Money for Nothing

One of the fundamental assumptions of free-market theory is that information is frictionless. A competitor introducing a higher-value laundry detergent drives innovation only if consumers know about the product. Renewable sources of electricity will be adopted only if public utilities can mothball their existing fossil-fuel-based generating plants – made more difficult when the bonds are still being paid off.

For much of the second half of the twentieth century, the American worker benefited from friction in the delivery of goods and services. That friction took many forms: shipping costs, brand loyalty, and legal and financial rules. Today, globalization of markets forces us to compete with much cheaper sources of labor overseas, and the laziness of American managers (as compared to German and Asian counterparts that invested in skill development) means that jobs bleed across our borders.

The last redoubt of friction is financial services. The Baby Boomers generation accumulated huge retirement reserves, and Reagan-era fiscal policies have driven government deeply into debt. The dollar is the currency of choice for international business. Finally, expensive real-time trading technology is a high barrier to entry.

To those that understood the dynamics, it was no surprise that in the fiscal year following the 2008 meltdown, financial services companies reaped fully half of the profits enjoyed by American business. The system was rigged in their favor.

Some information about the practices of the industry have been revealed by those investigating the collapse of mortgage equities and the Ivan Boesky pyramid scheme. Every financial advisor banks on insider trading. Their job is to build relationships that allow them to get their clients to the trough first when an opportunity is created. No outsider can hope to compete.

Now the World Economic Forum has weighed in on the dangers to this system of artificial intelligence. Substituting a relentless, unbiased algorithm for your investment advisor ensures that you will always be given the best deal available. Your loan may come from Malaysia instead of Wall Street, but the impact of that truth is to drive down costs in the financial services sector.

Yes, the interim will be messy as the trading algorithms expose instability and self-serving in our existing financial system. But the end result will be a system with far less friction. As promised in free-market theory, money will find those inspired to create value, and bypass those motivated solely by greed.

God and Guns

At the NRA conference yesterday, attendees were happy to assert that “Jesus loves me and my guns.”

No. There will be no guns in paradise.

Jesus accepts your fascination with Death, and recognizes that Death asserts its sway over you in our consumer society. But he also understands that your fascination is locked in the weapons that you worship, so that when you die it evaporates when the metal is reclaimed for something useful – like making surgical implements or machine fasteners.

Eventually part of you will get to heaven, but it will only be the part that “fears not,” as the Bible commands so many times.

Jesus forgives your fear, but is determined that it be separated from you so that you may enter heaven. That is the measure of his love for us.

Trump Pump and Dump

A “pump and dump” scam is a method used by unscrupulous investors to take money from “get rich quick” investors. It was common in penny tech stocks during the ’90s, and is openly advocated by virtual currency (“E-coin”) investors today.

Pump and dump starts by sending the victims a notice that an asset is “ready to move.” A large purchase is placed to drive up market valuation. When the victims pile on to take advantage of the “opportunity,” the price continues to rise. The scammer sells back into the market, reaping profits. When the victims run out of money, the asset valuation returns to its original value, leaving the victims with nothing.

Now we might not be terribly sympathetic to the get-rich quick investors, but it is worth noting that Trump has a history of association with Mafia pump-and-dump operators. With him as president, they have a bold opportunity.

This one relies on the futures markets using a technique called a short-sell. Organizations wishing to secure the price of an asset will place an order today, taking the risk that the price will fall in the future. A virtual seller can reap a profit by taking the risk, hoping that the price will indeed fall so that they can buy the asset for less than the buyer paid for it.

As the futures markets have evolved, they have come to include almost every financial asset, include stock market exchanges.

Now imagine that you have a president that likes to make threats of trade wars. You notice that the market drops like a bomb on the day of the announcement, recovers for a couple of days, then tanks again when a new announcement is made. Investors that know the timing of the announcements can short the index, reaping profits each time the market falls.

Of course, we don’t need such imagination. We have such a president, who excels at saying alarming things that destabilize markets. Now add his association with mafia market manipulators, and you have to wonder…how much money is his family making (including the Kushners) each time an announcement is made? How much money is Carl Icahn making?

