A Social Contract Exists Between Business and the Government of the People

While classical corporatism has other meanings, the context of corporatism to which I refer is really neo-corporatism, the power shifting that occurs between owners, managers and labor for economic sharing. it’s this whole shift of power from individuals to the state to the corporations that defines our modern day and controls our every pattern of life. I continue to question the flaws of corporatism in that it does not meet the goals of man’s orignal intent.

Corporations came into existence because kings wanted them for their own aggrandizement and because other aggressive men saw this as an entrance to sharing power with kings. Corporations were not intended by their original form to be the answer for full employment. Yet through the centuries this orignal intent has been replaced by an unwritten social contract of employment for the good of the community.

As society evolved, craftsmen found that work other than that on the farm could sustain them and their apprentices and thus businesses were formed, again with no social contract other than that which could be gained by the mutual benefit of seller and buyer.

But within man is the natural state of altruism. It is in our DNA. We cannot walk by others in squalor without a tinge to help. This tendency then manifests itself in government for government is merely the mirror of our sense of self. So governments evolve a structure of social safety nets to help the less fortunate among us. With such artificial constructs, how then do we provide for the needy except through various abnormal means such as taxation and such impositions on businesses as the minimum wage?

Now through advances in innovation and productivity, businesses have provided more and more for the common good and thus the level of squalor that we can conceive of allowing within our community continues to lessen. We expect that the least among us should be provided for through higher and higher standards. Such standards as these could not possibly be provided for if man were to be turned away from society to exist on his own living on only that which he could carve out of the wilderness.

And even if he could, there is no wilderness for men to exist within, for our modern capitalism has divvied all lands to provide the capital for modern business to thrive and for government to use as a means for the common safety net of its citizens. Therefore, the modern construct of corporatism that our nations have agreed will be the means to provide for the common good no longer provides an escape or alternative for the rugged individual.

We must therefore agree that a social contract exists whereby the capture of land and capital by government and business must also provide for those less fortunate and must provide for the employment of all to exist and to contribute to the community. This social contract that has haphazardly evolved is broken and must be fixed by an equally evolving paradigm of the right of all men to full employment.

Ironically, Trickle Down Economics Trickled Down America’s Future

America is a land of irony. We are filled with capitalists whose intent is to accumulate all the wealth the world has to offer, and at the same time, we also have an altruistic nature that tears at our capitalistic infrastructure. We defend our great society and fund outreach to other nations through our tax dollars. We support our dreams of a united earth through a funding of the United Nations and fund our version of world peace through 1,000 military bases dispersed throughout the world. To grow our middle class, for the past thirty years we have supplied enrichment to our upper class to have it trickle down.

Supply side economics is an irony of political invention as well. Its invention of thought intended to provide extra capital to America’s private sector, the sector that creates taxpaying, productive jobs that extends America’s know how, innovation, skills, and gross domestic product. In our world’s current economic system, when a venture is started, some seed capital that has been accumulated by the world’s elite is then combined with borrowed money created from thin air by banks through the venture’s promise to repay. This devised modern structure of government and banking thus provides the investment needed to fund the venture’s infrastructure and start up expenses, including the financial support for job creation.

The wealthier of our country are those that have traditionally been able to accumulate more money than they need to fund their daily expenses, and thus they have provided the seed capital for ventures through their investments. Instead of the entrepreneurs that risk all to build real wealth and create the jobs, Supply Side economics instead provides tax incentives to the wealthy, ironically giving credit to the capital providers for producing America’s jobs. However, capitalism knows no patriotic allegiance. Investment capital will flow to the highest risk adjusted returns regardless of national borders.

After America’s obsessive military buildup made international investments safer, international business became safer investments in the sixties. Opportunities grew wildly after China opened its borders to investment in 1978, creating a gold rush that attracted loose investment capital from the entire world, building tens of thousands of factories that enriched international investors dearly.

So when Reagan Supply Sider legislators passed tax breaks to the “rich”, their trickledown theory wasn’t wrong, it was just decades late in adjusting to the realities of risk adjusted investment opportunity. Ironically, instead of trickle down, America’s tax policy resulted in pouring out, not a trickle but a fire hose gushing toward foreign shores. Trillions of dollars, created by burdening our middle class with excessive debt, left our economy and were converted into factories and other infrastructure such as roadways, bridges, and cargo ships to enhance China’s economy and to increase their employment base.

It appeared at least temporarily that America profited from our supply side doctrine. An entire industry was born to find ways to collect the extra capital and distribute it to the East. America surely got interim jobs in the financial sector to support this fire hose of foreign directed money flow. Yet, decreasing taxes for the “rich” created much fewer permanent jobs in America than it could have, passing the greater load of jobs to the East. It provided America interim financial and deal flow processing while accomplishing the opposite effect than was hoped for to America’s real economic future.

Ironically, Trickle Down Economics Trickled Down America’s Future…page 2 of 2….Worse, when those permanent jobs left our shores, so did decades of investment in our schools and education that every American has paid for through our contract with America. Each of us has voted to contribute thousands of dollars to our school systems to educate our youth. We do not publicly fund our educational system out of altruism. Americans understand that in educating our youth, they will learn the lessons provided by educated Americans before them. They will carry forward the knowledge that grows in our businesses to learn new theories and methods and to discover new scientific breakthroughs that will extend American technical capabilities. We invest in our children to grow our country’s GDP and to support both those that have come before in their turn at retirement and those that will come after who will raise their families in freedom and who will extend our great country’s experiment in democracy.

