Late in the evening on Saturday November 7, 2009, the United States House of Representatives passed the new healthcare reform legistlation.  The bill, which has to meet approval in the United States Senate, is one of the most substantial bills ever passed in US history, in both scope and costs.  The 2,000 pages of legalese, has roughly 400,00 words and is the size of a major metropolitan city’s phone book, both yellow and white pages.   

Fortunately for everyone, House members, who are known not to read bills before taking a vote, had a whole week to read it carefully and decide.  Thank goodness they can read so fast. 

Anyhow, Am I my brother’s keeper?  These are the famous lines from the Old Testament uttered by Cain when speaking to his father about the whereabouts of his brother, Able.  Of course Cain had secretly slain his brother but kept the truth from their father.  These are also the words spoken by the character Nino Brown, a drug kingpin in the 1991 classic urban film, New Jack City.  Whenever Nino Brown wanted to reaffirm his fairness and generosity to the community and his organization, sometimes by giving away goods or help, he would ask rhetorically, ”Am I my brother’s keeper?”.  Strangely, Nino couldn’t see the impact he was having on the community.  People were strung out on drugs and increasingly poor.  His own organization was rife with corruption, but he was too blinded by greed and the bundles of cash rolling in.  What does any of this have to do with the healthcare legistlation?

Well I asked myself, where is the good in this plan?  Expanding a system that is already dysfunctional and overly expensive?  Expanding health insurance costs to everyone whether they want it or not?  Whether they can afford to pay it or not?  And the only thing that came to mind was the line, asked by Nino, ”Am I my brother’s keeper?”  It’s good politics to appear to look out for the poor and the sick.  It’s good politics to force the healthy or wealthy to pay for treatment of the sick and the poor.  But how about reducing illness thru education, good nutrition, and healthy alternatives?  How about helping the poor get jobs or raising their income at a time when inflation is rising and unemployment is at 10% and rising? Unfortunately, that isn’t the plan.

It is all about perception?  How do I look? The same Nino who sells the drugs gives away free turkeys to the community at Thanksgiving to keep up a good image.   What are we really talking about here with health care reform?  Are we really talking about helping the poor?  The same poor who are given sub standard education?  The same poor who are unemployed and underemployed?  The same poor with little to no income?  The same poor who are a majority of America’s prison population?  Or is this thanksgiving and Nino is handing out the turkeys to the poor? 

The problem with health care is largely that it isn’t about health.  It is mostly about the sale of prescription drugs and vaccines.  Massive, unconscionable amounts of toxic drugs.  Which brings me back to Nino Brown and the famous lines “Am I my brother’s keeper”?  The reality is that Nino Brown wasn’t his brother’s keeper. He sold drugs and lots of them.

The gigantic pharmaceutical companies who fund politicians stand to benefit most by expanding the number of participants in this massive, nationalized forced health insurance plan, ie drug game.  Worst of all the costs are passed on to those who are healthier and younger, who will be forced to pay for what they won’t often use.  And to those who are wealthier, through a mandatory additional 5% tax on their income.  And to unborn citizens, who will inherit the ballooning federal deficit. 

These folks really are their brother’s keeper, only not by choice, by force.  I’m sure Nino, who only had an aparment complex (The Carter) on lock down, would be envious of this operation, which locks down the entire United States. Wow! 

Are there any benefits to the national health insurance plan? Sure, if it was made available by choice. If it was actually affordable.  But to compel participation?  That is wrong, even if it comes with the distribution of the ”free insurance” for the poor.  And look, it is right around Thanksgiving.  Am I my brother’s keeper?

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Here is an open letter I wrote to President Obama when he first took office, but never got around to sending it.  For what it is worth, I share it with you now.

Dear President Obama,

Congratulations on a well run, improbable, yet successful campaign for President of The United States.  I along with millions of others have been inspired and transformed by your victory.

Now the difficult part has begun.  You have been handed a US economy, which is in far worst shape than people can imagine, the equivalent of stage 4 cancer.  The condition of the US financial system and economy is the result of years of abuses, poor decision making, selfishness, greed, payoffs, and deregulation.  Now you are responsible for it.  A little unfair, but you did run for office. So here are some friendly reminders to help in the process of delineating a course of action. 

