Tag Archives: Politics

The Second Reformation – Part III



The Coming Storm

There have actually been a several reformations throughout history. The term reformation means to reform or remake. When institutions that form the core of a society fail, or are torn down, new institutions rise up and replace them. The old institutions are reformed into new institutions. This is radically different from what we see on a daily basis as things change slowly over a longer period. Reformations are usually abrupt and significant. The Protestant Reformation saw a large number of people break from the Roman Catholic Church and is usually the first thing that comes to mind when discussing the Reformation. That Reformation resulted in the first protestant church following Martin Luther; we know them today as the Lutherans.

It is fitting that the final part in this series is written on the eve of the financial collapse that I have been predicting and which may lead to the next Reformation. So, fasten your seat belt, open your mind to new possibilities and prepare to step outside your comfort zone.

The Federal Reserve is currently using monetarist thinking by investing in long-term bonds to bring down interest rates hoping to increase borrowing and spending, and thus save the economy from a double dip recession. The problem however is not liquidity of funds for borrowing. The problem is that the people who would be consumers of goods are not buying because they still have too much debt. They have no equity in their homes and cannot take on any more debt. In fact, this move by the Fed will have the negative effect of reducing many people’s investment income from bonds, and therefore have a negative impact on goods consumption, especially from our seniors.

The storm causing this second tsunami in the economy is focused in the European continent, with their banks nearing collapse. The world has not yet recovered from the last storm. Therefore, it is less prepared to weather this one. The world’s banks might topple like a row of dominoes. If all the world’s banks fail, were talking total economic collapse. No one will be safe. We may be in for some very tough times for a while until the world can heal its wounds. What comes of that healing process may take many forms, and only one thing is a sure bet…it will be different, it will be reformed. If the world must go through a reformation, then we should want the new institutions that rise from the ashes to correct the flaws that led to this failure. We should learn from our mistakes when planning a new future. However, that is often easier to say than do.

The Dreaded Finger

Americans love to play the blame game. After the collapse, there will be no shortage of finger-pointing at the cause of the failure. All too often, this will result in simply pointing at the obvious, and failing to uncover the root cause. Fingers will be pointed at the liberals saying excessive regulation led to the failure, if only we had let them run free and get government out-of-the-way. Fingers will also be pointed at the conservatives saying there was too little government regulation, and that what we need is more rules, more government. Both sides of that argument will be wrong.

Banks will not fail because there was too much or too little government regulation. The banks will fail because human nature took over. A flaw in the design permitted human greed to rule over logic and drive the industry to poison the very water from which it drinks. Banks are corporations and therefore must ultimately answer to its shareholders. However, banks serve a vital role in a capitalist system as the controller of all capital that flows through the system. This gives the banks an enormous amount of power. So much power in fact, that they have been calling most of the shots on all sides of the political spectrum. We live in an illusion of Democracy. In fact, in America, what has evolved over the years is a Neo-Fascist Plutocracy run by the banks and a few very large corporations. Elections and politicians are permitted to exist simply to appease the populace by thinking they still have some modicum of control over their life.

The banks are not in this alone. The health care industry has been on a runaway spending spree for half a century and will crumble shortly after the banks go down. Famine, strife and anarchy will put a huge demand on health care, and there will be no way to pay for it. In 1960, the government spent about 1% of GDP on health care. By 2011 that had risen to 7%, a 700% increase in cost relative to the growth of the economy. Almost all health care providers are now corporations, which means they ultimately have to answer to their shareholders and provide a profit. The drive to be profitable is wrought with conflicts of interest with the people who go to them for medical help. They are motivated to turn a profit all costs. Their concern for a patients wellbeing culminates in a desire to avoid lawsuits, and stops there.

This is exacerbated by the fact there is also a health insurance industry, born ironically because of the high cost of health care. The health insurance industry is the primary payer of provider services, giving them a lot of leverage. Health insurers answer to shareholders also, giving them an obvious conflicting interest with the people who buy insurance. They are motivated to turn a profit by minimizing the cost of delivering health care. On the surface this sounds like a good thing, however the dynamic of the two industries trying to outdo each other and jockey for more profit has resulted in gross waste and inefficiencies. If the banking industry remained as healthy as a horse, the healthcare industry would still implode eventually  because its design is flawed resulting in an out of control cost system. However, these two industries are now large enough and powerful enough that true reform cannot take place. It is going to take something on the scale of a reformation to reshape these industries and design out these flaws.

