Fabius Maximus was the Roman General,
Consul, Leader, and Statesman, who ended his speeches in the Senate
with the phrase 'Vasta Carthaginiensibus.' Carthage must be
destroyed.
History records Quintus Fabius Maximus
as having been known as 'Cunctator' – 'The Delayer.'
I think he might just as easily have
been known as the dripping tap. He was not politically well-supported
until he was eventually proven correct in his outlook and his words
which had all along been just like a dripping tap, drip drip dripping
into the ears and minds of everyone, were accepted and his ideas
adopted by the public in ancient Rome.
Fabius Maximus |
Fabius Maximus delayed engaging
Hannibal as he crossed the Alps.
The greatest problem of the Western
world today is not Hannibal (nor is it the Rise of Islam,
fundamentalist or otherwise), but the failure of anyone to come up
with any kind of policy that can engender economic growth.
Yet, we have had short term growth from
time to time in the form of real estate bubbles, and also stock
market valuations bubbles before that, and now we have an enormous
issuance of money via the US Federal Reserve Bank, which is a kind of
a prices-and-values deflating currency bubble that keeps interest
rates seemingly, down.
Economic growth can only occur in a way
that doesn't terminate in calamity, when tax receipts are matching
the government's own demand to spend debt. Real estate is not a good
way to engage the taxing power of government because real estate
turns over insufficiently quickly to create enough taxing
opportunities. At the same time, commercial banks appear to only know
how to lend to real estate collateral and they of course are legally
permitted to create credit and thereby money, inside a ratio related
to the Federal Reserve's total currency issuance. This lawful
creation of money falls inside the Money Multiplier principle and is
quite a legitimate thing. But, it ceases to be functional or
legitimate when the creation of credit by commercial banks ONLY
happens through real estate. And, in these circumstances the banks
can appear to have a lot of moral credibility because they can
establish quite healthy reserves and thereby claim to be acting
'responsibly.'
In other words there is a clear
dichotomy between the political needs of elected governments of all
persuasions (and therefore the economic requirements of society at large), and the
commercially easy road for commercial banks.
THE SOLUTION
The solution is to force the lending
by 'the banking sector' to business activities of every description
BUT real estate –
retailing, manufacturing, technology, food, and many other things –
in short all sorts of things where the velocity of credit and money
circulation in the domestic economic is high on an annual basis. The
tax receipts will naturally increase, and the make up of banking
reserves will vastly have changed from the highly-skewed illiquid and
non-circulating thing that it has up till now been because of the
real estate bias.
Ben Bernanke's
insistence on significantly increasing the currency issuance is to do
with his attempts to hide the unusually large EXCESS RESERVES of a
handful of commercial banks as a ratio of the entire money supply –
and this is because there is a systematic looting of the system by
banks acting like a cartel to channel their credits through the low
tax arena of long term real estate, and structure of pushing off bad
debts into brand names designed to fail and to fall, and a strong
ideological bent by those banks to deny the rest of the market credit
because this is where both the tax risk is and the business risk is
too.
Nevertheless, the
public and the government have to pull the current thicket of
commercial and investment banks in. And one way to do with this is to
issue new banking sector licences to structures that will lend to
higher circulation velocity business activities. The borrower need
not advance any form of real estate security at all, but, they must
accept a higher eventual tax rate. It need only be a slightly higher
one.
And I think the
fact is my concept is not only the only one that will work but the
one that is inevitable at some point in the future.
Of course, it may
well be quite some time into the future because no one expects the
present cadre of special interests to easily depart from the centre
of attention that they so passionately appear to be in love with
possessing, nor give up their privileged access to fiat unbacked
printed money-out-of-thin-air-at-no-cost-to-them, nor their
stranglehold on the types of politicians put up for the big elections
and the agenda of what is discussed on Fox News and how it is
discussed.
Simply put though,
the current debate about 'impossibly large national debt' and 'taxing
the 1 per cent' and the 'dependent 47 %' is all complete and utter
rubbish.
These
things are spouted by accountants who are the equivalent of static
image photographers taking snapshots of bits of a Mercedes engine on
a garage floor and everyone standing around and nodding sagaciously
as if it mattered that the pictures are beautiful or the car parts
oily. What is needed are engineers and mechanics, not photographers
taking pictures of static images. Economics is a thing in complex
motion. And accountants and commercial banks biased to real estate
lending have gotten away with a claim to importance that is not only
overstated but politically and socially dangerous and dysfunctional.
Real estate itself, has somehow manage to get away with another false
and ludicrous claim about its being 'capital.' It is certainly not, a
'financial asset' for one thing – which is defined as any asset
that is guaranteed to be able to be turned into cash within one
standard accounting period of one year, and neither is it 'financial
capital' which is defined as any asset that is guaranteed to be able
to be sold by no later than ten years. Sometimes, and
using various sophistications, it is true that some real
estate can be sold within ten years, and some can be monetised inside
one year – but there are no general guarantees about it and
frankly, real estate is only weakly a type of economic 'capital' at
all.
Like the case of
Quintus Fabius Maximus, eventually, what I have just said will also
be widely accepted as irresistably correct.