Assignment Two: The Origins of Systems Science and the Modeling of Human Systems

ECONOMIC CRISIS AS A RESULT OF MONETARY SYSTEM DYSFUNCTION

by Florentine Christian

June 23, 2009

Saybrook Graduate Institute and Research Center

ORG 7032: Dealing with Complexity

Instructor: Kathia Laszlo

Introduction

With the state of the United States economy and the global economic crisis, leaders from around the world are calling for substantial overhaul in the global monetary system. There have been calls for a new reserve currency, as well as calls for a global currency overseen by the International Monetary Fund. Issues of trade, commodity pricing and credit are all working to shape these discussions. Here at home, our nation is feeling the pressures of job loss, decreasing home values, and a massive credit crunch. Costs of livelihood seem to be going up while the means to support our livelihood seem to be vanishing. While the media tries to uncover the causes and culprits for our current state of affairs and politicians scramble to take action toward economic fixes, as a nation we are at a loss for how we ended up here and most are just holding their breath and waiting for these times to pass and the economy to pick back up again. Without an understanding of the systems at play, I believe we are in a collective state of denial and ignorance as to the underlying systemic problems at play. At the very heart of the issues promoting our current economic crisis, as I will demonstrate in this paper, is a monetary system that is unsustainable and is actually working against its purposes in a sheer effort to survive.

The ultimate purpose of money as a currency is to enable complex exchange in an economy, the system of exchange of members of a society. The reasons to employ money and a monetary system within an economy are to: 1. make large scale exchange between members of society more convenient, 2. stabilize the value of currency so assets or items being acquired through exchange are not undermined by volatility in the value of the currency, 3. ensure adequate supply of money to accommodate varying levels of exchange, or the expanding and contracting nature of an economy 4. allow the market to function naturally, and thus harmoniously, 5. protect consumers from crises related to supply, demand and value of money. Essentially, a monetary system should provide the money to enable ease of exchange in a complex economy while ensuring that the money itself does not act as a mechanism of interference in exchange. In this paper, I will look at our current monetary system using Banathy’s Three Lenses and in concluding this paper, I will evaluate how well our monetary system fulfills the purposes of a monetary system I have just laid out.

Systems-Environment Lens

Our current monetary system in the United States was ultimately established by the Federal Reserve Act of 1913, which provided for the structure and organization of the Federal Reserve (Federal Reserve Act, 1913). The Federal Reserve System is essentially synonymous with our nation’s monetary system and will be referred to as such for the purposes of this exercise. The Federal Reserve acts as both the structure and the maintainer of the structure for our monetary system.

Embedding of Our Monetary System in Larger Environment

Our monetary system is embedded within our economy, or the system of exchange between individuals and groups or organizations. Virtually all aspects of exchange interact with our monetary system. Our economic trade and exchange has developed a dependent relationship with our monetary system, in that almost all exchanges in the United States occur in dollars. Our monetary system also impacts almost every aspect of how we organize socially. It is a foundational system upon which most other social systems rest, or, at the very least, with which they find themselves unavoidably intertwined. These systems include government, health care, education, transportation, and energy. Our individual necessities for life such as food, water, shelter and clothing are also nearly impossible to access without involvement in our monetary system. Money has come to position itself as the water within the ocean of our economy and, arguably, our lives.

Boundary and Interaction with Other Systems

Our monetary system interacts with, influences and is influenced by monetary systems of other nations, just as our economy interacts with other economies around the world. The monetary system of the United States plays a particularly vital role to the collective global economy, in that the US Dollar is the world reserve currency (Reserve currency, n.d.). This means that the Dollar is used as the primary pricing standard for commodities trade, and governments around the world hold large reserves of the US Dollar for its use in trade. Other benefits are afforded the United States since the USD is the reserve currency. Trade is easier and less expensive for the U.S. The US Dollar was established as the world reserve currency in 1944 with the Bretton Woods Agreement. The meeting at Bretton Woods, which was attended by leaders of the industrialized nation states, established an agreed upon system of rules, institutions and procedures to regulate the international monetary system (Bretton Woods system, n.d.). At that time, nation to nation exchanges in the US Dollar were backed by gold, so there was a relative sense of security in having the dollar act as the gold standard. That changed in 1971 when President Nixon eliminated the gold standard (Gold standard, n.d.). At this point, the U.S. Currency maintains a relative level of stability, not because it is backed by any thing of value, but because it is backed by the reputation of the United States of America and the stability of our economy. For this reason, there are immense pressures on the Federal Reserve to not only maintain to stability of our nation’s currency for use in our economy, but to also maintain the stability of our overall economy for how it impacts our global exchange. The decisions made by the Federal Reserve greatly affect the economies of the world and, in effect, how other nations interact with the United States.

The U.S. Government is a significant system that regularly interacts with our monetary system. As per the U.S. Constitution, the U.S. Government was granted the sole power to establish currency. This currency was limited to gold and silver coins (U.S. Constitution). The U.S. Legislature established the Federal Reserve and gave it legitimacy and power to conduct our monetary system and most essentially, to print our current fiat currency. The power boundaries and reach of the Federal Reserve were all established by the Federal Reserve Act of 1913 and subsequent legislature. While Congress is not granted power to make monetary decisions, they are empowered to restructure or redesign the system which does.

SIPOC ANALYSIS AND MAP: Federal Reserve System

Money creation, or the ability to impact the amount of money in circulation is the main function of concern within in our monetary system. The major decisions made by the Federal Reserve impact the regulation of the amount of money in circulation. I utilize the SIPOC model here to demonstrate how money is created, or put into circulation. And we will see, through further discussion, how money is removed from circulation.

If the main process or function is the moderating of the amount of money in circulation, the main Input is the authority that the Federal Reserve has to create and eliminate money. It does not require a physical input in order to create the physical output of money. It is actually able to create money that did not previously exist, and remove money, through the exchange of securities and the establishment of requirements which influence credit or debt creation. The supplier of this input of authority is the U.S. Government, who has approved legislation granting the Federal Reserve such authority. The output of money is then transferred to the customers of the system, which are people who use USD in their exchanges, which is virtually everyone in this country and a vast number of people globally. The direct customers are those who trade Treasury securities or take out debt from a bank. Indirect customers are people who are recipients of this money that was created through debt instruments. If the direct customer had not received loaned funds with which to exchange, the indirect customer would not have received those funds either, nor the person from which they would then hypothetically use their received funds to purchase. In effect, all people who exchange in US Dollars are customers of the system. The process of how the Fed uses its authority to create money will be discussed in the Process/Behavior Lens section.

Functions/Structure Lens

System Purpose and Characteristics

The purpose of the Federal Reserve is to ensure our monetary system is safe, flexible and stable (Board of Governors of the Federal Reserve System, 2005, p. 1). The Federal Reserve acts both as the producer of the money and the regulator of the banks who disseminate money into circulation via debt creation. The stakeholders of the system can be defined as anyone who utilizes the US Dollar as currency in exchange, as well as savers, investors, creditors and debtors, and those who are impacted by such transactions made in the US Dollar. They are individuals, corporations, banks, non-governmental organizations, and government agencies.

The decision-makers of the system are primarily 7 Governors of the Board of the Federal Reserve and Presidents of the 12 Federal Reserve Banks. These 19 people who charged with making decisions that impact a system which reaches into every segment of society of virtually every nation in the world. Their power and their responsibility are immense. Ownership of the Federal Reserve is a bit complicated to decipher. The Federal Reserve does yield earnings primarily through interest earned on U.S. Government securities and loans to depository institutions (which these institutions are then able to loan out to the public). The Federal Reserve Banks are essentially owned by their member banks, who are all required to own shares of stock in their regional Federal Reserve Bank. These member bank shareholders receive a 6% annual dividend. Beyond the Federal Reserve’s expenses, the remaining funds go directly into the Treasury (Board of Governors of the Federal Reserve System, 2005, pp. 11-12).

Main Functions

The Federal Reserve has four main functions: 1.) to maintain stability in our financial system, 2.) to administer our nation’s financial policy with goals of maintaining high employment rates, stable consumer pricing and moderate long-term interest rates, 3.) to protect the credit rights of consumers by supervising and regulating banking institutions, and 4.) to act as the primary provider of financial services for banks, the U.S. Government and foreign institutions. (Board of Governors of the Federal Reserve System, 2005, p. 1).

System Components

The Federal Reserve System is made up of three main parts: The 7 member Board of Governors, the 12 Federal Reserve Banks, and the Federal Open Market Committee. Additionally, our monetary system depends on depository institutions (ie. banks) as enablers which get much of the flow of money in the hands of individuals and organizations. Below I will detail the functions of each of these.

The Board of Governors is made up of seven people, all appointed by the President of the United States. A new governor is appointed every even numbered year and serves for a single 14 year term (Board of Governors of the Federal Reserve System, 2005, p. 4). The Board of Governors has broad oversight for the financial and economic developments nationally and internationally. They are responsible for regulating and supervising the 12 regional Federal Reserve Banks, as well as state-chartered banks that are members of the Federal Reserve System and bank holding companies. They also have some regulatory responsibilities for the entire banking system, including national banks and non-member banks. The Board is also responsible for administering regulation to protect consumer credit. The Board of Governors sets reserve requirements and approves discount rates of the Federal Reserve Banks. These are the two primary mechanisms which impact the rate of debt creation, and hence the rate of growth of money in circulation in the economy.

