trickleupeconomics - Tumblr blog

[trickleupeconomics]

How to Overtake the U.S. Economy in 3 easy steps :-)

Haven't written in forever but I've thinking lately of what I would do...say if I were in China's shoes to overtake the U.S. Economy and become the #1 economy.  It was an interesting thought experiment.  Some things were obvious and other things surprising.  So here goes.  My small checklist for overtaking the U.S. economy.  All it takes is a little patience and misinformation.

1. Peg the yen low to the dollar - for forty years!

The outcome of this of course is to export the US jobs and technology stack to China.  One way to peg the yen low is to print yen and buy US bonds which would tend to strengthen the dollar.  If I were really intent on this strategy, I might even start a sort of whisper campaign that the new economy is an information and services economy.

2. Gut the productive middle class by 'promoting' spending cuts.   

Gutting US productivity and know how obviously creates a GDP shift from ourselves to China.  Exporting jobs will gut much of the middle class, but to seal the deal, I would promote whisper campaigns perhaps through think tank funding to warn of debt disasters while promoting balanced budget efforts.  In previous blogs, I've spoken in more detail about how currency regulation works.  But the sum of it is as simple as people say it is.  We actually can print money to buy Chinese goods and we can also print money to maintain a strong national defense, subsidize the renewal of our own manufacturing and technology base, and create opportunity.  The ironic outcome of printing money towards value will be an even stronger currency

3. Stabilize a highly speculative currency until you feel you don't need it.

If your economic counterpart has been foolish enough to believe that speculation is productivity.  Coddle them.  Even use your own bond management to try and help the currency remain intact.  If at any point you feel you are ready to crash the thing.  It's super easy because..well it's incredibly unstable.  The outcome of crashing this will be a country of poor and extremely wealthy.  But the wealth will be measured in digits only because productivity will have been smashed already.

And there you have it, probably too simple yes.  

[trickleupeconomics]

Socialism in American: Brought to you by Obama? No Actually, Think 1999

Our current political dialogue, particularly among conservatives and the tea party, is highly concerned that President Obama has become the tipping point that is sending America down the path of socialism.  And while he maybe partially responsible remaking America into a socialist country, I would suggest that a massive tipping point actually occurred in 1999.  In fact, the socialist tipping point of 1999 might more accurately be called an avalanche.

Am I exaggerating? Judge for yourself. 

So just a little reminder of how we define socialism.  It's redistribution of wealth.  But more, it's redistribution by the agency of government. And it's redistribution based not on productive value given, but rather it's an arbitrary gift of government.

Before we get to 1999, let's review the last few years since the beginning of the Great Recession.  It started as a real estate bubble which popped. And since the popping of the bubble the Federal Reserve has been fighting a 5-alarm deflation fire by infusing massive amounts of money into the banking system through every mechanism available to it.  

Now as the money is infused into the banking system, it is then supposed to disperse through the entire economy through low interest loans.  But something odd has been happening in the process.  Massive amounts of money have been going somewhere, but not into the real economy.  Even now, the "Velocity of Money" is declining to abysmally low levels.  And since "Velocity of Money" is a measure of money being exchanged by us, the regular people in the country, this means the real economy is still deflating. 

So where are these massive amounts of money going?   Have you noticed Wall Street this year?  Record highs are back in the stock market.  Do you know why? Essentially free money given to Wall Street banks, and no incentive to loan it.  So guess where the money goes.  Not to loans, it goes into speculation, It goes into the stock market.  It makes everyone who is well off feel like they are much more well off.  But no new value is actually added to the economy.  

Now I'm really not blaming the Federal Reserve for what's happened. They're trying to do the job congress and the President ought to be doing. They're trying to get this economy back on it's feet.  But the real effect is that wealth with very little risk, wealth with little value added, wealth as a massive gift is being given to the already very wealthy.

The real effect is we have created...Socialism for the Wealthy.

While it is true that Obama has continued to expand Socialism for the Wealthy.  He did not start us on this path. No, the credit for our New Socialist State goes to...

Bill Clinton, Newt Gingrich, and the Republican congress of 1999.

Surprised?  I thought these guys were the great capitalists!

But in fact,  1999 is the year that Glass-Steagall was repealed.  This changed the entire structure of the banking industry, and with it the entire structure of our economy.  You see Glass-Steagall separated our banks into two types, the Wall Street investment bank.  And then the majority of our banks were boring old, Jimmy Stewart like savings and loans.  They existed for...well savings and loans.  And back when banks were structured this way, the Federal Reserve actually could stimulate the real economy by providing low interest "loans" to these banks.

