Emergency Economic Stabization Act
What The Bank Bailout Does For Main Street
The Stephen L. Rush Report
Premise For Reform
When the President takes the oath of office, he swears to protect and defend the Constitution of the United States (Art. II, Sect. 1, Para. 9). The Constitution is far more important than the office of the President, for without it there would not be a United States of America. That document gives life and purpose to this great country.
Equally important is the Bill of Rights, the guarantee of how governance by this document is measured. It is not sufficient to say that a new form of government has distinquished itself from the monarchy of England, but what kind of value this new government places on the people it serves.
From that perspective, anyone can say they can fix the problems within government, but the distinction is whether one actually serves the people they are sworn to. For, any presidential candidate can declare that he or she has the best method to reform American government, but many fall short of being true public servants.
The Economy and
The Bank Bailout
The Stephen L. Rush Report
2008 Bank Bailout
Bailout I - Congress's Homeowner Package
Government should grieve at the cries of its citizens, listen to its leaders in the community and academia, while it should also collaborate with its corporations, but none at the expense of any others. The fact is, as this special report brings out, the Bank Bailout does not fix the American financial crisis but simply switches one form of credit mess for another. One would think that political leaders would have been more ethical than that, but I don't even think they know what the answer is to truely resolving this crisis.
If there were a prediction as to what the Bank Bailout would accomplish before it had been drafted, it could have easily been seen as a revision of the policies of Herbert Hoover. "Old school" economists have said for quite a while that "The free market economy will correct itself." That is exactly what the advisors to President Herbert Hoover said. When Americans were dying of starvation calling for someone to do something, Franklin D. Roosevelt was led to say "This elects me." What is important to note is that President Bush is using the same rhetoric as Hoover. And, oddly enough many are repeating the mantra that would suggest that "The best way for the economy to recover is to find the bottom" as heard in the halls of Congress and among Wall Street investors recently at several junctures during this housing crisis. Sure enough, the Bank Bailout follows this same line of "free market" thinking.
Hoover economics were so bad, the running joke of the day had referred to a cardboard box as a "Hoover hotel". However, economists of today subscribe to the same inclination, and give our politicians exactly the same advice as they did in Hoover's day. Milton Friedman has popularized the notion of the freedom for the market to choose its own course, and it sounds great on the surface. Friedman merely explains how Adam Smith's "Invisible Hand Doctrine" can work, in essence describing an economy where the wants of the consumer, the business, the industry, and external forces all form a collective self-correcting mechanism. John Nash's theory of economics, though, disproves that the market knows what is best for itself.
As Nash points out, there are times when the best solution is when people act in the best interest of both themselves and others in the market. However, the market is always reacting and taking action on the least complicated path, not in the least concerned with the interest of others. One example posed by the movie "A Beautiful Mind" is that the free market tends to crowd out others, and completely ignores the fact it ends up scaring off the very opportunity it wants. The importance of Nash's theory in economics is the premise that without a guiding force for the consumer, business, and government to work together to acheive the best combined goal in cooperation, then everyone just does what is right in their own eyes. But the mere suggestion of either implementing the formation of a coordinated relationship, or having a guiding force that would stimulate coordination, requires thought and effort.
The free market is governed by its mistakes, but it is unfathomable how economists cannot learn to grasp any concept outside the bounds of the incessant pendulum swing of "oops". The economy will correct itself - in 15 to 20 years! But, only after 100's of thousands of American people are poor, starving, or dead. This is not the first time in American history the economy tanked (1837, 1873, 1929, and 1973). The only difference is the creation of the fiat dollar in the 70's took the Producer Price Index to new heights by displacing its gold-backed currency onto a currency of credit. That means it now can fall as deep as it is tall; twice as far, twice as fast. In that sense, it is self-correcting. But, so is a bull in a China shop - because there is no shop when it is done wreaking havok! It comes down to Congress choosing the path with proven results every time: the equivalent of doing nothing.
