Progressive Economics Group Quandaries (Demo)

I am posting this more in-depth response by Norman Kurland to the negative comments of Dan Sullivan and Rahul Jain on the Progressive Economics group thread in response to my postings and comments and that of Norman Kurland, President of the Center for Economic and Social Justice (www.cesj.org). Thread can be read at www.facebook.com/groups/1420002678254911/1452098295045349/?notif_t=group_comment under the article title “3 reasons nobody believes the official inflation numbers.”

Norman Kurland: As I previously said in my response of July 27, 2014 to Dan Sullivan attack on Gary Reber’s writings on binary economics and the Just Third Way, I have no disagreement with these two statements of his:
PART I: “Money and credit are not wealth, but are claims to wealth.”
PART II: “There is also no economic rationale for government to artificially stimulate capital formation instead of simply removing the artificial barriers to that formation.“

However, I see no evidence that Mr. Sullivan ever read the links to more detailed explanations and definitions of terms in my earlier response to his ad hominem criticisms of Gary Reber’s writings. He certainly reflected no understanding of the logic or justice of the Just Third Way, compared to whatever approach to economic development he may support, which I’m told are based on the ideas of Henry George. If Mr. Sullivan persists in not taking the time to understand our definitions of terms, there is no way he can understand our ideas. If he doesn’t understand our ideas, we will just hope others who read any further attacks by Mr. Sullivan will be more open-minded and scholarly in addressing our proposals for making any economy grow in a more sustainable and just manner for all citizens.

PART I RESPONSES

Yes, money (and money is a form of credit that should be asset-backed) in the broadest sense is really anything that can be used to settle a debt.  Even barter exchanges are money. In his 1967 book coauthored with his wife Patricia Hetter Kelso, Two-Factor Theory: The Economics of Reality, the late Louis O. Kelso described money:

“Money is not a part of the visible sector of the economy; people do not consume money. Money is not a physical factor of production, but rather a yardstick for measuring economic input, economic outtake and the relative values of the real goods and services of the economic world. Money provides a method of measuring obligations, rights, powers and privileges. It provides a means whereby certain individuals can accumulate claims against others, or against the economy as a whole, or against many economies. It is a system of symbols that many economists substitute for the visible sector and its productive enterprises, goods and services, thereby losing sight of the fact that a monetary system is a part only of the invisible sector of the economy, and that its adequacy can only be measured by its effect upon the visible sector.”

What is clear from this description is that money is a “social good,” an artifact of civilization invented to facilitate economic transactions for the common good. Like any other human tool or technology, this societal tool can be used justly or unjustly. It can be used by those who control it to suppress the natural creativity of the many, or it can be used to achieve economic liberation and prosperity for all affected by the money economy.

What is “property”?

Response: “Property is an aggregate of the rights, powers and privileges, recognized by the laws of the nation, which an individual may possess with respect to various objects. Property is not the object owned, but the sum total of the “rights” which an individual may “own” in such an object. These in general include the rights of (1) possessing, (2) excluding others, (3) disposing or transferring, (4) using, (5) enjoying the fruits, profits, product or increase, and (6) destroying or injuring, if the owner so desires. In a civilized society, these rights are only as effective as the laws, which provide for their enforcement. English common law, adopted into the fabric of American law, recognizes that the rights of property are subject to the limitations that (1) things owned may not be so used as to injure others or the property of others, and (2) they may not be used in ways contrary to the general welfare of the people as a whole. From this definition of private property, a purely functional and practical understanding of the nature of property becomes clear. Property in everyday life is the right of control.” See Kelso, “Karl Marx: The Almost Capitalist”, American Bar Association Journal, March 1957.

What is a brief version of the Kelsonian theory of Binary Economics?

Many other writers on “worker ownership,” “broad-based capital ownership,” and “participatory economics” have trivialized and marginalized Louis Kelso as merely “the inventor of the ESOP” and as just another advocate of “the ownership solution” to the flaws of global capitalism. (One notable exception is William Greider, who gives a generally accurate description of Kelso’s paradigm in his 1997 best-seller One World, Ready or Not: The Manic Logic of Global Capitalism.)

A more careful examination, however, reveals an elegant system of interconnected principles that bridges classical, Keynesian and other schools of economics. Furthermore, Kelso offers a new “post-scarcity” paradigm for analyzing and correcting structural economic defects that foster such seemingly intractable problems as global poverty, environmental destruction and the widening gap between the haves and have-nots.

In Kelso’s system “binary” means “consisting of two parts.” Kelso divides the factors of production into two all-inclusive, physically interdependent and market-quantifiable categories — the human (which he calls “labor”) and the non-human (which he calls “capital”). The central tenet of binary economics is that, through the property (or ownership) principle, these two “independent variables” can link marketable outputs from the labor-capital mix directly to incomes distributed according to market-quantified values of all “labor” and all “capital” inputs.

In contrast to traditional schools of economics, which assume that scarcity is inevitable, binary economics views shared abundance — sustainable economic growth, a balanced market economy between production and consumption, and the equitable distribution of future wealth and income throughout society — as achievable. Binary economics holds that broad-based affluence and economic freedom, as opposed to financial insecurity and economic dependency for the many, is made possible through the widespread ownership of constantly improved capital instruments and social institutions to produce more and more consumable goods with less and less labor input and more efficient technologies and uses of land and other natural resources.

Binary economist Robert Ashford identifies three distinguishing concepts within binary theory — binary productiveness, the binary property right, and binary growth. These components interact and reinforce one another, allowing for maximum rates of sustainable growth within a modern, globalized economy.

Binary economics recognizes a natural synergy, as opposed to an unavoidable trade-off, between economic justice and efficiency within a global free marketplace. Rejecting pure laissez-faire assumptions, binary economics holds that a truly free and just global market requires (1) effective broad-based ownership of capital, (2) the restoration of and universalized access to the full rights of private property, (3) limited economic power of the state (whose main role should be to eliminate special privileges, monopolies and other barriers to equal participation) and (4) free and open markets for determining just wages, just prices, and just profits.

What is Kelso’s definition of “Capital”?

In binary economics, “Capital” means all non-human factors of production, including land, all natural resources, plant and equipment, advanced physical and informational technological tools, robotics, rentable space, physical infrastructure, and intangibles, such as patents, copyrights and constantly improved management and marketing systems.

What are the three fundamental and interdependent principles of economic justice underlying the moral basis of binary economic theory?

The market-based theory of binary economics is underpinned by three interrelated principles of economic justice:

1. Participative Justice, is the input principle which demands as a fundamental human right, equal opportunity for every person to contribute to the production of society’s marketable wealth both as a worker and as an owner of productive assets. (See Article 17 of the Universal Declaration of Human Rights.)
2. Distributive Justice, is the outtake principle which holds that the contribution of labor to the economic process should be compensated at the market-determined rate (or “just wage”) for each particular type of human contribution to the production of marketable wealth. This principle dictates that the contribution of capital should be compensated by the “just profit” generated by the project or enterprise. (Just profits are determined by the market-based rental value of all contributed capital assets, or by the gross revenues resulting from market-determined “just prices” less the market-based cost of the factors of production, including labor.)
3. Social Justice (also known as Harmonic or Restorative Justice), is the feedback principle that corrects, balances and restores participation and distribution within the economic system. This principle was referred to by Louis Kelso and Mortimer Adler as the “principle of limitation,” aimed at limiting greed and avoiding economic monopolies in either the private or public sectors. “Social Justice” calls for citizens to organize and mobilize enough “people power” to restructure the laws and basic institutions of a market-based economic system at all levels to restore participative and distributive justice.

What is Credit?

Credit. A loan of money to be repaid, usually with an added amount of interest, transaction fees, or, under Islamic banking, through a risk-sharing, profit-sharing loan.

Credit, Capital. Funds lent or borrowed to finance feasible, “self-liquidating” projects that are expected to generate an income and repay the loan out of that future income. Capital credit is designed to advance outside funds to be repaid with future savings. It is a modern social tool for enabling people without sufficient past savings to become capital owners voluntarily on market principles. Also referred to as “Productive Credit” and “Procreative Credit.”

Credit, Consumer. Funds lent or borrowed to expend on consumer goods and services; that is, things that do not pay for themselves.

Credit, Interest-Free. Loans made for productive purposes, where the money loaned does not involve existing savings, and therefore no interest is due to the lender.

Under certain religious and philosophical traditions (particularly in Judaism, Christianity and Islam), interest charged for non-productive loans is considered usury, as it takes a profit where no profit is generated. In a productive loan involving existing accumulations of savings, the provider of those savings (the lender) is due a return because the loan is recognized as a form of investment and due to the owner as a right of private property.

When a productive loan is made based on the present value of existing or future marketable goods and services whose proceeds are used to pay off that loan (and not based on past savings), the lender has no pre-existing private property interest and therefore no interest is due. (See also “Credit, Pure”)

Credit, Non-Recourse. Loans in which the borrower is insulated from the risk of default and his personal assets cannot be seized in the event of loan default. Instead the loan will generally be secured by the assets standing behind the loan, by loan default insurance, or by a guarantee of a third party or the corporation itself. Under one example of nonrecourse credit, a loan to a corporation is nonrecourse to the shareholders of that corporation, unless the shareholders personally guarantee the loan. Another example is with a leveraged Employee Stock Ownership Plan, where the workers who benefit from loans made to an ESOP Trust are not personally liable in the event of default. Under Capital Homesteading, the proposed capital credit insurance provides a substitute for collateral to enable the lender to recover funds lent, thus insulating from risk any personal assets of the borrower.

Credit, Pure. An interest-free loan made for a feasible productive project. Pure credit is based on a system of enforceable promises, the acquisition of income-generating assets, and the ability of the new assets to generate a future stream of profits for repaying the loan used to acquire them.

In business loans for new capital formation and expansion, pure credit would be monetized as newly created, asset-backed, interest-free money authorized and regulated by the central bank and a competitive system of local commercial banks. The only costs associated with pure credit are transaction/service fees charged by the qualified financial institutions facilitating the loan creation and loan repayment process, and risk premiums for capital credit insurance and reinsurance to cover the risk of loan default. (See “Bank, Central”)

Pure credit differs from conventional credit, which charges interest on the use of already accumulated savings (or depends on non-related sources of income for repayment) to pay the lender a market-based yield on his savings.

Pure credit is backed by 1) the loan paper, 2) the shares purchased with the loan funds, and 3) the present value of the productive assets purchased with the money coming into a productive enterprise from its sale of new shares. Pure credit enables the borrower to finance feasible capital projects that create “future savings” (future profits) that pay for the assets themselves.

Using “pure credit” financing, profits generated by the new capital are first applied to pay off the loan, and thereafter are distributed as dividends to the owners. Under “capital homesteading,” pure credit (reflected in the issuance of newly created, asset-backed money) is also backed by capital credit insurance and reinsurance, which serve as a substitute for traditional collateral to cover the risk of loan default. (See also “Credit, Interest-Free”)

Credit, Self-Liquidating. Loans expected to cover the costs of capital assets out of future profits realized from the productiveness of those assets.

Credit System, Two-Tiered. A key monetary reform under Capital Homesteading that distinguishes between “good” uses of money and credit (i.e., used to finance broadly owned private sector growth and production) and “bad” uses of credit (i.e., used for fueling nonproductive consumer and government debt, or speculation). The Fed’s discount window would be available exclusively to member banks and members of the Farm Credit system for discounting “eligible” paper for feasible, ownership-expanding industrial, commercial, and agricultural projects.

Under this policy, credit and “new money” for Capital Homesteading, i.e., feasible business projects linked to broadened ownership (Tier 1), would be generated “interest-free” through the discount mechanism of the central bank, at a service charge based on the cost to the central bank of creating new money and regulating the lending institutions (0.5% or less). Credit and money for nonproductive, ownership-concentrating uses (Tier 2) would come from past savings (“old money”), and would be charged an interest rate determined by normal market yields on such savings. Under Capital Homesteading, local lenders would add their normal transaction fees and risk premiums for servicing capital acquisition loans, and the new loans would be collateralized by newly issued shares and newly acquired capital assets. Premiums paid to capital credit insurers and reinsurers would be pooled to spread the risk of default.

What is Binary Growth?

Binary Growth. Within binary theory, this concept holds that economies grow steadily larger as private capital acquisition is distributed more broadly among the population on market principles. This concept also focuses on the importance of unleashing the unutilized or underutilized capacity of all economic systems to produce in greater abundance.

Wealth distribution assumes wealth creation, and technological and systems advances, according to scholarly studies, account for almost 90% of productivity growth in the modern world. (Sources: John W. Kendrick, “Productivity Trends and Recent Slowdown: Historical Perspective, Causal Factors, and Policy Options,” Contemporary Economic Problems, 1979, American Enterprise Institute; also R. M. Solow, in K. J. Arrow, S. Karlin, and P. Suppes, eds., Mathematical Methods in the Social Sciences, 1959, pp. 89-104, Stanford University Press, 1960. Also: Edward Denison, “Accounting for United States Economic Growth: 1929-69,” Washington, DC: Brookings Institution, 1974, and Accounting for Slower Economic Growth: The United States in the 1970s, Washington, DC: Brookings Institution, 1979.)

What is Binary Productiveness?

Binary Productiveness. This concept states that while humans contribute to economic growth through all forms of labor, capital assets such as machines and technological processes are making an even bigger, ever-increasing contribution to overall output, in relation to that contributed by human labor.

What is the meaning of a “Binary Property Right”?

Binary Property Right. This concept refers to the right of every person to acquire, on market principles, private (individual and joint) ownership of wealth-creating capital assets.

What are the differences between The Just Third Way, Capitalism, and Socialism (and other systems of collective ownership)?

Comparison Matrix: http://www.cesj.org/learn/just-third-way/comparison-of-capitalism-socialism-just-third-way/

Graphic Overview of the Just Third Way: http://www.cesj.org/learn/just-third-way/graphic-overview-intropage/

Glossary of Terms of the Just Third Way: http://www.cesj.org/learn/definitions/just-third-way-glossary/

Free books, articles, accomplishments and testimonials on the Just Third Way: http://www.cesj.org

PART II RESPONSES

While I agreed above with Mr. Sullivan’s statement “There is also no economic rationale for government to artificially stimulate capital formation instead of simply removing the artificial barriers to that formation“, I am convinced he has not taken the time to read the links in my first response to his attacks against the Just Third Way and our proposed Capital Homestead Act.

As we point out in the following CESJ copyrighted movie script, passage of the Capital Homestead Act would remove all artificial barriers to faster rates of new capital formation. (A Summary of the details of the Capital Homestead Act can be read at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/)  Here is the script on how all initiatives would come from the private sector to generate new capital formation in the future, without changing the current powers of the Federal Reserve System:

Script for Capital Homesteading Cartoon/PowerPoint

(Dave Kelly, Dave Hamill, Michael Greaney, Norman Kurland, Dawn Brohawn)

Set-up notes:

1. Objective of the Capital Homestead Act: Empowering citizens through ownership sharing.
2. In the U.S., we have the right to vote.  But do we have any real power?  Power follows property (ownership), just as property follows access to the means to acquire and own productive (income-producing) wealth.
3. How do we articulate the message so that the 99 percent GET IT and buy into CHA?
4. CHA would change the system at the local, state, national and global levels.
5. Kelso: The law of the Urgent and Important (Our basic survival and security needs are more immediate and generally must be satisfied before most persons can be effective reaching their fullest human development and serving our highest and ultimately most important human needs, including working for justice and the dignity and fullest development of others, i.e. Maslow’s hierarchy of human needs).
6. A War of Ideas: the Just Third Way vs. capitalism and socialism.
7. The three interdependent systemic principles for achieving economic justice

• Participative Justice
• Distributive Justice
• Social Justice (encompassing the Kelso-Adler principle of Limitation)

1. This presentation starts with the assumption that the Capital Homestead Act has already been passed.

Defining our Terms:

1. Private Property: It’s not the natural resources and the things one owns. It’s the bundle of rights, powers, privileges and limitations that an owner possesses against all others with respect to things that one owns personally or jointly with others. This fundamental and universal human right that should be protected by government determines who should control things invented by people as well as land and other natural resources. Private property in a market system determines who has the power to govern one’s contributed human efforts (i.e., labor) and one’s freely contributed non-human inputs (i.e., capital) to the interdependent labor-capital process of creating marketable goods and services.  Slavery, which means that you have no rights, is the condition where someone else owns your body and all that you and your labor produce. State and collective ownership and slavery violate the fundamental human right of every person to acquire and possess private property rights, especially in the means of production, as recognized in article 17(1) of the Universal Declaration of Human Rights.
2. Growth: Sustainable increases in production and private sector jobs depend on growth in customer purchasing power. The last time we had real, sustained growth was during WW II when the customer was the U.S. government and when unemployment went from 17 % to near 0%. Our government supplied maximum customer power for war and weaponry. We can supply the means to achieve maximum customer power to all citizens, but now for peace, prosperity, freedom and fullest human development.
3. Money: It’s not just coin, currency and demand deposits (checking accounts); it’s anything based on trust or promises and backed by existing or future assets that can be used to settle a debt or engage in a deal where each party will mutually benefit.

(Note: In the following wherever any underlined word or phrase appears it will be a LINK to a definition.  Plus, we are starting here with the scenario that the Capital Homestead Act has been passed.)

SCENE 1: Men and women sit around a large table in a business boardroom

BD member 1: Our new customers are out there. But how do we fund our expansion?

BD member 2: We don’t have enough savings, or a fat-cat investor.

BD member 3: Well, there is another way, a new way.

BD member 4: Yes, the new Capital Homestead Act, just passed by Congress and signed by the President.

BD member 5: What does that do?

BD member 3: It will provide people with the right to obtain capital credit to buy our new shares. And it doesn’t take away property rights from current owners.

BD member 1: Who’ll be able to get the credit?

BD member 4: All our workers as well as every Capital Homesteader.

BD member 2: What’s a Capital Homesteader?

BD member 3: Every man, woman and child. They’ll all have an equal right to a yearly allotment of capital credit to be authorized by the Federal Government and supplied by local commercial banks. It will be based on the government’s projections of total new capital formation expected to be added each year by the private sector under the Capital Homestead Act.

BD member 2: How does this differ from money available for consumer credit?

BD member 3: In contrast to consumer credit, which provides money to buy things for consumption, not for investment, access to capital credit enables citizens to purchase our newly issued shares or those of other companies. Capital credit makes it possible for people with no accumulated savings to earn a living from producing as owners the things that people want to consume. Capital credit will provide the low-cost investment money needed to create new private sector growth and jobs, more advanced technologies, sustainable energy systems, rentable space and even infrastructure, like highways and power grids, plus many assets that citizen-owned businesses could provide and rent to government. 

BD member 2: Why should banks be interested in making interest-free Capital Homesteading loans to people who can’t afford to buy shares?

BD member 3: No interest needs to be charged since the money will not come from the accumulations of the rich and super-rich, nor will it come from savings of low-income and middle-income citizens, foreign investors or loans from any government. The only charges to be added would be service fees of banks and professionals serving Capital Homesteaders, plus insurance premiums charged by competing private sector insurance companies that would evaluate the risk of default on shares offered to workers in the ever-expanding ESOP and new Capital Homesteading marketplace. Banks will greatly expand their customer base and future profits earned by their commercial bank departments, as well as improving the public image of the banking profession.

BD member 2: Isn’t the idea of financing out of “future savings” new?

BD member 3: Not really. It was first proposed by Dr. Harold Moulton, who taught economics at the University of Chicago and headed the Brookings Institution, Washington’s first think tank from 1916 to 1952. He proposed “pure credit” in his 1935 book The Formation of Capital as a strategy for lifting America out of the Great Depression and an alternative to Lord Keynes’ advice to the Roosevelt Administration. Moulton pointed out that financing investment growth out of “past savings” took money that could otherwise be used for increasing consumption spending, thereby reducing market demand and growth rates for future investment and private sector job creation. Not until 1940-1945 when the government became a customer for weaponry producers did the American economy reach levels of near zero unemployment from double-digit unemployment rates of Keynes’ defective economic strategy. Keynes offered a one-sided focus on getting government to stimulate demand artificially if necessary, not full production – a focus that is still followed by most governments in today’s world. Unlike Keynes, the focus of Capital Homesteading is on lifting barriers to full production and full ownership opportunities for all citizens.

BD member 2: How would “future savings” work under the Capital Homesteading Act?

BD member 3: Citizens can now buy new productive capital assets on credit backed by “future savings” from the future dividends each citizen expects to earn and be used to pay off the shares he or she bought with interest-free capital credit. Those future dividends would, of course, come from the profits when new marketable goods and services are produced and sold when companies like ours invest in growth assets.

BD chair: But remember, these must be full-dividend-payout and voting shares.

BD member 3: Yes, and the expansion in dividends and new jobs will create more customers with more money to spend.

BD member 4: And the money for us to hire new workers.

BD member 3: And further expand our plant.

BD member 4: And it’ll cut the cost of government, balance the budget, and lower taxes.

BD member 5: How?

BD member 3:  When people have money in their own hands, they don’t need the government to redistribute it.

BD member 4: And the government can keep the promises of the past, like Social Security out of general revenues, while paying down the debt and cutting the deficit.

BD chair: OK, how will we market the shares to the Capital Homesteaders?