There is yet a third leg in our system that is fundamentally flawed. That third leg, not surprisingly is our form of government. The current form our democratic republic has taken in no way resembles what the original architects of our nation had in mind. Have you ever wondered in amazement that Politian’s rarely do what the public wants? The only way a politician can be elected is by out spending the competition. It has become a media circus where the best fundraiser wins the race. Raising funds however means making promises to those giving the money. Therefore, every politician ultimately answers to his or her contributors, not the American public. If that is not a dictionary definition for a conflict of interest, I do not know what is.

After the collapse, we will survive to rise from the ashes and begin the reformation. There will be numerous recommendations for change in how we govern ourselves. Some may call for a return to Socialism or Communism, while others may call for an extreme form of Fascism, perhaps even Anarchy. We need not adopt any of those extremes. I will explain in a moment, how I think we simply need to make a few changes to our Capitalist institutions to save Capitalism, and then reform our corrupted neo-fascist republic into a truer more equitable global democracy.

Reform Government

Defense spending alone will be just shy of a trillion dollars in 2011. Imagine what we could do if we did not need to spend that money. But, but, you say: we have to defend ourselves from those who want to do us harm. Most, if not all of those people hate Americans because of our imperialist expansion and corporate protectionism imposed on foreign countries. Repressive dictators that the U.S. propped up in order to secure access to Middle Eastern oil has resulted in a deep hatred for America. When ever you hear them say protecting U.S. interests, they really mean that our government and your tax dollars are going to war for a Corporation. Our enemies then use religion as a recruiting tool, but it was our Neo-Fascist/Corporatist intervention in so many countries that created the conditions permitting the rise of Islamic extremists in the first place. The solution is radical, yet simple. It could only come about as a recovery from a global melt down followed by Reformation. Without a global Reformation, the power elite would never permit all the changes I am recommending.

People around the world are becoming tierd of a corupt capitalist system which is robbing them of democracy:

By NICHOLAS KULISH

updated 9/28/2011 5:24:35 AM ET
MADRID — Hundreds of thousands of disillusioned Indians cheer a rural activist on a hunger strike. Israel reels before the largest street demonstrations in its history. Enraged young people in Spain and Greece take over public squares across their countries.
 
Their complaints range from corruption to lack of affordable housing and joblessness, common grievances the world over. But from South Asia to the heartland of Europe and now even to Wall Street, these protesters share something else: wariness, even contempt, toward traditional politicians and the democratic political process they preside over.
 

Read the entire article here.

We must form a global constitution, guaranteeing every person on Earth protection and equal rights under a common constitution, as well as access to a fair judicial system, and equal representation in a democratic government. Representation should be at the local, regional and global level. Most laws that affect our daily lives should be maintained at the local and then the regional level, with only a minimum of laws enforcing the constitution at the global level. The closer a law is to the person who it has jurisdiction over, the more the people will feel in control of their destiny. People should be able to maintain most of their local culture that brings so much diversity and beauty to the world. With the world united under a common constitution, there will be no need for large army’s to fight one another. No nations to wage war.

All that energy could be instead used to build up the under developed parts of the world and repair the infrastructure in the developed world which will bring prosperity to all. Repurposing a vast military industrial complex to peaceful output will create hundreds of millions of jobs. There will be employment for anyone who wants it.

Those who would be representatives for the people would not be permitted to raise funds to run a campaign as they do today. Each candidate will have equal and unbiased access funded through taxes to present to the people their credentials. Cost will be kept to the minimum needed for the people to choose the best candidate that represents their desires. The electoral process should be run more like a job interview with every citizen being a hiring manager and getting one vote. No candidate should be permitted an unfair advantage over another. This is the only way the people can make an objective decision for a person who will honestly represent THEIR interest, not the hidden agenda of some corporate sponsor.

