The Weiner Component V.2 #41 – Patterns of History: Part 1: Welfare for the Rich

English: Woodrow Wilson.

English: Woodrow Wilson. (Photo credit: Wikipedia)

The Presidency of Donald J. Trump seems to be taking the country historically backwards.  We, as a nation, are moving toward the past, going from being a middle class nation to a lower class one.  And the current major agent bringing this about is the President of the country, Donald J. Trump with the aid of the Republican dominated Congress.

 

In the post-Civil-War Period the United States underwent a rapid phase of industrialization.  The Industrial Revolution arrived.  We changed from a rural civilization to an urban one.  This was the period of the robber barons and monopolies.  Taxation was limited.  The XVI Amendment to the Constitution legalizing the income tax would not be passed until 1913.  Prior to that date a large group of industrialists made multimillions of dollars in their prospective industries, establishing, in many cases, family dynasties, like the Rockefellers or the Fords.

 

At that time there were no rules of regulations.  Cities rose rapidly.  The country was crisscrossed with railroads.  Unions were considered organizations in restraint of trade.  Child and women labor was ramped.  Most industries worked their way up to become monopolies controlled by one man or a small group of men.  Monopolies bribed their way into Congress.  By the late 19th Century monopolies and oligopolies con`trolled most production.

 

All this corrupt growth was partly halted by the development of the Progressive Movement which rose around the turn of the 20th Century.  The struggle to end the monopolies and oligopolies would continue to and end with World War I.  It would not resume again until the Great Depression.

 

There was a great influx of labor during this early industrial period.  People came from Eastern Europe and Asia.  They built the railroads, filled the factories, and lived in overcrowded slums in the rapidly developing urban centers.

 

The overall population of the United States at this time was lower class, people: men, women, children, working for wages, usually low and were barely living upon what they earned.  With the Progressive Movement laws were passed improving conditions in the cities and the factories.  The labor movement developed and wages gradually improved.  Working conditions got better as new labor laws were passed.  It was a slow process.

 

With the coming of World War I there were shortages of everything in Europe.  Food and war materials were imported from the United States.  There was actually a labor shortage there.

 

During 1917 the United States was drawn into the war on the side of the Allied Nations.  The U.S. President, Woodrow Wilson’s slogan was: This was the war to end all wars.  Unfortunately after the war ended Allied Nations wanted revenge.  Wilson was forced to settle for a League of Nations which later the United States refused to officially join.

 

Germany as the only nation left of the Central Powers at the end of the War had to pay reparations for the cost of the war.  The Allies used the German reparations to pay the United States the money they had borrowed from her to fight the War.  With the coming of the Great Depression all payments ended.  Each nation worked unsuccessfully to get itself out of the Great Depression.  For the United States the Great Depression ended with the coming of World War II in 1939.

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In 1933, when he became President of the United States, Franklin Delano Roosevelt doubled the money supply in the nation by collecting all the gold coins, legally doubling their value from $18 an ounce to $36 an ounce, and reissuing the money in paper currency.  Presumably everyone had their currency exchanged from gold to paper.  Gold non-circulated certificates were deposited with the Federal Reserve which were supposed to stand behind the paper currency.  The gold was melted into blocks which were then put into depositories like Fort Knox.

 

By this move Roosevelt not only doubled the money supply he also gave the Federal Government possession or control of 50% of the money supply without raising one dollar in taxes.  This money would be used to pay for the “New Deal” that would be given to all the people in need in the United States.  Apparently Roosevelt also liked poker, that where the name of his program came from.

 

The entire concept of money would change at this point, not only in the United States but throughout all the nations since they all would follow this pattern.  Money would no longer be an exchange of a good or service for a valuable metal worth that good or service.  Paper money henceforth would have no intrinsic value.  It would only be a means of exchange.  A good or service would be exchanged for a different good or service.  Money would be the instrument of exchange.  It would state the value of the good or service for the other good or service for which it was exchanged.

 

Money now also became a means of scoring what a job or item was worth.  It had no real value outside of the country.  It could not be used in other countries.

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As we’ve seen in the United States prior to 1933 money was actual gold and silver; paper money was a promissory note that could be redeemed at any time for gold or silver.  It extended the amount of money in circulation.

