Corporations vs Charters

The history of constitutional law is the history of the impact of the modern

corporation upon the American scene.

-    -  Supreme Court Justice Felix Frankfurter

Individuals are legally required to support corporations’ political advertising. Opposition is a violation of the corporation’s First Amendment rights. [1]

EPA monitoring of the air over a corporation’s factory, constitutes violation of the corporations Fourth Amendment rights. [2]

Corporations must be compensated for compliance to environmental regulations. Lack of compensation violates the corporation’s Fifth Amendment rights.[3]

Yes, inanimate, non-accountable corporate entities have the very same rights[4] afforded you by the authors of the Constitution. But it wasn’t always so. The Constitution doesn’t mention corporations. In Colonial times, corporations as we know them today didn’t even exist. Instead, there were charters*. The Founders knew well the abuses of the contemporary charters such as the East India Company, the Hudson's Bay Company and the British Crown charters in America and chose to allow the States to regulate them.

*Technically corporations are charters. For the purposes of this post, “charter” is used to identify the original charter entity before the re-definition of the word in the 19^th century.

Some key differences between corporations and charters;

Charters	Corporations
Of limited duration, Must be renewed or disbanded.[5]	Perpetual
Capital is limited	Capital unlimited. Can be "too big to fail"
Established for defined reason	Essentially unlimited
Strong accountability to shareholders is written into charter	Weak accountability to shareholders.
Minority shareholders protected	Minority shareholder support not needed for major decisions
All stakeholders responsible	Stakeholders not responsible for corporate actions

As early as 1816 Thomas Jefferson, always a foe of large powerful entities, warned of the threat to the young democracy from “moneyed corporations”;

“"I hope we shall …crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country."
- Thomas Jefferson, Letter to George Logan, 1816”

It took 70 years of struggle, but the corporations won their “trial of strength” in the infamous landmark Supreme Court review of Santa Clara County v. Southern Pacific Railroad, 1886; which overturned previous precedent and was used to give corporations the legal status of a natural person, and thus by extension, protection under the Bill of Rights. (Before this time corporations were considered “artificial persons” with a limited sub-set of human rights).  Since then, corporations have won erroneous judgements one after another, until we have arrived at the sorry state we find ourselves now.

Supreme Court Justice William 0. Douglas commented on the decision decades later, writing;

"There was no history, logic or reason given to support that view"

Corporations are Accountable to No One

Not the Government;

We regularly see in the news headlines “Corporation X Fined XX Dollars”. This is misleading. Corporations no longer exist as a privilege granted by the people through their government, but rather they exist under “contract” with the government. This is the reason fine amounts are “recommended” and companies are allowed to negotiate the final value. Corporations are not “fined” in the sense that you are fined for speeding or jaywalking, but rather the “fines” are more akin to liquidated damages for a violation of their “contract” with the government.

Directors can be held liable only for their own personal misconduct. No single person or persons are accountable for miss-deeds of the corporation.[6]

Not the People;

Corporations, having usurped the Commerce Clause to relieve “themselves” of government authority, and gained protections under the Bill of Rights, have granted “themselves” much greater freedoms than enjoyed by any individual. Individuals cannot invoke Commerce Clause precedent to overrule laws. Corporation can, and do on a regular basis. This has created the curious situation where an entity (the corporation) is no longer accountable to the entity that created it (the government). 

Even the most die-hard free-marketer must admit that even if individuals and corporations should have equal rights, it is much more difficult for the individual to assert those rights. Do you have a personal lobbyist in Washington? (No, your congressional representative doesn’t work for your interests. They follow corporate wishes and interests; you are not going to give them a job when they leave government).

Not Shareholders

Shareholders routinely resort to litigation to assert their supposed rights to control the corporation. Minority shareholders are easy silenced by majority shareholders or shareholder blocs. Shareholders have no direct influence in matters such as treatment of workers or the environment.

