Nature’s Basic Law of Economics
Who hasn’t dreamed of what they might do with a 6-foot-high stack of $1,000 bills or a pot of pure gold. Imagine for a moment you have all that wealth in your possession, free and clear. But there’s a catch…you and your riches are on a deserted island, with absolutely no chance of being rescued. What are the gold and currency worth now? You can’t eat, drink, wear or drive them. In your isolated situation, they are of no practical value whatsoever. It’s obvious, they are worth something only when you are able to exchange them for commodities…food, clothing, transportation, medicine… items or services which bring pleasure or provide sustenance for life. In and of themselves, neither gold nor money can supply any of life’s necessities or its luxuries. They are truly worthless.
An elementary, basic concept to be sure, but one which seems all too often to be forgotten by the average citizen…and politicians. After all, in this country, it’s easy to forget that money is nothing more than paper and ink or small, round pieces of metal. Why? Here, shortages of most services and products are rare. As a result, money may be used readily and almost immediately to satisfy whatever we desire. Money, therefore, assumes an importance all its own…itself quickly becoming the object of desire. Is it any wonder then that many people become confused? So close is the association of money with personal gratification that some begin to think of money as having inherent worth, as a commodity to be treasured for its own sake. Rather than viewing money as simply a medium of exchange, they cherish cash, hold big bank accounts in high esteem, and hoard huge investments of stocks and bonds.
Some say this false attribution of value to money and its adulation is behavior akin to worship, and perhaps such an attitude would be harmless were it not for the fact that this kind of thinking distorts reason, engenders false premises and retards real prosperity for all.
When we perceive money as a commodity with intrinsic value instead of as an exchange medium, we often become quite possessive… retentive. We develop a self-centered, self-serving posture which narrows our view. We develop blinders which prevent us from realizing that ours is an interdependent society and that much of our personal success has been due to efforts of countless others. Perhaps we even fail to recognize that the thousands of items we all use each day are produced by individuals who each make their own small but important contribution to the economy.
This rather constricted view of our society and of the inaccurate sentiment with regard to the nature of money serves as a barrier for greater economic prosperity for all in two fundamental ways. First, it promotes the belief that money is sacrosanct, and that leads to an inflexible monetary policy toward solving economic problems. Second, this limiting viewpoint leads to the fallacious idea that each person is independent, with little obligation to participate in a cooperative effort.
For example, many accept economic ills such as recession, depression, and inflation as inevitable weaknesses in our free-enterprise system, conceding that there is no way to prevent these dilemmas. But could it be that these problems continue to vex us, in part, because of our preoccupation with money as a commodity rather than as a medium of exchange? Could it be that this preoccupation, this obsession, prevents us from attempting more imaginative, even unorthodox, approaches? Perhaps we should break from our preconceived notions and courageously embrace the idea that money is nothing more than an exchange medium, remembering what Adam Smith, the father of capitalism, exhorted: that “the real wealth of a nation is not the gold and silver laid up in its treasury, but the goods and services that its people produce and are able to enjoy.” Accepting this innovative outlook will open up new vistas for solving economic woes.
Here are some specifics. Inflation, in reality, is a euphemism for theft, resulting from the simultaneous and arbitrary increase in prices by producers of goods and services. Producers generally incur no increases in the cost of their production, so they automatically reap large windfall profits from the hikes they impose on their customers. To counter this unreasonable practice, we propose a bold remedy…the establishment of a board of monitors to evaluate price hikes of major producers and manufacturers. These monitors would be comprised of a small group of individuals who would determine whether price increases were justified. This board would also periodically publish a “fair-price” list for the benefit of the consumer. Producers would be encouraged to increase profits by increasing production, not by hiking prices. Those who venerate money as a commodity may be skeptical, seeing this plan as a departure from the old school. They may contend that inflation has a more academic cause, blindly accepting the old line of the so-called academic experts, who routinely continue to spout the same propaganda over and over: “Inflation is caused by too many dollars chasing too few goods or by deficit government spending.” They don’t see that the real cause of inflation is simple unadulterated greed. It and it alone fuels the fires of inflation. It is not apparent to these people that some restraint must be applied to the greedy. The theorists are fearful of tampering with the law of supply and demand, insisting these two factors along with competition are sufficient for holding prices down. They don’t understand a fundamental truth: that because of price-fixing and price-gouging, true competition does not even exist.
