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Money, Trade and Commerce - THE LIFE BLOOD OF SOCIETY

The complete business site - M A R K E T S 

Negotium Business Article Archive

A society that puts equality...ahead of freedom will end up with neither equality nor freedom.

- Milton Friedman


The Merchant Class

Any discussion about economics must consider the following:

The creation of our economic systems is political. Our present banking system, the power given to those that create and control money, is a result of political decisions. Our present economic system is not a natural system: it is a system that was created to serve those that created it. The lifeline of our financial system is money, and in order to fully understand economics, we must first understand the nature of money, how it is created or destroyed, the effects that this process has on the economy and the benefits accruing to those that partake in this process.

What must be made clear, is that before an economist can provide an analysis of an economy, this person must first understand the financial system. Otherwise, all analysis becomes meaningless, because different financial systems affect the economy in different ways. Moreover, if we do not understand the basics of our financial system, then this leads us only into logical contradictions and errors. - From THE CLAIRE FOSS JOURNAL


Three concepts will be discussed:
1) The Velocity of Money
2) Profitable Margins are required for the 'Merchant Class' to exist
3) Corporations vs the 'Small Business' sector

This description sums up the limitations of classical economists:

The Classical economists, David Ricardo, Karl Marx and, to a lesser degree, John Stuart Mill disagreed with both the "pure" Quantity Theory of Hume and the real bills doctrine of Smith. They possessed what is known as a "commodity theory" or "metallic theory" of money. Money, in their view, was simply gold, silver and other precious metals. In this sense, the price of money was just like that of any other commodity: cost of production. Or, more explicitly, they regarded the long run value of money to be quite directly the costs of extracting from mines the precious metals that either constituted commodity money (coins) or the gold that underlay convertible paper money. Thus, fiat money, where notes are neither a commodity nor convertible to it, remain outside the scope of their theory. For instance:

"Gold and silver, like all other commodities, are valuable only in proportion to the quantity of labour necessary to produce them and bring them to market...The quantity of money that can be employed in a country must be depend on its value...Though [paper money] has no intrinsic value, yet, by limiting its quantity, its value in exchange is as great as an equal denomination of coin, or of bullion in that coin."

(D.Ricardo, Principles of Political Economy and Taxation, 1817: p.238)


Since we live under the Federal Reserve System, with its fractional reserve methods; one has to look to fiat currency theory to explain a modern and, now; cash less society.

Velocity of money is the speed at which money travels over a given period of time. For instance, a dollar spent on car insurance has zero velocity because it never returns to the investor. An IRA may have a velocity as high as 1.6 due to the principal remaining intact, interest earnings and tax recapture. A tax shelter may have velocity as high as 2 or 3, due to recovery of principal, growth and tax recapture.

The increase in the velocity of money creates a multiplier effect because the new money generated will also create new money.

The velocity of money concept stresses the point that money must keep moving rather than staying idle, for dollars that are idle are more vulnerable to the eroding factors of inflation, taxation and planned obsolescence, high interest costs and poor investments. http://www.sonic.net/~sbw/economics.html

The following is from the Foss Journal:

When the amount of money is increased to purchase existing assets, if the velocity of money decreases (people decide to hold on to the money from the sale of their asset), then GDP will remain constant. However, if people decide to spend the money from the sale of assets (velocity of money remains constant), then GDP will increase. It is important to reflect on factors that effect the velocity of money and the effect on GDP. When earnings are spent to purchase existing assets, and not expenditures, then GDP will fall which is reflected in a decline in the velocity of money. When people receive money from the sale of assets, if they spend this money on expenditures, then GDP will increase which is reflected in an increase in the velocity of money. If people receiving money from the sale of assets decide also to purchase assets with this money, then GDP is unaffected.

The relationship of expectation to spending becomes the key to consumer spending. If I have confidence that if I spend the disposable funds in my account, I can easily replace them from the profits of my business or wages; will be more likely to spend. However, if I fear that my business in not currently profitable or that I may be unemployed soon; I will cease excessive spending. The next factor is the multiplier effect. When I am spending from my neighbor, and he is buying from his supplier, and the supplier is purchasing from the manufacturer; all will profit. The quicker the pace of this process, the greater the 'new wealth' will be created.

But if the economic prospects are bleak, the cycle will slow or cease. This is a simple theory, but is one of the most powerful engines of wealth creation that has ever existed. The role of debt can be viewed in this manner:

If we consider debt that is created to purchase existing assets, the creation of this debt is likely to partially increase GDP and partially increase asset prices, though the creation of debt is likely to have a much smaller impact on GDP than debt created to fund expenditures. Repayment of this debt can come from the sale of assets purchased, or by reducing expenditures in the economy. Should none of the existing assets be sold to repay debt, then all of the payments of principle and interest must be made by reducing expenditures, which will reduce GDP, by the amount of principle and interest payments multiplied by the velocity of money.

