Why Does Our Supposedly Great Economic System Tolerate High Unemployment While There is Work to be Done?

The country has trillions of dollars of infrastructure and other development work desperately needed. There are millions of willing workers unemployed, and the factories which make the materials are running at low capacity. You would think that a country of 300 million people working under an economic system that claims to be innovative would be able to develop a financing scheme that matches up these needs. Our banking leaders can come up with a scam that causes a global recession but seem helpless when given the chance to finance something innovative that would help get the country out of reverse.


One example of innovative financing for a targeted problem was War Bonds. You can read about them here. They raised $185.7 billion for WWII. Another gift of “can do” to us from the Greatest Generation. Their desirable characteristics were:

           They were voluntary investments by the citizens, not a tax or contribution.

 Backed by the US Government

Aimed at the general public (half of total population participated)

From $25 dollars to $10,000. (They had a card for spare quarters until $18.75 was reached and they could be traded for a $25 bond)

Ten years to maternity at face value.

Simple and straightforward, everyone could understand

Lets call a modern version “Recovery Bonds”. They would be targeted at specific national goals (i.e. highway/ bridge/rail/ air control upgrades etc.)The national government would certify the prospectus and participate under same terms as citizens.

The citizens will have an energized attitude toward projects and government. They are voting with their investments.

I am convinced that the only way we will fix the cozy government/special financial interest relationship is to have more direct citizen participation in national projects. This is just an example of one approach. How about some others from our "innovative” financial sector?

Emergency Finance Bills Substitute Dictators for Democracy in Troubled Local Governments

As the lost revenue from the recession hits state treasuries there is a rush by several states for new legislation that makes major changes in who will actually control financially troubled local governments. It is not the citizens but an Emergency Financial Manager (EFM) that is being given unheard of power. The EFM is appointed by the Governor.


The new rules give the EFM the power to overturn negotiated contracts between unions and local units, remove elected officials from office, sell community assets, eliminate the salary and benefits of elected officials and request local millage votes to increase revenue. An EFM could dissolve a school district or local unit of government and merge it with neighboring ones. The EFM can also sell community assets.

More detailed comments on the EFM from the Detroit Free Press can be found here. The system is currently said to be applied only to communities which have repeatedly failed to solve their finance problems. It seems made to be abused. Revenue sharing is being cut drastically in many states and many communities will have problems.

Detroit has run a deficit since 2003 and is a prime target. Can substituting a dictator for a democratic process improve the situation? We will see. The economic cards for Detroit are so dire that it is doubtful. Taking the right to solve their problems through democratic procedures away from the population is a dangerous step which requires very close watching.

A nightmare scenario: Hey, Mr. Mayor, don’t worry; Even though we have drastically cut the state revenue sharing the Governor will assign an EFM to tell you what to do. Well, it’s not really a person; it’s a corporation from New York. They specialize in putting together packages of local government debt into securities that they sell on the market. Everyone is doing it.

Be very careful with the power you give an Emergency Financial Manager

Nation’s Outrage Explodes as the Secondary Effects of the Financial Meltdown Hit a Stressed Middle Class

The turmoil and suffering due to the recession still has a long way to run. We are just reaching the states revenue shortfalls. There are still those millions of bad mortgages that are cleverly hidden in the bank books. Many states have decided that the trouble will be placed on teachers, other public workers and unions. It is ridiculous to assign the burden of the state’s shortfalls to an already stressed middle class while those who caused the problem remain untouched. There is not even a veneer of justice in this approach.


Pass a law which places all of the financial burden on the middle class workers, allows state assets to be sold without competition, cancel essentially all collective bargaining rights for teachers or other state workers , and finally add a number of additional insults to the people who do the states work - and you have Wisconsin. You also have one heck of a state protest which has exploded into a nationwide movement. You can be brought up-to-date on the 4 week struggle here.

The Wisconsin protests that initially shocked so many because of their size were driven by the lack of justice and the obvious attempt at union busting. The newly elected Wisconsin senate and governor were blatant in their disrespect to those whom they were supposed to manage through a difficult year. It was insulting to watch the attempts of the new Wisconsin government to place the burdens for revenue shortfall to the teachers, firemen, and police, and other government workers rather than on the poorly managed national financial institutions where it belongs.

