RAGHUNOMICS - eBooks

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RAGHU-NOMICS 7 Beyond Two Party Politics

2012 Campaign Policy Review America’s only true problem is the ideological prison keeping us from

the simple solutions we already know but just didn’t give the time to

review. The review you have been waiting for.

by John “Raghu” Giuffre

Raghunomics.com; www.roopa.org; PO Box 1108; Hilo HI 96721;

808) 935-8879; [email protected] (Mirabai, my daughter, out on the campaign trail

with me)

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Rough Draft,

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Section 1

Home Page of Raghu-nomics website

Volume 7 of Raghu-nomics is a cut and paste from our Raghu-nomics website: Raghu-nomics.com. It was set up for our campaign run for Congress, 2012. Unfortunately, the website and video (which were to take 10 days to complete), took a month, among a series of other scheduling and resource setbacks so common to new campaigns. The site was not up in time to catch the nomination vote and so never really had the chance to test its impact on campaigning.

And yet, the effort provided something quite significant. It brought us to up-date Raghu-nomics strongest proposals and so it presents the latest of our theology and the best of our leading proposals. We rewrote the RADHA mortgage program with the latest discovery of how it magically reduces monthly mortgages by 25% to 50% (the time value of money). We also rewrote the American Shopping Party as a 10 Step plan to jump start American Jobs. The big secret is empowering our supply chain. We also added to the Leverage Debt Reduction articles.

In reviewing those updates from the site, I ended up rewriting several of those again. I added in another couple pages to the American Shopping Party and a dozen more pages for the Leverage Debt Reduction article with our 5 Accounting Mistakes.

The discovery found in looking over these proposals was this pattern of simply reviewing elements of each issue that both parties are familiar with, but have never taken the time to review more carefully. Ideology seems to be the reason for this and so made the stunning discovery that most of our problems are primarily due to the ideological death grip on our discourse and consideration. Simply moving beyond this political paradigm opens up to a vista of new options. Raghu-nomics is simply a demonstration of how much opportunity and potential solutions are there if we should simply get beyond the ideological framework confining our policy options.

Like every book written and most articles, I’m under severe time restraints and financial limitations. As such, I have to write these articles as a first draft rather than a thoroughly edited and nicely packaged book. In the case of this latest edition, I’ve written out about 15 pages over the last 12 hours as I work through the night to be out of this apt within

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the next couple hours. In short, mind the run on sentences, working numbers and other such first draft issues. We can clean those up in our editing phase.

This batch of policy proposals has a different context this time around. They are beginning to fit together into a larger picture of a different world of new prospects and opportunities not apparent before now. Those new horizons will drive us with renewed excitement into the next generation of policy innovation and all the promise waiting for us as a people of the 21st Century.

I now leave to finish packing and cleaning to be out of here within the next 1 ½ hours to whatever awaits me next.

Raghu G

9/26/12, 6:28 am

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Contents RAGHU-NOMICS 7 .......................................................................................................................................... 1

Beyond Two Party Politics ....................................................................................................................... 1

2012 Campaign Policy Review ................................................................................................................. 1

Section 1 ........................................................................................................................................................ 3

Home Page of Raghu-nomics website .......................................................................................................... 3

Section 1 ...................................................................................................................................................... 11

Chapter 1 ..................................................................................................................................................... 11

Home Page of Raghu-nomics website ........................................................................................................ 11

Solving Real Estate & Banking Crisis in just weeks. See video above. .......................... 11

Raghu-nomics: What it can do? ................................................................................................. 11

Beyond 2 Party Politics ................................................................................................................ 14

Section 2 ...................................................................................................................................................... 19

Chapter 1 ..................................................................................................................................................... 19

Raghu for Congress ..................................................................................................................................... 19

Section 2 ...................................................................................................................................................... 20

Chapter 2 ..................................................................................................................................................... 20

About Raghu ............................................................................................................................................... 20

Section 3 ...................................................................................................................................................... 26

Kingdom of Hawaii ...................................................................................................................................... 26

Section 3 ...................................................................................................................................................... 27

Chapter 1:.................................................................................................................................................... 27

10 Reasons Why US Wants to Re-instate the Kingdom of Hawaii .............................................................. 27

Section 4 ...................................................................................................................................................... 33

Health Care Reform: ................................................................................................................................... 33

ROOPA ......................................................................................................................................................... 33

Section 4 ...................................................................................................................................................... 34

Chapter 1:.................................................................................................................................................... 34

ROOPA: Responsibility for One’s Own Products & Actions ........................................................................ 34

Magic bullet to Health Care Reform ........................................................................................................... 34

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ROOPA: ..................................................................................................................................................... 34

3 Page Summary .................................................................................................................................. 36

Part I: .......................................................................................................................................................... 36

The Problme - it's a Crap Shot ........................................................................................................... 36

Part II: ......................................................................................................................................................... 37

Solution: Pricing Social Cost .............................................................................................................. 37

Demo 1: Obesity ................................................................................................................................... 37

Part III: ........................................................................................................................................................ 39

$4 Trillion in Savings ............................................................................................................................ 39

Demo 2: Tobacco ................................................................................................................................. 39

Add Summary Chapters & Intro from Book, Economics: Hand of God, ROOPA Theology and The Abyss of

Activism and the Wisdom Learned. ............................................................................................................ 41

(Editor’s Note: . the ROOPA book was last written 5 years ago. We need to update the figures and

rewrite the second half of the book. For example, the 10 options for tobacco or the DUI ticket need to

be rewritten with the latest I’ve learned about the new set of alternatives to those recommendations.

The first half was rewritten so is ready to go but for some proofreading.) ............................................... 41

Section 5 ...................................................................................................................................................... 42

The American Shopping Party ..................................................................................................................... 42

Section 5 ...................................................................................................................................................... 43

Chapter 1:.................................................................................................................................................... 43

The American Shopping Party ..................................................................................................................... 43

11 Steps to full Employment ....................................................................................................................... 43

Section 5 ...................................................................................................................................................... 61

Chapter 2:.................................................................................................................................................... 61

The American Shopping Party ..................................................................................................................... 61

Approaching Groupon ................................................................................................................................. 61

Section 6 ...................................................................................................................................................... 64

Housing ....................................................................................................................................................... 64

Section 6 ...................................................................................................................................................... 65

Chapter 1:.................................................................................................................................................... 65

Simply Solution to Housing ......................................................................................................................... 65

RADHA Mortgage ........................................................................................................................................ 65

Section 6 ...................................................................................................................................................... 75

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Chapter 2:.................................................................................................................................................... 75

What Happened to the 2nd Mortgage & PMI Insurance? ........................................................................... 75

Section 7 ...................................................................................................................................................... 78

Solutions to Debt: ....................................................................................................................................... 78

Leverage Debt Reduction ............................................................................................................................ 78

Section 7 ...................................................................................................................................................... 79

Chapter 1:.................................................................................................................................................... 79

There’s no Real Estate Crisis ....................................................................................................................... 79

It’s an Accounting Mistake .......................................................................................................................... 79

Bank & Insurance Paying-off Same Mortgage............................................................................. 79

Accounting Mix Up ........................................................................................................................... 80

Simple Answer .................................................................................................................................. 80

Securitized Mortgages Hid Duel Write Down ............................................................................... 81

No More ‘Underwater Homes.’ No More Toxic Loans. ............................................................... 81

Financed with Write-down ............................................................................................................... 82

Section 7 ...................................................................................................................................................... 85

Chapter 2:.................................................................................................................................................... 85

Solving the $350 Trillion.............................................................................................................................. 85

Derivatives Time Bomb ............................................................................................................................... 85

Part I: ........................................................................................................................................................... 85

Multiple Parties Backed by Same Asset ...................................................................................................... 85

Part 2: .......................................................................................................................................................... 89

4 Causes of Accounting Mistakes:............................................................................................................... 89

Part 3: ........................................................................................................................................................ 105

Credit Default Swaps Offers Market Based Solution ................................................................................ 105

Section 7 ................................................................................................................................................... 113

Chapter 3:.................................................................................................................................................. 113

6 Areas of Double Write Down by ............................................................................................................ 113

Banks & Insurance Companies .................................................................................................................. 113

Section 7 .................................................................................................................................................... 119

Chapter 4:.................................................................................................................................................. 119

Lehman Brothers:...................................................................................................................................... 119

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Example of Double Write-Downs .............................................................................................................. 119

Section 8 .................................................................................................................................................... 125

Articles ...................................................................................................................................................... 125

Section 8 .................................................................................................................................................... 126

Chapter 1:.................................................................................................................................................. 126

Part 1: ........................................................................................................................................................ 126

America’s New Cold War: China ............................................................................................................... 126

Section 8 .................................................................................................................................................... 133

Chapter 2:.................................................................................................................................................. 133

Freedom: America’s Religion .................................................................................................................... 133

Section 8 .................................................................................................................................................... 135

Chapter 3:.................................................................................................................................................. 135

T ................................................................................................................................................................ 135

‘Abortion has become the default option to all the cultural dysfunction of American family

policies and conveniently leaves it to be paid by ‘a women’s choice’ at the juncture of

motherhood.’ ........................................................................................................................................... 135

. ................................................................................................................................................................. 137

Section 8 .................................................................................................................................................... 139

Chapter 4:.................................................................................................................................................. 139

Section 8 .................................................................................................................................................... 147

Chapter 5 ................................................................................................................................................... 147

Questions by Raghu-nomics: .................................................................................................................... 147

Jobs vs Low Wages & Taxes ...................................................................................................................... 147

Excerpts: .................................................................................................................................................. 147

Section 8 .................................................................................................................................................... 151

Chapter 6 ................................................................................................................................................... 151

Obama & Republican Postures Miss Real Solution to Economy: Off-setting China ................................. 151

Section 8 .................................................................................................................................................... 155

Chapter 7 ................................................................................................................................................... 155

Section 8 .................................................................................................................................................... 163

Chapter 8 ................................................................................................................................................... 163

The Deflation Tax: Part I. The Economic Smart Bomb Against Inflation ................................................... 163

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Section 8 .................................................................................................................................................... 169

Chapter 9 ................................................................................................................................................... 169

The Deflation Tax: Part II. The ‘Taxes to Risk Ratio’ .................................................................................. 169

Section 8 .................................................................................................................................................... 177

Chapter 9 ................................................................................................................................................... 177

Real Story Behind Middle East Democracy: ‘Citizens of the 21st Century’ .............................................. 177

Section 8 .................................................................................................................................................... 181

Chapter 10 ................................................................................................................................................. 181

The Feds Brilliant but dangerous game of currency brinkmanship with China ........................................ 181

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Section 1

Chapter 1

Home Page of Raghu-nomics website

"We don’t claim to solve impossible challenges with simple solutions. We are saying the solutions are rather simple but politics makes them seem impossible. They are not. Raghu-nomics simply demonstrates the point.'" - Raghu Giuffre

Solving Real Estate & Banking Crisis in just weeks. See video above.

Would you support reducing our taxes by half if it could improve services? Would you support cutting health care costs by half if it could improve services? Would you support cutting $2 to $4 Trillion from government deficit without

raising taxes or cutting services? Would you support resolving the real estate crisis in just weeks without gov’t

regulations or intervention? If you answered yes to any of these, Raghu-nomics is for you. Details of programs below. Info for supporters at bottom.

Raghu-nomics: What it can do?

Deficit Reduction: $2 to 4 Trillion paid-off in in months without raising taxes or cutting services Program: Leverage Debt Reduction/, RADHA Mortgage/, ROOPA/, Derivatives Solution, Part I/. The Economic Smart Bomb Against Inflation;

Housing Crisis: Solved in Months; No Gov’t Intervention Program: Leverage Debt Reduction/, RADHA Mortgage/, Derivatives Solution/, Part I. The Economic Smart Bomb Against Inflation;

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Banking Crisis: Solved in Months; No Gov’t Intervention Program: Leverage Debt Reduction/, RADHA Mortgage/, Derivatives Solution,

Derivatives Crisis: Solved in Months; Program: Leverage Debt Reduction/, RADHA, Derivatives Solution/, Off-setting China/,

Simple Solution to Greece & EU Debt Crisis: 4T$/, The Deflation Tax: Part I. The Economic Smart Bomb Against Inflation/; The Deflation Tax: Part II = The ‘Taxes to Risk Ratio’

Budget Crisis: Solved in Months; No Tax Hikes or Service Cuts Program: Leverage Debt Reduction/, RADHA Mortgage/, Derivatives Solution/, Fair Tax Exchange/, Is the Democratic Party Dead?/, The Deflation Tax: Part I = The Economic Smart Bomb Against Inflation/; The Deflation Tax: Part II = The ‘Taxes to Risk Ratio’

Tax Reform: Reduce Taxes 50% to 150% while improving services Program: ROOPA/; Fair Tax Exchange/, Is the Democratic Party Dead?/, The Deflation Tax: Part I = The Economic Smart Bomb Against Inflation/; The Deflation Tax: Part II. The ‘Taxes to Risk Ratio’

Health Care Crisis: Solved in Months; No Gov’t Intervention Program: ROOPA/, Fair Tax Exchange,

Jobs: 4 Million in 6 Months w/out Gov’t Stimulus or Regulations Program: The American Shopping Party/; ROOPA/; Fair Tax Exchange/, Off-setting China/; Questions by Raghu-nomics: Jobs vs Low Wages & Taxes/ 5 Steps to full Employment (Not posted yet).

Hawaiian Sovereignty: Independence: 6 months to a year Program: 10 Reasons Why US Wants to Re-instate the Kingdom of Hawaii

Abortion: Solution to the debate: Program: Abortion: Part I The vote For or Against abortion hides the crime of ‘Inequity/,

Abortion Part 2: The Bridge to Financial Independence

Social Security: Solvent without raising taxes or cutting services.

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Program: SSRI: Social Security Re-investment Index (not posted yet). Is the Democratic Party Dead?/,

Immigration: Solved in Months; Program: PASS: Pay And Stay Securely (Not posted yet)

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Beyond 2 Party Politics

Raghu-nomics: Next Generation of Public Policy Raghu-nomics offers a host of new solutions to the major economic issue of the day. These proposals are geared to create a new set of working models that can jumpstart the political process around policy specifics rather than ideological postures. We offer new policies to help expand the discussion rather than trying to sell some new proposals. Raghu-nomics shows how much has been overlooked and the host of viable solutions once we step beyond the liberal vs. conservative catfight. Welcome to “Raghu-nomics.”

Raghu-nomics:

By Raghu Giuffre

John ‘Raghu’ Giuffre, is the author behind the ‘Raghu-nomics’ series with 7 volumes on economics completed so far. Raghu-nomics offers over 30 new policy proposals on

everything from Hawaiian Sovereignty to Tax Reform and healthcare. The central theme is found in Volume 5 detailing the ROOPA health-care reform. ROOPA comes complete with well-researched proposals, 30 charts and about 500 references done by Guerrilla Economics. Raghu-nomics offers a new social platform free of the old conflict politics.

Raghu-nomics is therefore better suited to build the next generation of social policy and political discourse.

Raghu 4 Congress:

Next Generation of Leaders

Raghu Giuffre is running for US Congress; US House of Representatives, Dist 1 – Honolulu. Raghu 4 Congress is introducing these concepts as a working model towards a new kind of political discourse. Raghu 4 Congress is taking this new political brand for a test run to measure the public response. If successful, we will have created a new platform of public policy for the next generation of leaders free of the baggage of the two party conflicts. Raghu-nomics picks-up from where today’s politics and media leave off by showing the solutions gained once we leave behind party politics. This campaign itself is a hub for voters and leaders to present a new political center. This campaign introduces a structure built upon an entirely different model for policy and

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discourse that still incorporates much of the old conservative liberal goals, but sidesteps their conflicts with a simple secret. Raghu-nomics can bridge these political differences by adding in all the missing features of any given issue. The answers become far more apparent once we have incorporated the full range of issues for any given topic. Ragh-nomics adds these missing links to complete our political equations and find the answers once we look at the full scope of a problem.

Secret of Raghu-nomics:

Step beyond Liberal vs Conservative

The problem in Washington is something far more rudimentary then politicians. The actual problem is the ideological model they frame every policy debate upon. The old ideology of Liberal versus Conservative has finally reached it limits against a 21st Century world. This is the real story behind Washington gridlock. Changing politicians, special interests players or parties will fail to change things so long as we continue this Democrat vs Republican world view. This ideology leaves our leaders to continuously misdiagnose our problems and so they are left with solutions that have little application to the actual problem

Raghu-nomics finds its policy remedies by first taking the time to more accurately target the real problem behind an issue. In general, the country already knows the prescription for most any given problem. It’s simply about getting the diagnosis right. If there were a single problem we could point to, it would be that ideology leaves the two parties to continuously misdiagnose the problem. In this sense, ideology is mired every issue and in fact made them significantly worse than most any issue left untainted by the conservative / liberal distortion.

Resetting Economic Diagnosis & Prescription

A simple example of this misdiagnosis would be the Republican dedication to low taxes, wages and regulations as the panacea to jump starting the economy. That would be true if we had an economic problem, but we don’t. Such stimulus programs would help get the economy going again much like this ‘prescription’ worked in times past. This is true of Democrat gov’t stimulus programs as well. Both parties think that they could get the economy going again if they were allowed to provide their brand of economic stimulus. It won’t. Unrecognized by either party is that neither of these stimulus strategies will work.

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Raghu-nomics recognized why these strategies won’t work. The reason is that we don’t have an economic problem. We have a ‘China problem’ which subsidize each and every industry which American business attempts to develop. The natural forces of a free market have been distorted by a trillion dollar player – China. Hence, we don’t have an economic issue, but a foreign policy one. We are not in the throes of an economic slowdown, but rather, we are facing a foreign economic aggressor. China has changed the economic dynamics drastically. This recalibrates the economic prescriptions from one of stimulus to one of counter measure in response to a powerful economic aggression.

This diagnosis has a completely different set of policy prescriptions that are opposite of a ‘free market system.’ As such, even diehard market proponents would provide a series of gov’t interventions as counter measures to China’s economic raid. What those responses should be, would differ based upon party and leader, but in general, they would all have some kind of gov’t intervention. In such a scenario, the ultra-conservatives would support such measures and they would not view it as antithetical to the free market system. They would actually recognize it as the proper role of govt.

It so happens that a number of Democratic prescriptions of gov’t intervention would be the appropriate response to China. Unfortunately, neither party sees this context so they miss their common ground. This context allows both parties a better working relationship that would change the terms of our country into one nation, working in common cause, against an economic aggressor. In such a country, American manufactures would no longer be faced off against their workers, but would be an active partner in taking on China. This would meld political rifts and align our economic policies with a real sense of cooperation. These are contributions Raghu-nomics offers to our national discourse and public policy.

(We cover this China issue in: Part I: America’s New Cold War: China/ Obama & Republican Postures Miss Real Solution to Economy: Off-setting China)

Here’s some more examples of Raghu-nomic Prescription & Diagnosis Models and the natural policy solutions they culminate into:

Health Care Reform: ROOPA

50% of all medical cost is lifestyle related. The political discussion never looks at lifestyle? Why? Because the liberal vs. conservative paradigm only sees the “either/or” of “free markets vs. gov’t care.” We take this second look at lifestyle in our ROOPA program, Volume 5 of Raghu-nomics. There we find how lifestyle allows us to reduce costs by this same 50%.

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Federal Deficits: LEDER & RADHA

$2 to $4 trillion of our federal deficit is in real estate securities that Uncle Sam bought as part of the banking bailout. This means resolving the real estate crisis could pay off nearly a 3rd of our entire federal deficit and allow Uncle Sam to sell those securities.

Raghu-nomics provides two programs for this. The first is Leverage Debt Reduction: LEDER and the second is RADHA. Note video above and the link here for more on Leverage Debt Reduction. Info on RADHA, click here.

The RADHA Mortgage offers to resolve the real estate crisis in a matter of months thereby paying off $2 to $4 trillion of our deficits in months. RADHA does this without “raising taxes or cutting services” which is the only area of focus by Democrat vs. Republicans. These are the kinds of options missed by the two party debate. These ‘other’ options are generally much easier, more effective and almost always, don’t conflict with either party’s positions on the issue.

Abortion

70% to 90% of all abortions are based upon socio-economic reasons. A girl will have an abortion for two main reasons:

1) The pregnancy does not fit a girl’s social scene or

2) The girl does not have the finances to afford a child.

If social economics is 90% of the motive, why is the entire discussion confined to the “either/or” of “morality (pro-life) or lifestyle (pro-choice)”?

This Morality vs. Lifestyle only represents 10% of the motive behind all abortions? This means Democrats and Republicans cover only 10% of the entire issue - COMBINED.

They are working with just 5% of the problem. Thus they can only offer 5% of the solution. Both sides use exaggeration to try and make-up the difference of poor policy. We beget entrenched political conflict. This is the real problem with politics today.

How Raghu-nomics Multiplies Impact on Issue.

Just take a step beyond the liberal vs. conservative arguments. See the broader issues. Take abortion for example. Let’s say we can help the ‘Social Economic’ side of the abortion issue. Say we can help by just 10%. We do this by offering additional social

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and economic options to a girl. These options offer twice the impact of either party. This is true of most issues. A small addition impacts the issue dramatically.

We don’t claim to solve impossible challenges with simple solutions. Today’s politics make simple problems impossible. Raghu-nomics simply demonstrates the point by showing the simple solutions we get once we remove the politics.

Raghu-nomics is not set to change your political loyalties, but to stir them into new possibilities. This is but a preachers work to strengthen our intuitions that were never given a second look. Raghu-nomics is that second look. Join us for a new look beyond the 2 party conflict. It offers us a new American discourse and the greater opportunities that come with such a world.

Support Team

Donors, Volunteers, Committee Members Raghu-nomics provides an opportunity to step into a new world of possibilities without the baggage of conflict politics, moral compromise, economic belligerence, the lesser of two evils, hate of other Americans, zero sum policies, ideological bondage and the host of other unnatural dysfunctions of today’s politics. The Raghu 4 Congress translates this world into a voice of action. This has the power to change the course of a country when the nation is calling for a new brand of patriotism founded in America’s best ideals over its harshest. America’s are rallying to be free of these shackles of a decaying regime. That regime is an ideological one. Today’s Socialist vs Capitalist paradigm has distorted most every social economic issue into a knot of irreparable political conflict. The ease and effectiveness of Raghu-nomic policy proposals is little more than removing this ideological distortion from the discussion.

Raghu-nomics and Raghu 4 Congress have all the same slots and needs of a typical campaign, but we have the addition of looking for those who can also help build out the party platform as well. We are looking for Supporters, Donors, Volunteers, but maybe more importantly, we are looking for committee members to help develop each of these individual programs. Let us know the programs that interest you the most and see what openings are available.

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Section 2

Chapter 1

Raghu for Congress

Raghu For Congress

Raghu for Congress is to provide a forum of support for those who like our policy proposals offered by Raghu-nomics. People have been supportive of the ideas presented. A campaign offers the chance to translate that support into tangible action where sharing with friends becomes part of community outreach and political reform rather than more arm-chair politics.

We have focused on policy positions that are all inclusive and have no ‘enemies.’ The proposals we have presented are offered as a working model of discussion rather than demanding another ideological oath of fidelity.

We are not even asking you to change your vote, but rather we simply ask that you harass your candidate of choice to take a second look at these proposals – at least our Leverage Debt Reduction proposal.

This campaign is about building out the matrix of democracy wherein a small action by many poeple has a compound impact. For example, if everyone shares this Leverage Debt Reduction with just 10 people (who also share with 10 people who share with 10 people), we will have reached 10,000 people by the third 3 generation of shariing. It hits 1 million people by the 5th generation. We can do this in a matter of days, at no cost, little money and a lot of fun. That is our power in a democracy. Use that power today. This is our media budget. You. Our community. Our own voice.

Please share whatever moves your spirit to action and get back to us. Of course, donations will allow us to build momentum, but it’s your participation that will give our humble efforts the power to soar above the mediocrity of today’s conflict politics.

Raghu Giuffre

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Section 2

Chapter 2

About Raghu

About:

How I Got into Economics = one painful step at a time.

Raghu Giuffre has written 9 books on economics. 7 of those are part of his Raghu-nomics series. Below is a summary of his journey into economics. They represent the cross cultural overlay of Raghu (John) Giuffre’s own upbringing and personify the strengths of such diversity. Raghu-nomics provides a frame work for a new kind of dialogue tailored out of the complexity of Raghu’s diverse upbringing. Diversity breeds its own conflicting norms and in resolving those, we beget hybrids for next generation technologies. His proposals are offered as a demonstration of the point and represent the real story behind his policy prescriptions.

Raghu Giuffre was working as a Hawaii and NY realtor completing $12 million real estate deals and party to $20 million in total sales. This brand of numbers and evaluation stirred a numbers habit that found expression in public policy. The host of policy prescriptions culminated with the Leverage Debt Reduction discvovery that there is a double write down in the markets real estate assets by banks and insurance companies. This now represents Raghu Giuffre's 5th attempt to get the world out about this. And so the story begins.

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Raghu Giuffre’s journey into public policy began years ago under the Clinton Administration in the Presidents railing against tobacco companies. The headlines screamed of the $100 billion a year spent on tobacco related healthcare costs. Raghu Giuffre had just returned from India in the tail end of his missionary days of international travel and ‘preaching’ and so he wondered what the total social cost of all vices would

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be: smoking, drinking, gambling, etc. The initial estimates ranged from $300 billion a year to as much as $1 trillion all going to cover the social cost of vice.

The punch line was that we could reduce taxes and insurance premiums by as much as 50% (half) if everyone just covered the cost of their own vices. This little discovery was a preachers dream for public display if not a new found club against ‘bad habits.’ It led to our first article: Economics: The Hand of God. The theme was polished upon over the next several years culminating in a booklet: Greater the Vice, Greater the Price. (Reprinted on this under: ROOPA Theology.) The theme being that vice and virtue translate into economic outcomes and so simply by covering this social cost, most gov’t policy goals and religious imperatives were often automatically achieved. It makes for truly effective and fair policy. This was summarized in the title: ROOPA: Responsibility for One’s Own Products & Actions.

Fellow church members were supportive but this ROOPA proposition marked its official crossover as a new economic model rather than simply a religious posture. So was born the foundation of Raghu-nomics. The model itself was formalized about 8 years later under the patient research, massive editing and ‘consultations’ (guidance) of John Dunham, Founder and President of Guerrilla Economics. John Dunham transformed ROOPA from a religious mission with an economic ring and help build the ROOPA concept into a whole new economic paradigm that bridged an interesting mix of the cross cultural correlations of Raghu’s own upbringing alongside sound economic policy. This is outlined in our introduction to ROOPA: The Abyss of Political Activism and Reforms Discovered. This became the title of our first draft book of ROOPA. Latter editions were renamed: ROOPA II; Social Cost: Magic Wand of Social Policy.

Place Picture

The latest edition now makes up volumes 4 & 5 of Raghu-nomics called ROOPA I and ROOPA II.

$30,000 in research for the ROOPA book became a mammoth undertaking, but it only wetted Raghu’s appetite for numbers and policy. The first draft of ROOPA was finished just in time for the Subprime Mortgage Crisis. And so as a Realtor, Raghu sat down with Guerrilla Economics once again to review the issues of the day. They started by taking a second look at owner-financed ‘lease-to-own’ home loans. Lease to own homes are common on the Big Island of Hawaii where Raghu got his first experience in real estate. Hence, the RADHA Mortgage was born. The concept was implemented by some credit unions and so Raghu took this to Washington and members of Congress as the simple solution to the real estate crisis.

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Place Picture

Members were too busy with Obama’s healthcare reform package, but the few who did hear about it were quite supportive. Raghu had spent about a year developing the program, finding clients and building a political network to present it to Congress. Our lead clients were CUMA and OAS Credit Union. Their letter of commedation for the RADHA Program. Robin Read, the CEO of The National Foundation for Women Legislators took a great deal of interest in the RADHA program and wanted to lead with it. They are the national body of all women legislators: federal, state and local. Robin had even called to set up appointments with both Greene Span and Warren Buffet to have their endorsements or participation in the launch of the RADHA Mortgage. We were looking at mere weeks. And then came the Lehman collapsed and so everything went into retreat.

Raghu Giuffre returned to the Big Island to write the manual for the RADHA Mortgage. It was in writing this manual that Raghu made the startling discovery about this double write-down of real estate assets by banks and insurance companies: There is No Real Estate Crisis, its one big Accounting Mistake. This is now referred to as Leverage Debt Reduction.

Raghu Giuffre once again returned DC to share this incredible discovery, but unfortunately, it was Thanks Giving, Christmas and New Years. And so he tells his own story from this point.

(These large spaces are reserved for pics that will be going in when we have more time.)

Members of congress from both sides of the isle were fascinated by our Leverage Debt Reduction = LEDER presentation. Unfortunately, I made it to DC just in time for Thankz Giving, Christmas and New Year’s holiday seasons. It was difficult to reconnect with these members because of the holiday breaks.

Place Picture

These members of Congress were supportive and agreed to a cheesy picture with our letter of commendation from the credit union. Raghu managed to approach about 50 members of congress. About 20 were interested and maybe 5 to 8 were considering to get involved. I will follow up this LEDER discovery and return to DC. That is why I have this Raghu for Congress. This campaign is to find new support to build upon the interest that is already there from Congress. We will be posting the notes collected from our experience going to about 200 offices, giving out about 300 pamphlets & emails and offering about 30 presentations to staff, members of congress and the media. In

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general, Democratic offices were more people friendly and approachable then Republicans though surprisingly, John Garamendi’s office was more hostile then even John McCains.

Trent Lott seemed receptive enough to having a follow up meeting about our RADHA and ROOPA program, but was never available.

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This Congressman from NJ was having a special event for American Manufactures and so presented our American Shopping Party proposal. Their interest had us resurrected the program after a 10 year sabbatical.

I presented the LEDER and RADHA Mortgage Program to the Democrats and the ROOPA program to the Republicans. Both parties seemed interested in both issues, but the health care bill at the time seemed to leave Republicans more interested in ROOPA while the housing bill going through congress seemed to leave Democrats more interested in the RADHA Mortgage program.

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I happened to catch up with Ron Paul at an event in the Capital. He was not quite sure what I was talking on about, but was gracious enough to stand for the picture as the camera guy stumbled with the camera. I didin’t realize Ron Paul was such a charming fellow until I got to meet him in person.

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I met Congressman King at a rally. He liked my Elevator Speech and agreed to meet which he did the very next week. I presented the ROOPA program to him. He seemed very supportive.

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Congressman King said he would look our ROOPA book over. It was a great meeting.

In general though, It was nearly impossible to do a proper follow up with the Members of congress that were interested. They kept leaving town for the holidays.

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Abercrombie announced he was retiring his seat in Congress to run for Governor of Hawaii and so Hawaii was holding a Special Election. It seemed that a campaign run for Abercrombie’s Congressional seat would provide some media exposure and public

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mandate to then take this LEDER discovery back to Washington and allow us better traction with Congress.

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I had to talk to about 500 people to get the few it takes to sign for my candidacy to get on the ballot, but once I was on and running, I was surprised by the respect people paid to those making the effort and how supportive they were with our humble efforts.

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The lady was the first to sign my ballot. And then friends and friends of the day.

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Food related businesses seemed more friendly for some reason.

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I finally showed up at the Hawaiian Republican Convention to announce my run for the Congressional seat and got to meet a host of Republican luminaries. Lynn Flannigan had met me in Florida about 3 years earlier when I was there with the Credit Unions to present our RADHA Mortgage program to the Women’s Foundationn of US Legislators. She spent about a half hour helping me build our presentation for the event. What a sweet heart. It was great to reconnect with her.

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I was surprised how stately Gov’ Linda Linkle was while still out posing me for this picture. After words, I told her that we had discovered a simple solution to the housing crisis and so was running for Congress to help build some public interest. She told me not to take her picture again and walked away. Eeeekkk.

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I did get one major news event. It was on the Rick Hamada Radio Show. There were 9 of us running. Of course, I was late and so got to the hot seat: seat number 1. I was the first one to have to answer the questions. I was in meltdown. In seat number 2 was Djou. He walked me through the two hour experience. Thank you Djou.

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The 3 occasions I met Djou, he was always genuinely friendly and a real hero at the radio show we did together.

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Congresswomen Hanabusa got the LEDER concept in a matter of minutes. I thought she was going to follow up, but her office kept postponing and finally stopped responding to my request all together. Hopefully, this campaign can get the word out on this incredible discovery about LEDER. I ran the first time to get the world out about this LEDER program. I’m running this time once I realized that even the best of them like Hanabusa will never have the time to consider anything different then their own party agenda. I’m asking you to help get this on the party agenda.

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I had talked with Ed Case over the years and so told him about our LEDER discovery. HE said to send it to him and he will look it over. I saw him again for his Campaign opening in Honolulu and started explaining the LEDER program to him. He interrupted me and said, ‘yes, I know, I read your emails’(which he does or at least, he responds to them every so often.) But even Ed Case won’t follow up with this review.

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I was faced with the typical media black-out of any independent candidate and hence, no public mandate so I headed out to join the Occupy Wall Street Movement in NY. They were getting media attention, celebrity support and a growing army of activist. By the time I got there, no more tents, bedding and just in time for 60 mile an hour winds and 45 degree temperatures. I was sleeping outside just dying, but somehow, no media was interested in our LEDER Discovery.

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Photo Album of March. http://www.facebook.com/media/set/?set=a.10150299448413218.343881.774488217&type=3

I joined the March from NY to DC thinking we would get both media attention and Congresses. I ripped my shin. I made it just past Phillie. The team arrived in DC a couple days after Congress left town for summer recess.

And so , once again, I try with you today to pass on this simple discovery. Let’s see what we can do this time. How far can this campaign take it.

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Section 3

Kingdom of Hawaii

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Section 3

Chapter 1:

10 Reasons Why US Wants to Re-instate

the Kingdom of Hawaii

Excerpts:

“..The Akaka Bill is a cat fight between the US gov’t and the people of Hawaiia over land. Land was the big deal of the last century, but in this era of housing bubbles, real estate is spiraling down the scale of assets of choice. In a global economy, products are the commodity of greatest oppertunities. Hawaii itself is now reaching a level of diminishing returns on its land while the appeal of the Kingdom of Hawaii as a product will only multiply exponentially.

The monetary prospects of The Kingdom of Hawaii far exceed anything the US gov’t could hope to gain from the lands of the Hawaiian people. California Raisins, for example produced an animation with Ray Charles. The animation made more money than the raisins did. The Kingdom of Hawaii as an international product is worth say $250 billion to $1 trillion dollars over the next 20 years. In contrast, the remaining value to be squeezed out from Hawaiian lands maybe worth $20 billion to $75 billion and done so at great costs and further liabilities to the state.”

“…The Kingdom of Hawaii offers America a turnkey legacy replete with all the mystique of an ancient civilization of legendary kings, Gods and that mythical kingdom of a lost world from faraway seas beckoning at rainbows end where mortals can touch upon the heavens.”

