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If I said… “Hey, dude, what happened 100 years ago today?”…. about 4 out of every 25,000 of  you, would know and answer back with a question…. “Are you sure you are not talking about 100 years yesterday?”    You would be officially right of course…  June 28th…. But I would be “politically” right, I guess, (struggling for an adjective to describe the rightness I would be..).

To fill in the rest of the 24,996 of you…. yesterday marked the 100th anniversary of the shooting of the Archduke of Ferdnand,,,,

“Who the fvck is that?”  say 24,996 people all at once….  (People in Oklahoma hear that rumble as another frack quake..)

Since reality is 100% of reality, I’ll take that on….

In 1914… there were 5 nations that mattered.  One of the nations that didn’t matter back then would have been the United States; others: China,  and Japan… The 5 nations that were relevant back then actually included Russia, believe it or not…. with Germany, France, Britain, and Austria-Hungary rounding out the full 5… This last nation, I always think of as a joke, and say so sometimes… (“What?  Austria’s Hungry?  What a joke!”)   That is because I tend to ignorant of anything southeast of Germany… I’m an American, you know…

Austria Hungary was called the Dual Kingdom…  Can you guess why?  One was Austria, the other was Hungary.   Austria ran Austria/ Hungary ran Hungary, and a couple of times a year they got together to coordinate…  Those episodes resembled today’s divided Congress.  Neither side would accept the provisions of the other….  and stalemate meant each could go their own way with little interference from the other…   However on security matters they were conjoined…  Austria had the military; a standing army of 900,000..  and Hungary bordered Russia from where any major attack would come…

To the south the ancient empire of the Ottoman Turks was decaying from its inside.  Recognizing that most of the Empire’s attention had to be focused inside of Turkey proper, all 5 relevant  nations begin eyeing the Balkans and Dardanelles and sizing each other up…  Significantly, Russia was very nervous over the Dardanelles because the wrong person owning that property, could bottle her navy inside the Black Sea…

Austria had, in just a very few years before, annexed Bosnia, roughly the same size as it is today, by marching in and calling it their own… Serbia, had wanted the same, but was too small to do anything about it and no one came to their aid…. But people inside of Bosnia who had wanted Serbia to control it, had financial resources made available to help make that happen…

The archduke was the next in line to the Austrian emperor, who himself was getting quite old.  Both the archduke and emperor were primarily pacifists who didn’t believe that war was profitable.  But like any nation, within their cabinet as well as in charge of their military, they had well-spoken ministers who argued that a “shock and awe” first strike was always the best option…

Unfortunately for the world, it was one of those two pacifists who was assassinated 100 years ago today….  along with his wife… killed by what today would be considered a terrorist cell of about 5 people total… working independently…  meeting in secret. etc. etc.  They botched their previous attempts and by today’s standards were almost comical, until they finally got lucky on number 3…

Some people got the word 100 years yesterday… June 28th.  Who these were, were mostly heads of state, many of whom were on summer vacation so telegrams had to jump all over the country, and in some places be put on skiffs and rushed out to meet the heads of states floating in the Baltic….   No one at first predicted what this assassination would preclude… Those who firmly believed in war,  thought it precluded war.  However most thought that was too unreasonable and assumed everyone would of course get mad first, then settle down and make certain arrangements and life would eventually go on as normal…..  After all, worse crises had been settled such….

There were two small problems… One involved the signing of treaties, some secret and some not, that tied promises of reaction to any military invasions of one of the signatories… The other, was the Victorian mode of character which dictated that one dutifully filled out one’s signed obligations, regardless if they had been originally made in error…  One filled out ones obligations and damned the torpedoes.

In efforts to preserve a peaceful Europe, (which had been effective for 40+ years, and probably a world record at that time)…. alliances had been made loosely between Britain, France, and Russia…  With the two extremes  of East and West appearing united, this left vulnerable those who could get crunched in the middle, so they formed an alliance too:  Germany and Austria-Hungary….

But no one ever thought they’d be used.  Ever! Europe was one chummy place.  The heads of England, Germany, Russia were all related, and met for state weddings and funerals regularly.  Vienna was one of the playful destinations in Europe, and socialites from all 5 nations frequented there every summer…  It and Paris vied for the Art & Music capitols of Europe…  Tension was not like during our Cold War at all. Europe was very open and much like international relations today, where one could travel freely, where all the big powers meet occasionally and decided how to deal with each of little tweaks and interruptions….

So 100 years ago today,  people woke up to this assassination story ….  Today (yesterday) is the real beginning of the count-down-clock because for the first time in European history,  the populations inside the nations were to have a profound impact on the upcoming events to come… (even though the structures of the governments were very closed to all but the upper crust of society…) Public opinion primarily through the growth of large metropolitan newspapers, had become an influence that had to be “reckoned with”.

For Austria Hungary was hot!  You can imagine if Joe Biden was killed.  Though some here love him, and some here make fun of him, … were he assassinated, this entire nation would demand retribution….   So Serbia got blamed….   In Austria-Hungary, with one pacifist dead, and the other now solo against a cabinet calling for an invasion, the call to go to war with Serbia came quickly…

Serbia appealed to their soul mate Russia.  There had always been a deep Slavic bond between the two nations… and the head of Russia, when confronted with the fact that his people would rebel against him if he ignored his brother nation’s plea, said Russia would attack Serbia’s attacker if Serbia were attacked by Austria Hungary…   Military philosophy at this time dwelt solely on the benefit of a quick attack.  All armies were trained to attack, not defend.  Simply put, the philosophy was that if you attacked quick enough, you always won…  And all nations suffered from this delusion, though reality had showed it certainly hadn’t worked in all the proxy wars (Boer, Sudan, Balkans)….   As Austria began to mobilize her troops towards Belgrade, Serbia’s capital, Russia began mobilization to send it’s troops to the  Austria-Hungarian border….

Austria Hungary had the second largest standing army in Europe (Russia had the largest due to its gigantic size relative to European nations)  but even still, Austria-Hungary could not both defend its border, and attack/occupy Serbia simultaneously… Therefore they appealed to Kaiser Wilhelm to promise an attack on Russia if Russia attacked The Dual Kingdom…  Previous handshakes had sealed the deal long before, and the Kaiser promised he would….

Now this caused a dilemma within Germany’s army.  Their plan had long called for first attacking France … France was the more dangerous of the two, so it made great sense to defeat France first and then attack Russia, instead of attacking Russia and have a fit France barge in through the back door…   No one had ever considered the option that perhaps a minor limited war with Russia could happen first without French involvement.  But plans were plans and the detail in them was so meticulous that there was really no option to opt-out and siphon off troops to the Russian Border…. (all the trains would be tied up and busy carrying soldiers to the West) until after France and fallen and signed their surrender…  The surprise Russian build-up now meant it was more imperitive than ever that France surrender before Russia could mobilize to march into Prussia proper….

France was insistent that it would not make the first move.  They tried to dissuade Russia to stand down, but Russia’s people felt a personal insult  (and a rational fear of internal overthrow) if Serbia fell, so that didn’t happen.  The French who were the villains of the last European War( the Franco-Prussian War that ended in 1870… a quick war, which France had lost, and been paying repatriation upon for a long time), were very squeamish about being  considered the aggressor again, and so they mobilized defensive forces and  fortified their common border with Germany, just in case.

Britain’s Prime Ministe firmly believed in making alliances but also keeping them secret so both his allies and enemies would be left guessing…  He was so good at it, that the Kaiser was convinced upon invasion, that Britain would definitely not interfere and that Paris would fall quickly as had long been planned (across twenty years)….

The accidental player in this scenario, turned out to be the tiny little neutral nation of Belgium……   With no real army and a reputation for being a peaceful take-what-comes population, its future role had been dismissed by Germany, France and Britain…   Germany simply assumed that it being a neutral nation, it would take the gentlemanly course and let the German’s pass through unopposed to attack France where it lacked defenses.  Britain and France had assumed due to its neutrality, Belgium would be off limits for any German advance….

As troop deployments began to show the German’s hand,  four nations raced to shore up that area….  Belgium said it would not allow German passage and began to mobilize  its defense….  (This infuriated the Kaiser who apoplectically raged how dare that tiny nation not fall in line with Germany’s plans; who did they think they were?)… which shows how reality and clear thinking often had little voice in governments at that time…. Assumptions made by whomever was annointed head of state, tended to always carry the heavier weight.

With everything ready and the impetus on the Axis (Germany/Austria)  to strike quickly and the Entente (Britain, France, Russia) to wait and only fight defensively, all pieces were in place for what everyone thought, would be a short little war… Most analysts assumed everyone lacked resources or the will to fight in order for it to carry over 2 months…  “By Christmas all the troops would be home” each nation’s people were promised….

What impressed me most upon looking back from a 100 years’ perspective and I guess it is true with any war, was how life went on normally for 99.999% of the world’s population while this crises brewed… Future weddings were planned, meetings between future adversaries were scheduled,  treaties and statements of purpose continued to be signed between the future enemies… At any point, if anyone powerful enough had said, “STOP!  let’s talk about it”, (as is done so often today it now seems like an extra step), this war would have been prevented… If Russia had not mobilized, this would have remained a local conflict, taking place only on Serbian hillside  whose outcome have been very quickly settled.  Or if Britain had been forthright, stating that it would come to France’s aid and attack German interests, then the cost of war would have risen to where the Kaiser would have backed down from attacking France first and would have made a deal with Russia…  If Germany had not been locked so deep into its own plans, so that once the order was given to mobilize it started everything which precipitated the next step automatically like a line of dominoes. …. if any of these occurred prior to the  First World War , history would be far different today;  The First World War would not have happened…..

