It is Time for The U.S. Government to Grow Up

America faces a major dilemma. We support free enterprise principles that help America’s multinational corporations compete in the world’s rapidly transitioning competitive market. Yet when faced with the immense worldwide scale of free enterprise, we are adamant about protecting the American consumer and worker from the assault of big business.

During the baby boomer generation’s rise to positions of power in business and in government, the world transformed to a global stage. While the post-war generation struggled to an impasse regarding competition for taxes to fund both warfare and welfare, we hesitantly overlooked the world’s competition for the American consumer. The true definition of a trust supersized past its concept as captured in the Sherman Anti-trust Act, crossing international boundaries in the process.

To compete on a global scale, corporations necessarily have had to increase size and scope to capture world market share. As sizes of the world’s largest corporations increased exponentially, their scale efficiencies and cost shifting capabilities offered significant trust opportunities at home. As a result, in the U.S. domestic market, the Sherman Antitrust Act of 1890 became increasingly challenged as an albatross of regulation from proponents of free enterprise and as a weak, antiquated tool of defense among those charged with protecting the rights of consumers and domestic small businesses in America.

So now we have competing interests. On the one hand, Americans want to support our industries as they compete with those from other countries to secure a growing world market share. On the other hand, the free enterprise principles required to compete globally create scale that flies in the face of the very laws and regulations deemed necessary to protect our domestic competitive market. The resulting tension of this dilemma is easily witnessed in protected markets such as U.S. drug companies that charge U.S. customers ten times what they charge international customers for the same product. It is less easily seen in growing oligarchies like airlines and banks but the effects on the American public are just as onerous.

Once again, we have another growing immaturity on the part of our Federal government as it stares into the abyss, unable to ferret out sustainable solutions in a rapidly transitioning world. Of course, American businesses must be allowed to grow to compete on the global stage. However, if the ultimate size of a corporation needed to compete globally requires that it surpass the size limits that fit America’s definition of a competitive domestic market, then this dilemma must be resolved by the application of sensible historical principles.

What may be necessary to allow businesses to grow beyond a healthy limit for our domestic competitive market is that we allow businesses to cross boundaries of competitive size, but in exchange, we compensate with more regulation in the home market. This principle is alive and well in America in such industries as power and gas.

In banking, however, we did just the opposite. We cut banking regulations at the very time that we allowed big banks to consolidate the U.S. market. The result of such government immaturity regarding our understanding of the nature of trusts was that the world financial market is now imploding. It is time for our government to grow up.

America Must Default Now

Remember the classic story of the leak in the dike? A young boy hiking along a dike in Holland stuck his finger in a leak that threatened to collapse the dike and let the waters of the North Sea rush in to destroy his village. He stayed the night holding fast to his duty until the men of the village came to find him and to repair the leak. The legend goes that this small boy, acting on his sense of duty, saved his community with his single act of bravery and that all of Holland might have perished had he not. Perhaps not the prime moral of the story but as important, had the village leaders not found this young patriot and quickly repaired the dike, he would have perished and his bravery would have been in vain. It took a village to ultimately stop the dike from collapsing.

The Tea Party has been America’s little Dutch boy. Tea Partiers claim that America’s debt is as ominous as the stormy North Sea bearing down on the dikes of Holland, threatening to destroy our economy. They also suggest that just as the dikes of Holland held back the seas, America’s economy must hold strong against our national debt to keep it from limiting our future. Seeing our historic deficits as powerful enough leaks to collapse our nation’s credit, in 2010, the Tea Party rose up to stick their finger in the dike, pledging to stop America’s excessive public debt from growing further until we could agree on a path for recovery. In the meantime, other leaks have sprung up on America’s dike.

Clearly, our Federal budget is not the only ill that is afflicting us. Another little Dutch boy, the Occupy Wall Street movement, with just as much valor and patriotism as the Tea Party, has now climbed the dike to stick its finger in political leaks as equally important as our federal deficit. Occupiers have identified the illicit bond between Wall Street bankers and our politicians that threatens to diminish America’s future and they pledge to remain on the dike until all of America can persuade our leaders to relieve both the Tea Party and the Occupy Wall Streeters from their patriotic duties.

Unlike Holland, where village leaders relieved the little Dutch boy’s first aid plugging of the leak by repairing their dike, our nation’s leaders have been conspicuously absent in rushing in to relieve our patriotic Tea Party and Occupy Wall Streeters from their first aid missions. Our President and presidential candidates are reluctant to present bold reformation plans, Congress’s Super Committee is unable to compromise on material Federal budget reductions, the rest of Congress is unwilling to put forth substantial jobs bills or to work on restructuring a healthier business environment, our state and local governments are dangerously close to insolvency by refusing to resize to fit lower tax revenues, our banks are refusing to restructure upside down mortgages that are stagnating America’s private economy, and our multinational corporations are unwilling to reinvest in America’s workforce.

Without substantial and coordinated efforts by all in leadership to increase our national productive output, to support corresponding jobs that can sustain a right sized government budget, and to reduce our public debt that is stagnating economic growth, America’s dike will collapse. Whatever we do going forward to solve our leadership crisis, whatever the terms of restructure, Our leaders must know that Middle America will not complacently wither through decades of high unemployment nor will our military complex accept the eventual severe lack of domestic military resupply capability that will result from such languishing. America must now face the inevitability of “DEFAULT”.

The word default is an enemy of the state yet its effects are already sinisterly invading our country. Our Federal government has already defaulted on the value of the dollar with its stimulus and quantitative easing. Our state and local governments have already defaulted on public services to keep bloated public employees in place. Our multinational corporations have already defaulted on America employment by slashing work forces to sustain profitability through the monetary collapse. Our bankers have already defaulted on their obligations to provide financial liquidity, first by choosing to bet against America and then by creating the monetary implosion that sent millions of Americans into foreclosure and bankruptcy. Now, the American people must join in this cacophony of defaults by forcing a restructuring of America’s business and political environment to sustain our families and our country into the 21st century.

Americans must default on our support of indefinite extensions of trillion dollar budget deficits that reflect commitments to unsupportable baby boomer ideals of social justice and vast military dominance. We must default on our submission to government policies supporting unrealized promises that free trade and globalization would enrich all Americans. We must default on our acceptance of the status quo shenanigans of a financially democratized two party system that places the overwhelming benefit of the few over the welfare of the many. And as importantly, we must default on subservience to the mountain of debt that has been yoked to our economic future for the benefit of bankers, multinational businesses and political parties.

Ultimately, the legal power of Americans to default rests in Government acting on our behalf. However, rather than focusing on these transformative needs of the electorate, America’s government representatives are locked in an addictive trance, fixated on meeting the desires of powerful masters. To constitutionally affect change, we will have to break the grotesque relationship between Wall Street, multinational corporations, and Congress; one in which Congress depends upon bankers’ and businessmen’s’ financial elixir for re-election, where Congress has the power to dole out favors, contracts, tax breaks, and laws in return for their election fix, and where bankers have the power to print money to support Congress’s illicit behavior. If America is to ensure an equitable solution in which our Congress, bankers and businesses help to fix the mess they’ve made, we must forever sever our enabling support for this addictive relationship.