There should be one global currency. Only the global government should have the power to create currency and set interest rates to control economic growth and inflation. As we will discuss in a moment, this will drastically alter the role banks play in global finance.

Trade should be free between all regions of the world. However, during a period of transition there may be great turmoil while people crawl out from the ashes to begin rebuilding. During this transitional period, the government may facilitate the flow of some goods, namely food and healthcare, to prevent further suffering and starvation. Once this transition period is over, the government should maintain a minimum of involvement in commerce, except to ensure the safety and health of the people of Earth, as well as the health of the Earth itself.

Ideally, most regions should strive to become self-sufficient in order to minimize the need to import goods from other regions. There may still be regions that lack natural resources or the environmental conditions to become self-sufficient. In addition, other regions may produce an abundance that they cannot consume. If a region is permitted to maintain a negative trade imbalance for an extended period, the drain of capital out of that region will eventually lead to its people becoming impoverished. In such extreme cases, the world government may consider altering the borders of a region or even the merging of two regions so that the result is a self-sufficient region. Such a move may seem extreme, but is preferable to the alternative that would be an artificial wealth transfer akin to welfare to support the deficient region.

Reform Financial Institutions

The world’s financial institutions put profits before people, and that is going to be the catalyst for the financial disaster the world will soon go through. We must remove the temptation to do harm in the name of profits if we are to have a healthy financial system that supports a robust capitalist economy. At the same time, we need to ensure that banks do what is in the best interest of the people they serve. That cannot be done if a bank is located half way round the world from customers that they will never see in person. The best solution is that each regional government owns the bank in their region. Banks will have a reserve limit of 100%, meaning that they can only loan money that they have in deposit. They cannot create currency out of thin air as banks are permitted to do today. All interest earned from bank loans and fees collected go to the regional government replacing or at least minimizing the need for a regional tax. Loans can only be made to people and businesses in the banks region. Regions money stays in that region except for inter-regional trade. multiregional corporations should be discouraged or prohibited to prevent them from becoming too large and gaming the system.

By having the Region own the bank, the need for growing profits to satisfy shareholders is eliminated. The need for the region to collect taxes will be minimal if not eliminated altogether. Most money stays local, so it will be difficult for one organization to drain money from the local economy by simply transferring it elsewhere. Regions will have their own banks to fund capital projects, which removes the need to raise taxes to pay off bonds. Some of you may be thinking that this sounds ripe for wasteful or corrupt government spending. That is unlikely to happen because there will be an incentive to minimize waste and cost. If a region wants to be competitive and attract people and business to relocate in their region, they will need to balance the cost of providing a top-notch infrastructure while minimizing interest rates and fees for service, which create a burden on commerce. If infrastructure or services deteriorate or costs get too high it will detract from people and businesses moving there. We have therefore eliminated the need for greed that drives bad decisions, yet maintained the need to be responsible and competitive so as not to be wasteful, while keeping wealth local and decisions that impact a community local.

The global government may at their discretion issue new currency by depositing it in a regional bank. Doing so increases the money available for loans. The issuance on new currency should only be done to accommodate economic growth while keeping inflation at a minimum. The system cannot fail because there will always be enough currency in the bank to cover all loans.

A healthy Capitalist system relies on the hard work and innovation of citizens to improve their lot in life. A problem that keeps appearing in Capitalist economies from the very beginning is that if too much power accumulates in one or even a few hands, the system starts to break down and it becomes dysfunctional. If new business cannot compete and people cannot get ahead, a feeling of hopelessness and despair sinks in to the population, which carries with it a whole host of bad side effects, not the least of which is crime. The system should not impede growth unless that growth starts to impact competitiveness.

The United States saw this as a problem in the 19th and early 20th century and passed ant-trust laws to prevent companies from taking over an industry with a monopoly. Those laws have all been destroyed in the last 30 years with the result that ‘too big to fail’ as become a common phrase in American culture. No company should ever be too big to fail. Citizens should never have to bear the burden of bailing out a dysfunctional company. A fair and competitive market should always decide the winners. To accomplish this, some restriction may need to be devised to prevent a company or a person’s interest in multiple companies from exceeding some threshold whereby that person or company can manipulate an entire industry making it uncompetitive.

