Category Archives: National Security

Will Knowledge Explosion Lead to Peace…or War?

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Some ask why prognosticators predict war over peace, as if it is blindly an easier and more provocative path to predict, rather than the harder path to achieve of world peace.

The answer lies in the historical pattern of power transitions between nations. While the world superpower period that we are in is unprecedented, regional superpower, empire, and hegemonic patterns are fairly well defined. As such, we are entering what historically has been the final phase of a hegemony, when a competing power grows powerful enough to wage war.

Hegemonies typically last for 3 to 5 generations. We are in the last generations historically of our hegemony. China already has way more people, acceptable manufacturing capacity, burgeoning technological ability, growing military strength, and a breadth of neocolonial trading relationships. The pattern for emerging war within a generation is concentrating.

Historically, when a nation emerges to wield similar capacities as the World’s dominant nation, and is not happy with the world’s economic and political systems that are designed to benefit the dominant nation, it sets the stage for war. The emerging nation attempts to bend the economic system their way, is met with opposing force of the dominant nation, and conflict erupts.

China is winning ground on all fronts. So, examining the historical patterns, the phase of our hegemony and China’s transition, and the pattern of conflict that has occurred consistently over the past millennium, some predict military conflict in the future.

A couple of trends oppose a classical war transition. One is the size of hegemonies involved. The U.S., being the most powerful hegemony that has ever existed, then requires a competitor to extend their capacity for war to unprecedented levels. Yet, China has been highly successful in gutting our military manufacturing capacity, which actually creates a more unstable environment that could lead to war simply because it equalizes power more quickly.

Another has been the resolve by which America pursues protection of hegemonic resources such as oil in the Middle East. Yet, our ten year wars have drawn us into the same economic drain that took down the Soviet Union. China, on the other hand, has been successful in creating new trading arrangements that circumvent the dollar as oil trading currency. These trends ultimately will prove the axiom of the taller you are the harder you fall, for as the greatest hegemony in history, America will fall the farthest if knocked down from our pedestal.

One hopeful trend that I discussed a few posts earlier is that the world is on the vertical slope of the information age, and gains in knowledge are progressing at light speed. It was hopeful that that Arab Spring was born from social media. The world’s citizens are connecting through the internet and are beginning to break down nationalist prejudices. There is the potential that people throughout the world will choose peace through knowledge.

Yet, history has shown that increased knowledge leads to military superiority, which leads to a higher probability of war if gained by the opposing force of the hegemony. This leads us back to why both China and the United States are attempting to fly up the vertical path of the world’s knowledge explosion to gain the upper hand. Hence, we have seen, thanks to folks like Snowden, the massive buildup of knowledge processing capacity by the NSA.

If mankind will make the leap toward removing worldwide bigoted barriers through an explosion of knowledge sharing, then Snowden will have earned a historical place as a true hero of world civilization. If, however, mankind follows our consistent historical pattern of technical superiority leading to armed conflict, then Snowden will be recorded by world history to have been simply another crack in the dyke of America’s hegemony giving way to war.

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Filed under American Governance, China, National Security, Social Media Democracy, social trajectory, War

Sage Smudging Will Not Correct Our Inner City Feng Shui

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Another day another school shooting, this time in California. Californians might suggest we burn sage. But smudging will not realign the feng shui of our burned out inner cities. Real investment in our people is what is required. Occupiers were drawn to the cities to find their voice. Rather than help them coalesce into a greater understanding that what they sought was a hopeful future and what was required could be obtained through reason, we tormented them with pepper spray showers. 

OWS was our Iran moment, our Arab spring. But this bubbling democracy of our voiceless youth was too messy. They said childish things that sounded too naively socialistic and purposeless. The danger was that they could be manipulated by a radically left wing conspiracy to seek out the assets of the elite, and this mob was too anarchist even for the Democratic mayors to tolerate so they were quashed. 

Yet they were at least able to express an instinct that this economic tsunami that washed so many good people out of their jobs was not equitable. They also instinctively knew that their dreams of owning their own homes and businesses had vanished for many for a generation. And they too could see the billions of criminal financial deals continuing to position investment houses to destroy people’s retirements while their government crawled impotently into a fetal position. Whether in gutted inner cities or in the childhood bedrooms of their parent’s homes from which they were now imprisoned, theirs would be a lost generation. 

And now, in the aftermath of what was to be a peaceful, nationwide demonstration intended to be a voice of reasoning, to allow an outlet of understanding in the wake of our economic disaster, now we see violent sparks of mass gun aggression like dangling wires on a cracked electric pole in the wake of a socially disturbed earthquake. We wonder if this is just the beginning of the damage we will uncover as the lost generation crawls out of the sewers. 

So here we are thirty five years after running into China, wondering what has happened but we can never get back what we lost and 2008 has taken what it has. We are where we are, gutted inner cities, a lost millennial generation, and all. We can hear the faint remnants of the occupiers as a call to reason but we instead choose to defiantly knee jerk into our further inner sanctum of a police state, righteously defending our turf from whatever ill will we perceive this karma to be. Perhaps, instead we can choose to reassess our point in life and choose to progress from here, to create a future for this generation, to give them hope.

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Filed under American Governance, Economic Crisis, National Security, Uncategorized

Healing From the Civil War Will Curb Gun Violence More Than Gun Control

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I digressed for a moment in 2013 for the change in hegemony is a central theme of my musing over the past couple of years. Yet, our nation’s decision to ensure that another world war would not occur does feed our gun violence as a root cause. Back to my gun control soapbox….most of the 300 million guns in this nation were not purchased to protect us from tyranny but as insurance against the alarming level of violence in our country. Yet, with some notable exceptions, fears of gun violence is not the driver of our incredibly high murder rate in America.

The Western World is conducting simultaneous experiments in social engineering to combat violent crime and reduce murder. Europe and Australia are confiscating guns and locking up only those that commit dangerous crimes while America is arming its citizens and locking up anyone who moves criminally. Which way is better if either?

America has more murders but we have always had more in our troubled history. Our gun slinging society also has only about 25% of other violence perpetrated in other countries pursuing the alternative track. Our would-be attackers do shy away from potential gun toting victims, more so than in Europe and Australia, but those that do attack are desperate enough to successfully kill their targets.

I have suggested that attacking root causes should be America’s aim much more than waging a war on guns that will be even less successful than our war on drugs. I mentioned that an overwhelming majority of gun violence is committed by inner city male youth tied to drugs and that root causes correlate to broken homes, physical and sexual abuse, parental involvement and academic failure. Should we now painfully follow this one vein of several root causes deeper into the social deficit mine?

Why are drugs such an emotional salve in our country and why are they such an economic motivator of inner city youth? Why is unemployment of inner city minorities so high? Why are our schools failing everywhere but especially in our cities? Why is there such an ethnic disparity of crime perpetrators and victims? Why are 91% of youth gangs comprised of minorities and why is a similar percentage in America’s prisons? Why do we fatalistically accept the generational transfer of criminal activity? Why do we accept such an income and opportunity disparity between races?

We should openly acknowledge that the past 50 years of social change have still only begun to heal centuries of a hateful economic engine of bondage. We should also agree that issues such as gun control, drug wars, gang violence, failing schools, and social safety nets we are merely sideline symptoms that we debate to avoid the societal cesspools resulting from our neglecting to create equitable change that will allow our nation to heal.

Obama has another four years to quietly go about initiating an infrastructure of equitable change while a disgruntled nation confusingly and begrudgingly accepts his handiwork amidst a nation dislodged by a devastated economy. Yet his God given opportunity can only act as a tediously slow catalyst to effect decades more of change that must occur before our nation’s legal and economic frameworks can finally clean up the poisons lingering from our history.

In the short timeline of our 150 year healing process since the Civil War, our nation’s wounds have scabbed, and the underlaying dermis of our scars have formed, yet violence continues to erupt at the wound causing us to debate how to protect ourselves in the healing process rather than how to speed the healing work at hand. We must not tolerate violent episodes of gun massacres while we heal. But thinking that confiscating guns will slow the violence erupting from our root causes has no historical precedence. And avoiding discussions of how to heal while focusing merely on symptoms has little future benefit.

