Yes, you can have your cake and eat it too in economics. It all depends on what it is that you call cake and how you define eating the thing. That is, you can view money as an end in itself, something you can take from one person and give to another. Or you can view money as a means to an end, something you create to do a job and then destroy when the job is completed.
If money is an end in itself, then transferring it from one person to another will not stimulate the economy because you cannot have your cake and eat it too. But if money is a means to an end, then it can be used to stimulate the economy if you make stimulation the end you seek. And this will be like having your cake and eating it.
So then, is money an end in itself or is it a means to another end? Well, scientists have discovered a while ago that a few things in nature, such as light for example, have a dual sort of existence; they found that light behaves both like a particle and like a wave. In a similar manner, money has a dual character in that it is both the end and the means to another end. In one sense it is the cake you can have or eat but not both; in another sense it is the cake you can both eat and have at the same time.
Some people hoard money because they think of it as an end in itself. To these people, the transfer of money from one place to another is a zero sum game; what you add to one pot you must subtract from another. When these people think of a stimulus package, they think in terms of money being "redistributed" in the sense that it is taken from those that have it and given to those that ask for it regardless of need or merit.
Other people understand that money is being created and that it is made to vanish all the time by the mere fact that credit is given and that it is circulated by the banks, by other financial institutions, by businesses and the public. These people make a distinction between money which they regard as the vehicle by which you create wealth, and the wealth itself which cannot be made to vanish without a violent occurrence such as an accident or a natural disaster.
To give an example in this regard, you borrow money to build a house. Until you do, the money remains the promise of wealth but not the wealth itself. Now you start building the house and by the time it is completed, the money will have vanished because in one way or another, it will have circulated through the system and returned to the bank where it will be destroyed.
By contrast, the house will be standing for a long time to come, perhaps as long as a hundred years or more. And in this sense, the house, the other edifices like it and all the goods and services that are created by industry represent the real wealth. In your case, the money you borrowed was utilized as a means to create a wealth that was not there before. And it was specifically distributed to you because someone believed you will be most effective at creating the wealth you promised to create.
When you have this comprehensive view of money in mind, you will not be alarmed at the sight of the government injecting a rich stimulus package into the marketplace in response to a man-made disaster that caused the financial system to freeze, and caused the circulation of the money to come to a halt. You now anticipate that the borrowed portion of the stimulus will eventually be paid back to the lenders (whether they reside at home or abroad) having created new wealth for society as well as prevented old wealth from vanishing.
And you will be relieved to know that the lenders had no better use for the money in the first place or they would have used it there, and that they will probably have no use for it again until someone borrows it once more. As for the printed portion of the stimulus, it will be sponged back by the central bank which printed it, and where it will be destroyed so as not to dilute the value of the currency.
All in all, both the borrowed and the printed portions of the money will have served as a means to an end which is to revive the economy and to get it back in shape. Unfortunately however, a number of individuals and institutions will get their hands on some of the money and will hoard it. That is, they will make the possession of money a desirable end in itself. This will have a deleterious effect of an intensity and a duration that is proportional to the level of confidence they have in the current economic situation. But the Fed which supervises the financial institutions has tools at its disposal that can mitigate the effect of such happening.
So far so good except for one small consideration. The central bank can create the money that is necessary to do a job, and it can destroy the money when the job is completed but what the bank cannot do is eliminate the distortions it will have itself created in the marketplace by its undertakings.
And here is how the distortions are created. When the bank buys treasury and/or commercial papers, it pays for them with money that sooner or later will be diffused throughout the economy. This happens because the money is used in most part to build colossal infrastructure projects such as airports and terminals, bridges and tunnels, schools and hospitals et cetera where the work is done by people who will spend the money on the goods and services they buy. In so doing, they will pay for the wages and salaries of those who made those goods and services, who in turn will buy other goods and services, and so on without end.
Thus, after a period of time, all monies will have been translated into wages and salaries which will be used to buy everyday goods and services among other things. The problem arises from the fact that those goods and services will not have increased to match the increase in the money that is chasing them because while people get paid to build airports, terminals, bridges, tunnels, schools and hospitals, they do not buy them. The result is the appearance of an inflationary bout which tends to push all prices upward. If this situation is allowed to go on for an extended period of time, the distortion thus created will damage the economy or even kill it which is what happened to the Soviet and to the other socialist systems.
Whether or not the stimulus packages now being injected into the economies of the world by various countries will be sufficient to damage the system to a serious degree remains to be seen. But one way or the other, the massive amounts of money being injected into infrastructure projects to rescue the capitalist system from its current predicament will require an extra effort to be made by everyone if only as a cautionary measure.
What can be done is the imposition of a user fee on the airports, terminals, bridges and tunnels that will be constructed. Also, the schools can make space available after hour to be rented out for such things as concerts, meetings and conventions. As for the government run hospitals, they could dedicate a section where the public may come to do fitness exercises for a fee. The hospitals could also use some of the space to set up a clinic for doing cosmetic surgery on a paying clientele.
Of course, many more similar ideas can be devised and implemented to increase the revenue without the governments having to raise taxes. But in the end, and certainly after the economies begin to perk up again, taxes will have to be gradually raised so as to help pay back the borrowed money and to firm up the value of the currency.
And there is one more action that can be taken. It is something that should be implemented in the name of fairness and not taken as a punitive measure. There is in the law something called false enrichment. When fully fleshed out, it says that if by direct, indirect or inadvertent means someone receives money to which he or she is not entitled, the injured party may sue to recoup all or part of the money.
Now, given that society was injured as a result of someone getting falsely enriched for whatever reason and by whatever means, the government should have the right to sue these people on behalf of society and to recoup as much as possible. The money thus raised can then be used to pay back the debt and to firm up the currency.
Saturday, February 21, 2009
Sunday, February 15, 2009
Work The Capital, Flow The Cash And Multiply
Depending on how you handle it, the multiplier effect may be an optical illusion or it may be turned into something that will do wonderful things for your business and for the entire economy. In fact, what you have in the science they call economics is the undeniable fact that the economy of a nation is made of all the transactions that take place within its jurisdiction. Consequently, every transaction you conduct will stimulate the economy to a degree that is proportional to its weight. This means the larger the transaction, the larger the stimulation.
