After three years at U.C. Berkeley graduate school of economics I should have been given a PhD, in 1964, but the pro-Castro faculty made that an impossibility.
Let us begin. Capital is not factories, planes, buildings, or anything else physical. Capital is all accurate knowledge. After the War, Germany and Japan rebuilt and promptly returned to their former GDP levels. Simple knowledge of where everything went and how it worked was the capital.
Many things are called ‘capital.’ Like ‘market cap.’ But the words capital are meaningless; some capital can buy a cereal box full of cocaine and other capital can buy 100 car operating railroad. Money is the language of commerce.
I explained capital in 1964 in my PhD thesis sent to the American Economic Assoc. Journal and returned to me for a revision to 40 pages because the journal wouldn’t publish anything that was 60 pages long. I didn’t bother.
The Fed was important, for decades, in regulating the American money supply. That stopped sometime in the 1990’s when U.S.debt went from $4 trillion to $10 trillion while the global debt went from $50 trillion to $100 trillion. The global debt tripled over the next fifteen years.
The Fed diddling at the margins of American debt while the money sloshing around the world reached significantly large numbers meant the Fed became unimportant.
We have had three oil induced inflations. 1974, 1979, and 2021. Nothing to do with anything but the price of oil. When the price of oil rises dramatically which it did in 1974 because the Arab oil countries were punishing the U.S for the military actions of Israel, and in 19
79 because of the American war against Iran and in 2021 because senile President Biden attacked the American oil extraction industry by executive order, every core industry faced higher operational costs. Especially transportation industries. Higher costs, transmitted throughout the economy, is the definition of inflation.
America is the center of global commerce. It is gigantic. Every other country is forced to invest in America because it is so big and so productive. The American stock markets contain $60 trillion of public corporation capital. Nearly all of that is in the eighty five percent that is in the top 500 public corporations. The U.S. is 45 percent of the global financial market.
Only two countries in the world are truly and consistently productive: The U.S. and Israel. Nearly all technical and business invention comes from these two countries. The reasons are straight forward. Their cultures and societies reward innovation. New ideas are disruptive. In these two countries the government and the social elite are not able to discourage innovation.
There are three kinds of commerce. Trade, Clientry and Industry.
- Trade is the most common and the origin of most commerce. The trader buys products and marks up the price to cover the costs of his/her business with enough additional to pay operating costs and stay in
business. A flower shop or baker is an example of trade.
- Clientry is a business designed to cater to the customer for a lifetime. A lawyer, dentist, and a banker are examples of clientry.
- Industry is what Adam Smith recognized. It is a form of commerce that reduces market prices by the use of specialization and economies of scale. Companies that are industrial provide only a small part of employment but the majority of economic output.
- Businesses that have an owner but no employees plus those with less than ten employees comprise nearly all businesses in the United States, over 95% of all businesses. The remainder, 5%, those with 11 or more employees produce more than half the GDP of the country.
In recent years, the incredible dominance of American electronic technology in the global market has generated such a large inflow of wealth that the U.S. has had the longest period in history without a recession.