The Coming Stock Market Collapse

On December 31, 2013, David Cay Johnston @DavidCayJ writes on Aljazeera America:
Tech stocks have returned to bubble levels, thanks to PR, weak financial journalism and cheap credit.
stock traders
Traders on the floor of the New York Stock Exchange in New York City. The Dow Jones Industrial Average reached record highs in 2013 and was up 23 percent for the year.
John Moore/Getty Images

Irrational exuberance is back on Wall Street, encouraged by cheap credit lavished on heavily leveraged speculators, lax accounting rules and the unfortunate tendency to confuse the true value of stocks.

The Dow Jones Industrial Average, long a bellwether of the stock market, started the year at 13,416. Last week it hit 16,478, which is 2.5 times its low point during the Great Recession in 2009.

Given rather modest job growth, government spending cuts that have weakened the economy and other lukewarm measures of domestic and global economic growth, this rise in the Dow is difficult to explain based on rational expectations.

But the Dow’s striking 23 percent rise this year is nothing compared with the steep prices of many specific stocks, at least when traditional measures of valuation are applied.

These sky-high valuations get little skeptical coverage in the financial press, which has acted more as lapdog than watchdog in the past decade. Instead of barking warnings, many Wall Street reporters wag their tales in ways that please the speculative crowd, which, at great profit, feeds them market-moving tidbits along with a pat on the head.

A key element in today’s irrational exuberance is the rise of novel ways of valuing companies that gloss over key facts.

This is about savings-based stock market gambling.

More accurately this is not about investment and profit but instead SPECULATION and CAPITAL GAIN. But the media continues to framed the term as investment and investors instead of speculation and speculators when related to the stock exchanges.

Stock purchased from a company and in which the company receives the (typically past savings) money from the purchase in order to produce things is a TRUE INVESTMENT.

The stock market operates on the secondary level whereby stock is purchased from another stockholder who receives the cash from the transaction, which when held for sale at a future time is speculation.

In the first case the stock becomes speculative as soon as that buyer decides to hold it for appreciation but it is important to understand that the money received by the producer company is used to build new asset activity or replace old assets.

In the case of speculative stock buying and selling, this activity does not provide gain to the producer company (even if the price of the stock offered initially (issued and sold) goes up, but instead enriches the holder of the asset (stock). Of course, if the producer company decides to later issue new stock the company owners will receive more money per share of stock issued.

Speculators do not add to economic activity, at least primarily. Perhaps members of society will feel more optimistic with the stock shares (market) going up, and perhaps they will be looser with their savings to purchase products and services. Unless, however, the producer company has new cash to build products and extend services in demand, then speculation will not help. Eventually, the speculators might sell their stock or other asset and use some of that to purchase consumer items, but that is a tenuous trail to economic progress and again it does not assure the producer company having the cash to actually build more things.

Of course, if the money from these sources were sitting in the bank, the producer company could borrow money needed for new production.

Though millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively minuscule, as are their dividend payments compared to the top 10 percent of capital owners.

Most people do not have the right to acquire productive capital with the self-financing earnings of capital; they are left to acquire, as best as they can, with their earnings as labor workers. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital.

What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security––those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it.

Thus, as binary economist Louis Kelso asserted: “The problem with conventional financing techniques is that they address only the productive power of enterprise and the enhancement of the earning power of the rich minority. Sustaining or increasing the earning power of the majority of consumers who are dependent entirely upon the earnings of their labor, or upon welfare, is left to government or governmentally assisted redistribution of income and to chance.”

Unfortunately, pursuing economic democracy has been frustrated by the systemic concentration of economic power and exclusionary access to future capital credit to the advantage of the wealthiest Americans. The so-called 1 percent rulers of corporations have rigged the financial system to enable this already rich ownership class to systematically further enrich themselves as capital formation occurs and technological industrialization spreads throughout the world, leaving behind the 99 percent to depend on income redistribution through make work “full employment” policies, government boondoggles, excessive military build-up and dependence on arms production and sales, and social welfare programs due to the lack of an alternative to full employment and the growing economic helplessness and dependency. The unsatisfied needs and wants of society are not in that 1 percent or for that matter the 5 percent; those people are not the ones who are hurting.

Once the national economic policy bases policy decisions on two-factor binary economics, productive capital acquisition would take place through commercially insured capital credit, resulting in a quiet revolution in which economic plutocracy will transform to economic democracy.

What is needed is to implement the Capital Homestead Act.

Right now the Federal Reserve creates money by loaning it to banks, who re-loan it multiple times because of fractional banking rules. With Capital Homesteading, money would be created by loaning it directly to citizens via banks at near-zero interest to invest in FUTURE wealth-creating, income-generating (full dividend payout) productive capital assets formed by producer companies. To build real wealth and also phase out our near-defunct social security scheme, the new full-reserve money would go into a long-term retirement account to be invested in dividend-paying, asset-backed shares of corporations. That way, money power would be spread to all citizens. The middle class would be invigorated using the principle of compounding interest, instead of being decimated by mushrooming public and personal debt.

The Federal Reserve could play a more positive role, removing artificial barriers to equal citizen access to acquiring and owning productive capital wealth. By creating asset-backed money for production, supported by growth-oriented tax policies, the Federal Reserve could truly help promote shared prosperity in a market system.

Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm

As an alternative that would result in financing to create real productive capital asset formation and grow the American economy, see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624

http://america.aljazeera.com/opinions/2013/12/stock-market-techbubble.html

Tarnished 'Golden Age': World Braces For Retirement Crisis

On December 29, 2013, the editors of Newsmax post on MoneyNews.com:

A global retirement crisis is bearing down on workers of all ages. It will play out for decades, and its consequences will be far-reaching, experts predict.

Many people will be forced to work well past the traditional retirement age of 65 — to 70 or even longer. Living standards will fall, and poverty rates will rise for the elderly in wealthy countries that built safety nets for seniors after World War II. In developing countries, people’s rising expectations will be frustrated if governments can’t afford retirement systems to replace the tradition of children caring for aging parents.