Now, given that injecting money into the economy by the government is a transaction that is as big as the stimulus package, such injection is supposed to stimulate the economy to a degree commensurate with the size of the package. But the question remains: By exactly how much will a known amount of money stimulate the economy?
People have studied various attempts to stimulate the economy in history and have come up with basically two different conclusions. But when you look closely at the studies, you find that even though they seem to differ on the surface, the two conclusions say almost the same thing except that because they take different approaches, one conclusion speaks the language of job creation while the other speaks the language of growth in the GDP.
Let us take the argument of the two approaches and apply them to the current debate regarding the package to stimulate the US economy passed by Congress not long ago. The American economy now produces about 14 trillion dollars worth of goods and services made by a work force that numbers 140 million people. Divide one by the other and you come up with the figure of 100,000 dollars as the average contribution to the GDP made by every working person in America.
One group of economists says that you can reverse the process and create one job with every 100,000 dollars you inject into the economy. But the other group says that you will need 300,000 dollars to create one job because the rule of thumb is that it takes on average a capital outlay equal to 3 times the annual salary of a worker to create a job for him or her.
Thus, according to one version, the 787 billion dollars of the stimulus package will create 2.6 million jobs during the two years of its life. But according to the other version, it will create 7.8 million jobs during the two years of its life, meaning an average of 3.9 million jobs per year. So then, which prediction will turn out to be correct? Alas, the simple answer is that we’ll never figure that out even after the fact.
To understand this part, we conduct the following mental experiment. You are a baker, you worked hard for many years and you saved 60,000 dollars. You are still young so you decide to start your own bakery. You do a little bit of research and learn that in a town a few hundred miles away, the people there consume more cakes than anywhere else in the country. So you go and set up shop in that town.
Your working capital is 60,000 dollars but at the end of the year your accountant says you made sales in the amount of 600,000 dollars and had an operational cash flow of 50,000 dollars. What this means is that you wrote cheques in the amount of 550,000 dollars throughout the year even though your working capital was only 60,000 dollars. And you were able to do all this, hire people to help you and stay in business because you sold cakes throughout the year, and the cash kept flowing into your bank account.
In essence then, you turned your working capital 10 times over during that one year period. And it is this multiplier effect that is so real and so measurable that you could hire 2 people and pay them good salaries to help you produce the cakes at the bakery. Take note of the fact that the 3 of you were paid about 200,000 dollars in salaries which amount to one third of the total sales, and more than three times the working capital.
In a similar fashion, the economy of a country has several levels of money supply, one of which closely resembles the working capital of a company. It is called the M1 money supply, and in a healthy economy where the inflation rate is low and the employment level is close to full, the GDP reaches about 10 times the value of the M1 money supply. This 10 fold turnover of M1 is called the velocity of money for that economy.
And when you inject a stimulus into the economy, you add to the M1 supply which, under normal circumstances, should multiply by 10 as it translates into GDP. This should therefore settle the argument concerning the stimulus package; it says the 787 billion dollars will generate 7.8 million jobs during the 2 years of its life or 3.9 million jobs for each year. Unfortunately it does not mean that because life is more complicated than this. To see why we go back to the earlier story.
When you were a baker and you moved to that town you did not determine the reason why the people consumed more cakes than anywhere else in the country. But now that 7 years have passed and the volume of sales has fallen off, you started to worry. You asked the profound questions and did the extensive research. What you learned was that more than 7 years ago the town was nothing but a small village. For some reason, a huge number of foreign boat people were settled there and as they sponsored more of their relatives, the village grew into a big town.
The newcomers and their children developed a sweet tooth and they went crazy over American cakes. They ate the things like there was no tomorrow but now that the older folks have developed diabetes and the younger ones have discovered other American junk foods, your business has ceased to do well with them. In the meantime, a younger guy who is manufacturing skateboard has moved into town and is doing good business, especially with the new generation of hyphenated Americans.
Even though your working capital has remained steady when measured in stable dollars, you cannot turn it over 10 times and generate the cash flow that you used to generate unless you drop your prices so low that you are left with little or no profit. You see Mister Baker, the multiplier effect is now an illusion that exists only on paper. And where you used to employ two workers, you went down to one worker and then there was only you working at the bakery. And you may soon have to close down the place and go somewhere else.
What this says is that the performance of an economy, like that of a business, cannot be understood by looking only at the amount of money thrown at it. The culture and the mood of the people has a lot to do with the possible outcome. Thus, in times of national crises such as a war when the mood of the people is that of defiance directed against a foreign enemy, the performance of the economy would be different from when the mood of the people is one of disgust directed against their own political class. And a comparison between the two situations is so irrelevant, it is a waste of time and it looks like an exercise in futility. And yet some economists rely simply on such data to do their analyses and draw their conclusions.
Anyway, now that the stimulus package has passed in the United States, what happens to the economy will depend on what happens on the cultural fronts of American life. Because of this, even in hindsight, no one will ever be able to determine how many jobs were created by the money alone and how many were created as a result of the velocity of the money being accelerated by what happens on the cultural fronts.
What is clear, however, is that for the stimulus package to work, a positive approach to life is needed. It is an approach that will nudge the nation into an era of realistic optimism. The people do not need one big project such as the moon landing or the Manhattan project to rally around; all they want during these sober moments is the absolute certainty that there is not a Madoff under every desk ready and willing to swallow the fruit of their labor and send it to friends and family at home and abroad.
Yes, the people want to hear their President clearly say: America first and no more sacrifices because someone wants us to like this one or to hate that one. We paid a heavy price playing this stupid game, we are tired of it and we shall be stupid no more. When we stop hating other people, they will start to respect us and that’s all we need because everything else is a cakewalk for a nation like ours.
When this is done, the stimulus package will prove to be more than adequate to generate the jobs that will be necessary to take the American economy to its full potential.
Now, given that injecting money into the economy by the government is a transaction that is as big as the stimulus package, such injection is supposed to stimulate the economy to a degree commensurate with the size of the package. But the question remains: By exactly how much will a known amount of money stimulate the economy?
People have studied various attempts to stimulate the economy in history and have come up with basically two different conclusions. But when you look closely at the studies, you find that even though they seem to differ on the surface, the two conclusions say almost the same thing except that because they take different approaches, one conclusion speaks the language of job creation while the other speaks the language of growth in the GDP.
