THE
NATURE
OF
WEALTH
First Online Edition 2012
Written by
Fred Lundgren




Charts by
Jerome Friemel


Foreword by Charles Walters 1926-2009
Founder and Publisher Emeritus of "Acres USA" Magazine

I presume the late James Michener would have opened this macro-economic inquiry with a simple historical statement, "And the Earth cooled."  He might have reminded us that it took millions of years to exhaust the environment of the hunter, and as the store of game was consumed, hunter-gatherer societies made a transition to farming, with women leading the way.

Michener would probably explain that, in simpler times, people understood economics in terms of raw materials, both hunted and gathered, and as societies developed, they learned systems of cultivation, production, and harvest.  In this way, agriculture, forestry, fishing and mining  lead the way to a stable and organized society by providing the primary energy that flowed to each individual..

Far from Michener's style, the authors employ simple mathematic formulas and scores of Government records to tell the story.  When you have finished reading The Nature Of Wealth, you will wonder, no doubt, why so many societies worship a mythology that causes millions to starve - like a blind horse - knee deep in corn.  Moreover, you may find shelter from the superstition that whenever money is created, a percentage of it must be offered as an appeasement to governments and money lords.  You will conclude, no doubt, that most economists and politicians are mythmakers incapable of finding solutions to the paradox of poverty in the midst of a wealthy nation, only because their view is too narrow, and their interests too self centered.  The Nature Of Wealth escapes their fate by taking a helicopter view of the farm, the factory, the consumer, and the whole-interrelated grab bag called the economic equation.

The origins this book date back to 1937, when an organization called the Raw Materials National Council documented the real cause of the Great Depression.  The council's work was driven by Carl H Wilkin, an engineer, farmer and publisher who condensed their findings into a treatise on capitalism entitled Prosperity Unlimited
With Wilken at the helm, the council had discovered irrefutable natural laws of economics, laws based upon arithmetic and physics; laws that had been purposefully hidden from the masses by generations of supposedly learned economists. Wilkin and his group proved that raw materials income governed national income, unless the latter was expanded by debt. Their data proved that expansion of trade beyond income destabilizes the internal U.S. economy and inevitably pressures U.S. wages downward towards a lower international common denominator that cannot sustain the American standard of living.
see http://www.normeconomics.com

Wilken died in 1968, but the discoveries he published had already become the framework for a new organization which was named "The National Organization For Raw Materials".

NORM was chartered in 1971 and operated under the direction of Arnold "Red" Paulson of Granite Falls, Minnesota.  Paulson was serving as the President of the United States Junior Chamber of Commerce when Wilken introduced him to the council's body of research. Paulson found Wilkin's new insights into natural economic law to be so compelling that he changed his world view, comparing it to a revelation, somewhat like St. Paul's conversion on the road to Damascus.  Thereafter, Paulson became Wilkin's most dedicated student. Today, Arnold Paulson is considered to be the founding father of NORM. 

Paulson and his team produced annual updates of the American economic condition using Wilken's irrefutable economic laws, which control and direct a private enterprise economy.  Each year, until Paulson's death in 1980, NORM employed national statistical data, harvested from a score of agencies in order to prove that maintaining "state of the art" ratios of cost to income and savings within the basic segments of  national income will automatically produce a sufficient level of earned national income to generate and sustain prosperity and full employment, while eventually eliminating the excessive debt which now threatens to consume the industrialized world.

When Paulson died, Vincent E. Rossiter, Sr. of Hartington, Nebraska became president of the National Organization For Raw Materials (NORM).   In 1981, Vince Rossiter assumed the annual task of updating Paulson's national economic audits.
Like Arnold Paulson, Vince was an ardent student of Carl Wilkin.  Vince was also a respected banker, who developed a unique style and an "official" presentation.  Over the years, Vince wrote countless articles and publications on raw material economics and traveled the country educating rural and urban groups on the topic.
Vince Rossiter was involved with many civic activities.  He served as president of the Hartington Junior Chamber of Commerce, President of the Senior Chamber of Commerce, Director of the National Catholic Rural Life Conference, Director of the Center for Rural Affairs, Chairman of the Independent Bankers Association Agricultural Committee and was always active in the Democratic Party on both the state and national level.  Many of Rossiter's papers can be found in the special collections department at Iowa State University. Authors note...In 1991,Charles Walters became the President of NORM and served until his retirement.

During the 1970s, Fred Lundgren and Jerome Friemel became Paulson's most dedicated students, and by the time of Paulson's death in 1980, each had gained enough knowledge to assist Rossiter and others with annual updates to the previous works and publications.  Author's Note...This book, first published in 1994, is a modern update of Wilkin's, Paulson's, Rossiter's and certainly Walter's efforts.

