Saturday, May 21, 2011

Society continues to fall apart. Part II by Roy Philipose. May 22, 2011

Three years ago, May 2008, I wrote that "Society is falling apart" due to economic reasons. Well today society continues to fall apart. I will list reasons why and recommend solutions to fix it.

Our society has not been conditioned for success, but rather security. Security that does not exist anymore. So as a result society suffers.  A lack of "financial and success" education in our curriculum has been a major contributor to our economic and social decline. Our education system focuses on math and science, but not enough on money and success. If money and success were taught, kids would be running to school rather than running away from it. Our nation would be richer and we wouldn't be borrowing so much from foreign countries. "The financial prosperity of a nation depends on the financial prosperity of its individuals", George S. Classon.

We need people to become activated. This is part of success education. We have too many who are living but not giving; many who become burden to government rather than benefit. We can not simply take care of everyone. There is too much incentive and benefit to remain working poor than to move up to working class. People must learn and be willing to take care of themselves more.

A solution would be to require financial education for everyone. A financial aptitude test, FAT, would be developed. After learning money, people would understand it better and make some for themselves. They would also start saving too. In return, the economy starts to grow. Companies would hire more employees due to the additional demand of goods and services. Capital markets would start to stabilize and then rise. Government tax revenue would go up. And as time goes on, governments would collect enough in taxes and then start to lower them. This would allow people and businesses to keep more for themselves. So a result, society as a whole becomes financially better off. Now society can use time and money resources to solve other problems.

Welfare reform is needed. Money is never free, it is always a loan. It is better to offer people loans instead of grants. Simply giving money to people makes them weak. But offering a low-interest government loan would force them to become disciplined. Financial education would be required in order to receive assistance and payments would be deferred. This plan provides both short-term and long-term benefit. The government reduces it's liabilities and would not risk default. Generally people would become better off as now they have more money to spend and save. These SIL, Social Improvement Loans would replace the many types of social grants and be more widely available.

Our education system is doing better than students they serve. We need higher equivalency exams than the current GED, High school diploma. One way to solve our education problem, would be to start equivalency exams for Associates, Bachelors, and Masters Degrees. They would be based on certain criteria achieved depending on the level completed, rather than required college schooling. This would allow anyone to drop the current system and pursue higher education on their own time and at lower cost. This would provide an affordable education and put students on a path to success. "You can drop out of school, but you can’t drop out on education."

Our economic system of living is not allowing people (commoners) to progress. We have seen an economic crisis unfold due to the excessive risk taking by financial institutions and individuals. Banks would gamble trying to make more money. Individuals would overpay for homes they could not even afford. Our national government comes to the rescue and essentially prints more money (virtual dollars) to solve the problem, assuming major bank debts along the way. “The large banks have kept their profits, but shared their losses.” Printing more money decreases the value of the currency. The US dollar is worth less now than 2 years ago. Much less as the years go by. This major printing of trillions of dollars stabilized the economic system, for now.

They say the system of capitalism becomes "reset." I don't believe so, not much will change. We need to replace the "empirical capitalism" we have now with "societal capitalism." Then society as a whole can be better off. The economy would boom if everyone was allowed to participate and understood how it worked. That is the right thing to do. That is the American thing to do. The people’s bailout of deferred payment low-interest loans can be more effective than the private bailout many banks and institutions received.

We have seen financial problems increase all across the board. A majority of companies, individuals, and governments are experiencing difficulties. Companies are selling less product, so their revenues are down. Individuals are receiving less pay and/or shortened work days, so they have less money to spend. And governments are receiving less tax revenues causing less services to be provided or even cut. In reaction to the downturn, companies are downsizing their product offerings with same or higher prices. Individuals are working harder just to make ends meet, often working 2-3 jobs. State and local governments are downsizing and raising taxes to cope with the revenue loss. These actions make the cost of living increase as people pay more than before. A 8% sales tax rate from 7% is a 14.2% increase, not just a 1% only increase. 