BD member 3: Through brokers serving to turn all Americans into Capital Homesteaders.

BD chair: Well, we just need to vote on a resolution to move forward. All in agreement, raise your hand.

ALL HANDS ARE RAISED IN VOTE OF AGREEMENT……………… 

SCENE 2: A living room with a husband, wife, college-age son and daughter and their trusted financial advisor

Husband: How will each of us get the money to buy shares?

Advisor: [BREAK THIS INTO SEVERAL SLIDES]

–       First you set up your own asset-accumulation trust, a Capital Homestead Account – a tax shelter like an IRA.

–       This account will periodically receive a voucher from the government entitling the trust to administer each year’s capital credit allotment to buy newly issued shares.

–       When dividends on the shares are paid out, they first pay off the local commercial bank that made the capital credit loan and then all remaining dividends go to you to supplement your labor and all other forms of income.

–       It works like a tax-exempt Employee Stock Ownership Trust, which is already in the law. The CHA allows you to borrow to purchase shares that pay back the lender from the full stream of future pre-tax profits earned on the shares from the future sale of marketable goods and services sold by the company. Lenders are more secure in getting paid back before the government in profits that would otherwise be taxed two or three times before getting to a shareholder. Taxes will be paid once under the CHA, when the citizen receives dividends and other distributions from the tax-sheltered CHA trust.

Husband: How will we make our selection of CHA shares?

Advisor: With my advice. Also, the bank and the capital credit insurance company will be rating the shares in which you’re investing.

Wife: Where will we get the money?

Advisor: From your bank.

Husband: But banks only make loans if you have collateral. Besides our house, we don’t have a lot of other investments or savings.

Wife: Yes, as they say, “you need money to make money.”

Advisor: The Capital Homestead Act will provide you and every citizen a new source of money and a substitute for collateral. This will help you invest in capital growth assets that will pay for themselves with the future profits they generate. The Capital Homestead Act will encourage private insurance companies to issue capital credit insurance. Risk premiums will be deducted from the full amount borrowed. The insurance company will pool all the risk premiums to cover losses in case a specific loan is not repaid. Capital Homestead loans are “non-recourse” loans — that means the bank can’t seize your home or other personal assets if your capital loan goes bad.  The assets behind the new money are in the company that issued the new shares.

Husband: I still don’t understand where the money comes from.

Daughter: Some Tea Party people say this is just one more government program.

Son: My Occupy friends say it’s another Wall Street rip-off and conspiracy with the Federal Reserve.

Advisor: Neither is correct. Under the new Capital Homestead Act the new money starts with a loan you get from your local bank or other qualified lender, once the bank approves your loan application to buy new shares, takes out one-time bank charges and insurance premiums, and, with the balance of bank-supplied, interest-free and asset-backed money, sets up a deposit account from which you can buy your new shares. The bank can also turn your loan paper into another form of money by selling it to the regional Federal Reserve Bank, which has the power to create interest-free, asset-backed currency or a demand deposit to buy new currency, if needed.

To see how this works, it’s very important to understand what money really is. Money is anything that is used to settle a debt. Rather than being top-down, Capital Homesteading is a bottom-up way to finance private sector growth without inflation, and create new jobs and widespread citizen ownership. 

Son: Wow! Sounds revolutionary.

Advisor: Yes. We no longer need “old” money – including the past savings of the rich – to pay for new capital. 

SCENE 3: Local commercial bank with Loan Officer, Husband and Wife and Financial Advisor

Husband: These are the shares our Capital Homestead Account trustee would like to buy for us and each of our dependents, and here’s our offer in the form of a Bill of Exchange. This represents the present value of projected future profits to be earned from the sale of future goods and services that will be produced by the new assets being added by the company we’re investing in. (He hands the Bill of Exchange, with evidence supporting his projection of future profits, to the loan officer).

Commercial Bank Loan Officer: Okay, the bank and the capital credit insurer will evaluate the feasibility and risk involved in your offer. Also, your advisor and the broker will continue to guide you.

SCENE 4: Same as scene 3 (Later)

Commercial Bank Loan Officer: We have accepted your offer. Our bank will “discount” your loan, meaning it will take a percentage of the $7,000 of the new money your Capital Homestead Account will receive this year created by our bank and with the support of the Federal Reserve as a loan to purchase the new shares. Our percentage will cover the “risk premium” on your capital loan, as well as our service charges and profits for setting up and administrating your loan.

Commercial Bank Loan Officer hands a large “Promissory Note” to the Husband

(A big picture with the label “Promissory Note” is shown.)

Husband signs the Promissory Note.

Advisor (to husband and wife): When you signed the promissory note and the bank set up a deposit account for you to buy the shares on credit repayable with the future profits that you and the bank expected would be earned from the productive assets you bought, the bank was creating new money. This is how Capital Homesteading reforms the banking system and creates new asset-backed money backed by “future savings” to build a nation of capital owners, from the bottom-up….

SCENE 5: Commercial Bank Loan Officer puts the Capital Homesteaders’ Promissory Note in the bank’s vault with a caption that reads: “Backing the new Demand Deposit in the name of Capital Homesteaders Capital Homestead Account.”

SCENE 6: Discount window at the Regional Federal Reserve Bank

Commercial Bank Loan Officer hands the Bill of Exchange to the Regional Fed Clerk behind the window.

Commercial Bank Loan Officer: Here is the Bill of Exchange for our new Capital Homesteaders.

SCENE 7: Regional Fed Clerk accepts the Bill of Exchange and hands back new currency issued by the Regional Federal Reserve to the Commercial Bank Loan Officer.

Regional Fed Clerk: The new currency we are issuing to back up your bank’s Demand Deposit — a checking account with the Federal Reserve. Your bank can withdraw new currency to back up the Capital Homesteader’s Capital Homestead Account account at your bank. The CHA trustee will use the new currency to purchase shares from the company selling the shares. The company will then buy new equipment and expand its plant. The added capital will generate future profits first to repay the Capital Homesteaders’ loan, and then provide them with a future stream of dividend income.

Commercial Bank Loan Officer signs the Bank’s Promissory Note and hands it back to the Regional Fed Clerk

The Regional Fed Clerk hands the checkbook for the Federal Reserve Demand Deposit to the Bank’s Loan Officer.

SCENE 8: The Commercial Bank Loan Officer puts the checkbook for the Regional Fed Demand Deposit in the Commercial Bank’s vault.

SCENE 9: (TEXT WITH ILLUSTRATIONS)

When the Regional Fed accepts (“re-discounts”) the local bank’s promissory note (taking a percentage out for its administration costs), the new asset-backed money is issued in the form of currency or a demand deposit (checking account) with the Regional Federal Reserve. The new money is transferred:

From the Regional Fed > to the local bank > to the Capital Homestead Account trustee > to the broker > and finally to the company that sold the new shares to the Capital Homesteader.

With the money (Capital Homesteaders’ investments), the company builds new plant and buys new equipment, creates new jobs, and begins producing goods or services.

Profits generated from the Capital Homestead investments are distributed to the Capital Homesteader’s Account.

Before the dividends can be spent for the consumer needs of the Capital Homesteader, the CHA will first take these dividends and repay the lender (the local bank). The bank then repays the Regional Federal Reserve.

At the end of the money creation-and-repayment cycle, the Regional Federal Reserve cancels the money or re-issues it for the next round of Capital Homesteading. 

SCENE 10: (TEXT AND ILLUSTRATIONS):

Through Capital Homesteading a nation can finance its growth with equal opportunity for every citizen to become an owner of capital. This can be done without taking away income or existing property from today’s owners.

Based on current White House figures for financing all forms of productive capital added each year, at modest rates of growth (2-3%) every citizen would receive – annually – a CHA voucher, giving him or her the right to obtain an equal annual allotment of capital credit ($7,000, at present growth rates) to purchase shares in a lender-approved business venture of his or her choosing.

Under Capital Homesteading, assuming no increase in growth rates, the average child born today would receive by age 65 the following benefits:

• Annual income of about $58,000 in pre-tax dividends.
• A tax-sheltered capital accumulation of $432,000.
• From birth to age 65, a pre-tax dividend income stream of $1.7 million.

This is how Capital Homesteading would create a nation of economically liberated citizen-owners.

THE END

The following is the complete up-to-date Progressive Economics thread to better understand the challenges in communicating the economics of reality.

3 reasons nobody believes the official inflation numbers
It’s all about the cognitive bias
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Michael Bindner Its all about lying about how to value changes in housing prices.
July 23 at 2:19am · Like · 1

Michael Bindner If last house sold (and land if you must) is the critereon, we would have been in such inflation in the mid oughts and such delfation since 2008 that much more would have had to been done.
July 23 at 2:21am · Like

Tuure Parkkinen Also, what most productivity metrics miss rises in productivity when a new service replaces on older one – as it is not possible to compare their relative quality directly. E.g. if Google Translate (a relatively free service) offsets manual translation services, it might look like a the translation industry is declining – although much more is being translated than before: in fact it is just a massive increase in productivity.

With new electronic services making things easier and producing new kinds of value, there is tons of this kind of increase in productivity and “purchasing power” that just cannot show up in statistics. So, what looks like inflation is (in part) in fact productivity increasing and (a bit more) “real economic growth”.
July 23 at 2:33am · Edited · Like · 1

Warren Chamberlain Inflation is a nominal idea but it has nothing to do with the rising “price” of a product but the devaluation of the currency unit the goods are being measured by. Real inflation must be measured in another standard like gold or real estate “values”. Housing and location (land) costs are not included in the CPI and another cost of living and cost of goods sold is interest expence on all the money we have to borrow to buy all this stuff.
July 23 at 6:27am · Like

Dan Sullivan House prices have never been part of the price indices, because the land component is so volatile and so subject to manipulation. They indirectly impact other prices, which is unavoidable.

This is not based on an intent to fool people but on an understanding of economic consequences that existed during the times when these indices were being produced.
July 23 at 10:04am · Like · 1

Warren Chamberlain Most inflation is cost push from asset “appreciation” from monetary deprecition not demand pull from higher wages.
July 23 at 10:41am · Like · 1

Rahul Jain With the Case-Schiller index, there’s little reason to worry about the difficulty of measuring hose price inflation. But mortgage rates should also be factored in. The CPI should have a roughly 50/50 mix (based on actual home ownership rates) of rental rates and mortgage payments.
July 23 at 3:20pm · Like · 1

Gary Reber For an non-inflationary growth economy we should provide equal opportunity for EVERY child, woman and man to acquire individual ownership in our economy’s FUTURE wealth-creating, income-producing capital assets using insured, interest-free capital credit loans backed by the Federal Reserve repayable out of the FUTURE earnings generated by the investments? This is the REAL path to an non-inflationary economy and to every citizen’s prosperity, opportunity, and economic justice, and to the elimination of economic inequality over time.
July 23 at 3:59pm · Like

Dan Sullivan Total non-sequitor. Just another Gary Reber commercial. Ending inflation has nothing to do with distributing assets, even if he adds the word “non-inflationary” to his message. And, of course, because Reber does not distinguish genuine, labor-produced capital assets from privileges, he is advocating theft. It’s a perfect example of why progressives suffer from alliances with socialists.
July 23 at 4:08pm · Like · 1

Gary Reber Dan, the deceptive theft master is at misrepresentation again.
July 23 at 5:03pm · Like

Dan Sullivan I didn’t accuse you of anything that people cannot verify just by reading your post.
July 23 at 5:31pm · Like · 2

Nate Blair Gary, if you throw in land value “tax”, then I’m with you.
July 23 at 5:40pm · Like

Dan Sullivan I’m not. It’s still a commercial.
July 23 at 5:46pm · Like · 1

Nate Blair Well yes, of course it is a commercial, but it sounds like he just wants low interest loans for people to be able to invest. I’s be alright with that if it worked well.
July 23 at 6:16pm · Like

Dan Sullivan Same could be said for methamphetamine: It would be fine if it worked well, and what could go wrong?
July 23 at 6:26pm · Like

Nate Blair That’s why it would have to go with LVT, so people could not just buy land and create inflation.
July 23 at 6:30pm · Like · 1

Gary Reber Nate, not low-interest loans, but insured, no-interest loans issued by local banks and backed by the Federal Reserve with insurance provided by private entities and government reinsurance.
July 23 at 6:31pm · Like

Gary Reber Land and natural resource could be owned by ALL citizens as individuals using Land Bank financial mechanisms.
July 23 at 6:33pm · Like

Dan Sullivan Far less complicated to simply tax land values and share the rent.
July 23 at 6:36pm · Like · 2

Dan Sullivan Also less complicated to just issue currency to all and let them work out their credit arrangements privately.
July 23 at 6:37pm · Like · 2

Nate Blair So what incentive will you give for banks to offer these low/no interest loans?
July 23 at 6:41pm · Like · 3

Dan Sullivan And at whose expense?
July 23 at 7:08pm · Like · 2

Nate Blair I’m curious, because it sounds like you want gov revenue to subsidize the lending and then also have government insure the same loans. Makes no sense to me that way.
July 23 at 7:18pm · Like

Gary Reber This is about new money creation that is asset backed. In place of retained earnings and debt financing as is practiced today, the government should require business corporations to issue and sell full-voting, full-dividend payout stock to more people to underwrite new productive capital formation, with the purpose of providing opportunity for new owners, both employees of corporations and non-employees, to participate in a growing economy. Of course, there needs to be a financial mechanism put in place that will guarantee loan risks; otherwise banks and lending institutions will not make the loans, and the system will continue to limit access to capital acquisition to those who already own capital––the rich. This is because “poor” people have no security or collateral, or sufficient income to pledge against the loan as security, and/or are disqualified on the grounds of either unproven unreliability or proven unreliability.

Criteria must be created to qualify the corporations subject to this policy and those corporations that qualify overseen so as to insure that their executives exercise prudent fiduciary responsibility to generate loan payback. Once the guaranteed loans are paid back out of the FUTURE earnings of the investments, the new capital formation will continue to produce income for existing and future owners.

Capital acquisition takes place on the logic of self-financing and asset-backed credit for productive uses. People invest in capital ownership on the basis that the investment will pay for itself. The basis for the commitment of loan guarantees is the fact that nobody who knows what he or she is doing buys a physical capital asset or an interest in one unless he or she is first assured, on the basis of the best advice one can get, that the asset in operation will pay for itself within a reasonable period of time––5 to 7 or, in a worst case scenario, 10 years (given the current depressive state of the economy). And after it pays for itself within a reasonable capital cost recovery period, it is expected to go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.

Still, there is at least a theoretical chance, and sometimes a very real chance, that the investment might not pay for itself, or it might not pay for itself in the projected time period. So, there is a business risk. This is why in addition to determining that the investment is viable and that the company being invested in is credit worthy and reliably expected to make loan repayments out of the projected FUTURE earnings of the investments, there needs to be security against default. Thus, for the lender to make the loan there needs to be an insurance mechanism attached to the loan to provide the security. Thus, multiple company diversification can be facilitated with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept).

Under this plan, the promissory note can be offset to the government’s central Federal Reserve Bank in return for the cash equivalent of the amount of the loan, less an administrative fee. The only cost to the direct lending bank in making a loan to the corporation on behalf of the expanded owners base would be the administrative fee, or about 2 percent of the loan’s principal and then another 2 percent for capital credit insurance, with an additional quarter of a percent paid to the Federal Reserve Bank to monetize the loan and give the lender the same cash as it would have had if it had actually loaned money to the corporation. The lender’s cash loaned to the Employee Stock Ownership Plan (ESOP) or Capital Homestead Consumer Stock Ownership Plan (CSOP) trust is replenished with the Federal Reserve Bank cash. When the company pays the ESOP/CSOP trust enough money to enable the trust to repay the lender, the lender has to retrieve the note and pay back the Federal Reserve Bank. Thus, the loan cost would be essentially not more than 5 percent to allow ownership broadening financial capital to be in­vested in ownership broadening ESOP/CSOP trusts to create new capitalists.

After the loan has been paid off with pre-tax earnings, the employees will have more earnings from capital and they will have more consumer power to purchase products and services. Multiply this by tens of thousands of employee-owned companies and the economy revs up to grow dramatically.

According to my colleague and father of binary economics and ESOPs Louis Kelso: “In a single transaction, you finance tools for the employer and ownership for the employees. The pre-tax yield of corporate assets of prosperous companies varies from 25 to 60 percent. The yield on secondhand securities is around five or six percent. Sure, with capital gains, you can get a little more, but don’t forget, that’s a zero-sum game; for every gainer, there’s a loser. Wall Street doesn’t fly any airplanes or raise any corn or do anything else in the way of producing products and services. It just plays games with your dough. And when you take it out in pensions, you’re going to get less than the company put in for you. You have to; that’s the dynamics of it.”

Unlike consumer credit, which does not generate its own repayment, and in order for the user to repay they must rely on other resources––for most Americans that means their labor worker earnings and personal savings, capital credit is restricted to the purchase of assets that are expected to pay for themselves out of the revenue generated from the capital investment, which it financed, and therefore these assets are expected to earn a continuing flow of profit for whoever owns the assets.
July 23 at 10:12pm · Like

Michael Bindner This is the standard CESJ commercial – aka Binary Economics or Two Factor Theory. Government money is not spent – the money is raised by borrowing from the Discount Window of the Federal Reserve (which kind of competes with or replaces any MMT from the same source). Gary is correct, however in that is theory (and mine as well) puts the wonership of resources (energy and land) into the hands of cooperative/employee owned firms, thus covering all individuals and ending the requirement for any LVT except to give a citizens dividend to non-company members or people who don’t have any capital under the program – and everyone would.
July 23 at 11:22pm · Like

Warren Chamberlain OK so if we granted loans directly from the Fed for people to purchase new capital goods in addition to the capital goods that have already been formed, where would this capital be built? Capital formation requires land and increasing the supply of capital will increase the demand for land and then when we are all owners of this new wealth producing capital who will be the customers of our products and where will the money come from to provide the income to pay back the loans?
July 24 at 8:18am · Like

Dan Sullivan “Government money is not spent – the money is raised by borrowing from the Discount Window of the Federal Reserve (which kind of competes with or replaces any MMT from the same source).”

All money is spent. Either ir is spent on each citizen or it is spent by favored darlings who get special treatment in the form of loans. How the money is “raised” is a different question altogether from how or whether it is spent.

What Michael and Gary are talking about is newly created money. They seem to think this money should be loaned to favorite darlings, in this case their darling co-ops, who will use it to create enterprises, while the classical progressives thought it should be spent for the public good, since it is the public’s money, and its value was created by the public.

As soon as you attach privileges to co-ops, you get institutions that are co-operative in form but not in function. For example, many of our insurance companies are member-owned, at least on paper. They include Nationwide, Prudential, GEICO and many others.

The whole notion that the public’s money should be loaned to certain people instead of distributed to all people, or spent on services that benefit all people, is simply an accommodation of privilege wrapped up in a pretense of serving the public good. Certainly Chrysler could have made itself look like a co-op on paper, converting stocks into bonds and enriching the same people who own it now, but satisfying the silly notion that we should only lend to co-ops.

The form would change, but not the function. There would be as much Irony as ever in Tom Paxton’s song:

“I Am Changing My Name To ‘Chrysler.’
I am going down to Washington, D.C.
I will tell some power broker,
“What you did for Iacocca,
Would be perfectly acceptable to me.”
I am changing my name to ‘Chrysler’.
I am leaving for that great receiving line,
And when they hand a million grand out,
I’ll be standing with my hand out.
Yes sir, I’ll get mine.”

Perhaps it would read, “I am changing my form to co-op,” but so what?
July 24 at 8:46am · Like · 2

Dan Sullivan https://www.youtube.com/watch?v=DgqSEL0N5-w
Play Video
Changing My Name To Chrysler – The Riverwalk Ramblers
“I’m Changing My Name To Chrysler”, from a live show at Beethoven Maennerchor Ha…See More
July 24 at 8:49am · Like · 1

Dan Sullivan When the left was protesting the Chrysler loan, I was, as always, asking the deeper questions. First of all, Chrysler and many of the companies that merged into it had been making quality automobiles for over 80 years. With that long legacy of production, why would they still be in debt?

Meanwhile, most of their customers were not immigrants fresh off the boat, but come from families who had themselves been producing wealth for generations. Why should they still have to borrow to buy cars? I eventually found out that it is because almost all money is loaned into circulation, and no matter how much *wealth* one has produced, nobody has produced much debt-free *money*. That makes you, me, Chrysler, and everyone else, dependent on the money-lenders.

With or without interest, lending money into circulation produces dependency, and the Keslonian schemers, of which Gary and Michael B. are spendid examples, propose to continue lending all money into circulation, but for “worthy” projects, the worthiness of which is to be determined by some government elites, whom we are to suppose (choke, gag) will not be politically or economically influenced in their decisions.

They fail to grasp the most elemental truth, that public money is the public’s money, and that it should go to the public. This can be in the form of dividends, spending on the public good, or tax cuts on the most deserving, i.e., those whose share of productive contribution already exceeds their share of land and other privileges.

Or, we can lend it all to the Chrysler Co-op and wonder why ordinary people still can’t afford to buy the cars they are making.
July 24 at 9:00am · Like · 1

Gary Reber This is not about privilege, EVERY citizen would be able to participate and build financial security through their Capital Homestead Account. Here’s how the banking part would work.

