Economic Collapse – Game Changer for Global Markets

1 11 2010

Building Asset-Based Market Infrastructure Best Alternative for Global Economy

(Updated 102408 – Formatting)

(RePosted 110110)

DJIA 9 October 2008

DJIA 9 October 2008

 

 

Few doubt that the collapse of the world economy will be a Game Changer. But the change needed is to a new game – a new infrastructure.  Not a set of minor changes to the same game.

What is the “game?”  The current model, which has gone down like a house of cards in a stiff breeze, is one tilted towards the interests of corporations, governments, and against those of the Individual.  It is based on various gradations of slavery, wage-slavery, consumerism predicated on freely available credit at usurious rates, predatory lending practices against victims disarmed by law, and perpetual debt.  We have created a debt-based global political economy, not an asset and equity based model.

Yet a non-debt based economic system is what we, the Individual Humans who collectively comprise the global economy, need the most.

We need to base our 21st Century political economies on equity, and assets.  Debt is a tool to grow equity and assets, not a substitute for it.  (Unless You are designing a slavery or permanent indentured sort of system.  It’s tougher to do that in a civil democracy.  And bear in mind the sort of Individually held asset and equities basis of global political economy hypothesised here is not the same as asset-egalitarianism.  It merely alludes to a reworking of the global financial system in a way that moves the advantage to the Individual accumulation of wealth over the current emphasis and advantage accorded to the corporate concentration of wealth.)

DJIA 15 October 2008

DJIA 15 October 2008

It is truly ironic that the heedless masters of the universe who invented opaque and impossible to value derivatives, hedges, indices and credit default swaps, and the predatory mortgage instruments they stood upon – It is truly ironic that they have so cannibalised the engine of this debt economy – Consumer Spending – that they have effectively killed this goose that laid such golden eggs for so long.

As Mike Whitney observed in his recent article at CounterPunch,

No job is safe. American elites and corporate tycoons are loading the boats and heading for foreign shores. The only thing they’re leaving behind is the insurmountable debt that will be shackled to our children into perpetuity and the carefully arranged levers of a modern police-surveillance state.”

The past three weeks have seen the front line dominoes tumble as the jury-rigged infrastructure of perma-debt collapsed before the eyes of those reputed to for years to be the smartest and boldest “risk takers” leading the global economy.  The most rabid force for de-regulation, the US Republican Party led by George W. Bush, is winding up its occupation of the Oval Office by nationalising the most pivotal parts of the US Banking System.

One by one, the remaining investment institutions have queued up for a government bailout that gives governments an equity stake.

Source - Hoover Institute

US - China Trade Deficit Growth Through 2006 : Source - Hoover Institute

Of course, in the US these massive infusions of government cash and guarantees are backed by the Treasury – which means borrowing from other nations, principally China.  And the repayment of this new debt will naturally fall on the US taxpayer, absent any serious reform.

LIBOR and the TED Spread are only immediate indicators of the credit market’s liquidity. The larger issue of infrastructure reform needs to consider how to build an asset-based, as opposed to debt-driven, political economy.  And that means encouraging the accumulation of assets and equities by Individuals, as opposed to corporations.  This impacts the structure and regulation of credit markets.

International leaders participating in the upcoming series of summits need to pay particularly meticulous attention to this.

For unless they obey the current inflection point and switch the game over to an asset-backed model of consumer spending, no amount of government intervention will preserve the current debt-driven model based on cannibalised captive markets.

Bubble Gum, Spit, and String

Such efforts as purchasing toxic assets, and injecting captial into the banks are short term patches of bubble gum, spit and string, and I surely hope our international leaders realise that.  There are already signs from the banks such injections, alone, won’t work.  The upcoming series of economic summits needs to focus on establishing a long term market model that honestly gives Individual Citizens a fair shake, and a more prominent role as stakeholder in the global system.

In the recent past I have been pessimistic about the real willingness of our leaders to address the root causes of this crisis.  On September 26, before the bailout was passed, in an email to Congress,  I asked “Where is the call for an international summit with our WTO trading partners, particularly China?”

But the pressure on the US by international leaders for it’s participation in a series of summits to address the current crisis in the economy gives me cause to reconsider my cynicism.

Consumer Savings

Consumer Savings

For this culture of debt, the dead end is clearly visible.  In the past 20 years and more Congress has let the Consumer Credit industry run hog wild, more recently letting predatory mortgage instruments do the same.  Debt.  Not assets.  Not equity.

In this sort of environment, consumer spending drives everything.  Like Love, it makes the world go ’round.  Henry Blodget did a lucid piece the other day on ClusterStock, entitled “US Consumers are Broke.”  I highly recommend it.

Equity/Asset Based Games vs Debt Games

If our global economic system threatens to collapse, as it is, and if consumer spending (particularly US consumer spending) is the engine; then we need to pay particularly close attention to the infrastructure changes our international leaders will try to design to address the crisis.