The problems are emerging as the generation born after World War II moves into retirement.

“The first wave of under-prepared workers is going to try to go into retirement and will find they can’t afford to do so,” says Norman Dreger, a retirement specialist in Frankfurt, Germany, who works for Mercer, a global consulting firm.

The crisis is a convergence of three factors:

— Countries are slashing retirement benefits and raising the age to start collecting them. These countries are awash in debt after overspending last decade and racking up enormous deficits since the recession. Now, they face a demographics disaster as retirees live longer and falling birth rates mean there will be fewer workers to support them.

— Companies have eliminated traditional pension plans that cost employees nothing and guaranteed them a monthly check in retirement.

— Individuals spent freely and failed to save before the recession, and they saw much of their wealth disappear once it hit.

Those factors have been documented individually. What is less appreciated is their combined ferocity and their global scope.

“Most countries are not ready to meet what is sure to be one of the defining challenges of the 21st century,” the Center for Strategic and International Studies, a Washington think tank, concluded in a report this fall.

It’s great to be unemployed and retired if you can afford it.

But the plain truth is that more than four in five older Americans expect to keep working during their latter years, a sign that traditional retirement is out of reach for vast swaths of society, according to a new survey.

Among Americans ages 50 and older who currently have jobs, 82 percent expect to work in some form during retirement, according to the poll by the Associated Press-NORC Center for Public Affairs Research.

In other words, “retirement” is increasingly becoming a misnomer.

“The survey illuminates an important shift in Americans’ attitudes toward work, aging and retirement,” said Trevor Tompson, Director of the AP-NORC Center. “Retirement is not only coming later in life, it no longer represents a complete exit from the workforce.”

For those who have been dependent on employment and/or welfare, the problem is that financially sustainable retirement is and will no longer be a reality. Even with Social Security, which is funded through payroll taxes called the Federal Insurance Contributions Act tax (FICA) and/or Self Employed Contributions Act Tax, (SECA), one must have had a job to be eligible for the entitlement––and the amount of Social Security is based on the income level generated from one’s employment record of payroll tax contributions.

In the United States, retirement incomes are supported largely by three pillars: Social Security benefits, employer-provided pensions, and personal savings (including non-housing capital asset wealth and home equity). Employer-provided pensions continue to decrease and personal savings is not the norm among the vast majority of American households who must spend virtually every earned dollar on living expenses. While increasingly individuals are finding it necessary to continue working in retirement to supplement their income, most older Americans discontinue full-time career work and struggle to meet obligations with minimum-pay part- and full-time jobs. A proportion of retirees also receive income from welfare programs, such as Supplemental Security Income and other life-support services funded through tax extraction and government debt.

Presently, the United States continues to benefit from never-ending technological innovation and invention. This is exponentially generating tectonic shifts in the technologies of production –– the effect of which destroys jobs and devalues the worth of labor’s contribution to the production of products and services. Thus, as the non-human factor of production becomes increasingly more productive, there will continue to be less employment opportunities as long as the economy does not significantly expand, especially with respect to affluent-level wage and salary income.

Amazingly, as a nation we continue to not address this reality or to understand that there are two independent factors of production –– human labor and non-human wealth-creating, income-generating productive capital. Individuals own capital assets (typically through stock ownership in corporations) such as productive land, structures, infrastructure, tools, machines, robotics, computer processing, and certain intangibles that have the characteristics of property. Just as one owns his or her labor used as a source of personal income, capital owners are entitled to the wealth and income their capital produces. Fundamentally, economic value is created through human and non-human contributions.

The role of physical productive capital is to do ever more of the work, which produces income. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for their owners. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever-increasing role. And without economic growth the prospects for employment in an increasingly productive capital-dependent economy will continue to diminish.

People invent tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive –– the core function of technological invention. As a result, most changes in the productive capacity of the world since the beginning of the Industrial Revolution can be attributed to technological improvements in our capital assets, and a relatively diminishing proportion to human labor.

Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power –– and relatively constant). The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.

Contrary to conventional thinking, productive capital does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, free-market forces no longer establish the “value” of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income and to provide taxpayer-supported job-dependent security. Thus, the government has become increasingly engaged in make-work policy-making. But this approach is cause for expanded government and is directly conflicting with the technological promise of toil elimination.

Because productive capital is increasingly the source of the world’s economic growth, shouldn’t we be asking the question why is not productive capital the source of added property ownership incomes for all? Why are we not addressing how the system facilitates greed capitalism and envy while concentrating productive capital ownership among the 1 to 10 percent of the population? One would think that a reasonable and logical conclusion would be to consider this postulation: if both labor and productive capital are independent factors of production, and if productive capital’s proportionate contributions are increasing relative to that of labor, then shouldn’t equality of opportunity and economic justice demand that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all? Sadly, the American people and its leaders continue to be ignorant of this plain truth and still pretend to believe that labor is becoming more productive, with a sole focus on job creation.

What is needed is for the system to facilitate spreading the ownership of productive capital more broadly as the economy grows with full payout of dividend earnings, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate productive capital wealth assets. In doing so, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader. This would benefit the traditionally disenfranchised poor and working and middle class, who are propertyless in terms of owning productive capital assets. It would also result is tremendous economic growth, which would benefit everyone including the already wealthy ownership class, and create opportunities for real jobs, not make-work as an expanded economy is built that can support general affluence for EVERY American citizen. Thus, as productive capital income is distributed more broadly and the demand for products and services is distributed more broadly from the earnings of capital, the result would be the sustentation of consumer demand, which will promote economic growth. That also means that over time, EVERY man, woman and child could accumulate a diversified portfolio of wealth-creating, income-generating productive capital assets to provide economic security in retirement and not be dependent on having to work during retirement or rely on government-assisted welfare.