In this way, the creation of a credit asset bubble can have a very negative effect on GDP. In this case, ever increasing amounts of debt will cause a substantial increase in asset prices. This propels prices of these assets far above the real value and we generally see the interest costs on these loans far exceed investment returns. Once credit expansion stops, asset prices will fall to a fair value, which will leave loan balances far above asset prices. New loans cannot be repaid at all from the sale of assets, and can only be repaid from a reduction of expenditures, which will reduce GDP, by the amount of payments of principles and interest. - FOSS Journal

Thus, what we have is a mechanism that increases the growth of prosperity through the commerce of active businessmen and consumers. As one leaves their money earning years, their purchases are scrutinize much more closely and are made less frequently. The reason is simple. They are no longer turning over their income as rapidly as they once did.

The next section will be more involved, because it will deal with the nature of profit margins, and why they are so necessary for a business sector to survive and prosper.



Every era has a currency that buys souls. In some the currency is pride, in others it is hope, in still others it is a holy cause. There are of course times when hard cash will buy souls, and the remarkable thing is that such times are marked by civility, tolerance, and the smooth working of everyday life.

- Eric Hoffer


Profit is Good !


Understanding Business is not rocket science. Profit is the means by which all commerce functions upon. But what are the factors that go into a business endeavor? Let's list the most important ones: Capital, Product a Service or Idea, Market to Sell and Access, Equipment and Physical Facilities, Labor, General Administration and Professional Support. When a person has the talent, ability and dedication to put all these factor together, they could be in a position to have a successful business. But what else is missing? PROFIT !!! Countless businesses had the above organization in place but went bankrupt through no fault of the manager. Money is the life blood of commerce, but profit is the goal that every business must attain to stay in business. Just turning over money in an endless cycle of paying bills and obligations, will guarantee failure at some point. But what exactly is Profit?

Margin mark up over all the components of real costs is a good starting definition. The higher the margin mark up, the greater the potential for profit. The tighter the mark up, the greater the pressure on profit potential. It is my contention that high margins in an efficient and well managed business are desirable, not only for the owner; but for the general society, as well. Why? Simply because a business will have the opportunity to remain in business, with all the benefits that it produces for its customers, suppliers, employees, raw material manufactures, bankers, professional advisers and even the government, through taxes. If the current objective of selling at the lowest possible price is the standard, most businesses will eventually close. Consolidation among the very few remaining operations will result in less creative innovation and competition. Competition should be viewed not based upon price, but on improvements in the products or greater service levels. Society benefits from superior quality, range of options and improvements. But Society derives another significant advantage. It allows a greater number of its citizens to own, start and dream that they can have and run, with reasonable expectation, their own successful business. The fruits of this system allows for many of the same benefits that home ownership promotes.

Couple this vast number of small individually owned enterprises with the velocity of money turns, and you will get a business system that breed confidence and the flow of newly created wealth to the greatest number of people who share in this process. By what means is this wealth created? The hard work of all involved is certainly one. But that work reality happens in most ventures that fail. How about the capital for the operation? Well, most small businesses seldom has access to the funds they need for daily operation, let alone for growth and expansion. Then how about cheaper raw ingredients, labor and overhead costs or even less employees? Wrong direction for the answer. Surely, lower taxes? RIGHT, fat chance of that.

'Profits' are the bases for wealth creation, and higher profit margins is the means to judge its desirable level.



Capitalists are motivated not chiefly by the desire to consume wealth or indulge their appetites, but by the freedom and power to consummate their entrepreneurial ideas.

- George Gilder


Corporations Serve Their Own Interests


Corporations are based upon a philosophy of organization that is quite separate from ownership. Corporation's goal is not 'Profit'. 'Profit' is but a means to its ultimate goal. Most Corporations seldom earn 'Profit' in the traditional methods of conducting business. Mergers and Acquisitions are the driving force in the Corporate Culture to avoid negative balance sheets. Creative bookkeeping is the true growth industry among Corporations. Access to new capital allows for the day of reckoning to be postponed. Whatever 'Profit' that is earned is based upon monopoly dominance of a given market by sheet brute force. Therefore, the ultimate objective for 'Corps' is: 'CONTROL'.

Managers of Corporations seldom are the owners of the business. Stock holders retain ownership. But managers strive to influence, if not, obtain the effective voting rights of shareholders. Stock holders seldom exert their correct and rightful power of their ownership. Managers wheel decision making and policy direction, while stock holders retain the risk of poor decisions. So what does the Corporation want to control? The reason for its existence is to set prices, determined what products or services are sold, who is allowed to do business in an industry, and costs for labor, raw materials and other expenses. These are not separate reasons. All are part of the goal to 'Control' what the market buys and sells.

