Apart from the agriculture the average
real-wage increased 6% from 1921 to 1929. To secure the price-stability the consumption was destorted like now, and unbalance in production was crea-ted. The quick increase in productivity should have resulted in moderate
price-falls. But the Federal Reserve allowed a massive expansion of credit
by choosing an artificial low rate of interest (like now).
The amount of money-notes and coins was considerable stable, $3.68b in 1920 and $3.64b in 1929, but credit increased from $45.3b in June 1921 to $73b in Juli 1929, an increase of 61%.
Speculation in everything to capitalize and consume the future potential profit and other purchaging power from everything, from stock marked shares to land.
But at the end of 1928 inflation stopped. Federal Reserve changed from buying government bonds to supply them instead. That meant the amount of money was reduced considerably and quickly. At this time 63% of all govern-ment bonds in the deposite of Federal Reserve were sold, and the economy still seemed perfectly going. The explanation is that the banks still had the resposibility to rediscount or sell their loans to Federal Reserve.
The total amount of money (notes, coins and short credit) was $73b at the end of 1928 and $73.26b at the end of June 1929.
Late in August 1929 Federal Reserve increased the rate of rediscount from 5 to 6%. Because money always follow the highest rate of return, a stream of gold from England began to enter USA - here we have to remember that the gold still bore the basic value. That meant share prices on the stock market increased further on a totally false basic.
At this time J. M. Keynes himself intended to speculate in that market. He did so even though he was adviced not to do it. His answer was: ”...there will be no collapse in our lifetime” nearly like one of his countrymen expressed quite another but still related perspective 9 years later: Richard Chamberlain: “Peace in our time” having been going around in Berlin and Munich by night searching for Adolf Hitler (who he really still admired) to get his signiture on a piece of paper – after the closing of the Munich Aggreement 1938.
September 23th 1929 England increased the rate of interest by 62%. Within 48 hours Austia, Denmark, Norway, Ireland and Sweeden did the same caused by their debt. Now the gold floated back as quickly as it got to USA. The artificial high share prices had to go down now, and the banks had to recall the many loans to shareprice-speculators in millions. There remained just one way to pay back the loans, by selling the shares. Then the prices fell further, which resulted in more recalls of loan a.s.o.
Where the Federal Reserve should have limit the credits, it increased them, and where the amount of money were pretty stable it should have increased instead, now the first false disposition had been made.
To make it crystal clear: Price fall that originate from increase of productivity -
not from money-amount-expansion - is a benefit to everybody. It is simply the result of increasing investment, often in new technic that can reduce the
variable cost per unit drastic and thereby increase the margens that exactly
make the profit in mass production.
To try to stabilize the purchasingpower in monetary units, blocks this process because it limits the rise in real income.
The credit-expansion was perhaps more or less an ignorance-price-stabiliza-tion-experiment, you could maintain. It was the prices on the market of shares that tripled in 7 years that broad the depression, but the actual cause was still another, as explained. At last you could buy shares on the stock market via a hire-purchase system. Nobody would listen to the warnings, not even the English economist J. M. Keynes.
It is basicly the same that happens today, when you exclude the more stable level of prices then, and the gold in the 1920s. Price-falls are certainly not the problem. Look at England in the 1800s. Here you actually find falling prices in the whole period 1817-1896. The reason was simply the productivity that increased quicker than the amount of money – and it has nothing to do with
goldcoin or the later goldstandard as basics. Industrialism was going quite
well, very well. The price on gold rose measured in units of products. That stimulated the search for gold further. Such a developement lead automatically
to rising real incomes (nominal incomes corrected for pricechanges). Larger
profit-margens were created, larger than could be eaten by the amount of money.
The easy-credits created the so-called boom in the 1920s.
A more restrictive montary-policy would have prevented the Big Crash that happened via the shares-prices on stock market. The easy-credits seduce the investors to believe that a larger propensity to save has made more resources avaible for investment. Now (2002) the press on the prices are beginning to be shown, and profits fall. It is the question if the central bank (FRB) will put the brakes on. Perhaps, but it is precisely the opposite what is needed then, when it has happended (like in 1929 the wrong was done more of less expected).
Another sign is the speculation in share-price earnings that are beginning
to go in and finance uneconomical unions of corporations. The same happened in 1899, 1902, 1924 and in 1929. The Dane, professor Laurids V. Birck called this practice the paper mill.
