Looking Forward from 1994
of Financial Markets
Lyndon H. LaRouche, Jr. - June 1994
It comes as no surprise that the name of the Bank of England's Eddie
George is added to the list of which it must be said that "whom the
gods would destroy, they first make mad." During the course of the
current London meeting of the International Monetary Conference, Eddie
joined the ranks of those greed-maddened public fools of finance who insist
that the danger from the now metastatically cancerous financial bubble in
derivatives speculation is being exaggerated by some critics.
It is a matter of some urgency that responsible governments subject all
incumbent and prospective economics and central banking officials to the
sanity test which Eddie George would have flunked gloriously. Among the
probable benefits of this, the least would be creating suddenly many
encouraging vacancies for the sane unemployed. The test consists of but one
crucial question: Prove conclusively that the near-term disintegration of
the presently bloating global financial and monetary bubble is unstoppable
by any means alternative to governments acting to place the relevant
institutions into bankruptcy reorganization.
Those officials about to be examined so could look up the answer in the
back of the book, so to speak. We supply it here and now. Would that be
cheating on their part? Not at all; it would be becoming sane.
LaRouche as a forecaster
About my qualifications: I have introduced relatively few forecasts of
critical events during my 40-odd years as an economist (not counting my
repetitions of some of those warnings). To date, every forecast which I have
made on the basis of my LaRouche-Riemann method has been confirmed by timely
developments. I now present a summary listing of those forecasts, for the
purpose of identifying my authority for designing the indicated test of
1) During late autumn 1956, in connection with a marketing study, I
forecast the imminence of a major U.S. economic recession, triggered by the
over-stretching of a post-1954 credit-bubble centered in financing of
automobiles, housing, and analogous consumer goods. This recession broke out
in February 1957 statistics, and was generally, if reluctantly acknowledged
to have occurred several months later. The recession-spiral lasted into
mid-1958, and was followed by a prolonged stagnation until an upturn
appeared under the Kennedy administration.
2) During 1959-60, I made my first long-range forecast: that near or
shortly after the middle of the 1960s, we would see the first of a series of
major monetary disturbances, leading toward a collapse of the existing
Bretton Woods agreements. I forecast that this collapse would see increased
looting of what were then termed developing sector nations, and that the
breakup of the Bretton Woods agreements would lead rapidly to austerity
measures modelled upon those of fascist regimes, in international economic
relations and in the U.S. domestic economy.
All of my economics forecasting and related activities of the 1960s,
through spring 1971, were premised upon that same judgment. The first of the
series of major monetary disturbances of the period occurred with the
collapse of the British pound during November 1967, followed by the dollar
crisis of January-March 1968. The break-up of the Bretton Woods agreements
occurred beginning Aug. 15, 1971, and was consolidated by the Azores
monetary conference of 1972. In immediate response to the August 1971
development, the U.S. government instituted the radical austerity measures
known as Phase I and Phase II.
3) In November 1979, during my campaign for the Democratic Party's
presidential nomination, I warned that the measures which the Carter
administration and Federal Reserve had just taken, at the urging of newly
appointed Federal Reserve Chairman Paul A. Volcker, would lead to the
outbreak of a devastating recession, beginning early 1980. Every detailing
of that forecast by EIR magazine's quarterly projections through 1983
was the most accurate forecast issued publicly by any agency; in fact, most,
including Chase, Wharton, Evans, and Data Resources, were absurd in their
sensing of the direction of the trends.
4) In February 1983, in the course of an exploratory back-channel
discussion I was conducting with Moscow in coordination with the Reagan
administration, I informed the Soviet government, that if it were to reject
what later became known as the Strategic Defense Initiative of March 23,
1983, the strains on the Comecon economy would lead to a collapse of that
economic system in about five years. This forecast was repeated in an EIR
Special Report, Global Showdown, issued July 1985. The collapse
occurred during the second half of 1989.
5) In spring 1984, in my renewed campaign for the Democratic Party's
presidential nomination, I warned, in a nationwide half-hour TV address, and
elsewhere, of the outbreak of a collapse in a large section of the U.S.
banking system: the savings and loan and related sectors.
6) In May 1987, I forecast, as published in EIR magazine and
elsewhere, the outbreak of a major collapse in the stock market beginning
approximately Oct. 10, 1987. This was my first and only stock-market
7) During my renewed Democratic candidacy of 1988, in a nationwide
half-hour TV address, I described the "bouncing ball" phenomenon
as the key to following the continuing collapse of the U.S. economy through
the course of apparent, short-term fluctuations relatively up or down. That
has continued to the present day.
8) During my renewed Democratic candidacy of 1992, I warned that we were
already gripped by a global financial mudslide, "down, down,
This is a record of nearly 40 years, a record which cannot be even
approached on the public record by any currently living economist, even by
France's (and Le Figaro's) eminently sane Nobel Prize-winning Maurice
Out of that same unequalled competence, I say to you now, as I informed
various relevant scientific institutions of Russia during the last week of
this April past: The presently existing global financial and monetary
system will disintegrate during the near term. The collapse might occur this
spring, or summer, or next autumn; it could come next year; it will almost
certainly occur during President William Clinton's first term in office; it
will occur soon. That collapse into disintegration is inevitable, because it
could not be stopped now by anything but the politically improbable decision
by leading governments to put the relevant financial and monetary
institutions into bankruptcy reorganization. That is LaRouche forecast
No. 9—the addition to the list of eight, above.
The rational standard of belief
What has been summarily reported on the first eight forecasts shows that
something is missing in the intelligence or morals of anyone who refuses to
take the ninth forecast very seriously. Yet, that being said, although the
public record shows that I am probably the world's best forecaster living
during the past 40 years, does that unmatched record in forecasting
guarantee that my ninth forecast is right? Any responsible government says,
"He may be the world's best economist, but, even in his case, I still
need the proof that his ninth forecast is right."
Think of an economist advising a government as morally in a position like
the physician advising a patient. Would it be consistent with medical ethics
to prescribe a medicine on the basis of "I happen to find the labels on
the pharmaceutical company's products attractive"? How should the
physician judge? He is morally responsible for using scientific method, and
for working in concert with those other members of the profession whom he
knows to be governed in their utterances by obedience to scientific method
(rather than some official of an insurance company controlled by investment
trusts, for example). What is the comparable ethical requirement in
connection with economic prescriptions?
Contrary to what most scientific illiterates among U.S. college graduates
believe today, science is not statistics. Science is the method by which
a series of successful fundamental, and other crucial discoveries have been
generated. Science is not mathematics; it is the delimiting conditions which
the successively successful method of physical science, over nearly 2,500
years since Plato's Academy at Athens, imposes upon mathematics today.
