OK, this thread is going to be an experiment in structured collaboration. The subject might be too big; I guess we'll see. My purpose in this thread is to ITEMIZE A LIST OF STRATEGIC FORCES CONTRIBUTING TO THE DETERIORATION OF HOUSEHOLD FINANCIALS. I'd like help brainstorming those forces, and interrelating them.

DISCLAIMER - MY BIAS

I believe that the US should be moving through an INFLECTION POINT now. AFAIC, this moment should mark the time when we say "The king is dead, long live the king!" The old king is (Reaganomics, trickle-down, deregulation, corporatism, Wall Street). It is clear that the old king was leading us to fascism. This stock market crash is the death of the old king. It must be shouted out, so that everyone KNOWS the old king is dead. Then, we must crown the new king. The new king is (Main Street, democratic socialism, regulation, trickle-up, Obamanomics ). The new king must step forward, representing the new financial paradigm, and rally support. This might happen over a period of months, but we must start to be clear about what REPLACES the old paradigm.

We (government) are in denial about the need to move through the inflection point. Republicans still cling to the past, failed paradigm. Democrats don't yet have a comprehensive, crisp view of what to replace it with; FDR had a handle on it, but we've backslid. Consequently, the proposed "fix" is formulated in the old paradigm. Citizens are pushing back, and know we must go through the inflection point - if not now, then shortly. But until the new paradigm is better articulated, the new king cannot be crowned.

OLD KING AND WALL STREET

The old king lived on Wall Street. That was his world. His friends lived on Wall Street. He instrumented Wall Street, so he knew how well everyone was doing. Each company there measured its financial health with P&L Statements and Balance Sheets, and reported to the old king periodically. (I'm taking a few liberties with the metaphor). The king tried to set policy for managing Wall Street to improve the financial life of those companies. The overarching goal of the old king was to find policies which maximized revenue/profit growth rates for these companies. These companies were owned by the lords who lived at the tops of the hills in their fortified villas, surrounded by peasants who worked their lands. Yes, peasants would suffer and die, but then, that is the order of things, according to the old king (RIP).

NEW KING AND MAIN STREET

The new king lives on Main Street, in a village with the peasants. He is concerned about the peasant's unnecessary suffering, and believes that it is right that policy should be set to alleviate that suffering and to improve the lives of peasant's families. He sees that their lives have been getting steadily more difficult, but since no one keeps even simple records of their financials, it is hard to know how fast things are deterioriating. But he observes that the same framework (P&L, Balance Sheet) used to instrument businesses is also usable for instrumenting households. The overarching goal of the new king is not so much to maximize the revenue/profit growth rates for households, but rather to help people in those households survive at some fundamental level. He sees they need healthy air, food, water, adequate shelter, work, transportation to/from, health, help educating their children and help managing the environment they all share; he likes Maslow's Hierarchy of Needs as a framework for thinking about needs of the people in those households.

THE SITUATION

The old king had been struggling with Wall Street for a while, but thought, and assured everyone, that everything was just fine. Fundamentals were strong. The "economy" was good. Our system was the best. But it wasn't really so good. He had already doubled the debt of those in his kingdom ($5.5T to $10T) and invested it in those businesses, but the stock market was just stagnant. The lords started whispering and muttering that things weren't going so well. They wanted the king to bail them out. They weren't making so much money as they used to. They told the king to increase taxes some more on the peasants and help them out. They said "We really don't know how big the Wall Street problem is, but you gotta help us out by taxing the peasants more, otherwise we'll might not make as much money; we might even lose some." The old king got despondent because neither he, nor his wizards, had any more ideas about how to keep the lords happy. That's when he got really sick, nearing death.

The new king took a look at the situation and observed that even though the lords weren't making as much money as before, at least they weren't dying. In fact, they all had plenty of clean air, water, food, doctors buzzing around them; they didn't have to work, so didnt' worry about costs of getting to/from work. In fact they didn't worry about money and survival, or their children's well-being, at all. They had so much money, they couldn't even imagine why peasants struggled. All they worried about was getting more money. The new king thought that wasn't good. He believed that "Nothing superfluous can belong to lords legitimately so long as peasants lack necessities." (Apologies to Jean Paul Marat). So he pledged himself to understanding more about what the financial conditions of the peasants living on Main Street with him was.