Ironically, beyond those trade secrets and innovations that are deemed highly responsible for national security, America does not have a policy about those innovations created in America that have been funded by at least 12 years of public schooling if not more through Pell grants, student loans, state school subsidies and other methods. America has an equity stake in every innovation created by Americans and yet we let them go as freely as we let our commodities be dug up from our patch of earth and be sold out from under us through private, foreign country based businesses operating mines on our public lands today.

However, the greatest irony is yet to come. In letting our capital be funneled to China, in letting our jobs transfer to her, in freely handing over our trade secrets, our innovations, and our scientific breakthroughs, we have transferred decades of core skill and national wealth building capability that will now build in China and not in America. The tax base that would have supported our great society social needs will now support those of China. The extra funds that could have supported our government’s international outreach will now support hers. Our altruistic capability will diminish purely from our trickle down tax policies.

And the great investments that our capitalists hope will provide gold rush returns from the trillions of dollars of investment extracted from the debts of all Americans, turns out they may be the greatest Ponzi of the 20th century. Those trillions of dollars now rest on China’s soil as hard assets. They cannot be dug up from the earth and planted back in America. The financial returns that investors hope for count on China remaining strong to honor her commitments. If China defaults, no one will travel to China and take a piece of the infrastructure back home. There is no international bankruptcy court that can enforce repossessment or repayment.

China’s ability to produce repayments of direct foreign investments depends on America’s ability to stay solvent and to continue buying Chinese goods, yet our solvency rests close to the precipice. If our current economic crisis is thrust off the cliff by short sided, self seeking politicians, America’s default will lead to China’s default and all the profits that our investors dreamed of receiving will disappear in the crash. The underlying assets and intellectual capital that transferred to China in the 20th century gold rush will remain there for China’s eventual rapid recovery while the trickle down and fire hosed out financial capital that left America’s shores will have ironically vanished with our gold strike dreams.

America’s Future Building Block #4 – Eliminate Minimum Wage and Fully Employ America….

While governments may choose to ensure that all citizens receive a minimum amount of dollars to consume, in the age of globalization, governments should not attempt to force this social welfare through minimum wage controls. Wages should be set by the market and any shortfall between wages and government’s socialized minimum family consumption floor should be made up by other socialized means.

At first glance, this assertion seems to support eliminating the historical gains made by workers against business’s exploitation. It seems to suggest that governments would thwart worker’s collective bargaining rights if they were to eliminate minimum wages. Yet these notions must be swiftly resolved if industrialized nations are to protect the security of workers jobs from their continued drift off shore. For America, minimum wage controls must be eliminated if America is to bring jobs back from overseas.

I hypothesize that the minimum wage, through its intermingling of two key concepts, is a poor attempt to force businesses to solve an American social goal. First is the concept that all Americans should by virtue of being born in America of having joined us through naturalization be guaranteed a minimum standard of living. Second is the concept that companies should only hire an employee if they can guarantee them, through employment for 40 hours per week, the minimum standard of living that has been set by our government.

This idea of an American minimum standard of living has never truly been established but we flirt with the idea in various ways. One attempt was the establishment of the poverty level as a measurement of President Johnson’s war on poverty. The poverty level established a family income that represented the ability of families to meet food and other basic consumption needs.

Minimum wage and poverty levels are fairly arbitrary and do not take into account actual cost of living differences between places like New York City and Jackson, Mississippi nor do they compare the level of consumption of poverty stricken Americans with the rest of the world, most who live well beyond American standards.

However at around 15%, poverty levels in America are once again approaching percentages close to those when America started measuring them in 1965. Since the methodology has not changed much in 50 years, the relative figures are consistent and demonstrate that our war on poverty has not been won. Yet the figures have been used by America’s legislation as a basis for multiple government redistribution programs and have since been ingrained in our political system.

The minimum wage is just as arbitrary as the poverty level and is not tied to it in any way. Earning the minimum wage actually places a person below the poverty level, yet it does create a somewhat lower floor than the poverty level for those Americans who are fully employed. And in the absence of collective bargaining, the minimum wage is an effort to protect the value of a workers’ worth. Why then should eliminating it be considered?

Prior to the emergence of the international corporate industrial state, growing American monopolies increased profits by reducing costs of providing safe and comfortable working conditions for workers as well as by providing low wages. For decades, workers collectively bargained for both better working conditions and for better pay. In addition, the federal government supported the collective bargaining process through the establishment of the minimum wage and by redistribution of corporate profits through taxation. Yet the creation of these defenses against corporate abuse led to antagonistic employer/worker environments that fed an examination of international wage differentials and an outflow of jobs to countries with much lower wages and workplace restrictions.

Many recall the showdown portrayed in Michael Moore’s first documentary “Roger and Me” in which GM gave its workers an ultimatum in Flint, Michigan; accept substantial pay cuts or accept a closure of Flint’s plant and the destruction of the town. Instead of accepting the pay cut, grossly misunderstanding the changing dynamics of the globalizing world, GM’s workers chose to strike against lower wages and the plant closed, devastating Flint. Globalization establishes the world’s value of a job, no matter the indignation felt by Americans for having to work at that price level.

