The Collapse is Coming
It happens almost just once in a lifetime, so the possibilities to experience are few. It will be even worse this time. The collapse is caused fundamentally by the human characteristics, when the morales and ethics disappear from the top to bottom.
Professor L. v. Birck wrote 1922:
“We live in a world, where the ‘machine of state’ that really should lean us selves against, is weakened in its foundation. It is hated by the rich an just tolerated by the poor. In Germany and Austria the holders of the economic power of society the organized capital that is considered to destroy the parliamentarian so-called democracy and the state influenced by the people to take the power itself. In United States is the conflict between the political and the economic postponed for the time being, as the political power by the latest presidential election has fallen in to the hand of an oligarchy (a rule of the few). Everywhere you find the sign of the powerless stat, and the possibility to establish the power outside the state and without oligarchy seems far away for the moment.” (quotation from ‘Denmark and World Crisis’)
Professor L. V. Birck also wrote a lifetime ago:
“The middle classes was short-sighted, it would not save the system they were place in themselves and get rid of all these amounts of paper that threatened the economic system that support the middle classes.
Does history repeat in some version when you are not allowd to learn from it?
The same happening today in much wilder speed
How inflation and speculation become possible, and how they are accelerated:
The private limited company was not really widespread until the 1800s. Also the bank houses of the Absolute Monarchy (which ruled in most states) were businesses owned by one man or by partners. The private limited companies are introduced en mass in the 1800s. Thereby you have to distinguish between physical and juridical persons, and at the same time distinguish between the responsibility of a physical person and a juridical subject. It was not my task to analyze the laws of private limited companies in different countries, but to show how the clear advantages of the private limited company turn to disaster for the society under the industrialism and the so-called democracies from the mid 1800s. All laws concerning the private limited company in the different countries are partly different, but a lot of the substance, of the rights and the responsibilities are rather common. Definitely common to such a degree that a rough outline will be described here:
The theory or principles of the private limited company:
A juridical subject with its characteristics and rights. The private limited company gets a private life that has to be protected. Here the deciding is its position as owner of a business, its protection, and its free access to profit. The company owns some real goods, factories, land and products. The share holders are directly related to those goods, because they look upon themselves as members of a co-operative society, and because the business of the company was not bigger or more distant than they were able to keep the information up to date. The stocks and shares and share certificates were pieces of evidence for a certain share of the real goods of which revenue and profit were made. The participants of the circle of share-holders share interest of certain common aims. That is the reason why they join their efforts, and because each of the share-holder is not economic strong enough. They appoint some participants – the biggest share-holders – to form a board of directors that appoints a director/a president, sometimes among the members of board of directors. In this way the board becomes some kind of a deputy for the shareholders; the board has some duties to the shareholders. It is not without some functions, but its whole existence is caused by the private company. The shareholders are in a way a kind of managers who are acting via delegation, but they feel and certainly have a responsibility, even outside economics.
The interest of the shareholders are certainly not profit due to appreciation, and he even feels some kind of moral responsibility that his goods must work in a honest pro-duction, not even the profit of the year is of his primery interest. The share-holders’ relation to the company are lasting, they do not sell the shares, the price of the share is just of interest in connection with inheritance or if misfortunes forces him to sell, and share is often solid fixed for life. The legislation concerning the private limited company was introduced several decades after the private limited company had become wide-spread, and describes the private limited company just as I did here. The task for the legislation then is to regulate the relations between the share-holders, to protect the minority and secure that the capital of share-holders is present considering the credi- tors. Gradually a breach of confidence from the board of directors from the management appears, and legislation then set up some common rules on documents of general meeting, on the authority of the company, and on some duties of the board, often expressed very vague.
The reality of the private limited company:
Reality does not correspond to this idyll. Life has denied the thought that the private limited companies are just another kind of tradesmen. It has become a social organi-zation, created for the advancement of some productive tasks. It is like a municipality, it has a long duration, longer than the life of an individual, independent of the share-holders, the board of directors, the management, the labour. It is an expression of a wanted co-operation. It is something in itself, and it gets itself means, management and labour. The most obvious differences between the municipality and the private limited company is the way the organization is managed, its protected acces to profit, and in the advantages of whom it is working. The tasks are often different, but they don’t have to be. The company is not working primary to satisfy neither the shareholders’ need of profit nor the need of the board of directors to get higher salaries.
A company does not have a private life or soul, nobody that can go to prison and no reputation that can be sullied. In principle it is irresponsible and amoral, because it is just an idea when all is said and done. The tangible is its capital – that is limited and divided – but have to be present.
The share-holder has stopped being a manager, the intense connection between him and the company and his pointing out of his friends and good connections to the board of director has come to and end. He gives nothing to the company but the amount of capital represented by the share. Often he has not bought the share by subscription but from another share-holder. He has been reduced to be a lender, he is almost on the same footing as the owner of a bond.