The 12 regional Federal Reserve Banks provide depository services to their member banks and also act as the bank for the U.S. Treasury. They oversee and regulate member banks and bank holding companies in their respective regions. They are also primarily responsible for the circulation of coin and currency in the monetary system. Each Federal Reserve Bank has 9 directors on its board. To maintain a balance of interests served, three Class A directors are from the commercial banking sector. Class B and Class C directors are members of the public. Class A and B directors are selected by member banks and Class C directors are placed by the Board of Governors and are not allowed to hold positions in or shares of a bank (Board of Governors of the Federal Reserve System, 2005, p. 10).

The Federal Open Market Committee (FOMC) manages open market operations, which is where Treasury securities are bought and sold (Board of Governors of the Federal Reserve System, 2005, p. 11). This is where monetary policy is primarily set which impacts our monetary system—and the supply of money—on an on-going basis. One of the main functions of the FOMC is setting the federal funds rate. This is the interest rate at which depository institutions are able to exchange money held in their Federal Reserve accounts. This rate in turn affects the rates that banks issue to their customers for short-term and long-term debt instruments. In this way, the FOMC manages the supply and demand for balances (money) held at the Federal Reserve Banks by member banks. The FOMC is made up of the 7 Governors of the Federal Reserve and 5 presidents from Federal Reserve Banks. The President of the New York Federal Reserve Bank maintains a permanent position on the board and the presidents of the other banks rotate serving on the committee on an annual basis (Board of Governors of the Federal Reserve System, 2005, pp. 11-12).

Depository institutions, simply known as banks, are the link in the monetary system which connect the Federal Reserve System with the general public and those who use the US Dollar in trade. All national banks and some state-chartered banks are members of the Federal Reserve. They are required to own shares of stock in their regional Reserve Bank, receiving an annual 6% dividend. They do not directly have decision-making power as shareholders, except that they do get to elect the Class A and Class B directors (6 of 9 elected) at their regional Federal Reserve Bank, and from these pools of directors, presidents are selected for each regional bank, who ultimately serve on the FOMC (Board of Governors of the Federal Reserve System, 2005). So in an indirect way, the member banks do have powerful input into decisions made at the Fed which impact monetary policy. It is interesting to note the degree of influence that banks have on our national monetary system, compared to the decisions of the general public. The greatest control we have is in electing our President and Senators who will then elect and confirm the next Governor of the Board of the Federal Reserve. As members of the public and users of the system, we have very little power to influence the system or ensure it truly functions in our best interests. The very entity that has been established to regulate and supervise the banks and ensure the protection of consumer credit is, to a great degree, run by the banks themselves.

Process and Behavioral Lens

Unlike most other systems which take inputs through a process of transformation in order to end up with their outputs, this system is slightly different, in that there is a physical output, yet not a physical input. The Federal Reserve and commercial banks are essentially able to create money that did not previously exist, through the utilization of debt instruments. The thing that enables them to do this is the power vested in them by legislative authority of the U.S. government. This authority allows the Federal Reserve System to create money where none previously existed, expand the money supply, or allow the money supply to contract by accepting principle and interest payments without issuing new debt. This control over the output of money has the power to whip our complex global economy around with a single monetary decision.

There are essentially two ways in which money is created. The first is when the Federal Reserve purchases U.S. Securities. Since the Federal Reserve Banks do not have “accounts” of their own of money to draw from (all of the money held at Federal Reserve Banks belong to depository institutions), these purchases are made essentially with new money that did not previously exist. This quote is from the a publication from the Federal Reserve Bank of Boson: “When you or I write a check, there must be sufficient funds in our account to cover the check, but when the Federal Reserve writes a check, there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money” (Federal Reserve Bank of Boston, 1984). When the Treasury disburses the funds received from the sale of securities in the form of government programs and projects, this new money enters circulation in the economy.

The second way money is created is through bank loans to customers. Banks are able to make loans for money they do not have, and when they do so, they thus increase the amount of money in circulation. The Federal Reserve makes decisions which create the credit conditions which control the rate at which banks are able to create new debt. The process for how both of these processes take place is detailed below in the Process Map section.

The first process I will describe is how money is created through Treasury securities, or government debt. First, Congress approves a budget, which might require the acquisition of debt to cover approved spending. In this case, Congress approves the printing of Treasury securities in the form of bills, notes and and bonds. These instruments vary primarily in the term length of the instrument. The treasury then sells the securities on the open market. Most of these securities are sold to commercial banks. When a bank purchases a security, money has not been at that point created. It is debited from the bank’s account and credited to the Treasury’s account. The bank has essentially converted its holdings in money to holdings in securities. The Treasury is then able to provide the money for government spending, which ultimately ends up being circulated into the economy. The banks, however, are not able to produce new loans based on securities, so they might decide to liquidate their securities holdings in order to meet reserve requirements to procure more loans. The banks are able to do this by selling the securities. When the Federal Reserve purchases excess securities on the open market, they essentially create new money that was not previously in circulation. In this way, the Federal Reserve is able to put new money in circulation. This money, we must remember, is backed by debt. With every debt that is created, there is a burden to repay said debt, plus interest.

The secondary way new money is created is through bank loans to customers. Banks have limits on the amounts they can lend, though those limits are typically multiple times the amount the bank actually has on deposit. These limits are set by the Board of Governors of the Federal Reserve when they set reserve requirements. Let’s say the reserve requirements were set at 10% (in reality they are much lower). That would mean that if I deposited $1,000 into my bank account, the bank would be required to hold $100 in reserves and could then loan the other $900. Let’s say the recipient of that $900 bank loan deposited the funds into their bank. That bank would then be able to create a loan for $810, and so on. When all is said and done, the total amount that could potentially have been loaned out by various banks would total around $10,000, or 10 times the amount initially deposited. From a $1,000 original deposit, $10,000 is potentially created and now exists in circulation for the time being. Of course, as those loans are re-paid over time, the amount of money in circulation will contract. In order to maintain money in circulation, new debt must continually be created. Debt creation, whether it be U.S. Treasury securities purchased by the Fed or loans given to customers of banks, is the only mechanism by which new money is put into circulation. A better way to understand this is to realize that if every dollar that is currently owed were to be paid back, there would literally be no money left in circulation.

There is one more very important aspect of this debt-based monetary system that is critical to understand. When a debt instrument is issued, the principle amount of that money is created and can thus be used to re-pay the debt. But most debt instruments also include some form of interest payment be paid in addition to the principle. The glitch is that the interest to re-pay the debt has not been created and put into circulation. In order for the system to function properly, the money supply must increase accordingly to accommodate the debt plus interest that now must be re-paid. Thus, an ever increasing amount of debt must be issued to keep up with the ever-growing debt plus interest.

Discussion

This infinitely expanding debt load puts further pressure on the economy to grow and expand, just to keep up with the need to re-pay principle and interest owed. While the amount of money in circulation might hypothetically be able to remain stable, the amount of debt continues to grow over time, because of the interest that continues to compound. Thus, more resources from the economy are required to service an expanding debt, which lessens the resources available for market exchange or the distribution of resources among members of the economy. Over time, the ratio of debt compared to available opportunities for “income” balloons. The economy is forced to expand, more labor is required, more physical resources are required, until we live in a situation in which households with two adults working multiple jobs find themselves over-burdened with debt and barely able to keep up, and our natural resources are exploited beyond repair or livable standards. There can be no other alternative to a monetary system with an insatiable appetite for debt.

If we return to the criteria laid out at the beginning of this paper, we can measure the effectiveness of each our criteria based on our understanding now of the monetary system through Banathy’s Three Lens approach.

1. Make large scale exchange between members of society more convenient

Yes, our current monetary system does accomplish this.

2. Stabilize the value of currency so assets or items being acquired through exchange are not undermined by volatility in the value of the currency.

Yes and No. For the most part, our currency is able to be stabilized through the regulation of the Federal Reserve, at least to a better extent than most national monetary systems of the past. The problem, however, is that the value of money under this regulation has tended to be inflationary over time, which undermines the value of cash savings and retirement accounts and works to reward those who are holders of debt. The rate of inflation is ultimately controlled by the decisions of a very small group of people who too heavily represent the interests of the banks rather than the overall population.

3. Ensure adequate supply of money to accommodate varying levels of exchange, or the expanding and contracting nature of an economy.

Yes and No. While the creation of new debt does accommodate a naturally expanding economy, the pressure on an economy to expand unnaturally, simply to satiate the monetary system’s needs, does not serve the economy and ultimately hurts society.

4. Allow the market to function naturally, and thus harmoniously.

No. Due to the exponentially increasing demands that our monetary system places on our economy, it hinders the economy’s ability to function naturally and thus harmoniously. We must remember that our economy is the overall system of exchange between members of society; it represents the way in which we exchange in community with one another. This is undermined when we have an additional burden that is growing like a cancerous tumor that we must tend to. Within this structure, there comes a point in time when the monetary system becomes more of a hindrance to our system of exchange than a help. I make the motion that we are pretty much finding ourselves at the point at the present.

5. Protect consumers from crises related to supply, demand and value of money.

Yes and No. Again, our monetary system has done a better job than most national monetary systems in the past at keeping our economy out of crisis. I would argue, however, that crises have the danger of being manufactured beyond what might have occurred naturally in the economy, because of the control that the Federal Reserve has over our monetary system and thus our economy. I would also pose that we are in the midst of an economic crisis that has much more to do with our monetary system than the exchange of goods and services between the members of our society.

It is in this way, our monetary system interferes with the natural behavior of our economy. In an effort to maintain itself, the monetary system makes demands on the economic system and causes unnecessary strain. On a finite planet with finite resources, infinite economic expansion is not possible. Thus, within the system of money creation through a debt plus interest mechanism, and majority of control over the system by those who profit from the creation of debt, we will see the eventual destruction of an economy and the systems in society that are dependent on such a monetary system. The monetary system has come to function much like a parasite that is devouring its host—our economy—in an effort to sustain its own life. The monetary system is only essential because we have positioned it to be so. Like a parasite, it could also be removed, as the organism of our society existed once before without it.