Choosing to not accept the global price because of some indignation felt about the low value placed on international labor only eliminates the worker from participating in the global work place. Placing a minimum wage above the global price for labor only forces labor to migrate to other world locations that do not set minimum wages above the global wage rate. Taxing corporations above the global taxation rate to support externalized costs of higher unemployment that result from minimum wage policies only speeds the movement of labor offshore.

In the age of globalization, any one country’s defenses against corporate wage abuses are impotent against the international corporate industrial state without the support of other countries. While countries could band together as an international collective bargaining unit to defend the rights of higher wages for workers, many countries are willing to accept much lower wage levels than the United States. Those countries that accept a much lower wage rate will therefore gain the jobs that America’s minimum wage sends to them.

Can’t America let other countries have the low paying jobs while our businesses create higher paying, more skilled ones for all in America, making minimum wage obsolete? Even if America was able to create enough jobs above minimum wage so that all qualifying Americans could get higher paying jobs, the simple truth is that intellectual and physical bell curves exist in any population, including America and many Americans would simply not qualify for those jobs. In addition, the poor state of our public schools creates a dropout rate that could not begin to support such a higher breadth of skill level required for all Americans to have such jobs. If that many high paying jobs could be created in America, they would simply be left unfilled. No, if all workers are to be able to contribute to our society, then some jobs must be filled at global wages well below the minimum wage that has been set in America.

Does that mean that those Americans who are unable to fill positions that pay above the minimum wage should have to live below a minimum sustenance level that is now being partially maintained by the minimum wage? …of course not…. However, as I previously pointed out, minimum wage levels are not the appropriate mechanism to meet those needs. Our government has multiple social welfare tools at its disposal that should not hinder business to accomplish supplementation of income.

Because some Americans should have to work at less than the current minimum wage and must be supported by other means to reach a social floor, should high wealth individuals be forced to fully support their shortfall?…Of course not… But, the idea that continues to be suggested by defenders of Reagan’s trickledown economics of lowering taxes on the rich as a solution to America’s wage and job ills should simply be refuted on the silliness of its merits. It has proven to be a fallacy of pre-globalization politics that by its very nature is illogical. This once revered solution has been antiquated by both globalization and America’s promotion of greed as accepted driver of business.

History has with few exceptions shown that given more money to invest, wealthy Americans will invest it in higher returns of other parts of the world instead of relatively lower returns found in America. However, higher tax rates on capital gains and income of the highest few percent of American earners with offsetting tax reduction opportunities to invest back into America should coax our high wealth individuals back into responsibility for America’s welfare and stem this downright harmful trend toward America’s future.

If corporations are relieved of their minimum wage burdens, should they also be relieved of any responsibilities to sustain America’s workers who do not qualify for higher wages? Of course not…. However, mechanisms that force corporate participation should not incentivize them to move labor offshore. Business participation should instead be mandated to support government social policies through tax reductions for investments in infrastructure that support additional labor and through tariffs for products supplied to America that hinder American labor without greater, offsetting benefits.

Can organized labor be allowed to create wastelands such as Flint, Michigan by placing a stranglehold on global wage levels for jobs that have long since been pressed downward below minimum wage? Of course not…This last bitter pill may be the most difficult to swallow. While labor must be allowed a full participation in the corporations’ development of global competitiveness and must be able to transparently understand labor’s value and role in the corporation’s international success, any support for labor to thwart full employment by forcing excessive labor rates should be rejected as well.

If America’s objective is for all Americans to be fully employed and contributing to our nation, and for our country to support all workers with a social net floor of consumer spending that allows all to live in dignity, then more logical solutions than minimum wage exist. If only America can work through them.

Why Do Democrats and Republicans Play Childhood Games with America’s Future?

As young boys, growing up in Ohio, we spent many summer days playing “Smear the Queer”. We didn’t know the inappropriateness of the name of the game as young boys. We only knew it meant coming together in fields behind our suburban homes to blow off summer energy and to demonstrate each other’s bravado. The game consisted of one boy holding onto the football as long as possible by running to escape the others. Each boy would run with abandon in his chosen direction until the rest of the pack would catch up and dog pile him into the ground. Another kid would then capture the ball and run headlong in the opposite direction knowing that the crowd would soon pound him into the ground as well.

In this childhood game, there were no winners, no advancement of the ball to score for the team. There was only chest pounding, boyhood energy, and bull headed bravado. Because we were oblivious to the bigoted implication of the game’s name, we perhaps could have been forgiven in our 1960’s innocence of youth. However, America’s two political parties, claiming to be learned elite, continue this politically incorrect game with reckless abandon in the year 2011!

In the midst of an historic crisis that left 24% of our able workers sidelined from our economy, a crisis that may eliminate America as the leader of the free world and sentence us to a diminished future, our two parties have refused to be either a beacon of hope or a forum of reason. Instead, as each party has been given the opportunity to gain the support of all Americans, they have foolhardily run with abandon in the direction of self interest. Easily discerning their veiled motives that disregard most of America, our electorate has voted to quickly dogpile each party.

In 2008, after elections signaled America sought “change”, the country experienced a monetary crisis that impacted us all. Instead of rapidly revising agenda to lead us out of crisis, the Democrats lunged forward with wealth redistribution and universal healthcare, worthy goals for their party, but lacking acknowledgement of our country’s need to wage war.

Punishing blind loyalty to party, the Great Middle dogpiled the Democrats in 2010 and elected leaders who promised to get the country back on track. Instead, when the Republicans gained firm hold of the football, they giddily sprinted for the other side of the field toward their ideals of wealth protection, union destruction, defunding of Planned Parenthood and NPR, and cutting of entitlements.

