Recessionomics: Daily Loaf, Creative Loafing Tampa

Florida's boom and bust gets airtime on Marketplace broadcast

Wayne Garcia — Tue, 28 Aug 2012 20:36:37 -0400

One of the best pieces explaining Florida, especially its boom past and bust present, was on APM's Marketplace show tonight, tied to both the show's election coverage and an ongoing series about the U.S. economy's challenges.

Reporter David Gura is doing a two-part series on the I-4 corridor and found the little-known Polk County town of Dundee, where the development boom of the '90s and early 2000s saw active orange groves sold for development that, for the most part, never was built after the housing market tanked in 2007-08.

As someone who has groused (yes, groused) for years about Florida's addiction to the cheap thrills of boom-and-bust homebuilding, I was especially bemused to hear the developer in the piece argue that he is upset that government didn't do more to help out the land speculators.

Take a listen. These are the kinds of issues that Florida Republicans should be talking about instead of chanting for a repeal of Obamacare.

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Recession Buster: dark chocolate flavored brussel sprouts

Samuel Johnson — Sat, 07 Jul 2012 09:17:15 -0400

Bacon-flavored broccoli isn't a madman's fantasy anymore. It's America's ticket to reasserting herself as one of the world's top scientific super powers while at the same time allowing her to make a quantum leap out of a crippling recession. In order to climb back into the saddle Americans needs to tap back into what has united them over the centuries in a singular purpose. A sense of collective ideology has enabled Americans to undertake and accomplish things so that are both exceptional and revolutionary.

Yet America's ingenuity is a double edged sword. It's both a blessing and a curse. A question lingers as to how America's shared ideological ethos has evolved. From its inception as an Eden and refuge for people who found themselves marginalized and unwelcome elsewhere, America has come to harness and tame those differences within a climate of “hyphen” American culture. When asked what it means to be American or what overarching ideology binds Americans together, a laundry list of demographically subjective opinions spring up. Alex Tocqueville figured it out more than a century and a half ago.
Tocqueville was a French political philosopher and a De facto historian who traveled throughout America during the 1830's. He was from an aristocratic French family and a dyed-in-the-wool European Romanticist. He set the tone for future exploration in social sciences with his seminal work known as “Democracy in America”. Essentially Tocqueville asserts that a collective subconscious pioneering spirit is at the core of what unites Americans ideologically. He draws attention to the concept of “The Frontier”.
Americans at the time Tocqueville visited had been on a steady march towards the west for roughly six decades. These pioneering folks shared a kindred spirit, he deduced. A deep-rooted ingenuity to conquer new and unfamiliar territory is what defined the American esprit de corps. The ability and independent fervor to try unconventional ideas and trends in order to pacify unfamiliar territories lends itself to a loosely knit ideological cohesion. However, if the ideological trends stay fluid they are subject to eminent change which is ever looming on the horizon. It stands to reason then that if these trends are in perpetual state of change then an inevitable loss of a uniting tradition will be the outcome.

This tendency towards experimentation can bring about alienation. For instance, when a shared problem arises there can be no meeting of the minds. Individuality and personal ingenuity take over in lieu of collective societal traditions. However, melding trends into traditions and forcing them to be elastic in their pragmatism is a highly beneficial thing. Abandoning a staunchly rigid approach of choosing either trend or tradition needs to be promoted. Altering trends to fit into tradition might pull America out of its divisive moral and economical funk.

Modified trends could be as lucrative as they are nutritionally beneficial. One multifaceted trend modification could be genetically altering veggies to taste like savory snacks or deep fried foods and would certainly be a sure fire hit. Or why not create a sweet tasting veggie like Brussel sprouts harvested in either dark or milk chocolate flavors? We have manipulated every other type of fruit and veggie.
Even taking a relatively conservative slant we have can say that we have tweaked evolution enough to create super cows. Maybe it's time to take a page out of the vegan/vegetarian manifesto which produces and consumes a whole butcher's shop full of soy and fungal meat substitutes which taste nearly identical to genuine meats. Like salty tofu-bacon or faux turkey for those thanksgiving day feasts. Lo sodium, low carbs gluten free and the list goes on and on.

The toxic love affair, I can't reiterate enough, of the Western world with traditional agriculture is robbing our collective ingenuity. Why can't the governing bodies of countries overproducing pork and beef and dairy products as well as maize and wheat and other grains turn the tables on farming subsidies? It's a “no-brainer” list of benefits.

Not only would scientific research be stimulated but the excitement of discovery and the prospects of cold hard cash would come trickling down to the high school level straight through to universities which could receive grants for the burgeoning SMET (Science, Mathematics, Engineering, Technology) education.

That scientific ethos would carry over into the private sector where companies could capitalize on the modified trend. Most notably the pharmaceutical industries which are assuredly going to benefit financially. The short term investment of racking up patent after patent would be a boon for all industries who choose to get involved in this pioneering research. Environmentally it's also a sound ethical and moral step forward.

The arable land now devoted to raising ruminant livestock such as sheep, goats and buffalo but more importantly cows, can make a desperately needed transition away from those monstrously large tracks of grazing land they now occupy. Those beguiling bovines consume vast amounts of grasses which we affectionately call roughage.

Cows are a decidedly flatulent creature due in part to the amount of roughage they consume. That flatulence brings with it the expulsion of methane gas. Methane is one of those dastardly greenhouse gasses. The best horror stories don't come from the fantastic creations oozing out the minds of writers. No, they are the factual stories which are tucked away on page 4 of the morning paper or gleaned from verbose and dull governmental studies.

Luckily, the United States Environmental Protection Agency doesn't balk at the chance to simultaneously educate and bore. One such study by the EPA paints a lugubrious picture of the impact of flatulent cattle; “Globally, ruminant livestock produce about 80 million metric tons of methane annually, accounting for about 28% of global methane emissions from human-related activities. An adult cow may be a very small source by itself, emitting only 80-110 kgs (176-220 lbs) of methane, but with about 100 million cattle in the U.S. and 1.2 billion large ruminants in the world, ruminants are one of the largest methane sources. In the U.S., cattle emit about 5.5 million metric tons of methane per year into the atmosphere, accounting for 20% of U.S. methane emissions.” Just imagine if we could reduce the amount of cow flatulence by one half what a inadvertent global health benefit it would be.

Encouraging scientific research through bestowing government grants to universities and tax incentives to agribusiness, in order to develop, produce and harvest savory crops of pork chop flavored beets and caramel flavored okra, might just be the first notes in the swan song of global warming, rampant malnutrition and scientific doldrums.

Of course, those are ideologically lofty goals but on a more pragmatic and attainable level the economic boon would be tremendous. The intricate web of symbiotic cooperation would be enough to heave America out of this stagnate recession.

Americans joining together for a common purpose has proven that they tend to galvanize their shared culturally innate ethos culminating in trend-setting, state-of-the-art solutions. The penultimate benefit comes through stimulating Americans to unitedly think outside the box when it comes to tradition.

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Strategy, Discipline, the Right to Assemble, and Occupy Tampa

Kelly Benjamin — Fri, 28 Oct 2011 10:54:41 -0400

The Occupy Wall Street phenomenon spreading across the US is both a continuation of a long tradition of civil resistance movements and something totally unprecedented. Its viral diaspora is evidence that it hits at the core of what many Americans feel is wrong with our system. But where it goes from here and if it will lead to significant change in the direction of this country (and the world) is the zillion dollar question no one can answer. In New York last week, I met United Methodist pastor and civil rights leader James Lawson who, having played key roles in the Nashville sit-ins and the Freedom Rides of the Civil Rights era, knows a thing or two about successful non-violent resistance movements. Of the many nuggets of wisdom he shared with my class at the Journalism and Civil Resistance conference, was this: “We need to make sure we know the difference between strategy and tactic and that every move operate under the ethos of building recognition and support from a wide population.”

This got me thinking about the movement as a whole, the atrocities in Oakland, and the police confrontations happening across the country. Here in Tampa, our own blossoming local resistance struggle surged onto the scene in early October. The press made a point of highlighting the peaceful dialogue between Occupy Tampa and the TPD early on, but for the last week and a half have focused almost exclusively on their tussles with the City of Tampa and the Police Department rather than their message. This is unfortunate because in a town like Tampa, arguing with the cops over the sidewalk and getting arrested is not the best way to win the masses over, even if a majority are sympathetic to your aims.

