Redesign the Paradigm

Government:

Problem

• Well financed special interests led by large banks, financial institutions, and Multi National Corporations (MNC’s) use high paid lobbyists to acquire and even write their own favorable legislation.
• Special interests provide campaign contributions to get political candidates elected, these candidates become beholden to their
  contributor’s legislative needs. This is especially true for officials who are sitting or will sit in key subcommittee positions (the decision makers).
• This type of political environment creates a lack of fiscal responsibility among politicians that results in deficit spending in order to meet and support those interests.

Cause

• Lack of moral center by politicians  who are more concerned with financial support, re-election, and serving political party
  objectives over doing what is right by the country and its people.
• The incentives for politicians in the current political system are financial contributions for re-election. To acquire this politicians are expected to return support to  individuals or groups that provide the greatest contributions. Unfortunately, that does not include the U.S. public and is being reflected in the laws that are being written and voted on.

Effect

• Continued deficit spending increased the national debt, which has exceeded GDP ($14.3T) with over $50T in total unfunded
  liabilities. This debt is being dumped on the country’s future generations.
• Global investor confidence in the U.S.’ ability to govern and manage its debt is decreasing. These investor countries are
  looking for other investments than U.S. Treasuries which they feel are no longer the world’s safest debt instruments. They are also beginning to actively search for an alternative currency to the U.S. dollar.
• Politician’s protecting special interest and corporate profits are allowing legislation which is acting as a barrier to entry for
  new technologies or is restricting the functioning of current  systems deemed a threat to those profits. This is limiting effective change.
• Distrust for government is amongst the U.S. population is mounting. The population is beginning to realize the depth of corruption that has been legalized. Voter disenfranchisement is growing as citizens realize that money for elections matters more than their votes or the country’s real needs.

• Main Street America– Devaluation of the dollar has and will increasing result in more inflation making imports more expensive from gasoline to products in all those big box stores. This reduces families spending capabilities. Less spending in the economy means prolonged recessions.
• Main Street America – Legislation continues to inequitably favor large corporate and other well financed special interests resulting in polarization of wealth away from the middle classes and towards the wealthiest Americans.

Solution

• The current political system is so entrenched in providing legislation to the highest bidder and there is such a lack of transparency available to the general public that not much can realistically be done to initiate change. Idealistically speaking, U.S. citizens would do well to stop voting for candidates from either of the two main political parties.. Their interests and ideologies are so diametrically opposed that they render themselves incapable of working together or finding solutions. You can’t solve problems with the mindset that created them – Einstein.
• Keep working towards real campaign reform. The current election system has degraded so far that it would be cheaper for the U.S.
  taxpayers if all campaign contributions and individual contributions were strictly abolished and billions in taxpayer dollars were allocated every 2 years for all qualified candidates to share equally.
• Establish strict fact checking guidelines initiated by non-partisan independent groups on all campaigns and for all opinion based media outlets reporting. Penalties would include fines and requires these outlets succumb to be required to correct misinformation in the same time slots as it was originally presented.
• Create an easy to access internet site that display all legislator voting records, who they receive have received contributions from, what special interests benefit from their votong history, and what loobist contacts receive and which help their staffs in writing legislation. Transperency and exposure for public scrutiny is the purpose of the site.
• Electonic voting machine tabulation will be verified by taditional hand count paper ballots to ensure that electonica results are not tampered with.
• Limit terms of office. If the President can serve for no more than 8 years, a Congressman or Senator should not be allowed th either. Term limits decrease both partisan loyalities and special interest control of legislators.

Note – Resistance to such measures is incredibly strong and multifaceted. Any advances will be met with new legislation designed to circumvent those advances. This will be a long struggle that requires vigilance

Monetary System:

Problem

• Rising national debt due to lack of fiscal responsibility in government.
• International debtors are loosing confidence in the U.S. ability to pay its debts and are slowing down their purchasing of debt instruments (Treasury Bills) and seeking alternatives to the dollar
• The Federal Reserve (FED) is printing more dollars to cover increases in government spending and using Quantitative Easing in an attempt to stimulate a weak economy. This practice further weakening the dollar in the eyes of international investors..
• The FED’ has kept interest rates artificially low and implemented Quantitative Easing measures for so long that it is accelerating the risk of sustained inflation.

Cause

• Unrealistic philosophy that indefinite budgetary funding with debt will have no consequences.
• Too many officials in the Treasury and FED are straight from Wall Street with allegiances that appear more interested in protecting large banking and investment banking interests than reigning in debt.
• Lack of fiscal responsibility centered around politicians who are more concerned inj protecting constituent and special
  interests and ensuring their re-elections than limiting deficit spending and reigning in the FED and its propensity to print money.

Effect

• Loss of international debtor confidence is creating a cycle where international debtors / investors purchase fewer U.S. treasuries and dollars. This requires the FED to print of more dollars in order to meet budgetary requirements. This cycle results in an ongoing devaluation of the dollar and U.S. Treasuries.
• Devaluation of dollar gives rise to further inflation as imports (big box stores) and oil become more expensive.

Solution

• Restrict the FED’s ability to expand or contract the U.S. monetary supply without congressional approval.
• Restrcit the FED’s ability to issue or repurchase bebt instruments without congressional approval.
• Require an anual audit of the FED.l
• Protect personal savings and investments portfolios with investments not affected by devaluing dollar  i.e. gold or other precious metals and their mining stocks, more stable currencies, funds such as ETF’s that hedge against inflation, etc.

Banking/Financial System:

Problem

• Financialization of U.S. markets. Derivatives’ investing is tying up almost 1 in 3 investment dollars that could be better spent in the real economy for manufacturing, innovation, etc.
• There is $600T worth of derivatives worldwide, $433T are interest rate contracts and swaps ($223T in U.S.). Most of this amount is notional meaning it will never come due, but if the FED is forced to rapidly raise interest rates to counter growing inflation only a fraction of these interest rate contracts need to be called due before another round of “to big to fail” bank bailouts occurs.
• Large banks are reluctant to invest / lend to startup, small, and medium sized businesses the backbone (85%) of U.S.
  job creation and Gross Domestic Product (GDP), despite assurances to the U.S. government for receiving TARP bailout funds.

Cause

• Wall Street greed (mammon is the more accurate word). Derivatives investment fees and commissions are very lucrative and still virtually unregulated thanks to heavy lobbying and campaign contributions by the financial sector.
• Large U.S. banks penchant towards “safe” lending which involves lending to only big MNC’s with global holdings predominantly in Asian countries. These Asian markets are considered to be emerging markets that have greater opportunities for growth than the mature markets or what some MNC’s consider declining markets of the U.S.
• Incentives on Wall Street reward short term risky investments. Moral hazard is prevalent since the general belief is that there will be another round of “to big to fail” bailouts by a FED and Treasury Department that is made up largely of ex banking executives.

Effect

• Large banks are not investing / lending to startups, small, and medium sized businesses for reasons mentioned above. This is limiting  both job growth and taxable revenue from these businesses and their employees. This revenue is necessary for paying down national debt.
• Large banks are investing / lending to large MNC’s with global exposure. These MNC’s continue to export high paying jobs to reduce labor costs and to get access the emerging markets in Asia. The results are increased profits for the MNC’s and fewer high paying skilled labor jobs for U.S. workers.
• Lack of credit availability to start-ups, small, and medium size businesses results in fewer opportunities for these companies to expand which contributes to stagnant employee wages.

Solution

• Seperate traditional banking from investment banking or from offering speculative investments.  Banks that hold U.S. citizen savings and checking accounts should only be engaged in traditional banking. i.e. providing loans to consumers / businesses and offering savings or transaction accounts.
• Break up the largest four banks into smaller entities. Too big to fail should be too big to exist.
• Large established banks have demonstrated they are not open to any changes that will benefit the general public. Savings and checking accounts are better placed in small to medium sized regional banks who engage in lending to  small and medium sized businesses or in local community banks.

Energy:

Problem

•  Availability of key natural resources and commodities such as strategic metal and material necessary for maunfacturing of manufacturing of high technology components are diminishing.
• Insufficient production capacity necessary to meet global demand in the fossil fuels industry.
• World oil production has plateaued at just over 84.5 million barrels per day for the past five years indicating oil may have reached peak capacity.  Global consumption continues to escalate driven by non-OECD countries, last years consumption outpaced production by 5 million barrels per day.
• The U.S. has large untapped U.S. liquid oil fields that remained in reserve or under limited production and has the world largest concentration of shale oil. However, U.S. production strategy appears centered around using up the rest of the world’s petroleum supply first. There is growing evidence that many of the world’s reserves are depleting faster than reported.
• Natural Gas production is expected to be able to meet growing demand for at least the next 5 – 8 years and production capacity is not expected to be reached until 2025 – 2030. However, this is only possible by utilizing hydraulic fracturing (fracking), horizontal drilling, and extracting natural gas from shale in order to offset the decline of traditional natural gas production
• Coal production is also expected to be able to meet demand at least for the next decade possibly longer and production capacity is not expected to be reached until 2025 but is chief producer of man-made greenhouse gases.
• Regardless of reserves available, production capacities for fossil fuels will soon begin to decline as the easy to access reserves are depleted requiring longer extraction and refinement processes timelines. In addition, costs associated with production are increasing as existing resources become more difficult / expensive to extract.
• New procedures for extracting remaining fossil fuel reserves have greater risks than traditional applications. Deep water drilling spills has done massive environmental damage to local waters and wildlife. Coal mining is very polluting and hazardous to the environment and drinking water. Oil sands are essentially strip mining and also very polluting.  Shale production for oil and fracking for natural gas both represent serious threats to local water supplies.
• Fossil fuel prices will continue to rise as global demand outpaces supply creating geopolitical tension between countries.

Cause

• Profits from fossil fuels are in the billions of dollars a quarter. Fossil fuel companies are in business to make profits and
  generate share holder wealth. Oil, coal, natural gas production accomplishes are accomplishing these goals in record numbers.
• Fossil fuel companies stand to remain profitable even if they are not able to meet demand since prices increases will guarantee profits despite lower production. There is no incentive to develop additional capacities, invest heavily in alternatives to fossil fuels, or push to strongly for legislation that will open local U.S. reserves.
• Millions of dollars spent on lobbying and campaign contributions ensure continued subsidies, tax breaks, and barriers to entry for effective renewable energy projects. Misinformation campaigns have kept the public questioning climate change, world wide reserve capacity, and environmental safety and pollution concerns.
• Lack of political will to take on fossil fuel industry combined with a belief system (promoted by the fossil fuel industry) that
  renewable energy will never have the efficiencies necessary for wide scale production and therefore should not warrant infrastructure investment. This belief still exists despite successful track records in other countries that prove otherwise.