So there you have it.  The first step back from Socialist America is to repair the damage that supposed capitalist conservatives have done to our system.

Reenact Glass-Steagall 

[trickleupeconomics]

Money is a Tool for Measuring the Costs of Resources

Unfortunately articles that simply attack the love of money lead people into an irrational hatred of money.

The irrational hatred of money is as flawed as love of money. The left uses hatred of money and corporations to draw people into self-destructive behavior.

Those who seek to preserve the American Experiment in Self Rule need to take a balanced approach to money. For that matter the Coinage Act of 1792 was a great example of a balanced approach to money. The goal of this act was to create an honest money.

The idea was simply that if the money was clean and honest, then it would serve as an honest foundation for trade.

The driving idea behind central banking is that central banking allows the ruling elite to influence behavior by manipulating money.

I believe that a good approach is to start by saying that "money is simply a tool for measuring the costs of goods and resources." Lovers of freedom need to attack theories that treat money as magic and demand an honest form of money. This is what I am doing in the article The Role of Money in Health Care.

[trickleupeconomics]

The Focus On Money is the Root of Our Economic Evils

There is in scripture a statement that the "love of money is the root of all evil".  Speaking of riches in this life, Jesus taught that we ought to Seek first for the Kingdom of God and all these things (that is the sufficient needs of this life) shall be added unto us. 

What do the teachings of Jesus Christ have to do with economics?  More than we ever realized.  Because you see, as our Federal Reserve focuses on stimulating and maintaining the economy through quantitative easing and low interest rates, and this policy is countered by focus on debt concerns and an out of control currency.  The result is creating a death spiral.  And a great economic evil is resulting.  We have built a FIRE economy.  Focused on Finance, Insurance, and Real Estate.  Our FIRE has been implemented with policies that focus on inflating the stock market to preserve 401Ks, re-inflating real estate values, and vastly multiplying the wealth and power of Wall Street.  The result of these policies is a false sense of wealth while no new value is created.  The result of these policies is massive shift of wealth to those who already have property and money.  The result of these policies is that we have massively redistributed property to those who already have wealth and property.  Since this redistribution of wealth occurs without real risk and without adding value.  What shall we call it?  Socialism for the Wealthy only? 

But ultimately this resulting FIRE economy will destroy both the wealthy and the poor.  Because without real value being created we are “burning the furniture to keep the house warm”.

But if creating our FIRE economy wasn’t enough.  We are now countering this by a focus on curbing our debt.  As we shut down spending for grants in arts, sciences, money and the maintaining of money increases in importance as opportunity for those without money and property declines. 

Thus our increasing focus on money has become the root of all our economic evils.  And the solution to these evils is in Christ's teaching to Seek first the Kingdom of God.  I know I know.  I have a number of atheist friends who are likely rolling there eyes at me at this point :-)  But to term Christ’s teaching in a more secular form, we ought first to be seeking for a nation of good or in different terms we must seek to be a nation of value.

And where will this value come from?  How can value begin to happen more often?  It happens when we provide Free Opportunity to each other.  And it is interesting that the greatest generation seemed to understand this.  They moved from the farms to the factories and to the computer labs.  Somehow it seems they understood that what makes America a Land of Opportunity is giving ourselves and each other opportunity.  They came from the family farms that formed the beginnings of the great American middle class.  Thousands of those farms came from free land gifted away from the government throughout the Homestead Act.  And in the tradition of the Homestead Act, they created a system of opportunity through grants for the arts, sciences, education, as well as a system of small business loans.  This system must be renewed, reinvigorated, and refined.

This greatest generation learned something we must learn again.  Granting Free Opportunity is not socialism, but is in truth the only way back out of Wall Street Socialism and back to a healthy middle class and a healthy capitalist system.  

[trickleupeconomics]

Revitalizing The Party Of Lincoln by Rediscovering Lincoln

Today will be a fascinating journey back to the beginnings of the Republican Party.  In rediscovering those old roots of the Republican Party maybe there is something there for the Republican Party of today.  Or the Democratic Party for that matter.  Whoever is smart enough to adopt these ideas again can dominate the political landscape for years to come.

As we revisit the past, there will be some themes that are very familiar to those of you who have been reading this blog all along.

In our political system, the Democratic Party is the longest lived party in our history.  It is the party of Andrew Jackson.  The Republican Party is a couple of decades younger and actually began with a meeting of 10,000 people in 1854.  By 1856, the Republican Party had a viable Presidential candidate placing 2nd among three parties.  By 1860, Abraham Lincoln became the first president from the modern day Republican Party.  The party went from nonexistent to seating a president in six years!