We don’t need to merely patch up the existing debt-based paradigm, except on the shortest term.  What we need to do is change the game to an asset and equity basis.

Consumer Debt

Consumer Debt

Consider:  Consumer spending is vital to either game as the driving force, but only in an asset / equity based economy is it guaranteed to grow, because the game is designed to build up the middle class – not hollow it out with predatory, usurious, and perpetual debt.

Consumer Credit should no longer be used as an Orwellian cyber-leash on the populace.  Instead, in building an asset-based market, the Individual owns and excercises real and legally enforceable control over their credit and other financial information.  The role for reporting agencies are transformed to data services competing to be the delivery agent for the Individual.  That means a much more direct relationship with those who would access that information – which would no longer be the sort of commercial product that automatically becomes subject to data mining.

Real protections against predatory lending instruments need to be instituted – that means no more Adjustable Rate Mortgages (ARMs), no more Balloon Payment, or Interest Only, or so-called option-ARMs.

WikiMedia - Credit Card -CC

That also means a cap on credit card rates, and a prohibition of unilateral rate changes based on the consumer’s account status with any other lender.  So one’s credit card rate doesn’t suddenly jump from 8 to 62 percent because you forgot to pay the electric bill last month – a bill you never pay with that credit card.  But the card company data mines your payment stream, sees the omission, and cranks up the rate.  Such behavior tends to gut the future ability of the account to maintain a credit relationship, and is thus cannibalistic of it’s own market.

This is what has happened to the US Consumer in this economic game of debt.  This is why the US Consumer is broke.  This is why the US Consumer is wary of credit, mortgage, and investment instruments tilted against them.  Any serious infrastructural reform that will last must address these very real concerns, and not just give them lip service.

Money To Be Made- More Reliably in Asset Based Economy

If US consumer spending has been such a great engine for growth and expansion in international trade, think of what a robust middle class would mean when combining the consumer spending of the US, China, India, and the EU.  In an international monetary system driven by the Individual accumulation of wealth, the emergence of a solid middle class would be an increasingly strong economic engine.  Perhaps international leaders should consider flattening the economic landscape in their upcoming efforts to build a newer, more resilient global economic system.  Rules and regulations should be guided by the express intent to enable and build up individual assets and equities, as opposed to corporate debt.

We must abolish the current idea of “minimum” wage and migrate to the concept of the Living Wage, indexed to the actual cost of living.

We need to encourage the invention of financial instruments for Individuals which give them certain and distinct advantages over existing corporate institutions, as a safeguard of their ability to accumulate wealth and contribute to the engine of asset and equity based consumer spending.  Predatory corporate and financial instruments are a certain death to such aims.

This means eliminating all taxes on personal income, personal savings and investments, to encourage and facilitate the accumulation of wealth regardless of class.

This will mean not just more banking regulation and tighter supervision over the mortgage and derivatives markets, but increases in wages across the board, across the world, in all countries participating in this restructuring.

In a global political economy that properly uses debt as just another tool to facilitate the building up of the actual wealth of the People, and not as a centerpiece to drive markets,  the health and robust growth of a more reliable form of Consumer Spending is ensured.

That’s all I have time to write for this weekend.  More later. Until then, the Fabulous O’Jays!

-dcm

Update 110110

Obama’s Big Chance – The New WPA

Sphere It!

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Julian Assange of WikiLeaks – Oslo Freedom Forum 2010

12 08 2010

From Oslo Freedom ForumFrom

May 18, 2010

Julian Assange is a spokesman and advisory board member of WikiLeaks, a transparency website whose mission is to “open governments” and expose human rights abuses. It has a core focus on protecting dissidents, whistleblowers, investigative journalists, and bloggers who face state threats, and it largely operates by publishing leaks of sensitive documents.

Winners of Amnesty International’s 2009 Media Award for exposing extrajudicial assassinations in Kenya, Assange and WikiLeaks have recently launched www.collateralmurder.com, a website that hosts a leaked video of U.S. military forces in Iraq apparently slaying over a dozen people indiscriminately.

In his speech, Assange chooses to focus specifically on WikiLeaks’s work against censorship and human rights abuses committed by Western governments. Paraphrasing Orwell, Assange explains that he who controls today’s internet servers controls the intellectual record of mankind.

He warns us that Western governments, large corporations, and certain wealthy individuals are increasingly able and increasingly trying to remove material permanently from the historical record using sophisticated methods.

Assange reviews WikiLeaks’s work in uncovering human rights abuses at Abu Ghraib, Bagram, and Guantanamo, and discusses the dangerous irony in the U.S. military’s conduct as it decorates its detention centers with “Honor Bound to Defend Freedom” signs.