Effect

• As global demand for natural resources begins to outpace supply expect a continuation of price increases in fossil fuels and strategic metals and materials. Price increases in these commodities will drive prices higher throughout the U.S. and global economies.
• Greenhouse gases (CO2, methane, etc) will continue to rise and contribute to climate change that is already occurring naturally as part of the Earth’s heating and cooling cycles. Pollution from fossil fuel exhaust gases will continue to increase contributing to respiratory and other health concerns especially in dense urban areas.
• Successful legislative barriers to entry mounted by the fossil fuel industry guarantee limited federal funding for research, infrastructure development, and the creation of large scale solar thermal, geothermal, tidal, maglev windmill, bio algae, and other renewable energy projects.
• Oil price increases equate to rising inflation since oil is the primary energy source used for almost all transportation purposes, and all consumables travel hundreds of miles to get to their final destinations. Oil is also used extensively in manufacturing processes which contributes to higher prices of both base components and finished goods manufacturers.
• When all energy sources are combined (including projected increases in renewable energy) global energy production peaks just prior to 2020 then begins a steady decline until the end of the century as first oil and then coal fail to meet global demand. This will occur unless a new energy source is discovered with efficiency levels approaching zero point and this source is allowed to come to market. Otherwise, global consumption peaks in 2020 and then begins its steady decline to the end of the century. The population explosion of the past 75 years has been directly correlated to the growth of fossil fuel production. A decline in population can be expected to follow the decline in overall energy production capacity since energy is the catalyst for food production and distribution.

• Main Street America –  An upward trend of rising fuel an electricity costs combined with unpredictable and sometimes rapid price fluctuations.
• Inflation will continue to increases in the U.S. driven by higher transportation costs as products travel hundreds if not thousands of miles to get to manufacturing / processing facilities and eventually the consumer.  Food prices will reflect this trend the strongest since that average food product has to travel almost a thousand miles before it reaches the grocer.
• Rising manufacturing cost will also drive inflation higher and restrict employee wages as manufactures struggle to not pass on price increases to customers.
• Fresh water aquifers are beginning to show evidence of contamination and this will threatening the health of local populations as fracking and strip mining operations escalate.

Solution

• Escalating global demand for fossil fuels and public outcry over rising prices will allow renewable energy solutions greater opportunity to supplement the fossil fuel industry. Private sector renewable energy companies should take advantage of this trend and lobby the federal government for research grants to increase production efficiencies and subsidies for developing infrastructure..
• Grants and subsidies can be acquired by redirecting the fossil fuel industries subsidies and tax breaks towards private sector renewable energy companies.
• Employ a nation wide program to drill arctic, deep water, and the recently discovered deep intercontinental fields. Apply special taxes to industry profits for the rights to drill and use the money for a nationwide renewable energy research and development program designed to wean the country off fossil fuels dependence within the next two decades.
• Cease or severely limit all fossil fuel extraction programs that represent a direct contamination threat to ground water tables.
• Implement public awareness campaigns to inform the local populations of the dangers of new extraction processes like fracking pose to their health. Inform the public of the benefits and limitations of current renewable energy systems and the need for additional research and infrastructure funding.

Healthcare Costs:

Problem

• Healthcare costs in the Unites States are currently at $2.6T and projected to continue rising that equates to $7960 per person and is over twice the average of the 33 economically developed countries. What is even more startling is the rate of cost increases compared to the other countries.  Costs as a percent of Gross Domestic Product (GDP) is at 18% and rising.
• The biggest cost drivers are new patented prescription drugs, expensive new technologies and equipment, inefficient administrative costs, and profit taking in every sector, much of it hidden from public scrutiny, especially in healthcare insurance.
• Healthcare insurance premiums are rising at double digit rates (130% in the past decade) while benefits continue to be reduced and fewer employers are providing coverage (9% drop since 2000).
• Bankruptcies due to healthcare costs represent 30% of all U.S. bankruptcies. Even people with employer provided group plans have discovered they are vulnerable to bankruptcy. While Americans watch their healthcare premiums going up and bankruptcy rates continue to rise the major healthcare insurers are have  enjoyed record profits for the past three years, even in the midst of a lingering recession. This is possible because as monthly premiums and insurance deductibles have increased policyholders are coming to grips with the fact they don’t have the financial resources for expensive operations, testing and medical care.
• The $1T pharmaceutical industry ($300 B a year in U.S. drug sales alone) with its 16.4% profit margins is at the forefront of U.S. healthcare cost. What is disconcerting is not just the revenues that are being generated but the industry’s propensity for expensive  long term patented drug treatments as opposed to actually bringing any cures to market. A cure for any disease would never represent the same level of profits that a long term patented treatment would. Therefore the financial incentive remains focused on providing treatments while any promising research that could lead to potential cures tends to end up getting buried, redirected, or diluted into a treatment.
• Almost every prescription drug provides some level of toxicity to the human body. This means that prolonged exposure to a perscription drug will generally result in that patient developing a future disease from taking the drug. This is componded by the more perscription drugs a patient takes.  This is a very profitable model for pharmaceutical companies since they are essentially creating their next generation of customers, but ithis cycle is significantly driving up the country’s healthcare costs and adding to the national debt.
• The U.S. healthcare industry as a whole has demonstrated an utter lack of interest in preventative care.  Prevention has been proven in nearly all the other economically developed countries to lower costs, but that means it will also lower the healthcare industries’ profits. Of the 33 developed nations only the U.S. is without some level of universal care. Universal healthcare systems are either government backed or non-profit institutions which are more concerned with keeping their costs low than generating profits. Bottom line -  healthy patients don’t generate profits.
• Healthcare costs expectations are projected to rise much more sharply over the next two decades as aging baby boomers,  with increasing rates of obesity and chronic disease, will require more medical treatment and enter the Medicare system.

Cause

• Healthcare insurance companies, pharmaceutical companies,  medical device manufacturers, etc. are in business to make profits and like all for-profit corporations have a fiduciary responsibility to generate share holder wealth by increasing the stock’s price. Profits and rising stock prices are tied directly to executive compensations packages which in some cases have reached into the hundreds of millions of dollars. Greed drives  decision making in the healthcare industry.
• A culture has developed among corporate executives over the past 20 years that is so focused on profit maximization strategies that profits are sought even at the expense of the patients. For example, pharmaceutical companies have become so fixated on the development of blockbuster drugs worth billions of dollars in profits that they will routinely skirt regulations, falsify drug studies, cover up fatal side effects, illegally market drugs, and pay kickbacks to doctors ($200 M last year) for endorsements and prescriptions of their drugs, going so far as to encourage doctors to prescribed drugs for treatments the drugs were never approved or intended for. It is now considered a good business practice to accept the hundreds of million of dollars worth of government fines and private party lawsuits in exchange for the billions of dollars in profits the drugs will generate.
• Corruption and fraud is rampant in the healthcare industry. The pharmaceutical industry continues to have one scandal after another. 9 out of 10 of the largest pharmaceutical companies have either already paid billions in government fines and private party lawsuits or are currently under investigation. Healthcare insurance companies have intentionally created complex and convoluted billing practices designed to discourage customers from pursuing claims while they still engage in practices designed to deny or limit coverage regardless of the Healthcare Reform Act of 2010.
• The healthcare insurance and the pharmaceutical industries have spent hundreds of millions of dollars on the best lobbyists K street have to offer and for campaign contributions to senators and congressmen in order to ensure legislation and regulations remain favorable and do not interfere with revenues.
• The pharmaceutical industry’s massive $60 B marketing and direct to consumer advertising budget mislead the public about the safety and necessity for prescription drugs. Advertising dollars and financial contributions to major medical associations, review journals, and universities have grown to comprise sizeable portions of their operations budgets. This has made prescription drugs the accepted method of treatment while downplaying nutrition and non-patented remedies regardless of research findings. Even the FDA which is suppose to be monitoring the pharmaceutical industry is receiving more than $600 M in user fees from the industry amounting to more than 60% of its drug review funding.

Effect

• Healthcare costs are rising. The rate of the increase is projected to accelerate over the next decade as the baby boomer population goes into retirement. Aging baby boomers are already experiencing increasing levels of chronic disease (heart disease, cancer, diabetes, etc.) which represents 75% of all healthcare costs in the U.S.  The federal government currently spends $.9T (23% of federal outlays) on healthcare and is not prepared for the cost escalations expected in Medicare and Medicaid from an aging population with growing levels of chronic illness. There is no realistic way planned to pay for these rising costs except to print more money which means more deficit spending. Deficit spending adds to the national debt which further erodes international debtor confidence.
• Healthcare cost escalations if left on their current trajectory could threaten to bankrupt the country in a decade or two. Due to aging baby boomers and record levels of chronic disease and obesities related illnesses which will require greater amounts of expensive and toxic drug treatments.
• Powerful lobbying pressures and campaign contributions  ensure that there is little political will left to address rising healthcare costs. Politicians who receive large contributions from the healthcare industry fight diligently to protect those contributor’s profits and the status quo and this limits the chance of reform. As a consequence it is unlikely that the rising Medicare and Medicaid costs will be reigned in, or that competition from a national healthcare program or from non-profit insurance, pharmaceutical, and medical equipment companies will force the for-profit healthcare companies to lower their prices or become more efficient.
• Expect fewer cures and more expensive patented treatments. Half of all Americans are routinely taking some type of prescription drug. Those numbers will continue to rise as Americans find themselves having to take more prescription drugs to counter the toxicity effects of the drugs they have been taking.
• Prevention and lifestyle changes which could appreciably lower healthcare costs by building up the patients immunity will continued to be ignored or downplayed by the healthcare industry to protect profits. This reduces the populations chance at better health requiring them instead to rely on drug treatments and surgery. Prevention consist of a routine monitoring, exercise regimens, and a diet made up largely of raw foods and nutrient /immune building supplements. The diet limits meat protein & fat, dairy all of kinds, processed / refined foods, fast foods, and sugar.
• The U.S. ranks near the bottom of the 19 developed countries in healthy life expectancy (HALE). The U.S. is dead last in the age-adjusted amenable mortality rate before age 75 category, both of which are strong indicators of the ineffectiveness of how the US treats disease. The country is paying more for healthcare than any other country and will continue getting sicker for it.

• Main Street America – Individual healthcare costs will continue to rise while insurance coverage decreases.  More citizens can expect to go into bankruptcy due to lack of insurance, high deductable ($5000 to $10000), or policies reductions that result in insufficient of their healthcare bills.
• U.S. population is becoming more medicated and less healthy.  Life expectancy and quality of healthy life will be lower for this generation than the previous one.
• Quality of healthcare in the U.S. will continue to decline and more Americans will die at the hands of the medical system which has recently surpassed stroke as the number three killer in the U.S.  Each year 225,000 Americans die  as a result of modern medical treatments. The main causes are negative reactions to properly prescribed drugs at 106,000 (this is the conservative number from the CDC), infection at hospital at 80,000, hospital errors at 20,000, unnecessary surgeries at 12,000, and improperly prescribed medication at 7,000.