References

Allen, L. (1999). Money Multiplier. In Encyclopedia of Money (p. 200). Santa Barbara, CA: ABC-CLIO Ltd.

Board of Governors of the Federal Reserve System. (2005). The Federal Reserve System: Purposes and Functions (9^th Ed.). Washington, D.C.: Federal Reserve System Publications.

Bretton Woods system. (n.d). Retrieved June 23, 2009 from Wikipedia: http://en.wikipedia.org/wiki/Bretton_Woods_system.

Federal Reserve Act, 12 U.S.C. § 3 (1913).

Federal Reserve Bank of Boston. (1984). Putting it simply—the Federal Reserve (2^nd ed.). Boston: Public Services Department.

Gold standard. (n.d.). Retrieved June 23, 2009 from Wikipedia: http://en.wikipedia.org/wiki/Gold_standard

Reserve currency. (n.d.). Retrieved June 23, 2009, from Wikipedia: http://en.wikipedia.org/wiki/Reserve_currency.

U.S. Constitution, Art. 1, § 8 & 10.

Assignment One: A Systems View of the Discourse of Life

ECONOMIC CRISIS AS A RESULT OF MONETARY SYSTEM DYSFUNCTION

by Florentine Christian

May 23, 2009

Saybrook Graduate Institute and Research Center

ORG 7032: Dealing with Complexity

Instructor: Kathia Laszlo

You don’t have to be an economist to understand the current economic crisis.

You just have to be a systems thinker!

Statement of Problem

In our nation’s current economic crisis, we find ourselves in times where the masses, or the “Bottoms” as Oshry (1995) would call them, are frustrated, divided among political party lines, pointing fingers and placing blame. And then we have the “Middles” in our current market who are experiencing the greatest degree of insecurity as their roles are cut or eliminated. And those at the “Top” of our government, and the heads of major companies and organizations feel the weight of the responsibility for the decisions they make during these times and how critically history will judge them based on the outcomes they yield. The Tops in Congress and the Presidential administration have decided as their main way of tackling this problem, to utilize debt for various programs to stimulate our economy.

In this paper, I will demonstrate that while the President and Congress’ attempt at addressing this crisis is intended to correct this economic recession–and in the short-term, it just might–in the long term, it will ultimately add to the problem. This is because they are addressing the problem at the level of an “event,” without looking at underlying patterns and the faults of the structure of our monetary system. In Systems Thinking Basics, Anderson and Johnson present the Events/Patterns/Structure Pyramid as a way of demonstrating the levels of understanding complex problems (1997, p. 5-9). They state that most problem solving happens at the level of events, rather than looking at patterns of behavior over time and asking questions about those patterns of behavior that lead one to see structural dysfunctions. I will show that at the pattern level, what we find is that debt has been growing at an exponential rate for several decades in relation to our capacity to repay such debt. We will then look to the level of structure to hypothesize what has been causing debt vs. income to grow at such a rate. I argue that until we are able to “see the swim we are in” (Oshry, 1995), any solutions formed will have limited impact, because the problem lies within the very structure of the monetary system itself.

Variables

Though there are an immense number of variables we could consider in evaluating the problems of our economic crisis, I am going to focus on the ones that appear to be most central in understanding the dysfunctions of the underlying monetary system which, until fixed, will not allow a sustainable solution from any other economic vantage point. The main components we need to consider in this examination of our monetary system are: money, debt instruments. Let us first define these components and the role they play within the system.

Money is used as the medium of exchange in transactions. Its function is to aid in trade and transactions between parties. It also provides a standard upon which to base prices of items in the market. Since almost all exchange in the United States is done in the currency of the U.S. Dollar, we will consider this our measure of money in an examination of our monetary system. While money is defined in different ways, we will define money here simply as dollars used to facilitate exchange of goods and services, pay taxes and service debt. Money is received as income when a product or service is sold to another. And it is used for purchase of goods and services for consumption.

Debt instruments are the means by which money is created and put into circulation. As more money is created and made available in the economy, an equal amount of debt is also necessarily created. There are two main ways in which this occurs. One way is through bonds which the Federal government sells. Most of these bonds are purchased by foreign governments and the Federal Reserve. They represent debt that is extended to the government with interest owed. The money which the U.S. Government borrows from the Federal Reserve did not exist previously. A deposit is created into the Treasury’s account in exchange for the bond that the Federal Reserve now holds. The U.S. Government does not typically pay down this debt, but pays the interest on it over time, so the amount of debt that the U.S. Government holds continues to grow. We will look at some of these trends in a moment. One thing that is important to note is that the Fed is not earning interest on money that it once had and then lent out. It is collecting interest on funds that it created out of nothing.

The sale of U.S. Treasury bonds is one way in which money is created. The secondary way money is created and put into circulation is through private loans made by banks. Most of the new debt that is issued did not come from funds on deposit at the lending bank. They are new deposits that are created. Let’s break this down with an example. When a person goes into a bank to get a loan for $100,000, the bank does not loan money it has in cash deposits or even money that exists yet in circulation. The bank is able to loan money based on a required amount of reserves. These required reserve rates are set by the Federal Reserve’s Federal Open Market Committee. So if the bank is required to keep reserves amounting to 10 percent of its total deposits, the bank would only need to have $10,000 on deposit in order to create a loan, for $100,000, a deposit to the borrower’s account of funds that did not previously exist. The borrower can now make purchases of up to $100,000. When the recipients of those funds deposit the funds at their banks, their banks now have an increased amount of money on reserve from which they can create more leveraged loans. This is referred to as fractional reserve banking (Allen, 1999). Debt creation, whether it be U.S. Treasury Bonds or private loans to individuals or organizations, is the mechanism by which new money is put into circulation. As money is returned to the bank through debt re-payment, new debt must be created in order to keep money flowing in the economy and available for exchange of goods and services. As quoted by former Chair of the Federal Reserve, Governor Marriner Eccles in his address to Congress, “If there were no debt in our money system . . . there wouldn’t be any money” (Hearing before House Committee on Banking and Currency, 1941).

Behavior Over Time Trends: Unsustainable

We will now look at the behavior of the relationship of debt to available money over time. The following graphs illustrate how both our national and household debt to income ratios have grown over the past 50 years. The first graph represents total debt in America, including government, business and household compared to the collective income of these sectors. The second graph represents total household debt as a percentage of household income.

(Hodges, 2008)

According to this trend, the burden of debt becomes heavier over time as it is growing exponentially in relation to our ability to service and repay it. We should also take into consideration that over time the number of jobs and hours worked for income per household has also increased over the past 50 years, and even with more jobs and hours worked per household, our household debt is still out-pacing our ability to keep up with it. One would wonder, what happens when we come to a point where we can no longer afford to take on anymore debt? I would argue that we have already reached that point, and we are seeing its results playing out in our economy right now. The banks have already over-extended debt to the point that households truly could not afford it, and I would argue that is what is largely responsible for the credit defaults we are currently seeing. The banks have been responding to this market feedback (of loans being defaulted) by tightening lending requirements. This has resulted in a severe decrease in debt creation, which means less money in circulation to facilitate the exchange of goods and services. Nothing has changed in terms of people’s desire for goods and services or the capacity, willingness and skills to get these goods and services to market. What has changed substantially is the amount of money available in the market to facilitate exchange. And the results have been devastating. In an effort to encourage individuals and businesses to borrow, The Fed had kept the interest rates at which it lends to its member banks historically low and has also kept the reserve requirements for banks relatively low. These are actions that the Fed will take to encourage lending. These efforts have done little to encourage borrowing though, and I propose, based on the graphs of the trends over time, that it is because most households are already maxed out.

In an effort to keep the economy moving, former President Bush and now President Obama, with the assistance of Congress, have enacted economic stimulus packages, aimed at increasing the money in circulation to stave off further recession and to guide the economy back into a mode of growth. Since households are not in a position to take on more debt, our federal government is doing so on our behalf. And if we are looking at the situation from within the system, this might look like the right thing to do, for surely we must maintain a steady amount of debt if we are to maintain a steady amount of currency circulating for exchange within our economy. But if we step outside the system and uncover the fault in the structure itself, we will see that this increasing of the debt load is only going to further exacerbate the problem in the long-term.

While borrowing to stimulate the economy may appear to have worked well in the past, such as when we were able to dig our way out of the Great Depression through war-time spending, this strategy of borrowing–whether for warfare or welfare purposes–in order to boost the economy has become a less and less potent strategy over time. All of the war spending over the past 7 years has not able to keep this current economic downturn from occurring, and now we are looking for ever more ways to spend money in an effort to stimulate our economy, all of this spending resulting in an ever burgeoning amount of debt. As the charts below demonstrate, the amount of debt required to stimulate an equal rate of production of income has grown exponentially over time. The graph to the below on the left demonstrates this, while the graph to the right demonstrates the inverse, that is the amount of income we achieved by each dollar of added debt has been decreasing over time.

Each dollar of economic growth requires more debt per dollar than before – now over twice as much and, the national income achieved per dollar of debt dropped 61%
The chart above shows that in 1957 there was $1.86 of outstanding debt for each dollar of national income.But, today’s economy needs $4.70 in outstanding debt for each dollar of national income.	The chart above shows the declining amount of national income achieved by the economy for each added dollar of debt. In 1957, 54 cents of national income resulted for each dollar of debt. But, today only 21 cents of national income resulted per dollar of debt.

