Friday, May 27, 2016
Friday, May 20, 2016
Zombie Capitalism
As the world stares in disbelief at the U.S. elections, what
I find even more incredulous is the abject failure of anyone focusing on the
elections that really matter – the Class 3 U.S. Senate races. The Republicans have 24 seats up for
elections and the Democrats have 10.
These are the races that matter and no one is watching. Far more impactful than the illusion of the
Presidency (see my novel Coup D’Twelve) is the power wielded by the Senate and
this class is one that could tackle some of modernity’s greatest
challenges. Towards the top of that list
is the looming financial crisis in the welfare and pension system known as
Social Security.
When Social Security was enacted in 1935, the retirement age
was established as 65 years of age. In
2016, this sounds like the prime of life well before death. But in 1935, life expectancy was 60 years. In other words, the majority of the working
population was never supposed to live to receive any benefit as the program was
set up to deal with the inconvenience of those who lived too long. In 1935, only 15% of the working population
had any corporate pension plan. By 1970,
this had tripled to 45%. In 1974, under the
Employee Retirement Income Security Act (ERISA), what was meant to increase the
private sector employer’s responsibility for retirement economic security had
within it the seeds of the demise of retirement income as we know it. But more on that in a minute.
Living longer presents a host of problems for a system that
was designed for working until death.
With baby-boomer retirement, the nearly 3:1 ratio of workers to retirees
is expected to drop to about 2:1 by 2035. The Social Security Board of Trustees reported
that their cash reserves will be exhausted by 2035 with all of their
programs running decreasing cash reserves since the peak in 2012. In 2000, about one quarter of the population
relied on Social Security as its primary source of retirement income. Last year, that number rose to one
third. Of current retirees, nearly 2/3s
rely on Social Security as their primary source of income and these
are the ones who will experience the coming economic shocks the hardest. To make it to cash-reserve burn out in 2035,
the Social Security program must decrease benefits by as much as an estimated
21% while increasing the collection of payroll taxes. And what makes all of the statistics most
troubling is that they’re all incorrect.
Together with the private pensions under the ERISA programs, Social
Security funds and their life-expectancy are based on a series of assumptions
that do not hold.
Since the mislabeled GFC of 2007-08, the intervention of
Central Banks to pump low-interest capital into the economy has allegedly
averted the crisis facing the markets in the wake of reckless behavior. This intervention did have the effect of
moving citizens into deeper debt linked to real estate investments. Creating massive overweight investment focus
on real estate and, in so doing, extending the cash-flow requirements for
workers well-beyond their pre-retirement years places compounded risks on a
system that’s already fragile. The same
government that creates agency loans for real estate is the same government
that invests in the debt of its citizens.
That same government uses these debt instruments as the “assets” that
backstop the pensions and pension liabilities that are due in the future. So, when the 21% benefit reduction hits the
market and defaults on real estate assets start climbing, the very “assets”
that insure pensions will be illiquid at the very moment that beneficiaries are
stretched to address their indebtedness.
This correlated market risk is not factored into the actuarial
assumptions for public or private pensions and the tsunami is already in the
water rushing towards the unsuspecting public.
Historians suggest that the Greeks stored olive oil as a
means of securing their economic security in times of instability or at latter
stages of life. As it was relatively
easy to store and could be monetized at will, olive oil was a prudent commodity
to smooth the effects of changes in economic status. Government-backed real estate loans are not
olive oil! When Thomas Paine suggested
that the American experiment should include old-age investment support to deal
with poverty in his treatise Agrarian
Justice (1795), his efforts were to modernize the nearly 200 years of “Poor
Laws” that had built massive social failures for those in dire straits. In 1882, piano and organ manufacturer Alfred
Dolge established America’s first corporate pension program which, regrettably
failed due to the failure of the business.
Eighteen years later, 4 other companies joined Dolge. Despite these early efforts to recognize that
rent-based labor was inadequate to sustain the life of laborers, at no point
did the market or public realize that it was industrial capitalism, not
end-of-life charity, that was the problem.
So, as we look forward into January 2017, we’re going to
encounter a looming super-storm. We have
the 115th Congress that will take its place to preside over the
collapse of the Social Security paradigm as we know it. We have corporations who have been
so derelict in reporting the status of their pension funding (which is under-funded
and over leveraged in many instances) that the Pension Benefit Guarantee
Corporation (PBGC) has doubled fines on those who don’t report
adequately in a desperate effort to get more money. Bloomberg reported on what’s become known as “zombie
pension plans” and the fact that financial managers are frequently abusing
these funds to the detriment of their fiduciary obligations. The PBGC has been petitioned to reduce the
financial obligations of pension schemes as a growing number of programs are
under-funded or outright insolvent. And
the PBGC itself is not clear whether it has enough money to cover its
obligations without curtailing benefits. The “baby-boomer” zombie pensions are
coming home to roost and those who think their retirement is covered have
another think coming. We have
ratification of the Trans-Pacific Partnership (TPP) which will move more
corporate treasuries (and jobs) overseas well out of illiquid pension retrieval
reach. And we’ll have a President who…,
oh that’s right, who isn’t qualified to lead the country through any one of
these storms – saying nothing about all of them descending at once.