Lundgren and Friemel take you on a multi-decade mathematical journey that demonstrates how America's balanced economy was repeatedly struck down in cold blood, over and over again in the 1800's, in 1907, then again in 1929, and again in 1958, repeatedly in the 1970s, the early 1980s, and most recently the great recession that began in 2006 and continues today.

They explain that recessions are simple to understand, if you know the rules of the game.  To create a recession, you begin by lowering the price of domestically produced raw materials to soften price levels across the economy while making up the lost income with cheaper imports.  Then, maintain consumption with debt expansion while continuing to import the cheap products that displace jobs while the economy tries to adjust.  Then, watch the economy exchange the profits of private enterprise for non-repayable capital debt expansion and government deficits until eventually, the country cycles back and forth between periods of recession and inflation, while piling on trillions of interest and debt that tax wealth away from the middle class and give it to the top 1% of society.  

Lundgren and Friemel track this syndrome through many decades. As an example, during 1953, the United States enjoyed $330 billion of National Income, and prices were in relative balance.  If raw materials had been fed into the economy at the same relative values that had existed during the 1946-1950 baseline, National Income would have exceeded $355 billion, instead of growing to only $330 billion.  This annual pattern of income shortages has now multiplied 1000 fold, and continues to grow each year. 

In 1997, political pundits foolishly claimed victory over national deficits while Americans borrowed $2.16 to produce each $1.00 increase in (GDP), gross domestic product. This excessive borrowing occurred because raw materials were under priced for too long as they entered the economic cycle.  Today, America continues to borrow it's  prosperity in a futile effort to compensate for a chronic shortage of debt free National Income. 

The Nature of Wealth proves that earned National Income growth (the money that comes from making and building things) must be generated by parity priced domestically produced raw materials and a strong manufacturing base.   

Today the annual shortage of National Income has grown to almost $1.5 trillion, and the accumulated shortage equals America's total public and private debt, proving that massive debt expansion is a public policy gone awry.  The book teaches that excessive debt is not an economic necessity and borrowing should not result in repeated national economic travesties.  Authors note..America's accumulated loss of income now totals over $20 trillion dollars, and with compounded annual interest,  equals America's total public and private debt of 57 trillion.  This economic plague has undercut the wage structure and the overall profitability of the American economy.  It forces debt-driven consumer expenditures.  Worst of all, too much debt inevitably stacks up inventories of surplus goods and surplus people. 

Lundgren and Friemel explain that the central equation of macro-economics is anchored by the central equation of nature's scheme, which is simply that production times price equals income. Therefore, when the total annual production of goods and services flow through the economy at their par value, (their intrinsic value as energy rather than their perceived value), then sufficient income is created along the way to distribute and consume those same products and services every year, without creating excessive debt in the process. 

Thus say the authors, a failure within the pricing system at the raw materials stage of production is especially harmful because it is duplicated each time the raw material flows through another stage of the economy, and since this price error is fed into the economy at the first point of sale, it distorts the value of all goods and services and eventually forces entire economies to cut back their national level of income below that dictated by the state of the arts.  The authors frustration becomes apparent as they repeatedly bring forth this concept, which is now considered outdated by national economic planners.

When confronted with centuries of historical data, politicians and academics swallow hard and offer the most stubborn of all quasi-intellectual responses, "Yes, but things have changed, the old rules no longer apply.  Yes, but America has become a service economy.  Yes, but we live in a global economy.  Yes, but with space satellites and the Internet, we can communicate with the world at will, so we can finally create wealth by human will". 

They laugh when the authors suggest this codified opulence rests on the laws of energy and thermodynamics and a nation's willingness to apply these laws to its economic system. The mere suggestion that irrefutable economic laws govern our economy and consistently yield certain overall ratios of cost to income and savings bring think tanks up fighting from their chairs, even though the entire apparatus of organized society is governed by these same laws.

Most economists and politicians will always have difficulty with NORM's founding precepts because they were taught to have a blind faith in a rudderless international market system. They were taught to believe that a so-called free market will automatically improve the income of Americans and their trading partners, in terms of an American standard of living and they were taught to ignore all evidence to the contrary.

Too often, the benefits of free markets are promoted by those with the power, authority and influence to change public opinion for personal gain.  Their arguments are nothing more than public relations campaigns, promoting half-truths and errors by omission, always underwritten for their corporate self interests.   They spin and tailor news releases and speeches to match each gullible audience, using skills well honed by years of practice.  When proven wrong, they become temporarily silent but never confess their crime.  

These "blind guides" have directed our society away from ironclad proven laws set down by nature's scheme; a scheme based on extracting, utilizing and eventually accumulating two primary energy sources, namely, the terrestrial stock of energy put on deposit eons ago in the form of coal, oil, gas, and other minerals, and the cyclical stock of energy harvested from the sun through photosynthesis, as the growth of farm crops. Regardless of how fast our computers become, they can't  circumvent the need for the production, mobilization and utilization of these two sources of energy.