Let us take the argument of the two approaches and apply them to the current debate regarding the package to stimulate the US economy passed by Congress not long ago. The American economy now produces about 14 trillion dollars worth of goods and services made by a work force that numbers 140 million people. Divide one by the other and you come up with the figure of 100,000 dollars as the average contribution to the GDP made by every working person in America.
One group of economists says that you can reverse the process and create one job with every 100,000 dollars you inject into the economy. But the other group says that you will need 300,000 dollars to create one job because the rule of thumb is that it takes on average a capital outlay equal to 3 times the annual salary of a worker to create a job for him or her.
Thus, according to one version, the 787 billion dollars of the stimulus package will create 2.6 million jobs during the two years of its life. But according to the other version, it will create 7.8 million jobs during the two years of its life, meaning an average of 3.9 million jobs per year. So then, which prediction will turn out to be correct? Alas, the simple answer is that we’ll never figure that out even after the fact.
To understand this part, we conduct the following mental experiment. You are a baker, you worked hard for many years and you saved 60,000 dollars. You are still young so you decide to start your own bakery. You do a little bit of research and learn that in a town a few hundred miles away, the people there consume more cakes than anywhere else in the country. So you go and set up shop in that town.
Your working capital is 60,000 dollars but at the end of the year your accountant says you made sales in the amount of 600,000 dollars and had an operational cash flow of 50,000 dollars. What this means is that you wrote cheques in the amount of 550,000 dollars throughout the year even though your working capital was only 60,000 dollars. And you were able to do all this, hire people to help you and stay in business because you sold cakes throughout the year, and the cash kept flowing into your bank account.
In essence then, you turned your working capital 10 times over during that one year period. And it is this multiplier effect that is so real and so measurable that you could hire 2 people and pay them good salaries to help you produce the cakes at the bakery. Take note of the fact that the 3 of you were paid about 200,000 dollars in salaries which amount to one third of the total sales, and more than three times the working capital.
In a similar fashion, the economy of a country has several levels of money supply, one of which closely resembles the working capital of a company. It is called the M1 money supply, and in a healthy economy where the inflation rate is low and the employment level is close to full, the GDP reaches about 10 times the value of the M1 money supply. This 10 fold turnover of M1 is called the velocity of money for that economy.
And when you inject a stimulus into the economy, you add to the M1 supply which, under normal circumstances, should multiply by 10 as it translates into GDP. This should therefore settle the argument concerning the stimulus package; it says the 787 billion dollars will generate 7.8 million jobs during the 2 years of its life or 3.9 million jobs for each year. Unfortunately it does not mean that because life is more complicated than this. To see why we go back to the earlier story.
When you were a baker and you moved to that town you did not determine the reason why the people consumed more cakes than anywhere else in the country. But now that 7 years have passed and the volume of sales has fallen off, you started to worry. You asked the profound questions and did the extensive research. What you learned was that more than 7 years ago the town was nothing but a small village. For some reason, a huge number of foreign boat people were settled there and as they sponsored more of their relatives, the village grew into a big town.
The newcomers and their children developed a sweet tooth and they went crazy over American cakes. They ate the things like there was no tomorrow but now that the older folks have developed diabetes and the younger ones have discovered other American junk foods, your business has ceased to do well with them. In the meantime, a younger guy who is manufacturing skateboard has moved into town and is doing good business, especially with the new generation of hyphenated Americans.
Even though your working capital has remained steady when measured in stable dollars, you cannot turn it over 10 times and generate the cash flow that you used to generate unless you drop your prices so low that you are left with little or no profit. You see Mister Baker, the multiplier effect is now an illusion that exists only on paper. And where you used to employ two workers, you went down to one worker and then there was only you working at the bakery. And you may soon have to close down the place and go somewhere else.
What this says is that the performance of an economy, like that of a business, cannot be understood by looking only at the amount of money thrown at it. The culture and the mood of the people has a lot to do with the possible outcome. Thus, in times of national crises such as a war when the mood of the people is that of defiance directed against a foreign enemy, the performance of the economy would be different from when the mood of the people is one of disgust directed against their own political class. And a comparison between the two situations is so irrelevant, it is a waste of time and it looks like an exercise in futility. And yet some economists rely simply on such data to do their analyses and draw their conclusions.
Anyway, now that the stimulus package has passed in the United States, what happens to the economy will depend on what happens on the cultural fronts of American life. Because of this, even in hindsight, no one will ever be able to determine how many jobs were created by the money alone and how many were created as a result of the velocity of the money being accelerated by what happens on the cultural fronts.
What is clear, however, is that for the stimulus package to work, a positive approach to life is needed. It is an approach that will nudge the nation into an era of realistic optimism. The people do not need one big project such as the moon landing or the Manhattan project to rally around; all they want during these sober moments is the absolute certainty that there is not a Madoff under every desk ready and willing to swallow the fruit of their labor and send it to friends and family at home and abroad.
Yes, the people want to hear their President clearly say: America first and no more sacrifices because someone wants us to like this one or to hate that one. We paid a heavy price playing this stupid game, we are tired of it and we shall be stupid no more. When we stop hating other people, they will start to respect us and that’s all we need because everything else is a cakewalk for a nation like ours.
When this is done, the stimulus package will prove to be more than adequate to generate the jobs that will be necessary to take the American economy to its full potential.
Tuesday, February 10, 2009
Removing Bad Assets From Balance Sheets
It looks like the US Treasury has not yet decided on a plan to deal with the bad assets now on the balance sheet of banks even though it was reported that several ideas in this regard have been floated already. Well, here is one more idea from someone who has no axe to grind to be taken for what it is worth. The idea is presented as a fictitious example but the principles enunciated should be regarded as universal and applicable with modification if necessary to different situations.
Let us suppose Bank A has a portfolio of shaky assets originally worth one billion dollars. The bank auctions the entire portfolio as a bundle and receives a few bids, the highest being worth 300 million dollars from a company called Liquidators & Co. (L&C).