When I was a child my parents took me on a field trip to Washington DC and one stop during that trip was to the US Mint.  There I saw millions of dollars being printed on these huge sheets of paper.  Over the years that image confused me because I always wondered why we couldn’t just print money to give financial help to the poor and to create jobs for the poor and unemployed.  Later I learned that printing money without production or real economic activity eventually lowers the value of the currency.  I learned that more cash in circulation drives up the prices of everything and hence the dollar is worth less.  Commonly referred to as inflation. 

This is most evident in Zimbabwe, where things are so out of hand that they actually put in circulation a 50 billion dollar bill, each of which is less than 1 US dollar. Outrageous. 

Unfortunately, we are on that course now.  Several nations have experienced economic collapse, notably Iceland and Bulgaria, and Greece is a few days from economic collapse. What can America do to avoid an economic collapse?

Here are some guiding principles and since I am not an economist, your team can translate these principles into detailed action steps and policy.

1.  Do not insure bad business deals. You can’t entangle the government in bad private investments. Whether banks, companies, or mortgages you can’t devalue the currency & remaining financial solvency of the entire federal government to protect the investments of a few very wealthy people.  This means less bailouts of failed entities and more new entities. Create new banks & credit unions, new companies, & new industries. Don’t hand out free cash, which ultimately enslaves future generations to protect what was essentially bad business.  Despite the cries, of doom and gloom, commerce will not cease without bailouts.

2.   Protect American commerce.  If you can’t stop US companies from moving overseas then maybe you should consider imposing tariffs on all manufactured products imported to the US or require some sort of profit sharing with the US or its companies thru a distribution fee, or licensing fee. In other words find some way to make foreign manufacturers pay to sell their goods in the US, even if it is done thru US companies.  China does this shamelessly.  I went there and saw it first hand.  We need production and markets.  We can’t simply be easy access markets only.

3. Invest in and expand new and emerging industries and technology.  We have to create new jobs, new industries, and new markets.  New markets are key. Someone has to really pay for what is created or rendered as a service. The federal government can’t be the only one’s writing checks because that will not last. If the tax base is not expanded through expanding commerce, then the Federal government is printing cash that is essentially as unreal as the credit swaps and derivatives that triggered the crisis.  Which means Wall Street will have shifted its financial problem on the Federal government and tax payers.

4.  Help the American people directly.  Try to insulate the American people by creating more tax incentives, reducing the tax burdens, providing more small business loans, providing money for re education, re-training and for college loans.  This will prime the well for future prosperity and transition the workforce into sustainable jobs.

5. Control the evolution of the economy. Put in place a new regulatory team that understands and follows the fundamentals of economics. Increase production and productivity. Make capital available. Invest in infrastructure. Invest in technology. Invest in people. Limit tax increases, particularly on small businesses. Restrict and regulate the “creation” of imaginary cash (credit swaps, IOUs, derivatives, etc)

6.  Realize you can’t please everyone.  In the end, people are fickle.  They are quick to blame and slow to take responsibility.  Don’t fall for the trap of trying to satisfy everyone because you could wind up pleasing no one. Consider all the options. Consider the consequences. And set the course. Also don’t fall for the trap of trying to accomplish too much to prove yourself. This is still people pleasing in another face.

These are early recommendations, but as your first term evolves, rest assured things will morph into a new and quite possibly more challenging reality.  Keep the faith, maintain your well being, and simply do the best you can.  May God bless you with safety and success.

Thank you for your example, sincerity, and dedication to the people of the Untied States and the world

Sincerely your friend,

Michael Billion

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With news reports mounting every day about the economy, job loss, the stimulus bills, the auto industry, wall street, US bank failures, the mortgage crisis etc, people are left disoriented and confused about the economic future of this nation.  Well right here and right now I  will begin to share with my readers some things you can know for sure about the economic future of this nation.  I will start with an analysis of how we got here next I will move to what strategies will and will not work, then I will end with some likely solutions. But rest assured, you can take these truths to the bank.   So here we go. 

First, the basic principle that most folks don’t fully realize. Credit and debt are the same thing. They are two sides of the same coin.  This means when one person issues credit then another person receives debt.   In accounting, its called double entry bookkeeping.   This is a key factor in the current economic problem. Remember that principle, you will see how it affected the crisis.

The second principle can be a bit tricky to follow. It is that an investment is in actually a loan that someone makes to another entity and as a loan it carries risk.  Meaning, the money invested is on loan to some one or some company that will use that (borrowed) money to make money, but at a risk that the money may not come back to the investor (lender) if the the entity invested in is unsuccessful at making money.  The investor gets paid (interest) for loaning the money at a risk. 

