12 Year Old Victoria Grant explains Canada (and U.S.) economy problem!

I do not typically put up video for my site as it does not typically fit with what I feel my mission is, but in this case I will make an exception.  My friend Ellen Brown, President and Chairman of the Public Banking Institute, and the author of Web Of Debt had this young girl as a keynote speaker at her recent Public Banking Conference in Philadelphia.

Every one should see this video.  Ellen’s latest article,Out of the Mouths of Babes, shows that Victoria’s message was framed so well that now even adults can understand it.  Maybe, this is why the video has gone viral, with over 1 million views and climbing. Victoria patiently explains to all of us, with clearly less cognition than she,  that when private banks create money out of thin air and lend it to people or to the central government at interest it makes little sense.

This 12 year old explained to all in the room that it made much more sense for the government to create the money directly and not have the banks in the middle charging for the privilege of creating our money for us and then lending it back to us. You see she correctly explains that in Canada, and also in the U.S., the banks create the money out of thin air and then loan it to the government with interest and then all of us have to pay the interest.  She also realizes that the government could create the money directly and not pay the banks interest for the phoney creation process.  Why is it this 12 year old gets clearly what most adults do not?  I have been having this discussion with people for years.

I encourage all to watch this video and then talk to your kids.  Clearly they are a heck of a lot smarter than we are.

Facebook: the IPO of the century – Really!

Ok, I guess now I can ask the question my publicist urged me not to ask two weeks ago. You see the snake oil is still flowing and I want to know why we never learn! The question is…

 What is the thing about Facebook that makes it worth $108 billion since it is entirely based on intangible values?

Well it looks like the jury is in and the answer is nothing. Sometime, relatively soon people will wake up and realize that the problem with the Dot-Com successes are that unless they can create a tangible and necessary value proposition in a down economic period,  then the value of a company like Facebook is not just speculative; it is simply ludicrous.

Worse, I suspect there is hidden in the recesses of this offering the same attitude that was pervasive in the last Dot-Com bubble burst. The most important thing to the original investors, the Venture Capitalists that funded this company is not value it is simply liquidity.  The good thing for these investors is, once again what is driving the public is perceived value not real value. In effect, what a lot of the “public” is willing to pay for does not have to equate to real value—ever.

You see, venture capitalists are paid to return value to their investors, not the future public owners. P. T. Barnum said it best, “There is a sucker born every minute!” So to all those that purchased this snake oil, there is a Latin phrase you should learn, “caveat emptor.”

This has been a carefully orchestrated dance with the devil ever since the first big money went in the door.  Rumors of government intelligence connections have been rampant for years, mostly as water-cooler as excuses to try to justify the ever climbing stratospheric price, but the reality has been a very simple one.  It is the same thing we who have lived in or near this tech-money world have seen for years.  It is the siren song of untold riches, if you just buy a few of the baubles, these simple slips of paper, that will grow, that simply must grow don’t you think. These that just can’t fail because after all it is “Excite@Home (oops that’s a bad one), or it is AOL (opps again) or it‘s Netscape (oops), I mean, you know what I mean, because, you know, they simply must grow to ever higher levels—its technology after all. If you get in now you too can be the next “Tim Drapers, or Brook Byers.”  Just buy a few, for a small investment, a pittance really, this dream can all be yours!

I live right in the promised land of private equity investors—Silicon Valley, CA.  I have spent much of my career around VC’s and Angel investors. Private Equity is a great thing. Without it much of the things we take for granted today would not even exist. It is the basis for the growth economy we have had for years. Along with Real Estate it has formed the basis of the so called FIRE economy that gave us the rapid rise in currency from a mere $500 billion in 1972 to over $16 trillion today. And while many of the dollars created went to real products, tangible products, things you could touch and feel in your hands, much recently has gone to companies based as much on perceived value as any tangible calculation. In this modern world there is no regulation that will protect people from the avarice of wall street, nor should there be. The onus is on all of us to keep both of our eyes open and both hands on our wallets.

Alas, now will come the predictable filing of lawsuits by those who will blame everyone for the unrequited love, the incredible get rich quick scheme that was the Facebook juggernaut. Here’s a news flash, you have no one to blame but yourself. You should know that if it sounds too good to be true it is. Get a freak’n clue! This was a liquidity game, played by major league players from the get go and Mr. Barnum definitely ruled this day and many people will likely soon feel like they got caught at a church picnic with their pants down out behind the barn with Mary Sue.