“..This dual identity of the Hawaiian American is representative of a convergence of mutual interests that simple was not there generations ago.

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Raghu-nomics explores these new dynamics as a matter of review and the exciting possibilities this could mean for both parties of this debate.”

*. *. *. *.

Raghu-nomics has done initial review of the Hawaiian Sovereignty issue. It seems that our approach could potentially allow us Hawaiian sovereignty in a matter of months if packaged properly.

Simply stated, the Kingdom of Hawaii provides America many times more social economic and political reach throughout the Asian Pacific Rim, than the land for which the USA is fighting over in their legal conflict with Hawaiians. Once the US sees this critical gift alongside the greater economic opportunities, they may promptly facilitate the quick establishment of the Hawaii Kingdom.

Here’s a short summary.

The mood of many Hawaiian Sovereignty members is that the USA stole Hawaii and should just give it back.

The question we ask is why should the US do so?

The answer of course is based upon the moral and legal rights, but Raghu-nomics looks beyond the legal case to uncover a host of benefits for the USA in facilitating the Kingdom of Hawaii. We have uncovered a range of advantages that offers everything from socio-economic and political to a new found tool for USA foreign policy. The combined benefits equal a far greater value to America then the lands and strategic location for which the USA has taken over Hawaii.

Some Sovereignty members feel that such courtesies to the federal gov’t is an insult to Hawaiians. They question why America should get any considerations for what they consider an illegal occupation of Hawaii. The relationship maybe comparable to an old marriage forced at conception like we saw of many marriages of 100 years ago and so true of most countries of the world today. However, we recognize that we are getting into fourth and fifth generations of Hawaiian American’s who see themselves as much as American as they are Hawaiian.

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This dual identity of the Hawaiian American is representative of a convergence of mutual interests that simple was not there generations ago. Raghu-nomics explores these new dynamics as a matter of review and the exciting possibilities this could mean for both parties.

Our initial assessment is that the Hawaiian American identity is a powerful cultural resource for the country at large that maybe best tapped in the full expression of their traditions as a free people of the Kingdom of Hawaii. We present how those prospects could play out for both sides of this debate. We hope this can help foster a new brand of partnership or at least a deeper understanding to the benefits both sides have to offer.

The time may have come were we can find greater accommodations in harnessing the best that each side has to offer rather than upon the foundation of conflict as set by the terms of today’s debate. Raghu-nomics presents a compelling case that there is a treasure trove of prospects that have been overlooked and never developed as moving parts to a greater opportunity. Welcome to a world where America may finally come see the unique gifts to its national identity and the international reach to be gained as a nation no longer imprisoning Hawaii, but the proud home of all the mystique and majesty that is the Kingdom of Hawaii.

Here are 9 Benefits the Kingdom of Hawaii offers:

1) Diminishing Returns on Land vs. Global Products

The Akaka Bill is a cat fight between the US gov’t and the people of Hawaii over land. Land was the big deal of the last century, but in this era of housing bubbles, real estate is spiraling down the scale of assets of choice. In a global economy, products are the commodity of greatest opportunity. Hawaii itself is now reaching a level of diminishing returns on its land while the appeal of the Kingdom of Hawaii as a product will only multiply exponentially.

The monetary prospects of The Kingdom of Hawaii far exceed anything the US gov’t could hope to gain from the lands of the Hawaiian people. California Raisins, for example produced an animation with Ray Charles. The animation made more money than the raisins did. The Kingdom of Hawaii as an international product is worth say $250 billion to $1 trillion dollars over the next 20 years (as discussed below). In contrast, the remaining value to be squeezed out from Hawaiian lands maybe worth $20 to $75 billion and done so at great costs and further liabilities to the state.

2) Unique gift for US & Asian interface

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This is likely to be the Century of Asia and few things offer America a better medium of cultural exchange than the Kingdom of Hawaiian. The Kingdom of Hawaii is America’s finest forum to Asia.

3) Cultural Appeal is Currency of 21st Century

The 21st Century is replacing military might with socio-economic power. The reach and scope of cultural appeal is the currency of exchange of this global village. In such a world, this cultural side of American influence will fill some of the roles previous carried out through military muscle of the last century. The Kingdom of Hawaii is the finest cultural currency America could have for interfacing with other nations with traditions of royal heritage. This happens to include most of the world from Asia and the Orient, to the Middle East and Africa. And of course, Europe too. America can now match the best of the ancient world offered up by any of these countries.

The Kingdom of Hawaii offers America a turnkey legacy replete with all the mystique of an ancient civilization of legendary kings, Gods and that mythical kingdom of a lost world from faraway seas beckoning at rainbows end where mortals can touch upon the heavens. These prospects recast the Kingdom of Hawaii as the cultural equivalent we saw of Pearl Harbor that was the center piece of the US presence in the Asian Pacific Rim, but with the political role comparable to Hawaii during WWII. In short, The Kingdom of Hawaii can be the center piece of American cultural diplomacy to Asia and the world at large. The strategic value of the Kingdom of Hawaii may prove far more effective in the coming culture wars of an Asia Centric world then the role the military nuclear technology played in the last millennium for the fear of our might will not compare to the excitement of our gifts.

4) Hub of New World Values

The Kingdom of Hawaii personifies all the ideals of the 21st World from self-sustainability and harmony with nature, to the resurrections and retooling of traditions past. The Kingdom of Hawaii can reformulate America’s international profile in away missing from its present line of foreign policy initiatives and move up its lead as a nation of the 21st Century ideals.

5) Nation of 200 Million People

Hawaii is heading towards 300 million visitors over the last 40years. The numbers are growing as millions more earn the means to come here. How many of these visitors left here carrying the torch for the cause of Hawaii sovereignty? The world is exhausted

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with victim overload and so few were ready to take on this cause. The victim card is the weakest hand to play in the public forum. Hawaii’s unique gifts is the magic the world awaits. Raghu-nomics asks how many of those same visitors would have signed on as a citizen of the Kingdom of Hawaii? 10%, maybe even as much as 30%? This gives us 30 million to as much as 100 million citizens of the Hawaii Kingdom. How many more of the world’s people would join such a nation? Another 100 million or more? We are looking at 200 to 400 million citizens of the Kingdom of Hawaii. This is more representative to the scope and reach we are allowed through empowering the Kingdom of Hawaii.

6) $1Trillion in Commerce

A small membership fee of $25 a year would alone generate $100 billion over the next 20 years. Merchandise, events and other related projects could generate several times that amount. This is the economic scale to be tapped with the Kingdom of Hawaii.

7) Mecca vs Tourist Destination

The Kingdom of Hawaii will transform Hawaii into a Mecca of a legendary kingdom over being just another tourist destination. Hawaii’s novelty as a tourist destination is likely to find more competition from Third World countries now building out their own exotic locations as they transition into developing nations. Transforming Hawaii into this Mecca creates a unique experience that is more than just another tropical beauty in some exotic location.

8) King of England better legal template.

It would be interesting to see if the King of England makes for a better legal template for the Hawaiians rather than the tribal status of American Indians. It would provide all the glamor and appeal we see of the British Royal Family, but likely to appeal to a greater masses of Asia's billions versus Europe's millions. Yeap, Hawaii will allows American to potentially outdo all that fancy European royal pageantry. No small feat indeed.

9) US gov’t is Special Interest

US gov’t is but a handful of special interests groups. Convince these special interest parties (or others like them with similar influence in the USA) and the gov’t will accept

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the proposals. The Kingdom of Hawaii provides enough incentives to win over old opponents or at least attract counter parties that can make this happen.

10) Effort Unifies

How much could actually be accomplished may be secondary to the boost to morale and the public traction that this new effort could create.

These are the kinds of considerations we felt should have a more careful review. It offers a different context that recalibrates the entire discussion as potential partners rather than active adversaries. This will produce an entirely different set of possibilities more representative of our common ground in the incredible opportunities that beckon us past the old conflicts of a zero sum game and into all the rewards of a 21st Century World.

(Editors Note: confirm numbers)

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Section 4

Health Care Reform:

ROOPA

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Section 4

Chapter 1:

ROOPA: Responsibility for One’s Own

Products & Actions

Magic bullet to Health Care Reform

ROOPA:

Responsibility of One’s Own Products & Actions

Magic bullet to Health Care Reform

50% of Taxes & Insurance Spent on Life Style

Up to 50% of our taxes & insurance premiums go to cover ‘lifestyle’ activities. Lifestyle is therefore the largest category of discretionary spending with the potential of reducing our costs by up to this same 50%. Lifestyle is also a far more accurate predicator of our future health care needs and social service requirements. This allows lifestyle to provide the best measure of planning & forecast over today’s ‘comparison shopping’ models. ROOPA highlights the number of savings and other advantages gained from this dual track of lifestyle and its corresponding social costs models. Welcome to ROOPA.

Lifestyle Based Health Care Plans

Designate up to 50% of our taxes and insurance premiums based upon our

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own lifestyle preferences. It’s more cost effective than today’s other health care options. Most importantly, it replaces gov’t or insurance companies from making these budgeting choices in our name (wherein the controversies, corruption and mismanagement all lie).

The program itself is referred to as ROOPA: Responsibility for One’s Own Products & Actions. This is presented in Raghu-nomics 4: ROOPA II, Health Care Reform Made Easy.

To Order:

Abridged - short - Edition.

Unabridged - full - Edtion.

For the full set of Raghu-nomics.

The stats were provided by Guerrilla Economics who also helped to develop the concepts. We are happy to hear your own thoughts on this new approach to health care reform. These are still rough draft copies of our books and so still have more re-writes that include your in-put. Your feed back now can directly impact our final edition. We look forward to hearing from you. (***Link to comments)

** ** **

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3 Page Summary

Part I: The Problme - it's a Crap Shot

Shopping for the ‘Best Plan’ is a Crap Shot

Compare ROOPA’s lifestyle approach to today’s other reforms efforts. Creating a health care program that covers all people, for all ailments, is proving too expensive – even for all of the socialist countries that have done so for decades. The alternative is not much better. Suggesting we ‘shop for the best plan’ is to ask we guess every illness we and our loved ones will ever have in the decades to come. It’s a crap shot.

Many people simply make the wrong bet so end up with all the nightmares of HMO’s. Most of today’s reforms are still working from either of these two same health care models. The so called efficiency-savings offered by today’s reforms are simply not large enough to make either of their models truly affordable. This is due to having the wrong working model rather than having an over-reaching goal for universal healthcare or industry wide reform.

There is another option: We pay according to our own lifestyle preferences and consumption. The advantage is that this is both more affordable and people are happy to pay for things they enjoy doing rather than for others or things they don’t use or need.

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Part II:

Solution: Pricing Social Cost

Demo 1: Obesity

10 Cents Per Soda Covers All Obesity Related Care

Obesity and smoking offer good examples. The ‘social cost’ of obesity averages around $150 billion a year. Let’s say this comes to about 10 cents per item (of junk food). Every soda pop, hamburger and candy bar will now have this 10 cent premium. (Pricing likely based upon number of calories). Because this is spread throughout every unit of ‘junk food’ of the entire industry, it’s far more affordable (and fair) then targeting a single item or company such as soda pop and french-fries or McDonalds and Pizza Hut. Maybe best of all, it will no longer be left to the personal discretion and prejudice of the latest politician and their special interest group.

The more soda you drink, the more you have already paid into your own health coverage for obesity. The extra cost serves as a small deterrent, but more importantly, it’s so much more affordable than covering this medical cost after your sick (or even paying the insurance premiums necessary to fully cover it).

The dime affords you free health care for all your obesity related treatments. It’s the most affordable ‘pay as you go’ insurance plan out there. It only costs 10 cents. And yet, it’s universal health care too. This is Universal Health Care for a dime.

Taxes vs Insurance: Market Based vs. DC This 10 cents is NOT a ‘new tax.’ It’s much different than the Democrat’s (suggested) 4 cent tax on’ junk food.’ Taxes are set by Washington and so generally fail to accurately price the actual social cost. They either charge too much (cigarettes) or too little (junk food). Even worse, adjusting either of these imbalances is nearly impossible to change in Washington once the premium has been set by them. In

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contrast, insurance premiums rise and fall according to related social cost of a specific product or activity. So as companies find new ways to reduce obesity, the premiums will fall right alongside it. The other term for such reduced premiums: a tax refund.

Insurance: Market Based Social Cost Auto insurance provides the working model. You drive, you pay auto insurance. You don’t drive, no auto premiums. You get 3 speeding tickets, you pay higher premiums. No tickets, lower premium. A more expensive car, by a younger driver, has a higher premium. A less expensive car, by an older driver, has a much lower premium. Auto insurance is a market based approach to a lifestyles social cost. It prices-in all the different risks and savings of our habits & choices and passes them on to the end-user. It does all this without gov’t tempering. ROOPA will now offer you this same market based approach to your taxes & health care.

Budget Lock Box

Another big advantage: gov’t cannot raid these funds. If the local, state and federal gov’t all go bankrupt today, drivers still have ALL their benefits. Their auto insurance funds are not raided by gov’t - no matter the ‘emergency.’ Insurance is a lockbox against government ‘discretion’ (extortion).

Contrast this against today’s program cuts to school budgets, health care services, infrastructure development, etc. As gov’t budgets collapse, so do each of these programs. The lack of budgetary independence is destroying these programs. ROOPA finances these programs by simply allowing the users to directly fund these things themselves. They will be free of gov’t siphoning and politics and the roller coaster of political discretion and special interest corruption.

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Part III:

$4 Trillion in Savings

Demo 2: Tobacco

Current Tobacco Policy: Over Charged, Underfunded In the case of tobacco, cigarette taxes can run double their related social cost. ($9.25 per pack in NY vs. the $4 in social cost.) Tobacco taxes are used for everything from Hawaii’s ‘Rainy Day Fund’ and public transport, to CA’s children’s health care and Special Education programs. And yet, little ever goes to treat smokers. Why? Is this extortion and injustice?

Smokers pay double the social cost per pack of cigarettes. They are then charged again in higher health insurance premium. Unfortunately, their insurance premium is too little to fully cover all the related medical cost of smoking. This leaves service providers cannibalizing resources from other healthcare programs to treat smokers. This degrades these other health care services while providing sub-par health care to smokers too. These extra costs to health care carry-over into state and employee programs spent on smoking related illness. This adds greater burden to gov’t programs requiring even higher taxes & insurance premiums. This is one of many examples to the kinds of distortions we get with today’s budget sharing process.

It’s much more cost effective for ‘cigarette taxes’ to be exclusively dedicated to smokers health care in place of cannibalizing other services. Let gov’t cover their other programs from the general tax revenue and leave smokers to cover healthcare cost from their own cigarette taxes. The whole justification for higher taxes on smokers was done in the name of covering these same health care costs. So use it as such. The cost of treating smokers is supposed to be the same price difference whether done from the general budget or not. ROOPA simply creates acleaner budgeting and accountability process.

ROOPA: Better Service for 50% Less

Tobacco generates up to a $100 billion a year between tax and insurance premiums. ROOPA’s position: All of this should be dedicated to smoker’s health care – EXCLUSIVELY. This would create a $1 trillion industry over the next decade. The

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buying power would yield huge savings while the massive market potential would attract a flood of new technologies, service providers, pharmaceuticals and research along with a host of other products for the next generation of cutting edge treatments.

A 5% annual savings reduction would lower cost by a whooping 50% within the next decade. As these costs drop, so will tobacco’s taxes = insurance premiums. These incentives will redirect the tobacco industry to gear their efforts towards reducing the social costs of smoking rather than today’s focus on loop-holes in gov’t regulation.

This coverage would include ALL smokers, not just the healthy ones. In such a system, the sickest will find coverage based upon the nature of their ailments (ex: smoking, drinking etc). Today’s system cherry-picks the healthiest leaving the rest to the public dole or to die. ROOPA reforms this and does so far more effectively then Obamacare attempts to do.

This gives us ‘FREE’ health care for all smoking related illnesses (much like the example for obesity related care above). You smoke once (or a thousand times), your covered – for life. ROOPA provides ‘universal’ healthcare FOR FREE that will cover a range of ailments from smoking and obesity, to AIDS or drug and alcohol abuse. Meanwhile, the rest of us are spared from dolling out a penny for any of these costs for they are entirely paid at the point of sale. If you are not buying these things, you are spared their cost.

The best part maybe that ROOPA is not left to gov’t budgets and discretion. People can now go about their own lifestyle prerogatives knowing their tax and insurance premiums go directly for their own care without gov’t meddling. Gov’t no longer decides how much is spent on these programs, nor can they siphon off ‘extra’ funds.

There’s still one more bonus. ROOPA squares-off the tobacco juggernaut against the insurance & pharmaceutical companies rather than leaving all three of these industry titans lobbying against gov’t. It is a simple and effective solution to reforming the special interest corruption of our political system. Welcome to ROOPA.

Smoking & Obesity: $4 Trillion in Savings The combined social cost for smoking and obesity comes to a startling $350 billion a year in health care obligations. Alcohol runs another $200 billion a year. We have $550 billion in social cost just between these 3 programs. ROOPA can remove this entire financial burden from both gov’t budgets and our general insurance premiums. This alone would reduce our general premiums by an impressive 10% to 20%. We will have removed nearly $6 trillion worth of claims from today’s tax and health insurance premiums over the next decade. All the while, health care services are dramatically

41

upgraded and many of them are in fact FREE . This is before adding in the savings realized from the new found program efficiencies and service up-grades.

Our initial estimates suggest we can reduce today’s tax and insurance burdens by as much as 50% once we have introduced this system for other lifestyle activities as well. ROOPA culminates into the Republican’s ‘Flat Tax’ proposal wherein taxes and insurance premiums have been reduced by half. This is further supplemented with the Democrats ‘Vice Tax’ which makes up the budgetary short fall of other Flat Tax proposals that is otherwise needed for all these lifestyle extras. ROOPA incorporates the best of both parties flat-tax/vice-tax programs for a new world that combines the best of each into the next generation of economic policy.

Raghu-nomics 4: ROOPA II: Health Care Reform Made Easy

The program itself is referred to as ROOPA: Responsibility for One’s Own Products & Actions. This is presented in Raghu-nomics 4: ROOPA II, Health Care Reform Made Easy.

To Order:

Abridged - short - Edition.

Unabridged - full - Edtion.

For the full set of Raghu-nomics.

The stats were provided by Guerrilla Economics who also helped to develop the concepts. We are happy to hear your own thoughts on this new approach to health care reform. These are still rough draft copies of our books and so still have more re-writes that include your in-put. Your feed back now can directly impact our final edition. We look forward to hearing from you. (***Link to comments)

Add Summary Chapters & Intro from Book, Economics: Hand of God, ROOPA

Theology and The Abyss of Activism and the Wisdom Learned.

(Editor’s Note: . the ROOPA book was last written 5 years ago. We need to update the

figures and rewrite the second half of the book. For example, the 10 options for

tobacco or the DUI ticket need to be rewritten with the latest I’ve learned about the

new set of alternatives to those recommendations. The first half was rewritten so is

ready to go but for some proofreading.)

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Section 5

The American Shopping Party

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Section 5

Chapter 1:

The American Shopping Party

11 Steps to full Employment

Excerpts:

This premise that gov’t involvement is a destructive force is actually true of a free-market system wherein such state interventions distort the markets natural rate of development, however, this is turned upside down by a 21st Century world run by the global economy. The role of gov’t in a global economy is critical for it is in fact not a free market system, but competing nations fighting the old cold-war on a 21st Century platform. This war is over markets and economic domination rather than being fought with weapons and military outposts. The old colonial model of colonies taken through warfare has evolved where the fight is over markets and the weapons of choice are products, marketing and pricing. This march from warfare to ‘market-fare’ represents an evolutionary jump for mankind, but has hidden the role that the US gov’t should be playing in such a world of competing nations. The economy has now become a foreign affairs issue unlike the free market system of yore.

...Under normal ‘free-market’ conditions, all the resources found in China would have been naturally built up in the USA, but once China provided billions in subsidies, that ‘natural’ system was co-opted over to China’s operations. Should we want to get back into this ring, it will take something larger than tax cuts.

USA companies are being squeezed out of an ever growing number of market share by foreign nationalize businesses though they show great quarterly profits. Their market shares dwindle as does their international access and global competiveness. Today’s so called profitable American businesses are actually being painted into an ever smaller corner by the international ‘competition.’ They have been distracted to fight with unions

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and labor rather than markets and innovations. This is where the fight actually lies for the battle front is over markets, not between unions and companies or even between Democrat and Republican. The true rivalry is between America and China and the rest of the countries working to subsidize and develop their own state industries against our own. This is the punch line of Raghunomics to America’s employment issues ‘

Raghu-nomics has identified 11 areas to be addressed to re-create the manufacturing boom of America’s glory days.

1) Create Market: ASP 2) Measure US consumption to job fulfillment 3) Counter foreign subsidy a) Trade b) Manufacturing infrastructure 4) Reset Paradigm: Global Economics vs Ideology. 5) The Trillion Dollar Mutual Trust Associations 6) Upscaling lowpay jobs into Middle Class Careers: FATE 7) Performance Infrastructure 8) Reduce Benefits burden 9) Creative Infrastructure: a) Entrepreneurial b) Creative c) Mastery d) Artistic e) Purpose f) Conscience 10) The Economics of Play Hard vs Work Hard 11) Hawaii: Why 7 Million visitors when 4 billion want to visit?

*. *. *.

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1) Create Market: ASP = American Shopping Party

The first step begins by building out a market for American Made products. Once a market is there, retailers & manufacturers will of course compete to provide it. The American Shopping Party makes it easy: 50 million Americans buying Made In the USA on the 1st Saturday of each month as a day of national celebration. Read more at the American Shopping Party.

2) Measure US consumption to job fulfillment

The USA is one of a few countries that only needs to consume a small portion of its total GDP in order to be 100% employed. We have a $14 trillion GDP. American’s need consume say just $4 trillion of USA Made to have 100% employment. (This is a ‘working figure.’) Let’s say for example, that a 30% consumption rate of American Made by each of us would give us full employment. This may mean adding just 10% to 15% of American Made to our shopping routine to give us that 30% for full employment. That’s why a simple, one day a month of buying Made in USA could be enough to create that 100% employment.

The other interesting stat was that if everyone spent just $5 buying American Made, it would generate 200,000 jobs. This means each of us spending about a $1,000 a year on American Made would provide 50 million new jobs. That’s just $80 a month per person or about $300 for a family of four. $300 buying American Made = 50 million jobs.

We need to index this kind of measure of consumption against job fulfillment and then have a plan of action such as the $300 a month per family. These are working figures to demonstrate the ASP template. Welcome to the American Shopping Party.

http://www.recapo.com/today-show/kathie-lee-hoda/kathie-lee-hoda-product-reviews/made-in-america-mom-buys-american-made-products-for-one-week/

US contractors using just 5% more of American Made Products in their construction would create 220k jobs. 20% more would be a million jobs. We can go through each industry and measure the ideal percentage for American jobs and then provide each industry the mark of their ideal. In the case of the construction industry, the ideal might be 20% (of all materials be from the USA).

http://abcnews.go.com/blogs/business/2011/10/how-to-build-a-made-in-america-home/

ASP (American Shopping Party) provides the 3 Star system: 30%, 60%, 90% American Made with the idea of getting companies to increase the component scale of American

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Made so a company using 25% USA Made of components would raise it to 30% and so on.

3) Counter foreign subsidy

a) Trade:

Republicans and Democrats alike recognize that the Chinese heavily subsidize their manufacturing (alongside all other areas of their economy). This starts with the massive subsidies to their currency that use to equal 50%. This means the price of everything coming out of China should have been double the price. America can compete with that price point quite well. China has allowed their currency to begin trading at near parity, but only after a $3.5 trillion worth of currency subsidy.

This does not include other subsidies whether in commercial espionage (rebuilding entire factories of foreign companies under Chinese name), worker, building or other infrastructural outlays, foreign and domestic political muscle or direct cash grants. How many more trillions do these other subsidies equal? Another $1 to $3 trillion? The total of China’s subsidy runs between $5 Trillion to as much as say $8 trillion.

The impact of these combined subsidies destroyed the US market for American Made while also flooding other European and Asian markets against USA products as well. China’s lower priced items pilfered potential buyers for American goods as it did for European producers. Conservatives like to point to America and Europe as over spenders cuddling an irresponsible public hooked on gov’t benefits. While some may like to blame the debt on costs, it hides the issue of why the economy is slowing. Raghunomics wonders how much of the economic slowdown in both the USA and Europe is directly related to these massive China subsidies. $5 to $8 trillion dollars is a massive monetary distortion to the entire global economy.

Let’s say the China currency had been allowed to float in parity all these years. The likely result is that these other Western regions would have generated the business and jobs they each had anticipated in their economic projections. Meanwhile, China does not allow the USA or European producers fair market access to their billion people. This access would have helped to offset the losses of their domestic markets to China made goods. Allowing better access into China would be one of several ways to rebalance these massive China subsidies and the disparities it created throughout the Western world. However, such access misses the ‘real’ answer and solution to this problem as we discuss next.

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b) Manufacturing Infrastructure

We covered this issue in our ‘America’s New Cold War, China.’ In that article, we proposed trade tariffs as the steps to offset such subsidies. A tariff can level price subsidies and raise the price of China made goods by 50% to 200% (or whatever China’s subsidies are pegged at). Tariffs are simple and easy enough, but further research revealed a greater issue beyond currency or other subsidies. Therefore, tariffs alone won’t get to the very heart of the issue much as tax cuts or gov’t stimulus fail to do today.

Cost is only part of the motive for moving operations to China. The larger issue is the ‘Supply Chain’ that China has built out for producers of every kind. China builds on demand for any major company considering to move their operations there. This includes more than just low manufacturing costs, but other, more critical advantages. That advantage starts with the fastest turn-around time to ‘scale up or down’ everything from a vast, cheap or qualified labor pool, to infrastructure and (so importantly), like-kind industry resources. For example, lower cost workers were more a side benefit against the 8,700 engineers that Apple needed for manufacturing its I Phones, or the specialty class manufacturer down the street that was not available in the USA.

The NY Times provided the final missing piece of this riddle to our Western world’s high employment numbers. Few have done so fine a job of cracking this economic code. It really should be an award winning article, but for economics rather than journalism. The NYTimes dug to reveal the true cause to America’s manufacturing lag.

The secret is as simple as it is obvious. According to their article, the secret to China’s success has been the gov’ts direct involved with every aspect required to meet Apple’s needs. China already had all the infrastructure built-out alongside the ready to go manufacturing resources.

http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?pagewanted=all

“For years, cellphone makers had avoided using glass because it required precision in cutting and grinding that was extremely difficult to achieve. Apple had already selected an American company, Corning Inc., to manufacture large panes of strengthened glass. But figuring out how to cut those panes into millions of iPhone screens required finding an empty cutting plant, hundreds of pieces of glass to use in experiments and an army of midlevel engineers. It would cost a fortune simply to prepare.

Then a bid for the work arrived from a Chinese factory.

(Ed Note: This was a bid based upon Chinese gov’t backing)

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When an Apple team visited, the Chinese plant’s owners were already constructing a new wing. “This is in case you give us the contract,” the manager said, according to a former Apple executive. The Chinese government had agreed to underwrite costs for numerous industries, and those subsidies had trickled down to the glass-cutting factory.

(Note the point: ‘The Chinese gov’t had.. underwrite the cost for NUMEROUS industries..’ They had already built out a number of platforms to be ready for this and any number of other manufacturing resources.)

It had a warehouse filled with glass samples available to Apple, free of charge. The owners made engineers available at almost no cost. They had built on-site dormitories so employees would be available 24 hours a day.

The Chinese plant got the job.

“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”

The next part of the article goes on to explain how they coordinated 200,000 workers and 8,700 engineers. In contrast, it would take the US 9 months to find that many engineers against China’s 15 days.

Why would it take the USA 9 months versus China’s 15 days?

The inference here is that China has more qualified people, a better organized manufacturing base and a more dedicated labor force. We looked this over at Raghu-nomics and it seems that these reasons miss the real bottom line of the issue. In fact, none of these ‘reasons’ actually get to the heart driving China’s success – at least according to this story. The ‘one’ and only reason for China’s ability to respond this quickly comes down to one simple fact: the Chinese gov’t itself was leading the operation.

This leaves us with several rather obvious questions.

a) Could the ‘USA’ manage to build this same operation in 15 days

IF:

the federal and state gov’ts were leading this charge in conjunction with the full spectrum of legal and political authority, broad gov’t agency resources and any needed military personnel or other assets and equipment such as the Army Corp of Engineers?

Of course we could. If this became a national priority of the US gov’t itself, it could have been done in 15 days.

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We may have likely done better. We actually have a more qualified personnel (at that military level) alongside a gov’t with better technological and infrastructural resources than China’s own gov’t.

b) Could China have done this in 15 days without the gov’t leading the operation?

We gather the simple answer is No. This is why you see the gov’t’s fingerprints all over this operation. Without the gov’t, most of this would not have been possible for ‘the owners’ to manage all these different aspects with the time frame and other resources they were able to bring to the table.

c) Is it fair to compare what the USA can do in its private sector against what the Chinese can do with the full force of their gov’t behind them?

No. Obviously, the gov’t involvement in no way represents the actual performance value of their private sector. Put another way, their private sector does not measure up to America’s private sector – hence, the Chinese gov’t has no choice but to involve itself if they are to effectively complete against America’s private sector.

Contrast this against the growing critics that hold forceful disdain for fellow Americans as ‘lazy,’ spoiled ‘takers.’ Why: Because China seems to be able to do things better, faster, cheaper. Raghunomics seems to have discovered that this perception is dreadfully misplaced. Such critics are comparing apples to McDonalds apple pie.

To make this a truly fair comparison, we would have to measure against this gov’t to gov’t performance or compare their private sector against our own. To compare our private against the full power of the Chinese gov’t itself is obviously not a fair comparison. Nor is it a fair fight as our collapsing business across the country have demonstrated. Could the USA have achieved this same proficiency for Apple had the USA brought to bear the full power of our gov’t harnessing all levels and branches of the state in building out this manufacturing resource for Apple? Yes. Yes would be the answer most of us would have. And if not, can we re-craft ourselves to do so? Yes we can.

The point we discovered in reading this article is that the only ‘fair’ competition would between ‘the US gov’t’ against this Chinese gov’t operation. The tax cuts formula as offered up by conservatives or the gov’t stimulus as proposed by Democrats (or even our Raghunomics early suggestion of ‘tariffs’) would not match this step by step involvement that China is providing to its manufacturers.

We would need something comparable to that level of ‘gov’t’ involvement to take on the China behemoth. In short, we do not have an economic issue, but a foreign policy one. Only the federal gov’t is equipped to handle and respond to such foreign intrusions whether they be political, economic or military. It demands a federal response and in this case specifically, it’s paring two equal players: the gov’ts of the USA against that of China’s gov’t.

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This is not to say that the US Gov’t should get into manufacturing. Raghu-nomics simply points out that there is no other player in the country (or world) that can match the gov’t of China. We don’t have to go toe to toe with China or any other country on every single industry. We are simply pointing out that the answers no longer lie with tax cuts or gov’t stimulus.

Under normal ‘free-market’ conditions, all the resources found in China would have been naturally built up in the USA, but once China provided billions in subsidies, that ‘natural’ system was coopted over to China’s operations. In other words, our own manufactures are actually more competitive against China’s private counterpart. What a startling revelation. Should we want to get back into this manufacturing ring, it will take something larger than tax cuts.

American could have actually jumpstarted much of their manufacturing base had companies reinvested the 2 trillion sitting in corporate coffers and the trillions more sent abroad to China. Businesses did not reinvest their profits here in large part because of the risk posed by China and the other countries subsidizing their manufacturing. This kind of economic and monetary intervention by a foreign gov’t demands action from our gov’t.

Gov’t is there to step in when markets freeze up and more so when such disruptions are due to foreign (economic) aggression. Actually, we are not even demanding gov’t to step in, we are simply pointing out that this economic crisis cannot be solved by fed bailouts, tax cuts or gov’t stimulus alone. They will not work because these old formulas of the two party economic traditions are simply no match against China’s subsidies. Maybe most revealing is that allowing Detroit to go bankrupt as conservatives pushed would have been catastrophic because it would have done more then closed down our manufacturing, but it would have destroyed a substantial part of America’s own Supply Train. The ramifications of this cannot be overstated.

Keep in mind, that Raghunomics is not some ‘liberal’ organization. We remain the only economic program offering to reduce gov’t budgets by 50% in a matter of months while also shaving off up to $4 trillion in US Federal Deficits in a matter of weeks. This is presented by our ROOPA and Leverage Debt Reduction programs. In other words, we are not about ‘big gov’t’ but rather, we recognize the role of the gov’t. Foreign policy is one of those undisputed areas reserved exclusively for the federal gov’t. This is true of economic aggression too.

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4) Reset Paradigm: Global Economics vs Ideology.

The raging debate over jobs and economic stimulus is ground zero to the uselessness of the conservative versus liberal model. It’s entirely outdated to deal with a global economy. Democrats beat the drums of gov’t stimulus against the Republican offsets of tax and regulation as the sole stimulus. Stimulus of either brand means little against the massive subsidies we see of China. China is providing a helping hand of every brand on every front. No American company can complete against this multi-trillion dollar juggernaut no matter how low their taxes are in the USA.

We have sent our companies to compete against the gov’t of China itself, all in the name of ‘free-markets.’ It’s not a fair fight. This paradigm of low taxes, regulation and wages cannot match the kind of help the Chinese manufacturer is receiving from their gov’t. The same is true of the Democrat stimulus as well. It can’t compete against China’s involvement.

One of the most revealing details of this article was the estimated cost of having US union manufactured I Pads. I ask union critics what they thought the price difference would be to produce an I Pad in the US versus China. They estimate the $600 I Pad would have to sell for $900 to $1,200 in order to cover the cost of union labor. Try asking someone and see what they say. The average answer is that union labor would add about 30% more cost to the final price. This is to say that the cost would be too expensive to produce here the USA. The punch-line of this thinking is that ‘American can’t compete.’

These folks are always surprised that the cost of USA labor comes to just $65 or about 12% the retail price. This would be against say $20 for China’s cost of manufacturing. That $45 difference is not a deciding factor to either the price or even profit. This was true of cars wherein the cost of union labor per car was running about $1,500 on a $10,000 car versus say $700 for Mexico or even China. The boogey man of union labor has been grossly overestimated. Here’s why:

This socialist vs capitalist paradigm was developed in a time when labor represented 40% to 80% of the cost of products production. Reducing the cost of labor meant significantly more profit. It was a zero sum game that capitalist had to pull from their workers. In an era of automation, that cost of labor as collapsed to just 5% to 20% of most products final retail price. Therefore, the price difference of labor between the USA or China is actually a minor role to the overall cost. This is personified by China where infrastructure and gov’t resource is the deciding factor, not the low wages or even taxes alone. The best part of this is that America really can duplicate those factors of infrastructure and gov’t resource - overnight.