The bank would review the offer for new capital asset formation, and, if it met their standards and was properly collateralized with capital credit insurance or reinsurance, issue a promissory note to accept and “discount” the bill.

(Mortgages, being based on past savings, bear interest based on the accumulated savings behind the instrument. Bills of exchange, being based on future savings, are discounted to reflect the present value of the face value of the bill to be redeemed in the future, and are “interest free.”)

The bank’s promissory note is used to back a new demand deposit (checking account). The borrower draws on the demand deposit to finance (“form”) new capital. When the new capital becomes productive (i.e., profitable), a portion of the profits is used to redeem the bill of exchange and cancel the promissory note.

A commercial bank can rediscount the bills it accepts at a central bank. The central bank then issues its own promissory note to rediscount the bill and creates a demand deposit for the commercial bank, thereby increasing the reserves of the commercial bank. In this way it is possible to have 100% reserves sufficient to cover all commercial loans, and eliminate fractional reserve banking.

By accepting (discounting or rediscounting) only private sector bills of exchange instead of government bills of credit (a special form of bill of exchange backed by the present value of future tax revenues instead of the present value of future production) — as the original Federal Reserve Act of 1913 specified — the banks, both commercial and central, can create a stable, asset-backed, “elastic” currency, avoiding both inflation and deflation, and finance broad-based capital ownership without redistribution.
July 24 at 11:46am · Like

Warren Chamberlain If there is a mortgage on land or the capital that sits on it, you do not own it, the bank does.
July 24 at 12:46pm · Like

Warren Chamberlain If even the government created the money to loan to me to “own my own homestead” I would not really own it as long as there was a lien on it. If I had to pay the government back to be able to gain clear title to that homestead, I do not own the homestead any more than a dairy cow owns its own pasture or a free ranging chicken owns is own coop. We are all living on borrowed time anyway.
July 24 at 1:01pm · Like

Warren Chamberlain God save Social Security and my GM pension.
July 24 at 1:06pm · Like

Dan Sullivan What a mass of self-contradiction:

“This is not about privilege, EVERY citizen would be able to participate and build financial security through their Capital Homestead Account.”

Then, he states that this is not actually true:

“The bank would review the offer for new capital asset formation, and, if it met their standards and was properly collateralized with capital credit insurance or reinsurance, issue a promissory note to accept and “discount” the bill.”

So, it is not every (let alone EVERY) citizen who is able to participate. It is those whose proposals “met their [the bank’s] standards and was properly collateralized with capital credit insurance or reinsurance” [meaning it is also limited to those who must also meet the credit-insurance companies standards].

Now, who is best able to meet those standards, richer people or poorer people? If you said “rich people,” then you win keys to a new Chrysler (not the actual Chrysler, just a set of keys). If you said “poor people,” Then you win a pound of Gary Reber’s Home-Style Baloney (best swallowed whole, not chewed).

The bottom line is that when new money is created, it could be loaned to richer people or given to poorer people. Traditionally, progressives proposed to give it to poor people, either through tax cuts, welfare benefits or dividends. People like Gary Reber and Mitt Romney want to lend it to “job creators,” because they believe it is capital formation and not demand that creates jobs.

Meanwhile, Romney had taken over Dunkin’ Donuts and shut down a third of the franchises. Why? Because not enough people were walking by with both the desire for a doughnut and the price of a doughnut. They still don’t understand that demand motivates supply, and that giving everyone an equal share of the money will facilitate “capital formation” without the paternalistic intervention of these structured money-lending schemes.
July 24 at 1:20pm · Like · 1

Gary Reber Yes, until the loan is fully paid the title holder has ownership. But the idea is to provide people with the opportunity to invest in America’s future using capital credit loans that pay for themselves and create new wealth and produce income for the new owner. How can you object to that?
July 24 at 1:23pm · Edited · Like

Dan Sullivan You want banks to lend richer people money that rightly belongs to all of us. How can anyone with a sense of justice not object to that?
July 24 at 1:24pm · Like · 2

Warren Chamberlain Yes “properly collateralized” by land titles. You mean that until the loan is paid off, the mortgage lender has the title.

So the idea is to allow a larger number of people to join the country club so the poor can not grow food on our golf course?

Then we all get to pay greens fees or membership dues?
July 24 at 1:35pm · Like

Gary Reber Dan, where have I EVER said “richer people” should be the privileged ones? I have consistently stated that EVERY child, woman and man (citizen) would have the equal opportunity to a Capital Homestead Account insured, interest-free capital credit account to investment in the formation of new, wealth-creating, income-producing capital credit assets.
July 24 at 1:47pm · Like

Gary Reber Warren, what are you rambling on about? Where have I said “properly collateralized” by land titles?
July 24 at 1:49pm · Like

Warren Chamberlain Every man woman and child on this earth has a birthright share of the earth. The ability to create money as loans is “grounded” in the power of the state to grant land titles that are titles of privilege. These land titles eventually end up as collateral for leveraging loans which is the way new money is created by the bankers.
July 24 at 1:54pm · Like

Warren Chamberlain If every single person has an equal opportunity to live on this planet, they should not have to borrow money to buy it back from anyone,
July 24 at 2:03pm · Like

Dan Sullivan “Dan, where have I EVER said ‘richer people’ should be the privileged ones? I have consistently stated that EVERY child, woman and man (citizen) would have the equal opportunity to a Capital Homestead Account insured, interest-free capital credit account to investment in the formation of new, wealth-creating, income-producing capital credit assets.”

No, you said they would have an equal opportunity to apply. Anyone can see that only richer people would be safe enough investments to actually qualify for the loans and the insurance, especially at no interest. Your saying this would go to everyone equally call’s up Anatole France’s quip that,

“The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread.”

The difference is that he knew he was being sarcastic, while you seem to make your equally absurd statements in earnest.
July 24 at 2:04pm · Like

Dan Sullivan If everyone is to benefit equally, why not just give them equal shares? Obviously, if we are to lend more to some, we must give less to others. Obviously if we are to lend only to those with collateral and a good business plan, we must necessarily lend more those who are better educated, better collateralized, and have a track record of success. To anyone who is not prancing around in Kelsotopia, that means richer people.
July 24 at 2:06pm · Edited · Like · 2

Gary Reber There would be no “qualification” except that you are a U.S. citizen. There would be no more lending to some and less to others. Read the proposed Capital Homestead Act beginning with the overviews at at http://www.cesj.org/…/capital-homestead-act-a-plan-for…/ and http://www.cesj.org/…/capital-homestead-act-summary/.

The Capital Homestead Act: A Plan for Getting Ownership, Income, and Power to Every Citizen -…
www.cesj.org
The Capital Homestead Act: A Just Free Market Plan for Getting Ownership, Income and Power to Every Citizen.
July 24 at 2:55pm · Like · Remove Preview

Dan Sullivan You are contradicting yourself as usual. If there is no qualifying, then why would “the bank would review the offer for new capital asset formation”? Obviously, it is to see if the offer QUALIFIES! You went on to say that ” if it met their standards and was properly collateralized with capital credit insurance…”

Didn’t anyone teach you that “meeting their standards” and “qualifying” mean the same thing?

If you are going to give the same loan to a wino who will spend it on booze as to an executive who will build an auto plant with it, then it is not a loan, but a gift. If it is a loan, then there is qualifying. You can’t have it both ways except in your fantasies.
July 24 at 3:07pm · Like · 1

Gary Reber No qualifying of the person, but yes qualifying of the investment proposal, as is done in today’s banking practice. The monies would have to be invested as conditioned by the capital credit loan requirements.
July 24 at 3:19pm · Like

Dan Sullivan It never occurred to you that rich people will have better and better-collateralized investment proposals than poor people?
July 24 at 3:50pm · Like · 1

Gary Reber Our proposal does not restrict investment in the economy outside of using Capital Homestead Account capital credit financing, but offers an incentive for American companies who desire to grow an opportunity to issue and sell their stock to be purchased with Capital Homestead Account insured, interest-free capital credit loans by EVERY citizen who wants to set up a CHA to build their financial security.
July 24 at 4:11pm · Like

Dan Sullivan It offers an incentive to everyone, or to those rich enough to qualify? Or are you lending people money that they can only use to purchase stock in companies that qualify? If you are lending me my own share of money, why do I have to use it to invest in the companies that your bureaucratic elite chooses to approve for me? Why can’t I take the money that is rightly mine, do what I want with it, and not have to pay back your Capital Homestead Account bill collectors?

This is the same kind of thinking that got us student loans. You force everyone to either take a loan to invest in projects that will necessarily fail, or to get nothing at all.

Why will they fail? Because the market does not need a great expansion of capital investment any more than it needs a great expansion of college graduates. Just as the world is full of college grads flipping burgers, it will be full of loan-funded Chryslers sitting in new car lots.

Your proposals are not based on principles, but on schemes.
July 24 at 4:30pm · Like · 4

Gary Reber There is no “rich enough to apply” stipulations, just citizenship.Yes the capital loans finance new capital asset creation (wealth) in companies that have been determined to have a feasible business plan. What you tag as ‘the bureaucratic elite” are the same expertise that determines whether or not to monetize each capital formation transaction today––management and banks. They would be tasked with determining that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.

Dan, you really need to study banking as it relates to forming new capital assets based on viable business plans that project a return of earnings to pay off a capital credit loan.
July 24 at 5:10pm · Like

Jonathan Hall “…ending the requirement for any LVT …” Shouldn’t talk about stuff that you have no clue about. Its like the guy doesn’t even understand why land has a price.
July 24 at 5:50pm · Like · 1

Dan Sullivan He also has no clue about how we became the world’s industrial leader in the 1800s with very little “banking as it relates to forming new capital assets based on viable business plans that project a return of earnings to pay off a capital credit loan.” Then there is his cluelessness about why “the first layer of risk would be taken by the commercial credit insurers” when there is no interest reward for them doing so.

It is one clueless statement piled upon another, on the premise that, if it is complicated enough, things that are wrong individually will somehow fit together to make something that is right. That is, two wrongs don’t make a right, but dozens and dozens do.
July 24 at 6:05pm · Like · 1

Jonathan Hall People focus too much on money. Its like thinking sunlight is the key to farming. Well, yes but so what, the sun is the sun, we know what it does, and we don’t place farms at the bottom of dark canyons. Knowledge used!

North American aboriginals did not know structural poverty, and they had no public financing and very little financing at all. So how is it they lived such rich lives on only 10 hours of work a week? I suppose part of this misguided money focus is an ignorance of historical human production. Do you think any of the money people understand what happened during enclosure? Why the quality of life went down? Could they look at all the great migrations of people, see that they ALL fled landlord power and then conclude what the world needs is a new system of finance?
July 24 at 6:58pm · Like · 1

Warren Chamberlain Aboriginals did not have a debt based economy.
July 24 at 8:13pm · Like · 1

Michael Bindner The Capitalism Manifesto and the CESJ.org web page explain all of this in better detail than a Q&A format and no one has to be insulted during the reading. For those who are pissed off that I don’t spend much time on Georgeist web pages, the shoe is on the other foot.
July 25 at 2:17am · Edited · Like

Michael Bindner Saying anyone has no clue does not get information shared either way.
July 25 at 2:19am · Like

Dan Sullivan You have been parroting this nonsense for so long that the prospects for getting information shared are not worth worrying about. It is not merely that you have no clue, but that hundreds of clues have been given to you and you have not picked up on any of them. Your problem is not simply an absence of clues, but a dogmatic passion for a proposal that simply does not hold together. You and Gary have been selling and selling and selling, on this list and various others, and nobody has been buying. It’s time for you to pack your demo kit and your canned script and move on.
July 25 at 6:10am · Like · 1

Gary Reber Dan, it is not an interest fee but an insurance fee for capital insurance.
July 25 at 11:41am · Like

Dan Sullivan A distinction without a difference, as the borrower still has to pay more than he borrowed.
July 25 at 11:54am · Like · 2

Warren Chamberlain That is what “interest” is on financial capital risk insurance.
July 25 at 12:16pm · Like · 1

Gary Reber FHA mortgage loans also extract insurance fees, but of course, a home does not produce income while a capital asset investment does and therefore pays for itself.
July 25 at 12:16pm · Like

Dan Sullivan So you are going to lend me my share of new money that should rightly be given to me, but only if I qualify, or rather, my proposal, my collateral and my creditworthiness qualify, and you are going to require that I buy insurance to guarantee that I pay what is rightly mine in the first place, and only if I do what you think I should be doing with that money.

Sounds fundamentally just to me.
July 25 at 12:36pm · Edited · Like · 1

Jonathan Hall I agree Michael Bindner, the designation of “no clue” says little. Although I think there is some problematic overconfidence here, and what little effect it could have is directed there.

What was more meaningful was the indictment of the missing step, the historical context. Its very easy for crackpots to come up with some new theory when it does not have to be grounded in history. And pretty much thats the only way a crack pot can operate, ungrounded from history.

I share your desire to have useful information shared. And would add that baseless ramblings do not share useful information either.

I was not always focused on history, but wanted at one time to join a group that performs at the Original Renaissance Faire while it had its original educational and authentic focus. And in one of the lectures they provided, the instructor asked “What did your character have for breakfast?” Its early May 1590, what did a Garlic Monger just North of Oxford likely have for break fast? This is not a question that typical history classes answer, but is far more important to understanding economics then who killed who on what day.

This is the history of the little guys, the ones that do all the work, and yet its not part of the curriculum. Only real historians of extraordinary depth can answer that question. And the rest of us get the implicit message that the little guy is not important. And from that we know that most of the work is not important, and so actual economics is not important. After that, flighty babble theories are free to waste time in a vast realm of imagination that has no grounding in history or common sense.

Is a little self discipline too much to ask, before asking others for their time? Speaking of which I need some evidence that G. R, has read this post, or I will take the very obvious and final solution to his imposition.
July 25 at 12:36pm · Like · 2

Gary Reber Jonathan, here is a bit of historical perspective. Binary economics and democratic capitalism, or what could be termed economic personalism, is founded on the principal that economic power has to be universally distributed amongst individual citizens and never allowed to concentrate. It is a value system based on the importance and dignity of every human person. The “pursuit of happiness” phrase in the Declaration of Independence was interchangeable in those times with the word “property.” The original phrasing was “the right to life, liberty and property.” “The pursuit of happiness” phrase was a substitute for the “property” phrase. In the forerunner of the Declaration of Independence and Bill of Rights, the 1776 Virginia Declaration of Rights declared that securing “Life, Liberty, with the means of acquiring and possessing Property” is the highest purpose for which any just government is formed. Democratizing economic power will return us to the pristine innocence and economic power diffusion we had in a pre-industrial society where labor was the principal factor in the creation of wealth.

In simple terms, binary economics recognizes that there are two independent factors of production: people (labor workers who contribute manual, intellectual, creative and entrepreneurial work) and capital (land; structures; infrastructure; tools; machines; computer processing; certain intangibles that have the characteristics of property, such as patents and trade or firm names; and the like owned by capital workers) that are owned by individuals or associations of individuals. Fundamentally, economic value is created through human and non-human contributions. NOTE, real physical productive capital isn’t money; it is measured in money (financial capital), but it is really producing power and earning power through ownership of the non-human factor of production. Financial capital, such as stocks and bonds, is just an ownership claim on the productive power of real capital. In the law, property is the bundle of rights that determines one’s relationship to things.

I have provided on this thread numerous answers to question about how broadening individual ownership of wealth-creating, income-producing capital assets can be accomplished. For a more in-depth understanding see my article “Democratic Capitalism And Binary Economics: Solutions For A Troubled Nation and Economy” at http://foreconomicjustice.org/11/economic-justice/

We Are For Economic Justice | For Economic Justice
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July 25 at 1:24pm · Like · Remove Preview

Warren Chamberlain But we the ‘people’ already own the earth in common. All we have to do is collect the rent from the other “people” who want to invest and improve it.

In simple terms binary economics ignores the difference between the fruits of human labor (capital) and the land they had to work or exploit to accumulate it.

You can pursue happiness all you want on “OUR” Land. Keep what you make but pay for what you take.
July 25 at 1:46pm · Like · 1

Dan Sullivan It’s a history of dogma. The problem is that the dogma itself lacks historical perspective. While it claims to be “founded on the principal that economic power has to be universally distributed amongst individual citizens,” it seems oblivious to the wealth of analysis that shows why economic power is *not* universally distributed. Instead of going to the root, it concocts an elaborate, symptom-treating scheme that completely misses the root usurpations of economic power, land monopoly and debt money. Indeed, the scheme is itself a debt-money scheme.

The above rant about life, liberty and property ignores the fact that Jefferson was not talking about property in some concocted stock-sharing scheme, but property in land. (Quotes available on request.)

“Tthe pristine innocence and economic power diffusion we had in a pre-industrial society” was originally Marx’s fantasy from the Communist manifesto. It was a time when, in reality, we were all serfs to feudal lords. There was no such diffusion until the discovery of new lands where rents fell and wages rose. This ahistoric Kesonian nonsense further illustrates how out of touch with reality it is.

“The bourgeoisie, wherever it has got the upper hand, has put an end to all feudal, patriarchal, idyllic relations. It has pitilessly torn asunder the motley feudal ties that bound man to his ‘natural superiors,’ and has left remaining no other nexus between man and man than naked self-interest, than callous ‘cash payment’.”

https://www.marxists.org/…/communist-manifesto/ch01.htm

Reber’s Kelsonian scheme would enslave us to the “natural superiors” who approve loans and decide which projects are “worthy” of those loans. He is doing is the favor of sparing us all from getting that “callous cash payment.” Thanks for nothing.

As for there being two independent factors, labor and capital, that is even dumber. Capital is produced by labor in the first place, making it hardly an independent factor, and both are dependent on land and natural resources, without which labor cannot work and capital cannot exist. The whole premise of Kelso’s binary economics is to rely on the two factors that are actually one while ignoring the truly independent factor. There are indeed two primary factors, land and labor, with capital being the product of the two. Historically, we have on the one hand, Locke, Smith, Turgot, Quesnay, Ricardo, Mill, George, Bastia and many others, right up to 10 Nobel Laureates. On the other we have Kelso and Marx, whose entire premises rest on obliterating the fundamental differences between land and capital.
Communist Manifesto (Chapter 1)
www.marxists.org
History of the Bourgeois and Proletarian class
July 25 at 1:53pm · Like · 1

Gary Reber Warren, thus you would destroy private property in “land,” which was a cornerstone of the founding of America. The real problem is not enough people own the land, which we address through Citizen Land Bank structures. In this way rather socialize land and have politicians dictate who gets what or what is done with the “rent” individual citizens would benefit directly from the value of the “rent.”
July 25 at 1:54pm · Edited · Like

Rahul Jain Yes, we would destroy the cornerstone of today’s highly-monopolozed economy. Have you ever played the game Monopoly?
July 25 at 2:02pm · Like · 2

Rahul Jain Georgists do not support politicians deciding what to so with the rent. HG said the surplus after the minimal maintenance of law and order and security is done should be distributed as a dividend to all.
July 25 at 2:03pm · Like · 1

Dan Sullivan “Warren, thus you would destroy private property in “land,” which was a cornerstone of the founding of America.”

I beg to differ. Jefferson, Franklin, Penn, Paine and Madison beg to differ as well. Most of all I am tired of charlatans attaching whatever notions they want ]to the founding fathers so they can perpetrate paternalistic schemes that are the exact opposite of what this country was founded upon.
July 25 at 2:05pm · Like · 4

Warren Chamberlain Yes,, the Privilege of government granted Private Land Titles was the cornerstone of the founding of America. (and slavery) And yes the problem is not enough people have government granted land titles.

