The struggles of Detroit city are remarkable and tragic to behold. They present microcosm of America's situation in the wider world. Once strong industries losing foot to foreign competition, the evolving difficulties in overcoming a racist history, high rates of gun violence, high drop-out rates and a steadily crumbling infrastructure.
Below are 5 different historical elements helpful to understanding this city.
Dynamism. Detroit was one of the most dynamic Midwestern cities in to the 1960’s and 1970’s. Open and welcoming of immigrants, with the opening of the Erie Canal it had one of the most cosmopolitan mixes of citizenry. Like all large Mid-western cities, the mostly 1st to 3rd generation immigrants that came were motivated and hardworking. Well before the auto industry Detroit was a powerhouse in all manners of industry, whether it was machining, stove tops, department stores or even shipbuilding. No surprise it came to be the city that popularized the automobile and built it in numbers never before seen. Detroit created the concrete highway, the stop light. It gave birth to modern suburbia, with two car garages and endless rows of cookie cutter housing (Pulte). It fulfilled long unimaginable dreams of people to be able to work and live in vastly different environments and even made the upper class luxury of a personal cabin on a private beach widely attainable. When World War 2 came to the United States shores, the federal demand for the mass manufacture of trucks, tanks, airplanes and munitions, pushed this growth to steroidal limits. The GI Bill and subsequent subsidized push for everyone to be able to afford the suburban dream, pushed sprawl faster to never before seen heights. However, the hang-over of such excess also came back to roost faster in this city. The community breakdown that results when people try and live with a foot in different worlds (in this case, Urban and Rural) is present not only in the city proper, but every suburb where most neighbors do not know each other. Homes are seen more as a temporary investment, a rung of a social climb than a tie to land or community. The lack of a more effective public transportation system exemplifies the individual character of the city. People drive to work, to school, to church, on vacation, people drive everyday from 40min-3hr.’s. The psychological and sociological effects of such dedication to a fast and wandering lifestyle have yet to be fully diagnosed, but if you want to see the results you need look no farther than Detroit. The breakdown in the inner-city is best seen in the massive violent crime and incarceration rates as communities handle problems with guns instead of a trusted common law. In addition the overburdened auto-industry reached a critical mass with non-competitive labor agreements and lower productivity rates amongst both white and blue collar workers through the 70’s and 80’s, the result of which has been a steady bleed of jobs. In this city defined by the mobility and independence of it’s populace the result has been a rapid exodus. The first stage was from the city proper and Wayne County most rapidly in the late 50’s- late 70’s, and now the entire region of Southeast Michigan, late 80’s-present. In the wake of this exodus remain many good industries amongst the aged and atrophied statist titans, like the many good citizens amongst the statist corrupt powers that hold public offices and codified cultured prejudices.
Racial. Detroit was a city of immigrants from Europe different parts of America and increasingly in the 1910’s-1960’s southern Blacks. Blacks were ghettoized and prejudiced against. Given the worst jobs at large factories, poor housing, unequal representation in government and law enforcement, but still many found enough economic opportunity to make it worthwhile. Detroit was an active fighting ground for civil rights. Powerful unions officially sided with black revolutionaries like Martin Luther King and many local religious leaders. Black nationalists and middle-ground liberals of all races made more rapid strides in Detroit than most cities of its size in the late 60’s and early 70’s. They overturned racist laws and legal practice, and came to prominence in the police, courts and local government more quickly in Detroit than most cities. However, these victories that publicly overturned the “traditional” racism of school, housing and courtrooms, also threatened the deep rooted preferences and prejudices of the majority of the affluent holders of capital. Steadily the factories and businesses were opened farther and farther away from the city proper. With the resulting suburban exodus of the 60’s and 70’s, city based industries reached a critical mass the corporate ranks became increasingly dense and hard to break into. Inner-city Blacks were left trying to make more with less: Lower savings, less education, more poverty, more problems. What evolved in the metro Detroit area was government enabled and enforced segregation. Judges might be able to force bussing within school district lines, but if a group of people choose to found their own district, in say Oakland County, a judge could not require inter district bussing. Oakland and Macomb County police forces are notorious for their racial profiling, but raise a suit on it and you will be subject to their courts and their juries. Nowhere is this system of discrimination more codified than in the body that daily decides civil and criminal rights, the Justice System. Here you see the bias that poisons all governments and civil services, that proper justice costs money. People facing severe penalties get court appointed attorneys often incapable of making the proper defense. While the counties might choose not to get involved in the collective education of youth in the region, they have no problem paying to detain them for decades when they feel threatened.
In my eyes the abuses of the prison system mirror the military-industrial complex we see in Washington, with the attached lobbyists, carrier politicos and seeming stance above the justice system.