One might ask how we failed to grasp the significance of productive capital’s input and the necessity for broad private sector individual ownership? Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment –– thus the political focus on job creation and redistribution of wealth rather than on full production and broader productive capital ownership accumulation. This is manifested in the belief that labor work is the ONLY way to participate in production and earn income. Yet, the wealthy ownership class knows that this notion is idiotic.

One should ask what form would the structural reforms take. Employment in this new enlightened age would start at the time one enters the economic world as a labor worker, to become increasingly a productive capital owner, and at some point to retire as a labor worker and continue to participate in production and to earn income as a productive capital asset owner until the day you die. As a substitute for inheritance and gift taxes, a transfer tax would be imposed on the recipients whose asset holdings exceeded $1 million. This would encourage those owning concentrations of productive capital assets (effectively the 1 to 10 percent) to spread out their monopoly-sized estates to all members of their family, friends, servants and workers who helped create their fortunes, teachers, health workers, police, other public servants, military veterans, artists, the poor and the disabled.

Other stipulations for the structural reform would entail structuring a more just and simple tax system. The tax rate would be a single rate for all incomes from all sources above defined personal exemption levels so that the budget could be balanced automatically and even allow the government to pay off the growing unsustainable long-term debt. For example, a family of four would be provided an exemption of $100,000 to meet their ordinary living needs. The poor would pay the first dollar over their exemption levels as would the hedge fund operator and others now earning billions of dollars from capital gains, dividends, interest, rents and other property incomes. This would include the elimination of all tax loopholes and subsidies.

There would be tax policy to incentivize corporations to pay out all profits to their owners as taxable personal incomes to avoid paying stiff corporate income taxes and to finance their growth by issuing new full-dividend payout shares for broad-based individualized employee and citizen ownership with full-voting rights.

The payroll tax on workers and their employers would be eliminated, but all promises for Social Security, Medicare, Medicare, government pensions, health, education, rent and subsistence vouchers for the poor would be paid out of general revenues until their new jobs and ownership accumulations provide new incomes to substitute for the taxpayer dollars to fill these needs.

The structural reform policies would direct the Federal Reserve to create an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing and diversified dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. The CHA would process an equal allocation of productive credit to EVERY citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets. The shares would be purchased on credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable products and services produced by the newly added technology, renewable energy systems, plant, rentable space and infrastructure added to the economy. Risk of default on each stock acquisition interest-free loan would be covered by private sector capital credit risk insurance and reinsurance, but would not require citizens to reduce their funds for consumption to purchase shares.

The end result would be that citizens would become empowered as owners to meet their own consumption needs and government would become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on our only legitimate monopoly –– the State –– and whatever elite controls the coercive powers of government to extract taxes, incur national debt and redistribute earnings from the productive sector.

For more on how to accomplish such structural reform, see  “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624 and “The Income Solution To Slow Private Sector Job Growth” at http://www.nationofchange.org/income-solution-slow-private-sector-job-growth-1378041490.

Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797 and support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm. See the full Act at http://cesj.org/homestead/strategies/national/cha-full.pdf.

http://www.huffingtonpost.com/gary-reber/a-solution-to-eroding-retirement_b_4103834.html

http://www.nationofchange.org/solution-eroding-retirement-security-1382020223

http://www.moneynews.com/Personal-Finance/Golden-Age-Retirement-Crisis/2013/12/29/id/544235?ns_mail_uid=673996&ns_mail_job=1551541_12302013&promo_code=16140-1

http://www.boston.com/business/personal-finance/living-longer/2013/12/29/unprepared-the-world-braces-for-retirement-crisis/wJqeLWe93ccMGK3HUWpmbN/story.html

Cutting Unemployment Is NOT The Answer.

On December 30, 2013, Thom Hartmann writes on the Thom Hartmann Program:

One point three million people have lost their unemployment benefits.  Americans who have been out of work for six months or longer are suddenly without the vital lifeline that kept them from ending up homeless and hungry.  Senate Majority Leader Harry Reid said that extending these benefits will be a priority when Congress returns on January 6th, but some Republicans are already indicating they may try to block an extension.

If those on the Right keep long-term unemployment from being reauthorized, another 850,000 Americans will find themselves without financial support within the next three months.  The current unemployment cuts alone may cost our economy as much as 0.4 percent of our GDP, and that number will only get larger as more Americans loose their financial assistance.  And, these cuts won’t save taxpayers any money, as our government will have to dramatically increase spending on programs like food stamps and housing assistance as more people have no where else to turn.  If Congress doesn’t act fast, more Americans will soon find themselves without any income, and many could wind up on the street.

As if that wasn’t bad enough, without this meager financial assistance, out-of-work Americans will no longer be able to contribute anything to their local economies.  That, in turn, can pose a serious risk to our modest economic recovery.  Allowing unemployment benefits to expire isn’t just immoral and un-American, it’s also a bad idea for our nation as a whole.  We shouldn’t be imposing more austerity – we should be investing in our nation.  And, our government should step in as the employer of last resort.  If Republicans really want to lower spending on unemployment benefits – the answer is not slashing aid – it’s helping out-of-work Americans find a job.

All the points made by Thom Hartmann will impact real Americans––individuals and families. Those who pretend things are getting better are acting rather disingenuous. But the solutions suggested, while definitely necessary emergency measures, if thought of as a panacea will continue to displace personal responsibility with collective dependency on the “State.” Michael Greaney, my colleague at the Center for Economic and Social Justice (www.cesj.org) raised question today, which appropriately raises the issue of self-sufficiency or dependency.

“Does everyone have the right to an adequate income, as well as every other material need? Or do they have the right to obtain an adequate income and meet other material needs? A lot of people see no difference between the two questions, but there is all the difference in the world. If we answer “yes” to the former, we condemn humanity to a condition of permanent dependency on the State, which is the only agency that can redistribute wealth with any degree of legitimacy. If we answer “yes” to the latter, we force people to grow up and become more fully human.

“It all depends on what you mean by “respect for human dignity.”

In my latest published article, I address a solution to the issues raised, stressing the critical necessity to expand individual citizen, not to just workers at corporations and companies, but to EVERY man, woman and child as the American way to secure the long-term productive capacity of the United States economy.

