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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.

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Is War an Opportunity to Solve China’s Social Ills?

As I continue to uncover for my own understanding China’s interwoven long term strategies and implementation of those strategies, I have been truly awed by her disciplined rise once again to power. Of all the empires on earth, China has somehow uniquely adapted to the world’s changing influences and has repeatedly renewed her dominance, unlike all other nations that ultimately imploded into insignificance through flawed national strategies. However, one China policy above all others seems disjointed in her current quest for world preeminence.

In an apparent attempt to limit internal demand for resources, China implemented over the past 30 years a one baby rule that limits families to one child. The resulting social ills have ripped a malevolent thread throughout China that may only be disposed of through war.

Without safety nets such as social security and Medicare, Chinese parents rely on their children to protect them in their old age. Societal norms require a son for this purpose. Over the past three decades, in the face of China’s family planning policies, Chinese parents have aborted 40 million baby girls to ensure their old age needs are met.

The disastrous results of this deliberate centralized planning aberration are numerous. Because of the need for male children and as a result of China’s artificially imposed birth fines, a growing child trafficking trade now kidnaps 70,000 baby boys a year for sale, destroying families and villages in the process. China now has 40 million males that have no chance of marriage. Wealthier parents, attempting to secure brides for their baby boys, have increased the demand for trafficking of baby girls who are purchased and raised as future brides. Many of the boys, who are now of marriage age and without wives have increased the demand for prostitution. Once again, it has increased the trafficking of young women to serve as prostitutes.

Has China’s policy created a social ill that will continue through the life cycle of 40 million young men with only symptoms of enormous trafficking, or will these ills compel other resulting social ills until the ripples simply cannot be contained within China’s current attempt of world dominance?

China’s historic gender aberration, perhaps a previously unplanned flaw in the context of her more systematically planned hegemonic rise, will influence her transition in ways yet unknown. Whether or not a giant flaw in her otherwise planned society or an intended gender distortion created for ulterior means, this distorting social instability must now be resolved by China’s central planners if she hopes to prosper.

Within the next two decades, the demand for commodities will peak, stressing underlying conflicts between China and EurAmerica while China demands her place as the 21st century hegemonist. Every transition from one empire to another has been marred by great wars including WWI and WWII at the start of America’s rise. An opportunistic solution to this potentially devastating draconian centralized authoritarian social policy that created such a destabilizing gender gap could be to reduce this warring age male population through war.

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Was America’s Empire but a Shooting Star?

During the early 1900s as America overtook England as the new century hegemonist, Europe was embroiled in colonization efforts to fend off the inevitable transition to America’s rise. Europe’s diminished capacity to deal with domestic consequences of the transition created the impetus for a chaotic shift of world leadership, just as every shift of empires in world history. In this case, it led to a world war.

The war left citizens in Weimar Germany impoverished and subjugated to the rest of Europe, setting the stage for Nazi atrocities. International banking policies including the Fed’s precipitated a great recession from which Japan turned militaristic. The hegemonist of the era, the United States refused to share our contracted oil and other commodities required for Japan’s military success in Manchuria, so Japan drew America into the war ending in the single greatest bombing devastation imposed on a civilization.

The end of WWII marked the end of what was clearly a severely chaotic transition to America’s hegemony. America emerged from WWII the dominant economic leader of the free world. However, just because every empire’s transition in history has been as chaotic as the transition to America’s time, does all of history prove that we will also experience a chaotic transition in the 21st century? Or will America’s fall from power be a unique exception?

We were unique in our treatment of Europe and Japan at the beginning of our reign. Throughout history there have been benevolent kings and despotic ones, and America’s king turned out to be benevolent. With a unique historical sharing of wealth through the Marshall plan, a plan that hastened America’s demise as this century’s hegemon, the United States seeded the economies of Europe and Japan so that all could prosper.

Perhaps it was America’s ecumenical roots that persuaded such global altruism. Perhaps it was our European heritage and our desire that Japan be a strong deterrent to the Soviets, or perhaps it was self interest in gaining market share of war torn countries. No matter the reason, America proved her unique qualities in that era. Could we expect a repeat of this uniquely historical benevolent treatment from China after emerging through a yet unknown chaotic transition?