The New York special election that gave a majority to Democrat Kathy Hochul in a Republican stronghold once again signaled the Great Middle piling on a party that irresponsibly misconstrued its mandate. Instead of advancing the Great Society in the absence of real economic growth, and instead reverting to trickle-down economics after having shipped 40,000 factories to China in the last decade, America wants critical leadership.

The Democrats are now beating their chest because they succeeded in mongering fear to protect Medicare from the likes of Paul Ryan. In the absence of leadership that calls for sacrifice from all Americans but that promises to not leave any of our brethren behind, this election signals that Democrats will likely get their turn to run like silly school children toward their camp in 2012.

But America cries out, “Where is our great leader?” Who will blaze a path forward that all can follow? Ask us to sacrifice for we must. Reduce our entitlements but put all able Americans back to work. Reduce government spending but divert it now into the private sector and transfer government jobs immediately into private domestic endeavors that can rebuild our future together. Call on multinational corporations to sacrifice for America’s future productivity. Divert dollars that continue to keep insolvent international investment banks afloat to keep America afloat. Put aside your silly boyhood games and lead.

How Could America Have Squandered the Gold of Ancient Egypt and the Incas?

Gold has been the store of human endeavor since ancient times. While each ounce of gold can hold only a finite amount of labor, perhaps 1,000 hours in non-industrialized nations, some of the gold locked in Fort Knox has touched millions of hours of labor from civilizations untold. For gold’s greatest benefit, as with all money, is not its storage of value but its lasting ability to temporarily hold value in the exchange of non-coincidental barters.

For millenniums, money was the interchange commodity for simple trades as between farmers and herders. The farmer gave the herder a coin in winter for meat, and the herder returned the coin at harvest time for a bushel of vegetables. Farmers and herders relied on the value of gold because precious metals took effort to mine and purify, were tested for weight and purity, and could be stamped, coined and carried. With such a universal appeal, precious metals became synonymous with storage of value and dominated the world’s choice for money.

At one point, America held within its coffers 70% of all the gold that has ever been purified from ancient Egypt and the Incas through modern times. But it was our misjudgment as to the true value of gold that robbed our forts of ingots and brought America to the precipice of ruin. As history’s greatest superpower, why did America not learn from ancient empires that tumbled down the path to insignificance, and why did we allow our government to amass more debt than has ever been owed by every other soul that has ever lived?

1964 marked an accelerating turning point in America’s misfortunes. In 1964, President Johnson was elected to enact Great Society reforms just as America was increasing her involvement in Viet Nam. Baby boomers were entering the work force just as multinational corporations were beginning an upsurge of direct foreign investment and the transfer of jobs to overseas markets. America’s use of oil was peaking just as political undercurrents were coalescing around oil as a geopolitical force.

Six simultaneous assaults on the American dollar joined to fuel the American financial malaise; a lack of fiscal adherence to a gold standard, military excursions in support of American interests, funding of the great society, a lack of will to respond to oil cartels, multinational corporate indifference to the plight of the American worker, and a financial industry gone wild.

America did not Steward Its Gold

Even though, for 600 decades of recorded history, gold was the stable base of transactions, the world has temporarily abandoned this gold standard for the last 5 decades. Our abandonment was not because of the world’s enlightenment that gold is an unnecessary physical impediment to the electronic age of finance. It is because, with no viable alternative, the world has clung to the hollowed out American dollar that inflated beyond the discipline of the gold standard.

In the 20th century, industrialized nations twice attempted to redistribute wealth through great wars that left all of Europe bankrupt. Afterward, America held 70 percent of the world’s processed gold, and became through Bretton Woods the gold-backed, paper money guarantor of the free world. During the next 15 years, America squandered her gold to cover currency imbalances, until by 1960 the dollar lost its legitimacy. Interestingly, it took Spain over a hundred years to squander its 20,000 tons of Inca gold.

From 1971 until now, America and the rest of the world have had little choice but to allow our currencies to float, giving up the imperfect discipline imposed by a gold standard. As a result of America’s freewheeling monetary policies, it is now encumbered by a spend drunk Congress and an obliging central bank that have conspired to reduce the value of America’s 1971 fiat dollar to a mere 17 cents today.

Scholars suggest that the reason for the dollar’s fall was the inevitable Triffin dilemma which requires America to carry a current account deficit to provide the world with reserve currency. Yet debt financed trade imbalances are not required to provide reserves. Reserves could just as well have been sold to other countries as given to them through trade shortfalls. No, America’s post war monetary policies quickly gambled away the historical hegemony that was bestowed on us at the end of two world wars.

This five decade hiatus from a gold standard will prove only temporary. Gold’s appeal as the engine of financial growth has not been lost on China. At the end of World War II, U.S. gold reserve was over 18,000 tons but has since reduced to 8,000 tons. China is executing a strategy of purchasing approximately 250 tons per year and, as the world’s largest producer of gold, producing 320 tons per year, and now has surpassed all but the U.S. as the second largest holder of gold with 2,000 tons.