So “Georgists” are not seeking to destroy private property in land but simply seeking mitigation for the systematic destruction of our common property for the pursuit of private profits.
July 25 at 2:10pm · Like · 3

Rahul Jain He also whines that the only people looking to distribute land rent to the people aren’t doing enough. If we didn’t have people fueled by nonsense like he pushes, we would have an easier time getting support for CLTs
July 25 at 2:11pm · Like · 1

Gary Reber Dan, Warren and Rahul, our proposals empower EVERY citizen as a share owner in FUTURE capital asset formation, rather than further empower an elite, whether in the private sector or the government sector to further enslave us under wage slavery, welfare slavery or charity slavery, while honing the principles of private property rights.
July 25 at 6:09pm · Like

Rahul Jain Exactly. Bait and switch. You would create slavery by taking what people make and redistributing it. Exactly the same as the injustice we have today.
July 25 at 6:10pm · Like

Jonathan Hall “economic power has to be universally distributed amongst individual citizens and never allowed to concentrate. ”

Charging rent for land is the one way flow of wealth that creates unequal power. This is achieved by force. Such a ‘deal’ can only be achieved by force. Your analysis is absent this key fact of any oppression, it rests on force. And then later you make a crippling conflation of “land” (Its value coming from force) and “tools machines…” (this value coming from the scarcity of the labor to make it.). Without a clear eye on what force is there, only confusion possible. Reducing all dependent theory to worthless babble. I am sorry, but your claim to understanding history and economics is directly contradicted in this conflation of honest labor and oppressive force. It is my hope some day you will see how critical an error it is.
July 25 at 9:37pm · Edited · Like · 3

Rahul Jain Stealing the fruits of labor from those who labor discourages them from producing better products. It encourages stagnation in the economy and waste in the environment. Those economies that base themselves on stealing from the laborer, whether due to feudalism or socialism, are unsustainable and will eventually be outcompeted by those that reward laborers for what they do
July 25 at 9:51pm · Like · 1

Gary Reber Rahul, I presume in your way of thinking EVERYTHING is produced by labor, except for land, which in reality is not the case. One’s labor is owned by oneself and when I offered to contribute to the process of production one voluntarily (chattel slavery was abolished by President Lincoln) works for an agreed upon wage paid by the owners of capital assets (formed as a company who offers employment to labor workers). The other non-human factor input is also owned––owned by an individual or an association of individuals (corporations, for example) whose earnings are the property rights of the individual or association of individuals. Thus the two factors are independent, each with property rights associated either with one’s labor or one’s capital assets that they own. This is the economics of reality. I suggest that you observe the production operations of numerous factories and businesses to gain a better sense of the two contributions that make up the production of products and services. Historically you should be able to realize that tectonic shifts in the technologies of production have constantly resulted in shifting from labor intensive input to capital asset intensive input, and this transition will continue as long as people can invent new technologies that save labor and unnecessitate the need for human labor.
July 25 at 10:17pm · Like

Rahul Jain Economically, the definition of capital is that which is produced by labor and land is all the rest. Old intellectual property is also land-like. Broadcast spectrum is land-like. Land itself simply generates about 50% of the surplus that accrues to land-like assets
July 26 at 8:21am · Like · 3

Rahul Jain mechanized farming made labor unnecessary, except that it didn’t. We will find something more to do with our labor in time.
July 26 at 8:22am · Like

Warren Chamberlain How can people be empowered with debt? If your capital has a mortgage on it you do not own it you are working for the bank and paying the bank the interest that may acrue to that capital. Sure there is some difference between owning your own home which is not income producing property and owning your own business but a morgage is still a mortgage.
July 26 at 8:37am · Like · 2

Warren Chamberlain Capital is produced by labor land is not and should not be conflated with each other. Over time land appreciates as labor works (taxes) the land and makes improvements on the land capital depreciates and has to be continuously refreshed.
July 26 at 8:43am · Edited · Like · 1

Rahul Jain Actually, a good portion of the value (desirability) of land comes from the investment in capital around that land. That includes buildings on other plots nearby and infrastructure that connects the plot being evaluated with other plots that are also productive locations.
July 26 at 9:33am · Like

Gary Reber Rahul, “we will find something more to do with our labor in time” explains why throughout the world there is so much unemployment and welfare dependency through extracting taxes on those who are productive and redistributing to those who are not?
July 26 at 11:24am · Like

Gary Reber Warren, I think you need to study corporate finance banking, and how it works.
July 26 at 11:25am · Like

Jonathan Hall “Rahul, I presume in your way of thinking EVERYTHING is produced by labor, except for land, which in reality is not the case.”

This is true by definition. Henry George’s precise definitions allow for precise thought. (as opposed to obscuring conflations) Henry George was merely formalizing classical economic thought, and had every right to in 1890. If people want to attach new meanings to these useful words, then a case for that change should be made. If you want to argue different semantics then please go ahead. But to just deny semantics that have stood for a century, well thats just plain rude.
July 26 at 11:25am · Like

Gary Reber And this explains why wealth is migrating to a very small portion of the population, while the number of poor people continues to grow and the middle class continues to shrink?
July 26 at 11:27am · Like

Jonathan Hall Rahul Jain you have used ‘Capital’ for ‘Wealth’ here and before. Wealth is the superset. Capital has a special meaning. Capital is wealth in the progress of production, where as non capital wealth is immediately ready to be consumed. Goods setting on a retail shelf are capital because their display and availability are part of the production process. But the chair you are sitting on is wealth. (right up until you plan on selling it.)
July 26 at 11:32am · Like · 1

Jonathan Hall “If your capital has a mortgage on it you do not own it you are working for the bank ”

This is a fundamental misunderstanding of the situation. Which is typically used by kooky policy in search of justification.

Take the scientific method of control and experiment to the claim. In both control and experiment the loan for capital is already made, what will change is working or not working, with control being not working.

At the end of the experiment those in the not working case owe the bank just as much as the those in the working case. Clearly the work is not a factor in what payment is going to the bank, and thus there is no “working for the bank”. The work made no difference. But if we look at the would be workers balance we see that it is changed by the work. This is evidence that they are working for themselves.

One can submit the experiment itself to a test, by replacing bank loan with slave master. In this experiment we see that the work product is accruing to the master from the working case. And so the work is in fact for the slave master. <<Stunning discovery>>

Now all this may be contradicted by the “Evil Bank Logic” that accepts any ‘logic’ so long as the banks are the final villains, but I think thats more an emotional response then critical thinking.
July 26 at 11:46am · Like

Jonathan Hall The numbers are there for perusal. Just see how much land rent is there every year and then see if any middle class could survive that much one way flow to the plutocracy. And not only does it explain it now, this is the case for every plutocracy from the moment they could collect rent on land. Even the Pharaohs were using the resource rent of the Nile river to build pyramids. They workers were slaves, but the chains were on the water.

The European Black Death plague saw a profound rise in the middle class. Explain that with ‘banking’ hoopla!

Land economics explains it perfectly. With so much newly available arable land there was no way for the plutocracy to collect high rents. The middle class is, just like in the animal kingdom, is the natural result. It happens in absence of oppression. It self creates when allowed to.
July 26 at 12:09pm · Like · 1

Rahul Jain You are working to take ownership of the capital from the bank. Capital is the result of the productive process. If an asset is not capital, it is land. Wealth, I would say, is capital that is usable productively. Active use doesn’t matter when we are looking at assets. Are you using it a little or a lot?
July 26 at 2:58pm · Like

Gary Reber I have addressed on numerous occasions in this group posting the explanation of bills of exchange, the financial instruments we’ve been talking about for some time. Simply put, “bills of exchange” are a form of “money.” That means to understand bills of exchange, we need at least a working definition of money.

At the Center for Economic and Social Justice we define “money” as anything that can be accepted in settlement of a debt. It is the medium of exchange, by means of which we exchange what we produce, for what others produce so that products and services can be consumed. (This is “Say’s Law of Markets.”) As Adam Smith pointed out, and which formed the basis for his economic theories, the sole purpose of production is consumption.

Money facilitates both production and consumption. It does this by providing a convenient way to obtain what we need to produce, and to trade what we produce for what others produce.

All money is therefore a contract, just as (in a sense) all contracts are money.

All contracts consist of “offer,” “acceptance,” and “consideration.” “Consideration” is whatever of value is being exchanged, something that has been or will be produced.

There are two basic types of contracts by means of which exchanges are carried out. These are called “mortgages” and “bills of exchange.” Financial historian Benjamin Anderson claimed that the first principle of finance is to know the difference between a mortgage and a bill of exchange.

A mortgage is a contract conveying an interest (ownership stake) in the present value of an existing product or service. A bill of exchange is a contract conveying an interest in the present value of a future product or service.

All things being equal, the present value of the existing product or service conveyed by a mortgage, and the face value of the mortgage, are the same. A mortgage pays interest on the face amount of the mortgage, and it passes as money at the face value.

All things being equal, the present value of the future product or service conveyed by a bill of exchange, and the face value of the bill are not the same. Usually the present value of a bill of exchange is less than the face value. It therefore passes at a discount. A bill of exchange does not pay interest. The gain to the holder comes from the difference between the discounted amount, and the face value when redeemed.

This is why “accepting” a bill of exchange is also called “discounting” for the first acceptance, and “rediscounting” for subsequent acceptances.

The term “acceptance” is also used, because the bill or note is “accepted” by the other party to the transaction. If another individual or business other than a bank accepts a bill or note, it is called a “merchants acceptance” or “trade acceptance.” If a bank accepts a bill or note, it is called a “bankers acceptance.”

Fo example: Suppose you want to plant a crop, but don’t have seed and other supplies or equipment. You estimate how much the final crop will sell for when harvested in 90 days, as well as how much the supplies and equipment will cost. You have a reasonable expectation that the crop will sell for $250,000. The supplies and equipment will cost you $98,000.

You offer a contract called a bill of exchange that has a face value of $100,000 to a commercial bank, since the discount rate for a 90-day bill is 2%. The banker “accepts” or “discounts” your bill, making it a “bankers acceptance.” To purchase the bill, the banker issues a promissory note obliging the bank to pay you $98,000 now in exchange for your $100,000 in 90 days. The banker then creates a demand deposit in your name in the amount of $98,000, using the promissory note as backing for the checking account. (The bill of exchange obliges you to pay, while the promissory note obliges the bank.)

You purchase the supplies and equipment, put in the crop, and harvest it. You realize $250,000 from the sale of the crop, and go to the bank with $100,000 and redeem your bill. This cancels your bill and the bank’s promissory note. The bank makes $2,000 on the deal, and you make $150,000.

You could also offer bills directly to your suppliers, making them “merchants acceptances” or “trade acceptances,” but the bank’s word is probably better known. In any event, it is extremely inconvenient to go around issuing a lot of small bills to a lot of people, instead of one bill to one institution that specializes in accepting bills and mortgages.

Before the invention of coined money in the west, cir. 2,700 years ago, all exchanges were carried out this way with mortgages, bills of exchange, and promissory notes. The vast bulk of documents from the ancient world, in fact, consist of financial instruments of this sort, whether on clay, papyrus, parchment, or anything else.

This same method of finance applies to no-interest capital credit loans or bills of exchange, whose purpose is to create wealth evidenced in products and services.
July 26 at 3:34pm · Like

Dan Sullivan The whole point is that money can be issued directly into circulation, so people do not have to go into debt in order for money to merely exist. That is one of the things Kelsonians fail to grasp.
July 26 at 3:46pm · Like · 2

Gary Reber Dan, you make a massive misstatement when you say “money should be issued directly into circulation.” The government should not “borrows by creating Treasury securities (T-bills, T-notes and T-bonds) from thin air, backed only by ‘full faith and credit’” of the American people.

The Treasury does not nor should not create Treasury securities from thin air. If it did, the debt would be worth less than it already is. The Federal Reserve buys Treasuries by buying Treasuries with fabricated dollars. That is the point of QE. This major misunderstanding has led misinformed politicians to claim there is no limit to the amount of debt the Treasury can issue. If this were so, then why not create $10 trillion a year and just hand it out to the public?

Debt has a price and that should be obvious to everyone. That is why using self-financeable debt that produces earnings and pay for itself is the wise use of debt because it is asset-backed rather than backed only by the “full faith and credit” of the American people with no attachment to real wealth creation.
July 26 at 4:01pm · Like

Dan Sullivan It’s not a misstatement at all, but the position of many prominent economists, from the Chicago Monetarist School to the Modern Monetary Theory School, to the Greenbackers, and to Michael Kumoff of the World Bank. Money has value because it is demanded and accepted for taxes, period. Bank notes, when they were privately issued, were discounted by merchants because, even though they were issued as debt, they often could *not* be used to pay taxes.

Making people borrow money into circulation is wholly unnecessary and is a way of enslaving them to banks. That’s fundamentally exploitive, even if it’s your Bank of the Sugarplum Futures.
July 26 at 4:40pm · Edited · Like · 2

Gary Reber I disagree, money should be asset-backed.
July 26 at 4:48pm · Like

Dan Sullivan But your schemes issue money backed by bonds, which are themselves just paper promises the same as money. It is come kind of strange banker notion that a government that is good for a $100 bond is not also good for a $100 bill. Of course, without that notion, we would not be dependent on, and massively in debt to, bankers.
July 26 at 4:55pm · Like · 1

Dan Sullivan Money should be backed by Sugarplum Futures.
July 26 at 4:55pm · Like · 2

Warren Chamberlain So if I borrow a pay day loan from lender for $100.00 and pay $200.00 back, the discount is not intetest?
July 26 at 5:46pm · Like

Gary Reber What we are proposing has nothing to do with bonds, and we are not advocating “pay day loans.” These have noting to do with creating new capital assets.
July 26 at 6:27pm · Edited · Like

Dan Sullivan Actually, the higher “interest” charge for payday loans is mostly service fees and return for risk, which your proposal also charges in the form of insurance.
July 26 at 7:57pm · Like

Dan Sullivan Meanwhile, what “assets” back your issue of new money? “Capital FUTURES.” That is to say, the “assets” are nothing more than promises, which promises are inferior to “the full faith and credit of the United States” that you so recently disparaged.
July 26 at 7:58pm · Like

Gary Reber Read our definition of money. Simply put, “bills of exchange” are a form of “money.”

As for insurance fees, the FHA insured housing program works because of attached insurance fees on FHA mortgages. Remember a home does not produce income, while capital asset formation does, and thus pays for itself. Every wealthy ownership person knows this business principal. They do not invest in new capital asset projects that they do not think for produce earnings.
July 26 at 9:50pm · Like

Michael Bindner Dan, the entire law on ESOPs was pushed through by Senator Russell Long with the staff work being done by Norm Kurland, who Gary works with. Millions of workers are using these systems. I personally don’t like the debt finance and I have a more robust egalitarian management system proposal – and there are some active plans that are even more egalitarian than I suggest. Read the books by Gar Alperovitz if you want details on how these things work in practice. You can’t simply laugh it all off as fringe because we can’t express everythign is the equivalent of a Tweet. To get the system, you have to want to understand. I you don’t you won’t. Until you have Nate Blair rename this group Georgism we have as much right to be here as anyone. Indeed, Gary is essentially using MMT to create the capital credit accounts which buy the shares, usually in the employer ESOP or stock shares but in others as well. After dividends pay off the capital credit loans, all dividends going forward are a second income. As for land, the companies that citizens (or in my proposal, workers) bought through this process will buy the land up from the rich, eliminating the need for an LVT (his proposal, not mine, I would have the companies pay an LVT or pay people in their area their citizen dividend).
July 26 at 11:00pm · Like · 1

Dan Sullivan Michael, it’s still a gimmick that doesn’t address root problems. It might be a useful gimmick that provides symptomatic relief, but a gimmick none the less.

nobody has questioned your “right to be here,” but when you are here pushing gimmicks, that will be pointed out to you. Your ESOP schemes do not accommodate individual entrepreneurship, do not slow the encroachment of corporate bureaucracy over small proprietors, do not slow the concentration of land and natural resources, do not decrease public and private debt (but actually increase it dramatically), and do not give us a sound monetary footing, but actually make our monetary system more unstable than before. I am glad you are at least troubled with the monetary aspects and the debt-financing. Perhaps you should have a conversation with Gary, who seems enamored with the idea that we should all be borrowing money in order that money exists.

It’s not what you are saying that makes your presence unwelcome, but that you keep saying the same things over and over on list after list, never coming to grips with the serious objections that are put forward, but just keep repeating the same things that have already been debunked. If you were to try to debunk the debunking, at least it would be a step forward instead of dancing in circles.

There is, or at least was, a clear distinction between progressive economics and socialist economics, and it goes well beyond Henry George to the core of American radical thought. Your ESOP proposal is rooted in socialist economics. Even though American socialists have been calling themselves progressives for a very long time, there are important distinctions between the two. I see no reason to change the name to accomodate two frustrated members who are selling something nobody is buying.
July 27 at 8:22am · Like · 2

Warren Chamberlain I remember when ESOPS came into existance because I was working at GM at the time and enrolled in it. I was at the time socialist leaning and concerned with the Class Struggle between Capitalism and Communism. At that time I did see it as a “third” way. Yes it was a way to share “ownership” in the coprorations we all worked for but did not address indvidual ownersip in small enterprises. The ESOPs were not funded with debt or new money as Garry supports it was funded from present revenue from our paychecks and matching contributions from our employers.
July 27 at 9:07am · Like · 2

Warren Chamberlain Investment in future production may not come from past savings but it does come from delayed gratification of present consumption. What is more important is what we are investing in speculation in inflatable assets like land or productive assets like plants and equipment.
July 27 at 9:55am · Like · 1

Gary Reber Warren, your ESOP was not properly or optimally structured to benefit the employees. There should have been no requirement for contributions from employees or owners using capital credit to finance future growth.
July 27 at 10:25am · Like

Gary Reber In simple terms, socialism is policy that REDISTRIBUTES wealth from those who are productive to those who are not. We are not based in socialism and do not advocate redistribution, but instead FUTURE distribution and productiveness through broadened individual capital asset ownership without taking from those who are now productive.

Insured capital credit loans by definition need to be directed at capital asset growth projects that are analyzed to have a reasonable expectation of success. This leaves wide open ALL other entrepreneurial endeavors that entail substantially more risk and are not insurable.

By decentralizing capital asset ownership (broadening) there will be far less monopolies. As people gain ownership and build incomes and financial security, they will be able to afford products and infrastructure, which is environmentally sound and sustainable, which we advocate.

Private debt would be decreased because as people gain ownership and build incomes and financial security they will have less need for consumer debt and able to pay cash. As people become for self-sufficient and less dependent on government welfare supported by national debt and tax extraction, governments will be able to reduce national debt, balance budgets, and over time pay off the national debt.

The money system would be stabilized with no inflation as we shift from debt-back money to asset-backed money.
July 27 at 10:40am · Like

Warren Chamberlain Even if new money created out of thin air was loaned into existence to purchase new capital for future production or land speculation. the investment spending of labor would still require delayed gratification. Even if you think my ESOP was not structured properly because current earnings of GM and the workers were diverted to investment in financial instruments like our Personal Savings 401k plans, any reduction of disposable purchasing power was made up from borrowing from our credit cards and equity lines of credit on our houses to off set the short fall. In effect the borrowed funds ended up in the stock market anyway.
July 27 at 11:01am · Like

Gary Reber Warren, I suggest you read The Formation of Capital by Harold Moulton of the Brookings Institute at http://www.cesj.org/…/2014/02/formationofcapital_cesj.pdf
July 27 at 11:17am · Like

Dan Sullivan “There should have been no requirement for contributions from employees or owners using capital credit to finance future growth.”

Despite Gary’s fantasies, it has to come from somewhere. There is no such thing as getting something from nothing. In his proposal, it is taken from the whole nation.

“In simple terms, socialism is policy that REDISTRIBUTES wealth from those who are productive to those who are not.” Not one socialist agrees with that description. It is another of Gary’s lies. In fact, all of the economic analysis Gary relies upon traces directly back to Marx, including Marx’s conflating of capital with land and other privileges. It ignores the root cause of monopolies and imagines that the monopoly of capital comes from some failure to lend money to ordinary people.

He imagines these ordinary people with debts to pay would compete effectively with those who own capital free and clear, and all with an artificially increased supply of capital that would drive down prices and profit margins. Anyone who looks at this calmly sees that the established businesses will easily out-compete the heavily leveraged Kelsonian collectives, and end up buying the assets of bankrupted collectives for pennies on the dollar. One reason is that there was no increase in debt-free money, so nobody could buy more of the things this capital expansion had to sell.

“The Formation of Capital” is not about the formation of actual capital, but is about creating money and debt. It makes the same banker-biased errors that Marxists and neoclassicals make. Once you define land, money and privileges generally as being the same thing as labor-produced capital, stupidity is inevitable. Henry George dealt with this well in “Public Debts and Indirect Taxation.”

“If it were possible for the present to borrow of the future, for those now living to draw upon wealth to be created by those who are yet to come, there could be no more dangerous power, none more certain to be abused; and none that would involve in its exercise a more flagrant contempt for the natural and unalienable rights of man. But we have no such power, and there is no possible invention by which we can obtain it. When we talk about calling upon future generations to bear their part in the costs and burdens of the present, about imposing upon them a share in expenditures we take the liberty of assuming they will consider to have been made for their benefit as well as for ours, we are carrying metaphor into absurdity. Public debts are not a device for borrowing from the future, for compelling those yet to be to bear a share in expenses which a present generation may choose to incur. That is, of course, a physical impossibility. They are merely a device for obtaining control of wealth in the present by promising that a certain distribution of wealth in the future shall be made — a device by which the owners of existing wealth are induced to give it up under promise, not merely that other people shall be taxed to pay them, but that other people’s children shall be taxed for the benefit of their children or the children of their assigns. Those who get control of governments are thus enabled to get sums which they could not get by immediate taxation without arousing the indignation and resistance of those who could make the most effective resistance. Thus tyrants are enabled to maintain themselves, and extravagance and corruption are fostered. If any cases can be pointed to in which the power to incur public debts has been in any way a benefit, they are as nothing compared with the cases in which the effects have been purely injurious.”

http://schalkenbach.org/…/social-problems/sp16.html…

Social Problems
schalkenbach.org
Both of these devices by which tyrannies are maintained, governments are corrupt…See More
July 27 at 11:47am · Edited · Like · 1

Warren Chamberlain I do understand that the whole purpose of the “third way” is to defend Capitalism from Communism. In the most simple terms, capital is formed when labor delays gratification for immediate satisfaction of desires and employs his labor to produce tools that will increase h is productivity in the future and satisfy more desires. There is no such thing as future savings.
I understand that it would be unjust to take the fruits of human labor and present capital formation and “share” it with others or redistribute it. That is why I do not like the income tax. I do like the land value tax because it is not a tax on income or accumulated capital it is a tax upon ownership of privilege a tax on property that you did not make.