The suddenness is simply mind boggling.  How could Europe go from congeniality and peace and prosperity and hope, to an all-out brawl.  Like a bar fight that erupts instantly leaving lifelong scars?

It would be like today… if we opened our paper and read the news that one of Putin’s emissaries was assassinated in Sevastopol, Crimea….   And…  by this upcoming Saturday (July 5th), Russia had asked China  if it will help fight and China agrees. .. and exactly two and a half weeks later on July 23, Putin’s Russia surprises the world with an ultimatum to Ukraine designed to be so harsh that the Ukraines cannot possibly accept it.  The world holds its breath, and the 5 day deadline passes, and Russia declares war on the Ukraine….  July 28th, exactly on month from today!

NATO mobilizes, beginning with their declaration… .   All NATO units are then put on full reserve and active units are then moved into Turkey, Uzbekistan, Poland, and Finland, positioned along their borders with Russia….

On the last day of this month, July, China calls upon the NATO to stop its mobilization…. NATO says no; it is mobilizing solely against Russia  and for only the protection of the Ukraine people….  Then on August 1st, China declares war on NATO, including the US….

The very next day, August 2nd, China bloodlessly rushes in to occupy North Korea  … China then demands of  South Korea to let them use its seaports to facilitate their landing craft invasion against Japan.  They promise that after hostilities are over, all Korea will be free and promise it can under them become one nation again…

The very next day, on August 3rd, China declares that the state of war now exists between it and Japan, Taiwan, North Vietnam, and the Philippines, and moves their navy into blockade those ports…  All those nations plea for help from the US and the US promises it…..  South Korea to the Chinese surprise, announces despite overwhelming odds,  it will NOT grant permission for China to enter peacefully, NOR allow Chinese military hardware into its country….  A brief testing skirmish occurs on the 53 parallel between US and Chinese troops becoming the first engagement of the war….  On this same day unknown to almost everyone, China and most Latin America nations sign a secret treaty…. relating strictly with the US and stating that if China is attacked, Latin America will side with China in order to protect their massive investments there….

The very next day, August 4th.  China swiftly invades South Korea and quickly over runs Seoul and commandeers all the ports on the peninsula.   China’s massive merchant marine of commercial cargo ships out of nowhere suddenly gather outside all of  Korea’s ports.   The US protests. calling for China to leave Korea. China flatly says it won’t.   The US declares war on China…. The Chinese merchant marine begins loading up the 2 million troops and lands them on the remote undefended section of north-western Japan…  Within 7 days,  2 million Chinese are moving towards Tokyo….

The very next day, August 5th… Latin America surprises all and closes shuts down all commerce with the US, closing it’s borders… All US firms have their property confiscated to be nationalized and the Panama Canal is closed  to all but Latin American and Chinese traffic…

The very next day, August 6th… Putin’s Russia declares war on the US and NATO….. and for what it is worth, the Ukraine declares war on China….

The very next day, August 7th…  The first US troops from Okinawa, land in Japan and rush north to engage the advancing Chinese… Battles ensue and the Chinese throughout the next week, till the 13th, win all of them…

The very next day: August 8th…  NATO and the US finally declare war on Russia…

For the next week, all eyes focus on China’s advance to Tokyo.  Then one week later, August 15th… Ukraine counter attacks a Russian outpost on its border, and regains control of the entire border area… The Russians run back across the border.  It will be the first allied victory of the war…

Two days later… August 17th… The US and NATO forces invade Russia proper upward from Uzbeckistan, and upwards from Turkey through Sochi, and eastward into Belarus from Poland, and towards Leningrad from Finland….

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4 years later, 2018, the armistice will be signed, leaving  37 million souls dead…. 93 million wounded for life…. and 34 million people simply missing… never heard from again….  And the borders between most of the big players will primarily remain just as they are… ( Hopefully all parties refrained from nuclear weapons….. or citizen causalities would be uncountable.)   Unsettled emotional antagonisms will continue to fester, and won’t be settled until after the next great war beginning in 2039…..

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This is how life changing that event was 100 years ago…. Literally it came out of nowhere…..  Just take a moment to consider the breathtaking speed with how fast this occurred and stretch your imagination wide enough to take in us being in a full fledged real world war equivalent to WWI in less than one month and 5 days from today, as you read this and the News Journal and fret over Greg Lavelle… ….. Maybe this could happen today, maybe not.   You and I need to make sure the “not” wins out…. were such a crises to occur.

The lessons of yesteryear are so lost on us today, as I’m afraid they are on every new generation.  I only share interest because of a personal bond with a relative, who was called to France in 1918.  So unlike most today, this history to me is something very real.   Upon my passing, there will then be no one to remind us of how stupidity can sometimes take over an ruin a world of good…  But for the rest of you, 100 years ago today you would be just reading about this life-changing first step in the paper…. (yawn) another assassination in Crimea… possibly thinking  “awwww… how sad”…  but never dreaming it would within four years time, cause you to lose your entire family in the same amount of time that briefly passes between two World Cups….

Life should never be taken for granted. Lesson.  Always be vigilant against war. Always.

 

 

 

 

 

 

 

 

 

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To really understand Christmas, you need to be in the Third World, hot climate, where Christianity doesn’t exist. Life is just a normal day. Their religion’s calling out prayer, markets bustling as always, and you are working too…. Somewhere during that day, if you are an American, it hits you. Wow, its the 25th.. This is Christmas.

And so it was. No one knew who Jesus was. The Bible says that in his own way, God announced it. But if you were living in Bethlehem roughly 2000 years ago, it would be like what you see here before you today. Life as normal. Just like every other day…

And that is the beauty of Christmas. In your town, today, the child of the second coming could be born. You would never know. And that offers a clue to how God works… He works things in his own way….

And somehow, it works out…. Against all odds of the dice being thrown in multiple odds, it always lands the right way when it is needed…

After all your calls home, you report for duty in the hospital where you work, and from a room a newborn cries out. The question hits you. What if in two thousand years, everyone shall know his name? At first you scoff, he’s just another mid-eastern baby. But then, so was Jesus…..

It happened just like this… THAT is the mystery of Christmas…


Right click to open full image… Pictograph Courtesy of Viral..

So, can someone tell me again, why we shouldn’t tax the rich, and instead, balance the budget on the backs of everyone else?…….

I seem to be missing that little detail where that all makes sense……

Almost all Americans will agree… There is one thing America does best…. Nothing….

Well, actually in this case, that might be a good thing…. For in Congress’s naturally tendency to play it both ways all the time, whenever they enacted legislation, the also set in stone a date for it to expire…. So if Congress does nothing, the automatic policies go into effect and we have a $7.1 trillion deficit busting package signed, sealed, delivered right to Americans… almost as efficiently as an order off Ebay….

Hats off to Cassandra for pulling out this nugget….. Here is the source, and here is the savings….

● $3.3 trillion from letting temporary income and estate tax cuts enacted in 2001, 2003, 2009, and 2010 expire on scheduled at the end of 2012 (presuming Congress also lets relief from the Alternative Minimum Tax expire, as noted below);

● $0.8 trillion from allowing other temporary tax cuts (the “extenders” that Congress has regularly extended on a “temporary” basis) expire on scheduled;

● $0.3 trillion from letting cuts in Medicare physician reimbursements scheduled under current law (required under the Medicare Sustainable Growth Rate formula enacted in 1997, but which have been postponed since 2003) take effect;

● $0.7 trillion from letting the temporary increase in the exemption amount under the Alternative Minimum Tax expire, thereby returning the exemption to the level in effect in 2001;

● $1.2 trillion from letting the sequestration of spending required if the Joint Committee does not produce $1.2 trillion in deficit reduction take effect; and

● $0.9 trillion in lower interest payments on the debt as a result of the deficit reduction achieved from not extending these current policies.

How does a zero balanced deficit in ten years sound?

If Congress does absolutely nothing, something they’re good at, we’ll have it….

Republican David had this to say on Delaware Liberal the other day…..

It may not be my ideal but the Democrats have finally bought in hook, line, and sinker to the intellectual and moral superiority of the Republican narative. Tax cuts are good and spending is bad. Debt is dangerous. Government should be scaled back. Once they try to operate from our narrative, but refuse to act accordingly, they lose.

Democrats cannot offer new programs because of the deficit. They can’t raise taxes because of the economy. They will demoralize their base. The business community will choose the real Republicans over the fake ones and they will hurt in the financial category. Their social agenda will write off huge portions of the country and they will lose VA, NC, MO, OH, and FL and put at risk WI, MI, and the upper midwest. Even PA is in play.

It is hard to win when on one side you abandon your base and the other side you do not draw people from the otherside. We win not because of the brillance of our side but because Democrats have boxed themselves in. You cannot say those Republicans are dangerous and adopt their premise. If I seem smug, it is because for the first time, I think the odds of a total sweep have shifted in our favor.

And now, a retro line back to 150 years ago……….

“Before I draw nearer to that stone to which you point,” said Scrooge, “answer me one question. Are these the shadows of the things that Will be, or are they shadows of things that May be, only?”

Still the Ghost pointed downward to the grave by which it stood.