The protests continue to grow. A recent protest on  March 12 in Madison was estimated by the police at 85,00o to 100,000. This is more that the largest Tea Party event.

There is a call for a new party that would correct the current situation. Robert Reich would call it the “Peoples Party”. Another solution that has been brought up has the shortfalls being mitigated by fines on those institutions responsible for the meltdown. Michael Moore calls for stricter measures in that many of those who caused the recession are thieves and should be arrested.

Although so far the protests have been very peaceful, you can sense that the patience is getting thin. Recalls are being prepared for many of the state senators who voted for the bill. As a constantly lied to class there is no confidence in a federal government that cannot pass a basic budget and is living off a two week fiscal extension. The middle class needs to see proof that the cozy government /special interests relationships at both the state and federal level will be either radically changed or replaced by just and honest organizations.

Let’s hope that this assurance will be forthcoming and/or everything is settled at the ballot box in 2012.

Republicans “Jump the Shark” in Wisconsin

Jumping the shark is an expression used to denote when a particular production effort has surpassed its relevance and reached a point of decline in quality that it is incapable of recovering from. (From Wikipedia)

That pretty much describes the Republicans in Wisconsin

Lucky for the Democrats that after winning the election the Republicans approached their opportunity for governing Wisconsin with the finesse of a T Rex on crack. Now we have thousands of unhappy employees and a national confrontation with the unions that is escalating to the complete middle class. And then there are the pending recalls from the voters who feel they were deceived.

Advice to Wisconsin voters -Be more careful when you vote next time!

But the protest was bound to happen sometime. Lies and half truths by ideologues during campaigns have reached outrageous size. People vote not on the issues but based on the TV channel they watch. When the actual implementation is much different than expected you have serious buyer’s remorse.

Truth, transparency, and honest intent could have gone a long way to solving the Wisconsin dispute fairly without conflict. Some truths I would appreciate to see to resolve the truth of negatives put forth against the unions are:

What is the total amount spent by the unions in influencing the federal government compared to that of corporations? Publish it each year.

Why is the education system criticized and cut while the financial sector who brought us the multi-trillion dollar financial meltdown are receiving bailouts?

After cutting the fat couldn’t the states remaining shortfall for critical areas like safety and education be amortized and paid back over time in an improved economy with less shock.to the citizens?

Why not publish teachers and government employees compensation compared with financial sectors compensation each year?

For some reason we have had a relatively smooth transition here in Virginia, and with a Republican Governor

Union Busting-Another Slice and Dice of the Middle Class

The financial sector screws up and throws the whole world into a recession. The middle class loses millions of job and picks up a multi-trillion dollar tab to save our incompetent economic infrastructure. What should we do next? Let’s use our financial screw-ups as an excuse to bust the unions. We can call them communists or socialists- that always seems to work. Let’s blame the teachers and government workers for the financial shortfall the states are experiencing. And let’s do it now while they are really down and out and desperate for jobs.


I have often wondered just how much abuse the middle class is capable of absorbing from the governing elite. With unjustified wars, an active special interest auction in congress, and the unpunished stealing of trillions from our economy we should have already reached the limit. Because of our numbers and the fact that we do the real productive work of society you would think there would be some caution about overreaching against us. But they seem to have such confidence in their mind control infrastructure they continue to push. Good leadership would be pulling the nation together to resolve our problems. Vilifying teachers and, government workers while attacking unions has the exact opposite effect.

It should be clear by now that the current financial problems are due to national financial sector mismanagement and fraud, not unions. In fact, unions and government worker pension plans suffer the same way that we all have. In hard times they can be expected to make the same sacrifices as all workers.

The union is an important element in our economy. They were strongly pro-America as administrations shipped millions of jobs overseas. Without their influence the individual workers would be on their own against the many billions of corporate dollars dedicated to short term profits. Union workers have the detailed knowledge of facility operations that can be turned into process improvements. When management and the union work cooperatively in trust and professional pride there is potential for many economic benefits. Many facilities miss this opportunity because of an ingrained attitude of confrontation between management and the union.

You have to wonder about the management capabilities of the new Wisconsin government. By picking now as the time for union busting they have transformed a straightforward budget balancing event into a national confrontation. You would expect that they would first try to gain the trust and support of the employees. Instead they now have a demoralized work force of thousands in a trying financial environment.