A factor which may unfortunately lead the world once again through such a transition is the life curve of oil that will be decreasing during the transition period. When America rose to power, Europe and Japan could both share in the benevolence that oil bestowed on all industrialized economies. The life cycle of oil however has now peaked and is in its declining phase.

At the world’s current usage, only one barrel of oil is being found for every barrel consumed. With China’s exponential growth occurring during the quickly receding life of oil, that ratio will quickly worsen to a crisis stage as China’s usage doubles in the next five years. While America flirted with the idea of developing a comprehensive energy policy back when we had time to achieve one, nothing we can do, given our political circumstances, will prepare us for the coming world tsunami of oil demand.

With far reaching international oil and other commodity contracts, China has positioned herself to prosper as she escalates her prosperity into her interior. Unlike the United States and Europe, China has a ready market for her next phase of escalated growth, her own interior. How will EurAmerica react as our civilized defenses of international law act against us as China secures oil that has helped us sustain our current world standings?

The lack of any viable alternatives to wealth creating fuels will likely make for an equally volatile transition this empire turnover. Will the transition lead to the death of our nation? How quickly can we modify our energy footprint while keeping our lifestyle intact? How will our diminishing middle class respond? How aggressively will our military complex react to greatly diminished budgets? How comfortable will the world be in turning over hegemonic control to China?

No matter our comfort level, the law of exponential growth states that China will propel herself rapidly beyond the economies of the United States and Europe in the coming decade and will boost herself into the next higher orbit. The question for our economies is what we will do as her rockets suck up the remaining rocket fuel reserves on earth. Unlike the United States and Europe, China has an economic booster rocket that can be ignited by the mere flip of a switch. All China needs to do to proclaim readymade wealth is to dial in her currency valuation as required. While it may make her exports less competitive, she already has an impatient interior market waiting for her goods.

So now the stage has been set for the transition and we have five years to position ourselves. Five years is but a day for finessed diplomacy. With our level of political discourse, five years is but an hour for national strategic planning. Without time to create such precise tools for our western civilization, how will EurAmerica react? Will we revert to the thuggery of gunship diplomacy for which we are all too well known by the East?

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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.

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While War is Sometimes Justified, Its Aggression is Encroached by Multinational Corporations

As our country lent our military support toward Libya, voices were heard from all sides of the issue on America entering this war. I had my own rationale for support of Libya, being that our history owed its allegiance to balancing the disproportionate voice of Muammar’s loyalists that bloodily silenced the Libyan cries for freedom from tyranny, trampling their neophyte flags of democracy.

Opposition rang out that there is never cause for pursuing war, that all war is instigated by evil, and that Libya is not a righteous purpose for an American call to arms. Although our country has only declared war five times, I intend to reflect on war’s broader sense, armed conflicts in which one state imposes its will on another.

Humankind’s darker nature has always been to impose our will on others. In fact, all religions have recorded that man is driven by lust, greed, rage, envy, vainglory, and hubris, to aggressively take what others have gainfully acquired. As technology and civilizations have advanced, war is ultimately the tool that has best bent the will of nations.

From the beginnings of such great city states as Sumer in 2,700 B.C. until today, parallel development of technologies and cultures has enabled men to use war to feed their unsatiated desire for power, wealth, subjugation and slavery of others. As each empire from the Egyptians through the Persians, Romans, and Ottomans rose and fell, expanding armies and improved logistics increased geographies of conquest to eventually subjugate the earth’s known limits.

Earlier Americans were not the exception. After having penned the Declaration of Independence and Constitution, we also recorded for posterity our malevolent aggressions. Armed with euro-centric land charter rights, we justified pacification of natives. We offered biblical verses to justify all manners of sin in the institution of slavery, supplied by warring African nations. We claimed Manifest Destiny to take land from the Mexicans as we completed our expansion westward. And with the industrial revolution, we acquired the capital and technology to exert our wills on “lesser civilizations” through colonization and banana wars.

While history’s wars of aggression have mostly been thrust upon the world by power lust rulers and capitalists attempting to garner military objectives for their own ends, wars have also been waged to free people from tyranny. Since man’s darker nature will always exist, all nations must be able to defend themselves against the aggressions of others, and when oppression comes from within, the governed must ultimately, if by no other means, defend against despotism.