Clearly they had a powerful message.  And what was that message?  We can begin to discover the message with it's first Presidential candidate John C. Freemont, who's campaign slogan was "Free Soil, Free Labor, Free Speech, Free Men and Freemont".

This simple slogan had some powerful ideas behind it.  It was a slogan for building the middle class.  The idea of Free Labor at that time was that the productive class, was the labor class.  These were the small business owners, the farmers, the planters, the mechanics and others of the "producing class".  Bankers, lawyers, and speculators were excluded from this definition of laborers.  Free Laborers were those who were free from working for others.  They worked for themselves. 

As part of the endeavor to create a larger middle class or "Free Labour" population, the idea of Free Soil was introduced.  Free Soil was the thought that land could be given away for free to those willing to move to the west and settle the land.  This was opposed by the Democratic Party because it was considered to be a threat to slavery and slave owners.  After all if free land was given to the regular man the west might be settled by Free Men and not by slave owners.

So here we have a coalescing of ideas that support the very central conservative ideal that a government's justification to even exist is for the protection of private property.

Free Soil given away, allowed greater opportunity for Free Labor.  Where a man was free to labor for himself in "creating" his own private property.  And the outcome of these ideas would be an ever growing population of Free Men.

The idea of Free Soil was a very powerful one for the Republican Party, it was intended as a safety valve for the disadvantaged and unemployed to have opportunities to advance.  Horace Greeley, one of the founding members of the Republican Party went as far as to suggest the idea of a job guarantee...MMT and MMR enthusiasts listen up :-)

So we come back to Abraham Lincoln, the first president from the Republican Party.  We are all aware that succession and Civil War were underway even before Lincoln entered office.  This obviously changed the main emphasis and focus of his presidency.  But would it interest to you to know what his campaign slogan was?

"Vote Yourself A Farm"

That was it.  That was Lincoln's campaign slogan.  To the unfamiliar this slogan is just cheap pandering.  To those a little more thoughtful is is utter and complete brilliance.  Those who "Voted Themselves a Farm"  voted the country into opportunity.  And how big was that opportunity?

In 1862, the second year of Lincoln's presidency.  In the middle of the Civil War, the Homestead Act was passed.  By 1934, the Federal Government had granted 1.6 million homesteads and had given away 270 million acres of land!

No wonder the world considered America to be the Land of Opportunity.  With so very much free land, is it any wonder a people could be so free?

Today's America no longer has land to "Vote Yourself A Farm", but with a carefully regulated currency, that currency itself becomes stronger as you "Vote Yourself An Opportunity".

P.S.

If you'd like to know more about the ideas of Free Soil, Free Labor, and Free Men here is a fantastic little piece written by Eric Foner called

Free Soil, Free Labor, Free Men: The ideology of the Republican Party before the Civil War

[trickleupeconomics]

Reaganomics: Classic Trickle Up Economics, Who Knew?

Time to set the record straight on Reaganomics.  The more I've studied the era and the outcomes the more clear it is that Reaganomics was quite the opposite of it's media portrayal.  The coalition of President Reagan and  the Tip O'Neil Democrats created a wonderful environment for people to prosper, not because everything "trickled down" from business but quite oppositely, because "We The People" created an environment for the middle class to rise.

When talking Reaganomics the only thing Republicans or Democrats talk about is taxes and deregulation.  But while Reagan did make taxes flatter, note that he did not seek a flat tax.  While Reagan deregulated some industries, the financial industry was left in a well regulated state.  

These are the aspects of Reaganomics everyone focuses on.  Forgetting the more critical elements.  Because very central to Reaganomics was 

The Strong Dollar.

The reasoning behind this was that a very Strong Dollar makes it so that even the waitress has incredible buying power.  For those who remember, those strong dollar years were incredible times to travel because everything abroad was so cheap.  But there has always been a paradox with the Strong Dollar that has bothered me for years.  It's seems like an incredible balancing act to maintain a strong dollar and still retain jobs.  Because the stronger the dollar the more jobs get exported overseas.

So why in an era of the Strong Dollar, was it an era for engineers?  Why was it that in the Reagan years our universities were full of engineering students with wonderful job prospects?

The Answer?

The implicit job guarantee.