If we do not act to break these addictive bonds, our Federal Government will most certainly continue to provide cover for banks and businesses while authorizing massive deficits that expand its growing $15 trillion dollar debt. If not forced by the Tea Party or international credit rating agencies to finally face its unsustainable lack of institutional moral fiber and financially driven dearth of governing judgment and foresight, Congress will recklessly inflate our dollars beyond any semblance as a safe store of value. But private debtors do not have the luxury to print money. Private debts can only be repaid by the output of our people. We now have to decide if our output will be used to invest in America’s future or to pay our mounting Federal debt.

Certainly our multinational corporations have been given free rein to invest where they will and to employ whom they will. Because of substantial market opportunities to the East, America’s ignorance in creating a hostile business environment at home, and our bankers, businessmen, and politicians’ complicity in exploiting both, our multinational corporations have chosen to invest overseas. Yet somehow, America’s politicians hoped that our businesses, which are made up of citizens of this great country, would also act as model “virtual citizens” making business decisions in the best interests of all Americans. Our government even went as far as to dictate from the decisions of our Supreme Court these hopes. The Federal Government’s complicity with bankers and multinational corporations would be much more guilt free if they could imagine businesses having a patriotic conscience, but alas the vast majority do not. Our businesses are hardwired for maximum, risk adjusted profit and for the reasons previously mentioned, maximum profits exist offshore.

No American Dutch boy movement has yet risen to force government to soberly recognize business’s profit nature. Until such a movement pressures Congress, it most likely will not create laws to protect the public from the more destructive nature to our economy of business’s international profit motive, nor will it attempt to find win-win solutions to harness this profit motive for the mutual benefit of both multinational businesses and our people.

Certainly America’s bankers have created their own free rein to conduct at will commerce by the power of their purse. Unfortunately, this rein has been out of alignment with America’s domestic interest for decades. Now that our bankers have indebted America beyond our ability to pay, they will fight any attempts by others to loosen their financial hold on our political system. America’s bankers would have Congress force us to stagnate in debt for decades while China surges past us into the new millennium, and why not?

Bankers used our debt to place investment bets on China’s rising over the past three decades, and in so doing shorted America’s future. They now are counting on Americans to pay this historic debt to protect their clients’ and their own disproportionate, concentrated, and increasingly risky investments in China. Because they placed their mountain of eggs in one basket, A sure bet is that our banker’s actions going forward will be singularly focused on ensuring that America complies with the terms of our debt obligations, whether or not they are in our best interests.

The Occupy Wall Street movement has become the little Dutch boy in defense of America’s interests against international bankers and they have rightfully begun asking if we should follow the terms that have been structured by America’s bankers. Our bankers set the initial terms of indebting America beyond its means to repay. They reneged on terms of protecting us from over indebtedness and covered up their own complicity in doing so. And now that they have extracted maximum debt from America, our bankers are threatening to destroy our economy if we even question their bastardization of the American financial system.

Occupiers are rightfully asking why our bankers set lending terms to soar America’s debts to levels that they knew through historical ratios could never expect to be paid without a high degree of default. Why were bankers comfortable in doing so? Were they hoping that the American ethic of fiscal responsibility would hold even when seduced into unchartered waters of financial servitude? It seems that betting banks’ fortunes on mere hope would be too risky. Did they expect that banks could dictate to our government that it subordinate the will of the electorate to that of America’s financially elite, even if excessive debt deteriorated America’s future? This strategy was successfully exploited before and therefore less risky, but given the emergence of social media democracy, it is becoming self delusional. Whatever their reasoning at the start of the housing Ponzi, bankers’ fortunes are now so dependent on maintaining the status quo that they will defend it with all available measures, even if exposed to the light of day.

Given the stagnating wages of our citizens for the past three decades, Occupy Wall Streeters are right to question why bankers did not meet their obligations to protect America from excessive debt. The prime reason that America awards bankers the right to charge us interest is because we expect our bankers to discern who is capable of repaying debt, and to judiciously discriminate by providing loans only to those that meet repayment qualifications. It is for this sole risk mitigation responsibility of protecting America from excessive debt that we pay America’s bankers such a disproportionate percentage of America’s wealth. Otherwise, we could pay technicians much less to merely print and distribute money.

Occupy Wall Streeters are right to question our bankers why in the height of the frenzy they threw away loan ratios that historically protected Americans from default. Why as America’s debt began to dramatically climb beyond the safety of these ratios did our bankers ignore warning signs and press for even more debt? Why did they pass out credit cards like Halloween treats? Why did our bankers create even more, no income verification, zero money down, speculative debt instruments to extend this bubble to unprecedented heights? Why when some Americans asked why loan ratios were no longer employed, did America’s bankers tell them that we had entered a new economy in which the old ratios no longer applied, one in which appreciating real estate values now dominated the loan equation?

Based on our bankers’ logic, housing prices could just continue to inflate forever without end. The fallacy in their folly to forget fundamentals was that underlying debt has to be paid by the wages of America’s citizens, and these wages were not rising but were in fact stagnating. When the housing bubble burst, we sadly realized that there was no new economy, but instead that greed had only temporarily supplanted old ratios and finance fundamentals. In the wake of America’s monetary collapse, with ratios now re-established, and with debt far exceeding them, America is now faced with the reality of choosing between stagnation and default!

Finally, Wall Streeters are right to ask why America’s bankers are threatening that if we do not honor our public and private debts then they will destroy our economy. What a spurious argument! Were not our bankers complicit in driving America to this debt precipice of their own making? And now that we have arrived at this critical juncture, are not these same bankers arguing that if we fail to honor the predicament in which they placed us that they will cut us off from future credit and capital? Yet theirs is a hollow threat, because it is only by America’s authority that America’s bankers are even given the right to create credit and capital from thin air on our behalf.

Without the self delusional support of a Fed like central bank to cover their losses, European bankers do not need to be cajoled by an Occupy Wall Street movement to accept partial responsibility for excessive European debt in order to stave off full absorption of a complete default. When German led banks first told the Greeks that they must surrender their livelihoods and enter into decades of an austerity program to repay their bank debts, the Greeks simply said “NUTS!” European bankers have since struggled but have finally and responsibly put forth their newest Greece restructuring plan including a bank “forgiveness” of 50% of Greece’s debt held by the banks. And Greece will most likely not be the last to see its debt reduced as other European countries will ultimately demand equitable treatment as well.