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Are Corporate States Alien Life Forms Here to Destroy or to Help the Human Race

For forty years, lobbyists have multiplied, as has their power to write and financially support changing laws of our country for their benefit. Sensing lobbyists growing power, politicians have enacted laws to limit corporate impact, but at every turn, other laws are passed that pat corporations on their backs for their ardent support of political clients.

For forty years, corporations have been nurtured in the womb of America’s heartland as inhuman zygotes preparing for eventual world competition. Yet, even as these multinational corporations grew stronger suckling on our country’s teat, their MBA mantra of short-term gains began to separate these new life forms from their motherland.

Citizens United was a celebration of the birth of the anational corporate state, corporations large enough to exist on their own outside of the reach of any one nation. Yet having broken free of inconvenient national bindings, corporate states could not just remain stagnant babies in our world. They must now evolve and commune together for their species’ survival.

Just as mankind grew from hunters and gatherers to city-states and finally nation states; just as nation states developed from mercantilist competitors to a league of earth’s cohabitants; corporate states must also now evolve. It is natural for these corporate states to want their own legislative bodies to form compromises in the shaping of bills that minimize intercorporate conflicts and that allow each to flourish like weeds in the gardens of their host nation-states.

ALEC, the American Legislative Exchange Council, is one such advance in their evolution. It continues their path of lobbyist democracy that has defined America for the past 40 years, yet it takes corporations to their next stage of evolution of feasting on nation state’s legislative bodies for corporate gains. Unless citizens of nation states learn that their conduit of representation has been usurped, and unless we finally agree to co-opt our corporate citizens into recognizing human citizens as stakeholders in corporate successes, America will ultimately become fodder in the new world order.

As a pragmatic nationalist, I favor learning to live amongst this new life form, the anational corporate state, and to harness it, even to domesticate it as we would a farm animal if possible for the betterment of mankind.

Humans evolved from living in caves to the nation states we see today. Along the way, we formed governments. Then these governments formed alliances and finally several world bodies. It was an evolution interspersed with several revolutions.

Corporations are another life form, incorrectly identified by our supreme court as people. That is why our supreme court is a legal entity, not one paid to do biological work. But as any life form, corporations too will evolve and, similarly to people, will most likely be involved in revolutions as well along the way.

They first appeared hundreds of years ago, well before the founding of America. At first, nation states thought they could be domesticated, even house broken, like little pot-bellied pigs. Over the years, America nurtured our cute little corporations and we wrote rules for their existence, which they seemed to follow for the most part. Sure, during the big wars, they exhibited wild like tendencies, often seeming to harm their nation state keepers in the process but we thought we had a handle on how to keep them tame.

But in reality, they were learning how to tame us. They were aliens, living in our world, like little terrorists cells do today, learning our ways. Somehow, they grew big enough to control the nerve centers of nation states, our political structures. They grew powerful enough to send nation states to wars on their behalf and to enforce and install puppet governments in other nation states. And when they became too large to exist within one nation state under its monopoly regulations, they finally learned how to split cells and to pass from one body to the next just as parasites leave their hosts.

As these new life forms continued to evolve, they mutated, each learning to live as one being with cells in multiple nation state bodies, hearts in one nation state, brains in another, still more organs and muscles in others. And they thrived and grew into corporate states, not tied to any nation, anational if you will. Yet at this stage, their existence was similar to the human stage of evolution perhaps in the feudal period.
It was merely another stage of their evolution however to want to commune together eventually. Certainly, corporate states have fought each other as well as worked together complementary. Yet they have had to find their ways individually and to seek each other out as they grew and developed needs. Communing together in associations helped to identify one to another more easily. And ALEC was a natural step in their evolution. With ALEC, they could form a modest “Governmental Function” of working together to identify how nation-state laws could best be constructed to mutually help this burgeoning society of corporate states.

Now if corporate states coexisted symbiotically with humans, say as trees providing us oxygen and wood without too much harm, they would be no cause for concern. But they do not. They have learned to mutate and grow within our systems and to cause harm. One needs to merely draw a timeline out into the future a few decades to understand that the trajectory does not bode well for nation states. Therefore, obviously something must be done for the human race to coexist harmoniously with the corporate state.

Anationals are amorphous beings and that even as laws are passed to contain them, they simply shapeshift to skirt the flimflam. Of course, I do not support the silliness of such flimsy cover for obvious lobbying that creates loopholes as large as trucks to drive home democracy splintering corporatism. This needs to be uncovered and bureaucratically defended even as they shapeshift to a new attack on our Republic.

Yet they are a life form that will not be snuffed out and they will grow as a cancer to consume the lifeblood of America unless we can co-opt them in some symbiotic fashion. So rather than beat my head against the wall that has been built between anational corporate states and our access to our own politicians, my intellectual effort will be to understand how we might harness their emerging strengths for the good of America.

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Filed under American Governance, Foreign Policy, Free Trade, Multinational Corporations, National Security, social trajectory, World Sustainability

America Faces a Worldwide Economic Revolution


In the midst of America’s great economic crisis, factions from every point in the political spectrum have raised issues as causes for America’s demise. Yet most of America’s problems, when examined in the light of day, are simply symptoms of our greater issues or even just political noise, offering no real hope in deducing the core of our dilemma. America will ultimately begin a path toward our thriving future. Yet, to do so, we must first clarify the true essence of our core problems before we can agree on viable solutions.

To that end, let’s peel back the political onion to examine what some say are our core issues, and then continue to peel until we briefly reach and peer into the collective complexity of our true core. Fret not however. An onion can make one cry because of its many stinky layers, but America’s solution knives, even those identified within these bindings, can cut through all of them.

Over the past three decades, we Americans spent our way to a debt mountain and a housing bubble that will take years to correct. Factions such as the Tea Party have risen up to chastise our government and to slow its ballooning debt even as record Federal deficits are predicted to continue for at least the next decade. Theirs is a worthy cause for what seems a politically irresolvable dilemma. But even if America comes together to solve our debt issues, reducing our debt will only remove a symptom of our nation’s core problem.

If we are to reduce America’s debt without defaulting on our worldwide financial obligations, we must once again employ all able Americans in productive, well paying jobs. Yet in the midst of our bursting housing bubble, we discovered that for three decades America had also created a false employment bubble, which burst as our economy faltered. As a result of our jobs deficit, America is now in danger of lingering in a severely dampened economy for many years to come, certainly another critical symptom.

America has fallen into a monetary contraction resulting from a combination of our housing debt overhang, our poor credit and a lack of jobs. A viable turnaround solution to this monetary implosion should be immediately implemented to begin America’s journey toward our thriving path, and Congress and the President must support it. Yet, while our slowly eroding jobs base, diminished credit and housing debt overhang must be simultaneously corrected if we are to have any hope of more than a token recovery, our monetary implosion, however frightening, is still at the edge of America’s core problem.

Faced with such dismal prospects for debt reduction and job creation, America is now forced to choose between two competing constituencies. Our very concept of freedom almost demands that we support free enterprise, for it has helped America’s multinational corporations compete in the world’s rapidly transforming marketplace. Yet, the immense worldwide scale of free enterprise is now tearing apart our middle class, assaulting the American worker, and we seem powerless to even slow its destructive path. This choice between competing alternatives of either 1) supporting American businesses in their quest to rise above world competition or of 2) supporting the American worker, who is being diminished by those same corporations’ conquests, begins to converge toward the core of America’s problems. Over the past thirty years, emerging nations have conducted mercantilist attacks on America’s gross national product. Yet, our government has resisted creating the economic weapons required to defend our nation against modern hybrids of global competition.