Military Excursions Drained America’s Coffers

Without the ability to borrow vast moneys, earlier civilizations relied on warring, exploration and conquest to quickly expand their stores of gold. This strategy was not without consequences. To fund war, Rome engaged in coin clipping and smelting with lesser metals to reduce size and value of denarius in attempts to pay soldiers with coins of veiled value. After 200 years, the Roman denarius reduced from 100 percent silver to only 5 percent just prior its army leaving Rome unprotected from invasions and fall. Interestingly, it has taken less than 100 years for America’s dollar value to plunge that amount.

As all empires have before, America found that its wars must be financed with inflation. The Fed supported an excessive expansion of the money supply (dollar clipping), creating debt to fund each of America’s wars. The Civil War added 2.8 billion. WWI added another 21 billion. WWII created another $216 billion. The Korean War was financed with taxes. Viet Nam increased the debt $146 billion. Cold war expenditures cost 1.6 trillion. The first Gulf War cost a mere $7 billion. In contrast, Iraq cost $786 billion and Afghanistan cost $397 billion. Not including the 700 foreign soil U.S. military bases that contribute greatly to America’s balance of payments deficit, her major wars added a total of $3.4 trillion dollars of carried debt.

The Great Society Became the Broke Society

President Johnson outlined The Great Society in his State of the Union Speech on January 4, 1965, saying “The great society asks not how much, but how good; not only how to create wealth but how to use it.” Notwithstanding the good that was done by these programs, they drained America’s future potential GDP growth and the money that would fuel her economic engine.

46 years later, Great Society initiatives touched education, health, urban renewal, transportation, arts and culture, Medicare and Medicaid, the Food Stamp program, Project Head Start, The National Endowment for the Arts, The Corporation for Public Broadcasting and federal aid to public education for a total expenditure of $9.5 trillion dollars.

America’s Addiction to Oil Made Us Slaves to the Oil Cartel

Oil enabled powerful nations to create a world order that flowed money from agrarian nations to those that controlled hydrocarbon powered machines. Oil was the catalyst that propelled the 20th century’s world leaders into fortune and thrust the world into war. Oil is a finite fuel, controlled by a few nations that are barely separated geopolitically and have common ancient civilizations and modern goals.

Already struggling from Viet Nam and Great Society debts, America found herself the object of a politically motivated oil embargo in 1973. Fuel prices soared and supplies tightened to cause the 70’s stagflation in America. From then until now, America has not found the political will through fluctuating fuel prices to organize an intervention away from oil dependence.

Since the embargo, America has consumed 250 billion barrels of oil at a total cost of $11 trillion dollars. This debit line in our national budget has only one trade, oil for dollars. Had America given our energy war a smidgeon of the effort of placing a man on the moon, we could have easily reduced energy consumption by 20 percent for the same productive output, transportation, and environmental comfort, and saved 2.2 trillion dollars. Surely, the costs to achieve such a modest conservation would have to be netted from the gross, but those costs could have been internally generated and added to America’s GDP.

America’s Multinational Corporations (MNC) were Indifferent Citizens

While America fought the war on poverty, her political leaders surrendered to the war on American jobs. Certainly, with the relative world peace supported by America’s military, globalization was bound to occur. With the risk of direct foreign investments reduced, the last five decades have unleashed an acceleration of money flow and intellectual capital from America to other countries.

While over 4 trillion dollars have been invested overseas by American uberwealthy, America has also been a receiver of investment, so that the net outflow has only been 0.7 trillion. However, the loss of America’s wealth and jobs has been much greater, contributing to a stagnant workforce where one in four able Americans has been idled. MNC direct foreign investment has indirectly added $4 trillion dollars to America’s debt.

The Fed Financed MNCs and Saved Banks but Failed to Keep America Employed

During most of the 17th century, Europe embroiled itself in wars that killed 30% of its population. Some of the world’s largest banking houses failed as royal debtors defaulted, including England in1672. Finally, in 1694, the king agreed to give the Bank of England authority to print all of England’s bank notes in exchange for bank loans to support his war with France. The newly created Central bank, having transferred its risk of loss to British subjects, profited simply by printing money for the monarchy. However, this excess printing did not stop the emptying of England’s coffers.

After America revolted to escape the monetary control of the Bank of England, Hamilton, the United States’ Secretary of the treasury, proposed a charter to a create a similar central bank for America. Against Thomas Jefferson’s insistence, the First Bank of the United States became the precursor to America’s Federal Reserve. Some say major banks manufactured a bank run in 1907 to destabilize the Treasury and instigate support for the Federal Reserve Act of 1913 establishing the Fed, a quasi-agency, private enterprise with a quasi-public board.

From the establishment of the Fed until today, many have argued that major Fed decisions have enriched banks at the expense of the American People. An example is the erroneous decision the Fed made to keep interest rates high for an extensive period of time as America and the World clearly were entering the Great Depression. Also of heated debate was the decision to bail out the banking industry at the start of the Great Recession.

Nonetheless, Fed decisions combined with lobbied efforts to reduce financial regulations, allowed Wall Street to orchestrate multiple financial bubbles that consecutively destroyed value in American portfolios. It cost taxpayers $88 billion to bail out the S&L crisis. The boiling and bursting of the dot.com bubble evaporated $5 trillion dollars. Notwithstanding that the credit default bubble lost the world $30 trillion in value, it has thus far cost America $51 billion in bank bailouts, $787 billion in stimulus, $1.5 trillion in quantitative easing, $5 trillion in lost property values, and with over 5 million bankruptcies and 5 million foreclosures, ruined trillions of dollars worth of wealth generating credit.