No matter who wins the battle the nation will be weakened and further divided. In a time when we need to pull the disillusioned middle class back into a national consensus another sector is being split off. There were many ways to cut costs that did not attack collective bargaining.

Is Washington Serious About Financial Reform?

On December 31, 2010 we reviewed an article in BusinessWeek that discussed the progress on the financial reform bill (aka Dodd Frank) As you remember, the bill passed in July 2010 and was our country’s effort to bring our financial sector under control. The bill as passed had very little clout. Developing the actual standards was passed on to the government regulatory agencies such as the Securities Exchange Commission (SEC) and the Commodity Futures Trading Commission ( CFTC). The report confirmed that in the face of the banks and lobbyists very little were happening. The bill was very weak leaving many loopholes still in place.


BusinessWeek seems to be one major media that is following up on this very serious issue. They have just released another update "Starving the Regulators". This article reports the astonishing fact that cost cutting is going to reduce the staffs of the regulatory agencies charged with finalizing the rules. Progress will be further slowed and actually stop in several critical areas. The governing elite create an 11 trillion problem, and then reduce the resources charged with preventing another. The situation is summarized in this quote from BusinessWeek.

The reform of financial regulations has slowed down because of the underfunding of the SEC and CFTC. The Dodd-Frank reform requires 243 new rules, 67 one-time studies, and 22 recurring studies. Yet in the face of these requirements, the CFTC is considering laying off staff. The SEC has had to delay establishing an office to oversee the credit-rating agencies. On the other hand, the Consumer Financial Protection Bureau has hired staff and is focused on making credit cards more consumer-friendly and eliminating 80 percent of the mortgage paperwork needed to purchase a home.

It should be noted that the one agency meeting its schedule is the new consumer protection agency whose establishment was bitterly fought by the financial sector.

The encouraging experience is that BusinessWeek is devoting resources to following this issue. In doing so they are performing a great service to the productive sections of the economy, who are their primary customers. Unlike the financial sector the rest of the economy would greatly benefit from a reformed financial system.

We must remember that the financial sector is different from the general business community. The primary products are basically funded and guaranteed by the government. It was meant to be a service to the productive business areas. Once they began to focus on their individual profits they have become a real liability for the rest of the economy. The current lobbying blitz against reform is aimed at protecting their own profits.

Tea Party, this is really important. Why isn’t the rest of the media active about this situation?

Egyptian Events Should Give US Governing Elite Great Pause

Just one if the three TV‘s above the bar was showing the Egyptian protests in Cairo. About half of the customers were casually watching. One person finally asked the obvious question.Could this happen in the US?

The answer certainly depends on where you are when you ask the question. The immediate consensus at that time was that our Constitution will act to prevent it. But let’s look a little deeper.

The First Amendment gives “the right of the people to peaceful assembly and to petition the Government for a redress of grievances.” This happens all the time in the US. No problem! But there are more complex questions to be answered.

What happens when the assembly isn’t peaceful?
What happens when the Government won’t address the grievances?

 There is general agreement that those who disturb the peace are subject to all the local and national laws they break. But it is difficult to arrest thousands of people out of millions of protestors. A non- peaceful assembly must be avoided.

A Government that will not address a just grievance is a special and very dangerous case. If non-peaceful assembly becomes a practice in the US, this will be the reason. When the suffering is by the many and the benefits are reserved for the few we are outside the intent of the Constitution. The preamble to the Constitution bears repeating:

We, the people of the United States, in order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the blessing of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America

The events in the Mid-East should give the ruling elite spending millions to fight common sense reform in the US government great pause. It is much better to reform early before the protestors are in the streets. This warning is especially appropriate for those active in the financial sector. You definitely fall in the category of “few”. And the “many “are not inclined to defend you. You should be honestly helping us to establish an efficient and reliable system that will return fair profits to the entire productive environment. If we have another financial induced failure you will not skate as easily as you did the first time. By overreaching you are setting both us and your system up for another disaster.

We must show that we can reform now through peaceful constitutional procedures. We don’t want to see citizens forced into the non-peaceful assembly route.