Security. Without justice you will have no peace. For decades blacks lived without public recognition of their greatest civil right: Equal protection under the law. In rebellion for this the political climate of Detroit became extreme like much of the United States and not only on courts and councils. The actions of the 67 riots and police response, particularly the STRESS death squads, further radicalized the city dwellers into opposing parties. The war on drugs became a war on the urban poor and widespread gun ownership escalated rapidly. The federal government increasingly encroached on the cities jurisdiction with its harsh mandatory minimum penalties and FBI Surveillance of criminals, politicians and civic leaders. Funding went up for increasingly paramilitary police, and the public was encouraged to be desensitized to the rampant death and destruction as seen on the local news: the weekly reports of police shootings and brutal murders. In a city already politically and economically repressive to black youth, taking up arms and selling drugs was a natural outlet to prestige and power. The destructive underground characteristics engendered by the drug war turned neighborhoods into gangland war zones. Detroit Police Chief Ella Bully-Cummings recently stated “…to put things in perspective, between 60 and 75 percent of our homicides in 2007 and the year before had a narcotics nexus, either through drugs, drug locations or people involved in drugs.” When prohibition against alcohol was enforced it was quickly repealed, because of the criminalizing effect it was having on society, paying for the ammunition in killers guns and bombs and giving them cause to use them. Drug prohibition has produced the same results, but it’s effects have been more segregated. For much of this suburban country the victims are like trees falling in the woods, the gun shots echo only so far and the media often fail to find its true source. It’s Detroit’s schools whose students are regular victims of gun violence, it’s the economically disadvantaged and politically weak who have all the more incentive to deal. A distant antisocial system of injustice was imposed on “criminals” that only resulted in a revolving door that escalated crime and depression. Meanwhile opportunists friendly with governments used increasing crime statistics to justify funding the construction of massive prison complexes statewide. The objective of these facilities and their officers was for-profit detention, not rehabilitation. This is just another dead end for the sick, illiterate and disadvantaged; one that leaves a permanent record to follow a person all their life. In Detroit a youth is more likely to spend time in jail or prison than to make it through college.
Political. With an exodus of so much of the educated, experienced professional class and the absence of economic stimulus came the growth of a political class. The Coleman Young election, turned into a 20 year era. His monopolistic political machine racially integrated, but gradually stagnated the ranks of police and government employ with political favoritism best seen by the debacle with his friend police commissioner Hart, his ban on city workers speaking to reporters and his refusal to allow suburban residents to serve on the Detroit Police Department. One of the demonstrable successes of Detroit was that the oppressed minority was able to freely organize, elect and re-elect their choice of politician. However, where the electoral process may have failed was in providing a false security; that elections would make preserving their quality of life any easier. Unfortunately by economic metrics Detroit was worse off in 1993 than it had been in 1971. Elections helped to more firmly establish certain rights and opportunities, but they could not help the rank and file to find employment in the city limits. The “conservative” voters whose candidates lost the elections voted with their feet and pocket books to find communities they could feel like winners in. Consider that John F. Nichols the founder of STRESS, the man who would lose the mayoral race to Young, would later become Oakland County Sheriff.
Economics. No politician controls the economy. The economy is a concert of a mass of individuals. Detroit’s greatest economic success, the mass manufacture of the automobile, was also it’s largest employer with a ten thousand company web of suppliers. They had a competitive advantage, but it was not sustained. Critical to an economic turnaround is the ability to re-educate and Detroit Schools have fallen short. In 2006 the Detroit School district, 11th largest district in the country, had a graduation rate of 21.7%, ranked as the last in the country for its size. Meanwhile Oakland County high schools have some of the highest graduation rates. While Oakland County currently has a 7% unemployment rate Wayne’s is closer to 10% with a quarter to a third of residents below the “poverty line.” Life is distinctly different across the county borders of Detroit. In Detroit you will find few of the traditional chain grocery stores or big box retailers that proliferate even in small towns. In Oakland County they build industrial parks and strip malls, in Detroit they tear buildings down. On top of that to have to pay an income tax and 67 mill property tax to the authorities, only to receive in return poorly functioning courts, schools and cops; it is little wonder businesses don’t move back. Take DFI, a family business founded in Detroit, employing mostly Detroiters, but to take advantage of Southfield’s tax system we are on the north side of 8 mile. The only reason for such disparity across an artificial border can be found in the underpinnings of the public system that people rely on or in many cases, suffer under.
For too long people have accepted these injustices as the tragic but natural results of a society experiencing hard times; that the people in the police and justice system are doing their best with a bad situation. While this may be the case for certain individuals, the failures of the local system of justice are so oppressive that one is left to call into question the very principles on which it operates. If a police man is convicted on corruption he will lose his job and possibly worse. So why should derelict divisions and prejudiced practices of the justice system continue to stand? Why do we accept mandatory minimums? What about dishonest cops shaking down drug dealers, dishonest city commissioners shaking down businesses, and dishonest mayors shaking down the city itself? The answer is that the majority of people do not accept these things. Nobody wants crime and mayhem on their streets or oppression in the halls of justice, but hand in hand no-one is born knowing the path to prevent these misdeeds. What we do know, is that bold-faced evils daily occur in this city because corruption is and had been an accepted currency of city bosses, be they Drug Dealers, Unions, Justices, Commissioners or Mayors. The best way to protect from such crimes is to reveal them. Free Detroit.
Sunday, December 28, 2008
Sunday, May 4, 2008
Why Your Life Will Be Harder Than Your Parents
Is America on the verge of a financial collapse? Are we entering the next Great Depression? Is the dollar going to fall even further? Oil $200 a barrel? Is China going to take over the world?
Broad doom-saying headlines and statements like these have been sprinkled throughout the news for so long now that we have naturally grown desensitized to them. An unfortunate by-product of a news cycle that’s primary interest is the comforting pleasure of entertainment and not the dedicated focus of education.
While the broad consensus among Americans is that we are in for harder times, we weren’t born with an understanding of the history of the financial system, exchange rates, government debt, and other nuanced economic issues our lives are shaped by. Without tangible dates, facts and figures that can answer the all important questions of how does this effect me and why is it worth my time to understand, people find little reason to alter their habits.
