normbook

First Online Edition 2009

Written by

Fred Lundgren

Charts by

Jerome Friemel

Authors note;

Words highlighted in blue are links to other sites which serve as footnotes. Some highlighted words link to Encyclopedia Britannica Online which requires a subscription. You may utilize a free trial membership while reading The Nature Of Wealth. Go to www.eb.com for details.

Foreword By Charles Walters 1926-2009

Founder and Publisher Emeritus of "Acres USA" Magazine.

You will wonder, no doubt, after reading The Nature Of Wealth, why so many societies worship a mythology that causes millions to starve - like a blind horse - knee deep in corn. Moreover, you may find shelter from the superstition that whenever money is created, a percentage of it must be offered as an appeasement to governments and money lords. You will conclude, no doubt, that most economists and politicians are mythmakers incapable of finding solutions to the paradox of poverty in the midst of a wealthy nation, only because their view is too narrow and their interests too self centered. The Nature Of Wealth escapes their fate by taking a helicopter view of the farm, the factory, the consumer, and the whole-interrelated grab bag called the economic equation.

In 1937, an organization called the Raw Materials National Council determined the real cause of the Great Depression. They discovered hidden, yet irrefutable economic laws that control and direct a private enterprise economy. They used national statistical data, harvested from a score of agencies, to prove that maintaining "state of the art" ratios of cost to income and savings within the five basic segments of National Income will automatically produce a sufficient level of earned National Income to generate and sustain prosperity and full employment while eventually eliminating the excessive debt that now threatens to consume the industrialized world.

The National Organization For Raw Materials (NORM) underwrote the publishing of The Nature Of Wealth for the purpose of updating the original work of the Raw Materials National Council. The Nature Of Wealth sets forth in modern terms, the truth (NORM) holds to be self-evident;: that all value and income is determined by the energy of nature and is quantifiable through arithmetic. As physicist Frederick Soddy put it, "The laws of thermodynamics" (the laws of nature), control nations by controlling the rise and fall of political systems, the freedom and bondage of societies, the movements of commerce and industries, the origin of wealth and poverty, and the general physical welfare of a people."

Admittedly, most economists and politicians have difficulty with NORM's founding precepts. They argue that a rudderless international market can automatically improve the income of Americans and their trading partners in terms of an American standard of living..

This false expectation is often promoted by those who employ their power, authority and influence for personal gain. Their arguments are filled with half-truths and errors by omission. They spin and taylor speeches to match each gullable audiance using skills well honed by years of practice. When proven wrong, they never confess to their fully informed self interest.

These "blind guides" direct societies away from ironclad laws set down by nature's scheme; a scheme based on extracting, utilizing and eventually accumulating two primary energy sources, namely, the terrestrial stock of energy put on deposit eons ago in the form of coal, oil, gas, and other minerals, and the cyclical stock of energy harvested from the sun through photosynthesis as the growth of farm crops. Regardless of how fast computers run, they can't circumvent the need for the production, mobilization, and utilization of these two sources of energy.

When confronted with the truth of NORM's data, these politicians and academics swallow hard and follow with the great intellectual response, "Yes, but things have changed, the old rules no longer hold. Yes, but America has become a service economy. Yes, but we live in a global economy. Yes, but with space satellites and the Internet, we communicate with the world at will so we can create wealth by human will". They laugh when we suggest this codified opulence rests on the laws of energy and thermodynamics and a nation's willingness to apply these laws to its economic system. The mere suggestion that irrefutable economic laws govern our economy and consistently yield certain overall ratios of cost to income and savings bring think tanks up fighting from their chairs, even though the entire apparatus of organized society is governed by these same laws.

The central equation of nature's scheme is simply that production times price equals income. Therefore, when the total annual production of goods and services flow through the economy at their 100% natural par value, (the intrinsic value rather than the perceived value of a product or service), then sufficient income is created along the way to distribute and consume those same products and services every year without creating excessive debt in the process. Thus a failure within the pricing system at the raw materials stage of production is especially harmful because it is duplicated each time the raw material flows through another stage of the economy. Since this price deficit is fed into the economy at the first point of sale, it destorts the value of all goods and services and eventually forces entire economies to cut back their national level of income below that dictated the state of the art.

This concept, as simple and logical as it appears, is now considered outdated by national economic planners. In the upcoming pages, you too, will be challenged by this conclusion.

It may be said that the impetus for writing The Nature Of Wealth was distinguishing between being stumbled over and being kicked. For this reason, and for the other reasons related above, Fred Lundgren and Jerome Friemel have studied the subject of economics for their entire adult lives. They produced computations which prove without exception, that for the past century, all major depressions have been the consequence of destructively low prices paid for the production of new wealth. Lundgren and Friemel prove that depressions are no longer caused by a lack of annual production, or the lack of desire to produce and consume, but by a nation's inability to manage its pricing system.