America’s bankers are not ready to accept default. Surrounded by the Fed and both political parties, they are well hidden from public view. Yet America’s little Dutch boys are on the dike exposing their defenses. The Tea Party will continue to press Congress to stop the spending. Without the cover of political largesse to mollify the masses, many of America’s politicians will then be forced to take sides, either openly exposing their support for globalist policies in a vain attempt to gain financial backing for re-election in the face of the electorate, or retreating from previous indefensible positions to save their political feathers from the onslaught of social media exposure. As more Dutch boy politicians are elected, America’s bankers will be left exposed in the open.

Occupy Wall Streeters will continue to root out America’s bankers, exposing unpatriotic profiteering. They should have no illusions that banks will respond to sit-ins or even to riots by agreeing to absorb debts as did the European banks. Yet in clarifying through their movement for the American people our bankers’ complicity, America’s social democracy will build political will to force a realignment of political power that will insist on equitable treatment of debt in America just as elsewhere across Europe.

For what other choice will our bankers have in the end really? When debt becomes so excessive that it strains the ability of a nation to repay it, then it loses its character of debt. If a nation defaults on its debt and international banks cannot force it to repay, then the banks have only the choices of either forfeiting their debt, as the European banks have chosen to do, or exchanging their debt for equity if allowed by the nation and as I have proposed in my set of solutions.

Once America’s little Dutch boys persuade America’s leadership to join Europe’s leadership in returning our nations to economic health, our bankers will have no choice but to join the ranks of the disillusioned and disheartened elite. America’s bankers will finally meet Europe’s bankers in dispassionately determining how they will discharge our excessive debt. When America’s banks accept their partial responsibility for America’s failure to thrive, Americans’ debt of $54 trillion dollars which threatens to stagnate our economy for decades, leading to even greater job losses and further threatening our national security, will be held back behind the water tight dikes of a renewed and prosperous future.

Without Economic Security, America Has No National Security

A corporation’s mission is to provide profit to their shareholders. Other stakeholders must be satisfied so that they support the corporation, yet America has no law against maximizing profit to the detriment of other stakeholders.

When China opened its doors after 150 years and created special economic zones in which American companies could set up shop as long as they brought their trade secrets and intellectual capital, 40,000 did just that without reprisal from the United States. It certainly was not illegal to do so, and of course, the American consumer was rewarded with somewhat lower prices.

Another stakeholder, Congress, got enormous campaign contributions by China bound corporations, and there certainly isn’t a law against that. In fact, America turns a blind eye to average senate races costing 10 million dollars that have been paid for by our corporations and banks, more than 90 percent of campaign donations. We do not fault our Congress for passing laws to help their corporate constituents nor do we fault our Supreme Court, whose recent ruling on Citizens United gave corporations the unique status of having citizen rights without citizen responsibilities.

By paying the $150 dollar fee to become a corporation, businesses gain property rights that are sacrosanct in America. Corporations can sell property even if it harms others, in most cases. In a very few, such as that is being raised with GE, when a corporation attempts to sell a trade secret or intellectual property that could put our fighting men and women in harm’s way, we stop the sale in the interests of national security. But when 40,000 companies took their intellectual property to China, America did not claim national security.

And why would we have when the China gold rush began in 1979? Our industrial belt had been rusted by international competition and we were told that globalization would bring millions of jobs to America. It did but it took tens of millions more away. We were also told that imported goods would be cheaper than American ones and they are. But the cost of lost jobs, lost wages, less taxes, fewer factories, transferred intellectual property, future GDP growth, trade imbalances, and greater interest on trillions of borrowed debt was way costlier than the savings from Chinese trinkets.

By moving millions of jobs off shore, we gutted regions of collaborating industries like Detroit, Youngstown and Pittsburgh, whose workers, engineers, scientists, and businessmen intermingled to create next generation developments that would grow America’s future prosperity. But can we fault our corporations just because their collective actions cost America millions of future jobs and GDP? No, we cannot for our laws do not even suggest that American corporations should consider our citizenry as stakeholders. And in 2011, America has not yet even considered that our economic security is directly tied to our national security.

Without yet considering how we will support a future war of attrition without domestic factories, our nation has not yet debated our financial security. America now has bulged her budget to 3.4 trillion dollar budget yet collects only 2.2 trillion in federal taxes. We are forced to borrow from the Chinese the very dollars we give them for their trinkets, while keeping 30 million of our citizens underemployed. Our credit rating has finally been lowered because of this folly, and now our Congress is faced with making deep cuts to our budget which may include substantially reducing our military capability.

We have not connected our past decisions to allow our corporations to give millions of intellectual properties to the Chinese in trade for access to their markets and to their cheap labor to our national security. Yet these decisions have in fact lessened our national security, because without economic security, we have no national security.

The Gingerbread Corporate Man (A Bedtime Story)

After having travelled across the Atlantic Ocean to build their little stone baking mill, an elderly American couple wished for a son. Knowing that America considers corporations to be citizens, they decided to bake a gingerbread corporate man. They added equal amounts of capital, toil, and love to bake their son. Upon coming out of the oven, he immediately began to delight his parents.

He worked side by side bringing them prosperity and joy. However, as he grew older and collected more capital unto himself, he grew haughty and began to think, “Why do I toil for the benefits of my parents. I am the capital of flour and sugar, and they are but mere laborers.” So one day to his parents’ horror, he ran down the dirt road for other worlds singing, “Run, run as fast as you can, you can’t catch me, I’m the gingerbread corporate man.”

As he ran down the path, he happened upon the mayor of the town who asked, “May I take but an arm or a leg to help feed the townspeople?” The gingerbread corporate man would have none of it, running away shouting, “Run, run as fast as you can, you can’t catch me, I’m the gingerbread corporate man!”

A little further down the road he met a tree hugging, spotted owl who exclaimed, “Slow down your development! I want to eat you.” But sidestepping the owl’s advances, he ran away shouting, “Run, run as fast as you can, you can’t catch me, I’m the gingerbread corporate man!”

Over the Wall, he dropped to the street finding a gaggle of banker geese honking, “Don’t stop! We will collect all of the flour and sugar in America and give it to you for your journey.” The gingerbread corporate man, thought a moment and asked, “You don’t want to eat me?” “No”, they cackled. “We want to eat a bit of every bag of flour and sugar we take from the little old ladies of America and give the rest to you so that you grow big.” “You’ve got yourselves a deal!” shouted the gingerbread corporate man as he ran down the street.

As he neared the seashore, he came upon a bevy of bakers from the baker’s union who shouted, “Stop, you have all our flour and we will be without a livelihood if you run away.” “Will you bake until the midnight hours toiling in heat?” asked the gingerbread corporate man. “No, will you let us eat you?” retorted the baking guild. Instead, he ran down to the sea shouting, “Run, run as fast as you can, you can’t catch me, I’m the gingerbread corporate man!”