 

Promissory notes began at one dollar and went up to thousands of dollars.  Ones and fives were silver certificates.  Anything above that was a gold promissory note that could be exchanged for gold $20 pieces of gold.

 

The year 1933 was the low point of the Great Depression.  In that year the Democrat, Franklin Delano Roosevelt, became the 32d President of the United States.  Among his actions that year he had all the gold coins, with the exception of a small number held back as souvenirs, collected and melted down into gold blocks.  They were stored in depositories.  Roosevelt had the value of the gold changed from $18 an ounce to $36 an ounce.  In essence he doubled the money supply.  This enabled him to pay for the New Deal.

 

What Roosevelt did, knowingly or not knowingly, was to change the function of money.  Before 1933 gold coins were accepted anywhere on the planet.  Money, an object of value was exchanged for equally valued goods and/or services.  After 1933 money became an object of exchange.  It had no intrinsic value.  It became within each country strictly an object of exchange; exchanging a good or service for a good or service.  Thereafter it became a sort of scorecard, denoting the value of an object, service, or occupation but other than that having no value itself.

 

In 1933 as the gold coins were collected gold certificates were issued and retained by the Federal Reserve for the gold collected and these served as the basis for the paper money issued.  Did the gold certificates equal the amount of paper money issued by the Federal Government?  I don’t believe anyone ever checked.

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Alexander Hamilton, the first Secretary of the Treasury, began this country based upon debt.  During the Revolutionary War the Continental Congress freely issued paper Continentals with which to pay its debts.  After the War Hamilton, as Secretary of the Treasury, Hamilton collected this money and put out a new issue paying off the Continentals at full face value.  He believed that a certain amount of Federal Debt ensured the allegiance of the property owning class.

 

With a few short exceptions, like the early part of Jefferson’s tenure as President, there has been a National Debt.  The question that now arises is: Should there be a limit to this Debt?  After all when the Federal Government borrows money it has to pay interest on the Debt.  Currently, toward the end of 2017 the Debt has reached 20 trillion dollars.  The interest upon that amount is in the hundreds of millions of dollars.

 

During periods of Democratic Presidents, when the Republicans had a majority in one House of Congress they have been deficit hawks, being upset over each additional dollar of debt.  With Republican Presidents they have been willing to massively expand the debt.  Under President Reagan the National Debt rose, for the first time, over one trillion dollars.  It more than doubled under the first Bush President and it quadrupled under the second Bush President.  Currently, under President Donald J. Trump, in order to bring about what the Republicans call “Tax Reform,” but what is actually a massive tax decrease for the wealthy, the Republicans are willing to increase the National Debt by over 1 ½ trillion dollars a year.

 

Originally they were going to gut Affordable Health Care (Obamacare) and use that money for the tax cut.  But when that plan failed their tax bill plans changed to take money from the middle class and from deficit spending.  Will that bill pass in both Houses of Congress?  I doubt it.  As long as the Republicans have a majority of two in the Senate they are having trouble passing anything.  To date, one year into their current administration they have passed no significant legislation.

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There is another important consideration to keep in mind.  With the current massive National Debt and the propensity of Republican Presidents to spend money unnecessarily or foolishly.  President George W. Bush’s Iraqi War and President Donald J. Trump’s ridiculous twelve hundred mile Wall there is a distinct possibility that the National Debt could continue to rise rapidly.  The effect of this is a redistribution of money in the hands of the wealthy.  After all who can afford to buy the continuous flow of government bonds?  Tax dollars will be paid by the rapidly declining middle and lower classes which will, in turn, be distributed as interest to the wealthy upper class.  This process will continually push many of the remaining members of the middle class downward economically into the lower class while enhancing the upper few percentile of the upper class.  It will help to take America back to where it was before the turn of the 20th Century.  In point of fact this plan can generate welfare for the very rich.

Franklin Delano Roosevelt, 1933. Lietuvių: Fra...

Franklin Delano Roosevelt, 1933. Lietuvių: Franklinas Delanas Ruzveltas (Photo credit: Wikipedia)

The Weiner Component #37 – The Concept of Money

Chicklet-currency

Cash, currency, paper bills, checks, credit cards, electronic deposits and transfers are all examples of money.  But what is it really?  What is its real value? 

