Energy: Part 1

(Read:  Part 1  Part 2)

Letting the Hard Times Go

An automatic email from Amazon came to me recommending Financial Reckoning Day: Surviving the Soft Depression of the 21st Century(1) , by William Bonner and Addison Wiggin.  The book claims our economy is following the Japanese economy, we are beginning a decade-long "soft" depression due to an aging population, misguided government policies, and a reaction to the "Big Boom" of the 90s.

Bummer.  No one is ever going to buy my condo!

As I gaze out the window on spring of 2004, not much seems to have changed in the economy since that email arrived a few months ago.  One might say the recovery appears to be… anemic.  The stock market has moved up a notch, the housing market looks better now with home mortgage interest rates in the 4% to 5% range, and I'm seeing a smidgeon more jobs available, at least in IT.

Is the American engine of prosperity revving up for another grand go?

Roughly four and a half years ago, through the months leading to the cusp of the boom, jobs were plentiful and well-paying.  Many of my peers were making 15% and more on their stock-market investments.  Even my twenty-something friends were looking at retiring in a few years: moseying off to ranches in Montana, traveling the world, or just walking along the beaches sipping Mai Tais.

Alas, the contraction, deepened by 9/11, keeps most of us working the daily grind.  One of my "conspiracy-brother" associates suggests (seriously) corporate elites brought down the middle-class' 401K-laden houses of cards because The Man wasn't going to stand by idly continuing to lose all us strong, productive drones to comfortable retirement.

"Let's go bust, so all these uppity workers stay under our thumbs where they belong!"

Seems farfetched.  I'll concede a lot of high management considers employees lowly slavish peons.  But why would companies want the stock market to lose money any more than they'd want themselves to lose money?  Besides, the true power elite—ref. Carroll Quigley(2)—doesn't have much connection with 99% of the stratospheric corporate management/ownership witnessed on the pages of Fortune or Business Week.

Best bet is many of us with good money—and a lot of others with real money—forgot some basics on the stock market.  It is simply not reasonable for everyone in the market to see a return on securities that exceeds real productivity growth indefinitely.  Current GDP growth is seldom more than a few percent, annually [GDP₂₀₀₂ = 1.411 x (GDP₁₉₉₅)(3)].

Three points:

1. Prosperity results from production and creation of economic value.
2. Prosperity will occur when production and creation of economic value is significantly greater than the destruction of economic value.
3. If we release the energy of the living mind from coercive institutional forces we shall quickly see production and creation of economic value go skyward. 

The engine of human progress, as we have suggested in previous columns, is the creative mind; the act of creation turns the key to the portal of wealth and general abundance.  The act of creation is a natural effect of the healthy living energy or life force of human beings, and will occur widely to the extent this living energy is not blocked internally or suppressed externally by others.

In this connection of external binding let me commend to my readers the works of Isabel Paterson, particularly her magnum opus, The God of the Machine.

Cato article on Isabel Paterson

A central thesis of this work is "the extended circuit of energy" in society will always be subverted by economic and political compulsion, especially the sort applied by ostensibly well-meaning people having access to government power.  Thus, the natural living energy of a population is maximized, its creative potential most realized, when man's material relationships are secured by property rights and contract.  Any more government than this minimal "night-watchman state" disrupts the life flow and retards wealth.

Let's put a quickie ROM (rough order of magnitude) dollar figure on destruction of economic value in America:

For a starting point, the yearly GDP is somewhere in the neighborhood of 11 x 10¹² dollars ($11 trillion)(4).  The American Federal government seizes/borrows 2.5 x 10¹² dollars ($2.5 trillion)/yr. from the taxpayers.  [Total government receipts are approximately $5 trillion per year.]  From a previous analysis in this column and from Peter McWilliams(5), the drug war, the most expensively evil government program in history, independently destroys 0.5 x 10¹² dollars ($500 billion)/yr. of American wealth.

Finally, we have to make an estimate in the force matrix of what additional wealth-destruction government causes for each dollar it takes from us, the so-called "multiplier effect."  The common adage is the government does a job half as well for twice as much.  [The post office is a good example, studies have shown first class mail delivery is twice as expensive as it would be on the free market.]

Conservatively, take every dollar the state receives and add another dollar to society's cost.  Thus, we come up with another deficit of 2.5 x 10¹² dollars.

Ergo, total wealth destroyed = $(2.5 + 2.5 + 0.5) trillion = $5.5 trillion.

Which works out to 50% in round conservative numbers.  Keep in mind we have not described any losses attributable to government's use of lethal force against innocent civilians.  What is the true value of a human life?  What is the value of a political prisoner's freedom?  These are interesting questions, but my point is already well made:

Literally half of the wealth we generate is rudely destroyed by negative social energy, principally via the state!

Using a working age  population (15-64) of 150 million(6), the cost per individual is ~$37,000 per year!

Compared to that level of depletion, the contemporaneous loss of stock market value and jobs pales to insignificance.  The bad times come from the gargantuan burden of state power, the strangling effect of this cancer on society—not from ephemeral relapses in the market.  What's amazing is we're only suffering an economic malaise and we're not all wandering in the woods scratching for roots and berries.

Living testimony to the power of creative thought!  And possibly the Internet. :)

But a civilized society cannot survive when effectively half the population, producing nothing, consumes wealth created by the other half.  On that political-economic level, it is clear we need to free up the system by imposing the nonaggression principle across the board.  This means we have to rapidly stanch the sacrificial bloodletting going from the productive class to the parasite class.

Practically, as citizen-tenders of government, the solution is to adopt a zero-tolerance policy toward the US Constitution.  If the Bill of Rights (the first ten amendments to the US Constitution) states the government shall not do something (e.g. abrogate free speech, dictate personal biochemistry, redistribute wealth, regulate securities trade, etc., etc.), then, by golly, we must insist the government not do it.  Or very quickly undo it.

Or else:

"…the people [will] institute new government, laying its foundation on such principles and organizing its powers in such form as to them shall seem most likely to effect their safety and happiness."

I don't know about you, but I'm going to be very happy with my effective pay hike of $40,000 per year.  I can even be patient and let the refund be scheduled in $10,000 quarterly increments.  If $40K isn't an incentive to write your legislators and vote Libertarian, what is?!!!  So do your part to let the hard times go!

I end by venturing that politics and economics are only the immediate physical manifestations of how the natural "circuit of energy" is connected and flowing through society (or disconnected and blocked).  Politics and economics illustrate the neighborhood at street level.  To see why the neighborhood functions well or poorly, we need to examine the energy health of the individuals who inhabit the neighborhood.

In order to abandon our destructive sociology of aggression and coercion, we individually need to learn how to accept the living energy the universe affords us as sentient beings.  In order to let go, we need to open up, which is the subject of part two.

Continued in Part 2

Read:  Part 1  Part 2