Solution

• General Option – A nationalized healthcare option which combines Medicare, Medicaid, CHIP, TRICARE and state / local health clinics into one system (the VA and the military’s healthcare system may remain apart) and subsidizes the creation of non-profit healthcare insurance companies, pharmaceutical companies, and medical equipment manufactures.
• Nationalized healthcare option and non-profit healthcare companies should be managed and structured for efficiency i.e. flattened hierarchies, computerized integrative billing, simplified regulations, established pricing etc. The goal is to provide quality healthcare at the lowest possible costs to Americans not profits for corporations or shareholder returns. This will force much needed competition within the industry.
• Fund  independent and university research facilities for pure research WITH NO TIES to pharmaceutical or biotechnology (owned by big pharma) companies. Redirect private sector donations towards these research labs. All research findings would be patented, human trials conducted, and any cures or treatments deemed suitable for public use be made available at cost to both the national healthcare option and to non-profit pharmaceutical companies.
• Remove the pharmaceutical industries influence from the FDA which is suppose to be monitoring the pharmaceutical industry not receiving the majority of the $1.5 B in user fees it supplements its budget with. Do not allow pharmaceutical executives to work in the FDA and require that FDA officials have to wait a minimum of 5 years before they can take high paying jobs with pharmaceutical companies in order to reduce conflicts of interest.
• Establish a nationwide prevention awareness program. Require labeling of adverse reactions and that doctors explain the toxicity risks of prescription drugs.
• Establish a program that allows all university graduates who pass medical school entrance exams the opportunity to attend medical school. State school s would be regulated to keep tuition costs low.  Provide grants to students that pay the costs of medical school in exchange for years of service at hospital in the nationalized healthcare system or at the VA. The goal is to have more doctors in the system and also to encourage doctors to engage in research or trial studies.

Food Production:

Problem

• The U.S. Farm bill subsidizes the country’s four primary crops – corn, soy, wheat, and rice. These crops are sold to food producers for less than costs of production. Third world farmers cannot compete with these subsidized exports leaving those countries susceptible to famine should production levels drop unexpectedly.
• Food production companies use the four primary food crops along with cheap chemicals to create the majority of U.S. food and food components. These foods are almost all heavily refined and processed. The processing causes foods to loose much of its nutritional value. Processed foods are  also heavily laden with addictive levels of fats, salts, and sugars.   Research scientists are discovering that some of the chemical additives have additive qualities of their own such as restricting receptors in the brain and stomach that tell a person when they are full or increasing a person craving certain types of food.
• Long term consumption of  processed food products is causing an obesity epidemic in the U.S. and contributing significantly to the rise in chronic diseases, both of which are driving up healthcare costs.
• Food production in the U.S. is becoming increasingly dependent on genetically modified crops (GMO). These crops usually consist of a monoculture (single) strain which lacks the genetic diversity necessary for crop resiliency against disease. GMO crops do not produce seeds requiring farmers to purchase seeds from the chemical companies who make the GMO crops.
• GMO crops are designed to be resistant to pesticides and herbicides. The chemical companies that produce GMO seeds / crops also produce the very same pesticides and herbicides. The crops are also drought resistant and produce large appealing fruits and vegetables. Unfortunately, they do not possess anywhere near the same nutritional value of their organic counterparts and lack proper long term trials to determine the health risks of prolonged consumption.
• Modern industrialized farming practices are deteriorating the nutrient composition of the soil rendering it almost useless in places and dependent on increasing amounts of fertilizers in order to grow crops. These fertilizers are produced by many of the same chemical companies that provide pesticides and herbicides.  Industrialized farming is also heavily dependent on oil for fertilizer production, fueling farming equipment, and transporting crops to food producers and food products to grocery stores. This makes food prices subject to price increases when oil prices go up

Cause

• Profit margins in the food industry are low and the industry is very competitive. One way that food companies have learned to sell more food and increase their profits is to generate a local population that consumes more of its products. The U.S. diet which consists primarily of processed and fast foods has increased obesity rates to over 34% nationally. Obese people eat more food.
• The food industry is incredibly efficient at providing the world with an abundance of cheap food. To achieve these goals and remain profitable food producers are providing the public with food that is not only nutrient deficient but is also so chemically altered through processing that what consumers are eating is essentially unhealthy.
• Lobbying and campaign contributions from the food and chemical industries have led to the creation of the U.S. Farm Bill and other legislation designed to subsidize industrialized farming. This makes it difficult for traditional and organic farmers to compete and isolates them into niche markets.
• Genetically modified foods (GMO’s) and modern industrialized farming practices serve as profit making machines for chemical companies more interested in selling pesticides, herbicides, and fertilizers than consumer in safety. These companies have successfully overtaken U.S. and European crop markets.

Effect

• The cost of mass produced processed /refined and fast food is significantly cheaper than healthier organic foods. Lower and middle classes who are being hit hardest by a lingering recession and are financially restricted to buying less expensive processed foods are experiencing the fastest decline in health.
• The U.S. population has become largely addicted to process and fast foods which generally taste better due to the high levels of fats, salts, sugars, and chemical additives.
• The U.S. population is becoming increasingly obese and more susceptible to chronic disease which is contributing to rising healthcare costs and the national debt.
• GMO monoculture crops with inferior nutritional value and possible long term health risks are also contributing to healthcare costs.
• Modern industrialized farming and GMO monocultures are producing crops less resilient to disease. Regional food shortages have already occurred due to extended droughts. A crop disease that attacks GMO monocultures could devastate production yields leading to famine in the third and world wide food shortages.
• GMO crops produce no seeds and chemical companies have successfully eradicated the majority of seed production through patent infringement law suits. This limits the farmer’s ability to rapidly recover from a large scale crop disease by planting a variety of each type crop in the hopes that one or two will be resistant to the disease.
• GMO producing companies bring litigation against farmers who don’t use their GMO seeds / crops under the pretense of patent infringement. The lawsuits claim that patent protected seeds blow onto their farms and thus violate their patents. Most farmers have chosen not to go to court and either sell their farms or agree to fines and to farm GMO crops in the future. Those who do go to court find themselves in a drawn out costly lawsuits that they generally win but financially devastate their businesses.
• Modern farming has become heavily dependent on oil for production and distribution that rising oil prices have already caused food prices to increase.
• Lobbying from the food industry is attempting to create legislation designed to limit the ability of organic and local farmers to bring their crops to market under the guise of food safety. While the vast majority of E Coli and other bacterial outbreaks come from large industrialized farms.

• Main Street America – Consumption of processed and fast food are increasing America’s obesity rates, heart disease, cancers, Type 2 diabetes, etc.
• Overall health in the U.S. population is declining due to a lack of proper nutrition and being over medicated. 
• Food prices will continue to be more expensive as oil prices increase and the dollar devaluates.
• Potential food shortages may be on the horizon and the majority of Americans are not prepared.

Solution

• Remove some of the subsidies from large food growers / manufacturers and redirect those  funds towards more sustainable local production that engages in organic or traditional crop rotation farming.
• Remove litigation threat to farmers from chemical companies who can sue farmers using their own seeds when GMO seeds blow onto their farms. Fortify the non GMO seed market and reintroduce seed variety back into mainstream farming applications.
• Tax processed food and especially fast food products in the same way tobacco is taxed.  Create a private sector fund not a government office to manage and distribute  the money to help pay for rising health care costs.
• Create a consumer awareness campaign to inform public of dangers of continued consumption of processed and refined foods. Create legislation that forces food companies to clearly illustrate chemical and additives compounds on labels. Enforce guidelines for what can be labeled as organic.

Growth for the sake of ongoing profits and investor returns is no longer going to be the answer for the majority of Americans. Favorable legislation for large MNC’s and the country’s wealthiest will ensure a continuation of polarization of wealth. Capitalism has propelled us to great heights, but it doesn’t have to mean profit and wealth creation for a few at the expense of the country and the middle classes. It is time to reassess our lack of responsible government, crony capitalism, corporate socialism for the largest MNC’s and realize that our critical sectors are not sustainable and need to be pulled back to their entrepreneurial roots. Sustainable business applications according to the long term needs of the country and a government that is also responsible to the people are what is need at this time.

In the first blog of this series, Problems in the U.S. Critical Sectors – Monetary & Banking, Energy, Healthcare, Food Production, and Government – An Analysis the major economic sectors critical to the survival of a modern day society were identified and their long term problems addressed. These sectors include: monetary & banking system, energy production, healthcare, food production, and water distribution. It was also noted that a stable and reliable government free of corruption is necessary to ensure proper legislation and regulation.  Finally, it was pointed out that if problems in these sectors remain unresolved they can have serious long term consequences for our economy even changing the lifestyles that Americans have grown accustomed to.

In the second blog, Problems in U.S. Critical Sectors  - Monetary & Banking, Energy, Healthcare, Food Production, and Government – The Cause problems in our critical sectors were identified as residing in a significant resistance to change from those who seek to maintain the status quo and the massive profits and wealth it generates for them. The underlying reasons for the resistance to change was also identified as an age old belief system which promotes selfish individual / group gain and achievement over all else. This philosophy has little regard for long term public or environmental consequences. In today’s world its mantra is “economic growth at any cost”, and it favors and rewards those who strive for profit maximization, wealth generation, and the influential connections to political power that ensure ongoing control. Ultimately it is greed, avarice, selfishness, and mammon (love for money above all other things). This philosophy is prevalent in many of the country’s most wealthy and influential. Their businesses and special interests constitute many of our nation’s largest investment groups and Multi National Corporations (MNC’s) and have considerable sway over our country’s critical sectors.

Societies have been warned throughout the ages by their greatest teachers and spiritual leaders of what would happen if too much wealth and power were concentrated amongst those who embrace this philosophy. Let us now consider the effects the past actions have had on our critical sectors and how the American public is faring.

Monetary System:

• U.S. national debt and lack of fiscal responsibility continues to rise making our international debtors lose confidence in our ability to pay.
• Effect – International debtors are already shying away from U.S. treasuries and looking for different currencies other than the dollar to conduct international commerce. If this keeps up expect a devaluation of U.S. treasuriesand the dollar
• Effect on main street America – foreign goods (big box store products) become more expensive and Americans experience more inflation
• The FED is caught between trying to stimulate the ec onomy with Quantitative Easing (QE) or printing money and buying financial assetsfrom large banks to increase their reserves combined with artificially keeping interest rates low, and running the risk of devaluing the dollar by printing to much money and increasing inflation by keeping the interest rates artificially low for to long.
  • Effect – The FED will likely continue the current practice of” printing money” (actually its all electronic transfers now). Large banks will continue to influence / pressure the FED to keep supplying them with free money to invest with because it is profitable for them to do so. This outcome, while beneficial for large banks and MNC’s, if continued only further lowers international debtor confidence which further devalues the dollar.
    • Note – this money is being spent on large MNC’s and in financial markets i.e. derivatives, it has not been used as was originally intended to relax credit for small / medium businesses which are the primary drivers of Gross Domestic Product (GDP) and job growth.
  • Effect on main street America - foreign goods become more expensive thus increasing inflation.