(Hodges, 2008)

In light of the data thus far presented, it appears that our economy requires an ever increasing amount of debt in order to not only grow, but to maintain. In order to understand this phenomenon, we must look at one more variable: interest. Let’s go back to the original example I illustrated which demonstrates how money is created. When the $100,000 deposit was created and put into circulation, the interest which is also now owed, was not created. The amount which will be required to pay the loan plus interest does not fully exist, since the only new money created was the principal amount of the loan. Now hypothetically, if the bank were to spend the entirety of the interest received in purchasing goods and services in the economy, the interest money would, in effect, exist in circulation. But banks are not required to spend their interest earnings. In fact, it would make better business sense for them to keep them as reserves to allow for further leveraged lending. So where will the additional money come from to pay the interest if it does not exist in circulation? The answer is that it comes from creating more debt! The very structure of our monetary system requires us to create an ever increasing amount of debt in order to pay off the previously loaned debt plus interest. This is by far one of the greatest dysfunctions of our monetary system, because an ever increasing debt compared to ability to pay is unsustainable.

As we continue down this path of ever-increasing debt in order to maintain our economy, what we stave off ’til tomorrow will soon become the reality of our next generation’s today.  As noted in the graph to the left, President Bush’s fiscal budget for 2009 projected that interest re-payment on our debt will continue to grow year over year as a percentage of our total budget. The red segment in this graph shows interest as a portion of the total budget and how it will increase our government’s budget as a percentage of GDP over time, meaning that over time, our tax dollars are being used more to pay interest on debt and less to provide services to the American people (Office of Management and Budget, 2008). This projection does not include the stimulus packages of 2008 or 2009 or any we will continue to see in the future. What will happen when taxpayers are unable to pay the taxes required to service our debt, plus service their own household debt? What will happen when the U.S. Government joins the ranks of households who are unable to take on more debt? What will come of our economy then, how will we continue to exchange with on another, and to whom will we be indebted? Pondering these questions should act as a mighty motivator for us to place priority on looking at the system of exchange which binds our society together.

Short-term vs. Long-term Solutions

The onus to tackle re-structuring our monetary system is primarily on the United States Government. It is granted the sole power to coin money for our land under the Constitution. (U. S. Constitution.) And while the Constitution did not give the federal government or any states the power to print paper or fiat currency, the Federal Reserve Act of 1913, which established and gave power to the Federal Reserve, allowed for the current monetary system as we know it (Federal Reserve Act, 1913). An act of Congress could also reverse or make amendments to the Federal Reserve Act and thus change our monetary system. And yet politics is a completely separate system in itself that must be contended with in the pursuit of a viable system of exchange.

Our election system is established so that elected officials have only a few years to prove their worth before being voted to continue in their roles. Thus, most seek change in which improvements will be realized within a few years, before the next election cycle. The political system does not support long-term, systemic approaches to problems without the enduring attention and commitment of its constituents. Many people applaud President Clinton for the state of the economy during his tenure, but the same lax lending requirements that were pursued during his time in office that extended home ownership to a greater population of households, pumped money into the economy and stimulated growth came with a massive price tag in terms of long-term debt that we are now struggling to re-pay. Similarly, while President Bush hoped to stave off recession with his war-time spending, the cost was high for little effectiveness, and has resulted in a growing amount of federal debt burden to taxpayers. Our inability to see the time lag in the resulting repercussions of economic decisions influenced by politicians is a symptom of seeing things at the level of events, and an inability to uncover the coinciding patterns that might have us understand the underlying structures.

Conclusion

Ultimately, effective solutions will require a complete paradigm shift so that we are able to approach this problem in a systemic way. Solutions brought about from within the framework of the existing system cannot solve problems that are inherent with its very structure. It will only be through the education of the American people to be able to see things at the level of structures and their commitment to demand systemic change from their political representatives that will allow for real sustainable solutions to be employed. Without the demand of constituents for long-term change and the patience to see the process through, elected officials will keep giving us what we ask for, which are essentially “events” or short-term fixes that bring about immediate relief from crisis, however short-lived their affect may be. For as simple as a paradigm shift might sound, Oshry (1995) contends that “There is much talk about the need for ‘paradigm shifts’–fundamentally different models for comprehending human behavior in social systems. It is difficult, however, to recognize such shifts, even when they are directly in front of us. The difficulty is this: We view the new through the old lens and, as a consequence, we look without seeing.” Perhaps then, we should look to optometrists to assist us in “seeing the swim we are in.”

References

Allen, L. (1999). Money Multiplier. In Encyclopedia of Money (p. 200). Santa Barbara, CA: ABC-CLIO Ltd.

Anderson, V., Johnson, L. (1997). Systems Thinking Basics: From Concepts to Causal Loops. Waltham, MA: Pegasus Communications, Inc.

Federal Reserve Act, 12 U.S.C. § 3 (1913).

Hearing before House Committee on Banking and Currency, 77^th Cong., 1342 (1941, September 14). (testimony of Fed Chairman Marriner Eccles).

Hodges, M. (n.d.). America’s Total Debt Report. Retrieved April 22, 2009, from http://mwhodges.home.att.net/nat-debt/debt-nat.htm.

Office of Management and Budget (2008). Budget of the United States Government, Fiscal Year 2009. Washington, DC: U.S. Government Printing Office.

Oshry, B. (1995). Seeing Systems: Unlocking the Mysteries of Organizational Life. San Francisco: Barrett-Koehler Publishers.

U.S. Constitution, Art. 1, § 8 & 10.

The roll-over of debt coming up in the next two years defies comprehension. For instance, in the next two years the U.S. must roll over $2.5 trillion. Worldwide, banks during the coming two years will have to roll over $7 trillion. On top of that commercial real estate in the U.S. has $750 billion to roll over.Whether all this debt can be successfully rolled over is doubtful, but one thing is clear – interest rates will go up. This will have an immediate impact on housing. Nobody can negotiate a mortgage now – and worse, nobody has the money to buy a house for cash.In the face of the deflationary events described above, the Fed will have to create a massive torrent of money. This should be highly inflationary – on top of the forces of deflation and semi-depression. Thus the base will be set for an inflationary depression, during which time the very viability of the dollar will come under suspicion.Since the dollar makes up a part of almost every nation’s reserves, the worth of every fiat currency will come into question. There will be a frantic search for a currency that will preserve the purchasing power of one’s wealth and assets. The money that can do that is gold. Consequently we may see a total panic for physical gold. Secondary beneficiaries will be silver and platinum, which may be ‘reclassified’ as monetary metals.

via ‘We’re on the Path for Fireworks in 2010′ — Seeking Alpha.

I’ve posted on here about tourism and the economic crisis, and have taught about it this year as well.  One of the things that strikes me regularly about the crisis is the unsystematic way in which it tends be analysed – one day a report of bankrupt airline, another day stories of industrial action or falling visitor numbers. 

I’m going to use this post to apply David Harvey’s ’seven moments’ model of the economic restructuring process that I heard him speak about here and that he has most recently outlined in an essay for the Monthly Review that you can read online here.  I have adapted these seven moments to analyse the tourism industry in this period of restructuring; it will be interesting to see whether this adds some clarity or helps us to think about how the tourism industry will emerge from the crisis.  

Some of these topics I’ve already written about, some have suggested new areas of investigation.  Over the next few months I’m going to post on each of these topics and then, eventually, bring them all together to summarise this period of restructuring in the tourism industry.

1. The organisation and technological forms involved in producing tourism products and services

It is likely that technological changes within the tourism industry will accelerate during this period of restructuring.   The effects of an increasingly competitive marketplace and problems of over-supply are combining to produce a favourable climate for innovations in the online packaging and knowledge-gathering aspects of the industry and  price-concious customers are driving an increase in competition between web sites, which seems to be providing a stimulus for big providers to move into web 2.0 provision, so as not to lose their competitive advantage.  Where the previous waves of web development have increased efficiencies for tourism businesses and helped to reduce prices for consumers, it is likely that this next wave of web 2.0-style developments will illuminate differences between providers and give new prominence to tourists as expert reviewers of tourism products.

Another aspect of tourism development that it might be interesting to focus on here will be the emergence of new destinations.  This will be driven by three factors, as we have seen in previous crises:

1. Decline within specific resorts and regions, as part of the fall-out from the economic crisis
2. The growth of new tourism markets, as the national and regional ‘winners’ of the crisis emerge
3. Socio-cultural changes that occur as a consequence of the restructuring and as a way of integrating it into pre-existing cultural frameworks.

2. The relationship to the environment

From the mid-1990s onwards, the concepts of sustainable development and eco-tourism have been central to debates about the future of tourism and have provided acres of newsprint for the broadsheets’ travel supplements as middle-class tourists have differentiated themselves from the masses by seeking our ‘responsible’, ‘ethical’, ’sustainable’, or ‘green’ holidays.  With predicted declines in the market for organic food, ethical fashion and fairly-traded products – has this mode of tourism development also suffered and what is the future for this sector after the downturn?

3.  Social relationships within tourism

Along with the rising importance of green perspectives on tourism, ethical concerns over the social relationships brought about through tourism have been a key element of tourism discourse since the 1990s. 

This area has mainly been focused on the nature of the host-guest interaction within destinations, but has also included concerns over representation in and governance of tourism destinations, authenticity and exploitation.  As with sustainable / eco-tourism, it remains to be seen how organisations that work in this area will fare during a depression.  Recent problems at Tourism Concern are hopefully not indicative of a gradual lessening of support for ethical tourism initiatives from the public and the tourism industry.