The real task is to change the culture, from one of wanting or lacking personal responsibility and dependency on the “State,” into one where our human nature can be sustained and advanced through a private property ownership mentality, pursuing individual virtue. We need to transform the present credo, as advocated by progressive political leaders and others from one of servitude and dependency to one of personal responsibility and sustainability by means of broadening wealth creating, income-producing private property ownership by EVERY citizen of the productive capital (non-human) means of production. Private property ownership is the cornerstone of American liberty. Without it our free enterprise system, our free markets, and our republican form of self-government cannot endure. Nor can we prosper without the equal opportunity to acquire capital ownership financed by its own earnings. We need to pursue policies that will strengthen the economic position of the individual, the family, and the local community with decreasing reliance on government welfare support financed by tax extraction and national debt.

See “Perpetual Unemployment And Underemployment” athttp://www.nationofchange.org/perpetual-unemployment-and-underemployment-1388414374.

http://www.thomhartmann.com/blog/2013/12/cutting-unemployment-not-answer

 

 

Comparing The Inflated Cost Of Living Today From 1938 To 2013: How The US Dollar Has Lost Incredible Purchasing Power Since 1938.

On December 30, 2013, MyBudget360 blog posts:

Money is only as useful as to what it can purchase.  The Fed has created a system where debt is now equal to money.  This is why big purchases like cars, housing, and even going to college are only feasible by mortgaging your future for many decades.  Since the payments are broken down into tiny monthly installments many people pay little attention to the true cost of things over their lifetime.  Yet over this time, the U.S. dollar has lost a tremendous amount of purchasing power due to inflation.  Inflation slowly eats away at your purchasing power yet having access to debt has given the middle class the false impression that they are still protected from the unraveling impacts of inflation.  Someone sent over a photo posted over on the popular Reddit website that shows the cost of living for people back in 1938.  You would think that people in 2013 would have more purchasing power than those living through the Great Depression.  Adjusting for inflation you would be surprised what has happened in the last 75 years.

The cost of living between 1938 and 2013

The picture in question has prices for living from 1938.  It includes important items like a new home, income, new car, rent, and extreme purchasing examples like tuition for Harvard:

cost of living

Source:  Reddit

You can normalize costs over time through adjusting for inflation.  Back in 1938 a new home cost about two times the annual average income.  A new car was only about one-third the cost of the annual average income.  These figures are important because back in 1938, using credit was only a small factor in purchasing goods.  The middle class didn’t start blossoming until after World War II so you would expect that things were still tough for regular households.  What we find though is that compared to the typical income, buying a new home or buying a car was relatively doable for most households.

Now adjusting all these figures for inflation shows how much more expensive things have become and how dependent we now are to financing purchases with debt (created by the banking system):inflation and actual prices

This chart shows the impact of inflation and the declining purchasing power of the US dollar.  For example, a new home adjusting for inflation (using the BLS calculator) should cost around $64,597 per year.  The current cost of a new home?  $245,800.  The average income has stayed about the same normalizing for inflation (doesn’t say much since we are going back to the Great Depression here).  A new home today costs nearly 10 times the annual average income of a worker.  The two income trap has largely hidden this inflation since it now takes two households to accomplish what one income was able to do 75 years ago.  On top of that, people now need to go into massive debt just to purchase a home.  

Take a look at the cost of a new car as well.  In 1938 a worker was able to purchase a new car with one-third of their annual income.  Today a new car is more expensive than the annual average income.  This is why in 2013 one of the top growing consumer debt sectors was with automobile loans.  If things stayed the same, the cost of attending Harvard for one year in 2013 would be closer to $7,000 per year (the current tuition is $54,496 per year).  It isn’t only Harvard charging incredibly high tuition around the country.  Of course the higher education bubble is one of the most pressing issues around creating a $1.2 trillion student debt market 

Rent, movie tickets, and even gasoline are much more expensive today adjusting for inflation.  This puts a heavier strain on the pocketbook of most Americans.  It also has created a dependency on debt.  We do have stronger safety nets so we don’t have the “in your face” poverty of the Great Depression.  Yet we still have close to 48 million Americans on food stamps.  The area that has seen prices become more affordable is with food.  This however is largely derived from better access to food and products and the mass production of this commodity.  Yet the bigger costs of living in housing, cars, rent, and going to college are all much more expensive today.  It may feel cheaper to some if they only look at their monthly debt payment but the true costs have increased.

The impact of a falling dollar

The trend of the US dollar is pretty clear since the Federal Reserve took the helm of the ship:

us dollar

Without a doubt, life has gotten better since 1938 in terms of healthcare, technology, cars, sanitation, and overall quality of life.  Yet this may be a false comparison argument assuming that this only came about because of the Fed.  Quality of life had already started improving before this as well via the Industrial Revolution and these things were happening regardless of the money system.  What this current debt based system has created is a massive increase in the price of goods through long-term financing.  Should people only have the ability to go to college if they assume mountains of debt?  For the average worker this may be the only road.

The US dollar even in the past few decades has taken a big hit:

us dollar

Why does it feel like things are more expensive?  Because they are.  You may not feel the impact of inflation in one year but over time, it has a dramatic and obvious effect.  The fact that the Fed now has $4 trillion on their balance sheet and continues this QE experiment reflects an addiction to easy debt.  The addiction now truly benefits a very small segment of our society and that is why inequality is worse today than it was in 1938.  It should tell you something where regular purchases from 1938 are now only feasible by going into massive debt.

This is a MUST READ article on the impact of our soaring non-asset money-based national debt and its impact on inflation.

