Energy & Economics – Bound By Cycles and Natural Laws

by Charles Walters

Editor Emeritus, AcresUSA, Executive Committee Member & Former President, National Organization for Raw Materials

We’ve long assigned a primacy role in economics to the raw materials of soil, sea and sky, with the author of all energy, the sun, thrown in for good measure.

Economists, political people, even common workers scoff at this assessment -- the former two because of career-related self-interest, the latter because they have listened to and believe in economists and politicians, though it is inimical to their best interests. The “package of misinformation” sold by economists and politicians to the common folks in our society -- a package that presumes to vacate the primacy of raw materials -- is called "trade."

We are told, and too many believe, that trade among the many peoples and nationalities in the global village holds the key to peace on earth, general prosperity for all, and is set out as the solution to practically everything. The primacy of free international trade is so self-evident, the schoolmen say, that all this fundamentalism about the raw products of the earth and a physical economy isn’t worth talking about. From a personal standpoint, having been beaten around the head and shoulders by academia for several decades, it occurred to me to try again to explain how the hogs ate the chickens -- so to speak -- to a bunch of city slickers and slick merchandisers of false economic information and false hope.

"Don t even try [to connect our modern economy to the physical economy]," an economics professor once told me. "God is dead, and it’s no use appealing to order in the universe. We rely on science..." Anyone can finish that sentence in 25 words or less.

The relationship between the physical world cycles that govern the arrival on Earth of energy, both kinetic and metabolic, and the performance of the general economy can be explained, albeit not in 25 words. The prime importance of energy’s arrival on Earth is that it first creates new wealth, then trails through a multiple of economic activities until that energy is finally spent. That is formally called the “trade turn” of raw materials. Most of the confusion in economics is born of the inability of people to comprehend this role of energy in economics.


It’s probably redundant to probe back to a big bang theory of the Universe or even to harken back to Aristotle s “first cause.” For the purpose of this essay, it’s enough to go back to April 20, 1990. On that day there was an occurrence that -- if history repeats itself -- commits planet earth to two or three decades of cooler weather, civil unrest, food shortages and the collapse of many prized institutions. This event should have commanded maximum coverage on TV, in the public prints, and in proceedings recorded in the Congressional Record.

This fact, reported in the journal of the Foundation for the Study of Cycles, and in William Houston’s excellent book, Riding the Business Cycles, relates to a disturbance affecting the sun. Out-of-balance forces in the solar system touched off a chain of events that very likely will see the end of the welfare state in which some 80% of the people receive a government check of one sort or another. The event of April 20, 1990, has cropped up every 179 years for the last millennium.

It appears that the Creator’s design of the Universe calls for Jupiter and Saturn to cause a periodic imbalance to the solar system. This tampers with the magnetic forces operative in the upper layers of the sun.

Calculations have it that the sun’s output could fall up to 2%. Such a drop in mean temperatures would have the effect of moving all habitable regions above the equator some 300 miles north. The effect on crop production can be imagined. It happened in 1630 and 1810.

Extreme cold prompted masses of people to migrate in the 17th century. During this era, known as the Little Ice Age, dynasties were overthrown, and food shortages caused civil unrest. Parasitic bureaucrats were removed from government payrolls.

Cycles watchers nowadays point to the fact that a number of important cycles -- one of them a 500-year cycle -- all reached their low point in the late 1990s.

W. Stanley Jevons discovered the sunspot periodicity during the last century. Every 11.2 years the spots diminished, causing diminished cosmic nourishment of sunlight to fall on Earth, and therefore causing weather to subtract its favor from crop production.

Other cycles plug in from time to time, the basic ones dealing with the arrival of metabolic energy for the human machine to consume.

Why is all the above important? Because just as sunspots govern crop failure or bounty, agricultural commodities supply the support mechanism for national solvency. It’s all tied up in physics and Natural Law.


Now let me introduce the term “exchange mechanism.” Simply put, it’s a way for an economy to convert raw materials into money for use in commerce. Those who think and reason clearly realize that production is the author of income, albeit only after units produced are multiplied by the price. No production times whatever-the- price still means no income. Simple monetary exchanges during processing and distribution add to the price as the commodity heads through the food chain towards the consumer, but nothing adds to the product after it is produced. That is a finite physical thing.


This first principle becomes transparently obvious once it has been stated. Trade creates no overall economic income unless the buyer or seller is cheated. Trade that is sustainable over time, by its very nature, must be quid pro quo, value for value, fair to both parties. Cheating at trade creates winners and losers and is unsustainable. Likewise, gambling creates nothing. It serves only to transfer money from one pocket to the next, and also produces winners and losers.

Looking back at the U.S. economy in this century, one sees it was the capacity of institutional arrangements to intervene in the natural exchange processes of raw materials that brought on depressions and hard times as long as the cycles of nature did not decree otherwise.

To those of us in the National Organization for Raw Materials (NORM), it was the primacy of nature's gifts that suggested foundation ideas for economic science that have still to be considered.