The new king realized that it was hard to get a handle on the size of the lords' problems on Wall Street, because, well, even though they reported their P&L, Balance Sheet figures to him, they intentionally hid things from him, so they could appear to be playing by the rules. The lords knew that the king would never abandon them if they got in trouble.

The new king found, to his dismay, that it was even harder to get a handle on the size of peasants' financial problems on Main Street, mostly because NO ONE WAS STUDYING OR MEASURING THEM. No one was measuring Main Street financials. No one was checking to see how many of the necessities on Main Street were being met; they didn't even have a list of necessities they thought everyone should have.

THE LORDS MEET THE NEW KING

The lords could see that the old king wasn't well, so went to the new king, trying to convince him that he should continue to tax the peasants and help Wall Street, because if the lords were fat and happy, then everyone would be fat and happy. The new king was skeptical, but the lords were powerful and unscrupulous, so he smiled at them, saying he'd consider their request. The lords couldn't tell the new king whether they'd be back for more money later.

The new king realized that what the lords were asking for might be EXACTLY THE WRONG THING TO DO TO HELP his peasants. First, if their "trickle down" theory didn't work (like, say, they were sending their money to other kingdoms), then he might end up taxing and taxing and taxing the peasants, but their plight would get worse and worse. Or, if trickle down did SORT OF work, but the problem with Wall Street was now too big to save it, then same outcome.

The new king realized that before he started down the road of taxing peasants and all their progeny to make his lords happy, he really should FIGURE OUT HOW BIG THE PROBLEM REALLY WAS, and FIGURE OUT WHETHER HELPING WALL STREET WAS THE BEST WAY TO HELP MAIN STREET. Helping Main Street was what he cared most about.

TO BE CONTINUED ...

I am concerned this might be too long to post soon, and have to get my grandson off the bus ... so will continue shortly

This is the same subject as Arianna writes on today.

Huffpo on Inflection Point





Except I think the central issue is less "How big should government be?" and more "Who should government work for?".

So ... continuing ... I'm trying to stay at a high level so we don't lose sight of the forest for the trees. Ended with this in the last posting ...


This question of "How big are the Wall/Main Street problems" was CRITICAL to the question of whether the king should help the lords, at all, or not.

In one scenario, where size of the Wall Street problem was tractable AND trickle down actually helped Main Street, then the king determined that it might be worth helping the lords out by taxing peasants, in order to help the peasants. it was lamentable that the lords fucked up so badly, but there was some legitimacy to the argument that he should tax peasants to help themselves. If trickle down was a sham, then it would be foolish to follow through on that. Or, if the size of the problem on Wall Street was the size of the pit the king tossed his garbage into, then Wall Street would not get healthy enough to help Main Street, ever. If the former, then the new king should help Wall Street; if the latter, then he should not.

If the problem in Wall Street was so big, that the first bail out, would be followed by the next and the next, and perhaps not even THAT was enough (think Iraq War), then perhaps it would be better never to take that first step, but rather to keep peasant's tax monies to help them directly.

Or even if Wall Street is bailed out, but the trickle down effect is so minor that it doesn't help Main Street enough to ensure survival, then perhaps it would be better to help Main Street directly.

Or even if the trickle down effect is substantial, but Main Street feels OTHER ECONOMIC FACTORS DIFFERENT FROM THOSE WALL STREET FEELS, then trickle down might not help enough to keep Main Street healthy.

NEW KING FOCUSES ON HIS MOST IMPORTANT PROBLEM

The new king decides that it was ass-backwards to tax his peasants to help out his already rich lords a little more, then hoping or wishing, based on no data, that it trickles down to help his peasants. He decides that if he really wants to help Main Street, then he should decide what is important to basic survival to peasants living there, and then have some understanding of the strategic forces which are hindering that. He decides to focus on the problem of Main Street primarily, and to return the problem of Wall Street

He reasons that it is important to know the answers to:
(1) What do we consider to be "survival", or more accurately "Minimal Acceptable Lifestyle (MAL)"?
(2) What does that MAL consist of?
(3) On average, do household financials support MAL for all members of a household? How are household financials trending?
(4) Are government programs properly focused on MAL?