The US Treasury, together with L&C, form a company that buys the portfolio of assets from Bank A under the following conditions: The Treasury pays 100 million dollars immediately and receives one third of the common stock. L&C agrees to pay 200 million dollars for which it receives two thirds of the stock if it pays the entire amount immediately. Otherwise L&C may opt to pay as little as 100 million immediately and consider the remaining 100 million to be a loan from the bank. The two agree on a modality for payment, including the interest rate, while the bank holds as collateral one third of the stock.
The bank now has a balance sheet that is free of bad assets; it has 200 million extra dollars in cash and a 100 million dollar certificate considered to be of the highest grade. This balance sheet is so well healed, the bank will have no trouble going about the business of borrowing from the Fed and lending money to worthy clients.
As for L&C, it can take possession of the one third portion of the stock held by the bank on an all-or-nothing basis only. Until this happens, it will not be in a position to out-vote the Treasury, and all decisions will have to be made and/or approved by two of the three parties to the deal. L&C will then go ahead and liquidate, break-up, develop, combine or bundle the assets in the portfolio as it sees fit so as to maximize the proceeds.
If L&C chooses to keep one or more of the assets in the portfolio for itself, such assets will be auctioned off and L&C will bid for them against other companies that may be interested in them as well. When all is said and done, if L&C makes a profit, the Treasury will receive one third of that. Otherwise, it will absorb its share of the loss.
I believe this is a fair deal for everyone because it addresses all the concerns I heard so far.
Let us suppose Bank A has a portfolio of shaky assets originally worth one billion dollars. The bank auctions the entire portfolio as a bundle and receives a few bids, the highest being worth 300 million dollars from a company called Liquidators & Co. (L&C).
The US Treasury, together with L&C, form a company that buys the portfolio of assets from Bank A under the following conditions: The Treasury pays 100 million dollars immediately and receives one third of the common stock. L&C agrees to pay 200 million dollars for which it receives two thirds of the stock if it pays the entire amount immediately. Otherwise L&C may opt to pay as little as 100 million immediately and consider the remaining 100 million to be a loan from the bank. The two agree on a modality for payment, including the interest rate, while the bank holds as collateral one third of the stock.
The bank now has a balance sheet that is free of bad assets; it has 200 million extra dollars in cash and a 100 million dollar certificate considered to be of the highest grade. This balance sheet is so well healed, the bank will have no trouble going about the business of borrowing from the Fed and lending money to worthy clients.
As for L&C, it can take possession of the one third portion of the stock held by the bank on an all-or-nothing basis only. Until this happens, it will not be in a position to out-vote the Treasury, and all decisions will have to be made and/or approved by two of the three parties to the deal. L&C will then go ahead and liquidate, break-up, develop, combine or bundle the assets in the portfolio as it sees fit so as to maximize the proceeds.
If L&C chooses to keep one or more of the assets in the portfolio for itself, such assets will be auctioned off and L&C will bid for them against other companies that may be interested in them as well. When all is said and done, if L&C makes a profit, the Treasury will receive one third of that. Otherwise, it will absorb its share of the loss.
I believe this is a fair deal for everyone because it addresses all the concerns I heard so far.
Sunday, February 8, 2009
Private Innovation, Public Supervision
Before the current economic crisis erupted, a new trend for doing business called Public Private Partnership (PPP) was developing, and it has been in effect in some places around the world for some time now. A while ago a number of interesting questions regarding the trend began to surface but they generated little debate. The questions are still valid today and, given the recent developments in the world economy, the answers to them have become more urgent than ever before.
The two most important questions to ask at this time are the following: First, is the PPP an organic trend in the sense that it is a natural outgrowth of the evolution of economics? Second, will the trend survive the current crisis and co-exist with or even replace the practices spawned by the nascent age of globalization?
When we think about these matters we realize that we are facing a dilemma of sorts. Because modern commerce increasingly relies on the exchange of complex industrial products rather than rely on the barter of simple products gathered in nature, the economy is becoming ever more unpredictable. This is due to the fact that new products are constantly being developed and they have the potential to render obsolete existing ones if not upset the entire commercial setup.
Because each new invention tends to create nefarious consequences for those whose livelihood depends on the existing order, it should not be surprising to learn that the dilemma of the new -- something that is desirable in itself -- has caused people to oppose change throughout modern history. However, it must also be noted that such opposition seems to have been tamed in the sense that it is becoming less frequent, less organized and less violent.
This taming of the opposition has no doubt come about because few people would now deny that the cultures which rejected change in the past were left behind while those which embraced it have advanced. The most glaring example in this category is the story of China and Japan where the first rejected modernism and was pushed well behind its neighbor. China then embraced modernism and started to catch up with Japan.
Yes, the fear of being left behind is a motivation powerful enough to make nations and ordinary people go against their immediate narrow interest and embrace change when they would rather live without it. But while the example of Japan and China speaks eloquently to this notion, the question remains: What about the changes that occurred in the countless cultures that have come and gone since the beginning of time? Was there not something more fundamental to the human character which gave impetus to the changes that those cultures have experienced?
To respond to this question we note that what separates us from the rest of the animal kingdom is one important characteristic. We are creative, a trait that allows us to innovate and to try new things all the time. This empowers us to cause the changes that we envisage but it also brings something new to the table. The inventions we create become the things that we trade among ourselves, they expand the base of the economy and they constantly change its outlook. Thus, to have a better idea as to where we are taking the economy, we need to understand the nature of the human trait we call creativity.
Creativity may depend to some degree on one’s ability to analyze things and to separate their fine points but the word itself must be defined as the act of synthesizing a multitude of bits and putting them together in a manner that is so new and different, the resulting product is seen as a creation like nothing that existed before.
And because creativity is the making of one thing out of many, the act of creation can only be accomplished by a single individual and not a group. Therefore, innovation can only be the domain of the individual and not that of a committee. It must also be asserted that while a group may adopt a new project and develop it to its ultimate expression, only the individual can initiate an original project and give it life.
Another important point to note is that since the ultimate committee devised by man is government, this institution is the most ill suited to be an innovator. For this reason, it is a good idea to keep government out of the business of innovation and to put the private sector in charge of it because the private sector is where the individual lives, dreams, works and creates.
The historical examples to give credence to this point abound. In fact, when it comes to economics post the Industrial Revolution, innovation has been the driving force behind the great advances made by nations. For instance, America became the economic giant that it is because America is where many of the inventions were made or were embraced early on. These were the light bulb, the phonograph, the electric motor, the internal combustion engine, the various home appliances, the wireless modes of communication, the computer and many other inventions.