So implementation of a price-monitoring board will help keep inflation in check; but, to counter inflation that has already occurred, we propose that the supply of circulating money be adjusted. Let us say, for example, there is a 1% rise in the cost of goods and services. In a $6 trillion economy, that’s equal to a $60 billion decrease in the supply of money…$60 billion dollars worth of goods and services which cannot be exchanged, or bought. We suggest replacing that missing $60 billion with new money. This will restore the balance between the money supply and the supply of available goods and services, enabling consumers to continue buying and saving the jobs of millions of workers.
Traditionalists may disagree. But remember we are only suggesting a restoration of monetary balance, not a wholesale printing of money. Once again a courageous pragmatic approach, unencumbered by orthodox ivory-tower theories, is indicated. Let us not forget either that the constitution gives the government the right to create money in an effort to guarantee every citizen the right to a job and adequate standard of living.
Another issue in need of reform is the minimum wage…currently at a rate which ensures that no matter how hard the individual works, abject poverty will be his or her lot. We believe that the minimum wage should be tied to the average national wage…that it should be no less than 15% of congressional salaries which should be frozen until this percentage is reached. The wage disparity in our country must be corrected.
Rejecting the concept of money as a commodity will help us accept a program for eliminating poverty, unemployment and welfare. By instituting a government-financed training program, we will at long last be providing every citizen with a means of earning a day’s pay for a day’s work. Those displaced from their old jobs by technology or for whatever reason will be retrained so that they may enter the work force again. This project will reduce unemployment, provide employers with a ready-trained work force and lift millions from poverty and the welfare trap. And, as a bonus, there is good reason to believe the crime rate will drop. If each individual has the opportunity to earn an honest living, theft becomes less attractive.
The Federal Reserve system is yet another area ripe for reform. Our antiquated ideas regarding the role of money have allowed this body to become dominated by the banking industry. By acquiescing to the demands of private banks, the members routinely raise interest rates, a major cause of inflation itself. We propose restructuring the Federal Reserve so that it is more responsive to the economic needs of the nation. This can be accomplished by freeing it from the control of the commercial banks. We will look at this in more detail later.
Nature’s Basic Law of Economics states that the real wealth of a nation is measured by the value of goods and services its workers can produce and enjoy from developing natural resources. When we confer a false value upon our exchange medium, money, we become self-centered and fail to realize the interdependent nature of our system. We then inevitably impose artificial constraints and limitations upon our ability to solve problems. This, in turn, prevents us from reaching our greatest potential.
When we embrace Nature’s Basic Law of Economics, we free ourselves of the idea that money has innate value, and we become less concerned about money for money’s sake. We see that the only real wealth are the goods and services produced by labor, the collective sweat of our brows. We see that personal assets are a reality because of our own hard work and because of the interdependent nature of our system and the hard work of countless others. Realizing that we don’t “make it alone,” we may be more willing to abandon the rigid precepts which are based on the false notion of money as a commodity. We may be more willing to consider programs which would help abolish unnecessary economic disasters such as inflation, recession, welfare, unemployment, crime and poverty.
If we stretch our minds enough to accept the fact that money has no worth except as an exchange medium, that we depend on each other for economic survival, and that an individual’s financial well-being is related directly to the well-being of others, then we may even be willing to accommodate a new approach to government.
To reiterate, Nature’s Basic Law of Economics teaches: There are only two kinds of resources—people resources and natural resources. All goods and services are produced when people resources work with natural resources. As long as these two resources are available, there is no reason for not producing the goods and services needed and wanted by the people.