. They totally annihilate the proposition that a paradigm shift makes a service or information based economy sustainable. They refute the commonly held belief that taxing people to near oblivion can repay a 5.5 trillion dollar federal debt. They destroy the mythmakers' remedy of selling cheap grain abroad, and importing cheap oil and consumer goods. They chide politicians who cannot understand that foreign sales lessen, not increase the rollover or the multiplier of dollars inside America. They use arithmetic, not theory, to explain how the total value of all raw materials, (the price paid to the producers of all raw materials at the first point of sale), become the residual capital profit for a society, and why today, raw materials must flow into the American economy at a ratio equal to one-seventh of the total National Income.

Lundgren and Friemel prove that personal savings and business profits are simply the residual energy of a nation's raw material bounty after the bounty is transformed into finished goods and services. They show that improperly pricing the bounty always causes turmoil in commerce and industry and the constant demand for excessive debt expansion. Finally, the authors draw hard on arithmetic to prove that the American economy can never sustain growth unless it regains its internal economic balance by properly pricing its annual bounty. They prove this is necessary if America is to remain the international role model for other private enterprise systems around the world.

Their efforts prove that a macro (National) economy can be operated profitably, but only if wealth creation occurs without excessive debt expansion and why sustained economic growth demands fair (state of the art) prices at every turn; a system vastly superior to debt expansion alone. They point to certain times in American history to show that Government can administer an economy that creates new wealth without debt expansion. They challange us to ignore class bias, racial bias, and every other form of preconceived dogma that stands in the way of economic fairness. They use arithmetic and formulas to prove the practicality of such a system.

The Nature Of Wealth is no less than a national (macro) economic audit. It proves that real economic profit can neither be synthesized with debt, or conjured from thin air within the computers of Wall Street. It proves that wealth cannot be created by taxing the body politic, or by grafting the newest version of chain letter economics onto the general physical welfare of the nation.

The Nature Of Wealth offers a look into a variety of economic futures, both positive and negative. It creates a visual picture of National Income, the effect of debt expansion, compound interest and fractional lending. Afterward, it makes strong recommendations for changes in monetary policy.

This book reviews the American economy from a historic perspective using government records. Each graph and table have been designed to help you understand fully, perhaps for the first time, that America can collapse under its own weight of private debt unless monetary and fiscal policies are altered in the early part of the 21st century. This warning is the core message of The Nature of Wealth.

Some points and conclusions were made repeatedly to reestablish firm principles of macroeconomics. The book is an economic road map that leads to one central destination. This redundancy was necessary to demonstrate that proper functioning of our massive American economy rests on a few solid principles. These principles, in order to be fully understood and accepted were repeatedly addressed, both in narrative and in almost 100 graphs and tables that span a century of American economic history.

This espouse' was developed one formula at a time. With every formula, the premises of NORM proved themselves more enduring than hammered iron. Each new formula led to the reconstruction of yet another hidden formula until the The Nature Of Wealth

The task of reconstructing these formulas required stamina and years. The charts and tables assembled here begin with the year 1910 and end with the year 2000. The forthcoming two paragraphs were paraphrased from the book and reflect the core message.

America's balanced economy was struck down in cold blood during 1953. During that year, the United States enjoyed $330 billion of National Income. If raw materials had been fed into the economy at the same relative values that had existed during the 1946-1950 baseline, National Income would have exceeded $355 billion instead of growing to only $330 billion. This income shortage that began in 1953 has now multiplied 1000 fold. It now grows each and every year. In 1997, political pundits on the right and the left claimed victory over national deficits while Americans borrowed $2.16 to produce each $1.00 increase in (GDP), gross domestic product. America continues to borrow prosperity in a futile effort to compensate for a chronic shortage of debt free national income.

Today the annual shortage of National Income has grown to almost $1.5 trillion, and the accumulated shortage equals America's total public and private debt, proving that massive debt expansion is a public policy gone awry, not an economic necessity. America's accumulated loss of income now totals over $20 trillion. This economic plague has undercut the wage structure and the overall profitability of the American economy. It forces debt-based consumer expenditures. Worst of all, a society burdened by too much debt inevitably stacks up inventories of surplus goods and surplus people.

I presume the late James Michener would have opened this inquiry with a simple historical statement, "And the Earth cooled." He might have reminded us that it took millions of years to exhaust the environment of the hunter and, as the store of game was consumed, hunter-gatherer societies made a transition to farming, with women leading the way.

Michener would probably explain that in simpler times, people understood economics in terms of raw materials, both hunted and gathered, and as societies developed, they learned systems of cultivation, production, and harvest. In this way, agriculture, forestry, fishing and mining lead the way to a stable and organized society by providing the primary energy that flowed to each individual..

Far from Michener's style, the authors employ simple mathmatical formulas and scores of Goverment records to tell the story.

Do not be afraid of the tables, charts and graphs in this book. Read them as you would read a narrative, carving for yourself one nugget of truth at a time.

For those who want to understand the true nature of wealth, read on.