However, what keeps us reading the articles and watching the programs is this unscratchable itch in our mind that things just aren’t right. Why are all the goods I by made in a foreign country? How can a government run on a perpetual deficit? Why doesn’t the rest of the world live in better conditions? How is it that America is so clearly falling behind?
My attempt with the rest of this piece will be to provide a more comprehensible common sense explanation of the changes we can expect in our personal financial/economic situations sprinkled with simple statistics and enough historical context to explain why these things are certain to occur. Things that you should be prepared for:
First. The government won’t help you, you are more likely to be helping it the rest of your life.
The deficit this year grew to over 9.5 trillion dollars. With annual interest payments of over 320 billion this is no small sum, but if the government were to use GAAP accounting as they mandate business to do, which recognizes accrued obligations on such things as health care and social security they would have to show a deficit of over $60 trillion dollars, growing exponentially larger as the population gets larger and entitlements only expand. The Federal government is effectively bankrupt, plain and simple. You will never see that social security being deducted from your check and further you will pay even more in taxes throughout your life and receive less medical assistance, less housing assistance, education spending, less unemployment, welfare, farming subsidies, across the board less of just about everything. The baby boom generation just turned 62 and has begun drawing their social security payments. Over the next generation the entitled elderly population will double to 72 million. You’ve probably heard throughout your life that the government has been putting spending off on future generations? Well guess what, that’s us.
Second. Your interest rates and all prices will rise except for the cost of your labor.
Whether it is the 3% on your student loans, 5% on your mortgage or 20% on your credit cards, they will all go up and faster than the wage increases you can expect. Just imagine if your credit card was at 35% interest, or more likely that you didn’t have access to one, because companies knowing people won’t be able to pay the high interest rates demanded, just won’t issue them to as many people. Same goes for business loans. That 10% profit you planned on earning won’t cut it, it will need to be more along the lines of 20%, that is again if you’re lucky enough to find it. Right in line with these prices will rise. The $1 dollar paper towel roll will be $3, the $15 dollar salmon filet will be $35, and energy costs will triple to quadruple, perhaps worse. This credit crisis and run up in energy prices, food and raw materials prices are just a warm up. To keep the wheels of the economy turning the Federal Reserve pumps money into the system at an ever-increasing rate. During the “run” on Bear Sterns and the subsequent liquidity grabbing, the Fed increased the money supply as measured by M3 by over 11%. That was enough to calm people’s initial fears about whether they’d be able to get their hands on dollars, and in most opinions the right move, but it totally avoids the question of whether these banks are legitimately solvent, just as the government has avoided being asked this fundamental question by coaxing the Fed into providing endless cash on hand. So why won’t the US continue to get away with this trickery if we have in our living memory you ask? Because our memories are short. Following WW2 America was in a preeminent position as the only fully functioning modernized economy run by a hungry experienced generation who had experienced economic depression and war. Such a good position that the elite nations agreed to make the dollar the world currency, on which all other currencies would be based (backed by gold at 35 dollars per ounce until 1971). Britain, Germany, France, Canada, even the USSR and most every major nation learned to trust the dollar and base their currency off it in some part. If you were in Germany and wanted to convert your Italian Lira to Deutsche Marks, you converted them to dollars and then into Marks. Everyone trusted the dollar, but after we took it off the gold standard to help us pay for the Vietnam War and rising deficits without having to worry about our gold disappearing, people naturally began to lose faith. When an OPEC boycott and other factors caused inflation to skyrocket in the mid-late 70’s, the Fed actually decided to try and protect the integrity of the dollar from inflation by raising interest rates higher than 15%, (an idea of what might be to come) which caused many other problems and a political regime quickly succeeded by a New World Order, whose priority was not the fundamental integrity of the dollar, but the appearance of the integrity of the economy as demonstrated in the unprecedented massive deficit spending they initiated and exploited for maximum personal gain. In response to this monetary instability governments around the world have slowly but surely been breaking away from dependence on the dollar. The creation of the Euro was a direct response to what these more monetarily experienced nations recognized as the loss of the former stable world currency. While nations with less experience and development across the world continue to use the dollar directly and indirectly as a peg (China, Brazil, Saudi Arabia and on and on) to our direct benefit (think $1 paper towels and $15 dollar salmon filets) it is becoming a more widely held view in all nations that the dollar is less and less suitable for this purpose resulting in actions like China’s who has taken to increase it’s reserves of Euros decrease it’s reserves of dollars and began to adjust its peg to the dollar. And this is happening around the world, as anyone who travels abroad will tell you just how the purchasing power of their dollar has disintegrated at an increasing rate. The reason it is a guarantee that our interest rates and prices will rise is because while we have long been beneficiaries of the credit people place in our currency, the self-evident truth these days is that we do not deserve this credit. Our government, our economy and our consumers are completely overextended as most recently demonstrated by the growing deficit, the credit crunch and the fact that last quarter the personal savings rate fell to the lowest level since they began recording it in 1947. We have transitioned from a manufacturing society to one that provides less tangible, more subjectively valued services and afforded our luxurious lifestyles and low rates by an international workforce hungry enough not to ask questions in their efforts at economic success. While the exact time line of these effects is as difficult to predict as peoples emotions, for the same reasons, the inevitability of this decline is not.
