The Mighty Dollar?

Lets look at the US dollar. Since the Federal Reserve was created in 1913, the US Dollar has lost 90% of its ablility to buy actual goods and services. Dollar losing its purchasing power is ignored in mainstream economic circles. Looking at the price of US Dollar versus Euro, Yen and Pound. The dollar had a good run versus its major trading currencies between 1980 and 1985. It fell between 1985 and 1995, only to rise between 1995 to  2000. Since September 11 2001, the dollar has  collapsed over 30% versus the major trading currencies. Maybe a conclusion is currencies are volatile. However during this period the dollar has been able to buy less and less. Yen, Euro and Pound are also buying less, but they can by more than the dollar.

A more revealing observation is the trend of US Dollar versus Gold.  The US Dollar is losing its value versus gold. In  October 2009 it cost US Dollars 950 to buy an ounce of gold. Today it costs over US Dollars 1800 to buy that same  ounce of gold.

What does all this mean? It means the US Dollar is losing its value. In fact, it has been since the Vietnam War. Each round of war brings about the further weakening of the US Dollar. The US Dollar buys less and less, as military expenditures mount. Why? Wars cost money-to pay for military expenditures more dollars are printed, this is at the expense of American productive capacity. Versus the major currencies dollar seems strong, this is an illusion. Major currencies artificially prop up the dollar, they do this by buying more dollars than they spend. The price of gold tells us the truth about what the dollar is worth. Dollar is not a good store of wealth, buy gold instead.

Looting, Stealing etc

Aristotle’s study of economics as oeconomia set the moral tone to classical economic studies. In The Politics , Aristotle defines the risks of immoral trading in the form of chrematistics. The latter represents; making money for the sake of profiteering.

The one possible flaw in Aristotle’s economic analysis is his inclusion of piracy as a form of oeconomia. Aristotle does not distinguish between piracies to correct imbalances in economic distribution- a sort of Robin Hood piracy, as opposed to blatant theft.

Looting in general destroys economic value. Wikipedia estimates formal medium and large sized businesses in the Western world lose an average of $150 000 per annum to theft. When theft and embezzlement are not sustainable a business can be bankrupted. Bernard Ebbers embezzled billions from WorldCom literally driving it to the ground. Thomas Petters, through fraud, turned The Petters Group into a $3 Billion ponzi scheme. Ramon Baez Figueroa  allegedly stole $2 Billion from Banco Intercontinental nearly driving the whole country, the Dominican Republic, into long term economic ruin. Many other organisations across the world have been ruined by theft, fraud and embezzlement.

National leaders who loot and plunder national resources can encourage under-development. During the reign of Mobuto Sese Seko, Zaire, now called the Democratic Republic of Congo, failed to register any economic growth. After his death Mobuto was found to have stashed away over $3.5 Billion in foreign accounts. This was nearly the total amount owed by his country, in foreign debt,   during his reign. Many other countries have seen development stalled, as national resources are plundered by corrupt leaders and civil servants.

The 8^th Commandment- thou shall not steal- applies to corporate and National welfare, if one looks at the above cases. Obviously depleting a company’s, or nation state’s,   resources leaves it with lesser resources to work with. In the long run, if plundering continues and cannot be covered by increases in productivity, or injections of further resources, the organisation will fold. The Bible does not condone any form theft. Be it either big embezzlements or the petty sort of stealing which plagues every organisation.

Some studies seem to indicate that small thefts help to increase productivity, and should therefore be seen as a cost of production. The jury is still out. This sort of theft however might increase productivity in the workplace; however, the cost is finally covered by the consumer. This ultimately reduces overall competitiveness. However, it increases National Product if insurance covers losses.

St Thomas Aquinas, a classical economist, looked at various moral issues in his studies of the market. His thirteen century work,  Summa Theologica, looked at various issues within the market including fair-play, charging interest and pricing. The number one question Aquinas asks is: am I doing unto others as I would like to be done unto me? Nobody wants to be stolen from; as such one should avoid stealing. This supports the 8^th Commandment.