Men’s courses will foreshadow certain ends, to which, if persevered in, they must lead,” said Scrooge. “But if the courses be departed from, the ends will change. Say it is thus with what you show me!”

And in an epiphany in which he understands the changes that the visits of the three spirits have wrought in him, Scrooge exclaims:

“I am not the man I was. I will not be the man I must have been but for this intercourse. Why show me this, if I am past all hope!……Oh, tell me I may sponge away the writing on this stone!”

America’s hope lies in you…… Still watching from the sidelines? …….

“If the course be departed from, the ends will change.”

Jump Starting America: The kavipsean Plan for Fixing the Economy

Chapter 1: Putting Money In The Hands Of Purchasers.

Chapter 2: Pay Some Type Of Compensation To Those Out Of Work.

Chapter 3: Rebuilding Our Infrastructure, (Green Energy Included).

Chapter 4: Re-establish Some Type Of Manufacturing Base Back Inside This Country.

Chapter 5: Open Access To Short Term Credit

Chapter 6: The Painful, Necessary Long Term Solutions

Chapter 7: Paying Down The National Debt

Chapter 8: Controlling Entitlements: Social Security and Medicare

Chapter 9: Bright Spots And A Tax Check To Spend

Chapter 10: The Silver Bullet: “A 3 Month Mortgage Holiday”

Chapter 11: Business Loans… Back on Line….

Chapter 12: The Stimulus Package

Chapter 13: Bankruptcy For America

Chapter 14: Moving Onward Past The Synopsis

Methodology

He said build something; I said with what?— kavips

Some of you remember the “giant sucking sound”?

Ross Perot, Reform Party candidate for the US President in 1992, coined the term during one debate (4:45) to represent how dropping protective tariffs for NAFTA… would suck our manufacturing jobs to undeveloped nations south of our border…

Today we see evidence that it was true. Although China, India, and Southeast Asia are contenders for stealing our manufacturing base as well.

There is no real industrial manufacturing base left in the United States, which is one of the reasons that bailing out our car manufacturers has become a national emergency. At the exact moment when we need a manufacturing base to prime the pump of our economy, it is missing. Gone. It is not there.

The Free Trade agreements do well for our nation’s consumers; they bode ill for those working at high wages. I remember buying the cheapest shovel I could find for $25 dollars back in ’92. Last summer the same brand was still on the shelf for $25 dollars, but the one I bought cost me $4. I figured I could buy 6 replacements before breaking even…. My choice gave me $21 dollars to spend on other items…. Free Trade works for American consumers…

But for someone costing more than $1 a day, for someone with pension costs, health insurance costs, and vacation costs, free trade is something to fear. For the sucking sound of job loss continues up until the point occurs where the cost of doing business here, drops down to meet the climbing rate of the cost of doing business elsewhere……. At $18 dollars an hour here, and $1 dollar an hour there, when both settle out around $9 the flow of jobs is abated.

But you can’t force a company to not make money. If it gets so bad that they can’t stay in business, they have every reason to shut their doors…. Even if WE were able to close off the imports of all products made more cheaply elsewhere than domestically…… we would be paying much more than necessary for those products we bought. Most of us would choose to go without that unnecessary expense, before paying what we considered exorbitantly high prices.

Furthermore, closing down imports would turn us into a trade island. Other nation’s $4 shovels would continue to be snapped up on the world market, while we sat on a huge inventory of $25 dollar ones…. As soon as our nation’s market was saturated, its one shovel plant would have to close, (provided no bailout was forthcoming to keep it solvent and afloat….) They could not sell any more of what they had….

I mentioned in a previous chapter that it was lower labor costs which were responsible for propelling Germany, Japan, and South Korea out of their economic paralysis following the ends of wars. Writing on the wall says that for us to survive… we probably will have to do the same.

Just having health care removed from corporate responsibility, could significantly impact how this is done. If the burden of providing huge sums for medical insurance was suddenly lifted off of business’ shoulders, its cost of doing business in the US would drop significantly without touching the amount paid out in wages.

So what would it take to get manufacturing jobs to come back to the United States of America.

Bottom line….the entire process from raw materials to final delivery, needs to be cheaper here ….. than somewhere else…

That cheapness doesn’t mean we are forced to sacrifice wages… After all, wages are the fuel that drives our economy. After all, wages are what buys those goods and services which America makes. After all large scale cutting-back on wages, cuts back on the money supply that buys what we produce…. Cutting wages is the final resort: our very last line of defense. It is in other areas where we need to look if we wish to get our nation to bypass this economic bump in the road…

One different and novel method would be to shorten the accounting rule on how one claims depreciation. One of the reasons that trading in mortgage securities was so profitable and lucrative was because the full cost of buying those securities was immediately deducted from the purchased amount creating an expense that matched the asset. However upon buying a piece of equipment under depreciation, a large amount of capital is required up front… and is not costed out except in little pieces over a very long time.

Building a business is capital intensive. Buying securities … was not. Considering the global shortage of capital right now, changing the rules for even a short time, could be considered to be sort of a tax break. If banks were lending (those loans guaranteed by the Federal Reserve), and…. purchases made this year could be written off totally… meaning no taxes would be paid on that amount…. this would be the goldmine year for a business to expand, buy, update, renovate, modernize, and become more efficient. And if each one of every businesses started ordering materials, …..well, you see what that would do to our economy…….

Since a business will be carrying a lot of expenditures this year, the chances are that their tax payment will be minimal. That does not do well for our nation’s Treasury… we sorely need that money… but, if one waits long enough… upon the following year, all those new pieces of equipment will have been completely depreciated, so that when the rules return to normal, the profit below the depreciation line is higher than it would have been had we left everything alone! And the Fed’s taxable portion of that amount, would be higher in its dollar amount, even though its marginal rate did not change. The same boost in more taxable dollars, would occur each year up until that time when the equipment would have finished its cycle of depreciation. Basically for the Federal treasury, it is the same principle as having a business skip a monthly mortgage payment, by agreeing to pay a token amount more each month after that grace period to achieve balance.

Another concept is to change our definition of what constitutes manufacturing… The old days are gone, thanks to technology. If one looks at our assembly lines today, one does not see a myriad of men running around at breakneck speed to keep up with the assembly line… Instead one sees (in the words of Robert Reich) “a lot of numerically- controlled machine tools and robots, and a few technicians sitting behind computer consoles. The old-style assembly line factory worker is going the way of the bank teller, telephone operator, and service-station attendant.”

“But there’s a different way to think about manufacturing, and here we’re doing much better. Take a close look at any manufactured item — a pen, a cup, a car, a dress — and see who’s actually earning what portion of its purchase price. Much of it goes to Americans, even if the factory that made it is located in Asia. More and more of any item’s value is going to researchers and designers, engineers, entrepreneurs, marketers, advertisers, distributors, bankers, lawyers, wholesalers, retailers. None of them is considered a manufacturing worker, but they are the future of manufacturing. ” a different way to think about manufacturing, and here we’re doing much better.”

“The loss of blue-collar manufacturing jobs is a huge problem for America. That’s because many young people with only high school degrees no longer have access to middle-class wages. But that problem, which has been growing for years, won’t be solved by an Assistant Secretary for Manufacturing or any get- tough trade policy. To solve it we need good schools, ready access to technical skills and community colleges, and companies that continuously retrain and upgrade their workforce.” Robert Reich 2003.

Robots are here to stay. What is needed to maintain them, is an educated workforce that can design them, program them, maintain them, market them, and sell them…. Education puts higher costing jobs back on the family’s table. If America is to compete, then we need to be the ones making the most technologically advanced pieces of machinery that are bought by technicians from other countries… We don’t want our workers competing for $1 an hour jobs, yet we need those products which are cheaply made so we don’t have to spend prodigious amounts of our income on simple necessities. We waste a lot of time in today’s schools. Currently Delaware schools lose 1 month every year talking up Black History month. We need to start asking hard questions on how that helps America compete against someone from India or China? It doesn’t? One example of where our priorities are wrong, and we know it, but we do it anyway.

If one asks Americans whether we need more manufacturing, the choice is overwhelming…. In one unscientific poll, 99.13% said they would be willing to pay more for a product if it was made in America. The unscientific nature of that poll is suggested by the lack of determination of just “how much” those Americans would be willing to pay over the cost of a foreign import…. As in that true story about Lowe’s $25 dollar shovel… are they willing to pay 600% more? If you remember … this one shopper wasn’t… He figured the could get six shovels for the price of one, and bet that his shovel would hold up well against those odds. (He was right too, by the way).

Another traditional way to protect local manufacturing jobs, would be to forcefully devalue our currency. If we artificially keep our currency at a lower rate per exchange with other nations as does China, our products, even if costing the same to produce, will be cheaper to buy… Again this would be a short term solution, since as our economy began to grow due to an increase of factory orders, our currency would gain value and then rise.

The downside is that it would make traveling through Europe expensive, but that would be a small price to pay for not having the Great Depression at our doorstep. A more significant negative would be that the global economy would prefer to peg their prices upon the Euro, and the once almighty America dollar, would fall quickly out of favor…

Speaking of traveling, the high fuel prices paid last summer point to another element as to why manufacturers would want to return to America. Keep in mind that many manufacturing jobs went offshore for cheaper labor. The downside of doing so is that one must pay to transport the product back here to market. With the influx of $4.33 dollars for a gallon of gas, the cost of getting foreign products into stores, climbed rather significantly. At some point it will be cheaper to again build in America and pay the American rate, instead of building cheaply offshore and then giving back the savings to those responsible for transporting ones product back to our shores to sell…. If a fuel tax is levied as has been discussed, it could turn America into a land of new manufacturing opportunities. The less miles traveled… the lower the cost that would be incurred.