This is quite contrary to 80 years of indoctrination wherein gov’t is always the problem. The irony of course is that the only other counter measure to gov’t is the ‘free market’

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system. If there is no free market system, there is no other alternative. China’s involvement nullifies the entire premise of ‘free-markets.’ The premise of free markets start with some sense of an equal playing field with the deciding factor being ingenuity. This ingenuity is supposed to leaves us with the most competitive companies. China simply bridges all such inefficiencies of its own producers until they are up to speed and have the resources to bludgeon American producers. There goes the ‘free-market’ along with our American companies.

This phantom ‘free-market’ is further undermined by all the other countries subsidizing their own domestic industries as well. You have planes by Brazil, electronics from Korea, cars from Japan, energy from Russia or steal from India. Each of these home based industries and companies are backed by their own govt’s as a national pride and treasure. Meanwhile, the USA waste its time over ideological purity of free markets on the one side and the worker rebellion on the other.

Republicans won’t provide a comparable helping hand to America’s business in the name of this phantom free market system while the Democrats add more hurdles in the name of standing for workers. It’s time that both parties recognize that their ideology is hurting the country and the backbone of the economy – the international competitiveness of USA production. Tax cuts and deregulation; nor gov’t stimulus are enough to move the USA economy forward as it has in the past. These formulas worked great in a world less connected by international trade fueled with trillions in foreign subsidies.

A bailout for an auto industry run by union members is fine with Democrats, but tax breaks for a USA company without such union endorsements is somehow a corruption. They call them ‘tax-cuts for the rich.’ Republicans are furious with such bailouts for the auto industry owned by union members, but have no qualms about preferential capital treatment for energy companies such as nuclear power. Somehow, unions mean a business is a good thing by Democrat measure and it has to be a bad thing by Republican thinking. And visa verse. We should be looking at the global market of the auto industry and seeing what we can do to move us forward internationally. Our old ideology will not allow us to do so. Therefore, the time has come to retire the Conservative vs Liberal paradigm and the two party system from which all our economic policies are founded.

One of my favorite examples is Solyndra and the other solar panel manufacturers. They present a terrific case study to the benefits of gov’t involvement. Republicans hold up the billions lost in gov’t guarantees to these green companies. They use this as an example of the disaster of gov’t involvement. Democrats won’t contest it because they have no jobs to show for it. The connection to Democratic supporters of these companies only adds to the embarrassment. And yet, these companies personify the glory of gov’t involvement.

How?

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These companies are struggling or went out of business because the price of solar panels collapsed by nearly 75%. The gov’t involvement was able to reduce the cost of this renewable energy by a massive 2/3rds. The gov’t did this in a matter of months. How extraordinary.

The gov’t backed the solar panel industry with $19 billion in loans. About $2 billion has been lost to companies having gone bankrupt. Most of the remaining is likely to be paid, but let’s assume none of it would be. Is a $19 billion ‘investment’ worth the whooping 75% price drop of this renewable energy? This price collapse is the result of gov’t ‘medaling.’ The gov’t can jump start a market and ‘fast-forward’ it beyond the markets own natural time frame. How many billions in ‘cheap’ energy would this provide the US if the program was taken to the next step. Let’s get these solar panels on to homes and into businesses with the next generation of tax and stimulus incentives? Solyndra offers the best example of gov’t involvement but has been lost to the ideological war between the two parties.

It’s funny because conservatives hold that any gov’t involvement is always a bad thing, and yet, somehow, it has proven critical to the establishment of most every major corporate player on the global scene by every other country in the world. European countries all subsidize their own domestic industries, as does Asia, South America and of course the Orient and the Middle East. And their companies are growing almost in direct proportion to those state subsidies. Somehow, when China does it, there companies do great, but if America is ever to ‘meddle’ it, suddenly, it does not work? How is that?

This premise that gov’t involvement is a destructive force is actually true of a free-market system wherein such state interventions distort the markets natural rate of development, however, this is turned upside down by a 21st Century world run by the global economy. The role of gov’t in a global economy is critical for it is in fact not a free market system, but competing nations fighting the old cold-war on a 21st Century platform. This war is over markets and economic domination rather than being fought with weapons and military outposts. The old colonial model of colonies taken through warfare has evolved where the fight is over markets and the weapons of choice are products, marketing and pricing. This march from warfare to market-fare represents an evolutionary jump for mankind, but has hidden the role that the US gov’t should be playing in such a world of competing nations. The economy has now become a foreign affair issue unlike the free market system of yore.

As such, it’s time for American companies to recognize they need to team with both the gov’t and workers and to stand as one nation against this economic aggression by the rest of the world. This may mean paying more in taxes and building out a stronger work force with the means to enhance performance – long term.

India offers a great example. The millionaires there evade taxes worth trillions. The country in turn loses trillions more in economic activity from the collapsing infrastructure of traffic and transportation bottlenecks, to floods and rolling blackouts that stymie

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manufacturing and the rest of the economy. The rich of India are losing far greater returns had they been willing to lead the infrastructural build-out of the country rather than protecting the small ‘profits’ they now hoard abroad in Swiss bank accounts. America is following down this same road with much the same result – our national infrastructure is collapsing with social economic bottlenecks growing. Tax cuts will not help this, much as off-shore tax heavens have done so little to build India into the next level of a global superpower.

China has introduced the next economic system and it’s not Capitalism, but national cronyism of sovereign led corporations. It’s time we come to terms with this new order of things if ever we are to secure the next Apple contract. Better stated, we don’t have a market based economy anymore. That is not America’s fault, but the reality of a global economy. We therefore no longer have an economic issue, but a foreign policy one. This demands gov’t action rather than a market based one as we see of old tax cut or stimulus models.

China looks at the full market potential of a product or industry. They lose billions, but gain hundreds of billions in business and markets in return. We need to work as one a nation to help secure that broader market rather than leaving companies to focus on ‘profits’ alone. A growing number of USA companies are being squeezed out of an ever growing number of market share by foreign nationalize businesses though our companies show great quarterly profits. Their market shares dwindle as does their international access and global competiveness. Today’s so called profitable American businesses are actually being painted into an ever smaller corner by the international ‘competition.’ They have been distracted to fight with unions and labor rather than markets and innovations. This is where the fight actually lies for the battle front is over markets, not between unions and companies or even between Democrat and Republican. The true rival is between America and China and the rest of the countries working to subsidize and develop their own state industries against our own. This is the punch line of Raghunomics to America’s employment issues.

(Paralyzing back pain has held me up from completing the last 20% of this Raghu-nomics jobs formula that would help tie up the package. I’ll see if I can get this done before the end of things. Below is the remainder to be completed.)

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5) The Multi-Trillion Dollar Mutual Trust Club

I have to be out of this apt within the next 5 hours so I’ll keep this brief, but it’s such an extraordinary piece that I have to at least get in a summary.

The Social Security budget is $750 billion this year in spite of the reduced payroll tax rate of the Obama tax cuts. It will total about $12 to $14 trillion over the next decade.

Raghu-nomics would take this program and place into its own private trust fund so the gov’t could no longer raid its surpluses. Those surpluses stand at $4 trillion in IOU’s so far and will generate another $1.5 to $2.5 trillion more in surpluses over the next 20 years.

This entity would run more like a mutual company wherein the ownership is based upon the ‘customers’ holdings and contributions. In this case, that would mean those paying into SS.

This would provide a forum for all of the different groups directly related with the program.

Those receiving SS benefits would have 30% of the ‘stocks’ assigned to them based upon the amount of their previous contributions. They are given the louder voting stock to better guarantee they are heard by those paying into the program.

Another 25% would be set aside for those that are presently paying into the SS Trust fund but taking no benefits. They too will have voting stocks based upon their annual contributions.

Those companies paying into SS Trust fund will make up 15% of the voting block based upon the amount of their contributions.

Wall Street would have 15% to trade with publicly. They can also buy the stock options of the other groups. People can only sell their shares, but only do so for a year at time. A new ‘stock’ is issued the following year.

The gov’t gets a 5% share.

This will allow a host of public programs to be moved out from the gov’t’s general budget and management over to those paying in to the program and using it. The involved parties can now negotiate things between themselves by those providing the funding and those receiving the benefits. In this way, the program is actually more democratic than a gov’t program while still harnessing the corporate efficiencies of a private company.

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The push to privatize SS is primarily so Wall Street can get their hands on the tens of trillions it will spend over the next 25 years. This new Mutual Trust Association will allow Wall Street to trade with some of those funds. This will get Wall Street to expand the value of those stock holdings by doing such things as incorporating the ‘assets’ of the SS program like hospitals, cutting out ‘waste’ and corruption, etc. They will bring to bare the strengths of the ‘market’ but in balance against retiree’s approval.

Right now, SS is only measured by the amount it spends. Behind these costs lies trillions more in assets. Once this is added in, SS could to be worth $25 to $35 trillion in assets and ‘business’ over the next decade. Wall Street would now be able to trade on 15% of that or $5 trillion. The added value of holding these SS stocks is likely to have the affluent happy to pay higher SS taxes (for the refunds and stock options). This should generate hundreds of billions more in new revenues. Wall Street’s influence will now be balanced out by the other 55% of the ‘stock holders’ that make up the retirees and tax payers. We will have the best of what we wanted from gov’t with representation of our voice as a partner while getting the best of Capatial.

The surpluses will now go towards personal savings accounts proportionate to ones contributions. This will get the wealthy to want to pay more into SS as well. This is a duplicate of the Chile system that allows people to pull from SS should their private accounts offer less than the gov’t program. It has not happened in the 20 years Chile had the program. While the markets fall from time to time, it always equals more than people would be getting from the gov’t. We would duplicate this ‘privatization’ using these surplus revenues only.

SS surpluses would equal 10% to 15% of one’s retirement contributions. This provides the equivalent of a 10% return on your retirement contributions before any further market earnings kick in. If the market could generate 5% a year, the total return on one’s retirement account would equal 15% to 20% a year. That’s a great return.

Using surpluses on private accounts made sense once I realized the gov’t will continue ‘stealing’ all of these surpluses each and every year for ‘other programs.’ The fed already has $4 trillion in IOUs which will never be returned to the SS Trust Fund. Better it goes back to those paying into SS for their retirement. This would provide Wall Street with an additional 5% more in added revenue funding worth another $1 trillion or so over the next couple decades.

Recasting SS into this Mutual Trust Association should generate the added income to keep SS solvent and likely allow for benefits to be expanded.

We would take a host of gov’t programs and recast them into these Mutual Trust Associations. I guess we could call them MUTRA for MUtual TRust Association.

We discussed this in ROOPA where the different lifestyle programs such as smoking, alcohol and obesity would be similarly partitioned off into these separate MUTRA programs.

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Tobacco runs about $100 billion a year in medical cost. That is about $1 trillion over the next decade. Obesity and Alcohol would be about $2 trillion each ($200 billion a year) .

This would have much the same set up as SS MUTRA. The Tobacco MUTRA would be composed of each of the groups that make up the industry.

Smokers would own 25% of the stocks based upon how many packs they bought.

Tobacco patients would make up another 30%based upon how much they use in service.

Tobacco companies would make up 20%.

Wall Street would have 20% to trade and also have the option to buy stocks from the other groups.

The gov’t would get 5% to represent its voice an serve as mediator.

This tobacco MUTRA would also incorporate a number of assets now being used to treat smokers. The assets of this new ‘corporate trust’ would multiply this trillion dollar association several fold as it did with SS.

We would do the same again with obesity providing another multi trillion association. It would be made up of those paying into the higher premiums on ‘junk’ food etc.

These 4 programs would create $40 to $50 trillion in new MUTRA’s over the next decade. This would reduce the gov’ts budget burdens now covering these programs. It will be handed over to those paying for these programs and using them. These MUTRA programs should be able to cut the federal gov’t budget by as much as half while still improving services.

Introducing MUTRA should jump start the economy with these multi-trillion dollar institutions.

Raghu-nomics has identified the critical role gov’t has played in providing the host of social service offerings and then takes that and sees how it can be converted over to the ‘private sector.’ This is not to hand over profitable business sectors to crony supporters, but rather, recognizing the role the private sector can play that would be more effective than the gov’t’s.

This provides several advantages.

The first is that it should help unlock trillions of added assets now going untapped.

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The second is that it will provide a forum of each segment involved with that particular cause and assign them both responsibilities and voice that cannot be found as a gov’t dept.

The third is providing an official role for Wall Street creating a set of rules of engagement that are not possible as a gov’t program left to the discretion of a politicians under lobbyist sway.

Ragh-nomics presents this as the new definition of ‘Compassionate Conservatism.’ Compassionate Conservatism is to recognized the moral mandate ‘for the general welfare’ and the gov’ts role in that. Knowing the value and function of these gov’t programs will allow us to find their counterpart in the private sector.

There seems to be no private structure that can actually effectively hold the cross section of people involved in such services. Therefore, we propose a new kind of corporate structure for it.

We combine the legal protections of a trust and combine it with a Mutual company owned by the ‘customers’ based upon their holdings and business in the bank or business.

We add in a further function of a union like club or association centered around one specific lifestyle or task.

Welcome to MUTRA. It should do wonders in reducing gov’t mandates and bloated budgets while improving services and jumpstarting our economy with a whole generation of multi-trillion dollar trusts.

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6) Upscaling lowpay jobs into Middle Class Careers: FATE

7) Performance Infrastructure

8) Reduce Benefits burden

9) Creative Infrastructure:

g) Entrepreneurial

h) Creative

i) Mastery

j) Artistic

k) Purpose

l) Conscience

10) The Economics of Play Hard vs Work

11) Hawaii: Why 7 Million visitors when 4 billion want to visit?

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Section 5

Chapter 2:

The American Shopping Party

Approaching Groupon

ASP, Best Marketing Program

Approaching Groupon About American Shopping Party

by Raghu for Congress on Friday, June 8, 2012 at 10:26am ·

On 06/08/12 1:04 PM, Raghu Giuffre wrote:--------------------Hi Ryan,

Yes, we have not released an official ASP (American Shopping Party) program yet so you won’t’ find much on the internet about it. So I'm forwarding a small summary of it here.

ASP was something developed for our campaign run for Congress here in Hawaii. We wanted to build it out further before taking it to the public commercially. We did share it in our campaign events and solicitations. The public response has been phenomenal with 3 groups especially responsive: women (they love it, it's a complete hoot), small business (the largest producer of American Made) and Union workers.

The idea is simple enough: we get 20 to 50 million Americans to buy Made in USA on the 1st Sat of each month as a celebration of US Manufacturing. This will suck jobs back into the country in a matter of weeks. When we say this to people on the campaign trail, they just start smiling and shaking their head yes. They get it. It’s the answer they have been looking for to getting jobs back in the country.

The 50 million shoppers is based upon 13 million union members getting 3 friends and family each (which they should be able to do within weeks). It will give unions a sense of relevancy and some means for ‘fighting back’ just when they have been sidelined. They will take to ASP with a vengeance.

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The premise is that America consumes about 4 to 8 times more than what it needs to keep itself fully employed. If just 20% of our consumption was of American Made, we would be fully employed. We can still buy foreign goods the other 80% of the time. We may only need to increase our purchase of American made products by say 30% over what we do today in order to reach this full employment level. In other words, a small adjustment to take us over the top in getting jobs back again.

It is interesting to see how much support is already out there for Buy American, but people are at a lost for a practical way to do so. To shop exclusively USA Made every day is a punishing experience as much for pricing as in figuring out what is even made in the US. The 1 day a month is something every can do and it’s a lot of fun. It’s a party. People love it. And that adds up to shopping 2 weeks ayear of USA Made.

We also have a 3 Star US Made system: 30%, 60% & 90%. So this one day a month, stores highlight their American Made Lines with our 3 Star ASP as part of a national celebration. This would include marketing as well as major social events from concerts, media or fashion events, to political and cultural rallies, etc.

Basically, it’s what Groupon already does, but now, you can do it with tens of millions of products simultaneously rather than just 1 item a day. This is every month for tens of millions of members now dedicated to promoting this rather than a passing email.

And then, there are the added revenue streams that ASP can now generate as well. You will have expanded the number of revenue streams to include membership fees from shoppers, vender rating fees and membership dues from businesses as well as a much larger advertising and campaign events to sell. Same effort, a lot more money. Lol.

There still remains one final bonus. ASP will allow companies to charge higher premiums of say 5% to 10% rather than taking a 75% hit to their price. A 5% to 7% premium for a company like Wal-Mart is a huge incentive. It has a broader appeal to business then a money losing coupon program.

The cultural context is also much different. ASP is patriotism in a bottle. It’s no longer a rush to the bottom in pricing, but has this inspiring and even glamorous patriotic ring to it. ASP is a cross between 4th of July and Vogue Magazine. lol.

We are in talks with some local organizations and coupon booklet publishers and once finalized, we will begin approaching investors. But, you are the King of the industry. ASP will allow your clients a whole new option that not only covers a lot more products, but allows them higher pricing instead of the 75% hit of your typical coupon program.

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Anyway, this is a quick summary of the issue. I hope this provides you a better sense of what we are working towards. This political season offers the perfect environment to whip up a frenzy of participation. And of course, summer is a hot, hot selling season.

More later,

Happy to answer any other questions or issues. Raghu G

On 06/07/12 8:36 AM, Felix Ryan Leal wrote:--------------------Hi Raghu,

Do you have a website about this American shopping party? Also, where are you located?

--------------------Hi Felix,

I would like to talk with one of the company officers about our American Shopping Party. I think we may have a fit here and see if we could use your services.

Raghu G

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Section 6

Housing

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Section 6

Chapter 1:

Simply Solution to Housing

RADHA Mortgage

RADHA Mortgage:

Simple Solution to Housing & Banking Crisis

RADHA: 5 bank advantages over 30 mortgage:

a) Capital infusion of 20% against entire distressed property portfolio.

(This would have replaced gov’t bailouts and avoided 90% of all banking bankruptcies.)

b) Reduces amount of principal write-down by covering the first 25% of such loss.

c) Extends the time frame for making any write-offs from 1 year to 5.

d) Bridges bank/homeowner to higher market value of tomorrow.

e) Affordability dramatically expands market thereby stabilizing prices and speed of resale.

RADHA: 5 buyers advantages:

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a) Mortgage is reduced by half

b) Down payment is 75% smaller

c) Term is just 4 years rather than 30

d) Affordability expands market appeal allowing easier resale if necessary.

e) Provides 20% equity in 4 years

The RADHA Mortgage program magically reduces costs of the monthly payments by 25 to 50%.

Yes, this sounds quite fantastic. It took us 5 years to finally figure how RADHA magically reduces your mortgage payments.

Here’s the simple answer. Most of us have heard about the great savings you get by making ‘EXTRA’ payments on your 30 year mortgage. The best part about these ‘extra payments’ is that you only need to do make them in the first few years of the loan. Doing so, we are told, will substantially reduce the amount of the total interest you will have to pay on the loan. This shortens the duration of the loan by 5 to 10 years or more – depending upon how much ‘extra’ you pay during these early years. Your home mortgage drops from 30 years down to just 15 to 20.

Put another way, you have simply leveraged the time value of money by paying more principle up-front. The RADHA Mortgage maximizes this principle and utilizes this time-value of money to reduce your mortgage payments – starting at about 20% (higher the interest rate of your original loan, the more RADHA reduces your payments).

Here’s another way of explaining the RADHA Mortgage. RADHA is a duplicate copy of the auto-lease to own system used by the auto industry. You can go and lease a car at your local dealership. The auto industry has used this system of financing for 40 years. The RADHA Mortgage has not actually invented something new per say, but rather, we simply found a new application for a product with a 50 year track record.

This auto-lease-to-own system is the only financial product for a depreciating asset. Right now, it’s used for cars because auto’s ‘depreciate’ so quickly. Real estate has no corresponding financial product for housing bubbles when home prices start to fall. America has a housing ‘correction’ every 20 to 30 years. The RADHA Mortgage hands us an ‘official’ financial product for this depreciating real estate market cycle.

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This is the simple summary of the RADHA Mortgage program. We present the 5 Steps of Magic of the RADHA Mortgage program for those who would like more information.

**. **. **.

RADHA Mortgage duplicates the auto-lease to own system wherein you make a small down payment and then pay a monthly for 2 to 4 years. At that time, you can either re-finance your car or walk away, ‘free and clear.’

The RADHA Mortgage follows this same template. 20% of the loan is financed over 4 years. Once that term has been paid-off, the homeowner has the option to refinance the remaining 80% of the loan or to walk away ‘free and clear.’

And now the magic behind this ‘mysterious’ savings.

There are 5 steps behind this RADHA magic. 3 of these simply leverage the time-value of money. 2 of them leverage upon divisibility or more commonly referred to as divide and conquer. Divisibility means the loans are broken into smaller amounts and so allows a larger impact on any pay downs to them – as we explain below.

1) Step-one of the RADHA Magic: Prepaid Principal

RADHA’s first step is where it all begins. Pay-off 20% of the 30 year mortgage on ‘day-one’ you get the loan. Paying off this 20% reduces the payments by 20% to 30% - depending upon your interest rate. Paying this 20% upfront reduces the amount of ‘long-term’ interest of the ‘original’ mortgage by this same 20% to 30%. In other words, paying off 20% of the principle reduces the monthly payments by this same 20% to 30%. (We use 25% as the average.) Hence, the monthly payments are reduced by this same 25%.

This also translates over to a bank holding a distressed property. Basically, the first 25% of the loan is now written off when done through the RADHA system. This saves the bank from having to make out of pocket ‘write-downs’ on this first 25% of losses.

Let’s say a bank needed to write-off 40% of a property’s principal in order to sell it. The RADHA mortgage system writes off the first 25% of that principal. Out of 40%, the bank needs only to take a write-off of just 15%. RADHA reduced the banks write-down by 60%.

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Simply put, RADHA reduces the homeowners monthly by 25% while also covering the first 25% of any write-down a bank would have to otherwise cover in a distressed market.

Here’s the best part. The RADHA Mortgage is not actually a write-down of the loan like the other loan modification programs. RADHA is in fact a complete refinancing of the original loan, but it simple has the equivalent of a much lower interest rate. RADHA therefore avoids the host of accounting contortions required of other loan modification programs. This is a critical advantage on the accounting side.

2) Step-two of RADHA Magic: 4 years vs. 30

The RADHA Mortgage refinances this 20% amount into a 4 year mortgage. It would appear that it is the ‘same’ (20%) mortgage we just took from the ‘original’ loan. But there is something quite different about it. The time value of money is now based upon 4 years of interest versus the 30 years of the original mortgage. Refinancing the loan in just 4 years reduces the amount of total interest paid by over 25 years. This in turn reduces the cost of this ‘1st Term’ loan by the same 20% to 30% - depending upon the original interest rate. (It took the longest time to figure out why the 1st Term Loan was also 25% cheaper.)

We now have two loans that have reduced their interest cost by 25%. (We use 25% as an average.) The first of these loans reduced cost by getting 20% of the principal paid off early. The second loan reduced cost by shortening the terms of the loan from 30 years down to just 4.

We have now divided the loan into two parts:

It works much like the auto-lease system. It has two loans. The ‘2nd Term loan’ is held in reserve while the ‘1st Term’ loan is being paid off.

There are two loans:

a) ‘1st Term Loan;

b) ‘2nd Term Loan.’

The ‘1st Term Loan’ makes up 20% of the total mortgage.

The ‘2nd Term Loan’ covers the remaining 80% of the mortgage.

This 1st Term Loan of 20% is paid off in 4 years (at 6.5% interest).

The remaining 80% is put on hold at a low interest rate of say 1% to 2%.

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This portion of the 2nd Term Loan waits (generally) unpaid but it is collecting interest while the ‘1st Term’ loan is paid off. This waiting period on the ‘2nd Term Loan’ is called the ‘Interim loan. ‘

The 2nd Term Loan is refinanced in the 5th for 26 years (at 6.5% interest or whatever market rates are.)

Let’s use some numbers now to make it more specific.

30 year Mortgage

$200,000 Mortgage

6.5% = Interest Rate

$1,275 = Typical 30 year Mortgage.

RADHA Mortgage

$40,000 = financed in the ‘1st Term’ over 4 years.

$995 = Monthly Payment; 25% less than typical mortgage

$180,000 = 2nd Term Mortgage, financed in 5th year for 26 year term.

$1,100 = Monthly Payment; 22% less than typical mortgage

Mortgage brokers mistake RADHA for an ‘Interest Only’ loan. An Interest Only Loan finances the ‘interest’ on your loan. It’s paid off over 4 years as well. It’s cheaper because you pay nothing on your principal. At the end of this 4 year term, you refinance it. However, you are still left to pay the full amount of your original loan. In this case, it would be $200,000. RADHA is radically different than this Interest Only Loan.

RADHA actually pays off 20% of the principal. This leaves you with a 20% equity in the property after just 4 years. The credit unions using this system had therefore renamed the program: the FAB Mortgage = Fast Equity Builder. It’s the only mortgage program that builds this huge chunk of equity in just a few years.

The RADHA mortgage now has two financial role models to use for its legal template:

a) The auto-lease-to-own

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b) The Interest Only Loan

RADHA does not require a ‘new’ legal template. It already has two legal models to work from.

3) Step 3 of the RADHA Magic: Wholesale Rate

It appears that the bank is ‘getting nothing’ for its ‘Interim Loan’ while it waits for the ‘1st Term’ loan to be paid. But it does get paid for this. Here’s how.

The RADHA mortgage has once again leveraged the time value of money. The bank receives 20% of the loan in a one lump sum, up front. It’s like going to a landlord and offering to pay 4 years of rent - upfront. However, you ask for price break. Because you are PRE-paying, you ask for the ‘wholesale price.’

Let’s say this wholesale rate equals 25% less than the monthly rent. Many landlords would accept this offer because they appreciate the ‘time value’ of money. 25% over 4 years is 6% a year. Can the landlord take this money today and find another investment that will pay them this same 6%? If yes, the landlord would be happy to take this up-front cash purchase at a wholesale price. This is true of the banks too. Banks would be getting paid up-front. Banks will receive less money because they are not getting 30 years of interest on it, but they still have not lost money on it either. Here’s why.

The bank can now take that money it just received from the ‘1st Term Loan’ and reinvest it into another project. The bank can collect interest on that new investment. This allows the bank to tap that same ‘time-value’ of money but does so on a new and different investment. The bank no longer collects the interest from the homeowner, but it does not need to. Even though the bank received less money up-front, it can still collect the same difference from a new party.

i) (We gather that this is the secret to the auto industry’s low interest rates on their auto-leases. They have collected the money up front allowing them to reinvest it to make up the difference on their low interest rates.

It looks like this would be a great investment for a homeowner as well. If a buyer used their own savings, they would be paying themselves this same 6.5% return (in interest). This would be on top of the of 25% discount they otherwise would pay in rent/mortgage. This would be tax-free income because savings are not taxed. The combined savings and interest pay-out offer a 12% return a year. We then have the mortgage deductions as well. This offers additional savings in tax write-offs pushing the returns up by another say 5% a year for a total of 20% over 4 years. We may be looking at a 75% return on investment - or about 17% a year. I need to confirm this.)

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4) Step 4 of RADHA magic: Double Downs

Upon paying off the 1st Term Loan, the buyer can either refinance the remaining difference or walk away free and clear. This will allow a host of homeowners to remain credit worthy even after their finances have changed. This short, 4 year, time frame is a much easier commitment for buyers/renters to make. This expands the market reach of buyers.

The other big advantage is that it reduces the size of the down payment. RADHA breaks the down into two payments rather than just one. Say the bank wants a 20% down payment on a $200,000 home. That’s a hefty $40,000 downpayment. RADHA allows the buyer to come in with just $10,000 for the 1st Term Loan. The home-owner now has another half decade to get the remaining $30,000. Requiring a 10% down payment would only take $5,000 for the 1st down and $15,000 for the 2nd Term Loan. These lower down payments are again expanding the market reach by making it more affordable to more buyers. It basically transforms renters into lease-to-own buyers. This allows for a far more stable market and committed buyers.

(We present RADHA as the more effective and market based replacement to Freddie Mac and Fannie Mae affordable housing program.)

RADHA is different from a Subprime mortgage. Subprime buyers had low downs and monthly payments as well, but they never built any equity in the home. RADHA is the exact opposite. The buyer now has a 20% equity within just 4 years. That equity rises to nearly 35% upon making their second down payment.

The down payment is now easier for the buyer, but it also makes any write off by the bank far more affordable as well. In today’s market, banks had to write off 40% to 50% of a property within a single year. Many banks could not afford this massive capital demand and so there were nearly 1,000 banking bankruptcies. Most of these would not have happened under RADHA program.

The RADHA program provides the bank 5 years to make these write-downs. A 20% write-off comes to just 4% a year – or they could pay it all in the 5th year or whatever suits them. The 5th year would be an ideal time to make any additional write-offs because they have just received the remaining capital in refinancing the remaining loan. The bank now has money in hand to make any last write-offs.

There remains one additional advantage. Real estate markets tend to change. The low real estate market of today could be 20% higher in 5 years from now or visa versa. RADHA bridges the bank and homeowner to this higher market value of the future. Or allows them to know they are making a smart write-off against a lower priced market. Today, banks are cautious to write-down a property if they think it will be worth more in 5 years from now.

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RADHA leverages the time value of money, but it also taps the time value of real estate. Real estate invariably appreciates over time (though there are windows of lost value). The longer you can extend the terms of debt reduction against real estate, the more we can tap the time value of real estate to pay-off debts. Time itself becomes the payer. It’s a really kewl concept.

RADHA provides the bank 5 incredible advantage over a traditional 30 mortgage:

f) Capital infusion of 20% against entire distressed property portfolio.

(This would have replaced gov’t bailouts and avoided 90% of all banking bankruptcies.)

g) Reduces amount of principal write-down by covering the first 25% of such loss.

h) Extends the time frame for making any write-offs from 1 year to 5.

i) Bridges bank/homeowner to higher market value of tomorrow.

j) Affordability dramatically expands market thereby stabilizing prices and speed of resale.

5) Down payments smaller – Leveraged Impact on Monthly.

This final benefit is what can guarantee a market turnaround. Dividing the loan up into smaller parts means that any down payment on them has a leveraged (multiplied) impact upon the monthly mortgage.

Our example above has the $200,000 mortgage refinanced into a $40,000, 4 year mortgage. This reduces the monthly payment from $1,275 to just $950 or 25% less. Let’s now add a $10,000 down payment to this $40,000 mortgage. This falls to just $725 or one half the original mortgage payment. $10,000 represents just 5% of the total mortgage, but it drops the monthly payments by 50%. This smaller loan segment allows us a leveraged impact on the monthly.

This is of course far more affordable for the homeowner, but it also means that the bank can now have their property sell at market rates (of 50% less) with just a 5% write-down.

This works again for the 2nd Term loan on the remaining $180,000. All you have to put in is a small 15% down payment of $30,000. It represents just 12% of the original loan, but it reduces the monthly by 50% for a monthly of $775.

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The bank can take steeper cuts on the principal if necessary, but RADHA allows these contributions a multiplied impact because each of the loans are now smaller.

This offers buyers 5 big advantages:

f) Mortgage is reduced by half

g) Down payment is 80% smaller

h) Term is just 4 years rather than 30

i) Affordability expands market appeal allowing easier resale if necessary

j) Provides 20% equity in 4 years

Once combined, RADHA could and can solve our real estate and banking crisis. As such, please share this with as many people as possible and see about creating a market demand for it. Banks will than offer it once they know people are clamoring for it.

(Add letter of recommendation from Credit Union – Use to open article..)

(Editors Note: The latest Edition of the RADHA Mortgage book was rewritten from the original by the company transforming it into a business plan. They changed the tone of it with such things as a reference to prince charming. Need togothrough and rewrite it again in my own voice, but all the material is there.)

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Section 6

Chapter 2:

What Happened to the 2nd Mortgage & PMI

Insurance?

The Problem & Solution to the Real Estate Crisis

This was written backin 08.

Numbers by Guerrilla Economics

Written by Raghu Giuffre,

Do you remember the old world of the 20/80 mortgage?

The ‘2nd Mortgage’ made up 20% of the home loan and took the hit if there was a problem. This 2nd mortgage made up the bulk (or entire loss) of a home loan gone bad. In return, banks charge(d) us higher interest rates for this 2nd mortgage. This seemed fair so we pay it without protest.

This higher interest rate was on top of the PMI insurance. PMI insurance provides banks one last back-stop. PMI pays the first 20% in losses on the foreclosed property. Many American’s have paid for this PMI insurance while all of us pay penalty interest rates on our 2nd mortgage. Rather than having these programs smooth the transactions, the 2nd mortgage holders are proving the most intractable party in these loan modification efforts. As for PMI, they went AWAL. What happened to the PMI?

The 20/80 mortgage system would have resolved much of this real estate mess had this one last step been honored. Last summer, housing prices had dipped by just 10%. Three months ago (end of 08), prices had fallen within this magic 20% margin. Today’s

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average market price has fallen by 30%. This means the 1st mortgage holder should only need to take a 10% loss to resolve these loans. PMI and the 2nd mortgage holder should be paying the rest. Why are banks now taking 40% to 80% in write downs? The simple answer lies in the failures of the PMI and 2nd mortgage providers to fulfill their allotted roles.

To suggest that these two players meet their contractual obligations would seem obvious, but it actually led us to something entirely different. Instead, we took a second look at this 20% of the (2nd mortgage) home loan. We found that financing this 20% into a 4 year loan reduces the homeowner’s monthly payments by 25% (over the typical 30 year mortgage). The monthly payments drop 50% by simply adding 5% more (of the loan amount). The homeowner now has a short, 4 year commitment that cost 50% less. Once paid, they can then refinance the remaining 80% in the 5th year or walk away free and clear.[1]

This offers the homeowner 3 big advantages.

1) Monthly payments are reduced by 25% to 50%.

(This means 25% less debt and 25% more petty cash for homeowners. This will free up money for credit cards, medical bills, student and auto loans, etc. This in turn helps all other industries being squeezed by today’s crisis. It’s the ultimate stimulus package and lasts for 30 years.)

2) More flexible loan terms. It’s a short, 4 year commitment rather than 30. The smaller monthly (& down payments) means lower credit requirements needed to qualify.

(Reducing monthly payments by 50% makes it cheaper to own then rent. This expands the number of qualified buyers. Most renters will qualify and real estate will boom once again.)

3) The property has a 20% equity in 4 years or comes onto the market at fair market value making it easier to sell or refinance for both buyer & bank.

(Today’s properties have fallen by 30% to 50%. RADHA has the homeowner pay off the first 20% of the loan with this 4 year mortgage. Banks can take a 10% write down in the 1st year. Any remaining write down (of say 10%) can be done when the loan is refinanced in the 5th year. This will have paid off 40% of the mortgage by the 5th year. Banks now have a couple ways and a half decade to write off any amount above the 20% paid by the homeowner. This beats taking a 50% write-off today as banks are being forced to do in today’s system. [2])

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As a final bonus, banks get this huge 20% capital infusion against their total mortgage holdings for they can now sell this 20% mortgage to third party investors. The remaining 80% of the loan amount, meanwhile, is kept by the bank at a rate of just 1% to 3% during this 4 year period. This low interest rate is offset by the large capital infusion banks get to pocket upfront. Citibank, for example, has $300 billion in mortgage backed securities. Citi would receive $60 billion in new capital within 30 to 90 days of this program or about twice Citibank’s present value.[3] RADHA provides banks with the two commodities they need most: cash & time.