Influential economists and business leaders, as well as political leaders, should read Harold Moulton’s The Formation Of Capital, in which he argues that it makes no sense to finance new productive capital out of past savings. Instead, economic growth should be financed out of future earnings (savings), and provide that every citizen become an owner. The Federal Reserve, which has been largely responsible for the powerlessness of most American citizens, should set an example for all the central banks in the world. Chairman Benjamin Bernanke and other members of the Federal Reserve need to wake-up and implement Section 13 paragraph 2, which directs the Federal Reserve to create credit for local banks to make loans where there isn’t enough savings in the system to finance economic growth. We should not destroy the Federal Reserve or make it a political extension of the Treasury Department, but instead reform it so that the American citizens in each of the 12 Federal Reserve Regions become the owners. The result will be that money power will flow from the bottom up, not from the top down––not for consumer credit, not for credit that doesn’t pay for itself or non-productive uses of credit, but for credit for productive uses to expand the economy’s rate of growth.

The following is based on a presentation by Norman Kurland, President of the Center for Economic and Social Justice (www.cesj.org)

We need policies that will expand the rate of private sector growth through Employee Stock Ownership Plans (ESOPs) and other credit democratization vehicles. The Federal Reserve discount mechanism under section 13 of the Federal Reserve Act needs to be refined. The aim should be to radically reduce the cost of capital credit to enable workers and citizens generally to gain equity shares and dividend incomes from the process of financing growth capital, without the use of tax subsidies. It should also reduce the reliance on tax incentives and subsidies for financing expanded ownership, as part of a more comprehensive national economic empowerment strategy of “capital homesteading.”

The discount mechanism of the Federal Reserve (section 13 of the Federal Reserve Act of 1913) should be reactivated, with appropriate modifications and safeguards, to allow qualified banks and financial institutions to discount “eligible” industrial, commercial, and agricultural paper, representing production-oriented loans to leveraged ESOPs, IRAs, community investment corporations, and similar mechanisms for securing access to low-cost capital credit for broadening capital ownership among workers, area residents, and other non-affluent citizens.

When the Federal Reserve Act was passed, Congress intended the purchase of “eligible paper” to be the main way that the Federal Reserve System would create bank reserves. When this practice was followed, the banks in a particular area could obtain loanable funds in direct proportion to the community’s needs for money. But in recent years, the Federal Reserve has purchased almost no eligible paper.

When the Federal Reserve System was set up in 1914 the money supply was expected to grow with the needs of the economy. It was hoped that by monetizing “eligible” short-term commercial paper, by providing liquidity to sound banks in periods of stress, and by restraining excessive credit expansion, the banking system could be guided automatically toward the provision of an adequate and stable money supply to meet the needs of industry and commerce. To safeguard their liquidity and provide a base for expansion, the member banks could obtain credit from the nearest Federal Reserve bank, usually by rediscounting their “eligible paper” at the bank-i.e. selling to the Reserve Bank certain loan paper representing loans which the member bank had made to its own customers (the requirements for eligibility being defined by law). If necessary, the member banks might also obtain reserves by getting “advances” from the Federal Reserve bank.

In other words, under a standard central banking system, businesses or other productive enterprises would obtain loans at their local commercial bank. The commercial bank, in a process known as “discounting,” would then sell the qualified loan paper of the business enterprises to the central bank. In the case of the United States, the commercial bank would sell its paper to one of the twelve regional Federal Reserve Banks. To be able to purchase the “qualified paper,” the Federal Reserve would either print new currency or simply create new demand deposits.

As originally intended when the Federal Reserve System was established, this process would create an asset-backed currency that increased as the need for money increased, preventing deflation. As the loans were repaid, the currency would be taken out of circulation, or the demand deposits “erased” from the books. This would remove money from the economy that was not linked directly to hard assets, and would thus prevent inflation.

Although no actual teller’s window exists where commercial banks stand in line to sell loan paper to the Federal Reserve, the transaction is described as taking place at “the discount window.” When the “discount window” is “open,” commercial banks can sell their “qualified industrial, commercial and agricultural paper” to the central bank. When the “discount window” is “closed,” commercial banks must go elsewhere to obtain excess reserves to lend, or cease making loans.

How Has The Discount Mechanism Been Used?

Despite the fact that the discounting mechanism was intended under the Federal Reserve Act of 1913 to be the main means for controlling the American money supply, it has long been abandoned as an integral part of the United States financial system. The discount window has been used to help bail out a few companies or countries considered “too big” or too important to fail. Overall, however, the money creation powers of the Federal Reserve have been used to monetize government debt. Since this is not how the system was designed to operate, a number of problems have resulted.

Our economic problems are usually blamed on decisions by Congress or the President, particularly those decisions that result in nonproductive or counterproductive spending and tax policies. Little is said about decisions by the Federal Reserve, many of which, as binary economist Louis Kelso and others have pointed out for over 40 years, have been equally counterproductive. Fed policies have added to the problem of government deficits, fueling the growth of the national debt to today’s level of double-digit trillions (making the United States the highest government debtor in the world). This has artificially and unnecessarily slowed the growth rate of the private sector.

As a result, what Kelso and other ESOP pioneers predicted is becoming increasingly evident:

• Continuing economic disenfranchisement of the American people.
• Low rates of peacetime economic growth.
• Rates of private sector investment far below U.S. potential.
• Excessive use of nonproductive credit in the public and private sectors.
• Downsizing of U.S. companies in competition with foreign companies with lower labor costs.
• Mounting trade deficits in the global marketplace.
• A growing gap in consumption incomes between the wealthiest Americans and ordinary workers and the poor.
• Under-use of human talent and new technologies that could be employed to improve America’s competitiveness in the global marketplace.

The reforms of the Federal Reserve Act proposed would be fully consistent with its original purposes––to provide an adequate and stable currency and foster private sector growth. These reforms would allow our country to take full advantage of the immense potential of a properly designed central banking system. They would restore a more healthy balance between Main Street and Wall Street, and between the non-rich and the already rich. The proposed reforms would shift the focus of the Federal Reserve from support of public sector growth and indifference to non-productive uses of credit, to support of more vigorous private sector growth, the favoring of productive uses of credit, and broadened citizen access to capital credit.