America is already thirty years behind the curve of economic revolution. We are seemingly only observers to a world in which free enterprise is a both a bulwark of defense used by nations against those that would employ mercantilist offenses against them, and also an offensive siege weapon used by emerging corporate-states to destroy the classical defenses of nations that would attempt to resist their growing invasive economic powers.

During these thirty “standstill” years of observing the world’s economic revolution, America’s baby boomer generation rose to positions of power in business and government. In the comfort of our former world prestige, our baby boomers enjoyed the luxury of basking in decades of societal actualization. We focused our attention on America’s internal problems at the expense of creating a competitive manufacturing base. Our political struggles over competing societal goals of social justice and military superiority blinded us to our emerging jobs crisis. Yet, the hungry world fiercely competed for and took from us our very own consumers and employers.

America’s consumers naively embraced the world’s competition for our dollar. We enjoyed the low priced fruits of a desperate world’s labor, not understanding the impact that our purchases would have in the destruction of American jobs, the explosion of our debt, and the diminishment of future opportunities for America’s growth. For awhile, the savings we enjoyed from globalization offset our slowly diminishing purchasing power. Yet, over three decades, our purchases raised the world’s productivity, brought an onslaught of global competition to our shores, and ultimately replaced the American worker with an army of overseas laborers.

Eastern nations adopted hybrid economies of neo-mercantilism to rise above the fray of neo-colonialism and to position Asia for a century of prosperity. Unchecked by any natural defenses against them, neo-mercantilist nations joined forces with international banks and emerging corporate giants to concentrate the world’s economic power for China’s 21st century rise toward hegemony. In the process of this world economic shift, America’s future competitors, the corporate-states, were born.

Fierce, global competition required American businesses to employ all manners of competitive measures including intercontinental scale efficiencies. As the world would soon come to realize, the international skills multinational corporations learned to survive included those necessary to pit nations against each other and to overcome the regulatory frameworks nations imposed in vain attempts to restrict corporations’ intrusions into domestic markets.

In the process, these commercial behemoths of corporatism trampled on America’s two hundred year foundation of classical free enterprise. Within the context of our government’s regulatory framework for fair competition, America’s version of free enterprise envisioned all nations playing by our rules of engagement. In the past thirty years of economic revolution, America instead became Redcoats in the global economic war. Our structured business legal system was a bright red target easily slaughtered by guerrilla warfare of nations and corporate-states intent on pillaging America’s capital and intellectual property.

As defined by our anti-trust laws, America’s isolationist views of perfect competition required that our industries limit any one competitor’s size to well under what could be called a monopoly within our borders. Our legislated size limits were smaller than the mega-factory direct foreign investments required to compete globally. As a result, even if not the root cause of business flight, America nonetheless needlessly influenced American businesses offshore in their bid for massive customer markets such as India’s and China’s.

Some of American corporations’ resulting worldwide operations have grown into virtual states. In their unquenched quest for profit, they have created international offensive siege weapons to easily circumvent the purposes of such antiquated American concepts contained within the Sherman Antitrust Act. Many of our historically American-centric enterprises have since blurred their connections with America. Consequently, the Sherman Act has become increasingly challenged by free market advocates as an albatross of regulation. Alternately, it has been condemned by those charged with protecting the rights of consumers and domestic small businesses in America as a weak, antiquated tool of defense.

Globalization has brought competing American interests to the brink yet we dare not allow political dysfunction to keep America on the sideline of global competition any longer. We somehow must now collaborate to support America’s multinational industries’ quests while simultaneously protecting our own competitive domestic market. We must provide a pro-business environment that places America’s businesses on par with those of other countries while stopping international corporations from employing siege weapons of free enterprise against our citizens. We must provide competitive yields for capital in America to ensure America’s posterity by reversing the tide of capital outflows from our country. And we must ensure that our loose federation of American businesses can compete globally against neo-mercantilist countries. America must define the post neo-mercantilist era.

We will soon be living in a land full of global corporate giants that employ modern offensive economic weapons to consume nations. Yet unlike the neo-mercantilist countries that have attempted to create hybrid, state run industries immersed in private capitalism to compete with these futuristic monstrosities, America has not yet even begun to create its weaponry against neo-mercantilists such as China, and certainly has no viable plans against emerging corporate-states.

As America faces the prospects of diminished power in this 21st century economic revolution, we must adapt to the corporate power realities that all nations will face. Our future thriving path strategies will inevitably merge the goals of our giant, American born, corporate-states with those of our nation and its citizens. Yet our government must go beyond such surface strategies to create America’s post neo-mercantilist framework to harness the power of corporate-states for the betterment of our citizens and for all nations.

If we are to create a thriving outcome from the 21st century economic revolution for all on our finite planet, America must seek out the core of our problems and create a model for other nations to follow. Our thriving path forward begins here.

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Filed under American Governance, China, Economic Crisis, European Crisis, Free Trade, Full Employment, Multinational Corporations, National Security, social trajectory, U.S. Monetary Policy, World Sustainability

American Soldier’s Valentine, 2012


I crawled into that tunnel armed with pistol and a knife.
For my country’s freedom, gave all I had, my life.

Forget me not my valentine,
Indeed I showed you valor.
I only ask my love for you
be honored, and to matter.

For love of country fought I and died, her future now I keep.
You sent me here, now honor her, else price I paid too steep.
Yes I and fathoms more took armaments and won
to hold dear freedoms up lest they be trampled on.

Forget me not my valentine,
Apathy shreds heart asunder.
I bled red America, no more to give,
Fight back, they dare not plunder.

Standing here at Freedom’s Gate, I questioned not my duty.
Love unrequited, still I held my post, dying felt my country’s beauty.
A soldier’s fate to serve his God and country, plus fellow near…
Please America, this day remember to keep us soldiers dear.

Add sweat and tears of charity to blood that we may give.
Together, pledge shared sacrifice, America must live.

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Filed under American Governance, National Security, War

Congress Must Act Now To Save America’s Homes or Seal Our Fate!

INTRODUCTION:

As of December 2011, housing prices have fallen 38% nationally, 7% more than during the Great Depression. While pricing has already dipped below the trend line that housing might have followed had the housing bubble not occurred, the outlook is for prices to continue freefalling another 4% during 2012. Some experts predict prices could drop nationally below 50 % of peak levels or more. Yet others suggest that economic fundamentals should be supporting a leveling of prices, and they wonder if normal economics of supply and demand have abandoned the housing market altogether.

Even though they may not appear so, the rules of economics actually still do apply to the housing market, and unfortunately they point ominously to even more alarming conditions in the years ahead. While many believe that Congress makes things worse every time they fiddle with the economy, Congress really has no choice but to intervene in this housing market if we are to save a cornerstone of America’s economic future. This post describes why housing prices rose and fell, and why they will continue to fall in the absence of intervention. It suggests why half the home mortgages in America could end up underwater and disrupt our economy for decades to come if Congress fails to act.

HOUSING’S RISE:

1995: Total housing units (in millions) 112.6 Renter Occupied 35.2 Vacant 12.7

In the five decades leading up to the 2000s building frenzy, housing prices rose predictably according to the principles of supply and demand. Housing pricing surged and slumped in response to peaks and troughs of business cycles, increases and decreases in interest rates, and growing or obsolescing local market commerce. Yet, nationally, averages followed historical patterns of a gradually rising nominal price market. Adjusted for home square footage that increased with each decade, new home prices tracked inflation nationally. Housing starts followed population growth, and as a major 14 % component of America’s GDP, housing generally has led the nation out of recessions.

Beginning in the mid 1990s however, housing economics began a dramatic divergence from historical trends. For the next decade, a sustained building spree added 6.6 million more housing units than was needed to support the rise in U.S. population, as many as one million units per year. In a rationally functioning market, this excessive addition of new homes would have quickly precipitated a business cycle slump and prices would have dropped to encourage a slowdown of new housing starts. But America got caught up in a housing frenzy and added enough demand to absorb this excessive supply while bidding prices up 225% above their historical trend line, a speculation that Fed Chairman Alan Greenspan as early as 1997 called an “irrational exuberance”.