Until WW1 the policy of the goverments in Great Britain and in USA until 1920 was to let depressions exhaust themselves. The readjustment-period
where unsound investments in the total capital apparatus had to be liquidated in order to make the sound economy go again.
Danish experience with financing of war, state-debt, and one the way to
To illustrate the amounts of the1910s and the1920s – in 1900 dkr100 mill.
circulated in Denmark. In 1914 the circulation was dkr 140 mill. In 1919 it amounted to dkr 430 mill. So the government let money printed to get through WW1 as convinient as possible (in the starting point just like FDR in USA). The Danish Treasury misused that type of debt Professor Laurids V. Birck maintained.
Later on we shall see state-debt totally loose its meaning, when we get to
J. M. Keynes and the Dane Joergen Pedersen from the midd 1930s.
The advances in the central bank were paid in cash but exchanged with
instruments of debt. In the war the states of Europe drawed in this way on the banks. Totally absurd in France and Midd Europe, but even in England
these “advances, way, and means” reached about Pd strl ½ billion in 1919.
When the government or the central bank print money and/or let the credit expand in a quicker speed than the growth of real production, it will end in disaster. The prices then rises, Milton Friedman proved. He was very much in line of L. V. Birck as we shall see below. Too much money corresponds to a rise in prices. The money are then lesser worth accounted in units of products what really is demanded.
When WW1 created a lack of products caused by the difficulties in foreign trade in the war, it seemed totally wrong to print money to finance the war.
What was bad enough turned even worser. WW1 was driven by counter-feiting turned inside out in a caricature with mad dimension of state-debt.
In the European-American economics the state-debt rose from dkr.150 billions to 1 trillion in 1918, to 1½ trillion in 1919 and to 2 trillions a little later.
State-debt and losses that got too astronomical to count in some states is not included in this account made by Birck.
Has this been tried before? The War of (In-)dependence and the Civil War were financed in the same way. The Thirty Year-War or Emperior’s War and the Napoleonic Wars the same.
It is not easy to get people to pay for a war they don’t want. The worst what could happen is that the government could fall.
Denmark near bankruptcy (like now)
The most peculiar rule of finance by Edvard Brandes can be divided into three period: 1) The first two years of the war with Dr. Brandes’ sinister policy of borrowing (dollars – see above) 2) the last three years of war, and 3) the phasing out years 1919-1923, the two last years under a so-called good market and trade conditions, but with a fatal financial result.
Denmark at the edge of bankruptcy in 1923.
The debt increased 50% in the period 1919-1922, and it rose 100% the next year 1922-1923. To judge Dr. Brandes’ rule of finance of which the impacts
reached from 1914-1921, we have to look at his deficit on the actual public finances in the 7 years – 237 mill. (notice quite other units cause by the problem that this article actually is dealing with) – money that he aught to have collected by taxation already in the first three years of war when the amount of money was not reduce respectively in any other way – actually he did the contrary.
This critic that can be directed against finance-policy in and immediately after the war is mostly of an economic kind. He contracted debt when the ability of taxpayers to pay was “fairly good”, and he chose to pay back when the ability was distinctly weak. Those loans were not supplied as government bonds even though it was the only logic thing to do, when especially this period shows money was easy. The dollar-loan had very pleasant conditions, I have to add.
And as we have seen (above) the American banks just wanted to get rid of the mountains of dollars.
The end of the Danish financial history of the first half of the 1920s follows in the section on capital and capital-process below, because the subject perfectly illustrates what happened, and happends again in 1990s in Denmark, and will continue in EU henceforward, if you listen to the visible rulers. Danish financial Scandales a lifetime ago:
We have several from the present an the newer history too, but they all look almost the same with a few variations, including the newest in USA.
Monetary means are primery notes, coins and credits (especially smart cards). Money on the other hand is the right to buy that is corresponding a yield to equalize. That is the reason why it is easy to deprave the means and
thereby the money and the right.
The international high finance’s words after WW1: “The national currency
as close as possible to par (the price on gold counted in the currency) and state-debt unchanged as much as possible, certainly not instalment once and for all, but a slow amortization born by the ordinary taxes. You will
gradually change the empty space of the state-debt to real capital.”