Money, the currency of each nation, is the means of exchange used within that society, the means of exchanging goods and or services earned in the present or at some time in the past and saved for present or future use.  It is also a means of setting up the economic pecking order of individual levels within a society.  In the United States, for example, the more you earn, the more successful you are.  Generally it also denotes to which economic class you belong, what level of economic prosperity an individual has or has not achieved. 

Determining the actual value of money is interesting.  There is nothing behind any currency other than the word of the nation that issues it or the National Debt of that particular country.  Up until 1933 when Roosevelt took the country off the gold standard by collecting all the gold coins, had them melted down into gold bricks, buried them in depositories, issued gold certificates to the Treasury, and had the banks issue paper bills denoting that they were “Federal Reserve Notes,” money had been exchanging value for value.  A one ounce gold coin was a twenty dollar piece which could be exchanged anywhere for $20 worth of goods or services throughout the world.  The Roosevelt Administration changed the value of gold from $18 dollars an ounce to $36 and required that all gold mined in the United States be sold to the Federal Government.

Historically, the problem was that there never, with the exception of the Sixteenth Century when the gold in the New World was looted and sent to Europe, enough gold available to serve the business needs of the various industrial nations.  As a result of this, the amount of gold available for all commerce both within and between nations had been and was stretched by using paper bills that theoretically could be exchanged for gold at anytime.  Of course when this was done there was a run on the banks, causing bankruptcies and a depression. 

The amount of currency needed in circulation today has to be enough to allow for a full exchange of all needed goods and services in the society.  The money itself has no real intrinsic value; it is merely a tool that allows for this exchange.  The amount in circulation has historically been arbitrary, generally determined by the amount of gold coinage available, and then partially controlled by the state and by the financial institutions within the society that have continually operated on the basis of pure profit for themselves regardless of the consequences to the general society. 

This lascivious control, mostly by private enterprises has led to innumerable economic disasters such as the Great Depression of 1929 and the Real Estate Debacle of 2008; both of which almost toppled the entire society.  The two economic disasters were based upon an ever-increasing frantic race for increasing immediate gains, banks and a part of the general population rapidly acquiring massive amounts of currency for themselves.  This issue was not understood until well into the Twentieth Century and the assorted nations have never yet exercised their sovereign power to totally control or regulate the money supply. 

In the United States the myth that is constantly being propagated is that the Federal Government is inefficient or incapable and that only private enterprise and the Market System can properly run the economic system within the country.  It is bogus nonsense!  It was the Federal Government that both in 1933 and in 2009 saved the country from total economic collapse.  And, in both cases,  it was private enterprise and the Free Market System that almost destroyed the economy.

The reason we have had recovery since the bank caused disaster of 2008 has been through the actions of the Obama Administration and the creativity of the Federal Reserve in utilizing imaginative Monetary Policy.  In 2009 and 2010 the President and Congress saved the nation from total economic collapse.  Since 2011, when the Republicans gained control of the House of Representatives they have done everything they could to hamper economic recovery by their austerity program which has tended to actually shrink a recovering economy.  They seem to be more concerned with discrediting the Obama Administration than working to bring about recovery.  Their constant cry is to cut government spending, particularly in discretionary programs, and reduce the National Debt.  One direct result of their austerity program has been the collapse of a fifty some year old bridge in Washington along a major highway.

Money has no real value; it is a tool that the society uses to exchange some form of labor for goods and services needed for comfortable living.  As long as there is no wild inflation, more money being available in the general society than products that can be produced, there is no danger from rapid inflation.  .

In the crazy escalation of currency during the Real Estate Bubble that exploded in the latter end of 2008, where people utilized their homes as bank accounts, there was no real inflation, only economic growth.  The money supply shrank enormously as real estate values collapsed.  We have still not fully recovered from that bank-induced recession that could have toppled the entire economy.

It is time to stop treating money as the ultimate object of wealth and begin treating it as an object of exchange, as a tool that can be utilized to create and maintain a healthy economy with everyone prospering. 

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