For those who are MMT or MMR enthusiasts this will definitely perk up some ears.  The untold secret that was entirely out in the open and was key to the success of Reaganomics was that there was a job guarantee.  As jobs were exported due to a strong dollar. Jobs were "backfilled" because we deficit spent to build a strong military.  As we built a strong military jobs were created THAT COULD NOT BE EXPORTED!  As we built  a strong military, low paying military jobs were available for soldiers along with high paying jobs in engineering and science.

And has anyone noticed by the way that as a result of the Reagan vision for which he was ridiculed, we now deploy anti-missile defense systems all over the world whenever tyrannic madmen threaten.

So a point needs to be revisited.  We dramatically deficit spent during the Reagan era and yet came away with a stronger dollar than ever.  Hasn't everyone told you that deficit spending will weaken the dollar?  If so then how did the Reagan "Boom" ever happen?  How did it occur that the dollar was stronger than ever out of the Reagan years of high deficit spending?

There is something extremely important to understand here.  It seems that when fiat currency or any currency is spent "towards value" the currency always becomes stronger.  The trick is, always spending towards value.

But that shall be writing for another time.  Suffice to say, focusing on balancing our budget is actually a useless and even a destructive Red Herring. 

Go back my conservative friends and really understand Reaganomics.  It looks a little more like FDR than you realize.

[trickleupeconomics]

Part Time Nation

Last fall, before ObamaCare really started to kick in I predicted that the effect of ObamaCare would be that we become a "Part Time Nation".  I was surprised at how many in the G+ community came out to tell me I was dead wrong.  I was surprised because really, I was only stating the obvious. 

Now my friends and some of my family have already felt the effects of ObamaCare.  They cannot work over 29 hours and they have no health care. This is happening among those who can least afford it, as we push them down into poverty levels.

If you've listened to President Obama carefully, he is actually very truthful about why ObamaCare is structured the way it was structured.

Everyone has to be in it so that corporations make money.

That's all you need to know.  In the effort to protect corporations both parties are repeatedly taking us down a road to ruin. In the name of a single corporate merger, Glass-Steagall was repealed.  For the benefit of corporations more than the elderly, Medicare Part D was formed. Creating a 13 trillion unfunded liability.  To protect the banks more than anyone Freddie Mac and Fannie Mae took on all mortgage risks while the banks took on all profit.  The unintended effet of Sarbanes-Oxley was that it further narrowed Corporate ownership to very liquid shareholders and executives.  And of course now we have ObamaCare bought and paid for by corporations.

But, now that we are building a "Part Time Nation" does it not occur to anyone that this is not even healthy for corporate executives.  A lowering tide sinks all ships.

[trickleupeconomics]

Marriage: It's a Children's Rights Issue

As the debate concerning gay marriage goes to the Supreme Court, I am still so very disappointed with the nature of the debate.  It seems that there are so very few asking the question, why does marriage even exist as an institution?  What is it’s societal purpose?  And with just the smallest consideration we can realize that marriage is really instituted to support and sustain the most ideal conditions for children to be born and raised.

It is true that there are thousands of different ways that children can be raised and even be successful.  In fact, there are those children who have grown up as orphans raising themselves!  But it would take a massive dose of self-deception and lying to argue that this is ideal.  Would you be one of those arguing that this is ideal?  Of course not.

So a question more close to home.  When Dan Quayle was mocked by “Murphy Brown” for arguing that children raised in single parent conditions was not ideal, who did you side with?  Were you with “Murphy” because it was popular? 

Were you one of those who would you argue even against the mountain of data that suggests otherwise that children raised with a single parent is ideal for the child?  Were  you one of those that would argue that since single parenting usually consigns children to poverty that this is what is best for children economically?

Of course you would not have.  But in a knee jerk and emotional “protest” against the Vice President that is what millions of people implicitly argued for as they mocked him.  We should be careful shouldn’t we to set aside emotional and reactionary arguments for more careful thinking should we not?  As we consider the societal consequences of changing the definition of marriage is it Ok for a moment to set aside emotional name calling of “bigotry” in order to talk more seriously as a rational people?  

Marriage, as an institution exists in large part because society has become wise enough and kind enough to seek for the best conditions possible for children.  Marriage as it has been defined is really a Children’s Rights Issue.

So the question is, if the little ones could speak for themselves, if they could march with signs and assemble as millions at the Washington Mall, what would they be asking for?  What would the signs say?  It isn’t that hard to know.  Ask yourself sincerely, how would I prefer to have been raised?

With some thoughtful consideration of this question,  you will know very clearly how the institution of marriage ought to be defined.  And you will realize that those who went before you were kind and wise and thought of the children first.  