The Emergency Economic Stabilization Act does nothing to change the situation we got ourselves into. What it contains in its hundreds of pages (repaginated eco-friendly version is only 37 pages; go figure) is the idea of homeowner assistance in the form of troubled asset recovery. In other words, it gives the banks the financial leverage they need to purchase financially troubled homes and credit. It contains the following:
The American people may not understand what actually took place, but honestly believe they have been given a bill of goods they do not believe in, and that there must be some slight of hand going on behind the scenes. The reason for such disgruntled disappointment is because this bailout merely trades one problem for another. The bill does not provide a serious means of paying back the bailout, and merely shunts the burden of the financial crisis from the shoulders of homeowners to future taxpayers. This is what meant when saying, "the Bank Bailout does not fix the American financial crisis but simply switches one form of credit mess for another". Sad, isn't it?
Now to some degree, I do not blame Congress or the President for this monumental blunder. Since it is Corporate America that has fought to empower itself, and since lobbying was the main mechanism behind crowding out the voice of the American people so Congress could turn a blind eye, then it is the fault of corruption. Corruption is like a snake: once it is let inside the house, no one can sleep. The underlying problem then, is not merely how to fix America's economic problem - which is hugely important, but also how to lock the cookie jar so that the little crumbs don't make a mess in the future. The greatest philosopher once said, "If a coin has a picture of Ceasar's face on it, and he ends up asking you for it, then give it back to him." Hopefully, the next President will take back from Corporate America every coin that has a picture of a President on it and then proceed to give it to its rightful owners - the American people.
After looking at just areas of concern that are known, the picture is clear that the purpose of the bill had nothing to do with bailing out Main Street, but ensuring that Main Street got stuck with the bill. If at this point the bank bailout were compared to the economic theories supplied earlier, the stratagem used would be kin to free market economy theory. Certainly, there was no collaboration between the people, the corporate banks, and the government. Certainly, the opportunity for power and money was lost by the lack of foresight of these elitist corporate bankers in trying to crowd out the middle-class - in the form of trust and words like "recovery". Now, both trust and recovery will take so much longer, leading to the conclusion that Nash was indeed correct. However, there is hope for recovery of the economy through a comprehensive plan based on Kondratieff Wave theory (see "The Solution" below).
Bailout II - Obama's Economic Package
President-elect Obama now has a fine economic mess to look forward to. As of his first week following the election, a total of 19 banks had closed their doors and countless others had been bought out or indicted, around 40% of homeowners across America had lost their home already and another 30% facing financial duress, job losses for September and October were in hundreds of thousands, the amount of interest our nation owes was measured in trillions, and retail sales went through the floor. This is important to note because committees on local, county, and state governments are up in arms over reduced revenue from property taxes, employment taxes, federal taxes, and sales taxes - and that means cutting back on the services that help the indigent and unemployed and needy when those services are needed most. For example, a rising number of autistic children during a population decrease means there are a greater number of special needs children when school districts are fighting for more money just to maintain the services they already provide. Imagine that same inverse scenario being played out in every aspect of our society right now. It's huge.
For a moment, consider whether Obama's plan for the economy will have significant impact into this kind of economic chasm. Obama has stated in his platform, as well as in recent press conferences, that he will provide:
There are better economic solutions, but there is a price to be paid that must be reckoned with. First, one must deny voice to the belief that says the economy will correct itself and that printing more money is the answer. Any course of action where printing more money is focal point of the solution will only worsen the economic winter and make a bad situation worse. It is not good to take a pendulum swing in the other direction and not provide bailouts, either. There are ways for these packages to pay for themselves - at least partially, if balanced properly with other economic factors. But, handing out money in of itself is not a cure by any means. The economy can be corrected, but it will take careful planning and execution, but also a refusal to perceive economic shifts as certain and absolute. President-elect Obama needs to be working on a plan with his cabinet during his transition that will be "perfect upon innauguration". Question is: what should that plan look like (see below)?
Solution To An Economic Winter
Part I - Revised Homeowner Bailout
Between the analysis of the Bank Bailout and Obama's solutions for recovery, there are few answers for the change Americans are seeking. But there is good news. This report has concluded there exists a solution for the American economic dilemma. There exists a comprehensive plan to deal with political corruption, provisions for the bank bailout, as well as for the economy based on Kondratieff Wave theory. The solution for these is simply a reversal of impetus that caused the trend, or at least plateau in extreme cases.