Any responsible government today is asking the following three questions
about the ninth forecast in that series: 1) Is the method which I employed
to develop the first eight of these forecasts consistent with the method
upon which the ninth depends? 2) Is the method which opponents of this
forecast employ identical to the failed method which their circles used in
failing to meet the standard of each and all of the first eight forecasts in
my series? 3) If the answer to the preceding questions is "Yes,"
then show the additional, crucial proof that my method conforms to the
actual principles by which physical growth in economic processes is
That is what any responsible government will demand of me, once it
recognizes that it would be terribly, morally reckless to continue its
disastrous former blind faith in my failed "Brand X" competitors
of the post-World War II period, such as John Von Neumann, Abba Lerner,
Milton Friedman, Friedrich von Hayek, Karl Popper, Arthur Burns, Paul
Samuelson, George Shultz, Paul Volcker, Margaret Thatcher, Wharton, Evans,
Chase, Data Resources, and, at the bottom of the barrel, that notoriously
poisonous academic imp from Harvard, Jeffrey Sachs.
The future will judge the governments and the electorates of the present
by the way in which they respond, or fail to respond to their obligation to
pose those policy questions respecting that ninth forecast. The future will
demand: 1) If you had asked those questions, you might have foreseen the
mass-murderous disaster which was about to hit your nation and the rest of
the world besides. Did you ask those questions? 2) If you did ask those
questions, did you receive an answer? 3) What would have been the result had
you accepted that answer? This moral accountability applies to
government; it may determine whether or not certain economists deserve to
sit in Hell; it is also a measure of the morality of the voting-age
population in general.
The reader will find all the crucial features of the method employed in
all nine of the list of past and present forecasts identified adequately in
many published locations, including two most recent editions of the
quarterly journal Fidelio. "On LaRouche's Discovery,"
(Spring 1994) is an account of the original work, over the years 1948-52,
which produced my original fundamental discovery in the science of physical
economy. This, including footnotes (pp. 37-55), is a concise report of the
discovery. The second, longer treatment of the significance of economic
policy in history, is found in "The Truth About Temporal
Eternity," in the Summer 1994 issue.
If the reader has advanced competence in mathematical physics, including
the issues associated with such matters as Bertrand Russell's fraudulent
attacks upon Bernhard Riemann and Georg Cantor, or the related matter of
Kurt Gödel's shattering proof of a crucial blunder by John Von Neumann,
those two articles report enough to constitute rigorous scientific proof. If
the reader lacks that advanced training, the contents of the two articles
will be nonetheless highly informative and relevant.
It is my intent, that any literate person, whether one with adequate
scientific training or merely good moral sense in such matters, will be
suitably informed by the following description of the proof for my ninth
What is a financial bubble?
As the first step in understanding the derivatives bubble about to pop,
ask yourself the question which I posed to members of my class in economics
back in 1966, a class which included Virginia's present-day Democratic
celebrity Nancy Spannaus and a number of other university graduate students.
Why do slumlords find investment in New York City slum-housing so
profitable? Nancy Spannaus, together with others among those graduate
students, set up a field investigation, a project which involved many long
hours at the New York Hall of Records, tracing the history of New York slum
properties and their sites back as far as several generations. Nancy and
other members of the task force found and proved the answer to my question.
Take any income-producing investment, whether a factory, a farm, a retail
sales outlet, or a slum rental-housing property-title. From the total
revenue which the owner of that investment obtains annually, a certain
portion is taken out of the total. By "taken out" is signified
"not poured back into reproducing or improving the physical operations
of the investment itself." Four elements of this withdrawn portion of
the total sales revenue are of primary concern to us at this moment:
Withdrawn rent, interest, profit, and a certain portion
of the taxes paid.
Focus for a moment upon the withdrawn-rental portion—the portion of the
rent not put back into either paying taxes on the real estate or maintaining
and improving the structure. Let us suppose that the current holder of the
title to that slum rental property decides to sell this property as a rental
property; how do we determine the expected valuation used for determining
the selling price? That valuation will not be based on the cost of
constructing a replacement building, or the depreciated original cost of the
building; it will be based upon a multiple of the withdrawn portion of the
rental income, or some analogous consideration.
Thus, for this classroom example, we have two values for that slum
property. One is the depreciated value of the original construction,
including depreciated value of improvements added. The other value is a
multiple of the portion of the rental income withdrawn from the physical
cycle of maintenance and replacement by the holder of the title. Let us give
a name to the difference between the depreciated value of the original
construction and the market value assigned to the rental income from that
building. In 1967-69 New York City, the latter valuation was vastly greater
than the first. The increase of the latter valuation over the former is
termed fictitious capital.
The task force of which Nancy Spannaus was a member found that the
slumlord system was extracting greater actual rates of return on slum
properties used by very poor families, than more legitimate landlords were
taking in from decent housing renting to middle and higher income
households. By squeezing the rental income to the maximum, through
non-maintenance and use of related tricks, a slum property realized a higher
yield than a non-slum property. One could have seen in those facts a warning
of the coming age of utter economic degeneracy, the age of junk bonds,
hostile takeovers, and derivatives: one might say, the age of the keenest
admirers of George Bush and Maggie Thatcher. The landlord with the scummiest
morality, and the least degree of redeemable value to society, was being
rewarded more richly than a landlord with decent morals.
That economic category, fictitious capital, is key for
understanding why the present-day derivatives bubble is precisely analogous
to a cancer of the world financial and monetary system in its terminal
phase. Let us describe the present global bubble in these terms of
reference, before turning to analysis of some of the crucial points of our
Instead of a 1960s slum rental property, take today's near-approximation
of that: Milton Friedman, Margaret Thatcher, George Bush, and Wendy and Sen.
Phil Gramm's (R-Tex.) U.S. economy. That is the "post-industrial"
United States which has replaced its steel industry-centered economy with a
free-to-steal marketplace economy, the present-day Wall Street Journal,
American Spectator, and Washington Times's economy of Michael
Milken and kindred neo-conservative bandits.
It is visible that the net physical investment in maintenance and
improvements of productive capacities of basic economic infrastructure,
farms, and factories has long since dropped way below the level of zilch.
The collapsing of farms (for the greater glory of George Bush's cronies in
the grain cartel), and the collapsing of numbers of industrial and other
skilled operative's work-places shows conclusively that the U.S. economy is
being contracted rapidly by a process of asset-stripping. This is a global
process. It took off first in the developing sector, especially after the
installation of the post-August 1971 "floating exchange-rate monetary
system," in place of the former gold-reserve standard set earlier by
the Bretton Woods agreements. After the introduction of the New York Council
on Foreign Relation's 1975-76 "controlled disintegration of the
economy" doctrine as Federal Reserve Chairman Volcker's October 1979
"Volcker measures," this disease of looting spread throughout the
U.S. economy, into all sectors.
By the beginning of the 1980s, through the asset-stripping already in
place during the "post-industrial" binge of the 1970s, the United
States economy had lost the technological capabilities on which the
successful 1960s manned landing on the Moon had depended. Under the guidance
of Senate president and later President George Bush—as the late Robert
Benchley wrote back in 1943—matters went "from bed to worse."