Contract this system of business organization with 'Small Business'. Most innovation and discovery is based upon concepts and ideas generated from small creative ventures. That is the reason that 'Corporations' are so eager to purchase these small firms. The corporate manager is well aware that their own organization seldom possess equal motivation among their employees to develop an idea from inception. That is why talent is sought for corporate recruitment that has demonstrated their ability to master the development process, learned from 'Small Business' experiences. The 'Corps' possess the ability to place a product into the marketplace with easy, by their dominance; while the 'Small Business' struggles to gain entry. 'Corperations' influence government policy and shape legislation through their influence of money (bribes) and lobbyists. 'Small Business' seldom is able to compete in this arena with the limousine crowd.

'Corporations' view labor as an unfortunate expense and irritation. That is the main reason that industry has relocated offshore. 'Small Business' employs real live humans beings that are part of their own communities. While, 'Corporations' seek to lower costs through smaller numbers of employees. Examples like this can go on and on. The point is that the corporate manager operates on his perceived personal best interest, at the expense of all other interests. This results in compensation that is higher than excessive, golden parachutes, and perks of privilege that even the real owners don't have.

Society pays the price for this manipulated and distortion of commerce. Prices may seem to be cheap, but the social costs of this system extracts a hefty price upon all consumers. People have fewer choices to earn a living. They seldom have control over their personal circumstances with continued transfers and new corporate employment. Society becomes dependent upon foreign imports to sustain critical needs. Balance of payments deficit sore with purchasing power being diminished. The 'serf' mentality is the final result of the 'Corporation' attainment of Control. The consumer is left with few choices and must buy from and through the corporate source. The power of bureaucracy grows along side of corporate dominance. The end result is State/Corporate control of the entire society. 'Small Business' defuses the concentration of economic and political power from elite's and spreads it throughout the Community. Choices expand for each consumer, with their ability to master their own personal economic condition.

The argument that equity prices reflect individual participation within the 'Corporate' system is false. PE ratios, in the current stock boom, are totally unsustainable. They boarder on the lunacy and are nothing but a temporary manipulation of a short term bubble. Paper profit can evaporate in an instant, while solid assets of a continuous 'Small Business' has true intrinsic value. The pride of ownership of a 'Small Business' is one of the best motivations in the world. The uncertainty of corporate status is one of the biggest contributors of social upheaval.

For those who defend the 'Corporations', are really promoting 'CONTROL' over people. And as we both know, those types aspire only to become the corporate manager and condemn the 'Small Business' entrepreneur.



American prosperity and American free enterprise are both highly unusual in the world, and we should not overlook the possibility that the two are connected.

- Thomas Sowell



Deflation and rising prices? by Jude Wanniski

Competitive not comparative advantage creates wealth by Shafiq Ahmed Siddiqi

The Nature of Money by John Kutyn

Money versus Wealth by David C. Korten

Money as a Social Disease by David C. Korten


Creating Entrepreneur Through Technological Innovation by M. Masykur WIRATMO & Fahmi WIBAWA

Economic End Game by Wolf DeVoon

The financial bubble: prosperity for some, tragedy for all by John Hoefle

Stage Three in Education Has Arrived by Gary North

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Essays by SARTRE

Wall Street, Money and the Merchant Class

The Harsh Economic Costs of 911

Who Sank the Economy?

The Color of Money

Capitalist Owners of the Corporate Economy

The Euro Makes All Things Possible!

Corporate Business has little to do with commerce

The Wal-Mart we all know and love

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Interest Rates, Risk and Rulers

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Tariffs For Survival Or Profits For Multinationals

I Spy and Free Trade

Balance of Payments Deficits - Caused by the Real Voodoo Economics

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Tax Cut Calculator


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World's View of Multinationals

Even from the apologists for the NGO's, you get the picture that the individual has value, ONLY as a consumer. Is this progress? Does this unbridled destruction of American values and traditional culture preserves our Nation? It matters little who the faceless managers are of these 'oligarchies' of business, the results are all the same.

During the sixties there was probable the best television program of all times. It was the 'Prisoner', with Patrick McGoohan. The reality of a world that has embraced Social Darwinism and Situation Ethics has produced a world view that diminishes the value of individual life. The struggle between the supremacy and sovereignty of the individual (who's authority comes from GOD) and the power and ability to control him by elite's, companies and governments; is at the heart of this debate.

When Klinton, who I describe as the equivalent of John the Baptist for the AntiChrist, preaches to his fellow demons in evil at Davos, he is inviting them to make the case that serfdom is but a small price, for the masses to pay, to exist in a pleasant village of material allusions. This technological race to 'so called' prosperity is allowing for the affective means to destroy the hopes and dreams of any Freeman who lives his moral life with integrity and honor. The WTO and Free Trade is the stick that will beat any man of conviction into submission.