4.  Conceptions of tourism and its values

The core question to be answered here is ‘what is tourism for?’  Historically, tourism has been seen variously as a privelege, a human right, a leisure activity, a cultural form and as a social practice.  I wrote here about contemporary developments in the relationship between tourism, social policy and regeneration.  The current crisis provides two non-exclusive conceptions of tourism within the public sphere. 

Firstly, and most likely to gain prominence quickly, is the assertion of the direct and indirect economic benefits of tourism.  In a period of a weak national currency tourism can be a key export for the UK economy and a parallel rise in domestic tourism places tourism in a position of potential growth, even if that growth is relative rather than absolute.   This potential could see tourism taking a stronger role in economic and regional development strategies, perhaps displacing retail and creative industries development in the development zeitgeist.

Secondly, it is possible that the new economics of tourism, if coupled with a sense of corporate social responsibility or development levies of some kind, could create a more favourable climate for social tourism in the UK.  In many European countries, tourism plays an important role in social policy.  Social tourism can take many forms: In France, subsidised tourism channels tourism spending to particular destinations whilst in many part of Scandanavia tourism is seen as a human right, creating obligations on the state to secure this right for its citizens.  In the UK, organisations like the Family Holiday Association have a history of providing tourism opportunities for disadvantaged groups, but this approach has never been mainstreamed into public policy. 

5.  Industrial relations within tourism

We have seen a sharpening of industrial relations within many sections of the economy over the last twelve months.  Disputes at Visteon, Vestas, Lindsey and the Royal Mail appear to be the harbingers of a new period of renewed labour militancy in the UK, but the mixture of compromises and legalistic disputes that have postponed resolution of the BA strike and the Royal Mail strikes mean that it is unclear as yet whether unions are likely to become more or less powerful through the restrucuring currently underway in response to the economic crisis.  The activities of unions in the travel and public sectors are likely to have the greatest impact on the tourism industry, but rising worker militancy generally could lead to changes in the way that non-unionised workers (the majority of tourism employees) react to threats of closures, job losses, pay cuts and work intensification, as the employees of Thomas Cook in Dublin show in the video below:

6.  Tourism policy and politics

In the UK, most public agencies are in a state of paralysis at the moment as they wait for an election and the almost inevitable period of regime change that will follow it.  The smart money seems to be on an early election in March, so until then it is going to be very difficult to get a feel for how tourism policy in the UK is going to develop.  The incoming conservative party have let it be known through various outlets that they plan a ‘bonfire of the quangos’ and no doubt this will hit our tourism agencies.  However, every incoming government since 1979 has promised exactly this and then, faced with the prospect of losing control over spending or developing truely accountable structures of governance, has tended to spend a lot of money on the restruturing and rebranding of the quangos instead.

7.  The social reproduction of tourism

Within Harvey’s model, this seventh term relates to the social reproduction of labour within capitalism and the way in which systems of production are maintained and developed through social processes.  Within this adaptation, I will develop the final category as a synthetic product of the preceding areas of analysis.  Once the 6 areas above have been considered dialectically, it will be possible to draw some initial conclusions about the ways in which the tourism industry is being maintained and developed as the crisis progresses and the strategies of restructuring become more clear. 

Each of these seven areas will provide material for blog posts throughout 2010, with a final article being produced towards the end of the year.

Dec. 30 (Bloomberg) — Russia is the top investment pick for the biggest emerging-market stock funds in 2010, even after the RTS Index’s world-beating 126 percent rally prompted Finance Minister Alexei Kudrin to say shares are too expensive.

Russia is the leading “overweight” holding among the world’s largest developing-nation mutual funds, EPFR Global data show. More than 95 percent of analyst ratings on Russian stocks are “buy” or “hold,” the highest level since Bloomberg began tracking the data in 1997. Goldman Sachs Group Inc. says Russia is the most attractive emerging market for 2010 and Troika Dialog, the nation’s oldest investment bank, predicts equities will climb about 40 percent.

Read more here…

(CFD.net.au – Contract for Difference, Share, Forex, ETFs, Commodities Traders) -

Wednesday October 28, 2009, 10:59 am National Australia Bank Ltd (NAB) shares rose marginally in early trade after posting a 42.9 per cent fall annual profit after <A href="http://au.search.yahoo.com/search?p=bad%20debt&fr=sfy_cl_au" target="_blank" title="Search for bad debt“> bad debt charges dented its bottom line. The bank also said loan <A href="http://au.search.yahoo.com/search?p=arrears&fr=sfy_cl_au" target="_blank" title="Search for arrears“> arrears were starting to stabilise as economic conditions improve. Chief executive Cameron Clyne said the overall result for fiscal 2009 was solid given the difficult market conditions created by the global financial and <A href="http://au.search.yahoo.com/search?p=economic%20crisis&fr=sfy_cl_au" target="_blank" title="Search for economic crisis“> economic crisis . Net profit was $2.589 billion for the 12 months ended September, down from $4.536 billion in the previous year, the Melbourne-based bank said in a statement on Wednesday. Group <A href="http://au.search.yahoo.com/search?p=cash%20earnings&fr=sfy_cl_au" target="_blank" title="Search for cash earnings“> cash earnings , its <A href="http://au.search.yahoo.com/search?p=preferred%20measure&fr=sfy_cl_au" target="_blank" title="Search for preferred measure“> preferred measure of profitability because it leaves out unrealised gains or losses related to <A href="http://au.search.yahoo.com/search?p=asset%20values&fr=sfy_cl_au" target="_blank" title="Search for asset values“> asset values , fell 1.9 per cent to $3.841 billion, from $3.916 billion. Underlying profit, which excludes expenses and bad and doubtful debt charges, was $9.3 billion, up 14.6 per cent. The bank’s band and doubtful <A href="http://au.search.yahoo.com/search?p=debt%20charge&fr=sfy_cl_au" target="_blank" title="Search for debt charge“> debt charge for the year was $3.8 billion, which was up $2.3 billion after excluding conduit costs.

Source: NAB up after posting "expected" result

As I sat on the edge of my bed this morning, for the usual ritual of coffee, the news via my much beloved Blackberry–which, I confess, may make me into a bonafide Crackberry–, as I dress first the leg and then the rest of me (I am laughing out loud) something plain and crisp made its way into my just-coming-online awareness: “Perfectionist Fault Finders” are truly ubiquitous~! There is truly nothing more Satanic in its personality traits than is the perfectionist fault finder–or PFF. (See, for example, Revelation 12:10, for the tip of the glacier on this issue)

The pols are “sniping” at each other relative to the some $41 Billion airport security behemoth that failed to stop yet another crazed and misguided zealot with a bomb and a fascination with jetliners’ potential as a weapon of mass destruction. So they are pointing their fingers at one another and at this and that technological “thing” that did not do the job “perfectly” after all. Prosecutors all, they are lined up like a gauntlet, taking aim at who and what will, in their not-so-humble opinion, solve the “problem” this time. The “problem” without saying it in specifics can be generalized as a lack of perfection. The PFF is perfect because the PFF is a malignant narcissist and he or she truly sees him or herself with diseased eyes and a diseased heart. Some peer into the mirror and see themselves as they are–in truth–and they are reminded to forgive and not judge. (Matthew 7:1-5) Most lapse, however, into believing that they can avoid the necessary work awaiting their attention at home if they can point out enough fault elsewhere and with all others. Ah … the Chad’s of life, they truly have become one “discreet in their own eyes.” (Isaiah 5:21)

So as the PFF CHOIR does its work this week; and as those driven like the Alaskan Husky at the Iditarod– to meet every PFF expectation–so they can, at last, avoid hearing that grating nails-on-chalkboard PFF choir of complaints–continue to strive for the perfection that cannot be achieved this side of Armageddon–; the rest of us might ask: Who or What is in Control?

Is it the crazed zealot who is confused into thinking that God is a psychopath like Satan? Is it the government systems that the PFF worhips day and night as the only possible Savior of our World? Is it the PFF him or herself, on the grounds that the “one qualified to inspect” everyone and everything else for FAULT is the sole perfect soul among us? Is it chaos? Who ir what?

Perhaps … a writer (Peter Baker) at the New York Times got his arms around it all–perhaps unintentionally–with this: “On The White House–A Phrase Sets Off Sniping After A Crisis …”

“… the furor over Ms. Napolitano’s comments on the Sunday talk shows demonstrated once again the perils of finding the appropriate balance during moments of crisis, between reassurance that the government knows what it is doing and recognition that maybe it sometimes does not.”

When has it ever existed except to do injury to mankind? Certainly, that was Solomon’s ultimate belief, that it was futile for mankind to govern mankind–or at least that it was “vanity” and little else. As long as we have imperfections we will, unfortunately, have the perfectionist fault finder walking around with his or her own version of perfection and their insufferable, ongoing, never-ending inspections of everyone and everything except themselves and what they control. Perhaps, then, the Who AND What everyone else ought to be focused upon is the Perfectionist Fault Finder? The staus Quo is a PFF of course, for it reigns on high in the present context of actually having any voice or authority to speak on any other’s actions or on any THING of consequence to our lives. Shakespeare in Henry VI, I believe, urged us to first kill all the lawyers–and surely that was in his own role as a PFF and, no doubt, out of genuine concern for the many lawyers who, likewise, operate as PFF’S while themselves corrupting everyone and everything they encounter with evil. Let us, rather, amend the Bard’s remarks with the real and true problem–the PFF~!