As he reached the shore looking back toward the mayor, spotted owl, gaggle of geese, and bakers all running after him, the gingerbread corporate man shouted, “Oh no! They will catch me. How can I cross this deep ocean?” At that moment, he came upon a crafty Huli Jing, a Chinese fox lingering at the shore. The fox exclaimed, “Climb upon my tail and I will swim across the Pacific.” “You won’t eat me?” asked the Gingerbread corporate man. “Of course not”, said the Chinese fox, “I want to help you.”

As the gingerbread man climbed aboard, he brought the huge bags of flour and sugar that weighed down the fox. The fox said, “Climb upon my back so you won’t get wet.” As they swam closer and closer to China, the gingerbread man added more and more of the capital onto himself, making him bigger and bigger, weighing down the sly fox further.

When China appeared on the horizon, the fox said, “You are much too big and powerful for my back and I am tired. If you want to enter China, you must bring all your fast ideas with you and hop upon my nose to keep dry.” Wanting to escape the Americans who wanted to eat him, the gingerbread corporate man did as he was told.

As soon as they reached the Eastern shore, the Huli Jing tossed the gingerbread corporate man into the air, opened his mouth, and snap, that was the end of the Gingerbread Corporate man!

American Moments – Brush with Destiny – Multinational Corporate Indentured Servitude of 1607

The year is 1607, in the great nation of Chief Powhaten, the civilized American native nation of several hundred villages surrounding the Jamestown Colony> A conversation can be overhood between the Great Chief Powhaten with his warrior about the logic of free trade with this starving colony, this first of many international corporations that would invade America.

Warrior: “Chief Powhaten, we attacked the unfinished stockade at Jamestown and made progress at repulsing this English corporation, London Company, back into the sea. But they used techniques unknown to us to thwart us, firing iron from their ships. Nonetheless, they are but a few and our Powhaten nation is large, with several hundred villages and thousands of natives. We can easily defeat them and rid our country of these foreign corporations.”

Chief Powhaten: “No, we will let them live among us for they have these tools of iron that I want. We will give them our country’s trade secrets of tobacco farming so that they can make a profit off our land. We are a great nation. They are but a small company. Free trade will be good for us.”

Warrior: “What else do we have to trade?”

Chief Powhaten: “We have 275 species of plants as medicines, 130 as foods, and 27 as tobacco. For giving them these innovations that we have gained through living on this land for thousands of years, they will give us these trinkets of iron. Certainly this short term gain is worth our knowledge of ages.”

Warrior: “Yet they overwhelm our land. They send fleets of several hundred ships to deplete our fishing fields off our northern shores”

Chief Powhaten: “Yes but I am personally enriched by their trades of clothing and jewelry and our land is plentiful. If I felt that our nation could not sustain such an onslaught, I would not personally seek such enrichment.”

Warrior: “But for that, you are agreeing to grant their corporate leaders rights to thousands of acres of our people’s land!”

Chief Powhaten: “What are these rights but mere pieces of parchment on which I have scratched my honor on in ink. We record these debts on contracts which will never be repaid to these corporations. This land, these intellectual properties, our great nation’s wealth, has been our birthright since before recorded history and no small corporation, unknowledgeable of our ancestral ways, will ever take it from us.”

Warrior: “I hope for the sake of our nation that you are wiser than you seem. Else these corporations will come and live among us, indebting us to their ways. They will take from us our land. They will indebt our nation, and when we finally cannot repay their debts, they will gather us up and send us from our birthright, ill and dying from their smallpox, to till arid lands they deem as worthless, and our great nation will be forgotten from these times until the end of ages.”

Chief Powhaten: “Free trade… International Corporations…This is the way forward for America….”

Globalization Transfers a Nation’s 70 Year Depression Cycle to the Entire World

The Great Depression of 1929, more than any of America’s depressions before it, showed that although capitalism is the world’s greatest engine of economic progress with no better alternative, it does contain a great flaw that periodically destabilizes the capitalist economy. As each business cycle progresses, wealth and commercial power concentrates in the hands of a few, limiting competition and consumer demand to the extent that the economy and the money supply collapses through nested debt defaults. When this occurs, the overhanging debt and undervalued assets cause a commercial vacuum that is hard to correct.

After, the Great Depression, America instituted controls intended to limit the flaw of capitalism, attempting to limit the concentration of market power in oligarchies and the concentration of wealth in the capitalists, hoping to create a more sustainable balance in the economy. Over time, America’s politicians were lobbied successfully to remove these limiting regulations so that once again concentration was permitted to flourish. However, different from every other concentration cycle, this time concentration was able to effectively cross international borders through globalization.

Having accumulated a concentration of wealth and commercial power needed to seed expansion into globalization, during the last thirty years American businesses have run headlong into the greatest transfer of wealth and capital across international borders ever known. With globalization, America’s nation state has lost much of her ability to regulate what have become multinational corporations for the good of her people.

The result of this loss of power is that similarly to how capitalism’s flaw allows a periodic transfer of wealth from a nation’s workers to its capitalists, indebting the working class until it no longer can support an increase in the economy while servicing its debt, ultimately resulting in the collapse of the nation state’s money volume into 60 to 80 year cyclic depressions, globalization’s flaw will also ultimately prove similar but on a world wide scale. The expansion of the multinational corporation will allow a periodic transfer of the entire world’s wealth from nation states to corporate states ending in a disproportion of wealth that ultimately will cause a worldwide monetary and fiscal collapse.

Prior to the rise of globalization, corporations existed within the laws, regulations, and taxation of single nation-states. They depended on the customer base of single nations and the stability of their nation’s business environment. They also depended on their host country’s mercantilism and military strengths for their relative worldwide trading power. With a prevalence of dependence on their nation states, they negotiated with their stakeholders from a position of relative weakness.

After the Great Depression through the 1970s, corporations contended with the growth of collective bargaining, socialism, environmental regulations, and antitrust interference in their oligarchic profit strategies. With such a lopsided negotiating power structure, corporations were relegated to lobbying behind the scenes for needed legislative and regulatory support as a means to balance their unequal negotiation positions.

Throughout this period, America’s focus on defeating communism through overwhelming military strength had two unintended effects. First, America’s burgeoning military allowed American businesses to expand unopposed into world markets through the bully pulpit of the U.S. military. Second, with the winning of the cold war, the emergence of Eastern markets, and the opening of China creating such immense business opportunity for American businesses, they could now use their legislative relationships they had developed in earlier years to support their participation in the modern gold rush.

American businesses sprinted to these new profit fields in an effort to gain a stake before foreign competitors. To do so, they needed availability of low cost loans and a commitment to open access of American consumer markets. To gain open access to American markets, businesses needed the support of politicians to sell the argument that open trade was a net benefit to the American consumer and that it was essential to America’s success. Winning this public argument then provided cover for politicians, who were beholden to the multinationals and associated banks for campaign funds, to vote for opening America’s markets to foreign manufacturing facilities. This was the beginning of America’s job emigration. We let the job killing Mongols over the wall.