In the same vein, the imposition of Carbon taxes would bring manufacturing back to America. If America imposes Carbon taxes and China does not, then all those Chinese products being imported are subject to carbon tax tariffs making them too expensive and unmarketable on these shores. Carbon taxes especially when coupled with high energy costs, make manufacturing closer to home, the cheaper alternative.

Cheap energy can really bring American manufacturing back onto these shores. That energy would be wind at 2.3 cents per kilowatt/hour, being made with free fuel turning the rotors of 7MW generators perched on tall towers dotted across America. Pushing forward with subsidies to initiate the building large wind farms, would be advantageous in not only putting workers to work on building the towers as well as installing the rotors, but also in lowering our energy costs so that any company moving here would still do better than it’s competitor languishing oversees.

Some say our brand new baby boom may bring jobs back to America. In 2007 America broke its record for the most births per year. That last record had held from 1957. With a workforce growing by 4,300,000 persons per year, and China’s one baby policy still in effect, our labor pool may appear more attractive 18 years into the future. This may not sound as far fetched as one would initially think. Most business decisions are sketched out over a fifteen year time frame… which means in most better run companies today, some employee has already started the research that will ultimately become the foundation of the plan… The idea is to get companies to reinvest here… not elsewhere. Grand trends that happen in our future can be a valid part of convincing someone to open an American manufacturing plant….

Likewise tougher and better American regulation can return manufacturing back to America. That may not make sense to anyone who has not done business in third world environments, where capriciousness blows with the wind. One of the classic blunders invested in the third world is the huge oil investment made in the Niger delta, now rendered cost prohibitive by the actions of local guerrillas. Another occurred last winter, when toy manufactures suffered significant losses because toys contained lead. And it was last year when animal enthusiasts bought everything American so that their pets would not keel over dead? In an arena where paying off a string of corrupt politicians is considered just a cost of doing business, the uncertainty of knowing just how long those politicians will last, has firms thinking again about the stability of doing business on American shores… RegalWare. Inc has brought back all of its plastic manufacturing back to Kewaskum, Wisconsin. As their CEO Jeffery Reigle states:

About three years ago, the company, with the guidance of consultants TBM, started evaluating its operations to become more efficient. A particular concern was how long it was taking to deliver cookware to customers. The overseas manufacturers emerged as a key bottleneck. Since the company brought production home earlier this year, delivery times to one major customer, Reigle says, have gone from 30 to 60 days to as little as 24 to 48 hours.

Even if Regal Ware’s prices are 8% to 10% higher than buying direct from China, the its cash flow from Regal Ware products has increased 10% because the seller can turn over inventory more quickly.

Other pressures that motivate a manufacturer (or outsourced work) to move their manufacturing back from overseas: 1) bad experience with foreign vendors, partners, suppliers, local government, employees, 2) updated product portfolios and the pursuit of short lead-time or customization, 3) good utilization of automation, 4) overheated competition and lack of patient protection from improving foreign competitors, and 5) finding the made-in-USA label sells really well overseas. Not to mention liability issues where shoddy work, or tainted raw materials can upon being discovered, totally disrupt normal business flow.

The overall rising costs in China, from wages to taxes and to utilities, are definitely in the spotlight. American businesses may have realized through the years, from observing work transfer first to Mexico and then to Asia, that no country will be low-cost forever. Low cost is not everything. Consistency and trust in the quality also considerations a consumer factors in when making a purchasing decision. Tightening our quality standards, our environmental regulations, and stressing our attention to detail, will have the effect of increasing the value of the label “Made in America” That label is already the one preferred by wealthy Chinese who like us, have care and concerns for their children as well… Knowing how their countrymen sometimes operate, they prefer American.

So far missing in this analysis is all mention of imposing tariffs on imports for any reason. Pat Buchanan has been making the argument to stem free trade for years.

To date one of the more interesting aspects, is his distinction between how foreign trade works with VAT taxes and against corporate taxes… VAT (Value Added Tax) are used by almost every civilized state other than us. American’s have held off because of the huge populist sentiment that permeates their politics. (VAT’s being a consumer tax, are regressive). The VAT works on this principal: at each step of a manufacturing process, just the value added … is taxed. In America, when one buys a bag of flour on sale at $2 dollars a pound, and assuming a 6% sales tax, one pays 12 cents additional in sales tax. In Europe, Japan, and other industrialized nations, each step is taxed and the consumer pays the final price posted, Over there the fuel, seed, and fertilizer used in the growing of the wheat is taxed. When harvested, the silo operator taxes the farmer, who in turn has the taxes paid on his raw materials, deducted from the amount he is called to pay. The regional distributor taxes the silo operator, who in turn deducts the amount of tax he paid to receive each farmers wheat. The mill operator tacks on his charge which is paid for by the regional distributor, and when selling the product to a distributor, he credits the amount he paid… and so it goes right up to the last person to sell you the bag of flour.. Each entity buys the product with the tax attached, attaches their tax and gets credit for the tax they paid when they purchased their raw material. That way, each entity is taxed only on the value they added to the product.

Since just my telling of it appears so complicated, one can get an idea of how keeping track of every step in the process, must run tax agencies bonkers. Instead of trimming the IRS, we would be growing it by leaps and bounds. Which is why in frugal America… VAT’s have not yet been moved out of any committee….

The bright side is that this amount replaces corporate income taxes: zero corporate income tax. The downer is that we would be paying $2.12 for our flour …. before a state even had a chance to tack on their 6% sales tax. Together, we would be paying a 12.36% tax on all products. Your $150 grocery bill would cost $168.54. Whereas that seems like a lot to Delaware citizens who are used to no sales tax, to those in other states already immune to a 6% sales tax, the difference would be only an additional $9.54 dollars.. The average American would be paying roughly per month, four times that amount on groceries or $38.16 for the privilege of doing away with corporate income taxes…

But… and here is the argument when applied to free trade….

Foreign cars arriving here, have their portion of the VAT’s deducted by their home corporations. We, without a VAT, must pay the full amount of the VAT expected in foreign countries, when we drop our cars off there. Roughly a 15% charge is added to the purchase price of any American car in a VAT country, while they receive a 15% credit for selling cars in ours… It is hard for American cars to compete as imports.

Perhaps we could recognize this constraint being placed on what is now, … the taxpayer’s car company, and use this opportunity to initiate a VAT solely on the car manufacturing sector of our economy to see whether or not its principal holds up under actual international trade. The worst case scenario is that American cars may cost us 15% more, and the best case is that US manufacturing plants go into full production due to the overseas high demand of affordable “American quality” vehicles….

Finally, we come to the heavy hitter part of the intellectual argument. If we are talking about changing import taxes, what about tariffs?

Tariffs limit free trade. How? Tariffs make imports more expensive, thereby making domestically produced products cheaper by comparison. Tariffs become a means of keeping prices higher for all Americans thereby enabling American companies to remain solvent as well as increase their profit margins. Tariffs once imposed, cause retaliatory tariffs against us which shut out our imports from entering new markets, causing plant shutdowns and layoffs.

Protectionist tariffs are often blamed for the increase in the severity of the Great Depression which occurred after the passage of the Smoot Hawley Act of 1930. Intended to protect America businesses and force up prices by limiting cheaper foreign competition, those companies protected went under, because no one bought any of their higher priced goods. Imports plunged 66% from US$4.4 billion (1929) to US$1.5 billion (1933), and exports fell 61% from US$5.4 billion to US$2.1 billion, both drops far more than the 50% fall in the GDP.

It did little to protect America jobs. Unemployment was at 7.8% in 1930 when the Smoot-Hawley tariff was passed, but it jumped to 16.3% in 1931, 24.9% in 1932, and 25.1% in 1933.

Today, one cannot help but to invoke the image of Ronald Reagan when discussing “Free Trade”. Above anyone, he is the person responsible for bringing that term into modern consciousness. However, even the harbinger of free trade was quick to slap tariff duties on “motorcycles over 7 liters” to protect Harley Davidson from going under.

The Cato Foundation was quick to criticize this action. In a policy piece titled “Taking America For A Ride” they were quick to point out the economic hardship facing America. Concluding that:

“the new tariff will unambiguously prove to be a setback for the American economy. ITC specialists predict that the tariff hike will raise prices 10 percent the first year. Other officials believe that the price increase might be as high as 17 percent. The ITC estimated an increase of 12.5 percent for the second year.

They went on to predict that 20,000 less motorcycles would be sold the first two years, with an increase of 8,000 to 10,000 Harley’s being sold over the same period…

But they were wrong. Initially the goal was to jump the current tariff of 4.4 percent to 49.4 percent and keep it there for a year; lower the rate to 39.4 percent in the second year, to 24.4 percent in the third year, to 19.4 percent in the fourth year, and to 14.4 percent in the fifth year. After the fifth year the tariff is to return to 4.4 percent. During the amendment process lines were added that allowed numbers of BMW’s, Italian, and English manufacturers to slip through unaffected. The Japanese were given the same amount as were the other foreign bikes in without tariffs, but… due to the size of their market share, a large percentage of their imports were affected.