The Answer is Right in Front of You

In my last post, I took a long view of the process through which we as a nation have struggled against the forces of Mammon – the tendency to reduce all human relations to currency.

There are two positive paths forward from the crisis we are now in. The first is to trust in historical trends and human steadfastness. The second is to mature in our relationship with God.

History is on the Side of Justice

Hope is found in this simple historical fact: this pattern of oppression has been experienced again and again through human history. When wealth and production become decoupled (as we see with outsourcing from America since 1970), financiers eventually control politics because debtors must continue to pay interest on their obligations in order to maintain access to additional financing.

This is a fun game for the financiers until tangible goods begin to decay. This was first evident in the Rust Belt, but is now visible in America’s degraded infrastructure. Initially the cost of living rises as the population attempts to preserve its lifestyle, but in Detroit and Flint we see the end point: a dramatic decrease in the standard of living that drives down the value of property.

When there isn’t anything worth buying any more, what’s the value of money?

Ultimately this leads to the collapse of currency and the dissolution of nation states (such as during the American Revolution, driven primarily by taxation issues, and in current events as California and New York actively rebel against federal myopia on climate change, trade, human rights and taxation). In that liquidation, regulations are established to prevent recurrence.

Those regulations must cover the reach of the financial system, and so we see that government always expands in the aftermath of collapse. This happened not long after the Revolution of 1776 when the original Confederation of States was reorganized as a Federal system under the US Constitution. It occurred again after the Great Depression, when the bureaucracy was expanded to regulate interstate corporations. After World War II, the shell of global financial regulatory systems was set up in the International Monetary Fund, the World Bank and the European Union.

We should be encourage now that we are faced with the final stage of harmonization of financial regulation. Commerce is now global, and English is established as the language of business. All we have to do is organize the political will to establish that framework.

And, despite resistance, the financiers have always been unable to prevent that step – largely because they eventually discover that there’s nothing left to cheat out of the impoverished masses, and turn on each other. The financial game is no longer worth playing, and those that want to make money return to the problem of trying to create value.

Maturation in God

When asked about the age that we are in now, Jesus made vague remarks about “wars, and rumors of wars,” foul weather and disease. When I first read that material, I thought “Well, when has this ever NOT been true.”

But there was a reason, for Jesus had already told them the answer. The age ends when we learn to love God and our neighbor.

When I make this point to people, I follow it up with the observation that “there’s a conspicuous omission there.” Most of them recognize that it’s “myself.”

Loving unconditionally, as God loves us, has the problem that the beloved can abuse our trust. We see this arising again and again in the Old Testament. The Fall, the Flood, the silence in Egypt, the punishments for the Golden Calf, the rules regarding access to the Holy of Holies, and the Fall of Jerusalem are all motivated by the pain suffered by the Most High due to the infidelity of the Chosen People.

So love is metered out to us in the measure that we are trusted to use it. If we don’t respect God, we lose his love.

That shouldn’t surprise us.

In recasting faith as a process for regulating the flow of power from the Most High to our neighbors, Jesus was offering this wisdom: we are the instruments that God has placed on this earth to regulate the flow of power to others. God seeks to empower us, and when we empower others, their witness is a testament to our worthiness to receive power.

On the road to Jerusalem, the Apostles argued over the rights of each in the realm to come. Jesus rebuked them with the parable of the talents. Two beneficial paths are identified: if you have skills that will allow you to help others, God will give you power when you exercise them. If you do not have skills but invest your strength in support of those that do, God will give you power to facilitate that work.

But if you hide your power because you fear to lose it, you will be lost, because to enter the kingdom of heaven requires far more power than you can hold in your self. You can only enter in relationship with others that hold you in loving regard, preserving your spirit from the enormous forces that swirl around the Most High as he seeks to fulfill his compact with us.

How does this work against criminality in business? Because when we hold someone in our loving regard, we know when they are endangered. We can feel it even from a distance, and that knowledge forms a cyst around those that would do ill to us and others.