CONTINUED ...

(More forthcoming ... this takes longer to lay out than I thought it would ...)

WHAT IS SURVIVAL / MAL?

The new king didn't believe in sharing all the resources of the kingdom equally. But he did believe that it would be obscene if he set policy so his lords could work on their 5 sigma pleasures, when his peasants were dying. The king felt that basic survival of his peasants and their children was a right. Beyond survival, he felt that their own talent and industry should play a role in determining what kind of life they made for themselves and their household. He felt everyone has a right to clean air, water, nutritious (even if simple) food, to be warm enough or cool enough not to get sick, to stay dry, to have a bit of private space, not much, to work and to be able to get to work, to have children, and for them and their children to be educated so they could contribute, even amongst competition.

WHAT DOES MAL CONSIST OF

The new king thought that he'd have to be pretty specific, and pin down precisely what he meant by MAL. He realized that MAL might change from time to time, as understanding grew or the times were easier or harder. If times were REALLY hard, government might not be able to help ensure survival at all. But that wasn't today's problem. Today's problem was a wild discrepancy in wealth between his lords and peasants, and many of the lords didn't give a shit about the peasants, even when it was a matter of survival. So he wrote the following specification to help assure MAL success:

1. Breathable air - pollution limits
2. Potable public water - water quality
3. Minimum per capita drinking and cooking/bathing water ration
4. Uncontaminated / healthy food - adequate per capita nutrition, not fancy, fun, interesting, but enough to sustain life
5. Temperature within a livable range - no one should have to live in rooms colder than 40, nor warmer than 100.
6. Private living space - an allocation of 200 sq ft of living space, per capita
7. Healthcare - BASIC healthcare was a part of MAL, and he asked his physicians to propose what that should be
8. Work - Everyone should have access to work which paid enough to assure MAL, after their taxes.
9. Transportation to/from work - People need to be able to afford to get to their work
10. Children - each person had 1 child allocation, cap and trade system
11. Communication - Each person had the right to learn, and to knowledge, and to communicate with others freely
12. Safety - each person deserved some kind of physical safety: protection from lawbreakers, fire, foreign armies
13. Education - each person should have free access to enough education to allow them to contribute.
14. Provision for retirement, sickness, birth/death
15. TBD

In all cases, the new king believed that if MAL were feasible, then the cost of implementing it should be as close to zero as possible. He didn't believe that his lords should make a profit in providing MAL to his people in general, so required that the entire supply chain for MAL operated on a NOT FOR PROFIT basis. He also believed that technology might substitute for manpower in providing MAL to everyone, so invested in building out machinery, information techhnolgy and robotic technology to help provide it. He dreamed of a day when survival was free, and guaranteed.

TBContinued ...

Very interesting thread - we like it - please continue.

Question: at some point will we be defining the Age of Aquarius?

Hehe ... I dunno. But if we want it, I think we oughta define it, instead of waiting for the government to do that for us. I have a sneaky suspicion that most of them don't wake up in the morning worrying about it.

Anyhow I think I might be able to get to where I wanted in a couple more postings. Sorry it's taking so long, but RL is interfering.

Why bother with any of that when it's far easier to gin up wars and slaughter to distract people while their pockets are being picked? If that doesn't work, the "King" and his "Court" retreat to an undisclosed location while 4/5ths of the Peasants are slaughtered and the rest reduced to slavery. Then the Kings come out and write the history showing what wise, enlightened rulers and common men they are.

Yes, that's the way it's always been done. And for some reason, peasants always buy into the narrative, except when pushed way too far, and then heads roll. I conjecture that one of the reasons they don't catch it sooner, is that there is nothing concrete to hang on to, and therefore the people's response waits for intolerability.