Not the Consumer

Even if corporations are not accountable to any one else, they must be accountable to the consumer, right? Not really. Corporations can treat consumers any way they chose. Telephone companies are one example. They routinely mistreat their customers, their business declines, and then they merge or otherwise reform themselves under a different name and continue business with the same equipment, the same employees and even the same customers (Who are non the wiser) Study the history of ATT for proof.  Airlines are another striking example. Under a charter system, entities that harmed the public good would be disbanded and their assets sold and delivered in proportion to their stakeholders.

Corporations (including the Federal Reserve) are the scourge of democracy and will be the cause of the failure of the Grand Experiment.  You cannot “vote with your dollars” to force corporations to behave in an ethical manner. The only hope is to reform the nature of corporate “personhood” and return to the ideals of the founders of this great country.

[1] Pacific Gas & Electric Co. v. Public Utilities Commission of California ET AL. Appeal from the Supreme Court of California. No. 84-1044.

[2]  Dow Chemical Corporation v. U.S., 476 U.S. 337

[3] U.S. Supreme Court review of Pennsylvania Coal Co. v. Mahon 260 U.S. 393 (1922)

260 U.S. 393 Pennsylvania Coal Co. v. Mahon et al. No. 549.

[4] Actually, they have more. An individual’s power to control government is through the vote and the resultant composition of Congress and the Presidency, and ultimately, through elected officials, the Judiciary. But since corporations have successfully hijacked the Commerce Clause to limit government’s power, they are ultimately accountable to no one.

[5] The scourges of the First and Second Banks of the United States were eliminated by allowing the charters of these abominations to expire. The present incarnation of this evil, The Federal Reserve, cannot be dispatched so easily because its status as a corporation allows it to exist in perpetuity.

[6] To cite a recent example, is the CEO of British Petroleum responsible for the Gulf disaster? No, he wasn’t even there, he had no way to know what they were doing, and he can’t be expected to keep up with every employees actions. How about the guy on the

 

rig? No, he was just an employee doing a job. He can’t be responsible for the corporation. Inevitably, a mid-manager will be taken to task for the disaster and punished accordingly. But does this change the corporate attitude? Can this alter the corporation’s way of doing business? Of course not. In the end, no one is accountable. What incentive does BP really have to be responsible? If worse comes to worse, they can always simply merge with some unknown company, change their name, and continue business as usual. BP can easily change their legal structure, since there is no longer a requirement to serve a public good. Articles of Incorporation are available simply for some relatively trivial paperwork and fees. Would the boycotters even know? No, they would declare “victory”. Would anyone even care that the new ACME Oil company was formerly BP? No, they will have moved on to the next cause. BP knows this.

The Fukushima Corporate Made Disaster

It's been a few months now since the Japanese government released their 440 page report on the Fukushima disaster.[1] They blame just about everybody imaginable, going back decades before the place was even built. But glaringly absent from the long blame-list is the company that built the time bomb - General Electric. Their poor design was as much a cause of the escalation of the disaster as anything else, but yet they're blameless. I call BS. 

Japanese engineers working on the plant wanted to modify the design to make it more resistant to...tsunami's! But bureaucrats, in awe of the venerable GE, demanded they build it just like GE said. So when the tsunami came - disaster. 

Specifically, GE designed the units with the emergency cooling units in the basement of the reactor building. Japanese engineers (and presumably any one with common sense) saw that this was idiotic, as the cooling units were susceptible to flooding.

After a couple of decades of operation, less ignorant thinking prevailed and it was decided to move the emergency cooling pumps onto higher ground. But, in an act of residual dumbness, the switches that powered the pumps were left in the basement.

The tsunami comes, the basements were flooded, and the pumps, previously moved to a safer location, couldn’t be run because the switches were underwater in the basement. Time was wasted trying to pump the water out of the switchgear. Of course that didn't work, so time was wasted trying to re-wire the pumps from an alternate source. That didn't work because cables weren't available. All the time, the reactor cores were melting down - the infamous China Syndrome. 

A second monumentally asinine design feature placed the highly radioactive used fuel rods on the fourth floor of the reactor building. Without constant cooling they generate enough heat to self ignite, resulting in a radioactive fire that could (still can) produce enough radioactive fallout to kill every human being on earth several times over. 