Of course, in that knowledge, we have two choices: we can choose to do unto the criminal as they did to us, or we can ignore them and focus on constructing functional relationships. When we get wrapped around the axle by management wrangling at work, this is what I tell my peers: “Forget them. We are here for each other, and every day that I am here I will do my best to help you succeed.”

This is what Jesus meant we he said “pick up your cross and carry it.” When we devote ourselves to that task, there is no weakness to exploit in the bonds of good will.

Conversely, we do create a culture that justifies financial fraud in that passive investments are merely an attempt to profit from the labor of others. If we are seeking to get more than we deserve, why shouldn’t our financial advisers do the same?

So this is the bottom line: stop worrying about yourself, and focus on caring for others. And as you do, remember this: there is a billion times as much energy leaving the sun than warms the earth. That’s enough energy for every eight people to have a planet of their own. There is nothing that we can’t do once we have earned the right to it, and nothing that we need fear from those that have.

Because we will rest secure in the knowledge that, as God, they exist only to love us.

The Other Shoe

Under Ryan and McConnel’s proposed tax plan, tax breaks for corporations will drive up stock markets, creating the impression that they are a more secure haven for retirement funds than Social Security. The Republicans will advance legislation to transfer Social Security obligations to private investment funds.

Remember that during the corporate restructuring of the ’90s, companies with well-funded pension plans were bought out, raided, and the folded up, leaving pensioners destitute. The new Social Security fund managers will reap windfall profits, and then default on Social Security commitments.

The New Deal recognized a fundamental fact that Republicans don’t wish to honor: “innovation” in financial services generates profits by churning wealth and increasing risk. That’s fine for those with money to play with, but the middle class needs a safe haven for its wealth. Those havens have been steadily decimated.

Prior to deregulation of the Savings and Loan industry, the middle class loaned money out to each other and earned interest on savings at a 1% differential. Today the differential is closer to 8%, and the profits go to Wall Street.

Prior to the regulations of the Affordable Care Act, which stabilized health insurance markets, the middle class paid for insurance and was denied coverage by corporation that hired huge teams whose sole purpose was to find technical errors in their applications for coverage. It was fraud.

And now we confront the desire to privatize our retirement planning. The financial industry drools over the huge pool of Social Security funds, but it is a temporary opportunity. Social Security comes directly off of our paychecks, and so reduces disposable income. Once that direct deduction is removed, people will be faced with a choice between putting money into a retirement fund and buying a fancier car or replacing a broken water heater,. Most of them will choose to spend the money, and the cost of living will rise to absorb all of their disposable income, eventually leaving nothing for retirement savings. This is what happened in the era before Social Security, and our country’s elderly were the poorest segment of society.

So, yes, Ryan and McConnell, burn down the house that Roosevelt built. Your friends on Wall Street, understanding the demographic realities, will siphon off the money to finance mansions on the pristine federal parkland that I am certain you will sell off to them. And you will be remembered as the facilitators of the greatest con ever run against the American people.

Christian Tax Policy

Here’s the prescription:

  1. Progressive corporate tax to punish monopolies and foster small business formation.
  2. Value-added tax to soften the transition to automation of work.

What follows motivates the prescription.


As a Christian, it is hard for me to focus on money. It’s not that I don’t understand economic and financial theory, it’s just that money isn’t important to the ends that I pursue. I seek, through this blog and other work, to heal the confusion that poisons our relationship with the Most High. That’s a difficult problem, demanding the fullest commitment of my energies.

As I told my sons in their formative years: “Money is a way of storing power. For those that commit all of their power to solving difficult problems, there is nothing left to store.”

Jesus warned us that “You cannot serve two masters…No man can love both God and money.” Therefore, in seeking to transform our relationship with the Most High, we do need to understand money, because it is a principle source of resistance to the rule of love. People that desire money desire it because the are selfish, and as I have explained out at Love Returns, selfishness is the opposite of love.

We have two looming disasters in our economy. The first is the destruction of the middle class by the richest members of our society, people such as Rupert Murdock and Peter Thiel that have no compunction about using their wealth to fund propaganda machines that demonize government. The second is the loss of blue-collar jobs, accessible to those with high-school diplomas, to automation.