Financial /Banking System:

• Wall Street financial institutions increasingly invest in derivatives and other financial instruments that don’t contribute to GDP.  One in every three dollars is tied up in exotic financial investments like derivatives (hedges or bets on a derived value), this is essentially pulling money out of the economy that could be better used manufacturing, innovation, etc. They are also limiting investing to what they believe are safer investments – large MNC’s with global exposure in the growing economies inAsia.
  • Effect – Our largest banks virtually ignore startups, small, and medium sized business that are critical to job growth and who provide the bulk of taxable corporate revenue necessary in paying down the national debt. This has created credit restrictions to small / medium businesses which limit their expansion capabilities and our country’s job growth (85% of
    jobs).
  • Effect on main street America - Fewer manufacturing and other skilled labor jobs as large MNC’s export them overseas. Continuation of stagnant wages experienced in real world dollars since 2000. Fewer opportunities as growth slows and recession continues (unless you actually believe its over for most Americans)

Energy production:

• Readily available fossil fuels are becoming scarce. Extraction processes are increasing in costs and it is requiring more oil to
  extract resources. Some extraction processes are damaging the environment and contaminating water supplies.
  • Effect – Barriers to entry to protect profits from the fossil fuel industry for alternative energy resources guarantees that no
    significant funding or subsidies will become available (fossil fuel companies still enjoy subsides despite a decade of record profits). Global world production has plateau in the past 4 years while demand continues to increase.
  • The effect on main street America – Increasing energy costs at the pump and in electrical bills.  Increased inflation since almost everything has to travel hundreds of miles to get to its sales destination. Consider food which travels almost one thousand miles from processing plant to grocer. Fracking and other similar approaches contaminate
    local water supplies.

Healthcare costs:

• In response to rising healthcare costs insurance Companies are increasing premiums and stripping away benefits to meet profit expectations. All this while industry executives enjoy some of the highest salaries of any industry. Billing practices have become convoluted and confusing for anyone not in a billing department.  Simple surgeries or routine testing can cost
  thousands of dollars.
  • Effect – Medical bills represent 2/3 of U.S. bankruptcies and this includes people with “good Insurance”. Huge lobbying
    efforts, campaign contributions, and sympathetic media outlets successfully act as deterrents to real non profit healthcare insurance companies or the creation of a national insurance program from which they would have to compete against.
  • Effect on main street America – Rates continue to rise while coverage becomes limited. As more baby boomers
    reach retirement age requiring additional expensive treatments for chronic diseases this problem is expected to amplify.
• The pharmaceutical industry’s concern is to provide long term expensive treatments. The public can expect few if any cures despite hundreds of millions from charities and the government for research. The toxic nature of long term drug use ensures future disease requiring still more prescription drugs. The FDA is financially supported by the very industry it is supposed to
  monitor.
  • Effect – The U.S. is the most medicated country in the world paying more than three times the average of all other developed countries. The medical system revolves around expensive patented prescription drug use where health and preventive measures continue to take a backseat to profits has the U.S. ranked near the bottom of developed countries in Healthy life expectancy (HALE).
  • Effect on main street America – Prescription drugs and insurance costs continue to rise. Prescription drug use
    in the population continues to rise increasing the need for more drugs and lowering the populations overall health.

Food production:

• Subsidized food production makes our food cheaper than at any point in human history, but it is processed, refined, genetically modified, and laden with additive levels of salts, sugars, fats, and additive preservatives and other compounds.  Industrialized
  farming is rapidly depleting nutrient value of soil requiring ever more petroleum based fertilizers. Four crops – corn, soy, wheat, and rice make up the bulk of all U.S. food and is becoming largely genetically modified and homogenized lowering crop resilience to disease.
  • Effect – one third of the country is obese and that figure is growing. Consumption of current processed food creates obesity related illness and expensive chronic diseases such as heart disease, stroke, cancer, etc. to rising healthcare costs which drive up the cost of healthcare and contribute to the nations debt.
    • Note – Food profit margins are low. To increase profits it is necessary for the population to consume more food. Obese people generally eat more. While this is good for the food and pharmaceutical profits, this cycle is also contributing significantly to rising healthcare cost which is approaching 2.5T per year. This in turn contributes to national debt as Medicare and Medicaid costs increase.
  • Effect on main street America – Healthcare insurance and prescription drugs become more expensive. Population (including children) are getting more obese and unhealthy (just look around). Increased consumption of addictive processed foods lowers nutrition value necessary to maintain healthy immune system requiring more trips to the doctor and more drugs.

Government:

• Politicians remain in gridlock over what to do about the rising national debt; despite recent posturing and attempts at compromise they remain more concerned with gratifying wealthy contributors’ and getting themselves re-elected. Both parties realize that tax revenues need to increase and spending needs to decrease but lack the political will to challenge party lines, contributors, and special interests.
  • Effect – Raising taxes and / or removing Bush era tax cuts and the cessation of three unproductive wars will be met by considerable resistance from Republicans. Decreasing the size of government and trimming endowment programs (Social Security and Medicare) even if only through efficiency measures will be met with considerable resistance from Democrats.
    The result is ongoing political games and kicking the problem down the road. This is degrading the confidence of international debtors in the U.S. ability to deal with fiscal responsibility causing some to seek out alternatives to the dollar
  • Effect on main street America – If the dollar experiences rapid devaluation inflation severely impacts all but the wealthiest of American families who have less money tospend in the economy. Less spending means prolonged recession.
• Legislation is being determined and in many cases written by lobbyists. Campaign contributions ensure that legislatures will champion contributors causes. Large Multi National Corporations and other special interests view the millions they spend on these endeavors as investments that provide incredible returns. The populace has no organized way of matching or countering these expenditures.
  • Effect – Corporate and special interests are determining the course of the country over the interests of the American people. The more money a group has the more favorable legislation they will receive regardless of the long term outcome for the public. New revolutionary technologies are shelved to protect existing industry profits,
  •  Effect on main street America – Polarization of wealth, stagnate wages, environmental degradation, disenfranchisement, and a loss of faith in government.

The overall effect on our critical sectors if we continue on our current course will be a continuation of the status quo and these unsustainable systems even to the point of collapse in order to protect profits and investor wealth. Our critical sectors are more than profit maximizing engines; they are the foundation of our information age society and are the staple of the lifestyles we are accustomed to. Individual and group selfishness doesn’t have to lead the U.S. into an era of decline. I agree with Warren Buffet – “our best days are ahead of us, perhaps not on this current trajectory.”

It is time to evolve our thinking beyond personal gain and include our fellow man, our communities, and our environments. Capitalism has propelled us to great heights, but current paradigms are now disproportionately benefitting a few to the expense of the overall country, we can make it work for all of us again it just involves a restructuring of the objectives. Those who are benefitting from the current systems can continue to do so, but for many who no longer see the benefits reaped by a few there are other options. In the next blog we will explore a few such options.

In the previous blog, Problems in U.S. Critical Sectors – Monetary & Banking, Energy, Healthcare, Food Production, and Government – An Analysis - the major economic sectors critical to the survival of a modern day society were identified and their long term problems addressed. These sectors include: monetary & banking system, energy production, healthcare, food production, and water distribution. It was also noted that a stable and reliable government free of corruption is necessary to ensure proper legislation and regulation. Finally, it was pointed out that if problems in these sectors remain unresolved they can have serious long term consequences for our economy even changing the lifestyles that all Americans have grown accustomed to.

Problems in these sectors are becoming obvious even to the general public. The causes are numerous but largely reside in a significant resistance to change from those who seek to maintain the status quo. This is understandable since it generates massive profits and wealth. These influentialindividuals and their associated special interests constitute many of our nation’s wealthiest investors and largest Multi National Corporations (MNC’s). They believe they have the expertise, resources, and global exposure necessary to ride out any detrimental scenario the future may bring, but what about the other 99% of Americans? Can they expect to turn to a government which has demonstrated repeatedly a definite lack of political will to realistically deal with any of these concerns? Campaign contributions and the best lobbyists’ money can buy guarantee it otherwise.

The real cause, the one underlying the resistance to change revolves around a new philosophy that has evolved over the past several decades, one that has replaced the American dream of life, liberty, and the pursuit of happiness and redefined what success and achievement means in our society. In truth, this philosophy is not new; it has been with humanity since recorded history. It is a belief system that promotes selfish individual / group gain and achievement over all else, and has little regard for long term public or environmental consequences. In today’s world its mantra is “economic growth at any cost”, and it favors and rewards those who strive for profit maximization, wealth generation, and the influential connections to political power that ensure ongoing control. The cause has many names greed, avarice, selfishness, and mammon – it is the love for money above all other things, and seeks power to ensure that goal. People and resources become numbers on a balance sheet. Decisions to pursue profit and guarantee a return on investment (material wealth) can then be justified and even encouraged despite however much damage may be done.

Since World War 2 the US has experienced massive growth and most Americans have prospered, at least up until recently. Our country came out of World War 2 with an immense manufacturing base due to the war effort, and we were one of the few developed countries not straddled with large scale reconstruction costs. We rapidly became an economic powerhouse with readily available access to natural resources. The pie expanded for all. Now, large MNC’s view the U.S. as a country in its maturity phase, consuming more than it produces, relying on debt that because of fiscal irresponsibility is becoming more restrictive and more difficult to obtain from International debtors. The pie is growing much slower. However, large influential financial institutions, MNC’s, and investor groups still demand increasing profits and substantial returns on their investments in order to meet their growth models and expectations, and they are getting them by any means necessary.

The result of these actions has been a shrinking proportion of “pie” for Main Street America. This is evident by a decade of stagnant wages, a relatively jobless recovery, having to bear the brunt of a financial collapse that bailed out the very players that created it, and a growing polarization of wealth towards the upper 1%. Warren Buffet one of our nation’s most successful investors has stated accurately that the current rising tide is raising only the yachts. To make matters worse large MNC’s are looking towards what they believe are the more profitable growing economies and emerging markets of Asia. We can all sense that something is wrong in our country with our growing debt, increasing inflation, and a lack of faith in our political parties, but we are not sure what we can do.

Einstein declared that it is impossible to solve major problems with the mindset that created them. Yet that is exactly what continues to take place and the result has been a further entrenchment into the very systems causing the problems. Our aforementioned critical sectors are more than just profit maximizing engines for big corporations and the wealthy; they are the required foundations of our modern society.

Maximizing profits and increasing investor wealth are institutions of American capitalism and have helped raise the country to where it is.  But in our critical sectors it is beginning to limit progress and keep the country locked in archaic systems that are not only proving to be unsustainable but could result in a rapid decline of these sectors all at once. While the current paradigms are certainly financially beneficial to a select few, that benefit is not shared with the public. Quite the contrary, Americans are reeling from increasing costs and may soon have to prematurely deal with a tipping point that could result in an economic downturn even more severe than what we recently faced. The reality is that the playing field is no longer fair. Those with wealth and power have too much control over legislation, and that legislation is creating an environment that not only restricts the necessary change in our critical sectors, on a larger scale it is degrading the middle classes.