In Conclusion

Adding up the numbers versus our $15 trillion dollar debt, it is amazing that the resiliency of the American economy is thus far holding ground:

10,000 tons of gold: $0.5 trillion
Wars: $3.4 trillion
Great Society: $9.5 trillion
Lack of Energy Policy $2.2 trillion
MNC DFI: $4.0 trillion
Banking Debacles: $12.4 trillion +
Total $32.0 trillion

The idea of currencies unsupported by gold reserves is not in itself troublesome. Whether Crowley shells, tally sticks, or paper money, if the market has trust in its role as a place holder for non-incidental barter, any money will do. However without the external discipline imposed by a gold standard, America must instead substitute gold’s imposition for a President strong enough to stand for American sovereignty, a Fed subjugated to defend a stable currency, a Congress selfless enough to impose its own financial discipline, and a willingness of American businesses to defend American jobs. Otherwise, America’s five decade reign over this short lived worldwide fiat money dollar system will come to an end.

Unemployed 99er Population Rises Dramatically in March

As reported in The “Real” Long-term Unemployment Report. from the blog http://www.layofflist.org

The March Employment Report was again pumped as another victory in the war against unemployment. But for millions of long-term unemployed, it’s still a brutal battle to find work. That’s why it’s unfortunate that most main stream media outlets and politicos seem incapable of understanding, or chose to ignore the “real” unemployment numbers.

The BLS reported that unemployment (U3) for March was 8.8%, which is a slight improvement from February’s 8.9%. 216,000 jobs were created, but that’s a relatively small monthly number of jobs for what is supposedly a strong economic recovery from the Great Recession. In comparison, during the 2004 economic recovery, 338,000 jobs were created in March.

The Obama administration and media mouthpieces seem preoccupied with the U3, 8.8% measure of unemployment, but you need to dig into the numbers to reveal the “real” state of unemployment.

A disconnected news media conveniently forgets to mention that the US needs to create about 125,000 jobs a month to simply keep up with new entrants to the workforce. If you subtract 125,000 from 216,000 jobs created in March, you end up with 91,000 “extra” jobs for 13.5 million unemployed.

Underemployment remained quite high at 15.7%, or 8.2 million workers who want full-time work, but are forced to work part-time jobs of 34 hours a week or less. Yes, full-time work is considered 35 hours or more per week, although many “real world” workers consider jobs of less than 40 hours a week as part-time.

But what was most striking about the March jobs report was the continuing increase in the number of long-term unemployed. According to the BLS, March showed 1,899,000 workers who have been out of work for 99 weeks or more, an increase of 127,000 from February. The real 99er population is growing quickly and shows no signs of abating.

NELP estimates (PDF) that “throughout 2010, 3.9 million unemployed workers exhausted all of their unemployment benefits without finding new work.” Exhausting unemployment benefits also includes those unemployed that exhausted benefits after 60, 73, 79, or 93 weeks, so NELP’s estimate is larger than the BLS estimate for those out of work 99 weeks or more.

Not only are more unemployed out of work 99 weeks or longer, but those out of work 52 and 27 weeks or more are increasing as well. Those out of work 27 weeks or more now accounts for a record 45.5% (6.14 million) of all unemployed, while for those out of work 52 weeks or more the rate is 31.5% (4.25 million) of all unemployed; again a record high.

The participation rate is another employment issue rarely discussed on the national media stage. According to the BLS, “the participation rate is the share of the population 16 years and older working or seeking work.”

The labor force participation rate was unchanged, 64.2%, the same as the previous two months. This is the lowest labor participation rate since March 1984.

The March Employment Report showed some job gains, but not nearly enough jobs were created to put a dent in the long-term unemployment problem. Media talking heads and politicians looking for 2012 votes touted the March jobs report as a winner, but it was a loser for millions of increasingly desperate long-term unemployed who are struggling without jobs or unemployment benefits. Let’s not hang those “Mission Accomplished” banners just yet…

Gallup Finds U.S. Unemployment at 10.2% in Mid-March, Underemployment was also Unchanged from the end of February, at 19.9%

REPRINT FROM GALLOP

March 17, 2011
by Dennis Jacobe, Chief Economist
PRINCETON, NJ

— Unemployment, as measured by Gallup without seasonal adjustment, was at 10.2% in mid-March — essentially the same as the 10.3% at the end of February but higher than the 10.0% of mid-February and the 9.8% at the end of January. The U.S. unemployment rate is about the same today as the 10.3% rate Gallup found in mid-March a year ago.

The percentage of part-time workers who want full-time work was 9.7% in mid-March — essentially unchanged from the 9.6% in both February measurements and higher than the 9.1% at the end of January. The percentage of the U.S. workforce that is working part time but wanting full-time work is the same now as was the case a year ago.

Broader Underemployment Was Unchanged in Mid-March

Underemployment, a measure that combines the percentage of part-time workers wanting full-time work with the percentage who are unemployed, was 19.9% in mid-March. Not surprisingly given the lack of change in its components, this is identical to the end-of-February reading, and is virtually the same as the 20.0% of mid-March a year ago.

Jobs Situation About the Same as It Was a Year Ago

The government’s February report on the U.S. unemployment situation suggests that 192,000 jobs were created last month and the unemployment rate declined to 8.9%, down from 9.7% a year ago. Federal Reserve Bank of New York President William Dudley and others said they were encouraged by this report.