Third. Your investment potential will be limited.
People aren’t completely irrational for not saving. Why put your hard earned money into a money market fund at 2% that has no chance of keeping pace with inflation at the rate dollars are printed? So people try and get more action for their dollar by putting it into stocks and bonds, and of course the banks and brokerages aren’t going to turn them down. Instead they find ways to promise more and more return by taking on increasing risk and try and justify the dangers away with talk of the complexity of their mathematical models and the “science” that modern investments has become. However there is nothing modern about it asides from the shiny new devices they’re using, the Blackberries and Bloombergs that make the same old Ponzi schemes look like magic. If you haven’t had the chance to study the trickery in the modern financial system here’s a quick lesson. You have $1 million dollars to invest, you want a 10% return with as little risk as possible so your friendly financial advisor suggests that you put it into something historically safe like a mortgage or corporate bonds, but you can’t get 10% when mortgages and bonds are only selling to return 5% that is unless your financial advisor goes out and borrows another $9 million at an interest rate below 5% (likely indirectly from Chinese or Arab lenders) and uses all $10 million to make loans at 5%. Now your $1 million is earning 10% and because it’s in mortgages or some other historically safe sector your advisor will tell you you’re not taking much risk, but all it takes is a change in one of the faulty assumptions made, whether it is the interest rates, falling housing prices or one of the lenders just feeling unsettled for this house of cards to collapse. That’s what’s happened to Bear Sterns, and is what’s occurring to all these big financial services companies that so many people put their trust in, which allowed them to leverage their equity between 15-30 times. Truth is they’ve been awash in money for decades and they just need to find places to put it to justify keeping their jobs. You can only buy so much GE, Coca-Cola and Google stock, because 90% of listed companies are overpriced. Warren Buffett just announced to shareholders in his company that they should expect returns on their investments to shrink in the near future. That people should be happy if they make 10%. This from a man whose company has returned an average of 24% for over 30 years and it’s not just him. Leading investors and industrialists around the world are sounding the alarm on the American economy. Even in Europe countries like Britain and Germany that have taken more fiscally and monetarily balanced approaches have been watching their middle classes shrink under the burden of rising prices and increased foreign competition. The American dream of the middle-income worker who puts away 10% of his paycheck to watch it grow into a healthy nest egg allowing them to put their kids through college and retire at 65 is increasingly an illusion.
Now I have no crystal ball. Admittedly my estimates, particularly in terms of the amounts of inflation, interest and investment rates are all speculations. I do not discuss the intricacies of competitive advantage, the revolutions of technology or that American manufacturers have for years been handicapped by a currency that other countries manipulate to the advantage of their productive capabilities, which our currencies devaluation is likely to have some positive affects on. I also have no delusions that Europeans have the answer. With some of the most heavily unionized workforces, and excessive government systems of regulations and benefits they too will experience great tribulations. To varying degrees rising powers also have their issues with corruption, a lack of transparency, excessive bureaucracies, authoritarianism, demographic problems, monetary and fiscal reforms and on and on. However, no comfort can be taken in the faults of others, because their failings will not change the fact that the problems enumerated will increasingly become a part of your life.
The dilemma we face is not new. These are problems of the excess of affluence and coming off the apex of empire that are as old as civilization, all that is new is that it is our generation that will have to deal with them. At the root of these problems is the very real fact that America is no longer competitive. We see the decadence every day in our peers more concerned with titles and impressions than actually making an impact. We are a nation of lawyers, financial advisors, consultants, actors, artists and politicians, aspiring to titles and accreditations, better houses and cars on borrowed money, to status and impressions more than to actually being productive and affecting positive change. In children that tune in and drop out.
We live on the shoulders of those that came before us, in the buildings they constructed, in the institutions they created with the technology they invented and the work they put into it. Over the past 50 years we have increasingly farmed this work out to foreign countries in return for IOU’s. Japan, the largest holder of American debt rose from the ashes of World War 2 to become a leading power in the world in 30 years on savings rates right around 20% of income. For over a decade now China, with 10 times the population of Japan, has been saving at over 25%, with this years estimate at 40-50%. In an age when capital flows freely across borders, anyone who claims belief in capitalism should understand that it is the people that save who own the world. The future is theirs.
People look to Barack Obama with hope that he will change things. A representative of the new age, more culturally aware and open-minded then the apathetic poster boy for entitlement he replaces. They see in him the hope of our generation, that by our intellect we will rise above our problems and I sincerely hope this is the case, but counting on a politician is like wishing on a star. I don’t mean to give the impression that issues like the Iraq War and government reform aren’t important, they are crucial, but sedating your life with CNN and political talk that’s so much the fashion these days changes very little. The failure of America is that of waiting for others to do what needs to be done and more than ever what we need is revolution, and not a revolution of arms or words, but one of actions, because it will be only by our collective hunger, our sweat, our pain and sacrifice that things will really change. The only question is are you ready for this reality?
Broad doom-saying headlines and statements like these have been sprinkled throughout the news for so long now that we have naturally grown desensitized to them. An unfortunate by-product of a news cycle that’s primary interest is the comforting pleasure of entertainment and not the dedicated focus of education.
While the broad consensus among Americans is that we are in for harder times, we weren’t born with an understanding of the history of the financial system, exchange rates, government debt, and other nuanced economic issues our lives are shaped by. Without tangible dates, facts and figures that can answer the all important questions of how does this effect me and why is it worth my time to understand, people find little reason to alter their habits.