But, since the failure of the cooling pumps, the meltdown of the reactor cores and the resulting explosions, there is no way to cool the spent fuel rods suspended on the fourth floor. Workers are reduced to spraying water on them, further contaminating everything with the runoff. The containers previously holding the cooling water were compromised in the explosions and no longer hold water.

Various ecological and scientific groups say this situation is the gravest immediate threat facing mankind. 

If the reactors had been designed specifically for Fukushima, instead of a package design built for Kansas, there would not have been a disaster other than the temporary shutdown of production.

The cost of corporate greed is incalculable.

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[1] http://warp.da.ndl.go.jp/info:ndljp/pid/3856371/naiic.go.jp/wp-content/uploads/2012/09/NAIIC_report_hi_res10.pdf

Economics Is NOT Rocket Science - Stages of the Economic Cycle

This blog was created to simplify the alchemy of economics. Economics is not rocket science, . I maintain that it isn't even a science at all. Behind the facade of formulas, theories and schools, the underlying principals are relatively simple. 

The issue is separating economics from business and investing. Both are essentially the study of people. In economics, if people do a, the result is x. If they do b, the result is y, and so on. The problem in business and investing is trying to predict if and when people will do a or b. Of course, this can be impossible, and is the reason business and investing is difficult....and complex. 

In economics there are "laws" or "rules". Economics doesn't follow the Austrian School some of the time and the Chicago School some of the time. This is ludicrous, despite the fact there is a huge industry of producing and employing economists and researchers. The Federal Reserve itself employs over 300 PhD level professionals. 

So in the interest of offering people a clear view into the obfuscated world of economics, I am re-posting an article from a couple of years ago outlining the true stages of the economic cycle. This cycle has been repeated over and over throughout the history of mankind, and despite of, or perhaps because of, our technical progress we are still subject to the same cycle. Because we are now in stage 11, it is important to know the truth.

True Stages of the Economic Cycle 

1. Hard Money. A form of currency is established to facilitate commerce. In order to gain acceptance the currency is backed by something of intrinsic value such as precious metals. This is known as Hard Money.

2. Debasement of the Currency. It is immediately evident that “free” wealth can be created by Debasing the Currency. In its most fundamental form this involves the practice of charging interest (or usury, the meaning has been exactly the same throughout history up until recent times).

3. Enactment of Legal Tender Laws. Without Legal Tender laws, implied values are self correcting and always closely match true value. Legal Tender laws greatly facilitate the debasement of a currency. The Founding Fathers knew this, Thomas Jefferson wrote: 

"If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered".
 

The U.S. Constitution, Art. I Sec. 10 Cl. 1, states: 

"No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts;"

The Supreme Court ruled in U.S. Supreme Court - Wheaton 1827; 

“The prohibition in the constitution to make anything but gold or silver coin a tender in payment of debts is express and universal. The framers of the constitution regarded it as an evil to be repelled without modification; they have, therefore, left nothing to be inferred or deduced from construction on this subject.”

4. The Accumulation of Debt is unavoidable with legal tender laws in general, and especially in a Central Banking scheme such as our current Federal Reserve, in which the perpetual increase of debt is an essential component.

5. An Illusion of Economic Prosperity is created by the accumulation of debt. This is no different in principle from a person going on a spending spree with credit cards. They have the illusion of being very prosperous, but in reality they are destined for a reckoning when the debt cannot be paid.

6. Monetization of the Debt. As the accumulation of debt becomes unmanageable, it become necessary to monetize the debt. The debt grows so large it cannot possibly be paid. There are a few ways to “resolve” this. 

• The most obvious way is through taxation, but this is never politically acceptable. 

• Another way is by directly devaluing the currency. This has been done many times in history, but is also not very politically acceptable.
• The third, and easiest (for leaders at least) is hyper-inflation. In simple terms hyper inflation erases debt by transferring wealth from individuals to government.

It is apparent that all three solutions have one thing in common – all transfer wealth from individuals to government, or more accurately, to the central banks.

7. Dilution of Currency Value The process of monetization directly causes a Dilution of Currency Value.

8. Loss of Confidence. In essence Consumer Confidence is a measure of how well the taxpayer is being fooled into thinking all is well. The dilution of his buying power caused by the dilution of currency creates a Loss of Confidence.