[trickleupeconomics]

This post has been about ten years in the making and I keep avoiding actually posting this because I’m afraid I won’t do it justice. But it’s way past time so here goes.

My parents grew up in a time of rapid change. Both my mother and father grew up in farming communities. In that age and in...

[trickleupeconomics]

Robotics and Starvation in an Economy of Abundance

This post has been about ten years in the making and I keep avoiding actually posting this because I'm afraid I won't do it justice.  But it's way past time so here goes.

My parents grew up in a time of rapid change.  Both my mother and father grew up in farming communities.  In that age and in their community the horse was a major part of the "labor force".  My mother's "school bus" was a horse drawn sled in the winter with a stove pipe through the top and a wood fed stove to keep them warm.  My father plowed the fields of his childhood farm with a horse drawn plow.  In the communities my parents grew up in, horses provided all modes of community transportation.  

And now years later it's still a surprise for me to go back to the farming area I grew up in and see that "four wheelers" have taken over the last domain of labor that remained for horses.  It's true, they are no longer even needed on the farm.   One generation ago horses were a central part of the "labor force" and now they are unnecessary.  They are in fact a high maintenance issue so we use them now almost exclusively for recreation.  

What replaced the horse?  A type of robotic.  The internal combustion engine and wheels.

Is there some level of discomfort that your feeling right now?  Let me see if I can make your discomfort more clear and more...uncomfortable :-)

A simple reminder of the nature of capitalism will help us.  A capitalist is one who has been able to accumulate capital or money.  With accumulated capital they determine to take a risk on producing a good or service.  They apply accumulated capital to a labor force to produce that good or service.

Corporations provide the capability of multiplying capital accumulation by focusing capital into a singular entity.  Focused capital, an infinite lifespan, incredible patent and copyright advantages, worldwide reach, and advancing automation provide tremendous capital accumulation advantages for the corporation.  Particularly when competing against the laborer who might be trying to accumulate enough capital to become themselves a capitalist.

With the continuing rapid advancements of automation we see Walmart with an infinite lifespan continuing to accumulate capital at an ever more rapid pace.  This is good yes?  Our prices are now much cheaper and China has had great advancements through Walmart.  

But there are problems with Walmart that we all know about.  In every community that Walmart comes into the regular retail community becomes a waste land of "old world" retailers.  And what has happened to the retail industry with Walmart has already taken place in the manufacturing community in the past two or three decades as Detroit and other former manufacturing cities now lay in wasted ruin through the advancements of capital accumulation, automation, and of course China.

The Internet is also a type of worldwide robotic and a tremendous capital accumulation lever.  We now have worldwide stores such as Amazon that have replaced huge segments of the "old world" brick and mortar retail industry.  I do almost all my Christmas shopping through Amazon...how about you?  

All of these advancements provide the great capitalist advantages of ever lowering prices, and more goods and services.

But shall we get back to the horse again?  We can easily see a day in the next decade when stocking shelves at Walmart is done robotically and cashiers are entirely replaced with robotic cashiers.

And ever lower prices.

But the horse, I keep thinking about what happened to the horse.  What is my obsession with that?

Saw an interesting graphic the other day that suggested that if our current robotic population continues to increases at this rate, by 2035 the robot population will exceed the human population.  

Ever heard of the Kurzweil singularity?  Of course you have it's all Glenn Beck talks about these days.  Others have been aware of it for years :-)

The Kurzweil singularity suggests that somewhere in the range of 2035 to 2045, computers will be super intelligent   Exceeding the intelligence of humans.  Movies depict this kind of stuff more all the time.  And mostly what they depict is astonishing abundance in the robotic age.

But...can you sense your discomfort growing?  It goes back to that horse doesn't it?  Are you uncomfortably realizing something you may have already subconsciously known?

You are the next horse.  

You and I may soon become a maintenance headache in the labor force and will need to be dismissed.  So as capital centralizes into fewer hands, what becomes of the rest of the human population?  How will we resolve the strange paradox of abundance and possible starvation when the human workforce is no longer needed?

Unless capitalism understands what it faces, it will as I have suggested in the past, be taken over by inexorable forces of socialist rebellion. Because no one will even understand that an alternative exists.

And that alternative is what is talked about on this site.  The keys to renewing capitalism and conservatism are understanding as the founders clearly did the difference between property and land.  We must understand what is necessary for "We the People" to regain control our currency. By understanding, particularly how currency works (see http://monetaryrealism.com) and the difference between land vs property, we more clearly understand the difference between opportunity and entitlement.  