America’s military action in Libya was to defend humankind to this end, to free Libyans from the bleakness to which the world is capable. Libya is within the moral subset of war that justifies force against institutions of evil purpose. For this reason, modern nations must support standing armies.

The existence of an army however leads to the temptation of a corrupting use of its force. Abraham Lincoln in his comments regarding the Mexican-American war stated, “Kings had always been involving and impoverishing their people in wars, pretending generally, if not always, that the good of the people was the object. This our Convention understood to be the most oppressive of all Kingly oppressions; and they resolved to so frame the Constitution that no one man should hold the power of bringing this oppression upon us.”

If the mere existence of a standing army tempts its corrupting use, it is understandable that the third world is wary of the greatest military force ever known. America’s 20th century exercises were mixed with both historic defense of freedom and support of hegemonic expansion. However, as we placed bases in over 700 locations worldwide, our transition to the world’s first and sole superpower was also a witness to the transfer of our military’s aggressive purpose to multinational corporations (MNC).

Having created a plateau of peak world stability over the past three decades, the United States military has also created the perception of less need for its presence. As such, MNCs have perceived less value in militaries to accomplish their purpose. If the aggressive purpose of militaries was to take the spoils of other nations by force, this purpose has been transferred to the MNCs, who accomplish this task without bloodshed. Man’s darker nature has created a modern wealth extraction mechanism that has far exceeded the capability of war.

Global financial, communication and operational technologies allow a hyper-concentration and fungibility of capital by MNCs that subdue the governance of democracies, autocracies and theocracies. They thwart the efforts of communism and socialism to redistribute their power. They have conquered most nations on earth and have aligned the productive means of much of mankind to their will.

While modern MNCs do employ mercenaries, and in fact some MNCs specialize in the field (i.e. Blackwater), MNCs are accomplishing more than any imperialistic state has been able to achieve through war. However, since the effects on mankind are similar, the definition of war may need to expand to the forces employed by these new virtual states. America is also being subjugated by the darker nature of men. This modern MNC warfare is upon us and we should arm ourselves before its tyranny bends us to its will.

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Filed under American Governance, Multinational Corporations, social trajectory, War

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

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Filed under Foreign Policy, Free Trade, Full Employment

Defense of Freedom Pragmatically Mitigates National Security Wars

To put our servicemen and women into harm’s way, America must be guided not only by lofty ideals but by self interest and most importantly national security. Our incentives in Korea, Viet Nam, and even the Cold War were guided by a combination of the three. Obviously in recent years, human atrocities have occurred in places like Darfur without our intervention, and we have backed governments that, while lacking protection of human rights, have supported our interests in a hostile environment. While I am sometimes discomforted by our hegemonic decisions, I try to understand the complexities.

The demonstrations begun in Tunisia have now spread headlong into Bahrain and Saudi Arabia, our chief military and economic allies of the region. Our support for Libyan freedom fighters cannot be seen as a support in the eyes of our Allied kings for continued violence against regional leaders. I see the complexity. However, Muammar is a crazed dictator responsible for Lockerbie and state sponsored terrorism. He is a despot that has fairly easily differentiated characteristics from our allies. His willingness to turn military against his own people places his regime in a category of its own.

We are now policing Iraq, at war in Afghanistan, and allied with Israel in an embroiled region that is critical to our national security and standard of living. As the consumer of a quarter of the world’s oil, disruptions from the region will have dramatic effects on our economy. (As an aside, people are not yet speaking of the Step change down in Japan’s energy dependent economy because of its permanent loss of about 6% of its power output that will take several years to replace) So does Libya, who produces less than 3% of the world’s oil supply, pass the ideal, self interest, and national security hurdles?

I say yes, with the understanding that there are risks of enforcing a no fly zone but they are minimal. We placed a similar zone above Iraq, who had a more advanced military, without material losses. None-the-less, the risks of not supporting Libyan freedom fighters is the long term ill wind against America that will blow across the new governments of Northern Africa.