From the end of 1982, the asset-stripping process ran amok under the
influence of the Gramm-Bush push for radical deregulation of finance. The
measures of deregulation pushed by Bush and Gramm could be fairly termed the
"Kravis and Milken Junk-Bond Feeding Legislation." The
"planned train-wreck" called the Gramm-Rudman bill, putatively
intended to balance the budget, balanced nothing, but rather unbalanced much
of what was left of the economy, and also the minds of its credulous
Look at this degeneration of our economy through the eyes of a 1960s New
York City slumlord—his admiration would be orgasmic.
Look at the real income-stream taken away from the "reproductive
cycle" of the process of production and distribution of goods and of
such specifically indispensable services as education, health care, and
science. Trace the profit, interest, rent, and taxes from these sources. Now
carry that extraction away from reinvestment in the physical improvement of
those cyclic processes of production and distribution of product, and sell
those extracted sums of income-flow on the financial market. Sell them as
slumlords sell property titles to slum-rental holdings—not the physical
property, but rather the legal title to the rental income.
Generate thus large masses of fictitious capital. Now, in addition to the
real-income stream from primary sources of rent, profit, interest, and
taxation, a second kind of income-stream has been generated, fictitious
In any market economy, even in the rural barter of livestock, the
occurrence of fictitious capital and of fictitious capital gains
is endemic. Under certain kinds of conditions, the pyramiding of fictitious
capital gains as an income-stream upon which a second order of fictitious
capital is generated, sets into motion a process made famous in modern
economic history by such disastrous lunatic binges as the
seventeenth-century tulip bubble in the Netherlands, the early
eighteenth-century South Sea Island and Mississippi bubbles, and today's
Bush-league practices behind the junk bond and derivatives bubble.
As long as money and assets discountable for money treat such
property-titles and contracts as negotiable assets, money treats real-income
streams and fictitious capital gains more or less equally. In this
circumstance, a legion of worse-than-useless Wall Street, City of London,
and kindred parasites around the world become immensely rich, while families
of farmers, industrial operatives, ordinary honest businessmen, and the
nation at large become increasingly poor, even as destitute as Russia under
the policy-influences of Margaret Thatcher, George Bush, and Jeffrey Sachs.
As long as the prospective purchaser is prone to act upon the belief that
a nominal capital gain in a contracted fictitious capital represents an
expected and discountable income-stream, this imagined new income-stream can
be assigned a fictitious capitalization in the same way a slum-property
title is assigned a fictitious valuation based upon the purchaser's
willingness to pay a market-price for acquiring title to the stream of
rental income. Once this next phase in the spiral of financial speculation
becomes the basis for a new market in such instruments, a process of
"geometric" growth of nominal fictitious capital is unleashed. A
ballooning of fictitious aggregates occurs. That is the distinction of a
true speculative bubble, as contrasted with endemic forms of speculative
activity within markets.
What is a 'cancerous bubble'?
The present global financial and monetary bubble goes one fatal step
beyond a mere ballooning of fictitious capital gains. It has a dimension
which marks it as fatally cancerous for the financial and monetary systems
which it infests.
Asset-stripping is the key to this point.
Let us use the term "leverage" to identify the implied
multiplier which converts an imputable annual rate of income-stream into a
corresponding magnitude of nominal fictitious capital. In the case of the
slumlord, looting the tenants to increase the income-stream from rental
income is a way of increasing the imputable income-stream, and thus the
fictitious capitalization of the property-title. The valuation of the
secondary and tertiary fictitious capitalizations spun off from the
imputable marginal gains in fictitious capitals are themselves so based upon
leverage against the primary, real income-stream.
The valuation of the interconnected whole market in fictitious capital
gains depends thus upon both the relative and corresponding absolute
magnitudes of the primary income-streams taken as a whole. This fact is
illustrated dramatically by the case of the asset-stripping needed to
sustain the massive creation of fictitious capital in the RJR Nabisco
operations. Without massive asset-stripping against the economy as a whole,
the speculative bubble as a whole would have collapsed approximately a
This is complicated by the fact that without an increase in the flow of
fictitious capital gains at the top of the bubble, the bubble as a whole
would collapse. For, without a continuing growth of the magnitude of
fictitious capital gains, the bubble as a whole would collapse under
pressures of reversed leverage.
"Collapse" would be a most misleading sort of euphemism in that
case. "Reversed leverage" in such a bubble is best approximated
mathematically by the same Kolmogorov equations used to describe a chemical,
fission, or thermonuclear explosion, or a firestorm like that which the
British war-time Royal Air Force created at Hamburg and Dresden: in
mathematical-physical terms, a "shock front," and a very hard one
at that. In effect, one evening the financial markets appear normal, stable;
by the end of the next day, or something approximating that, everything is
rubble; the financial and monetary system built up since August 1971 has
disintegrated as it were in a single day's trading.
As in the case of a heroin or methadone addict, the habit of looting the
real-economic basis must be fed to prevent a collapse. Feeding the habit
prevents the immediate collapse by hastening the date of total collapse. The
addicted state is destroying the basis upon which it feeds to sustain
itself. As is illustrated by the tragic fate of the enterprises gobbled up
in the RJR Nabisco caper, this is the fate of the world's economy under the
rule of the cancerous financial bubble marked by derivatives speculation.
So, to sustain the bubble, the bubble must grow. To cause the bubble to
grow, the real basis must be looted more savagely: asset-stripping. We see
the result in the collapse of the constant-dollar value of the market-basket
of per-capita and per-square-kilometer real consumption by households,
farms, and manufacturing. We see the collapse of the similarly adjusted
value of tax-revenue base per capita and per square kilometer.
Go back to 1913, to Paul Warburg's notorious Federal Reserve System
scheme. See Confederate agent Alan Bulloch's nephew, Teddy Roosevelt,
running a Bull Moose campaign to bring about the election of Ku Klux Klan
booster Woodrow Wilson. Both are supporters of Warburg's Federal Reserve and
federal income-tax proposals. Roosevelt's actions, and the later Wilson
White House backing for the re-founding of the Ku Klux Klan, ensure three
things: that the two acts will be declared legally enacted, and that the
United States will be pre-committed to go to the side of Britain's planned
war against Germany (otherwise Britain would not have gone to war, and then
there would have been no World War I, or its sequel World War II). Look at
the present situation from the standpoint of the state of Paul Warburg's
original Fed and tax system proposals back about 1913, and look briefly at
the relevant preceding development, the U.S. Specie Resumption Act of
1875-79. Look at the relationship between Federal Reserve-engineered U.S.
debt-service charges and the U.S. income-tax revenue today, and then the
significance of the derivatives bubble is clearly symptomized: Doom is on
Through its relevant U.S. agent, the House of Morgan, London bankrupted
the United States government during the last quarter of the nineteenth
century by a congressional law called the U.S. Specie Resumption Act. This
act, enabled through massive corruption of members of the Congress,
unlawfully repealed relevant sections of Article I of the U.S. federal
Constitution, by requiring the U.S. government not only to cease engaging in
its sovereign constitutional right to issue currency, but to call in
existing, Lincoln-series U.S. currency-notes to a degree conforming to the
demands of the London gold-exchange market. This collapsed the United States
into a protracted social crisis, manipulated from London, under which
conditions London was able to buy up the choicest morsels of the
still-growing U.S. economy. By the turn of the present century, London,
which had been constantly the principal mortal adversary of the United
States since 1763, was suddenly promoted in Jim-Crow Anglophile America into
our closest ally! The natural follow-on to the protracted crisis caused by
the Specie Resumption Act was the plainly unconstitutional Federal Reserve
The Federal Reserve System is key to the derivatives bubble of today.