Our government will say prices are rising slowly via CPI (Consumer Price Index), but actually they are rising much faster. If you take in the quality and quantity of the product than just price, you would see a dramatic price increase. For example, a loaf of bread with 22 slices will cost $3.00. Now due to cut backs, the loaf is 20 slices and the quality is less, yet the price is same or even higher. Then it looks like there is no inflation. Yet in reality prices increase with less quantity and less quality. Many manufacturers are producing and selling goods this way. So really the CPI should be reported higher, but I believe they do not take these factors in consideration. As consumers, we know prices continue to rise much more than stated. True inflation is around 10% per year. What we will see in the future will be 1970s stagflation (prices rising, yet income flat). I wonder if Ben Bernanke, current Fed Reserve Chairman, personally shops for food and other items. Then he would notice prices have really gone up and report so correctly.

As less money flows into the government, you will see more taxes, fees, and tickets introduced. "What was once free, will become fee." Protests and strikes will continue. People who are normally honest will start to become dishonest, just to get by. You will see more and more people do improper things out of financial desperation.

Fraud of all sizes is increasing. A society with too much fraud, become a society no more. There has to be a sense of order. If not, too much fraud destabilizes things. As the gap between the rich and poor widen, fraud will continue to grow. Basic living is becoming difficult resulting in more fraud by individuals and groups. There are too many societies and individuals that want to better themselves only. It seems our government doesn’t have things under control.

Our country as rich as it is, seems to be poor to many. The poorer society becomes, the more society falls apart. Economists said before everything was fine, when everything was not. You see people selling water on the street; the men, women, and children selling water for a dollar. This compares to the Great Depression when apples were selling for a nickel. The poverty rate is 50% using a baseline of $50,000 for a family of four, not 25% using the $22,000 standard.

It seems the less fortunate are always need of assistance. Without it, lower income families would not survive. The average low-income family receives minimum $1000 a month in assistance. That I know personally. There has been talk of welfare reform and yes it very much needed, but reform is needed allover. Tax Reform, Health Care Reform, Wage Reform, Insurance Reform, etc...

One of the biggest reforms that is most important is "Capital Reform." Our capital is being diluted everyday. Capital donations have very little effect when capital dilution is occurring at a much greater rate. Warren Buffett will say "America's best days are ahead", unfortunately I don't believe so. In the short term, things will be better for a few but get worse for the many.

The rich invent this thing called equity and give themselves a ton of it. In many companies, the average worker will earn about $20K a year, while the CEO earns $2 Million. That is a 100 times difference. Not bad for the CEO and his executives, but bad for the common workers. Bottom taking care of top. We really don’t teach the $20K a year person, how to earn $2 million. One reason today we have income in-equality and the huge growing gap between the rich and poor.

When society falls apart, it spills over everywhere. Everyone is affected, including people who live in so called safe areas. As our society falls, people who are prepared with emergency food, water, medical supplies, defensive capabilities, etc...will be able to weather out the coming financial chaos and turmoil. Necessities such as food will become luxuries. Gold and silver holdings will be the only true money as the US Dollar crashes.

What we need more of is "Social Innovation". This would allow people to progress. There is always talk of technological innovation, but the social kind comes first and is more important. Social Innovation is allowing people to be truly free. Free to succeed. Our education system has lacked success and financial classes. A main reason why society has fallen. It seems the purpose of school is to make the establishment whole, while making the commonwealth a little better off.

We continue to work hard for private benefit. Many of us work hard for kings and queens, as the commonwealth disappears. The commoners have less wealth than before. Our assets are being traded to the private in exchange for another day of living. Soon what was once free will become fee. Our government as we know it may soon disappear. We maybe heading back to the past. Walls are going up. I am optimistic, but at same time need to be realistic. A group that places themselves above others soon becomes a separated people. A successful society is one where society comes first, family second, and individual last. Not the other way around.