This article seems to present a preview to Modern Monetary Theory in that loans are not the result of past savings but “new money” can be created out of thin air to finance future investment and employ underutilized labor for future production.

The issue is not the distribution of income or even wealth already produced by human labor but the distribution of the opportunity for all potential productive workers to be able to work

The problem is in thinking of money as a limited commodity not and abstract concept like credit.

“If the funds for capital expansion do not come from reductions
in consumption — and Moulton’s findings proved
that conclusively — the question then becomes, what is the
source of financing for capital formation? Moulton answered
the question as follows:
“A new and even more dynamic factor has come into
the process of capital formation through the evolution
of modern commercial banking. The development of the
banking system, with its ability to manufacture credit,
has served to render funds immediately available for
the purposes of capital creation without the necessity of
waiting upon the slower processes of accumulating funds
from individual savings. The result is to sustain productivity
at a higher level and to facilitate the growth of new
capital at a more rapid rate than would otherwise have
occurred.
In other words, new capital formation can be financed by
using money created by the commercial banking system. It
is not necessary (and is even counterproductive from the
standpoint of economic equilibrium and sustainable growth)
to rely on cutting consumption to generate the savings necessary
to finance new capital formation.”

One way to advance future production and consumption is to get purchasing power into the hands of both workers and consumers. This can be done either by commercial credit distributed by banks as loans or Social Credit distributed as direct spending by a government treasury for the construction and reconstruction of public infrastructure and the distribution of a Citizens Dividend or Basic Income Guarantee.
July 27 at 12:09pm · Like

Warren Chamberlain According to MMT, just as savings are not required for banks to make loans for investments by the creation of commercial credit and the build up of private capital formation and consumption of production, it is also not necessary for the government tax people to fund public investment and consumption spending.
Just as much as commercial banks can issue and emit their own bills of credit (as debt) to finance commerce, the treasury of the government can do the same thing and emit its own bills of credit and spend them into the economy (debt free) The only thing we need taxes for is to drive the currency unit and maintain its purchasing power.
July 27 at 12:17pm · Like · 1

Conan Moore “socialism is policy that REDISTRIBUTES wealth from those who are productive to those who are not”

…said no socialist EVER. This sounds a lot more like feudalism. Slaves, serfs, knaves, yeomen, and such villeins were productive, and the political structure redistributed the value they generated from them to the gentry, who were not productive.

Socialists want the productive infrastructure and the land they need for it to be controlled by the workers directly using that productive infrastructure and land. They don’t necessarily distinguish the land from other infrastructure, and they don’t all agree on the system of power that would achieve this allocation of the means of production.

It’s modern capitalistic economies that redistribute wealth after all that’s said and done as a means of mitigating social problems that would come with unchecked flows of privilege.
July 27 at 12:23pm · Like · 3

Warren Chamberlain Communism is Feudalism with a central committee, but I think Socialism is a redistribution of power and opportunity to all members of the society. Power can be distributed by the distribution of purchasing power to the people.
July 27 at 12:28pm · Like · 1

Dan Sullivan As much as I disagree with socialism, I would never hang a description like that around their necks. Where did you get that description, Gary, from the John Birch Society?
July 27 at 12:29pm · Like · 3

Rahul Jain I think it’s a valid description of what socialists end up doing, but it’s not what they intend to do.
July 27 at 12:32pm · Like

Warren Chamberlain So that is why the LVT is NOT redistribution of wealth produced by the productive and not “socialism” by your definition but the value of nature being withheld from production. So Georgism is NOT Socialism.
July 27 at 12:37pm · Like · 1

Dan Sullivan “It’s modern capitalistic economies that redistribute wealth after all that’s said and done as a means of mitigating social problems that would come with unchecked flows of privilege.”

Exactly. And while classical progressives attacked and sought to abolish the privileges themselves, and socialists sought to collectivize the privileges, and erred in collectivizing beyond privilege, the curse of neoliberalism has been to leave privilege in check and to concoct schmes to somehow make things work out for the workers without removing the privileges that rob the workers. That is essentially what Gary proposes here.

We already saw what happened when well-meaning neoliberals gave preferential credit to home buyers instead of addressing the root cause of higher home prices. Exactly the same thing would happen when well-meaning Kelsonian neoliberals give preferential credit to “capital formation” buyers instead of addressing the root privileges that create barriers to ordinary people forming capital themselves.

“Everybody nowadays is anxious to help do something for the poor, especially they who are on the backs of the poor; they will do anything that is not fundamental. ”

– Clarence Darrow (borrowing heavily from Leo Tolstoy)

http://savingcommunities.org/…/darrow…/abolish.html

How To Abolish Unfair Taxation, by Clarence Darrow: Saving Communities
savingcommunities.org
Clarence Darrow on why labor laws cannot succeed without land value tax.
July 27 at 12:37pm · Like · 3

Conan Moore Dan, what Tolstoy is that? I’ll probably read it.
July 27 at 12:42pm · Like

Warren Chamberlain A smart parasite will always look out for the health of its host.
July 27 at 12:43pm · Like · 2

Conan Moore America was founded by smart parasites.
July 27 at 12:44pm · Like · 2

Dan Sullivan “I sit on a man’s back, choking him, and making him carry me, and yet assure myself and others that I am very sorry for him and wish to ease his lot by any means possible, except getting off his back.”

-“Writings on Civil Disobedience and Nonviolence (1886)”

Incidentally, Tolstoy was a raving Georgist.
July 27 at 12:46pm · Like · 4

Dan Sullivan My searches for the source material are overwhelmed with quote pages. If anyone finds the actual source material online, please let me know. Searching on books turned up hardcover books for sale, but no e-text.
July 27 at 1:02pm · Like

Gary Reber This can be done either by commercial credit distributed by banks as loans or Social Credit distributed as direct spending by a government treasury for the construction and reconstruction of public infrastructure and the distribution of a Citizens Dividend or Basic Income Guarantee.”

…”Just as much as commercial banks can issue and emit their own bills of credit (as debt) to finance commerce, the treasury of the government can do the same thing and emit its own bills of credit and spend them into the economy (debt free).”

But commercial capital credit relies on non-inflationary capital asset creation, while government relies on tax extraction or non-asset-backed debt to redistribute or inject inflationary money into the system.

Socialism relies on tax extraction and non-asset-based national debt to firstly redistribute monies collected into social welfare programs and second to finance pueblo infrastructure and the military, etc. To the extent that modern “capitalistic” economies redistribute they are practicing socialism. Sweden is a perfect example. I did my doctorate studies on the Swedish social welfare state, whose architect was in large measure Gunnar Myrdal, a professor I studied under, but constantly disagreed with, because he could only see production in terms of the single factor labor and always sought to create make-work instead of unleashing the full productiveness of the non-human capital broadly owned.

I agree Rahul, the intent is worthy, but the means are disruptive and unjust.

The thrust of the Just Third Way is to eliminate privilege and provide EQUAL OPPORTUNITY for EVERY child, woman and man to build independent, sustainable financial security and incomes through acquiring ownership in FUTURE wealth-creating, income-producing capital assets financed without the necessity of pledging “past savings” or a reduction in consumption.

Georgism is socialism in that it extracts a tax on land owners instead of providing mechanism whereby EVERY citizen can be a share owner of the land and natural resources, and the non-human capital assets yet to be formed.

The “barriers to ordinary people forming capital themselves” is the necessity for “past savings.” which only the wealthy ownership class has, and to the reality that one cannot get a capital credit loan today to invest in new capital asset formation without pledging “past savings” and equities.
July 27 at 2:46pm · Like

Dan Sullivan There is no need for government to be picking winners and losers, and there is no basis for saying that debt-free money is inflationary. Inflation is determined by the total amount of purchasing power, whether or not that purchasing power was created with debt-strings attached or not. There is no need to finance new infrastructure to find a Citizens Dividends. Just start paying dividends on the existing infrastructure that already gives value to land – and to new money, for that matter.

“The ‘barriers to ordinary people forming capital themselves’ is the necessity for “past savings.” which only the wealthy ownership class has.”

That’s a load of crap. It’s the old “Capital Fund Theory” that Henry George debunked and that most modern economists don’t even believe any more. The only reason the “ownership class” has more savings is that they get a constant flow of rent (and interest on debt-money) from the producers, who also pay most of the taxes. You don’t need to concoct special schemes to make the producing class into the ownership class. You just abolish the mechanisms that allow others to steal what they have produced.

As Alan Watts noted, it’s like saying we can’t build houses because we don’t have enough inches. It’s all bunk.
July 27 at 2:59pm · Like · 3

Conan Moore “Socialism relies on tax extraction and non-asset-based national debt to firstly redistribute monies collected into social welfare programs and second to finance pueblo infrastructure and the military, etc. To the extent that modern “capitalistic” economies redistribute they are practicing socialism.”

You have a fundamental misunderstanding of what socialism is.
July 27 at 3:07pm · Like

Dan Sullivan Why should his understanding of socialism be any less wrong than his understanding of everything else?
July 27 at 3:12pm · Like · 2

Dan Sullivan “An English writer has divided all men into three classes — workers, beggars and thieves. The classification is not complimentary to the “upper classes” and the “better classes,” as they are accustomed to esteem themselves, yet it is economically true. There are only three ways by which any individual can get wealth — by work, by gift or by theft. And, clearly, the reason why the workers get so little is that the beggars and thieves get so much. When a man gets wealth that he does not produce, he necessarily gets it at the expense of those who produce it.

“All we need do to secure a just distribution of wealth, is to do that which all theories agree to be the primary function of government — to secure to each the free use of his own powers, limited only by the equal freedom of all others; to secure to each the full enjoyment of his own earnings, limited only by such contributions as he may be fairly called upon to make for purposes of common benefit. When we have done this we shall have done all that we can do to make social institutions conform to the sense of justice and to the natural order.

“I wish to emphasize this point, for there are those who constantly talk and write as though whoever finds fault with the present distribution of wealth were demanding that the rich should be spoiled for the benefit of the poor; that the idle should be taken care of at the expense of the industrious, and that a false and impossible equality should be created, which, by reducing every one to the same dead level, would destroy all incentive to excel and bring progress to a halt.”

http://schalkenbach.org/…/hen…/social-problems/sp09.html

Social Problems
schalkenbach.org
WHOEVER considers the political and social problems that confront us, must see t…See More
July 27 at 3:16pm · Like · 2

Warren Chamberlain And You Gary recognize only two factors of production and conflate land with capital.
July 27 at 3:24pm · Like

Gary Reber Warren, because it is non-human and can be owned.

Dan, “When a man gets wealth that he does not produce, he necessarily gets it it at the expense of those who produce it” clearly puts you in the camp that ONLY human labor produces wealth, completely ignoring the the contribution of non-human “tools” used in the process of wealth-creation and the constant forward march to technological progress that requires less and less labor to produce the same or more wealth.
July 27 at 3:40pm · Like

Warren Chamberlain Non human yes, but no one made land, it is not capital How people get land that they did not produce it is by government granted privilege at the expense of those who do not and can not own any land. Only human labor on the land produces capital perhaps until he has accumulated so much capital that he can now enjoy an income from the capital while he sits idly on his land.
July 27 at 3:46pm · Like

Gary Reber Warren, you are still ignoring the reality of tectonic shifts in the technologies of production and the property rights principles our country was founded on. By broadening ownership we also broaden ownership of land as well as capital assets.
July 27 at 3:54pm · Like

Warren Chamberlain I am not ignoring technology or the or the rapid advancement of technology or the property rights of those who are creating all this technology. I am simply trying to stop ignoring the reality of land as the basic necessity for all productive activity. http://embraceunity.com/…/is-the-free-market-the-road…/

EmbraceUnity » Is the Free Market the Road to Serfdom?
embraceunity.com
July 27 at 3:57pm · Edited · Like · 1

Rahul Jain Technology advancement means that capital decreases in value. There is already a disadvantage to creating capital and you’d just confiscate it to make it worse. You’d steal from those who want to invest in the FUTURE. This is why we have overconsumption, because we punish saving, and you want to make it worse.
July 27 at 4:05pm · Like

Warren Chamberlain New technology makes old capital obsolete.
July 27 at 4:07pm · Like

Gary Reber Rahul, this is nonsense. I’m advocating using insured, capital credit to finance FUTURE investment, repayable out of FUTURE earnings, without the need for “past savings” or the reduction in one’s personal consumption needs and wants.
July 27 at 4:08pm · Like

Rahul Jain the insurance is a directed subsidy to government cronies, and making entrepreneurs debt slaves does not fix the systemic problem of debt slavery, because it’s the same as the status quo. You will pilfer from them by charging interest, which is the same as confiscating the fruits of their labor.
July 27 at 4:10pm · Like

Gary Reber Warren, in the business world, capital is expected to go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.
July 27 at 4:18pm · Like

Gary Reber Rahul, where do you get that the “insurance is a directed subsidy to government cronies?” Also, the capital credits is insured, how does that create debt slavery to the child, woman or man having the opportunity to benefit from a capital credit loan? Also, read above there is no “interest” payment for the loan.
July 27 at 4:23pm · Like

Warren Chamberlain Even if there is no interest on the loan other than the discount or premium “paid” to get the loan the principle has to be repaid out of the income from the capital aquired by the proceeds of the loan.
July 27 at 4:35pm · Like

Warren Chamberlain Capital depreciates, land appreciates.
July 27 at 4:36pm · Like

Gary Reber Capital assets generate earnings for their owners, regardless of face value depreciation.
July 27 at 5:29pm · Like

Conan Moore Gary, if you ignore the distiction between land and capital, and you lump land and land-type things in with capital, like intellectual property, mineral rights, and electronegative spectrum, you will think that capital assets generate earnings regardless of face value depreciation. Those are not earnings. That is the return of privilege to privilege inherent when private property rights include land. Distinguishing between land-type holdings, infrastructure-type holdings, and commodity money will help us to deduce the actual value of labor. Monetize societal structures and ecosystem services so we can charge agents in the market for their negative externalities.
July 27 at 6:27pm · Like · 1

Warren Chamberlain Idle capital earns nothing no matter who ownes it. If you do not belive that I know a few automobile plants in Flint MI you can invest in.
July 27 at 6:46pm · Like · 1

Rahul Jain Land does not depreciate. It appreciates.
July 27 at 6:51pm · Like · 1

Gary Reber Warren, idle capital does not earn anything. But as I have stated in the business world, capital is expected to go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development as long as there are “customers with money” to buy what is produced. The goal should be for society to profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy.
July 27 at 7:44pm · Like

Gary Reber Rahul, in the law, property is the bundle of rights that determines one’s relationship to things. In that sense land ownership is conveyed as property rights.
July 27 at 7:45pm · Edited · Like · 1

Rahul Jain What does law have to do with economics?
July 27 at 9:09pm · Like

Rahul Jain land appreciates. That has nothing to do with the law. The law cannot forbid it except by physically restraining people from using technology and from reproducing.
July 27 at 9:09pm · Like

Gary Reber Law determine the parameters of an ownership claim on the productive power of real capital.
July 27 at 9:12pm · Like · 1

Rahul Jain And that has nothing to do with where that productivity comes from and how it changes over time.
July 27 at 9:23pm · Like

Gary Reber But it does have to do with how the property rights relate to the owners and users of capital assets.
July 27 at 9:25pm · Like · 1

Michael Bindner Glad you guys had fun with out me today.

The problem I am addressing is workers being treated as tools, while being stolen from by executives and management. I include in the universe of workers those in small business who consult to the larger firrms – who don’t quite make into into employment, even though they are employees (I had one of those gigs myself with my wife’s employer – and have a lot of history working as a outside staffed employee – where the wages are so poor that doing retirement savings is a sick joke and the insurance is so bad that for the year the carrier gets more from me than I get from the carfier. Do I want to eliminate those situations (and franchises too whose sole purpose is avoiding unionization and offseting inventory risk and land risk onto franchisees)? To quote the greatest Republican mind of the last decade. You bethca!

Gary is not asserting new point, he is faithfully transmitting Binary Economics as devised by Kelso and Adler, with improvements by Norm Kurland and Michae Greenry (unless he’s now in development too).

On ESOPs and other cooperative and employee-owned situations, neither the tools of binary economics nor even Social Security personal accounts will or can be used to force small businesses to change. What will force them to change is the fact that enough of the labor market will change (the amount it has changed, by the way, is the most under reported fact in business today) so that workers will demand the same kinds of benefits in other employers and the market for workers means that eventually, all workers will get them.

Many believe that when that happes, land won’t be a problem at all, although unlike the distributists, which are fellow travels to both the ESOP and LVT worlds, I favor that the enhanced worker benefits be applied to overseas subidiaries and suppliers of multinationals who adopt employee – ownership. I would hope that would be the case automatically, but the labor movement has already been a disappointment in that regard.
July 27 at 11:13pm · Unlike · 1

Michael Bindner My land depreciated – or rather – it lost location value – as all land lost location value – when the mortgage market crashed. When it was at the bottom, that would have been the time to both forgive loans over market and impose an LVT so that the prices don’t go back up.
July 27 at 11:15pm · Like

Warren Chamberlain “As long as there are customers with money to buy what is being produced.” Yes so how do we make sure we all have income to make sure we have income to buy what we produce?
July 28 at 5:54am · Like · 1

Warren Chamberlain Yes and this is the proper time to shift to LVT to prevent property bubbles and stimulate production and full employment and balanced public budgets for state and local governments. This is also the time to implement Social Credit to gradually replace Commercial bank credit and provide a basic income for all.
July 28 at 6:04am · Like · 1

Rahul Jain any time is good for LVT. the only question is when is it politically viable…
July 28 at 6:14am · Like

Warren Chamberlain No the LVT is proventive. If applied at the peak of a bubble it would burst the bubble. Now that the bubble has burst it is the proper time. This is the time it can be more politicly popular. Reducing taxes on production now and shifting the burden to land values will end the recession and usher in a new recovery free of inflation.
July 28 at 6:22am · Like

Gary Reber Warren, by simultaneously creating new wealth-creating, income-producing capital asset formation and broadening its ownership so that increasingly over time more and more citizens will derive financial benefit and second incomes from their expanding diversified capital asset portfolios. In this way, we can balance production with consumption––the purpose of production.
July 28 at 9:27am · Like

Gary Reber Michael, Norm Kurland and I go way back with Louis Kelso. In fact, I brought Norm into our advocacy company Agenda 2000 Incorporated, which developed numerous financial mechanism to broaden ownership through economic development projects. During the late 1960s and throughout the 1970s, following university doctorate studies in economic development and urban and regional planning, I became a political economist and economic justice advocate. During that period I co-founded the advocacy consulting firm Agenda 2000 Incorporated with my mentors Louis O. Kelso and John W. Dyckman.

Louis Kelso was a leading corporate, tax and financial lawyer, and political economist based in San Francisco and the author of “The Capitalist Manifesto” (Random House 1958), “The New Capitalists” (Random House 1961), “Two-Factor Theory: The Economics Of Reality” (Random House, 1967), and later “Democracy And Economic Power: Extending The ESOP Revolution Through Binary Economics” (Ballinger Publishing Company, Cambridge, Massachusetts, 1986; reprinted University Press of America, Lanham Maryland, 1991). The first two books were co-authored with Mortimer J. Adler, President of the Institute for Philosophical Research, former professor of the Philosophy of Law at the University of Chicago, and author of The Idea Of Freedom. Kelso’s latter two books were co-authored by Patricia Hetter Kelso, his collaborator and wife since 1963. The four books present Kelso’s theory of binary economics (or the economics of reality), which describes labor and capital as independently productive and the financial tools for democratizing capital ownership in a private property, market economy where most products are exponentially made by physical capital. For more reading visit www.kelsoinstitute.com.

John Dyckman was Professor and Chairman of the Graduate School of Urban and Regional Planning at the University of California, Berkeley and the author of numerous books and articles on urbanization. Under Dyckman, I taught binary economic development theory in the graduate program for one year while running San Francisco-based Agenda 2000 and the advocacy Institute For The Pursuit Of Economic Justice at Berkeley, which I founded.

Throughout this period I lectured at universities throughout the United States, England, and Europe, espousing binary economics and democratized, broadened individual capital ownership.

Aeronet Communications | Strategy, Design and Technology for Web and Mobile
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July 28 at 9:33am · Like · Remove Preview

Dan Sullivan Well, bunk sells, sometimes. But let’s state with the basics:

Money and credit are not wealth, but are claims to wealth. Furthermore, they are claims to *existing* wealth, not *future* wealth. The difference between money and credit is that the latter also comes with an obligation in the future on the person who got the credit. While the repayment will be a transfer in claims sometime in the future, those repayments will also be in money, which will also be claims on wealth that exists at that time.

Capital creation must come from the present stock of wealth and labor. This is clear when you stop conflating claims to wealth with actual wealth. The labor that is creating capital for some new company or co-op cannot be creating wealth or capital, or providing services for anyone else at the same time. That is, all wealth creation draws on the existing stock of land, natural resources, labor and wealth.

When government and its licensed banks create additional claims to wealth, they do not create additional wealth in any way. Rather, they diminish all of the existing claims to wealth. This can be appropriate, as when the people of the nation have increased the stock of wealth to be claimed. The question then becomes, “Who are the rightful recipients of these additional claims to wealth?”