Most important, the proposed new boost to expanded capital ownership for private sector workers and other citizens would not be constrained by Federal Reserve balanced budget restrictions. It would involve no new “tax expenditures” or subsidies. Nor would it rely on existing pools of domestic or foreign wealth accumulations. It would be “A Proposal to Free Economic Growth From the Slavery of [Past] Savings”––a shift to what Kelso called “pure credit.”

For the complete article see The Federal Reserve Discount Window at http://foreconomicjustice.org/?p=1508.

http://www.mybudget360.com/cost-of-living-1938-to-2013-inflation-history-cost-of-goods-inflation/

 

2014: Seize The Moment

On December 30, 2013, Senator Bernie Sanders writes in The Huffington Post:

The Congress has just ended one of the worst and least productive sessions in the history of our country. At a time when the problems facing us are monumental, Congress is dysfunctional and more and more people (especially the young) are, understandably, giving up on the political process. The people are hurting. They look to Washington for help. Nothing is happening.

In my view, the main cause of congressional dysfunction is an extreme right-wing Republican party whose main goal is to protect the wealthy and powerful. There is no tax break for the rich or large corporations that they don’t like. There is no program which protects working families — Social Security, Medicare, Medicaid, food stamps, affordable housing, etc. — that they don’t want to cut.

But the Democrats (with whom I caucus as an Independent) are most certainly not without fault. In the Senate, they have tolerated Republican obstructionism for much too long and allowed major legislation to fail for lack of 60 votes. They have failed to bring forth a strong and consistent agenda which addresses the economic crises facing the vast majority of our struggling population, and have not rallied the people in support of that agenda.

As we survey our country at the end of 2013, I don’t have to tell you about the crises we face. Many of you are experiencing them every day.

– The middle class continues to decline, with median family income some $5,000 less than in 1999.
– More Americans, 46.5 million, are now living in poverty than at any time in our nation’s history. Child poverty, at 22 percent, is the highest of any major country.
– Real unemployment is not 7 percent. If one includes those who have given up looking for work and those who want full-time work but are employed part-time, real unemployment is over 13 percent – and youth unemployment is much higher than that.
– Most of the new jobs that are being created are part-time and low wage, but the minimum wage remains at the starvation level of $7.25 per hour.
– Millions of college students are leaving school deeply in debt, while many others have given up on their dream of a higher education because of the cost.
– Meanwhile, as tens of millions of Americans struggle to survive economically, the wealthiest people are doing phenomenally well and corporate profits are at an all-time high. In fact, wealth and income inequality today is greater than at any time since just before the Great Depression. One family, the Walton family with its Wal-Mart fortune, now owns more wealth than the bottom 40 percent of Americans. In recent years, 95 percent of all new income has gone to the top 1 percent.
– The scientific community has been very clear: Global warming is real, it is already causing massive problems and, if we don’t significantly reduce greenhouse gas emissions, the planet we leave to our kids and grandchildren will be less and less habitable.

Clearly, if we are going to save the middle class and protect our planet, we need to change the political dynamics of the nation. We can no longer allow the billionaires and their think tanks or the corporate media to set the agenda. We need to educate, organize and mobilize the working families of our country to stand up for their rights. We need to make government work for all the people, not just the 1 percent.

When Congress reconvenes for the 2014 session, here are a few of the issues that I will focus on. (By the way, I’d love to hear from you as to what your priorities are).

WEALTH AND INCOME INEQUALITY: A nation will not survive morally or economically when so few have so much, while so many have so little. It is simply not acceptable that the top 1 percent owns 38 percent of the financial wealth of the nation, while the bottom 60 percent owns all of 2.3 percent. We need to establish a progressive tax system which asks the wealthy to start paying their fair share of taxes, and which ends the outrageous loopholes that enable one out of four corporations to pay nothing in federal taxes.

JOBS: We need to make significant investments in our crumbling infrastructure, in energy efficiency and sustainable energy, in early childhood education and in affordable housing. When we do that, we not only improve the quality of life in our country and combat global warming, we also create millions of decent-paying new jobs.

WAGES: We need to raise the minimum wage to a living wage. We should pass the legislation, which will soon be on the Senate floor, to increase the federal minimum wage from $7.25 an hour to $10.10 an hour, but we must raise that minimum wage even higher in the coming years. We also need to expand our efforts at worker-ownership. Employees will not be sending their jobs to China or Vietnam when they own the places in which they work.

RETIREMENT SECURITY: At a time when only one in five workers in the private sector have a defined benefit pension plan; half of Americans have less than $10,000 in savings; and two-thirds of seniors rely on Social Security for more than half of their income, we must expand and protect Social Security so that every American can retire with dignity.

WALL STREET: During the financial crisis, huge Wall Street banks received more than $700 billion in financial aid from the Treasury Department and more than $16 trillion from the Federal Reserve because they were “too big to fail.” Yet today, the largest banks in this country are much bigger than they were before taxpayers bailed them out. It’s time to break up these behemoths so that they cannot cause another recession that could wreck the global economy.

CAMPAIGN FINANCE REFORM: We are not living in a real democracy when large corporations and a handful of billionaire families can spend unlimited sums of money to elect or defeat candidates. We must expand our efforts to overturn the disastrous Citizens United Supreme Court decision and move this country to public funding of elections.

SOCIAL JUSTICE: While we have made progress in recent years in expanding the rights of minorities, women and gays, these advances are under constant attack from the right-wing. If the United States is to become the non-discriminatory society we want it to be, we must fight to protect the rights of all Americans.

CIVIL LIBERTIES: Frankly, the National Security Agency and other intelligence agencies are out of control. We cannot talk about America as a “free country” when the government is collecting information on virtually every phone call we make, when it is intercepting our emails and monitoring the websites we visit. Clearly, we need to protect this country from terrorism, but we must do it in a way that does not undermine the Constitution.

WAR AND PEACE: With a large deficit and enormous unmet needs, it is absurd that the United States continues to spend almost as much on defense as the rest of the world combined. The U.S. must be a leader in the world in nuclear disarmament and efforts toward peace, not in the sale of weapons of destruction.

