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Essay 7 - Corrective Action - Part 2
The 'Declaration of Independence', the bloody 'American Revolution' by citizen-soldiers (the 'militia'), and the U.S. Constitution that followed, were driven by the concept of 'Capitalism' - the concept of sovereignty or superiority of individuals over sovereignty or power of the state to control the individual.
In practice, the concept of 'capitalism' has been precluded from application to individuals as 'sovereign' over the state by the elected and appointed officials - individuals whose existence and income, without the pain and rigor of labor, depends totally on the continued existence and growth of the state and the market for money.
From the bottom to the top in the hierarchy of any system of living in some organized way, self-government or sovereignty of the individual at the bottom, has always been subjected to the weight and pressure of the ever increasing costs of state and national levels of government, and from the national level to the global level of government.
The source of the weight and pressure that imposes on and confiscates the sovereignty of the individual - his inalienable rights to govern himself and his own individual behavior - his freedom of movement in the market place through purchasing or trade power are: taxes, inflation and the high and changing cost of borrowed money.
The source of the weight and pressure that imposes on and confiscates the sovereignty of nations - inalienable rights of a nation to govern itself and its own individual behavior - a nation's freedom of movement in the market place through purchasing or trade power are: each nation's self imposed taxes, inflation and the high and changing cost of borrowed money.
It's the different inflation rates of all the different nations in the world that impacts currency exchange rates on a daily basis in the international market for buying and selling money - buying and selling human lives.
Is the self-determination of individuals - the rights, privileges and conditions essential to self government - any different than the self-determination and independence of nations?
Isn't the self-determination and independence of nations inextricably tied to the rights, privileges and conditions of any nation's individuals to govern themselves?
There is nothing wrong with the concept of a World Bank, so long as its powers are limited to maintenance of international currency exchange rates, and do not extend to loans and loan guarantees to other nations to support their currency exchange rates, or to finance their internal businesses, industries and agriculture. Let each nation, using its own national currency, like each individual, carry its own weight in the market place.
Hopefully there is still time to make changes, or take corrective action, and still meet the same grand goals espoused in the grand concepts for free-flowing trade between individuals, businesses and nations, without sacrificing national sovereignties through international trade agreements like GATT and NAFTA.
The 'global economy' argument is a hollow argument - a false foundation for destruction of national and individual sovereignties through the four international world trade agreements of global proportions.
The world has been a 'global economy' ever since its passengers dis-embarked from Noah's Ark and scattered to form new nations and principalities in the wake of the Great Flood.
Corrective actions proposed to satisfy the grand concept of free-flowing trade, nationally and internationally, without sacrificing national sovereignties, and preserving freedom of movement of the individual in the market place, to secure individual freedom and global peace and prosperity, are as follows:
Each corrective action is further discussed as follows:
Inflation is caused by increasing the nation's money supply at a rate that exceeds the growth rate of population.
The only reason for the inflation of money to exist is to support the market for money - a market that is totally independent of markets for goods, products and services. Uncontrolled or deliberate inflation of money in the United States to support the money market is illustrated in Appendix 5, Inflation and the Cost of Money (to be included at a later date).
Simply establish the M/P ratio of money supply amount over national population head count as it exists at any point in time, then fix that ratio into public law. Thereafter, there could be no expansion of national money supply except as a function of an increase in national population head count. The concept of an elastic money supply is not destroyed but the elasticity is controlled. Per capita distribution of national money supply remains fixed or stable, independent of population growth or population densities.
Zero inflation is only one of the three corrective actions that must be imposed simultaneously to fix money as a standard unit of measure of the unit cost of human labor. The other two required corrective actions are fixing the cost of borrowed money at 5% and fixing the total cost of total government.
A fixed cost of borrowed money with zero inflation works to establish a standard unit of measure of the cost or worth of human labor.
Money is not wealth, it is the medium for trading or exchanging the wealth inherent in the goods and products that are traded or exchanged. The object here is to establish a standard unit of measure of money as a basis for fair (which really means 'balanced') trade or exchange.
The first of two reasons to fix the cost of borrowed money is the inescapable fact that any business or enterprise must have a profit to survive.
There is no 'Capital' without 'profit', and poverty or bankruptcy derives from the absence or void of 'profit'.
'Capital' or 'profit' is the feedback (representative of stored human energy in a positive direction) essential to continued existence and prosperity of any business enterprise or individual.
Dynamic sensitivity of amount of 'Capital' or 'profit' to the negative force of inflation, the continual negative force of the burden cost of government and the negative high, changing and perturbating cost of borrowed money because of inflation, is better appreciated when the balance equation of accounting principles is shown in vector form. This dynamic sensitivity is discussed and illustrated in Appendix 3 - Dynamics of the Balance Equation.
It's an assertion of this thesis that a profit amount required to stay above poverty or bankruptcy is a minimum of 7% of gross incomes. There should be no limitations, by public law or any other means, on the percent of profit that any individual, business or enterprise can realize by its involvement and competition in the market place.
