$885 Billion and Sustainable Prosperity

Think of a coin. It seems to have a paradoxical nature to it: two sides, either heads or tails—or it can be viewed as a circle, 360 degrees. What if we were to look at the economic situation, not from heads or tails, but from the circle perspective—a perspective that has no sides?

The tenor of the economic discussion is "get me out of here." The economic situation is a mess—we do not like it and we want out. Apparently we are to believe the situation is like a coin—it only has two sides: heads = tax cuts or tails = massive spending.

One day Alice came to a fork in the road and saw a Cheshire cat in a tree. "Which road do I take?" she asked. "Where do you want to go?" was his response. "I don't know," Alice answered. "Then," said the cat, "it doesn't matter."
~Lewis Carroll

The Cheshire cat has a point. If as each side would argue, heads or tails will take us out of the situation, we still have a problem. We do not know where we are going.

We want Sustainable Prosperity. We want the roller coaster of boom and bust to end. While some postulate the roller coaster is inevitable and a characteristic of the beast called capitalism, I believe that is faulty thinking that needs to change. I further believe the "heads or tails" conversation, layered on top of "just get me out of here" thinking circumvents our path to Sustainable Prosperity.

I will play devil's advocate to both "sides" of the current conversation. I would like to demonstrate the essence of the coin: a circle—no sides. Eventually the plan needs to come full circle, making progress in the short term while taking us to Sustainable Prosperity.

Like all complicated stories, it is best to start at the beginning.

Once upon a time, the line between gaming and investing was crossed, and crossed and crossed—again and again and again. Until there was so much bad debit in so many places that no one trusts anyone anymore.

"People in the financial industry make hundreds of millions doing this sort of thing [that is, repackaging bad debt as financial instruments] but it doesn't work in an international economic crisis of this scale."
~Paul Krugman, 2008 Nobel Laureate in Economics

George Washington, First President of the United States, said both:

"To contract new debts is not the way to pay old ones."

"Gaming is the child of avarice, the brother of iniquity and the father of mischief."

In the $885 billion bailout, there are two philosophical forces at work:

"Heads" is the exaltation of profit, also known as the "free market theory." This means money is made and held by institutions that are self-interested and self-perpetuating. It is their nature. The institution is not bad or wrong—no more than a fish is bad for being a fish. The institutions have claimed an unchallenged sovereignty over the creation of wealth. The institutions believe that without them we would all perish. Free market theory says the market will always fix itself. If the Federal Government uses interest rates correctly and taxes correctly, it can assist the correction with supply and demand of money. But, above all else, do not invade the sovereignty of the financial institutions with oversight and regulation.

"Tails" is massive government spending. When institutions behave badly, the government can do what the institutions should be doing—creating employment and wealth. Based on a target level of Gross Domestic Product (GDP), the economy—supplied with enough cash—can reach the desired GDP. Reaching this target GDP is a backwards breadcrumb trail from employment, which will get folks buying and grease the wheels of commerce.

Heads, you lose. Tails, you lose.

Here is the first problem with the dichotomy: the government wants employment while institutions want profit. They do not share the same core value. Accordingly, the vicious layoffs rippling through our hemisphere further illustrate the main priority of the institutions—profit, not employment! It should be noted that employment is the wealth creation strategy of an individual.

Institutional sovereignty says banks know best what information to share—or not share. Lack of disclosure is seen as necessary, lest there be a run on the bank. Apparently having lost money is okay, but telling folks that you have done so is not okay. This sovereignty also maintains that if things are going really well (i.e. profits are out the wazoo), then how the money is made does not really matter. Even gambling with other people's money is not a problem—as long as there is profit. A mere eight weeks ago the CEO of one of the largest banks was gleefully claiming that they did not need the bailout money—but "had to take it" to protect everyone from knowing which banks were in trouble. Today, apparently they need over 30 billion to stave-off the bad debt they have disclosed.

The current devaluation of the investments already made in the banking institutions is near 50% due to undisclosed losses at the time the institutions received the money. The reverence for the sovereignty of the institutions has made our regulations gelatinous—easy to go around, over, and through.

The second problem is with government spending: there is no reliable accounting system to see if the spending is working. GDP—the basis of the spending in and of itself—is a red herring. No assurance or data exists that concludes a GDP of a certain number will actually mean "jobs" for those needing them. Additionally, as the bill stands now it is so "porked-up" that it does not address creating jobs, thus turning the unemployed to employed so they can spend. Certain parts of the plan, like extension of unemployment benefits are necessary lifelines, but they do not take us out of the problem.