Thom Hartmann is fond of saying that healthcare is a right. That is a special subcase of survival. I think that survival is a right (as defined by MAL 1.0 - see MAL 0.8 above). I think government is the agent for facilitating MAL - making sure businesses are well behaved (not for profit, robust, reliable, efficient) if they operate in the MAL supply chain, and taxing citizens to ensure MAL for everyone. I also think that government invests in lowering the cost of MAL, so that in the limit it is free (via various forms of automation).

If the PEOPLE believed that MAL was a right, they have something to fight FOR, MAL 1.0, not just react against (total oppression). But before the people can believe in anything like that, they must have a picture of what it is. This is a problem with the education of the people and a revision of their concept of the purpose of government.

This thread is all fine and dandy but vigilance is essential that you now write congress and the senate again.

This bill is all about bailing out CHINA!

READ The TRUTH about this BAILOUT

"Hundreds of billions of dollars are going to bail out FOREIGN INVESTORS. They know it, they demanded it, and the bill has been carefully written to make sure that can happen." - Brad Sherman , D-California

We have less that 48 hours to hit their phones, fax's, and emails again.

You want to bail out American Mortgages? Fine, make a clean bill for that. But this bill ain't it.

Get Busy! Please I am begging you, stop this nonsense.

I understand your frustration and urgency. This thread is for after the bill passes, since that is what I think will happen this week. But you are welcome to put your energies toward stopping it. I believe we must go back to the foundation. People are still under the illusion that government is working for THEM. And they don't have any clear notion of what they should DEMAND from government. As a result, they get nothing but taxed, and those taxes go to those for whom the government works.

The price of ignorance is this kind of crap in government and business. But there are other ways to deal with it, provided we clarify our thinking.

Thank you.

I do want this bill stopped.

I don't want to see my dollar worth 50 cents.

I don't want to pay tax to China.

I don't want oath of office breakers running our country.

I do want every vote to be counted, with public oversight, as that is the only way that we are going to hold these oath breakers accountable.

So I do thank you for welcoming me into your thread, to try to stop this bill right now, with the same urgency we did only days ago.

Peace

~phil

I don't want those things either. But I think we will find ourselves in the world where they all hold, and we will then have to "fix" things from that deteriorated position.

Pressing on on questions 3 and 4...

HOUSEHOLD P&L, BALANCE SHEET and HOUSEHOLD FINANCIAL TRENDS

Many of the new king's peasants would be content with their lives if they could be assured of survival of themselves and their children, and extra energy went into upside: personal development, economic advancement, whatever. So the new king was interested in knowing where peasants' households stood, on average: How much were peasant households able to "make ends meet" regarding MAL. And how much were they able to save, or put aside, for emergencies and special occasions. How much of that would his government try to provide, and how much would they be expected to provide for themselves.

The new king observed that the same approach to instrumenting the financials of businesses in his kingdom could be used to instrument households, so that he'd be able to measure their ability to provide MAL for themselves, perhaps with assistance from his government. Households WERE businesses, in fact, producing survival. So he decided to look at how well each household was doing through the lens of P&L Statement, and Balance Sheet. He even toyed with the notion of REQUIRING each household to be a business as it relates to MAL, so that he'd have good numbers to manage all those households with.

The other thing the new king was concerned about was whether household financials were trending up, or trending down. Were household financials improving or deteriorating in their abiity to provide MAL? So he chartered his economic advisors to go away to study household financials as though they were businesses, and to report back to him with data and trends. He wanted to make sure that his peasants could survive (make ends meet re: MAL). He also wanted to make sure that his policies supported some amount of that objective (after all, it WAS mostly the peasants' taxes he was spending). He also wanted to make sure that his policies didn't actually HARM his goal that peasants should have assured survival.