Bottom line: Harley Davidson is still around today. They would not have been had this tariff not been imposed. Harley Davidson took this time to retool, refinance, and modernize their brand, becoming a better company for it. Able to make better motorcycles, their market share increased to make them enough profit allowing them to call for the removal of the tariff a year earlier than planned.

Furthermore, solely because of the tariff, two Japanese companies, Honda and Kawasaki increased production at their American plants since they were not affected by the tariffs, in turn providing additional work for American workers.

So why was one tariff a success and the other an abysmal failure? The difference is scale. The Harley Davidson tariff was limited to Japanese manufacturers who used their protected high prices at home to subsidize dumping into the America market, which ultimately drove down motorcycle prices so low that Harley Davidson was unable to keep up. The tariff was limited to five years, and designed with a specific purpose: equalize the playing field. It was not done to protect American workers (they were few in number); it was not done to keep a lazy and insolvent company afloat forever; it was done to allow the free market to work. Now, every time a “hog” pulls alongside of you, you can thank Ronald Reagan.

Protectionism ( the imposition of trade barriers) has its purpose. With today’s economy one should expect to see and hear labor unions clamoring for more and more “protection”. It’s a plea that is hard to resist. After all, we could all be in the same boat some day, and certainly would appreciate someone bailing out our leaky vessel…. How can one “not” protect American workers?

The answer to that question is this: that we, the rank and file Americans, have to realize that protectionism is a form of war. As we recently found out, when a nation goes to war, it had better be sure beforehand that it will end up on the winning side. For once a war is started, the costs are always higher then expected. And if the enemy has a method (not in your calculations) of outmaneuvering you,… you never get the chance to say… “oh…never mind… let’s call this off and pretend like it never happened…” For once you hurt someone… they will do their darnedest to hurt you back.

The Smoot Hawley Act hurt a lot of people indiscriminately. The Harley Davidson tariff did so with precision. It’s the difference between accomplishing the same goal with either an all out war, or with a deniable, dark-ops special operation. One must take into account, and not be surprised, by the retaliatory measures which be taken against us.

As an aside, it is worth noting that an interesting observation came from the removal of the Smoot Hawley Tariff as WWII came into closure. The world emphatically sought assurances that no Smoot Hawley Act would ever be passed again. This bitter hate led to the Bretton Woods Agreement, in 1944, a great lessening of global tariffs starting in December 1945, and the General Agreement on Tariffs and Trade, in the 1950s. However it is interesting to note that special provisions were made for national security. Due to globalization in the 20’s and 30’s, Britain and France had ceded their watch making to Germany and Switzerland. Later they discovered that the lack of a watch industry was a great handicap in building defense equipment during the war. Both nations determined never to be without a watch industry again and placed embargoes on watch imports after WW II. (Lewis E. Lloyd, Tariffs: The Case For Protection, 1955, p. 137-139). The US is in somewhat the same danger today.

When dealing with protectionism, it is important to first sift through all the facts to see who is benefiting from whom. When George Bush protected the American Steel Industry in 2003, business went to China costing our nation 200,000 American manufacturing jobs…. Yet when one goes shopping for jeans, and sees articles from the Philippines, Malaysia, and made in America all at the same price, it puts a hole in the argument that free trade lowers prices for all Americans. Obviously instead, it increases profits for those who move their business to cheap labor areas off shore, then selling it back to us at the rate we are used to paying… Again that is why one must be leery of free trade pronouncements being made by large multinational corporations. They may benefit someone else, and not America.

Protectionism helps the American worker as Ross Perot adequately explained. The downside is that protectionism hurts the American consumer as Al Gore showed Ross Perot in their 1993 debate over NAFTA on the Larry King show. Al presented Ross with a large picture of Smoot and Hawley shaking hands in a congratulatory ceremony. As with anything tainted with protectionism, we need to weigh the benefits against the risks. Sometimes the risk may be acceptable. But it is unconscionable for us to look at protectionism in a vacuum…. as one affecting just American workers. The proper yardstick to measure protectionism’s effectiveness would be to measure its impact upon the total amount of money circulating throughout our system. Will protectionism grow the amount of money… or diminish it. Each case by case analysis needs to take that single measurement into consideration, otherwise we will be making a great mistake, sort of like Smoot and Hawley did during Hoover’s administration.

Bottom line of this entire post:

Raising tariffs, like war, is a very unpredictable method of furthering a nation’s wealth. Therefore other methods to increase our manufacturing base should be tried first.

Recognizing the severe nature of our economic situation, any policy change if enacted should be given expiration dates. A handout is helpful; continuous welfare is not.

To return American manufacturing jobs back to Americans, the entire process of acquiring raw materials to delivering the finished product, needs to be cheaper here in America, than it would be with foreign workers halfway around the globe. The best avenue for providing that benefit while getting the biggest bang for the buck, is to temporarily change our depreciation laws so that capital purchases can be written off entirely over one year. As opposed to the much talked about stimulus package amounting to no more than a national welfare check; this little change would have a lasting economic effect with less long term cost than a corporate tax cut. The second short term policy would be to use a budget reducing gasoline tax, to artificially raise fuel rates, making it expensive for foreign manufactures to ship here. Doing so would reward those businesses that built near their markets.

Both stimulate our economy without directly affecting retaliatory measures by our trading partners. Those two, one politically acceptable and one not, should be our first choice of action.

Longer term solutions involve 1) educating most of our youth to be technically savvy, 2) moving forward with a Carbon Tax benefiting technologically advanced societies over cheap working developing nations, and 3) developing cheap energy sources (2.3 cents per kilowatt/hour) for American manufacturing, would all keep American jobs in America…

What we do not want to do… is believe that we are an island and impose trade restrictions that isolate and collapse us further, instead of growing our way out of our current crises. We do want to lower all other costs so manufactures will want to set up shop here, on these shores, despite our higher wage levels……

If we could owe this debt to ourselves instead of others, we’d be rich from all the compounded interest we’d be paying back… — kavips

There is nothing that a strong dose of morphine can’t cure…. at least to the person receiving the injection ….. Damn… No legs…. Ahhh… no problem…..

Obviously the long term plan is the one we need to tackle first, so short term fixes like the one above, are seen as steps in the right direction, and not random neural contractions found during a soon-to-be-eaten chicken’s last minute.

Long term:

1) We need to spend within our means, both personally and as a nation.

2) We need to pay down the deficit, reducing our national interest payment.

3) We need to control our spending on entitlements: Social Security and Medicare.

4) We need a better trade balance with our trading partners.

5) We will need more cash in order to do all of the above.

We have been lulled into believing that we can spend money that we do not have… Hell we’ve been doing it for 8 years now… We did it for twelve years before that, starting with Ronald Reagan. And it was working fine up until late September…. Why can’t we keep on the same path?

As we have now found out, there is a small problem with taking out loans…. It’s called paying them back. To pay back a loan, some of the money that you are currently making needs to go back to those who invested in you at the beginning. Wait you say… why can’t we get more people to invest in us, and use that money to pay off those who invested in us earlier?

It’s been tried. And someone Madoff (made off) with a lot of other people’s money by doing just that. But eventually somewhere along the line, one cannot find enough new people to pay off the old, and crash, the system collapses.. Sort of like our Social Security system today ….

So if we have a loan, we have to pay it back?

Yes, that seems to work best. Although often loans can be forgiven after it becomes clear that they will never be repaid, and that further attempts to repay will collapse the entire pyramid where everyone loses everything… In those cases, sharing the risk by writing off some of the debts, allows one to begin making money again at some point in the future…..

But choosing to default, or not paying off the loans, also makes it impossible to get loan money later when you really need it.

So how much do we owe?

That depends on how you want to count it.. When you get a loan, there is a price tag attached that is called interest. One pays back the loan plus the interest to the party that fronted the money. After all, that is why people lend money in the first place… to make more of it… So if you bought a loan for $100,000 dollars, you could pay $100,000 the next day and be done.. That is one way of counting how much you owe. But, over time, that house you are buying is going to cost you 2.15 times its amount, because of compounded interest. So saying that you owe $215,000 is also correct….

The current U.S. obligations as of September 30th..( before any of the bailouts were passed by Congress) stood at 56 Trillion dollars. Every man, women, and child now owes $184,000 dollars. If we pay that back over 10 years, that is $18,400 per year of our income going just to the Federal government. Which means that if your family is struggling on $60,000 a year right now, that you had better start planning on how you can survive on $41,600 over the next ten years.

It may not be as bad as it seems. If free health-care becomes a reality, a yearly out of pocket savings of $7800 is a step in the right direction. Now we have just $10,600 to make up…. And if we cancel further investments into our 401 K for ten years, depending on how much you put in yearly, that accounts for somewhere between another $2000 to $10,000 dollars of which you will soon be out of pocket.. One had better hope that Social Security is still there for you when you retire…..

This is not something we have options on. This is a reality that must happen. Of course we can choose to pay it out over a longer time frame and survive with less money leaving our household per year, but over the span of a long time, we will ultimately pay a lot more… It seems better to knock out the debt, learn to live within our means, and once that debt is paid, prosper again after hopefully having learned our lesson over not paying as you go…..

That means that any new money pouring in from the “tax to the max”, must all be designated toward paying down the debt, and not be split off to other much needed projects. That is a hard choice to say no to… but once all debt is gone, less money will be required to be collected to fund those projects on a pay as you go basis. Our tax burden will be much less, giving us more money to spend, yet we will have ample money to fund the projects being built. The economy will grow in that scenario.