The PFF is rotten to the core–ALWAYS. You can assume it outright. They point their finger at others and things other because they are fearful you will spot them and discover who and what they are IN TRUTH. We ought not to be confused on this any longer. The PFF is that guy with explosives strapped to his body, and tired of waiting for God to finish His Work–that which only God can do perfectly and that which requires the perfection that is God and His Ways–he sets out to first find fault and them punish it out of existence and, along the way, he punishes himself out of existence because he or she forgot to recall that as we judge we are judged and as we point our finger we have three more pointing right back at ourselves.

The PERFECTIONIST FAULT FINDER is a monster for sure. He or she is everywhere all around us: Always sick and always twisted and always accusing–the insufferable and always hateful PFF: Listen to the PFF’S Father in action~! (See: JOB 1:9-11)

“. . .At that Satan answered Jehovah and said: “Is it for nothing that Job has feared God? Have not you yourself put up a hedge about him and about his house and about everything that he has all around? The work of his hands you have blessed, and his livestock itself has spread abroad in the earth. But, for a change, thrust out your hand, please, and touch everything he has [and see] whether he will not curse you to your very face.”

The PFF is in control, of course, for now. It is from his throne of malignant narcissism that he operates as the PFF, the prosecutor, the policeman, the judge, the one who governs the rest. He or she points at everyone else to cast all light away from him or herself and at what he or she has done, is doing, and will yet do against the rest of the entire world.

Remember that when you desire to find fault as that insufferable perfectionist. Lighten up instead. ~

We love our network of working women. YWM encourages you to lead in times of change. Today’s guest blogger is Leanna Cruz.

As the economy settles there will be a new way to get things done and the most deserving leaders will rise. Everyone is facing opportunities but only a few will recognize theirs and then get past the fear and defensiveness to rise to the occasion and succeed. Critical to this rise to leadership is demonstrating the skills required for organizational success during change. Times of change present an opportunity to demonstrate leadership strengths.

Align yourself with the immediate need of the organization for a workforce which is adaptable, flexible and willing to adjust.
On the other side of this recession are opportunities to reinvent the way business is done for future growth. Strategies to maintain a competitive edge will result in constant change. What you may experience is chaos and frustration. You may experience unexplained termination of assignments which you had put a great deal of energy into. You may experience a continuous change in coworkers, bosses and responsibilities. You may even feel like nobody knows what they are doing.

You won’t like it and neither will those you may feel are responsible. But, this is an opportunity for you to demonstrate your leadership skills. Hone your knowledge about organizational change and change management and be an advocate for change in your organization.

Be an advocate of change.
Take the initiative and help to create a culture which reacts quickly and positively. Change is unpleasant, but those who don’t adapt, who resist and slow down progress or disconnect will be left behind. Shifting with the tide is necessary. Slowing down until the dust settles, or to see where industry is heading may seem to make more sense than constantly changing. But this is not an option in competitive markets. In the past a slow response time was acceptable- no longer. In those good old days competition wasn’t as threatening. The constant and rapid changes resulting from our global economy, improvements in technology and ‘the way work gets done’ calls for a shift in attitude.

Become a valuable asset.
Organizations are looking for leaders who will take initiative, solve problems and take on change with confidence and a positive attitude. Don’t sit around waiting to see what orders will be sent down from the C-level. Be an advocate for the future- stay on top of the organization’s momentum. Know what is going on. Ask questions of those who are likely to be up-to-date, especially when stress levels and frustration is high. Chief executives have been told that during times of crisis and change, keeping the workforce informed is necessary to maintain moral; but often they are so engrossed in creating the future that they forget to come up for air to announce progress. This is when you need to take initiative, ask questions and keep up.

Where there is a problem there is an opportunity.
If you have heard the grumbles as a result of change, you have been shown your opportunity. Hone your change management skills and be an advocate for change. Then build other leadership capabilities; because on the other side of the crisis, will be more opportunity.

Leanna Cruz is editorial director for Positively Magazine a personal and professional development magazine. The Positively Successful issue has several articles and stories with ideas to tailor your career to maximize your elevation to the C-Suite.

photo credit

How will historians in 50 years look back on the first ten years of this century? Will they name it the “decade of terror” as the Financial Times (and lots of other media) suggest? Not if you look at the number of people (one in every 10,000 deaths) killed by terror acts, according to Canadian journalist and historian Gwynne Dyer (“The United States empire takes a hit in the ‘Noughties’").

Will it go into history as the “bubble decade”, as CNBC proposes?

Or should we call it the “decade of climate change” (National Geographic), focusing once again on one of the symptoms and not the root cause of what went wrong in the last ten years?

But maybe we should not concentrate on the “bads” and look at the “goods”, the lessons we learned during the last ten years. That is what Paul Krugman does in the NY Times (“The Big Zero”). He looks at all that was promised at the beginning of the decade, the “economic triumphalism” (the New Economy, the Lisbon Knowledge Society) and what was really achieved: “zero job creation”, “zero economic gains for the typical family”, “zero gains” for homeowners and for stocks. No, “what was truly impressive about the decade past … was our unwillingness … to learn from our mistakes”, says Krugman, and he concludes rightly: “So let’s bid a not at all fond farewell to the Big Zero — the decade in which we achieved nothing and learned nothing. Will the next decade be better?”

Before I try to answer that question, let me try to give this decade its proper name. What about the “decade of ecological limits”? I know it might not sound as good as some of the alternatives mentioned but I think it will be closer to what historians will make of it in 40 years’ time.

Because, let’s face it, what we discovered this decade, is that our exuberant, materialistic and consumption-driven Western way of life, when imitated and reproduced by others (China, India, Brazil), will undermine the very fundamentals on which it is built (healthy ecosystems, social cohesion, cheap energy).

Climate change, peak oil, biodiversity collapse, water scarcity and other threats have brought back the debate of the unjustly forgotten and underestimated Club of Rome’s ‘limits to growth” and all the hopes of “green capitalism” born from a new social contract or Green New Deal will still have to prove its ability to live within these new limits. We will need a new global narrative on what is real prosperity and how to achieve it. There are signs of the beginning of this paradigm change but a real working alternative is still a long way off.

I think the next decade will be a decade of protecting (ecosystems and people), conserving (peace and prosperity) and sharing (resources and wealth). What this means for politics is unclear. I am not convinced the current return to neo-Keynesianism and state intervention (which is generally personified by leftist policies) is the right way. We could well see the rise of a new social and ecological conservatism based on values and a new humanistic spirituality.

Whatever 2010 will bring in terms of economic recovery, it will only be a temporary phenomenon and the age of permanent recessions (every time a bit worse) may well be upon us. Others have called this the “long descent”.

The next decade we will hit more of these ecological (and social) limits and if we do not learn to live within these limits, there will be lots of violence, wars and suffering. The “spirit of Copenhagen” does not bode well for the future. Could we be on our way to a repeat of the first fifty years of the 20^th century, where we needed two world wars before learning our lessons?

If the price of land (and natural resources) goes up holding money supply constant, the price of labor has to go down. The more money is spent on land, the less money there is to spend on labor and eventually the only money spent on labor is coming from land wealth rather than labor wealth. The wealthy like to own and buy land because they realize this truth. With the more land they own, the less they have to pay someone to mow their lawn, clean their house, or polish their shoes. The working class pays increasing rent or pays increasing interest on their mortgage. The worker pays more on rent than they do on taxes. The worker pays more on interest on their mortgage than they do to any other creditor. This is the big secret the tyrants don’t want you to know.

Even if you hold population constant, the wealthy who already own a lot of land, collecting rent on it, continue to generate wealth and keep buying more land. They keep driving up the price. The rest of the people have to increasingly work harder in order to afford to buy their own land or pay rent for land. As this happens, there are more people working harder for the land owner than there are people working for each other.

Eventually the commodity bubble of land bursts because eventually there isn’t enough money for the workers to keep renting or buying available land. When this happens, the wealthy, specifically the banks, grab all the land back from the workers and start the cycle over by renting and selling land to the workers again at lower, more affordable rates. Labor rates stay down since people are still desperate to start building their wealth again which is now more concentrated in the hands of the wealthy.

The worker never wins unless they are able to work hard enough and sacrifice enough to keep their own land under the rules of the tyrants. They sacrificed more than they should have to get there. Many will get a false sense of financial security and spend what they earn. Many will give up in frustration trying to work in a system rigged against them. They’ll start to game the system which gamed them.

This is why the elite push forward such economists like Ludwig von Mises, Karl Marx, Milton Friedman, and Maynard Keynes. They want you to be left confused by witch doctor economics. The Native Americans were intuitively better economists than any of the big names from the last two centuries.

Most anarcho-capitalists, and I hate to call them “anarcho” since most of them support land theft through statist institutions, try to claim that the one with the most gold wins and to the victor goes the spoils. I’m sorry, but that piece of paper saying you own a piece of land or a lot of gold is secured by force of the state and was once taken by force of the state. They throw out the Cicero’s natural law philosophy, probably the Roman Empire’s greatest achievement. They come forward with this egoist, objectivist philosophy, which is no better than the social darwinism put forth by the socialist tyrants they oppose.

I’m not trying to promote anarcho-socialism or the moderate schools of anarchism. I believe they all have valid concerns, but none of them are valid is isolation. People should have the freedom to live in communes as pack animals and leave the commune if the alpha dog is a fraud. People should have the freedom to be rugged individualistic capitalists as lone wolves and be protected from other lone wolves and pack animals who will likely be stronger than they are. Neither can accomplish their goals without awareness or acknowledgement of the concerns raised by Henry George.

I’m just trying to promote the idea that land and labor are different. People have the right to their own labor. Land is not a person’s labor. People borrow land from nature. However, land is needed by everyone to exist, and everyone needs to have their right secured to have land and the natural resources the land provides to compete fairly in free markets. They shouldn’t have the right to someone’s labor. They should have the right to have the land and natural resources needed for survival. They shouldn’t have to work for someone else just to exist on land.