But most important, not one of these inventions was made by a committee or anything that resembles a government. Instead, they all came about as a result of the efforts made by the individuals who thought, experimented and worked hard -- usually alone -- to achieve the breakthroughs that made the inventions possible. The ideas of those pioneers piled up on top of each other, and when they reached a critical mass, they were utilized to give shape to the products that shifted the cultural paradigms and forever altered the way that humans do commerce and live.
This history argues in favor of nurturing private enterprise and doing away with the public sector. In fact, such calls have been made throughout the decades since at least the onset of the Industrial Revolution. Each time, however, the excesses of private enterprise -- blamed on the approach to doing business called laissez faire -- manifested themselves and argued in favor of public supervision of the economy if not the full participation in it. And this, in fact, was realized through a form of governance called Socialism. Such calls are now being made again, triggered by the excesses that led to the current near collapse of the world economy.
But Socialism has been tried in a big way and it proved to be inadequate precisely because it stifled the effort of individuals and made it impossible for innovation to take root and to flourish. In fact, Socialism led to the stagnation of economies such as those that existed in the Communist systems of Eastern Europe and elsewhere during most of the Twentieth Century.
Enter the PPP experiment where a partnership was attempted between the private sector and the public one in some places and where it was envisaged that the best of both worlds can be adopted, and the deficiencies of either avoided. As such, the PPP can be considered a hybrid that is the natural outgrowth of the evolution of economics. So far the jury is out on the success or failure of this experiment but the signs are that it may succeed and impose itself as the wave of the future, one that will sweep the age of globalization and shepherd it to its ultimate potential.
It is not that PPP was not tried in earnest; countries like Sweden and a few others have dabbled with it for some time now and they report success in some areas of governance. But it is impossible at this time to give a comprehensive assessment of the project because the economic system of the world is still fragmented. That is, we have two contradictory trends working against each other at the same time. We have diverse forms of government around the planet being affected by one unifying force called globalization. Regrettably, along with its positive aspects, globalization does the unification by creating conduits among nations that contaminate every place on Earth with the excesses of each jurisdiction.
Thus, the PPP experiment in one place has always been affected if not totally frustrated by developments in the other places. And the net effect is that it is nearly impossible to assess the merits and demerits of the experiment. But what is different this time is that the current economic crisis made it imperative for all the jurisdictions to cooperate in finding a cure to the current economic crisis, and to work for the creation of institutions that will prevent the crisis from erupting again. The result may prove to be that globalization will finally meet its match, a global response to its ill effects. It will then be possible to implement and to fully assess the effectiveness of Public Private Partnership.
Finally, because all nations are now forced to act together in search of a balance between the desire to avoid the excesses of Capitalism on one hand and the stifling nature of Socialism on the other, they will have no choice but to adopt PPP and do so in concert. Unlike the past, however, the trend may now survive a long time and perhaps at perpetuity. Thus, from an experiment that was tried with timidity, PPP may become the wave that will stand strong and become a permanent feature of human civilization. If this happens, it will be a fitting development because PPP is about balance, and balance is why the Universe exists at all. Take balance away and the Cosmos will go back to being a Singularity, a small point in existence that could never fulfill its destiny.
The two most important questions to ask at this time are the following: First, is the PPP an organic trend in the sense that it is a natural outgrowth of the evolution of economics? Second, will the trend survive the current crisis and co-exist with or even replace the practices spawned by the nascent age of globalization?
When we think about these matters we realize that we are facing a dilemma of sorts. Because modern commerce increasingly relies on the exchange of complex industrial products rather than rely on the barter of simple products gathered in nature, the economy is becoming ever more unpredictable. This is due to the fact that new products are constantly being developed and they have the potential to render obsolete existing ones if not upset the entire commercial setup.
Because each new invention tends to create nefarious consequences for those whose livelihood depends on the existing order, it should not be surprising to learn that the dilemma of the new -- something that is desirable in itself -- has caused people to oppose change throughout modern history. However, it must also be noted that such opposition seems to have been tamed in the sense that it is becoming less frequent, less organized and less violent.
This taming of the opposition has no doubt come about because few people would now deny that the cultures which rejected change in the past were left behind while those which embraced it have advanced. The most glaring example in this category is the story of China and Japan where the first rejected modernism and was pushed well behind its neighbor. China then embraced modernism and started to catch up with Japan.
Yes, the fear of being left behind is a motivation powerful enough to make nations and ordinary people go against their immediate narrow interest and embrace change when they would rather live without it. But while the example of Japan and China speaks eloquently to this notion, the question remains: What about the changes that occurred in the countless cultures that have come and gone since the beginning of time? Was there not something more fundamental to the human character which gave impetus to the changes that those cultures have experienced?
To respond to this question we note that what separates us from the rest of the animal kingdom is one important characteristic. We are creative, a trait that allows us to innovate and to try new things all the time. This empowers us to cause the changes that we envisage but it also brings something new to the table. The inventions we create become the things that we trade among ourselves, they expand the base of the economy and they constantly change its outlook. Thus, to have a better idea as to where we are taking the economy, we need to understand the nature of the human trait we call creativity.
Creativity may depend to some degree on one’s ability to analyze things and to separate their fine points but the word itself must be defined as the act of synthesizing a multitude of bits and putting them together in a manner that is so new and different, the resulting product is seen as a creation like nothing that existed before.
And because creativity is the making of one thing out of many, the act of creation can only be accomplished by a single individual and not a group. Therefore, innovation can only be the domain of the individual and not that of a committee. It must also be asserted that while a group may adopt a new project and develop it to its ultimate expression, only the individual can initiate an original project and give it life.
Another important point to note is that since the ultimate committee devised by man is government, this institution is the most ill suited to be an innovator. For this reason, it is a good idea to keep government out of the business of innovation and to put the private sector in charge of it because the private sector is where the individual lives, dreams, works and creates.
The historical examples to give credence to this point abound. In fact, when it comes to economics post the Industrial Revolution, innovation has been the driving force behind the great advances made by nations. For instance, America became the economic giant that it is because America is where many of the inventions were made or were embraced early on. These were the light bulb, the phonograph, the electric motor, the internal combustion engine, the various home appliances, the wireless modes of communication, the computer and many other inventions.