As the cost of borrowed money increases, profit margins are reduced, the business enterprises operating with profit margins at 6% are at risk. They ultimately fall into bankruptcy, for no other reason than the piggy-back increase of the cost of borrowed money promoted by inflation.
The second of two reasons to fix the cost of borrowed money at 5% is the fact that a rate of 5% provides the most linear rate for charge and accumulation of interest for borrowed money. The cost pressure and non-linearity of interest amounts compared to principal amounts at rates above 5% is illustrated under Appendix 5 (to be provided at a later date).
After millenniums of history and human experience, evidence is in that government is like any other business or enterprise, with the exception that government, because it is our common interest, should be non-profit. Constitutional or any other form of 'government' is anything other than personal non-profit for those elected or appointed to seats of power and control.
Dressed in flowing robes, imitating the high priests of man-made institutions of religious beliefs, government masquerades as a high priest and guardian of the public welfare.
Like many good, honest and otherwise productive people, who are good, honest and productive in spite of the man-made institutions of religious belief, many worthwhile businesses and enterprises survive and prosper, not because of government, but survive and prosper in spite of 'government'.
It is a conclusion, a contention and a conviction that individuals and business enterprises succeed in spite of government not because of government. When we look to and depend on 'government' for protection of individual freedoms of movement, speech and association, we find that 'government' is the greatest offender of imposition, infringement and constraints on individual freedoms to work and to prosper from work.
Why should any nation want 'government' to do anything more for them than to provide the infrastructure for water, sewers and roads, to protect its citizens from foreign and domestic idiots, and to take out the garbage?
No man-made law or Commandment from God ever prevented any crime or atrocity from ever being committed. In retrospect, evidence is in that bad or mis-guided public law interferes with the natural demand and supply forces of the market place through inflation, taxes and the changing cost of borrowed money, and is at the root of causes for the commission of crimes and atrocities - the classic consequences of the classic struggle between poverty and wealth.
Placing total government, Federal, State and Local, on fixed budget incomes is the optimum and ultimate solution to prevent government interference with the natural demand and supply forces of the market place.
Fixing the total cost of total government is the best, the optimum and the ultimate solution to containing the power of government, or the state.
Fixing the total cost of total government eliminates dependency on the endless vagaries of public sentiments, hypotheses and opinions through voting elections to contain the unlimited power of 'government' to tax, or to retain power and authority to rule on the basis of how tax dollars are distributed through loan guarantees, grants, subsidies and social welfare programs.
Fixing the total cost of total government eliminates those government and man-made law interferences that perturbate costs and prices derived from the natural demand and supply forces of the market place.
The Federal budget is the 'bone' in the current 'dog fight' between the 'socialists' under the banner of the Democratic Party (claiming authority to rule on the grounds of pursuit of elimination of poverty) and the 'free-traders' under the banner of the Republican Party (claiming authority to rule on the grounds of pursuit of wealth).
This proposed corrective action removes the 'bone', pulls their teeth and castrates the 'dogs', to stop the fight so that the honest who work for their living can get on with their work essential to leading productive lives.
From natural law, maximum efficiency is achieved only when the power of the source is equal to the power of the load. Total national money supply is total national power.
Distribution of total national money supply is distribution of total national power. So begin by reserving 50% of total national money supply to support the total cost of total government.
The other 50% is reserved to support balanced (not free) exchange of goods, products and services in the market place.
Given no prohibitions to engage in foreign trade within any specifics of negotiated nation-to-nation foreign trade agreements, participation in the 'global economy' is not constrained, other than by quality and price competition in the market place.
Of the 50% of total national money supply allocated to support the total cost of total government, 25% can be reserved to support the total cost of all three branches of Federal Government (Executive, Legislative and Judicial), including national expenditures for national programs like defense and investment in science through space exploration.
The remaining 25% of the fixed cost of government can be distributed to each of the several States on the basis of any State's population as a percent of total national population.
Distribution by the individual States to the lower level county and municipalities can also be distributed on the basis of county population as a percent of a State's total population. This truly balances the power between Federal and State governments.
By 50-50 distribution of one half of total national money supply between the Federal and State governments, where State government distribution to lower level government is done on a basis of population distribution (by County, as a percent of State population), per capita cost of government stays the same, independent of population growth, movements or densities.
Illustration of this distribution is shown in Figure 7.1, Fixed Government Budget Income Distribution.
Argument for this distribution rests totally on the natural law fact that maximum efficiency is achieved only when the power of the source is equal to the power of the load.
Ultimate objective and benefits are:
Dr. Quesnay, the first 'economist' (from Essay 2), advanced the idea of a single tax on net income from land, because he viewed land as the source of wealth. 'Corrective Action' embraces and advances the objective of a single and progressive tax on gross incomes of all individuals and businesses, because of assertion that application of God-given talents to make and repair products through human labor - and nothing else - is the source of all wealth.
The problem of all civilizations or societies (all systems of living in some organized way) has never been distribution of wealth; the problem has always been distribution of the tax burden. The current system of taxes on incomes need changes only in the arena of allowable tax deductions. Reject the so-called Fair Tax which is a consumption tax that will increase your cost of living by at least twenty five percent.
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