We must avoid becoming an entitlement society but just as importantly we must vigorously seek to renew and reinvigorate America as a Land of Opportunity.  It turns out that a well regulated, well understood fiat currency provides a tremendous advantage in accomplishing this.  

To those of the Tea Party persuasion, I strongly encourage you to study this out.  It will refine and change your priorities dramatically.  While it is true that corrupted spending needs to be staunched and rooted out of our system.  It turns out that the efforts at Balanced Budget Amendments is a Zero Sum game.  Economically the limit of the Zero Sum Game is Zero Productivity and Zero Jobs.

[trickleupeconomics]

The Economy of Clouds

Clouds astonish me.  The system of clouds is more brilliant than any conception of man by orders of magnitude.  Yet it seems to me that our schooling  in the "economy of clouds" provides a sort of license of arrogant assumption. Because we can explain it just a little it's no big deal. But for those who really think through the "economy of clouds" they are a continual miracle.   

Each day clouds gather over our oceans carrying billions of gallons of water in an "air flotilla" which travels continually across our world.   This massive flotilla "ships" billions of gallons of water thousands of miles across millions of square miles of country where it is delivered to us so freely and easily we often complain about getting too much of it.

Since I live in desert country, places along the east and west coast of the United States truly amaze me because people don't even have sprinkler system!  They know that the clouds will always deliver what they need...free of charge and just in time.  

But if you've ever been to the truly desolate deserts, these cloudless corners of our world are stark reminders of what our world would be like if clouds failed to "deliver".

So this past month in my part of the world the clouds have failed to deliver.  Each day has been another hundred degree day with the longest streak of hot winds I can remember.  At night, driving home from work has felt as though my world was going apocalyptic. With hot, dry winds, and smoke of fire and ashes coming down in place of rain.  As the sun has set, and the smoke of fire has risen, the collision of smoke and sunset has often changed the hue of the sun to an eery "blood red".  At times its been bad enough that I have wondered if the system of clouds had broken and the world was turning into Mars.

So this past Sunday, the weather report was the same as it's been all month...except with possible thunderstorms next week which would truly make our fires worse.  With no apparent end to fires and smoke and hot winds a group of people gathered and humbly recognized this gift of clouds which is so freely and continually given to us is a gift given to us by God.  And so they fasted and prayed that He might remember our need for rain.

 And now this morning which is Thursday our valley of smoke filled skies, hot winds, and sparse clouds received "shipment" of a massive floating flotilla of millions of gallons of water.  The shipment had taken about 4 days to travel a thousand miles.  Now today, water has rained down on us in an even, gentle shower all day long.  It's been a very long time since I can remember a summer downpour quite like this one.

And so I am reminded that these continual gifts of water and shade, we call clouds are from God.  And in the "economy of clouds" these gifts come more readily when we at least occasionally humbly acknowledge  the Kindness of the Giver of All.  

[trickleupeconomics]

This Country Will Not Be Able to Pay It's Debt. It's Already In the Math.

Urban legend has it that Albert Einstein once said that “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it”  Whether or not he said it I don’t know but I like it :-)

Whether you listen to Dave Ramsey or any other financial success advisor, they will say the same things about compounding interest.  You want to be getting, rather than paying interest. Of course the magic of compound interest is that it’s an exponential curve which at a given point in time seems to rapidly approach infinity.

So what if you are a country accruing exponentially growing debt over centuries?  It turns out that while debt grows exponentially, economies grow in an s-curve, as debt ultimately begins to flatten all economic growth.

The final outcome of this is that ultimately a country, any countries debt can no longer be paid off or the currency must inflate exponentially.  

It’s in the math.

Did you know that the Sumerians, Babylonians, and Israelites of the Bible not only understood this issue of debt and actually structured themselves for this?  It was called a debt jubilee.

Did you know that a country with a fiat currency could be structured to handle this?  After all if you print your own currency do you really need to issue bonds to pay for debt?

To learn more about this go to the work of economist Michael Hudson and also study more of the work of the Modern Monetary Realists. 

[trickleupeconomics]

What Health Care Reform Should Have Been

I have learned that with every piece of legislation that is created, to understand how it evolved  you must always look at which corporate interests were involved.  For example, Medicare D which adds about 15 trillion to the unfunded liabilities ledger was obviously created for Big Pharma.  And ObamaCare is really a subsidy to the health insurance industry rather than being real health care reform.

So the question is this.  Suppose that We the People rather that corporations had the greater share of representation in our government.  What would health care reform more likely have looked like?  And for just a moment, suspend the question of should it even have been done.  