COMPONENTS OF INCREASED DEMAND:

2006: Total housing units (in millions) 126.6 Renter Occupied 34.1 Vacant 16.7

LOW INCOME BUYERS: Some blame the excessive demand that pushed pricing well above its historical trend line on low income buyers who benefited from government regulations that forced lenders to ease requirements for lending. By passing the Community Reinvestment Act (CRA) and substantially revising regulations in 1995, Congress pulled these non-traditional buyers and their higher risk into the housing market. In doing so, Congress did nudge the beginning of the feeding frenzy, but the immediate effect of adding these buyers was not a large component of demand but merely a catalyst of future demand.

More importantly to the housing bubble than the numbers of low income CRA buyers was their impact on creative financing. Being forced into accepting additional risk, banks responded by creating risk spreading financial tools to mitigate high-risk, subprime loans. These tools would later be used to set the housing industry ablaze. Without them, the Housing Ponzi could not have developed.

BABY BOOMERS: Others blame the added demand of the bubble on Baby Boomers whose retirement accounts had been consumed by the bursting of the Dot Com bubble. In need of a quick fix for their fast approaching retirements, some Baby Boomers took advantage of “exotic” loans to buy too much home at too high prices hoping for substantial returns. As more Boomers entered the market, they pushed up home prices and acquired excessive debt in the process. At the beginning of the bubble, the median home price was $120,000 and the median income was $73,000, a ratio of 1.65. At the peak, the median home price had soared to $215,000 but incomes remained the same increasing the loan to income ratio to 2.94, an unsustainable level.

To cover the shortfall of income needed to make their new debt payments, consumers relied on home equity loans and credit card debt. Between 2000 and 2006, home equity debt increased $1.2 trillion and credit card debt rose $900 billion, again to unsustainable levels. By the peak of the Ponzi, home ownership had surged from a historical 65.1 percent to a 69.9 percent of the population and home ownership debt load had increased from 65% of GDP to an unsustainable 110%.

CONGRESS: More blame the actions of Congress for the housing bubble than the addition of non-traditional buyers and overreaching Baby Boomers. Certainly the Community Reinvestment Act and its subsequent regulatory revisions in 1995, including HUD’s direction that Fannie Mae and Freddy Mac set aside 50% of guaranty funds for low income earners, increased subprime loans tenfold and increased demand. But the repeal of Glass-Steagall, through the Financial Services Modernization Act of 1999 that allowed commercial-banking, Wall Street banks, and the insurance industry to merge, created banking products that swelled demand much more. And the Commodities Futures Modernization Act of 2000, that excluded certain financial commodities from oversight by the Commodity Futures Trading Commission, the Securities and Exchange Commission, the Federal Reserve, and state insurance regulators, allowed bankers to flood the world with lucrative credit-default swaps and to push exotic retail products into a growing speculative housing market to feed the swap market. Without the collusion of Congress, the irrational exuberance of consumers needed to fuel housing’s excessive demand could not have been enticed by the resulting banking products.

INVESTMENT BANKING: Most place the blame for the Housing Ponzi squarely on the shoulders of investment bankers. To allow non-traditional buyers into the market in the mid 1990s, banks initiated low doc and low down payment introductory loans to the primary market and combined these loans with others to form securities called Collateralized Debt Obligations (CDOs) which were then sold into the secondary market to transfer bank risk off their books. While 52% of low income loans were securitized by Fannie Mae and Freddie Mac in the early years, securitization quickly became a lucrative international commodity product of investment bankers and the market topped $2 trillion at its peak in 2006.

Yet as big a profit maker as CDOs were, an even greater profit was made in the issuance of Credit Default Swaps (CDSs), a form of unregulated insurance that allowed banks to take the risk of loans off their books, to increase their loan-to-collateral values four fold, and to profit from insuring events that they thought could never occur. At the peak of the Ponzi, the CDS outstanding market topped $60 trillion and had made $4 trillion in profits for participants in just three short years, much more than the $2.7 billion paid for lobbying Congress or the $1 billion paid in campaign contributions by the financial industry (peanuts in comparison) to persuade Congress’s votes allowing this free-for-all in the decade prior to the financial crisis.

To feed this frenetic pace of profiteering, international banking required the pace of loan origination to increase even though housing prices were accelerating upward beyond traditional affordability, and thus they began what became their final phase to lure additional demand. To bring the last customers into the Ponzi before its collapse, banks introduced a myriad of “exotic” loan products. After low doc and low down payment loans came no down payment and no doc loans. Later, interest only and negative amortization loans were offered. Banks then created piggy back loans with first and second mortgages that eliminated PMI and even offered to finance closing costs. From 2003 until the peak of the Ponzi, fully 25% of mortgage loans included teaser introductory rates. And in the final two years of the housing spree, banks allowed consumers to acquire pay-option mortgages that gave them the choice each month of paying fully amortized, interest only, or even very small monthly minimum payments. All of these risky products fed the secondary CDO and CDS market with mortgage securities by targeting the U.S. market for excess demand and exuberant prices.

RISING HOME PRICES: By 2003, all semblances of historical housing pricing metrics were gone. Brokers, agents, and bankers all explained that the new measurement of housing value was not bound by either the historical rental rate of housing or the constraint of trailing American incomes, but was instead measured by a new metric, combining these traditional valuations with the rate of return of increasing home prices themselves, thus spurring a real estate bubble with the fallacies of hope and greed. Half of all home buyers responded to this new flawed ideal by purchasing beyond their means, and in the process, pushing up the price of housing.

FEDERAL RESERVE: The Federal Reserve, flush with investment from China and concerned about recession because of the bursting of the Dot Com bubble and the economic shock of 9/11, consciously chose to support the housing surge through lowering of interest rates from 2001 through 2005. As a result, average mortgage rates reduced through the period from 7.9 percent to 5.6 percent, increasing demand and supporting higher home prices.

SECURITIES AND EXCHANGE COMMISION: The SEC inexplicably allowed five of the nation’s largest brokers to waive their capital-to-debt requirements that had historically been held to a 12 to 1 ratio. The brokers responded by leveraging their capital as high as 40 to 1, adding liquidity to debt financing, fueling housing demand, and pushing up pricing. Three of the five qualifying brokers later went bankrupt or were absorbed by other firms.

In the aftermath of the financial crisis, when many are demanding prosecutions of what seems to have been criminal actions by some in the financing industry, the SEC has been loath to act. Data suggests that the SEC had significant knowledge of financial firms’ negligence in following regulations for several years prior to the financial crisis and yet the SEC chose not to act on its knowledge. If the SEC were to take action now, the resulting trials would focus as much on the SEC’s foreknowledge and complicity as they would on the potential criminality of bankers and would shine an ugly light on the revolving door between government and industry, two reasons why the SEC might conspicuously choose to continue its inaction.

THE HOUSING BUBBLE POP:

2008: Total housing units (in millions) 130.3 Renter Occupied 35.8 Vacant 18.6

Inwardly, the banking industry knew that it had stretched the bounds of credibility and sustainability as it introduced riskier and riskier loan products to create additional demand. Bankers feared that resulting aggregate loan to income ratios exceeded all historical limits and might eventually collapse. In fact, some industry insiders even began to bet against CDO portfolios of other companies through CDSs, expecting to profit on rising defaults that began as early as 2004.

So when these defaulting subprime loan cracks appeared in the dyke of this elaborate housing Ponzi, a nervous fog settled in over the entire industry and many began to speculate whether highly leveraged firms such as Bear Sterns could cover their liquidity gaps. After some banks refused to cover Bear Stearns with short term loans, confidence waned, Bear’s stock plummeted, and Bear was purchased by J.P. Morgan Chase. By allowing Bear’s leverage to grow to 35 to 1, the SEC allowed just a 1% loss of asset value to increase Bear’s leverage to over 70 to 1. In this maximum consumer debt environment, that extraordinary leverage caused market confidence to collapse. Lehman Brothers followed suit six months later with a delayed total collapse of their 40 to 1 leveraged firm.