American’s are now being confronted with the reality that infinite growth and unsustainable debt models do not work in finite systems, and that an increased concentration of wealth into the upper 1% is taking away the very thing that makes America great, opportunity for all. We are allowing the insatiable appetite some have attained for profits and wealth to get the better of us as a nation. It is time for some of us to set aside the desire for personal gain and focus on more important things like fixing our critical sectors.

The greatest teachers and spiritual leaders of our past have all warned us against this type of belief system and what would happen when it is left unchecked.

Jesus Christ said “No man can serve two masters: for either he will hate the one, and love the other: or else he will hold to the one, and despise the other. Ye cannot serve God and mammon.” Meaning that if the love for money is all one is concerned about then all actions regardless of the consequences to others can be justified. Are we not seeing evidence of this today?

The Hindu Avatar, Krishnastated in the Bhagavad Gita – “A person with demoniac tendencies thinks: “So much wealth do I have today, and I will gain more according to my schemes. So much is mine now, and it will increase in the future, more and more”. Buddha said in the Samyutta Nikaya. – “Were there a mountain all made of gold, doubled that would not be enough to satisfy a single man: know this and live accordingly.”

In these passages and many others are references and warnings about the addiction to wealth, how it cannot be satiated, and how we can lose our compassion and the very essence of what makes us human when the desire for personal gain takes over.

Over the next few years the issues facing our society need to be realistically addressed, hopefully by people with the vision and courage to step beyond the selfish profit maximizing goals of today. Our critical systems have for to long only been driven and motivated by personal gain and ambition. Protecting profits and individual wealth is limiting our society’s ability to move beyond the unsustainable systems in our critical sectors. It may be time to assess our current form of capitalism as it applies to our critical sectors and realize that these sectors aren’t sustainable and need to be pulled back to their entrepreneurial roots.

In the next blog, the effects of the current systems in our critical sectors on the American people will be discussed.

There are four major economic sectors that are critical for the survival of a modern information age society. These sectors include: Monetary & banking system, energy production, healthcare, and food production /water distribution. It is also necessary to have a stable and reliable government to ensure appropriate legislation and regulation.

There are growing problems in these sectors and it is spilling into other sectors. If left unresolved these problems could have serious long-term consequences to the U.S. economy. Hindrances to their resolution consist of a growing lack of political will to deal with them and a significant resistance to change from those who seek to maintain the status quo and the profits and wealth it generates for them. These influential individuals and special interest groups constitute many of our nations largest Multi National Corporations (MNC’s) and wealthiest investors.

These large MNC’s and investor groups believe they have the expertise, resources, and global exposure necessary to ride out any scenario
and with their resources they could very well be right – but what about the other 99% of Americans?

Problems in our critical sectors will have to be dealt with sooner or later. If handled proactively, it will be possible to make the changes less painful. If continually postponed, they will have to be dealt with reactively and in a state of crisis. It is unfortunate that in our society critical issues are generally not addressed until they approach a crisis mode. The population is easily distracted by the various media outlets with the issues that are of lesser relevance but has more emotional impact.

Monetary & Banking Sector -  Problems in this sector begin with our nation’s rising debt, which is currently $14.3T, approaching 100% of GDP. What is significant here is that our rising debt means our international debtors, if they lose confidence in the U.S. ability to manage its debt & pay interest – they will purchase less of our debt instruments i.e. treasuries. The Federal Reserve or FED will then be forced to print more dollars to cover government spending – which will lower debtor confidence even more – thus creating a cycle.

The threat here is that this loss of confidence extends to the dollar – resulting in a devaluation of the dollar and consequently our treasury
bills. This scenario can also give rise to inflation. Our international debtors hold approx 28% of the U.S. debt – purchasing has already slowed or stopped altogether in China, Russia, and some of the oil bearing countries.

What does this mean for the U.S. citizen – If the dollar becomes devalued the $1.5 T worth of goods the U.S. imports each year become more expensive. More expensive goods means inflation.

In addition to rising national debt is U.S. financial markets preference towards financialization, which primarily involves derivatives investing – derivatives tie up money which could be better spent in the real economy. There is $600T worth of derivatives worldwide, $433T are interest rate contracts and swaps ($223T in U.S.). Most of this amount is notional meaning thankfully it will never come due. The scenario here starts with the devaluation of the dollar and treasuries occurring from a loss in confidence; this then requires the FED to raise interest rates / treasury yields in order to continue attracting investors and results in interest rates going up as well. Consider what will happen if interest rates, which currently are being held low artificially by the FED, raise faster than expected and just a fraction of these interest rate contracts get called due.

The FED is using something called quantitative easing to keep interest rates low. Explained simply, the FED establishes very low short term interest rates, then prints more money. It uses that money (created from nothing) to buy government and corporate bonds from banks and other financial institutions so they have more money to invest. The problem here is that it can cause inflation if too much money gets flooded into the system and printing more dollars also devalues the dollar. This risk is compounded if the FED has to raise rates to attract investors. Note – There is also the assumption the banks and financial institutions will invest in main street (small and medium size business loans ) as opposed strictly to Wall Street financial investments, this has not and is not occurring at expected rates.

Think of interest rate contracts / swaps as hedges or as insurance policies against unexpected interest rate adjustments. Now consider our four main banks, they have over $188T of interest rate contracts on their books, any significant movement in interest rates could mean another “too big to fail” scenario. Requiring even more money be printed, once again lowering debtor confidence.

Energy –  Energy sector problems involve a combination of diminishing access to natural resources (i.e. fossil fuels), production capacities reaching their limits, costs of production increasing as diminishing resources become more difficult to extract, and
increasing global demand rapidly outpacing supply. Using oil as an example, production levels appear to have plateau at around 84,500,000 barrels per day which may be indicating a potential global peak oil scenario, while demand from developing countries in Asia is rapidly increasing to support their growing middle classes. These are only a few areas remaining in the world with untapped easy to access surface oil fields, the remaining untapped fields will require greater production costs and increasing amounts of energy (oil) for extraction and processing. Consider the difficulties and energy requirements for deep water drilling and oil sands / shale production.

As production capacities peaks and demand outpaces supply oil prices will rise. Oil price increases equate to inflation since all consumables have to travel hundreds of miles to get to their final destinations. Oil is also used extensively in manufacturing processes – which also contributes to higher prices at the base component level.

Renewable Energy as yet represents only a fraction of our supply(8%), and will require heavy infrastructure costs and better efficiencies to become a viable alternative. Biofuels that could be used to ease some the oil demand as yet represent only 3% of consumption. I’m a big fan of renewable energy – but it can at best supplement oil over the next decade. There is also a lack of political will to seriously push alternative fuels like cellulosic ethanol, algae based bio diesel, or high efficient batteries or capacitors for electric cars. All of which require significantly more research and infrastructure development costs, something we will have difficulty affording in the future.

Resistance is very strong and well organized in the fossil fuel energy sector driven multifaceted lobbying efforts and campaign contribution. These corporations stand to profit greatly from higher prices regardless if demand is met, but this attitude and the subsequent higher costs in gasoline and electrical bills is not going to help the rest of the economy or the American people.

Healthcare – Escalating healthcare costs in the Unites States are at $2.5 T and rising, that’s over $8000 per person. $2950 is the global average among the developed countries. Cost drivers include expensive advances in medical technology and associated new equipment, cumbersome administrative expenses, new generations of patented prescription drugs, and of course profit taking in every sector. The biggest expectation of future costs increases will come from aging baby boomers accompanied with growing rates of obesity and chronic disease.

Possibly the greatest costs driver is the pharmaceutical industry’s ongoing concentration on expensive patented long term drug treatments as opposed to actually providing cures, and the lack of any real interest in preventative care. In addition, almost all drugs have some level of toxicity which means that long term exposure generally results in another round of future disease requiring additional treatments. While this may represent a lucrative profit model for pharmaceutical companies it is the principle driver behind the rising healthcare costs of U.S. and if left on its current trajectory could potentially bankrupt the country. Powerful lobbying pressures ensure that there is little if any political will to address these rising costs.

Do U.S. citizens benefit from these rising costs? Consider that the U.S. ranks near the bottom of the 19 developed countries in Healthy life expectancy (HALE), The U.S. is dead last in the age-adjusted amenable mortality rate before age 75 category, which is a strong indicator of the effectiveness of treating disease. To make matters worse, the US appears to be slipping even further behind the other countries despite its increasing spending and being the most medicated of developed countries.

Food Production – Food production represents problems on a number of fronts.   The U.S. is better able to provide its population with readily available low cost food supply than at any time in history. This is possible due to very efficient large scale farming and the U.S. Farm bill which subsidizes the country’s primary crops – corn, soy, wheat, and rice. These crops can then be sold to food producers for less than costs of production. Food production companies then utilizes these four crops and a variety of cheap chemicals to create the majority of the food we enjoy today.  Unfortunately, in order to achieve the mass production efficiencies necessary to keep costs as low as possible these types of  food  are heavily refined and processed, thus loosing their original nutritional value. They are also laden with addictive levels of fats, salts, sugars and numerous chemically based additives.

Long term consumption of these food products is causing an obesity epidemic and contributing to chronic diseases.  Chronic disease such as heart disease, stroke, and cancer and obesity related diseases like diabetes have no real cures and currently require expensive and often long term treatment. This in turn contributes to rising health care costs.

Food production in the U.S. is becoming increasingly dependent on genetically modified crops (GMO). These crops usually consist of only one strain lacking the genetic diversity necessary for crop resiliency against disease. There are benefits to GMO’s which include pesticide resistance (GMO companies are generally chemical companies), rapid growth, drought resistance, and large visually attractive produce. However, they  have inferior nutritional value and there are growing concerns over long term health consequences. This has resulted in GMO crops being banned in a number of countries due to inadequate testing.  Over reliance on GMO crops and the foods produced from them could be another driver towards increasing healthcare costs. Over reliance on GMO crops and the foods produced from them could turn out to be another major factor raising  healthcare costs.

GMO crops also do not produce seeds that can be replanted, thus forcing farmers to purchase seeds yearly instead of saving their own. Farmers who do not purchase GMO seeds or do not use GMO crops are subject to lawsuits if there farms contain any GMO plants. A virtual certainty when considering that plants reproduce by their seeds traveling through the air via wind currents. In addition, if there is a disease that attacks and decimates the GMO crops there simply is not enough backup seed or diversity available to quickly recover. This could spell famine for many regions in the world dependent on U.S. GMO crops since indigenous farmers stopped producing since they cannot compete against cheap GMO imports.

Modern farming has also become heavily dependent on oil. Heavy machinery is used prolifically on all large scale farms. Mass production requires petroleum based fertilizers since it degrades the soil to the point crops will not grow otherwise.  Produce and food products travel hundreds of miles to grocery stores, so when oil prices go up, food prices do as well which increases inflation.