Now that borrowing and creating money out of thin air via computer entry has become the norm, it seems useless to argue against the efficacy of that phony system before it self-destructs. This collapse, the natural cycles say, will take place during the next six years. In fact, Martin Armstrong, who is associated with the Cycles Foundation and is a financial counselor, has a computer model looking into the future that factors in data about cyclical forces.

Global capital flow is now distressed, almost as if obeying that April 20, 1990, signal from Jupiter and Saturn. Russia was debt-free when Glasnost and Peristroika arrived on-scene. Russia has now assembled some $85 billion in debt, and interest payments have been suspended, a clear signal for the International Monetary Fund to loan more money. so that the illusion of debt repayment can be kept alive.

In the meantime, the Russian nationalists have declared their intention to default. This new form of Russian roulette suggests a flow of capital out of Europe to the United States and Australia. If so, the debt trouble is not over quite yet. The Dow futures index will rise like sour cream and people who can’t cipher will believe themselves rich with a fist full of inflated dollars.

As expected, China will opt for war when its overload of people becomes unmanageable. Both China and Russia need to find external enemies or their leadership will collapse.

The bottom line on all this is a postponement of the day of reckoning that is inevitable when mathematical ambition and physical possibility part company.

Armstrong’s computer models revealed that Clinton would be re-elected, which he was. The same computer projected the demise of the Democratic stranglehold on the Congress. Electronic prognostication has it that the Republican party will split, as it did in the 19th century. All this suggests a third party president after the first election in 2000.


What would have happened if excessive debt had been outlawed? What would have been the results if the economic lessons of W.W.II had been heeded? We do not need to speculate because we have the record to rely on, elements of which were published in December, 1944, in Country Gentleman and further codified in my book Unforgiven in 1971.

As early as the mid 1930s, research by the predecessors of NORM revealed that the United States could have any level of prosperity it decided, without the threatening cataclysm of debt, simply by maintaining farm and raw materials income on par with cost factors in the rest of the economy. Indeed, data reaching back to the beginning of the Republic proved beyond a shadow of a doubt that appropriate farm and raw product income was the guarantor of full factory employment and national prosperity.

All the major interests in the U.S. economy are governed by this factor -- provided custom, law and institutional arrangements prohibit a reliance on fiat money and reckless termination of the provisions of our sacred Constitution.

The value of manufactures, labor payrolls, retail sales, transportation income, and the volume of construction, all are limited by raw materials income. They follow at an interval of a few months. Indeed, the national balance sheet is always regulated by the raw materials of the earth multiplied by the prices they command, a natural law requirement that cannot be set aside without unsound debt creation.

The annual production of raw materials represents new wealth that never existed before. Every other thing that happens in the economy simply adds value.

All the above findings emerged in 1944 from studies conducted under the auspices of the National Association of Commissioners, Secretaries, and Directors of Agriculture (NASDA). NASDA commissioned the study because its members wanted to know how it was possible to create the income needed to make full employment and the distribution of factory goods possible.

The researchers were Carl H. Wilken, Charles Ray and John Lee Coulter. It probably never occurred to any of them that one day scholars would talk about baseball teams or gambling boats generating earned income for an economy, or that debt would be substituted for earnings as though its doubling and redoubling was a continuing possibility.

It was known during the 19th and early 20th centuries that farm income was a barometer of purchasing power in the entire economy. Summed up, the Wilken, Ray and Coulter findings revealed that raw material income, chiefly that of agriculture, is the prime mover in the national economy. A byproduct of the above-named research was the discovery of a natural law, the law of exchange, which controls the complex system by which we live.

Raw material income starts the cycle, the researchers found. It is the new wealth, annually created by production. All other money involved in the process of manufacture and delivery to the consumer is money temporarily borrowed from the store of capital already in existence, and is returned to it when the finished goods are sold. It is the rate of turnover of raw materials income as it passes through the various stages of economic use that is the key.

What follows now is an in depth abstract of the concept and its literature (also see Raw Materials Economics, available from Acres U.S.A.,


The NASDA researchers found that there is a rate of turnover to this raw materials income as it passes through the several stages of economic use. "This is the key," Carl Wilken said, "the national income on an earned basis is simply the amount of raw materials income times the rate of turnover. The nation s wage fund, the manufacturing output possible, and the amount of public purchasing power are fixed by the turn of raw materials dollars." This turn is a multiplier governed by the state of the available technology and the art of its application.

Going back into the records for nearly a century, the researchers found this natural law constantly at work setting the limits of the national income on an earned basis. The rule has not changed, but the multiplier has emerged as a moving constant regulated by changes in technology and sophistication of the economic process.

In 1850, approximately half our labor force was required in the production of raw materials. The turnover or multiplier was only two. By 1925 to 1929, the national efficiency had risen enough to establish a multiplier of 3.9. By the end of World War II, a five-fold turn emerged from the statistical arrays. According to research sponsored by the National Organization for Raw Materials (NORM), the raw materials multiplier is now in excess of 7.3.