With (a) the debate about open trade behind them, (b) China eager to accept their hard assets and intellectual capital into her country, and (c) banks having maneuvered financial deregulation to extract American capital from consumers, American multinational businesses were now free to expand their direct foreign investments exponentially. As they did, their corporate structures became ever more multinational and their negotiation position with nation-states strengthened considerably.

China, for one, represented negotiations with corporations as between equals. Initial negotiations were win-win and entrepreneurial because expanding corporations and emerging nations wanted separate assets which they valued differently from each other. Corporations wanted and received low cost inputs to production, low cost educated labor, minimal environmental costs, and loose business regulations. China gained access to hard assets, America’s consumer market, trade deficits, American corporate processes and intellectual capital.

Intellectual capital was most important to China so that she could leap frog American know how by creating entire cities to manufacture single products, and providing America’s intellectual capital and business knowhow to the city so that geographically concentrated Americanized core skills could develop. Yet for American multinationals, they valued China’s market potential much more than their own intellectual capital which they believed china could otherwise reverse engineer. They also discounted China’s ability to compete, and felt they could mitigate giving China their secrets by keeping research in America and innovating more rapidly than China.

Once established across multiple countries, multinational corporations now had strengths they never had before. While nation states were able to impose the same wage restrictions, regulations, and taxation as before, multinationals now had mobility to transfer labor, production, distribution, and profits across national borders. Corporations no longer negotiated labor rules and wages from weakness but could now set world wage rates. Through the likes of tiered corporate structures, offshore subsidiaries, multinational accounting, and transfer pricing, corporations could now dictate effective world tax rates. And through multinational diversification, corporations were no longer constrained in size by the whims of any one country’s antitrust laws but were now free to grow unrestrained.

Through globalization, nation states lost the majority of negotiation power they once had. They could no longer command the supply side. Labor could migrate to the nations with lowest overall cost of production and distribution including taxation. Nation states were also forced into political decisions regarding protection of domestic producers that could not compete with foreign costs. And the politicians that would have to enact laws to make domestic goods more attractive could not risk offending their benefactors, the foreign direct investment owners of foreign factories. Nation states could no longer command the demand side either. Their citizens, having tasted the benefits of low cost consumer goods, would not sit idly while prices were increased through substantial tariffs.

With such strengthened negotiating power, multinational corporations ascended to new ranks in the world economy as virtual corporate states, similar in power to nation states yet without the incumbent obligations to citizens’ social welfare. Having loosened the limiting bonds of national antitrust laws, Multinationals could now increase their size without bounds and, as a result, grew to have “economies” that rose above those of most nation states.

The world has yet to fully understand the power of the corporate states, but emerging nation states are embracing multinationals’ newfound power as a means to gain arbitrage power from industrial states. In doing so, they feed and strengthen corporate state power sending the world toward unsustainable wealth concentration. Industrial states have not reacted by collectively attempting to regain a foothold to create regional political regulations but instead are slowly acquiescing to a concentration of corporate state power as all have been left impotent at the direction of their elected officials.

Yet concern for multinational corporation concentration of power is rising amongst western industrial states as all are affected by the corporate state induced economic crisis. Cries for isolationalism, protectionism, and proactive job creation legislation have surfaced once again amongst labor unions and domestic businesses as unemployment has risen, yet their cries come too late for America, having already lost 40,000 factories, 8 million jobs, and trillions of dollars of intellectual capital, core skills, and future development that will never be as a result of these transfers.

The premise of free trade has proven a fallacy. Yet now that globalization is upon us, no country has the power to reverse it. Without collective action to globally regulate multinational corporations, individual industrial nation states will eventually attempt to thrust kamikaze assaults on the power, finance, and asset transfers that have already reduced the future of industrial countries in favor of emerging ones and emerging countries will abandon old world colonialism in favor of new world corporate subjugation. And we will all live through the first experiment of global concentration of wealth and power that promises eventual world collapse. If national capitalism collapse takes 60 years, how long does globalism collapse take?

Will Multinational Corporations Evolve into Responsible Nations?

Countries are evolving, even if at different rates, in attempts to understand and to cooperate with their international neighbors. However, businesses within countries are less dimensional, focusing on profit and growth, predictable but self absorbed by their need to survive.

It has taken the world thousands of years to reach the limited point of understanding that we have today, and yet, even within single countries we have socioeconomic conflict. Therefore, we are not soon for a one world government. Nation states continue to be our best hope for growth of freedom and human equality while securing safety from aggression. In the midst of this evolution, we now have to contend with international conflict brought about by the growth of multinational corporations.

Multinational corporations are industrial states without geographies. Unlike countries that are structured to evolve, to regenerate, to rid themselves slowly through the generations of their historical chains of prejudice, MNCs have no such design. They are like great white sharks, modern dinosaurs roaming the earth in search of prey, learning daily to conquer new environments, yet evolving only in becoming more effective at besting their competitors.

So into the League of Nations, rising are the most immature yet most financially powerful of entrants. They are slowly divesting national allegiances while gaining others in their minimal dimensional quest. Whether net gainers or losers in the process, nation states must deal with MNC immaturities while continuing to provide the economic infrastructure that best supports their citizens through businesses, whether domestic or MNC, that being capitalism. It continues to be the one option that most aligns the motivations of man’s self interest with business and is the mode of business that will provide the world its greatest economic advancement.

In the thirty years I have been in business, I have seen the remnants of American social disarray that MNCs have left in their wake as they advance East. I am disappointed by the implications for America and for the rest of the world of multinationals growing unrestrained. Their motives no longer fully aligned with those of their host nations, nation states can no longer be the conscious, even if poor alternatives, of their MNCs.

I advocate America appealing to MNCs’ minimal dimensions by removing disincentives that inhibit collaboration. I also advocate removing the ease by which we allow MNCs to diminish America’s future. I also think that eventually nation states will have to collectively manage the era of the rise of MNCs if we are to transition from a predetermined obsolescence consumer competition for the limited resources we have left to a long lived asset conservation economy of economic cooperation between nations.

Kyoto Protocols Would Have Accelerated China’s Plan to Reverse-Exploit EurAmerica

In 1978, the year China emerged onto the world stage with its four modernizations, China, a country with four times the population of the United States, had a paltry gross domestic product of $216 billion, less than eight percent of the United States. China exposed her strategy of four modernizations to the world as if to say,”Please invest in China and we will ensure that our workforce is educated, and that our business infrastructure is stable for your investment.” Yet, this openly expressed strategy, that may have seemed to the rest of the world as a difficult but noble goal for China to achieve, was only the tip of China’s Grand Plan, and only the part she wanted the world to see.

EurAmerica’s history with China was one of gunboat diplomacy, exploitation, and forced trading. When China opened her borders again in 1979, EurAmerica’s merchants were enthusiastic to exploit an opportunity once again. Yet, China had not forgotten EurAmerica’s role in the Opium War, the Sino-Japanese War, and the Boxer Rebellion. China would never open her border again to be exploited. When she finally opened her border in 1979, it was from a position of power, deep strategy, and long lived planning that suggested EurAmerica was finally ripe for reverse exploitation. China’s grand plan was to emerge as the 21st century world power.

