Science is defined as a system of knowledge that uncovers empirical truths through the scientific method, while philosophy studies foundational ideas like knowledge, truth, and reasoning. Consider the terminality of a PhD, a Doctor of Philosophy degree. It is a degree in applying logic to a specific field. But a PhD is not required to think logically. Anybody can think logically, which is the same as thinking philosophically.

Knowledge is acquired through two methods. A posteriori, or empirical knowledge, is knowledge derived from experience, observation, and therefore memories. A priori, or logical deduction, is knowledge gained independently of experience, like mathematics. Without empirical data, you can know 10 of something plus ten of something equals 20 of something.

In fact, as you read and interpret these symbols known as letters, sequenced together to form words, which form sentences to convey complete thoughts, you are using a priori reasoning. Similarly, when listening to spoken words, we are logically interpreting the sounds to form coherent ideas. All reasoning, whether in reading or listening, involves contemplation or, deductive thinking, happening in the present moment.

Economics is an a priori science, based on logical reasoning rather than empirical data. Universities misrepresent it as an empirical science, using past data, such as charts and graphs, to predict future events. For instance, taxing a business $50,000 logically reduces its ability to invest, without needing empirical proof.

Keynesian economics or, the a posteriori approach to economics, named after economist John Maynard Keynes, is the framework taught in both public and private schools and universities that emphasizes the role of government spending and monetary policy in managing the economy. It is often presented as the mainstream or default way to understand how economies work. In the early 1900s, there were significant debates between Keynesian economics, which emphasized government intervention to manage demand, and Austrian economics or, a priori economics, which focused on free markets, individual decision-making, and the importance of savings and production.

Keynesians, led by John Maynard Keynes, argued that governments should actively stabilize the economy through spending and monetary policy via central banking, especially during recessions (i.e., through printing or digitally creating new money for their expenditures). In contrast, Austrian economists, led by Ludwig von Mises, warned that such debt-based intervention distorts markets, leads to inefficiencies, and creates long-term problems like inflation and perpetual debt.

To clarify the difference, consider this: In a priori knowledge, mathematics derives universal truths through logic alone. For example, “2 + 2 = 4” is true regardless of any empirical observation. This is how Austrian economics works: it starts with logical axioms like “humans act purposefully” and deduces economic principles universally true in all contexts, such as the law of supply and demand. In a posteriori knowledge, mathematics is a tool to describe and interpret empirical data.

Keynesian economics uses math in this way, applying it to historical data (e.g., GDP trends) to model specific, context-dependent phenomena. For instance, Keynesian mathematical formulas like the GDP multiplier are built from observed relationships in economic history, not from universally valid logical principles.

The confusion arises because Keynesian economics uses math but does not establish universal truths; its conclusions depend on empirical observations, making it a posteriori. Austrian economics, by contrast, uses no empirical data. Its logic is universally valid, through contemplative, logical thought, such as “2 + 2 = 4.”

According to Mises, Keynes merely knew how to cloak the plea for inflation and credit expansion on behalf of the government via a national central bank, known as the Federal Reserve, in the sophisticated terminology of mathematical economics, as is erroneously taught in public and private schools and universities. During the Great Depression, Keynesian ideas gained political traction because they promised quick solutions through government action, despite Mises having forecasted the depression. By the mid-20th century, most governments adopted Keynesian economics as their official approach, favoring its emphasis on demand management (i.e., printing or digitally creating new money for their expenditures) over the Austrian focus on market self-regulation and privatized banking. This marked a shift in global economic policy that persists in many countries today.

Another example of a priori knowledge as it pertains to economic science would be of the four ways to spend money. Just think about them. You can spend your own money on yourself, ensuring you get the most value for every dollar. Spending your money on someone else reduces efficiency, as their preferences may differ. Spending someone else’s money on yourself lowers efficiency further, as you have less incentive to save. Finally, spending someone else’s money on others, as governments do, is the least efficient, as neither party has a personal stake in maximizing value. Understanding banking and its relationship with the government requires logically comprehending the principles of money, which have remained unchanged over thousands of years.