To classical progressives, and particularly Greenbackers, the rightful recipients of new claims to wealth, i.e., new money, are the whole people of the nation. Whether they get that benefit in services funded from the new money, or get it in per capita shares of the money, is a less fundamental question than that of who should get it in the first place.

There is no moral basis whatsoever for taking the people’s money and giving it to whoever has a nifty capital-formation plan. If the people want to do so, then they can, as individuals, buy stock in the new enterprise with their share of the new money. This would essentially be the people voluntarily doing what the paternalistic Kelsonian schemes try to finesse them into doing.

There is also no economic rationale for government to artificially stimulate capital formation instead of simply removing the artificial barriers to that formation. The first of those barriers are land and resource monopolies, which the Kelsonian plan ignores. (Heck, Kelso doesn’t even acknowledge that land and resources exist apart from capital, or behave any differently. Try creating a “land formation fund” and you quickly see how idiotic that is.)

The second is a monetary system that forces the general public into debt by lending all money into circulation. The Kelsonian schemes not only fail to address that, but propose to lend even more money into circulation so people can go deeper into debt, all in order to create more capital than the market can sustain. Of course, the market would be able to sustain more capital if land and money monopoly were reduced, but no such reduction appears in the Kelsonian schemes.

Yes, Kelso wrote a lot of crap. So did Marx. So did many other people who had nifty ideas based on faulty premises. It all sounds just peachy to people who want to believe it badly enough, and who cannot or will not think for themselves.
July 28 at 12:20pm · Like · 3

Michael Bindner Gary, I did not know you brought Norm in. I am impressed.
July 28 at 8:48pm · Like

Michael Bindner The Act by Long did use tax incentives to encourage current capitalists to sell their companies to an ESOP trust, which holds the shares until the loan is paid. The capital homestead act uses no government money (save the current tax credit for the owners selling out), only money created by borrowing at the discount window. I would rather use current wealh transfers than future ones, although I would use retirement taxes to do this, allowing workers to invest a portion of their taxes in what is essentially a private plan instead of a public plan. This plan, unlike Kelso, takes the monetary system out of most consumer lending and gives it to the employers, who are owned by the employees – thus avoiding the problem of peonage. As for Marx or Kelso writing a lot of crap, maybe, maybe not. Irregardless, Franklin had the right statement – if we don’t all hang together we shall surely hang seperately. The Capitalists love that we have differences. Perhaps instead we should be more open to items of agreement and resolving areas where disagreement exists. Winning involves compromise, not ideological or intellectual purity.
July 28 at 8:58pm · Like

Rahul Jain LVT won’t cause a bubble to burst any more than natural forces would. It is the only way to create a “soft landing” by redistributing the bubble’s profits to everyone. It is a bailing-out of everyone who needs to pay higher rents and didn’t play the speculation game so that they can continue producing.
Yesterday at 4:56am · Like · 1

Rahul Jain The differences we have allow us to work together.
Yesterday at 4:58am · Like

Warren Chamberlain The LVT would accelerate already natural forces.
Yesterday at 5:11am · Like

Dan Sullivan “Winning involves compromise, not ideological or intellectual purity.”

We compromise all the time, but a good compromise is in amount, not in a change of direction. You don’t get to closer to right by doing wrong.

“Opposition to the truth is inevitable, especially if it takes the form of a new idea, but the degree of resistance can be diminished- by giving thought not only to the aim but to the method of approach. Avoid a frontal attack on a long established position; instead, seek to turn it by flank movement, so that a more penetrable side is exposed to the thrust of truth. But, in any such indirect approach, take care not to diverge from the truth- for nothing is more fatal to its real advancement than to lapse into untruth.”

– *Strategy*, by Sir Basil Liddell-Hart (considered the greatest military strategist of the 20th century)
Yesterday at 6:34am · Like · 1

Warren Chamberlain Winning may mean becoming more open to discovering and agreeing upon what the truth is.
Yesterday at 6:55am · Like

Dan Sullivan Not if you have to agree to lies and pretend they are truth.
Yesterday at 6:57am · Like

Warren Chamberlain We have to agree on what the lies are too.
Yesterday at 7:01am · Like

Dan Sullivan Not really. Everyone doesn’t have to work on the same thing.
Yesterday at 7:18am · Like

Michael Bindner I am fully willing to work with what Dan is doing on local projects. I think its great. However, when Warren goes for teh full monty on replacing all taxes with an LVT (or when Fred does it), I balk because at some point the cost analyst in me can’t see how any single tax with the same revenue and spending does not have the same effect on how much the tax is blended into product pricing as any other tax, particularly a single one. Warren is correct that LVT won’t burst the bubble and I don’t think anyone disagrees. Sadly, home prices have gone up again so the time for LVT in this cycle may be lost – but maybe not. It would still be urgent to do mortgage write downs (although if I got a principle write down today, my house would still be on the auction block – unless there was a really good citizen dividend to pay the mortgage with – but upsetting the apple cart also makes things unpredicatable. There are always consequences boyond theory).
Yesterday at 12:44pm · Like · 1

Nate Blair Michael, the only way LVT can be passed on in consumer prices is if land is accidentally assessed or taxed at more than 100% of market value, or maybe if people perceive a risk that it will be taxed at more than 100%.
Yesterday at 12:56pm · Like · 1

Michael Bindner not saying that it can be passed on in prices – but it can be embedded in them. Indeed, the land taxes that I pay (or used to pay) are paid by my salary, which is paid by moviegoers. That land tax is not explicitly part of the ticket – however a part of the price finds its way into the coffers of the City of Alexandria in the form of land taxes.
Yesterday at 1:00pm · Like

Michael Bindner In reality, everyone pays everyone everthing is a relatively free economy – including their taxes and even their use of abortion services (like when you buy a hamburger and that pimply faced kid needs the money to get his girlfriend out of trouble. You did not mean to fund the abortion, but the money paid did so indirectly (although far more directly than when you paid taxes).
Yesterday at 1:01pm · Like

Michael Bindner Here’s the fun part, my employer owns the theater, but not the land. Its rent is used by the land owner (probably some trust) to pay the land taxes (and maybe the property tax, not sure). That is embedded in the ticket price, though not explicitly – although if the cost of tax went up, the ticket price would go up or we would save money some other way – usually on the backs of the staff. The ticket price also, rather more explicitly, pays my social security and income taxes. The movie goer does not get the benefit of those taxes, but it gets the benefit of me and I am a package of taxes and consumer services to be paid.
Yesterday at 1:06pm · Like

Warren Chamberlain Maybe we are all working on the same goals saving families and saving communities. I do see the LVT as a very powerful tool in an urban planners tool box, as a means to an end, not an end in itself.

Single issue politics does not work for me, like banning abortion. My goal is to work to provide a pro-life and pro-liberty economy or community.
Yesterday at 1:14pm · Unlike · 2

Warren Chamberlain It is not that complicated. http://www.bing.com/videos/search…

Dan Sullivan Michael, if your theater-owner friend has a long-term lease with a pass-through clause, the land value tax will be passed on to him for the duration of the lease. After that, the economics are such that he will get a better deal than he would have had without LVT. This is something you could understand if you wanted to, as it is standard textbook economics.

In any case, ticket prices are based on what the market will bear, and even your theater owner cannot pass on the tax in higher ticket prices. If he could, he would have charged those prices anyhow. Nor can he pay staff any less; if he could pay less, he would already be paying less.

What will happen economy-wide is that the price of land will fall. However, if your friend has a long-term lease, what will happen is that the value of his theater business will fall. This is one of the reasons we do this gradually. Also, consider that some of the taxes we would replace with LVT are those that fall on your theater owner, his employees and his customers. If his is a good land use, it shouldn’t be a problem for him.

Anyhow, we have had this conversation over and over and over. I’m guessing you didn’t read Samuelson’s explanation or any other explanation. If you really want to believe that land value tax is passed on to renters, consumers and workers, or you want to believe 2 + 2 = 5, that is your right. Still, if you keep saying so on this list, you are going to be corrected.

http://www.cooperativeindividualism.org/samuelson-paul…

Paul Samuelson and William D. Nordhaus / Taxation of the Rental Value of Locations
www.cooperativeindividualism.org
Yesterday at 2:11pm · Like · 1

Forest Baker Warren has moments of perfect clarity. If a Land Value Tax works better than other forms of taxation to fund the government then a finite community should certainly do just that. But if it measurably does not or demonstrably would not then let’s get real. Ideology speaks to the ideal. But there is no such Utopia. If we get 80% of the way toward a good idea then the circumstances will have changed and our earlier assumptions must be challenged before we fund that process further. It is likely that we have already done all that we might…and that pushing it further has diseconomies.
22 hrs · Like

Warren Chamberlain The LVT is not necessary to fund the government, it is only necessary to recapture the rent on the land and control any inflation caused by the issue of bills of credit by that government
22 hrs · Like

Forest Baker Let’s not become confused about what any tax does, Warren. It funds the government.
22 hrs · Like

Warren Chamberlain Taxes also alter human behavior.
22 hrs · Like · 1

Catherine Cashmore “let’s not become confused about what any tax does” … Indeed. http://www.economonitor.com/…/06/17/tax-bads-not-goods-2/

EconoMonitor : Great Leap Forward » TAX BADS, NOT GOODS
www.economonitor.com
Economics for the 21st Century and Beyond
17 hrs · Like · 2

Michael Bindner My theater is owned by a chain with HQ in the Kansas City area. Your friend’s theater will likely be bought by us or our competiting chain (which is sad, actually). I hope he holds out.

I agree with Warren, working together is a good idea because we have the same goals regarding who we are helping.

I am not saying that my customers are being taxed for my land – merely that they are giving me money that I use to pay the tax on land and techncially for my income, sales and retirement taxes as well. Changes in the tax impact me, not them, although if the sales tax rate goes up we may or may not eat it or pass it to the ticket buyers. Still, whether I pay many taxes, as in the present or one single tax, all of the tax I pay will liekly be the same – or it might be a bit lower – though I am suspecting that if the government spending needs are constant, as the cost of land goes down, the tax rate will go up to compensate.

I am a weapons systems cost analyst and the cost of everything is broken down into a work breakdown structure. That is one slice. The other slice of the the same cubed cake is the cost item – which can be individualized or aggregate. In other words, you can count up the social security taxes for each person into one total for analytic purposes (and to send a check to the IRS). If there were only one tax, the LVT, it may or may not be as visual. Indeed, if we want to stop using mortgage companies to collect the tax, it could be a payroll withholding – which means the individual will never see it. On a side note, I find it interesting that banks offer automatic mortgage payment but not automatic rental payment – the do with computer banking, but it is simply not a priority to them.

My point is that I am not so concerned with how the tax is paid as I am with how much of a share it takes in the micro economy (the macro economy is easier to measure). The numbers will still add up either way, or they should.
16 hrs · Like

Rahul Jain The whole point is to tax away the fruits of privilege from those who have privileges!
9 hrs · Like · 1

Warren Chamberlain Michael I think the theater ticket price will more likely determine where it is economical to locate that theater. The retail price we are all willing to pay is the highest price the market will bear and the overhead costs required to secure that location are calculated from that point of diminishing returns. If the owner of the building charges too much for the lease, for what ever reason, his building will be empty of have vacancies. The same is true for any town government if their tax rates are too high so it is not about how high the tax rate is it is about what are we taxing why we are taxing it and how it would produce altered economic behavior.

Taking the traditional property tax on both land and buildings and shifting the total aggregate tax burden, in a revenue neutral way, off of the buildings and other personal property to the locational value of the land only will alter the economic behavior and activity of all the property owners in a city or town.

Yes, if in spite of what the MMT people says that taxes do not fund government and just serves to drive the economy, this is not true at the state and local government level. Taxes are required to fund local and state governments but in addition to that taxes can and do effect human economic behavior.
8 hrs · Like

Rahul Jain Local and state governments can borrow instead of tax. The consequences of inflation are the same whether you measure it in the quantity of bonds issued or the quantity of currency issued. The only difference is whether the government is allowed by its parent government to issue an independent currency and whether the general public trusts that the currency or debt will retain its value
7 hrs · Like

Warren Chamberlain Yes but evetualy the local and state governments have to pay back the bonds and pay the interest on those bonds. State and local governments are prohibited to issue and emit their own bills of credit for currency.
7 hrs · Like

Dan Sullivan “Your friend’s theater will likely be bought by us or our competing chain.”

Why? The land value tax is just as high for the chain that would consider buying it as for the independent who owns it now. Moreover, most chains are less competent at making the best use of locations than independents are. Chains are labor-efficient, not land efficient. Again, you keep making these declarations off the top of your head that are contradicted by both logic and evidence.

“I agree with Warren, working together is a good idea because we have the same goals regarding who we are helping.”

Except that we would help them by lowering their taxes and making land more affordable to them, while you would help them by giving them incentives to go deeper in debt. In other words, you would actually hurt them. No basis for working together in that case.

” Changes in the tax impact me, not them, although if the sales tax rate goes up we may or may not eat it or pass it to the ticket buyers.”

True enough for sales tax, because fewer sales mean less tax. Not true for land value tax, which is the same no matter how many tickets you sell. The way for a theater to overcome land value tax is to sell more tickets, (and more popcorn) which means either lowering the price or otherwise enticing people to come, not raising the price. Again, it is clear that you don’t understand the fundamental economics.

Your cost analysis of goods and services does not apply to land. If you do this for government, you are oblivious to the holding costs. If you do this or a private company, you will find that the only way it can reduce the per-unit land cost is to produce more units per value of land held. That is, move to a cheaper location, give up some of the land, or more aggressively producce and market the product. That is true whether the product is weapons or theater tickets.

The only rational excuse for raising theater ticket prices is if the show is sold out, in which case it would have been rational to raise them anyhow.
5 hrs · Like · 1

Dan Sullivan I should have said contradicted by logic, evidence, and a consensus of economists.

Dan Sullivan It isn’t human and non-human it’s land, labor, and capital. Capital is nonhuman, but made by humans. It is also non-land, but made from land.
1 hr · Like · 1

Dan Sullivan On to Norm Kurland’s nonsense:

Presuming seems to be his modus operandi.

“Now, let me point out my disagreements with Mr. Sullivan’s remaining statements, which I presume are based on his commitment and possible personal economic interest in defending Monopoly Capitalism.”

That is entirely ad hominem and entirely wrong. The idea that I am committed to monopoly capitalism is absurd to anyone who has been paying attention.

“Capitalism, a term cleverly invented by Marxists and promoters of collective and State ownership, is a system that Ayn Rand and Milton Friedman also attempted to promote based on their glorification of “greed” and “selfishness” as moral virtues.”

More ad hominem presumptuousness that has nothing to do with what I have written, except that I have been saying all along that capitalism is a Marxist term, and I have been criticizing Rand all along. Ironically, he is using Marx’s definition of capital, which obliterated the classical-liberal distinctions between genuine capital and capitalized privilege (land, money, stocks, debts, etc., which are not wealth but claims to wealth). Conflating genuine wealth and capital with mere claims is the fundamental error on which all of Kelso’s other errors are founded.

“The fact that the wealthiest 88 people in the world own more income-producing wealth than the bottom 350 billion members of world society does not trigger the moral sensitivities of these plutocrats. The top 1 percent of Americans own more productive wealth than the bottom 95 percent combined.”

I am so tired of people whining about the problem in order to get people to not find fault with their bogus solutions. We all agree that wealth is improperly concentrated, and the disagreement comes from Kelso’s failure to get to the underlying cause, and to instead concoct schemes that would make things worse. At the root of his errors is his “binary” stupidity that there are only two factors of production, labor and capital, and that the earth itself is largely irrelevant.
1 hr · Like
Dan Sullivan “And I presume that Mr. Sullivan is either unaware or indifferent to the unjust exclusionary barriers in the world’s monetary, tax and other institutional barriers to enabling every human being to enjoy an equal opportunity (not necessarily equal results) to acquire personally or share with others private property rights in new capital formation and voluntary transfers of existing income-producing capital assets, without violating private property rights of existing owners over the capital assets they now own.”

More asinine presuming. Also, have you ever noticed that these Kelsonians cannot construct simple sentences? Even a complex sentence that was coherent would be an improvement. The problem is, if you don’t lay a lot of gratuitous adjectives into the statement, it is easy to see that the statement is unsound.

So let us start with his presumption that I am unaware or indifferent to unjust exclusionary barriers. (Let’s just let that sink in for a minute.)

Okay, when everyone is done laughing, let us note that he didn’t actually name any of these barriers. I name them all the time, and trace them to their roots all the time, but he, like Kelso, and like Marx, simply assumed that, if capital (as he misdefines it) is too concentrated, we must not look for the underlying causes of that concentration, but must simply describe the concentration (in considerable detail, I would add).

Failing to see what all classical liberals saw (the importance of separating land as a factor), he follows in the footsteps of Kelso, and of Marx before him, in thinking that he must concoct some way to encourage a wider distribution of wealth. He seems to think his “third way” is voluntary, as if manipulation were not a species of coercion. None the less, this pretense of voluntarism at least makes his proposal sound palatable to those who do not want to be coerced and do not think things through very well.
1 hr · Like

Dan Sullivan Here is another whopper of a run-on sentence:

“I see no evidence that Mr. Sullivan has read, certainly not in any scholarly way, or understands the logic of Kelsonian theory of binary economics, the vision of “The Just Third Way” beyond Capitalism and Collectivism, the three fundamental interdependent principles of Economic Justice and the specific reforms to lift unjust and artificial barriers to “the means of acquiring and possessing property” as a fundamental citizen right as expressed in the Preamble of the Virginia and Massachusetts Declarations of Rights at the birth of this nation, legal barriers that would be lifted under the proposed Capital Homestead Act.”

Let us parse this into one mistake at at time:

“I see no evidence that Mr. Sullivan has read, certainly not in any scholarly way, or understands the logic of Kelsonian theory of binary economics,…”

*He* sees no evidence, but everyone on this list knows that we have talked ad nauseum about the fallacies of lumping everything into labor and capital. Again, that is Marx’s central error, because he wanted to attack capital is if it were privilege. Reactionary anti-Marxists, including Ayn Rand, used the same bad definitions to defend privilege as if it were capital. Kelso seems to be trying to make everyone happy, but in the process he blinds himself to what even Marx eventually figured out, that the primary basis of the monopoly of capital is the monopoly of land.

“… the vision of “The Just Third Way” beyond Capitalism and Collectivism,…”

We have discussed that vision ad nauseum as well. It fails to address underlying causes, and supposes:

* that labor products (true capital) would not automatically accrue to the laborer if he had access to land and newly issued money on just terms, the same as everyone else,

* that the constant rent flow to a landed aristocracy and interest flow to a banking aristocracy can be overcome by clever schemes that do not challenge the underlying privileges of either,

* that companies that rent land and purchase raw materials (if even from other companies owned by the same people) will give workers more ownership without giving them less pay, and will not be milked by the land and resource owners even if they do become more efficient

* that people can borrow money and pay it back from “future production,” when, in fact, money is issued, not produced, and can only be paid back from additional issue,

* that people need artificial “ownership plans” instead of a removal of the actual barriers to them naturally owning what they make.

“…the three fundamental interdependent principles of Economic Justice,,,”

I don’t know what this guy thinks they are, but we will leave it for him to tell us when he is done being presumptious, if ever.

“…and the specific reforms to lift unjust and artificial barriers to ‘the means of acquiring and possessing property’ as a fundamental citizen right…

In all these months of listening to Gary and Michael go on and on, nobody has every identified a specific unjust and artificial barrier, and nobody has every proposed anything that *removed* any barriers. And, now, neither has this guy. We, on the other hand, have identified actual barriers, disambiguated them from capital, and made a specific proposal to remove each barrier.

[The run-on sentence isn’t finished, but Facebook only can take so much in one post.]
1 hr · Like

Dan Sullivan “as expressed in the Preamble of the Virginia and Massachusetts Declarations of Rights at the birth of this nation,…”

I think we have been given an overdose of grandiosity here. None the less, starting with the Virginia declaration, I will first note that it was written by Thomas Jefferson, who advocated exactly what we are advocating, and nothing at all like what Kelso advocated. Perhaps we should have another thread about the Virginia Declaration of Rights, where I can elaborate on how much spin it takes to get a Kelsonian interpretation out of it. (Note that the first plank is about a right to *Nature*, i.e., land, the factor that Kelso conflated into his “binary” capital and labor.)

The Massachusetts Declaration of Rights also talks about *enjoying in safety and tranquility their *natural* rights, which, again, pertains to land, and only secondarily to capital, which is made from land and which one automatically owns if one owns access to land (in an honest monetary system).

“…legal barriers that would be lifted under the proposed Capital Homestead Act….”

Would love to see an actual legal barrier named, and see how it would be lifted – not how it would be compensated for by some elaborate scheme, but how it would actually be lifted.

In any case, I don’t see this guy saying anything that is less flawed than the stuff Gary has been saying.

Oh, joy, there’s more.
1 hr · Like

Dan Sullivan “Yes, Mr. Sullivan, the current system generally finances new capital formation on past accumulations (past savings).”