However, what keeps us reading the articles and watching the programs is this unscratchable itch in our mind that things just aren’t right. Why are all the goods I by made in a foreign country? How can a government run on a perpetual deficit? Why doesn’t the rest of the world live in better conditions? How is it that America is so clearly falling behind?
My attempt with the rest of this piece will be to provide a more comprehensible common sense explanation of the changes we can expect in our personal financial/economic situations sprinkled with simple statistics and enough historical context to explain why these things are certain to occur. Things that you should be prepared for:
First. The government won’t help you, you are more likely to be helping it the rest of your life.
The deficit this year grew to over 9.5 trillion dollars. With annual interest payments of over 320 billion this is no small sum, but if the government were to use GAAP accounting as they mandate business to do, which recognizes accrued obligations on such things as health care and social security they would have to show a deficit of over $60 trillion dollars, growing exponentially larger as the population gets larger and entitlements only expand. The Federal government is effectively bankrupt, plain and simple. You will never see that social security being deducted from your check and further you will pay even more in taxes throughout your life and receive less medical assistance, less housing assistance, education spending, less unemployment, welfare, farming subsidies, across the board less of just about everything. The baby boom generation just turned 62 and has begun drawing their social security payments. Over the next generation the entitled elderly population will double to 72 million. You’ve probably heard throughout your life that the government has been putting spending off on future generations? Well guess what, that’s us.
Second. Your interest rates and all prices will rise except for the cost of your labor.
Whether it is the 3% on your student loans, 5% on your mortgage or 20% on your credit cards, they will all go up and faster than the wage increases you can expect. Just imagine if your credit card was at 35% interest, or more likely that you didn’t have access to one, because companies knowing people won’t be able to pay the high interest rates demanded, just won’t issue them to as many people. Same goes for business loans. That 10% profit you planned on earning won’t cut it, it will need to be more along the lines of 20%, that is again if you’re lucky enough to find it. Right in line with these prices will rise. The $1 dollar paper towel roll will be $3, the $15 dollar salmon filet will be $35, and energy costs will triple to quadruple, perhaps worse. This credit crisis and run up in energy prices, food and raw materials prices are just a warm up. To keep the wheels of the economy turning the Federal Reserve pumps money into the system at an ever-increasing rate. During the “run” on Bear Sterns and the subsequent liquidity grabbing, the Fed increased the money supply as measured by M3 by over 11%. That was enough to calm people’s initial fears about whether they’d be able to get their hands on dollars, and in most opinions the right move, but it totally avoids the question of whether these banks are legitimately solvent, just as the government has avoided being asked this fundamental question by coaxing the Fed into providing endless cash on hand. So why won’t the US continue to get away with this trickery if we have in our living memory you ask? Because our memories are short. Following WW2 America was in a preeminent position as the only fully functioning modernized economy run by a hungry experienced generation who had experienced economic depression and war. Such a good position that the elite nations agreed to make the dollar the world currency, on which all other currencies would be based (backed by gold at 35 dollars per ounce until 1971). Britain, Germany, France, Canada, even the USSR and most every major nation learned to trust the dollar and base their currency off it in some part. If you were in Germany and wanted to convert your Italian Lira to Deutsche Marks, you converted them to dollars and then into Marks. Everyone trusted the dollar, but after we took it off the gold standard to help us pay for the Vietnam War and rising deficits without having to worry about our gold disappearing, people naturally began to lose faith. When an OPEC boycott and other factors caused inflation to skyrocket in the mid-late 70’s, the Fed actually decided to try and protect the integrity of the dollar from inflation by raising interest rates higher than 15%, (an idea of what might be to come) which caused many other problems and a political regime quickly succeeded by a New World Order, whose priority was not the fundamental integrity of the dollar, but the appearance of the integrity of the economy as demonstrated in the unprecedented massive deficit spending they initiated and exploited for maximum personal gain. In response to this monetary instability governments around the world have slowly but surely been breaking away from dependence on the dollar. The creation of the Euro was a direct response to what these more monetarily experienced nations recognized as the loss of the former stable world currency. While nations with less experience and development across the world continue to use the dollar directly and indirectly as a peg (China, Brazil, Saudi Arabia and on and on) to our direct benefit (think $1 paper towels and $15 dollar salmon filets) it is becoming a more widely held view in all nations that the dollar is less and less suitable for this purpose resulting in actions like China’s who has taken to increase it’s reserves of Euros decrease it’s reserves of dollars and began to adjust its peg to the dollar. And this is happening around the world, as anyone who travels abroad will tell you just how the purchasing power of their dollar has disintegrated at an increasing rate. The reason it is a guarantee that our interest rates and prices will rise is because while we have long been beneficiaries of the credit people place in our currency, the self-evident truth these days is that we do not deserve this credit. Our government, our economy and our consumers are completely overextended as most recently demonstrated by the growing deficit, the credit crunch and the fact that last quarter the personal savings rate fell to the lowest level since they began recording it in 1947. We have transitioned from a manufacturing society to one that provides less tangible, more subjectively valued services and afforded our luxurious lifestyles and low rates by an international workforce hungry enough not to ask questions in their efforts at economic success. While the exact time line of these effects is as difficult to predict as peoples emotions, for the same reasons, the inevitability of this decline is not.
