Published CommPro.biz 2014.02.27

The Solution
 

“What do you think is the most important problem facing this country today?” The folks at Gallup ask 1,000+/- scientifically chosen Americans that question the first week of every month. Last week (2014.02.17) they released the answers for this month. Jumping back into the lead it shared with “The Economy” every month from 2008 until last fall, was “Unemployment and Jobs”. So despite the chorus that has been droning “debt/deficit, debt/deficit, debt/deficit” during that same timeframe, the public has been worrying about unemployment, jobs and the economy. The deficit and debt has been at the bottom of their list after other concerns like healthcare and the politicians who are supposed to be doing something about these problems.

Actually the politicians beating the deficit drum are the ones who were in power when it was created. So if the people are concerned with unemployment, jobs and the economy, why do they keep sending the debt creators back to Washington to complain about their creation? The answer is twofold. Firstly, those who benefit most from the policies of debt creation –the ultra-wealthy– pour money into the election campaign coffers of the debt creators. Secondly, gerrymandered districts –immune to democracy– have been created for these servants of the wealthy.

How do we create jobs, reduce unemployment and fix the economy? We don’t claim credentials when it comes to economics, nor are we relying on the host of economists who see the solution we see. We are just reviewing the past. If you start at the beginning of the modern economic model –the industrial revolution and the birth of capitalism– you find the beginning of the pattern of periodic downturns in the economy, mostly caused by one greedy sector or another.

If you examine that series of ups and downs you will find that without exception, when the economy went down, recovery was triggered by the same solution. The government stepped in creating jobs, jumpstarting recovery. There is not a single instance in the United States or any other modern economy where a downturn has been reversed by any other means, not one. The idea that austerity is the path out of an economic downturn is a proven failure. Anyone who reviews history can see that. We see it today in Europe, nations teetering on the brink of bankruptcy. Germany, the strongest nation in the EU, is stagnating. We are the strongest nation in the world. Yet we are creeping; dragged down by the debt creators.

Now is the time to repair our crumbling infrastructure, to invest in education, to fund research, to create the jobs that will pull our economy out of the mud. To do what has been done every time we’ve faced this problem for more than 200 years, jumpstart growth. The people have been worrying about unemployment and jobs for five years. We know how to fix that; it could have been addressed in 2008. Makes you wonder why some of those charged with fixing it have instead focused on the debt/deficit; maybe a distraction?

"Am I wrong?"--"Am I Nuts?"-

-"What do you think?"--"Do you agree?"

Published in CommPro.biz 2013.04.25

 

HSBC Scot Free?

In study after study there is nothing to support the idea that “C” Suite occupants are irreplaceable. There’s an occasional example of a corporate leader’s departure negatively impacting a company’s performance: Steve Jobs’s voluntary ten-year absence from Apple left the company floundering; the jury is out at this point following his death in the fall of 2011 but the company is certainly not going to collapse. However, in all but a few cases there is an able individual in the wings ready to take over.

That makes a Department of Justice decision to give HSBC a get-out-of-jail-free card so outrageous. Listen to Attorney General Eric Holder earlier this month (2013.03.08) before a Senate Committee: "I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute -- if we do bring a criminal charge -- it will have a negative impact on the national economy, perhaps even the world economy," How dumb is that? What an insult to the tens of thousands of honest HSBC people to imagine that there are not lots of capable executives at HSBC who could step into the shoes of the boneheads who have turned an international financial giant into a gigantic criminal enterprise.

Let’s review: HSBC laundered carloads of money for the Sinaloa Drug Cartel, who are reported to have murdered thousands of people. HSBC created shams to help North Korea, Iran and others beat sanctions. HSBC financed Al Qaeda and a wide range of terrorist organizations along with mobsters in Russia, and they provided good old tax cheats a place to stash their earnings. That’s just a smattering of the flat-out criminal activity at HSBC. And the DOJ is letting them get away with it? Just have coffee in the same coffee shop as a terrorist and you’ll be grilled by the FBI. And HSBC gets a pass? Unbelievable!

Where does Holder think the “indications” of worldwide economic collapse if we jail these crooks is coming from? From the same HSBC lobbyists who pour bucks into the pockets of members of the Congress. Fortunately there are a few on the hill who are willing to stand up to these crooks, Carl Levin and Elizabeth Warren among others. Still, one estimate of support in the Senate for a break-up of the monster banks sees fewer than forty votes. Can you imagine how few members of the House would support such an action?

Everyone knows that’s what’s needed. The Dallas Fed chairman and at least one other Fed Board member have documented the need to break up the too-big-to-fail banks. These banks are the real threat to the world’s economic health. And until we treat criminal banksters for what they are, crooks, and put them in jail where crooks belong, they are going to keep right on breaking the law and risking another crash with their roulette wheel style of banking. Why not, when the top law enforcement officer in the United States gives them a pass?