Academia slaps its side in bellowing amazement at this finding. Relying on the distortion created by debt injected into the economy as a substitute for earned income, these schoolmen believe they can prove a national income well above the one claimed for the raw materials multiplier. Nevertheless, their belief is a sham. In terms of a stable dollar, the natural law described above holds.

The distortion caused by debt figured as income marches in all directions. The work force engaged in agriculture and raw materials is vastly lower than the raw materials income extended to earned national income suggests. The shortfall manifests itself almost exactly in the standing unemployment figure and the institutionalized poverty flowing therefrom. The rest of the population is able to earn a living by taking the raw materials to the factory, processing them, distributing the finished goods, and performing other services called for by our standard of living. The unemployed and under-employed, through little fault of their own, have been forced by too-low raw materials prices to stand on the sidelines of the economy and draw checks from the government.

In an economy that operate on a sound basis, the amount of raw materials production and the price it brings determines the amount of national income that can be distributed among the several groups.

The new income this provides is starter for the whole machinery of exchange. If in balance with cost factors, the machine runs full speed. If raw materials are underpriced, the machine slows down and bad times follow.

Agriculture, of course, supplies between two-thirds and 70% of this starter income. It is the most sensitive because the food is quickly consumed and has to be replaced. Income from hard commodities such as iron, copper, stone, etc., enters the exchange equation more slowly. This reality was cemented into place, once upon a time, because agriculture accounts for broad spectrum distribution of income among increasingly greater numbers of communities and peoples who require food and fiber.


The proof of this thesis reveals itself when we examine what happens in the absence of debt injection. The years 1928 and 1932 saw raw materials production from the farms and ranches of America at approximately the same each year. But the market value of this production was cut in half in 1932. The national income also dropped to half. The raw materials multiplier remained the same. Factory payrolls took a similar drop. Specifically, acute production fell twice as much, and construction almost vanished. Eventually, when farm income moved up, the other sectors followed. Thus, we know that a failure to maintain a flow of new income from adequately-priced raw materials in turn charts the road to perdition. Consumers do not gain from low farm prices. They always spend a greater percentage of their real income for food when farm prices are low.

Charlatans always sell inflation as the way out and people like it -- at first! Wow! We now live in $100,000 homes and didn’t even have to move.


The swing of the stars and planets into cyclical alignments brings mathematical ambition to terms with physical reality. A global cooling in the offing. Something happens in the ozone and ion exchange. Cool weather energizes people. They strike off the chains of oppression. A heavy dose of reality sets in. Welfare governments discover they can’t tax enough to pay for a parasite community of bureaucrats and institutional welfare recipients.

For now, it seems self-evident that the American people can figuratively eat and digest a great deal more inflation without rebellion. At some uncertain point in the future, it will dawn on many that their real wages have been cut. The tax load necessary to sustain the parasite economy is added to every product and service. So, is the cost of ever-compounding interest brought about by substituting borrowed money for earned income. If you make enough money to pay the prices, you’re paying those taxes and interest in the products you buy. Then, the tax has to be paid on the fictional income cited on W-2 or 1099 forms. So the helpless citizen pays twice.

The point here is that inflation has not, nor can it, repeal the laws of thermodynamics. That’s physics in action. The adjustment to reality in our society is in motion. Let me count the ways we can tell.

At the end of 1991, U.S. social insurance programs had racked up $15 trillion in unfunded liabilities.

Most families are technically insolvent. Fully 70% of all white households headed by a person age 51-61 have savings of less than $53,000. Half have savings of less than $17,300 for retirement. Yet, to finance a 20-year retirement with purchasing power of $20,000 per year requires something like $317,000.

Some perceptive observers see the collapse of the welfare state as imminent. If so, family will regain its honored place.


Still, euphoria reigns supreme. It is the nature of a parasite not to kill quickly, but to defy cure.


Sometimes, at the end of a long illness, the patient has a feeling of well-being. The doctors call it terminal euphoria. That likely is happening in America today.

It is difficult to know whether the gambling sickness of the nation is terminal, or about to reach a turning point. Politics will run its course. Mathematical certainty will come about. And those who will survive and prevail must now position themselves for the difficult times such a period envisions.

Lord Reese-Mog expects silence among the lambs-called-people because the vast majority draw government checks, and not even an indictment would dampen the enthusiasm for Bill Clinton.

Bankruptcies have now topped a million per annum, and credit card debt exceeds any possibility for continuance of this insanity. Some historians believe Socrates, a formidable warrior in his youth, might have opted to be a farmer. But old Soc married Xanthippe, a hellcat, nagger and adversary in the house. Under such circumstances, what could he do other than become a philosopher? The national sickness in America may be gambling with our lives and our futures, but it is also the nagging mistress called population that wants something for nothing. Under such circumstances, what can we do other than become philosophical?