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When was America Capitalized? Some answers, prediction, what’s coming next

January 20, 2012

(January 2012)

This is touchy subject. Thinking about what Capitalism is I looked to the Websters Dictionary;

 “… 1. an economic system in which all or most of the means of production, and distribution, as land, factories, communications, and transportation systems, are privately owned and operated in a relatively competitive environment through the investment of capital to produce profits: it has been the growth of large corporations, etc. that has lead to economic inequality, which has been delt with usually by increased government control  2…” (WEBSTERS, 2003)

So I would have to look at when economic inequality began to be recorded in America.  After reading a “New Economic View of American History: Second Edition” Inequality is present from the beginning when King of England set up port-companies and giving each monopoly rights over the area. (P.29)   But this was to long ago, I thought.  Then I decided to look into the Great Depression, hoping to eventually connect the dots to the present.  My search here lead me to early 1861 when a national banking system is proposed by Treasury Secretary Chase, who was hoping to make a “System (that) would be chartered and regulated by the federal government to create a uniform currency replacing the plethora of state bank notes and to provide a market for government bonds since the national banks would be requirded to invest their capital in government bonds.” After the “National Banking Act” passed in February 1863 congress quickly became unsatisfied with the number of State banks that remain reluctant to switch to the new system- because the increased regulations were considerably more restrictive that than under many state banking-charters- and in June 1864 Congress passed a 2% tax on all state banks. (P.502)

It didn’t take long for the amount of national banks to grow to the hundreds and it didn’t take long for Congress to increase the tax again- to 10% (bullying them into forclosure or compliance).  In the years between 1863-1868 the number of state banks changed from over 1 500 to 247.  (graph 18.4, P. 504)  “The National Banking Act of 1864… tried to impose a homogeneous structure upon the banking system despite the hetergeneity of needs.” (P.503)  The banks were given a payment plan depending on how many people lived in their cities, also and more importantly they were required to keep (high) minimum reserve ratios; this insured their control over the value-liquidity and to compensate for bank-failure. (P.505)

The big push by congress is in persuit of economical prosperity, hoping to unite the country under one currency, honorable but did they cross the line?  State banking wasn’t done though, by 1895 state banks once again out numbered the national banks, “the principle explation for this new lease on life for state banking was the substitution of personal checks for the bank note as a means of payment, thus avoiding the tax penalty on noncongressional state bank notes… Morover, national banks were permitted from making mortgage loans, yet real-estate was the principle asset in rural areas.  As a result, the majority of new banks adopted state, rather than federal, charters, and the two systems became locked in competition for membership” (P.505) The falling amount of states that still have no reserve restriction on banks, increasing federal law, and explantion of federal notes in circulation, indicate that the government’s intervention increased competition, weakening the banking system increasing rates of bank failures and suspensions leading up to the Great Depression, as Eugene White argues  in A New Economic View of American History”. (P.505-7)

So the banking system was infected with the governments motives and ends, but at the same time as the first bank-rush to national, 1868, a new form of life-insurance was birthed that took the excess  accumulated reserves and invested by the person and the company invested them on behalf of the policy-holder. (P. 507)  This proved to be quite nice and convient for the ‘small-saver’ and counted for about 60% of policies in 1905. (P. 508)  This system that had benefitted over have the population was ended by congressional investigation, claiming:

“The congressional commettiee’s report recommended a number of reforms, including the prohibition on tontine insurance, apparently on the grounds that it encouraged gambling, that the tontine policies were misrepresented by the insurance companies, and that the policies were immensely profitable for the insurance companies, and that the policies were immensely profitable for the insurance industry.” (P.508)

Tontine insurance was the poor-mans way to save, and be included in the stock market (in the late 1850s turnover was around 70,000 stocks a day and in 1886 the market had its first million-share trading day), and for the most part, “stock prices were behaving “rationally”– that is to say, stock prices were aproximatly equal to the present day discount value of the infinate stream of dividens that the stock was expected to pay”. (P.508)  It seems now important to state that before 1900 stocks were out performed by railroad bonds, and when around then two changes occured: Real interest rates decreased, and stock volidity increased; outperforming stocks continuing into the 2000’s. (P.509)

Going back to our title, “Where Did America Turn Away From Capitalism?” I think we are approaching it, Kenneth Dolbeare wrote (1984) that, ” seasoned observers from across the American political spectrum have warned of the dangers we face from our current political incompacity”, on the subject of neofascism. (D&D, P. 401) But this is America, the home of the free, the land of opportunity, how could this be? Isn’t it Hitler– you know, the other guys–that are Fascist?  “Although hardly parellel to Nazi superagencies, many advanced industrialized democracies today have industrial policies and/or planned economics.  These also require integrating government, business, and labor.”  (D&D, P.404) 

Could it be that capitalism hasn’t been in America since 1900?  Did it leave when congress (I keep wanting to capitalize that word) made national banking its own hit man, giving banks “…an offer”, of 10%,”that they couldn’t refuse? (Scarface, 2001) Or when congress made the stock market more-inaccessable by destroying one form of competition in the life insurance industry?  I don’t know. “Bertram Gross predicted America’s future as “friendly fascism”, that is, management by a benevolent bureaucracy” in Friendly Fascism: The New Face of Economic Powers. (D&D, P.401)

If I had to guess, I’d have to say Capitalism left America when governmennt (I keep wanting to capitalize that word) began to react ‘for’ the people, opposed to reacting ‘from’ the people; that is, when the people’s problems stopped being  the causes and started being the effects of government policy. 

What do we do? Join internet groups, support viral agency, then when the time comes to put a face to an email show up nuts drawn; and tell them we’ve come here togeather; and that it feels good! If they take away our Right to get virtual STDs with internet censoring, I fear the real thing may be next! But like Ben Frankin said, “He found 9999 ways NOT to make a light-bulb”, so enjoy the ride and fight for failure! When we need to assemble infront of the government, they will tell us No, but we will not stop coming and impregnant an old-decaying democracy with new life- Think dirty America. Walking towards the pink as a new horizon forms, people come togeather over the congress painting over  the white house & all of congress with a think coat of liberty; then after our cries of freedom can be heard from space, we can wipe our brows, kiss old-America  goodnight and start cleaning up the mess…

 

 

References:

Websters Dictionary, 2003.

 A New Economic View of American History: SECOND EDITION; Jeremy Atack, Peter Passell;

Dogmas & Dreams: A Reader in Modern Political Ideologies; edited by Nancy S. Love

American History X

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