The National Organization For Raw Materials (NORM), underwrote the publishing of The Nature Of Wealth for the purpose of updating the original work of the Raw Materials National Council and the more recent work of NORM.  The Nature Of Wealth sets forth economic formulas in modern, self-evident terms to prove that all value and income is determined by the energy of nature and is quantifiable through arithmetic. As physicist Frederick Soddy put it, "The laws of thermodynamics (the laws of nature), control nations by controlling the rise and fall of political systems, the freedom and bondage of societies, the movements of commerce and industries, the origin of wealth and poverty, and the general physical welfare of a people."

It may be said that the impetus for writing The Nature Of Wealth was to help the masses distinguish between being stumbled over and being kicked.  For this reason, and for the other reasons related above, Fred Lundgren and Jerome Friemel have studied the subject of economics for their entire adult lives.  They have produced  computations which  prove without exception, that  all major depressions have been the consequence of destructively low prices paid for the production of new wealth from the soil.  Lundgren and Friemel prove that depressions are no longer caused by a lack of annual production, or the lack of desire to produce and consume, but by a nation's inability to manage its internal pricing system.

Lundgren and Friemel totally annihilate the proposition that a paradigm shift makes a service or information based economy sustainable.  They refute the commonly held belief that taxing people to near oblivion can repay tens of trillions of federal debt.  They destroy the mythmakers' remedy of selling grain abroad to pay for expensive imported oil and cheap consumer goods.  They chide politicians who cannot understand that foreign sales lessen, not increase, the rollover or the multiplier of dollars inside America. They use arithmetic, not theory, to explain how the total value of all raw materials, (the price paid to the producers of all raw materials at the first point of sale) become the residual capital profit for a society, and why today, raw materials must flow into the American economy at a ratio equal to  one-eighth of the total National Income.

Lundgren and Friemel prove that personal savings and business profits are simply the residual energy of a nation's raw material bounty after the bounty is  transformed into finished goods and services. They show that improperly pricing the annual bounty of nature always causes turmoil in commerce and industry, and a constant demand for excessive debt expansion. Finally, the authors draw hard on arithmetic to prove that the American economy can never sustain growth unless it regains its internal economic balance by properly pricing its annual bounty.  They prove this change is necessary if America is to remain the international role model for other private enterprise systems around the world.

The Nature Of Wealth proves that America can operate profitably if wealth creation occurs without excessive debt expansion and why sustained economic growth demands fair (state of the art) prices at every turn of the production cycle; a system vastly superior to debt expansion alone.  They authors point to certain times in American history to show that a knowledgeable government can administer an economy that creates new wealth without debt expansion.  They challenge us to ignore class bias, racial bias, and every other form of preconceived dogma that  stands in the way of economic fairness.  They use arithmetic and formulas to prove the practicality of such a system.

The Nature Of Wealth is no less than a national (macro) economic audit.  It proves that real economic profit can neither be synthesized with debt, or conjured from thin air within the computers of Wall Street.  It proves that wealth cannot be created by taxing the body politic, or by grafting the newest version of chain letter economics onto the general physical welfare of the nation.

The Nature Of Wealth offers a look into a variety of economic futures, both positive and negative.  It creates a visual picture of National Income, the effect of debt expansion, compound interest and fractional lending. Afterward, it makes strong recommendations for changes in monetary policy. 

The Nature Of Wealth reviews the American economy from a historic perspective using government records.  Each graph and table have been designed to help you  understand fully, perhaps for the first time, that America can collapse under its own weight of private debt unless monetary and fiscal policies are altered in the early part of the 21st century.  This warning is the core message of The Nature of Wealth.

Some points and conclusions were made repeatedly to reestablish firm principles of macroeconomics. The book is an economic road map that leads to one central destination. This redundancy was necessary to demonstrate that proper functioning of our massive American economy rests on a few solid principles.  These principles, in order to be fully understood and accepted were repeatedly addressed, both in narrative and in almost 100 graphs and tables that span a century of American economic history.

This expose was developed one formula at a time.  With every formula, the premises of NORM proved themselves more enduring than hammered iron.  Each new formula led to the reconstruction of yet another hidden formula until the The Nature Of Wealth becomes obvious.

The task of reconstructing these formulas required stamina and years. The charts and tables assembled here begin with the year 1910 and some contain projections to  the year 2030. 
   
Do not be afraid of the tables, charts and graphs in this book.  Read them as you would read a narrative, carving for yourself one nugget of truth at a time. 

      For those who want to understand the true nature of wealth, read on.

Discovering the physics
within an economic system
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This page was updated on: July 13, 2014
"Let us see, from the standpoint of modern knowledge, whether light can be thrown on the difficult and vexed question of the real nature of wealth".......

Frederick Soddy;
Wealth, Virtual Wealth and Debt
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