THE
NATURE
OF
WEALTH
Narrative by Fred Lundgren
Charts & graphs by Jerome Friemel



Chapter Three

The Rules for Unlimited Prosperity
We (the capitalists) can enjoy any degree of prosperity we desire while leaving as many people in poverty as we choose.  However, to be inclusive, our capitalist economy must pays itself adequately at every stage of production, sufficient to insure internal balance.  This "balance" is a prerequisite to consistent full employment and optimal production. 
The rules that define macro-economic fairness and justness are the same rules that foster economic "balance".  These simple rules are always ready to guide our country to a balanced and fully employed economy. 
     We have rediscovered fundamental economic equity within these rules.  These rules boil down to a single, inviolate and universal truth.  Every one of us must be paid a parity price for our labor, our production and our services in order to grow the American capitalist system in a manner that affords prosperity for all.  No good purpose is served by perpetuating a system which underpays many for the benefit of the few because it perpetuates poverty in the midst of plenty. 
   For over a century, the most powerful people on earth have known this and practiced it in business. They have cloaked this truth in the mysticism of so-called "free markets", and by doing so, they have committed crimes against humanity sufficiently gruesome to be characterized as economic genocide.
   Now, let's dust off these fourteen rules that have waited far too long for acceptance.  Then we can begin to take the necessary steps toward their implementation to insure a balanced and growing economy with a fully employed and prosperous work force.
 
Rule One
The national minimum wage for an hour of labor must be set by law at a level equal to the parity price for a bushel of wheat.

Rule Two
       These two prices must be updated yearly and extended from, (or indexed to) the only balanced base period in American history, {1946 through 1952} = 100.
NOTE!  National economic balance is impossible if these two prices are artificially set to conform with imbalanced base periods.   Today, the only correct answer is $15.50.

Rule Three
The number of persons employed in raw materials production, (Agriculture, Forestry, Fishery,  Mining, (energy) and Recycling) as a ratio to the total national work force must remain consistent with improvements to efficiency which is driven by the state of the arts.

      NOTE...This ration is destroyed when goods are imported that were produced by exploited labor, because such goods displace jobs and factories that operate within the parity guided framework of a stable, middle class work force.  The (parity) ratio of raw materials workers to the total national work force is currently 1 to 7.5 (circa 1994) and it increases (expands) very slowly as education and technology increase the efficiency of labor and production.

     NOTE...This expansion, if properly managed, allows the work force to accommodate each new generation of workers.

       NOTE...This ratio was only 1 to 2 in the year 1900 when a majority of Americans lived, worked and died on farms and ranches.  Industrialization expanded the ratio to a level of 1 to 5 by the year 1950. The ratio expanded as raw materials workers departed the land to perform tasks that required more and more machine knowledge.  As improved technology continued to release more labor to our cities, this parity ratio eventually expanded to approximately 1 to 7.5.  We refer to this ratio as the Parity Labor Ratio  

       NOTE...The need for adherence to this ratio is hidden from the masses while its manipulated by the most powerful people on Earth.  Adherence to the parity labor ratio is a prerequisite to achieving full employment at living wages.

Rule Four  
The ratio of total annual raw materials income (paid by the first buyers at the first points of sale) to total National Income must be the same as the labor ratio.  This is the Parity Ratio of Raw Materials Income to National Income. 

Rule Five
  The Government separates National Income into the five segments.  The "cost segments" include wages, salaries, supplements to wages and net interest 
The "income segments" which combine as the total profits of private enterprise include Farm and Non-Farm Proprietors Income, Corporate Profits, and Rental Income.        
Annual National Income must be created in a fixed ratio of two parts "cost" to one part "income". Stated another way, 66 2/3% of all National Income must be earned by the "cost segments" of wages, salaries, supplements to wages and net interest and 33 1/3% of all National Income must be earned by the "income segments" of Farm and Non-Farm Proprietors Income, Corporate Profits, and rental income.

Rule Six
Adherence to rules 1 through 5 yield a National Income "Multiplier" effect whereby one dollar of parity raw materials income generates $7.50 of "Earned" National Income. This multiplier will increase as technology expands the ratios. This is the only path toward the monetization of labor and production.  It is the only proven way to replace capital debt expansion with real economic expansion driven by the intelligent manipulation, conversion and utilization of raw materials by skilled labor.