If the West doesn’t reverse its course of increased censorship and rights abuses, Assange warns, it will lose all of the ideals that it once stood for.

Julian Assange – Oslo Freedom Forum 2010

Two Parts


:dcm

Julian




Joe Stack’s Final Act – Full Statement

18 02 2010
18 February, 2010 – This morning a software engineer and small businessman in Austin TX flew a plane into a building housing an IRS office and other businesses. His name was Joe Stack. He had reached the end of his rope in frustration about our existing political, economic, and judicial system. He decided to rise up and revolt. So he flew a plane into this building.
I do not agree with that. But I think his concerns are the concerns of more than a majority of Americans. So I think he should be heard.
Here is his complete statement, posted on his site embeddedart.com, this morning. (It’s on Scribd:
Although embeddedart.com has been taken down due to a request from the FBI, the site owner’s last post has been captured by the Smoking Gun here:
http://bit.ly/dAgiY0 which takes You to
(note: all links will open a new window/tab)
Mr. Stack’s statement is here presented in the interest of complete historicity. -dcm




Peter Morici : Tough-Talking Obama Kowtows to Bankers

15 12 2009

Dr. Peter Morici[Occasionally I invite a Guest to publish at Scribal Thrum – and I’m proud to welcome Peter Morici, Professor of International Business at the University of Maryland and former Director of Economics at the US International Trade Commission. Thanks for Contributing, Peter.]

You got to admit President Obama obfuscates embarrassing facts and pays off his supporters as well as any politician since Huey Long.

He slams health insurance companies, while endorsing health care reforms that would compel thirty more million Americans to buy their policies or face a poll tax.

Now he slams the bankers for paying themselves $140 billion in bonuses.

Those bonuses were “earned” trading derivatives and other engineered products with the more than $2 trillion in cheap credit provided by the Federal Reserve, TARP and other Washington largess. Meanwhile, bankers denied worthy homeowners opportunities to refinance mortgages and solid small businesses credit.

How much is $140 billion?

The U.S. economy grew at a $89 billion annualized rate in the third quarter. That was the first growth since the second quarter of 2008 and came to $22 billion in actual growth in the third quarter.

The bankers, after causing the greatest economic calamity since the Great Depression, are rewarded with six times the growth accomplished so far in the much heralded “economic recovery.”

Meanwhile, seven million families face foreclosure and 25 million Americans can’t find full time work.

White House economist Christina Romer says we are still suffering the fallout of the recession, but with those bonuses, it will be tough to find pain on Wall Street this holiday season

In Britain, the Prime Minister is imposing a special one-time claw back tax that will take 50 percent of bankers bonuses.

In America, the bankers get a scolding from President Obama.

It is no accident that these same bankers are among the largest contributors to Democratic congressional and presidential campaigns.

Hey, the bankers know how to invest, and the president knows how to take care of his friends.

Original post at  Peter Morici’s Instablog

Obama Talks Tough but Kowtow to Bankers

[Links added to this post -dcm]




Whistleblower Protections Gutted by Congress, Again – 123 Real Change

5 08 2009

National Security victim / whistleblower Sibel Edmonds notes that Congress has screwed our most patriotic and honest National Security workers again, denying legal protections.

Edmonds has written an appeal to President Obama, asking for him to keep his promises. 123 Real Change

Here is Obama’s promise.

Well, Mr. President?

Shared via AddThis





Amazing Keith Olbermann: Health reform now, or else – RawStory 1/2

4 08 2009

You sure do nail’em down so they don’t float away, Keith.

Vodpod videos no longer available.

more about “Amazing Keith Olbermann: Health refor…“, posted with vodpod





Why aren’t Unlimited Text Plans $1 / Year?

28 12 2008

AT&T, Sprint, T-Mobile, Verizon Still Owe Senator Kohl (And their Customers) Some Explanations

There’s a reason costs for text plans have skyrocketed recently, and it’s not due to increased overhead.  From Randall Stross’s What Carriers Aren’t Eager to Tell You About Texting:

…text messages are not just tiny; they are also free riders, tucked into what’s called a control channel, space reserved for operation of the wireless network. That’s why a message is so limited in length: it must not exceed the length of the message used for internal communication between tower and handset to set up a call. The channel uses space whether or not a text message is inserted.nsa-med

Senator Herb Kohl would like to talk with the wireless carriers about that.

So far they haven’t been very forthcoming.  Stross writes:

The written responses to Senator Kohl from AT&T, Sprint and T-Mobile speak at length about pricing plans without getting around to the costs of conveying text messages. My attempts to speak with representatives of all three about their costs and pricing were unsuccessful. (Verizon Wireless would not speak with me, either, nor would it allow Mr. Kohl’s office to release publicly its written response.)