The OAS Credit Union and the Credit Union Mortgage Association have begun using this RADHA program. More should follow shortly. The point, this program required no gov’t bail out or new regulation for them to use it (though it would be very helpful).

[1] Dividing the loan up into 2 terms like this is taken right out of the auto lease system wherein you

make a down payment and pay monthlies on the first loan for 2 to 4 years. You can then walk away or

refinance the remaining amount and keep the car. Millions of drivers have used this to finance their autos

for decades. The only different here is that we have applied it to real estate for the first time. This program

swaps the 20/80 mortgage positions. The 20% mortgage now takes 1st place and can be backed by

Fannie Mae along with a good interest rate on a mortgage that cost the homeowner 50% less. It can rent

for more if owner walks away. This adds up to a great deal of incentives & security for investors.

[2] This new mortgage offers homeowners more incentives over today’s other loan modification

programs. Today’s programs either reduce interest rates for a few years; extend the loan from 30 to 40

years; or give banks an equity position in the property. In each case, there is no equity value to the

homeowner and often, the reductions are so small as to still be unaffordable. This has left growing

numbers walking away even when their homes were refinanced. In this program, homeowners not only

stay in their homes, but they finally have affordable payments and real equity stake within 4 years. The

50% mortgage reductions makes the property an easier sell even if owner walks away.

[3] Citi Bank receives $240 billion in the 5th year when the remaining mortgages are refinanced into

26 year loan terms at normal interest rates. Citi would make any last write down in the 5th year.

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Section 7

Solutions to Debt:

Leverage Debt Reduction

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Section 7

Chapter 1:

There’s no Real Estate Crisis

It’s an Accounting Mistake

Bank & Insurance Paying-off Same Mortgage

(Wrote this back in 08)

By Raghu Giuffre

How many names can you think of for ‘home loan?’

Mortgage. Securities. Credit-default-swaps?

Different names, same loan. The titles may have confused the accounting as we explain.

The lender asked the homeowner if they would like a loan. Let’s say it’s for $100,000.

The homeowner said yes.

Lender loaned this loan and now called it a MORTGAGE.

The lender took this $100,000 mortgage and sold it to a Wall Street bank.

Banks packaged this same mortgage and called it a Real Estate ‘SECRURITY.’

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Banks felt very insecure about this security, so they asked insurance companies to insure this security against default (should the homeowner stop paying their home-loan).

Insurance companies agreed to insure this loan by CREDITING it against DEFAULT and so they starting calling it a ‘CREDIT DEFAULT SWAP.’ (These could also be Swapped in the market.)

Different names by different companies but it’s still the same home loan.

Accounting Mix Up

Now for the accounting mix-up. Wall Street stepped in and counted the banks (real estate) Securitized Mortgage as $100,000 asset. Wall Street then went over and counted the insurance company’s Credit Default Swap as a whole new $100,000 asset as well. So Wall Street said we have two assets for a total of $200,000 worth of assets (one from the bank and one from the Insurance company). But we don’t. They are just counting the same asset twice - under two different names.

The Securitized Mortgage and the Credit Default Swap are actually just two sides of the same coin. One positive if the homeowner pays, the other negative if they default, but both are based upon the same asset of that $100,000 mortgage.

Simple Answer

Now for the interesting part. Let’s fast forward. Here we are today and both the bank and the insurance company are now writing off their respective ‘securities.’ This means they are actually writing off against this same home loan.

Let’s say each industry has now written off 35% of their own securities. Combined, they have actually written-off 70% of this $100,000 loan. This write-down is recorded by each industry separately, but never recognized collectively.

All we are asking is that we take a second look at this issue. (We will find some kind of duplication. For example, there were $65 trillion in Credit Default Swaps at the height of the market. This was the equivalent of 5 insurance policies for every one of the real estate loans made. Paying off home loan should take care of 5 CDS policies as one of many examples.)

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Securitized Mortgages Hid Duel Write Down

No one sees this duplication because mortgages have been securitized (which divided the mortgage into little pieces and sold them off to different buyers). This has made it nearly impossible to follow the individual mortgage through its securities process. However, collectively, these securities can be traced by following the industry as a whole. Looking at the industry shows us that banks have written-off several times more than the actual real estate value from which these securities were issued.

Real estate has fallen (on average) 35%. Yet securities are selling for just 15 cents on the dollar (they are now trading for a more). This gives us a 50% disparity between real estate and their corresponding securities. This leaves much of the banking crisis looking more like a misreading of our securities rather than the true measure of collapsing real estate.

(And now the Good News: AIG has far less liability then investors realize and so, it’s also worth significantly more. Ditto to our banks. Maybe we are getting a good deal on our bailout money after all? (Pre-AIG Bailouts & updated after.).)

No More ‘Underwater Homes.’ No More Toxic Loans.

The conclusion: WE CAN recoup a great deal of this extra value by simply running the money through the entire mortgage system once again, starting with the homeowner. The ‘OTHER WAY’ to get rid of all ‘toxic loans’ would be to refinance all ‘underwater’ homes (that owe more than they are worth). No More ‘Underwater Homes.’ No More ‘Toxic Loans.’

The benefits of refinancing homeowners (in place of banks):

· It cost about 5% to 10% the price (of the TARP program) and paid in weeks (it takes to refinance owner) rather than years (as required by TARP). (This was re-presented during the TARP debates legislation)

· The securities are paid in full. ·Banks are refunded with rebates of 30% to 70% in return for their (excessive

write-downs on the mortgage) securities. ·And it’s a market based solution rather than a gov’t takeover of the banking

system.

Helping homeowners in place of banks cost less, it’s a lot faster, and much more profitable.

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Both banks and Washington have now committed to refinancing most distressed homeowners anyway. They have the money budgeted to do so. There is no need for further legislation or money. Just show them this ‘secret’ of the mortgage duplication and the world will finally see the bottom of this problem and all the value just waiting there for us to tap.

End here for abbreviated article. Include following for extended article.

Financed with Write-down

The best part of this approach is that banks can simply pass along the write-down they already made when they wrote off their (mortgage) securities. Banks need only credit this same write-down onto the homeowner.

This means no additional capital needed to refinance homeowners into lower mortgages. The bank can instead take these write-downs and use them like a new capital pool for lowering home mortgages. This ‘new capital’ could replace gov’t funding now slated to help pay-down the homeowner’s mortgage. (This saves gov’t from spending on both the bank and homeowner.)

If the bank made a 70% write-down on their securities (as an example), they would pass 35% of this off onto the homeowner. The homeowner gets 35% knocked off from their mortgage. The bank gets Refunded the (35%) “Difference.” (The ‘Difference’ is between the 70% write-down they took in our example on the securities and the homeowners 35% lowered mortgage).

It is nearly impossible to match each investor with each loan. So the simple approach would be to apply this industry wide offer. It could be for say a 35% write-down on all (underwater) homes (mortgages).

The lowered mortgage converts these banking write-downs into new spending power for the homeowner. The homeowner now has this new found spending power. This transforms our struggling homeowners from banking-liability into America’s next wave of economic activity. It’s the ultimate stimulus package. (No more gov’t stimulus required.)

This may sound ambitious, but let’s compare it to the old TARP approach now being repackaged by Pres. Obama. Remember the huge debt reduction we saw when we combined the write-downs by the bank and insurance company? They each wrote-off just 35%, but combined, the write down actually equals 70%.

Well, this added leverage works in reverse if we try and pay off the bank & insurance company separately. (This is what we see of the TARP approach). We have to pay-off 100% of the banks securities and then pay off another 100% of insurance companies ‘securities. This is what TARP is attempting when the Federal gov’t bought $2 trillion

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worth of real estate securities and then went and tried to bail out the insurance companies ‘credit-default-swaps’ too. Basically, we paid off the same debt twice. Of course, this will create inflation. You just paid twice the price for the same product. And yet, this has not even touched the homeowner’s debt.

The gov’t is also treating the homeowner’s mortgage as an entirely different debt altogether (though it is also the same asset as the one already counted by banking and insurance securities). So the gov’t has set up a whole new fund to help homeowners. This leaves the gov’t trying to bailout the homeowner, the banker and the insurance company separately. Put another away, the gov’t is paying off the same home loan (security) 3 times. This is why the bailouts have such little impact. Each dollar only covers one third, to one quarter of the total ‘paper’ debt.

Let’s contrast this to helping the homeowner. Make the mortgage affordable to the homeowner. The bank and insurance company have automatically covered their entire debt. Helping American’s homeowner takes a fraction of the cost (30% vs 200%) and yet everyone gets this instant performing asset instead of a crushing financial liability.

Yeap, this financial crisis appears to be more an accounting glitch rather than about falling real estate prices. The upside is that solving the crisis may be as simple as fixing this accounting glitch. All we have to do is re-state the full value of all these write-down’s by the banks & insurance companies. We will then see that this liability was written-off a long time ago. We can do this by simply refinancing the homeowner into a more affordable mortgage. The gov’t has already set aside the money for the banks to use for this. The banks are now working to do this anyway. The only difference now is we can be sure that this time, our efforts will work.

These are some of the issues outlined in the book: ‘The Trillion Dollar Discovery.’

John ‘Raghu’ Giuffre is a NY Realtor (presently in Hawaii) who has worked with Guerrilla Economics on a new mortgage system that will help much of this real estate crisis. It was in outlining this mortgage program that many of the issues like those discussed above were discovered and became the book: The Trillion Dollar Discovery.

The book is available at lulu.com. Search under Trillion Dollar Discovery. Here’s the link:

http://www.lulu.com/content/paperback-book/trillion-dollar-discovery/6491549

There will also be information on our website: roopa.org.

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Section 7

Chapter 2:

Solving the $350 Trillion

Derivatives Time Bomb

Applying Leverage Debt Reduction

Part I:

Multiple Parties Backed by Same Asset

‘There is no real estate crisis. The whole thing is just one big accounting mistake.’ This is the explosive claim by Raghu-nomics in their video/article called Leverage Debt Reduction or LEDER. LEDER explains how banks and insurance companies have been writing off the same real estate asset without realizing it. As such, each ‘write-off’ has paid off multiple counter parts. Simply put, every home mortgage in America may have already been paid-off. This was covered in previous articles and most recently in ‘Leverage Debt Reduction.’ We now go on to demonstrate how this double pay down is likely true for much of our other debts as well. Once this is understood, it should help us unravel the $350 Trillion Dollar Derivatives Market into an affordable debt reduction programs as we discover a growing number of pockets of equity and other values.

Let’s begin with our opening example of the rental car insurance used throughout our other presentations. Many of us get the $12 a day insurance premium when renting a car, however, if you use the American Express Card, the auto insurance is included

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automatically. If you have a commercial driver’s license, it too will cover you in case of an accident. The car rental company also has its own insurance policy.

This totals 4 insurance policies on that same car:

1) Your $12 insurance premium.

2) Your Am Ex Card insurance.

3) Your Commercial Driver’s License Insurance.

4) The auto rental companies insurance policy.

The point we make with Leverage Debt Reduction is that if just one of these policies pays-off the car, the other policies are automatically paid-off too. Here’s the best part. The car is also entirely paid off as well. This is what we have today. Wall Street tracked all the liability recorded in each of these auto insurance policies without tracking how the asset, the car itself, was already paid off by one of these ‘other’ insurance companies.

What happened in the real estate market is a little different. A better example would be if each of those auto insurance companies took a 25% write-down on their liability for the car. Even though each only wrote-off 25%, once combined, it equals 100% of the cars value. This is what happened with the real estate securities market due to the gov’ts ‘Mark-to-Market’ accounting requirements, but we will get to that later.

We will add in one more layer of ‘debt’ to better exemplify the true nature of today’s so-called trillions of debt. There is an additional ‘claim’ on that car. This claim is by the bank and is on top of all this coverage by insurance companies.

For our example, the bank has an outstanding liability of $10,000 in loans on the car to the rental company. The bank has also taken an insurance policy on that loan. This insurance policy is to cover the rental company should they default and not pay for the car. This gives us 5 insurance policies. Four of these policies are by the insurance companies. The last policy is taken by the bank.

Real estate securities have a similar counter-part that offers a similar kind of insurance policy. They are called Credit Default Swaps. They averaged about 5 Credit Fault Swaps = CDS, for every home mortgage in America. One of those CDS was taken out by the bank when the homeowner took the loan (in the event the owner defaults). Many of these CDS were written down as did the bank. These write-downs were done as direct write-offs or happened via bankruptcy. In the housing market, the driver is the homeowner and that homeowner is still paying on that loan. By refinancing the homeowner, the bank gets to be refunded against all the equity paid by these different insurance policies that were written-down. Refinancing homeowners into a new mortgage at the homes market price would hand the banks trillions in refunds. Let’s wrap up the example and demonstrate our point about this Leverage Debt Reduction.

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Each of these insurance policies are for a $10,000 payout on the car. Once combined, these 5 policies register as a massive ‘liability’ of $50,000. This is on top of two more ‘debts.’ The first debt is by the bank who loaned the money to the rental company and the second debt is recorded by the auto rental company itself. This shows up on Wall Street as $20,000 worth of loans on a $10,000 asset, the car. Now add in the $50,000 in insurance liabilities recorded by the insurance companies. This gives us a combined $70,000 worth of ‘liabilities’ and ‘debt.’ This entire $70,000 of ‘liability’ is backed by nothing more than this same $10,000 asset – the car you are about to rent and drive.

LEDER simply points out that we have this large cross section of duplicate copies of debt and liabilities against this same one asset – the car (or home). Once any one of those 7 areas of debt or liability are paid upon, it reduces the liabilities on all these other holders as well. Such write-downs were done in a number of ways such as banks and investment companies taking direct write-offs on their holdings or in other cases, going bankrupt. Sometimes, insurance companies paid on their policies meaning that the homes backed by those policies were then paid off in full. The bank refinancing the home at market prices would provide a bonus payment to the bank. Our initial assessment indicates that most, if not all, this real estate liability may have already been paid off through these multiple options and write-offs. We will offer more examples of this for other areas of debt as well, but let’s first take a minute to re-frame the discussion as presented by today’s growing Experts of Doom.

Today’s economic preachers of gloom and doom come in and hold up this $70,000 worth of liabilities against this $10,000 auto asset. This is their ‘proof’ that our entire system is a fraud built upon none existent paper money that has no value. And yet, somehow, things continue on for another day, another year and now with this financial crisis, almost another half decade.

Why?

How?

These ‘experts’ have found all the liability, but they have no insight about the corresponding players and value. As such, they have no ability to find or tap such value that can and does offset most if not all this liability. Our demonstrations here offer examples to show the step by step process on how to identify and tap such corresponding values, players and assets. This provides a host of advantages over the experts of doom.

LEDER can out-perform Wall Street’s experts too for they have been confined to view things from their own ‘company’s’ immediate bottom line rather than seeing the broader market trends that hide these assets. To identify these values, we should first understand how and why the US lost track of them. As we walk through these ‘accounting’ mistakes, the hidden values become more obvious and the ‘solutions’ more simple to harness. Most of all, we will finally see that this entire economic crisis was built upon mis-indexing a host of assets from every major sector. It’s a stunning

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revelation find all the corruption of the housing industry was rather tiny by comparison and that the bulk of our economic problems was not the war, housing or tax cuts, but was primarily caused by this series of accounting mistakes. Now is the time for you to disagree with me because once you read this, you will understand the full scope of this claim.

*. *. *.

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Part 2:

4 Causes of Accounting Mistakes:

These ‘accounting mistakes’ have five factors that converged to create the greatest mis-indexing of the country’s liabilities and values ever recorded. Four of these ‘accounting’ issues were never before part of the financial system and hence, the over sight could be somewhat justified. There was no text book to require our accounting institutions to take a second look at all the different areas of these ‘new’ systems. Unfortunately, these 5 issues combined to multiply the market miscalculations exponentially.

They are:

1) Securitized Mortgages 2) Automated security trades 3) Credit Default Swaps 4) Mark-to-Market Accounting 5) Overstated Market Bubble

(Editors note: I wrote this out over about 2 days as I was packing to move out of here. I could use some checking and editing.)

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1) Securitized Mortgages: Grouped into single currency of lowest common denominator

The first of these is the Securitized Mortgages. Securitized mortgages are not new, but the Bush years took this ‘investment’ and retailored it into a new breed of ‘financial instruments’ that included such things as ‘derivatives’ and hedge funds, etc. Simply put, two things happened with this new generation of securities.

The first new feature was that these securities could be sub-divided into ever smaller parts called ‘trounches.’ This allowed a single home mortgage to be sub-divided into a half dozen or more parts. These trounches were scattered into as many portfolios of as many different investors. These were further subdivided when investors deciding to sell portions of their portfolios to other third parties. This mixed and matched securities into an untraceable maze of ownership nearly impossible to pinpoint.

The second feature of these ‘new instruments’ was how much further it allowed investors to ‘leverage’ their ‘assets’ (securities) by multiples never before seen. All this leveraging further complicated tracking securities against their corresponding assets – the home itself.

De-linking these two sides of the investment (home against its security) ended up placing ‘all’ securities into a single breadbasket of value. This value was now based upon the overall market trend as a whole rather than the value of each individual home and buyer. Therefore, the portfolios were written down in mass against the ‘market value’ rather than against actual homes. There is far more equity in assessing the individual homeowner, neighborhood and other such market nuances missed by a general market trend.

All securitized mortgages had collapsed to the ‘market’ rate. The market rate for securities in 2008 had fallen to a low of just 10 cense on the dollar. What’s most telling is that the real estate market itself had only fallen by only 20% by then. There was a 70% differential between the securities value and their corresponding real estate asset. This was the first red-flag to me as a Realtor. We were experiencing something of a phantom market implosion. We had created a market bubble, but it was a bubble of phantom debt and understated equity. This was not caused by over stated housing prices, but understated asset value.

As a Realtor, I recognized that the bulk of this market correction was confined to just 10% of the market place. Out of 45 million US homes, only 5 million homes (back than) had lost this 20% of their value. In other words, the total 20% market ‘correction’ was true for just 10% of all homes. Only 5 million homes were underwater out of the nation’s 45 million residential properties. These 5 million homes were underwater by only 20%. Its specific impact therefore was a negligible 2% of the total market value (20% of 10%). The best part is that it was still only a ‘potential’ liability rather than an active one. Most

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of this struggling homeowners were still paying their mortgages. Real estate securities should have reflected this small 2% market liability and not fallen much further. Why did they fall so much more than this?

The simple answer is that securities were being indexed at a bulk-rate pricing scheme. All securities were treated as a single currency and so all of them were reduced in unison down to the worst case scenario. That worst case only represented this small, 10% market segment of the housing market whose outstanding liability was just 2%. And yet, they had to reduce all securities to this lowest common denominator.

Why?

The reason is embarrassingly simple: no investor could accurately state how much of their own portfolio held this 10% in ‘toxic loans.’ The result, all securities were treated as potential carriers of these toxic loans. This was only the beginning to a series of overstated liability, understated value and mass hysteria to fuel it. Such is the power of ‘accounting mistakes.’

The securitization of real estate loans became the equivalent of a single currency rather than being representative of 45 million separate homes of nuanced market values and owners of varying resources. This bulk rate eased the way for massive trading options, but it also disconnected them from a far greater value possible in a micro-managed system of small community banks with in-house, home loans for members they knew personally. That system of micro-management we now know to be worth the $14 trillion in lost securities value created by these stand-in security mortgage ‘zombies.’

This was covered in my first book on the real estate crisis called the Trillion Dollar Discovery and so began my trips to DC to canvass Congress and banks about this Discovery and our RADHA Mortgage program. I thought if I had the answer and could show it to them, that our political representatives and media would be interested. Here we are 5 years later and still no traction.

It was a pleasant surprise to find that many key members of Congress already knew this in part. Barney Frank for example gave me 10 minutes to explain how they saw the banking bailout as an ‘investment.’ He knew (as did other leading members) that this 10% sales price on securities was absurdly low. In a short time, these securities would regain most of their original value once markets came out of their panic mode. Or so they reasoned. The banking bailout therefore was not based so much on ‘saving’ the system from collapse, but viewed as a bridge loan to a rather good investment. They didn’t see it as throwing good money after bad as told by many media reports. Most Democrats counted on getting a full return on these federal bailout ‘loans’ and in large part, they have proven correct so far.

I agreed with Barney Frank in principle but countered that the most affordable response would be to refinance all underwater homes into their reduced market prices. Underwater homes represented a faction of the total market and so would have a

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combined cost of just 2% against the market’s total value. In contrast, the bailout would require the Feds to take on much of the entire securities market. This was a behemoth by comparison.

The real estate market at the time was estimated to be worth about $12 trillion. A 2% write down would run about $240 billion. I proposed that this could be split between the banks and Uncle Sam. This would run about $100 billion each. In a worse case, they might need to do this for up to 4 years. This would bring the total cost to $400 billion, over a half decades time. That was half the size of just one lost institution: Lehman Brothers which fell from $800 billion, but sold for $20 billion to Chase.

I calculated it would be much less than this $400 billion. Here’s why. Most distressed homeowners were in hardship because of their ‘sub-prime’ mortgage. Their affordable low-interest rates had expired and they now faced sudden interest hikes. Their rates jumped from a low of 2 or 4% to a crushing rate that could be as high as 11%. A home mortgage running about $1,300 a month could double to say $2,400 a month. This was true for 70% of all distressed properties back in 08. Buyers only ran into problems once they were hit with these rate hikes. Buying bigger homes than they could afford was a minor element of the problem back then. These huge interest rate hikes were at the heart of the problem. For most of these homeowners, refinancing the home back into lower interest rates would have made their payments affordable once again. Such refinancing would have saved the banks from having to take a write down on the principal, but they didn’t know a good deal when they saw one. Banks resented homeowners trying to ‘weasel’ their way out of these contracted higher interest rates. They didn’t want to lose those higher profits and so refused any consideration for refinancing much as some still do to this very day. The cost so far is over $17 trillion in just lost stock market value.

We offered our RADHA mortgage program as the simple solution. RADHA reduces the homeowner’s monthly payments by this same 25%. No further write-down by the bank would be necessary. Now, you may understand why I dedicated the last of my resources and quit my job to promote the RADHA Mortgage. It would have solved the entire real estate crisis before it had a chance to pick up momentum.

Refinancing all underwater homes at market rates would have retired all real estate securities at full price. This was important because the greatest financial liability was with the securities market rather than the real estate market. Taking the ‘hit’ on the real estate loan was far more affordable than trying to re-balance the securities side. The Credit Defaults Swap market was running about $65 trillion in 07. The real estate market was only $12 trillion. It was one 5th the size because there were 5 Credit Default Swaps for every home mortgage. The gov’t’s bailout was trying to tackle the debt issue by buying from this $65 trillion side of the mortgage equation. We were approaching it against this 2% in liabilities on the $12 trillion in housing mortgages. Our RADHA approach had a clearly defined cost of just $250 billion. The banking bailout started at $4 trillion and was expected to rise from there. This personifies the Leverage Debt Reduction program. LEDER can more accurately assess the true cost over other

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reforms trying to tackle insurmountable debt. We will demonstrate how that can work for other areas of debt as well.

Writing off the real estate asset was much cheaper because of the nature of leveraged assets. In other words, the securities market had these multiple claims on the same housing asset. Writing off each of these counterparts would involve a great many more steps and parties rather than simply refinancing the homeowner. Writing off the home mortgage automatically resolved all those outstanding securities. It was so simple and provided a clearly defined re-pricing against the homes true market value.

‘Investor resistance’ to this approach is the story of traditions fighting new solutions. The old real estate model was to foreclose on the distressed homeowner. This system worked prior to securitization of home mortgages. Once Wall Street switched over to securitized mortgages, refinancing and writing-down the home became the more effective way to handle the situation on a nationwide basis.

Redressing the homeowner is the only affordable means to deal with securities in a nationwide meltdown. Many investors failed to see that the old ways no longer worked. The greatest resistance was not based upon old business practice alone, but ideology. Liberals despised Wall Street and rallied for the homeowners they considered victims. Conservatives blamed overreaching and cheating homeowners that should now face the penalties of their irresponsible behavior. In both cases, this had little to do with the economics of the situation or the means to effectively resolve it. It was based upon perceived behavioral infractions that should be punished as a matter of moral discipline rather than savvy economics. This distorted the obvious solution of simply refinancing homeowners into market priced home mortgages. Both parties were resistant. A homeowner’s bailout would have made banks whole along with Wall Street investors and homeowners too. Policy without punishment to your counter ideological rival rings no political bells in DC and so this brand of policy consideration finds no emotional traction like those served up in conflict policy.

I had hoped our assessment of the market condition would have allowed us to step beyond this political blame game. This approach would ‘save’ both the securities market as well as housing. It would also cost so much less and it would prove far more effective than all the federal bailouts to date.

The immediate federal banking bailouts of 08 totaled around $5 trillion. This was shared between the feds and treasury. It is likely more than this when factoring the other sources like state and local gov’t programs etc. This ‘bailout’ now represents about a third of our entire Federal Deficit. Resolving the real estate issue will pay off this same $2 to $4 trillion of our federal deficit held in real estate securities. This became the basis of our ‘15 Reasons to Bailout Homeowners’ campaign we initiated back in 08. It can be found in our press releases of the time. Our program would have cost less than 10% these bailouts, probably much less. It would have also finally resolved the housing and securities crisis - which the bailouts did not.

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The point here is not to sell you on the policy prescription, but rather, how the accurate assessment of the situation allows us a clearer picture to the way forward. It’s a tool that can better measure what is most affordable and the most effective plan of action. Today’s political and economic models simply don’t work anymore. Our policy makers have been reduced to flying in the dark with no clear sense of what, where and how. Prior to this crisis, there was always this sense that the ‘experts’ in gov’t and finance knew what they were doing. The horror of today’s crisis is hearing from the experts that no one really knows what to do, how to fix it or even a clearly defined cause. It all sounds like guess work now. That has left us to the preachers of doom to point out our options. Raghu-nomics offers a series of programs like LEDER and RADHA that give us new reference points that help to map the whole issue and provide milestones with clearly defined objectives and solutions. You may disagree with some of our suggestions, but they offer a better framework to work from. Put more simply, we are not selling you the proposal, but rather, the process for developing them.

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.

2) Automated Security Trades: imploded blue chip companies

Wall Streets ‘new’ and tech savvy automated stock trading programs is the ‘real’ story behind our economic collapse. This had been mentioned, but never talked about by our policy leaders. Old ideological demands have their favorite target. Conservatives have ‘big gov’t.’ Liberals have ‘mean’ spirited Republicans and the exploits of Capitalism. The policies by each follow almost exclusively along this narrative. As such, these ideological targets received all the attention. By our measure, these are secondary factors against the real center of our economic implosion. That story, in large part, is the automated trading programs. They single handedly converted the phantom crisis of the real estate securities into a self-fulfilling prophecy of economic doom.

We explained above how the actual liability of the real estate crisis was a mere 2% of the housing markets total value. Much of that 2% had more to do with spiked interest hikes rather than financially distressed homeowners. This did set off a panic that imploded the securities side of the market. However, the actual harm to the broader economy was done in large part by these Automated Trades. The significance of their role has been missed like other critical components of our economic issues. This is due to the two party obsession over ideological demands rather than true economic concerns. This was all covered in our book, the Trillion Dollar Discovery (though this summary here has the crisp finish of hindsight and a writer with another half decade of experience).

These Automated Trades were all the rage for the next generation of select investors - or so it was advertised. The latest in trading tech became a must for any respectable trading house. It started as a specialty tool for privileged clients to have a ‘jump’ on the market, but in time, it became the standard program used by most every major trading group. Put more simply, a tool to rig the system for VIP client’s ended up crashing the system once it was used in mass.

One feature, for example, was to sell good stocks once a distressed stock reached a lowered threshold. This was to offset the portfolio with cash against a potential liability that could not be sold. This happened when the Credit Default Swaps began falling in value, but there were no buyers to sell them to. The automated response by these programs took one portfolio after another and sold off ‘blue chip’ company stocks to offset the value now lost on the Credit Default Swap holdings.

Another feature of these programs would sell a stock upon falling below a pre-set price point. Let’s say Ford Motors went from $24 a share to $19. The automated program would dump the portfolios entire holdings of Ford Stocks. These programs dumped billions of such stocks in a matter of minutes, all without human interaction.

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The result was crushing. A host of blue chip companies that were doing great, suddenly faced a corporate stock market losses of 25%, 50% or more. America’s best producing companies had billions in ‘paper’ losses – all vaporized in minutes. The irony of course is that many of these same companies were finally showing ‘record’ profits after a long recovery from the 9/11 attacks. A number of them were gearing up for their next round of hiring which would have finally taken the economy to the next level.

The surprising side of all this is that both the companies and Wall Street knew that these falling stocks were nothing more than a software glitch. And yet, corporate heads responded to these paper losses as if it were representative of the company’s actual financial health and poor corporate revenues. In turn, CEO’s revamped their companies as if they were facing slowing business. This began mass firing to retrench for a slowing economy that was not slowing. At this point, things were doing well by every other measure but these computer glitches and stock market misreading’s of securitized mortgages.

There were those few economist foolish enough to say that the economy’s ‘fundamentals’ were solid. They were pounced upon as ‘talking heads’ for the administration or rich guys out of touch with the ‘real’ economy. Amusingly, these economists were indeed correct. The only problem was confined to this series of new phantom crisis’s of skewed securities of the corporate and mortgage industries. Corporate profits, performance and expansion targets were all doing well. The corresponding economic fundamentals were also good. The simplicity of this problem left me to try ever harder to get the word out. I tried to let the world know that this entire crisis was nothing more than an accounting mistake. What is a poor man to do?

To watch Pres Bush getting the public beating over this was the oddest experience of all. He was a man of the ‘industrial military complex’ that I had come to disdain. I despised his stolen presidential election alongside all the wars and the rest of the usual complaints. Oddly, I now found myself sympathetic for all the blame being heaped upon Bush. These problems had little to do with the war which caused its own economic burdens, but was not the center piece of our monetary troubles in 08. Nor were the tax breaks. Yes, the tax cuts added to the federal deficit, but they were not the cause for the slowing economy. In fact, the tax breaks had actually provided the kinds of economic stimulus Republicans had forecast. The stirring of economic activity these tax cuts had produced were now being offset by this series of accounting mistakes.

America was right at the threshold to the next generation of hiring along with the next phase of real estate sales and development. A year or two more would have completed this new hiring and finalized those real estate deals. We would have seen the next wave of tax revenues as promised by the Bush tax cuts. These accounting fiascos cut this economic model one step short of completing its cycle for the corresponding tax revenue. I realized then that the formula itself could work for a slowing economy. Most any capital stimulus programs would (whether it be in tax cuts or gov’t ‘investments’). There was not enough time for this particular tax cut model to bare its fruits. In this case, the fruits were there on the tree, just waiting to ripen. A year or two more would

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have completed the cycle and demonstrated the validity of this conservative tax model. We were in a new world now. This new economy worked faster than the old one. These new ‘accounting’ dynamics sabotaged this Republican model. They did not have the extended time frame needed to complete the cycle of their tax program.

It was in recognizing this shortfall that we developed the Fair Tax Exchange called: FATE. It is like a computer patch that fixes a program and bridges the gaps. FATE does this for the Republicans tax cut program. FATE provides a series of greater tax breaks that can go as high as 150% of a company’s profits. However, it is based upon the tax revenues of their employees. This provides a more accurate award to ‘job creators’ while providing a faster turn-around time between tax cuts and new jobs related tax revenues.

The greater story is Washington’s inability to identify and incorporate new economic dynamics as they come up. These issues represented new undercurrents that were never seen before. They were entirely new in nature. The experts were even familiar with them. Unfortunately, there was no place to fit them in against the old economic models that dictated all policy discussions. This is the real story of our economic issues of the day. There is a host of new dynamics at play for which our experts are familiar, but there is no room for these new issues at the table. There is no infrastructure to take on new economic factors. Raghu-nomics is geared to provide a platform for these new considerations that can interface with our policy discussions.

This story shows us a couple things. The Bush cuts helped the economy much like any capital infusion would. The economic effects of these tax cuts were offset by these accounting mix ups. In short, we did not have an economic issue, but an accounting one. Simply fixing those accounting issues would have reset much of the economy for the better – overnight. We see this again with today’s economy. Our economic woes are once again, no longer economic, but rather, they are a foreign policy based issue. It is China and as such, more capital from either gov’t or tax cuts can’t off set this foreign policy dynamic just as these old policies could not resolve the accounting issues. The answer to today’s economic woes is to empower our ‘supply train.’ This is covered our American Shopping Party articles.

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3) Credit Default Swaps: settled for 1/7th their total.

Credit Default Swaps is a new industry that billed itself as the insurance policy against investment risk. It’s like buying a home out in the forest and getting fire insurance in the likely event that there is a fire. The concept of risk free investing in high risk investments can sound incredulous to some as our securities meltdown showed us. Raghu-nomics provides a demonstration in the next Chapter how feasible this can be. In short, an industry wide approach to collectively harnessing the premiums to pay off small market disruptions would be both profitable and simple. We use the example of this 2% liability of the real estate markets of 07 to show how this would work. A 3% premium on 5 different policies throughout the industry equals 15%. It would only take 2% to write off all the liability of the housing industry. The CDS insurance industry could be walking off with 8% to 13% in profit a year – assuming they needed to write-off 2% a year. More details on that in the next chapter.

The point here is that Wall Street recognized that Credit Default Swaps: CDS, would place multiple policies (bets) against the same asset. They never realized the importance of tracking those policies against their specific, home loan. Had this side of the process been in place, much of the securities meltdown could have been sidestepped all together. They would have been able to accurately identify which securities held that 2% of the liability. All other securities would then have traded (near) full price. Again, it’s simply an accounting issue and one that had no previous precedent to work from. Raghu-nomics hopes to change that.

There is actually an even larger issue. These CDS were really a duplicate policy against the same asset. Leveraged financing created trillions more duplicate securities against that same asset as well. A host of portfolios and companies had securities that were now filled with different versions of securities all issued against the same asset. Paying off that asset should have automatically retired all its counterparts. Here’s another way of saying this: you should have been able to write off much of that portfolio by simply paying off a small part of it.

Our favorite example is Lehman Brothers. Our example above showed how the car from the auto-lease company had 7 different securities against that same car. If a single portfolio happened to be made of these 7 different securities, it could be written off by simply paying off just 1/7th (one seventh) of that amount. Pay off the car (of our example) and you not only get the car fully paid, but you also have the other 7 liabilities paid-off as well.

Lehman’s $800 billion in securities comprised of a host of duplicate copies all issued against the same real estate assets. Let’s say Lehman held equal portions of these 7 securities as we used in our auto example. All 7 of these policies were issued against the same car (real estate). This $60 billion would now have paid off that car (homes). In doing so, you will have also retired Lehman’s other $740 billion in outstanding liabilities.