What boldness of purpose China must have felt as she aligned her nation’s efforts to that decade’s long task. Looking back today on her impossible achievements, one must give pause to the monumental economic goal she set for herself in 1978, indeed greater than America’s technical goal of landing on the moon early in 1961. Yet, with such a miniscule $216 billion GDP and few material assets how could China possibly build her empire to surpass that of the United States?

Through a hybrid statist-capitalist political structure, China would create a conduit through which American businesses would willingly draw down the wealth of Europe and America and transfer it to China in order to share in the prosperity of that wealth transfer. Through the centralized imposition of forced savings on its people, China would provide low cost labor to sell goods at low enough prices to cause EurAmerica to look the other way as their neighbors’ jobs went to China. Through low interest loans, China would entice EurAmerican politicians to spend beyond their means to temporarily ease the pain of EurAmerica as China’s sucked away their life force. These were the basis of her strategy.

Similarly to how a business cycle contains early adopters and late stage laggards, China planned a capital extraction cycle for EurAmerica, in which China would extract capital in multiple phases, each phase having an optimal extraction strategy. First extraction would be through the early adopter “gold rush” investors rushing into China to stake a claim. China would also plan for early majority, late majority and laggard’s capital extraction.

In 1978, China assessed America’s assets:
• America’s most valuable assets were intellectual capital that resulted from 200 years of publicly funded primary and publicly subsidized secondary education
• America’s physical assets included business assets, commercial, and residential real estate worth $7 trillion in addition to public assets of land, buildings, and infrastructure
• America produced 26% of the world’s GDP at $2.8 trillion and consumed a quarter of the world’s goods
• America’s debt was as low as it had been since WWII as a percentage of GDP and its 110 million workers were capable of doubling their loans to provide China more capital
• America’s Baby boomers were entering a peak spending phase followed by peak saving
• America’s constitutional republic allowed a relative few capitalists to control the direction of her economy

By 1978, multinational corporations had steadily grown in number and size for two decades. China’s success depended on corralling MNCs through direct foreign investment to create massive inflows of capital quickly monetized as hard assets and infrastructure.

China would entice merchants to invest by offering access to the future potential purchasing power of its people. However, given China’s low household incomes, market penetration would be low to start. Therefore, to entice the early adopters, China would create special economic zones that provided the perfect investment opportunity of cheap educated labor, loose regulation, low taxation, strengthened business law, and enhanced infrastructure and transportation, in which businesses could produce goods at very low arbitrage costs to sell back to their home countries for high margins.

With low cost of goods from special economic zones, early adopter businesses were highly profitable and banks poured investment into China as a result. But, China could not complete her Grand Plan to multiply her GDP 50 times by enticing early adopter investors alone. She had to implement a plan timed to extract maximum dollars from EurAmerica at each phase of her exponential growth.

During the next stage, the early majority stage, China manipulated baby boomers’ peak spending phase:
• China’s low prices secured America’s baby boomers as loyal customers
• Prior to America noticing a substantial loss of jobs, China secured free trade agreements, and mined American businesses for their intellectual capital.
• She reinvested profits back into America’s debt to keep America’s interest rates artificially low in order to spur on higher levels of consumer spending and government borrowing.
• China supported lobbying of America’s mass investment vehicles to fund MNCs. 401Ks and IRAs, created in ‘80and ’81, funneled money through the stock market into MNCs for investment into China.

Then, America was drawn into the late majority stage as America’s baby boomers entered their peak saving years. 401Ks and IRAs artificially fed the stock market frenzy. Baby boomers sensed they knew how to invest in a bubble market that kept rising. With access to low interest rate loans kept low by China’s reinvestment, speculators borrowed money to bet on the rising stock market. America ultimately increased its debt to pump up stock values to build more Chinese factories.

Inevitably, the stock market bubble burst, leaving America’s baby boomers with lower retirement savings. The stock market that seemed destined to go up forever finally reversed rapidly decreasing valuations. However, the debt that had funded its escalation remained.

During the late majority phase:
• More businesses began to invest in China just to remain competitive with businesses that had moved offshore earlier.
• Tens of thousands of businesses transferred factories to China to obtain low cost labor
• Millions of Americans lost jobs
• With a generation of education completed, China now was able to take more advanced jobs as well as factory jobs. America’s bastion of protected, more technically competent jobs was not a bastion after all.
• American retail outlets for Chinese goods grew exponentially
• China continued to loan its excess profits back to the American government to keep interest rates low.
After having lived through the weakness of the stock market, real estate appeared to be the baby boomers’ best retirement savings alternative. In the early stages of the Great Ponsi, housing prices went steadily up. With low interest rates, Americans could now borrow on the value of their homes to continue funding China’s growth. China’s final stages of extraction saw the housing bubble increase beyond what had ever been experienced before.

Even though American jobs were increasingly being driven offshore, the frenzy of increased housing prices allowed additional borrowing from Americans, feeding the China gold rush further. This behavior was not unexpected, following a pattern of historical boom-bust cycles and was part of China’s planning. As a result of the stock bubble and the housing bubble, America’s total debt had risen to over $55 trillion. With such exuberance in the housing market, secondary debt markets participated in credit default swaps to the tune of an additional $42 trillion. China now had extracted close to the maximum of America’s value, leaving America with the corresponding debt.

So China extracted maximum value, first in trade secrets and early adoptive money, then by IRAs and 401Ks, then by stock market and home equity loans, then by 2nd mortgages and housing speculation. China monetized the massive cash flows as quickly as possible, building infrastructure and excess manufacturing capacity, while leaving America holding debt in exchange.

Without any other rising asset values to borrow from, America has tapped out its debt. Having maxed its debt, America can only print money to finance its trade deficits. Without further real debt derived money extraction to give China for infrastructure investment and without a real ability to pay for low cost Chinese goods, America is fast losing her worth to China as an infrastructure vehicle. Recognizing that maximized extraction and rapid monetization of America’s wealth is nearing its end, China is now finalizing the implementation of her strategy, that of pulling out of American debt before other countries that maintain reserve currencies create a run on the dollar.

In thirty short years, China was able to accelerate her GDP from $216 billion to $11 trillion. She amassed reserve capital of $3 trillion. She reversed America’s fortunes from the greatest creditor nation to the greatest debtor nation. She gutted America’s factories while creating the world’s largest manufacturing base in her own country. A measure of output that highly correlates to GDP is energy consumption. In June of this year, 2011, China surpassed the United States as the largest consumer of energy on the planet. While the U.S consumes 19 percent of the world’s energy, China consumes 20.3 percent.