Without corrupt, virtually treasonous complicit officials at the Fed, the
speculative mania which has ruined our nation and much of the world besides
would not have been possible. The Fed is a privately owned central bank,
chartered by the federal government, which has gained increasing, unlawful,
extortionist power over our government itself. It is principally an agent of
those major commercial banks and private banking and other financial houses
based in New York City. During the recent 15 years, the principal functions
of the Fed have been to manipulate the U.S. government in Washington, and to
use the monetary authority usurped by the Fed to subsidize bankrupt and
other banks and other wild speculators in New York City and associated
The Fed operates in collusion with complicit Treasury officials to
increase the private indebtedness of the U.S. government to the clients of
the New York City-based market in U.S. bills and other securities. This
debt-creating mechanism is used principally to feed the Fed's process of
generating its own unconstitutional, private U.S. Federal Reserve
currency-notes; this generation of currency-notes is managed to generate a
subsidy for the Fed's true private owners, and, during the recent dozen
years, to feed the Bush-leaguers' wildly speculative financial
When the Fed was originally conceived, the adoption of a national
income-tax was designated as the lawful source of budgeted funds to meet the
debt-service obligations upon the Federal Reserve-created U.S. government
debt! Now, we see that the U.S. revenue from the income-tax is being gobbled
up more and more by the debt-service requirements on the federal debt! As
the sign carried by the fellow wearing the white robe and beard says,
"The end is nigh!"
The constant-dollar value of the per-capita tax-revenue base is
contracting, largely as a result of the asset-stripping impact of
Bush-league speculation practices. To increase the tax rates on anything but
the speculative financial markets themselves would be to increase the
income-stream out of the real economy, accelerating the economic
contraction, hastening the collapse. To cut entitlements, another persisting
proposal made on behalf of the Wall Street speculative pirates, would have
That relationship between federal debt-service and income-tax base is but
one of numerous signs to the same critical effect. As the driver explained,
bringing the bus to a halt before the washed-out bridge, "Brother, it
looks like we are about to run out of road."
The cancer of speculative derivatives burgeons—an ugly growth. Worse,
to exist, the cancer must loot the healthy tissue in at least equal degree.
Thus the monster grows, while the human being is sucked to death so. Excise
the tumors, kill the cancer without killing the healthy tissue. The task is
destroy the parasite, to save its victim.
The issues of method
The problem has been described. We are thus situated to consider the
likely varieties of significant objections to that description.
Known objections to the foregoing description fall into three broad
classes, of which two can be summarily discarded as cases of a speaker who
offers no rational argument for his no less vehement objections. The three
1) What we may describe fairly as the Eddie-George-the-pantry-bandit
syndrome: "Mommy, you are exaggerating again; there are no cookies in
2) The opinionated-common-gossip syndrome: "People whose opinion I
respect say that you are wrong."
3) The academic standpoint: any one or a combination of several fads
commonly taught in contemporary classrooms, textbooks, and economics and
financial trade periodicals.
Only the last has any further interest for us here.
Within that third class of objections, the principal academic premises
are, variously or in combination: a) the marginal intellects, the
utilitarians who deeply resent personally any attempt to distinguish between
productive and non-productive occupations; b) the idiot-savant
mathematicians of the "Chaos Theory" cults; c) the ever-faithful
gnostics chanting, with an obligatory uprolling of the eyeballs, "the
magic of the marketplace." Conveniently, all three, and related other
varieties of professionalist objections, including the lately fashionable
"Chaos Theory," share the fundamental flaw of the late John Von
Neumann's efforts to derive a mathematical dogma of radical marginal
utilitarianism from a set of linear inequalities.
It greatly simplifies the discussion to begin with a thumbnail historical
account of the controversy over the appropriate method for study of economic
Let us situate the internal modern history of political-economy in a
nutshell. Modern political-economy began to be developed in Cosimo de'
Medici's mid-fifteenth-century Florence, Italy through the initiatives of
the Byzantine scholar George Gemisthos, also known as "Plethon."
It began to assume modern form during the sixteenth century, in such
expressions as the writings of France's Jean Bodin and the establishment of
political-economy within a body of statecraft known formally as cameralism.
The first work establishing a scientific basis for the study of political
economy was Gottfried Wilhelm Leibniz's development of a branch of physical
science known as physical economy over the interval 1672-1716.
At the end of the seventeenth century, Venice's far-flung intelligence
services launched a vigorous campaign throughout Europe, mobilizing for the
destruction of France and the discrediting of Leibniz. The key figure
leading this eighteenth-century operation in the field—in France, Britain,
and Germany—was a most senior Venetian nobleman, Abbot Antonio Conti
(1677-1749), whose network included such notorious Venetian operatives
against France as Giovanni Casanova (1725-98), Count Alessandro Cagliostro
(1743-95), and the founder of late-eighteenth and nineteenth centuries'
British radical empiricism, Giammaria Ortes (1713-90).
The point to be stressed here is that all of the doctrines for which Adam
Smith, Jeremy Bentham, and Thomas Malthus are best known today were copied
from the writings of Giammaria Ortes. It was through the work of Ortes that
Smith obtained his dogma of "the invisible hand," and Jeremy
Bentham his "hedonistic calculus." Malthus's 1798 On Population
is a direct plagiarism, in more popularized language, of Ortes's 1790 Reflessioni
sulla Populazione delle Nazioni.
To situate the discussion, consider the widespread lie which asserts that
the United States was founded upon Adam Smith's doctrine of "free
trade." The fact is, the economic and social issue of the U.S. War of
Independence against Britain was the American colonists' rejection of
Britain's eighteenth-century version of "International Monetary Fund
conditionalities," in favor of what was called later a
"protectionist" economic policy.
"Free trade" was first brought to the United States in 1783, as
a peace condition dictated to France and the United States by Britain's Lord
Shelburne, in the 1783 Treaty of Paris. As a consequence of this concession
to British "free trade," the economies of the United States and
France were bankrupted by 1789. The United States used its head, wrote a
federal Constitution which arranged the outlawing of "free trade,"
and recovered to prosperous growth under President George Washington and
Secretary of the Treasury Alexander Hamilton. The king of France acted
differently; failing to use his head, he lost it.
