Eric Harrington – A Bold Plan for Economic Recovery
Over the past weeks I have been consistently criticizing the financial free-for-all, I mean Bailout, and my feeling that it is absolutely the wrong approach. So my conservative readers (obviously with stock market investments shriveling like raisins in the sun) have replied “It’s easy to criticize WHEN YOU DON’T HAVE A PLAN!” And they have a point. But in truth I do have a plan or at least a compilation of ‘plans’. Now, I am no Harvard economist like Paul Krugman, or a Yale MBA like George W. Bush, but these are the steps I see as necessary to truly bring our economy back to not only stability, but fruition.
Please note: this is NOT the FINAL solution. The Debt Money system (watch the film ‘Zeitgiest’ and ‘Zeitgeist – Addendum’ in the Conspirealty TeleVision Page) of the United States and the world is fundamentally flawed and promotes economic slavery, but that is a BIG fix that will take literally an international upheaval to correct. Maybe it’s coming, but I am of the opinion that all great change comes in baby steps… Here are my baby steps to fix the economy right now and for the near future..
Stock Market Casino
As some may have read from my post Free Market – The great American Casino, I describe how the volatility of the stock market has created a whole new subculture of Money players, or people who make money off of the volatility of the market. This volatility or instability makes it much like a Casino, for while big scores can be made, in the long run the house always wins. And in this case, the house is the huge international companies with lots of cash and international diversification, who swoop in after every crash and buy the fruits of American ingenuity for pennies on the dollar. The economists like to call this process “Market Consolidation” but it is basically Economic Imperialism and is a legal way to rob the middle class of their hard won assets.
The solution to the problem of market volatility is quite simple and can be achieved with the swipe of a pen, without a dime spent, and in fact will provide increased revenues for the US:
1) Recreate (we had one once) a Securities Turnover Excise Tax on all investments with an amount that is small enough (say .5%–the UK’s similar tax is .25 while Taiwan’s is .3) to not stifle investors, but large enough to make day trading and short term speculation un-profitable. (see Thom Hartman’s terrific post for more details)
2) Abolish Short Selling and other market unfriendly speculation.
3) Drastically limit or eliminate Leveraged investments. People should NOT be able to invest money THEY DON’T HAVE.
4) Institute an incremental Stock sale requirement. When someone wants to sell their stock, they can only sell 10% per day. If gun purchasers need a cool-off time of a week to ward off dangerous emotional decisions, why not investors?
5) Require ALL investment brokers to issue a simple to understand analysis of a company’s financials prior to a stock purchase, similar to the loan fair reporting standards. Include a standard calculated Rating number (that can’t be fudged) that gives a clear perspective of what the company stock SHOULD be worth based on the financials, not emotion and perception.
6) Extend the hold period for early stage investors (Venture Capitalists etc..) in public stock offerings, and allow liquidation of only 25% after 5 years, and 10% per year there after.
These steps will create a stable, pro-growth market that serves the small long-term investor instead of the speculators and huge corporate predators. It will allow for market slow downs but not crashes.
The fix here is again fairly simple:
1) Temporarily suspend the fair value accounting standards for financial institutions, to limit bank’s artificial write-downs on the value of their mortgage related securities. (See Pete DeFazio’s D-OR (love those Oregonians) post)
2) Recreate the 1982 Net Worth Certificate Program to loan capital to banks when they need it, but paying interest back to the taxpayers when they are paid back. This program worked in 1982, why not now?
3) Require a minimum of 10% verified cash down-payment for all mortgages and full income disclosure. Allow 10% of total mortgages held to have relaxed requirements to help 1st time and low-income home buyers ala Fannie Mae and Freddie Mac.
4) Abolish packaging of loans in securities, and derivitives. Force the loan originator to hold the loan and share the risk for the term of the loan.
5) Increase FDIC insurance limits to $250K or even $500K to eliminate runs on banks.
6) Convert to a general transaction based tax system and charge taxes specifically for use of services as proscribed in the constitution. (See Platform for Threat-free Taxation system)
Now these changes should dramatically improve the financial climate of the US in the short term. But the elephant in the room is our debt. The publicized national debt is estimated to have exceeded the 10 Trillion threshold but in reality, there are outstanding US obligations that exceed 50 TRILLION dollars. That’s $166,000.00 per PERSON. This cannot be corrected by business as usual no matter how stable. The US is slowly being dominated in the marketplace by the emerging third world countries with their cheap labor and lax or non-existent environmental and labor laws. This arrangement helps international companies and investors, but not the American Middle class– the ones who actually create the real tangible wealth in this country, i.e. the ingenuity, invention, and innovation, that will keep us competitive – and without a dramatic change, we will have to become a Third world country to compete.
