"The mind is a compact, multiply connected thought mass with internal connections of the most intimate kind. It grows continuously as new thought masses enter it, and this is the means by which it continues to develop."

Bernhard Riemann On Psychology and Metaphysics ca. 1860

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Saturday, September 24, 2011

Answer to "The False Dichotomy of Greed"

I notice a fleeting mention of the word infrastructure here. This is perhaps a subconscious acknowledgment that there is a world of difference between the monetary economy and the physical economy. It is quite true that the acolytes of Greenspan such as Phil Gramm and his rather loutish epigone (if that were  possible) Rick Perry like to drone on with their sophistical "horse sense" bilge  about the family budget at the dinner table being just like government.
The problem is that unless you start from the recognition that the role of government, exclusive to the constitutional system of the United States, is "to provide for the general welfare" and work your way back from there, your mentality becomes enmired by the taint of the false belief that somehow monetary values are real. This failing perfectly captures the false reasoning of the likes of Mr Krugman that monetary stimulus is the solution.
Currently, we have a mass of illegitimate debt created out of thin air by so called financial houses. In a bygone era, we outlawed the practice known as "bucket shops." Today, the so-called "shadow economy" of too big to fail speculators is  with their quadrillions of derivative products created by autistic "quants" is nothing but a farcical and tragic repeat of those bucket shops.
(Then there is another childish variation of monetarism, hardly worth mentioning, that holds that gold as a physical substance is the source of wealth.)
The plain truth is that if the education system in this great land of ours were to simply instruct our students how Alexander Hamilton established a First National Bank that successfully rescued us from an untenable morass of debt, we would not be engrossed in such dead end "debates."
Hamilton directly and forcefully refuted Adam Smith's Wealth of Nations in his Report to Congress on the Subject of Manufactures. Smith's rehashing of the Physiocratic dogma that the bounty of nature is wealth with the mantra of 'buy cheap, sell dear" was nothing more than a celebrated apology for the evil of the looting colonial heist known as the East Indies Company.
Where did Hamilton locate in that document the source of wealth? In the ability of mankind to improve upon the "bounty" of nature by applying technological advances to manufacturing useful goods. This was strictly in keeping with Benjamin Franklin's motivation for the development of the use of paper currency, that was taken up by the use of the Pine Tree Shilling by the Massachusetts Bay Charter. Thus, the role of government is to regulate credit to secure improvements that benefit the physical well being of future generations.
Today we must reenact the Glass Steagall regulatory principle of the separation of depository institutions that serve the common good from the marauding investment houses that act to the opposite effect. Next the fictitious derivatives must go the way of the Dodo. Finally, we must use the levers of public credit precisely in the way that Alexander Hamilton did when he almost single-handedly rescued an unique experiment in self government from the brink of ruin. The way forward is to establish government backed credit for multi-generational great projects that will produce such benefits.

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