In the after shock of Bear Sterns and Lehman Brothers, the U.S. Government stepped in to rescue Freddy Mac and Fannie Mae, made loans to AIG, put in place a $700 billion bailout of teetering banks, forced the sale of Washington Mutual to J.P. Morgan Chase, and implemented a stimulus plan to strengthen Wall Street. The two remaining firms that had taken advantage of the SECs allowance of extreme leveraging, Goldman Sachs and Morgan Stanley, abandoned their status as investment banks. One effect of such sweeping industry changes was to substantially reduce the demand for higher risk mortgage CDOs in the secondary market, thereby dampening exotic retail products which then diminished housing demand and depressed pricing.

THE UNWINDING OF HOUSING SUPPLY AND DEMAND:

2011: Total housing units (in millions) 131.2 Renter Occupied 38.3 Vacant 18.7

SUPPLY:

EXISTING INVENTORY: At the peak of the housing bubble, housing inventory for sale equaled about 4 months of sales. From that point, listed inventory rose steadily to level off at about 9 months of inventory. Additional shadow inventory being withheld from the market, such as bank REOs, has kept listed supply at about 9 months for the past two years. However, as housing prices continue to decline, more houses will be returned to banks either through walk-aways or foreclosures, adding to bank’s already significant shadow inventory. In addition, job uncertainty and job immobility due to housing illiquidity continues to add to shadow supply. If demand increases, shadow inventory will flow into the market and continue to depress pricing.

NEW INVENTORY: Demand for new construction is now running at about half of the 1.2 million new homes per year required to fill the needs of a growing population. The excess supply of existing housing and the increasing cost of new construction commodity materials have combined to keep existing housing prices well below the cost of new construction. This price differential not only pressures construction labor rates downward and reduces profitability of the new construction industry, but it causes demand to be filled by existing homes rather than new ones. Therefore the vacant inventory of existing homes is being absorbed at a rate of 600,000 units a year. At this rate, the excess 6.6 million homes that were built during the Ponzi will not be fully absorbed until 2020, extending pricing slide and/or excessive gap for years to come.

VACANCY RATE: At 9.8%, vacancy rates are about 40% higher than the 40 year historical norm. Vacancy rates increased to such historical highs for two reasons. First, housing construction lagged the housing crisis and new units were completed even as the crisis unfolded. Vacancy rates surged as these lagging units came online. Second, as the crisis unfolded, foreclosure rates increased fivefold adding to the rental population. Increased vacancy rates have depressed pricing.

RENTAL RATE: Home ownership unwound from its Ponzi peak rate of 69.9% back toward its historical averages of 65.1% as home owners gave their homes back to the banks and entered the rental market. As a result of increased demand for rentals, the percentage of new construction rental units has increased. In addition the monthly rental rate in many U.S. markets now exceeds monthly mortgage rates. The growing gap in rental versus mortgage costs suggests either that home buyers are unable or reluctant to buy and indicates a lax demand that is depressing pricing.

DEMAND:

PURCHASE RATE: At a rate of 4.9 million purchases annually, housing purchases are occurring at approximately the rate that would be expected had the bubble not occurred and had the trend of purchases extended with population growth from the early 1990s until now. The current rate of housing purchases is slightly below historical standards, but only appears depressed when compared to the excessive standard of the housing bubble. No indicators point to any trends that will materially increase purchase rates for the foreseeable future. Therefore, an extended period of excess housing supply will continue to support a long term downward drift in pricing.

Buyers have left home ownership in droves since the beginning of the housing crisis by either selling, short selling, walking away from mortgages or being forced out through foreclosures and have shifted to either rentals, sharing quarters with others, or becoming homeless. Home ownership has unwound from its Ponzi peak rate of 69.9% back toward its historical averages of 65.1%. Nonetheless, there are no indicators to suggest in this high unemployment and uncertain business environment that home ownership will level off at its historical average of 65.1%. It will likely continue to decrease, depressing demand and pricing further as a result.

REDUCED DEMAND OF SECONDARY MARKET: While the market for credit default swaps still exists and continues to destabilize the world’s economy, demand for CDSs has dropped to half of its peak of $60 trillion at the height of the housing bubble. Demand for underlying CDOs has been hampered by the scandal of claims to title that has rocked the CDO market. During the frenzy of the housing bubble, short cuts were taken that left the chain of title to millions of individual notes in question, threatening legal entanglement for years to come. At the same time, housing value deteriorated, reducing the value of their packaged CDOs and in some cases triggering repayment from their corresponding CDSs. The resulting title debacle collapsed the secondary market for CDOs, squashed the exotic loan supply, lessened demand for housing, and dampened housing pricing.

REDUCED ACCESS TO CREDIT: Banks, that had received bailouts from the Federal Government in its attempt to preserve lending liquidity, instead chose to reserve funds to enhance balance sheets. In addition, without being able to pass risky loans to the secondary market, banks tightened credit criteria and withdrew to more standard loan products, requiring PMI insurance, higher down payments, higher credit ratings, more solid work histories, and historical income to debt ratios. Tighter credit requirements diminished demand for housing and depressed pricing.

Banks also substantially retracted from the credit card market, eliminating 25% of $5 trillion available credit. In addition, banks increased average rates on credit cards from 10.9 percent to 16.2 percent. Buyers had counted on consumer credit to support their short fall between income and housing debt during the bubble, and without it, home buyers lost the ability to carry higher priced homes. Even though the financial crisis eliminated the motive to flip houses for profit and thus removed a primary reason for excessive use of credit card credit, the loss of credit as a cash management tool for existing housing dampened demand and depressed pricing.

SAVING TREND: After the housing bubble burst, consumers prudently used excess funds to pay down loans, eliminating more than a trillion in housing debt, and more than $100 billion of the peak credit card debt. Another $4 trillion is needed to reduce housing debt overhang and close to $800 billion in credit card debt still remains. If the economy and housing prices continue to drift downward, these numbers will grow. The trend toward repayment has subsided somewhat but continues to remove funds from the purchase market and to depress pricing.

INFLATION: While median salaries essentially remained stagnant throughout the housing bubble and beyond, prices for commodities have increased. As food, energy, clothing and other essential commodity prices continue to increase against a back drop of stagnant wages, less income will be available for housing which will dampen demand and depress pricing.

The Fed has signaled that interest rates will be held at essentially zero for the next two years but the Fed may be forced to change its position as external events overtake it. Housing ARM interest rates are threatened not only by creeping inflation but by rating agency threats over continued Congressional inaction, the Fed’s stuffing of long term treasuries with the its Operation Twist, and by potential overflow reaction as the Euro Zone worsens. The mere uncertainty of interest rate increases that would cause more funds to be used to pay interest instead of higher home prices dampens demand and depresses pricing.

POPULATION DEMOGRAPHICS HAVE SHIFTED: The housing bubble was driven in large part by Baby Boomers who controlled 80 percent of America’s wealth. During the bubble, they aggressively added 12 million housing units to the existing inventory of 112 million units, influencing the size and style of new inventory. Boomers reached beyond their means to buy more square footage than they needed or could afford. From the post war 1950s, the average home gradually increased from 258 square feet per person, but during the bubble, size increases swelled to over 960 square feet per person. To fill the square footage void, boomers added immediately obsolescing features such as gargantuan walk in closets, media rooms, sitting areas, and home offices that would not be valued by the following green generations.

The housing bubble burst just as the Baby Boomers began to retire, wanting to shed themselves of large houses. Their 1.7 children were flying from the nest and Boomers now wanted to condo-size. However, the 20 years following the Boomers’ births, 1965 to 1985, produced about one million less babies per year, not enough to absorb Boomer houses. This group of home buyers is now entering their peak earning and peak square footage years at a time of economic slump and increased awareness of energy and space efficiency. Therefore, the demand for large Baby Boomer houses will be diminished as contractors build new houses to meet this group’s desires. Changing demographics will place a downward pressure on Boomer housing pricing that will permeate the entire home market.