The strongly Leibniz-influenced economic policies of the U.S. federal
Constitution and the first George Washington administration were known
officially from that time onward as the anti-British "American System
"Free trade" was revived in the United States several times
during the nineteenth century. Under the influence of British agent Albert
Gallatin from within the second Jefferson administration and the Madison
administration. Under the influence of British asset and New York banker
Martin van Buren over the second Jackson administration, causing the Panic
of 1837. "Free trade" was the doctrine of the New England
opium-traders and the southern pro-slavery faction during the early
nineteenth century. Under the treasonous Pierce and Buchanan
administrations, the effects were ruinous. Every period of economic recovery
into 1875 was the direct result of rejecting "free trade" in favor
of reviving the "American System" policies of Franklin, Hamilton,
Henry Clay, Mathew and Henry Carey, and Friedrich List.
Despite Cobden and Bright and their "Corn Laws" reform,
throughout the late eighteenth and the nineteenth centuries, Britain never
made a general application of a "free trade" dogma to itself, but
only to those competitors and colonies which it looted for the enrichment of
the London financial houses. To defend what Britain saw as its special
economic or related interest, she was a jealous protectionist, to the point
of war. Her policy on that point could be fairly described: "Free trade
was meant for the suckers." The "invisible hand" turns out to
be her hand in your purse.
All of the grounds for putatively professionalist objections to my
description of the speculative process, including the work of the
utilitarians, of Walras, of John Maynard Keynes, of Von Neumann, of the
modern "Chaos" theorists, and so on, are merely different
disguises for the same underlying set of mid-eighteenth-century axiomatic
assumptions introduced to Britain through the work of Giammaria Ortes. All
of the issues posed by the third of the three named classes of critics can
be addressed comprehensively, and most efficiently, by examining the crucial
differences in axiomatic assumptions separating the method of Leibniz's
influential science of physical economy from the derivatives of Ortes's
The essential difference between Leibniz's physical economy, on the one
side, and the liberal, Marxist, and neo-conservative dogmas, on the opposing
side, is between those, like Leibniz, who base the measure of economic
performance on the starting-point of human demography, and those,
like British economist Karl Marx, who are obsessed from the start with
someone's primeval hoard of "my money." First, look at
political-economy from the standpoint of Leibniz's and my own science of
physical economy, and then contrast that with the teachings of a
mathematical pseudo-science such as John Von Neumann's and Oskar
Morgenstern's famous Theory of Games and Economic Behavior.
The science of physical economy is premised upon the conclusive proof
that the human species is unique in the known universe, set absolutely apart
from and superior to all other known forms of existence. The crucial
evidence for this conclusion is found in studies of the changes of the
human species' potential relative population-density: Only mankind is
manifestly capable of willfully increasing this potential population-density
by decimal orders of magnitude.
The study of this phenomenon begins with scrutiny of two more readily
measurable sets of phenomena: changes in demography, and changes
in the per-capita productive powers of labor. First, we examine changes
in relative population-density, and then their correlatives in, second,
demographic characteristics, and, third, productive powers of labor.
As a matter of elementary scientific rigor, implicitly this study
encompasses many different cultural series over thousands of years, and even
longer, preceding our time. Of course, it also includes the past 600-odd
years since the fourteenth-century European Black Death pandemic. The
scope of the investigation indicates that the question of money is
introduced only as a tertiary feature of the studies. We are concerned
primarily with the physical relationship between society and nature as a
whole; the principles involved must be adduced without introducing any
consideration of money. Money matters are studied later, against the
background of the monetary system's interaction with the physical-economic
processes upon which money-systems are superimposed.
In demography, we begin with the obvious considerations of fertility of
households, and life-expectancy and conditions of health of households'
members by age-interval stratifications. We consider not only the typical
individual household, and also the immediate society with which the
household is associated, but also the reciprocal functional interaction of
the individual person and the society with one and another, and of both with
the entirety of the human species. We examine the productive powers of labor
in terms of a demographic model of social reproduction of the household, the
society and mankind as a whole. We measure these productive powers in terms
of the market-baskets of both households' goods and of means of production
required to maintain improvements in demographics per capita, per household,
and per square kilometer above a conjecturable "0," or so-called
We examine the effect of the development of basic economic
"hard" infrastructure (e.g., water, general land-transport, power,
sanitation, and communications) upon demographic and productive factors. We
include three qualities of services—education, health care, and scientific
and equivalent development—as "soft" infrastructure, and also
include as "hard" infrastructure the logistical means required for
maintaining these three essential categories of services to households and
To shorten the account, sum up a number of steps in the following terms:
We define consumption in terms of a roster of goods included in
market-baskets of consumption, whether by households, or by production of
goods. Excepting the three indicated special classes of services
(education, health-care, and scientific progress), the designation of goods
is limited to physical goods. These goods are listed as elements of market-baskets,
each associated with corresponding categories of the general social division
of labor in employment. We have as broad categories of market-baskets: households'
goods, hard-infrastructure goods, soft-infrastructure goods, agricultural
producers' goods, industrial producers' goods, plus a general
social-overhead allowance for consumption by other categories of employment
as a whole.
We also define economic activity by categories of land-use. We have waste
land, reserve land, land used for urbanized and rural residence,
respectively, land used for urban administrative and general social
functions, and land assigned to the categories of each of the principal
elements of the social division of labor.
In practice, in a well-designed university curriculum, economic science
starts with the study of the changes in these categories and their ratios
during the recent 550 years in western Europe and the Americas. Once the
student is familiar with the conceptions which are prompted by studying five
centuries of changes in those locations, the student is prepared to contrast
the modern European case with the qualitatively different cases during the
preceding 2,000 years of European civilization, and with the older
civilizations of Asia and Mediterranean Africa to about 6000 B.C. Those
studies prepare the student to study pre-Columbian America, Oceania, and
sub-Saharan Africa. This gives the student a global overview within the
bounds of the intraglacial warming period in which we presently dwell. And,
The ascertained cause for the somewhat correlated changes in potential
population-density, demographic profiles, division of labor, land-use,
content of market-baskets, and so on, is changes in human behavior of a
quality typified by valid fundamental scientific progress. Such scientific
progress merely typifies the quality of thinking common to the spectrum of
changes in statecraft and in Classical forms of fine arts which, together
with scientific-technological progress, cause the improvement in demographic
performance. In other words, what is reflected here is an increase in
mankind's per-capita power over the universe, as measured in respect to
per-capita power per square kilometer of the Earth's habitable surface.
The subjective cause for the increase of this power admits of no
description other than "creative powers of the individual mind."
The case for a valid fundamental discovery within the scope we assign to the
name "mathematical physics" typifies this argument. For our
purposes here it will be sufficient merely to summarize the argument
supplied in the indicated relevant sources.
Technology as creativity
In any branch of science, there is no way to avoid certain deep-going
conceptual problems without foundering forever in the incurable
incompetencies of one's own foolish babbling. In economics, the key such
conception is that of creativity.