We rather create slaves than create success. Slavery is a form of control. As I have written before, financial slavery has taken the place of physical slavery. Many of us are still slaves today. We have job slavery rather than job security. The greatest thing President Obama could do is to break the "financial slavery" many of us are in. Abraham Lincoln freed the slaves and President Obama can do the same. So many problems today start first with economics. At a future point will problems start to get solved. A great problem in our society is our economic policy. A policy that guarantees financial suffering. True freedom is financial freedom. That is something that our President can help achieve. Society would bottom at that moment, then start to rise.

If action is not taken, you will see the US Dollar fall in value over the coming years as the level of debt exceeds the level of production. Gold and silver prices will rise. The gap between the rich and poor will continue to widen, causing even more pain. We will have to pay more for less. Prices will rise and quantity will decline. We will become citizens of the companies (countries) we work for. Separation of cities and states will occur, as financial difficulties become unbearable. The partial democracy we once had will be no more.

We are becoming less of a commonwealth and more of a concentrated wealth. As more and more of the commonwealth is transferred over to private hands. There really is no more commonwealth, because the “commoners have no wealth.” We are a “plutocracy” run by kings and queens. Our common form of government is going away to rule by the establishment and elite.

Society has been economically deprived. Majority of Americans are living paycheck to paycheck, and a good number are living below it. The poverty line continues to expand. Many are past due on bills, looking, praying, and hoping for a way out. For society to come back, the economy has to come back. And economy means everyone is participating, not just the elite. People are working hard, but not getting ahead. Working hard, but earning little. The economy can not grow because we have too many who barely have enough for essentials, but not enough extra money to buy more goods and services. Prices alone going up is a false indicator of domestic growth.

Society doesn't get better when people who are already secure become more secure. It gets better when people who are suffering start to become better off. Unfortunately we focus mostly on the secure people. It is better to have 100 families earn $100k a year, than to have 1 family earn $10M. Again we focus mostly on the few. We don't teach those poor families how to succeed. Another reason why society is falling apart. It seems the secret society wants the overall society to fail. They are doing a good job of it. I see it as a form of population control by economic means. There are better ways of solving that.

Leadership requires a good understanding of money and capital. "Many of our politicians are lawyers", says Bill Gates. And many of them lack the basic understanding of finance. The leaders think they understand it, but they usually don't. There is a difference between income and expenses, assets and liabilities, balance sheets, and cashflow. Any candidate for office should be required to pass a financial aptitude test or FAT. “When you don’t teach people money, they will either mis-use it or abuse it.” 

We have stripped the commonwealth as the wealth transfers over. You can't have growth if the people having nothing in their hand. Society can not improve if we are more focused on individuals and private organizations. The affluent economy alone will not be able to grow America significantly.

Capitalism has become capital extraction instead of capital creation. America is officially a third world country with a soon to be third world currency. Our society is falling apart due to wealth extraction. Our government will stop the overspending once the dollar crashes to almost zero. You will see more people on the street, more demand for government services, and more advertising via billboards, as our country becomes more third world. Our nation spends more than it takes in, borrowing heavily just to maintain itself. Our infrastructure is breaking down. Financial terrorism is occurring.

More wealth transfer is occurring as organizations are taking over land and assets. In desperation many of the commonwealth’s roads, parks, libraries, rivers, etc... will be transferred over to the private and leased back to the public. You will have to pay extra to use something that was once free. America is becoming a big piece of land that will be privately owned for majority private benefit.

Americans fought a war to go independent. Now we must fight a war to become free. There is a financial war out there, that we need to fight and win. What Ron Paul says is correct, we need a "Revolution". The commonwealth comes first, not last. We worked better together as a commonwealth. We need to return to the model that built America. The model that made our country great and will do so in the future.

If Benjamin Franklin were alive today, he would be upset to see what is going on in his beloved city and country. He would be disappointed in the university in which he help founded. The University has become part of the establishment. He would say, "It seems you have done more for yourselves, than doing more for others."

By Roy Philipose, Instructor, Investor, Entrepreneur, Author, Economist
©Copyright 2011 Roy Philipose. All rights reserved. USA. Standard Disclaimer Applies.