Reform Healthcare Institutions

As you can see from the chart above, healthcare as a percentage of GDP has grown by 700% in 50 years. That fact is the single biggest contributor to our nations deficit problem today, not social security or even defense spending. America spends three times as much as the next highest spender on healthcare. However, the quality of our healthcare is the worst among industrialized countries. We are in that race next to some East European and African countries.

Health care providers should all be converted back to non-profit organizations as they were in the 1940’s and 50’s. Universal health insurance should be provided by each region as a single payer system available to all citizens. Every region will be required to recognize anyone from outside that region for health care. Regions can then forward the cost for that healthcare to the region of origin. That way, regions whose industries rely on tourism will not be unfairly burdened by out of region people getting sick while visiting.

Regions acting without a profit goal, will nonetheless want to keep costs low while maintaining good health services in order to remain competitive. They can accomplish this by emphasizing wellness care and healthy living programs so that people stay healthy and avoid becoming a medical burden unnecessarily.

By providing free education to all citizens to any level they desire, the exorbitant costs doctors and even nurses incur before they even begin their career will drastically reduce the need to pay them as much just so they can repay student loans. Many doctors face financial hardship in their early years just for choosing that profession, and it just is not right.

A free higher education will also help ensure that we have people with the other skills required to compete in the modern world.

Another issue that will drastically reduce medical costs is tort reform. A doctor who is competent should not live under the fear that the slightest mistake will result in an expensive lawsuit and possibly a loss of their medical license. They need to be accountable, sure, but our current system goes excessively far. Doctors should feel free to document when an honest mistake is made so that other doctors can learn from that mistake. How else are they to improve? Tort reform will reduce the cost of malpractice insurance that is major contributor to rising healthcare costs.

The Second Reformation: Looking Forward

So, did you get out of you comfort zone, just a little bit? Did fears of the illuminati, or the New World Order conspiracy creep into your thoughts as you read my recommendation for a global government. Trust me when I say, that if the conspiracy theory is true, they would never in a million years adopt this plan. The reason is that I deconstruct their power base. The corrupt politicians and mega wealthy bankers will have no pulpit from which they can bully citizens. We will have a true democracy, something even the United States does not have today. Both banking and healthcare should be the twin backbones of every society. However, they are actually doing great harm instead, all in the name of profits. Those industries should be reformed into instruments for good and promoters of a healthy Capitalist global society. Finally, we would have an end to all wars and needless killing. Vast regions of the world that are suffering today under the harshest of conditions could be lifted up and made healthy again. The relief of so much suffering in the world alone makes this a noble cause.

If you agree with the ideas put forth here, then please help by passing the word. The more people who read this, the better our chances will be when it comes time for the reformation and the world is searching for answers. If you find flaw with these ideas please let me know. Perhaps things would have turned out different for the world if only Carl Marx had asked for a little critical feedback before publishing his Communist Manifesto.

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The Second Reformation – Part I


The first Reformation began in the 16th century when Martin Luther started a movement to break away from the Catholic Church, which had shaped society in Europe for 1,000 years. When people feel disenfranchised from the system, once empowered by something, in this case Martin Luther, they will form a new system. That is what the early Lutherans did; they formed their own church that met the needs of their people. Thus began the Protestant branch of Christianity.

It may be about to happen again; however, this time it is not a greedy and repressive Catholic church causing the problem, nor is the effect going to be limited in scope to Europe. The next reformation will affect the world’s new God, ‘money’, and involve the reshaping of our new-world church, the world’s financial institutions, on a global scale.

Which form is the best economic system: Capitalism or Socialism
The measure of what is best will vary depending on whom you ask, and what kind of mood they are in. For many people it all boils down to the selfish notion of whatever is best for them as an individual. When that is resolved then it becomes what is best for the family, children and other heirs. Once that is secure, what is best for society in general may or may not be considered. Not everyone fits this pattern however. Some people have a more highly evolved sense about their place within a society, realizing that when society is made better as a whole, that their lot in life can be improved also. Instead of the proposition being ‘I Win – You Lose’, it becomes ‘If you win, I win too’.

