Back Your Money with Cleverness

Money and goods are not the same thing. They are opposite things. Confusion in economic is caused by the failure to recognize this fact. Goods are wealth you possess; money is a CLAIM ON WEALTH that you do not possess. Goods are an asset; money is a debt. If money is to be considered as wealth, then think of it as the negative of wealth, or anti-wealth.

Capitalism is the pursuit of profit in a price system. Its first incarnation in the West (after feudalism) was commercial capitalism. Merchants conveyed goods from one place to another where they could sell the goods for a price that covered the original cost, all costs of transportation at the merchants' expense, and a PROFIT. Originally this increased the amount of wealth in the world by encouraging specialization in agriculture and crafts, which increased skills and output, and added new commodities to the market.

Eventually supply and demand caught up to the merchants in the form of rising prices (costs) at the source and falling prices at the destination (profits). This consequence of this was institutional entropy which was then compensated for by a restrictive policy called mercantilism. This policy is also called restraint of trade. It kept prices high by artificial scarcity.

This means that what used to motivate merchants (profit) to increase general prosperity by increasing exchange and productivity was transformed into a restriction on both trade and productivity because profit had become an end in itself instead of an accessory means to the system as a whole.

Restriction is the opposite of expansion.

Money and goods always behave in opposite ways. First of all, they move in opposite directions. In addition, if the value of one goes up, the value of the other goes down.

After the epochal crisis led to such reactive strife as class conflicts and the Second Hundred Years' War culminating with Napoleon, there were two more kinds of capitalism, industrial and financial.

At the end of industrial capitalism, economists identified restrictive practices in the form of monopoly capitalism—large industrial units, cartels, and trade associations that reduced competition and exploited the majority. At the end of financial capitalism, the restrictive practices were centralized financial control—investment banks and central banks acting in concert, creating a quasi-feudal system of global financial dominance through secret agreements and manipulation of credit, currency, and state policy. Industry arose from crafts and manufacturing (power production of goods). Finance arose from the focus of attention on the movement of money instead of on the movement of goods.

Breaking down the macrohistorical or cliodynamic framework:

Systems and structural oriented historians described capitalism as evolving through stages, each ending with restrictive practices that compensated for declining profitability:

1. Industrial Capitalism → Monopoly Capitalism

Problem: Industrial capitalism generated massive demand for fixed capital (railroads, steel mills, shipyards).

Restrictive Practice:

Emergence of cartels, trusts, and trade associations.

Collusion among industrial giants to reduce competition and stabilize profits.

Exploitation of workers and consumers through price-fixing and market control.

Outcome: Industrial units became so large and interlinked that they could finance expansion internally, weakening financial oversight and leading to monopoly capitalism.

2. Financial Capitalism → Global Financial Control

Problem: Financing heavy industry required capital beyond individual fortunes, leading to investment banks and limited-liability corporations.

Restrictive Practice:

Central banks and financial elites coordinated secretly to dominate economies.

Manipulation of treasury loans, foreign exchanges, and credit availability.

Political influence through economic rewards, creating a feudalist-style system of control.

Outcome: Financial capitalism restricted competition by integrating industries into larger units under financial control, eventually producing crises and struggles for state power.

Systems history's insight is that each capitalist stage ends by restricting competition to preserve profits:

Mercantilism restricted trade.

Monopoly capitalism restricted industrial competition.

Financial capitalism restricted economic sovereignty through banking control.

This pattern dramatizes capitalism’s tendency to evolve into institutionalized dominance, where instrumentalities of growth (trade, industry, finance) transform into institutions serving their own preservation rather than broader social needs.

History being history, there is an overlap. In the vicinity of the West's point of origin, monopoly capitalism was farther advanced. On the outer edge, especially in the former colonies → the United States, finance took root early and stayed late. In Germany, cartels were legal. In the U.S., there were attempts at trust-busting.

Germany was surrounded by international finance. Reparations were on its terms. In his conversational and sometimes chatty diary, Goering described how Hitler, receiving less support from the Wehrmacht, sought support from "die Reaktion", meaning cartelized industry. This set the stage for the Second World War.

After the war, it was the Marshall Plan for Europe and the New Deal at home. On Keynesian lines the New Deal established a pluralistic economy.

The pluralistic economy refers to a system in which no single group—whether merchants, industrialists, financiers, or the state—dominated economic life. Instead, multiple centers of power coexisted and balanced one another, creating a more open, flexible, and socially responsive economy. This mosaic of power contrasted with earlier stages of capitalism, where restrictive practices concentrated power in monopolies or financial elites. Instead, these powers were checked.

It was designed to serve broad social needs, not just the interests of elites. This meant wages, working conditions, and public welfare were considered alongside profits.

The pluralistic economy was not static—it constantly adjusted as new technologies, social movements, and political institutions emerged.

Economic decisions were made by a variety of actors (businesses, unions, governments, consumers), rather than concentrated in a single oligarchy.

Economics cannot be separated from cultural and political values. A pluralistic economy integrates humanitarian, scientific, and democratic ideals into its functioning. Pluralism is a way for Western civilization to avoid the fate of other civilizations that collapsed under rigid monopolistic systems.

This hopeful “pluralistic economy” didn’t endure, and instead neoliberalism rose with its hallmark restrictive practice: austerity.

Crisis of the 1970s:

The post–World War II “Golden Age” (1945–1973) was marked by Keynesian policies, welfare states, and relatively pluralistic economies.

By the 1970s, stagflation (simultaneous inflation and unemployment), oil shocks, and declining profitability undermined this system.

Elites sought new ways to restore profitability and discipline labor.

Rise of Neoliberal Ideology:

Thinkers like Friedrich Hayek and Milton Friedman argued that state intervention distorted markets.