It is also equally important to recognize Henry George just proposed the idea of collected land rent through land value taxes in order to pay everyone a citizen dividend to everyone. There are flaws in this application as there are flaws in any application of any philosophy. I hope we can work to build upon this philosophy to recognize natural resources are also land, some land should be held in private while other land should be public. That we do need some minimum government to secure rights and help move people in the direction of a realizing their ability to provide for themselves.

Therefore, I don’t want to promote a purist application of Henry George. I favor the use of property taxes, to simplify land valuation, and the use of sales taxes on the sale of natural resources, to fund both basic government and to supply a significant citizen dividend since today’s cave or hut tends to mean skilled labor in the creation of a home. We should minimize social services and maximize the citizen dividend so people have a claim to land and can more easily work in a capitalistic society to provide and choose their own social needs. You don’t want the state to become owners of the land and chose how to spend the money either since the state is ruled by the same tyrants. The state as land owner can be worse than slave owners since the state will eventually want to kill the slaves they can’t control to do their bidding.

Therefore, everyone pays taxes on land and natural resources. They are paying rent for the land and natural resources they are taking exclusively from everyone else. They are paying rent to everyone. Those who take more will pay more rent and they receive as a dividend. Those who take less will receive more than they pay rent. The result is that tyrants will no longer be able to horde land to drive up the price of living on land while they drive down labor rates without paying the people they’re stealing the land from under their feet, forcing people on the streets and into sweat shops. There won’t be people slaving in horrible conditions for a corporation just for some food and a place to sleep. People will have the freedom to say no and work for themselves and other people like themselves more freely. People are more driven to store their wealth in investments that put people to work rather than investments in land and natural resources. Fractional reserve banking could be eliminated because there would be significant savings available to loan to others. Usury would dramatically drop. A natural economic balance will be achieved where the inflation and deflation of land and labor move in the same direction rather than in opposite directions.

Income taxes should be banned by constitutional amendment. We should never promote the idea that one has the right to another person’s labor, but we should promote the idea that everyone has the right to have their own share of land and natural resources.

With that right secured, capitalists can go out and pursue their goals without pulling the rug out from under their own feet or the land from under the feet of another less abled person, and socialists can go build their communes without someone taking it from them or forcing it upon them.

If there is a citizen dividend, capitalists would realize they would have a great insurance policy if they should lose everything. If there is a citizen dividend, the socialists would have the freedom to fund their social goals without having to work for a capitalist.

Henry George economics is a victory for everyone, except perhaps the tyrants who are the only victors in other economic systems. It is time to bring Henry George out of the closet. Everyone has the inalienable right to land. If you don’t have your own land, you’re a slave because you have to work for someone else in order to just put your feet on the ground. It is time to get angry, put your head out the window, and yell, “I’m mad as hell, and I’m going to learn about Henry George.”

Agency plans to restart Recovery loan approvals by Dec. 28

WASHINGTON – President Obama signed the U.S. Department of Defense (DOD) appropriations bill on Saturday, which included $125 million to continue through Feb. 28, 2010, the enhancements made possible through the American Recovery and Reinvestment Act (ARRA) to SBA’s two largest loan programs. The SBA estimates the additional funding will support $4.5 billion in small business lending.

New approvals of loans with the higher guarantee and reduced fees made possible by ARRA are expected to begin by Dec. 28.  Loan applications from borrowers who chose to be placed in the SBA’s Recovery Loan Queue will be funded first, followed by new loan approvals beginning on or before Dec. 28.

“This Administration and Congress recognize that these key programs were successful in helping jump-start the economic recovery for America’s small businesses,” said SBA Administrator Karen Mills. “The increased guarantee and reduced fees on SBA loans helped put more than $16.5 billion in the hands of small business owners and brought more than 1,200 lenders back to SBA loan programs. The extension of these programs through February is important to continuing our path toward recovery and will mean thousands more small business owners have access to the credit they need.

“Just two weeks ago, President Obama laid out key aspects of his jobs plan, including significant ongoing support for small businesses. We will continue to work with Congress on moving those proposals forward, including extending these loan enhancements as the President called for, to ensure that small business owners have the tools they need to drive economic growth and create jobs in communities all across the country.”

As part of ARRA, SBA received $730 million, which included $375 million to increase the SBA guarantee on 7(a) loans to 90 percent and to waive borrower fees on most 7(a) and 504 loans. More information about the waived fees can be found here.  The funds for these programs were exhausted on Nov. 23.

SBA created the Recovery Loan Queue as part of its transition back to pre-ARRA lending on Nov. 23 because previously approved loans are sometimes canceled or never disbursed for a variety of reasons.  Eligible small businesses, in consultation with their lender, could choose to be placed in the queue for possible approval of an ARRA loan if funding became available.  Currently there are 1,069 loans totaling almost $530 million in the Recovery Loan Queue.

The extension included in the DOD bill authorizes the higher guarantee levels through Feb. 28, 2010.  The fee relief is authorized until this additional funding is exhausted or the end of the fiscal year, whichever comes first.  As was the case in November, SBA will transition into a queue system as the funds start to wind down in order to ensure the maximum simulative effect of the programs and disbursement of funds.

For non-ARRA 7(a) or 504 loans funded during the transition period, this extension does not provide a retroactive guarantee or waived fees.  Loans that were funded under non-ARRA terms cannot be canceled and resubmitted to take advantage of the ARRA extension provisions.

This extension does not affect other SBA ARRA programs, including the America’s Recovery Capital (ARC) loan program or the agency’s microloans. ARRA funding still remains for both of those programs.

Too bad they hit the jackpot on the nickel slots.

The entire Goldman bonus pool should be donated to small businesses, but that’s just me.

Community Development Financial Institutions (CDFIs) have been a rare small business lending success story this year — and next year, they’ll have more cash.


NEW YORK (CNNMoney.com) — Goldman Sachs’ banking titans and top congressional Democrats don’t often see eye to eye — executive pay caps, anyone? But here’s something the megabank and Capitol Hill agree on: One of the best ways to get financing to worthy small businesses is through a little-known community lending vehicle called a CDFI.

Taken together, Goldman Sachs and the federal government have earmarked more than $300 million to invest in these local financiers in 2010. Compared to Wall Street’s bailout billions, that’s pennies on the dollar, but for CDFIs it’s a jackpot. Next year’s funding pool is almost three times bigger than any they’ve ever had before.

A CDFI is a Community Development Financial Institution, a certification conferred by the Treasury Department. The program gives low-interest government loans, grants and tax credits to organizations that specialize in economically developing low-income and otherwise underserved markets.

CDFIs were a hot topic at the small business lending forum Treasury Secretary Timothy Geithner convened last month to brainstorm solutions to the ongoing credit crunch small companies face. Wary of lending to firms struggling through the recession, banks slashed their small business credit this year.

That left CDFIs, which specialize in riskier loans, scrambling to pick up the slack. Funding requests surged. For the 2010 fiscal year, the CDFI Fund received applications totaling $467 million, a 97% jump from 2009.

Entrepreneur William Ortiz-Cartagena turned to the Opportunity Fund, a California CDFI, for the $10,000 loan that launched his San Francisco parking logistics company. Gentle Parking now has a staff of 12.

“It was very hard to start this company, because traditional lending institutions were just ‘no, no,’ just not even see me in the door,” Ortiz-Cartagena told attendees at the lending forum. “I couldn’t even get an appointment with a traditional institution.”
Opportunity Fund got Ortiz-Cartagena the money he needed and walked him through the steps of starting a business. “They really sit down with you and make sure that first your business plan is viable — that it can be successful — and then help you throughout the process,” he said.

The success CDFIs have had getting money out into communities through the downtown is now being rewarded. For fiscal year 2010, Congress appropriated $247 million for the Treasury’s CDFI Fund, a funding level President Obama signed into law last week. That’s a giant jump from the $107 million the fund got in 2009.

Goldman Sachs (GS, Fortune 500) added more financial fuel with the “10,000 Small Businesses” initiative it launched last month. Over the next five years, Goldman Sachs will dole out $300 million to CDFIs across the U.S. A bank spokesman said $50 million of that money will be distributed through grants, with loans making up the other $250 million.

Community development financiers routinely depend on bank loans and philanthropic donations to fill their coffers, but Goldman’s cash wad is of record size. It’s the largest single-source CDFI funding pool specifically dedicated to small business financing, according to Mark Pinsky, CEO of the Opportunity Finance Network, an industry trade group.

Goldman Sachs said it chose to work through CDFIs because of their track records and community expertise.
“They have deep knowledge of local markets and relationships with the borrowers and businesses that are the least-served by the traditional banking system,” said Alicia Glen, managing director of Goldman Sachs’ Urban Investment Group.

First at bat

The first CDFI to get an infusion of Goldman capital is Seedco Financial in New York City. The organization landed a $20 million loan, which it will in turn begin lending out early next year.

Part of the money will go to create a new financing program aimed at more mature small companies. Seedco will target businesses that have been around for at least three years, generate annual revenue of $300,000, and have five or more employees.

“We believe that in the $50,000 to $250,000 — and even up to $750,000 — loan amount range, we will be able to have a more material positive impact,” said Lesia Bates Moss, president of Seedco Financial.

Targeting small but established companies serves a key goal of both Seedco and Goldman Sachs: Financing job creation.
For one small engineering firm in New York City, a recent Seedco loan is translating directly into financial salvation and two new jobs.
Founded in 2003, IAQ Systems grew steadily until the end of 2008, when the recession hit home.