As many of the Occupations around the country are experiencing, the rest of America is not New York City. The chief tactic of occupying public space for long periods of time tends to get complicated in cities without the public/private loophole that has allowed Occupy Wall Street to continue for several weeks. This begs the question: does every city really need to emulate New York’s public occupation rather than finding their own creative ways to push the same message about our failing economic system?

Important changes that have pushed our society forward have often come from non-violent direct action. That said, picking the battles should be a cautious decision. In the anti-colonial resistance movement in India, Mohatma Gandhi often called off any action that was not organized and disciplined. He feared that a lack of discipline would diminish the movement’s credibility. This came to mind when I learned of the six Occupy Tampa protesters arrested for “occupying” the sidewalk in Tampa last week. Sick of being pushed around by the police and a set of constantly changing rules, the six protesters set aside the consensus decision process of the group and stayed out on the sidewalk past when the police saw fit. Knowing full well arrest was in store even as negotiations for a public space were underway with the City Council, they took a stand. What was the significance of this sidewalk? Were there stock traders and investment bankers hidden beneath the pavement? No, it was just an ordinary sidewalk and it had nothing to do with a failed economy or the 99%. It had more to do with being pissed off at the police and that's exactly how the media portrayed it.

This does not excuse the the City of Tampa for not making a greater attempt to engage the protesters and maintain open lines of communication with our local chapter of a growing international movement. City of Tampa elected officials take an oath of office to preserve and protect the Constitution and our right to peaceful assembly. In a sprawled out city like Tampa, having a place where the public can meet and talk to each other and air grievances in an open dialogue outside of their homes is an important thing. City officials and the Police Department should help provide that space, not make it impossible to create.

The message of both Gandhi and James Lawson is that their movements succeeded because they placed organization, discipline, and an understanding of strategic goals above self-righteous posturing. They understood that a well-conceived and executed plan tends to trump reckless acts of spontaneous defiance. If what we are defying is a morally bankrupt system that has precipitated the suffering of 99% of us, it's that much more prudent to resist it as if this were the most important chess game ever played, always thinking ten moves ahead.

(Editor's Note: Kelly Benjamin reported on Occupy Wall Street for the first two weeks of it's existence and assisted with creating a dialogue with Occupy Tampa and the City of Tampa Government.)

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Occupy Tampa: we're gonna stay right here

Kelly Benjamin — Thu, 27 Oct 2011 22:50:25 -0400

Some people deride the Occupiers for not clearly articulating their grievances and reasons for protesting. In this video, a few of them tell you...

(Editor's Note: Kelly Benjamin reported on Occupy Wall Street for the first two weeks of it's existence and assisted with creating a dialogue with Occupy Tampa and the City of Tampa Government.)

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Democrats try to fix the economy, but Republicans get to frame the debate

Ben Luongo — Sat, 08 Oct 2011 14:05:47 -0400

The Labor department reported that job growth was stronger than expected as employers added 103,000 net new jobs in September. The news of added jobs comes amidst growing fears of an economy inching closer to a double dip recession. However, a rehiring of 45,000 striking Verizon workers accounted for nearly half of the added jobs. Furthermore, the number of jobs added barely kept up with population, maintaining an unemployment rate holding steadfast at 9.1%.

Members of Congress, in both parties, rushed to cite the jobs report in the debate over the American Jobs Act, a stimulus bill proposing a mixture of tax relief and infrastructure spending. House Speaker John Boehner said, "The American people are asking the question: 'where are the jobs?' The Democrats running Washington need to stop campaigning, start listening, and start working with Republicans to liberate our struggling economy and remove government barriers to private-sector job growth."

For weeks, the President has instructed Congress to pass his $447 billion jobs bill, but gridlock has frustrated real legislative action. House Majority Leader Eric Cantor refused to put the bill up for a vote and Democratic Majority Leader Harry Reid blocked a vote on the bill in the Senate.

According to the Labor Department's recent report, the economy needs to create several hundred thousand jobs a month just to keep up with population growth. There's little indication, however, that the recovery is building any real momentum. Many recessions are self-correcting and characterized as a V-shape, which symbolizes a steep drop in the economy followed later by a climbing recovery. The nature of our recovery, however, is L-shaped; the current recession is marked by steep drop and then flat-lines for an extended period of time. So, why do we have a dilatory congress during a persistent recession?

The current gridlock in Washington is reminiscent of the debt ceiling debate over the summer. Democrats in Congress moved to raise the debt ceiling to prevent a default. Republicans in the House, though, saw this as a continuation of reckless government spending. The House, then, threatened to block any measure which would raise the debt limit without an agreement that slashes government spending. Democrats in Congress, desperate to prevent a default, abandoned all efforts to raise taxes on top income earners and agreed on measures to cut taxes and spending.

This was more than just a policy victory for Republicans in the House - they set a precedent for future economic policy. Freshmen in the House framed the debate by conflating the debt crisis with the recession and, ultimately, seized control of the issue when the Democrats compromised without receiving anything in return. From that point on, any bill considered in the Congress had to take care not to add to the debt. In light of this, President Obama has made it clear that the American Jobs Act is fully paid for by raising taxes on top income earners. This, currently, is the new focus of Republican criticism. Not only is adding to the debt harmful to the economy but, Republicans argue, so is raising taxes on top income earners.

However, starving the government of revenue and prohibiting any kind of public spending denies government the ability to do anything to ameliorate the effects of the recession when suffering Americans want the government to do something. Below are the results of a Gallup poll illustrating that most Americans believe that the U.S. government does have some role to play in the recovery.

It's important to emphasize a couple of points. First, Americans want their government to do something to address the recession, whether it's tax cuts for small business owners or investing in our infrastructure. Second, it's clear that this is not a typical V-shaped recession, but an L-shaped one marked by a flat-lining recovery. Can the government afford to do nothing? How do debts and tax breaks for the wealthy fit into the context of our current recession?

First, House Republicans want to slash public spending to bring down the debt. This means, however, that programs that people depend on, such as Medicare, Medicaid, and Social Security, receive much less funding. Who relies on these programs the most - the middle and lower class. An era of austerity will only neglect those who suffer most in a recession, possibly exacerbating the yawning divide between the top income earners and the middle class.

Furthermore, the core issue of our recession is employment, not the debt, and the American public knows this. According to a New York Times/CBS poll, 59% of Americans believe that jobs or the economy is the most important problem facing this country today. Only 8% of Americans believe that the debt is the most important. Nobody denies that the debt is a problem, but unemployment is far more important. Once we put people back to work, then the government can generate enough revenue to pay down the national debt.

This segues to the second issue of raising taxes on top income earners. Many believe that increasing taxes on the wealthy and corporations will stymie the recovery because taxes encumber job creators. However, corporations are sitting on record profits while the American workforce continues to atrophy. In fact, companies are hiring, they're just not hiring American workers. Over the past decade, U.S. mulitnational companies have hired abroad while cutting jobs here at home. Below is a graph from the Commerce Department illustrating the number of jobs going overseas.

Corporate America has hired 2 million workers abroad, cut 3 million workers here at home, and are still asking for more tax breaks. It's time to realize that what's good for corporations is not always good for America. Rather, tax breaks for the wealthy actually contributed to the national debt. Below is a chart from the Center on Budget and Policy Priorities illustrating the effects of the Bush-era tax cuts on the deficit.

If we are truly worried about the debt, then the government should raise taxes for top income earners. There are no indications that raising taxes on the wealthy will hurt the economy or add to the debt. Remember, Bill Clinton raised taxes during a time of economic expansion and left the office with a budget surplus.

Austerity measures simply don't work. Recovering from a recession requires spending money to equalize demand with supply. If Americans continue to tighten their belt, then the only consumer left is the government. If the government fails to act, then the L-shaped recovery continues to flat-line. Whatever programs are slashed won't yield enough money to pay down the debt, and a floundering economy will generate very little public revenue. In the end, the government inherits a debt it can't pay down.

We need some kind of government action because the economy isn't correcting itself. In fact, the lingering recession is creating structural problems. People have been out of work for an extended period of time which makes it harder for them to find work in the future. Lulls in employment look bad on resumes and quality references last for only so long. It's no wonder that public approval of government is at an all-time low. It's no wonder that protests are spreading across the nation. Again, government has to do something.