9. Inflation. As buying power decreases, the consumer tries to make up the difference by charging more. The merchant charges more for his goods, the laborer demands more for his services. This is classic Inflation.

10. Inflation Stabilizes as government  implements inflation control measures, but does nothing about the underlying problems, causing a:

11. Return of Inflation, quickly followed by:

12. Hyper-Inflation, which effectively erases the debt. If the U.S. experiences the level of hyper-inflation similar to Hungary in 1946/7 (42 QUADRILLION percent per month), the entire national debt could be paid off with less than a penny. This may sound like a good thing to some, but the truth is, wealth is simply transferred from private individuals to the government. This is the stage of Reckoning. It is obvious that there was no real wealth created in phase 2. This is the essence of my argument against the “Economy creates wealth” proponents. Economic trickery does not create wealth. It never has and it never will.

The wealth transfer causes:

13. Depression, which leads to:

14. Reorganization of Government. It is only at this point that a significant number of people understand the inextricable link between wealth and real money. This enlightenment leads to:

15. Return to Hard Money, and the cycle repeats.

These phases are exponential in nature. The time from the debasement of a nations’ currency to the loss of confidence in that currency can be measured in decades or even centuries. The time between the loss of confidence and inflation however, may only be weeks or months. In the later stages of hyper-inflation the loss of a currency’s value and the accompanying price increases can double in days or even hours.[1]

It should also be noted that inflation is not bad for everyone in equal measure. It is actually a good thing for those people of means who are in a position to borrow to purchase property. The reason is the same; the repayment of debts, is made in currency that is worth less than the currency originally borrowed. This is also the reason working people cannot prosper during times of inflation or hyper-inflation. Wages are generally not indexed to inflation and always lag price increases. Even in the case of the relatively few people whose wages are indexed to inflation, the adjustment is always done after the fact. Loses accumulated from the previous adjustment are never recovered.

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[1] In the Weimar Republic in 1923 workers demanded, and were paid three times a day in order to be able spend the money before it lost further value. 

Soros and the Bank of England Revisited

George Soros is much maligned for "breaking the Bank of England". But most ignore the more important fact, that he forced the UK to exit the European Exchange Rate Mechanism and keep the British Pound, rather than adopting the Euro. The UK has enjoyed relative prosperity since then. It was the artificial manipulation by the Bank of England to conform to the EERM that gave Soros the opportunity to short the Pound in the first place.

The same thing has been happening in recent months with the Japanese Yen, allowing Soros to walk away with another 1 billion dollars.

Soros has been a voice in the wilderness attempting to point out the Central Banks misdeeds that decimate the middle classes, but he has been successfully vilified by right-wing pundits and politicians whose main interest is protecting the Central Banks and their Corporate accomplices.

However you feel or have been taught about the man, it would be wise to listen to his financial advise. He has been right in a big way, time after time after time.

Corporate Profits vs Wages 2001 - 2011

Below is a chart I created using data from the U.S Bureau of Economic Analysis showing the increase of wages and the increase of corporate profits in the ten years from 2001 to 2011

Lawyers Defining Morality

A little background. Two years ago my father came upon an accident where a car had collided with a light pole, shearing the light pole off at the base. The pole was lying across the roadway, so my father stopped to try to warn oncoming traffic of the hazard. Before he could get in a safe position a car came speeding around the curve and struck the metal light pole which in turn struck my father, breaking his legs and back and rupturing his stomach.

Months later, in a deposition by the attorney for the insurance company of the driver of the second car that struck the light pole, this conversation took place;

Attorney: Are you a paramedic?

My father: No sir

Attorney: Are you a doctor?

My father: No sir

Attorney: Then you had no business at the scene of the accident. Because your vehicle was not involved, your proper course of action would have been to continue driving and not stop.

What??? I’m not a lawyer (thank goodness) but I was under the impression that there was a crime known as “failure to stop and render aid”. Not to mention helping someone in need is the right and honorable thing to do. But according to this idiot attorney, if you aren’t a doctor or EMT the injured don’t need your help.