But most important, not one of these inventions was made by a committee or anything that resembles a government. Instead, they all came about as a result of the efforts made by the individuals who thought, experimented and worked hard -- usually alone -- to achieve the breakthroughs that made the inventions possible. The ideas of those pioneers piled up on top of each other, and when they reached a critical mass, they were utilized to give shape to the products that shifted the cultural paradigms and forever altered the way that humans do commerce and live.
This history argues in favor of nurturing private enterprise and doing away with the public sector. In fact, such calls have been made throughout the decades since at least the onset of the Industrial Revolution. Each time, however, the excesses of private enterprise -- blamed on the approach to doing business called laissez faire -- manifested themselves and argued in favor of public supervision of the economy if not the full participation in it. And this, in fact, was realized through a form of governance called Socialism. Such calls are now being made again, triggered by the excesses that led to the current near collapse of the world economy.
But Socialism has been tried in a big way and it proved to be inadequate precisely because it stifled the effort of individuals and made it impossible for innovation to take root and to flourish. In fact, Socialism led to the stagnation of economies such as those that existed in the Communist systems of Eastern Europe and elsewhere during most of the Twentieth Century.
Enter the PPP experiment where a partnership was attempted between the private sector and the public one in some places and where it was envisaged that the best of both worlds can be adopted, and the deficiencies of either avoided. As such, the PPP can be considered a hybrid that is the natural outgrowth of the evolution of economics. So far the jury is out on the success or failure of this experiment but the signs are that it may succeed and impose itself as the wave of the future, one that will sweep the age of globalization and shepherd it to its ultimate potential.
It is not that PPP was not tried in earnest; countries like Sweden and a few others have dabbled with it for some time now and they report success in some areas of governance. But it is impossible at this time to give a comprehensive assessment of the project because the economic system of the world is still fragmented. That is, we have two contradictory trends working against each other at the same time. We have diverse forms of government around the planet being affected by one unifying force called globalization. Regrettably, along with its positive aspects, globalization does the unification by creating conduits among nations that contaminate every place on Earth with the excesses of each jurisdiction.
Thus, the PPP experiment in one place has always been affected if not totally frustrated by developments in the other places. And the net effect is that it is nearly impossible to assess the merits and demerits of the experiment. But what is different this time is that the current economic crisis made it imperative for all the jurisdictions to cooperate in finding a cure to the current economic crisis, and to work for the creation of institutions that will prevent the crisis from erupting again. The result may prove to be that globalization will finally meet its match, a global response to its ill effects. It will then be possible to implement and to fully assess the effectiveness of Public Private Partnership.
Finally, because all nations are now forced to act together in search of a balance between the desire to avoid the excesses of Capitalism on one hand and the stifling nature of Socialism on the other, they will have no choice but to adopt PPP and do so in concert. Unlike the past, however, the trend may now survive a long time and perhaps at perpetuity. Thus, from an experiment that was tried with timidity, PPP may become the wave that will stand strong and become a permanent feature of human civilization. If this happens, it will be a fitting development because PPP is about balance, and balance is why the Universe exists at all. Take balance away and the Cosmos will go back to being a Singularity, a small point in existence that could never fulfill its destiny.
Sunday, February 1, 2009
Read Your Speeches Before You Read Them
On Monday January 26, the American President Barack Obama stood before the press in America and those around the world to discuss his energy plan and a few other things which he did after reading a short speech containing the opening remarks. As he red the speech, the President stumbled once or twice and thus disclosed that the speech was written by a speechwriter. The President also became visibly uneasy as would someone who just saw a ghost which is not surprising given that speechwriters are ghost writers who express their opinions as much as they do those of the person who reads the speech or worse, those of a third party.
Given that Mr. Obama is a good writer and a great orator, it is easy to detect which speeches or parts thereof he writes and which are written for him by someone else. Naturally, his writings bear a signature that is vintage his own while the other writings bear a signature that is supposed to be vintage the different writers, but something odd has been happening here which merits further study.
Since at least the second term of Bill Clinton and throughout the presidency of W. Bush, the bent of the various White House speechwriters has been one that reflects the heart and soul of Israel’s Benjamin Netanyahu. Not only did the speeches and the utterances of the American Presidents reflect the evil that is the spirit of Netanyahu but they carried a dirty message to the world as well. They demonstrated -- and deliberately so -- that the Likud Party of Israel owned the brains of the two previous Presidents and that AIPAC (American Israel Public Affairs Committee) a division of the World Jewish Congress, operated their mouths.
Sadly, the passage red by Mr. Obama on January 26 also bore the signature of the Netanyahu spirit and thus solidified the suspicion started a few weeks earlier to the effect that those who work for Israel had again succeeded in dragging the symbol of America’s power down the slippery slope of horror. This is the slope on which the superpower had skidded in the past, a time when America’s good name and image began to be dragged in the mud. Thus, if there is one advice I can give the President it is that he should read his speeches before he reads them to the public.
But why was it necessary for any of this to happen at all? Well, no logical argument can be made here as to the why of things but the observation is easily made to the effect that some people believe they have the divine right to be handed everything they desire. And given that what they desire at this time is to embellish the image of Israel, they do all they can to use the goodwill that the world harbors for America and they divert it to polish the image of Israel, to make her shine and make her look better than she is.
And because Israel’s image is muddied every time her army bombs the children of Palestine, the most effective way to dilute the ugliness of these activities is to drag America into the mix. The Israelis achieve this by utilizing the American Weapons of Child Destruction, then letting the world know who is supplying them to Israel. The Israelis make it perfectly clear that America supplies the jets and the helicopters, the smart bombs and the cluster types. These are the weapons that search for, find and blow up the schools like those run by the UN and other organizations. The deliberate destruction of schools was carried out in Gaza not long ago and carried out on the UN headquarter in Southern Lebanon before that.
And, like watching a video game, the spectacle has delighted the Israeli voters and warmed the hearts of Jewish audiences around the world as well as a few non-Jewish crackpots. Hitler too felt warm in his cold grave; and who would now insist that these people have no heart! They accused humanity of hating them because we are all genetically programmed to be anti-Semitic, so they told us to love our enemies. And to give the good example, they fell madly in love with Hitler, their longtime worst enemy. They warmed his heart and gave him the comfort of knowing that in his absence, someone is carrying on with his demonic work.