 So had health care reform really been done on behalf of the people rather than corporate interests, it would have been built around Health Savings Accounts.  Corporations would have been given tax incentives to contribute to those accounts.  Tax rebates would have been given for low income people to be able load their HSA accounts.  Then, HSAs would have been paired with catastrophic insurance coverage.  In this way doctors would mostly be paid in cash, eliminating 20% to 30% of their overhead costs.  Individuals would have become more cost sensitive. And health care costs would have plummeted.

Rather than being thousands of pages in legislation, this would have been a fairly small piece of legislation

So why didn’t this happen?

Why do you think?

[trickleupeconomics]

Every economist who has looked at the mathematics of compound interest has pointed out that in the end, debts cannot be paid.

Yup.

[trickleupeconomics]

Someone to Own Them

In the last posting, it hopefully became clear that we actually have No One to Own Our Corporations because nobody actually has the owners incentive.  Ironically the class of individuals that have the most ownership incentive is the group that has the least actual ownership in our companies.  This group is the corporate employee.  Sadly, one of the effects of Sarbanes-Oxley was to dry up almost all of what remained of employee  ownership of the corporation.  And this while employees who have worked with a company for years have the most incentive for it to continue to grow and prosper so that they can keep their own employment.

So how can this ownership incentive of the employee actually work to the benefit of our corporations so that somebody actually does Own Them?

I have a rough idea of a legislative proposal to address this.  I’m hopeful that at the very least it might spur more ideas from others much more capable than myself.  

Suppose that a new type of corporation is defined.  The O-Corporation, for Owned not for Obama :-)  Suppose that the O-Corporation is defined as a publicly owned company that has also created an employee owned trust. The trust owns shares in the O-Corporation.  Now suppose also that we create a graduated tax system for the O-Corporation.   For a corporation who’s employee trust owns 30% of the company, the corporate tax would fall to 0 percent.

The hope with this simple idea is that public shareholders will favor O-Corporations over other corporations initially because of the competitive advantage of low taxation.  The hope is that public shareholders will pressure more and more companies to become O-Corporations.  Over time, as public shareholders see that a truly Owned Corporation performs better than other corporations, they will become the favored public company by virtue of ownership.

Ultimately as stated in my previous posting, the motive behind this legislative idea is that a core value in conservatism is that government and law is justified to protect private property.  And that one of the central features of private property is ownership.  Since ownership no longer really exists in the majority of our corporations, they become easy prey to squatters.  And consequently we have a growing issue of our corporations being run into the ground by squatters.

We would be foolish to just blame individuals for what has happened.  We would be wise to analyze our system and to realize that we have created a system that incentivizes corporate squatting while destroying corporate ownership.  Note in the simple solution that has been proposed, there are no new rules for others with regard to buying and selling stock. Real ownership by employees will cure a host of problems.  Also note that with this idea, unions are not nearly as interesting.  A union creates an antagonistic relationship with the Corporation and only becomes one more entity that seeks to harvest a corporation with little ownership concern.  I am convinced that had GM been an O-Corporation, employees would have insisted on changes.  But the union simply ran that company into that ground along with the CEO because they were both merely harvesting.

This idea is intentionally as simple as possible.  But if you see problems or have new thoughts or ideas feel free to post them.

[trickleupeconomics]

No One to Own Them...

I an have idea for new legislation that I believe is essential for a better structure in our capitalist system.  

But first to start with the problem this legislation would address.  This legislation or any legislation must begin with the central concept of protecting private property.  For that is what justifies government and laws in our country.  We know that private property has the quality of ownership.  A man or women who receives the fruit of their labors, by virtue of the sacrifice of labor also feels ownership and responsibility for those things that they have earned.

I review this idea because we have a growing and dangerous irony now in our country.  So many corporations and no one that actually own’s them.  It is ironic because we certainly have built corporate law in terms of ownership.  The shareholders pay a price to own these corporations.  But as we look at different classes of shareholders and then ask ourselves,  do they have the owners motive?  We will find out that there is nobody left that truly “owns” our corporations. 

First, let’s look at the common shareholder.  Currently their are two types, the large mutual fund, and the individual investor.  And now let’s realize one thing, the average holding time for a shareholder is less than 6 months.  Does this sound like a property owner with true concerns for the long term interests of the corporation?  Obviously not,  it takes no thought at all to realize that the interests of these types of shareholders more closely resembles the interests of a squatter.  They “live” on a piece of corporate land long enough to reap a harvest and then they go with no regard or concern for the interest of the corporation they “invested in”.  This class of shareholder is the majority “ownership” for corporations in America and their ownership commitment to each company is always...one mouse click away.  