Our resistance to support Sudanese, Iranians, Tunisians, Algerians, Egyptians, Yemenis, Bahrainis, Saudis, and now Libyans while securing Kuwait, Saudi Arabia, Afghanistan, Iraq, and our friend Israel will have long lasting detriment to our economic security that could be mitigated by some show of support for the democratic ideals that all people see as America’s beacon. If our economy is severely threatened by loss of oil, infinitely more loss of American lives will ultimately be shed.

This old man believes in ideals. Some might fear I forget that ideals are an old man’s folly and war a young man’s end. I believe that given the pragmatic alternative of spending some effort today to secure the historic democratic alliance of a critical world region versus the alternative of major military conflict later with great loss of lives to secure safe transit of oil amidst a resentful coalition, I cautiously prefer the former.

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Will America’s lack of a Multinational Corporation Policy Bring a Resurgence of War? (Part 2)

America must cull the artificial bubble economy effects from our analysis and reassess the effect of American trade policy on our country’s wealth over the last thirty years.  To ensure we correctly right size our military, we must account all costs and benefits of having achieved world military dominance.

Through our military support of world stability, did we better America’s future?

 America’s military budget exceeds $600 billion.  For the last 60 years, we have spent more than all other countries combined to export freedom, including the stabilizing effect of more than 700 overseas military bases.   Some argue that the relative world peace our citizens have enjoyed is more than offset by the negative consequences of our military on our country’s historic debt.

 However, our military has been paid for by the world.  America controls much of the world’s reserve currency.  Through currency manipulation, we have “taxed” the world for the peaceful trade benefits they have gained.  With over $15 trillion reserve currency held by foreign governments, inflating dollars by just 4 percent each year pays our military budget.  America’s waning percentage of world trade would have caused the U.S. dollar to cease as the world’s reserve currency decades ago were it not for the perception our military created that the dollar was the best alternative for wealth storage stability.  So, at least for now, reserve currency benefits have been supported by and have paid for our military.  

 However, if other economic factors caused by our military dominance strategy are included, the net resulting benefit to America becomes less clear.  Our military dominance reduced the risks of direct foreign investments, resulting in an explosion of MNC growth.  Trade skeptics claim that MNCs are directly responsible for trade deficits of $800 billion and job losses of over 14 million, enough to re-employ all able Americans. Cumulative trade deficits, financed through government and private borrowing, have crowded out entitlements and infrastructure, and have diminished American standards of living.  In addition, our military strategy has led American wealth to be reassured of safe returns off-shore, limiting access to capital and credit for domestic businesses.  Investors transferred $6 trillion abroad to direct foreign investments, and an additional $10 trillion to offshore banks shielded from taxation.

Unfortunately, trade deficits have led the world to nearsightedly consider replacing the dollar with a world denominated reserve currency, threatening our ability to sustain our military.  As we pull our military back from the world stage, the security gap will be filled from competing sources, creating military instability that will threaten the peace the world has enjoyed for the last 40 years.  As a result, the MNC investments that precipitated these changes will be at risk of default and trillions of dollars of hard assets already invested in emerging countries, could be at risk of nationalization.   As emerging nations continue to expand, commodity exporters may be unable meet world demand.  Recognizing the threat to national security, with the world’s warring history as a guide, armed conflict could ensue.  Ironically, MNCs gutted our country of essential, strategic, manufacturing capability to mount a credible and sustainable war for commodities.

 These possibilities argue for a comprehensive review of our trade, economic, and taxation policies regarding multinational corporations.  What are your thoughts?

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Will America’s Lack of a Multinational Corporation Policy Bring a Resurgence of War? (Part 1)

World history has been dominated by trade wars and military interventions to resolve trade conflicts. From the 15th through the 19th centuries, shipping merchants became wealthy competing for trade routes and exploiting price differences between nations’ captive markets.  Wealthier nations financed mercantilism to increase their gold coffers at the expense of other nations that lacked merchant ships and navies to protect them.

In the 19th century, those nations of Europe and America that had accumulated wealth through mercantilism, now invested in the transformative industrial innovations of their time.  For much of the 19th and 20th centuries, the industrial revolution compounded the wealth of these nations, and advanced the theoretically achievable wealth of the entire world.  However, a concentration of industrial strength by relatively few countries led to export surpluses that drove countries to compete for trade routes, and that eventually caused an eruption of war. 