In 1992, the world came together to discuss the impact of climate change resulting from energy consumption. The talks resulted in Kyoto protocols being initially adopted in 1997 that attempted to create a framework for reducing greenhouse emissions. The protocols called for 33 industrialized nations to reduce their greenhouse gases to 1990 levels and then to maintain emissions at those levels. Although it called for emerging countries like China to voluntarily lower levels, it did not require them to be mandated.

Of course, all of the countries who had no requirements to reduce their emissions signed the agreement. The United States, under scrutiny from environmentalists and others did not sign. China did sign. This was an additional strategy perhaps not envisioned in 1978 that nonetheless would have assisted in accelerating America’s slide had we signed.

GDP highly correlates to energy usage. In 1990, America’s real GDP was about $8 trillion as compared to $14 trillion in 2011. Kyoto would have caused America to either:
• Invest billions in the attempt to lower our energy usage per dollar of GDP
• Pay billions to other countries to have them produce less so that we could grow our GDP from $8 to $14 trillion
• Or, maintain our GDP at 8 trillion

In the meantime, China’s GDP in 1990 was $1.3 trillion and has since grown to over $10 trillion. China’s energy use has correspondingly grown as well until the point that this month, she overtook America as the greatest polluter. Kyoto was a grand idea that was doomed from the start because of the flaw that allowed the now greatest polluter to play by different rules. It attempted to cap the economic growth of America while allowing other countries to grow unfettered.

China had a Grand Plan that has been executed with the finesse expected of a centrally planned economy. Kyoto added nicely to that plan. America has been thwarted by China’s plan but now has the ability to reverse course. Given China’s size and growth rate, she will pass us soon if she has not already and her stride will be too great for us to catch her. However, by avoiding traps like Kyoto, and understanding that economic gamesmanship can accomplish a much greater destruction of a nation’s wealth than warfare ever could, perhaps America can once again right its course.

The Rise of the Industrial State – The Fall of the Nation State

Up until modern times, individual greed suited the village, the city-state, the feudal system, the nation. Each nation provided for the betterment of its people, through internal and international trade, war, and mercantilism. The greatest of history’s ancient capitalists were the nation builders who attempted domination of their known worlds through conquest. All failed prior to the industrial age because the energy required to capitalize the value of their worldwide sphere of influence was greater than could be compiled by the organization of vast armies. Worldwide domination could not be accomplished by 1,000,000 or so manpower.

The captains of industry that emerged from the industrial era did what no other capitalist had done since the dawn of time. They controlled not only the energies of man, both bodily and intellectually, but enslaved energy from the bowels of the earth to multiply man’s productivity a thousand fold. Through industry, they could grow industrial empires to eventually harness not only the energies of their nations but of the entire world.

Early in the industrial revolution, this power was contained within the geographies of the nation states. Prior to WWI, colonization fed raw materials from other nations through machinery contained within industrialized nations. Wealth was dispersed to machinery workers and taxed for the benefit of the nations to support their under classes. While the enslaved hydrocarbonic energy of industry had the power to grow exponentially to dominate the world, its time had not yet come. First, hydrocarbons had to be tested by the unbridled desires for nation building that had dominated the centuries before.

Captains of statism still controlled the lives of mankind. These leaders of nations did not yet understand the ultimate power of industry. They thought it could be transformed to once and for all dominate the path to world economic power that had been unsuccessfully attempted by all the previous conquerors in history. This newfound harnessed energy that multiplied man’s output could perhaps be used to capitalize the world’s value through worldwide domination using energy to multiply the power of assembled armies to more than 1,000,000,000 or so hydrocarbon energy enhanced manpower of warfare. Theirs was the grotesque hydrocarbon experiment that had to be played out in the early 20th century.

Great energy driven wars were wrought to subdue the world’s geography. In the end of two great wars, 80 million people had been killed and twice as many maimed in the attempt to control the world’s economies through hydrocarbonized warfare. The captains of statism had assembled great armies accompanied by war machines that directed hydrocarbonic killing contraptions of historic proportions. Modern warfare had ironically made massive armies obsolete, and had castrated the world conquest dreams of most of the statist capitalists.

Yet one nation state above all others, the United States, capitalized energy driven warfare for the benefits of its citizens, dominating the transitional era from that of the nation state to that of the industrial state. Through its obsessive militarized harnessing of the power of hydrocarbonic war, America subdued all other nations within its desired sphere of influence. The demolishment of human capital by the end of WWII and America’s monopoly of the military complex gave way to the transition of the rise of industrial states.

The error of the America’s strategy was that industrial capitalism could not be bound by the geographies of state. Although isolated pockets of multinational corporatism had existed prior to WWII, especially in the oil industry, from the 1960s to the present, multinational corporations expanded exponentially. As they did, corporate taxes that nation states had previously counted on to sustain the needs of their under classes, could not be as easily derived as MNCs, these growing industrial states, expanded across geographic borders.

Commerce is driven by profit motive. Profits had served capitalistic nation states well for centuries because growing wealth of industry could be harnessed through taxation to serve the needs of a nation’s people. However, as industrial states began to cross geographical borders, the ability of nation states to feed off their profits was diminished. And as world-wide military subjugation of “rogue” nation states continued, and threats to world commerce was subdued, ironically industrial states began to value the protection of nation states less.

By the 1960s, all that was to be done to mop up the world’s major commercial threats was to subdue the soviets across the world chess board while isolating other non-capitalist nations from participation in growing capitalist trade. While this decade’s long tactic was completed, great expanses of geography were tamed for commerce. Trade grew exponentially between participating industrial nation states, supported by their satellite commodity colonies and post colonial commodity hegemonies.

The 1960s and’70s saw exponential growth of both the size and number of multinational corporations. The largest multinational corporation in 1970 was GM with revenues of 24 billion. Yet it was the opening of China in 1978 that provided the fuel for worldwide domination of the industrial states. By 1990, GM still dominated, now with revenues of 126 billion. By 2000, six of the top 10 world corporations were banks. By 2007, Wal-Mart was the world’s dominant leader with $348 billion in sales.

Certainly, even in 2011, with its ability to obtain through taxation $2.6 trillion dollars in revenue, the United States is still a much greater economic power in terms of consumption than Walmart is in terms of productive value. Yet with deficits over a trillion dollars compared to Walmart’s profits of $13 billion, America’s ability to sustain itself grows ever more fragile.

The United States’ deficits are predicted to remain above a trillion dollars for the remainder of the century as multinational corporations grow in their ability to exploit the geographical limits of its taxing reach. The United States has exercised only limited power to corral any employment benefits from the expansive growth of multinational corporations, leaving its citizens enduring unemployment and underemployment approaching 20 percent. And the United States is not alone. With cross border monetary resources at their disposal, multinational corporations are able to thwart efforts to align their profit motives with taxation and employment motives of industrialized nations throughout the world.