Of course, if it were this attorney’s spouse or child injured and in need of help he probably wouldn’t object if you weren’t a doctor. But he is willing to abandon human decency in an attempt to “win” and get his employer (the insurance company) off the hook for my father’s medical bills.

On an even more personal note, years ago I pulled an injured woman from an overturned car in the middle of the night as others stood by watching. I never gave much thought to those that did nothing. After hearing my dad’s story, I wondered for a split-second.. “Am I stupid”? Here is what I’ve decided: If I had it to do over again, I would do it the same way. Others can let corporations and their lawyers define morality for us, but I can’t. So sue me, take what little I have (not much) but I won’t let a soulless lawyer make me choose between keeping my material things or my conscience.

  

What do you think? Should we mind our own business and protect ourselves and our assets? Or should we help those in need, even if it costs us?

Telecommunications Breakage

Telecommunications Breakage is the practice of requiring a telecommunications customer to pay for more service than is actually used. Perhaps you think telephone companies set their plan amounts roughly according to the amount the average customer uses. This is not the case. The companies optimize the plan amounts to maximize the amount of paid but unused service. For example; say a telephone companies records indicate the average customer uses 120 minutes per month. Instead of setting the plans to include 120 minutes, the plans will be set at 100 and 200 minutes, maximizing the number of customers who pay for time they don’t use.

This is not a theoretical exercise. Telephone companies, gift card issuers and others routinely use breakage as an easy profit center.

Breakage is reported in a company’s 10-K report to the Securities and Exchange Commission. The disclosure is listed under “Summary of Significant Accounting Practices”.

Corporations vs. Charters

The history of constitutional law is the history of the impact of the modern corporation upon the American scene.

-          Supreme Court Justice Felix Frankfurter

 Individuals are legally required to support corporations’ political advertising. Opposition is a violation of the corporation’s First Amendment rights. [1]

EPA monitoring of the air over a corporation’s factory, constitutes violation of the corporations Fourth Amendment rights. [2]

Corporations must be compensated for compliance to environmental regulations. Lack of compensation violates the corporation’s Fifth Amendment rights.[3]

Yes, inanimate, non-accountable corporate entities have the very same rights[4] afforded you by the authors of the Constitution. But it wasn’t always so. The Constitution doesn’t mention corporations. In Colonial times, corporations as we know them today didn’t even exist. Instead, there were charters*. The Founders knew well the abuses of the contemporary charters such as the East India Company, the Hudson's Bay Company and the British Crown charters in America and chose to allow the States to regulate them.

*Technically corporations are charters. For the purposes of this post, “charter” is used to identify the original charter entity before the re-definition of the word in the 19^th century.

Some key differences between corporations and charters;

Charters	Corporations
Of limited duration, Must be renewed or disbanded.[5]	Perpetual
Capital is limited	Capital unlimited. Can be "too big to fail"
Established for defined reason	Essentially unlimited
Strong accountability to shareholders is written into charter	Weak accountability to shareholders.
Minority shareholders protected	Minority shareholder support not needed for major decisions
All stakeholders responsible	Stakeholders not responsible for corporate actions

As early as 1816 Thomas Jefferson, always a foe of large powerful entities, warned of the threat to the young democracy from “moneyed corporations”;

“"I hope we shall …crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country."
- Thomas Jefferson, Letter to George Logan, 1816”

It took 70 years of struggle, but the corporations won their “trial of strength” in the infamous landmark Supreme Court review of Santa Clara County v. Southern Pacific Railroad, 1886; which overturned previous precedent and was used to give corporations the legal status of a natural person, and thus by extension, protection under the Bill of Rights. (Before this time corporations were considered “artificial persons” with a limited sub-set of human rights).  Since then, corporations have won erroneous judgements one after another, until we have arrived at the sorry state we find ourselves now.