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The best part is that you would still have $60 billion of debt free real estate assets left over.

Here’s how this would translate over to the housing issue. You would get to have the homeowner pay you back for the payout you just made to pay off your portfolio. It would equal about the same amount you just paid. You would recoup about 100% of your pay out. The payout would be for just a third to a fifth of the portfolios original total liability. We could have written off much of these securities with just a fraction of the portfolios total liability while getting a hard asset to show for it. This would be possible if we simply had been able to track these assets. This opportunity was lost due to poor accounting.

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4) Mark-to-Market Accounting

Mark-to-Market accounting did more to multiply the mass bankruptcies of the financial industry than most any other factor of the real estate crisis. Mark-to-Market requirements demanded companies to reset the value of their portfolios to the markets going rates. Let’s say a home fell from $300,000 to $100,000. Mark-to-market would have this property re-listed on the books as worth only $100,000. This was required even though the homeowner was still paying their monthly mortgage with no indication they would stop. Mark-to-market would than require the bank to put in the $200,000 cash difference from their own coffers to offset this loss. It’s like your taxes. You take money out of your paycheck and hold it on the side to pay your taxes at the end of the year. This capital write-down also had to be made the end of the year.

Banks and other investment firms did not have that cash on hand. This left them to sell off good assets at fire sale prices. This pushed stocks and other asset values down even further. Most of these institutions knew that the going market price for their assets were artificially low and would rebound once the market scare wore off.

Banks asked for a longer time frame to make these write-downs. The gov’t stalled in considering this request while critics called it another special interest corruption to weaken regulations. It seemed a fair request to me. These were not short term, one year investments. Mortgages have a 30 year shelf life. A 5 year window to re-appraise and write down a performing asset seems like a legitimate request. Markets could have stabilized by then and so reducing the amount that had to be written down. Many banks did not have these massive capital pools or other asset buffers. Over a thousand banks were forced into bankruptcy over the last 6 years – large part because of these capital requirements of the mark-to-market rules.

Mark-to-Market now created the third wave of undervalued securities and assets to be sold off below their true market value. First it was the Securitized mortgages and Credit Default Swaps that were pushed within pennies of their value. Then blue chip companies had their stocks dumped into artificially low prices by automated trading software. This was followed by this mark-to-market rush on assets. This created the third wave of assets forced into fire sales. Trillions of legitimate value and assets with solid financial performance were suddenly forced into artificially low appraisals and fire sale prices because of these 3 accounting mishaps.

This crisis was not due to a housing bubble, but due to a new system that created the perfect storm of financial confusion and misperception. These combined to destroy the integrity of sound investments and solid assets. These accounting mistakes had little to do with the operation and function of these assets.

All the corruption of the real estate fiasco was still confined to just a small segment of the US economy. It would not have derailed the economy at large but for these

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‘accounting mistakes.’ These mistakes created a whole new set of phantom crisis throughout the rest of the country. It was a surreal economic version of the Terminator. This Terminator was set into motion by accounting shortfalls rather than out of control technology. It took on a life of its own and destroying viable performing sectors all beyond the hand of man. It’s a tale of technology and economics getting ahead of man or at least the experts. It’s a case of old models and outdated ideologies fuelling such problems by ignoring these new dynamics of a fast changing 21st Century World.

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5) Overstated Market Bubble

Critics of the real estate boom dismissed the Bush years as nothing more than another housing bubble. They claimed it was built upon little more than hype and easy credit. My Realtors eye found something significantly different about this market then past housing run-ups. That difference was the dropping interest rates on housing loans.

My Mother’s house for example was refinanced from something like an 8.5% interest rate down to a 4% loan. This reduced her payments by about a half. She in turn refinanced the house against its new equity that had jumped from $110,000 to about $180,000. She was not richer. The refinancing allowed her to pay off $50,000 in debts. Her monthly payments were much the same given that she now had a larger loan to pay. Simply stated, the new found equity in the house was really nothing more than these reduced interest rates.

Many buyers study the price of the home while overlooking interest rates on the loan. The interest rate can make up 50% of your monthly payment or more. Every 3% to 4% in added interest hikes can double your cost over 30 years. Dropping interest rates by this same 4% reduces it by half. The bulk of the housing run was not hype, but the affordability transfer of these falling interest rates.

A refrain of political conspiracy is that banks raise interest rates and oil prices on Democrats such as Bill Clinton and Jimmy Carter will dropping them for Republicans. Whether this is by design, conspiracy or simply a matter of perception, it allowed me to take note of it once Bush took office. As a Realtor, I recognized that these low interest rates represented the single largest transfer of wealth to America’s Middle Class - in decades, if not history. It was worth trillions and was more than just a ‘paper’ gain. That transfer was taken from the banks and handed over into the homeowner’s equity and higher property values. This was not market hype, but a real monetary value due to lowered interest rates.

This transfer of wealth between banks and homeowners made up the first 100% to 200% of the homes appreciation. The monthly mortgage cost was the same to buy a $100,000 home at 8.5% interest rate as it is to buy a $250,000 home at a rate of 4%. That $150,000 difference is the bank handing over its interest rate profits to the homeowner. The homeowner who sold their home for this profit was monetizing that transfer of wealth from the bank to themselves.

This was the dyslexic mind viewing the evils of banking interest in reverse. While high interest rates are the bane of any decent conspiracy group, they somehow miss the value of these dropping rates. It is amusing to note that it is these same conspiracy groups that than complain bitterly about the inflationary dangers of cheap money and low interest rates. The inflationary complaints are in fact endorsing the whole justification of higher interest rates that they condemn the fed for. I love conspiracies for

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they provide leads to a greater picture often missed by the experts. This massive transfer of wealth is one such example. Interestingly, the conspiracy groups miss the positive turns of their theories. None seemed to have noticed the full ramifications from this massive windfall of low interest rates. Conspiracies are often about attacking the status quo rather than finding working solutions and so tend to overlook such ‘positive’ developments.

This interest rate drop was the big difference over the 1980’s housing run up. The 80’s interest rates were quite high. They were running at about 8%. The prices on homes simply rose higher. There was no actual added value given to these properties besides market perception and ‘hype.’ That was not the case of the housing boom of the Bush years.

There was real and substantial value added. That value was these interest payment transfers from the bank to the homeowner. While Republicans are pegged as gifting the rich, other dynamics always come into play. Economics is rarely a zero sum game and so to take from one place has to create a vacuum someplace else. Finding these inversions comes naturally to a dyslexic brain.

Housing appreciation found an additional monetary value in the tax advantages offered by the Bush tax cuts. A couple would pay no taxes on the first $500,000 in profits against the sale of their ‘primary’ residence. Profits above that were charged at a reduced rate of 15% versus a tax rate of 35%. These tax benefits presented housing with another layer of real monetary value. The rising values left neighbors to borrow and upgrade their homes providing additional value to the property and neighborhood. Higher end buyers often replaced lower end sellers again providing further economic upgrades. Contractors put in better quality housing and larger homes. Again, this added even more value. A Realtor can follow these kinds of developments for it’s the basis of our sales pitch.

Most economists seemed to have missed these nuanced values to the market place and so many of them could only see these rising prices as pure hype. I gathered that the first 100% to 200% of the housing appreciation was based upon all these added values to our American home.

The price escalations above this represented the housing bubble. Let’s take my Mother’s home as an example. It went from $120,000 to about $300,000. The first $200,000 (to $230,000) represented real value from the lowered interest rate, improved homes and neighbors and the tax benefits of owning a home. The last $70,000 to $100,000 represented the ‘market bubble.’ In other words, the market needed a 15% to 30% market correction.

Housing critics felt that the entire $200,000 price escalation (of my Mothers home) was nothing more than pure hype. They felt markets needed to fall by this same 75% in order to find market parity. This was a miscalculation on their part. It became the official index to the markets correction as precursor to finding a market bottom. Prospective

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buyers were scare off if properties had not fallen to this lower price. Our experts had once again grossly overestimated the liabilities and seemed blind to the host of other added values. While the other 4 accounting mistakes added to the economies fall, this last one slowed the markets recovery - considerably.

(Editors note: have to check the numbers here.)

*. *. *.

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Part 3:

Credit Default Swaps Offers Market Based

Solution

The example we gave using the auto rental company and the multiple insurance policies given above sets the scene for our real estate ‘crisis’ and the surprisingly simple way it can be ‘unwound’ to recapture a ‘net’ surplus that can offer substantial ‘refunds’ to banks and or homeowners & gov’t deficits.

This kind of ‘double write-down’ talked about in reference to Credit Default Swaps is replayed again on the investing side as well. We can take this debt and collapse it unto itself like playing cards as we showed with CDS. We cover that in further detail below.

Banks took out insurance policies on their home mortgages to protect against owner default. Those insurance policies are called Credit Default Swaps. (A Credit Default Swap will Credit the investor should the homeowner Default and in the meantime, they can be Swapped and traded.) It turns out that there was the equivalent of 5 such CDS for every home mortgage in the USA. This means that if just 10% of these CDS were paid off, it will have paid off 50% of every home mortgage in the USA.

Raghu-nomics has found 6 areas of this kind of double write-down or Leverage Debt Reduction. Here in this article, Raghu-nomics demonstrates how this principle can be applied as a new formula for the Credit Default Swap industry. It may also help solve the $350 trillion Derivatives Market as well. The principles of leveraged debt is much the same in most every industry therefore our Leverage Debt Reduction program should work for most of them.

We begin our review with the $65 trillion in Credit Default Swaps the US had in 2007 at the height of the market. These Credit Default Swaps, or CDS, policies were against the $12 trillion in total real estate mortgages held nationwide. That means there was the equivalent of 5 CDS policies per home mortgage.

Insurance premiums run about 3% a year against the total value of an asset. (Higher premiums for things like cars or distressed markets, lower for more secure assets and markets). Here’s the fun part. There are 5 of these CDS insurance policies for every home. Combined, the income from these CDS would equal 15%. (3% premium x 5 policies = 15% of the assets value).

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(The premiums can be raised or lowered depending upon the risk factor and how many policies are issued. If there were enough policy contracts, they may even decide to lower the premiums further to encourage more buyers making it cheaper still. Of course, fewer policies or higher risks would raise the price.)

This would mean the Credit Defaults Swap = CDS industry was collecting the equivalent of 15% in annual revenues against the real estate market. Collecting these premiums for four years leaves the CDS industry with a 60% premium against the total value of the home mortgages. The real estate market had fallen by 15% when the sub-prime mortgage crisis began in 07 and only had a 20% depreciation by 2008. The CDS industry could have refinanced these underwater homes and paid off this market difference. This refinancing would have cost the insurance industry about 2% of the market total. This explained this 2% cost above where 10% of all homes were underwater by just 20% (or 2% of the market total). The CDS industry may have actually needed to make this write down every year for say 5 years. The premiums equaled 15% while the cost was just 2%. The industry could pocket the 13% difference. Refinancing the homes would have terminated the CDS contract thereby ending any further exposure to the investor’s insurance policy. This approach will have created a true insurance policy against investing.

This could maybe work even today. The real estate market has fallen an average of about 35%, however, the CDS industry has been collecting premiums for 5 to 6 years. If true, the premiums will have totalted 90% of real estate’s total asset value by now. Refinancing these properties into market priced mortgages would still provide the CDS industry with profits of between 30% to 60%.

Raghu-nomics presents this as a case study for approaching the $350 trillion dollar derivatives market. This mammoth $350 trillion number has the ring of Ponzi scheme, but Raghu-nomics suggest it maybe better explained as leverage financing. Leverage Financing uses the same capital or asset to finance multiple deals. Leverage financing will have the same multiplied impact once it is written down. We refer to this as Leverage Debt Reduction. The car rental example mentioned above was a simple explanation of this principle. Our example below may better encapsulate the nuance of it as it applies to other debt financing.

We use the example of building a house. This demonstrates the seemingly absurd amount of debt of the modern world but is actually backed against real value. Let’s say you buy a property for $50,000 with 100% financing. You now want to build a house on it and so take out a $150,000 loan to build that house. This leaves you $200,000 in liability and no income for an asset that is only worth $50,000. The full debt against this asset now stands at 4 times that amount of the assets worth. You have a $200,000 debt against a $50,000 property. It would sound dreadful and look even worse on the books. However, a real estate investor knows that the homes in the area are going for $300,000. The investor sees a 30% equity in the deal. Only time (and building the home) is separating him from that 30% equity value.

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‘The books’ will come to ‘look’ worse before they look better.

So the investor has now borrowed $200,000 for a property that is only worth $50,000.

He hires a contractor to build the house, but only pays the contractor $25,000 down.

This leaves the contractor to go borrow another $75,000 to hire his help and buy the materials.

We now have the original $200,000 that was borrowed by the investor, plus this $75,000 borrowed by the contractor.

The total debt related to this one house now comes to a large $275,000 in liabilities against an asset (a plot of land) that is only worth $50,000. At this point, the debt to equity looks bad to an ‘outside’ review.

The contractor also contracts out the plumbing, electrical, cement work, roofing and windows. He pays them a total of $15,000 down for $60,000 in work. Each of these subcontractors goes to borrow a total of $30,000 more to hire their own help and buy materials. The total debt related to this house now runs $305,000 against just $50,000 in ‘hard’ assets.

Then we have the hardware store. The store is supplying these materials and so they too go and borrow another $50,000 to provide materials to all these contractors. Imagine all this borrowing was done on the American Express Card by each of these contractors. American Express would show this massive debt of $355,000 in liabilities against an asset that is presently worth just $50,000. To American Express, it may look risky. To each borrower, it is a rather conservative business ‘investment.’ It’s a good deal for the investor, the contractor, the subcontractors and the store. Each of them knows they will get a 20% to 35% return for their services upon completing the job they borrowed against. Here’s the best part. Once the job is finished, $165,000 of these loans will have been immediately repaid leaving just $200,000 in remaining debt.

This entire deal has been reduced into just $200,000 in loans against an asset now worth $300,000. In short, the process took a $50,000 asset and $365,000 dollars in loans to create this $300,000 property. This offered a 30% equity of $100,000 above market prices. This example better personifies the nature of ‘modern debt.’ Our banking system is financing each party and each phase of an operation separately and so it looks like a lot of debt relatively to its small looking asset base. This goes on until the project is completed.

This construction example gives a better idea what Wall Street is doing. Wall Street’s ‘Leverage Financing’ multiplies the appearance of this greater debt, but it pays off a multiplied number of these debts once the ‘job is completed.’

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There may be a better slant to this example to explain our mammoth debt loads. Let’s also use the insurance policy of each contractor. Say the total insurance liability carries $3 million in ‘coverage.’ The contractor is insured for $2 million in liability coverage. The subcontractors and store have an additional coverage for say another $1 million. This gives us $3 million of insurance liability showing up on the books. Remember our example above where the property is worth just $50,000. Let’s add up all these insurance liabilities against the total debt created before the home was finished. There is the $365,000 in total loans plus the $3 million in insurance liability. Now for the fun part. All this liability collapses down to a small $200,000 loan once construction is finished. In short, three million or $3,365,000 in liabilities shrinks into just $200,000 upon completion of that home.

This insurance and loan example is a better explanation how we appear to have $350 trillion in derivatives against say $20 trillion in total ‘hard’ assets. These Derivatives are multiple loans and investments taken out against the same asset. They give the appearance of a much greater liability over all, but they need to be viewed at each step of the process. Following along its progression makes it much easier to accurately assess the risk or savvy of all these loans, insurance policies and other liabilities.

This is not to say that each of these players (in the home building example) was in fact savvy. The investor could have misjudged the housing market or the contractor and sub-contractors could have underestimated the cost of labor and materials. And of course, there is cheating and fraud from time to time. However, even when we have ‘a great deal,’ the total liabilities (at the mid-way point) will look like a financial monster. Today’s political discussion has packaged the financial crisis in this way when they talk of the total ‘liabilities’ of the Credit Default Swap market, Social Security and the Derivatives Market – among others.

The larger issue is that if the house (of our example) is not completed, the $365,000 in liability now goes unpaid. Each player with their respective loan no longer has the capital to repay it if they don’t get paid for the job. The original asset is worth no more than that $50,000 lot (or less). In this scenario, it’s worth adding in a ‘stimulus’ to complete the house. This lets us harness the greater value of a market ready home. In contrast, the unfinished home has 5 times the debt versus a 30% equity.

Let’s say the market fell by 50% as we see of real estate today. A finished home is only worth $150,000 versus the original $300,000 projected market value. Completing the house will leave a debt of 125% of its value. This is $50,000 in debt above its market value. Not completing the house, however, has a total debt of $365,000. The original asset of land is only worth $20,000. So the debt is now 15 times (1,500%) the asset value. It is therefore worth completing the house because the total debt falls from $340,000 to just $50,000 above the market value - once the home is completed.

We present this example to show the advantages of judging debt upon values and savvy it offers. This goes to the heart of stimulus versus market outcomes. Markets make decisions based upon the information and variables they have to choose from.

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We present this example here NOT to make the case for stimulus (per say), but rather to better clarify the added number of variables we have to choose from once we have a more accurate reading of the deal and ‘value.’

The central point is that we need to look at more than the total liabilities. Instead, we need to find and index the role and value behind each of these liabilities. Raghu-nomics offers some new tools to better identify these many values. The ‘experts’ can tell us about ALL the liabilities, but they fail to help clarify the role, phase and value behind each of these debts. Our national value is far more substantial then recognized by media reports and political one-liners.

Raghu-nomics is here to demonstrate how much value there is in America waiting to be claimed. Once we have better identified these values, we can better assess the true liability. So far, our initial assessment is more like our example above. Behind the $3,365,000 in so called initial liabilities on the home construction shown above, there was actually a value of $100,000 equity to be realized upon completion of the home. If the deal had only been judged by the $50,000 plot of land, it would look like a dreadful deal. You need to size the entire picture to better place the values and liabilities. This is what we did with the CDS and real estate industries.

Our initial estimate is that we have a similar degree of equity hidden away there in this real state crisis. We simply need to better pair the liabilities against their players and assets. Raghu-nomics suspects this to be somewhat true, (though less so) for the derivatives market as well. Raghu-nomics is rather confident it can solve America’s real estate crisis in a matter of days. We see so much value there to be tapped. Using our same approach, it would be interesting to see how true this might be of the $350 trillion derivatives market. Raghu-nomics presents some new tools for looking at this rising crisis.

This can sound all theoretical so we conclude with an actual demonstration of this principle. Lehman Brothers was an $800 billion company. It collapsed in a matter of days going for a fire sale price of just $20 billion. Chase Manhattan Bank bought it from the Federal Treasury. Here’s the interesting thing about assessing Lehman’s collapsed value. Lehman was made of both Mortgage Back Securities and Credit Default Swaps. Put another way, real estate securities and CDS are really a mirror liability of each other. Paying off one automatically pays off the other.

Credit Default Swaps or CDS are nothing more than an insurance policy taken out against Securitized Mortgages. So once the Securitize Mortgage was ‘written-off,’ there was no need for the CDS to have to pay on it. That CDS liability was automatically resolved or visa versa. Paying just one of the CDS automatically paid the other 4 policies along with the original home mortgage. (Remember above where we showed that there was the equivalent of 5 CDS for every home mortgage in the country.) The bonus is that those home mortgages would also have been fully paid leaving all the country’s homeowners debt free as well. Of course, banks and Wall Street would be absolutely mortified that homeowners were suddenly debt free, so we suggest they

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refinance all underwater homes to market rates. This would allow the banks a massive refund and the homeowners would now have shaved 20% to 35% off their home mortgage.

Let’s go back to our car rental example wherein there were 5 insurance policies on the car. Paying off just one of those policies automatically paid off the other 4, plus the car. So say Lehman owned those 5 insurance policies on the car alongside the loan to the car itself. Paying off just one of those policies will have automatically paid off the other 4 policies plus the car. In short, it only takes 1/5 one fifth of the total liability to pay off 100% of that total debt. Paying off just 10% would have paid off 50% of all that liability much as we pointed out in our video commercial. Put another way, $160 billion could have paid-off the entire $800 billion of Lehman debt if the company had equal ratios of CDS to mortgage securities = one part real estate securities against five parts CDS.

But wait, it gets even better. Let’s go back to our car rental example. Let’s also say that the car was indeed in an accident, but only had minor damages of say $1,000. This means that the total cost to each of the 5 insurers of the car could pay just $200 each rather than the full $10,000. Each of these insurance programs would now be able to remove the entire outstanding liability of $10,000 off their books by paying this $200.

This is what happened with the housing crisis. Housing prices had only fallen by about 10% at the time of Lehman’s collapse. Why were the real estate securities selling for just 5 cents on the dollar? Wall Street kept treating those securities as if it was 100% loss value. It wasn’t. Those securities should have been worth at least 80% to 90% of their original value because homes could have been resold refinanced for that amount at market prices.

Refinancing all the ‘underwater’ homeowners (in the whole country) for say 80% of their original value would have allowed Lehman (and every other financial institution) to write-off all their liabilities with just a 4% pay-down of the total asset portfolio (or 20% of one fifth). In other words, $30 billion should have been enough to have written off all $800 billion of Lehman’s liabilities (assuming we had 5 equal parts of CDS against 1 part real estate securities). Welcome to Leverage Debt Reduction.

Once you have delineated what the debt is issued against, you can achieve far greater results with significantly less money. In our example of Lehman, Chase Manhattan could have bought itself a company for $30 billion versus the $20 billion they spend to by a potential $800 billion in liabilities.

Using the Raghu-nomics approach would have provided Chase with $100 billion in performing assets of mortgages that were being paid on at about 10% below market value. In other words, if the new mortgage holder still had problems paying their monthly, Chase could turn around and sell it at 10% below market prices without taking a loss on it. Had markets fallen 30% as they have 5 years later, the liability cost to Chase would only run 10% or $10 billion, 4 to 6 years later. That would have left Chase with $90 billion in performing assets for a total cost of just $40 billion = the $30 billion

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paid up front and the $10 billion spent 5 years later. That still leaves Chase with a $50 billion above cost in performing asset portfolio that they basically got for free.

Put another way, $1 trillion in gov’t ‘stimulus’ could have resolved $20 trillion in real estate and CDS liabilities using our LEDER system. That means no more CDS liabilities. No more underwater mortgages, no more gov’t debt. What the gov’t did instead was to buy the CDS and the real estate securities to clear these liabilities from the banks books. This means the feds paid 5 times as much then necessary.

Let’s use the example of the car rental insurance companies again. It would be like the gov’t stepping in to buy the insurance liability from all 4 of the insurance companies that had insured that one car rental. So the gov’t goes in and pays $50,000 to the insurance companies and then pays the car rental another $10,000. So the gov’t just spent $50,000 to back the ‘financial system’ that was geared around the $10,000 car. Had the gov’t paid off the car, all the insurance companies would have been resolved of their liabilities too. And now for the bonus. The gov’t has a car that has been fully paid. They can now turn around and sell that car for $9,000. So the gov’t put in $10,000 and still has a car they can sell for $9,000 (after the $1,000 in repairs). It cost the gov’t just 2% or $1,000 to solve $50,000 worth of so called debts and liabilities. Or, ‘the free market’ could have done the same now that we know about this ‘Leverage Debt Reduction’ principle using the new system where CDS pool premiums to pay off market liabilities.

Where did the gov’t get that $50,000 from? They printed it thereby weakening our American dollar. Taking this Raghu-nomics approach means the US gov’t will now have this $50,000 refunded back to the fed (of our example above), thereby paying off $50,000 in ‘debt’ while having a $9,000 asset (car), debt free. In other words, all these trillions the fed is throwing at this problem is not at necessary. By applying this LEDER approach, the gov’t could recoup upto 98% of all that cash they have been printing up (electronically) and retire it.

The federal gov’t is holding $2 to $4 trillion in real estate and CDS securities. This Raghu-nomics approach will allow Uncle Sam to sell those securities and pay-off $2 to $4 trillion of our federal deficit in a matter of days. No services cuts required. No taxes raised. The US currency will strengthen fivefold (if we are to go by our example above).

How can we do all this? Raghu-nomics recognized that it was impossible to untangle the financial web if you approached this from the banks side. Wall Street financing is simply too muddled to make any sense of it. The far more effective (and easier) way to resolve this mess is to start with the hard asset itself, the home. The homeowner therefore makes the best medium for clearing this mess.

Helping the homeowner was always cast as a charity handout for irresponsible homeowners, but this prejudice overlooks the obvious effectiveness for solving this crisis. Refinancing the homeowner at market rate prices will cost 1/20th the price then approaching this crisis from the banks side. This is as true of the gov’t stimulus as it is of the market response. Had the banks simply refinanced the homeowner into

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mortgages just below market prices, Wall Street would have been able to pay-off trillions in liability for pennies on the dollar. Free-market advocates insist on taking asset write-downs. This is 5 times more expensive than refinancing the homeowner. This market system is an absurd way to approach it. Why spend trillions more for market orthodoxy? It’s entirely unnecessary to use these outdated systems we see of Wall Street financing (and debt reductions).

I gather the same would likely apply to this $350 trillion Derivatives market as well. $14 trillion in write-downs would in theory, settle $350 trillion of these Derivatives. This of course requires that the assets were paired against their respective liabilities properly and resolved at the right juncture as we did in our examples of the car rental and home construction. In doing so, the original $14 trillion in assets would also be debt free much as paying off the car resolves the insurance liabilities as well as the banks.

Things might not be this simple, but Raghu-nomics hopes to provide a new context to this $350 trillion ‘market.’ This context is missing from today’s other reports. How much Raghu-nomics can help with this Derivatives crisis is anyone’s guess, but this new context does provide its own set of tools and prospects that will add to our ability to tackle things in a way we have not been able to do so far. And hopefully, we pray, we may even get far enough ahead of this as to resolve this crisis into more manageable components. This essay provides a new forum to build up these ideas with the intent to shift the sense of possibilities against impossible odds. That change of attitude is an important step in its own right.

(Editors note: I had added in the section about 5 areas of accounting mistakes over the last 2

days. I need to go through and edit out this last chapter that is now redundant because of it. I

also need to check the numbers in both these given that I was calculating from two different

sets of numbers and did not use a calculator for some of these. I expected to have the time to

go back and tighten up these estimates into precision numbers. That will all be part of the

editing when I get more time. This has been a rushed job to get this done before I move out

today.)

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Section 7

Chapter 3:

6 Areas of Double Write Down by

Banks & Insurance Companies

(Reprinted from Raghu for Congress on Saturday, April 23, 2011 at 7:28am) ·

This is taken from a letter to a friend on the topic.

Here's a summary of the correspondence on the issue. The complete correspondence is listed below:

6 Areas of Double Write Down by Bank & Insurance:

1) Unpaid PMI Insurance

We first discovered this whole area of untapped value looking at the issue surrounding PMI insurance. PMI is the insurance policy that banks take out to cover the first 20% of a home loan. If the home owner defaults, the insurance will cover this first 20% of the write-down. This provides banks with a 20% buffer against falling property value. They can therefore turn around and sell the property for the full value of their remaining loan. In a normal market, this 20% is more than enough to protect banks from most any lost (property) value.

We realized that banks were not receiving this PMI payout from insurance companies. Banks were taking the entire loss themselves. These PMI payouts would have been a huge help. If a bank took a 20% write-down on their real estate portfolio, 100% of that would have been covered by the PMI policy. The liability to the bank would then have been 0. If the bank took a 40% write down on the home loan, than 50% of it would

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have been covered by this PMI insurance. That added revenue would have prevented most of our banks from going into bankruptcy. Even a partial payout by these PMI policies would have been a huge help to banks.

This unpaid insurance means one of several things:

a) the bank should have this loss (write-down) re-imbursed by insurance or

b) the insurance company should at least credit this write down on their own books. This would reduce the insurance liability by 100% of this PMI insurance policy.

From what we have gathered, insurance companies did not take this write off against their PMI insurance liability (even though they never reimbursed the banks). We gathered this by the fact that the insurance companies have the same problem as investors: they cannot track their assets against their corresponding securities. Had insurance taken these write-downs (that the banks wrote off so insurance does not need to), they (the insurance) would have less liability then otherwise accounted for. (These insurance companies are worth more than they realized.)

2) PMI Insurance is Double Write-Down

If the insurance companies had taken a write down on these PMI policies, then passing those write downs off to the bank would now reduce the banks liability.

Let’s say the bank had already taken a write-down on their mortgage assets as well. This would give us the double write down we talked about in our summary (sent to you). More specifically, it means 40% of the asset has now been written off: 20% by the bank & 20% from the insurance companies PMI policy. (This 40% figure is from our example above.)

What happened instead is that this payout (to the banks or this write down by the insurance company) has been over looked in a number of cases. It potentially equals (tens of) billions in reduced liability to either of these two institutions (but not included in their final calculations). In short, these companies/industries are worth significantly more (which is the point of our article).

3) 5 CDS (Credit Default Swaps) per each Mortgage offering 5 x the write down.

There was $65 Trillion in CDS against $12 Trillion in real estate properties at the height of the real estate market. (I think we maybe at about $25 trillion in remaining CDS.)

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This means there were 5 (insurance) policies for each real estate mortgage. It would be like having 5 fire insurance policies in case your home burns down.

What this means is that for every mortgage the bank has written off, there should be 5 CDS policies that should have also been written off. We gather that there are a number of cases where insurance companies did not take this write down even though the bank had done so. The problem of course is that these securities could not trace the original asset (home) from which the CDS was issued against. Instead, CDS went ahead and took their own write down. This in turn offered a double write-down if credited against the asset the bank had also already written off.

Now to talk to the specific point raised by Ron. Yes, the investment in a CDS was based upon its premiums as your dear hubby pointed out, but the policy itself is actually paid out upon the gross value of the security. So the premium on a $100,000 CDS may only have an annual cost of $5,000 in premiums, but the payout would still be $100,000 should the homeowner default. We are assuming that the write downs were therefore written off against some variation of this higher payout value though not at a 100% of it. It may have not been at a 100% of the policies original value, but should include something more than just the premium value that your hubby referred to. This overlap provides some amount of double payment against the actual value of the original asset.

a) This 5 to 1 ration of insurance duplication (mentioned above) happened because a mortgage would be subdivided in to 100 separate ‘trounches’ (literally) and repackaged into 100 different security packages. These securities would be pooled into larger groups which would then be divided further (ex: if the investor needed to liquidate part of their investment for added cash). Each time this security was placed into a new package, it would have to get its own CDS insurance policy. In short, they insured (recounted) the same (home) asset with several insurance policies.

4) DCS WriteDowns has some overlap on asset over premium

This also works in reverse. If the CDS is also written down, it will in fact serve to write-down something of the original asset it is insuring. This may not be at 100% of the value of the asset. But remember, there are 5 of these CDS for every one mortgage so even a 5th of a write down by 5 CDS would pay-off one loan. There is likely to be something more than just the insurance premiums paid off in these write-downs. This would equal some amount of the original value of the security asset. Again, it would create a double write-down once combined with the banks write-down.

5) Gov’t Contributions

Just as there is a double write down by the bank and insurance company, there is an additional write-off by the gov’t. There are ‘tax-credits’ but it’s the county or state

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gov’ts that offered the biggest contributions. They bought distressed homes or paid off portions of them. They did this to save neighborhoods & real estate values. This should also be accredited to both these mortgages held by banks & insurance companies. I suspect that they were not entirely accounted for because the home had already been placed into foreclosure so the bank counted it as a write off though they would still end up getting some reimbursement for it. This mis-accounted pay-off would then be duplicated throughout the entire Wall Street evaluation of assets. I don’t know how much of these gov’t contributions have been included into the pay-down of these securities.

6) Banking Write Downs.

The simplest of all the write-downs is the one taken by the banks directly. Say they have taken a 50% write down on the real estate portfolio. Our suggestion is simple: have the bank extend say a 35% mortgage reduction to the homeowner. This would provide the bank with a 15% refund (against their 50% write-down).

These 6 areas represent just 1 of 5 other additional segments of real estate & banking values we have also identified. They offer billions more in potential value to be tapped. How much value each of these areas have is secondary to our main point. We are making the case that simply by refinancing the homeowner, we can tap whatever values maybe sitting there in these different pockets of the real estate system that presently go untapped.

So far we have been able to successfully answer the bulk of the issues that ‘experts’ have raised. WE are fairly confident of doing so again. A secret to our success is the perspective we work from. It’s an inverse pyramid from the Wall Street experts. They start from the Banking perspective as if Wall Street sits at the pinnacle of this financial equation while we recognize that the homeowner is the bases for all these securities. We have therefore proven more effective for we are starting with the actual asset found with the homeowner rather than the experts who are viewing this from Wall Street. Working from the right paradigm provides extraordinary advantages as we hope bares out in our work.

I hope this little presentation can peek your/his interest enough to want to hear our presentation.

Look forward to hearing your own ideas on this for we may in fact prove the 'smarter people.' lol

Have a great weekend,

Raghu

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by Raghu for Congress on Saturday, April 23, 2011 at 7:28am ·

For the complete article/letter go to Raghu for Congress: 6 Areas of Double Write-down

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Section 7

Chapter 4:

Lehman Brothers:

Example of Double Write-Downs

Latest FBook Page by Raghu for Congress on Wednesday, December 22, 2010 at 7:43pm We present the Lehman bank bankruptcy as the primary example of the ‘double write-down on assets.’ This was one of our discoveries from our RADHA Mortgage program. Lehman had nearly $650 Billion in assets now selling for just 15 cents on the dollar. (See article below.) They held real estate securities as well as (the securities corresponding) Credit Default Swaps or CDS. (CDS is the insurance policy against those real estate securities. If home owner defaults, the CDS would reimburse the investor against those loses to their real estate security portfolio.) It would be like you having a car accident and paying for the cost of repairs from your own pocket without receiving refurbishments from your insurance policy. Meanwhile, your insurance company still wrote off the liability for this accident on their books. (This ‘write-down’ was required by gov’t accounting practices. It was known as ‘mark-to-market.’ The bank never had an actual out of pocket cash payment against these properties because many homeowners never did foreclose. However, banks were required to re-appraise their assets to the ‘present market value’ investors would pay for those securities if the bank had to sell them. Investors judged real estate values based upon the likelihood homeowners would default rather than how many were actually in foreclosure today. Put simply, it was a phantom expense that never did exist and in many cases still does not though it’s been 3 years later). Say your car was worth $10,000. You spent $5,000 repairing it. Meanwhile, the insurance company also wrote off $5,000 from its books as a liability (though they never paid you for this). This means the car has been entirely paid off.