The transition of power from nation states to industrial states is nearing a maturing phase in which the state authority will reach maximum impotence. America’s strategy of dominating hydrocarbonic warfare has already reached the peak of its impact and is waning. In this maturing environment, China may be the one country that has envisioned a strategy that can harness multinational corporate energy within its borders. As a result, it may ride the rising tide of multinational corporate waves to the domination of all other nation states. China’s power to sustain itself during the peak world domination phase of the multinational corporation, however, has yet to be tested.

A Triumphant Cake for the Return of China’s Empire

When making a cake for a great celebration, the baker uses the same ingredients as when baking a small 10” diameter cake, he just uses a lot more. When the world first saw China stirring up batter, they thought somehow this poor country surely was beginning to make a little 10 “ diameter cake. Now that they see the size of China’s great celebratory cake, some view it as so great that it could feed all of their cake eaters back home five times over. Surely this cake must be too big and therefore China’s baker must be on the verge of closing shop for having so foolishly made such a big cake. For those that still think China’s cake is too big, they just haven’t yet grasped the size of her guest invitation list.

When China began implementing her modernization plans in 1978, she hadn’t planned a 10” diameter cake. She planned a cake for the size of China. And it wasn’t one of those cheap, store bought cakes that we would have expected her to bake given her finances in 1978. It was one fit for a triumphant party celebrating the Empire’s return. In fact, the cake would be so big and would use so many ingredients that parties back home would have to shrink their party plans. The world’s storehouse would not have enough ingredients to throw elaborate parties for both China’s guests and the world’s.

No matter, if there was one thing China learned over 5,000 years, it was how to plan a celebration. China planned her strategy to ensure that on the day of the big celebration, she would have enough ingredients. This certainly meant she would have to manage party conflicts with those back here at home at some point. However, if parties back home didn’t have cake factories to make their cakes, they wouldn’t be able to compete at the appointed hour of China’s celebration, and if they didn’t have cake factories they surely wouldn’t be competing for ingredients at the appointed hour. China would implement her plan to ensure her guests would have their cake. But, she needed to implement first things first.

Reviewing her strengths, China noted she had plenty of baker’s assistants. They simply needed to be trained. She would definitely need more factory space to make the cake and more roads to get the supplies to the factory. And because she didn’t have all needed ingredients in-house, she would have to make arrangements with cake ingredient suppliers to ensure that she would get the ingredients even if others competed for them. Critical to her success, China needed baker’s secrets to make such a great cake. Most importantly, because China had many more bakers than she needed but not enough money or know-how, she would need to trade her strengths for the others.

With strategies set, China set out to implement her plans. She first told all comers that they could build a cake factory in her special cake factory zones, and that they could bake cakes for all of China’s people. With the announcement of this cake bonanza, Bakers came from all over the world for the chance to make cake for China. When asked how big to make the factories, China said to make them ten times larger than they first imagined. The bakers would need access to money and lots of it.

Oddly, While China had such big plans for cake factories, no one in China could afford to buy such magnificent cakes, and no one in China knew how to make them. So if the baker wanted to make cakes in China, the baker would have to teach Chinese baker assistants the secrets to baking a cake. The baker would also have to go back home for bank funding and for free markets to sell the cakes made in China back at home.

Of course, when presented with such a sweet deal, the banker could not pass it up. Together, the baker and the banker convinced everyone back home of the sweet deal from China. China would sell the cake for half the price of home prices so that everyone would be happy. The baker could get a great factory, at least one in China, and had the hope of selling cake to the Chinese some day. The people back home could get a cake that tasted just as good because the baker used his secrets in China to make the cake. Of course the financier back home was happy. Increasingly, cake factories back home seemed to be having trouble selling cakes at twice the price of Chinese cakes, and with cheaper prices and free markets, China cake factories promised great banking returns. The only people that seemed upset were the baker’s old assistants back home who no longer were employed to bake cakes, but no matter, everyone else was happy.

China was happy that her plan was progressing. She would get a grand cake factory that could be used for the great celebration. China could also begin to build relationships with all the worldwide cake ingredient suppliers. She now needed to spread the icing for the next layer of the plan. The baker assistants back home were the ones buying the cakes made by the cake factories in China. If they didn’t have a way to pay for the cakes, all would be lost.

China knew, when planning for her modernization party, that in order to make a cake big enough for the triumphant celebration, she would need so many factories, roads, ingredients, and educated cake bakers that it would take all the expendable money in Europe and America combined to build them. In fact, it would take much of the world’s stock market value and even the equity in people’s homes if she were to be able to throw a truly triumphant party. She needed the baker assistants back home to borrow from their savings, their homes, and their future earnings if the plan was to succeed.

No worries, China had studied capitalist boom-bust cycles of the past. She knew it was very possible for bankers to create the boom once again, in the exact same manner as Europe and America had fallen prey to many times before, and that during the short boom, she could fund her party. Given the opportunity to fund all the cakes in China, bankers back home repeated their very sins of the past. Their patterns had remained predictable for centuries, reacting in a frenzy every time a cake bonanza presented itself. This time they dropped interest rates, made crazy loans, created IRAs and 401 Ks, and escalated not one but three bubbles to draw out as much money as they could to fund as many cake factories as they could in as short a time as they could.

The feeding frenzy occurs because there is only so much time the batter can rise before it falls. When the bubbles finally popped, China had her cake factories, all the baker assistants back home had borrowed more than they could ever pay back, and all the bankers back home had made enough money to live happily ever after.

Now came the appointed hour of the triumphant party for the return of the Empire. By this time, China had been building ingredient relationships unabated, because the bakers back here at home no longer bought baking ingredients. China had built the world’s fastest, largest most efficient ships to bring all the needed ingredients to her shore. She had built massive highways to transport the ingredients to her impressive, massive, modern cake factories. She had educated all her people to fill the ranks of cake bakers. She had saved historic amounts of money from the cheap baked goods she sold to the baking assistants back home and now could buy all the ingredients she needed.

But wait, what about the party back home? Now that it was time for her great celebration, China bought up all the ingredients that were supposed to be for the party back home. The baker’s assistants back home no longer had money to buy cakes, so the Chinese cake factories now could turn their focus inward on their country to bake for the celebration. But really, Chinese cake factories hadn’t any competition for ingredients. The baker’s assistants back home had long lost their knowledge of cake baking. The cake factories had long fallen into disrepair and could no longer be used to make cake. The roads back home were in disrepair. The cake baking schools back home had fallen behind without local businesses to spur them to excellence. The ingredient suppliers had long ago built relationships with China’s bakers and knew where their bread was buttered.

As the triumphant party was being held in China and the great cake was being presented to her party guests, back home all that anyone could do was watch from afar. The bakers had lost their market for cakes back home. Without demand, they could not make the payments on the bank loans and they defaulted. Without sufficient buyers, they turned over their factories to the Chinese. Without customers back home and without money or credit to pay for new cake factories back home, the bakers now became unemployed themselves. The bankers, now without payments on their loans, well they closed up shop as well.