The investigation of this conception begins, pedagogically, with the
subject of those forms of creative discovery which are most easily
represented, the mathematical form of what are justly called
"revolutionary," or "axiomatic-revolutionary" qualities
of fundamental scientific discoveries. The yardstick we apply to the study
of such discoveries and their impact is the standard of technological
progress, by which we signify increase in the qualitative powers of
physical productivity of labor per capita, per household, and per square
kilometer of usable land-area.
Once the idea of "creativity" is removed from the domain of
emotionally colored, vague imageries, and is rendered an intelligible
scientific conception of willful practice, the entirety of economic science
begins to open up for the student. Until that step is made, professors of
economics will never move much beyond the pre-Stone Age level of competence,
bungling and babbling over all of the crucial conceptions upon which this
branch of science is absolutely dependent. Once creativity is rendered an
intelligible, practically applicable conception, all of economic science
begins to open up rapidly for the student. From that standpoint, the
incompetence of all critics of the foregoing description becomes
To the degree any mathematical physics can be represented in a
mathematically consistent way, it may be represented, if only for purposes
of description, by what is termed a "theorem-lattice." That
signifies, that any formal mathematics can be regarded as a network of
theorems which are each mutually consistent with all other theorems of that
some collection. This mutual consistency is representable by a set of
interconnected theorems and postulates, such as the theorems and postulates
of a formal Euclidean geometry.
Therefore, we may think in terms of some collection of interconnected
theorems, each and all of which are not inconsistent with any among that set
of interconnected axioms and postulates. In looking at this business in that
way, we are able to conceptualize both the presently known and
yet-to-be-discovered theorems which would satisfy those restrictions. We may
describe this as all the theorems of that formal mathematical-physical type.
Against this background, consider the case, that one is able to define
experimentally a theorem which is true in nature but which is not consistent
with any previously known mathematical-physical type. Close analysis shows
that this new theorem requires a specific kind of change in one or more of
the axioms of the presently accepted form of mathematical physics. Enter
Socrates: The fun begins.
The question is thus posed implicitly. Suppose we adopt a new set of
interconnected axioms and postulates, one which conforms fully to the new
experimental theorem, which introduces only the absolutely necessary
modifications in the previously established collection of axioms and
postulates. Can we secure an experimentally valid, revised version of the
theorems of the old system which fit the new set of axioms and postulates?
In effect, that is what a revolutionary discovery in science forces us to
do. In that case, a crucial experimental theorem of those troublesome
specifications has introduced an axiomatic-revolutionary change into formal
mathematical physics. That kind of successive axiomatic-revolutionary change
has been the characteristic of both formal mathematics itself and of modern
physical science since Nicolaus of Cusa's De Docta Ignorantia of A.D.
1440. The discovery of Dmitri Mendeleyev's Periodic Law, Georg Cantor's
transfinite, Max Planck's quantum of action, radioactivity, and nuclear
fission typify the revolutionary changes which erupted at the close of the
last century and the first three decades-odd of this. Each of those required
an axiomatic-revolutionary change in our notions of physics as a whole.
Over the millennia preceding A.D. 1400, the revolutions came more slowly,
and there were even long periods of sterility, or even falling backwards in
too many cultural strains. Yet, the same principle is reflected in the
shards of very old prehistoric cultures. This type of willful increase in
mankind's power over nature per capita and per square kilometer, is what
most clearly sets the human species absolutely apart from, and above all
other known forms of existence within physical space-time.
That brings the inquiry to a crucial point: "Why must one equate
'axiomatic revolutionary' with 'creative'?" The mastery of the science
of physical economy depends upon the student's comprehending this
connection. Once this point is grasped, the essential incompetence of
today's politically correct university economists and their textbooks is
shown readily. The immediate relevance of this is that it involves proof of
the fraudulent character of the assertions of Norbert Wiener and John Von
Neumann, and their followers the idiot-savant chaos-theorists, on the
subject of the human intelligence and mathematics generally.
Logic versus creativity
Given two theorem-lattices, separated from one another by only a single
change in axiom. There is no consistency between any theorem in one of these
lattices with any theorem in the other. The difference between the two is
therefore, mathematically, a formal discontinuity. In real life, this
signifies, that in the case of every valid axiomatic-revolutionary discovery
in mathematics, or mathematical physics, once we have discovered the
axiomatic change which defines the successor theorem-lattice, we shall
always be able, on principle, to treat every theorem of the preceding
lattice as a special case of the latter; however, no theorem of the second
lattice can be reached by consistency with the axioms of the first.
This principle was well known to Plato and his associates. Plato's Parmenides
dialogue is a demonstration of the way in which a creative discovery must
appear from the standpoint of the mere formalist Eleatic (or the
Aristotelian Immanuel Kant's Critiques). To the formalist, such a
discovery appears as an inexplicable leap of the intellect.
The classical modern illustration of Plato's point is the solution to the
paradox in Archimedes' quadrature of the circle by Nicolaus of Cusa.
Until Cusa, mathematicians were fooled by the fact that a series derived
from Archimedes' construction may estimate the value of the ratio of the
circular radius, @gp, to any required decimal position. Cusa showed (A.D.
1440, 1453) that this apparent arithmetic convergence had an embedded
falsehood insofar as one assumed falsely from the apparent convergence in
numeric values that a circular perimeter was constructable in this way. The
values were, in fact, nearly equal, but never congruent. Cusa defined
circular action as of a different, higher mathematical species than the
Greeks had assumed all incommensurables to have been. Later (1697), the
physical significance of Cusa's discovery was proven for radiation of light
by Jean Bernoulli and Gottfried Leibniz, and established as the basis for
what they termed "non-algebraic" or "transcendental"
Since 1697, this discovery, known under the rubric of the continuum
paradox, has continued to be the
center of the principal methodological controversy, and a source of the most
significant classroom and textbook frauds within mathematical physics.
A crucial treatment of this from the standpoint of Karl Weierstrass's work
was given by Georg Cantor's presentation of the series of Aleph
transfinites (1897); the exposure of the axiomatic fallacies of the entire
life's mathematical work of Bertrand Russell, and also the related work of
John Von Neumann, was given by Kurt Gödel in 1931.
Despite the conclusive proof, from these and other sources, the denial of
the existence of what Riemann describes as the "continuum paradox"
persists stubbornly as a leading, fraudulent feature of the standard
mathematical physics curriculum today. As in the exemplary cases of Norbert
Wiener's popular Cybernetics and the work on economy and the human
mind by John Von Neumann, this popularized classroom fraud plays a dominant
role in the mistakenly generally accepted versions of professionally taught
and practiced economics doctrine today.
Back during the 1940s, this writer sometimes amused himself by asking
some of the pompous varieties of academics whether human life were
statistically possible. The central premise upon which this writer's 1948-52
discoveries refuting Wiener and Von Neumann were based, was the position
that a theory which cannot be shown to be consistent with the existence of
the theoretician is bad physics. In later years, a few notable thinkers have
expressed either the same or a very similar position.