Socialism is an economic system in which the means of production are publicly or commonly owned and controlled cooperatively; or a political philosophy advocating such a system. As a form of social organization, socialism is based on co-operative social relations and self-management; relatively equal power-relations and the reduction or elimination of hierarchy in the management of economic and political affairs. (Wikipedia)

Few people in today’s world will argue about the problems inherent in a pure Socialist/Communist society as we saw in the former USSR. In a pure Socialist society, the drive to grow and improve is removed. All incentives to excel in life are diminished or obliterated. Because of the abuses suffered under Capitalism, where very powerful people could completely dominate a whole class of people, it became a desired feature of a new system to eliminate the possibility that one person could come to dominate over another. That was the intent; in practice though it had problems.

The flaws with the Socialist system are many, but most notably, it is easily gamed by people who would manipulate it for their own personal gain. People who would normally excel and seek power still do so, any way they can find it; usually with under the table with illegal activities or corruption. In addition, people who lack power become increasingly dependent on the state to provide all their needs with the result being lower productivity and a population that lacks fulfillment. The happiness that can come as the result of a rewarding lifestyle is just not possible.

Capitalism is an economic system in which the means of production are privately owned and operated for profit, usually in competitive markets. Income in a capitalist system takes at least two forms, profit on the one hand and wages on the other. In any case, profit is what is received, by virtue of control of the tools of production, by those who provide the capital. (Wikipedia)

Carl Marx came up with the theory of Socialism as an answer to the corruption and abuse that he witnessed in early 19th century England with child labor and sweat shops being the norm. Marx was not an evil wana-be dictator hell bent on the murder of millions of people in Russia. He was a humanist that simply saw a flawed system, and wished to improve humankind’s lot on this Earth. Others would take those ideals and twist them into what became Soviet Communism.

The flaws in human nature that led to the horrible working conditions in 19th century England are still with us. Humankind still has the capacity to act selfishly and with a greedy heart by treating other people like livestock; there to do their bidding, and nothing more. Capitalism was at risk of abject failure during and shortly after the 19th century because of these abuses.

Therefore, while Capitalism has been more successful in terms of the growth and prosperity of our society than its antithesis, Socialism, they both contain similar flaws; flaws in our human nature.

In dealing with human flaws, where Capitalism primarily differed with Socialism, is that the real power remained distributed in the hands of the people. Democracy won the day. Those people through their elected representatives learned how to place a yolk around the neck of Capitalism to keep its greed and corruption in check, and from gaining too much control, thereby realizing a balanced system. In a balanced system, Capitalism could provide growth and improve ones lot in life without the fear of repression or enslavement.

The Capitalist system though is self-serving, not self-correcting as some would profess. Those who sit at the top of the food chain, pine for a return to a pure unfettered Capitalism where their power can grow unchecked, claiming that only when set completely free can the system reach its real potential. They will go to any length, and spend any amount of money on propaganda to sell their position to the gullible voting public. All that is needed is time and money. Enough time for people to forget what they are capable of, and enough money to buy their votes.

What does all this mean to Mr. and Mrs. Main Street USA.
In the early part of the 20th Century America was at a crossroads. Capitalism was failing horribly with wild economic boom/bust cycles, and a new kid on the block Communism was starting to look attractive to the people living under Capitalist repression. Leaders knew they needed to do something drastic to preserve their Capitalist system or risk losing it to a communist takeover as Russia did just a few years earlier. What they did would turn out to be revolutionary, and save Capitalism. They introduced social reforms into the system, attempting to realize a few of the benefits of Socialism without adopting the entire system. This was not even meeting Socialism half way; it was more like a gentle nudge in the general direction. However, it was enough at the time to make a dramatic difference. Society blossomed like a flower.

