The mariner has pondered how real cash dollars disappear during a downturn of the economy. There is no cash to buy things that are bought easily in better times. What happened to all the dollars that were around during good times? As he read about dollars, he learned that there are many different kinds of money – which makes it difficult to ask such a simple question as “Where is the money?”

The oldest money is commodity money – trading two pigs for a horse and a wife. There are no dollars in commodity money – only the relative value of a pig versus a horse, a little clamshell for a bigger clamshell, and a variation where labor is considered a commodity – I’ll shovel your snow if you give me a turkey. This kind of money worked fine except that it is hard to carry pigs, horses and turkeys in your pocket.

It wasn’t long before the first “banker” went into business by warranting, for a fee, that you did indeed have a horse that can be exchanged for a wife and conversely, there was indeed a father trying to marry off a daughter. This was easier because people didn’t have to carry all these commodities around; just show a note to the other party that the banker has warranted that a horse is available and vice versa. Is this note a kind of dollar?

What happens to the note if the horse is not available?  Oddly, the banker’s note still exists but the horse doesn’t. The note still says you have a horse. In 2008 this note was called a derivative. So many people had derivatives that did not actually have horses that the whole process came to a standstill. Actually, the horses were supposed to be in people’s homes. They had a warranty from the mortgage company that said they had horses, but they had no horses. The bankers were shrewd. They took out insurance in case there were no horses. So the bankers made tons of money replacing nonexistent horses.

There still are commodity dollars around today. In fact, there’s something called a commodity exchange where people gamble about how much a commodity, like coffee or corn, will be worth next year. The most commonly known commodities are gold and silver except that the value of the dollars in our pockets has nothing to do with gold and silver unless you want the gold, then you need to give away some dollars. Do the dollars you give for the gold mean that you are warranted to have enough horses to match the price of the gold? Only if they are real dollars. They are real only because the Federal Government’s Central Bank warranted your horses.

Forget commodities. Dollars are not based on commodities anymore. Today there is a theory that money isn’t real. “Money” is your worth to a credit company or a bank. For example, if you bought a soft drink for a dollar with your credit card or a check, or “real money,” there was no money spent or earned. Instead, your warranty dropped in value and the seller’s warranty went up in value. Value is the new word for money. There are no real dollars; if you have paper dollars, they have no value except on a ledger sheet where you received your paycheck, your bank, or your credit card. Just like the barter days, you don’t have to carry around a lot of dollars to demonstrate warranty, you just need the bookkeeper’s credit card – the universal warranty.

The theory goes that the more value in play from buyer to seller to buyer, etc., the more value can be created – not dollars but value. Using this “circuitous” redistribution of value – or credit – value can be created without commodities (horses) as long as the circuitousness keeps moving. You add value to the circuit and the circuit creates ten times more as it redistributes your value. In downturns of the economy, the circuit slows down and does not create as much new value. If you have spent more value than you contributed, then you have to go looking for horses to pay off your debt to the circuit.

You may not have followed this account well, but the answer to the question “where does the money go?” is that it isn’t created when the circuit slows down. The money doesn’t exist in the first place.

Ancient Mariner

Over several posts, the mariner has described how dangerous the imbalance of wealth has become because of little or no participation in the growth of profits by middle and lower class workers.

What changes will correct this situation?

One- Elect democrats. The mariner is neither a democrat nor a republican but unity of principle is required. Elect them at all levels of government. There are two reasons for using the Democratic Party: As a rule, democrats are not hoarders by nature. Even the wealthier democrats are sensitive to the state of affairs and believe in doing something about unfairness in the society; conversely, most republicans are hoarders of money and believe if the rich have enough cash, eventually some will trickle down to those other people. This belief is what is causing the imbalance of the economic society today.

The second reason is that the entire government, all the legislatures, all the governors and mayors, all the judges and the President must be in unity to create a change to the economic culture – a moment of chaos, as I have used the word in other posts.

Two- Reestablish the Banking Act of 1933, which in essence separated commercial banks from investment banks and imposed regulations on activities banks could pursue.