Freshwater scarcity represents another concern.  Our glaciers are diminishing, aquifer and lakes water tables and dropping. Our largest aquifers are not even replenishable by rain water. This will threaten farm productivity and limiting urban growth in many regions. It is being expedited world wide by increasing populations and may represent one of our most significant long term threats.

Government – The final area of concern is our lack of responsible government or what some would argue is legalized government corruption. This has resulted in an ongoing decline of moral values among our leadership. The process begins with well financed special interests led primarily by large banks / financial institutions, and MNC’s all of which are using lobbying to acquire and even write favorable legislation. It also includes campaign contributions that get officials elected who are beholden to their interests, especially those who sit in key subcommittee positions, the decision makers. The return these institutions receive is substantial, for every $1 of campaign contributions and / or investment in lobbying there is a yield of $1000 in favorable legislation, tax breaks, and subsidies.

This environment also creates a lack of fiscal responsibility regardless of which political party is in office as politicians become increasingly beholden to special interests. This is one of the principle reasons for the rampant deficit spending that is increasing the U.S. national debt. These actions further decrease global investor confidence in theU.S. ability to manage its debt.

There was large scale disapproval from our international debtors when 2011 budgetary projections went from $900B to $1.5 T, the bulk of this increase went to extend the tax cuts. This occurred while Europe was and is currently taking on austerity measures to address its own debt. Without fiscal responsibility, an end of extensions for the Bush era tax cuts, and a cessation of combat duties in Iraq, Afghanistan, and now Libya, CBO projections expect a debt level surpassing $20 T by the end of the decade.

The abuses in lobbying combined with no limits on corporate campaign contributions are two of the primary reasons corrective actions to our problems are also so difficult.

All of these problems can be addressed effectively with the possible exception of water scarcity, which is very dependent on rising
populations and changing weather patterns.

These factors also are interconnected and each contributes to the others. These issues need to be addressed as a whole in addition to their
individual components.

In the next blog we will take a long honest look at the underlying cause of what is driving the scenarios in these critical sectors. Sectors
essential for U.S. economic growth and maintaining the standard of life so many Americans have grown accustomed too. In a nut shell, these sectors are evolving into arenas concerned with only short term profit maximization, wealth generation, and ensuring that power and control of these systems remain in place regardless of the consequences. This emphasis is now disproportionately benefiting a small
percentage of the population and it is happening at the expense of the overall country.

In the previous blog U.S. Fiscal Responsibility – An Assessment of Growing U.S. Deficits and Debt Obligations I discussed the factors contributing to the U.S. debt, potential dangers if irresponsible fiscal policies continue, and a strategic direction for returning to fiscal responsibility. Of equal importance are receipts (tax revenues) and outlays (government spending) and how those allocations are distributed, which will be discussed in this blog.

As of October 2010 the U.S. debt has grown to $13.5 trillion, a 131% increase in a decade. Bush administration fiscal policy resulted in a record $4.22 trillion increase in U.S. debt. This was principally caused by lost revenue from the enactment of the 2001 and 2003 tax cuts, the wars in Iraq and Afghanistan, and increases in federal spending that added $700 billion a year to the budget. These spending increases were not matched with additional tax revenues expected from the economic growth the Bush tax cuts were projected to provide. The Obama administration soon outpaced the debt increases of the Bush era by racking up $3.53 trillion in less than 2 years. Debt increases from the Obama administration were driven largely by hundreds of billions in stimulus programs to spur the economy out of recession, a $1 trillion down payment on the new health care program, and escalations in spending for safety net programs and education. The $786 billion financial sector bailout (TARP) decisions were shared between both administrations in 2009. The following table lists the growth of the federal debt over the past decade, debt percentage of Gross Domestic Product (GDP), and the associated administration.

There are basically two recognized effective methods to control debt, increase revenues (taxes) or decrease outlays (spending). Increasing taxes is obviously unpopular. Serious independent analysis of the effects of increasing taxes versus a potential loss in tax revenue if the country is overtaxed should be conducted.  Reducing some taxes like capital gains and dividends may actually stimulate economic growth thereby generating more tax revenues in the long run, but widely implemented individual and even corporate tax cuts have not been proven to stimulate significant enough economic growth that would result in additional tax revenues. GDP percentage increases were only marginal after the 2001 and 2003 Bush tax cuts and were less than the GDP growth levels of the previous Clinton era.  GDP growth did peak  after the ERTA tax cuts in 1981 but only dropped a few percentage points after portions of those cuts were rescinded in 1986 (see table below). It could be argued that the 1981 and 2001 tax cuts were implemented during periods of recession which would restrict some of the GDP growth, but the recessions did not last the duration of the administration. In any case, tax revenue collection after the Reagan ERTA cuts averaged an increase of 6.5% a year from 1981 to 1986, the Clinton OBRA tax hike averaged a tax revenue was increased to 7.7% per year from 1993 to 2000, and the Bush tax cuts only generated an average tax revenue of 3.8% per year.  Tax revenue collections were not increased during tax cuts as many claim but during periods where tax receipts were increased.  Of more relevance are the significant increases in the debt levels during periods of tax cuts and the debt level increases in general during the Reagan and Bush administration’s policies on supply side economics – illustrated in the following table.

The belief that decreasing taxes will generate additional revenues or will not increase debt levels does not hold merit. A realistic tax policy that has fiscal debt reduction as one of its core principles should be created by independent experts without political agendas. This policy needs to address the best mix of tax maintenance practices combined with increases or decreases in those sectors that will only be allocated after careful analysis of long economic changes and their effectiveness in generating budgetary surpluses required for lowering debt. Current tax receipts for 2009 – 2010 plus projections for next year, 2015, and 2020 are listed in the table below. Data is according to the Office of Management and Government – Budget of the U.S. Government, Fiscal Year 2011 and may be subject to change depending on administration.

This budget increases taxes over the next decade presumably in accordance with economic growth projections but is a representation of a Democrat proposal not the work of an independent group and as illustrated in the following table accompanied by large increases in spending. Careful consideration should be assigned when taxes are increased in the private sector. The goal is to indeed to increase tax revenues but not at the expense of stifling growth in small and medium sized companies, the backbone of jobs in the U.S. Additions in tax revenues should be combined with strict analysis of spending programs to identify those sectors that would be identified to receive reductions in funding. Current outlays for 2009 – 2010 combined with projections for 2011, 2015, and 2020 are listed in the table below. The source is again Budget of the U.S. Government, Fiscal Year 2011 and projections may again be subject to change in the event of a change of power in Congress.

The next table is divided into non-discretionary and discretionary spending. Non-discretionary represents budgetary expenses that are required by law and have built into them cost of living adjustments (increases).  These types of outlays require new legislation in order for budgetary changes to take effect.  It is also the most politically difficult type of spending to make cuts in. Non-discretionary spending includes Social Security, Medicare, and Medicaid and represents 56% of outlays. Discretionary spending includes security (military) expenditures and non-security expenditures which consist of a variety of programs like net safety programs (assistance to families  / individuals for financial hardship), education, transportation agriculture, energy, etc. Combined discretionary spending equals 38% of outlays.

Clearly proposed outlays under the Budget of the U.S. Government, Fiscal Year 2011 continue the escalation of the debt and represent Democrat fiscal policies which like those of prior Republican policy are not in line with fiscal responsibility. Less spending is necessary but where to cut? Interest payments on the national debt are not up for negotiation. Failure to meet those obligations would produce rapid detrimental consequences. Non-discretionary expenditures represent the largest potential for cuts despite legislative difficulties and a political nightmare for any lawmaker foolish enough to try, but from a long term perspective may be exactly what is necessary. Social Security and Medicare outlays begin to increase dramatically by 2020 driven by increasing numbers of retiring baby boomers. This will be a very difficult decision; folks have paid into these programs for decades as a type of insurance for retirement. We may be witnessing the last generation of recipients that will collect the full amount of entitlement benefits as well as an increase in what constitutes retirement age in order to restrain from further deficit spending.

This brings us to discretionary spending of which military expenditures consist of more than 64%. Some sources claim that when military spending ($782 billion) is combined with military related national security expenses buried across all the government departments a more accurate picture of what the U.S. allocates for defense may be as much as $895 billion. The U.S. congress will soon have to decide whether to continue the funding for two potentially unending wars ($136 billion for 2010) while spending more than the next top 15 other countries combined and forward deploying to over 100 bases worldwide all in the name of maintaining a strong “defense” is more necessary than fiscal responsibility. As debt continues to grow many ask if it is necessary to spend $782 billion a year to fight low intensity wars and guerilla insurgents? The cessation of wars in combination with serious analysis of where spending is occurring combined with an assessment of the viability of the programs in a 21^st century environment will soon be required.

Non-military discretionary expenditures represent the final sector that will require budgetary cuts. There are numerous programs here, many essential to the stability of the country and some that have become far too bureaucratic and overfunded. The largest of these programs (25%) include a variety of net safety programs created to provide assistance to low income families and individuals that face financial hardship. Other programs that are currently under scrutiny are listed in the table below. There are numerous places where these programs can be cut. Many programs designed to provide aid in times of temporary hardship have become indefinite sources of social welfare. It will require more independent analysts to determine the realistic cost versus benefits of the programs and what the long term effects of cuts may result. Some programs may actually require increases, for example: additional allocations for programs that support innovation and promising new technologies that if developed would stimulate economic growth and increase jobs.

In light of the information above, increasing tax revenues is unpopular politically and the public is not on board. Some groups would like to see the reduction of entitlement and social programs, while some other groups want to limit what many consider run away military costs. The simple truth is that for our government to become fiscally responsible, all of the above measures, to some extent may be necessary. What is going on with our federal budget is similar to what took place over the past decade with individual citizens, we have been running up our debt and now many of us are faced with the painful challenges of paying off our individual debt or facing bankruptcy and years of poor credit which would effect our standards of living. The U.S. Government is no different, just on a macro scale. It is time to face the hard choices and do what is necessary before our debtors force us to do it and with potentially more painful consequences.

http://www.nationalpriorities.org/

http://www.cbpp.org/cms/index.cfm?fa=view&id=1258

http://www.wallstats.com/deathandtaxes/

http://www.grabgadget.com/wp-content/uploads/2008/11/wallstatsdatlarge.jpg

http://fc00.deviantart.net/fs29/f/2008/140/5/7/Death_and_Taxes__2009_by_mibi.jpg

http://www.mint.com/blog/wp-content/uploads/2009/07/DAT2010mint.jpg

http://www.gpoaccess.gov/usbudget/fy11/pdf/budget.pdf

http://www.gpoaccess.gov/usbudget/fy10/pdf/hist.pdf

http://www.cbo.gov/doc.cfm?index=11659

http://www.factcheck.org/taxes/supply-side_spin.html

Fiscal responsibility is rapidly becoming one of the most important issues facing the United States. Debt is growing at an unsustainable rate and unless decisive action is taken soon time may be running out to voluntarily change the financial course of our future. Failure to reign in debt could lead to a fiscal crisis where investors, both foreign and domestic, lose confidence in the U.S. ability to manage its budget. This in turn, would decrease the value of the U.S. debt financing instruments, i.e. Treasury Bonds, affecting the U.S. ability to borrow at affordable rates and driving up interest rates resulting in either severe inflation or deflation and high unemployment.  Without strict adherence to fiscal responsibility, which at this point equates to cuts in both discretionary and non-discretionary spending and increases in tax revenues, these outcomes may be unavoidable. 