They actually knew then that real capital was the problem.
The businesses do not invest if their expected margens of profit do not match the condition to produce the production or produce a changed production. The difference between the costs and the expected revenue (sold amount multi-plied with the price), as these costs demand produced unit by unit, is too small. If enough difference or margen still can be made at a lower level of production perhaps the production is realized at this lower level, with the lower employment, if the best/most profitable alternative is lower/humbler.
Businesses do not invest caused by some price margens, but caused by
enough profit-giving price/cost-margens. The problem is not one-dimensional
but two-, and in reality often multi-dimensional. Somebody had said that Keynes was not able to think in more than one dimension at a time. If it is true, it should not surprise that the economic commentators if anything are
The economic reality is and will always be that it is the producers who drive
the economy forward, savings is the fuel in this process, Friedrich Hayek, Ludwig von Mises and Laurids V. Birck would have maintained.
What the consumers give out does certainly not activate the economy, and never will, but it keeps up the apparatus at best. Sometimes we hear commentators report that the expenditues used on private consumption
constitute some percent of the total demand.
To give the reader an impression that the contrary should be of interest this:
At the end of the twenties the US-private-consumption was accounted to about 8.5% of the producers’ expenditures on factors of prodution including producer-products. This means that the consumption of capital-goods was 12 times larger than the private consumption.
The production-process consists of a vast number of complex states. It follows directly on this that the total combined expenditures on all these states/
levels must exceed the expenditures of private consumption considerably. As an illustration you may imagine the total fixed apparatus of capital gradually performed to end-consumption. This will have to happen in a period of several years (here 12). What is given out on consumption originate from the production, while the production originate from capital (inclusive the factors of production) that in the first link originate from the savings. That is the reason why:
The more savings (see the next section) the more real capital is created and accumulated by production, and the more can finally be consumed.
Lower and lower interest rate with the results: Consumption is increased or precipitated, savings are used on consumption, stocks are emptied and malinvestments maintained. Falling prices do certainly not mean deflation. Falls in the prices as an effect of increases in productivity benefits everybo-dy.
Lasting price-falls as an effect of monetary tightening is deflation starting investments ending in consumption.
A fall in consumption has never been a problem for employment or growth in production. The expenditures on factors of production is several times larger than and much more demanding, than all the subsequent links leading to final consumption. Falls in savings partly originate from the monetary policy that stops the production from the first link in the capital- production- and division of work and of production-process widely.
Capitalisation and state-debt
Real capital is the quinteessence of each single good that in the economic
business perform our means of consumption and maintain itself. Capital as a function. The fixed real capital is tied for a longer time in land, buildings, plants, eventually in stocks, the floating (or working) real capital is tied in the consumption of factors within the production process, while it runs and eventually in the stocks. The proces is typically repited.
Private capital on the other hand is characterized by the sum of legal rights
that allow earnings from unearned income so to say (often as interest or share-price-earnings f. ex. from the stockmarked), where you could not point out any connection to productive performance. If I via public subsidies that are meant to effect unemployment and renew some buildings have the possibility to get my buildings rebuilt and after this are able to increase
the rent in the flats by 15-20% at the same time that I find out that the prices of my buildings have risen – alone caused by the public subsidy - I cannot maintain that the community has grown richer or more productive. Perhaps I will get richer (accounted in means of money), when I sell the buildings in good time but what more should it do, when we for a moment forget that it also removed life-capital from the real production. The tax- or easy-money-based subsidy draw the money to another site. Activity then increases for a short period, and the suppliers of factors expect more reve-nue too. Do the subsidies continue the economy of command, the state of officials grow, and the twisted economy away from the natural order increa-ses too. If the subsidies stop the malinvestments begin to disappear with a drastic fall in employment, and unemployment grow fast (the supply of labor market helt fixed), and even to a higher level than before the contribu-tion. In the end the natural order is regained. “Patience” is then the word, but this word has not a lot of a meaning in the so-called democratic representation. Capital Concepts: http://www.lilliput-information.com/kap/capital.html
My neighbour does what I did, when he looks at the subsidy-renews
of my block of flats. “New deal”, “New economics” that filled the1930s with subsidiess and the hasty speeding up of public initiatives, and nothing else.