Ben Luongo teaches American Government and International Relations at St. Petersburg College.

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Criticisms of the President's plan distract us from the real issue

Ben Luongo — Sat, 24 Sep 2011 13:50:46 -0400

Unveiling the second part of his $3 trillion deficit reduction plan on Monday, President Obama stressed, in no uncertain terms, that he would veto any bill that would call for cuts to Medicare without raising new revenue. According to the President, "I will not support any plan that puts all the burden for closing our deficit on ordinary Americans". The deficit plan called for $1.5 trillion in new taxes and immediately elicited criticism from Republicans who accused the President of engaging in class warfare.

America does have a history of class warfare, and it's a turbulent one.

The most salient example are the Great Railroad Strikes of 1877 when wage cuts, dangerous working conditions, and distrust of industry leaders erupted into violent confrontations between management and labor. Strikes occurred all over the country killing over a hundred people. The most extreme case occurred in Pittsburgh when fires erupted setting the city ablaze. There are other examples such as the bombing of the Los Angeles Times building which occurred in 1910 over its anti-union policies. Then there was the Ludlow Massacre of 1914, when the National Guard attacked a compound of striking miners and their families killing around twenty people.

These are America's stories of class warfare, and represent the very real, and very violent, clashes that manifest under a growing divide between the side of capital and of labor. It's an egregious mischaracterization to equate the elimination of tax deductions for the wealthy with the cases mentioned above. In no way does the President's proposal continue an oppressive history disenfranchising the working class. In fact, the charge of class warfare distracts us from the real issue of today - the yawning divide between the rich and the middle class. Below is a graphic from the Center on Budget and Policy Priorities which illustrates that rift.

The U.S. middle class has been stretched thin over the past couple of decades. The median income has remained stagnant for the past thirty years as much of America's wealth continues to concentrate up at the top. In fact, the UN has reported that before the recession of 2008, the United States had the highest level of income inequality among all highly industrialized countries. Despite the upward flow of capital, top income brackets have actually been paying increasingly less in taxes. Below is a chart from the Tax Policy Center illustrating the falling tax rates over time. Note that under the President's proposal, top income earners will still be paying far less than they were under Reagan and Nixon.

In the President's words, "This is not class warfare, it's math".

However, not all of the plan's critics are crying 'class warfare.' On another front, many argue that raising taxes on top income brackets would disincentivize job creators from hiring and, in turn, stymie growth in the economy. This may seem right in theory, but it's a specious argument as our current economy demonstrates that business profitability does not necessarily lead to more jobs. As many have pointed out, job creation has flat-lined despite that fact that corporations are sitting on record profits. As it turns out, those at the top income brackets are not the "job creators" we have expected them to be.

Furthermore, there is nothing to suggest that high marginal tax rates for top income earners would encumber the economy. Again, the chart from the Tax Policy Center shows that the top marginal tax rates soared between 70% to 90% three decades following World War II, a period marked by an expanding middle class, climbing GDP, and over all economic prosperity. The U.S. economy grew more during that period than any other since. This is not to say that higher tax rates caused the prosperity, but it does refute the old canard that high tax rates on the wealthy inevitably hurts the economy.

Now what happens if we continue to lower tax rates for top income brackets? Lower income earners will have to pay a bigger burden. Many GOP candidates have suggest we do just this. Rick Perry, Mitt Romney, and Michelle Bachmann have all suggested that we 'broaden the base', which means extend the tax burden to more income brackets including the middle class and lower class. What would that do to the economy? Does anyone really think that raising taxes on middle class families during a recession is a good idea?

After all is said and done, the American people support raising taxes on the wealthy. Below is a Gallup poll measuring public opinion of President's plan.

Two-thirds of Americans support raising taxes on top income earners, and over two-thirds support eliminating tax deductions for corporations.

This is not a new debate. Liberals and conservatives have always disagreed over the role government should play in the economy. However, despite our pro-market culture, our history paints us as champions for the middle class. Government action protected laborers from harsh working conditions in factories. Anti-trust laws exposed questionable business practices and broke up monopolies to ensure competition in industry. The American economy is not one that ever enjoys complete absence of government. Many times the government has to get involved, and raising taxes on those who can afford it is a minimal measure. Republican leaders would do well to remember this because the more they decry the President's plan, the more they isolate themselves from general will of the American middle class.

Ben Luongo teaches American Government and International Relations at St. Petersburg College

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Workers anxious about job security amidst dismal jobs report

Ben Luongo — Sat, 03 Sep 2011 15:22:11 -0400

Stocks plunged as the Bureau of Labor Statistics reported that no new jobs were created in August, holding the unemployment rate persistently at 9.1%. The latest BLS jobs report, the worst in almost a year, confirms fears of a stalling recovery. Also affecting the markets was the news of major banks, including Bank of America, Goldman Sachs, and J.P. Morgan Chase, facing federal lawsuits concerning the securities sold duing the housing bubble. Friday's markets closed with the Dow down 253 points, 2.2%

The news of both tumbling markets and a grim employment outlook breaks just after Gallup reports on the rising fears of being laid off. Job insecurities are double what they were in 2008. What does this mean for our recovery?

Consumer spending accounts for 70% of the American economy, which is encumbered by a flat-lining unemployment rate now compounded by rising fears concerning job security. In turn, employers aren't hiring until they see a rise of consumer spending. It's a vicious cycle and unlikely to correct itself for some time.

Now, public opinion is an interesting thing, and this latest Gallup poll is not to be taken as a presage of imminent mass layoffs. In fact, after spiking in 2009, the number of layoffs dropped precipitously in 2010 and are still declining today. However, it's possible that such worries could become self-fulfilling prophecies if workers cut spending in anticipation of a job loss or cut hours - and the vicious cycle continues.

What could shake the cycle is a well formulated stimulus plan injecting an aggressive amount of capital in the system, though this is unlikely given Washington's recent move to austerity. Even if we see more stimulus in President Obama's jobs plan next week, such a plan would be met with resistance by Republicans in the House. While Congress struggles to reach compromise on a plan, in the meantime, Corporate America may actually be in a position to ease the concerns of their workers.

For starters, Corporate America shouldn't forget the reciprocal nature they have with their employees. Yes, those on the payroll are workers, but they're also consumers. Yes, they cost money because you pay them, but they also spend that money on your products. In other words, creative employers need to incentivize workers to consume more of their products. How can they do this? They could start by raising the pay of their workers - not only do they need it, they deserve it. Below is a chart from the Bureau of Labor Statistics illustrating the growing gap between productivity and compensation.

Hourly compensation hasn't kept up with productivity. We have been producing more for cheap at the expense of our work force. Now would be a perfect time for Corporate America to play catch-up. In other words, while employers aren't willing to invest in hiring new people, they could invest in the workers they already have. They can do this by promoting more workers to higher positions, raise salaries and hourly pay rates, increase bonuses by size and frequency, pay for more employee training programs, offer company discounts, etc. These measures could possibly mitigate some of the job related concerns felt by the workforce. Who should these measures target specifically? The middle class is the most worried. As the chart illustrates below, households earning $50,000 or less feel the most insecure about their positions.

Do corporations have the capital to afford this? Yes! They have been sitting on record profits sparing costs for an uncertain future. That, however, is an unstable situation as record profits can't be sustained without the economy's primary component - consumer spending. So, if business leaders want to stay in the black, they're going to have to invest in their workers.

Now, let's be careful not to suffer from optimism bias. This kind of proactive approach for businesses is, by no means, a panacea; nothing can jump start the economy better than a well formulated stimulus bill. While it's evident that the Recovery Act of 2009 did work, 'stimulus' has become a dirty word. The President should continue to fight for a jobs bill and hopefully the plan he unveils next week will be ambitious. However, after an acrimonious debate over the deficit, Washington seems unable to act decisively in a time of crisis. That said, we need to think of what can done from all fronts. The private sector has some role to play, and while business owners possess no silver bullet, employers can work to ease the insecurities of their workers. After all, their workers are consumers too.

Ben Luongo teaches American Government and International Relations at St. Petersburg College.