However, Gallup’s unemployment and underemployment measures have not shown the same gains in early 2011. Gallup finds an unemployment rate (10.2%) and an underemployment rate (19.9%) for mid-March that are essentially the same as those from mid-March 2010.

In part, the difference between Gallup’s and the government’s current job market assessments may be due to the government’s seasonal adjustments. Gallup’s U.S. unemployment rate is also more up-to-date — its mid-March data include jobless figures for much of March, whereas the government’s latest unemployment rate is based on the jobs situation in mid-February.

Most importantly, a key reason the government’s unemployment rate is dropping apparently has to do with the so-called participation rate: the percentage of Americans who are counted as being in the workforce. The government’s participation rate in February was at its lowest level since 1984. In essence, this tends to suggest that the government’s unemployment rate may be declining because many people are becoming discouraged and leaving the workforce — not because they are getting new jobs.

If this is the case, then neither Gallup’s unemployment report nor that provided by the government is good news for the economy. It is equally bad news if people are out of work and looking for a job or just too discouraged to say they continue to do so. Either way, a lack of sufficient job creation to increase employment among those who want to work remains a major obstacle to U.S. economic growth in the months ahead.

Why Can’t I Get Real Numbers on Unemployed?

During an interview on NBC’s Today show on April 5, 2011, Republican National Committee chairman Reince Priebus criticized President Barack Obama’s handling of the economy saying we’ve lost 26 million jobs since he’s been president. Of course he was quickly criticized. I have a hard time finding real job numbers well documented anywhere.

My father told me never to cheat at golf, because if I didn’t count every swing or miss, I would never know if my game was getting better. I quit golf a long time ago when my game stalled out but it would be nice to really know the score on unemployment.

So I pieced together numbers from various websites to make a “educated” guess. My guess is that the cost to the taxpayers of these unemployed and underemployed is about $500 billion dollars a year or about $3,800 for every employed worker. Imagine the good they could do if that 500 billion was put through a job voucher program.

Total Americans (millions)…………………………307

over 18……………………………………………………..226

Less
over 65……………………………..36
In college…………………………….5
In military……………………………2
Stay at home………………………..6
Severe Work Disability…………6
On welfare …………………………..5
Homeless not working…………..2
Institutionalized……………………1
in jail……………………………………3
Available to work……………………………………….160

Less Working……………………..133

Unemployed……………………………………………….27

Plus Underemployed……………..9

Unemployed
and underemployed…………………………………….36

Percent Unemployed ………………………………..17%
Percent underemployed and unemployed……23%

Of course if we add in social security, welfare, disability, welfare, and the institutionalized that figure per working person goes up to $10,600 per working person. Interestingly however, if we add the cost of government employees and divide the number by working private employees the number jumps up to over $24,000 per working private employee per year. Considering that the average wage in America is about $43,000, well that is alot of cost to cover. Just figuring……

Tariffs are a Winning Political Strategy Unless A Political Party Counters with a Solution that is both Populist and Effective

The relative world peace established by the United States’ rise as the world’s sole super power has for several decades lulled the potential for global war. By spending more than all other nations combined on war capability during the previous decades, America effectively eradicated multinational corporations’ (MNCs) only known natural predator. In the absence of other governments organizing their citizens to wage war for control of another country’s resources, multinational corporations have had no natural predators in third world countries for the past 40 years.

In third world countries, where developed and complex economies do not exist, dictators have been easily influenced to enter into one sided contracts and socialist countries’ have had few alternatives to the purchasing power of corporations but to enter into monopolistic contracts as well. Therefore, just as in any ecosystem that is devoid of natural predators, MNCs have proliferated during the previous three decades. While U.S. corporations have led the growth of MNCs, industrialized countries throughout the world have competed for direct foreign investments worldwide.

Two results of this explosion of MNCs have been the driving down of consumer goods prices and loss of jobs in industrialized nations. Since America consumes a quarter of the world’s output, jobs have been lost in countries across the globe to support our consumption. Other industrialized countries have partially subsidized the price benefits that America has received.

However, America has also lost jobs as a result of the transfer of investment to other countries. Some in America claim that we should have imposed limits on our country’s corporations’ foreign investments to limit American job losses. Limiting our investment would have only allowed other countries’ corporations to invest without competition from U.S. corporations. As a result, our corporations would miss opportunities as other nations’ corporations increased worldwide market share. Therefore, America correctly acquiesced to the notion that we must share the burdens of globalization to ensure our corporations maintain world market share of global investments.

Globalization is a worldwide phenomena created by America’s overwhelming military goals. Our military is an economic catalyst transferring the wealth of industrialized nations toward creating household purchasing parity around the globe. And this economic disparity of household incomes is so great that it will continue to provide overseas investment opportunities for America’s wealthy for decades to come unless the disaffection of industrial nations’ middle classes creates another predator. While China is quickly gaining long term worldwide contractual relationships with third world countries and building military defenses for a future military threat to its hegemony, war does not seem a threat to globalization for several decades at least. The more eminent threat to globalization is the political opportunity that MNCs have caused by their increasing structural unemployment in industrialized countries.

America’s Republican Party is now attempting to capitalize on the high unemployment of our middle class by touting tariffs as a way increase employment and to win the 2012 elections. Tariffs do increase employment and America is ready for a populist employment platform. Unfortunately, history has shown that as a government centric solution, tariffs are ineffective and ultimately cost a nation more than they benefit it. However, unless political parties are prepared to counteract waves of populist sentiment, America is destined to repeat detrimental policies. Remember what happened in Great Britain in 1945. Even though Winston Churchill had 83 percent support after the war, his party was overwhelmingly rejected when the Labour Party touted full employment, health and housing platforms.