The exploitation of resources has always been a foundational principle of American politics. Elected our first president, George Washington complained that he spent all of his time as a promoter of business opportunities in the nation’s undeveloped lands. That practice is enshrined in most of our state constitutions, where the first priority in land use policy is economic. At the federal level, conservation policy has limited the most brutal forms of resource exploitation.

Contract law provides a legal framework for exploitation of the last great resource: human potential. In the “Land of the Free,” the ability to enter into economic contracts is one of our most honored acts, though paradoxically it places us under the heavy hand of law enforcement when we have disputes. It is this that is decried in Revelation 13:18:

so that no one could buy or sell unless he had the mark – the name of the beast or the number of its name.

Murdock, Thiel, and their ilk know that they have attained wealth only through exploitation of investments made by others – investments accrued over millions of man years of public education and government-funded research, and trillions of dollars of infrastructure investment. Their attempts to limit their obligation to “pay it forward” are driven by greed.

Not being limited any longer by prudence or compassion, this class seeks economic dominance in their various industries. Concentration of industrial power is visible in all industries. It was decried as monopoly in the late 1800’s, and defense against it was established through the Sherman Act, the Clayton Act and the Federal Trade Commission. Those tools have become blunted in the last twenty years because trade has become multinational. Facebook and Google, the information service monopolies of our era, are not disciplined because they are American monopolists. The European Commission sees them as adversaries, of course, and Google, for one, is facing some large fines for monopoly conduct. But it’s not limited to high-tech: concentration is growing in telecommunications and financial services.

Fortunately, monopoly has one clear indicator: huge profits. In the personal tax code, we recognize that those making the most money also benefit most from public services, and tax them accordingly. We should do the same in corporate taxation. While large corporations use their market position to reap huge profits, it is small businesses that generate new opportunities and new jobs. We should reward them for their efforts. We need a progressive corporate tax code.

The middle class is not only being squeezed by monopoly pricing, it is being gutted by automation. Jobs are disappearing, and fast. On the immediate horizon is the loss of almost two million blue-collar jobs as shipping moves to self-driving trucks. But we see this throughout America: even as wages rise overseas, making local production competitive again, the factories that we are building use a fraction of the employees needed by their predecessors. All the material manipulation and most of the assembly is done by machines.

The factor that drives this investment is payroll reduction. A robot is a fixed-cost investment, does not ask for higher wages, and is subsidized by capital equipment tax write-offs. They are also far more precise in their work, yielding higher-quality goods that are preferred by consumers.

The replacement of taxed payroll expenses with tax-free capital equipment investment also hobbles government by restricting tax revenues. Clearly, our workforce needs new skills. Our youth are provided those skills for free by pubic education, but those skills no longer guarantee lifetime employment. People need to learn throughout their lives.

Employers, of course, don’t want to pay for that investment, because it creates opportunities for their best people to take positions elsewhere. So – as predicted by Adam Smith in The Wealth of Nations – the tendency of corporations is to exploit workers until they can be replaced by machinery, and then to cast them aside.

Smith defined the theory of capitalism, and his prescription was simple: governments must tax businesses to provide workers opportunities to retrain when they are replaced by equipment. Governments starved of tax revenues by automation can’t provide that service, which means that America’s human capital is now going to waste.

The solution comes to us from policy-makers confronting outsourcing of jobs: in Europe, companies were caught out selling products “Made in England” that were assembled from parts produced overseas in low-wage markets. To limit that incentive, a “value-added tax” was created. VAT charges a tax on companies reflecting the increase in their wealth as materials move through a system to create a finished product.

While this didn’t prevent jobs from going overseas, it did ensure that government revenues were maintained to support retraining and job placement services. If applied to goods shipped into our lucrative consumer market, it is also a reasonable way to limit the social costs of overseas production by countries that choose to exploit both labor and the environment. If a car made in South Korea for $2000 and sold in South Korea for $6000 enters the American market to be sold for $20,000, well the South Korean manufacturer should pay a VAT when that product is unloaded at Los Angeles.