Fraud exists everywhere, as evidenced by all the persistent financial crises. John Kenneth Galbraith analysed the persistence of fraud in Neoliberal economies as the Bezzle- which is a multi-million dollar undiscovered inventory of doing business. Given small economies lack liquidity, the cost of the Bezzle drives out good business. Small countries and companies need more vigilance against all forms of fraud to stay in business. If all players in small countries played honestly this would result in true economic growth.

Plato & true economy

By Roland Onyimo

 “Greed is good,”says Gordon Gekko: the suave corporate raider represented in Wallstreet. Greed seems to represent good market behaviour. According to Adam Smith; self- interest is a market fundamental essential to the efficient workings of capitalism.

In the major work ‘The Politics’, Aristotle defined two types of distributive activities. Firstly, Aristotle defined Oeconomia , the root of the word economics-as household management. The latter, involving: growing crops plus tending animals, craftwork to produce the necessities of life and the system of creating domestic order.  In such a system debt is publicly issued by either The Palace or The Temple. Given agriculture, merchant shipping and sharecropping were seasonal activities, debt bridged seasonal subsistence gaps. Interest for debt was nil ,and purchasing parity was fixed was fixed by law. The laws of Hammurabi fixed a weighting of silver to a specific amount of grain. When debt became unsustainable it was easy to cancel, given it was issued by the Central authority of either Palace or Temple. Zero interest minimised losses which were the result of famine, flood or war causing debt default.

On the other hand, chrematistics, concerns the making and lending of money to generate profit. It also involves the accumulation of wealth, currency and earnings through speculation. Chrematistics basically defines economics as we know it today. The word bank, comes from the word bench-a bench on which the wealthy sat and lent money for profit to those in need. When the powers of the wealthy increased and Palace Temples lost their clout, the vacuum was usurped by profiteers. The economics studied today should be defined as pure chrematistics. Earlier civilisations, in The Neolithic and Babylonyian era, had Oeconomia or pure economic activity.  Plato is credited with defining this historical distinction of two separate bi-polar activities.

Oeconomia, as sustainable production, was considered by Plato to be good and necessary for human existence. Chrematistics was considered dangerous and destructive to society. The danger in chrematistics lay in its “notion that wealth and power have no limit,” according to Aristotle.  Aristotle felt “the art of acquisition which is commonly and rightly called money making” is downright unsustainable. As such, Oeconomia is a natural activity whereas chrematistics is not.

Exchange is only helpful when it helps a household cover its needs. The natural purpose of exchange as Aristotle surmises is not to make money. Resultantly, it is no surprise Aristotle detested the charging of interest, speculation, hoarding and profiteering. Within this analysis, in The Politics, the exchange of goods and services has not only a material dimension but a moral one as well. Money, as a means of exchange, therefore has a moral value, as it facilitates the exchange of goods and services,or true product value itself.

When people are driven by greed, they act immorally. Speculation, hoarding and trading for non-productive purposes all create industries which do not benefit society.  Oversized hedge-funds, speculators like Gordon Gekko and greedy citizens (both corporate and members of the public) all work to destroy the productive sector of the economy or oeconomia. They do this in two ways, as they diminish the moral value of money and its true productive value.

Using Aristotle’s taxonomy, modern economics should be called chrematistics. Its legalization and general acceptance after the 16^th Century, when Europe finally became privately monetized, has brought about immense social destruction in the form of imperial wars, industrial slavery, environmental damage and the destruction of societies.

The so called progress brought about by private industrialisation has dehumanised the world population and created a new mass of humanity living in poverty. These billions cannot survive in a system which enriches the few, who acquire the majority of resources, through the system of money making. Gekko was right-“Greed is good,” if you are rich, a political insider, living on elite fraud and actually have the resources(free credit) to engage in chrematistics.

Aristotle however was wiser. Only through Oeconomia , plus the resultant sustainable development, can human economic value and moral worth  be preserved.