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It's here! The Knowledge/Service Economy 2.0: Completing the shift to the next economy

Ann Kramer — Tue, 27 Jul 2010 16:00:50 -0400

Since 1975, we have slowly but surely been shifting out of the Industrial/Consumer economy to a Knowledge/Service economy. From 1975-2008, we were in Knowledge/Service 1.0 as production was outsourced throughout the globe, and we put our attention into increasing technology and knowledge expansion here at home. Knowledge/Service 1.0 saw the first wave of transition sending blue-collar jobs overseas and now the white-collar jobs attached to these production industries are going too. Less obvious however was the emergence of the new industries of the Knowledge/Service economy: medicine, education, finance, technology, arts, entertainment, and other quality of life industries that support optimal human life. 70% of our economy remained tied to the Industrial/Consumer economy while only 30% was part of Knowledge/Service 1.0.

As we sit in the Great Recession of 2008, we are faced with the stark reality that we will not be able to consume our way out of this recession. A jobless recovery is now predicted and this makes sense because many of the industries that provided jobs are no longer thriving. This time, a myriad of forces have come together to push us onward. As chaotic as this now seems, if we will embrace it, we’ll discover we’re about to enter the most vibrant economy ever! While yet to be determined, it is possible that a complete flip will occur and within the next 10 years, 70% of work will be found in Knowledge/Service industries while just 30% remain in the Industrial/consumer sector.

Yes, there is a jobless recovery, but that’s because we’re trying to put people back to work in the Industrial/Consumer economy jobs. Obviously, that’s not working! As we shift into the Knowledge/Service 2.0, there’s plenty of work that needs to be done -- it’s just that it isn’t in the industries that we are familiar with. We need to begin to wrap our heads around this reality. Instead, let’s put our focus on what this Knowledge/Service 2.0 economy needs in terms of work. Once we do this, we can go from a jobless recovery to new employment creation based on what this next economy needs in terms of work!

Economies change, work changes too.

Just as we shifted from the work we were familiar with doing in the Agricultural economy in order to learn how to do the work needed for the Industrial economy, so too will we need to learn and pay for the new work needed for the Knowledge/Service 2.0 economy. That is the opportunity available to us in the crisis of the 2008 Great Recession. Investment in this new infrastructure will force us to expand beyond the GDP measurement system because it is insufficient to meet the needs of the Knowledge/Service 2.0 economy. As well, new employment sectors that will foster the needs of this economy based on quality of life will need to be added. This will include local community tied to human capacity development and environmental restoration/stewardship to support high quality of life. We are not yet accustomed to paying for this work because of the deficiencies of GDP measurement but we certainly have the ability to make this possible.

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Transitioning from consumers to "Creatives" to shape a 'quality of life' economy

Ann Kramer — Tue, 13 Jul 2010 12:00:53 -0400

How many times have you read or listened to a radio news report and heard lines that go something like this: “Consumer spending was up today and economists predict a good year;” “The Stock market today reacted to a slow holiday spending season as consumers decided to save;” “Lower consumer confidence spells out a continued recession;” or “Deep discounts opened up the wallets of consumers and businesses breathed a sigh of relief.”

Consumers, consumers, consumers -- we use this term as if this is a life form of its own! We used to be ‘citizens of the United States’, but now mainly, we are identified as consumers, which as we all know is the hallmark of the Industrial Economy. After 9/11, we weren’t asked to be good citizens, we were asked to be good consumers and as the run up to the current recession shows, we were relentless!

As many consumers have finally realized, consuming costs a lot of money and getting that money costs a lot of life. So much so that it has begun to dawn on a lot of consumers that consuming wasn’t nearly as much fun as it should’ve been. We became exhausted consumers working to pay off massive debts that we now realize can never be paid off.

And while all that is happening, the Industrial/Consumer Economy is showing massive and multiple signs it is on its last leg. The Wall Street/'Too Big to Fail' banking debacle was the last gasp attempt to keep the Industrial economy going through the selling of ‘fake assets’; so much so that a consumer-manic world got so excited about buying that it didn’t even realize it was being sold thin air! With a jobless recovery predicted, its clear the shift to a Knowledge/Service Economy is fully underway.

But what happens when the Industrial/Consumer Economy changes to a Knowledge/Service economy? And if you aren’t a consumer, then what are you?

I’ve been researching this question and it appears that continuing to identify ourselves as consumers will soon become very passé. If you want to be successful in the 21st century Knowledge/Service economy: then learn, act, grow and identify as a “Creative.” There is evidence of a surprisingly large group of Creatives that are already building the foundation of the Knowledge/Service Economy.

We won’t be consuming our way out of the greatest recession/depression since 1929. We’ll be ‘creating’ a whole new economy. That’s actually the good news even though it’s going to take a little while to get comfortable in our new roles and new way of living life. The difference between the old and the new is shifting our focus from a “quantity of stuff” economy to a “quality of life” economy.

Oh, yes, we’ll still have some stuff to consume, but Creatives are folks who are much more interested in ideas, relationships, community and businesses that are sustainable and benefit humans and the planet. It’s more about quality of how we spend our time each day, versus the rat race lifestyle that left us with no time to actually live our lives! Creatives love working but in balance to other important parts of their lives -- family, community, and nature. The Knowledge/Service Economy will support a very different set of lifestyles (different, not less).

So, imagine these headlines about Creatives to replace the old Consumer ones: “Creatives have fostered a global network of volunteers who are bringing literacy to the 3 billion people who have yet to learn to read";“Creatives have developed integrative working environments in all businesses (especially repetitive endeavors) to ensure full development for all employees"; “Creatives have established new economic measurements that are focused on happiness and quality of life to replace the previous 'unlimited growth = profits' system — in doing this, many new employment possibilities have become valued and many from the old system, such as Credit Default Swaps trader, have been eliminated"; “Creatives have developed a new work/value system for each employment position -- it turns out, the front end receptionist is more valuable than most middle-managers and will now be paid commensurate with this new work/value rating system"; and “Creatives have determined that the most important employment areas align with those that foster high quality of life for the individual, community, and natural environments. This is in contrast to the Consumer economy’s limited and narrow criteria of ‘if it makes money, its important."

The changing, new Knowledge/Service Economy represents a simple shift from a focus on the term “consumers” which implies that shopping is normal, to a focus on the term “creatives” and knowing that this means whole life/wholeness is normal. Two little words provide such a very different approach to how we live our lives. If you thought being a consumer was fun, just wait until you discover the joy in being a Creative.

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Let's transform our economy to a Triple Bottom Line to support humans, the environment and business

Ann Kramer — Tue, 18 May 2010 17:23:26 -0400

Thomas Friedman’s May 14th Op-Ed article referred to Lydia, a Greek child who had left a note outside a recently bombed bank in Athens, Greece. Killing three innocent bank employees, that bombing can be connected to the economic collapse in Greece as well as the Too Big to Fail banking mess that started on Wall Street. In the note, she asked “In what kind of a world will I grow up? Lydia, age 10.”

Friedman writes that it is time for us to all wake up and realize that we are such an interconnected world economy that actions in one part of the world now have an impact in other parts of the world—often with dire consequences. In some cases, like this one, it’s economic and financial systems that are impacted, in others—it’s environmental and social systems that feel the ripple effect from far away. But if you step back far enough, you see that a crisis in any one of these four major systems creates chaos in all the others.

Friedman discusses two value systems—the one we currently have-- Situational values--whatever feels right at the moment, while challenging us to shift to Sustainable values--“values that inspire in us behaviors that literally sustain our relationships with one another, with our communities, with our institutions, and with our forests, oceans and climate. ……..Sustainable values inspire you to do what you should do in every situation.”

Essentially, what Friedman is now advocating for is a Triple Bottom Line economy—where social, natural and business systems are equally valued and taken into account when choices are being. This is in direct contrast to the economy we have now—which is a Single bottom line—anything that makes money for business is good (even if it does so at the expense of human and environmental systems).

In an interconnected world—Situational values result in the huge disparity between rich and poor, Sustainable values result in a world that works for humans and the planet. That’s the world Lydia could grow up in…if we shift to a Triple Bottom Line economy. In doing so, we can begin to measure and monetize our economy from a much wider set of options—along with the current Gross National Productivity (business), we could add Gross Household Productivity (social) and Gross Environmental Productivity.