Plato's Academy at Athens demonstrated their proof, that there existed
geometric magnitudes which are not congruent with rational numbers,
geometric magnitudes called "incommensurables." Later, Nicolaus of
Cusa was the first to show us that we must divide those incommensurables
into two distinct species, species which Leibniz later identified as the
"algebraic" (the lower species) and the "non-algebraic"
(the higher species), the latter commonly referenced today under the rubric
of "transcendental functions." The continuum paradox, the central
topic of Leibniz's Monadology, and the center of the work of Riemann
later, must be recognized as showing us that there exists yet a higher
species of mathematics. This is a higher domain in which the principle of
cardinality is preserved, but not ordinality as we know it from the three
lower species of mathematical domains. It is this last, the fourth and
highest domain (from Cantor's Aleph 1 and up) which enables us to represent
scientific creativity and its effects, a representation which is impossible
from the standpoint of lower orders of mathematical physics.
So, although we cannot represent scientific creativity by any of the
mathematical methods taught in engineering schools, a proper comprehension
of the work of Cantor from the standpoint of Leibniz's Monadology and
the Riemann Surface shows us how to deal with this formal problem once we
have identified the physics of representing a demographic process of
development under the impetus of technological progress.
This problem was forced upon me during the 1948-51 interval of my efforts
to define a rigorous refutation of the obvious frauds by Wiener respecting a
Boltzmann H-theorem-based definition of "negative entropy," and
Wiener and Von Neumann's mechanistic misconceptions of human thinking
processes. My approach to that problem may be summed up as part of what
ought to become standard pedagogy in any respectable university classroom in
The lesson of the internal history of mathematics, especially during the
recent 550 years of the rise of European science, is that we must always
seek to measure, but must not trust blindly the tape-measures which were
issued to us as students in the classrooms or textbooks. Sometimes, we need
to invent a new yardstick, just as we have today four distinct species of
mathematics. Until the end of 1951, I knew of but three species of
mathematics; I was about to learn a fourth, beginning January 1952.
Apply what was then, circa 1950-51, standard industrial engineering
knowledge of the structure of a successfully developing agro-industrial
economy. Define as the relevant input and output of a function an array of
households' and producers' market-baskets containing nothing functionally
significant excepting a combination of physical products plus three
categories of services: education, health care, and scientific progress.
Draw a cut through the continuing cycle of production-consumption at any
point. Measuring all inputs and outputs in terms of per capita, per
household, and per square kilometer, compare the input (consumption by
either households or producers) and output (products of infrastructure,
agriculture, mining, and industry, plus services of classical forms of
education, health care, and scientific progress).
Since any economic process trapped in a zero-technological-growth mode
must collapse "entropically," our first concern is to maintain
growth of productive powers of labor. Therefore, subtract input from output,
and divide the remainder by input: The result must be larger than
"0." The margin by which the ratio must be greater than
"0" will be an amount greater than the rate of technological
Thus far, not problematic. Term the input "the energy of the
system," and the remainder the "free energy" margin. See the
ratio as a "free-energy ratio."
Then comes the problem: Not only must there be a rate of technological
progress, to offset required growth plus effects of attrition of natural and
man-improved resources; to sustain the needed, relatively rising free-energy
ratio, the value of the energy of the system must increase per capita, per
household, and per square kilometer. No matter how we adjust the list of
items in the bill of materials and process sheets, that difficulty remains.
That locates the crucial issue.
The next step, is to refine the picture by writing down and verifying a
series of linear inequalities corresponding to the direction of changes in
the social division of labor, and demography, which accompany the indicated,
twofold transformation in the apparent functional form of rising free-energy
ratio. The principal such inequalities describing successful economic growth
of economies during the recent 500 years are described in my 1984 textbook So,
You Wish to Learn All About Economics? It is easily shown that, during
the same centuries, all economies which violated those constraints suffered
decline, that violation of these constraints is the characteristic of
There should be nothing surprising about the fact of my lines of inquiry
into these matters during 1948-52.
During the late 1940s, after the 1930s depression, and following the war,
experiencing the recession of 1947-48, and the 1949 economic recovery
sparked by the Cold War revival of the Korea conflict, all we veterans who
were reasonably sentient were aware of the anomalous fact that, during the
twentieth century to date, the only prosperous periods had been those
associated with relatively larger expenditures for the costs of war. During
those days, the U.S. and other governments were frequently charged with
seeking warfare as a way of organizing an economic recovery! Thinking about
the story behind that apparent economic anomaly did not make warfare less
wasteful of life and material; tracing out a few economic facts made clear
the reasons for the anomalous appearances.
The characteristic of modern regular warfare is exceptionally high rates
of technological attrition. Technologies are developed during a few years of
forced-draft, which would have required decades otherwise. As some of the
Manhattan Project's veterans described this to me in some detail, the
intensity of scientific collaboration in that undertaking packed decades
into about five years of research and development. If the history of
"crash program" technological development is traced from its
origin in the 1793-1814 technological leadership of France by Lazare Carnot
and Gaspard Monge, through the military and aerospace crash-programs of the
subsequent 150 years, what stands foremost for one's attention is what may
be fairly described as a four-step process for injecting high rates of
prosperous growth into any modern economy.
The top of the mountain is fundamental (axiomatic-revolutionary) progress
in science. Slightly down the slope, there is the elaboration of these most
crucial discoveries at the summit of the mountain into subsidiary
discoveries. At both levels, the new discovery prompts the design of
demonstration-of-principle experiments. As these experiments are refined,
the lessons of the successful experimental designs are taken to a place a
short distance down the slope from the two levels of scientific work: Here
we encounter the transformation of the successful experimental designs into
machine-tool or equivalent principles. Downstream from the advanced
machine-tool-design sector, we have the new machine-tools revolutionizing
product designs and productive powers of labor at the base of the mountain,
where production occurs.
In "crash program" mobilizations, not only scientific and
related progress at its most intense, but every new conception is quickly
turned into improved military or other applications. The machine-tool sector
is expanded rapidly to accommodate to this. The rate of flow of tools proven
in the highly mobilized military or aerospace applications, for example,
spills at exceptional rates into the economy in general.
The way in which to think about such experiences is stop all the wimping
and whining about budget-balancing and kindred mind-crippling, dog-like
obsessions, and concentrate upon the crucial lesson to be learned from
examining such an anomalous appearance. Concentrate upon the end-result, the
effect of delivery of large masses of technologies, at accelerated rates,
into both the improvement of product-designs and increase of the productive
powers of labor. The lesson is, that if we would use our heads, unlike the
King Louis XVI who failed, during 1783-89, to use his, we should always have
the "moral equivalent of war-mobilization." To wit: We should
insist that a large part of the total labor force be engaged in developing,
investment in, and production by high rates of massive injection of newly
discovered science and newly developed technologies into the promotion of
improved product designs and high rates of increase of the productive powers
of labor overall.