Not what I was saying. I was saying that all wealth is produced from land by labor, using existing capital unless one is producing from “scratch.” It is not about how one “generally finances” anything, but about how there is no such thing as borrowing from the future. On to another run-on sentence:

“However, those [who imagine that they are] favoring a more just, inclusionary and free market system [and imagine that anyone who disagrees with them do not], however, reject the “past savings” myth….”

This is more incoherence. He rejects the past-savings “myth” without saying what he thinks that myth actually is. I said explicitly, that he cannot issue new claims to wealth and lend those claims to some people without diminishing the claims of everyone else. That is no myth.

As I had noted, if new claims to wealth are appropriate, they can be distributed to the people, who can very well finance Kelsonian schemes or not, as is their preference.

Prepare for a mouthful:

“…and offer a comprehensive solution based on these four pillars of a Just Third Way economy: shifting economic power from government to the citizens, protecting and expanding private property rights, restoring free markets for determining just market values, and ensuring equality of economic opportunity for all citizens, the poor as well as the rich,…”

It does none of those things. Instead of “shifting economic power from government to the citizens”, it makes citizens more dependent on, and indebted to, government-sanctioned Kelsonian schemes.

Instead of “protecting and expanding private property rights,” it dilutes and weakens those rights by arbitarily lending claims to wealth to some people at the expense of others. Ultimately, the only people whose property rights are strengthened are the holders of the debts, which, interest-bearing or not, cannot be paid without the issue of debt-free money (which is protege Gary opposes).

Instead of “restoring free markets for determining just market values,” it manipulates markets and offers no criteria for what just market values are.

Last, instead of “ensuring equality of economic opportunity for all citizens, the poor as well as the rich,…” It ignores the basis of equal opportunity that were so well articulated by Locke, Smith, Turgot, Quesnay, Penn, Franklin, Jefferson and Paine, and concocts a scheme that is not based on a natual equality of opportunity, but on the equal opportunity to borrow onself into debt. We have also determined quite thoroughly, that even this does not go to “the poor as well as the rich,” as the loans are predicated on having good business plans and good collateralization.

“…to work and to acquire and share future ownership power and profits…”

What a load of verbiage! For those who lost track, it was equal opportunity [yada yada] to work, etc. Now, anyone who has not swallowed the binary Kool Aide knows why we don’t have equal ownership power. It is because there are three factors of production, not two. (Well, maybe there is land and labor, for capital is produced by labor from land, but Michael, Gary and this guy are the only two-factor people who don’t understand that.
So, the wealth title holders can command, and the wealth money monopolizers can command is subtracted from what labor can command. Yet Kurland, Kelso, Reber and Bindner have not proposed any dimunition in what title holders and money monopolists can command, but propose instead to put the landless and nearly landless deeper in debt.

“…from their personal growth assets.”

What the heck are their “personal growth assets”? Is this an economics class or an EST seminar?
1 hr · Like

Dan Sullivan “Or, in other words, we don’t need the accumulations of the rich to finance a more economically just future for the non-rich to gain equal future ownership opportunities.”

Yeah, we know that. All we need is egalitarian access to land and natural resource and egalitarian access to new money. Tax the value of land and spend all new money into circulation instead of letting banks lend it, and we won’t need any artificial schemes.

“All we need is for open-minded people from across the political spectrum to wake up and organize to lift the barriers to a more just market system for every country.”

Yes. That is exactly what we need, so WAKE UP!
1 hr · Like

Dan Sullivan “Don’t worry, Mr. Sullivan, if you’re one of the top 1 percent or want to join their monopoly status,”

Nope, I’m neither….See More

Capital Homestead Act Summary – Center for Economic and Social Justice
www.cesj.org
The Capital Homestead Act Summary details basic policy changes in tax, central banking, financial, labor, inheritance and other laws.
1 hr · Like · 1

Warren Chamberlain Capital my be non human but where can I park my $800,000.00 house?
1 hr · Like

Dan Sullivan On an ESOP.
1 hr · Like · 1

Warren Chamberlain Gross point MI?
1 hr · Like

Forest Baker Warren, you said “Just try to think through…” And that is the underlying problem with any such ideology. The real world is counter-intuitive. The more you “try to think through” rather than to experience or to understand as a function of raw experience…the more likely you are to get it wrong. When you are wicked smart and you apply human logic…therein lies the error of your method. You will get it wrong almost every time.
25 mins · Like

Conan Moore Hmm. I wonder how closely the set of all the things Rand and Marx agree on correlates with the set of the worst assumptions about healthy economies.
July 30 at 5:03pm · Like · 1

Warren Chamberlain I do not have any ideology and by my raw experience the fucking world is really fucking stupid.
July 30 at 5:15pm · Like · 2

Warren Chamberlain I just try to hang on here on the edge of sanity, trying to make sense of an insane situation.
July 30 at 5:24pm · Like · 2

Conan Moore You just summed up life.
July 30 at 5:26pm · Like · 1

Warren Chamberlain Is it so hard to ask how your actions now could affect future generations of Human beings?
July 30 at 5:35pm · Like · 2

Forest Baker As a working capitalist I seek out simple, executable, better, faster and cheaper solutions to well-defined business problems within the context of what we know how to do today about what works for certain. Progressive and conservative. Both.

A “bra…See More
July 30 at 7:41pm · Edited · Unlike · 1

Michael Bindner Warren, the location of a theater is mostly determined by, 1. can you buy someone out who is sucessful and 2. will that location draw enough traffic (and is there parking or public transit). All of which has nothing to do with how much the ticket prices includes taxes paid by the employees and the company – both now and with an LVT as the single tax.
July 30 at 11:01pm · Like

Dan Sullivan That’s stupid. It’s not the amount of traffic the theater will draw, but the amount of net revenue it will command after taxes. The two are related, but hardly inseparable.
July 31 at 7:32am · Like · 1

Rahul Jain LVT is not even an innovation. It is just an adjustment to the existing system that has been tried and has succeeded in numerous places.
July 31 at 7:56am · Like

Forest Baker If the US government thought for a minute that Land Value Tax would work better for them and do less damage to our underlying economy than the tax paradigm du jour then you can bet your sweet ass that the tax law would be changed immediately. If there is anything in this world that the US government does really well…it is to legislate and collect taxes.
July 31 at 10:01am · Like

Rahul Jain No, you are wrong. That is what the country does worst, and lack of LVT rewards the hereditary elites and penalizes new businesses, so it is not something the government would try
July 31 at 10:05am · Like · 1

Gary Reber My colleague, Michael Greaney of the Center for Economic and Social Justice, also comments on Dan Sullivan’s posts with respect to Norman Kurland’s remarks: Dan Sullivan very cleverly used a straw man argument to divert attention away from the substance of the response. Norm’s presumption had nothing whatsoever to do with the facts, and could have (and probably should have) been deleted without affecting the argument in any way. It allowed Sullivan to avoid coming to terms with his own egregious errors of fact and logic by focusing on a trivial and essentially meaningless statement by Norm.

The problem is that, having established in his own mind that we go on nothing other than supposition and surmise, that is, on opinion rather than knowledge, he can therefore reject everything we say, and continue to insert his own suppositions and surmises in place of the facts, a case of the pot calling the laundry black.
July 31 at 11:52am · Like

Warren Chamberlain It is acctually unconstitutiona for the US government to tax property directly,
July 31 at 12:03pm · Like · 2

Forest Baker Well, there’s a problem that they would solve in a downtown minute if it made better sense to tax property values than income created…including the value-added wealth taken out in the form of payroll.
July 31 at 12:06pm · Like

Rahul Jain No, Forest, the elite landowners would not acquiesce to giving the working class a greater share of control over the economy.
July 31 at 12:25pm · Like

Forest Baker Acquiesce my big ass. If the government could maximize its share of the economy without doing the same damage that an income tax is purported to do then “elite landowners” are the least of their concern. The biggest landowner of them all is the US government itself. There are far more elite capitalists than elite landowners and the business class rather than the landed gentry have the attention of Washington more than anyone you know.
July 31 at 12:29pm · Edited · Like

Dan Sullivan Perhaps these other clowns from the Kelso group should join the list and read a little so they know what they are talking about. Either that, or I should join their list so we can waste time correcting their stupidities there. I see Greaney has nothing but ad hominems and no substance to offer.

“Dan Sullivan very cleverly used a straw man argument to divert attention away from the substance of the response.”

What straw man argument? What substance of the response? I didn’t find any substance that I didn’t answer, and neither did anyone else, so Mr. Greeney would have done us a service to tell us what the substance in Norm’s statement actually was. Alas, not a clue from Mr. Greaney either.

“Norm’s presumption had nothing whatsoever to do with the facts, and could have (and probably should have) been deleted without affecting the argument in any way. It allowed Sullivan to avoid coming to terms with his own egregious errors of fact and logic by focusing on a trivial and essentially meaningless statement by Norm.”

What egregious errors of fact and logic? Really, I would like to know what Mr. Greany thinks they were. All we have Mr. Greaney criticizing Mr. Kurland for making a meaningless statement while making another meaningless statement.

Really, we have been debunking Kelsonian propaganda, delivered to us by Gary Reber and Michael Bindner, for months on this list and other lists before that. Those who didn’t join yesterday pretty much know what is going on here. Pronouncements from Mr. Kurland and Mr. Greaney, based on a nearly total lack of awareness of what has been exchanged, are unlikely to be of any value.
July 31 at 1:42pm · Like · 1

Rahul Jain The “business class” own the land in this country, too, Forest.
July 31 at 7:11pm · Like

Rahul Jain (sometimes via banks where they own the rent on land via interest on a mortgage)
July 31 at 7:11pm · Like

Michael Bindner Dan, you don’t known what you are asking. Michael G., as you see, can be, to put it delicately, without a sense of humor while arguing. There is enough of that now.
Yesterday at 2:05am · Like

Conan Moore Warren, its unconstitutional to tax income as well.
23 hrs · Like

Warren Chamberlain That is why we have the 16th amendment.
23 hrs · Like · 2

Conan Moore Touche
23 hrs · Like · 1

Dan Sullivan I see a long, complicated contentious tangent coming on. Whether the 16th actually makes income tax constitutional or not, it certainly gives enough appearance of constitutionality as to satisfy those who impose it.
23 hrs · Like · 1

Warren Chamberlain Only if Rick DiMare shows up.
21 hrs · Like · 1

Michael Bindner there are questions on the ratification, but they are not justicable. Courts don’t touch them – only Congress can decide both ratification and amendment submission (and constitutional conventino call) procedures. Amazing how ad hoc they are on this – you would think there would be a rule on some of these questions – then you would be mistaken.
14 hrs · Like

Gary Reber I am posting this more in-depth response by Norman Kurland to the negative comments of Dan Sullivan and Rahul Jain on the Progressive Economics group thread in response to my postings and comments and that of Norman Kurland, President of the Center for Economic and Social Justice (www.cesj.org): As I previously said in my response of July 27, 2014 to Dan Sullivan attack on Gary Reber’s writings on binary economics and the Just Third Way, I have no disagreement with these two statements of his:

PART I: “Money and credit are not wealth, but are claims to wealth.”

PART II: “There is also no economic rationale for government to artificially stimulate capital formation instead of simply removing the artificial barriers to that formation.”

However, I see no evidence that Mr. Sullivan ever read the links to more detailed explanations and definitions of terms in my earlier response to his ad hominem criticisms of Gary Reber’s writings. He certainly reflected no understanding of the logic or justice of the Just Third Way, compared to whatever approach to economic development he may support, which I’m told are based on the ideas of Henry George. If Mr. Sullivan persists in not taking the time to understand our definitions of terms, there is no way he can understand our ideas. If he doesn’t understand our ideas, we will just hope others who read any further attacks by Mr. Sullivan will be more open-minded and scholarly in addressing our proposals for making any economy grow in a more sustainable and just manner for all citizens.

Welcome to CESJ! – Center for Economic and Social Justice
www.cesj.org
Homepage of the Center for Economic and Social Justice (CESJ).
1 hr · Like · Remove Preview

Gary Reber continued…
PART I RESPONSES

Yes, money (and money is a form of credit that should be asset-backed) in the broadest sense is really anything that can be used to settle a debt. Even barter exchanges are money. In his 1967 book coauthored with his wife Patricia Hetter Kelso, Two-Factor Theory: The Economics of Reality, the late Louis O. Kelso described money:

“Money is not a part of the visible sector of the economy; people do not consume money. Money is not a physical factor of production, but rather a yardstick for measuring economic input, economic outtake and the relative values of the real goods and services of the economic world. Money provides a method of measuring obligations, rights, powers and privileges. It provides a means whereby certain individuals can accumulate claims against others, or against the economy as a whole, or against many economies. It is a system of symbols that many economists substitute for the visible sector and its productive enterprises, goods and services, thereby losing sight of the fact that a monetary system is a part only of the invisible sector of the economy, and that its adequacy can only be measured by its effect upon the visible sector.”

What is clear from this description is that money is a “social good,” an artifact of civilization invented to facilitate economic transactions for the common good. Like any other human tool or technology, this societal tool can be used justly or unjustly. It can be used by those who control it to suppress the natural creativity of the many, or it can be used to achieve economic liberation and prosperity for all affected by the money economy.

What is “property”?
Response: “Property is an aggregate of the rights, powers and privileges, recognized by the laws of the nation, which an individual may possess with respect to various objects. Property is not the object owned, but the sum total of the “rights” which an individual may “own” in such an object. These in general include the rights of (1) possessing, (2) excluding others, (3) disposing or transferring, (4) using, (5) enjoying the fruits, profits, product or increase, and (6) destroying or injuring, if the owner so desires. In a civilized society, these rights are only as effective as the laws, which provide for their enforcement. English common law, adopted into the fabric of American law, recognizes that the rights of property are subject to the limitations that (1) things owned may not be so used as to injure others or the property of others, and (2) they may not be used in ways contrary to the general welfare of the people as a whole. From this definition of private property, a purely functional and practical understanding of the nature of property becomes clear. Property in everyday life is the right of control.” See Kelso, “Karl Marx: The Almost Capitalist”, American Bar Association Journal, March 1957.
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Gary Reber continued…
What is a brief version of the Kelsonian theory of Binary Economics?
Many other writers on “worker ownership,” “broad-based capital ownership,” and “participatory economics” have trivialized and marginalized Louis Kelso as merely “the inventor of the ESOP” and as just another advocate of “the ownership solution” to the flaws of global capitalism. (One notable exception is William Greider, who gives a generally accurate description of Kelso’s paradigm in his 1997 best-seller One World, Ready or Not: The Manic Logic of Global Capitalism.)

A more careful examination, however, reveals an elegant system of interconnected principles that bridges classical, Keynesian and other schools of economics. Furthermore, Kelso offers a new “post-scarcity” paradigm for analyzing and correcting structural economic defects that foster such seemingly intractable problems as global poverty, environmental destruction and the widening gap between the haves and have-nots.

In Kelso’s system “binary” means “consisting of two parts.” Kelso divides the factors of production into two all-inclusive, physically interdependent and market-quantifiable categories — the human (which he calls “labor”) and the non-human (which he calls “capital”). The central tenet of binary economics is that, through the property (or ownership) principle, these two “independent variables” can link marketable outputs from the labor-capital mix directly to incomes distributed according to market-quantified values of all “labor” and all “capital” inputs.

In contrast to traditional schools of economics, which assume that scarcity is inevitable, binary economics views shared abundance — sustainable economic growth, a balanced market economy between production and consumption, and the equitable distribution of future wealth and income throughout society — as achievable. Binary economics holds that broad-based affluence and economic freedom, as opposed to financial insecurity and economic dependency for the many, is made possible through the widespread ownership of constantly improved capital instruments and social institutions to produce more and more consumable goods with less and less labor input and more efficient technologies and uses of land and other natural resources.

Binary economist Robert Ashford identifies three distinguishing concepts within binary theory — binary productiveness, the binary property right, and binary growth. These components interact and reinforce one another, allowing for maximum rates of sustainable growth within a modern, globalized economy.

Binary economics recognizes a natural synergy, as opposed to an unavoidable trade-off, between economic justice and efficiency within a global free marketplace. Rejecting pure laissez-faire assumptions, binary economics holds that a truly free and just global market requires (1) effective broad-based ownership of capital, (2) the restoration of and universalized access to the full rights of private property, (3) limited economic power of the state (whose main role should be to eliminate special privileges, monopolies and other barriers to equal participation) and (4) free and open markets for determining just wages, just prices, and just profits.
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Gary Reber continued…
What is Kelso’s definition of “Capital”?

In binary economics, “Capital” means all non-human factors of production, including land, all natural resources, plant and equipment, advanced physical and informational technological tools, robotics, rentable space, physical infrastructure, and intangibles, such as patents, copyrights and constantly improved management and marketing systems.

What are the three fundamental and interdependent principles of economic justice underlying the moral basis of binary economic theory?
The market-based theory of binary economics is underpinned by three interrelated principles of economic justice:

1. Participative Justice, is the input principle which demands as a fundamental human right, equal opportunity for every person to contribute to the production of society’s marketable wealth both as a worker and as an owner of productive assets. (See Article 17 of the Universal Declaration of Human Rights.)
2. Distributive Justice, is the outtake principle which holds that the contribution of labor to the economic process should be compensated at the market-determined rate (or “just wage”) for each particular type of human contribution to the production of marketable wealth. This principle dictates that the contribution of capital should be compensated by the “just profit” generated by the project or enterprise. (Just profits are determined by the market-based rental value of all contributed capital assets, or by the gross revenues resulting from market-determined “just prices” less the market-based cost of the factors of production, including labor.)
3. Social Justice (also known as Harmonic or Restorative Justice), is the feedback principle that corrects, balances and restores participation and distribution within the economic system. This principle was referred to by Louis Kelso and Mortimer Adler as the “principle of limitation,” aimed at limiting greed and avoiding economic monopolies in either the private or public sectors. “Social Justice” calls for citizens to organize and mobilize enough “people power” to restructure the laws and basic institutions of a market-based economic system at all levels to restore participative and distributive justice.
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Gary Reber continued…
What is Credit?
Credit. A loan of money to be repaid, usually with an added amount of interest, transaction fees, or, under Islamic banking, through a risk-sharing, profit-sharing loan.

Credit, Capital. Funds lent or borrowed to finance feasible, “self-liquidating” projects that are expected to generate an income and repay the loan out of that future income. Capital credit is designed to advance outside funds to be repaid with future savings. It is a modern social tool for enabling people without sufficient past savings to become capital owners voluntarily on market principles. Also referred to as “Productive Credit” and “Procreative Credit.”

Credit, Consumer. Funds lent or borrowed to expend on consumer goods and services; that is, things that do not pay for themselves.
Credit, Interest-Free. Loans made for productive purposes, where the money loaned does not involve existing savings, and therefore no interest is due to the lender.

Under certain religious and philosophical traditions (particularly in Judaism, Christianity and Islam), interest charged for non-productive loans is considered usury, as it takes a profit where no profit is generated. In a productive loan involving existing accumulations of savings, the provider of those savings (the lender) is due a return because the loan is recognized as a form of investment and due to the owner as a right of private property.

When a productive loan is made based on the present value of existing or future marketable goods and services whose proceeds are used to pay off that loan (and not based on past savings), the lender has no pre-existing private property interest and therefore no interest is due. (See also “Credit, Pure”)

Credit, Non-Recourse. Loans in which the borrower is insulated from the risk of default and his personal assets cannot be seized in the event of loan default. Instead the loan will generally be secured by the assets standing behind the loan, by loan default insurance, or by a guarantee of a third party or the corporation itself. Under one example of nonrecourse credit, a loan to a corporation is nonrecourse to the shareholders of that corporation, unless the shareholders personally guarantee the loan. Another example is with a leveraged Employee Stock Ownership Plan, where the workers who benefit from loans made to an ESOP Trust are not personally liable in the event of default. Under Capital Homesteading, the proposed capital credit insurance provides a substitute for collateral to enable the lender to recover funds lent, thus insulating from risk any personal assets of the borrower.
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Gary Reber continued…
Credit, Pure. An interest-free loan made for a feasible productive project. Pure credit is based on a system of enforceable promises, the acquisition of income-generating assets, and the ability of the new assets to generate a future stream of profits for repaying the loan used to acquire them.

In business loans for new capital formation and expansion, pure credit would be monetized as newly created, asset-backed, interest-free money authorized and regulated by the central bank and a competitive system of local commercial banks. The only costs associated with pure credit are transaction/service fees charged by the qualified financial institutions facilitating the loan creation and loan repayment process, and risk premiums for capital credit insurance and reinsurance to cover the risk of loan default. (See “Bank, Central”)

Pure credit differs from conventional credit, which charges interest on the use of already accumulated savings (or depends on non-related sources of income for repayment) to pay the lender a market-based yield on his savings.

Pure credit is backed by 1) the loan paper, 2) the shares purchased with the loan funds, and 3) the present value of the productive assets purchased with the money coming into a productive enterprise from its sale of new shares. Pure credit enables the borrower to finance feasible capital projects that create “future savings” (future profits) that pay for the assets themselves.

Using “pure credit” financing, profits generated by the new capital are first applied to pay off the loan, and thereafter are distributed as dividends to the owners. Under “capital homesteading,” pure credit (reflected in the issuance of newly created, asset-backed money) is also backed by capital credit insurance and reinsurance, which serve as a substitute for traditional collateral to cover the risk of loan default. (See also “Credit, Interest-Free”)

Credit, Self-Liquidating. Loans expected to cover the costs of capital assets out of future profits realized from the productiveness of those assets.