Rule Seven
Adherence to rules 1 through 5 produces an annual level of national  "Gross Savings" equal to all raw materials income earned annually at the first point of sale. (Gross savings is defined by the Federal Government's Bureau Of Economic Analysis as a nation's gross annual private savings or, the sum of personal savings and gross business savings, after adding or subtracting government surpluses or deficits.

Rule Eight
Adherence to rules 1 through 5 also yield a "capital pool" sufficient to fund the next annual cycle of investment. The capital pool is defined as the annual sums of corporate profits, net interest income and rental income.  The pool is filled to levels which approximate gross savings or parity raw materials income.  The ratio of available funds in the capital pool to annual National Income must remain consistent with technology and expand with the other ratios.  Debt must be injected across the economy to permit the flow of goods and services at any time these ratios increase beyond their state of the arts limit. 

Rule Nine
A nation's total annual return on investment can be accurately calculated (regardless to adherence to the aforementioned rules) by subtracting total annual public and private debt expansion from the capital pool and expressing the net sum as a percentage of Domestic Wealth. 

Rule Ten
Gross annual raw materials income flows through a nation's economy in its several forms to become the natural floor under the profits of private enterprise. 

Rule Eleven
Total public and private debt is nothing more than the accumulated loss of National Income over time when state of the art ratios are consistently ignored.  These losses originate when raw materials are underpriced (below parity) at the first point of sale thus expanding the ratio beyond said limit. Capital debt expansion, subsidies and ever greater social services will always be necessary to maintain consumption and sustain employment when parity ratios are ignored.   

Rule Twelve
The "Profits of  Private Enterprise" earned during any calendar year will always approximate all parity raw materials income, (paid at the first point of sale) during the previous year.  

Rule Thirteen
Total checkable deposits, which are the cash and electronic ledger entry representations of the net profits described in rule twelve, (as calculated by the Federal Reserve) will always approximate raw materials income at parity paid at the first point of sale.

     NOTE...In "modern" debt driven capitalist economies, checkable deposits have come to approximate the value of the raw material plus the debt expansion that pushes raw materials through their stages of production and distribution.  This system of perpetually low raw materials prices continued for too long and finally saturated countries in debt.  This debt is non-sustainable, non-repayable and unnecessary. It causes these economies to become less efficient than they would be if they employed the strict monetization of raw materials at a parity value. 
The effect of this inefficiency has become obvious and it always leads to stagnant wages, high unemployment and perpetual cycles of recession and inflation.  Inflation is inevitable in a debt driven economy because the interest must be paid in addition to the product flowing through commerce.  Interest becomes the hidden cancer of a capitalist system because it constantly drains its host of energy and vitality by demanding service at all stages of the economic cycle.

      NOTE...Each time raw materials are underpriced (below parity) at the first point of sale, debt must be substituted to replace the nonexistent income or overall consumption decreases and unemployment results. This produces an artificial surplus of products and people. To offset this effect, the Federal Reserve encourages borrowing by lowering interest rates. This is like taking dope to cure an addiction.

     NOTE...When raw materials prices eventually rise to parity due to drought or world events, capitalist economies are forced to service the accumulated debt plus the higher and legitimate value of the next cycle of raw materials that enter trade. This brings growth to a halt.  The accumulated debt is impossible to repay because the goods and services associated with the debt were consumed long ago.  The economy has no alternative but to capitalize the debt and debase the value of the currency.  

Rule Fourteen
   There is no free lunch!
 
Conclusions
    Achieving economic "balance" and sustained full employment is impossible without adherence to these rules.  These rules are the essential elements to the creation of economic lodestars (stars that leads or guides with certainty, such as the North Star), in the expanding universe of progressive economies. Dire consequences always accrue to any society when the economy is altered in opposition to these natural parity ratios, because the gradual movement of these ratios is controlled by the expenditure of, and payment for, human and mechanical energy.  Therefore, they should only change in response to improvements to technology and refinements in the "State of the Art".
Our close examination of these natural ratios have explained in simple terms why debt cannot be repaid with more public or private debt expansion and why the so-called "profits" earned from capital debt expansion must eventually become more capitalized inflation and debt. 
America's refusal to acknowledge these basic rules of math while ignoring logical cause and effect have yielded a system so out of balance with itself and its goals that in one generation, Bill Gates accumulated more wealth than 100 million American citizens and we dare call this "progress"?

For the study of political economy, you need no special knowledge, no extensive library, no costly laboratory.  You do not need textbooks or teachers, if you will but think for yourselves!"  Henry George, Economist, speaking at the University of California.

Discovering
the physics within
an economic system
Updated January 12, 2013
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