Matter of fact, the solution for Congressional Reform has been available since 2004 in the form of Applied Quantum Politics. The resolve that best applies to the current trend in corruption is Congressional spending audits and approvals, plus a real good one is Consecutive Term Limits where incumbants must lobby for the middle-class and poor (see Consecutive Term Limits). These measures of reform are carefully detailed so most every concern is accounted for, leaving little recourse for the those who attempt to manipulate the political machine. That is well defined, but it may take some doing to explain the bank bailout and the economy.
The Bailout bill is essentially one-sided and does not entirely account for the voice of the American people. There are perhaps reasons for that, but what should have taken place is a bailout that provides significant homeowner relief, instead of a trickle. Such a bill should have included "at least" the following to fix the economic scenarios that already have been known to contribute to this crisis:
Part II - Stephen L. Rush's Economic Solution
Economists are predicting and economic winter: are you ready? One cannot just come up with an economic plan and hope that it works, because winter is so cold and there needs to be enough firewood and food packed away. A sound economic plan gets the country through the winter; a not-so good plan or no plan at all will result in death - plain and simple. First thing to understand about a sound economic plan, is that it is like accounting. In accounting for example, any transaction is double-sided, where a credit will affect a debit somewhere else. Second, an economic plan must adhere to basic principles of governance and honor trade negotiations. A solid economic plan must reconcile with not just the trouble spot, but how changes will also affect the balance of power. Consider for a moment how global trade affects the economy and trade simulataneously: a tariff against steel imports affects steel mining in other countries. One cannot simply protect its own workers at the expense of global partners. Therefore, any economic plan must therefore take checks and balances into account, and must carefully assess both sides being impacted.
This give and take effect can be seen in several recent complications within America's economic infrastructure. Corn has increasingly been used for fuel in the form of ethanol in recent years. The economic turbulence exists when the remaining pulp, called distiller's grain, is re-introduced back into the economy. The slim profit margin associated with this particular alternative fuel requires the by-product of distiller's grain be sold as cattle feed. When the high price of corn is injected into the profit margins for cattle farming, it results in higher milk and beef prices. Not only are these higher prices passed onto the consumer, but those farmers who depend on food from the Mid-west. One problem is that when consumers demand less, the cost of supplying the food increases. Now in addition to the high cost of dairy products, higher fertilizer prices are also passed onto the corn ethanol farmer, and hyper-inflation results. So, one economic adjustment that should take place is the high price of corn - but the trick is doing something in such a way as without hurting farmers.
It is my belief the only way to accomplish that is to separate the economies of "corn as food" and "corn as fuel" (see Separating the Economies). There are three trains of thought in terms of economic solutions that involve separating those economies: create another economic stream for distiller's grain such as using the pulp for thermal energy, require a percentage of corn stover to be used in cellulosic ethanol technologies, and curb welfare-state farming by paying farmers to produce who normally receive subsidies that are left over from the "lettuce wars" (see Immigration). All three options should be implemented and would address key problems associated with farm economics while benefiting farming with additional profits and at the same time reduce government monies paid out. It's no problem.
That is just one scenario broken down. Now, Obama wants to take monies from the approved Bank Bailout to bailout auto manufacturers. Even if Congress approved such expenditures, it does not resolve consumer perception nor does it bring about much needed change. The auto industry is governed by two very old systems: unions and American auto manufacturers. The union does not want to reinvent itself leaving auto manufacturers to increase pay in a recession. Auto industry economies revolve around insuring the workers against health risk and job loss, but at the expense of the consumer in the form of higher prices or engineered lower standards of quality. To be competitive in price is to choose the latter. Now, within this writing on Political Reform is already the path for resolving this issue, but it will require several steps and following through with one's decision. This plan for the auto industry involves a complex set of reversals from the impetus that caused the trend, and some of these America must bite the bullet on:
The next President will make many such decisions, besides reducing unnecessary federal expenditures, protecting against corporate fraud, and separating corn economies. There is stabilizing stocks, working with trading partners to offset imbalance, encouraging production and technological advances, flattening the inverted population pyramid, having a solid disaster plan, among others (see Comprehensive Economic Plan). Each of these have their quirks, but trade is a very good example of how to stimulate production right now and make America strong again.
America offers Treasury Bills whenever there is a trade imbalance, so why not exchange necessary technology for them? Also, America's lending institutions have provided monies to the International Monetary Fund that other countries can reimburse for. In exchange, America has many types of technologies that can solve real global problems today. America could start producing modular homes for use refugee camps, desalinization equipment in famine-prone areas, atmospheric moisture capture technology in deserts, farm equipment for Afghan farmers, earthquake engineering equipment for Chinese schools, and Tsunami warning systems for countries along the Ring of Fire.