Before money, there was a barter economy. A corn grower, wheat grower, and fisherman lived nearby, trading goods directly. The wheat and corn growers often exchanged wheat for corn, benefiting both. However, one day, the wheat grower’s trade offer was declined because the corn grower already had enough wheat and wanted fish instead. The wheat grower, knowing a fisherman, traded wheat for fish, then used the fish to obtain corn from the corn grower.

In this case, fish acted as money, used not for consumption but as a medium of exchange (indirect exchange). These types of mutual agreements and voluntary exchanges bring about what is known as the market, also known as the economy, civil society, or social cooperation, which means the division of labor. Over time, various items like rocks, feathers, and shells were used as currency, but gold and silver became the most popular due to their scarcity and desirable qualities. This illustrates how markets and economies naturally developed through voluntary exchanges, without the need for government or banks to create money. Economics studies the use of scarce resources with alternative uses.

Humans are born with testosterone and a natural tendency for dominance and control, leading to the concept of government and owning private property or resources. Freedom means making choices about production and consumption without government interference. Government, however, requires money to function relying on taxes from individuals and businesses to operate.

Property rights are essential to prevent conflicts over ownership, but when disputes arise, the government intervenes through law enforcement and courts, funded by taxes on productive income or consumption. Taxing consumption allows some choice over what taxes are paid, but income taxes are unavoidable and reduce production and wealth creation.

The government starts with no money and can only acquire it by taxing individuals and businesses in the economy, such as farmers and fishermen, who produce goods or property into existence, which is real wealth. This taxation reduces the private property available for investment and productivity. As more goods are produced, the trade value of each gold and silver coin in circulation increases, as there are more goods available to exchange for the same amount of money.

Goods such as cell phones, which everybody owns, have prices due to their scarcity. As demand increases and supply remains limited, prices rise; when supply increases and demand is lower, prices fall. In a free market economy, prices are determined by supply and demand. Consumers want low prices, while producers/businesses/sellers aim to maximize profits. Fair market prices arise from what consumers are willing to pay and producers are willing to accept.

Producers often lower prices to increase sales volume, benefiting from economies of scale and attracting more customers. What they lose per item, they make up through higher overall sales, gaining market share and long-term growth. People tend to buy more of what costs less and less of what costs more. This balance ensures competitive pricing while meeting consumer demand efficiently. In order for money to maintain or increase its value, it must remain scarce relative to the existing goods in the economy.

As people began saving money, banks emerged for safe storage. Early banking involved storing gold, with depositors receiving redeemable paper receipts, or certificates, which eventually became a convenient medium of exchange. Goldsmiths, acting as early bankers, noticed that few people reclaimed their gold and began issuing fraudulent paper receipts, lending more than they had in reserve. This allowed banks to profit from interest on loans. Over time, depositors demanded a share of the interest, leading to modern banking, where depositors earn interest and banks profit from the difference between what they pay depositors and what they charge borrowers. Today, those paper receipts are called dollars but individuals haven’t been able to redeem them for gold since 1933, during the Great Depression, when President Franklin D Roosevelt issued an executive order requiring US citizens to surrender their gold to the government. The US government hasn’t been able to redeem them for gold since President Richard Nixon abandoned the gold standard entirely in 1971.

Suppose you deposit money into a bank savings account and therefore into the bank's control (you’re lending the bank money). Then you borrow the same amount of money at 6% interest. If the loan is a simple interest loan, you would pay a fixed interest amount (e.g., $600 per year) on the original loan balance for the entire loan term. The banker pays you 4% interest on your savings account while you are paying him 6% interest on your loan. The bank earns 2% interest, you lose 2% interest, and you owe income tax on the growth of the money in your savings account. For an amortized loan, most of the interest is paid initially, and as a result, less interest is paid over time as the principal decreases. This structure benefits the bank more than the borrower because the bank receives a larger portion of the interest early in the loan, securing more profit upfront. The borrower pays more interest in the beginning, slowing their equity buildup.