Examples from Copenhagen in the 1920s (refered to above)
When the total rent in blocks with flats in Copenhagen rised from 1914 to
1926 by dkr 40 mill, private capital of about dkr 500 mill. was created (the capitalization of 40 mill. a year for 12 years). And that happened without the community became richer. Some of this capital was realised by sale. If you for a moment go back to the total amount of money in Denmark a few sec-tions above, you will find the amount dkr 430 mill. in 1919. The amounts is counted on the 1925 prices-level. Or four times the amount of money before
WW1. Inactive capital. Some would call this a crime. (will be translater from Danish)
The capital process is being speeded up in a community, where ownership
of capital is an increasing condition for personal freedom and security in life.
Surplus-capitalization was going on under WW1 via shares of stock, real estate bonds, government bonds, and bankloans. Dividend was paid from those sources, dividend from too high valued stocks, plants obvious justified. Just follow the history of our shipcompanies from 1012 til 1920. One compa-ny is killed,while the ships valued to dkr 1000 per ton was being sold to new companies. The price multiplied by 10. What the new stockholder paid was not transferred to trade and shipping that furthermore had to yield a profit of this capital, while money went into the pockets of stockholders, and many of these so-called new companies reached the limit of insolvency very soon. (Does the name Enron say anything)
Today we have asset-stripping and in Denmark also public credit to ship-companies that have continued, while the authorities looked upon it, and perhaps had, without any intentions to do so, participated wearing different hats. When you think of the manoeuvres under which that capitalization and the overcapitalization take place, and the mountain of papermoney, and especially credits that are being created, and they then want the community amortize this amount, you understand that no community are not able to live with it.
The Crash of Agriculture Bank (only in Danish till now)in 1923 shows how sick a community may develop, when all fine gentlemen in public and private high places participate or just close their eyes, ears and mouths.
I can add that we have several cases of business-strippings from the 1980s of which both persons as well as companies have suffered, and that we are able to give a full documentation from primery sources.
An example: http://www.lilliput-information.com/kosan.htm (will be translated to English)
A third example
The real capital has not yet been destroyed by war, but by secret surplus-spending in the public and fund sectors to an extent that the world’s highest taxes did not manage to finance. The government issues bonds and reduces thereby the monetary amount of M1 that should have been invested as real capital, but that is not enough. The government bonds are also sold in foreign countries. Via this death route the governments tries to get foreign currency in strong competition with other nations.
Keynesians untruely talk of the future that bear some of burdens created in the presence, and they talk of deficits on the public finances that will speed up the economy. Both is completely uncorrect and invented for the objective that remains the hidden secrets of “the dancing mosquitos”. It could be called RD cheques on our children and grandchildren.
If the first had been correctly the moral legitimacy would have been more than doubtful, but is not right. It is a lie.
By bond-loans and by taxation the purchasingpower of the citizens is transferred to the state that necessarily directs its demand for the products and the services of the presence. War cannot be fought with guns of the future, and soldiers cannot dress in the clotches of the future and live on the agriculture product of the future. The state uses the yield of taxes as well as that of the loans to buy products of the presence. As the citizens in the case of loans broadly keep to the purchasingpower, prices on goods have to rise powerfully as the primery effect of the loans, and the inflation is put into the profits and share-prices that nevertheless have to rise as long as people believe in more rises – that is what going on again today. These profits and share-price-earnings result in a wild surplus-consumption, and the lending citizens do not know that the community has become poorer, because they have among their assets a good obvious secure source of interest in the government bonds (private capital). On the contrary, but he still believes when he conclude from his own that the community has grown richer.
They also hear this lie every day on TV (today)
When there has not been earnt or saved real purchasingpower in a period of 5 years, no individual has deserved to increase his fortune in that period. The balances of the banks of Copenhagen were dkr.1.1 billions before the WW1,
dkr.3.5 billions in 1922.
A great deal of the those means that the bank got into their dispositions had not been used on just to drive the prices up, but much more to drive up our values of capital, stock-shares and real estate. Also the powerful shift of the capital away from real activity into inactive earnings-giving acquisition in form of private capital (as explained above)
The middle class was shortsighted, it would not save the system it was a part of itself by getting this amount of paper out of the world, an amount that threatened to destroy the economic system that bear the middle class.
Today the same is happening of an even wilder extent.