This economic plan addresses many solutions to bring emotional and financial relief that America needs right now. Between auditing Congressional spending, a revised homeowner bailout, separating food verses fuel economies, calling upon trade partners to get America producing again, and other sound economic ideas, that is a pretty good start. Along the way, four major objectives are met and there should be enough momentum to carry America to the place where she is able to get going on her own again. Those are some real solutions that are balanced and can soften the blow or could even shorten the economic winter (Details of these economic solutions can be learned about at Economic Plan).
This economic plan is fairly exhaustive, as the references and links to other webpages indicates. This solution assumes government should grieve at the cries of its citizens, listen to its leaders in the community and academia, while it should also collaborate with its corporations, but none at the expense of any others. Now, this notion that Obama (proposed above) will work out a plan such prior to taking oath of office precludes there is sufficient time after establishing his cabinet for hashing out the details of such an economic plan. It also precludes that one man cannot do it all in one term without serious help. Having said that, even though Obama was smart enough to bring Rahm Emanuel on as his Chief of Staff, Obama will still need more than that. It is recommended Obama seek out a team of presidential-peers to each focus on one crisis at a time (see Why Have A Cabinet of Peers).
What The Bank Bailout Does For Main St
What does the Bank Bailout do to fix the American financial crisis? Imagine for a moment an average someone notices a traffic officer redirecting cars into a tunnel where construction crews are working on the infrastructure. The officer points in the direction where things are not flowing ahead, but motions to go forward anyway. Unknown to the driver is a jagged metal rebar in the road, while other cars are catching up from behind. Now, the driver is so focused on the road ahead when the car impacts the metal obstruction, that the driver gets rear-ended in a car accident. The car that hit them is a rebuilt 1929 Pierce Arrow, was in mint condition to that point, complete with a luggage rack and rumble seat. The gentleman that steps out is finely dressed in a Hickey Freeman designer suit. It is obvious to the driver that the well-to-do man is a banker. The police officer calls the construction company to bring someone over, and already has their insurance agent on his radio saying, "they will fix all the damage", and "not to worry". Much to that driver's chagrin, the construction company owner slips the officer a bill and the officer orders the insurance company to send a check to the banker. And so, just like that average someone's car, Main Street's financial crisis is still busted.
Who Is To Blame
Now, there are those who would blame the person who caused the problem when they try to come up with a solution, but I do not think it is so simple. It is more about lawmakers fixing what they know to fix when it comes to the banking industry, and not knowing how to fix Main Street's problem; there is more than one problem here much in the same way the story above speaks of both the metal shard and the collision. Since that is entirely believable the government does not know what to do, given the old world political tools Congress is using for stimulus, someone needs to present an comprehensive economic solution to deal with the intricacies. That means bringing in someone entirely new, such as: a business strategist, rapid decline expert, contrary economist, or the like.
You've found him : Stephen L. Rush!
What Is A Great Leader
A new trend in America is the desire for a leader who is equipped to handle turbulent times. One may recall Califonia's Energy Crisis in Summer of 2000, the bankruptcy of Enron and collapse of New York's Twin Towers in the Fall of 2001, only one of nine coal miners trapped in Pennsylvania's Quecreek coal mine climbed out Summer of 2002, destruction of Columbia Space Shuttle early 2003, Biggest Blackout and record snowstorms of 2003 in the Northeastern U.S. while the Arizona Aspen Wildfire and 800,000 acres of California burned in the West, with the Indian Ocean Tsunami admist the Federal Budget Deficit soaring to a record $413 billion in 2004, not to mention the continued inteligence failures of pre-Iraqi war CIA scandals and Hurricane Katrina in 2005. Prior to these events, Executives, Governors, and the President could easily slide under the radar of mediocrity and concentrate on issues that made themselves look good. Not anymore. Now today's leaders have to resist getting broadsided by new social frontiers, disasters, and security concerns of Americans. Whirlwinds of distress will come test whether our leaders have the internal fortitude to stand during a crisis.
Issue One: finding an Economic Co-President for Obama's team. : Stephen L. Rush!
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