Three- Standardize by Federal law all election procedures, including Federal State, and Local elections. Remove abusive, unfair registration requirements that are used to suppress some citizens their right to vote.

Four- Standardize by law that every Commission on Redistricting is occupied by unelected individuals appointed by the highest court applicable, with equal numbers of the two largest parties represented. Include guidelines that deny separated areas for a single district, and populate the districts in reasonable fashion with an attempt to represent the average racial representation.

Five- Standardize by law that any individual campaigning for public office can raise funds only from within the applicable territory covered by the elected position. Make PACS and SUPER PACS illegal.

Six- Create term limits for public office. The primary reason for this change is not to turn over the elected quickly enough to prevent a lifetime in office but to have legislators who are of an age that understand the current culture. The mariner thinks more in terms of an upper age limit than a given number of terms.

Seven- Overthrow the Supreme Court’s opinion that money can vote.

Eight- Pass legislation that tightens significantly and increases the penalty for elected officials who receive gifts of any nature, whether based on assets, post term favors, or by which the elected official may gain personal advantage.

Nine- Eliminate all right to work laws and permit only union or employee owned business practices. Taxable income for stock and bond investments is taxed at graduated levels as investment income increases.

Ten- Reestablish 401k or retirement benefits in every licensed business.

Yes, it is a tall order, especially now that conservative capitalists tightly control the economy. Even one of the ten items will make a difference; two would make a significant difference. The citizenry should tackle them one at a time. The more items that are achieved, the easier and faster the next item can be achieved.

In case anyone wants to call these ten items socialism or communism, he or she is mistaken. The capitalist system is retained but shares its profits more equitably.

Ancient Mariner

One talks about the Social Security going broke, Medicare and Medicaid are too expensive, Union after union is lost through preplanned bankruptcies. Student aid programs, both public school and college loans were never adequate and are continually reduced in budgets.

The retirement class will rise 12 percent by 2025. A significant number of factory workers remain unemployed or earning a pittance of their factory job. Computerization/Internet will remove another group of people from the workforce.

Armageddon is near

Easing the basic need of the workforce, poor and students is a huge issue. Easing workers who ever more rapidly lose their jobs to technology and global economy have no place to reposition themselves in the world of work. The masses no longer participate in capitalist growth.

If salaries remained comparable to the wages fifty years ago and pension plans remained untouchable, as they were before Reagan, and right-to-work laws had not weakened unions, it would be possible to be laid off in one’s fifties and still have a decent financial position. That second job would make a comfortable lifestyle instead of barely keeping enough food on the table.

This juggernaught of cash flowing toward five percent of the population, unfairly lifted from the deserving population in the economy will only increase. That is 18 million individuals out of 317 million citizens. If one prefers the one percent claim, it is 3 million out of 317 million. These differences do not reflect the algebraic curve of wealth as one nears the top; the wealthiest are really, really wealthy compared to the really wealthy below them.

One may agree with the conservatives that the government is too large. This has nothing to do with taxes. Taxes must be raised by incomparable amounts to offset the disappearance of middle and lower class economy. The taxes should be collected by the IRS and flow back to the public in the form of support for the general public. For example, if the Taiwanese government can pay 100% of college tuition, there is no reason the United States cannot do the same. Most developed nations have free or virtually free health care for every citizen. Why can’t the United States do that?

Capitalism has not been kept under control by the Federal Government; it runs rampant and is becoming unbelievably destructive to the general citizenry.

The mariner sees chaos coming.

Ancient Mariner

Winners and Losers

This post is about the shift in an economic paradigm. An example is the emergence of the computer. The computer age has been around in a meaningful way since the 1950’s. The new technology-based workforce added millions of new jobs to the economy – jobs for engineers, programmers, software developers, data base designers – and those that were in the first wave of lost jobs were armies of bookkeepers, administrative assistants and typists. When a new economic model bursts on the scene, there is a great wave of new opportunity, large cash flow and an upward change in lifestyle – except for the losers.