When we do that, we also expand employment into a full spectrum of markets, government, and the household enterprise, as well as factoring in volunteer activities and the natural environment/true cost accounting into the equation. (Present as well is the illegal employment sectors—drugs, sex etc.,--which will never go away, but in a Triple Bottom Line economy—the need for this sector is reduced since there are three new other employment options available—household, volunteer, natural environment)

This would be an amazing world for Lydia to grow up in and it is entirely doable. And do we must. The current Single bottom line economy/situational value system works for just the few at the top while a Triple Bottom line economy/Sustainable value system work for us all while enabling us to achieve our highest creativity levels possible. And isn’t that what an economy is really for in the first place?

Let’s move beyond blowing up banks and the limitations hoisted on us by the current economic and financial crisis. Our energy is much better spent transforming our world economy into one that measures and monetizes activities to support a system that honors the interconnectedness of humans, the environment and business all at the same time. We have the know-how to do this, now we need only the will. And for Lydia—isn’t this the world we’d want her to grow up in?

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Goldman Sachs: Worse than Enron?

Ann Kramer — Mon, 26 Apr 2010 14:05:21 -0400

Remember Enron? Kenneth Lay, the CEO? As the fraud and deception of Enron began to unfold in the media—he stood before the public and his employees and continued to insist that all was fine. Now we have Lloyd Blankfein insisting to everyone that the SEC fraud investigation is nothing to worry about, they have no case. But as Enron showed us, the ‘smartest boys in the room’ can sometimes turn out to be not so smart after all.

Many are beginning to realize, the Wall Street geniuses who created Hedge funds, Credit Default Swaps (CDS) and Collateralized Debt Obligations (CDO)—may turn out to be no brighter than the Enron boys. These investment instruments are so complex that actually no one understands them and are created through computer models gone array. They have made vast fortunes for some—but they come with a huge dilemma. As the fraud investigation shows—these were rigged games that picked some investors pockets while lining others and few were privy to who knew what. Goldman Sachs may be at the center of it all—but they are not alone. Warren Buffett has called them ‘weapons of mass destruction’—but so far it’s mostly Main Street that’s been destroyed. Goldman Sachs posted another $3.5 billion first quarter profit—primarily through continuing to trade just as they were before the financial meltdown of 2008.

In a recent announcement, the German bank IBK announced it would no longer do business with Goldman Sachs. It was one of the banks who lost millions for investors while John Paulson’s investment firm made a billion dollars on the duplicity of shorting a hand-picked CDO that it knew was going to fail. Great Britain too has filed suit against Goldman Sachs because the Royal Bank of Scotland—which was bailed out by Great Britain to avoid its collapse was intimately involved with Goldman Sachs. Just a few more major banks or countries standing up to Goldman Sachs and pulling out its funding and the once mighty could fall.

Now many will say that while the Enron collapse was terrible—it’s not the same thing as Goldman Sachs going down. Because it is a huge bank, it must be kept operating—else, where will money come from? If they’re gone…where will the loans come from—it remains too big to fail. But here’s the thing—Goldman Sachs isn’t loaning money—it’s not investing in real work and real output. Most of its profits right now stem from continuing these ruinous deals that benefit the few at the expense of the many. That giant sucking sound around the country of city, county and state deficits—with layoffs and economic retraction happening everywhere (the City of LA announced 700 city employees will be laid off by June) is a result of the fact that the Too Big to Fail banks aren’t making loans for businesses and/or municipal entities. Instead, they’re focused on cleaning up their books from the toxic assets that still remain—or in the case of Goldman Sachs-selling more Hedge funds, CDS and CDOs….and posting huge profits.

So, the loss of Goldman Sachs would not hurt Main Street since they’re not loaning to Main Street anyway. They should be—but they’re not..and they’re not going to any time soon. They have no need for pesky ‘real wealth” loans—heck why bother when you can make $3.5 billion without it! No, Main Streets problem will not be solved by Goldman Sachs—whether they remain or fold. Main Street is beginning to discover that it has some other options that will provide a much better revenue source to provide credit and loans for the nations’ small businesses— public State banks working in cooperation with small, local banks and credit unions.

So, Goldman Sachs goes the way of Enron? Who’d have thunk it….but then, as Enron showed us—sometimes the brightest boys in the room can get caught in their own net. Enron’s debacle hurt many—and when it collapsed, good, hard-working people in that organization and others that served Enron—Arthur Anderson accounting for example—went down too. But today, Goldman Sachs and all the TBTF banks have left wreckage across this country—of families destroyed, foreclosures, homelessness that will impact millions of children for the rest of their lives—the list goes on. They’ve done nothing to change their behavior and Main Street continues to suffer. Closing Goldman Sachs to prevent this continued recklessness may be the only option. There was life beyond Enron—there will be life beyond Goldman Sachs too.

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Where will you be working in the 'knowledge economy'?

Ann Kramer — Tue, 16 Feb 2010 09:00:24 -0500

The future is a knowledge economy — we’ve been hearing this for the last 15 years now. But it seems to me, no one is willing to recognize how different that is from the consumer economy. And while, yes, a highly educated populace is a necessity for a knowledge economy — once educated, where will these people be working?

Much of the work that is necessary in a knowledge economy does not fit into the 'unlimited growth and production equal profits’ of the consumer economy. Where will the funds come from to pay for the work done in a knowledge economy, since much of it does not generate profits? The traditional market sector is the only place where wealth is created, as far as our current economic models are concerned. The wealth created in the market/consumables sector is utilized by the private sector (profits generate salaries and taxes) and it also funds the government sector. When the market declines, the government is without its source of funding too. A knowledge economy does not fit nicely into a market economy — yet we keep trying to make a square peg fit into a round hole.

Right now, we only have three employment sectors measured and monetized in our economic model: markets, government and illegal. The market sector employs 96 million people in the US, but if 'consumption' permanently drops from a 70%/96 million people, to a 40%/66 million people, where will the other 30 million work? We already see this beginning to happen. There are currently 10 million people newly unemployed. Many will never be re-employed in the traditional market sector, and yet the knowledge economy is not ready for them either. And until we redesign the economy and financial systems, there won’t be a way to employ them because we’re waiting for the markets to produce the ‘wealth,' yet the markets are retracting. It’s quite a dilemma.

A knowledge/service economy provides a wonderful opportunity to build a real wealth world where people and the planet are working together to build a world that works — but we're going to need to start accepting new employment sectors where people can create wealth and offer the valuable work that we need.

The United States could choose to be a leader in this new 'real wealth' economy, but it will require us to all start talking about the reality: the consumer economy is on its last leg and we need to prepare for the knowledge economy. We've done this before: in the early 1900s we were an agricultural economy, gone by the 1940s. The 1960s-1990s were the apex of the consumer economy. The early 2000s were, as we can now see, a huge smokescreen to help us ignore the fact that the consumer economy was retracting fast (the US had a 0% net job increase in the last 10 years). We need to get our heads out of the sand and begin to redesign.

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A jobless recovery + 10 million unemployed = A wake up call and an opportunity

Ann Kramer — Mon, 08 Feb 2010 16:30:40 -0500

Here in the US we've had 0% job growth in the last 10 years. That’s right, there’s been no net increase of jobs in 10 years. There are multiple reasons why this is happening. Some of it is because the consumer economy is retracting and frankly needs less and less workers. Technology is also replacing millions of people and we’ve outsourced jobs overseas as a way to continue to cut labor costs out of production. Put it all together and there has been no job growth in the United States. This is a reality that we knew was happening but we chose to ignore it during the good times. But as this recession continues, it is becoming increasing impossible to maintain our ignorance.

Even as we look forward to this recession ending, over and over again you hear the phrase 'jobless recovery'. And this makes a lot of sense considering we didn't have job growth in the last 10 years when the economy looked like it was in good shape (Ha!).

So, when you mix a jobless recovery plus 10 million unemployed in the US, what are you looking at? Well, it isn’t going to look pretty, that’s for sure. Literally millions will remain unemployed or under-employed and that will not bode well for our future. But it is wrong to believe that we can’t create a solution to this. We need get out heads out of the sand and recognize that the old model of the consumer economy’s measurement and monetization system no longer is sufficient to meet our needs. We have to come up with a new economic model. It isn’t as hard as one might imagine. Frankly, it’s the strong suit of the United States—creating new solutions is what we do best!