In the 20th century, technology advances supported worldwide business capability, yet wars, government corruption, and misguided trade barriers dissuaded businesses from expanding to other countries. But the wars did temporarily thrust underground the notion that trade differences should be settled through bloodshed.  Nonetheless, the United States pursued military dominance.  As the 20th century ended, the U.S. emerged the sole superpower, creating a unique opportunity.  For the first time in history, the entire world could peacefully pursue economic parity.

The world responded by leveraging wage imbalances between the world’s rich and poor nations.  Entire civilizations altered age-old governance systems so their people could participate in world wealth redistribution.  China created a capitalistic engine to support its socialist goals as the center of the ASEAN economy.  India reduced the pressures of its caste system to benefit from newfound prosperity.  And we are witnessing today the Middle East standing up to dictatorships that have shielded their people from participating in the world’s economy

Europe’s and America’s businesses reacted by aggressively expanding into global markets through direct foreign investments of multinational corporations (MNCs). Their expansion resulted in the transfer of both wealth and jobs to other countries, and created a formidable force that wounded America.  As we face down this force, America should be asking the following questions 1) through our military support of world stability, did we better America’s future?, 2) can we simultaneously innovate to advance our nation’s wealth frontier while supporting the rise of the rest of the world?  And 3) have we determined an economic path forward that will protect the world from a reemergence of military struggles?  The answer to these questions will depend on the ability of United States to develop a coherent policy regarding MNCs.


Filed under China, Free Trade, Innovation, Multinational Corporations

We Can Regain Jobs That Left With The Multinationals

U.S. Military Bases Support Job GrowthEarly on, our nation made the strategic decision to outpace all others in military superiority. With a military budget that now exceeds all other nations combined, America declared and exercised our right to quickly defend the sovereignty of our allies from over 1,000 U.S. bases that extend our dominance throughout the world. We pursued our goal with such steadfastness that we are now the sole super power on earth. Our military influence has created a worldwide economic bastion that has allowed all nations to far surpass the economic output that could have been produced had not such a peaceful expectation existed.

While this exertion of power created great peacetime dividends for this country, it also created unexpected results, the birth of multinational corporations, or “borderless nations”. Our strategy of military dominance created a much safer, stable world that lessoned the risk of U.S. based companies investing abroad. With risks lessened, businesses could more easily justify moving traditional industries overseas. Unprecedented peace allowed multinational corporations to gut factory towns like Detroit, Youngstown, and Pittsburgh.

While our manufacturing strength was slowly eroded from our shores, our citizenry was lulled into the belief that our future was sound by the successively reassuring waves of the savings and loan bubble, the stock market bubble, the internet bubble, and finally, the Wall Street derivatives bubble. By the time the suds cleared, our nation was left without a significant means of traditional production. While we were being seduced into the belief that our country was financially sound, many of the trade secrets, core skills and financial wealth of corporations had been shifted to other countries.

Meanwhile, our citizens believed that the bubble value of our homes and stock market portfolios would support our needs to consume. Instead, when the bubbles finally stopped popping, we found that our consumer debt was of historic proportions and that our federal, state, and local governments had ballooned to consume bubble inflated tax revenues and were awash in deficits. We now have the unenviable position of being the greatest debtor nation that has ever existed.

While it will be painful for all to reverse this trend that threatens to quickly topple America from its century of hegemony, acting decisively with the right prescriptive tools, we can decide that our nation will not endure a decade of languishing high unemployment. However, if we are to escape the fate of our grandparents, government must partner with American business to create historic advances in innovation and productivity.

A partnered solution that can accelerate our country toward full employment is my voucher plan. It replaces extended unemployment payments with hiring vouchers. 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 federal unemployment budget.

A few benefits include: Employees learn new skills and can continue to seek full employment. Employers lower risks of hiring new employees, spur innovation, and reduce prices of goods and services to compete in the global market. Government supports job growth through direct infusion of dollars into small businesses, and lets the free market determine how to maximize resources.

This idea can employ all Americans now, and can move many from the sidelines of our economy onto the field of American ingenuity and global competitiveness. I ask your readers to share with their representatives thoughts about this voucher plan in hopes that a leader might champion its concept now when we need it most.



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Filed under Multinational Corporations