One of the main factors for the increasing U.S. debt is our political leaders. The decline of moral and ethical values combined with a lack of fiscal responsibility has produced a decade of unrestrained spending by both parties of congress. Special interest group’s driven primarily by large Multi National Corporations (MNC’s), their associated industries, wealthy investment groups, and a myriad of other interests have purchased and influenced legislation via campaign contributions and lobbying. The result has been a congress more interested in providing for the needs of financial contributors than for the interests of the country at large. This level of corruption has resulted in laws that benefit the short term profitability of these special interests at the expense of the citizenry, which was demonstrated with the inappropriate deregulation of the financial sector which required hundreds of billions in bailouts for irresponsible bankers. 

Political maneuvering  that catered to special interests, generated years of reckless spending, and resulted in a disregard for fiscal responsibility has, according to the U.S. National Debt clock, raised the current level of debt (as of October 2010) to $13.5 trillion up from $5.6 trillion a decade ago. Our debt is increasing at a rate of $4.14 billion per day. The U.S. Gross Domestic Product (GDP) the measure of the U.S. overall economic output in 2009 was $14.25 trillion, expecting to increase to $14.7 trillion in 2010. At projected 2010 levels, the U.S. debt will reached 91% of GDP, an already alarming amount that is expected to increase further. 

War is another factor that has increased U.S. debt. Wars prior to the Vietnam era were all repaid within a few decades. Vietnam however, saw a change to this practice and “The War on Terror” now called “Overseas Contingency Operations” was the first war in history largely financed through debt while accompanied by a cut in taxes. Combined, the War in Iraq and Afghanistan have already cost over $780 billion to over $1 trillion dollars (depending on the data source). It remains a significant contributor to the increase in debt and despite a troop scale down in Iraq, Afghanistan is ramping up forces and neither war appears to have a realistic end date. 

U.S. military expenditures remain the largest source of discretionary spending at $662 billion for 2009 ($782 billion when military related national security costs are included). This expense exceeds the combined military expenditures of the top 15 countries which stand at a total of $611 billion. Cost of “Overseas Contingencies Operations” in both Iraq and Afghanistan for 2009 was $136 billion. There are also additional costs associated with the rapidly increasing use of independent contractors for troop support, logistics, and privatized security forces. These costs are already in the tens of billions and are expected to continue to grow. The U.S. is also overextending foreign operations abroad. The U.S. currently maintains 30 U.S. Air Force Bases or joint Air Bases in 15 different countries, 97 Army bases, command centers, and training facilities in 15 different countries, 16 Marine Corps camps, air stations, and training facilities in 5 different countries, and 16 naval bases, naval air stations, and command centers in 10 different countries.  

The third factor contributing to debt is that the U.S. is consuming much more than it produces. This is leading to a massive trade deficit. This deficit increase has gone from 5% of GDP to 17% of GDP in the past 30 years. In our attempts to globalize and ensure free trade many of our largest companies seek access to cheaper labor and resources overseas which limits internal production. The result is that we are not producing at the levels needed to sustain our consumerism while allowing cheap products from abroad to flood our markets. Compounding the problem is the increasing trade imbalance with China, which is concentrating incredible wealth within the Chinese government and is creating a Chinese middle class largely from U.S. dollars, thus transferring wealth away from the U.S. middle class. The results of such imbalances are losses in U.S. jobs and subsequent tax revenues. It is also enabling China, our largest trading partner, the revenue to purchase a greater level of U.S. debt instruments. Almost half of our debt is now foreign owned, and China, owns most of the foreign debt. If we do not change these policies we could become increasingly dependent on other countries, namely China to keep purchasing our debt. When the trade imbalances reach a level where they represent too much risk, a real threat exists that those countries purchasing U.S. debt instruments would stop resulting in a potential devaluation of U.S. Treasury Bonds followed by a rapid drop in the value of the dollar. 

There are other factors on the horizon whose long term potential may be as equally devastating as those afore mentioned. Social security surpluses have been used to help decrease the deficit each year, but within the next decade these surpluses will end and instead become possibly one of the largest contributors to the debt. This would be driven by increasing numbers of retiring baby boomers drawing upon their retirement benefits. Equally alarming are long term Medicare cost which are forecasted to dramatically increase due to rising health care costs caused by an aging population, increasing chronic illnesses, and obesity related diseases. If left on its current course, the potential increases in debt could become so deep that our children will experience tax levels prevalent in socialist countries (50% to 60% or more) and the U.S. will be forced into major fiscal reform requiring strict budget controls instead of a planned reform. 

There is not going to be an easy or painless fix for the debt despite what congress is trying to portray. Political arguments such as “lowering taxes in the U.S. will lead to an increase in revenues” are unfortunately not a viable solution. Cutting taxes in some sectors such as capital gains and dividends has resulted in additional investing and increased higher tax revenues over the long run. However, the Bush Tax cuts of 2001 and 2003 generated tax revenue decreases from 2001 to 2004 totaling $591 billion when compared to year 2000. The $1,663 billion ($1.66 trillion) tax revenue increases from 2005 to 2009 were barely enough to return to the 40 year national average of recorded increasing tax revenues. This also does take into account the losses on revenue, if the tax cuts had never been implemented, which were $599 billion in only 2004 to 2006. In fact, supply side economics, prevalent in the Reagan and Bush era’s, which has been accurately associated with increasing GDP, tax revenues, corporate profits, and individual wealth has also during those same periods drastically increased the U.S. debt, and for the first time in U.S. history those increases came during peacetime. 

The debt problem has become deeper than what the media and pundits are claiming. Many think that if The U.S. can stop wasteful spending, repeal pork barrel projects and earmarks, do away with the Bush tax cuts, and even end the wars in Iraq and Afghanistan, the U.S. should be well on its way to stopping a future potential debt crisis. That ship may have already sailed, and much more may be required. The true debt is in reality much higher than the $14.5 trillion dollars that has been disclosed on the world debt clock. If one considers the off balance sheet figures, there already exists at this point $7 trillion in unfunded obligations for Social Security, $26 trillion in unfunded Medicare promises, $8 trillion yet to be paid for the new prescription drug program and another trillion in miscellaneously unfunded items. This equates to over $55 trillion in real debt. 

Under the current spending practices, even with the Obama stimulus programs removed from the equation, within 40 years (2050) this country may be barely able to pay the interest on its debt and only a small percentage of social security and Medicare. By 2040 the debt to GDP will be over 200%. Unfortunately, The U.S. would probably have declined into severe inflation before then. The U.S. congress must act now, it can no longer afford either runaway spending to accommodate the needs of special interests or indefinite and costly wars if there hope to reign in fiscal deficits and stop a potentially looming fiscal crisis. In addition, the U.S. should not continue the trade imbalances of the past. There may come a time of reckoning and a point when carrying to much debt and spending too much of GDP on interest payments could force foreign lenders to look for safer investments. 

To reestablish fiscal responsibility would require cutting programs across the board, even in the politically unpopular areas like military spending, Social Security and Medicare. And equally important, reign in the increasing costs of health care. The ineffective “do nothing” plan of the past decade must be thrown out or the next generation of U.S. citizens could experience a lower standard of living as compared to what we currently enjoy today. Politician’s can no longer demand lower taxes while both political parties massively expanded government and increase spending. The recent recession has taught American consumers to finally begin to save more and it is now time that government officials follow suit. The U.S. should not continue to print money and issue treasuries without legitimate concerns about devaluating the dollar and experiencing high rates of inflation, or a potentially worse scenario such as deflation. Either outcome generally results in increased interest rates, less borrowing, and rising unemployment. 

Congress needs to step away from practices that disproportionately benefit financial contributors and constituents and start doing what is right for the country. Since it appears unlikely that Congress, being so beholden to special interests and to concerned with reelections will be able to make the necessary politically painful decisions, it will be up to the American public to stop listening to pundits and talking points designed to keep the status quo in place and become the ones responsible for demanding fiscally appropriate action out of congress. 

http://projects.publicintegrity.org/WarCard/?gclid=CPaBlI-r9aICFRB1gwoddhGlhQ 

http://www.nationalpriorities.org/ 

http://www.cbpp.org/cms/index.cfm?fa=view&id=1258 

 http://fc00.deviantart.net/fs29/f/2008/140/5/7/Death_and_Taxes__2009_by_mibi.jpg 

http://www.mint.com/blog/wp-content/uploads/2009/07/DAT2010mint.jpg 

http://www.gpoaccess.gov/usbudget/fy11/pdf/budget.pdf 

http://en.wikipedia.org/wiki/List_of_United_States_military_bases 

http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures 

http://www.gpoaccess.gov/usbudget/fy10/pdf/hist.pdf 

http://www.cbo.gov/doc.cfm?index=11659 

http://www.factcheck.org/taxes/supply-side_spin.html

Profit maximization and increasing individual or shareholder wealth should no longer be the driving goals to meet our civilizations basic needs (i.e. food production, energy for electricity and transportation, and attainable health care). Our current system for meeting these needs is driven by quarterly profits, analyst expectations, executive pay plans, stockholder value, and subsidies to politically connected and very profitable companies. There is considerably less emphasis and focus on the end user – the U.S. consumer and taxpayer.

Removing corporations and investors motivated solely by profitability from these vital sectors of our economy and replacing them with regulated private non-profit companies will do away with the politically connected oligarchies that primarily benefit the wealthy elite at the expense of the population as a whole. Maintaining the status quo only guarantees a constant stream of profits for executive compensation bonuses and increased stockholder wealth while locking out both competition and new innovation through massive economies of scale and lobbyist guided legislation. The purpose of these non-profits will be to provide products and services at the lowest possible end user price and in the most efficient methods possible.

Taxpayer subsidies to the extremely profitable fossil fuel, food production, and healthcare industries should be eliminated. The funds transferred to establish start up true non-profit companies, assist existing companies willing to switch to a non-profit system, and to create necessary infrastructure.

Consider the following situations:

Food production: Our Farm Bill subsidizes four basic crops, corn, soy, wheat and rice, from which the majority of our food and ingredients are derived. These crops are sold to food manufacturing companies for less than the costs to produce them.

Problem: The bulk of westernized food is processed and prepackaged, heavily laden in addictive salts, sugars, fats, and simple carbohydrates. In addition, these processed foods contain a host of additive combinations many of which are untested, including nano-particles which are being used in food production without satisfactory tests to determine the affects of long term ingestion. The drive to increase profits in an industry with traditionally low margins seems to have resulted in an attitude of increasing consumption habits in order to increase market share.  The result has been foods that cause obesity and related illnesses while providing very low nutritional value.