Additionally, the GDP is out of sync with real time. You can call your bank and see how much money you have today. But what about those checks not cashed and the bills you have not paid? While you have the ability to adjust for these factors in real time, the GDP does not.

The third problem is the field of economics. In economics, the ability to do controlled studies is lacking—economics cannot conduct the kind of scientific studies to test a theory will give us a "cure.” We have no data other than the past, and it is hard to filter out or quantify data to assure we know our theories are actually any good in practice!

The $885 billion requested by President Obama is based on the calculation of desired GDP and a theory, known as Keynesian economics, by a man named John Maynard Keynes.

Here is the scant data on Keynesian economics:

*FDR spent only after WWII was over (think current wars in Iraq and Afghanistan) at the level Keynes wanted.

*It took 30 years for the spending to actually "work."

*Keynesian economics was escorted out the door in the 1970's because it has no strategy for inflation. Many economists postulate the spending had much to do with inflation—and despite the spending unemployment continued!
We are all experiencing free market capitalist theory now; so it would be somewhat redundant to review it—except, that is to underscore the ethics aspect of the theory. Smith, who outlined the theory, said, "without ethics there is no free market." Duh! Like I said, it seems obvious now.

So to review: Neither heads or tails thinking has demonstrated progress towards Sustainable Prosperity. As we can observe these theories in action, both theories create cycles of boom and bust. The theories are problematic and incomplete.

Oh wait! Maybe it is a circle.

So imagine you are in the doctor's office. The doctor tells you that you have a horrific illness. The illness is rare, so there is not much information about it—especially about how to cure it. The doctor says he only knows two choices, neither of which seems to work really well. But he says that you need to do something—fast and not just because the situation is dire, but because your confidence will wane and wane as the circumstance drags on and this will also have dire negative effect upon you.
Now I ask you, would you flip the coin to pick a choice? I didn't think so. You would find another option. And frankly, at this point your mind knows it is in trouble and would rather die trying something that COULD work rather than something that will likely not work.

We need a different choice(s). We need sustainable choices—sustainable prosperity. We can take the path of deep inquiry, thoughtful conversation and a sense of reverence for what we are about to embark upon. We do have the brainpower. There are countless individuals and educational institutions that can help:

• Stanford University, University of California-Berkeley
• Harvard
• University Of Wisconsin-Madison
• MIT
• Northwestern University
• Cornell University
• University of Michigan
• University of Chicago
• Yale University
• California Institute of Technology
• Wharton at U of P
• ...

There are over 100 quality educational institutions on call and waiting.

Who has been called upon for offer solutions? The same people who believe in heads or tails and that our only choice is to flip a coin! (Lest anyone think that I am not being supportive of the President: I am one of his biggest fans. That does not mean I am a "yes woman.")

My sense is a combination of some highly targeted spending by the government, and ardent oversight of the institutions, accompanied with full disclosure and full write-off of the bad debt (with tax payers needing to be partners and get paid first) will move us through the short term.

We will only survive the long term if we are willing to put everything on the table for debate—every piece of pork, every entitlement, every regulation we don't have, and most importantly, every thought about "getting out of here" and focus on our desired

The Audacity of Hope

Our hope is our audacity. No matter how confused we are, cowering under the bedcovers is not an option. You are not required to have an answer today about heads or tails—especially if you are sure the conversation is too small. Be audacious. Be hopeful. Say "NO!" to the sides of the coin and be certain a coin is more a circle than anything else. Demand better from the conversation. Your children deserve it.

You get the picture. Standing at the cross roads of heads-tails or the circle, anything is possible. The question is: "What is probable?"

You decide. Pick up your phone, your pen, your bullhorn and take action. Call, write, and email your Congressperson, Senator, or President. They can do better. Or you can just wait, trusting your fate to one of two paths already laid out. Like Alice, you will get out—but to where?

Global to Individual: only thing different is the form

I have spoken much about the global situation this month. For those of you at a crossroads in your personal life, your path to clarity is the same. Put everything out on the table for re-consideration and evaluation. Realize it is your mortal mind that is part of the problem. We all need bigger thoughts now. It is not heads or tails for you either.

Just like the country needs to establish alignment between the values is professes and how it invests its money, so too does the individual.

Our essence, our nature, our inner-being knows what is right for us. We just need to move beyond the noise and listen. If you are interested in working deeply with money on the individual level, I have workbooks, tools, tele-seminars to assist individuals. Some of the resources are free—including the audio vault that you can access on my website.

As always, feel free to contact me through my website with questions and comments.