This is underlined by the divided shares in different categories, preference-shares with cumulative interest, and ordinary shares with varying interest, and we have the share-bond, and the preference-bond which is a transition to bonds. We also have the deferred sharethat does not yield profit from the moment it is issued. Some improvements have to take place, for example in the organization of sales or in the degree of monopol before profit is received. In 1926 France and Belgium consolidated the loose debt in form of state-bonds that supplemented the fixed interest with a share in the profit from state-railroads and state-monopolies. The company’s capital originated from loans, and in this way the primary difference between the share and bond disappeared.
The share is a borrow evidence with a varying interest and second-rate security and second-rate legal position, while the bond has a fixed interest or yield, but first-rate security and first-class legal position. Often the bond-capital represent the real values. The preference-shares often represent the most likely profit-possibility and the ordinary share the hopes. By this the share has stopped being a real evidence of some shares in certain real goods. It has become a letter of right to varying profit, which value has to be dependent of the amount of profit, its duration and security compared with the general rate of interest. In this way the varying price of the share is getting the primary interest, and speculations in the changing price is becoming the deciding foundation for the owner.
And remember that the right to vote at the general meeting has also been split-up following the splitting-up of the capital. The share has then been detached from its basic, the real goods of fortune that produces and at the same time (but in reality pretty independent of this) also yields profit. It dismantles further, and the “hot air-process” follows.
You will understand that the share-holder to a high degree has been separated from the business, from where he gets his profit. The example from the French railroads was just an illustration. There are numerous ways.
The worst happens when the public creates private limited companies or join those, and steal the majority with new-printed notes. Notice, some convincing justifications have always been carefully chosen in advance.
Anyway the holder of the ordinary shares will have difficulties to judge anything, and as a difference of a few percents in the company can lead to a doubling of the profit for the ordinary share-holder or totally disappear, and as the board of directors and the management know the total profit long before the share-holders, the last mentioned has actually been separated from the company.
But when the company – inspired by all the new capital as we shall explain below – that has to make an effort to yield interest, to make things effective (or monopolize) make business-fusions vertically and horizontally, then the trust (and the public control or lack of the same) has been really introduced to control what will happens then? Now the share-holder is just a lender, whos position is unbelievable weak.
The share has now character of the paper of gambling. The share-holder cannot monitor the distant company that really produces: “I, who own a share in a London finance-company that owns shares in South American diamond-trusts that owns shares in individual mines” has no means to know anything of the production and prospects. I have to buy after haven listen to rumours, and I sell I panic. I have no human interest together with real producing units in the company. Everything is unknown. You listen in City that they expect a certain profit next year, I have no interest in honest work anymore. The share has become a lottery ticket.
But the share is not even owned by somebody. Through margin-payments you can “own” a share by paying one tenth of the price, perhaps less. The stockbroker or lombarding bank is in reality the owner. What is turned over is just the one tenth I paid. In this way the interest in the business is reduced further and my interest in the price of the share overwhelming strong. The trade-off between the interest, price-differences and the lending interest rate in the bank is what concerns me now.
The share-holder has stopped being a share-holder in the original sense. He has nothing to do in production. The non-speculating holder of share certificates, who owns and has paid his share entirely and has the share for years, has gone.
If you look at the administration of the company, you find share-holders at the general meeting who are entirely unprepared, and know nothing. The accounts are at best opaque, and often uncorrect. The share-holders are simpletons as lambs and are under normal conditions forced to be meek as such, because they know that critics of the management of company are going to press the price on their own shares. The share-holders therefore are incompetent to give their votes with any sound reason. But most of the votes given at the general meeting are not those of the non-speculators. The shares have been used to borrow money, and the right to vote has been transferred to the bank, or a group of finances by means borrowed in a bank which take possession of the majority of shares by the famous ten percent payment, or the board of directors take the power by buying the majority of shares in the days before the general meeting. The board of directors whos interests are not those of the company, and its actions are dictated by objectives that do not concern the running of the company and a reasonable management. The management is not a crowd of non-speculating representatives of shareholders. It has been elected by a group of power that certainly do not own the capital, but it has been able to pay just the tiny bit of the price of shares in majority. Often the financing bank – that has financed the majority – points out the management of company. Often the capital is simply owned by savers in the financing bank, without they know it and can have their legal right. The group of finances is certainly not the old type of share-holders and does certainly not represent those. They are professionals with means not owned by themselves, they act as irrelevant self-licenced masters of industry and are possessors of the community’s capital. The management that is not dependent of the board of directors leads to the fact that the management cannot act in the interests of the company in the long run. It has taken what the bank or financing group wanted, and seldom it is in the interest of the company.
Might it be prevented better in the future after the war: http://www.lilliput-information.com/intmo.html
J. E. Vig