That object-lesson should reenforce our appreciation of a point which
ought to have been clear beforehand. The sum-total of the lessons for
statecraft from history and pre-history, is that creative, revolutionary
progress in scientific and analogous knowledge is not an occurrence on the
periphery of man's vision: It is the essence of human existence, it is what
distinguishes us as the Mosaic heritage specifies, as in the image of God
the Creator by virtue of our developable individual potential for creative
The anomalous aspect of the mathematical picture of a growing economy is
that the essence of the economy is not the production and consumption of
objects, but rather the upward transformation of the cycle of consumption
for production of the means of improved human existence. The creative powers
of reason are the source, the cause for that growth upon which the avoidance
of social collapse depends absolutely. The anomalous aspect of the economic
process is that the characteristic feature of a viable economic policy of
performance is human creative reason, that principle of reason which the
economic doctrine of the late John Von Neumann and the contemporary
"Chaos" theorists implicitly deny to exist.
Adam Smith has no morals
No nation as a whole has ever profitted from the dogma of "free
trade" except by employing the doctrine as a ruse for looting another
nation. The technical flaw in Adam Smith's dogma is not derived from a
defect within his nonexistent science, but originates purely and simply in
his lack of all human decency. One has but to read the moral basis for his
dogma of the "invisible hand," in his earlier, 1759, Theory of
the Moral Sentiments. Ortes is the key.
From the beginning of Venice's deployment of the Fourth Crusade to loot
and ruin the competitor power of its former master, the Byzantine Empire, in
A.D. 1204, until the collapse of the Lombard debt-bubble during the middle
of the fourteenth century, Venice ruled the Mediterranean and European usury
as an imperial maritime power. This power was threatened by the A.D. 1440
Council of Florence, leading to the alliance of nations—the League of
Cambrai—which came close to conquering and destroying Venetian power
during the first decade of the sixteenth century. In the aftermath of that,
Venice survived by placing each and all of its enemies against one another's
throat, the Papacy, France, Spain, the German Empire, the Ottoman Empire,
and England, chiefly. By playing upon the sexual susceptibilities of a
possibly insane King Henry VIII of England, Venice split England from its
close relations with Spain and with the Tudor House's ally in France. Thus,
by the close of the sixteenth century, the leading circles in England had
been captured as Venetian dupes: Walsingham and his circles around Queen
Elizabeth, and the evil Francis Bacon, and so forth, around the unfortunate
King James I. Even during the Civil War in England, Venice controlled both
sides, including the Pallavicini-linked Oliver Cromwell, and the Restoration
Stuarts after Cromwell's son and heir had been overthrown.
Those points are key to understanding the great control Venice exerted
upon not only Adam Smith, Jeremy Bentham, and Thomas Malthus, but the
entirety of what came to be identified as British political, social, and
economic thinking from the middle of the eighteenth century to former
President George Bush riding like a sick cat on the tail of Prime Minister
Margaret Thatcher's broom. During the late seventeenth and early eighteenth
centuries, in Britain, the Liberal Party of the Duke of Marlborough,
Walpole, King George I, and the notorious Hell-Fire Clubs were already known
as the "Venetian Party," as Disraeli referred to the imperial
party of mid-nineteenth-century Britain.
Venice saw London as becoming the "Venice of the North," a
worldwide maritime power, building a global empire, and moving on to
establish a system of world-government consistent with Venetian financial
and social principles. London's Liberal Party, in turn, was content to be
guided by its Venetian mentors. Still, during the eighteenth century, until
the city was weakened somewhat in its quarrel with the Genoese asset
Napoleon Bonaparte, the Venetian intelligence service was very widespread,
deeply embedded, ferally capable, and still very powerful.
The portrait of Venice's decadence during the seventeenth and eighteenth
centuries would probably turn the stomachs of even the citizens of old Sodom
and Gomorrah. Vile creatures such as Conti, Grandi, Ortes, Casanova,
Cagliostro, and, later, Capodistria, were the appropriate instruments to
devise the ultimate extreme in systematic immorality copied from Ortes's
writings by Adam Smith, et al.
Nothing could be further from the truth than the British empiricists with
their dogma respecting "human nature"; no one was more inclined to
the unnatural than these Venetian bachelors who taught them. Man is not a
creature of mere appetites and sensual passions; were man as Bacon, Hobbes,
Locke, Hume, Smith, and Bentham portray the individuals of our species, our
species would never have ascended above the level of baboon-like Yahoos
subsisting precariously upon a few berries mixed with decayed flotsam cast
upon the beaches of Africa's coast.
Human nature is that essential characteristic which sets our species
as a whole absolutely apart from, and above the beasts. That quality is the
potential for development of creative reason in every person, the quality
which the tradition of Mosaic monotheism recognizes as man in the image of
God the Creator. Human nature is a child whose mind and morals have
not yet been destroyed by a modern Frankfurt-school-style day-care center, a
loving child asking parents, relatives, neighbors, and virtually everyone
else besides: "Why?"
 See Bernhard Riemann's celebrated 1854 Habilitationsschrift,
Über die Hypothesen, welche der Geometrie zu Grunde liegen, in Collected
Works of Bernhard Riemann, Heinrich Weber, ed., Dover, New York, 1953,
pp. 272-287. For a passable translation, see Bernhard Riemann, "On The
Hypotheses Which Lie At the Foundations of Geometry," Henry S. White,
trans., in A Source Book in Mathematics, David Eugene Smith, ed.
(1929), Dover Reprint, 1959, pp. 404-425, passim.
 The cult-fad of "Chaos Theory" in
political-economy, for example, is a delusion of those Bourbaki and kindred
idiot-savants who confuse reality with arithmetic estimates assigned to
computer algorithms such as Mandelbrot figures. The influence of the late
John Von Neumann is largely responsible for the spread of this and kindred
lunacies within political-economy and other areas. Norbert Wiener, the
author of Cybernetics and co-author of "information
theory," was justly expelled from a Göttingen University seminar by
the great David Hilbert, for reason of the same methodological incompetence
which Wiener later exhibited in his outrageous notions of "negentropy,"
and his own and John Von Neumann's sick notions of the human mind.
These and kindred pathologies explain some of the reasons for the high
rate of insanity among many highly trained mathematical formalists. If one
attempts to define a "general field" theory of mathematical
formalism on the basis of the false assumption of Bertrand Russell, John Von
Neumann, et al., that externally bounding limits can be accessed as a
theorem of the externally bounded theorem-lattice, the person so deluded
must either give up that assumption, as Kurt Gödel did (for example), quit
mathematics, or become an obsession-crazed fanatic, a lunatic dwelling in
some wildly mystical paranoid's fantasy world. Thus, in the ancient Greek
cult of Delphi, it was recognized that peering out from between the cracks
of the mind of Apollo there is a leering Friedrich Nietzsche, a Bakunin, a
Richard Wagner, a Martin Heidegger, a raving Dionysos-Python, or, as
Herodotus underlines, a Satan, an Osiris, a Siva.
 Kurt Gödel, "On formally undecidable propositions of
Principia Mathematica and related systems I," in Kurt Gödel
Collected Works, Vol. I, S. Feferman et al., eds., Oxford University
Press, pp. 144-195.