PRICE STICKINESS: 28.6 percent of homes with mortgages, or 14.6 million homes, have underwater mortgages. If the cost of selling a home and putting a down payment on a new home is included, then fully 50% of home owners cannot afford to sell their homes now. As pricing drifts downward, this figure will only exacerbate. As a result, would be buyers who cannot take the loss of a sale of their own property are trapped from entering the market, reducing demand, and depressing pricing.

Employers, who used to buy workers’ homes to initiate job transfers have ample local employee choices and can no longer justify the cost, further exacerbating a reduction of demand and thus putting a downward pressure on pricing.

GLOBALIZATION: After WWII, the United States military provided a modicum of economic stability in the world, lessening the risks of businesses transferring operations to overseas locations. As a result, mass transfers of capital and jobs to direct foreign investments increased significantly. With China’s doors opening in 1979, the U.S. flooded China with 40,000 new factories that each took away certainty of America’s future and that accelerated a trend toward wealth disparity and a diminishing middle class. The resulting impact on wage pressures over the past three decades has lowered the expectations of the new generation of home buyers, reducing demand and depressing pricing.

MONETARY IMPLOSION: The artificially stimulated economy of the past two bubble decades hid the underlying sickness of America’s base GDP. When the housing bubble finally popped, our consumer based economy was clogged with both housing and consumer debt that had been diverted from the real economy to feed the housing bubble. After the banks quickly pulled credit to protect themselves from what they knew would be a chaotic implosion, America’s consumer base had no means to continue consuming, the credit engine of small business was stopped even before small business could fulfill its current client requests, and business shortfalls translated to employee layoffs, precipitating a circular implosion of consumers, businesses, and employees wealth and debt capacity.

After the implosion, as the economy lingered without commerce or money creation, debts mounted, credit ratings suffered, and unemployment intensified. The ability of home owners to pay their mortgages decreased which in turn increased mortgage delinquencies and foreclosures and accelerated the deflation of the housing bubble, exposing the housing debt overhang.

The resulting economy now suffers from a trifecta of dilemmas. The greatest bubble America has ever experienced has led to a housing debt overhang that stifles America’s engine of consumption. It has also damaged credit ratings that have pulled American businesses’ and home owners’ access to essential cash management tools and vital growth credit. And it has led to a loss of productive jobs for 25 million Americans who without work cannot help to restore America’s economy. If a simultaneous solution to these dilemmas is not enacted, the economy will spiral lower and will create an environment for a continued downwardly drifting malaise of the housing market.

CONCLUSION:

Since the passage of the National Housing Act of 1949, Home ownership has been heralded as a benefit to American society, supporting stable families and prosperous communities. It has provided the number one source of economic security for the majority of Americans for the past six decades. However, rather than bring hope to millions of Americans that had previously been left out of the American dream, two decades of governmental policies and international banking have led to the gutting of that dream not only for those who could not afford homes previously but for tens of millions more Americans, eroding home ownership benefits in the process.

Rather than the rock of social stability that it could have been, the American home has become the proverbial albatross around the neck of the middle class, draining its limited wealth to keep banks from suffering the consequences of their prior decisions. If Congress is to stop the housing crisis’s deterioration of families and communities across America, and if it is to protect the cornerstone of our economic and national security, Congress must act now to stabilize what, by all indicators, will be another decade of housing pricing decay.

Components of my plan:

Equity for debt swap to remove excess housing debt
https://jobvoucherplan.com/2011/08/04/hawaiians-have-the-hale-housing-solution-to-right-america-housing-bubble/

Job voucher plan to employ all able Americans immediately
https://jobvoucherplan.com/must-reads/

Credit amnesty program to quickly repair business and consumer credit
https://jobvoucherplan.com/2011/09/08/yes-america-can-quickly-turnaround-heres-how/

Modified Republican multinational incentives that entice domestic investment without giving carte blanche tax holiday and that do not entice further foreign domestic investment
https://jobvoucherplan.wordpress.com/2011/10/26/our-economy-can-be-re-ignited-like-a-boy-scout-fire/

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Filed under American Governance, American Politics, China, Economic Crisis, European Crisis, Job Voucher Plan, National Security

Cautious Worldwide Win-Win Solutions Should be Sought

Vaclav Havel, Former Czech President, Commencement address at Harvard University
Cambridge, Massachusetts, May 1995
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http://www.humanity.org/voices/commencements/speeches/index.php?page=havel_at_harvard
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The problem with the premise of Vaclav Havel’s speech stating that we have essentially reached a single global society is that he contradicts himself throughout as if to say that it is merely his hope for future global achievement. I do not see evidence that mankind is evolving toward his ideal. Havel idealists can point to certain social structures and advances in the precedence of laws to suggest that we are progressing as a species. For instance as of 1981, all nations on earth have passed laws against slavery. And yet, others would point out that the earth contains more slaves in 2011 than at any other time in the recorded history of mankind.

We can point to the relative peace that has been achieved since WWII but this peace is not without precedence and has been at the extraordinary cost of the United States as hegemonist spending more than all other nations combined on military assets and personnel and creating technologies that could destroy the world many times over. And yet, with all this extraordinary expense of national will power, the number of battles has not decreased nor has the atrocities committed by nations or men.

We can point to the evolution toward democracy intertwined with capitalism as a trend away from the captive ideas of feudalism and mercantilism, yet where on Earth does true democracy exist? Globalism has reversed any trend toward economic and social freedoms envisioned by those that espoused the virtues of free enterprise of capitalism back toward even larger geographies of quasi-feudalism and mercantilism.

The nature of man is unfortunately not evolving at any measurable pace. The capacity of all is toward evil although 99 percent seek our better natures. The 1 percent who are ruled by their own sociopathic desires find positions of power when opportunities arise with which to pursue societal evil played one nation upon the other. The tools with which to accomplish this evil are unfortunately far outpacing mankind’s social progress.

To protect ourselves from those evil doers who have successfully harnessed other nations or societies, our societies have evolved to nation states and even larger civilizations of shared histories, shared cultures, and shared socioeconomic futures. However, because of the nature of mankind, we are far from evolving to a society that encompasses the entire world.

So mankind must cautiously move forward accepting as best we can winning compromises that allow others to win as well. Cautiously because we do not know if like all other bubbles of this period, that relative peace and cooperation are a bubble as well.

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Filed under American Governance, European Crisis, National Security, social trajectory, War, World Sustainability

The Solution is Relatively Simple if The Will is Relatively Strong


Without extraneous noise from various American factions over the past thirty years, the logic for how America fell into this economic mess is relatively straight forward. The reasons why previously tried and currently proposed solutions will not work are equally as coherent. A solution for digging America quickly out of the circular predicament we are in is relatively straightforward. What is not straight forward is the gerrymandered path through Congress to do what is needed on behalf of the American People. What follows are general truths (although each has exceptions to the rule). See if you agree.

What do we know?