Third. Your investment potential will be limited.
People aren’t completely irrational for not saving. Why put your hard earned money into a money market fund at 2% that has no chance of keeping pace with inflation at the rate dollars are printed? So people try and get more action for their dollar by putting it into stocks and bonds, and of course the banks and brokerages aren’t going to turn them down. Instead they find ways to promise more and more return by taking on increasing risk and try and justify the dangers away with talk of the complexity of their mathematical models and the “science” that modern investments has become. However there is nothing modern about it asides from the shiny new devices they’re using, the Blackberries and Bloombergs that make the same old Ponzi schemes look like magic. If you haven’t had the chance to study the trickery in the modern financial system here’s a quick lesson. You have $1 million dollars to invest, you want a 10% return with as little risk as possible so your friendly financial advisor suggests that you put it into something historically safe like a mortgage or corporate bonds, but you can’t get 10% when mortgages and bonds are only selling to return 5% that is unless your financial advisor goes out and borrows another $9 million at an interest rate below 5% (likely indirectly from Chinese or Arab lenders) and uses all $10 million to make loans at 5%. Now your $1 million is earning 10% and because it’s in mortgages or some other historically safe sector your advisor will tell you you’re not taking much risk, but all it takes is a change in one of the faulty assumptions made, whether it is the interest rates, falling housing prices or one of the lenders just feeling unsettled for this house of cards to collapse. That’s what’s happened to Bear Sterns, and is what’s occurring to all these big financial services companies that so many people put their trust in, which allowed them to leverage their equity between 15-30 times. Truth is they’ve been awash in money for decades and they just need to find places to put it to justify keeping their jobs. You can only buy so much GE, Coca-Cola and Google stock, because 90% of listed companies are overpriced. Warren Buffett just announced to shareholders in his company that they should expect returns on their investments to shrink in the near future. That people should be happy if they make 10%. This from a man whose company has returned an average of 24% for over 30 years and it’s not just him. Leading investors and industrialists around the world are sounding the alarm on the American economy. Even in Europe countries like Britain and Germany that have taken more fiscally and monetarily balanced approaches have been watching their middle classes shrink under the burden of rising prices and increased foreign competition. The American dream of the middle-income worker who puts away 10% of his paycheck to watch it grow into a healthy nest egg allowing them to put their kids through college and retire at 65 is increasingly an illusion.
Now I have no crystal ball. Admittedly my estimates, particularly in terms of the amounts of inflation, interest and investment rates are all speculations. I do not discuss the intricacies of competitive advantage, the revolutions of technology or that American manufacturers have for years been handicapped by a currency that other countries manipulate to the advantage of their productive capabilities, which our currencies devaluation is likely to have some positive affects on. I also have no delusions that Europeans have the answer. With some of the most heavily unionized workforces, and excessive government systems of regulations and benefits they too will experience great tribulations. To varying degrees rising powers also have their issues with corruption, a lack of transparency, excessive bureaucracies, authoritarianism, demographic problems, monetary and fiscal reforms and on and on. However, no comfort can be taken in the faults of others, because their failings will not change the fact that the problems enumerated will increasingly become a part of your life.
The dilemma we face is not new. These are problems of the excess of affluence and coming off the apex of empire that are as old as civilization, all that is new is that it is our generation that will have to deal with them. At the root of these problems is the very real fact that America is no longer competitive. We see the decadence every day in our peers more concerned with titles and impressions than actually making an impact. We are a nation of lawyers, financial advisors, consultants, actors, artists and politicians, aspiring to titles and accreditations, better houses and cars on borrowed money, to status and impressions more than to actually being productive and affecting positive change. In children that tune in and drop out.
We live on the shoulders of those that came before us, in the buildings they constructed, in the institutions they created with the technology they invented and the work they put into it. Over the past 50 years we have increasingly farmed this work out to foreign countries in return for IOU’s. Japan, the largest holder of American debt rose from the ashes of World War 2 to become a leading power in the world in 30 years on savings rates right around 20% of income. For over a decade now China, with 10 times the population of Japan, has been saving at over 25%, with this years estimate at 40-50%. In an age when capital flows freely across borders, anyone who claims belief in capitalism should understand that it is the people that save who own the world. The future is theirs.
People look to Barack Obama with hope that he will change things. A representative of the new age, more culturally aware and open-minded then the apathetic poster boy for entitlement he replaces. They see in him the hope of our generation, that by our intellect we will rise above our problems and I sincerely hope this is the case, but counting on a politician is like wishing on a star. I don’t mean to give the impression that issues like the Iraq War and government reform aren’t important, they are crucial, but sedating your life with CNN and political talk that’s so much the fashion these days changes very little. The failure of America is that of waiting for others to do what needs to be done and more than ever what we need is revolution, and not a revolution of arms or words, but one of actions, because it will be only by our collective hunger, our sweat, our pain and sacrifice that things will really change. The only question is are you ready for this reality?
Sunday, March 23, 2008
Why is it so hard to make the right decisions if the truth is self-evident?