Here’s an option: a Triple Bottom Line economy (3BL) instead of the current consumer/market/unlimited growth and production equals a profitable economy. A 3BL is designed to support people, the planet (plants, animals, land, water, etc.) and businesses concurrently. This allows us to f measure and monetize all the economic activities where work (and life) takes place. When making choices under a 3BL, all three areas are of equal importance. The result? We can expand the employment sectors that we measure and monetize to 6 employment sectors instead of the current 3. And voila, instead of a jobless recovery, we’ve created three new areas to absorb the 10 million people who need to be a vibrant part of a thriving 3BL economy.

The 3 new sectors are:

1) Household enterprise: paying for all the work in our home - child care, elder care, cooking, cleaning, and life! We spend almost as much time working in our homes as we do outside the home. But the thing is, we don’t measure and monetize it in the home - only outside. So, if we hire someone to clean house, the GDP goes up and someone gets paid. But if we marry the housekeeper, the GDP goes down and no one gets paid (though the cleaning still has to be done). Pay a stranger to look after your child, and the economy grows. Take care of your own child, and it has no value in our economic measurement. This back and forth shift between the unpaid household economy and the market economy, where we only measure and monetize if it is in the market economy but not the household economy, needs to stop. If we measure and monetize both sides of this equation, we could almost double economic measurement and GDP. If we paid for this work, we could employ millions of people doing the high quality work necessary for human development and resulting in optimal human life and communities. In doing so, we could raise the bar on the caring work done to professional levels too. This is something we will need since the future will require highly functioning humans - and this requires the best care from day one. In a 3BL economy, paying for this becomes possible because economic measurements include this new employment sector and people, planets and business all benefit.

2) Volunteer work: I suggest a national volunteer service registry, much like Social Security which records our input over our work life. We could create a department within that agency that would keep the record of our volunteer work hours (currently valued at over $19/hr nationally) and make it a 'tradable' asset that we can work/save over our lifetime.

3) The Natural sector: Giving ‘true value’ to earth’s assets. We currently take these gifts provided by nature for granted and the result is environmental destruction and policies that artificially skew the true cost of our economy. With the natural sector factored in, the costs for renewable energy come in much lower than maintaining our oil dependency. As well, factoring in the ‘true cost’ could result in millions of more green jobs as we find ways to work in ‘closed-loop’ production cycles that increases output while protecting the earth. The increased output emerges from the fact that along every step of the production cycle—‘waste’ that is produced is no longer tossed but is itself, turned into a new product or service.

The great news about a 3BL economy is that we can easily show the 'cost-benefit' of all three of these new employment sectors being added to the national economy. But the best benefit right now is that it take the “jobless recovery” and turns it into full employment and a thriving economy that honors people, the planet and profits!

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Disappearing mailbox holiday blues

Sarah Gerard — Wed, 02 Dec 2009 15:36:56 -0500

While visiting my grandparents in Cleveland last week, I found myself needing to mail a very important, date-sensitive package to an upcoming writer’s conference at Eckerd College. What ensued, in the midst of the ever-present Gerard household holiday hubbub, was a twenty-minute labyrinthine car search for a rapidly disappearing commodity: the blue mailbox.

I was sure there used to be one next to the Whole Foods. Wasn’t there one on the corner by Giant Eagle? Gone, both of them. But where did they go?

According to the Denver Post, “About 200,000 mailboxes have disappeared from streets and rural routes—more than the 175,000 that remain—in the past 20 years,” due to declining mail volume. The USPS attributes this drop in snail mail to the increased use of other communication mediums, such as the Internet and cell phones, not to mention the relative ease of online bill paying. And in this struggling economy, the Postal Service has to make sacrifices just like everyone else.

According to an (irate) August 14^th letter from USPS president Ted Keating to President Barack Obama, the Postal Service has reduced its workhours by 29 million over the same period last year as well as 8 million hours of overtime and 3,000 management positions. Its revenues are down 8.4%. With numbers like that, continuing to pick up at empty mailboxes equals precious pennies wasted. One Boston Globe article, for example, claimed that every penny per gallon increase in gas costs the Postal Service an extra $8 billion a year.

But what if the mailboxes aren’t totally…totally empty? Isn’t your letter to Grandma important? To determine whether a mailbox needs to be removed from an area, the Postal Service uses a process called “density testing”. If, after monitoring a box for six days, they find that it receives an average of 25 pieces of mail per day or less, they will consider removing the mailbox from that location.

Still, some are concerned that the change negatively affects those who need the mailboxes most, such as the elderly, who may not be as proficient in using a computer or cell phone, and who may have difficulty reaching a faraway mailbox. Not to worry, though. Gary Sawtelle, corporate communication specialist for USPS Tampa, assured me that Tampa Bay, at least, won’t even notice the difference: “Most recently, six months ago or a year ago, we’re not pulling any single mailboxes from corners anymore. We only remove a box if there are multiple in a location. If we don’t need two boxes there, we’ll pull one.”

There are currently 118 collection boxes in St. Petersburg, down from 138 last year. Of those removed, all of the boxes removed were “buddy”, or duplicate boxes. In Clearwater, currently 40 boxes are still standing, down from 57 last year, and all but one of the 17 removed were buddy boxes. In Tampa, there are 261 boxes left last year’s 313, and only nine of those removed were not buddy boxes.

This is music to the ears for people like me, who find the quaint charm of a letter in hand irreplaceable. Let’s face it: a text message “I love you” will never take the place of a handwritten one. The Postal Service understands that some of us just aren’t as comfortable with change as others, which is why most cities try to maintain at least one mailbox per square mile. To find a mailbox near you, visit http://usps.whitepages.com/post_office.

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Something is wrong in America

Eric Stewart — Fri, 23 Oct 2009 15:30:19 -0400

Will you stand? Comment what you're standing for here locally in Tampa bay.

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HR 1207: Will Ron Paul's House bill spell the end of the Federal Reserve System?

Al Coryell — Thu, 17 Sep 2009 07:32:47 -0400

By Al Coryell

PoHo correspondent

In Part 1, Part 2 and Part 3 of this series of articles we have learned that, at present, there are two important competing economic philosophies. There is the Keynesian philosophy, practiced by the Federal Reserve, which purports to centrally control economic stability through price and monetary manipulation — and the Austrian School philosophy, which supports a hands-off approach to economic management contending that a truly free market will self-correct if left alone to do so. In this final installment of the series, we will ask "Can the Austrians possibly overcome the overwhelming power of the Federal Reserve and return the U.S. to a free market, sound money economic system?" Both sides are locked in a battle which will forever change the face of America, and much of the world, regardless of who wins...

We have discussed the Keynesians at length, but the other major player in the macro-economics arena is known as the Austrian School of Economics. Economists of the Austrian School, such as the late Ludwig von Mises of the Mises Institute, contend that the Federal Reserve's operation amounts to an artificial manipulation of the money supply and has led to the boom/bust business cycles occurring over the last century. Many economic libertarians, like Austrian School economist Murray Rothbard, believe that the Federal Reserve's manipulation of the money supply to try to stop the "gold flight" from England, caused, or was at least instrumental in causing, the Great Depression. By Executive Order 6102, after the 1929 market crash it was illegal to own gold in the United States. You could be imprisoned if you didn't turn your gold over to the Federal Reserve. Shamefully, the Federal Reserve paid citizens $20.67 per oz for the gold it collected, then, less than a year later raised the price to $35 per oz., the net effect being a 40% devaluation of the dollar almost overnight. Although the linked article above states the change had no lasting effect, Rothbard contends it had a devastating effect on the struggling economy at the time.

Austrian School economists are advocates of laissez-faire when it comes to free market banking and business operations. They argue that there is no better judge of the proper interest rate and money supply than the market itself. The Austrians believe that manipulation of the economy creates asset bubbles, instabilities in the business cycle and the financial system, and inevitably leads to booms and busts of great magnitude like we have witnessed lately. Obviously no politically based system of government is going to willingly support the Austrian School of thought since there would be little for the politicians to manipulate or regulate — hence very little pork. Therefore, the bar is set pretty high for any attempt by the Austrian School advocates in Congress to oust the entrenched faction of Keynesian supporters of the Federal Reserve System.