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This happened on Wall Street when a company like Lehman wrote off both its real estate securities as well as its CDS. (In a sense, they actually just paid themselves off with the same write down.) Put simply: Lehman is actually worth many times more than presently stated by today’s accounting practices. (Instead of being worth just $20 billion, they may in fact be worth $150 billion, as an example.) We gather this to be true of a number of situations and different markets (whether on Wall Street or the real estate market). Let’s finish with our auto example. Our recommendation is that the insurance company pay you $2,500 towards your auto accident (liability). This lets the insurance company write-off a $10,000 liability from their books for just $2,500. Say your car is also worth $5,000. It means you can sell it for $5,000 in cash. This is on top of the $2,500 from the insurance company. Your total loss is now gone from $10,000 to just $2,500. You are reimbursed for the difference. The insurance company has also written off its own liabilities for just $2,500 as well. In Lehman’s case, that 15 cents on the dollar would now be worth say 40 to as much as 80 cents on the dollar. This would be true of all banks. They would be getting these huge reimbursements. The CDS industry which stood at about $25 trillion a year ago would now be entirely cashed out with all the liabilities paid off. This is covered in our book: Raghu-nomics, Part 2: The RADHA Mortgage. More info at: roopa.org Or on Face Book at: Raghu for Congress http://www.bloomberg.com/news/2010-12-20/bankrupt-lehman-paid-its-lawyers-managers-fes-of-45-million-in-november.html Lehman Pays Advisers $45 Million in November By Linda Sandler - Dec 20, 2010 12:55 PM GMT-1000 Lehman Brothers Holdings Inc. paid its lawyers and managers $45 million last month, bringing the bankrupt firm’s total adviser fees to more than $1.1 billion through November, according to a regulatory filing. Restructuring firm Alvarez & Marsal LLC, which runs the defunct investment bank through its co-founder, Bryan Marsal, led recipients with $382.4 million in fees for “interim management” for 26 1/2 months of work, including $12.6 million in November, according to today’s filing with the U.S. Securities and Exchange Commission. Weil Gotshal & Manges LLP of New York collected $254.6 million for acting as the investment bank’s lead bankruptcy law firm, including $8.7 million last month. Milbank Tweed Hadley & McCloy LLP got $83.5 million for advising Lehman’s creditors’ committee, with $7.9 million coming in November.

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Lehman and its affiliates had cash and investments of $21.4 billion on Nov. 30, up from $21.1 billion on Oct. 31. Once the world’s fourth-biggest investment bank, Lehman has said it may spend five more years selling assets to pay unsecured creditors an average of 15.8 cents on the dollar. Its payments to advisers haven’t faced major challenges such as those in the bankruptcy of automaker Chrysler LLC. Lehman filed the biggest bankruptcy in U.S. history on Sept. 15, 2008, with assets of $639 billion. Creditors include Goldman Sachs Group Inc., UBS AG, the New York Giants and Abu Dhabi Investment Authority as well as individuals who hold Lehman bonds. The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan). To contact the reporter on this story: Linda Sandler in New York at [email protected]. To contact the editor responsible for this story: David E. Rovella at [email protected]. << back Author: Roopa org 23 December 2010 01:13

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Here's another (clumsy) article about double write-downs. Lehman Bank: Example of Double Write-down Latest FBook Post. by Raghu for Congress on Wednesday, December 22, 2010 at 7:43pm We present the Lehman bank bankruptcy as the primary example of the ‘double write-down on assets.’ This was one of our discoveries from our RADHA Mortgage program. Lehman had nearly $650 Billion in assets now selling for just 15 cents on the dollar. (See article below.) They held real estate securities as well as (the securities corresponding) Credit Default Swaps or CDS. (CDS is the insurance policy against those real estate securities. If home owner defaults, the CDS would reimburse the investor against those loses to their real estate security portfolio.) It would be like you having a car accident and paying for the cost of repairs from your own pocket without receiving refurbishments from your insurance policy. Meanwhile, your insurance company still wrote off the liability for this accident on their books. (This ‘write-down’ was required by gov’t accounting practices. It was known as ‘mark-to-market.’ The bank never had an actual out of pocket cash payment against these properties because many homeowners never did foreclose. However, banks were required to re-appraise their assets to the ‘present market value’ investors would pay for those securities if the bank had to sell them. Investors judged real estate values based upon the likelihood homeowners would default rather than how many were actually in foreclosure today. Put simply, it was a phantom expense that never did exist and in many cases still does not though it’s been 3 years later). Say your car was worth $10,000. You spent $5,000 repairing it. Meanwhile, the insurance company also wrote off $5,000 from its books as a liability (though they never paid you for this). This means the car has been entirely paid off. This happened on Wall Street when a company like Lehman wrote off both its real estate securities as well as its CDS. (In a sense, they actually just paid themselves off with the same write down.) Put simply: Lehman is actually worth many times more than presently stated by today’s accounting practices. (Instead of being worth just $20 billion, they may in fact be worth $150 billion, as an example.) We gather this to be true of a number of situations and different markets (whether on Wall Street or the real estate market). Let’s finish with our auto example. Our recommendation is that the insurance company pay you $2,500 towards your auto accident (liability). This lets the insurance company write-off a $10,000 liability from their books for just $2,500.

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Say your car is also worth $5,000. It means you can sell it for $5,000 in cash. This is on top of the $2,500 from the insurance company. Your total loss is now gone from $10,000 to just $2,500. You are reimbursed for the difference. The insurance company has also written off its own liabilities for just $2,500 as well. In Lehman’s case, that 15 cents on the dollar would now be worth say 40 to as much as 80 cents on the dollar. This would be true of all banks. They would be getting these huge reimbursements. The CDS industry which stood at about $25 trillion a year ago would now be entirely cashed out with all the liabilities paid off. This is covered in our book: Raghu-nomics, Part 2: The RADHA Mortgage. More info at: roopa.org Or on Face Book at: Raghu for Congress http://www.bloomberg.com/news/2010-12-20/bankrupt-lehman-paid-its-lawyers-managers-fes-of-45-million-in-november.html Lehman Pays Advisers $45 Million in November By Linda Sandler - Dec 20, 2010 12:55 PM GMT-1000 Lehman Brothers Holdings Inc. paid its lawyers and managers $45 million last month, bringing the bankrupt firm’s total adviser fees to more than $1.1 billion through November, according to a regulatory filing. Restructuring firm Alvarez & Marsal LLC, which runs the defunct investment bank through its co-founder, Bryan Marsal, led recipients with $382.4 million in fees for “interim management” for 26 1/2 months of work, including $12.6 million in November, according to today’s filing with the U.S. Securities and Exchange Commission. Weil Gotshal & Manges LLP of New York collected $254.6 million for acting as the investment bank’s lead bankruptcy law firm, including $8.7 million last month. Milbank Tweed Hadley & McCloy LLP got $83.5 million for advising Lehman’s creditors’ committee, with $7.9 million coming in November. Lehman and its affiliates had cash and investments of $21.4 billion on Nov. 30, up from $21.1 billion on Oct. 31. Once the world’s fourth-biggest investment bank, Lehman has said it may spend five more years selling assets to pay unsecured creditors an average of 15.8 cents on the dollar. Its payments to advisers haven’t faced major challenges such as those in the bankruptcy of automaker Chrysler LLC. Lehman filed the biggest bankruptcy in U.S. history on Sept. 15, 2008, with assets of $639 billion. Creditors include Goldman Sachs Group Inc., UBS AG, the New York Giants and Abu Dhabi Investment Authority as well as individuals who hold Lehman bonds. The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

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To contact the reporter on this story: Linda Sandler in New York at [email protected]. To contact the editor responsible for this story: David E. Rovella at [email protected]. << back Author: Roopa org 23 December 2010 01:13

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Section 8

Articles

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Section 8

Chapter 1:

Part 1:

America’s New Cold War: China

‘…We hear China chiming in with all the other critics of America’s monetary policy. They boldly talk about the importance of reform while dancing around this skirmish over the 45% subsidy for their currency. China acts as if removing this one subsidy would strip out much of their manufacturing advantage. Would it? If so, it reveals a telling truth about China. It would suggest they are little more than a one pony act. Their act: gross economic subsidy. If true, this would be the final testament to American manufacturing. China would be formally recognizing that they really can’t match American manufacturing on a level playing field. Maybe China knows this. Somehow, we don’t.’

‘…the Republican Free-market formulas will also fail to work because China will blunt the returns of those economic rewards as well. This is no longer a free-market issue, but a foreign policy one. It DEMANDS a Gov’t response. The response from a Democrat or Republican will look much like we are getting from Pres. Obama’s policies today. Conservatives may not agree with these policy choices during times of peace, but they are likely to follow in kind during times of economic aggression.’

*. *. *. *

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Our political reforms are still operating under the banner of ‘free markets’ and so we send the best of American enterprise to compete against China. We are losing these valiant companies to China’s superior fire-power of unlimited money and levers of market controls unparalleled in history. The full power of the Chinese gov’t is there at work – as much with cash subsidy as with raw, political might. They operate at full force behind their many facades of international companies. No private business can complete against the might of the entire Chinese gov’t. And so, we see the unraveling of American enterprise and all the dominance that goes along with it.

The most famous of these subsides is China’s 45% undervalued currency. This is worth hundreds of billions - if not trillions - in direct cash subsidies to their manufacturers. Correcting this one subsidy could alone return millions of American jobs. Combine this 45% subsidy with the cost of transport. This would raise the price of China Made goods by as much as 60%.

The American worker can complete against this 60% price difference. Rebalancing this one disparity would put America’s labor force in the running against the best China has to offer. Tallying all of China’s market subsidies from currency, to environmental, to regulatory and worker compensation could be 100% of its present price point. Maybe more. From this perspective, China starts looking more like a lumbering producer. They somehow have the look of a capitalist like economy (with the price advantage of low cost manufacturing), but peek just behind this façade and we find a different picture. We may discover the classic typecast of a communist run economy. China may prove the greatest example of it. This would be a startling revelation for all of us.

Adding all these subsidy costs into the price of China’s exports may do more than slow their manufacturing. The question is: would it crush it? China’s so called price competitive production is starting to look more phantom than real. It’s a ploy that has been built into a trillion dollar hoax. To whatever degree it is a lie, to that degree it becomes hollowed in each step of production. Every step consumes another bite of gov’t resources. Greater the production, greater the subsidy and the more unsustainable it becomes. China knows it. That is the real story behind China’s $1.5 trillion in American holdings.

These US holdings are only the first measure of China’s subsidies – if not their largest. Without subsidizing their currency, China’s currency would have risen by about this same 45%. The true competitive worth of American manufacturing would have found real traction by at least this same $1.5 trillion. Therein hides our missing jobs and tax revenue. They have been kidnapped by China’s subsidies. Interesting to see how this follows the free market calculus. China gets 6 of one (US currency imbalance) or a half dozen of the other (US manufacturing traction). China is paying a price either way. They either have to payout direct subsidies or lose business to American manufacturing. Unfortunately, subsidies are also paid for in lost US jobs and manufacturing. More Republican tax cuts or Democrat commercial jump starts won’t change that. China simply adds in the countermeasures to it. These stimulus programs are being intentionally neutralized by China’s subsidies. That is their whole point.

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China is being driven by something more pressing than raw ambition for power and prosperity. It is fear itself that drives them. They are hoping to beat their terrible day of reckoning. Market forces have a way of snapping back once over extended too far, for too long. China’s rising inflation is one example. Their $3.2 trillion in foreign holdings is another. China knows its problems. The rest of the world is beginning to see it. It’s creeping upon China in ever larger imbalances. China may still beat the clock after all. They sit with growing impatience hoping the US economy takes the brunt of these market distortions before their plank walk of subsidies runs out.

Today, we pull back the curtain to this wizard’s show. There you will see the face of fear. It’s not our military they fear. It is the labor force of the American manufacture. Besides this manufacturing price savings, what more does China have for competing against America? It’s not technology. It’s not delivery & transportation. It’s not in new product or manufacturing development. There are some environmental short cuts but their regulatory conveniences are often counter balanced against the political risks of China corruption. If you remove these so called low labor costs you, what other advantage do they offer? China’s trillion dollar subsidies are clearly directed against American’s highly competitive labor force. Their trillions in subsidy present us some index to the financial worth of our labor force. Other countries are throwing in hundreds of billions in other subsidies behind their exports as well. This is what our American’ manufacturer has been running against. China spends to subsidize their manufacturers the way we spend to keep our military strong. It is nothing less than their war budget. No surprise than that they are winning this war of markets and manufacturing against our lone American business. It’s war for them. It’s commerce to us. Time to recognize the difference.

We cannot beat Chinese manufacturing with cash alone. The old capital markets of just a few years ago use to be one of America’s primary advantages. Not anymore. It is the gov’t of China that lies behind each of its many businesses. How can any business outspend the whole of China? The weapon in this war happens to be none other than our American worker. It is the power of Made in USA that alone can bring down this economic façade of China’s trillion dollar empire. Today’s GI Joe is the man trudging ahead in the trenches of American enterprise. They are the solider on the beachfront of America’s cold War with China. They simply need the honor of fair trade. This means removing China’s horrific subsidies. This will give these soldiers a real chance of winning this war and save our economy.

To empower the labor force of American manufacturing will allow us to regain our footing. Republican calls for tax cuts and deregulation won’t give us this. This no longer works as it once did. Today’s problems are not for a lack of cash per say. Democrats offer gov’t contracts or other manufacturing jumpstarts. That won’t work either. Both parties have tried their formulas and somehow, they both come up short. Why? Democrat and Republican formula’s are stimulus based. This stimulus is geared towards swaying market forces. These economic tools have worked before, but we now have a larger force at play. It is a political force that lies outside the ebb and flow of market cycles. It is China.

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Until the China issue is resolved, all these other measures will be canceled out by China’s subsidy. These subsidies are geared specifically to thwart any and all of these Democrat and Republican measures. This includes our budgeting issues as well. The money will continue to dwindle for a country that no longer generates revenues from business and employment. Therefore, you will never be able cut budgets deep enough when the revenue only continues to dwindle. This China issue lays smack center of all these issues. None of these will be amended until this one issue with China has been resolved.

Even the issues of the Afghan and Iraq wars are less pressing. Losing these battles means losing our sphere of influence in that part of the globe. Losing our economy is to lose everything. Today, the entirety of America’s global and domestic economic standing lies in the balance of this Cold War with China. What else can compare?

Herein is the root of our economic problems and the real challenge laid before us. Now for the good news: there’s a simple solution to it: Tariffs.

The disparities between American enterprise and those of the Chinese subsidy are easy to quantify. We suggest indexing each area of these subsides. Take a tally of these and total them into a single bill. We do this in Part II of our series. This approach is taken from our ROOPA program. ROOPA finds the social cost of a product, action or thing and tallies these costs into a single bill. We than have the respective parties cover their social costs. This is most often done as part of the retail price of their product. We apply this same method here with China’s political subsidies to its exports.

These subsidy costs can be layered into the price of China’s imports. There may be other ways to handle this, but a simple tariff seems as effective as it is fast and easy. We can literally have this fully implemented within a matter of days. This cost can be divided equally between all China imports and paid with a simple tariff. Imagine if it was implemented by all countries. It would break China’s subsidy regime rather quickly. The world can now find itself a fair playing field at long last.

Don’t mistake this to be another trade war playing out between countries. We are only suggesting implementing the full terms of China’s membership to the World Trade Organization. Joining the world’s premier trade group means we all play by the same rules. There are penalties for breaking these codes of conduct. Tariffs are the most common. Their primary purpose is to level the playing field. China should up-grade if it is ever going to be a true partner in global trade. This would be the final step to it.

In principle, China supports the cause and benefits of ‘free trade.’ The vast majority of its prosperity has been realized from it. China has incentive for completing its terms of membership to the World Trade Organization. These China subsidies were a recognized accommodation to China as a gesture of good will in this new partnership to world trade. Now it’s time to take off the training wheels. Let them ride like the rest of us. China is no longer the handicap kid with ‘special needs.’ Time to play like an adult of the international community. Welcome to the club as a full partner.

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This sounds a wee condescending because it is intended to be a bit biting. It’s done as a fitting response to China’s own calls for reform. We hear China chiming in with all the other critics of America’s monetary policy. They proudly lead this charge as the new, up and coming super power of the world. They boldly talk about the importance of reform while dancing around this skirmish over the 45% subsidy for their currency. China acts as if removing this subsidy would strip out much of their manufacturing advantage. Would it? If so, it reveals a telling truth about China. It suggest that they are little more than a one pony act. Their act: gross economic subsidy. If true, this would be the final testament to American manufacturing. China would be formally recognizing that they really can’t match American manufacturing on a level playing field. Maybe China knows this. Somehow, we don’t.

The proof seems straight forward enough. China seems to have no choice but to layer on an ever deeper set of price subsidies. Does China really believe it has little chance of competing against the US without these? Is China manufacturing so vulnerable that removing this currency subsidy could single handedly decimate its entire manufacturing advantage? If this is the case, we can talk of extending more help as we have in the past. We have been a real partner to them this way. What we have now is underhanded. It breaks the rules of engagement and now crosses into economic aggression. This China aggression is crushing our manufacturing base much as it is intended to do. This 45% currency subsidy is the final tipping point. It demands a response and one worthy of any act of rising aggression.

We have reached a threshold where China need only hold out a bit longer before the US economy potentially collapses. The rate of collapse continues in pace with our loss of manufacturing. It is being consumed by this economic black-hole of China’s subsidized production. This sounds terrible, but imagine this. It is actually second to our greater political crisis.

Here’s the really scary part of this story. The urgency of this obvious economic imbalance has been buried under by America’s ideological battles. Liberals go after corporate performance while conservatives keep their death grip on public policy. Yes, these were the old battle grounds of yore. They each proved their worth in mending the country’s economic maladies at different junctures of yesterday. Today, neither of these get to the heart of this new problem. Their infighting is only distracting us from it.

China’s subsidy regime is playing a central role to America’s manufacturing slowdown. Conservatives keep pinning this slow down on Pres. Obama’s policies. Their ideological commitments won’t let them see beyond this format of problems and answers. It is a dreadful misreading of the problem. The urgency of this crisis is now sidelined and redirected against Pres. Obama. Here’s the greater irony. The proper response to China happens to include many of the same policies we see by the President. In a closed economy, these policies would appear to be socialist. That changes once we recognize that our country’s manufacturing is under siege by a foreign power. These same socialist policies now become the fitting counter measure to China’s economic war of aggression.

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Stated simply, the Republican Free-market formulas will also fail to work because China will blunt the returns of those economic rewards as well. This is no longer a free-market issue, but a foreign policy one. It DEMANDS a Gov’t response. The response from a Democrat or Republican will look much like we are getting from Pres. Obama’s policies today. Conservatives may not agree with these policy choices during times of peace, but they are likely to follow in kind during times of economic aggression.

Let’s take the example of the auto-bailouts. Without them, China would have gobbled them up as it did with IBM. Or it could have been something worse. Failure to act could have given China the final advantage over the US auto industry. This is true of the other economic sectors to have been saved by gov’t intervention. Most of these sectors would have been swallowed whole or they would have closed the last of our commercial infrastructure to compete against China.

This is different than the Free-Market calculus wherein their demise would have been replaced by another ‘friendly’ player with a better product. This is not the case with China playing spoiler. China would now be the one replacing our national players. Nor would the markets get a player of greater efficiency. China would be replacing this with their far less efficient operations. Failure to have stepped in against China intervention would have downgraded the US on every front: economically, commercially, internationally and politically.

Look at what we ended up instead. The gov’t made these loans to the US auto companies. In Chrysler’s case, this allowed them time to partner with a European player for a much better price than otherwise possible. This was a bast case scenario on both accounts. For GM, they have already paid off the feds loan. Their role as both manufacturing infrastructure and critical jobs center was upgraded. This kind of gov’t loan and intervention (or savvy investment as Democrats see it) may not be the ideal in a true free-market system, but it is critical for a market under siege by a foreign power sitting in wait to pick off our weakest.

The best example of this maybe the American and Soviet space race of the 60’s. This race to space demanded more than waiting for the ‘free-markets’ to get us there. It was in direct response to the Soviets own success and beating them. We had to beat them as much for the sake of space as for the Cold War. It was more an issue of foreign policy and national security than just developing our markets and technology. This is how China treats their manufacturing sector. It’s time we did the same. The subsidies China is willing to pay to gain these commercial treasures gives us some idea of their value. As our economy continues to hollow out, we see how critical they have been to our everyday life. They are in fact the national treasures of our economy. National treasures have some added consideration. That’s required now.

And yes, we have accounted for the economic ramifications of these tariffs. That would include everything from China selling off our currency or the export of our inflation to China. We have found the counter measures to these. They will be covered in Part 3 of our series.

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In closing, we present this as a call to our political parties to reassess their positions and take a second look at their differences. China does not fit into the ideological postures of this two party paradigm and so it failed to register in these raging debates over economic policy. They were blind to the urgency of China’s impact though both parties know of the China issue so well. These old ideological postures simply have little application to this crisis much as they have little to offer a growing number of other problems. It is worse than irrelevant, they now cover and smother our natural vision to a host of other options starting with our fellow American. Maybe now we could band together as one people. We have gone too long without common cause. This China issue will be a blessing in disguise if it finally helps find our common bonds as Americans. Both parties recognize the gravity of China’s subsidies. Now they must recognize its first demand. We must stand as one voice, one people, one America.

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Section 8

Chapter 2:

Freedom: America’s Religion

Excerpt

Our Founding Fathers took millennia of civilizations and condensed it into this simplest of Divine tenets: ‘All men are created equal.’ From this simple truth, we beget our Freedom in all its glory...

* * * * *

Freedom is America’s national religion. Like all religions, the principals of

freedom are founded in Divinity. A mandate secures its legitimacy with a validation from

an authorized third source or party. In this country, your Freedom is taken directly from

the Divine and handed over as your birthright from the day you become American. This

had rarely been done before and therefore, few societies achieved this expression of

the human potential like we see of America today.

This may seem an obscure philosophical detail, but it remains one of History’s

greatest social-religious breakthroughs. Before this, man was more animal then human;

unless and except for those rights bestowed by Divine King, Church, Deed or

Consensus. These systems held man to be a third party to God’s Divinity. America

changed this. Our Founding Fathers took millennia of civilizations and condensed it into

this simplest of Divine tenets: ‘All men are created equal.’ From this simple truth, we

beget our Freedom in all its glory (as offered by the Declaration of Independence &

implemented by the US Constitution).

Every religion holds true, the choice given man in his evolution towards the

Great Divine. Freedom celebrates the power of this choice as the centerpiece of the

Lord’s special gift to all mankind. However, it was America that came to honor this

freedom as the deciding principle to our rights as a Divine being, and the inherent

goodness of such choice. In that right, we stand as a testament to the brilliance of this

theology, for it remains the magic behind the unfolding of our destiny as man, women

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and country.

These Principles of Freedom are the hub of American power, both moral and

political. Freedom towers over those of lesser insight (and policy) to the greatest of

mankind’s hopes and promise. Not surprising, Freedom remains our greatest export

and cherished ever more as a global ideal.

America has shown the wisdom learned from poor choice, the spirit to find

anew its lessons, and the strength to build from these; the higher ground in life,

goodness and accomplishment. And yet, we are on notice that to disengage as a

Nation, Under God, is to distance the reach and practice of these precious rights. For it

is in the Divine that we sidestep the class divide of man as beast (and all the limitations

this reintroduces to our freedoms as a Man of the Divine). By this same token,

encumbering these rights is to trespass against this Divinity, and in time, can comprise

our sense of both. Therefore, we must stand ever vigilant.

These rights have been secured in the sacrifice of blood and deed by those

before us, so that today, we live in the confidence of our birthright we call Freedom.

Lives spent in the cause of Freedom were done in this Divine cause. And so, we honor

them in the celebration of America’s founding that still holds to this day, the torch of

Freedom: For the People, By the People, Of the People.

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Section 8

Chapter 3:

Abortion: Part I

The vote For or Against abortion

hides the crime of ‘Inequity

T

‘Abortion has become the default option to all the cultural dysfunction of

American family policies and conveniently leaves it to be paid by ‘a women’s

choice’ at the juncture of motherhood.’

* * *

Abortion remains one of the most underdeveloped issues of all American politics. Supporters define the issue by taking all the emergency, life threatening scenarios and putting them along side all the horrific cases of rape and incest. Unfortunately, these are the veil to drape the greater issue that make up the real reason for most abortions. That ‘real reason’ is the growing hardship faced by motherhood in America today.

Abortion has become the default option to all the cultural dysfunction of American family policies and conveniently leaves it to be paid by ‘women’s choice’ at the juncture of motherhood. Waving threw this issue with a vote (Up or Down) for abortion seems lazy to me. The vote itself seems representative of the insensitivity to the social economic plight left at the doorstep of the American women at that most special moment of life itself. It remains an economic black-hole precisely because it’s a women’s issue as a

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mother, rather than one held as a priority by men. I see the whole framework of the debate built upon this cultural prejudice.

Abortion allows men to posture about the sanctity of life and gives women the ‘feel-good fight’ against the social penalty of motherhood without having to cast a dime for the number of other options to such a horrific choice. I therefore find either of these two positions somewhat dishonest to the real issue. It maybe something a kin to mandating that starving people should not eat their family pets. The obvious wrong of cannibalizing the family pet is off set against the severity of starvation. A focus on solving the starvation would seem both more effective and honest than lecturing on the wrongs of eating Ralphie.

The framework of today’s debate takes the financial hardship of our system left piling up at the doorway of motherhood and buries it ever deeper from public discourse. Motherhood remains the great economic bottleneck of the American social system. The vote For or Against abortion hides this crime of ‘Inequity of American Motherhood.’ Until this issue is addressed head-on, motherhood is going to be left to compensate for the growing economic disparities of today’s social experiments. This will subject the ‘women’s choice’ to push motherhood ever further out to the future until we have generations of women with no children at all. This is a severe price to pay for the political expediency of the abortion vote or even that most sacred of modern causes: economic development. We are already beginning to see this play out where entire towns in Europe stand empty because of the population implosion.

This population implosion shows up as anecdotal news reports, but may prove the greatest defining issue of all Western civilization. We see it in the issue of Social Security for example where there are fewer workers paying in against those retiring.

A better example maybe Islam versus the West. Muslims are having lots of kids. We are having few or none at all. We could be looking at a world overrun by Islam within a couple generations because we decided against having kids today. Does this make it a national security issue? Who knows?

Abortion caries such a range of concerns. All of them must be better developed if we are ever going to have an honest discussion that can cover the full range of issues that intersect at this juncture of life and politics. This cannot happen as long as the debate is confined to the single question of voting For or Against abortion.

My question is what alternatives do you see? We need to address the social economic duress and financial penalty placed upon motherhood that abortion is now used to paper-over. Our Family Franchise will provide some context to this discussion. I would like to see your thoughts on this as well.

(This taken from Raghu-nomics 3: Abortion: America's Final Solution.'

For a copy of the book:

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http://www.lulu.com/browse/search.php?search_forum=-1&search_cat=2&show_results=topics&return_chars=200&search_keywords=&keys=&header_search=true&search=&locale=&sitesearch=lulu.com&q=&fListingClass=0&fSearch=raghu-nomics+abortion&fSubmitSearch.x=0&fSubmitSearch.y=0

.

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Section 8

Chapter 4:

Abortion Part 2:

The Bridge to Financial Independence

Excerpts

Abortion sprinkles the fairy dust of freedom over the worse of poverty, hardship and poor judgment...and so..has become the ‘Goddess of Prosperity’ for those who can call upon its favor in times of need.

* * *

…The backwardness of our socioeconomic model can now be measured by the number of abortions performed for the reason that abortion is the

official reset button to our social failing as experienced by Mom.”

* * * * *

Abortion has become the dumping ground for most every social dysfunction of the modern world. It’s the silver bullet to everything from overpopulation,

crime, and poverty, to environmental destruction and political instability. And that is before we get to the personal reprieve abortion offers from poor choices, finances or timing. A host of problems are finding their way to this default-option of a ‘women’s’ choice.’ This is perverting the original intent of

abortion and crafting it into America’s ‘Final Solution.’

* * * * *

What kind of culture would leave so many, so committed to abort their baby? Blaming mothers for the ‘choice’ seems more the ultimate travesty when abortion stands as the centerpiece of the Western quest to career

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and family rather than some kind of individual ‘women’s choice.’ Therefore, this cultural prejudice is the more accurate target to be address rather than

the ‘Women’s Choice’ or even the Pro-Life issues that dominate today’s debate.

*.* *.* *.* *.*

My last article pointed out that abortion hides a whole cultural dysfunction that needs to be addressed if we are to do justice to the actual issues hiding behind abortion politics. This was not to avoid taking a stand (as some inferred) but rather to lift the veil to the real issue. Today, I show you the face of this issue in a way only philosophy can. It goes to the heart of America at its interface between love & money, policy & people, lives & principle. Abortion is the catch-all for a host of neglected social economic dynamics that have been pushed into the lap of America’s motherhood. I started listing those different issues here but then made a startling discovery: this ‘dysfunction’ happens to be the official financial model for today’s American family.

Abortion is the means to reaching the career goals of the American women. Without abortion, those goals are moved further out of reach. This vocational priority has taken center stage. This has changed the original terms of the debate from one of emergency life saving procedure, to one about finance, opportunity and education. This leaves us to address this financial model if we are going to effectively deal with the issues of abortion. I have tried to start that discussion here.

It’s a mammoth undertaking. No wonder politicians go with the simple option of voting For or Against abortion. It is so much easier.

I start with a look at different family models used by other cultures to see if they offer any pointers. (They do. Hawaiians, for example, have Grandma care for the child allowing mom the freedom in her youth, simply to mother her own grandchild later in life.) I then tried to identify some of the social dynamics and contrast those with counter arguments. (What a minefield.)

A deeper review turned up even more interesting findings that now seem obvious, though never clearly connected to abortion before. The financial role played by abortion is only a prelude to its other (if not greater) functions to the modern world. Abortion has become the dumping ground for most every social dysfunction of the modern world. It’s the silver bullet to everything from overpopulation, crime, and poverty, to environmental destruction and political instability. And that is before we get to the personal reprieve abortion offers from poor choices, finances or timing. A host of problems are finding

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their way to this default-option of a ‘women’s’ choice.’ This is perverting the original intent of abortion and crafting it into America’s ‘Final Solution.’

Examples

Globally:

‘Too many people in the world: abortion will take care of it.’

‘Too much poverty or environmental destruction, well, that is because of too many people and so once again, abortion is the answer.’

‘Wars, well, that’s because there are too many people fighting over too few resources. Answer: abortion.’

Personal Reasons:

‘You don’t like the Dad: abortion will solve the problem.’

‘Weak relationship: Abortion.’

‘Not enough money right now, have an abortion.’

‘Want to finish school first, have….’

Other cultures arranged things so many of these issues were accounted for prior to marriage. From this evolved traditions and customs that sidestepped a host of pitfalls so one was fathering with the right partner or having their finances in place before hand. Pushing aside traditions shifted these issues over to be dealt with upon pregnancy. Other cultures considered pregnancy the very worse time to deal with such issues. Abortion however, comes along and offers this big reset-button. This made abortion the official chat-time to weigh all the issues of life, finances and vocational status. Abortion is ‘the miracle redo button of life.’ Therefore, the cultural tone (from friends and family, to doctors and counselors), often starts with the question of abortion as a first choice rather than the option of last resort.

This all purpose solution has transformed abortion into the magic wand of the modern world. Abortion sprinkles the fairy dust of freedom over the worse of poverty, hardship and poor judgment. The goddess ascribed to motherhood by other cultures may have found its modern counterpart in abortion. Abortion has become the ‘Goddess of Prosperity’ for all those who can call upon its favor in times of need. These depictions are of course a bit colorful but they do offer a more accurate context to the role abortion has come to represent to its most ardent followers. Their tone is more adulation than harrowing emergency of last resort. This better explains the demands for abortions unbridled accessibility. A large segment of the Pro-Choice movement is not asking for emergency room access or even life style accommodation anymore. They want abortion

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on the ready for any one of a host of ‘choices.’ Abortion is the culmination of mans best solution: Leave it to mom.

However you feel about our take on abortion, it’s actually secondary to the main point. The point is that this entire discussion is now hidden away by the vote FOR or AGAINSTS abortion. It’s an important discussion, but it’s been glossed over by the shouting match over the vote. This is why I have remained reserved about taking a stand on the abortion vote thus far. We don’t need another assembly line politician passing this poorly conceived social reform down the political process. (I had written this article during my campaign run for congress here in Hawaii.) The issues raised in this essay offer a better sense to the stature and complexity of the subject. These have to be accounted for, if ever, we hope to answer the real motives feeding the frenzy of this abortion debate.

Abortion sits at the cross roads of family, morality, economics, cultural paradigms, financial models, religion, birth, life itself and all the thorny issues that rip apart the grace of political posture. Many of these issues are touched upon (in the index below).

The greatest revelation may actually be the simplest. Abortion is not the center piece to these issues. Motherhood is. This review allowed me to see this more clearly then recognized by today’s debate. Hopefully, others will come to see this too.

Motherhood is the natural social hub wherein these communal issues found place and support for millennia. A dysfunctional system of motherhood has left these issues backing-up into the debate over abortion and out into society at large. In a sense, we can actually use these social failings to measure how much we have failed motherhood. Abortion then is not an answer, but rather the rate of our greater cultural shortfall. (Contrast this from the media view that sees it as a matter of progress often used in rating such things as teen pregnancies). The amount we call upon abortion marks the degree of our cultural failing. The backwardness of our socioeconomic model can now be measured by the number of abortions performed; for abortion is the official reset button to our social failing as experienced by Mom (whose job lies center of this crossroads to our social economic problems).

We somehow failed to overlook the significance of this cultural side of the abortion debate. This in turn demands a cultural review more than just a political one. This cultural assessment maybe a central piece missing from today’s debate. It may also prove a more accurate target than the moral principle of ‘the right to life’ that now leads the charge.

We left-out this side of the debate for the reason that the Right to Life arguments have been made far more graphically then we ever can hope to do here. This has made the Pro-choice Movement all the more callous to the point. Raising it again would not change their feelings. Talking to the issues of finance & culture is likely to have greater traction. It also seems a more accurate target to the problems. Best of all, it remains the

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neglected side of the debate and so allows us to offer considerations that are genuinely new.

This cultural review may be one of the bigger contributions we can make to this discussion. Has this cultural consideration landed me smack center the raging culture wars taking place between the Left and Right of American politics? (Eeeekkk)

No.

This is NOT about the social prerogatives of American culture now weighed between two sides. Rather, we are talking of a built-in prejudice by the culture itself. This prejudice lies infused to both sides of the debates. The cultural paradigms of the West seem to carry this inherent bias against motherhood. You can see this in its portrayal of being weak of character (welfare moms), as a financial liability (versus an investment as other cultures treat it) or as a secondary profession (stay-at-home mom as a second choice, for example, to being a childcare worker though both serve the same function).

These negative stereotypes represent a profound lack of insight to the role, value and long term treasures of motherhood and her corresponding economic rewards for family and country. Yet, these stereotypes are often the norm. This suggests that abortion may be the final culmination of this cultural bigotry. The real question then is this: What kind of culture would leave so many, so committed to abort their baby? Blaming mothers for the ‘choice’ seems more the ultimate travesty when abortion stands as the centerpiece of the Western quest to career and family rather than some kind of individual ‘women’s choice.’ Therefore, this cultural prejudice is the more accurate target to be address rather than the ‘Women’s Choice’ or even the Pro-Life issues that dominate today’s debate.