Report of the Financial Crisis Inquiry Commission (FCIC) is Very Critical of Financial Sector

In Nov 6 of 2009 we made a post reporting what we felt was the action needed for the citizen to begin to restore the trust in our financial system. They basically needed proof that the cozy financial sector/ government relationship was over.

They wanted a strong reform action that will guarantee that the psychology and ethics that led to the current betrayal is completely disgraced and placed outside the American system forever. It is critical that those in the sector who were responsible for the meltdown are publically identified and punished. There must be significant retribution with large sums recovered for the people who innocently suffered. The public consequences to those that caused the situation must be adequate to prevent any thoughts of ever returning to similar behavior.

An important first step to this goal was the formation of a non-government investigative commission, the Financial Crisis Inquiry Commission (FCIC) .

The task, as described in the preface of the report was:

Our task was first to determine what happened and how it happened so that we could understand why it happened. Here we present our conclusions. We encourage the American people to join us in making their own assessments based on the evidence gathered in our inquiry.

In addition they were directed to identify any violations of Federal or State laws and turn them over for the appropriate legal action. Although no names are given in the report the commission head Phil Angelides said in a TV interview that they had turned several instance over for investigation of illegal actions.

In my opinion it is a through report, well written, and easy to understand. We now have an extensive document that can serve as a check on the Dodd-Frank Bill (aka Financial Reform Bill). The report. is extremely damaging to the entire financial system that allowed the failure and shows the inadequacy of the Dodd-Frank bill.

Three important points we should never forget:

This mismanagement has been very expensive to the country. Nearly 11 trillion dollars in household wealth has vanished, with retirement accounts and life savings swept away.

The additional power we have foolishly given the financial sector caused a shift from productive investments to non-productive financial activities. On the eve of the crisis in 2006, financial sector profits constituted 27% of all corporate profits in the United States; In 1980 it was 15%. Understanding this transformation has been critical to the Commission’s analysis.

Industry testimony has claimed the event was unpredictable. These reports, as well as many other analyses completely disagree.

You can obtain a full copy from the FCIC.  I recommend you download it for a full understanding of what needs to be done. I will list the leading conclusions and two interesting quotes. The report has a full discussion of each conclusion.. They are very damaging to the entire sector and call for a serious review of the companies and institutions which we have given power over our financial system

Here are the conclusions:

This financial crisis was avoidable.

The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public. Theirs was a big miss, not a stumble

Dramatic failures of corporate governance and risk management at many systemically important financial institutions were a key cause of this crisis.

A combination of excessive borrowing, risky investments, and lack of transparency put the financial system on a collision course with crisis.

The government was ill prepared for the crisis, and it’s inconsistent
response added to the uncertainty and panic in the financial markets.

We do place special responsibility with the public leaders charged with protecting our financial system, those entrusted to run our regulatory agencies, and the chief executives of companies whose failures drove us to crisis. These individuals sought and accepted positions of significant responsibility and obligation. Tone at the top does matter and, in this instance, we were let down

There was a systemic breakdown in accountability and ethics

Collapsing mortgage-lending standards and the mortgage securitization
pipeline lit and spread the flame of contagion and crisis

Over-the-counter derivatives contributed significantly to this crisis.


The failures of credit rating agencies were essential cogs in the wheel of financial destruction.

The current Dodd-Frank bill does not come close to providing the required fixes. The FCIC has identified the causes. Our political leaders now have ample information to be sure that the heavily lobbied Dodd-Frank bill is corrected and rigorously implemented.

The regulators are being heavily lobbied. The citizens need to see a comprehensive checklist of the causes identified in this report versus the response in the Dodd-Frank bill.

For this to really happen will require extreme citizen pressure.

Americans Are Not Getting the Information They Need to Vote Intelligently

So far this year the media has covered the following accomplishments of the new Congress

Reading the constitution aloud in session
Holding a symbolic vote in the House to completely repeal the health care bill
Discussing mixed party seating during the state of union address
Arguing about lifting the debt ceiling in March

News at this low level of complexity and usefulness is adequately handled by the sound byte practice used by the modern media. However it breaks down quickly when applied to the more complex issues. This is where it is important that the citizens have the information required to make the right decisions. Bad national decisions are almost always based upon faulty information.

For complex issues we need a much higher quality of information than we are receiving. This is exactly the way many special interests want it. Here are just a few examples of issues where the information supplied to the public needs a major upgrade.