I am no Greenie in ANY respect. But recently I read Ted K's Unibomber's Manifesto.

His description of the technological excesses and the pattern of destruction that this society has created is compelling in its conclusion that man is destroying himself. His solutions makes Jessie Jackson look like a saint. The point is this: The notion that the meaning of prosperity IS based upon material and monetary wealth is a false delusion.

I stand with Number 6 (the prisoner), not Ted. But I recognize that the means to enslave me, and you; is the global monster that controls trade and commerce in its present configuration. I hope that I may be able to persuade you that the true path to individual Freedom and balanced wealth, is through a traditional 'America First' policy that respects the dignity of each person, while protecting the interests and Judeo-Christian culture of the American citizens.




...the only means to well-being is to increase the quantity of products. This is what business aims at.

- Ludwig von Mises

History of Economic Thought: The Austrian School by Professor Peter J. Boettke

Ludwig von Mises Institute

What the Trade Deficit Portends by Hans Sennholz


In the history of capitalism's long expansionary cycles, it is finance capital that usually rules in the final stage, displacing the inventors and industrialists who launched the era, eclipsing the power of governments to manage the course of economic events. ...Since returns on capital are rising faster than the productive output that must pay them, the process imposes greater and greater burdens on commerce and societies.

William Greider, One World Ready or Not, p. 227.


Anarcho-Capitalism: An Annotated Bibliography by Hans-Hermann Hoppe

Lew Rockwell's Outlook

Transformation of American Opinion

Lights Out For Civilization?

In Praise of Failure

National Treasures

In Defense of Rothbard

Business Cycle Primer


Property rights are not the rights of property; they are the rights of humans with regard to property. They are a particular kind of human right. 
David Friedman



The economics of Ricardo.

Money and Morality by Joseph Sobran

The U.S. Monetary System is a Ponzi Debt Scheme by Jim Thomas


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National Debt Clock

Federal Income Tax Truth

Would you believe me if I told you there was no federal tax on income? Technically, there is none! Taxing your income would be a violation of all current laws and would raise serious constitutional questions.

The federal income tax is based upon specific taxable sources and is measured by the net income from the specific taxable source; the net income being what is left after all allowable deductions from the gross income. The Code of Federal Regulations defines the taxable sources for purposes of the income tax and they are the only official listing of taxable sources. What you may believe to be taxable sources from reading tax bulletins or the Internal Revenue Code would most likely be in error.

When you review the Code of Federal Regulations based upon tax law, you will likely find that your income is not taxable because it is from an excluded source of income. Thus, it is not a taxable source of income. The source is the key and not how many dollars you earned.

Before it is taxable, income must be derived from a listed taxable source. If your income is not derived from a listed taxable source, you have no taxable income. When you review the taxable sources for tax purposes, you will find that the only source is for foreign income. No taxable sources are listed for U.S. citizens in the 50 states because they are excluded from taxation.

Laws covering taxable sources have not essentially changed since the Income Tax Act was passed in 1913. One should note that citizens not protected by the Constitution are not excluded from taxation because they are outside the 50 states. When Alaska and Hawaii came into the union of states, the tax regulations had to be changed accordingly. Of course, anyone can volunteer to pay income taxes and it will be recorded as a gift tax as specified in the United States Code under Duties of the Secretary.

Have you ever talked to someone that paid income taxes prior to World War II? I'll bet that you have not. Check with some older folks who are still around. The 1921 Code Book was very clear on who was taxed and who was not. The tax laws have not changed but deception continues to enlarge.

The 16th Amendment of the United States Constitution has little to do with our current income tax system. It has no enacting clause and does not modify any taxing clauses of the basic Constitution. It does assure that the income tax remains in the category of an indirect excise tax but according to the Supreme Court, it creates no new taxes. It does state that Income Taxes must be derived from any source. They forgot to mention Taxable source. You must understand that the taxing clauses of the Constitution are very restrictive and must be in harmony with the Bill of Rights. It would be the same without the amendment. The source is determined by Congress, within their limited powers, and not the amendment itself. If Congress could tax every source, then there would be no need to deceive you through deceptive regulations. Again, the source is the key and they are very limited.


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If you wish to prosper, let your customer prosper.

When people have learned this lesson, everyone will seek his individual welfare in the general welfare. Then jealousies between man and man, city and city, province and province, nation and nation, will no longer trouble the world.

- Frederic Bastiat

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There are two methods, or means, and only two, whereby man's needs and desires can be satisfied. One is the production and exchange of wealth; this is the economic means. The other is the uncompensated appropriation of wealth produced by others; this is the political means.

- Albert Jay Nock


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