The short answer to this question is that there are simply so many decisions to make. After all, every day we are confronted with millions of decisions if not more, and most of them we are not even consciously processing. You do not think of what look to give every passerby, what words you will choose in any given conversation, as you don’t think of every breath you take. While some decisions get the chance to spend more time under the magnifying glass that is your consciousness like these words you are reading, in the end still the majority of the processing falls to an endless network of subconscious responses, neural pathways formed during your previous encounters, in this case with words, language, and lofty self-help endeavors. While there are objective truths in life, as any priest or mathematician will tell you, we each see the world through a complex prism formed by an interplay of our experiences in the world outside our skin and one within, each more complex than we can ever hope to contiguously understand. However, life necessitates that we go forward so in hopes of helping us on this journey I submit to you my simple thoughts on this ever so complex of questions.
First, is that the root of our dissatisfaction with our decisions that this question implies rests squarely between our ears. While we may feel guilty or upset that we have been misdirected somewhere along the way, the simple fact is that we are not born knowing, but if we don’t take responsibility for ourselves, work to understand that maze of associations, conceptualizations, and emotions our life’s energy is running through and accept that we have the power to change, we haven’t a chance to get on the right path no matter who is there to help. Meditate/pray, talk to friends and family a psychologist, priest or anyone that you can trust and above all do not fear openness and honesty with your self as these are the only paths to something better.
Second, is that we must eliminate our addictions. Whether it is to alcohol, drugs, a sense of satisfaction from exhibiting we are better than another or emotional dependency, the greatest obstacle each of us faces in coming to know ourselves and truly living well is false comfort. On some level we will always know that the sense of control we derive from these pleasures is false, and likely the greatest source of our unhappiness, and while I know this is not an easy step not taking it risks weakening the foundation upon which we build all other things in our life. You might feel you can hide these secrets from others, but it is for you that you should have concern as you are living a lie. To beat this we must first defeat our feelings of shame that fuel these cycles of dependency. Absolutely any human being can get caught up as you have. The reason AA and similar support groups are effective is because they affirm that we are not alone in our struggles, and that there are always people who will help us deal with these problems and there always, always are.
Third, is that we must let go of those things that we covet the most, namely, the material aspects of religion, politics, family and all other personal possessions that distract from the truths that underlie them. This is not to say that we must let go of religious beliefs, political views, or members of our family as those support and guide us more than anything, but that there is a tendency towards excessive veneration of the structures, the titles, and objects that we grow familiar with while coming to our understandings. When our associations to terms like Communist, King, Islam, Conservative, Black, Democrat, cause us to compartmentalize and lose sight of the people that we speak of, we have also lost sight of the truth and ourselves just as when we overly revere our fathers and mothers to the point that we can stop seeing their weaknesses, needs and their basic humanity. It is not wrong to have attachment to your house or car, but to care more for inanimate objects that you see and feel more than for people that die, because they are not near is a failure of our understandings and so much a reason as to why we find ourselves in this divided world today. This would seem a harder challenge to overcome, because while addiction occurs primarily in the mind, how can one fight what they do not see, what they have never known and often prejudices affirmed by those closest to us and most honored by us. To this, I think the only solution is to live with a fearless openness, to seek out and communicate with these individuals we judge harshly or revere excessively and let our shared humanity shape our judgment with compassion and not the great poisons of indifference and excessive want, for when we choose to turn a blind eye to any of our brothers and sisters, fathers and mothers it is only ourselves that we are truly cutting off.
What I meant to express with these words are not moral judgments, but steps I believe will help all of us to make better decisions and achieve better things in our lives. I know because I have spent so much of my life blaming others, not taking responsibility for my actions, allowing addictions and dependencies to rule my life, and taking for granted those closest to me, but with hard work and help from others I have begun to see the light and the error of my ways. For anyone who wants to discuss any of this feel free to contact me any time, day or night.
Cell: (248) 672-1739
First, is that the root of our dissatisfaction with our decisions that this question implies rests squarely between our ears. While we may feel guilty or upset that we have been misdirected somewhere along the way, the simple fact is that we are not born knowing, but if we don’t take responsibility for ourselves, work to understand that maze of associations, conceptualizations, and emotions our life’s energy is running through and accept that we have the power to change, we haven’t a chance to get on the right path no matter who is there to help. Meditate/pray, talk to friends and family a psychologist, priest or anyone that you can trust and above all do not fear openness and honesty with your self as these are the only paths to something better.
Second, is that we must eliminate our addictions. Whether it is to alcohol, drugs, a sense of satisfaction from exhibiting we are better than another or emotional dependency, the greatest obstacle each of us faces in coming to know ourselves and truly living well is false comfort. On some level we will always know that the sense of control we derive from these pleasures is false, and likely the greatest source of our unhappiness, and while I know this is not an easy step not taking it risks weakening the foundation upon which we build all other things in our life. You might feel you can hide these secrets from others, but it is for you that you should have concern as you are living a lie. To beat this we must first defeat our feelings of shame that fuel these cycles of dependency. Absolutely any human being can get caught up as you have. The reason AA and similar support groups are effective is because they affirm that we are not alone in our struggles, and that there are always people who will help us deal with these problems and there always, always are.