Now, those who are watching this intangible value-based company decline by the day can pray that it pulls a trans-formative move and, like Amazon did years before, maybe become a true value supply chain player. Years ago there were those of us who saw the original Amazon business plan and just knew then that the original ‘no brick and mortar warehouse, drop ship from publisher’s model’ was not going to work.   All of us then learned a valuable lesson. The lesson we learned was that it was liquidity, not value, which was the play.

As my 13 year old son now says, “you all got schooled!” You know what?  He’s Right!

The battle we can’t afford to lose!

We are under attack, and we have been for the entirety of our existence. No, I don’t mean from al-Qaeda, or the red menace, or domestic terrorism, or space aliens. We are now, and we have always been, in a hidden war. Loosing battles in this war, which we do daily, has dire consequences to our family, friends, and neighbors. It is also devastating our national economy much more than the war in Afghanistan or Iraq.

The enemy is pervasive, but also seen and unseen. In fact, some are almost invisible. Highly adaptable, they are also some of the most physically fragile beings in the universe. Still, they are once again winning this war.

To quote Kevin Bacon’ character, Capt. Jack Ross, a marine prosecuting attorney in the movie, A Few Good Men, “These are the facts, and they are undisputed!” If this is true, then why is it that you likely have no clue as to what I am talking about.

Well, it is because in the past 150 years we have built an entire system – or non-system if you prefer – a huge set of industries, and centuries of myth building, marketing, and hype that has obscured these undisputed facts. Like other things in our day to day existence, we have all heard about them, but never have we heard them discussed in a manner that brings critical cognizance of the raging battles and losses. More often than not, these battles are taking place on the fringes of our perception – the page six areas of the newspapers, in the filler segments on the evening news. Every once in a while, like the recent story of Aimee Copeland, 24, who contracted flesh eating bacteria in the Little Tallapoosa River in Georgia, and is now gradually loosing significant pieces of her body to this attacking hoard, they will rise to our national consciousness because of their sensational story line. Mostly they just go un-noticed. The victims piling up in anonymity.

The fundamental area of this war is healthcare. You see, we may think healthcare is a static process but it is really an on-going war. It s a war with other species – parasites, bacteria, and viruses. It is a war with our environment – broken bones, punctures, pollution, and poisons. It is a war with ourselves – our own behavior. And, it is a war we are increasingly loosing.

For well over 100 years, we have been in a protracted, often heated, biochemical war with bacteria and viruses, the smallest and most prevalent of all species on the planet. Guess what, they are winning. One reviewer of my recent book, The History and Evolution of Healthcare in America, very politely pointed out I had not spent much time on the miracle weapon that was penicillin. He was correct. The reason was to make a bigger point later in the book. Penicillin, once the wonder of wonder drugs, today is hardly ever prescribed. In fact, it is now prescribed so little, there are some new bacterial strains now loosing resistance to this drug and in some rare cases it is again effective. What goes around – comes around, I guess!

Unfortunately, this is not the norm. We have, every day, more and more strains of bacteria that are resistant to our strongest antibiotics. MRSA, Methicillin Resistant Staphylococcus Aureus, is the often fatal hospital acquired infection that is running rampant in the U.S. and the rest of the world. It is a mutation of a common bacteria found in everyone’s mouth. The so called flesh eating bacteria is a deadly mutated strain of a common Streptococcus bacteria found in soil and often on your skin that usually is best known for a strep throat. This is just the tip of the iceberg.

As we have been bombarding these species with our best biochemical weapons for the last eighty years they have not been content to just die off. Some have fought back and survived. Sometimes we have let them survive buy not treating the disease thoroughly or aggressively enough. Sometimes we just treated nothing at all with these wonder weapons and the bacteria always lurking found ways to adapt to survive and attack us in different and more deadly ways.

As a result, today we are weaker as a species and our micro-enemies are stronger, faster and much more virulent. Now they don’t just prey on us, you might say they have an increasingly bad attitude.

Unfortunately in this war, unlike our other war in Afghanistan, our defense contractors of Big Pharma and Biotech have run out of the low hanging fruit. The drugs they are coming up with now are more caustic and have more side effects. Soon, some therapeutics will require a very specific match to a persons generic make up (genotype), or their specific body chemistry (phenotype). Our current healthcare system is standing flat footed, without a system to mange such a supply chain.