Their ideas gained traction among policymakers facing crisis, especially in the U.K. (Thatcher) and U.S. (Reagan).

Neoliberalism promised to “free” markets but in practice concentrated power in finance and global corporations.

Financial Globalization:

Deregulation of banking and capital flows in the 1980s–1990s shifted power decisively toward financial elites.

This mirrored the warning about financial capitalism’s restrictive practices, but now amplified globally.

States became dependent on international credit markets, giving financiers leverage over public policy.

Austerity as Restrictive Practice:

Definition: Austerity means cutting public spending, reducing welfare, and prioritizing balanced budgets over social investment.

Mechanism:

Imposed by international institutions (IMF, World Bank, EU) as conditions for loans.

Adopted domestically to reassure financial markets and maintain currency stability.

Effect:

Restricts social spending, weakens labor protections, and shifts resources upward.

Functions as the neoliberal equivalent of mercantilist tariffs or monopoly cartels: a restrictive practice to preserve elite profitability.

Why It Happened:

Collapse of Keynesian pluralism: Governments could no longer sustain welfare states under global financial pressures.

Financial dominance: Capital mobility gave financiers veto power over state policy.

Political realignment: Parties across the spectrum embraced neoliberal “discipline” as inevitable.

Cultural framing: Austerity was sold as “responsibility” and “living within our means,” masking its role as a restrictive practice.

Corporate mercantilism, in which corporations relocating overseas could transport goods within their extraterritorial spheres of influence on favorable terms, was only the beginning. Globalization has telescoped the restrictive practices of previous stages into a single coordinated system.

The End of Bretton Woods:

By the late 1960s, the U.S. dollar was overvalued due to Vietnam War spending, foreign aid, and inflation.

Gold reserves were insufficient to back the global supply of dollars at $35/oz.

Speculators began selling dollars, anticipating devaluation.

Nixon responded with the New Economic Policy (August 15, 1971): wage and price controls, import surcharges, and suspension of gold convertibility.

Economist Michael Boretsky, a U.S. Treasury official in the late 1960s and early 1970s, proposed alternative approaches during the crisis that culminated in Nixon’s suspension of dollar–gold convertibility in 1971. Boretsky argued for greater international monetary cooperation and reform rather than unilateral U.S. action. His ideas included moving toward a more flexible exchange rate system and strengthening international institutions to manage balance-of-payments pressures. Nixon and his advisers, however, rejected these cooperative proposals in favor of the unilateral “Nixon Shock.”

Boretsky’s Pluralism-Preserving Recommendation:

Michael Boretsky was a senior economist at the U.S. Treasury and later at the U.S. Trade Representative’s office.

He was known for his critical stance on protectionism and unilateralism.

During the Bretton Woods crisis, Boretsky suggested that instead of closing the gold window outright, the U.S. should pursue:

Multilateral negotiations to realign currencies.

Greater flexibility in exchange rates (a precursor to floating rates).

Strengthening international monetary institutions to stabilize trade and payments.

Nixon's Reaktion:

Nixon’s political calculus favored dramatic unilateral action to reassure domestic audiences.

Treasury Secretary John Connally famously declared: “The dollar is our currency, but your problem.”

Boretsky’s cooperative vision was sidelined in favor of short-term political gain.

By 1973, floating exchange rates had emerged anyway — ironically closer to Boretsky’s proposals, but without the cooperative framework he envisioned.

Boretsky was a voice for pluralistic, cooperative reform in the monetary system, but his modest Macauleyan reform proposal was drowned out by Nixon’s unilateral “shock.” This could be dramatized as the Unheard Counsel and the Pivot to Empire — a motif of wisdom offered but ignored, foreshadowing the eventual drift into neoliberal austerity.

But a more important opportunity was missed, one that could have inaugurated a fourth stage of increasing returns.

Michael Boretsky argued for an activist policy of investment in new technology, seeing it as one of America’s enduring strengths. In the early 1970s, as the Bretton Woods system was collapsing, Boretsky emphasized that the U.S. should not rely solely on monetary maneuvers or austerity but should actively channel resources into technological innovation to maintain competitiveness.

Boretsky’s Dirigiste View on Technology:

Decline in innovation: Boretsky warned that the rate of technological innovation was slowing and that U.S. technology was being disseminated abroad in “naked form” (without protective industrial policy), weakening America’s advantage.

Historical strength: He traced how U.S. economic power had historically been built on technological leadership — from Hamiltonian industrialization through WWII — and argued that this foundation was at risk if not renewed.

Policy activism: Boretsky recommended government-led investment in new technologies, not just leaving it to private markets. He believed that deliberate policy could sustain America’s edge in aerospace, computing, and advanced manufacturing.

Comparative studies: He compared U.S. and Soviet approaches, noting that the USSR’s centralized investment in science and technology was formidable, and the U.S. needed its own activist strategy to remain competitive.

Why This Was Significant - Alternative to Austerity: 

Boretsky’s proposals were a counterpoint to the restrictive practices of neoliberalism (like austerity). Instead of cutting back, he wanted expansionary investment in innovation.

Missed opportunity: His ideas were largely sidelined in the Nixon era, which prioritized monetary shocks and short-term fixes. By the 1980s, neoliberalism entrenched austerity and deregulation, rather than activist technology policy.

Foreshadowing: Ironically, later U.S. policy (DARPA, semiconductor initiatives, internet development) did follow Boretsky’s activist logic — but piecemeal, not as a comprehensive national strategy.

In short: Boretsky recommended an activist investment policy in technology, seeing it as America’s comparative strength. His proposals were overshadowed by Nixon’s unilateral monetary shock, but they remain a fascinating “unheard counsel” — a vision of renewal through innovation rather than restriction.