November 29th 1922 (the Danish) Financial Times wrote:
As early as 1913 the first bridge was built between Treasury and the central bank (Danmarks Nationalbank), and in the following years when President
Heilbuth was placed in the board of directors of the Agriculture Bank the
building of the bridge was finished, what his excellency Glückstat later on
with the most complete mastery exploited.
At this time you could read chief-editor in the Danish newspaper Jyllands-posten H. Hansen’s considerations on Zahle’s intelligense (the Prime
Minister). On the other hand Edvard Brandes (Minister of Finances) and Ove Rode (also in the government) appeared to have good heads to destroy the finances, H. Hansen wrote.
Today nobody writes anything.
After the war the choice stood between to go bankructcy or to continue this
mortgaging and borrowing on the nation’s landvalues and the working capacity that already had begun.
The debt of the Danish state was dkr.2.4 billions in 1923, when the debt of the municipalities and of the harbours were included, and the price-level was common. In 1900 the debt was about dkr.200 mill. That is 12 times more in 23 years. To the debt of the state should actually have been added the burden of retirements capitalized to presence-value in 1923.
In the official forum you then compared such an amount of debt with interest-bearing assets of the state and municipalities (in the 1920s). They were accounted to dkr.1.8 billion in 1923.
Debt of the state should officially be considered as quite the contrary from the midd 1930s, thanks to John Maynard Keynes and his masters.
Now (2002) it seems as if state debt is of some importants again. They even speake of it on TV when it concrens other countries. "It is a little difficult to find out the meaning of this." Perhaps the sun will begin to rise in the West as yet another sign of a new era (remember the Black Sun).
Rising prices reduce the real income of the ordinary people, when the
issuing of money, the credits and the wages are held at same level, if they are not, it turns worser until the false economcy has recovered.
When state-debt finance the goods of the present, the burdens instantly effects the price-level. Then taxpayers pay again, when the interest and the repayment of debt have to be paid. Here the money or the purchasing-power is reduced again, this time via the taxes that effect broad, and it is felt most among people with smaller incomes.
And it goes on and on time after time, if this little smart trick just is not being used too obvious too many times in a lifetime.
To John Maynard Keynes’ other uncorrect claim on the role of state is just
to remark that by selling of government bonds you remove means of money
from one area, where the private enterprise is ruling, and let the state make its dipositions instead. Then the natural order of the economy - based entirely on needs and honest earned purchasingpower – and the ordinary people is given the burdens from both the price-rises that comes appears instantly, and later on also from the increased taxes to finance the interest- and repayments from the loan contracted by the state.
The state is then taking over the initiative without being able to do so, and the citizens pay twice to get more ruled.
The active (or real) capital is being weaked by maintaining the false passive
capital (the private capital).
The interest receiver from the government bonds look through the eyes of the bank and will understand too late that it is not just the (real-) wages that are reduced, but also the (real-) interestpayment that is increased only in nominal units. That is alone due to the inflation. The reduction of the purchasing-power that enivitably follows exceeds the rise of the interest-payment. The result is that owners of the government bonds will pay, if new postponed but more expensive-making swindles are not made.
Here the “dancing-mosquitoes” write and rehearse the choreography.
Basic macro-economic reality: http://www.lilliput-information.com/infl.html
Under inflation the prices were allowed to rise many times over. At same time huge fortunes were collected in private hands, and the state just through binding government bonds out to the citizens. If the government had use a fortune-taxation once and for all to pay back the debt of the war, it would not had left the citizens with the absurd impression to believe that war cost nothing.
It was immorally that huge private fortunes could be created by war and
deceit of inflation, and it was uneconomic to allow the citizens a consumption
on the basic of a seeming fortune that did not related to the real lack of real capital in Europe.
You capitalize the future opportunities of yield and for the wealthy you have
made it clear that war is a splendid business, something worth to repite.
The same is happening today, but until now without war here, but with our young people in the frontline. And at the same time they build a new Europe-State on a new currency and upon indebted European states. As if we did not know that currency and nation is one and the same (WE don’t). EURO
Part 2Does a metallic standard of value prevent inflation
To read further on American and international relations I can recommend:
We have not dealt with foreign trade and exchange rates of currency. This is dealt with on: http://www.lilliput-information.com/intmo.html
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lilliput-information.com , Denmark 01/19/02
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