This is a tough and historical moment in American history. Despair is not an option. We must stand together as brothers and sisters and fight for the America our people deserve.

Senator Bernie Sanders HAS finally acknowledged the critical importance of CAPITAL OWNERSHIP! Sanders said:
We also need to expand our efforts at worker-ownership. Employees will not be sending their jobs to China or Vietnam when they own the places in which they work.
Michael Greaney, my colleague at the Center for Economic and Social Justice (www.cesj.org) raised question today, which appropriately raises the issue of self-sufficiency or dependency.
Does everyone have the right to an adequate income, as well as every other material need? Or do they have the right to obtain an adequate income and meet other material needs? A lot of people see no difference between the two questions, but there is all the difference in the world. If we answer “yes” to the former, we condemn humanity to a condition of permanent dependency on the State, which is the only agency that can redistribute wealth with any degree of legitimacy. If we answer “yes” to the latter, we force people to grow up and become more fully human.It all depends on what you mean by “respect for human dignity.
In my latest published article, I address a solution to the issues that Senator Sanders raises, stressing the critical necessity to expand individual citizen, not to just workers at corporations and companies, but to EVERY man, woman and child as the American way to secure the long-term productive capacity of the United States economy.

The real task is to change the culture, from one of wanting or lacking personal responsibility and dependency on the “State,” into one where our human nature can be sustained and advanced through a private property ownership mentality, pursuing individual virtue. We need to transform the present credo, as advocated by progressive political leaders and others from one of servitude and dependency to one of personal responsibility and sustainability by means of broadening wealth creating, income-producing private property ownership by EVERY citizen of the productive capital (non-human) means of production. Private property ownership is the cornerstone of American liberty. Without it our free enterprise system, our free markets, and our republican form of self-government cannot endure. Nor can we prosper without the equal opportunity to acquire capital ownership financed by its own earnings. We need to pursue policies that will strengthen the economic position of the individual, the family, and the local community with decreasing reliance on government welfare support financed by tax extraction and national debt.

See “Perpetual Unemployment And Underemployment” at http://www.nationofchange.org/perpetual-unemployment-and-underemployment-1388414374.

Rising Consumer Debt Is Good For The Economy But Not For Consumers

Consumer borrowing is climbing at the fastest pace in more than five years, but with jobs still uncertain, they may be digging themselves into a familiar fiscal hole.

Credit card logosDebts held by U.S. households rose 1.1% in the third quarter to $11.3 trillion, according to the Federal Reserve Bank of New York. That’s the biggest jump since the first three months of 2008. (Scott Eells, Bloomberg / December 29, 2013)
On December 29, 2014, David Lazarus writes in the Los Angeles Times:

IOUs held by U.S. households rose 1.1% in the third quarter to $11.3 trillion, according to the Federal Reserve Bank of New York. That’s the biggest jump since the first three months of 2008.

Meanwhile, student debt continues to pile up as tuition and other higher-education costs become increasingly out of reach for many families.

Outstanding student-loan balances climbed $33 billion to $1.03 trillion in the third quarter, and a record 12% of loans were delinquent 90 days or more, the New York Fed said.

At the same time, many people with a more secure financial footing have rediscovered the pleasures of buying homes and cars and college educations — even though they may not have the money.

Consumer spending accounts for roughly two-thirds of U.S. economic activity. So if people are buying stuff — even with borrowed bucks — the economy is growing.

The question is whether Americans have become better money managers as a result of the recession and subsequent doldrums. Or are we just going to dig ourselves back into a familiar fiscal hole?

The answer is the American consumer is going to dig themselves back into a fiscal hole, just as the Federal Government is doing with escalating national debt.

What needs to be understood is that there are two kinds of debt: consumer debt and asset-based productive capital debt.

Consumer debt does not pay for itself and requires a source of income to pay off the debt, or to ever be holden to the lender paying monthly interest payments.

Capital credit debt is self-financing in that the investment is made on the premise that the created productive capital asset(s) will produce income for its owner, and that the earnings from the investment will pay for the capital credit loan typically in 5 to 7 years, and thereafter return annual earnings dividends.

What we need in America is to reform the financial system so that EVERY citizen can acquire ownership in newly formed wealth-creating, income-producing capital assets using insured, interest-free capital credit loans repayable out of the FUTURE earnings of the investments, without having to invest with past savings or secure the loan through equity pledges (such as homes).

How to accomplish building a Capital Ownership Culture is an integral part of the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797 and action plan as spelled out in the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm. See the full Act at http://cesj.org/homestead/strategies/national/cha-full.pdf.

http://www.latimes.com/business/la-fi-lazarus-20131229,0,2343000.column#axzz2ovYu5qkm

 


The Ownership Of Business Enterprise

“In the past, the ownership of business enterprise, the only form of property with which we are here concerned, has always at least in theory, involved two attributes, first the risking of previously collected wealth in profit-seeking enterprise (past savings). But in the modern corporation, these two attributes of ownership no longer attach to the same individual or group. The stockholder has surrendered control over his wealth. He has become a supplier of capital, a risk-taker pure and simple, while ultimate responsibility and authority are exercised by directors and ‘control.’ One traditional attribute of ownership is attached to stock ownership; the other attribute is attached to corporate control. Must we not, therefore, recognize that we are no longer dealing with property in the old sense?”

— Berle and Means, The Modern Corporation and Private Property, 1937, p287

The Root Cause Of Present Injustices

“The root cause of present injustices is not to be attributed to division of goods, nor the inequalities of the division, but rather to the fact that the mass of people are practically bereft of ownership. Some means must be devised to admit the proletariats within the proprietory system. Widely distributed property makes for social stability. Any alternative offered lacks the moral discipline of responsibility and ownership. Perhaps the best summary argument for private property is the impossibility of finding any better general system to take its place.”

McDonald, The Social Value of Property According to Saint Thomas Aquinas (Washington, D.C.: Catholic University of America Press, 1939) pp. 185 paragraph 8.