America has re-engineered life and love in the name of economic development (by moving motherhood out into the later years of life). This has recalibrated nature’s way. In so doing, it appears to be spawning a series of social economic bottlenecks in everything from young love and social identity, to impaired families and imploding community.

I think this bottleneck encapsulates the one underlining failing of the modern world in general. Modern man has this shortsighted understanding to the long term impact of changes to the natural eco-systems of life. What makes these times so exciting is this growing trend to incorporate more accountability towards these long range outcomes. As the modern world continues to mature in this way, we may see our manner looking similar to the traditions of the old world. They may look more like those of our grandparents, from cultures past or in the religious ideals that seemed so dated just a few years back. In a sense, we will have gone ‘full circle.’

It’s like the story of the grandparents leaving the family farm to find prosperity in the city, only to buy ‘the ranch’ a generation later when the ‘kids’ come into their millions. The life of farming and those of a millionaire would seem so different and yet a ranch holds

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sway to both. We may find this true of our family models. Or, we may fashion a hybrid of cultures past; alongside the unique advantages of the modern world. The limitations of each finally discovering new potential so different than those imagined before. I maybe reaching here, but this offers a preview to the cross cultural advantages for meeting the ‘problems’ of the modern world from the insight of traditions past.

Re-introducing the old world is not the agenda but simply how this review has evolved so far. This is just a sample to see how a true discussion would play-out. This is the intent of our exercise here and a good sample of the rewards for taking a neutral approach to their natural conclusion.

We have assembled a decent list of issues in the Index below (Part 3). You will see how the points have found voice in this essay. Hopefully, we can have more discussions like this that can incorporate a broader spectrum of issues into one’s presentation. That is where we will find true revelation. For example, it’s quite interesting to see how these issues combine. Sometimes, issues have an entirely different conclusion then as a standalone topic. This added quality of dialogue is the point of our work.

I pass this on to you as a tool of dialogue rather than one more ideological weapon of posture. This is a small demonstration to the kinds of great discussions we should be having as a country. Others will take this list and add or offer an entirely different angle. That will serve as a testament of our work. We are not trying to jimmy the conclusion so much as showing the advantages of an honest conversation and see how the issues speak for themselves.

The essay concludes with my own proposal that offers some enterprising solutions. That program is called The Family Franchise. Details on how it works will be covered in follow-up articles.

Please look this over and add to the points raised under the ‘13 Issues’ listed so far (they are available in the Raghu-nomics 3 book). Welcome to our brand of political dialogue. It offers us a broader range of issues, a greater context to each and a sense of the added possibilities to be gained over today’s strident political posturing that has served little more than self indulgence and petty power plays.

Aloha

Raghu G

(Part 1 and 2 are taken from Raghu-nomics: Part 3; Abortion - America's Final Solution. Available at lulu. com. Search for Raghu-nomics.)

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For a copy of the book:

http://www.lulu.com/browse/search.php?search_forum=-1&search_cat=2&show_results=topics&return_chars=200&search_keywords=&keys=&header_search=true&search=&locale=&sitesearch=lulu.com&q=&fListingClass=0&fSearch=raghu-nomics+abortion&fSubmitSearch.x=0&fSubmitSearch.y=0

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Section 8

Chapter 5

Questions by Raghu-nomics:

Jobs vs Low Wages & Taxes

Excerpts:

"This first is why countries like Germany or Japan were doing so well though they both have such high regulations, wages and taxes? The same may be said of other countries whether they be England, Canada or some may even say France. In other words, the distinguishing factor between first world and third world countries seems to in fact be high wages, taxes and regulations."

*.* *.* *.* *.*

Here’s some fun questions.

Low taxes, low regulations and low wages is the formula given by Conservatives as the only economic panacea to today’s job market. They are convinced it’s the only way to bring manufacturing jobs back to the USA.

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This leaves us with several questions. This first is why countries like Germany or Japan were doing so well though they both have such high regulations, wages and taxes? The same may be said of other countries whether they be England, Canada or some may even say France. In other words, the distinguishing factor between first world and third world countries seems to in fact be high wages, taxes and regulations.

On the other side, we have China with low wages, no regulations and no taxes and yet, they were forced to subsidize their currency by as much as 50%. They did this for a (half) decade. This is on top of other hefty social economic subsidies. If low wage, tax and regulations were the one true answer, China should not have needed the trillions more in other subsidies.

You can know the answer by removing all the other factors out of the equation and still have the same result. This is not the case when it comes to this low-tax, wage, regulation model. In fact, it proves quite the opposite for countries like Germany and Japan. They did well in spite of these so-called economic disadvantages. The big question to this is obvious: why?

On the other side, you can know an answer by adding that factor into an equation and it should give you the desired outcome. Somehow, the low wages, regulations and taxes of China’s model was not the deciding economic factor for them. Hence, all the other subsidies. Had this been the answer, there would be no need for China to throw trillions more in additional subsidies. China has an outstanding foreign currency reserve of $3.5 trillion. This was used to keep their currency artificially low. This kept the renminbi trading about 50% below its natural market value. This distored markets both here at home in the USA as well as locked out American products from markets abroad.

Removing just this one subsidy alone would have left China’s prices 100% higher. Doubling the price of China’s products would have destroyed their price competitive advantage. China was left with no choice but to flood their manufacturing with a host of additional subsides starting with their currency manipulation. In other words, low wages, regulations and taxes was not enough – not by a long shot. It took China $3.5 trillion more in currency manipulation and that only begins to offset their manufacturing disadvantages. It took hundreds of billions of other social economic subsidies as well.

We find this true of most every third world country. Dozens of third world countries have these same low tax, wage and regulation policies and yet, they too are not competitive against American manufacturing. Why?

Why does this low wage/tax formula no longer work and more importantly, why do conservatives believe it would?

Raghu-nomics is a new economics approach and often starts by asking questions of old assumptions. In this case, the assumption is based upon the centuries old capitalist vs

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socialist paradigm developed in the old world when labor made up a hefty portion of a products final price – often the majority of that cost. That is simply not true today.

Manufacturing’s automation and technology efficiencies collapsed the cost of labor to a products final price – even when done by unions. I’ve been asking union critics what they think it would cost to have I-Pads manufactured here in the USA rather than China. The answers range from 50% to as much as 200% more in added labor costs. They assume unions would double I-Pads $500 price tag.

Economist have done this same equation and projected it closer to $65 in total cost of American labor. This would come from Apples profit margin of about $200. This is $65 in US labor cost versus say $25 for China Made. So you can say Made in the USA cost $40 more than if done in China. This $40 would not change the final retail price, but would impact 20% of Apples final profit margins. Union critics assumed it would wipe out all Apple profits. That’s simply not true.

This is not some ‘liberal’ agenda to defend unions or Democrats tax and regulation policies. Raghu-nomics looks to crack these economic riddles for obvious reasons. Cracking these economic codes will give us the right answer to our economic problems. It appears we have been misdiagnosing America’s problems. That’s as true of Republicans as it is of Democrats. We therefore, they keep missing the actual solutions.

Raghu-nomics has finally discovered the real secret behind China’s manufacturing success. Once this one single aspect (factor) is duplicated here in the USA, we can have a rush of jobs returning to the USA. The best part is that it is both simple and rather obvious once you hear the answer. Most of us already figured this one issue to be the answer anyway, but the political rhetoric by the two party conflict has keep us distracted from taking a second look at it. Raghu-nomics will finally provide the kind of attention this one simple solution deserves. Neither party will be opposed and the country should love it.

We will offer up this simple solution once there is some real public interest for it. How about waiting til a million people ask for this? It’s amusingly obvious and will leave eyes rolling and slapping foreheads nodding upon hearing the answer. This will be fun. Stay tuned to Raghu-nomics. (Supply Train)

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151

Section 8

Chapter 6

Obama & Republican Postures Miss Real

Solution to Economy: Off-setting China

"That brings us to the publics own confusion where they see that the

Republican formulas of tax cuts and de-regulations don't seem to work

while the Democrats Gov't spending stimulus doesn't seemt to work either.

Why? And what would be the alternative to it. At Raghu-nomics, we have

discovered that both of these approaches would have and did work in the

past, but will not work today for the simple reason that most any industry

and American manufacturing operation that starts to gain traction will be

offset by China's far larger subsidies to over take all such developments. In

short, we don't have an economic issue as the Democrats and Republicans

have been arguing, but rather we have a foriegn policy issue that is all part

of American's New Economic Cold War with China. We talkede about this

in more detail in our previous article: America's New Cold War: China."

*. *. *.

How to make sense of all this legislation. Republicans are not jumping at President Obama's Payroll tax which reduces the Social Security Tax from 6.5% of income to 4%.

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And it is now the Republicans demanding saving the cut to doctors fees in Medicare. On the outside, it appears that some how Democrats and Republicans have swapped roles. To the more savy, they will see Obama's states craft to leave Republicans forced into political postures that better high light his profile as the man working to cut taxes for the middle class while the Republicans are fighting no for fightings sake. The political posture is working. President Obama's approval ratings are rising as they have since he has gone on the defensive with the Republicans while the Republicans numbers much like those of Congress in general continue to sag.

Oddly, it appears that many of the Republican positions are actually accurate for much of the reasons the Republicans state. To find myself agreeing with Michele Backmann is always an amusing experience, but her position like those of other Republicans is that Social Security needs to have its money saved and the surplus's set aside to build up reserves.

More importantly is the Republican positon that such tax cuts don't 'create jobs' while their focus that tax cuts for the 'rich' or better phrased 'small' business is where the real benefit lies. At Raghu-nomics, we have been able to identify the truth of both these positions. On the one hand, the $70 a month 'extra' cash that the Payroll reduction offers to the median income is some what incidental to a family making $5,000 a month. However, a 10% reduction in taxes for a business on the hand would provide a 50% to 100% spike in profits. In short, such a tax reduction represents a exponential economic benefit to businesses bottom line.

Say a business is has a 15% profit margin as is the case with a growing number of businesses today. Providing such a business a tax reduction of 10% would now spike their profit margin by a whooping 80% and so they would now show a profit of 25%. The economic ramifications are huge all the way down the line for a business whether in its business profits it gets to trumpet to investors or affiliates alike to venders and banks or projections of how much they themselves will reinvest in expanding their own business. We simply don't have this kind of exponential impact when we provide tax cuts to the middle class as President Obama has been pushing for much of his Presidency when ever he tries to out flank the Republicans in public posture - something the President has done rather successfully when he has decided to.

However, Raghu-nomics has recognized that much of this kind of tax break for business will also be significnatly muted in this economic climate for several reasons. We point to Obama's first 'stimulus' package as our example to make the point. Of the nearly $800 billion proposed by the President's package, nearly 80% was for tax cuts with $550 billion going for such tax reductions. That stimulus carried under $300 billion in actual 'liberal' spending stimulus and so you have such 'liberal' economists as those from the NY Times have the audacity to say we need a larger gov't stimulus. The Republicans have inadvertantly proved that their tax cuts policies won't and can't work as well when they go after President Obama's stimulus as they have done with such a vengence. Oddly, Democrats have failed to make an issue of this Republican rhetorical laps to the degree they should have as a matter of political posture.

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That brings us to the publics own confusion where they see that the Republican formulas of tax cuts and de-regulations don't seem to work while the Democrats Gov't spending stimulus doesn't seemt to work either. Why? And what would be the alternative to it. At Raghu-nomics, we have discovered that both of these approaches would have and did work in the past, but will not work today for the simple reason that most any industry and American manufacturing operation that starts to gain traction will be offset by China's far larger subsidies to over take all such developments. In short, we don't have an economic issue as the Democrats and Republicans have been arguing, but rather we have a foriegn policy issue that is all part of American's New Economic Cold War with China. We talkede about this in more detail in our previous article: America's New Cold War: China.

So while we have President Obama providing great political theater and leaving Republicans on the retreat, it fails to get to the heart of our economic situation much as the Republicans claim. We disucss solutions and pro-active actions for this in our previous articles on this, but here we outline the real issue to see through all this political drama.

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Section 8

Chapter 7

Simple Balanced Budget –

Cut Republican Entitlements

Excerpt:

Cut off all Federal Benefits to Republicans. Once Conservatives agree to more taxes, they can be reinstated. Sound flippant? Well, yes, but it personifies how today’s ‘reforms’ sound to Democrats.

When Republicans talk of cutting spending, Democrats hear them saying to dump seniors, children, students, moms, the poor and all the other social victims Democrats think we have in the US. ‘Dump Democrats’ is what liberals hear. There is truth to it, but Democrats seem to have just one response. ‘That’s not fair.’ Complaining about fairness sounds winy to conservatives. The response of course is that life is not fair. Grow up, get use to it and do something about it. From this perspective, conservatives have a point.

The problem than is not Republicans, but the Democrats. They have failed to make a stronger case against budget cuts. A natural counter point: There’s plenty of revenue to cover all of America’s Democrats. We can cover all these benefits at the tax rates Republicans want. We simply don’t have enough revenue to cover Republican’s federal benefits too. If Republicans want to enjoy Social Security and all the rest, they have to raise taxes or go without these until revenues pick up.

Sound absurd? Well, yes it is by some measures. However, this better personifies the Democrats communication gap. Democrats see program cuts as a Republican move to punish Democrat constituents. Removing all the country’s Republicans from all Federal programs would demonstrate the point. And of course, it will cut costs too. Yet, this does not get to the Democrats economic point about program cuts or the benefits ‘liberals’ are

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trying to save. Making that case is what Democrats should be doing. However, offering to removing all federal services from Republicans makes for great headlines. lol.

"That brings us to the publics own confusion where they see that the

Republican formulas of tax cuts and de-regulations don't seem to work

while the Democrats Gov't spending stimulus doesn't seemt to work either.

Why? And what would be the alternative to it. At Raghu-nomics, we have

discovered that both of these approaches would have and did work in the

past, but will not work today for the simple reason that most any industry

and American manufacturing operation that starts to gain traction will be

offset by China's far larger subsidies to over take all such developments. In

short, we don't have an economic issue as the Democrats and Republicans

have been arguing, but rather we have a foriegn policy issue that is all part

of American's New Economic Cold War with China. We talkede about this

in more detail in our previous article: America's New Cold War: China."

*. *. * *

Democrats seem to have lost the argument for the liberal agenda. This led to losing the public mandate in last Nov. elections. Today was the final act of this. Democrats therefore lost the policy initiative and naturally, the political play as well. This Republican and Democrat Deficit match is becoming the end game of the Tea Party against the entirety of the Democratic ideology. Laurels of the Democrats old moral mandates had become a powerful political machine. The power and politics have taken the focus. Their ideological fight has been almost entirely neglected. That liberal machine is now crumbling. Democrats only measure of influence is in how much was ‘not lost’ rather than gained. The remaining hold outs like Social Security are likely to be swept away during the second trial of this deficit debate. This will replay in just weeks from now.

Democrats are down playing this political slap down. The President has reverted into supra-spin mode about the positives of this deal leaving him crossing over into a front man for the conservative’s view of this latest outcome. It’s all good.

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How did this happened? Republicans have been focused into a simple and effective public stance: cut taxes, reduce costs and scrap benefits. This commitment of purpose is credited to the Tea Party. They found more than validation. This startling victory heralds the Tea Party as the official economic policy of America. A new day has arrived in Washington.

While kudos are passed around by supporters, the opposition is left snickering about an over reaching Neo-con plot that has left Democrats all but irrelevant as a political force on the economic front. This resentment personifies the problem with Democrats. The issue is not the Republicans. Democrats never made their case. Fairness is not an economic policy and therefore it cannot stand in an economic forum. As such, the only way out is to rephrase the debate. The problem is that Democrats are not sure what that would be and hence the quiet protest, but as of today, no series counter argument.

What would a ‘serious’ counter argument be?

This is about more than political posture. Rather, it about identifying what has been left out of debate. Re-phrasing the debate re-sets the options we have to work with in tackling the debt. There are other options out there. What are they?

Here are some examples from the absurd to the simple that reveals how much is missing from today’s political debates.

Remove Republicans from all federal benefits until taxes are raised.

Cut off all Federal Benefits to Republicans. Once Conservatives agree to more taxes, they can be reinstated. Sound flippant? Well, yes, but it personifies how today’s ‘reforms’ sound to Democrats.

When Republicans talk of cutting spending, Democrats hear them saying to dump seniors, children, students, moms, the poor and all the other social victims Democrats think we have in the US. ‘Dump Democrats’ is what liberals hear. There is truth to it, but Democrats seem to have just one response. ‘That’s not fair.’ Complaining about fairness sounds winy to conservatives. The response of course is that life is not fair. Grow up, get use to it and do something about it. From this perspective, conservatives have a point.

The problem than is not Republicans, but the Democrats. They have failed to make a stronger case against budget cuts. A natural counter point: There’s plenty of revenue to cover all of America’s Democrats. We can cover all these benefits at the tax rates Republicans want. We simply don’t have enough revenue to cover Republican’s federal benefits too. If Republicans want to enjoy Social Security and all the rest, they have to

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raise taxes or go without these until revenues pick up. We should be generating more revenue given all the tax breaks Republicans pushed through – at least, if you believe in the tax-cut-to-growth paradigm.

How this works is pretty simple. If you’re a Republican politician, you automatically lose all federal funding from office and travel, to health care and campaign tax deductibility. If you’re a Republican senior citizen, you get no Social Security check and the same again if you’re a student of a Republican household. The list goes on to include everyone from ex-Republican Presidents on down to the poor going in for medical treatments.

Sound absurd? Well, yes it is by some measures. However, this better personifies the Democrats communication gap. Democrats see program cuts as a Republican move to punish Democrat constituents. Removing all the country’s Republicans from all Federal programs would demonstrate the point. And of course, cuts costs too. Yet, this does not get to the Democrats economic point about program cuts or the benefits ‘liberals’ are trying to save. Making that case is what Democrats should be doing. However, offering to removing all federal services from Republicans makes for great headlines. Lol.

Democrats look at social services the way Republicans look at tax cuts. Republicans see tax cuts as a simple and obvious upgrade to business performance. Democrats see social services as a simple and obvious upgrade to people’s economic performance. Democrats see people as something like a corporate entity that provides an economic service that can be enhanced once equipped with education, health, transportation, housing etc. Democrats see benefit cuts as an economic impairment to such performance. Oddly, Democrats rarely make the economic case for their programs and instead talk about ‘fairness’ in response to Republican calls for budgetary discipline.

Talking fairness makes Democrats sound out of touch with budgetary reality. Republicans come off looking more responsible. Democrats blame over reaching conservatives, but really, they just have made a better case and hence, they are winning the mandate and power. They will continue to do so until Democrats present an economic case for their programs the way Republicans have for tax cuts for business. Republicans don’t see these stimulus measures as ‘costs’ but rather as an investment that generates more money. Democrats have to show their program costs as an investment that raises more revenue too. How?

It’s easy to do. Why Democrats struggle making their case is almost plain silly. Take Social Security. It’s a great example. In the last hundred years, life spans went from 58 years to 85. We just added 30 years to the average American’s life. India is only now making it into their 60’s. The US on the other hand has expanded our American life span by 50% = three whole decades. That’s huge. It’s miraculous to me. It’s what you hear of Gods and Angels doing.

Here’s what’s more interesting. Today’s seniors actually spend less ‘sick’ time incapacitated over their counter parts from a hundred years ago. Top this off with the

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extra 2 to 3 decades of added work we get from them. A century ago, we didn’t have lots of 60 year olds running around working. We didn’t even have that many 50 year olds. For the most part, they were all dead. Today, 70 and even 80 year olds are ‘working.’ Make that 90 in some cases. Some say it’s because of the recession. I call it a miracle. So we have doubled their working years from 30 years to 60, without adding much to their ‘sick days.’ Wow.

Does this cost us more money?

Of course.

Are we getting a whole lot more money from today’s seniors than we did a hundred years ago?

You bet we do.

How much more productive are today’s seniors over their counter part of a hundred years ago?

Let’s count all the economic activity we get as compared to the cost for things like Social Security.

Are we getting our money’s worth?

My first impression is a resounding yes.

We hear conservatives complaining how Social Security was suppose to be temporary but kept getting extended. And we now have seniors living longer. They make this sound like a bad thing. It’s an odd complaint. They sound awful.

Yes, ‘we’ pay more, but how much more do we get in return?

This side of the equation has never been developed. This is what the Democrats are suppose to be doing. They don’t. And no, this has nothing to do with fairness. It has to do with great returns for small investments. It’s great economics. Democrats have failed to make the case. That is the Democrats fault, not the Republicans.

We have great returns. OK, fine.

What about budgeting?

Can we really afford this when we are facing such large deficits?

Can we really afford Social Security?

Democrats have once again dropped the ball in answering this simple question.

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Let’s take a look at this budgeting side.

Social Security still runs a ‘surplus’ in revenue by about $75 billion a year - if I remember correctly. Social Security has no net cost to today’s budget. So why all the ruckus about Social Security?

We hear the horror stories how Social Security has $20 trillion in ‘unfunded’ liabilities. The surplus tax revenue was originally projected to run for another 10 to 15 years. Social Security is going to run out of money in the next 3 to 5 years so scream the conservatives.

Now for the $4 trillion dollar questions: what happened to Social Security’s $4 trillion in IOU’s?

Every generation of political leaders have raided the surplus money from the Social Security Trust fund for over a half a century now. The fed even pays a 6% interest on this ‘DEBT.’ These interest payments and surplus revenues would have ballooned into $15 trillion* if it was simply allowed to sit in the ‘trust’ (as it was originally intended). Instead, this money has been ‘BORROWED’ as in ‘gov’t-will-pay-it-back.’ This is another way of saying that today’s seniors loaned us about $15 trillion from their Social Security fund. Yes, WE borrowed $15 trillion worth of money from our seniors Social Security trust fund.

(*Rough estimate. Surpluses varied so requires a year by year break down of revenue to get a more accurate picture. We suspect it to be higher than these figures used here.)

Well, this paints a very different picture. Social Security has been loaning us money. This $14 trillion deficit has nothing to do with Social Security. Hmmmm. Now that’s an interesting little anecdote.

And of course, let’s not forget about this 6% interest. Apparently, the feds are STILL paying 6% interest on SS $4 trillion in IOU’s. That should come to about $250 billion a year in interest payments. The SS should have about $10 trillion over the next decade (at compound interest rates).

And don’t forget about the years of surplus revenues we still have coming in from Social Security taxes. Throw those into the mix and the SS Trust fund should be closer to $25 trillion within 20 years. $5 trillion more than needed to cover ‘unfunded liabilities.’ In other words, SS is actually completely funded if we just stop raiding the funds from today onwards. Forget about the $15 trillion seniors already loaned us. That was free money. A donation to the younger generation. Thank you Grandma.

What do seniors get for their money? BLAME. We have neo-cons pointing the finger at grandma saying she is reason for these deficits. ‘Adding insult to injury’ comes to mind here. Somehow, our seniors have never made an issue of this mugging nor even this

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blame game where they are held up as the scapegoat to be sacrificed in this alter of political slight of hand. They are true ladies and gentlemen.

Resolution tow: Stop stealing from Grandma’s SS fund.

Democrats never made this case? Why? Don’t blame the Republicans.

Social Security is an easy one. How about Medicare & Medical? Both of these programs are also self sustaining. The taxes collected for these programs covers their cost and in some years even had surplus revenue as well. Once again, this $14 trillion deficit has nothing to do with these programs. Conservatives of course again talk about the ‘unfunded liabilities.’ Maybe some adjustments need to be made to the program.

I got a simple and effective idea reading an article from the Wall Street Journal: ‘The Story of Dick Cheney’s Heart.’ (7/9/11) They offered a big revelation there: ‘Heart disease accounts for about a third of what Medicare spends merely on hospitals, not counting drugs or other charges.’ Heart disease also remains one of the fastest growing areas of medical inflation.

The simple solution maybe to have all heart related treatment partitioned off into its own separate health insurance plan. Medicare would now cover everything but heart related disease. Those that can afford the added premium, they get the service or a separate public option is created for those that can’t. In this way, we have just shaved off more than 35% of Medicare’s cost. All of Medicare’s other services are provided in full while reducing the overall budget. Whatever reforms we do decide to chose, the point remains, ‘THIS’ deficit has nothing to do with Medicare or Medical.

This brings us to the $14 trillion dollar question. We see that entitlement programs like SS and Medicare did not cause this $14 trillion in deficits. If entitlements did not cause this deficit, what did? Well, now we have a discussion.

Between $2 to $4 trillion went to the wars in Iraq and Afghanistan. Another $3 to $5 trillion went to bail out banks. And the remaining $2 to $4 were in ‘tax cuts for the rich.’ Depending upon which figures you want to use, $6 to $12 trillion of this entire deficit is from war, banking and tax breaks for the rich. The conservatives are now reaching in to take money from grandma’s Social Security savings to cover banks, rich folks and oil led war games in the Middle East. The $15 trillion politicians stole from Social Security was not enough. Now we have to steal more to cover wars and banks. This time there is no more ‘surplus’ and so they are actually talking about taking Grandma’s rent, food, medicine and, well, her life and all that ‘extra’ lifespan. Remember that big complain about seniors living longer? Well, these cuts can finally begin to correct this ‘problem’ too.

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Let’s say America did not spend a dime on any entitlement programs over the last 10 years. We would still have a $10 trillion deficit from war, bank bailouts and tax cuts. You can hear Democrats crying foul and ‘unfair’ once more, but there’s something more important. It’s really about getting to the heart of the problem. Than we can solve the actual problem itself. These deficits were not caused by entitlement programs nor are they the answer to them.

Raghu-nomics looked at this riddle and found that the war and housing crisis nullified the economic stimulus of Bush’s tax cuts. The country therefore never received the anticipated returns from these tax cuts. The war sapped a great deal of the stimulus benefits of the tax cuts while the housing collapse cut short the time needed to cash in on the benefits of these tax cuts. In other words, a couple more years and the added economic growth would have generated the kinds of new tax revenue’s projected by conservatives. It could have happened sooner without the war sucking out so much of the man and capital from the markets. Pres. Bush’s tax cut actually provided us a workable economic model, but one that could not succeed in that time frame with a war going. So conservatives were both right and wrong about their tax cuts. Unfortunately, conservatives want grandma to pay for this mistake. Yes, unfair, but more importantly, stealing even more from SS is just bad economic policy. They are taking from a great program that works wonders for a failed program of tax cuts and failing banks. This is the definition of ‘throwing good money after bad money.’

Maybe the final irony is that many Tea Party members are actually Libertarian. Some consider Libertarians to be a nice word for anarchist. Anarchist are not looking for smart gov’t or great budgeting. Nor are they after reducing gov’t. They are here to end gov’t. They want gov’t out of everything but basic national defense and domestic protection: police. In other words, they want to end Social Security, Medicare, Medical and all the rest. These programs are treated as intrusive, oppressive and everything else sinister. Well, we now have the perfect solution. We can end it for Republicans much as they demand. They even get to have all those tax cuts they insist upon. They forfeit all their federal benefits until we have the revenues to match. That would be more honest like the Republican governors returning federal stimulus money. Meanwhile, Democrats get to have all the benefits they believe in and do so within the budget confines the Tea Party demands. You see, everyone is happy. Now, that my friends, is a counter argument. Democrats should try it some time.

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Section 8

Chapter 8

The Deflation Tax: Part I. The Economic

Smart Bomb Against Inflation

Excerpt

‘Taxes provide a unique deflationary tool that has a precision and flexibility

that the Fed cannot duplicate with its (interest) rate adjustments. The best

example would be the housing bubble that could have been effectively

pricked with just the right tax..’

Tax Cuts are a stimulus based economic policy. Tax Cuts are the sacred cow of Neo-con economic principle. Democrat policies of gov’t intervention are similarly based upon stimulus initiatives as well. In both cases, more stimulus is not always the answer for every phase of the economic cycle. Sometimes, you actually need to cool the economy to avoid a far more sinister animal called inflation. That is the phase we are in now: inflation.

* * *

Democrat and Conservatives know of only one tool for taming inflation - the Federal Reserve’s interest rate hikes. Each party will push for higher or lower rates depending upon their own market perceptions. It often has to do with the opposing party being in office. Democrats seem to demand higher rates when a Republican sits in the White House and visa versa.

The playbook is not really complicated: Raise Federal Reserve interest rates for an overheating economy and reduce them to stimulate a slowing one. If the Fed fails to strike the precise balance between the two, the economy suffers. We end up with a slowing economy (from rates being too high) or get market bubbles like we’ve seen of housing (where rates were too low, for too long). Today’s low interest rates are again adding to the commodities bubble. Thank God for the Fed. Both parties can blame them when things go wrong - as things often do.

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Raghu-nomics presents a new weapon for popping market bubbles. Taxes. Taxes is the bane of conservatives and the cure-all for liberals. We present a third view. Raise taxes to slow an overheating market and cut them for a slowing one. In both cases, it is the precision of where taxes can ‘Strike and Spike’ that offers us a whole set of new options.

Taxes offer more applications for balancing economic distortions then we find of either party’s tax policy. Republicans have some general idea to the stimulus impact of tax cuts. They also stand united against tax hikes for it being a drag upon the economy. We agree with them on both accounts. We suggest they now review the full range of applications that tax hikes offer against inflation as well.

Taxes provide a unique deflationary tool that has a precision and flexibility that the Fed cannot duplicate with its interest rate adjustments. The best example would be the housing bubble that could have been effectively pricked with just the right tax configuration.

The gov’t could have raised taxes on real estate without affecting most any other sector of the economy. The Federal Reserve could not duplicate these advantages with its rate hikes. Raising interest rates impacts the entire economy. In contrast, taxes can be targeted with a laser-like market accuracy. In this role, taxes are the smart bomb of inflationary policy - striking its exact target with pinpoint accuracy - on demand.

Here’s some examples.

The gov’t could have raised taxes on over inflated properties. A mortgage (or rent) that was more than the median house hold income of a given area would pay this Deflation Tax. The tax could run as high as 50% and be applied to any rental revenue over and above this median income range. (Or it could apply to banks loaning at interest rates higher than industry averages thereby targeting sub-prime mortgages and their institutions, etc.)

Let’s say a $1,000 a month was the affordable price for a 2 bedroom on the median income. Let’s also say the markets rental price was $1,500. We could apply a 50% tax on that last $500. Obviously, this would dramatically reduce housing prices back to self sustaining levels. Such a tax would be ‘a real prick’ to a market bubble. This would deflate most any overheated market in a matter of months. Rates can be adjusted higher or lower depending upon the speed you want to slow the market. Welcome to the Deflation Tax. The Deflation Tax would be applied for all the reasons conservatives have warned us – it slows the market down.

The Deflation Tax can even be applied on a city by city basis by state and local gov’ts. So Florida or Ohio could introduce their own tax hike (on all housing prices above the median income). The City of Los Angeles could pinpoint specific neighborhoods - say Venice Beach and Westwood. All other housing markets throughout the city would

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remain untouched. Taxes are a tool of precision when it comes to deflating the housing market.

Each state and city would become its own mini Federal Reserve policy chief. This would allow each of them to be proactive against a run-away housing market (and its corresponding collapse). They no long have to wait for the Fed to take action. These tax hikes would cycle out into slowing markets much as conservatives warned. However, cooling this market would carry all the benefits of a proactive anti-inflation Fed policy. In the mean time, the rest of the economy (outside of housing) would go untouched.

Contrast this tax advantage over the Federal Reserve’s interest rate hikes. During the Bush years, the Fed wanted to continue developing other areas of the economy with their low interest rates. Other sectors of the economy were moving ahead at a somewhat balanced pace of development. Should the Fed choke off all the other areas of economic development for the housing market? They chose not to. We ended up with this massive housing bubble.

Today, everyone recognizes the Fed should have raised interest rates. Much of Washington saw this at that time too. A chorus of doom about an over inflated housing market grew ever louder. Oddly, it never occurred to Republican or Democrat that a simple real estate tax would have effectively neutralize much of this market distortion.

Why would both parties miss this obvious tax solution? The reason goes to the heart of Washington ills: ideology. Taxes are looked upon as a matter of principle for greater cuts by conservatives or as an emergency funding grab by liberals. These postures serve as blinders keeping both from seeing taxes as a neutral tool for effective economic balancing. Taxes work much the same as Fed hikes but are treated so differently. We suggest a look at taxes through this Fed lens.

Today, we introduce the Deflation Tax ‘Strike and Spike’ program as part of a different economic perspective. It gives us a new set of tools for rebalancing a host of economic distortions. Strike taxes down for a slowing economy and Spike them up for an over-heating one. Raghu-nomics recalibrates taxes from one of ideology and into a toolset of Fed like monetary initiatives. If successful, this marks a historic transformation of both taxes and politics.

Democrats and Republicans will respond along party lines:

‘Yippy, more money for gov’t coffers.’ (Democrats)

‘Oh No. Another plot by Liberals to shake down American entrepreneurs.’ (Republicans)

This brand of national dialogue has created a political vortex. It sucks in most every economic consideration into an ideological straight jacket. Every new idea must first be ‘tried on for size’ against these two opposing dogmas.

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Today, we offer a new range of functions now available once old ideological restraints have been removed. Raghu-nomics recast taxes as the people’s mini-Federal Reserve. Taxes are more like a surgeon’s scalpel versus the blunt power of a baseball bat we get from the Fed’s rate hikes. A bat can send a baseball out of the parkway, but it’s hard to pop a balloon with it. A pin can - effortlessly.

Real estate offers an obvious example. A steep tax on over inflated pricing would have headed off much of today’s housing collapse. We may find the Deflation Tax to be a ‘one hit wonder.’ It may work exclusively for housing. However, it’s worth looking to see if it can be applied to other markets as well. For example, could a similar Deflation Tax relieve today’s growing commodities bubble?

Banks took hundreds of billions in cheap stimulus money from the Federal Reserve and used it to buy commodities. These huge purchases guaranty gold’s run-up. So gold is safer and now offers better returns than loaning to anxious small business in a struggling economy. This created an artificial demand well beyond the markets normal rate of consumption and trade of such commodities. What could a Deflation Tax do for this kind of speculation led inflation?

How about a 5% to 50% asset tax on anything above a $1,200 per ounce of gold? This would only apply to commodity shares versus gold itself. (Buying and selling actual gold carries its own lag time. This gives it a slower turnover and pricing hold.) This tax would only apply to portfolios with more than $100,000 in holdings. It would not make gold itself more expensive, just the trade of gold shares. Would this reduce the artificial demand created by these banking purchases?

Could the Deflation Tax work on rising oil prices? Maybe.

Most initial commodity hikes are from investors jumping in to the market upon expectations for greater demand. The cost from actual consumption of commodities general lags these investor price runs and their corresponding falls. Could a Deflation Tax better steady these market pitches into more gradual peaks and valleys?

This is not to say we should have a Deflation Tax for all market bubbles. We simple offer examples to the kinds of questions we can begin to ask. We have new tools to play with here. Maybe it would work on commodities as well. Or maybe not.