Jobs for Americans
Reducing the trade deficit to zero
Specific fixes to the health care plan
Developing an investment plan for the future of America
A reasonable immigration policy
Real ethic standards in Congress

These subjects have been given the same media treatment that is applied to lighter information content news. We have statements from both the right and the left that are so ideologically slanted that the information is essentially useless. We really don’t know where progress stands. In fact, we aren’t sure many of these projects are even being seriously worked on This should not be a public relations contest. If we are to act wisely toward supporting important national policies and projects we need to generate more information with high truth content.

Wise decision making by the citizens is fundamental for the long term survival of a constitutional democracy. It is worth a large investment. The forces that have in the past obtained power from a democracy have achieved it by directing the citizens into poor decisions that lead to horrific results. As reflected in our Constitution the Founding Fathers were dedicated to preventing this from happening to the United States.

Good decision making is especially critical when joined with the rights to free speech and freedom of the press guaranteed by our First Amendment. These rights are critical tools for the pursuit of truth but can also be used to present sham information.

Considering the importance of good national decision making, why are our national issues so embedded with issues and controversies that pay such little attention to truth? Our casual acceptance of lies and misrepresentation is mind boggling. We are drowning in so many self serving lies and half truths that you would think the citizens would rebel. Speculation and damaging accusations are given with no concern for backup and logic. We waste billions of hours addressing and readdressing useless and false issues that unbiased facts and truth seeking should have resolved.

What can we do? .

The media must acknowledge that simply presenting two biased sides of an issue does not lead to truth. They just create two incompatible and probably erroneous conclusions There must be more media attention to the factual content the citizens need for decision making.

The citizens have to take responsibility for applying analytical thinking to the facts. Watch closely the reasoning of those special interests that will be happy to do this for you.

We must withdraw support for candidates who lie or resort to misrepresentations. Integrity should be a prime characteristic of our leaders. Don’t vote for anyone without it.

A factual media, analytical citizens, and leaders with integrity will take this democracy a long way.

An American Loss to China in Global Economics Could Deprive Billions of the Opportunity to Live Under Democracy

For over 250 years America has been the proof that a free people can successfully govern themselves. A critical contributor to this success has been our choice of democratic capitalism as our economic system. Democratic capitalism works well with the freedoms that have characterized America.

Our constitution gives us the power to choose the representatives that are to set and guard the economic rules. Although there have been missteps the government generally guided capitalization toward activities that benefited the nation. The system steadfastly outperformed all other competing systems in the ability to deliver economic benefits to its citizens. We were without serious challenge as the leading economic force in the world.

This ended during the later years of the 20th century. We allowed our government to make terrible mistakes that have completely changed the game. We now face the results-financial, trade and investment deficits. excessive special interests influence, loss of manufacturing jobs, too much control by the financial sector-and the list goes on.

These self-inflicted wounds have allowed another form of capitalism to emerge. One that gives little freedom to its citizens but shows great skill in supporting the state. It is best described as state capitalism. China is currently its most successful user.

State capitalism uses the aggressive tools of capitalism but does not grant its citizens the participation and freedom they would enjoy under a democracy The goal is not the general welfare of the citizens but to increase the power of the state. It is a tenacious competitor in the global economy and is currently outperforming our damaged system. It definitely threatens the dominant position of democratic capitalism.

If it prevails and our system continue its current degradation the American vision will eventually collapse and the dream of free people governing themselves will fade. We must not let this happen.

The seriousness of the situation requires strong and immediate action. We must admit mistakes on past policies that have had bad results for the country and make the fixes. We must stop giving away economic opportunities that we need to other countries.

An encouraging example of what must become our standard practice is covered in a recent article in the Washington Post. It reports on an event where the US Export-Import Bank discarded past policy and helped the US vendor fight back. The result was the sale of 150 locomotives by GE. This was against aggressive bidding tactics of China that would normally get them the business.

As the article reports

“The political resistance to brash tactics which would imperil the delicate management of the China relationship has collapsed," said Rosen.

Way to go-US EX-IN Bank and GE!!. We need more of these “brash tactics.” Now let’s fix those other problems. The billions of people may still get the chance to live under a US style democracy.