Third, is that we must let go of those things that we covet the most, namely, the material aspects of religion, politics, family and all other personal possessions that distract from the truths that underlie them. This is not to say that we must let go of religious beliefs, political views, or members of our family as those support and guide us more than anything, but that there is a tendency towards excessive veneration of the structures, the titles, and objects that we grow familiar with while coming to our understandings. When our associations to terms like Communist, King, Islam, Conservative, Black, Democrat, cause us to compartmentalize and lose sight of the people that we speak of, we have also lost sight of the truth and ourselves just as when we overly revere our fathers and mothers to the point that we can stop seeing their weaknesses, needs and their basic humanity. It is not wrong to have attachment to your house or car, but to care more for inanimate objects that you see and feel more than for people that die, because they are not near is a failure of our understandings and so much a reason as to why we find ourselves in this divided world today. This would seem a harder challenge to overcome, because while addiction occurs primarily in the mind, how can one fight what they do not see, what they have never known and often prejudices affirmed by those closest to us and most honored by us. To this, I think the only solution is to live with a fearless openness, to seek out and communicate with these individuals we judge harshly or revere excessively and let our shared humanity shape our judgment with compassion and not the great poisons of indifference and excessive want, for when we choose to turn a blind eye to any of our brothers and sisters, fathers and mothers it is only ourselves that we are truly cutting off.
What I meant to express with these words are not moral judgments, but steps I believe will help all of us to make better decisions and achieve better things in our lives. I know because I have spent so much of my life blaming others, not taking responsibility for my actions, allowing addictions and dependencies to rule my life, and taking for granted those closest to me, but with hard work and help from others I have begun to see the light and the error of my ways. For anyone who wants to discuss any of this feel free to contact me any time, day or night.
Cell: (248) 672-1739
Monday, January 21, 2008
Human Nature: The Inner Psychopath
Sometimes it seems that our human capacity for cruelty is as great as that for kindness. News headlines echo and emphasize the crimes committed daily by our brothers and sisters. Movies and TV shows popularize, and explore the fascination of bringing pain to others. Not a weekend passes without release of another horror movie, promising more blood and gore and greater cruelty than the last and while expletives are censored on television, at any hour you can find fictional police drama's with stories of heinous crimes, whole series set around serial killers and this darker part of our nature. While the pages of history are filled and often shaped by this darkness and in our hearts, it is a lack of proper fear and respect for this weakness, a lack of awareness that is making the problem worse. While each of us has the potential for greatness and this is where most focus their attention, if we neglect an understanding of our weakness we will be doomed by it.
"You don't understand these things because your not underthe influence of factor x." (Dennis Rader, BTK Killer in taunting 1978 letter to police, errors included)
Surely when Rader penned those words he was fulfilling his self satisfying desire for dominating social control, and not actually attempting to answer the question of what makes him what he is. However, it approximates the internal justification so many make in trying to explain such unforgivable behavior. We call them demons, because we cannot understand them as humans, but murderers come from across the human spectrum, from every age, class and culture and have since the beginning of human history. In this age of individual empowerment, they too have found how to use the tools to devastating effect. While they may have had the support of millions there is no doubt today that the actions of Mao, Stalin, Hitler, Pol Pot and countless others were, like serial murders, self promoting for purposes of social control. While the lives and actions of Mao and Rader were as different in other ways as any two can be, both share the characteristic of living almost entirely for themselves. There is no empathy for their victims, there is nothing greater than themselves.
Each one of us feels this pull in one way or another. Whether it is the desire to pick on a weaker individual, or the more silent oppression of vicious angry frustrated thoughts that go unspoken to those that pass us by, the capacity for cruelty is alive in each of us. We watch these horror movies, and crime dramas, because they excite us, because the titillation of evil thoughts and self glorification is a more effective emotional control than others. While our intuitive desire for control is nothing new, and cruelty older than humanity, technology has made the act of ending life so simple that we risk the ending of life as we know it and not only from the ever present threat of nuclear annihilation, but from the increasing frequency of life shattering acts including school shootings, suicide bombings, genocides and other violent crimes.
Changing these things doesn't require us to roll back technological progress, but it means we must take the time to move forward in our collective understanding of the human mind. Otherwise, this sacrifice of self awareness for gratification will be our end.
"You don't understand these things because your not underthe influence of factor x." (Dennis Rader, BTK Killer in taunting 1978 letter to police, errors included)
Surely when Rader penned those words he was fulfilling his self satisfying desire for dominating social control, and not actually attempting to answer the question of what makes him what he is. However, it approximates the internal justification so many make in trying to explain such unforgivable behavior. We call them demons, because we cannot understand them as humans, but murderers come from across the human spectrum, from every age, class and culture and have since the beginning of human history. In this age of individual empowerment, they too have found how to use the tools to devastating effect. While they may have had the support of millions there is no doubt today that the actions of Mao, Stalin, Hitler, Pol Pot and countless others were, like serial murders, self promoting for purposes of social control. While the lives and actions of Mao and Rader were as different in other ways as any two can be, both share the characteristic of living almost entirely for themselves. There is no empathy for their victims, there is nothing greater than themselves.
Each one of us feels this pull in one way or another. Whether it is the desire to pick on a weaker individual, or the more silent oppression of vicious angry frustrated thoughts that go unspoken to those that pass us by, the capacity for cruelty is alive in each of us. We watch these horror movies, and crime dramas, because they excite us, because the titillation of evil thoughts and self glorification is a more effective emotional control than others. While our intuitive desire for control is nothing new, and cruelty older than humanity, technology has made the act of ending life so simple that we risk the ending of life as we know it and not only from the ever present threat of nuclear annihilation, but from the increasing frequency of life shattering acts including school shootings, suicide bombings, genocides and other violent crimes.
Changing these things doesn't require us to roll back technological progress, but it means we must take the time to move forward in our collective understanding of the human mind. Otherwise, this sacrifice of self awareness for gratification will be our end.
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