Austrian support is growing, however, particularly as the economic health of the nation deteriorates. More and more members of the Congressional House of Representatives have signed on (currently 282 members) to sponsor a bill submitted by Rep. Ron Paul to "Audit" the Federal Reserve , a necessary first step in the ultimate goal to expose the Fed's fraudulent and incompetent operations. Ultimately, Paul hopes to gain public support for the abandonment of the Federal Reserve System in favor of returning to a free-market economy.

Currently, the operations of the Federal Reserve are done in secret and Congress has no authority to review their domestic or global operations, nor can they audit the accounting or the accounting procedures of the Fed. Thus, Congress and the American people have no idea what the Federal Reserve is doing other than to rely on the regular reports generated by the Fed and its operations arm, the Federal Open Market Committee (FOMC). The FOMC meets on a regular basis to set Fed policy and establish financial interest rates, etc. But the meetings are held in secret and no transcripts of the meetings are provided, thus no one really knows what transpires or what decisions are actually made at the meetings. The Fed contends that its operations must be secretive and that the members of its Board of Governors must be appointed for long, staggered terms so as to limit the influence of day-to-day political considerations. But noted Austrian School economist Murray Rothbard describes them this way:

"The Federal Reserve System is accountable to no one; it has no budget, it is subject to no audit, and no Congressional committee knows of or can truly supervise its operations. The Federal Reserve, virtually in total control of the nation's vital monetary system, is accountable to nobody — and this strange situation, if acknowledged at all, is invariably trumpeted as a virtue."

Rep. Paul's bill would open up the meetings, require transcripts and force the committee to work more in the sunlight. Additionally, the GAO (Government Accountability Office) would be given the unencumbered authority to audit the books of the Fed on a regular basis, acting in a watchdog capacity. In 1978, the GAO was supposedly given authority to audit the Federal Reserve under The Federal Banking Agency Audit Act of 1978, but the exclusionary provisions of the act ensured it had no real teeth and in 1993 the GAO gave up any real attempts to audit the Fed after producing this report to the Senate Banking Committee and posting this message on its government website:

Currently, GAO lacks audit authority over the Federal Reserve's monetary policy, foreign transactions, and Federal Open Market Committee operations. Legislation pending before Congress would remove all restrictions on GAO's authority to examine Federal Reserve activities. Although whether to expand GAO's authority is clearly Congress' call, GAO believes that if its authority is expanded, measures should be included to protect against release of confidential documents and to prevent undue interference with the Federal Reserve's ongoing policymaking functions.

The 1993 legislation failed. The Federal Reserve remains un-auditable today.

Rep. Paul's HR 1207 would change that situation immensely, hence the concern of the Federal Reserve about the bill's passage. The bill's proponents say that, were HR1207 to pass, life at the Fed would change dramatically. Supporters of the bill say the Fed would no longer be able to hide behind secrecy, its inept (if not corrupt) operations would expose its incompetencies and hopefully lead to its eventual demise, opening the door for a return to a free-market, sound money economy. Needless to say, the Federal Reserve is vehemently opposed to any such intrusion in its operations. As an independent institution, the Federal Reserve System has the authority to act on its own without prior approval from Congress or the President. They are not going to give up that power without a fight.

So how are they fighting back? The Fed has historically managed to fill key positions of every administration's cabinet (including Obama's) with sympathetic allies. In Obama's cabinet, both Treasury Secretary Timothy Geitner and National Economic Council Director Larry Summers are key allies in a bold strategy by the Federal Reserve to grab even more power for the agency. This article in the Washington Times summarizes the Fed's attempted power play aided by the current administration: Federal Reserve to gain power under plan

In response to the Obama administration's new regulatory reform plan, which will effectively give the Federal Reserve complete dictatorial control over the U.S. economy, Congressman Ron Paul told MSNBC that the Fed was now more powerful than Congress. Paul emphasized that no amount of regulation could compensate for a financial system created and controlled by the Federal Reserve when the Fed itself was completely unstable to begin with. Paul contends:

"The regulations should be on the Federal Reserve. We should have transparency of the Federal Reserve. They can create trillions of dollars to bail out their friends, and we don't even have any transparency of this. They're more powerful than the Congress."

So, as it stands today, we all have front row seats to a battle between unequal opponents. I have likened it to David and Goliath. It would be a stretch to assume that the economic situation we find ourselves in today is a result of a failure of capitalism and a free market run amok which now needs to be reined in and better controlled, as the Federal Reserve and much of our government leadership want us to believe. But on any given day, on any given news or market broadcast channel, you are bombarded with the spiel of the money elite as they decry the failure of capitalism and pitch the need for more and better control of the wayward financial institutions and businesses so "this can never happen again." From time to time, faintly in the background but getting louder every day, are the voices of the Austrians calmly stating their message that there is a better way; a way that will restore a free market economy and fix the broken fiat monetary system which is on the verge of collapse. HR 1207 could come up for a vote as early as October. Whoever controls that vote will likely control the direction of the economy for decades to come. It is no small piece of legislation.

Who will win this David and Goliath battle? While I am personally rooting for David, my money is on the Goliath.

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The Austrians vs. the Keynesians: The end of the Federal Reserve

Al Coryell — Wed, 02 Sep 2009 07:26:35 -0400

By Al Coryell

PoHo correspondent

In Part 1 and Part 2 of this series we learned the origin of the Federal Reserve System and looked at the Keynesian economic philosophy, the preferred philosophy of economists who have run the Fed since the Great Depression. We learned that Keynesian economic philosophy is an anti-free market philosophy, one that supports a centrally managed economy utilizing money and interest rate manipulation and taxation to control prices in the economy. Now we will look at the Austrian School economic philosophy and make some comparisons. There is a battle shaping up in Congress between the proponents of each philosophy. The winner of the battle will ultimately decide our collective economic fates well into the future...

Austrian School economics is a philosophy almost exactly opposite to Keynesian economics. Where the Keynesians believe in a fiat (paper) money system in which a dollar is worth whatever they say it is and they can print as many of them as they want to manipulate price levels in the economy, the Austrians believe in a sound money system where the value of the dollar is directly tied to a fixed asset value. Gold is the preferred asset because it has a long history of acceptance as a global monetary exchange medium, and our own Constitution requires that gold and silver be the only forms of money used as legal tender for the re-payment of debts (Article 1, sections 8 and 10). In an Austrian monetary system, the central bank would not be allowed to simply print fiat money to suit its whims, every dollar would be accountable to an equivalent amount of reserve gold. And actually, in a true Austrian monetary system there would be no central bank. A central bank wouldn’t be necessary since interest rates and the money supply would not be manipulated, the primary means used by the Federal Reserve in its mandate for price stability.

In a true free-market economy, there is a fixed number of dollars, meaning that inflation is impossible unless you can inflate the asset to which the dollar is tied. The only way to inflate the value of a dollar tied to gold, for instance, is to dig up more gold. It is safe to say any inflation as a result would be slow and certainly able to be controlled. But in a Keynesian-managed monetary system, inflation is always a danger because to control price levels, the Federal Reserve is constantly printing and destroying money in a complex and difficult balancing act that has, as we are all too aware, gotten far out of control. Once out of control, then deflation becomes a threat when the credit bubbles created by unrestrained monetary inflation start to burst. The ‘tech’ bubble and the recent housing bubble were both a result of monetary credit inflation caused by the Federal Reserve’s inability to competently control interest rates. The Fed ineptly kept rates so low for so long, consumers and businesses were extended credit in amounts they will never be able to repay. Asset or credit bubbles can not occur in an Austrian School economy. It is simply impossible because the money supply can not be inflated and therefore a grossly exaggerated credit expansion simply cannot occur. The dollars, quite literally, just would not have been there to loan to un-creditworthy borrowers.

The Austrians are firm believers in laissez-faire when it comes to banking and financial interest rates. As with any other business service or product, the Austrians believe consumers will determine the interest rate they are willing to pay by virtue of their patronage of the various institutions. They contend that regulation of interest rates is only necessary in a managed economy where the central monetary authority (i.e., the Fed) artificially sets the rates; consumers cannot vote with their patronage, since neither they nor the banks have control over the prevailing rates which are artificially set by the central bank. Therefore, only under a managed financial system is it necessary to monitor compliance of the institutions to the mandates of the central authority. In a free market financial system, consumers would vote with their feet, choosing the banks with the best services and interest rates over the ones with less deficient services or exorbitant rates, just as they choose between Wal-mart and Target, etc.

