Let us consider what Capitalism is. It is the accumulation, through time and effort, of the buying power to invest in something that makes something, say a factory. Since we can’t eat money, the part of Capitalism that is actually USEFUL to us is that part that makes things: boats, lettuce, software, music.
A fundamental principle of true Capitalism is competition. Now, in material objects, innovation is always possible, and necessary if you hope to continue to succeed. You use better tractors and fertilizers in food production, or transport it more efficiently. You write software programs no one has seen. You write a new song. You figure out how to make better boats cheaper.
Innovation in money is not possible. It is what it is. The path forward for money lenders then–and I am not here talking about your local bank, which serves a needed purpose, but rather the Federal Reserve, which prints money and loans it to banks who loan it to your neighborhood bank–is to develop a money trust, or Mercantilist relationship with the Federal Government: an anti-competitive relationship.
Let us posit one dollar on the table, with one teacup. This is its present day purchasing power. Let us further posit that the amount of money in circulation at any one time is completely arbitrary. We need enough physical “bits” to prices things precisely, but nothing more. Let us say that our dollar stands in for all real money in circulation, that can be cut into as many bits as needed. This is day one.
Day two, a second dollar bill is placed next to ours, making the teacup–the SAME teacup–cost 2 dollars. What happened? We now have half the purchasing power with the same dollar. What happened was the Fed printed money, and it trickled down the food chain. The people who got that money first, now own part of your teacup. Wealth has been transferred.
We know that in conditions of innovation, goods should be getting cheaper. You shoudl be able to buy two teacups for the same amount of money. The reason this doesn’t happen is that while we are innovating, our wealth is being diluted by injected money. Since 1913, when the Federal Reserve was created, we have seen 3% annual inflation, which compounded amounts to nearly 2000% inflation.
Clearly related are the facts that our national savings–what the Fed terms M2–have diminished to nearly nothing; in point of fact, almost all of us are net debtors. This is because a combination of inflation and cheap credit has caused us to view borrowing as smarter than saving.
Consider, though, our manufacturing: where has it gone? Much of it has left. Why? This is no doubt something with many explanations, but for me one stands out: if you can make money without making anything, why wouldn’t you? Is our economy not largely one of massive financial institutions, with trillions of dollars between them?
The essence of the idea of the gold standard is that there is a finite amount of money. Gold can be mined, yes, so it can be added to the money supply, but not easily. The intent is to put limits on how much money can be in circulation at any one time.
I may be mistaken, but it appears to me for now–and I will continue thinking and studying–that the reason we work so hard and get so little is very simply that we have given much of our real money over to Wall Street and the Federal Government.
On that last point, consider how many people the Federal Government employs. Consider all the buildings and land they own. Consider the pensions people get, and health benefits. ALL of this–ALL OF THIS–comes out of the private sector in the form of taxes and inflation. The government cannot provide you ANYTHING, except the rule of law and defense of the borders, that you could not better get on your own. This applies particularly to the poor, since every job in the public sector is a job taken from the private sector, with interest.
We need to get our money back. We need to abolish the Fed, and return to the gold standard. I will put a few more ideas in the following post.