An interest rate is the price of borrowing money or the return on lending, expressed as a percentage of the principal. The central bank of the US is the Federal Reserve banking system (the Fed). It influences interest rates by adjusting the federal funds rate, which determines the cost for banks to lend to each other overnight. This has a direct impact on fractional reserve banking in America, a system where banks hold only a fraction of deposits in reserve while lending out the remainder.

When the Fed changes the federal funds rate, it affects how much banks can lend, influencing borrowing costs, credit availability, and overall economic activity. By raising interest rates (making borrowing more expensive by reducing printing or digitally creating new dollars), the Fed aims to discourage borrowing, slowing spending and investment. Lowering interest rates encourages borrowing (making borrowing cheaper by printing or digitally creating new dollars), the Fed aims to stimulate economic growth by increasing access to credit through the fractional reserve system.

To create new money, the Fed conducts open market operations, buying government securities from banks. This increases banks' reserves, allowing them to lend more, effectively creating new money. Similarly, by lowering the reserve requirement or through quantitative easing, the Fed increases the money supply.

Inflating the money supply leads to a general rise in prices, known as inflation. When more money is available in the economy, people have more to spend, increasing demand for goods and services. If this demand exceeds supply, prices tend to rise because too many dollars are chasing too few goods. An increase in the money supply reduces the value of currency, contributing to higher prices for goods and services. The Fed's policies aim to create an environment that encourages economic stability, often through incentives like lower interest rates, which although makes borrowing cheaper, also makes saving less rewarding.

Economic investment ultimately comes from savings. In order for any meaningful investment to occur, there must be capital that has been set aside. This is the essence of savings. Savings represent deferred consumption, allowing resources to be collected and used for productive purposes, such as building businesses, infrastructure, or technology. Without savings, there would be no capital available to invest in new ventures or expansion, which means economic growth would be severely limited. Even though money serves as the medium of exchange, it's the underlying savings that matter, as they represent real resources available for investment.

Capital refers to assets or resources (goods) that are used to produce other goods and services. It is anything that can enhance the productivity of labor and help generate more value over time. Capital is essential for growth, whether it’s a tool, a piece of equipment, or even money used to invest in resources. Capital goods are the actual tools or equipment such as nets for fishing or dams for corralling fish. They directly assist in the production of consumer goods.

Combining a net and a dam to catch fish is an example of improving production efficiency through capital accumulation because it involves using multiple forms of capital (the net and the dam) in tandem to increase the overall productivity of labor. Each tool, used separately, enhances the fish-catching process, but when used together, they complement each other and create a more efficient system. This combination of tools illustrates how capital accumulation, investing in multiple productive assets, can lead to greater efficiency and higher output in the production process, reducing wasted effort and increasing yields.

Financial capital is the money used to buy those tools or to invest in production (like a fisherman saving money to buy a net or invest in the construction of a dam). In the development of national economies, financial capital is crucial because it allows businesses and individuals to invest in capital goods. As more capital goods are accumulated (such as factories, machines, and infrastructure), production efficiency increases, leading to economic growth. Financial capital drives the process of acquiring capital goods, which then directly increase production and grow the economy. Therefore, to some degree, every country is capitalistic. The only question is how capitalistic.

If a country’s government owns a significant portion of its land, labor, and capital, it tends to be referred to as a socialistic economy. If a country’s government owns all of its land, labor, and capital, it is considered communist. How free people in an economy are to produce, to consume, to determine what has to be produced, in what quantity, of what quality, and to whom such goods are to go determines how capitalistic a country is and therefore how productive and wealthy it is. Less government intervention, regulation, and taxation results in people having more freedom and more wealth.

The Federal Reserve is indirectly tied to the stock market through its influence over economic conditions, interest rates, and overall financial stability. While the Fed's purported primary mandate is to manage inflation (financial capital or money it prints or digitally creates in a computer), unemployment, and ensure the stability of the financial system, its actions have significant effects on the stock market. Here’s how the Fed is tied to the stock market.