What's Fair

What's Fair

 

A Bloomberg Businessweek focus on wealth inequality (11.16.11) came up with some stunning conclusions. Using Census numbers –and a wide variety of past and present expert opinions– they point to the existing and growing disparity of wealth in America and conclude that it is bad for our economy. The gridlock we are experiencing leads those who are slipping behind to conclude that they have no hope, that they are at the mercy of the rich. The two ends of the economic ladder slip into bitter blame game positions.

Here’s where this game goes wrong for the rich. Income inequality leads to social instability. That leads to the belief that the system (read Stock Market) is rigged in favor of the ultra rich and you lose as much as a generation of investors. They point to the stock market following the crash in 1929. It took until 1954 for it to regain its pre-depression level, more than a quarter century. One wonders how long an extended downturn of that nature might last if we do not find our way out of the gridlock now engulfing us. Unlike the ‘30s, ‘40s, and ‘50s, in the era of the 401k etc. there are lots of middle class folks with a stake in the stock market these days.

We keep hearing that the rich create jobs. But the research shows that jobs are created by small businesses. Those folks are not the rich; they are what’s left of the middle class. They are looking for loans to grow and hire, but the banks that we all bailed out are not lending to small businesses. Instead they are back in the risky games that got us into this mess. Worse, small businesses are paying the high corporate taxes –not the big guys.

Speaking of taxes, it makes no sense for the poor and middle class to shell out a bigger piece of their income than the rich. Everyone seems to understand this except those in DC who hold to the job creation myth, and of course the rich who haven’t been able to do the math. When you talk to the savvy wealthy folks, you find that they favor a more equitable tax system. They understand that you can’t build a healthy economy on the backs of the poor. The smartest investor on the planet, Warren Buffett, figured it out years ago. No matter how big your slice is, you can’t do well if the pie keeps shrinking.

In the meantime, if the rich are not creating jobs with their wealth, what are they doing with their money? Well, their investments seem focused on commodities, where they speculate and drive up prices on food and oil; thanks for high gas prices. And they are driving the luxury market; if it’s expensive, they’re buying. Even the price of first class air travel – would you believe aircraft fitted with showers and private compartments? After all you have to look sharp when you arrive in some exotic locale. And what’s $15,000 or $20,000 for a plane ride. There are some pretty obvious ethical issues in all this. Too bad they don’t seem to matter much in our world where the Lobbyists rule in DC. How many of them do you think work for the middle class and the poor?

Dear A.I.G., I Quit!

Poor Jake!

An A.I.G. EVP vented on the New York Times opinion page today (3.25.09). Jake DeSantis is quitting because he has been betrayed by the company that has paid him to make money for them trading “Commodities, Energy, (and) Derivatives” according to his public profile on the professional social media site, LinkedIn. Now A.I.G. (and most of the rest of us) expect him to give back the +/- million buck bonus he was paid earlier this month.

Jake says it’s unfair that A.I.G. is reneging on the deal they promised him. That the division where he labored 10-14 hours a day was not responsible for the “credit swaps” that sent A.I.G. reeling. That he had agreed to work for $1 a year on the belief that he would be rewarded for his effort with the big bonus in question. It was a deal, a “contract in writing,” and he should get to keep his money. So there!

Jake says, “I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.” Jake graduated from M.I.T. S.M., Materials Science in 1992. His thesis? "Chemical Vapor Deposition of Iridium and Rhodium from Organometallic Precursors conducted at the Los Alamos National Laboratory”, where he was an intern.

Bright guy, most of us can’t pronounce that stuff let alone understand what it is about. So where did this scientific genius head? To the Union Bank of Switzerland (UBS) where he worked in “Equity derivatives trading.” Isn’t that what’s being called “toxic” these days? After six years at UBS he moved to A.I.G.. Over the last eleven years Jake made a lot of money.

He says, “I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.”

Hard work? Actually most would argue that commodity and derivative trading during the boom years that Jake has been at it, was a piece of cake. If -as he says- he and his fellows have been overpaid, why did it not occur to him earlier that the retention contracts he and others signed to hang in there and try to salvage the company that has made him rich were wrong? Is he saying that the sailors on a sinking ship should be given a contract assuring them of a big pay check before they agree to help to bail it out? Just because the hole in the bottom of the ship is in the bow doesn’t relieve those in the stern from the need to help save the ship.

That’s what it’s all about, Jake. If the American people -few of whom are as privileged as you- are going to throw billions of their hard earned dollars into saving your company, shouldn’t you be willing to work for a $1 a year and live off the fat of the land (all the money you made in the last eleven years) for a couple years to help save the company that has been so good to you? When little folks all over the country are being asked to give up part of their earnings, why are you whining all the way back to your luxury life?

Where is the moral compass that allows your vindictive plan to be sure that the company that put you where you are and/or the taxpayers who are trying to save the company do not get one cent of the bonus that you are giving up. Where would you be if A.I.G. had been allowed to fail? There would be no bonus. Nor would there be most of the other goodies that assure that you and yours will live comfortably for the rest of your lives.

You stepped off the ethical high ground when it even crossed your mind that you should be paid to do the right thing. Maybe you didn't lose any money for your company but you are a loser Jake!