But in case this will not be enough to dump all of Israel’s responsibilities into the lap of America, the Israeli delegation at the UN in New York always manages to convince the American delegation to give the superpower’s blessing to Israel’s crimes against humanity. In the meantime, and by deliberate coincidence, the speechwriters handpicked by AIPAC in Washington get busy at the White House and they write the speeches into which they slip a few treacherous code words and a number of expressions. This is how the American Presidents are duped into innocently saying the wrong things not realizing what these things represent to an Arab audience or a Muslim one.
One trick the AIPAC people love to pull is to let the Arabs, the Muslims and the rest of the world know beforehand what the American President will say and what he will do then have him say and do just that. And bingo, in the eyes of even a child, the image of the American President transforms from that of a respected man standing proud at the helm of a superpower to that of a parrot kept prisoner inside a cage or worse, a poodle hooked at one end of a leash while the other end is held by master Netanyahu. President Clinton took on this image toward the end of his presidency but did not seem fit for it; President W. Bush took on the image at the beginning and throughout his presidency and looked like he was born for the role.
Another trick AIPAC and Company use is that which they pulled on January 26 when they made the current American President insult the Arabs the moment he mentioned petroleum. Well, in the eyes of the Arab World, the Muslim World and the whole wide World no one is forcing America to buy oil from the Arabs. In the privacy of their thoughts, these people ask: If you hate buying oil from the Arabs why the hell do you buy oil from the Arabs? And when they attempt to answer the question they see something fraudulent about this uniquely American habit.
To try and decipher this puzzle, let us say for the sake of argument that it is a fraud to express a phony hatred toward the Arabs for selling to America what America comes knocking at their door to buy. If this statement were true, the question follows as to who may experience hatred when America trades with the Arabs or the Muslims. Who wants to drive the wedge between these two? And who wants to isolate America as a prelude to owning her lock stock and barrel? To find the answer to these questions you only need to read Tom Friedman’s column in the New York Times and watch him on television. You will realize that it is Netanyahu of the Likud Party of Israel, and it is the Jewish Establishment in America who want these things. When you do, you will also have realized that it is they who author the words spoken by the American Presidents. Bingo, you got it now.
On that January day, President Obama also submitted to an interview with the Arabic satellite channel El Arabiya. He said that he wanted to deal with the Arab and Muslim Worlds with mutual respect. The trouble is that Presidents Clinton and Bush before him wanted the same thing but they made the mistake of doing the opposite not realizing what they were made to do. They were not aware that the words and expressions put in their mouths were loaded with booby traps designed to blow up the moment they reach Arab or Muslim ears. One booby trap being to insult the Arabs for selling oil to America, the very sin that Mr. Obama committed when he stood before the press earlier that day.
But unlike Clinton who is semi-intelligent and Bush who is devoid of intelligence, Obama enjoys a high degree of intelligence. He will therefore understand that those who (in the words of Rodney Dangerfield) feel they don’t get no respect have chosen to make the world suffer that same fate. Consequently, they believe in the depth of their souls that if they get America to show disrespect for others, the others will return the favor and show disrespect for America. Those characters hope that when this disease is injected often enough into the body of humanity, it will spread to contaminate the entire human race. And when disrespect becomes the accepted norm throughout the world, the Jews will no longer appear unique with regards to what happened when the Nazis made them spit on the floor and forced them to lick their own spit.
Powered by this desire, the self-proclaimed Jews of today who inhabit Israel and those who run AIPAC will not rest until the world is metaphorically made to spit on the floor and forced to lick its own spit. The way to achieve this is to begin by making successive American Presidents insult people left and right, which has been happening for some time now. But aside from that routine, the question to ask boils down to this: How far is America prepared to go in giving those sickos everything they wish for? You will see how genuine and how explosive this concern can be when you consider that the AIPAC characters are consumed by another and more gruesome historical event.
More than they resent being forced to lick their own spit, these people are consumed by the fact that lampshades were made from Jewish skin. And like Alan Dershowitz has been advocating for decades, the Jews believe they have the right to do to others what the others did to them or did to each other. And so the question poses itself: Is America prepared to make lampshades from the skin of every group on the planet to make the AIPAC sickos feel better about themselves? And how many skins will that be? Six million? Or must it be a disproportionate one hundred to one, therefore six hundred million skins?
Just remember, Mr. President, once you choose to go down this slippery slope, you will reach the bottom of the pit before you realize what it is that dragged you down there. The way to avoid all this is to say to the Jews at the outset what you would say to anyone: Enough is enough; there is nothing divine or special about you. If you want to be respected, you must work for and you must earn that respect. Do not count on me being instrumental in spending one more ounce of America’s prestige to make you or make Israel look better than what you will make of yourselves. Run along, kid and find a Clinton or a Bush to con because with me, the game stops here and stops now.
Given that Mr. Obama is a good writer and a great orator, it is easy to detect which speeches or parts thereof he writes and which are written for him by someone else. Naturally, his writings bear a signature that is vintage his own while the other writings bear a signature that is supposed to be vintage the different writers, but something odd has been happening here which merits further study.
Since at least the second term of Bill Clinton and throughout the presidency of W. Bush, the bent of the various White House speechwriters has been one that reflects the heart and soul of Israel’s Benjamin Netanyahu. Not only did the speeches and the utterances of the American Presidents reflect the evil that is the spirit of Netanyahu but they carried a dirty message to the world as well. They demonstrated -- and deliberately so -- that the Likud Party of Israel owned the brains of the two previous Presidents and that AIPAC (American Israel Public Affairs Committee) a division of the World Jewish Congress, operated their mouths.
Sadly, the passage red by Mr. Obama on January 26 also bore the signature of the Netanyahu spirit and thus solidified the suspicion started a few weeks earlier to the effect that those who work for Israel had again succeeded in dragging the symbol of America’s power down the slippery slope of horror. This is the slope on which the superpower had skidded in the past, a time when America’s good name and image began to be dragged in the mud. Thus, if there is one advice I can give the President it is that he should read his speeches before he reads them to the public.