Now, with those two things in mind consider the setup of the problem.  Most businesses use credit (debt) to keep their business afloat and to expand.  Also, most people have their retirement money invested (loaned out) whether in mutual funds, cds, or other investment vehicles, or as savings in banks that loan it out to others.  Consider as well that most major purchases, including houses, cars, college education,  etc., are made by consumers thru borrowed money (loans). 

Lastly, keep in mind that State and Local government municipalities invest (loan) tax revenue out to banks and investment firms.  So credit (debt) is being loaned out everywhere and people are counting IOU’s or (debt) as income or “actual money”.  For example, people say things like “my retirement is X dollars” (IOU), “my house is worth y dollars” (debt), ”my mutual funds or stock are worth z dollars” (IOU). The State govermnment has W dollars in investment money (IOU).  All of which is actually true only when you cash out and have the cash in hand or another tangible asset.

Also keep in mind that all this activity runs through the banks and is a very substantial segment of the U.S. economy.  All of this is relatively fine until someone hits the first domino in a long chain of dominos.

Many mortgages (housing loans) were issued on a false pretense that housing values always go up steadily over time regardless of the cost of the house and that the price increase is always greater than the cost of the loan for the house.  Which is not true. Why?  Because salaries have to increase relative to the housing cost in order for the houses to sell.  

As a result people purchased loans (yes loans! not houses) that were way too expensive for them and also at a cost that would go up when their interest rates were reset.  Many soon discovered that they couldn’t afford to pay the loan and that they owned the debt not the house.  So the banks kicked them out the house and  the borrower still owed the loan (foreclosure).

Banks issue loans and sell investments all the time, this is how they make their money.  Remember one persons loan (debt) is another persons investment (credit). How many ways will a bank issue credit or sell investments?  As many ways as they can?  This became the setup for the current crisis because banks repackaged and sold risky loans as investments to other people.  Then sold what amounts to insurance on the risky loans, as another investment offering. This placed risk (the original risky loan) on top of risk (the investment offering) on top of risk (the insurance investments).                 

So in essence you have investments offered on top of investments.                               Or another way of looking at it, you have debt, piled on top of debt, piled on top of debt. This continued unregulated indefinitely until you had a mountain of debt piled up.                                                    

So once the people begain to default on their housing loans then it meant the creditor (bank) couldn’t collect so every investment built on that loan was now bad. Once that string of investments went bad then the banks couldn’t guarantee other investments because they didn’t have the money, so they also went bad, and so on and so on.  Down came the house of cards.

Worst of all, now that the banks had bad loans and debt piled up everywhere that no one could pay back, then the banks could not issue new loans because there was no money to give, only debt.  This paralyzed the economy by freezing major consumer spending which triggered job loss and slowed the housing market and increased foreclosures.  It also dried up the investment market as investments went bad and crippled businesses who could no longer get (credit) loans.  What a mess!

Who can solve it. Republicans? Democrats? President Obama? Doubtful.   

Here is the bitter truth folks that we will have to swallow.  The days of excessive free flowing money (credit & debt) are over.  People will have to really work.  People will have to create and innovate. P eople will have to become globally competitive. People will have to produce in order to have money.  There is no way around it.

Why?  Because the debt is piled everywhere and you can’t print US treasury notes (money) to solve it because those notes are also backed by credit (U.S. debt) extended by foreign investors to the Federal government.  Nor can the banks simply hit the reset button and all of the bad investments (debt) simply vanishes so that they can be back in business loaning money freely.  Neither is a viable solution.  Also with global markets and competition continuing to rise there is no entitlement to market share and business success.  Oh what a tangled web we weave …

So we can’t print (money) our way out of it. The ink toner solution won’t work.  Nor can we go back in time and erase all the debt and all the bad investments and loans.  And it is unlikely that just because the U.S. banks and investment firms ”crapped out at the investment casino table” that we can clean up their books by giving them money or by taking them over because the extent of their indebtedness is not known.  

It is like throwing good money into a black hole, not to mention that giving a private entitiy huge sums of taxpayer money is completely unethical.  Oh and easing taxes? My dear Republicans, will help out a few, a bit, but it also falls way short of bringing us back to where we were or setting the nation back on track.

So what can we do? 

Well you can start by sharing this blog with everyone you know because over the next few posts you will continue to get real answers.                                                   

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