Broaden The Ownership Of New Capital

Joint Economic Committee
Congress of the United States
on the
January 1976 Economic Report of The President
BROADEN THE OWNERSHIP OF NEW CAPITAL
Wealth in the United States is concentrated in the hands of a relatively small fraction of the population. Unfortunately, the date on wealth are sparse. The last comprehensive attempt by the Federal Government to measure its characteristics and distribution was made by the Federal Reserve Board in 1962. It was estimated that more than three-quarters of the country’s total wealth was owned by less than one-fifth of the people, while more than one-quarter was owned by just the top 0.5 percent. The Federal Government should remedy the lack of up-to-date information on personal wealth through periodic surveys and comprehensive reports on this subject.

The distribution of wealth reflects in large part the pattern of ownership of non-residential capital with corporate shares being one of its principle forms. This category of wealth is much more concentrated than total wealth, with the top percentile of the personal income distribution owning 51 percent of the market value of individually owned corporate stock and receiving 47 percent of the dividends. Meanwhile, the new capital assets generated by businesses, which in recent years have averaged well over $100 billion annually, rebounded largely to the benefit of these persons who already have great wealth.

The number of shareholders, moreover, declined by some 18 percent from 1970 to 1975, and data suggest that young people today are not purchasing stocks in significant volume. Balancing this declining role of the individual investor has been the rise of financial institutions, which since 1950 have more than tripled their share of the market value of stock holdings.

To begin to diffuse the ownership of capital and to provide an opportunity for citizens of moderate income to become owners of capital rather than relying solely on their labor as a source of income and security, the Committee recommends the adoption of a national policy to foster the goal of broadened ownership. The spirit of this goal and what it purports to accomplish was endorsed by many of the witnesses at our regional hearings.

Without getting into specifics, the types of programs which could be established to help meet this goal will be outlined. Such alternative methods of broadening capital ownership are under study by the Committee.

In the individual firm, employee ownership can be encouraged directly through tax incentives to the employees to purchase stock or to firms to place newly issued stock into the hands of their employees. The latter approach, known as Employee Stock Ownership Plans (ESOPs), was examined in recent hearings by the Committee.

An alternative plan involves multiform funds which would receive tax-favored contributions from affiliated firms and issue nonnegotiable fund certificates to the employees. This type of fund, which has been in operation in France and West Germany, may diversify its portfolio, although it may be limited to particular industries and regions.

Providing ownership opportunities not just to employees but to citizens at large could be accomplished through various devices. One example would be the establishment of funds which would accumulate personal savings on a tax-preferred basis and use them to acquire a diversified portfolio of equity shares in corporations. For instance, individuals with earned income not exceeding $20,000 could be allowed to save up to $3,000 a year in one or more funds and to deduct this amount from their taxable incomes.

Whatever the means used, a basic objective should be to distribute newly created capital broadly among the population. Such a policy would redress a major imbalance in our society and has the potential for strengthening future business growth.

To provide a realistic opportunity for more U.S. citizens to become owners of capital, and to provide an expanded source of equity financing for corporations, it should be made national policy to pursue the goal of broadened capital ownership. Congress also should request from the Administration a quadrennial report on the ownership of wealth in this country which would assist in evaluating how successfully the base of wealth was being broadened over time.

"Broaden Capital Ownership"

The following appeared as a “Letter to the Editor” on July 20, 1976, from Chairman of The Joint Economic Committee, 1976, Hubert H. Humphrey

“Broaden Capital Ownership”

In his column on July 4, Hobart Rowen maintained that “Debate Still Needed on Employee Stock Ownership Plans.” I agree wholeheartedly with this. However, I wish to point out that the debate should not be limited to ESOPs alone, for there are many alternatives methods for achieving the ultimate goal, which is to broaden the ownership of capital.

I view this as such an important goal that in addition to introducing with Senator Javits the Employee Stock Ownership Fund Act of 1976, which was discussed in Mr. Rowne’s column, I directed the Joint Economic Committee to seriously examine this goal (“Broaden Capital Ownership”) and the best means to achieve it. The committee began its investigation by holding two very informative days of hearings on ESOPs last December at which Louis O. Kelso and other ESOP experts testified. I am pleased to say that the committee fully endorsed this goal by making it a recommendation in its 1976 Annual Report to the President: “to provide a realistic opportunity for more U.S. Citizens to become owners of capital, and to provide and expanded source of equity financing for corporations, it should be made national policy to pursue the goal of broadened capital ownership.”

The most recent contribution by the committee to the debate on whether such a goal is needed and is justified and, if so, how it should be met, was a staff study released last month entitled “Broadening the Ownership of New Capital: ESOPs and Other Alternatives.” This study is a valuable input into the debate Mr. Rowen says is needed as it presents the overall context for the debate and analyzes many methods other than ESOPs that would broaden capital ownership in the U.S. The latter point is a critical one, for I feel that the more comprehensive types of plans should be subjected to debate, which they haven’t been up to this point, by Congress and the appropriate Executive Departments.

The main advantages of such plans according to the study were: (1) they stimulated both the issuance of stock and its distribution to new stockholders and (2) the new stockholders would, if so desired, consist entirely of lower and middle income Americans who currently own a very small share of this country’s outstanding stock. It is my intention that the Joint Economic Committee continue its efforts in this area by examining these types of plans over the next year.

The broad framework of my thoughts in this area may be stated quite briefly. Throughout my career as a public servant, I have viewed full employment as a top priority goal for this country. And I continue to do so. But I also recognize that capital, and the question of who owns it and therefore reaps the benefit of its productiveness, is an extremely important issue that is complementary to the issue of full employment. I see these as the twin pillars of our economy: Full employment of our labor resources and widespread ownership of our capital resources. Such twin pillars would go a long way in providing a firm underlying support for future economic growth that would be equitably shared.

HUBERT H. HUMPHREY,
U.S. Senator (D-Minn.)
Washington D.C.