The Fed controls the federal funds rate, which is the interest rate at which banks lend to each other overnight. This rate serves as the foundation for other interest rates throughout the economy, including those for mortgages, business loans, and bonds.

When the Federal reserve lowers interest rates, borrowing becomes cheaper, which encourages businesses to expand and consumers to spend. This often boosts corporate earnings of publicly traded companies, which can drive stock prices higher. Lower interest rates also make bonds and savings accounts less attractive relative to stocks, pushing investors and savers to seek higher returns in the stock market. As lower interest rates encourage consumers to take on debt and spend more on goods, including those produced by such publicly traded corporations, therefore boosting stock prices, they simultaneously make stocks an appealing option for consumers to save their unspent money. This is the reason it’s referred to as a house of cards. While the Fed’s policies create short-term economic growth and stock market gains, the underlying system is inherently unstable. The expansion fueled by artificially low interest rates is not based on real savings or productivity but rather on inflated credit (printed or digitally created new money) and speculative investments.

Publicly traded companies benefit from the stock market being tied to the Federal Reserve in various ways, including lower borrowing costs, easier access to capital, improved stock valuations, and greater market stability. The Fed’s policies, especially during times of economic downturn or instability, encourages an environment for corporate growth, consumer spending, and investor confidence, all of which fuel stock market performance. As a result, these companies can grow their earnings, boost shareholder value, and enhance their competitiveness in the marketplace.

The Federal Reserve's inflationary policies, while benefiting large publicly traded companies, creates significant challenges for smaller businesses, particularly in terms of access to financial capital and competition. Here’s how smaller companies face difficulties in competing with larger corporations in this environment:

1.) Impact of Lower Interest Rates: When the Federal Reserve lowers interest rates by creating new money, it becomes cheaper for companies to borrow money. Publicly traded companies receiving the newly created money buy up scarce resources, driving up their prices higher than they would have been otherwise, making them more expensive for smaller companies competing for the use of the same resources.

2.) Larger Companies Have Better Access: Large, publicly traded companies have easier access to capital markets, especially during periods of low interest rates. They can issue bonds, raise equity, or secure loans at favorable terms due to their size, creditworthiness, and established track record. In contrast, smaller businesses often lack the same access to capital markets or cannot issue bonds and shares on the scale large companies can. They are more reliant on traditional bank loans, which may not be as easily available or offered at the same favorable rates since smaller companies are perceived as higher risk by lenders and investors, leading to higher interest rates on loans and less favorable terms. This puts them at a competitive disadvantage.

3.) Consolidation of Industries and Market Power: The availability of cheap capital to larger companies can lead to increased consolidation in industries, where a few large firms dominate market share. This makes it hard for smaller companies to break into the market or compete effectively because larger firms can undercut them on price, expand more quickly, or invest in more innovative technologies.

4.) Political and Regulatory Influence: Large corporations have significant lobbying power and can influence policies and regulations that favor their interests, creating barriers to entry for smaller companies. They can also lobby for favorable tax treatment or regulatory environments, which small businesses may struggle to navigate or afford.

5.) Regulatory Costs: Large firms have more resources to comply with complex regulations or to shape those regulations in their favor. Smaller companies may find it difficult to bear the same regulatory burden, limiting their ability to grow or compete effectively.

6.) Bailouts and Favorable Treatment: Large companies, especially those deemed “too big to fail,” often receive preferential treatment during economic downturns. For example, during financial crises, large firms may receive government bailouts or other forms of support, while small businesses are left to navigate the crisis on their own.

Without the Federal Reserve banking system, government spending would be limited by how much it could tax citizens, putting real constraints on government power. While abolishing the Federal Reserve is unlikely, individuals can literally create their own banking system through mutual life insurance companies, which operate on savings rather than debt and are independent of the Federal Reserve banking system. Banking revolves around cash flow, and this concept can be applied using whole life insurance policies designed for wealth accumulation. Premiums act as deposits, building cash value that can be used as collateral for loans. This cash flow process is known as Whole Life Banking™.