On a recent cable news program, a career communications entrepreneur responded to the question about new technologies displacing workers by saying that the new technologies will add 2.6 million new jobs to the workforce, blithely avoiding the point of the question. He failed to mention that a significant portion of the workforce loses their jobs in a major change of the economic paradigm and will not have a place in the new economy.

Several years ago on Bill Moyers’ PBS interview program, three noted economists, liberal and conservative, supply side and demand side, all agreed that on average, fifteen percent of the workforce will not have jobs in a new economy. The attitude of the economists was heartless. Jobs disappear, they agreed, it is part of the process. Empathy for jobless families was absent; that is just how it is.

We first learn about this winner and loser phenomenon in Economics 101. The typical example is the disappearance of jobs related to a horse transportation economy when automobiles displaced the horses: no need for all those buggy whip workers. No need for so many carriage makers, farriers, and harness makers.

At a presentation for incoming freshmen at the University of Iowa, the speaker was an economics professor. He said that economics is really a continuous series of decisions to balance supply and demand. The example he gave for balancing supply and demand was the availability of organ donors versus the greater number of those who need organs. “Who gets the organ and who doesn’t?” he asked. The principles of economics seek the best model for the economy. In this case, it is a set of policies used by medical professionals to make the decision. In other words, there always will be winners; there always will be losers.

Listening to news broadcasts and interviews of experts, we already are evolving into a new economy. First, there is the globalization of the marketplace; second, Internet technology will change what the word “work” means.

There will be fewer winners than losers. The economics professor provided a realistic metaphor using donor organ supply and demand.

Someone once said that democracy elects the safest candidate rather than the appropriate candidate. Given the silliness of our Federal, State and Local governments, the electorate definitely is safe from unexpected change. The private sector has many inadequacies but it is always for change. That is where the big money is.

The United States is similar to the sailor that has one foot on shore and one foot on the drifting boat: calamity is bound to happen. There are so many loopholes and welfare for the rich and so much incompetence dealing with discretionary programs that the Federal government has fallen into a useless pit lined with greed and ignorance. The open question is how to apply economic fairness as change occurs ever more rapidly. But that’s another posting.

Many years ago, it was popular for economic futurists to conjecture that national economies would merge; the vision was based on natural geographic boundaries. For example, Europe would become one common economy; Canada, Mexico and the United States would become one common economy; China and its bordering Far East neighbors would become one economy and so forth.

The demise of colonialism and two world wars later, history has thrown a lot of curve balls. A significant one was that nations were not merger-minded. Rather, a model of have and have not countries, commonly called “super powers,” “developed nations,” and “third world nations” emerged. The cold war between Russia and the United States started a forty year monopoly game to see which of the two nations could politically control the most countries, thereby solidifying their super power position among nations.

Today, nationalism is as strong as ever. Even the land of the free abhors anyone who thinks they can just walk across an imaginary line and become a resident in the United States. The Arab nations are way behind  the western world in social graces but the Middle East is such a war zone that hundreds of thousands of refugees move across borders without even a green card.  Thank goodness for oceans!

While Russia and the United States were playing monopoly, Europe was in the middle. Europe already had democracy and didn’t want communism but Europe didn’t have a lot of natural resources either and depended on military support and trade from the United States. European nations had to come up with something that would expand their authority on the world stage. It took a while before they made a move toward a geographic economy predicted those many years ago: a common dollar called the Euro. Still, though, every nation kept its national borders and an independent national government.

The Euro and the bitcoin (artificial “money” traded on the Internet) are very similar. Neither has a basis for value. European nations don’t run their basic economies with Euros; bitcoins have value only to those who think they can be used like monopoly money. The Euro and derivatives are very similar. Both are a bundled value. The Euro is like a lot of things – anything but money.

Now about the future. There has to be a way to do away with nationalism when it comes to economics. The way is called the global marketplace. Markets don’t care if one is Chinese, American, Jewish or Baptist. Corporate business already has been taking advantage of opportunities in many countries simultaneously to increase product sales and minimize costs. Corporations operate in a manner similar to FOREX, the exchange for money trading. In other words, there are places where labor is less expensive than other places, or natural resources are less expensive, or places where regulations are less burdensome. Corporations leverage these differences just like money traders leverage differences in kinds of monies – even Euros.