The carriers will have other opportunities to tell us more about their pricing decisions: 20 class-action lawsuits have been filed around the country against AT&T and the other carriers, alleging price-fixing for text messaging services.

We should All listen to what they have to say.

I wonder if they’ll get around to talking about what Common Carrier means.  Does the bus company charge You to use the bus’s rest room while enroute?  It’s there, on the bus, whether or not any passenger uses it.  And You’ve paid for it in the cost of the ticket.

From Ars Technica Sept 10 Article Senator to cellular carriers: UR TXTS R 2 XPENSIV:

Kohl’s office is asking each carrier to explain the method behind the text message rate madness, including any cost, technical, or other factors that justify the 100 percent increase between 2005 to 2008. Kohl also wants data on how text messages are utilized, comparisons of how text message packages stack up against competitors, and—perhaps most importantly—price comparisons against per-minute charges for voice plans, and per-KB charges for mobile Internet and tethering plans. It should be fun to hear AT&T defend why it charges over $1,300 per megabyte for text messages.

Again, Kohl’s office made it clear that this letter is more of an conversation starter (though a fairly forceful one) in what could turn out to be an embarrassing (for the carriers) discussion over high cost of text messages. The staffer did, however, hold out the possibility of further investigation, and even a request that antitrust regulators to look into the matter, should the situation call for it.

Donald Melanson at Engadget filed this report at the time.

Here is Senator Kohl’s letter:

For Immediate Release:

9/9/08
Phone: (202) 224-5653

KOHL CALLS ON CELL PHONE COMPANIES TO JUSTIFY RISING TEXTING RATES

In Three Years, Text Message Charges Have Doubled for Wireless Customers

WASHINGTON, DC — Today, US Senator Herb Kohl (D-WI), chairman of the Senate Antitrust Subcommittee, asked the presidents and chief executive officers of the four largest wireless telephone companies to justify sharply rising rates for its customers to send and receive text messages. In a letter, Senator Kohl requested an explanation from Verizon Wireless, AT&T, Sprint and T-Mobile, which collectively serve more than 90 percent of the nation’s cellular phone users. The text of Senator Kohl’s letter follows below.

September 9, 2008

Lowell McAdam President and CEO Verizon Wireless

Randall Stephenson Chief Executive Officer AT&T

Dan Hesse Chief Executive Officer Sprint

Robert Dotson President and Chief Executive Officer T-Mobile

Dear Messrs. McAdam, Stephenson, Hesse and Dotson:

I am writing to express my concern regarding what appear to be sharply rising rates your companies have charged to wireless phone customers for text messaging. Some industry experts contend that these increased rates do not appear to be justified by any increases in the costs associated with text messaging services, but may instead be a reflection of a decrease in competition, and an increase in market power, among your four companies.

Your four companies are the nation’s leading wireless telephone companies, collectively serving more than 90% of the nation’s wireless subscribers. Since 2005, the cost for a consumer to send or receive a text message over each of your services has increased by 100%. Text messages were commonly priced at 10 cents per message sent or received in 2005. As of the end of the month, the rate per text message will have increased to 20 cents on all four wireless carriers. Sprint was the first carrier to increase the text message rate to 20 cents last Fall, and now all of its three main competitors have matched this price increase.

What is particularly alarming about this industry-wide rate increase is that it does not appear to be justified by rising costs in delivering text messages. Text messaging files are very small, as the size of text messages are generally limited to 160 characters per message, and therefore cost carriers very little to transmit. Text messaging files are a fraction of the size of e-mails or music downloads. Also of concern is that it appears that each of companies has changed the price for text messaging at nearly the same time, with identical price increases. This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace.

What has changed in recent years is the level of consolidation in the wireless telephone industry. The number of major national competitors has declined from six to four. And the large national wireless carriers continue to acquire their smaller, regional competitors, with the announced acquisition of Alltel by Verizon Wireless being just the latest example. As Chairman of the Antitrust Subcommittee, I am concerned with whether this consolidation, and increased market power by the major carriers, has contributed to this doubling of text messaging rates over the last three years.

Therefore, I specifically ask each of your companies to explain why text messaging rates have dramatically increased in recent years. Please explain the cost, technical, or any other factors that justify a 100% increase in the cost of text messaging from 2005 to 2008. Please also provide data on the utilization of text messaging during this time period. Please provide a comparison of prices charged for text messaging as compared to other services offered by your companies, such as prices per minute for voice calling, prices for sending e-mails, and prices charged for data services such as internet access over wireless devices, from 2005 to the present. Finally, please state whether your text messaging pricing structure differs in any significant respect from the pricing of your three main competitors. Please provide this information no later than Monday, October 6, 2008.

If you have any questions regarding this request, please contact Jeff Miller or Seth Bloom of my Antitrust Subcommittee staff at (202) 224-3406. Thank you for your attention to this matter.

###

-dcmSphere-It!








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