Of course this $184,000 is a shock figure designed to wake America up with a dose of reality. A bulk of the repayment will be paid back in the form of corporate taxes… starting as high as 50% and climbing perhaps to 90%. But the American consumer eventually also pays for those in the higher cost of each item he buys, since that payment will be embedded in the price he pays at the cash register.

The corporate rates mentioned above, were the same levels applied to corporate incomes after WWII, which continued and were not relaxed until under John F Kennedy’s administration. Over this time frame, corporations will have to settle for just being in business. After all,… that is what most small businesses do; they are grateful each day they open their doors. There is going to be a new reality that permeates the American corporate business world.

The essence of our nation’s problem is that we have lived off a credit card; one that will be paid by our children and grandchildren. And it has not just been our government that has done so.. Private debt, corporate debt, as well as government debt have all elevated our spending beyond where it should naturally be. This has been going on for so long that most investors thought that this debt/GDP ratio could continue rising indefinitely without ever overwhelming the economy and corporate earnings. In fact, the way it kept growing, we also started wondering if this could also go on forever. The total debt in round numbers is almost $52 trillion. This was not much changed this year due to the credit freeze, but rose $4.3 trillion in 2007, which was over 5 times the rise in GDP. The composition of the debt is $25 trillion in Corporate debt-both financial and non financial, $14 trillion in Household debt, and $13 trillion of Government debt-Federal and State & Local) and the GDP is $14.4 trillion. These debt composition numbers are rough estimates but all would agree that we currently owe 3.6 times our entire GDP….

This debt cycle really started in the early 1980’s when the U.S. savings rate peaked at over 10% and continued downward until this year when it troughed at a negative savings rate. People once again spent everything they made and then some last year, pushing the U.S. personal savings rate to the lowest level since the Great Depression more than seven decades ago.

As anyone who has been on the wrong side of debt can tell you, once the savings rate goes negative, it becomes a lot harder on the next round to change it. For then we have to pay charges on that amount which we spent beyond our means… So not only do we have to cut back to live within our means, but we need to further cut back in order to live within our means AND pay back those pesky charges…..

Under compounded interest any wait to pay back the cost is expensive; sooner is better than later. If we borrow a dollar and are charged with 3% interest, we pay back that dollar and the three cents of interest we owe… If we wait one year and are charged 3% on the dollar-and-three-cents we owed but did not pay back, we now owe a dollar and six cents. That may not sound like much, but when it comes to big numbers, that 3% on our national debt of 10.6 Trillion, becomes $318 billion dollars. One chuckles when Republicans find themselves up in arms over bailouts costing these amounts, but yet when the same figure is just interest, it is just considered the price we pay for living “la-de-da” beyond our means… At 3%, want to know how much interest we will pay on just that 3% interest itself, if we skip a year? $9.8 billion just to pay the interest, on the interest, that we are too broke to pay… “Deficits don’t matter” said Dick Cheney. When no one has money… where do we find that additional $9.8 billion to cough up?

But debt can be eradicated. Here is proof from a fellow posting his strategy.. It is a personal story to be sure, but it shows the proper mental attitude that must be created if one is about to embark on changing his lifestyle for the better….

Just the numbers of consumer debt are startling…. U.S. Household debt soared from 4.2 Trillion in 1990 (the first Bush president) to $13 trillion in 2008. During this period, the average American household dramatically increased its home mortgage debt, from almost $2.5 trillion in 1990 to nearly $10.5 trillion today. Similarly, consumer “revolving” or credit card debt quadrupled from $239 billion (B) to about $950B today. Moreover, the growth of U.S. credit card debt is substantially under-reported by the official U.S. Federal Reserve statistics, due to the tremendous volume of mortgage refinancings that were transacted between 2001 and 2005. At least $350B in consumer credit card debt was paid off through mortgage refinancings, home equity loans, and cash proceeds from the sale of real estate over this five- year period. This is consistent with the findings of Alan Greenspan and James Kennedy, who report that equity extraction was used to repay an average of about $50 billion of mortgage consumer debt between 1991 to 2005, about 3% of the outstanding balance of that debt at the beginning of the year.” Significantly, it averaged only $25.2B per year prior to 2001 (link to Manning’s work)

So how do we responsibly pay down our national consumer debt? Judging from the data provided above, it cannot be done. But a reasonable approach would be to isolate consumer debt into three categories: a) Chapter 7 Bankruptcy; b) substantial debt relief in the range of 60 to 80 percent; and c) repayment of the full balance over a 5 year credit management plan. The first category (a) is for those right on the edge; we know bankruptcy is inevitable, so we get it done and over so that they can start their ten years of rebuilding their credit as soon as possible. The second category (b), is a win win for both lenders and debtors. Just enough of their debt is forgiven allowing them to be debt free in 3 years.. The third category (c) is solvent enough to pay all their debts over a 5 year period on a managed plan. As is done with any bankruptcy, applicants for these programs are mean tested to determine into which category they fall … We can dream that all debts may someday be repaid. That is unrealistic. A practical approach moves forward, determining which debts are solvent and which are not, expeditiously processing those that are not, and in just a short time, all debt is secured and we know what our economy has to work with. No more surprises.

You can determine how your family finances can be resolved by using this calculator provided by the same Manning mentioned above.. I recommend that if you have unsecured debt, you play around with the credit card repayment section, seeing the differences that occur if you contributed your coffee fund, you movie allowance, your HBO bill towards paying down your credit card debt. Those little totals often taken for granted, can make years of a difference in pulling yourself out of debt.

We often hear pontificating towards our governments, local, state, and federal, end with the admonishment that since American consumers live within their means…. why can’t the federal government do so as well…

That is not exactly true. We do a lousy job compared to our parents.

They and their parents bought savings bonds… Which brings us back full circle to our best idea of paying down our national debt… What if a percentage of everyone’s pay check went toward buying themselves savings bonds. Unlike a tax, at the end of maturation, they get the entire bond returned to them with nominal interest tacked on.

Kind of like our parents and grandparents implemented for us growing up. A forced savings plan… “Oh but I want to spend it….” “No, we’re putting it in savings”… With this plan, like a tax, the government has access to increased funds, but unlike a tax, it pays us back. This has three things going for it.

One it helps us save. The American saving’s rate was negative last year. That means individuals spent more than they had… Obviously when the time comes to pay it back, it will not be good for the economy.

Two it provides a intermediate source of funding for our government. Instead of cutting taxes, this plan augments taxes… Since the money must be paid back upon maturation, the government needs to get a rate of return higher than what it is paying back..

Three. Using this money to decrease the Federal deficit, is a win win for all. Essentially we are using this program to buy up our own stock. It will be us who have control over our nation’s destiny, and not…. it’s foreign creditors…. Applying the entire amount bought in this fashion, to paying down our National Debt, will give us lower taxes in the future. The legislation initiating this program could earmark all revenue from these mandatory bought savings bonds, go towards decreasing our National Debt.

It will take great leadership to change our behavior. The bully pulpit is needed now more than ever. Since the 1980’s, we have funded our economy by borrowing. Anyone can be given an unlimited credit card and then tell us he is living well. For a long time this nation has placed the acquisition of corporate profits as the prime gauge rating the welfare of our nation. Now, with acknowledgment that it will take 4 years of GDP to pay off all debt, private, corporate, and governmental, we understand our predicament.

Simply put: to survive, we need to acquire more money than we spend and use that extra amount to buy down debt. Once our debt is down, we can use that extra amount to spend again, exploding our economy through the roof of expectations.

Saying a lot is one thing; planning it and executing it is another. — kavips

Here is the “full court press” we recommend…

We recommend dividing our economic gurus into three teams….

Team One’s responsibility is to jump start our economy. In athletic parlance, it is called “winning today’s game” It’s goal is three consecutive quarters showing real GDP growth, coupled with three quarters all showing an increase in the level of personal wealth attained by each of the five quintiles. It then disbands.

The second team’s responsibility is to tackle our longer term problems of our deficit spending, and our ballooning entitlements… In athletic parlance, this is called getting ready for the playoffs…..

The third team’s goal is to focus on how we will one day exit our current, direct and necessary governmental intervention into the economy at some point in our not so distant future…. In athletic parlance, this is called building a team for next year….

These three teams must get started immediately, for successful policy on all of these outreaches is critical if we are to again become an healthy economy. We expect to find that each teams answers may contradict the other teams in both theory and philosophy. What works for today, may not work for tomorrow. If so, we need to recognize that possibility now and lay plans for any upcoming change in the future. But the sad truth is this. Right now, we do not have any plans sitting on the shelf, which we can pull down, and right our keeled-over economy. We need some contingency plans in writing, emanating from experts and experienced thinkers, and not from politicians whose responsibility is to jerk their knees to the mood of the moment.

Again, those teams can be summarized as follows: the “today” team, the “next game” team, and the “next season’s” team……

Here is what we recommend for the first all star team to pursue.

Surprisingly we recommend that we find the proper way to give each mortgage holder a three month holiday from paying their mortgage, one giant loan extension. This break allows them to get their finances in order… There is no way any government can match a stimulus impact nearing the size of this amount. If this is utilized, within three months, America’s economy will have pulled itself out of its depression. We found the proper Executive Order outlining such, if issued by the President, could be enough to put this policy quickly in effect… We also found that it worked best if the benefits were not watered down by any type of means testing, but were given to all homeowners irregardless of their income level… It would be fair to all: a pass for three months on paying one’s primary mortgage.