This corporate model will undergo an explosive change in the next decade.

Do you know about the World Speed Golf Championship? Your score is an aggregation of your stroke score and the amount of time it takes you to play eighteen holes. No carts allowed; one must run and carry a minimum number of clubs to keep the bag light for running. What Speed Golf has done to the normal golf game is what will happen to international corporations. Another way to put it is to note that it took a month for England to deliver manufactured goods to a new America. In the next decade, that same trip will take virtually seconds to minutes.

What has been missing until now is the Internet, supergiant data bases, rapid search engines and the electronics to leverage the Internet. These are now in place.

The current business model is linear – each step in product development uses a different set of knowledge and must move people and resources from place to place. The new business model will be simultaneous and worldwide at the same time. The trillions and trillions and gazillions of data transactions flowing across the Internet will provide enough marketplace information that corporations can shift from making red widgets in Mongolia to making green widgets in Australia with just a few of those trillions of data transactions. This is the global marketplace. The growth in jobs, locations and options will energize the global economy. No longer will corporations leverage differences as FOREX does; corporations will carry light bags as in Speed Golf and time spent delivering to the customer is the biggest cost.

Let’s get ideology out of the way first. The mariner doesn’t care if the reader is republican, democrat, libertarian, socialist, Zen Buddhist, tea party, neo-Nazi, racist, or Black Power. It doesn’t matter. Everyone has the same problem: It is the nature of capitalism to accrue profit and wealth. The affect of this objective is that money makes money, meaning that the more money you have, the more money you will make until, theoretically, there is no more money for anyone else. (Used to be called the feudal system)

This characteristic of capitalism is fine when it is managed properly. One cannot fault an individual for pursuing profit. Accruing profit is not the objective of the United States and its citizens. Nowhere in the founding documents is language that says accruing wealth is mandated for every citizen. It allows the freedom to accrue wealth but not every citizen will have that opportunity despite the Iconic phrase “America is a free country.” In fact, 98% of all Americans will not have the opportunity to accrue wealth.

In American politics, it is no longer one man, one vote. It is one dollar, one vote. The wealthy run the country to fit their convenience and enhance the opportunity to make better profit with their money.

It was a sad day in American culture when the President of the Senate offered a bill that will reduce Social Security payments rather than increase taxes on the wealthy. Hundreds of thousands of citizens have only the Social Security check to keep them alive. Something is wrong in the United States.

The mariner still thinks it might be best to start at the State level. Vote for candidates who are committed to the following:

Remove right to work laws. Unions aren’t perfect, and they’ll never be equal to Richard Wolff’s utopia of democratic business. Still, they are a facet of the financial world that at least makes the wealthy give up a little more money for a worker’s retirement plan, 401k, and a COLA raise each year. With only this one change, the middle class will begin to grow.

Make it illegal for a business to move its primary operation across a State boundary. State governments give huge tax relief to bring business to the State. The least the business can do is stay in the State. When voting for Federal candidates, the candidate should be in favor of making it illegal to take a business overseas or have corporate ties that permit business to stop in the U.S. while its partner organization ramps up business. If a profit can’t be made with the current product, make another product.

Raise taxes on the wealthy. This has nothing to do with the size of the Federal Government. It is an attempt to reduce the rapidity by which money makes money.

These suggestions alone will revitalize the middle class of America. Capitalism will never be reined in fully but it must play a role in the health of the economy that makes money for the capitalists.

What follows is the very first post to The Blog of the Ancient Mariner. It was posted on April 5, 2013 at 2:AM. He could write the same post today. These thoughts seem more urgent, more dire than when this post was published.

The topic is what next? It’s mostly about us – the masses, the common citizens, the disenfranchised, the young who have no yardstick for the future because there is no means by which to measure the future; the jobless who have lost pride and station in life because automation and the global economy have dropped them by the wayside, the seniors who are hale, hearty, living extended lives but are pushed aside and left with little purpose. Wrapping all these demographics into a bundle, what is their purpose? What binds them? What makes them equal and whole individuals? What is the common social fabric?