So let’s look at a different class of owner.  The executive shareholder.  This hardly needs telling but we know that executive compensations have risen exponentially over a 20 year period with no “new” technology or capability to explain this meteoric rise in compensation.  Classic capitalism tells us that this type of unexplained rise in prices is not a market at all.  Something else is going on.  What happened as we know is that exorbitant compensations were put into effect to “ownership” motivate executives so that they would lead better performing companies.  The irony is that these compensations had the opposite effect.  The compensations were exorbitant and the payouts were much too quick.  Again providing the “squatters incentive” to harvest quickly, and when the corporate property was run into the ground, it didn’t matter, the executive harvest was more than sufficient for a few lifetimes. 

So what other class of shareholder do we have?  We actually do have employees as shareholders.  But this ownership actually has declined because in an irony of unintended consequences Sarbanes-Oxley dried up almost all employee option rewards.  These options and stock now go almost strictly to executives and management.

But is this really a problem?  Here is why I would suggest that it is actually a major problem.  Of all the classes of individuals that can have a ownership interest rather than a squatters interest in the corporation, it is the employee.  For the employee has a deeply vested interest in the longterm health and growth of the corporation.  Because they want their job over the long term.

So where are we now?

Lehman Brothers, a massive investment firm, established around the Civil War Era was run into the ground while CEO Richard Fuld was compensated 350 million over about an eight year period.  Meanwhile the emails of these executives was the classic dialog of squatters.  They knew they’d built a house of cards that would come down.  But they all hoped to be gone before it did.

We also have GM.  Anyone with a true investors interest knew GM was bankrupt years in advance of the actual event.  They even knew when the “jig” would be up, because it was clear when the debt trigger would hit.  And in fact they made money shorting the obvious in the marketplace!

Did CEO Rick Wagoner not know?  Of course he did.  But at 15 million a year what did it matter.  Nobody actually owned GM, the company with a wonderful American legacy.  Everyone was there to harvest it into the ground.  The executives and the unions had no ownership concern at all.  And it is a shame on us that we structured GM to have no one to own it.

But GM and Lehman are not exceptionally different than most of our corporations today.  They are in fact the norm.  What is an exception is companies that actually have an owner.  Think with me.  Do you know who those companies are?  I’ll give one example.  Steve Jobs and Apple, Bill Gates and Microsoft.  Steve was the original entrepreneur and owner of Apple.  Bill was the original entrepreneur and owner of Microsoft.  The original owner is actually an owner.

But as corporate ownership is passed from the original owner to an inheriting CEO something changes.  Ownership is lost and the squatters incentive rules.  So for us we have a twofold set of questions.  Can we have a healthy capitalist system if there is nobody to really own our corporations?  Assuredly No.

And so, what can we do to have healthy ownership for our corporations?

I’ll talk about how in my next posting.

[trickleupeconomics]

We Hold These Truths to be Self-Evident...

Words matter. Words can have a powerful impact. And few words have effected our world the way our Declaration of Independence has.

”We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness”

These words inspired our country to seek Independence. They inspired slaves to seek equal treatment under the law. They continue to inspire people throughout the world to seek for rights given to them by God and not alloted to them by government.

May I also suggest something else that is self-evident? We hold these truths to be self-evident that corporations do not have rights endowed to them by God. That these are legal entities endowed by us as a people with rights. Corporations do not stand equal with men in the eyes of God nor should they have constitutional rights equal to men. It is also self-evident that if corporations are given rights equal to men that they become our master and we become thier slave. Because in addition to having been granted constitutional rights corporations have the advantages of infinite life, international existence, and a collective of individuals. All of these advantages give corporations extra-constitutional rights over We as a People.

Words matter and can have a powerful impact.  And we weaken the words of our Declaration of Independence and of our Constitution when we "shoehorn" in rights for corporations that exist only for us as people.

For these simple reasons it is self-evident that we must move to amend our Constitution so that it’s rights are made to apply strictly to us. Strenthening our Constitution to protect our God given rights that apply to nothing else but We The People.  This is a cause that is important to all Americans but ought to be particularly important to Conservatives and those who call themselves "Strict Constitutionalists".  Oddly and ironically it is this group that seems to be asleep regarding this issue.

Please but particularly Conservatives please become a part of the Move to Amend effort at http://movetoamend.org. And tell your Congressmen and senators particularly your Conservative congressmen and Senators to do likewise.