Secondly, we recommend that a way be found to force lending. We discovered that it was the process of “calling” in one’s loans, that made it difficult for banks to lend, both during the Great Depression and today… We recommend that some agreement be made among principal parties, so that when a loan is ever called, the banks coughing up the funds, have a long span of time in which to acquire that capital… perhaps up to a year…. Removing all fear that a bank may go under, could be accomplished rather quickly by eradicating it’s uncertainty that at a moment’s notice, it might have to give all of it’s money over to another bank…. This could be effectively done by issuing one more Executive Order directed towards the Federal Reserve, which states that banks had up to a year to turn over their assets if their loans were ever called in by another bank…. and that the bank requiring the loan to be returned, could go ahead and place that incoming amount on its books as an asset, since the money was surely on its way…

Thirdly, we recommend direct projects be funded by the government for the sole reason of putting people back to work, and in doing so, inject cash directly into the system… However we recommend some qualifications be instituted on what was built. Building a bridge to nowhere does little good except during the time of the actual construction. Building something like new schools, on the other hand, continues various economic benefits long after the building is finished. New teachers and new administrative personnel are needed for many years thereafter… The best bet, and what should be the primary factor in deciding which of the projects clamoring to be built will get the nod, is to insist that whatever is built, will be something that creates new jobs that last long time after the project has been completed…

Number four: we recommend that unemployment be fully funded… We also recommend that all those receiving unemployment should be required to work in some capacity, on their own time as a volunteer. Currently our unemployed payments are hinged on the proof of “searching” for work… We felt that with no jobs being created by the private sector at this time, that this clause of the Unemployment Act would be a waste of effort; we felt it was far better to help a child read, pick up neighborhood litter, or volunteer to assist a classroom in a neighboring school, and then issue proof of doing so to claim a check, as opposed to filling out applications that would not be seen by employers definitely not hiring…… Therefore we recommend that unemployment be tied to giving service back to one’s community. If unemployment ever reaches 25%, with one out of four out of work as it was briefly during the Great Depression, keeping those unemployed busy, would be good for them as well as for our nation.

Number 5: We found the stimulus plan in the form of a rebate check, went to pay down existing debt and did little to stimulate the economy. We found that tax breaks for corporations were equally a waste of resources and actually hurt the economy far more than helping it.. A better approach we found, one which was historically documented throughout the Eisenhower and Clinton years, was to increase the rates that corporations and the wealthy were required to pay in taxes..and then give them an option out for not doing so. We found the economic growth caused by doing this, was rapid. Higher taxes caused the consistent reporting of lower profits mostly because companies opt to reinvest their money into themselves instead of forking it over to the IRS.. This did two things: this dropped the volume of money leaving the private sector, and secondly it caused increased hiring. Having every business reinvest its own money back into itself, pumps far faster money into research, development, growth, new products, new jobs, than anything the Federal Government could mandate directly with their limited resources. We strongly recommend that corporate rates be quickly increased, coupled with sunset restrictions that are guaranteed to lower the high rates when certain agreed-to economic standards have been reached… for instance 3 consecutive terms of 3% GDP growth in a row… The higher rates would then automatically expire.

Sixth. We encourage the ability of businesses and homeowners to completely and fully write off capital investment within the year that it was purchased. This results in lower taxes being levied upon those businesses during the first year of this policy change, when they sorely need it; and slightly increases the subsequent year’s taxes over the span of several years,… when they don’t… Whereas this can negatively impact the government’s revenues during its first year of implementation, it will serve to increase them during the boom times to follow, assisting us in our long term effort to diminish our national debt.

Seventh. We recommend that toxic assets not be bought by the federal government, but instead have their value guaranteed by the Federal Reserve for a fee. The guarantee simply states that the Fed would ante up the difference if needed, should the asset fall and eventually not meet its purchased value.. These toxic assets would then be marketable, and could then be picked up and held by investors, thereby again infusing banks with capital. It would serve us well by not tying down billions of the Federal government’s money. It would be similar to how we responded to our largest problem during the Great Depression. Back then, we didn’t nationalize the banks; we guaranteed the deposits within those banks… Guarantees, as it turned out, that we rarely had to pay.

Eight. The same type of guarantees should be applied to the process of overloaning. The local bank makes a construction loan, knowing that it is insured by the fed from any defaults. The stipulation is that it uses its own money in its own neighborhood, knowing that were serious default to occur, that the Federal Reserve would guarantee its return… The Federal guarantee allows a bank to loan more money than it has. The bank gets its return as payments on those loans begin pouring in. After the banks regain solid footing, these special loans could be sunsetted… Following this plan, puts capital directly where it is needed: in the hands of those who will rebuild our infrastructure.

Nine. The imposition of a Carbon tax acts like an old fashioned tariff to cheap imports. Although this impacts the cost we may pay for some items we use as a consumer, it makes the option of building in America while still paying higher wages, cheaper than shipping overseas to a sweatshop and importing those products back. Likewise the inflated fuel cost suffered last summer, had the golden lining of making building within the United States and shipping locally, appear more competitive than building offshore and transporting products back. For businesses to stay in this country, their entire cost. from top to bottom, must be cheaper than it is elsewhere. We need to lower all other costs for business just so we can keep our wages higher. For those wages are what drives our economy… The Carbon Tax, if elected by us and opted out by our competitors, can balance our two costs and help us to keep businesses inside this country.

Ten. Removing health care responsibility from being primarily funded by businesses, would assist in cutting labor costs low enough to make our country more competitive in global markets. A good portion of our nation’s economic health, lies in the number of manufacturing jobs it has at its disposal. Dropping costs vis a vis our competitors, would make investing in America again, far cheaper than moving into a plant offshore.

Eleven: Moving our nation rapidly to a source of energy far cheaper than the current costs of carbon fuels, would assist in dropping our businesses’ costs lower than those of our global competitors. It takes a wealthy country to do make such an investment in infrastructure, and as a nation, we the people of the United States of America, have the competitive edge over all other countries to do so. Wind and Solar have free fuel costs. That means applying efforts to use new technology to decrease capital costs, will over time, guarantee a significant drop in the cost of all energy being used within our borders. It’s cost needs to drop low enough to make the option of opening a plant in the US, equal to or cheaper than that of building one overseas.

Twelve. We need to begin planning for our new baby boom’s investment. 2007 was the first year we broke the 1957 record of new births. Increasing population is one of just two ways to increase an economy. That process was started during the nights of 2006 and early 2007. We need to prepare for impact in 6 years, 12 years, and 18 years as that baby boom bubble aims for our educational system… We need to be ready with new schools, new teachers, as well as eventually, more new jobs.

Thirteen. Returning to better and tougher product regulation can also increase the worth of products made in America. Already we see signs that “Made In America” is a quality statement among the wealthy Chinese… Beforehand, we were guilty of making the assumption that quality would remain consistent, no matter from which locality a product was made. Last year with pets dying, poisonous lead found in children’s toys, and other international quandaries, we finally understand how again returning to a tighter system of regulating ourselves, can make our products appear trustworthy and thereby remain more competitive, despite the higher wages we are paying to our nation’s hard working employees.

Fourteen. We must not panic ourselves into protectionism. It was tried and failed; the Smoot Hawley Act aggravated if not instigated the 1930s Great Depression. Protectionism can work on a micro scale, case by case, as it did for Harley Davidson during the Reagan years. But using protectionist philosophy as a broad swipe, drastically drops our nation’s exports, causing the GDP to collapse, thereby raising unemployment to levels currently undreamed of. Protectionism on a broad scale is very bad for our economy.

We now move on with the agenda of that second team: the one responsible for tomorrow’s game. This team’s goal will be to again remake America solvent. The second team must focus on these following problems. As often happens in the financial sector, having two separate teams work independently, could be likened to any corporation which had one team working with the court on its immediate bankruptcy proceedings, and another team working with its creditors on how to alleviate its long term problems with long term solutions.

We must be ready before our depression ends, to jump into phase 2 and prepare for the method on how we wean ourselves off of debt. It is not just the National Debt we need to fix. We also need to tackle our personal, corporate, state and local government’s propensity to spend money we don’t yet have… As a society, we want more! And as consumers we are just not savvy enough to understand that buying now, will cost us more later…. “Oh, I can afford that low payment”, has become our excuse to put off our fiduciary responsibilities…..

We recommend that the compounded power of interest needs to be re-explained to our population; it needs to come from a political figure they trust. We were shocked to find that most citizens of our nation are relatively ignorant about the math behind money, The “bully pulpit”, we think should be used to explain how some debt for houses and building businesses is good, but that too much for personal consumption is not in the best interests of our nation…The accumulation of more and more debt, needs to be framed alongside the political perspective that in doing so … we cripple our country. “By increasing your personal debt, you are not only causing hurt to yourself, but you are eating away the foundation upon which stands this once great nation”….

We recommend the following three step process be used to deal with the personal debt of private citizens. We recommend first dividing the population up into these three classifications of personal debt… 1) Those who can never catch up. 2) Those who can catch up part way, and 3) those who are still living within their means.

For the first group we recommend biting the bullet and processing that whole group through bankruptcy as expeditiously as possible… Let them begin from scratch, and let’s write off their bad debt at once. It makes for a bad month, or two, and it severely impacts one quarter. The alternative to quick action, is to ignore the inevitable by muddling through this malaise, and continuing to have this sickness interfere with our economy for many quarters to come.