The result was twofold: First, the people were lifted up out of poverty, creating for the first time on planet earth a society dominated by a middle class. The second thing to happen was that this new middle class had an insatiable hunger for ‘things’; the trappings of the wealthy that they had been denied. That desire to buy the things that they needed and wanted made them into a whole new entity; they became consumers. The more people consumed, the more producers could grow and produce the things they wanted. The American consumer economy created unprecedented growth, leading them to dominate the entire world as far as Income per capita and standard of living.

America has a debt problem; however, it is not the one you have been hearing about
A little problem happened on the way to the bank however. Economic output requires resources, many resources; especially energy. When domestic resources could not meet demand, those resources had to start coming from elsewhere. When that happened, the growth dynamic changed. Wealth started being syphoned off the economy to other nations. With those dollars disappearing, it became harder and harder for the typical American family to continue the growth they had all become accustomed too. However, being a resilient and industrious people, we found ways to continue to grow the economy, even while more and more of the nation’s wealth was being drained off. We discovered a new source of untapped labor by putting women to work. That bought us another decade, or so. However, the hunger to consume and grow the economy was great, and the producers of goods found ever more ingenious ways to tease that hunger.

They soon discovered that extending credit was an easy way of creating wealth where it did not exist before. The banks became the creators of the money supply by lending out more money than they had in deposits; they were permitted to actually create money out of thin air. Up to 10 dollars for every dollar they have in deposits can be created by a bank and loaned out.

It was soon realized that creating money out of thin air was very profitable. In fact, it did not even matter if the people borrowing the money had the ability to pay it back. More profit is made on a risky loan, than on a secure one; a lot more profit. There soon began a new gold rush, a credit gold rush, for the remaining gold left in the pockets of the middle class. The fact that this huge influx of money to the system maintained a healthy economic growth meant that the powers that be, the government, who should have been watching out for us, and crying foul, were turning a blind eye.

While Americans were going farther and farther into debt in a crazy attempt to maintain what had long ago become an unsustainable growth in the economy, the drainage of wealth from the American middle class became even more acute. In search for ever better profits, and a global market place with access to education, suddenly an inexpensive workforce became available. Manufacturing moved overseas in the proverbial blink of an eye. All those wages paid to American workers and being plowed back into the economy where gone. More wealth than ever before was now being syphoned out of the American economy. More and more debt would be needed to keep the economy fueled and growing. The only way to effectively do that was by easing credit so that anyone with even a slight desire could take a big swing at the American dream, go deeply into debt and buy a house. In addition, very efficient sales and marketing firms made sure everyone who was still breathing and capable of forming a signature got their piece of debt to fuel the economy. It was a feeding frenzy at the mortgage brokers to see who could sell the most debt, risk be damned.

The normal checks and balances that would prevent abuse of the system were tore down, one by one until the feeding frenzy reached a point commonly referred to as a population crash. A population crash occurs when a species of animal is given unrestrained access to food, and so they over breed creating more and more of their own kind until suddenly the last of the food is eaten, and there is no more to be found. The population then crashes with a massive die off because of starvation, sometimes even leading to the end of that species. It is a real phenomenon that happens in nature. We are now going through a financial population crash as the supply of new credit, like an animal’s food supply has dried up. When there was no one left to loan money to, all the people who could take on debt had already done so, the system lost its food supply, and the whole system started crashing.

In a panic, the government made a bone headed move with TARP. They gave billions of dollars to the banks in an attempt to create liquidity so people could start getting access more debt and keep the economy fueled. The banks in one of the only intelligent thing they would do throughout this fiasco withheld the funds and tightened up credit. They knew that the people could not perpetuate the debt game any longer. There was no one left to borrow the money they were given. In fact most banks didn’t even want or need the money, but were forced to go along. After all they could creat as much money as they need any time they wished.

The economy continued to suffer for another year with anemic growth. However, before you rush out and give your banker a big hug and a thank you for the tough love, know that they did put that TARP money to good use. They had to spend it once it was on their books, so they lined their own pockets with record payouts and bonuses to all executives. The rich get richer, while the rest of us stew in our own juices.

This will be continued in part two where solutions to some of our most pressing problems will be laid on the table.