The solution is fairly simple here as well, but this one costs money and it costs BIG. Fortunately we have a very wealthy economic twin by different mothers by the name of China, and they will fund some of it for us. It is suggested that the Chinese have us over a barrel holding trillions in American debt, but in fact the reverse is true. The ONLY reason they are buying our debt is because they need us (their primary international customer for Chinese goods) to keep buying the Chinese crap to keep their economic growth at the astronomical rate they have maintained for over 40 years. If their economy suffers, the communists at the top know their days are numbered. So they spend their truckloads of cash on keeping us afloat, likely knowing all too well they will never get it back. But those days are numbered as China is rapidly acquiring new markets in the burgeoning new super-power of South America, and soon they will cut us loose. But for now, we have THEM over a barrel, and we should use our advantage NOW.
By ‘use it’, I mean make one more big cash bailout– although in this case rescue actually is a better term, and this time make it for us the American PEOPLE. We need to IMMEDIATELY spend roughly 2 TRILLION dollars or roughly double that spent on Iraq or the current bailout, on a new, FDR “New Deal” type infrastructure plan. But NOT for roads, (roads are passé with the never ending escalation of oil prices that comes with China’s increasing demand) or bridges (also passé) as Mr. Obama suggests, but for Renewable Power Generation. It is absolutely essential that we convert our entire infrastructure over to clean renewable sources immediately for several reasons.
1) Global warming – We are the largest emitter of CO2 and we must set the example. The problem is Global and immediate, and isn’t just about higher temperatures, but impending water shortages that could starve and ultimately kill Millions throughout Asia. (see my post Financial Bailout- The Last Great Mistake) The only answer for water starved Asia? Desalinization, and desalinization requires HUGE amounts of power and they will drive oil prices sky high in their quest for enough energy to keep their country alive. Also our CO2 production is threatening the entire planet. (Read a review of Plan B 3.0)
2) Remaining competitive – With most of the actual production of US corporations going to cheap overseas economies, the US desperately needs an edge to keep us competitive in the 21st century or we will simply decay to a third world lifestyle. Our lifestyle up till now has been artificially supported by our military intervention and economic imperialism. But no longer — the international industrialists are abandoning America for profit under the guise of “Competitiveness.” The real problem is that American Industry ONLY caters to stock prices, at the sacrifice of the quality of life in America over all. We need to give our country a real infrastructure edge to make them want to be here.
3) Preserving our ‘Spacious’ lifestyle – With increasing oil prices (and trust me they are not going down EVER long term) the American suburbs are doomed. Unless we implement this plan, it will become prohibitively expensive to live outside of major metropolitan areas where delivery of basic resources can be accomplished with little oil. The prices of housing in the cities will skyrocket and many people who used to live in a 3 bedroom house, will be forced to live a small 3 bedroom apartment (See Japan). But this can be avoided. While the age of 50 mile commutes is soon to be over, there is a solution that could offset a real collapse.
So what should be done? I propose the following:
1) Alternative Energy Co-investment – Create a Co-investment program that would provide enough capital (roughly 2 Trillion dollars to cover 60-70% of the costs) for the implementation of Alternative Energy Generation making it highly profitable for private industry. Private investment groups would become Power companies by installing solar or wind generation systems on commercial properties and selling the power back to them at substantial savings from current Carbon based generation. As Trillions were invested, the costs of systems would drop dramatically, and innovation would improve the efficiencies and durability.
Such a substantially subsidized industry would be a veritable windfall (no pun intended) and would attract major domestic and foreign investment. And best of all it would create MILLIONS of new, millennium-tech jobs…
2) Convert to electric transportation – Over 50% of Americans travel is in trips under 40 miles. All of this travel could be accomplished by inexpensive all electric cars. Longer trips could be done with gas hybrid and later hydrogen hybrid systems. Maglev trains (Watch Zeitgeist – Addendum) must replace Commercial Airline travel completely and will use roughly 10% of the energy and with NO emissions and at speeds competitive with commercial jets and potentially much faster. But they require big energy to build and we need to use the still relatively cheap oil (yes it is still very cheap compared to all other energy sources) that is available to do it. And again, hundreds of thousands of new jobs.
3) Co-invest in the creation of industrial waste treatment plants to handle high tech waste. One of the reasons many high-tech production facilities have gone off shore isn’t because of labor costs. It’s because of the cost of remediating the waste materials. Industrial waste remediation is a growing expense and companies would rather just move to places without regulation. By providing publically financed remediation facilities, many companies would be able to stay in America. Such plants could also offer advanced and extensive commercial recycling operations.
4) Create major incentives and infrastructure for companies to move to telecommuting – Major investments in communications and information security would be necessary to allow significant portions of the work force to work from home. The savings in labor expense, buildings, commuting gasoline, general stress, and CO2 production would be tremendous.
5) Last but not least, a dramatic increase in financial assistance for those pursueing secondary educations particularly in technology and science. Our young minds are our greatest competitve edge without question.
Well I was trying to keep this short and I have already failed miserably, so I will end by saying that these fixes must happen immediately. Our window for actually being able to implement a major infrastructure changeover is rapidly closing for our credit is all but used up, and the era of cheap oil industrialization is over. But we can still get it done if we act NOW…