Solution: Remove or reduce government subsidies from farms and food manufacturers producing corn, soy, rice, and wheat and their bi-products and redirect subsidies into nonprofit farms and manufactures that are concentrated on producing a variety of nutritional, whole, or organic foods. Eliminate or limit current strains of genetically modified crops (GMO’s) and require new strains of GMOs to concentrate on increasing the nutritional content of the foods instead of generating rapidly growing drought resistant plants that could also be considered a pesticide. Independent GMO testing for long term implications of ingestion should be a requirement as well. Equalize the price between unhealthy processed foods (including junk food) and healthier varieties and farming practices by attaching additional taxes to unhealthy food similar to cigarettes and alcohol and use the revenues for additional subsidies towards producing healthier selections and to help pay for obesity related diseases.

Energy production:  Current energy production remains entrenched in fossil fuels. Petroleum is used for transportation and coal and natural gas for electricity generation. Fossil fuels currently represent 84% of all U.S. energy consumption.

Problem: Fossil fuels are very efficient but pollute, increase atmospheric CO2 levels, and create geopolitical instability around the world. The industry has through lobbying and campaign contributions ensured that the current energy production methods, refinement processes, and distribution systems and their associated massive profits will remain intact. Renewable energy systems (7% of production) like solar thermal, wind, geothermal and tidal are met with resistance through legislative driven regulation and difficulties acquiring necessary government subsidization and funding. New energy technologies are either purchased outright and shelved or are met by such significant barriers to entry that even private financing becomes difficult.

Solution: Remove government subsidies of the fossil fuel and supporting industries and redirect subsidies into nonprofit renewable energy companies.  Cease production of new coal fired and natural gas power plants in favor of solar thermal and geothermal that doesn’t require ongoing mining and drilling operational costs. Require existing plants to have bio-algae producing photobioreactor’s located adjacent to facilities for CO2 absorption. Increase bio-fuel production. Subsidize cellulosic ethanol to supplement gasoline and bioalgae, jatropha, or halophyte plants to supplement petrodiesel for all existing engines. Incentivize the automotive industry to begin wide scale production for electric, fuel cell, and hybrid automobiles and light trucks to replace existing lines until cost and energy efficient hydrogen systems become available to meet transportation needs.

Health care:  The German Chancellor described the escalation of costs in the U.S. healthcare system as the direct result of increasing profitability in every subsector of the healthcare industry. Our current system, even with the new reform, is unsustainable unless additional measures are taken.

Problem: For profit healthcare insurance companies have grown so powerful through lobbying and campaign contributions that they can actually monetarily incentivize medical review boards to decline claims. New reform has limited the ability to deny claims but loopholes still exist. Increasing premiums, reducing benefits, high administrative costs, and confusing billing practices guarantee profits at the expense of the public. Pharmaceutical companies have too much control over the FDA, drug testing is rarely conducted via independent sources, and U.S. drug prices are considerably higher than any other country. Medical equipment prices increase drastically each year in the U.S. as compared to other countries as U.S. hospitals rush to acquire the latest generation of equipment.

Solution: Follow successful practices initiated in Switzerland, Germany, and the Netherlands that required for-profit healthcare insurance companies to compete head to head against non-profit companies with their streamlined billing, lower administrative and operational costs, and the ability to reinvest revenues into the system to reduce costs to customers since money is not paid out to shareholders. Remove the pharmaceutical industries ability to fund and influence the FDA. Establish independent 3^rd party testing and stop relying on trial information derived directly from the drug companies themselves or from laboratories sponsored or owned by them. Stem medical equipment price increases through regulation (like the rest of the industrial world has done) and create non-profit biotech laboratories and production facilities for new generation drugs. Unleash the stranglehold the pharmaceutical industry has on “cures and treatments” for illnesses. Open the door to alternative medicine solutions and then hold both to strict double blind tests. If they cannot beat the placebo effect they should not be considered treatments or cures.

Real non-profit companies motivated by providing quality products and services in the most cost efficient manner, and with a long term strategic perspective, will outperform for-profit companies if provided an equal playing field. It is time to stop giving preference to the status quo and its wealthy beneficiaries and start considering the other 98% of the population. Please provide any constructive comments, correction, or direction regarding this post.

Please provide any constructive comments, correction, or direction regarding this post.

Financialization has become the goal of the large banking institutions. Risky intangible financial instruments in a deregulated environment have been the greatest source for generating investor wealth and have provided billions in fees and commissions to the financial sector. Wall Street elites are once more attempting to increase the levels of financialization despite what it has done to the real economy over the past few years or could do again.

All the while, U.S. citizens have continued to put their money in savings and checking accounts of the very banks and financial institutions that created the credit crisis and its associated problems. Personal income that once was used for capital by banks for lending to businesses or consumers instead flowed into exotic derivative instruments that were understood by only a few and benefited only a few. Those benefits include billion dollar incomes for top hedge fund managers, lucrative banking executive bonuses even after the US taxpayer bailed out their messes, and tens of billions of dollars to select financial institutions that were “too big to fail”. Much of the bailout money enabled those same institutions to buy distressed and bankrupt financial institutions (not worthy of TARP money) for pennies on the dollar.

Profits during the run-up of financialization not only went towards investors or bonuses but to an ever increasing army of lobbyists whose sole goal was to buy the proper Congressional support for deregulation. This process is occurring again with campaign contributions and lobbyist giveaways to both the republican and democrat parties to ensure that any significant regulation doesn’t become implemented.

Financialization in a recession lengthens the recession as investment dollars are kept away from domestic companies. Without necessary injections of capital from the banking industry for expansion or for general operations companies will falter due to a lack of cash flow. Banks then look at the poor credit rating of these companies and the bad economic environment and the companies are deemed too risky to lend to. Then the distressed company is forced to sell off assets, lay off employees, or even dissolve.

There are long term consequences of financialization in developed countries as well. Investment dollars are diverted away from the next generation of science and technology endeavors essential to the development of future industries, companies, and projects critical for real future economic growth and job creation in our information age. Mainstream manufacturing jobs will continue to be exported to developing countries due to globalization and trade treaties making it difficult for established developed countries to compete in their labor intensive markets. This requires developed countries to invest in innovation and develop technology oriented companies to fill in for the losses in manufacturing if developed countries hope to remain economically sustainable and globally competitive. This will be increasingly difficult as long term tangible economic growth is sacrificed for the short term profits and commissions provided by more investing in financial instruments.

To counter financialization and grow a sustainable economy we must:

1. Reform the political process so that thousands of appointed lobbyists and campaign contributions can’t buy deregulation.
2. Recreate regulation that limits access of financial institutions to “vanilla” easily monitored financial instruments for investing.
3. Reform the tax structure so that profits are taxed according to standard tax code practices and not just to the 15% capital gains tax.

Financial resources must be concentrated back into the real economy. Financial institutions will need to have access to another round of exotic derivative investing if they expect to make the profits of the past, they cannot allow this to be curtailed through regulation. They will not willingly return to simple lending and basic banking. The short term profit motivation has led to such levels of greed that the entire economy has taken a back seat to profits. The process of financialization is already attempting to be reinstated in the U.S. and other developed countries that haven’t yet recovered from the current recession. The question remains to the middle classes, are you willing to linger in this recession to ensure that wealth generation and hording continues to grow amongst the financial elite?

 http://www.levyinstitute.org/pubs/wp_525.pdf

http://en.wikipedia.org/wiki/Financialization

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

http://wallstreetwatch.org/soldoutreport.htm

Financialization refers to economic conditions where financial markets become the preferred system for investments rather than investing in the real economy. The goal is to create an economic system where any tangible or intangible form of work, product creation, or rendered service can be valuated as an exchangeable financial instrument. These financial instruments can be cash instruments (cash, transferable securities, or an agreed upon transfer of loans / deposits) or preferably a derivative instrument (financial instruments that are valuated based off the perceived value and characteristics of an original asset). Financialization is what has led to the financial crisis recently experienced by most of the industrialized world.

Financialization has gained a significant hold over the American and world economies. In 2008 the Gross Domestic product or GDP of the United States was 14.2 trillion dollars. This was the value of the total economic output derived from all finalized goods produced and services provided in the United States. World GDP was 60.6 trillion dollars. In 2008 the sum total of all traceable international derivative exchanges was 1200 trillion dollars. Note: Derivative exchanges did not require the total 1200 trillion dollars to be exchanged only an agreed upon percentage.

The process has had three outcomes:

1. Wall Street financial elites, with their influence over financial institutions and markets, have used profits to provide 3.4 billion dollars on 2900+ lobbyists (figures do not include lobbying at the State levels) and 1.7 billion dollars on direct campaign contributions over the past 10 years to remove regulation and elevate the importance of the financial sector above that of the real economy.
2. Money has been transferred out of the real economy and into the financial sector where banks, security firms, hedge funds, private equity groups, etc. make money by essentially shifting money around and speculating on future derived values of the aforementioned financial instruments. Generally nothing real or tangible is created.
3. An increase in income inequality and a stagnation of wages as wealth becomes concentrated in elite circles. The more complex and exotic the derivatives traded, the more monitoring agencies (Moody’s, Standard and Poor’s, etc.) have difficulty understanding how these risky instruments should be valuated. This lack of monitoring capability is actually preferred since it allows financial institutions to sell or broker without guideline restrictions. The greater the risk the higher the potential yield or return for the investor and the larger commission and fees charged by the financial institution. As more dollars and income flow into these lucrative unregulated markets less is available for the real economy which contributes to GDP and in turn job creation.

The final outcome of these measures is an economy that experiences a drawn out recession, over-indebtedness, and a reluctance to invest or lend in the less profitable real economy. As long as regulation can be avoided through political influence and derivatives instruments still remain available for trade these outcomes will continue.

This also leads to the matter of moral hazard where financial institutions that are “to big to fail” feel insulated from risk because of the possibility of additional government bailouts. This has resulted in banking executives who have not learned the lessons of their high risk decisions in a regulation free environment and are scrambling for the next run of exotic derivative investing. In addition, the remaining large financial institutions are already profitable again, most having paid back their TARP loans and the U.S. government has in many cases seen a return on its investment in the TARP program. This quick turnaround has led to cries for no regulation and the allowance of free markets for continued derivative instruments trading despite what it did to create a credit crisis and lead the U.S. and world economies into severe recession. Large banks and financial institutions have already unleashed their lobbyists and are providing the next round of campaign contributions to political parties to ensure favorable legislation.

This process is cannibalizing our real economy. The American economy is producing significantly less than 20 years ago. There is little if any long term benefit to the U.S. or world economies where societies are sacrificed for the profits associated with shuffling around financial assets and instruments. What we need to do to pull the US and world economies out of a potential long term recession is tangible investments in manufacturing, infrastructure development, innovation, and the development of new technology crucial to industrialized nations in the information age.

Ask yourselves, who is benefiting from the manipulation of financial markets with derivative investments? Are you?