Trolls against Compassion

In watching the Republican Tax Deform bill works its way through the institutional process, I can’t help but see trolling in play.

Online, a “troll” has been determined to be a person that understands human psychology, and uses it to disrupt functioning social systems. They have all the tools necessary for compassionate engagement, but choose to use them to cause fear and pain.

You see this in the tax bill crafted by Ryan and McConnell. After accounting for the additional $1.5 trillion in debt that will accrue to the public during the lifetime of the program, only the rich will benefit from the bill.

Every successful troll claims a beneficial intent, and we see this advancing in the Republican policy program. Ryan and McConnell want to create a fiscal crisis so that they have a remit to cut middle-class entitlement programs such as Social Security and Medicare. This is a program that has been pursued by the Republican Party since the Reagan era. America’s $20 trillion public debt was amassed due to tax cuts for the rich advanced during eras of Republican control. They created the public debt, and now claim it as the reason to cut benefits established and paid for by the middle class.

To understand why these trolls are not exposed, we have to understand who benefits from their strategy. It is the financial system. Large money-center banks suck at the teat of government debt. They profit every time a government bond is sold and redeemed – and long-term deficits means that those redeemed must be replaced by new. They profit from fiscal irresponsibility in Congress. The same is true of our trade deficit: every time an American buys a Chinese product, dollars must be converted to yuan, which flow overseas and then come back to America as dollars that buy our government debt. Every step in that process makes money for the financial industry.

What should be alarming is that profits enjoyed by the financial industry accrue from the exchange of dollars that does not add value to our economy. The value of the dollars does not change – they simply move from place to place.

Wall Street is effectively a tax on Main Street.

What is painful is to realize how deeply this psychology has migrated downward into our economy. Payday lenders make short-term loans against future earnings, sometimes charging as much as 1/3 of the loan value for bridge financing that lasts only a week. In Kansas, the most successful franchise (raking in billions of dollars in profits) was started by three brothers that claimed Native American sovereignty to get around state regulations that prohibited predatory practices. Eventually, the FBI stepped in to tear down their empire. But as the empire collapsed, the remaining brother took the protected financial data and created a list of fake debt claims that were then sold on to the debt collection industry.

Yes, many debt collectors are no longer paid by claimants. They actually pay for debt listings, and do little to verify the validity of the claims. The Tucker family made millions by selling the fake debt claims to multiple debt collectors. Those debt collectors had mouths to feed and mortgages to pay, and the only way to make good on their investment was to get money out of the people whose private financial information they had acquired. The FBI is now investigating the abusive practices of the collectors working against those false claims.

The abusive behaviors of the financial system, libertarian politicians and online trolls are linked by another factor: their behaviors harm people that they don’t know personally. Safely at a distance, trolls reach out through our communications infrastructure to wreak havoc in the lives of their victims. The don’t have to confront the mounting desperation of individuals and communities ground down by their hunger for money or power. They simply acquire wealth that they use to finance the careers of politicians that oppose regulation of their industry.

This is what makes men like Paul Ryan so pitiful. They believe that they must be doing something good because people tell them that they are taking on a problem that poses an existential threat to our country: the federal debt. But the people that applaud his determination are those that engineered the creation of that debt, and that benefit most from its existence. The true motivations for their investment in politicians such as Ryan is to ensure that their wealth is protected when the system collapses.

Trembling underneath this juggernaut of debt, there are those in American commerce that still believe in producing goods for consumption, and that compete to create value for their customers.  Working in the automation industry, I am conscious that the work that I do displaces workers, creating distress from a distance much as does the financial industry. But being involved with the creation of goods and services, I do feel the pulse of that part of the economy.

The mantra that is evolving is hopeful. On the surface, that is hard to see: robots are displacing blue-collar workers, and artificial intelligence is threatening knowledge workers. What remains for people to do, then, is to ensure that customers are happy and successful, building a base for repeat business.

In other words, while the masters of the universe troll society, on the ground people are focused on learning to care for each other.