Fiat money systems always fail. There is no historical record of a country with a fiat money system which survived the ages. However, history is littered with fiat systems that failed, including our own Continental dollar during the American Revolution and greenbacks during the Civil War. This picture of a Weimar Republic woman burning German fiat money after WWI is not a joke. It was literally more efficient to burn the currency than the wood it would buy after the fiat currency hyper-inflated.

The Austrians insist you cannot spend your way out of a crisis caused by credit expansion (easy money debt). Decades ago the famous Austrian School economist Ludwig von Mises wrote:

"There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.”

If the Austrian School economists are right, the methods being employed by the President, the Congress, the Federal Reserve and the Treasury Department are exactly the wrong things to do for a swift end to the economic crisis. We can’t spend our way out of the mess we are in. Attempting to do so puts a huge strain on our dollar and will inevitably help it to collapse.

In this October 2008 Fox News interview of Ron Paul, he explains very well why the stimulus appropriations are a bad idea and points out the dangers of the Keynesian approach to monetary manipulation:

So, we have the Austrians led by Ron Paul, Peter Schiff and a growing coalition of concerned, enlightened congressmen pitted against the representatives of the money elite of the world, the Federal Reserve System led by Ben Bernanke, Timothy Geitner, Larry Summers and a truly global consortium of others… a veritable re-enactment of David and Goliath. The battle lines are drawn. Whoever wins will have a real and substantive impact on all of our lives for better or for worse for decades to come.

Next installment: The final installment of this series will explain how the Austrians are attempting to get the message out to you that there is an alternative to a Keynesian manipulated economy where booms and busts are artificially created and controlled by a central monetary authority. We will look at what they are doing to spread the word and assess the prospect of their ultimate success or failure. Stay tuned.

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The Keynesians and 'Helicopter Ben' Bernanke: The End of the Fed, Part 2

Al Coryell — Mon, 24 Aug 2009 05:00:18 -0400

By Al Coryell

PoHo correspondent

I left you in Part 1 of this series with the statement the U.S. "...has not had a truly free-market economy since 1913". Hopefully you were able to draw the inference that that was the year the Federal Reserve System was created by the Federal Reserve Act of 1913. It was created to perform as a quasi-public banking system, i.e., a central banking system for the United States. In its infancy, the U.S. tried and failed several times to establish a central banking system. But a series of bank panics, in 1873, 1893, and 1907 provided the needed public approval for the creation of the Federal Reserve System in use today.

What the public was unaware of, however, was the ultimate cost that a Federal Reserve system would eventually impose on them...

The primary motivation, at least from the public's perspective, for creating the Federal Reserve System was to address banking panics. Bank runs occur because banking institutions in the United States practice fractional-reserve banking and do not have enough cash in reserves to give to all of their depositors simultaneously. Bank runs can lead to a multitude of social and economic problems as we are, unfortunately, beginning to witness first hand as the rate of bank collapses increases monthly. The Federal Reserve was created as an attempt to prevent or minimize the occurrence of bank runs and to respond appropriately when they do happen. Until recent events, it has been believed by most Americans that the Fed has been both responsible for, and successful toward, that end.

But current systemic problems in the financial markets have cast ever-increasing doubt on the Fed's ability to maintain stability of the financial system. The primary economic philosophy employed by Federal Reserve economists is called "Keynesian economics", a macroeconomic philosophy based on the ideas of twentieth-century British economist John Maynard Keynes. Few people in America know that there are actually competing economic philosophies in the world. That is because the Federal Reserve economists are all Keynesian economists. When you hear monetary policies and theories discussed in the news or by congressional debate, the issues are always discussed from a Keynesian perspective. You rarely, unless you know what you are listening for, hear the views of the competing economic philosophies.

Prior to the Great Depression, most economics theory centered around Say's Law. Say's law, or the "law of markets", is an economic proposition attributed to French businessman and economist Jean-Baptiste Say (1767–1832). Sometimes called the "Classical Theory", Say's Law is founded on the notion that commodities are produced simply as a means to acquire other commodities, i.e., consumption is the aim of production. So, in order to obtain a desired commodity, it is necessary to first produce an equally desirable commodity. Businessmen who are unable to produce desirable commodities, or who produce desirable commodities but can't make a profit, will fail, a la Darwin. What's more, each desirable product produced will be exchanged for a product (or products) of equal desirability and value, or nearly so. According to the classical theory, in a purely free-market economy, supply equals demand, and the process is self-regulating. It doesn't require monetary or financial market manipulation.

Thus, an economic recession or depression where the the economy is characterized by a systemic imbalance of supply and demand, can only result from suddenly massive and widespread entrepreneurial miscalculation regarding which commodities are desirable and which production methods are efficient. According to Say, the classical economists, and Austrian School economists (whom I will talk much more about in the next installment), such deep and wide entrepreneurial failures are simply impossible in a purely free market economy. These kinds of gross miscalculation can only happen in a managed economy where interest rates and the money supply, i.e., the monetary system, is artificially manipulated.

Keynes, however, was unable to accept the idea of a free market and thus the hands-off tenets of Say's law. The state, according to Keynes, can and should manage the economy to help stimulate economic growth and improve stability in the private sector through, for example, interest rate manipulation, taxation and public projects. The theories forming the basis of Keynesian economics were first presented in his treatise The General Theory of Employment, Interest and Money, published in 1936. Keynes attempted to build his own theory around ways the Great Depression could have been avoided. His efforts were able to successfully nullify the "classical theory" in the minds of many followers, Alan Greenspan, Ben Bernanke (and most modern economists) being among them. The application of Keynesian economics has appeared to work over the last 70 plus year bull market, but, at present, it appears Keynesian economic theory has been rather unsuccessfully applied (at least by the Federal Reserve) to this modern bear market crisis.

The Fed's failure, while surprising to almost everyone including the Fed itself, is not surprising to those aware of the work of economists Milton Freedman and Anna Schwartz. In the 1950s Friedman and Schwartz began collecting data on monetary variables from 1867 to 1960, publishing their findings in 1963 in what is considered a landmark explanation of what happened to cause the Great Depression. In their book, A Monetary History of the United States, their data basically refuted the Keynesian explanation for the depression using empirically collected evidence. Their book did not blame the Federal Reserve for the 1929 stock market crash but it squarely laid blame on the Fed for a series of disastrous post crash policies that made what should have been a rather mild recession into the worst depression in American history.

It was Friedman who first suggested that a monetary authority can escape or minimize the effects of poor monetary liquidity by bypassing financial intermediaries (banks) and giving money directly to consumers or businesses. He called it "helicopter money" creating the image of a central banker dropping money directly onto businesses and consumers in times of need. Ben Bernanke, in a famous 2002 speech, (where he claimed deflation couldn't happen in America) referred positively to Friedman's concept as a viable one for fighting deflation. That speech is where he got the nickname "Helicopter Ben".

But when the time came that the Fed's helicopters were actually employed, the Federal Reserve and the U.S. Treasury, instead of 'bypassing the financial intermediaries', gave the money directly to the banks and financial institutions leading to accusations of bailing out their friends instead of the consumers. By law, financial institutions can not simply give money to needy businesses and consumers. They have a fiduciary responsibility to their stakeholders to require borrowers to be of worthy credit. Consequently, the people who really need the money will never get it because the banks and financial institutions can not legally give it to them and are therefore legally protected to hoard the monies for themselves... certainly not what Friedman had in mind.

Next installment - It is inevitable that the U.S. economy and its currency will collapse catastrophically if the Austrians are correct in their assessment of our future economic situation. If they are right, then for the Fed to survive the economic debaucle it has created, it will need to quickly accomplish two goals. One, defeat the Austrians whose free-market, sound money ideas are gaining footholds in the minds of an increasingly enlightened public. Two, gain enough control of the political system in the United States so that no laws forcing transparency of its secret operations can be passed by the U.S. Congress. We will take a closer look at the Austrians and analyze both of these assertions when next we meet. Stay tuned.

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