To win against the party that supports tariffs, the competing party must support full employment that does not raise costs to Americans and that ultimately makes our goods and services more competitive in the world marketplace, two things that tariffs cannot accomplish.

My job voucher plan is a solution that can give the political party that retains it as part of its 2012 platform a winning populist strategy. It makes America competitive without raising costs of foreign goods to our consumers. It creates full employment without creating more social costs than our current unemployment and welfare solution. My job voucher plan does reduce the cost of American goods, does provide full employment for our labor force, does reduce our trade deficits, and ultimately pays back America for its investment in our people.

If you have a member of your political party that would be interested in more details, I would be happy to engage a discussion

Are Americans Entitled to Extended Unemployment?

Tea Partiers are ignited about the idea of abolishing long ago formed agencies that have been cemented in stone buildings along Constitution Avenue. They believe that good government concepts never really die and eventually become entitlements that stymie original intent.  However, once formed, these ideas take hold in the American consciousness and we begin to believe we are entitled to them as unalienable rights.

Take unemployment insurance for example. Like defense, education, and the rule of law, unemployment compensation has its roots in increasing the efficiency of capitalism.  With a temporary stipend, unemployed workers are free to move from businesses that are sliding past their plateau of usefulness to those that are innovating.  Without the fear of losing their homes and other assets, employees move to healthy businesses even during economic downturns.  Because this idea supported the beliefs of both parties of congress, unemployment insurance passed by an overwhelming majority in 1935 as part of the Social Security Act.

In most downturns, the unemployed are able to find jobs within the insured period of 26 weeks. However, an underlying sickness gutted our sustainable job base during the last thirty years as we borrowed our way through successive economic bubbles.  Only after the credit default swap bubble collapsed our economy did we understand that our jobs were gone.  Not only had our manufacturing blue collar jobs been shipped overseas, but our technically skilled jobs were exported as well. Our average period of unemployment has now swelled to 37 weeks.

It was only natural that Congress quickly adjusted the unemployment period as a stop gap measure when faced with the Great Recession.  They rightly protected our longer term unemployed to keep them from losing all they have gained in contributing to our country.  Now that the ranks of the 99ers, those that have fallen past the safety net of extended unemployment, are swelling, America is debating if unemployment benefits should extend further, and whether the unemployed are entitled to a longer benefit period.  

The debate on entitlements needs a paradigm shift.  Instead of discussing whether unemployed should receive more than two years unemployment compensation, we should be creating a process that allows our citizens to quickly re-enter the workforce and once again contribute to America’s success.  

My voucher plan is a paradigm shift.  Instead of paying unemployed to sit on the sidelines of our economy, America instead invests in our future by getting our people back to work.  Small businesses can hire voucher employees at their unemployment rate. In return, Voucher employees can work twenty five hours per week and receive the same pay they would have received through unemployment. The Federal Government can then reimburse employers the employees’ wages without increasing the unemployment budget.

Tea Party members will be concerned that this voucher plan will become yet another entitlement. They can rest assured that the voucher plan will be a relic of the Great Recession, created to automatically expire as the economy improves. Voucher dollars will decrease as the percent of unemployment decreases, requiring employers to cover more of voucher employees’ wages.  As a result, voucher employees in barely sustainable businesses will transfer to healthier ones.

Some claim that the unemployed feel entitled to remain unemployed, collecting extended payments.  While we can all find a few examples of misuse of American altruism, I have found that most people want meaningful employment.  The entitlement argument stems from the disincentive our unemployment system creates for rejoining the workforce.  It’s not unreasonable to compare available jobs with current unemployment payments. When a worker leaves a job that paid $14 per hour, is getting $8 per hour for unemployment, and is faced with a job that pays $9 per hour, their incentive to work is only $1 per hour; substantially less than their former job and only a dollar more than unemployment. Unemployment should not create a re-employment inertia differential.  My job voucher plan creates the largest re-employment incentive because unemployment extension payments end.

Americans might be concerned that my voucher plan would be used to balloon what they believe is already too large a government providing too many entitlements.  They cite previous government programs that raised social benefit costs without creating profit generating, taxable products or services. My job voucher plan, however, grows jobs only in private sector small businesses, and can be supported by existing government agencies without expanding their budgets. 

Others claim that my voucher plan is just an entitlement to small business, creating an inefficient makeshift set of jobs for the unemployed.  While I agree that my plan can rapidly employ all Americans, and as such may create some early, inefficient placement of workers, it nonetheless will also create a micro-venture capitalist function for millions of small businesses.  Some of these ventures will successfully create taxable revenue, and some will be incredibly successful, paying back America’s investment through future taxes on corporate profits and employee compensation.

Finally, concerns have been raised that any program such as this may create an entitlement mindset that all Americans must work.  Government work programs have been abused by some to collect compensation while performing work at subpar levels.  This problem is self correcting in my voucher plan.  Employees would still be governed by private sector principles.  If the job is not a good fit, employees will not find safe harbor in this program. For the program to be successful, government intervention will have to be restricted to current EEO and ADA requirements.  But, in the end, one entitlement should fly true.  America will find it is entitled to renew its future.