Credit System, Two-Tiered. A key monetary reform under Capital Homesteading that distinguishes between “good” uses of money and credit (i.e., used to finance broadly owned private sector growth and production) and “bad” uses of credit (i.e., used for fueling nonproductive consumer and government debt, or speculation). The Fed’s discount window would be available exclusively to member banks and members of the Farm Credit system for discounting “eligible” paper for feasible, ownership-expanding industrial, commercial, and agricultural projects.

Under this policy, credit and “new money” for Capital Homesteading, i.e., feasible business projects linked to broadened ownership (Tier 1), would be generated “interest-free” through the discount mechanism of the central bank, at a service charge based on the cost to the central bank of creating new money and regulating the lending institutions (0.5% or less). Credit and money for nonproductive, ownership-concentrating uses (Tier 2) would come from past savings (“old money”), and would be charged an interest rate determined by normal market yields on such savings. Under Capital Homesteading, local lenders would add their normal transaction fees and risk premiums for servicing capital acquisition loans, and the new loans would be collateralized by newly issued shares and newly acquired capital assets. Premiums paid to capital credit insurers and reinsurers would be pooled to spread the risk of default.
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Gary Reber continued…
What is Binary Growth?
Binary Growth. Within binary theory, this concept holds that economies grow steadily larger as private capital acquisition is distributed more broadly among the population on market principles. This concept also focuses on the importance of unleashing the unutilized or underutilized capacity of all economic systems to produce in greater abundance.

Wealth distribution assumes wealth creation, and technological and systems advances, according to scholarly studies, account for almost 90% of productivity growth in the modern world. (Sources: John W. Kendrick, “Productivity Trends and Recent Slowdown: Historical Perspective, Causal Factors, and Policy Options,” Contemporary Economic Problems, 1979, American Enterprise Institute; also R. M. Solow, in K. J. Arrow, S. Karlin, and P. Suppes, eds., Mathematical Methods in the Social Sciences, 1959, pp. 89-104, Stanford University Press, 1960. Also: Edward Denison, “Accounting for United States Economic Growth: 1929-69,” Washington, DC: Brookings Institution, 1974, and Accounting for Slower Economic Growth: The United States in the 1970s, Washington, DC: Brookings Institution, 1979.)

What is Binary Productiveness?
Binary Productiveness. This concept states that while humans contribute to economic growth through all forms of labor, capital assets such as machines and technological processes are making an even bigger, ever-increasing contribution to overall output, in relation to that contributed by human labor.

What is the meaning of a “Binary Property Right”?
Binary Property Right. This concept refers to the right of every person to acquire, on market principles, private (individual and joint) ownership of wealth-creating capital assets.

What are the differences between The Just Third Way, Capitalism, and Socialism (and other systems of collective ownership)?

Comparison Matrix: http://www.cesj.org/…/comparison-of-capitalism…/
Graphic Overview of the Just Third Way: http://www.cesj.org/…/just…/graphic-overview-intropage/
Glossary of Terms of the Just Third Way: http://www.cesj.org/…/definitions/just-third-way-glossary/
Free books, articles, accomplishments and testimonials on the Just Third Way: http://www.cesj.org

Comparison of Capitalism, Socialism & the Just Third Way – Center for Economic and Social Justice
www.cesj.org
For a matrix comparing the three systems of Capitalism, Socialism/Communism, and the Just Third Way, click here for the PDF>>
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Gary Reber continued…
PART II RESPONSES
While I agreed above with Mr. Sullivan’s statement “There is also no economic rationale for government to artificially stimulate capital formation instead of simply removing the artificial barriers to that formation”, I am convinced he has not taken the time to read the links in my first response to his attacks against the Just Third Way and our proposed Capital Homestead Act.

As we point out in the following CESJ copyrighted movie script, passage of the Capital Homestead Act would remove all artificial barriers to faster rates of new capital formation. (A Summary of the details of the Capital Homestead Act can be read at http://www.cesj.org/…/capital-homestead-act-summary/) Here is the script on how all initiatives would come from the private sector to generate new capital formation in the future, without changing the current powers of the Federal Reserve System:

Script for Capital Homesteading Cartoon/PowerPoint
(Dave Kelly, Dave Hamill, Michael Greaney, Norman Kurland, Dawn Brohawn)
Set-up notes:
1. Objective of the Capital Homestead Act: Empowering citizens through ownership sharing.
2. In the U.S., we have the right to vote. But do we have any real power? Power follows property (ownership), just as property follows access to the means to acquire and own productive (income-producing) wealth.
3. How do we articulate the message so that the 99 percent GET IT and buy into CHA?
4. CHA would change the system at the local, state, national and global levels.
5. Kelso: The law of the Urgent and Important (Our basic survival and security needs are more immediate and generally must be satisfied before most persons can be effective reaching their fullest human development and serving our highest and ultimately most important human needs, including working for justice and the dignity and fullest development of others, i.e. Maslow’s hierarchy of human needs).
6. A War of Ideas: the Just Third Way vs. capitalism and socialism.
7. The three interdependent systemic principles for achieving economic justice
• Participative Justice
• Distributive Justice
• Social Justice (encompassing the Kelso-Adler principle of Limitation)
8. This presentation starts with the assumption that the Capital Homestead Act has already been passed.

Capital Homestead Act Summary – Center for Economic and Social Justice
www.cesj.org
The Capital Homestead Act Summary details basic policy changes in tax, central banking, financial, labor, inheritance and other laws.
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Gary Reber continued…
Defining our Terms:
1. Private Property: It’s not the natural resources and the things one owns. It’s the bundle of rights, powers, privileges and limitations that an owner possesses against all others with respect to things that one owns personally or jointly with others. This fundamental and universal human right that should be protected by government determines who should control things invented by people as well as land and other natural resources. Private property in a market system determines who has the power to govern one’s contributed human efforts (i.e., labor) and one’s freely contributed non-human inputs (i.e., capital) to the interdependent labor-capital process of creating marketable goods and services. Slavery, which means that you have no rights, is the condition where someone else owns your body and all that you and your labor produce. State and collective ownership and slavery violate the fundamental human right of every person to acquire and possess private property rights, especially in the means of production, as recognized in article 17(1) of the Universal Declaration of Human Rights.
2. Growth: Sustainable increases in production and private sector jobs depend on growth in customer purchasing power. The last time we had real, sustained growth was during WW II when the customer was the U.S. government and when unemployment went from 17 % to near 0%. Our government supplied maximum customer power for war and weaponry. We can supply the means to achieve maximum customer power to all citizens, but now for peace, prosperity, freedom and fullest human development.
3. Money: It’s not just coin, currency and demand deposits (checking accounts); it’s anything based on trust or promises and backed by existing or future assets that can be used to settle a debt or engage in a deal where each party will mutually benefit.

(Note: In the following wherever any underlined word or phrase appears it will be a LINK to a definition. Plus, we are starting here with the scenario that the Capital Homestead Act has been passed.)
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Gary Reber continued…
SCENE 1: Men and women sit around a large table in a business boardroom
BD member 1: Our new customers are out there. But how do we fund our expansion?
BD member 2: We don’t have enough savings, or a fat-cat investor.
BD member 3: Well, there is another way, a new way.
BD member 4: Yes, the new Capital Homestead Act, just passed by Congress and signed by the President.
BD member 5: What does that do?
BD member 3: It will provide people with the right to obtain capital credit to buy our new shares. And it doesn’t take away property rights from current owners.
BD member 1: Who’ll be able to get the credit?
BD member 4: All our workers as well as every Capital Homesteader.
BD member 2: What’s a Capital Homesteader?
BD member 3: Every man, woman and child. They’ll all have an equal right to a yearly allotment of capital credit to be authorized by the Federal Government and supplied by local commercial banks. It will be based on the government’s projections of total new capital formation expected to be added each year by the private sector under the Capital Homestead Act.
BD member 2: How does this differ from money available for consumer credit?
BD member 3: In contrast to consumer credit, which provides money to buy things for consumption, not for investment, access to capital credit enables citizens to purchase our newly issued shares or those of other companies. Capital credit makes it possible for people with no accumulated savings to earn a living from producing as owners the things that people want to consume. Capital credit will provide the low-cost investment money needed to create new private sector growth and jobs, more advanced technologies, sustainable energy systems, rentable space and even infrastructure, like highways and power grids, plus many assets that citizen-owned businesses could provide and rent to government.
BD member 2: Why should banks be interested in making interest-free Capital Homesteading loans to people who can’t afford to buy shares?
BD member 3: No interest needs to be charged since the money will not come from the accumulations of the rich and super-rich, nor will it come from savings of low-income and middle-income citizens, foreign investors or loans from any government. The only charges to be added would be service fees of banks and professionals serving Capital Homesteaders, plus insurance premiums charged by competing private sector insurance companies that would evaluate the risk of default on shares offered to workers in the ever-expanding ESOP and new Capital Homesteading marketplace. Banks will greatly expand their customer base and future profits earned by their commercial bank departments, as well as improving the public image of the banking profession.
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Gary Reber continued…
BD member 2: Isn’t the idea of financing out of “future savings” new?
BD member 3: Not really. It was first proposed by Dr. Harold Moulton, who taught economics at the University of Chicago and headed the Brookings Institution, Washington’s first think tank from 1916 to 1952. He proposed “pure credit” in his 1935 book The Formation of Capital as a strategy for lifting America out of the Great Depression and an alternative to Lord Keynes’ advice to the Roosevelt Administration. Moulton pointed out that financing investment growth out of “past savings” took money that could otherwise be used for increasing consumption spending, thereby reducing market demand and growth rates for future investment and private sector job creation. Not until 1940-1945 when the government became a customer for weaponry producers did the American economy reach levels of near zero unemployment from double-digit unemployment rates of Keynes’ defective economic strategy. Keynes offered a one-sided focus on getting government to stimulate demand artificially if necessary, not full production – a focus that is still followed by most governments in today’s world. Unlike Keynes, the focus of Capital Homesteading is on lifting barriers to full production and full ownership opportunities for all citizens.
BD member 2: How would “future savings” work under the Capital Homesteading Act?
BD member 3: Citizens can now buy new productive capital assets on credit backed by “future savings” from the future dividends each citizen expects to earn and be used to pay off the shares he or she bought with interest-free capital credit. Those future dividends would, of course, come from the profits when new marketable goods and services are produced and sold when companies like ours invest in growth assets.
BD chair: But remember, these must be full-dividend-payout and voting shares.
BD member 3: Yes, and the expansion in dividends and new jobs will create more customers with more money to spend.
BD member 4: And the money for us to hire new workers.
BD member 3: And further expand our plant.
BD member 4: And it’ll cut the cost of government, balance the budget, and lower taxes.
BD member 5: How?
BD member 3: When people have money in their own hands, they don’t need the government to redistribute it.
BD member 4: And the government can keep the promises of the past, like Social Security out of general revenues, while paying down the debt and cutting the deficit.
BD chair: OK, how will we market the shares to the Capital Homesteaders?
BD member 3: Through brokers serving to turn all Americans into Capital Homesteaders.
BD chair: Well, we just need to vote on a resolution to move forward. All in agreement, raise your hand.
ALL HANDS ARE RAISED IN VOTE OF AGREEMENT……………….
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Gary Reber continued…
SCENE 2: A living room with a husband, wife, college-age son and daughter and their trusted financial advisor
Husband: How will each of us get the money to buy shares?
Advisor: [BREAK THIS INTO SEVERAL SLIDES]
– First you set up your own asset-accumulation trust, a Capital Homestead Account – a tax shelter like an IRA.
– This account will periodically receive a voucher from the government entitling the trust to administer each year’s capital credit allotment to buy newly issued shares.
– When dividends on the shares are paid out, they first pay off the local commercial bank that made the capital credit loan and then all remaining dividends go to you to supplement your labor and all other forms of income.
– It works like a tax-exempt Employee Stock Ownership Trust, which is already in the law. The CHA allows you to borrow to purchase shares that pay back the lender from the full stream of future pre-tax profits earned on the shares from the future sale of marketable goods and services sold by the company. Lenders are more secure in getting paid back before the government in profits that would otherwise be taxed two or three times before getting to a shareholder. Taxes will be paid once under the CHA, when the citizen receives dividends and other distributions from the tax-sheltered CHA trust.
Husband: How will we make our selection of CHA shares?
Advisor: With my advice. Also, the bank and the capital credit insurance company will be rating the shares in which you’re investing.
Wife: Where will we get the money?
Advisor: From your bank.
Husband: But banks only make loans if you have collateral. Besides our house, we don’t have a lot of other investments or savings.
Wife: Yes, as they say, “you need money to make money.”
Advisor: The Capital Homestead Act will provide you and every citizen a new source of money and a substitute for collateral. This will help you invest in capital growth assets that will pay for themselves with the future profits they generate. The Capital Homestead Act will encourage private insurance companies to issue capital credit insurance. Risk premiums will be deducted from the full amount borrowed. The insurance company will pool all the risk premiums to cover losses in case a specific loan is not repaid. Capital Homestead loans are “non-recourse” loans — that means the bank can’t seize your home or other personal assets if your capital loan goes bad. The assets behind the new money are in the company that issued the new shares.
Husband: I still don’t understand where the money comes from.
Daughter: Some Tea Party people say this is just one more government program.
Son: My Occupy friends say it’s another Wall Street rip-off and conspiracy with the Federal Reserve.
Advisor: Neither is correct. Under the new Capital Homestead Act the new money starts with a loan you get from your local bank or other qualified lender, once the bank approves your loan application to buy new shares, takes out one-time bank charges and insurance premiums, and, with the balance of bank-supplied, interest-free and asset-backed money, sets up a deposit account from which you can buy your new shares. The bank can also turn your loan paper into another form of money by selling it to the regional Federal Reserve Bank, which has the power to create interest-free, asset-backed currency or a demand deposit to buy new currency, if needed.
To see how this works, it’s very important to understand what money really is. Money is anything that is used to settle a debt. Rather than being top-down, Capital Homesteading is a bottom-up way to finance private sector growth without inflation, and create new jobs and widespread citizen ownership.
Son: Wow! Sounds revolutionary.
Advisor: Yes. We no longer need “old” money – including the past savings of the rich – to pay for new capital
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Gary Reber continued…
SCENE 3: Local commercial bank with Loan Officer, Husband and Wife and Financial Advisor
Husband: These are the shares our Capital Homestead Account trustee would like to buy for us and each of our dependents, and here’s our offer in the form of a Bill of Exchange. This represents the present value of projected future profits to be earned from the sale of future goods and services that will be produced by the new assets being added by the company we’re investing in. (He hands the Bill of Exchange, with evidence supporting his projection of future profits, to the loan officer).
Commercial Bank Loan Officer: Okay, the bank and the capital credit insurer will evaluate the feasibility and risk involved in your offer. Also, your advisor and the broker will continue to guide you.
SCENE 4: Same as scene 3 (Later)
Commercial Bank Loan Officer: We have accepted your offer. Our bank will “discount” your loan, meaning it will take a percentage of the $7,000 of the new money your Capital Homestead Account will receive this year created by our bank and with the support of the Federal Reserve as a loan to purchase the new shares. Our percentage will cover the “risk premium” on your capital loan, as well as our service charges and profits for setting up and administrating your loan.
Commercial Bank Loan Officer hands a large “Promissory Note” to the Husband
(A big picture with the label “Promissory Note” is shown.)
Husband signs the Promissory Note.
Advisor (to husband and wife): When you signed the promissory note and the bank set up a deposit account for you to buy the shares on credit repayable with the future profits that you and the bank expected would be earned from the productive assets you bought, the bank was creating new money. This is how Capital Homesteading reforms the banking system and creates new asset-backed money backed by “future savings” to build a nation of capital owners, from the bottom-up….
SCENE 5: Commercial Bank Loan Officer puts the Capital Homesteaders’ Promissory Note in the bank’s vault with a caption that reads: “Backing the new Demand Deposit in the name of Capital Homesteaders Capital Homestead Account.”
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Gary Reber continued…
SCENE 6: Discount window at the Regional Federal Reserve Bank
Commercial Bank Loan Officer hands the Bill of Exchange to the Regional Fed Clerk behind the window.
Commercial Bank Loan Officer: Here is the Bill of Exchange for our new Capital Homesteaders.
SCENE 7: Regional Fed Clerk accepts the Bill of Exchange and hands back new currency issued by the Regional Federal Reserve to the Commercial Bank Loan Officer.
Regional Fed Clerk: The new currency we are issuing to back up your bank’s Demand Deposit — a checking account with the Federal Reserve. Your bank can withdraw new currency to back up the Capital Homesteader’s Capital Homestead Account account at your bank. The CHA trustee will use the new currency to purchase shares from the company selling the shares. The company will then buy new equipment and expand its plant. The added capital will generate future profits first to repay the Capital Homesteaders’ loan, and then provide them with a future stream of dividend income.
Commercial Bank Loan Officer signs the Bank’s Promissory Note and hands it back to the Regional Fed Clerk
The Regional Fed Clerk hands the checkbook for the Federal Reserve Demand Deposit to the Bank’s Loan Officer.
SCENE 8: The Commercial Bank Loan Officer puts the checkbook for the Regional Fed Demand Deposit in the Commercial Bank’s vault.
SCENE 9: (TEXT WITH ILLUSTRATIONS)
When the Regional Fed accepts (“re-discounts”) the local bank’s promissory note (taking a percentage out for its administration costs), the new asset-backed money is issued in the form of currency or a demand deposit (checking account) with the Regional Federal Reserve. The new money is transferred:
From the Regional Fed > to the local bank > to the Capital Homestead Account trustee > to the broker > and finally to the company that sold the new shares to the Capital Homesteader.
With the money (Capital Homesteaders’ investments), the company builds new plant and buys new equipment, creates new jobs, and begins producing goods or services.
Profits generated from the Capital Homestead investments are distributed to the Capital Homesteader’s Account.
Before the dividends can be spent for the consumer needs of the Capital Homesteader, the CHA will first take these dividends and repay the lender (the local bank). The bank then repays the Regional Federal Reserve.
At the end of the money creation-and-repayment cycle, the Regional Federal Reserve cancels the money or re-issues it for the next round of Capital Homesteading.
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Gary Reber continued…
SCENE 10: (TEXT AND ILLUSTRATIONS):
Through Capital Homesteading a nation can finance its growth with equal opportunity for every citizen to become an owner of capital. This can be done without taking away income or existing property from to…See More
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Forest Baker If you are investing faster than earning and your accounting is “cash basis” then you have no taxable income per se. If you have real estate or capital goods that are booked at cost rather than current market or replacement value and you continue to expand faster than retained earnings can support, so you leverage with borrowed funds, then on an accrual basis you also have zero taxable income. As a private household if your business is incorporated or a partnership and you use your portfolio assets (real estate especially) or your balance sheet as collateral then spending borrowed funds causes you no income tax exposure because that money is not income. Sure you must pay SECA but that can be minimized and of course there is always property tax. But operating like this with an expanding business and debt-leverage you are living very close to the LVT ideal and screw the rest of the taxpayers if they let themselves carry the heavier load.
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Dan Sullivan ” If Mr. Sullivan persists in not taking the time to understand our definitions of terms, there is no way he can understand our ideas. If he doesn’t understand our ideas, we will just hope others who read any further attacks by Mr. Sullivan will be more open-minded and scholarly in addressing our proposals for making any economy grow in a more sustainable and just manner for all citizens.”

What a load of crap. We have discussed this ad nauseum. Aside from the fact that I have read far more Kelsonian nonsense than I care to read, the exchanges with Gary should have clarified any misconceptions Kurland imagines me to have. If I do not know what the proposals are, then neither does Gary.

I don’t have time for all this spam, and, I suspect, neither do the rest of the readers. There is a saying in business that, “if you can’t put your idea on the back of a business card, you don’t have an idea.”

The essence of these ideas is wrong, and no amount of dancing around the details can change that.
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Nate Blair Gary Reber, unlike Dan, I still feel that i have no more than a vague sense of what your proposal is. Part of the problem is that I’m not willing to read lots of propaganda to get the picture, but i truly am curious. Can you put it clearly: who, what, and how? Sounds to me like you want government to pay/force banks to grant 0 interest loans, which the government will then guarantee. I don’t understand how that sets up good incentives or how it would fix the largest problem: the land problem. Do you have an article that summarizes your actual plan in ~500 words?

PS: instead of posting huge amounts of text, please make a blog entry and share that link.

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Gary Reber Nate, as with any desire to gain knowledge and expand understanding it requires reading, study and analysis on the part of the knowledge seeker. Far too many people, and increasingly so, are not motivated to read in-depth and want everything explained to them in a “tweet” or on a “business-size card.” Both Norman Kurland and I, in addition to the lengthly comments within this thread, have provided numerous references to reading materials from which one can acquire the full knowledge of the paradigm shift and system reforms we advocate. Hopefully, there are people within this group that are sincere about understanding this knowledge set and are willing to read and study as necessary to fully understand, and not just dismiss everything disrespectfully as Dan Sullivan said is “a load of crap.”