We need to soon focus on a fundamental redesign of the healthcare supply chain or our prognosis as a species is not good. Fortunately, we do have some innovative companies like Savarra Pharmaceutical who is finding new ways to revitalize old resistant drugs like Vancomicyn for treatment of MRSA in patients with Cystic Fibrosis. We have companies like Mercator Medsystems who is developing innovative ways to apply higher concentrations of therapeutics directly on the required areas using micro catheters, and we have non profits like Staphylococcus Education Leadership Foundation (SELF) who are finally working against the tide to raise awareness of these crucial survival issues. And, there are many others. All toiling quietly away trying to make a change.

Still it is uncomfortable to say this, but few of us are really grasping the scope of the problem. How soon it will be before we wake up to this risk is only a matter of when the first MRSA or Flesh Eating Bacteria pandemic explode the comfortable myth of our interspecies technical dominance. Clearly, the AIDS pandemic scared the bejesus out if us for a short time. But in the end, and unfortunately for us, it’s initial impact was in a segment of the population easily marginalized. Soon, we may not be as lucky. Or maybe, soon we will see an attack so severe in its countenance, like the bubonic plague was in the middle ages, that we may finally mobilize enough resources for long enough to once again win a few big battles. Will we then finally recognize the fundamental need for change? Perhaps we still won’t!

In the end, this is, and always will remain, an ongoing battle for survival of the fittest. And as long as our fitness comes from artificial or biochemical means then we are not really surviving at all – just deluding ourselves and prolonging the inevitable.

Perhaps you will find this interesting – perhaps not… I wrote this entire article on my iPhone! Not particularly easy but do-able. Ain’t technology grand!

Socialism again triumphs in France and Greece: Is America next?

Socialism trumps austerity in Greece, and France, is America next?

“Socialist Francois Hollande elected in France”

So, in both France and Greece, voters rejected the backers of austerity measures—Surprise, Surprise! This is no doubt the thought that most Americans had as they saw this headline in their morning paper.  For some the next question may be, “Is America going to be next?”

The two headed snake

America faces two major problems that could lead us to a French or Grecian style disaster. One is that we have the same problem in our economy; albeit we have been able to forestall, some say cover up, the problem since 1972. The second issue is we are deviating from the basic premises and rules our founding fathers established to preserve the American Republic and our engine of prosperity—capitalism.

Economic Collapse

America is very likely already at risk.  Our economic issues, the rapid unaccountable increase in currency since 1972, have caused a significant “hidden” inflation.  We have been able to avoid dealing with the fiscal realities because once we were off the gold standard and as a result of being the world’s benchmark currency most countries have had a vested interest in not calling us on the carpet.  While we have increased the amount of money in circulation from $500 Billion in 1972 to over $16 Trillion today, by most accounts an increase of over thirty-five times, no one believes that we have at the same time really increased the tangible net worth of the U.S. economy thirty-five times. Even accounting for the gains driven by technology, most would project only a $5 – 7 trillion economy at this point.

Constitutional Erosion

We were formed as a constitutional republic, specifically not as a democracy.  While early in General Washington’s first term as President of the new republic, a schism opened between John Adams, Alexander Hamilton, and other “Federalists” who believed in a strong central government structure vs. Thomas Jefferson, James Madison, and other “Democrats” who believed strongly in resting much of the power in the hands of the states; none of these protagonists were advocates for a change in the U.S. Constitution to that of a democracy.  All of the founding fathers knew that democracies simply did not survive.  They realized that while the idea of democratic principles had a place in government to preserve the voices of, and provide protection for, the people; only a republic, backed by a constitution could provide the pragmatic offset to self-serving rules benefiting the masses at the long term expense of the republic itself.  They knew from history that democracies had a way of falling into revolution on the one hand and anarchy, socialism, or communism on the other.

While it can be said that the U.S. Constitution has served us well and that the strength of the republic carried us though many international crises since our founding, it has not protected us against ourselves and our own instincts to seek an easier road to survival or a weakening of our requirements for personal responsibility.  Beginning in the early 1900’s the so called progressive movement attempted to re-frame our nation as a democracy.  Slowly, our own view of our role as Americans has shifted from what we can do for our country, to what we expect to have our country provide for us.  This shift became so dramatically clear after World War II, that on January 20th, 1961, then President John, F. Kennedy in his inaugural speech felt it necessary to try to remind America’s youth that there was a higher ideal they should aspire to. He said clearly, to all Americans, “And so, my fellow Americans: ask not what your country can do for you— ask what you can do for your country.”