• The Western World’s banks lent to both businesses and consumers beyond historically safe levels for three decades. As a result:

oThe West is now bloated with excess private debt
o The economy is struggling to pay debt loads and default rates are high
o Debt repayment has absorbed discretionary revenues that would otherwise be invested into a growing economy

• America used excessive bank credit to spend beyond its means for the past three decades. As a result:

o Money was available to fund speculative bubbles. Higher bubble values in turn made more money available to spend on consumer needs during the bubble rises
o Investment and housing bubbles propped up 15 million jobs beyond what the underlying economy would have otherwise if America simply spent within our means
o As real economy jobs transferred to the East, America’s underlying weakening economy was hidden by our continued excess spending

• America’s Federal Government borrowed to pay for welfare and warfare for four decades. As a result:

o America’s public debt grew to 100% of GDP, a level that could absorb all public discretionary spending if interest rates rise, spending that would otherwise assist a growing economy
o Further increases in Federal debt could result in America’s credit rating being lowered which in turn could force higher interest rates

• The rubber band of excess spending could only stretch to finite limits. As a result:

o When the limit was finally reached, Banks knew first and moved quickly to protect themselves from what they knew would be a free fall by closing credit lines, charging exorbitant rates on outstanding credit debt, and stopping lending even to credit worthy consumers
o Without access to consumer credit to cover the shortfall between incomes and housing debt, consumer demand stalled
o Without access to credit, the housing bubble popped and housing prices freefell
o To make ends meet, consumers cannibalized financial investments and investment prices fell
o Within a very few years, much of America’s housing and commercial real estate debt far exceeded the value of underlying properties

• With the collapse of housing values and credit, the plug was pulled on the artificial engine of growth. As a result:

o Consumer demand contracted
o Demand for labor then contracted and jobs were lost
o Federal tax revenues contracted as unemployment rose
o Lower housing values reduced state and local tax revenues

• State governments that required balanced budgets and local governments, dependent on housing tax revenues were rescued initially by Federal stimulus dollars. As a result:

o State and local governments failed to react quickly and responsibly to a permanently lowered tax base.
o Many states and municipal governments came perilously close to default

• American multinational businesses were buoyed by Asian GDP growth but our domestic businesses were hammered by a weakened domestic economy. As a result:

o Multinational businesses secured substantial cash balances but withheld investing over concerns of the world’s teetering economy
o Domestic businesses shrank with the contracting economy, lost access to credit, and laid off employees to survive.

How does America wish to respond to the crisis?

Republicans want to:

• Protect military spending
• Recover through less government spending, lower taxes, and less regulations

Yet:

o Even without cutting taxes, balancing the federal budget will require cutting 43 cents of every dollar the federal government now spends
o Military spending and its hidden ancillary spending cost a third of the federal budget. Without drastic cuts to military expenditures as well as all other federal expenditures, the federal budget cannot be balanced.
o If we do not curb deficit spending to quickly achieve a balanced budget, America’s interest rates will rise and cut off federal discretionary priorities
o Lowering taxes without cuts in government spending that offset not only the tax cuts but the extreme deficits now in place would exacerbate an already dangerous interest rate precipice

Compromise issues:
o Government spending is steadily increasing. Government spending increases and not just rate reductions in increases must be reversed.
o While lower taxes are one way to provide the private sector additional revenue for growth, it is not the only way. The private sector can acquire investment capital by other means if credit can be accessed.

Democrats want to:

• Increase social programs, secure social agencies, and protect entitlements
• Recover through stimulus spending and supporting state and local budgets
• Increase taxes on the wealthy to pay for social programs

Yet:

o Even without reducing government spending, federal taxes would have to increase 75 percent across the board to balance the budget
o The United States could not spend enough to stimulate the entire world’s demand in order to recover from a worldwide monetary implosion. Thus far, $2 trillion in stimulus spending and $15 trillion in loans has budged the world’s economy little and has had no multiplicative effect.
o It is evident that the economy will not recover enough to offset stimulus spending with increased tax revenues. Therefore, stimulus will further exacerbate the federal debt and invites a faster debt rating reduction and higher interest rates

Compromise issues:
o To balance the budget, social welfare spending must be reduced, along with all other budget line items, to much less than America spends today
o To at least maintain America’s middle class standard of living, GDP growth must keep up with population growth. GDP growth must be supported by investment capital. Congress must either redistribute Federal spending to support higher private sector productivity, lower taxes to free up private sector investment capital, or entice business to invest domestically by creating a better business environment

America’s unemployed and underemployed want to:

• Find productive employment
• Gain access to credit
• Reduce their debt payments
• Eliminate their housing bubble debt overhang
• Regain savings for retirement

Yet:

o Jobs will not become available until businesses begin to rehire
o Businesses will not begin to rehire until the economy improves
o The economy will not improve until consumers increase purchases
o Consumers will not increase purchases unless they can pay existing debts and have enough left to increase discretionary purchases
o Consumers will not have additional funds without increasing incomes, repairing credit ratings, and gaining access to more credit
o Consumers cannot increase incomes unless the 25 million un-or-under employed gain employment, cannot repair credit ratings without increasing income, and cannot gain access to more credit without repairing credit ratings
o Consumers cannot gain employment until businesses begin to rehire
o And thus the circular argument of an imploded monetary economy………….

Compromise issues:

o In an imploded economy, consumer demand and business supply cannot be corrected in isolation, but must be repaired simultaneously.
o Democrats tried to fix both consumer demand and business supply through artificial government stimulus, but it was not large enough or economically diverse enough to reignite the economy, and it did not attempt to simultaneously correct the underlying debt and credit issues that also must be repaired in tandem for an imploded economy correction to adhere and affect a turnaround.
o To create enough turnaround friction, stimulus must bubble up from the economy wide full employment, improved credit ratings, and access to both consumer and business credit. Government cannot possibly spread stimulus broad enough or create a large enough stimulus through spending programs alone
o Republicans have offered to correct the economy by creating a better business environment through lower taxes, fewer regulations, and multinational businesses incentives. However, the Republican plan for reigniting the economy only addresses methods for attracting capital back to the United States, hoping to make the U.S. a better alternative for multinational corporations to spend capital than elsewhere. Yet multinational businesses are not spending their capital anywhere and will not until the global consumer demand improves. And at this time, Republicans are not offering any solutions to improve the global business environment.

A viable turnaround solution requires that:

• All able Americans immediately return to work
• U.S. consumers are freed from the weight of housing debt overhang and credit ratings that were damaged by the worldwide monetary implosion
• The dollar is uncoupled from attempting to stimulate the entire Western world.
• Multinational Corporations be enticed to bring investment capital into an economy that has already begun its turnaround
• Federal, state, and local governments not be allowed to skim needed growth capital out of a delicately growing economy

One viable solution includes:

• Job voucher plan to employ all able Americans immediately

https://jobvoucherplan.com/must-reads/

• Equity for debt swap to remove excess housing debt

https://jobvoucherplan.com/2011/08/04/hawaiians-have-the-hale-housing-solution-to-right-america-housing-bubble/

• Credit amnesty program to quickly repair business and consumer credit

https://jobvoucherplan.com/2011/09/08/yes-america-can-quickly-turnaround-heres-how/

• Modified Republican multinational incentives that entice domestic investment without giving carte blanche tax holiday and that does not entice further foreign domestic investment

https://jobvoucherplan.wordpress.com/2011/10/26/our-economy-can-be-re-ignited-like-a-boy-scout-fire/
https://jobvoucherplan.com/2011/06/18/can-the-coming-world-depression-learn-anything-from-the-great-blackout-of-1965/

• Republicans and Democrats do the heavy lifting of deciding together which programs will be cut, how to best run the military with a much reduced budget, how to extend the life of entitlements with a much reduced budget, and how to reduce Congress’s incentive to hold to a balanced budget.

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Filed under American Governance, American Politics, Federal Budget, Jobs, Multinational Corporations, National Security, U.S. Monetary Policy, U.S. Tax Policy

How will America be Protected from Our Developing Police State Subculture?

A danger exists in America that cultural shifts occurring below the surface of our daily lives can take away our freedoms without our knowing that these shifts exist or without our even having the chance to defend against them. I have argued that global capitalism is a subculture that has severed jobs and that has lowered America’s expected future economic growth. Recent events have demonstrated that Homeland Security initiatives could also have already restricted America’s freedoms more than we even know without our knowledge. Seemingly rogue incidents of excessive force by a few officers in disparate police forces across America could be early indications of an unseen sea change of police powers that has restructured America since 9/11.

9/11 warned America that our way of life could be forever stolen by a terrorist nuclear detonation in our nation’s capital or financial center. Because such an event could debilitate the future of hundreds of millions of people not only in America but around the world, it necessarily called for the accelerating escalation of detection, surveillance, deterrence and reactionary capabilities to minimize the chances that any such cataclysmic threat could ever occur. As a result, America has spent billions in new technology, systems, personnel, training, integration, and interoperability on local, state, and federal police and intelligence communities to increase the capability of the United States to stop terrorist acts before they occur.