“We have been hammered on the payment part,” IAQ founder and President Sai Barade said. “We were not getting paid on time, and the demand was such that we had to deliver. The ends were not meeting; there was a big gap.”

Late last year IAQ landed a contract with the New York City school system that will yield $8 million over three years. But to get that work moving, IAQ needed a loan to make payroll and cover overhead costs.

The company previously tapped bank lines of credit, but “at the end of 2008, all the banks were shrinking away from giving us any lines or loans,” Barade said.

Seedco Financial turned around a $200,000 loan within two weeks. “Seedco was very responsive,” Barade said. “They understood where we were.” The company has 10 employees now and plans to soon add two more.

It doesn’t take even $200,000 to create jobs, though. Opportunity Fund, the San Jose, Calif., lender that financed William Ortiz-Cartagena’s parking business, has an average loan size of $7,000. Its target borrower has one to five employees.

“There is this credit crunch for small businesses, and there is this reality that we need more loans to flow to small business if we are going to have a robust job creating recovery,” said Eric Weaver, Opportunity Fund’s CEO and founder.

Opportunity Fund has developed a niche lending to day care and health care providers who work out of their homes. Its interest rates typically run from 6% to 8%.

“For a very small amount of capital, you can start or expand that business,” Weaver said. “It is hard work, but it is very important work and it is real income to a family.”

Mr. John Williams with shadowstats.com  recently released an updated version of his Hyperinflation Report. You have to subscribe to get the updated version (well worth the money, I get no compensation for saying that), but here is a link to a Fairfield County Weekly interview with John about that recent report.

Click here.

Here are groovygirl’s suggestions for preparation for this period. First, don’t panic, this is just a cycle, it will end.

Maybe it’s me but at any level this appears to be very wrong!

Haldeman - Freddie Mac

Williams - Fannie Mae

The US Government put huge amounts of taxpayer’s money into the two huge US Mortgage companies Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation).

Now the BBC has reported that:

The heads of US mortgage giants Fannie Mae and Freddie Mac may each receive pay packages of up to $6m (£3.7m) for 2009, depending on company performance.

Now I’m not an American nor do I really understand the issues BUT when taxpayers put in $111,000,000,000 of THEIR money into these organisations (that’s $365 for every man, woman and child on the US Census!) and so many of those same US taxpayers are up the proverbial financial creek without a paddle, there has to be a better way of rewarding top bosses (of US publicly owned corporations) than the option of $6,000,000 each!

But the regulator which decided the pay levels said the awards were 40% lower than before the government bailout.

The sums involved reflected the need to attract and retain talent, it argued.

Frankly, I just don’t believe that there aren’t many other incredibly capable business leaders who would do these jobs for a fraction of six million dollars.  (The present incumbents are Michael Williams at Fannie Mae and Charles E. Haldeman Jr. at Freddie Mac who will receive a base of $900,000 in 2010 with the opportunity to earn $5.1 more if “certain targets are met“.)

Read the article here – I’m going to lay down in a dark, quiet room for a while!

By Paul Handover

There’s always a “can do no wrong” element when we discuss or debate our favorite sports team, athlete, automobile, political candidate, music, or whatever. What happens if we can actually admit (even for a moment), that we were wrong at some point, or that our idols have screwed up, or are screwups, etc. – and confess in a fun and lighthearted way? Plus, although it goes against every competitive bone in my body, I thought it would be interesting to see what happens when the “other side” gets to see it.

Anyways, just a thought experiment. The more the merrier, so I hope you’ll reply! If you prefer to send your ideological “confessions” (haha) via email instead, I will wipe out the names.

So let me go first. I admit that…

Temperance tarot card, acrylic on canvas, www.carolineallen.com

It’s that time of year again, but what if we looked at New Year’s resolutions from a more spiritual perspective?

As the world falls apart, perhaps we should stop obsessing over being a size 5 and turn our energies to more beautiful, more poetic, and more significant issues.

So, if you do want to lose weight, what if you resolved to honor your body, to tell yourself regularly that you’re gorgeous just as you are? What if you resolved to dress your curvy hips in rich spectacular fabrics? What if you decided to love the smell and taste of food, to enjoy every bite as if it were your last?

Here are a few more examples via tarot:

1. Nurture growth. Where do you need healing? Commit to read, do therapy, journal to begin the healing process in one area of your life. For example, if you don’t pay your bills on time and want to be more responsible, explore the deeper blocks and give yourself the nurturing you need. Three of wands.

2. Find balance. Where do you go overboard? Look at resolving to have more gentle equilibrium by the end of 2010. Two of cups.

3. Open yourself to new experiences without fear. What would you do differently if you knew you only had 10 to 15 years to live? Would you have less less fear around trying new experiences? What have you always wanted to do, but keep putting off? The fool.

4. Protect yourself. Who or what could you protect yourself from more often? Protect yourself so you have time to heal and do art. Woman ofcoins.

5. Who needs you most? Ask the universe for guidance on where your energy is most needed. I find this process incredibly powerful. I’ll ask the universe for the names of the people that I know who really need support that I can give easily. It’s not just an altruistic process — the blessings I’ve received in return have been enormous. And my friendships deepen significantly. Nine of wands.

These are just a few ways you might turn the process of New Year’s resolutions into something less egotistical and more holistic and spiritual. Environmental and spiritual crises require we all turn more often to spirit. Your personal spiritual growth emanates spirit into the world, and affects others in profound ways.

Contact me for a reading to take a spiritual look at how you can approach 2010. www.creativetarot.com. carolineallen@aol.com.

On March 4, students and workers from all around the country will take action to defend education against increased privatization of K-12 schools and budget cuts, layoffs, furloughs and tuition increases at the college and university level—especially the public institutions.

Workers and students have shouldered the brunt of the capitalist crisis, while bankers and some corporations have been given hundreds of billions of dollars of public monies to bail them out of a crisis that was created by the capitalist system.

Young people in particular are faced with a grim future, one where well-paying jobs with benefits are becoming scarcer, where the educational system is being increasingly privatized and teachers’ unions weakened, and where the curriculum is being designed to prepare future generations for worldwide competition for low-wage jobs.

Colleges and universities are getting further out of reach for many, and those who are able to attend must mortgage their futures.

It is the current political climate, on top of drastic measures taken by state governments across the country, that helped give birth to the idea of having a national day of action.

At their Oct. 4 conference, California students and faculty, teachers and other workers first called for March 4 to be a statewide day of action.

California students have taken bold action, occupying a number of universities — University of California, Berkeley and San Francisco State, to name only two. The action and energy from California have piqued the interest of many across the country, who then reached out to California students to make the statewide day of action a national day.

In mid-December the California Coordinating Committee and activists, students, educators and other workers from across the country released complementary statements agitating for a March 4 National Day of Action.

The ad hoc group’s statement reads: “As people throughout the country struggle under the worst economic crisis since the Great Depression, public education from pre-K to higher and adult education is threatened by budget cuts, layoffs, privatization, tuition and fee increases, and other attacks. Budget cuts degrade the quality of public education by decreasing student services and increasing class size, while tuition hikes and layoffs force the cost of the recession onto students and teachers and off the financial institutions that caused the recession in the first place.

“Non-unionized charter schools threaten to divide, weaken and privatize the public school system and damage teachers’ unions, which are needed now more than ever. More and more students are going deep into debt to finance their education, while high unemployment forces many students and youth to join the military to receive a higher education. In addition, all of the attacks described above have hit working people and people of color the hardest.

“In California, students, teachers, workers, parents, and faculty have taken action against these attacks. They took to the streets in a one-day strike on Sept. 24, organized strikes and actions across the state during the UC Board of Regents meeting from Nov. 18-20, and have called for a statewide day of action on March 4. These actions have created a broad mass movement in California, drawing in students from all over the state to create a powerful struggle.

“As the effects of the economic crisis continue to spread into the education system nationally, it’s time to join our voices with students and workers in California and draw inspiration from their example.

“We support each group or coalition organizing in the manner and for the duration of their choosing. In solidarity with those in California, we the below-signed individuals and organizations call on students, teachers, workers, parents, faculty, and staff across the country to join together on March 4 to Take a Stand for Education!”

Planning for the March 4 National Day of Action has already begun in California, New York, Illinois, Ohio, Texas, Georgia, Alabama, Massachusetts, Maryland, Tennessee, Wisconsin, Minnesota, Colorado, Connecticut and North Carolina. It will no doubt grow.

FIST (Fight Imperialism, Stand Together) and many student groups, community organizations, socialist parties and unions have begun planning and organizing for what could be a resurgence of a national student movement at a time when workers’ organizations and anti-war and community groups are becoming enraged at the loss of jobs, continuing imperialist war and plunder, racism and police brutality, attacks against immigrant workers, and all the other ills of U.S. capitalist society.

Hales is a national leader of FIST. Go to www.defendeducation.org or www.tiny.cc/TgYNe to endorse the call for the March 4 National Day of Action.

WW photo: Tony Murphy

Chanting “MTA, we won’t pay!” hundreds of youth protested on Dec. 21 at the Metropolitan Transit Authority headquarters in New York City. Signs at this Day of Outrage protest read, “Save the Students, not the Bankers.”

The MTA has suggested balancing their budget problems on the backs of K-12 students by discontinuing a program that provides free MetroCards for more than 500,000 city students to ride the subways and buses to school.

Unlike students in many school districts throughout the country, who ride school buses, students in New York rely on public transportation to get to and from school. At current rates, parents would be forced to pay upward of $1,000 per child per year for a monthly MetroCard.