I’m going to writing more about the critique of capitalism
as it’s practiced now. Regrettably, we
have not had an intervention-free experiment anywhere on earth yet so a
critique of the principles is inaccessible in any date. But what we know is that by failing to
measure the value of humanity’s contribution to the march of industry, many of
the laborers who have been chewed up by the system are going to have serious
tummy aches when they find out the promises that the capitalist system made are
as soulless as… a zombie.
x
Monday, May 2, 2016
Somewhere Over the Rainbow
In 65 AD, Seneca the Younger wrote in Naturales Quaestiones Book
1 that a rainbow “requires both sun and cloud, and these opposite to
each other.” Optical physics informs us
that, to see a rainbow, we need to be positioned at approximately 42° from the
interaction between sunlight and rain or atmospheric water droplets to perceive
the refraction of light. All of which
adds to the apparent mystery that took place at 6:30am AEST on Saturday, April
30 around the Spring Cove Sydney Harbor.
While we were commencing our morning yoga and meditation at the Breathing Enterprise inaugural laboratory
at the Manly Q Station beach, a massive rainbow appeared before the sunrise in
the East! Aristotle, Seneca, and others have
explained that morning rainbows are to the west and afternoon rainbows are to
the East. But this rainbow, on this day,
didn’t get the memo. It sprung up in a
solid light column in the southern bank of the Sydney harbor opening and arched
its way north to the Manly beach. The
sun had yet to rise yet there it was – a gorgeous arch of brilliant colors.
During the weekend, close to 60 of us were working through
an intensive process of reorienting our perspective to examine the human
condition and see if there are some principles in nature that could inform and
better serve humanity’s interaction in the world. This involved a number of modalities engaged
to deconstruct and integrate principles that are observed in nature to examine
what makes them Persistent, Generative, and Infinitely Orthogonal while most,
if not all, of our human systems seem to “require” effort and conflict. Using a method recently described by Jacques
Derrida in his 1967 work Of Grammatology and sympathetic to
works of Gregory Bateson, Bertrand Russell and others, I sought to awaken the
minds of the participants by holding tension between the words we use – the technology
of language – and the essence that they seek to awaken or engage. Deconstruction is a rigorous process and it
stretches everyone to the edge (and for a few, beyond) their comfort zone. In the film I produced with Kaya Finlayson, Future
Dreaming, I discussed the ways in which we’ve enslaved our human
experience with language. I was
intrigued, throughout the weekend, how many people, in spite of the explicit
critique of our terms of indenture (having to “make a living”, the “need for…”,
“if I had…”), continued to use as justification for their feelings of hurt,
isolation, and purposelessness the illusion that the world is somehow
conspiring against them and that they’re trapped. “Yes, I’d love to do things that deeply
engage my true sense of purpose but I have to go to my job to make a living…”,
was a refrain that echoed in many early hours of our interaction.
When light passes through a droplet of water, the luminance
of the sun is refracted and is subtly dispersed based on the wavelengths within
the light. Shorter wavelengths (blue)
appear to distinguish from longer wavelengths (red) and the appearance of
difference emerges. Our perception of
the energy of light allows us, through the introduction of a temporal variation
optimizing the spectrum, to manifest a momentary appreciation for dimensions that
we could not otherwise perceive. The
droplet of water – a time and space machine allowing for more precise discernment
in the moment – is to light what the Breathing Enterprise laboratory is to the
consensus energy of our social systems.
By placing the droplet or the experience into the flow of existence, we
can discern the subtle components of what appears to be an indecipherable
whole. But like the rainbow which affords
distinction in the unseen ray of light (you don’t see the shaft of light that
is refracted by the droplet) so to does the deconstruction of language-linked
reality afford us to perceive components that were not otherwise available for
distinction and discernment.
Many enterprises strive to be capable of delivering a
consensus product or service. “Come to
the workshop and you will…,” is the siren that brings people into the modality
of the modern social technology of learning.
When we discussed The Awakening, I was very explicit on the fact that
this was meant to be a laboratory – not a workshop in the common use of the
term. Quite ironically, inspite of the
clarity of that message, some people came expecting what they’ve been
conditioned to experience in the past: an event that is constructed to salve
the pain of the consensus illusion. These
people left in frustration and in varying degrees of motivation to malign and
diminish. Others came having no idea
what to expect and it was in the very willingness to engage in the not knowing
that their insights and personal break-through moments happened.
See the funny thing about nature is that it’s wisdom is
available in its observation, not in its manipulation. The rainbow on Saturday couldn’t happen yet
it did. And the life-transformations –
the reality that for the first time many people uncovered as a path to their lives’
purposes – which also lay as fallow prospects in the distant memory of most
manifest not because of a “truth” that was shared. These came about because of the dance between
light and the storm. I’m deeply honored
by all of the team in the Breathing Enterprise and I’m deeply honored by all of
those who came and stuck through the process to the end. For in the end, we found our true beginnings
and that, my friends, is the pot-of-gold at the end of the rainbow!
x
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