The activities taken under the umbrella of Homeland Security to interweave our domestic defense community have tested our nation’s perspective of constitutional freedoms and their appropriate restrictions in the name of security. In attempting to balance freedom and security over the past ten years, our nation has created a security subculture. Many Americans were shocked recently to see the public face of that subculture’s rationale demonstrated by police forces in response to Occupy Wall Street’s peaceful exercise of democracy. Did Occupy Wall Street expose the camel’s nose under the tent of too great a removal of America’s Constitutional freedoms as we are becoming inculcated to new security measures deemed necessary by those in authority?

A gradual acceptance of perpetual defense against terrorism can itself create authoritarian tyranny. America is not immune to such gradual changes occurring underneath the view of our consciousness. As an example, while the Moral Majority amassed public power in the 1980s, underneath the surface, America became less attached to its views. Ultimately, America reacted in a way unexpected by the Moral Majority showing that a subculture had grown below the political surface. If this social subculture ultimately was exposed by an unexpected and unrelated fluke event, then perhaps well ahead of any definitive proof that an undercurrent of a building police state could be happening now without America’s knowledge or consent, Occupy Wall Street could also be a fluke event that exposed America’s growing tolerance of excessive police actions. This point is just a cautionary tale of the potential of abuse if America is not diligent in our pursuit of freedom.

My last post highlighted America’s potential to miss the subtleties of change, by comparing the unnoticed but real effect on our nation of the last ten years of structural police enforcement integration with the structural social changes that occurred during the 1980s and 1990s that went unnoticed by some in political movements of the time. Specifically, I compared the potential for police state changes in the 2000s with the changes in tolerance of sexual behavior that went unnoticed by the socially conservative political movement of the previous two decades.

I came of age in the time of the rise of the evangelical Christians as a political force. In 1976, Jimmy Carter, a self professed evangelical, was elected president. In that same year, Jerry Falwell introduced the idea of actively mixing religion and politics. Encouraged by Jesse Helms to rally the “Silent Majority” of millions of televangelist TV viewers to become active in the political arena, Falwell founded his political organization “Moral Majority” in 1979. The idea of organizing this evangelical group of millions of Americans into a political force was at the time a fairly radical sea change in harnessing the strength of coalitions in America.

Under the leadership of Falwell and Helms, the Moral Majority coalesced into a political force, influencing politics throughout the 1980s. It brought a sizable voting minority in the United States, perhaps 25%, that viewed “Religious Right” issues as the critical factor in their choices of political candidates, to the firm support of the Republican Party. Historians point to the Moral Majority’s influence in the election of Ronald Reagan in 1980, his subsequent reelection, and a revision of the Republican Party’s platform on issues such as school prayer and abortion, leading some to believe that the Republican Party would have a sizable majority for decades to come.

Yet even as its influence grew, the Moral Majority did not recognize that its political strength was ultimately eroding during the 1980s because of several factors including the rise and subsequent fall of Televangelism. The concentration of wealth and power that television had afforded ministries played out in the highly publicized fall from grace of such powerhouses as Jimmy Bakker in 1987 for his alleged rape of his secretary Jessica Hahn, and Jimmy Swaggart for his tryst with a prostitute in 1988. The fall of the Moral Majority was heightened by Pat Robertson’s bid for President, which subsequently deteriorated the power of his broadcast ministry, and Reverend Falwell’s power struggles as he disavowed Pat’s bid for President, supporting George Bush instead, and Falwell’s seedy grab of power from Jimmy Baker’s organization in 1989.

By 1992, the Moral Majority’s influence on moral and ethical issues had clearly divided the country along conservative and progressive social lines. Yet thirteen years after the opening of China to Western businesses and banks, China was beginning to impact the economy of America leading the 1992 Clinton campaign to emphasize “It’s the economy stupid” and Ross Perot’s third party to vigorously oppose NAFTA. Perot pulled enough conservatives away from the Republican Party, by some estimates, to give President Clinton the win. Clinton’s subsequent support of liberal policies following his election however, continued to galvanize those supporting the Moral Majority’s philosophies against him.

In 1994, Newt Gingrich and Dick Armey, who later would be instrumental in the founding of the Tea Party, created the “Contract with America” six weeks before the election to win over the electorate to the Republican majority. The Contract stayed clear of social issues raised by the Moral Majority, instead emphasizing economic issues supported by the majority of most Americans such as a balanced budget, the line item veto, a moratorium on regulations, welfare reform, term limits, social security and tort reform. The Republican Congress handily won the election based on the public’s vote for economic reforms.

Because the Republican Party de-emphasized the relative importance of social issues in the campaign, the subculture of social shifting at the time went unnoticed. The election, however, set the stage for the appointment of Kenneth Starr to continue the Clinton Whitewater investigation, ultimately leading to Clinton’s Impeachment.

The political buildup before Clinton’s impeachment trial fed the Moral Majority’s frenzy of disapproval of Clinton’s ethical authority to lead America. The coalition believed that the American people were solidly in favor of punishing Clinton’s behavior through censure or ultimately removal from office. When the charges ultimately came down to perjury and obstruction of justice by Clinton’s self testimony in his sexual harassment trial, the public sided with the President and let the air out of the Moral Majority’s perceived leadership on this issue.

The Moral Majority had not recognized that an undercurrent of change had occurred, that many Americans perceived the economy as a more important issue, and that Clinton’s moral failings did not rise to the level of removal from office. The hypocrisy of the Republican Party members tasked with leading the impeachment proceedings also highlighted the public’s shift away from judgmentalism. Former House Speaker Newt Gingrich made the plea that it wasn’t hypocritical of him to lead impeachment proceedings against President Bill Clinton in the 1990’s, even though he was having an extramarital affair at the time, because the impeachment case was “not about personal behavior.” Yet the public disagreed with Gingrich’s argument regarding Clinton’s lying in front of a judge about his sex acts.

For those holding to moral ethics regarding Clinton’s moral failings, Billy Graham, a registered Democrat, who was voted the most revered man in America at the time, and who had stayed above the televangelist fray refusing to join the Moral Majority saying, “I’m for morality, but morality goes beyond sex to human freedom and social justice and evangelists …have to stand in the middle in order to preach to all people, right and left”, took the steam out of the moral pursuit when he said, “If [President Clinton] is guilty, I would forgive him and love him just the same because he’s a remarkable man. He’s had a lot of temptations thrown his way and a lot of pressure on him.” Later in the interview, Graham added, “I know the frailty of human nature and I know how hard it is — especially [for a] strong, vigorous young man like he is. He has such a tremendous personality that I think the ladies just go wild over him.”

With what many viewed as Billy Graham’s shocking appeasement completed, the nation shifted its focus away from Bill Clinton’s dalliances only to be thrust into focusing on our nation’s survival three years later. The public has argued that during the past ten years since 9/11, we have given up freedoms to gain the security enabled by such tactics as placing troops in Iraq and Afghanistan, enhanced interrogation, increasing invasion of privacy such as wire taps, TSA, and surveillance of private records. Yet these changes occurred under the surface in the subculture of security. America has talked about these increasing losses of freedom but we have not noticed them on the surface until Occupy Wall Street, as a fluke, drew them out from their clandestine cover.

Now that our security subculture has been exposed, barely breaking the surface of America’s collective consciousness, many Americans have denied seeing the changes for what they may actually be, suggesting that these rogue elements of abuse are either a result of a lack of political leadership regarding the Occupy movement, or a lack of training regarding policing of such movements. If, in actuality, these rogue incidents are just the surface of a much deeper, ingrained police state subculture that has developed to protect America from our enemies, both foreign and domestic, how do we ensure that America will indeed be protected from what now seems to be an undercurrent of our own developing police state subculture?

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Filed under American Governance, American Politics, Bureaucracy, Emergency Response, National Security, Occupy Wall Street