The Fed’s interest hikes would no longer be the only game in town. The advantages would be huge. Such a tax prescription would allow us to cool housing and commodities (or any other markets) while still maintaining low interest rates for the rest of the country. We would have the best of both worlds. These are exciting possibilities and so recommend a second look.

Maybe the USA has no need for this right now. However, China may be very interested. They are facing their own set of bubbles and inflation. This maybe what they are looking

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for. The Deflation Tax would give the US a new tool to present as the latest in financial products & services until our own housing boom and bust.

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Section 8

Chapter 9

The Deflation Tax: Part II. The ‘Taxes to

Risk Ratio’

Excerpt

We discovered the tax models of both parties to be the right one, but only if applied to specific time slots of our economic cycles. This can reset the roles of America’s two political parties to finally work as one team.

‘..The Fed helps us simplify the issue. Follow the Fed policy of raising taxes for an overheating market and tax cuts for a slowing one. By this measure, both parties are actually right though they stand true to specific market conditions. This is the ultimate paradox to the fundamentalists of both parties: neither side is wrong. Both are in fact correct. They simply have specific market conditions best suited to their economic formula.’

‘..The logic is simple. Higher tax rates off-set the cost of larger risks. The thinking goes like this: ‘I’m going to lose this money to gov’t taxes anyway. I may as well gamble with it.’ ‘

‘..Higher tax rates don’t always end with gov’t taking more of your money. It’s often the case you just spend and invest more of it – faster. This would mean higher taxes may actually stimulate capital markets to spend more. We suspect this of the Clinton years.’

*. *. *. *.

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** ** ** ** **

Part I of the Deflation Tax talked of raising taxes on over inflated housing markets. It would serve as a new tool against inflation without the penalty of Federal Reserve Rate Hikes. High interest rates cut across the board. In contrast, taxes can target specific market niches (with Fed like deflation measures) without penalizing the rest of the economy.

Here in Part II, we talk of other market distortions taxes can help to rebalance. The most interesting of these came up in our review of capital markets. Companies now sit on $2 trillion in capital reserves. The role taxes can play here is stunning. It’s a different application then the Deflation Tax, but it lays out this whole array of new functions taxes can play in rebalancing market distortions. We don’t find these kinds of options in the ideological posturing of our two parties.

The pros and cons of this are almost incidental to the remarkable issues they uncover. Some may find these nothing short of revelation. For one, we discovered something a kin to a new policy trail. From here, you get a different view of Democrat and Republican platforms. It becomes more apparent how each serves a valuable role for different economic cycles. Their context completely changes. You just need this broader perspective to see it. Their policy positions are more like a seasonal program versus the either/or choice they present to us. The idea that both parties could be right has to be one of the more tantalizing discoveries of economic novelties.

Behold these new economic vistas:

Companies have been hording cash over the last few years. They are waiting for the market to pick up rather than leading the charge with new capital investments. It could be argued that this $2 trillion is a leftover from Pres. Bush’s tax cuts. In that sense, Bush’s forecast proved accurate - low taxes led to greater corporate profits. However, we have a new dynamic that was not accounted for.

We see that profits don’t guarantee companies going out to spend it. Conservatives assert that companies will turn around and invest this money into the next generation of American production. It is the bedrock of neo-con economics. This recession is showing us something very different. Capital pools will not always translate into new investments. This money is therefore not getting recycled back out into the economy as predicted by ‘trickle down economics.’ This final step of the low-tax premise comes up short. This changes the calculus for the low-tax formula.

What would get companies to spend again?

Higher taxes?

(Do you see a brewing sinister plot here by liberals? Well, wait til you hear the reasoning. It gets worse.)

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The logic is simple. Higher tax rates off-set the cost of larger risks.

The thinking goes something like this:

‘I’m going to lose this money to gov’t taxes anyway. I may as well gamble with it.’

The flip side is that low tax rates gear investors to the most conservative investments. Gold or gov’t bonds have greater appeal in a low tax nation over enterprise and small business.

This opens to a host of new issues.

Do higher taxes push investors to spend more?

Can higher taxes bring business to make investments they would not otherwise make?

The answer is of course yes. The real issue is by how much. It would certainly be true some of the time. Could it be true most of the time?

This could explain countries like Russia. They have ultra-low tax rates and a correspondingly low reinvestment rate as well. This translates into less investment as well as less social infrastructures that we get from greater tax revenue. It’s a double penalty to social economic development. This idea may find further traction with the World Bank prescriptions to countries it bails out: raise taxes while also cutting costs.

This led to the most unsettling question of all: Would a permanent low-tax lead us into this kind of 3rd world, downward spiral too? Is this what happened to Ireland? Wildly praised by conservatives just a couple years ago, it now finds its economy shuttered along with its old social safety nets shredded.

It’s hard for some to imagine that we need higher rates to bully investors to spend. And yet, the idea raises a trail of questions:

Do LOW TAX rates leave investors piling up higher capital cushions before they will invest? It seems it may actually cuddle them into risk aversion.

Or the inverse: Do HIGH TAXES lead investors to spend at a lower capital threshold? The sense of loss to higher taxes leaves them feeling more daring about riskier projects.

Examples:

Let’s start with Pres. Clinton’s tax rate of 35% on a million dollars. You can either hand over $350,000 to Uncle Sam or spend $500,000 on new investments. Your total tax bill now drops to just $175,000.

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Let’s say this half million investment suffers a 50% loss. $250,000 is wiped-out. This cost just $75,000 more than if you paid full taxes on your million dollars. That higher tax rate reduced your sense of loss - dramatically.

It also means the Clinton system actually got less tax out off your initial million. However, there is now another half million dollar enterprise to tax. Is it possible that the Clinton tax policies collected less tax per capita, but just had more of them to take from? The idea is intriguing.

Now let’s try this with Pres. Bush’s tax rate of just 25%? You pay your $250,000 in taxes. You now have $750,000 left over. You’re likely to want a more conservative investment. You’re not rushed to spend it before the end of the year as you were with the Clinton led investment. Nor are you losing 35% of it to gov’t taxes. It may take $2 to $3 million before even considering that $500,000 higher risk investment again. Today’s asset led economy lends some credibility to this idea.

Higher tax rates don’t always end with gov’t taking more of your money. It’s often the case you just spend and invest more of it – faster. This would mean higher tax rates may actually stimulate capital markets to spend more. We suspect this of the Clinton years. We gather investors made larger investments, more of them and did so on riskier ventures. It would explain things like the Tech Bubble. This raises important questions.

One of the most striking questions: Could higher tax rates be the great secret of American enterprise? Did this leave us throwing in more money at ventures in our run from the tax man? The result: We out capitalized other countries. The broader investment coverage allowed us to hit more targets of opportunity and success – (if not a corresponding rate of failures too).

The issue could prove critical when it comes to China. Have the Chinese begun to outspend us? Will this allow them to gain on us by tapping this great American secret?

This is a serious concern. It introduces another layer to the equation: international competitiveness. We’ve talked of ideologies and economic cycles, but a great deal of those cycles are directly connected to other countries.

These ideas leave us with a host of new issues that really need to be addressed. The two party system can’t seem to get to these kinds of discussions. Unfortunately, this is the great issue playing out in today’s economy. Banks still enjoy Pres. Bush’s low tax rates - much as Conservatives said was required. Banks also received hundreds of billions in interest free money from the Fed as part of the Democrats stimulus. Pres. Obama thought that surely, banks would start loaning to small business. They have piles of cheap money just sitting around. But something very different happened. Their investment choice: gold.

Why not?

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What incentive do banks really have for loaning to small businesses in a struggling economy?

You hear conservatives making the same point. Why add more risk to their books in this economy? How foolish would that be? Only liberals would be so foolish. Or those trying to beat their higher tax bill.

So this led to the obvious question:

What happens if we raised taxes on them?

And gold?

Suddenly, those risky small businesses start looking a lot more attractive against Uncle Sam’s higher tax grab.

This is true of multi-nationals too. They have record profits but low, low reinvestment and hiring rates. How much could taxes change this?

Higher taxes re-shift the risk by changing the context. Companies are no longer risking their own money. They are instead taking it out of gov’t taxes. This leaves them spending it like politicians. The level of loss and risk drops dramatically. They end up spending more. Or so it would seem.

It’s a shame we can’t get Russia to give it a test run. Have them raise the tax rate from their 13% to say 30%. Than wait and see if this jump starts reinvestment faster than the investors rushing for the door. I think we may be pleasantly surprised.

(It would be worth mentioning to Russia just to see the reactions on their faces.)

This ‘Tax to Risk Ratio’ Index resets the Republican low-tax paradigm. What’s more surprising was discovering that it also recasts the Democrats position as well. The issues surrounding the Democrats platform are more nuanced, but even more dramatic.

Democrats hold the Clinton tax rates as the ideal balance between spending and taxes. They say Clinton raised more revenue solely on the basis of the higher tax rate. We suspect that the rate itself did not generate more income in its own right. Business may have invested more than if they had a lower tax rate. They likely opted to invest the capital rather then lose it to Clinton’s higher taxes. Each additional transaction added more taxes while also expanding the scope of investments in both size and volume.

This may prove true of outsourcing jobs as well. The savings from manufacturing abroad was lost to the higher tax penalty on the profits. It became more cost effective to keep jobs here in the US when combined with the tax write-offs. We then had tax rates dropped under Pres. Bush. This spurred the next wave of outsourcing. Here’s the most

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revealing thing about this narrative, all these advantages of the Clinton tax rates hide a much larger story. Democrats missed that larger story altogether.

The difference is the cure-all claim we get from Democrats in their view of the Clinton years. Our findings suggest that the Clinton rates are likely to be specific to market conditions rather than being the all purpose ‘gold standard’ for tax policy.

Yes, Pres. Clinton may have found the happy median. It stands between those rates that are too low (Russia) and those that are too high (Europe). The ‘socialist’ model that conservatives scream about may indeed be a kill joy to investment. The rates are just too high for investors to circle money back around into the economy. Pres. Clinton kept them just low enough to keep the incentives alive.

And yes, Pres. Clinton’s policies do suggest that times of high profits and low reinvestment could be rebalanced with a higher tax rate. This happens to be the case with today’s economy. Multi-nationals have great earnings, but still not reinvesting. A higher tax rate may be the push they need to spend in place of losing it to higher taxes.

And yet, none of these explain the host of needs for lower taxes. Democrats usually miss this part of the story. For example: higher taxes may not be the smartest policy for a slowing economy. This is what we hear from Conservatives. The extra capital from company reserves is no longer there in a down turn. Higher taxes could only be cutting into shrinking profits. A high tax rate would further slow the market. For such a slow down, Pres. Bush’s tax cuts would be the RIGHT policy call.

This equation is lost to most Democrats. Democrats are often geared towards higher tax rates as a matter of fairness and budgetary needs. The economic factors are too often lost to these liberal principles.

(Funny to say, but much of the Conservatives resentments against higher taxes is also based upon this fairness issue – unfair to big business. Both parties miss the economic imperatives of both tax cuts and hikes.)

Let’s take a second look at Bush’s tax cuts. They happened to coincided with 9/11. Low taxes may have been a great policy choice for this market event. The market bounced back rather quickly – at least relative to today’s recession. Conservatives say this was due in large part to Bush’s tax cuts. They may be right. This means that Bush’s tax cuts would not be the big mistake Democrats point to. Those cuts played a central role to the markets turn around. In fact, Democrats higher tax rate could have slowed this miracle comeback.

So do we now say Republicans are right? Well, yes. Does this mean Democrats are wrong? Well, not really. They are also correct. In both cases, it was all in the timing. Such is life. They were both right. People are apt to be right if they hold to one position long enough. It’s just a question of time before the cycle comes around again to prove them right. Insisting we wear a jacket will prove true a third of the time (the winter

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months). You will be hot in summer though. Pres. Bush was right about the tax cuts for the 9/11 market, but failed to raise taxes again once we had the housing boom and Wall Street rally. Democrats entirely missed this tail of miscalculation. They think Bush’s mistake was the tax cuts themselves.

Here is a simple measure to judge by. The call for higher interest rates by the Fed marked the time to raise taxes. Democrat policies would have missed the cues for the initial tax cuts that Pres. Bush got right. It took Conservatives to catch this timing for tax cuts - much as it took Democrats to recognize the timing for tax hikes. Both were right for these specific time slots. Both were also wrong as the sole policy prescription between these two cycles of falling and rising markets.

The Fed helps simplify the issue. Follow the Fed policy of raising taxes for an overheating market and tax cuts for a slowing one. By this measure, both parties are actually right though they stand true to specific market conditions.

This is the ultimate paradox to the fundamentalists of both parties: neither side is wrong. Both are in fact correct. They simply have specific market conditions best suited to their economic formula.

Maybe this can help reset political ideologies as a seasonal function for specific market conditions rather than principles of patriotism. The flip side is that neither is the universal cookie cutter of monetary policy. We are not suggesting a happy compromise between the two but showing the truths from which they come - and the best application for them to work. Welcome to the Fed policy perspective for hikes and cuts. This is how the Fed looks at things. Their neutral (placid) response to both parties makes more sense from this perspective. If the fed can do it, can we?

A Deflationary Tax may prove a valuable new addition, but resetting the political tone maybe a much bigger contribution. This holds the prospect of finding that mythical policy that is truly bipartisan. We could than move beyond the either/or of today’s conflict politics. One side no longer has to be wrong. Each system need only be aligned to their specific set of economic conditions. This would give us a country set to tap the best of its resources in place of political battles crafted from its worse. We will have that long hoped ideal that the left and right are really just two sides of American ingenuity rather than its evil twin. Maybe the Inflation Tax can prove a new powerful tool to fight market bubbles, but a greater feat will have been finding our voice as one America. Such possibilities deserve a second look.

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Section 8

Chapter 9

Real Story Behind Middle East Democracy:

‘Citizens of the 21st Century’

Excerpt

‘..This is not another story about the Radicals vs. Regional Stability. This is a much older tale and one of universal principle. It is the ‘coming of age’ of the next generation. This time, it’s not of any one particular creed, class, race, religion or even nation, but an entirely different category: Citizen of the 21st Century.

*. *. *.

Somehow, most experts missed the greater story of Middle East Democracy. Today, we witness the next generation of Muslims standing in the power of Democracy as their first choice and final demand as a nation. The significance of this seems understated or overlooked, if not actually ignored.

Mediterranean passion for romance and revolution is centuries old, but this is different. We are talking about the heart of Islam civilization. Pundits of every domination hold up their experience. They show the divide between Islam and democracy to be mutually exclusive. And yet, today, the legacy of Islam’s fearless warrior leads the charge for Democracy under their own direction.

The skill by which they launched the weapons of democracy was spectacular to behold. The terms of this battle are so different from those of their forefathers. Still, somehow, they performed with a mastery expected of Gandhi or Martin Luther King. And though much younger then these legends, they worked much faster and under conditions more impossible. This is more than a reach for democracy. It is Islam’s moment of awakening to a new world of possibilities. A handful of youths take down the fiercest of tyrants with little more than a demand and the power of one voice. They were startled by its ease and effect - much as we were.

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This marks it as a new Muslim experience. It’s an astonishing discovery of their new powers, in a new world. THEY now add a very different storyline to their history. In a sense, this narrative is the preamble to the geo-political issue of democracy in the Middle East. This is about their own evolution, first & foremost. Western Centric notions of geo-politics that lead most media accounts is actually second. We have the ‘radical’ Brotherhood of Egypt calling for the rights of man and pressing the imperatives of Democracy. Yes, of course, they have agenda’s of their own, but they now use democracy as their weapon of choice – and succeeded beyond their wildest dreams. Taking-out a tyrant was only the first victory. Out maneuvering their critics was the second. It’s a double victory and a final testament.

In this success, we beget a new strain of Islam, a hybrid that incorporates all the latest social technologies spreading throughout the Arab world and beyond. This democracy movement marks the launch date of this Hybrid Muslim of our New World. The experts failed to fully grasp much of this and all the ramifications of it.

The most telling spectacle: This was NOT done in partnership with America. It was almost in spite of it. America was muted at best. Many were wildly suspicious. Old world experts responded with the standard archaic terms of Dictators vs. Stability. And so, the stirring undertow of our national debate: Did we fail this epic of history? Final grade: Our foreign policy stance, national commitment and individual action? F? The fact that we have to ask is the bigger problem.

We celebrated the fall of the Berlin Wall: A triumph of Capitalism over Communism. Yet, we overlook the greater feat of this revolution. We instilled a passion for Freedoms call to a people once sworn to destroy it. This centuries old enemy now takes our greatest treasure as their own. In fact, their children have taken it to heights far beyond our own reach. ‘Experts’ seemed to have missed this though it shines as our final victory and one of history’s grandest.

The coming approach of this democracy left tyrants and Imams vanishing into a wisp of irrelevancy. And so is America’s legacy. These men & women offered their lives to the cause of Freedom in a way we can hardly imagine for ourselves. All this was done by poor, simple youths of a Muslim creed out in the desert. They tailored a clarity of purpose - stitched from the finest of democracy’s virtues. So magnificent was their performance that we find ourselves humbled much as the rest of the world looks on in owe. They showed the ages the chivalry of democracy in a new story of glory as never told before.

In contrast, we, as a country, dithered and so now, they pilfer away our medals of legitimacy. Our laurels for housing freedoms infancy has grown into the age of American complacency. This revolution exposed our lapses. We now stand in their shadow, surprised and befuddled like bystanders rather than as patrons and partners of their freedom.

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This is not another story about the Radicals vs. Regional Stability. We hear this broadcast by neo-cons, and on up the chain of command of the political-media circuits. This is a much older tale and one of universal principle. It is the ‘coming of age’ of the next generation. This time, it’s not of any one particular creed, class, race, religion or even nation, but an entirely different category: Citizen of the 21st Century.

This new generation functioned as one people, hand in hand around the globe with the handshake of Tweeter Democracy. They are dedicated to their own religion – freedom. They stand as a new people - one world. In action and brotherhood, they designate freedom as the religious denomination of our Century. They speak in one voice against all who challenge its right – no matter the party, religion or national bond. They are connected as much by technology and common cause for a better planet, as they are about tapping the opportunities found in the unity of diversity on a global scale.

Leaders of their countries failed to recognize freedoms role in the lives and dreams of these young men, much as our leaders fail to recognize the common language and ideals shared between the youth of the 21st Century. Today’s experts were left stammering because their old models simply no longer apply. Their brand is officially outdated. All the worn paradigms of the Radical vs. Moderate, East vs. West, Right vs. Left, Muslim vs. American, Class divide vs. Ideology; all these are on notice to a new measure. This Century will leave our leaders irrelevant like those pushed aside by the youth of Islam - unless they can recognize these new conventions. This, my friends, is the larger lesson of these wondrous events.

Know this generation by their deeds. You have the next generation Rockefellers’ calling for the retirement of Chevron’s CEO in a banner year of profits. His offense: not enough ‘investment’ for renewable energy. Imagine this of the senior Rockefellers despised in the world of conspiracies. See the heir of Rothschild’s trillion dollar empire of the Federal Reserve. His job – environmentalist. His designation - ranger to earth’s well being. He holds up this choice to all the other careers of the world. What could be more telling then the demands of young Israeli’s calling for the rights of Palestinians? Muslim, Jew, Rockefeller, Rothschild, this generation is moving so far beyond the designations of old labels as to look like an alter ego of conscience – on steroids. They are turning our world inside out and up-side down in a rush of ideals no generation has reached before. It’s quieter, broader, deeper and reaches a moral high ground that touches all the promise of heavens kind.

This is dramatized in this revolution of the Middle East. It is about more than democracy alone, or technology, or the other goals and gadgets of this generation. It’s a wake-up call to the old world. It serves notice to their leaders as much as it is to ours. The 21st Century has a whole set of new aspirations and players. They are different than those subscribed by old experts. But take this with pride. Their aspirations are tailored from the best of our own ideals as a democracy, in technology, of a global partnership for a better world. Democracy of the Middle East is a preview to the unraveling of the outmoded and obsolete; as these special souls reach ever higher for all the magnificent potentials they can call upon as Citizens of the 21st Century.

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Section 8

Chapter 10

The Feds Brilliant but dangerous game of

currency brinkmanship with China

Excerpt

"Targeting China to appreciate its currency would allow the US to reduce our debt load by several trillion and yet, still allow us to have much of the same buying power with the rest of the world who would NOT reset their currency against ours. This can work as long as China would allow its currency to appreciate against the US dollar by not buying any more US dollars.

I suspect the Fed is actually trying to break China’s lowered currency and then will pull back and reduce the amount of US currency (higher interest rates etc) so that the US dollar has the ideal of lowered value against the Chinese currency and a median price against all the others of the world. In this way, the US can still buy from the rest of the world with a semi (relatively) decent buying power and still reduce its value (and debt load) to China."

*. *. *.

This article below is a bit amusing. China has bought almost $3 trillion in Foreign Reserves, primarily in US backs assets of bonds and currency to maintain both a higher

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value of the US dollar and a lower one of their own currency. Put another way, the US is printing up a bunch of paper with no value other then China buying it. Lol. Paper for nothing in most any other situation would be a scam, but in this case, it’s amusing because the US is complaining bitterly about China buying into this scam to the tune of nearly $3 trillion. Lol. Here’s why the US is pressing China to stop buying US dollars (odd indeed). The US can reduce its debt load by as much as 50% by simply resetting the value of the dollar against the Chinese currency by about this same 50%. This would reduce the amount we owe to China by this much because we would have to pay back half the value then what China bought our US dollars for. This has always been the way banks settled huge swaths of their debt (called inflation), but this remains the largest ‘change-up’ (or short changing a third party) in history. As an American, however, I realize the value of this to the US so not complaining but realizing the benefits of this to the US. Yeap, pretty savvy indeed. This issue about having a more price competitive US exports is only a political front. Bankers have rarely been interested in US manufacturing other than for trading away with other countries for better access to their financial markets. Any US manufacturing advantages would likely be sideline once again through some new trade bill even if China reset its value and provided the US with greater price competitive products. Targeting China to appreciate its currency would allow the US to reduce our debt load by several trillion and yet, still allow us to have much of the same buying power with the rest of the world who would NOT reset their currency against ours. This can work as long as China would allows its currency to appreciate against the US dollar by not buying any more US dollars. Failing that, the only other way to reduce our debt burden would be to print more money in general as Bernanke is doing. This would depreciate the US dollar against commodities such as gold, silver etc. China, like much of the rest of the world, suspects that Bernanke is now publicly taking this route (versus the more covert and slower approach of pasts attempts at inflation). This is summarized in the article below. Flooding the world with US dollars is a far more dangerous approach because it could actually implode the US currency around the world rather than just against China. This would create an asset bubble meaning an artificially bigger drop of the US dollar against the value of the ‘hard assets’ of gold/silver, etc. This would leave high asset prices to ‘correct’ leaving those who bought gold and silver losing money on those purchases as their value drops against the US currency.

I suspect the Fed is actually trying to break China’s lowered currency and then will pull back and reduce the amount of US currency (higher interest rates etc) so that the US dollar has the ideal of lowered value against the Chinese currency and a median price against all the others of the world. In this way, the US can still buy from the rest of the

183

world with a semi (relatively) decent buying power and still reduce its value (and debt load) to China. However, things may end up out of control wherein they cannot save the US dollar's value (through buy backs, interest rates etc) in time for the currency to recover without going into free fall. We would than have all the horrors that critics of paper talk about. Of course, our answer is that the RADHA mortgage program and the ROOPA tax reform (some other simple reforms) would solve much of this debt far more quickly, with far less risk and with a far greater turn-around time to jump start the US economy in a big wa The following article offers a summary: Bernanke hits back at Fed critics Reuters – Ben Bernanke, Chairman of the U.S. Federal Reserve Board delivers his keynote speech at the sixth European … By Gavin Jones – Fri Nov 19, 2:17 pm ET FRANKFURT (Reuters) – Federal Reserve Chairman Ben Bernanke hit back on Friday at critics of the U.S. central bank's bond-buying program and issued a thinly veiled attack on China's policy of keeping its currency on a leash. Bernanke, facing a chorus of protests about the asset-buying spree from within and outside the central bank, said a more vigorous U.S. economy was essential to fuel the global recovery and dismissed charges he was debasing the dollar. "The best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in a context of price stability in the United States," Bernanke told a conference at the European Central Bank in Frankfurt. The Fed's November 3 decision to buy a further $600 billion in U.S. government debt with new money generated outrage among policymakers in many nations, who accused the United States of seeking to weaken the dollar to gain an export edge. German Finance Minister Wolfgang Schaeuble called the policy "clueless," while domestic critics have argued the policy could ignite inflation and fuel asset bubbles. Fed officials have circled their wagons to defend the program with an unusual campaign of public remarks. Bernanke went so far as to brief lawmakers on Wednesday behind closed doors. In his remarks on Friday, Bernanke faulted inflexible currencies for blocking a needed rebalancing of global growth, but admitted a need for greater U.S. saving as well. STRUCTURAL ADJUSTMENTS "Deficits and surpluses are generated by many countries' behavior not a single currency," Bernanke said during a panel discussion with IMF Managing Director Dominique Strauss-Kahn and European Central Bank President Jean-Claude Trichet. "It will be very difficult for exchange rates by themselves to restore the balance and so I

184

think structural adjustments on both sides are necessary," Bernanke said. Strauss-Kahn said he too recognized the difficulties involved but said global imbalances could not be tackled without "important changes in the relative values in the currencies." "We need to move in that direction," he said. Addressing international criticism of the Fed's action, Bernanke said much of the recent weakness of the dollar reflected an unwinding of the increases that were notched as investors fled to the safety of the greenback during the European sovereign debt crisis in the spring. Still, analysts said Bernanke's emphasis on the need to reinvigorate the U.S. economy was a dollar negative. "It is hard enough to stop a central bank from weakening its currency when it is cutting rates, but when it is willing to print money to do so ... it looks very much as if they see a weaker currency if not as the sole target of monetary policy, then as something that is natural, if not inevitable," analysts at Citibank said in a research note. Many emerging economies have worried that volatile investment inflows sparked by the dollar's decline could be destabilizing -- either fueling inflation or asset bubbles. Bernanke said the failure of some emerging market economies with trade surpluses to allow their currencies to appreciate was making the problems those countries face worse. "Currency undervaluation by surplus countries is inhibiting needed international adjustment and creating spillover effects that would not exist if exchange rates better reflected market fundamentals" he said. While Bernanke did not explicitly point to China, U.S. officials have long argued that an undervalued Chinese yuan gives the Asian export powerhouse an unfair advantage. Bernanke said inflexible currencies were preventing a needed rebalancing of global growth and could end up destabilizing the world economy. "For large, systemically important countries with persistent current account surpluses, the pursuit of export-led growth cannot ultimately succeed if the implications of that strategy for global growth and stability are not taken into account," he said. SOCIAL COST Michael Feroli, an economist with JPMorgan Chase in New York said Bernanke's forceful words carried a message for domestic and international critics alike. "The essence of the chairman's argument is that the market will resolve undervalued Asian currencies in one of two ways: either an increase in the price level in Asia, or a decrease in the price level in the U.S.," he said. "Without an aggressive Fed response, the U.S. runs a greater risk of deflation and U.S. monetary policy would in part be abdicated to Asian policymakers." Bernanke said sluggish U.S. growth, falling inflation and an unemployment rate that has hovered near 10 percent for months convinced Fed policymakers they needed to pump in more stimulus. "On its current economic trajectory, the United States runs the risk of seeing millions of workers unemployed or underemployed for many years," he said. "As a society, we should find that unacceptable." Bernanke said a fiscal program that combined near-term measures to enhance growth and steps to address long-range deficits would be an important complement to Fed policies.

185

But whether Republicans -- who seized control of the U.S. House of Representatives in November elections on a platform of fiscal restrain -- will cooperate is questionable. Many Republican lawmakers have lashed out at the Fed for risking inflation. (Additional reporting by Mark Felsenthal in Washington; Editing by Mike Peacock, John Stonestreet, Andrew Hay) a higher value of the US dollar and a lower one of their own currency. Put another way, the US is printing up a bunch of paper with no value other then China buying it. Lol. Paper for nothing in most any other situation would be a scam, but in this case, its amusing because the US is complaining bitterly about China buying into this scam to the tune of nearly $3 trillion. Lol. Here’s why the US is pressing for this. The US can reduce its debt load by as much as 50% by simply resetting the value of the dollar against the Chinese currency by about this same 50%. This would reduce the amount we owe to China by this much because we would have to pay back half the value then what China bought our US dollars for. This has always been the way banks settled huge swaths of their debt, but this remains the largest ‘change-up’ (or short changing a third party) in history. As an American, however, I realize the value of this to the US so not complaining but realizing the benefits of this to the US. This issue about having a more price competitive US exports is only a front. Bankers have never been interested in US manufacturing other than to trade away with other countries for better access to their financial markets. Any US manufacturing advantages would likely be sideline once again through some new trade bill. Targeting China to appreciate its currency would allow the US to reduce our debt load by as much as several trillion and yet still have much of the same buying power with much of the rest of the world who would not reset their currency against ours. This can work as long as China would allows its own currency to appreciate against the US dollar. Failing that, the only other way to reduce our debt burden would be to print more money in general as Bernanke is doing and have it depreciate against commodies such as gold, silver etc. China, like much of the rest of the world, suspects that Bernanke is now publicly taking this route (versus a the more covert and slower approach of pasts attempts). This is summarized in the article below. This is a far more dangerous approach for the US because it could actually implode the US currency around the world rather than just for China. They call this an asset bubble for it would create an artificially high drop of the US dollar against the value of ‘hard assets.’ This would leave the high asset prices to ‘correct’ leaving those who bought gold and silver losing money on those as their value drops against the US currency.

186

What I suspect is that the Fed is actually trying to break China’s lowered currency and then will pull back and reduce the amount of US currency (higher interest rates etc) so that the US dollar has the ideal of lowered value against the Chinese currency and a median price against all the others of the world. In this way, the US can still buy from the rest of the world at relatively strong buying power and still reduce its value (and debt load) to China. However, things may end up out of control wherein they cannot save the US dollars (through buy backs, interest rates etc) in time for the currency to recover without going into free fall. We would than have all the horrors that critics of paper talk about. Of course, our answer is that the RADHA mortgage program and the ROOPA tax reform (along side a couple other simple reforms) would solve much of this debt far more quickly, with far less risk and with a far greater turn around time to jump start the US economy in a big way. The following article offers a summary: Bernanke hits back at Fed critics Reuters – Ben Bernanke, Chairman of the U.S. Federal Reserve Board delivers his keynote speech at the sixth European … By Gavin Jones – Fri Nov 19, 2:17 pm ET FRANKFURT (Reuters) – Federal Reserve Chairman Ben Bernanke hit back on Friday at critics of the U.S. central bank's bond-buying program and issued a thinly veiled attack on China's policy of keeping its currency on a leash. Bernanke, facing a chorus of protests about the asset-buying spree from within and outside the central bank, said a more vigorous U.S. economy was essential to fuel the global recovery and dismissed charges he was debasing the dollar. "The best way to continue to deliver the strong economic fundamentals that underpin the value of the dollar, as well as to support the global recovery, is through policies that lead to a resumption of robust growth in a context of price stability in the United States," Bernanke told a conference at the European Central Bank in Frankfurt. The Fed's November 3 decision to buy a further $600 billion in U.S. government debt with new money generated outrage among policymakers in many nations, who accused the United States of seeking to weaken the dollar to gain an export edge. German Finance Minister Wolfgang Schaeuble called the policy "clueless," while domestic critics have argued the policy could ignite inflation and fuel asset bubbles. Fed officials have circled their wagons to defend the program with an unusual campaign of public remarks. Bernanke went so far as to brief lawmakers on Wednesday behind closed doors. In his remarks on Friday, Bernanke faulted inflexible currencies for blocking a needed rebalancing of global growth, but admitted a need for greater U.S. saving as well. STRUCTURAL ADJUSTMENTS

187

"Deficits and surpluses are generated by many countries' behavior not a single currency," Bernanke said during a panel discussion with IMF Managing Director Dominique Strauss-Kahn and European Central Bank President Jean-Claude Trichet. "It will be very difficult for exchange rates by themselves to restore the balance and so I think structural adjustments on both sides are necessary," Bernanke said. Strauss-Kahn said he too recognized the difficulties involved but said global imbalances could not be tackled without "important changes in the relative values in the currencies." "We need to move in that direction," he said. Addressing international criticism of the Fed's action, Bernanke said much of the recent weakness of the dollar reflected an unwinding of the increases that were notched as investors fled to the safety of the greenback during the European sovereign debt crisis in the spring. Still, analysts said Bernanke's emphasis on the need to reinvigorate the U.S. economy was a dollar negative. "It is hard enough to stop a central bank from weakening its currency when it is cutting rates, but when it is willing to print money to do so ... it looks very much as if they see a weaker currency if not as the sole target of monetary policy, then as something that is natural, if not inevitable," analysts at Citibank said in a research note. Many emerging economies have worried that volatile investment inflows sparked by the dollar's decline could be destabilizing -- either fueling inflation or asset bubbles. Bernanke said the failure of some emerging market economies with trade surpluses to allow their currencies to appreciate was making the problems those countries face worse. "Currency undervaluation by surplus countries is inhibiting needed international adjustment and creating spillover effects that would not exist if exchange rates better reflected market fundamentals" he said. While Bernanke did not explicitly point to China, U.S. officials have long argued that an undervalued Chinese yuan gives the Asian export powerhouse an unfair advantage. Bernanke said inflexible currencies were preventing a needed rebalancing of global growth and could end up destabilizing the world economy. "For large, systemically important countries with persistent current account surpluses, the pursuit of export-led growth cannot ultimately succeed if the implications of that strategy for global growth and stability are not taken into account," he said. SOCIAL COST Michael Feroli, an economist with JPMorgan Chase in New York said Bernanke's forceful words carried a message for domestic and international critics alike. "The essence of the chairman's argument is that the market will resolve undervalued Asian currencies in one of two ways: either an increase in the price level in Asia, or a decrease in the price level in the U.S.," he said. "Without an aggressive Fed response, the U.S. runs a greater risk of deflation and U.S. monetary policy would in part be abdicated to Asian policymakers." Bernanke said sluggish U.S. growth, falling inflation and an unemployment rate that has hovered near 10 percent for months convinced Fed policymakers they needed to pump in more stimulus. "On its current economic trajectory, the United States runs the risk of seeing millions of workers unemployed or underemployed for many years," he said. "As a society, we

188

should find that unacceptable." Bernanke said a fiscal program that combined near-term measures to enhance growth and steps to address long-range deficits would be an important complement to Fed policies. But whether Republicans -- who seized control of the U.S. House of Representatives in November elections on a platform of fiscal restrain -- will cooperate is questionable. Many Republican lawmakers have lashed out at the Fed for risking inflation. (Additional reporting by Mark Felsenthal in Washington; Editing by Mike Peacock, John Stonestreet, Andrew Hay)

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