GOVERNMENT PROGRAMS & MAL

The new king thought in general terms about the relationship of his government to the goal of MAL for each household. He felt that UNTIL the survival of the people in his kingdom was assured, that it was IRRESPONSIBLE, even IMMORAL, to focus on how the lords of his kingdom could accumulate yet more. Once MAL was assured, he'd be more open to government programs which helped more superficial needs that people had, like wealth accumulation, personal development, cultural development. MAL trumped everything, in the new king's mind. If Wall Street put itself at odds with Main Street, then Wall Street challenged the new king. It was his job to articulate the meaning and priority of MAL, and to manage his government so that it moved steadily toward that goal.

He decided to create a Cabinet position focused on households and MAL. He asked the new minister to begin to do an audit of major government programs to determine whether they helped or hindered his MAL program. The ministry would be responsible for ongoing measurement of household financials, and for impact assessment of each new program as it related to MAL.

TO BE CONTINUED SHORTLY

... 1 more posting, the Economic Advisor's Report, and I think I've gotten this on the table enough, for what it's worth ...

We are seeing a classic struggle between free market capitalists and democratic socialists.

Reagan was an old school anti-communist who believed the free market would solve all our problems. This is a simplistic and naive view of economics, not surprising coming from a guy who was a movie actor. He actually majored in economics in college, but I guess a little knowledge is a dangerous thing for some people. Reagan pushed for deregulation and got it. Then we saw the S&L crisis. The bailout of the S&Ls (how Reagan rationalized the bailout I'll never know).

Bush I and Clinton continued the deregualation agenda, and now, Bush II going out of office, Wall St. has decided to empty the coffers of government before Obama comes in to start investing in anti-free market projects like Universal Health Care and the protection of Social Security, those FDR socialist programs.

Well, guess what, the market ain't doing so bad today without the stinking bailout. Paulson's scare tactics worked to turn the public against Wall Street and to scare investors into putting their money into standard blue chip stocks instead of derivatives.

NEW KING'S ECONOMIC ADVISORS' REPORT

The new kings financial advisors returned after completing their study of households in the kingdom. They'd been charged to look at those financials through the lens of P&L and Balance Sheet, gather data and summarize distribution so the new king could understand the current situation, and to audit whether the P&L, Bal Sheet line items were trending positively or negatively with respect to the MAL goal.

PROFIT AND LOSS STATEMENT LENS

The new king's advisors understood that each household struggled with the problem of "making ends meet". They wondered how well households would do with "making MAL-ends meet." That means that the mini-P&L, whose costs and expenses were those supporting MAL, is at least break even. In general, there is a certain amount of asset and debt on each household's balance sheet, and some movement of money from P&L to/from Balance Sheet, which we'll address in a bit.

So going through the line items on that mini-P&L ...

1. Income: As it stood, each household had an average number of people in it. Income was mostly salary on Main Street. For the last few years, the kings lords had been globalizing their business to expand into new markets and to reduce costs by exploiting OTHER kingdom's serfs. They'd outsourced. They'd insourced. Industries had consolidated. They'd done all kinds of things to drive the going wage for jobs down, since that was in their expense lines. So income is trending down in households, acting against Main Street.

2. Tax Magnitude: Of course, peasants paid taxes on that income. Those taxes had been going up, and up in magnitude, acting against Main Street

3. Tax Contribution to MAL priorities: of the taxes paid by peasants, what really matters is what fraction of each tax dollar is allocated to MAL goals, and how effectively is that money spent. This is pretty insidious, because the old king had started some wars with neighboring countries, and an increasing portion of each tax dollar was going to support priorities other than MAL. That of course was something the old king didn't want peasants to know about. But the "contribution % to MAL" was trending down, acting against Main Street.

4. Tax Blowback: Since we were talking about MAL, which is about survival, every time the government DIDN'T spend $1 on MAL priorities in a given household, then the household had to spend it, since it was about survival. So the MAL expenses were increasing in household P&Ls, trending against Main Street.

5. Taxing the Unrepresented: Unfortunately, the old king had taxed peasants so heavily that he had to tax their futures, not just their present. And even worse, some of those tax monies already spent must be repaid not by those who voted them in (of voting age), but by those who were under voting age, or not even born. So much tax money had been borrowed against the peasants' children, grandchildren and great-grandchildren that the Tax Blowback effect in #4 above would steadily get worse and worse. It was getting to the point where it was possible that NONE of the tax monies collected on future generations would be used to help them. It'd all go into interest on debt, and military. Infrastructure would crumble, and there would be no tax money left for MAL priorities, so that ALL of MAL expenses would be borne by households directly. Trending against Main Street.