The mariner is reminded of the Vietnamese immigration after the Viet Nam War. That was a set of people with no extra resources; all they had was hard work and imagination. Many had higher education, even postgraduate degrees that were of little use in the in the United States. The Vietnamese took labor jobs, families helped families, somehow saved a significant percentage of income, opened small, low overhead businesses like dry cleaning, beauty parlors, finger nail shops and small soup kitchens. Now, their children are going to college or growing the businesses of their parents.

What is the next purpose for the American masses? There must be one; there must be a value that is created by many millions of living people; There must be a unity – that is a natural law inherent in the homo sapiens species. The new hardship is that no one will invent it for us or do it for us; we have to invent it and do it ourselves.

The future is still in darkness but a light, a very, very, very faint light is sitting in the corner. It is, for want of a word unknown at this time, ‘sharing’. Sharing can be a purpose. Sharing can be an economy. Sharing has growth potential. Ah, but the light is so faint. What will common sharing look like? Can it draw from wasteful economies that no longer serve the masses efficiently? Can it invent new businesses – profitable businesses – that are based on sharing? Can local government become a protector of a sharing culture?  Does sharing mean we, the masses, must share ourselves in some way for the common good? The US citizen may be better off than the Vietnamese immigrant but the creativity they have for generating a small economy under the larger profit-intensive US economy seems a good model.

Can those who know share knowledge with those who don’t know without the overhead of educational corporations? Leading edge electronics and upstart businesses have no correlation to formal education. The same can be said for liberal arts, religion, and equal distribution of resources like food, water, manufactured goods – all of which possess extreme inefficiencies and waste when delivering a profit-only product.

Dare we dream that the cultural mandate for hoarding profit be converted to a cultural mandate for sharing profit? There are fragile signs: Habitat for Humanity; zero balance loans to indigent women in Africa; Americorps and the international version Peace Corps; Salman Khan (www.khanacademy.org), Project Hope, the floating hospital, even the woman interviewed on CBS News who shares her sofa by leasing it overnight. All are based on sharing – surviving off the excesses of the profit-only model. Remember Victory Gardens?

The mariner has a friend in Maryland who owns a 40 foot boat. He uses it occasionally but is concerned about the overhead. As a model for profit by sharing, he could lease the boat well below the rate of a profit-only charter service and still make enough to maintain the boat, keep a few dollars and share the rest of the income with another ‘share’ business that may provide a few jobs. The light is still too faint to imagine what an entire culture of sharing will look like but this seems a good example: use what you have to generate income.

The common citizens will have the burden of finding a way to survive financially. Giant corporations are just getting started as a global market emerges. The mariner suspects there will be economic room beneath the global markets. Twenty years ago an American steel manufacturer stayed in business by making specialty steel – something large volume steel corporations that moved overseas couldn’t afford to sustain. Genuinely organic farming still defies the ‘legislatively defined’ organic products produced by large scale producers. Organic growing is time and labor intensive – something that doesn’t fit the profit-only model.

Detroit, Michigan is about to go bankrupt. Population has dropped by a third and there are no jobs. A few years ago, the City had to come up with something to provide food for vast neighborhoods that had no grocery stores. Detroit leveraged the many vacant blocks by turning them into gardens and small livestock operations (sheep, goats). It is a fine effort but doesn’t generate the taxes the missing profit-only corporations provided before they left Detroit. Nevertheless, many common citizens have something to eat that otherwise would have nothing.

The profit-only culture has become so excessive that it can be undercut and still deliver services and provide jobs that profit-only business cannot afford. In Colorado, a one owner bakery thrives near a Dunkin Donuts shop.

For the conservatives among the readers, sharing is not socialism, it is personal profit by sharing what one can invest of his or her own resources; for the liberals, it is not communal living, it is profit through sharing outward – not dividing inward. The Vietnamese immigrants didn’t care what they were called; They were in the business of surviving.

Ancient Mariner