Supreme Court Justice William 0. Douglas commented on the decision decades later, writing;

"There was no history, logic or reason given to support that view"

Corporations are Accountable to No One

Not the Government;

We regularly see in the news headlines “Corporation X Fined XX Dollars”. This is misleading. Corporations no longer exist as a privilege granted by the people through their government, but rather they exist under “contract” with the government. This is the reason fine amounts are “recommended” and companies are allowed to negotiate the final value. Corporations are not “fined” in the sense that you are fined for speeding or jaywalking, but rather the “fines” are more akin to liquidated damages for a violation of their “contract” with the government.

Directors can be held liable only for their own personal misconduct. No single person or persons are accountable for miss-deeds of the corporation.[6]

Not the People;

Corporations, having usurped the Commerce Clause to relieve “themselves” of government authority, and gained protections under the Bill of Rights, have granted “themselves” much greater freedoms than enjoyed by any individual. Individuals cannot invoke Commerce Clause precedent to overrule laws. Corporation can, and do on a regular basis. This has created the curious situation where an entity (the corporation) is no longer accountable to the entity that created it (the government). 

Even the most die-hard free-marketer must admit that even if individuals and corporations should have equal rights, it is much more difficult for the individual to assert those rights. Do you have a personal lobbyist in Washington? (No, your congressional representative doesn’t work for your interests. They follow corporate wishes and interests; you are not going to give them a job when they leave government).

Not Shareholders

Shareholders routinely resort to litigation to assert their supposed rights to control the corporation. Minority shareholders are easy silenced by majority shareholders or shareholder blocs. Shareholders have no direct influence in matters such as treatment of workers or the environment.

Not the Consumer

Even if corporations are not accountable to any one else, they must be accountable to the consumer, right? Not really. Corporations can treat consumers any way they chose. Telephone companies are one example. They routinely mistreat their customers, their business declines, and then they merge or otherwise reform themselves under a different name and continue business with the same equipment, the same employees and even the same customers (Who are non the wiser) Study the history of ATT for proof.  Airlines are another striking example. Under a charter system, entities that harmed the public good would be disbanded and their assets sold and delivered in proportion to their stakeholders.

Corporations (including the Federal Reserve) are the scourge of democracy and will be the cause of the failure of the Grand Experiment.  You cannot “vote with your dollars” to force corporations to behave in an ethical manner. The only hope is to reform the nature of corporate “personhood” and return to the ideals of the founders of this great country.

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[1] Pacific Gas & Electric Co. v. Public Utilities Commission of California ET AL. Appeal from the Supreme Court of California. No. 84-1044.

[2]  Dow Chemical Corporation v. U.S., 476 U.S. 337

[3] U.S. Supreme Court review of Pennsylvania Coal Co. v. Mahon 260 U.S. 393 (1922)

260 U.S. 393 Pennsylvania Coal Co. v. Mahon et al. No. 549.

[4] Actually, they have more. An individual’s power to control government is through the vote and the resultant composition of Congress and the Presidency, and ultimately, through elected officials, the Judiciary. But since corporations have successfully hijacked the Commerce Clause to limit government’s power, they are ultimately accountable to no one.

[5] The scourges of the First and Second Banks of the United States were eliminated by allowing the charters of these abominations to expire. The present incarnation of this evil, The Federal Reserve, cannot be dispatched so easily because its status as a corporation allows it to exist in perpetuity.

[6] To cite a recent example, is the CEO of British Petroleum responsible for the Gulf disaster? No, he wasn’t even there, he had no way to know what they were doing, and he can’t be expected to keep up with every employees actions. How about the guy on the rig? No, he was just an employee doing a job. He can’t be responsible for the corporation. Inevitably, a mid-manager will be taken to task for the disaster and punished accordingly. But does this change the corporate attitude? Can this alter the corporation’s way of doing business? Of course not. In the end, no one is accountable. What incentive does BP really have to be responsible? If worse comes to worse, they can always simply merge with some unknown company, change their name, and continue business as usual. BP can easily change their legal structure, since there is no longer a requirement to serve a public good. Articles of Incorporation are available simply for some relatively trivial paperwork and fees. Would the boycotters even know? No, they would declare “victory”. Would anyone even care that the new ACME Oil company was formerly BP? No, they will have moved on to the next cause. BP knows this.