6. Supplemental Taxes: As the economy shrinks and tax revenues shrink, peasants will begin to see other kinds of taxes being raised to keep programs in place, especially those in the MAL category. Supplemental taxes to cover highway infrastructure. Supplemental taxes for crumbling educational system. Trending against Main Street.

Then the economic report moved on to the question of the value of money, since the next parts of the report, expenses, had to do with how much peasants could buy with it.

7. Simple Inflation: as the situation with Wall Street deteriorated, and the band aid of increasing the money supply was applied, the value of the kingdom's $ fell. Locally produced items were more expensive, generally pressuring household finances. Trending against Main Street, already struggling to make ends meet.

8. Exchange rate: But of course, many of the lords' globalized businesses were now manufacturing things in other kingdoms and the $ was being devalued relative to currencies of those kingdoms, driving the cost of their goods, up, on everything from food, to household durable items, to cars, and even to "call center" services. Trending against Main Street.

9. Availability of Credit: Some households were having to borrow to operate their households, even at the MAL level. Some had borrowed off their credit cards to delay the crisis. Some had borrowed off their home equity. But their credit cards capped out, and credit became unavailalbe because of the Wall Street games. Furthermore, declining home values, meant that peasants had less to borrow from their houses, even if someone would loan them money with mortgage deeds as collateral. Trending against Main Street.

10. Cost of Credit: As credit became scarce, it also became more expensive. Trending against Main Street.

Then the economic report moved on to the components of MAL

11. Clean Air and Water: Everyone in the kingdom needed clean air and potable water. But both were getting fouled. In the case of clean air, fuel became more complex (and expensive). Taxes were allocated to keeping air clean and water potable, when those allocations never existed before. In the case of clean water, the water table was in many cases being fouled by commercial exploitation and disregard for the environment, but households took the brunt of the impact. People were buying water, expensively, because tap water was undrinkable. Trending against Main Street.

12. Enough Water: The new king's economic advisors were concerned that the population was growing unchecked, and that there simply wasn't ENOUGH of some resource to go around, especially water. In some villages, rationing was in place. In others, water supplies had been separated into drinking vs irrigation/bathing, and the latter was rationed or shut off (NB this happened to my inlaws in southern california; irrigation water shut off, so all their fruit trees now dying.) Trending against Main Street.

Hmmm, the new king was starting to get depressed looking at this list, since every single line item of the household MAL P&L so far was operating AGAINST the household. ALL the strategic forces were conspiring against the household, yet none of his ministers was watching the situation until now. He decided to pause and think some more, delaying his reading of the remaining items of the household P&L until the next day.

So eventually the economy fell apart and the stores shelves were empty and local governments were unable to pay their police and fire people and there was chaos and the peasants stormed the warehouses looking for food and the army was called but they wouldn't shoot their own people. The military then decided to take over the country and there was a military junta. The end.

Exactly what will happen if this situation isn't managed, as it isn't now. In fact, if your scenario obtains, and a new government is instituted, then, unless that government is measuring and managing to this goal, then exactly the same thing will happen over time with the new government.

So I appreciate your impatience with my attempting to frame a solution, instead of just the problem. The problem might simply be too hard to solve, in which case, it's every man for himself, which sounds mighty Republican to me.

Fast forward to a conclusion. (Almost) All of these strategic forces on household finances are independent of the problem we are dealing with on Wall Street. So it's hard to see how IF Wall Street regains its health, and IF trickle down is more than a myth, that Main Street will be helped. That is because Main Street is dealing with a headwind of its own. So the question is "Why should Main Street bail out Wall Steet at all?" First, it probably won't work. Second, it won't trickle down. Third, Main Street needs to be concerned about it's own SURVIVAL, not just WEALTH.