But why was it necessary for any of this to happen at all? Well, no logical argument can be made here as to the why of things but the observation is easily made to the effect that some people believe they have the divine right to be handed everything they desire. And given that what they desire at this time is to embellish the image of Israel, they do all they can to use the goodwill that the world harbors for America and they divert it to polish the image of Israel, to make her shine and make her look better than she is.
And because Israel’s image is muddied every time her army bombs the children of Palestine, the most effective way to dilute the ugliness of these activities is to drag America into the mix. The Israelis achieve this by utilizing the American Weapons of Child Destruction, then letting the world know who is supplying them to Israel. The Israelis make it perfectly clear that America supplies the jets and the helicopters, the smart bombs and the cluster types. These are the weapons that search for, find and blow up the schools like those run by the UN and other organizations. The deliberate destruction of schools was carried out in Gaza not long ago and carried out on the UN headquarter in Southern Lebanon before that.
And, like watching a video game, the spectacle has delighted the Israeli voters and warmed the hearts of Jewish audiences around the world as well as a few non-Jewish crackpots. Hitler too felt warm in his cold grave; and who would now insist that these people have no heart! They accused humanity of hating them because we are all genetically programmed to be anti-Semitic, so they told us to love our enemies. And to give the good example, they fell madly in love with Hitler, their longtime worst enemy. They warmed his heart and gave him the comfort of knowing that in his absence, someone is carrying on with his demonic work.
But in case this will not be enough to dump all of Israel’s responsibilities into the lap of America, the Israeli delegation at the UN in New York always manages to convince the American delegation to give the superpower’s blessing to Israel’s crimes against humanity. In the meantime, and by deliberate coincidence, the speechwriters handpicked by AIPAC in Washington get busy at the White House and they write the speeches into which they slip a few treacherous code words and a number of expressions. This is how the American Presidents are duped into innocently saying the wrong things not realizing what these things represent to an Arab audience or a Muslim one.
One trick the AIPAC people love to pull is to let the Arabs, the Muslims and the rest of the world know beforehand what the American President will say and what he will do then have him say and do just that. And bingo, in the eyes of even a child, the image of the American President transforms from that of a respected man standing proud at the helm of a superpower to that of a parrot kept prisoner inside a cage or worse, a poodle hooked at one end of a leash while the other end is held by master Netanyahu. President Clinton took on this image toward the end of his presidency but did not seem fit for it; President W. Bush took on the image at the beginning and throughout his presidency and looked like he was born for the role.
Another trick AIPAC and Company use is that which they pulled on January 26 when they made the current American President insult the Arabs the moment he mentioned petroleum. Well, in the eyes of the Arab World, the Muslim World and the whole wide World no one is forcing America to buy oil from the Arabs. In the privacy of their thoughts, these people ask: If you hate buying oil from the Arabs why the hell do you buy oil from the Arabs? And when they attempt to answer the question they see something fraudulent about this uniquely American habit.
To try and decipher this puzzle, let us say for the sake of argument that it is a fraud to express a phony hatred toward the Arabs for selling to America what America comes knocking at their door to buy. If this statement were true, the question follows as to who may experience hatred when America trades with the Arabs or the Muslims. Who wants to drive the wedge between these two? And who wants to isolate America as a prelude to owning her lock stock and barrel? To find the answer to these questions you only need to read Tom Friedman’s column in the New York Times and watch him on television. You will realize that it is Netanyahu of the Likud Party of Israel, and it is the Jewish Establishment in America who want these things. When you do, you will also have realized that it is they who author the words spoken by the American Presidents. Bingo, you got it now.
On that January day, President Obama also submitted to an interview with the Arabic satellite channel El Arabiya. He said that he wanted to deal with the Arab and Muslim Worlds with mutual respect. The trouble is that Presidents Clinton and Bush before him wanted the same thing but they made the mistake of doing the opposite not realizing what they were made to do. They were not aware that the words and expressions put in their mouths were loaded with booby traps designed to blow up the moment they reach Arab or Muslim ears. One booby trap being to insult the Arabs for selling oil to America, the very sin that Mr. Obama committed when he stood before the press earlier that day.
But unlike Clinton who is semi-intelligent and Bush who is devoid of intelligence, Obama enjoys a high degree of intelligence. He will therefore understand that those who (in the words of Rodney Dangerfield) feel they don’t get no respect have chosen to make the world suffer that same fate. Consequently, they believe in the depth of their souls that if they get America to show disrespect for others, the others will return the favor and show disrespect for America. Those characters hope that when this disease is injected often enough into the body of humanity, it will spread to contaminate the entire human race. And when disrespect becomes the accepted norm throughout the world, the Jews will no longer appear unique with regards to what happened when the Nazis made them spit on the floor and forced them to lick their own spit.
Powered by this desire, the self-proclaimed Jews of today who inhabit Israel and those who run AIPAC will not rest until the world is metaphorically made to spit on the floor and forced to lick its own spit. The way to achieve this is to begin by making successive American Presidents insult people left and right, which has been happening for some time now. But aside from that routine, the question to ask boils down to this: How far is America prepared to go in giving those sickos everything they wish for? You will see how genuine and how explosive this concern can be when you consider that the AIPAC characters are consumed by another and more gruesome historical event.
More than they resent being forced to lick their own spit, these people are consumed by the fact that lampshades were made from Jewish skin. And like Alan Dershowitz has been advocating for decades, the Jews believe they have the right to do to others what the others did to them or did to each other. And so the question poses itself: Is America prepared to make lampshades from the skin of every group on the planet to make the AIPAC sickos feel better about themselves? And how many skins will that be? Six million? Or must it be a disproportionate one hundred to one, therefore six hundred million skins?
Just remember, Mr. President, once you choose to go down this slippery slope, you will reach the bottom of the pit before you realize what it is that dragged you down there. The way to avoid all this is to say to the Jews at the outset what you would say to anyone: Enough is enough; there is nothing divine or special about you. If you want to be respected, you must work for and you must earn that respect. Do not count on me being instrumental in spending one more ounce of America’s prestige to make you or make Israel look better than what you will make of yourselves. Run along, kid and find a Clinton or a Bush to con because with me, the game stops here and stops now.
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