Many scholars now believe that there has been a steady erosion of the constitutional basis for our republic as a result of many historical actions to affect short term problems.  Conspiracy theorists believe there has been a conscious effort to change us from a republic to a democracy by those in the Democratic Party.   Conspiracy theories are hard to fathom because it would need to attribute way more intellect and forethought to human beings that experience and evidence suggests.  History simply shows us that a series of decisions and events, each made for short term pragmatic reasons, have culminated in an ever increasing loss of core values.  You see core values are hard, they require sacrifice, they require risk, they require adherence to principals larger than us. It is by their very difficult nature that we define these values as part of one’s character, and it is this reason that we innately want to find ways to rationalize away these very responsibilities.

For about 100 years, we have been rationalizing away these values.  We have softened our education system and stopped teaching the detail of what it means to be a republic or an American.  Ask any American, under the age of sixty, what form of government we have and more often than not you will hear that we are a democracy.  If you press the point and ask what being a democracy means, they will say that the majority is supposed to rule. Interesting is it not that an ideal that brought unanimous approval to the Constitution of the United States by the founding fathers is now a tenant of which most of us are woefully unaware!

What is even more illustrative of the change to our national values and psyche, is the fact that Jefferson, Madison, and others, who were the foundation of the original Democratic Party, were strong advocates for a weak central government and felt that governing power needed to be as close to the people as possible thereby vested in each state. Also, I find it fascinating that the term “progressive”, now used as an invective by republicans as a cudgel to hammer democrats was originally an outgrowth of the republican ideals of the early 1900s. How is it that the party personalities can have so radically changed yet we remain blissfully unaware that the way we encapsulate ourselves is so transient?

Is America next?

While many of the same people who today believe we are a democracy—and believe that democrats stand for big government, that republicans want to hurt the middle class for the benefit of the rich and have no interest in helping the poor—also believe that there is no way that America will suffer the same fate as Greece, or France, or many other countries. Maybe it is time we asked ourselves some hard questions:

  • Have so weakened our own understanding of who we are, what our country is founded on, and what it is that protects us from such a declination that we no longer know how wrong we are about our own base assumptions?
  • Have we allowed this gradual debasement of personal responsibility, in favor of government entitlement and forced corporate reallocation of wealth, to go so far that a fundamental shift away from the principals of our own constitutional republican form of government is unrecognizable?
  • Are we electing leaders that are doing what is in the best long term interest of America, or are they simply willing to do whatever will get them the votes to be re-elected?
  • Do we really believe that a safety net for the helpless is the same as entitled services for all including the clueless and the worthless (fraudsters)? And do they believe that after years of hyperinflation of the currency we can continue to just print money out of thin air to pay for it or that the so called “rich” in America have enough to pay for everyone else?
  • Are we really immune to the fate of these other countries, or have we already suffered the economic collapse and have just been covering it up by printing more money and manipulating our economy to rationalize the perception of great gain?
  • When will this all come crashing down on us, or has it already started and we are just ignoring it? Is this why it is now so much fun to watch reality TV and revel in the catastrophes of other’s lives because it allows us to feel we are still better than them? Is it possible that is why the spectacle of the Coliseum in ancient Rome became so popular, because it helped hide their reality of the oncoming demise?

One last point to ponder!  If you think that we really have not lost a national understanding as to how our government functions, think of this.  No one can explain why we still have the election of the President of the United States conducted by an electoral college instead of by popular vote.  There are many who argue this is an anachronism, a relic of days before computers, and broadcast media but this is sophistry that would make the ancient Greek philosopher, Zeno, very proud. The electors have always had a duty to vote for the best candidate, not the most popular, and not the one that promised the most free-stuff.  The best candidate, the one that was best for all of America is the responsibility that rested in the elector’s hands. Now, many states have changed their laws to alter the rules for the electors to now only vote for the candidate that receives the majority of the popular vote—winner take all.  What happens if that candidate commits a heinous crime, or it is discovered that he is morally corrupt, or that he or she is conspiring to damage the country?  Are they still bound?  They did not used to be!

The final question is, “Are we about to become France, and Greece, or have we already suffered the same fate, and all that is left is the counting?”