For the second group, we recommend the recalculation of their debt according to this formula which is different from whatever loan agreements they originally signed. Recognizing that much of their debt is currently at interest rates well over 25%, and a majority of their debts are carrying over one third of their balance in superfluous late fees, we recommend that each of those debts receive a new recalculation based on the amount of principal they borrowed, plus an average, fair interest rate over the life of the loan. We recommend 8 %, considering the Federal Rate is now close to 0%. We recommend the removal of late fees entirely, and should a payment not be forthcoming by it’s due date, that only, … the accumulated interest be added to the balance. (That was the original plan of the United State’s credit card industry up until 1997). We acknowledge that those still dreaming of a 50% rate of return off some accounts may scream that they are being taken. We simply argue in return that those who have been taken by them all these years, are finally receiving their fair break. 8% interest is still higher than any loss, which in today’s economic world is a very real alternative.

For those who have been consistent in their payments despite these hard times, ie the third group, we recommend that all of past credit records be wiped out entirely and that their credit scores commence immediately at 800, the perfect score. We feel that this would give immense incentive to all those of the top echelon for continuing to pay in a timely fashion, especially as they see others who can’t pay around them receive huge breaks. We recommend that anyone paying off pre 2009 debts, be given a huge positive impact in the formula used for all future calculations of a customer’s credit worthiness.

Although we emphatically agree that some personal debt is necessary, we also acknowledge that there are limits to the debt that we have left. For that reason we further recommend the passage of legislation either on a Federal level or by individual states to again set a high limit on the amount which can be made from borrowing. That decision is a societal one, not a corporate one. Society should reclaim its responsibility to monitor and set its usury guidelines; it’s a responsibility that should have never been delegated to those profiteering from the interest.

Lastly, to assist in personal savings, we recommend the restitution of buying U. S. Savings bonds. We further recommend the use of a mandatory deduction from each person’s payroll for US. Savings bonds at whatever low interest rate shall be determined. This will understandably have the effect of a new tax at first, drawing more money out from the private sector of the economy. But over time it will return that money back and provide all of us the benefit of lower future taxes, especially if it is used as a tool or way to restructure our gigantic, impending national debt. Opposite of a tax, under this plan each lender WILL get a full return of his money back at some future date. Under this plan, our nation is borrowing from each and every one of it’s citizens; it’s citizens in turn are investing in their nation, and accumulating personal savings while doing so. The explicit difference between this new plan and Social Security, is that in this case, all of the amount that an individual actually does put in, will one day be returned to either himself or his dependents. Unlike Social Security which was “supposed” to grow independently within a trust fund arrangement that was completely outside of the regular budget of discretionary governmental spending, this mandatory savings fund is designed to 1) increase the national amount of savings being done by all Americans, by 2) supplementing the national budget by explicitly invested that yearly amount into the paying off of our nation’s obligations. We recommend that this program should have written into its passage, that the yearly amount collected from its citizens, be at least, equal to that segment of debt decreased from our nation’s obligation. In other words, all the money goes to pay down the national debt. It can be used for no other reason.

At first glance this appears as one more obligation. Even if we eliminate a good portion of our National Debt, we will still have large sums sucked out of America’s pockets just to reimburse our thirst for retirement income and medical care of the poor and elderly. Currently discretionary spending is only 1/3 of our budget. Two thirds of our budget has already been committed to be spent and cannot be touched….

It is to that two thirds that we must addressed our concern if we are to EVER achieve solvency as a nation.

To that end, we recommend that Social Security taxes be increased 1.7% from the current amount of 12.4% of payroll up to 14.1% of payroll. We further recommend that Social Security benefits commence at age 70, instead of age 65. Together these will bring Social Security back to solvency.

Cutting back on the amount going out to retiree’s was not an option. Social Security currently takes up between 4 to 5 percent of our GDP. Social Security cuts depress economic activity and depressed economic activity is NOT more of what we need now. Social Security Cuts need to be taken off the table. For every dollar cut out of Social Security, the economy depresses by a factor of three. Social Security can become solvent through the 1.7% payroll increase, and by raising the age of retirement to 70.

Medicare and Medicaid is a different story, however. That entitlement in its current state, will be 5 times more costly than Social Security. That entitlement just simply cannot continue in its current fashion.

We recommend a shift in our nation’s focus towards it’s priorities on health care. Instead of our government guaranteeing unlimited care for keeping the dying alive, we feel its priorities should be shifted towards keeping the living population healthy. Our recommendation is to institute a new version of health care in which the Federal Government pays for preventative care, and leaves the ballooning massive costs of staying alive to private insurers.

We recommend that doctors be paid a flat fee per visit, and that the payment for that visit comes from the federal government. This would release significant savings to medical practitioners who require an inefficient number of staff just to deal with the maze of insurance regulations and requirements for each individual patient who pays a visit.

To pay for this, we are recommending that initially, an additional insurance payroll deduction ($11.48/ week) be applied to each paycheck. Over a short time, we recommend the removal of the Medicare and Medicaid programs as they stand today. By then the current Medicare tax would cover this program. This change will save roughly 400 billion currently paid to cover the Federal government’s responsibility towards our health care… Within four years this savings could pay off our national deficit in discretionary spending, and within ten years it alone could pull us out of debt.

We recommend that screening for the four largest human killers; colon cancer, heart disease, strokes, and prostate , be free of charge to every patient and be performed as perfunctorily as are our vaccinations of toddlers today. Our proposal is similar to health care programs of other wealthy nations. We propose that in one year we progress to step one, which is to have all medical, emergency room, and dental visits covered by the Federal government. Currently we found that a $75 dollar flat fee for the initial visit, irregardless of the ailment was sufficient, but argue that these fees be set regionally by boards of physicians themselves… We further recommend that after first visit is covered in full, if required, the second gets paid only at 50%, and subsequent visits are not covered at all. This provides sufficient incentive for doctors to get it right the first time, and prevents the stringing along by doctors of uncertain hypochondriacs in order to soak up additional federal dollars.

The estimated cost of preventive health care on a fee only basis is around $82 billion. We feel that it is the nation’s responsibility to insure that each of its citizens has the right to live healthy by providing free preventative health care; likewise we feel it is NOT in our nation’s best interest to squander our children’s inheritance just to pay for us to cheat death a couple of minutes more….

The Second team needs a solid goal. Financial solvency by 2020 would be a good start. The two best ideas we found to achieve that goal were to mandate a required national savings policy using Savings Bonds to pay down the national debt, and to revamp Medicare to pay 100% for all preventative and minor health care, but leave to private insurers the responsibility to cover the catastrophes if and when they occur.

The third’s team role will be to shift us away from huge government involvement in the economy, back to an economy that is privately run. Over the course of the past century we can see both benefits and pitfalls in following either privatization or socialism. Each are good in their time, and each if trending too long, comes to the point where each creates more problems than they solve. The smart method is to handle this occurrence by planning for it in advance. That would be the focus of the third team. This team would take the the long term problem of shifting our energy away from Carbon. It would tackle the problem of paying down our National Debt. It would look at our economic viability in the next two or three decades and recommend changes that might be required. It would look at tax policy to determine the ideal amount that creates a three legged system balanced between the government, business, and the people… After all the optimal size of government is relative. If it imposes itself upon businesses and the people, it is too big. If it fails to protect us, it is too little. Our wisdom has been enhanced. No more shall businesses and government expand at the expense of the people; no more should the people expand their government too far at the expense of business. We now understand that each leg’s function is to compliment the other two, and when in perfect balance, all three prosper.

The third team’s goal will be to examine all options available. and restore that balance between all three legs… There is a good chance that they will want to deviate from some of the plays we are calling in today’s game… That’s fine. After all, what is important is that we win today’s game, win tomorrow’s game, and continue to win all of next season’s game….

The play we need is simply the “full court press”

This humble plan is the beginning of getting us there.

So I’m listening to WDEL and the case of food giveaway and thinking wow that’s nice; $11.50 for a case of food that will last a weekend. How nice would that be for a family out of work?

But then I think: “Gee, I’m in bad straits, and it’s getting worse.. and my own family is the one who I need to take care of…”

Then someone named Charlene comes on and tells about when she was a single mother and had no money, how much a donation of a bookbag had meant to her… She had no other way of getting one, and someone told her that if she went down to the Breakfast Mission she could pick one up. She railed on how humbled she felt that someone would think of donating a bookbag for someone who they didn’t know to use …..”What wonderful people” she exclaimed….

$11.50.

And then I remembered the night before Thanksgiving, picking up some odd items needed for once a year recipes, ( the bulk buying had already been done), and spending $56 dollars on one flimsy bag of stuff that I really didn’t need… 5 cases of food for 5 families… I then thought of the crappy candle I bought for a fund raiser that was done because someone had bought from my fundraiser too…$24 dollars… 2 cases of food for 2 families…

I really can’t by presents for people who don’t need them when there is stuff like this that is far more important…. Perhaps I could give a card that said I donated a case of food in your name with the money I would have spent on you for the Holidays…but…that sounds tacky and kind of grossly self serving…

I think it is better not to say anything at all, just don’t give them anything this year…And I do have a family that is my first priority… But in discussing this with others, the consensus seems to be that settling for low budget presents that are liked, and spending half of the holiday money where it is really important, such as a case of food, might be how we balance it out this year…

I was impressed that giving was up this year over last…
because the economy sure the hell isn’t…..