Article III, Section 3 or Just AIG

Anytime I hear that any government bailed out entity is acting in “the best interest of taxpayers” I smell a rat! When I hear AIG (NYSE: AIG) say that it wants to buy back “assets” from Maiden Lane II, I find myself wishing that the framers of the U.S. Constitution had anticipated the government declaring war on its own currency when Article III, Section 3 was drafted. When I find out that the New York Federal Reserve is actually not sure that it wants to take AIG’s offer of $15.7 billion in cash (yes, U.S. Dollars – THAT cash) in exchange for toxic assets which nearly cratered the company and the country just two years ago I lament for the absence of any public media capacity to actually tell the country what’s really happening.

Let’s review for a moment. The U.S. Treasury – that vaunted entity that is responsible for the financial assets of the United States – owns about 92% of AIG. For the record, that’s a controlling interest and, we, the people, allegedly are being served by the management thereof. The New York Federal Reserve, the Managing Member of Maiden II, together with the collateral agent, The Bank of New York Mellon, are actually the “owners” and “managers” of Maiden Lane II. You will recall, recently the Federal Reserve (a corporation having NO public accountability and having no interest in the taxpayers’ interests) authorized the purchase of approximately $600 billion in U.S. Treasury securities. Now I know this will come as a shock but this purchase explicitly violated the rules of independence set forth in the AIG bailout – specifically violating provisions of independence required under the Fed’s custodial role. By accepting AIG’s purchase of the Maiden Lane II assets, the Fed would receive an estimated $1.5 billion profit for selling securities for $0.50 on the dollar.


But, you’d have to be a real loser to spend this much time actually READING the evidence of the cover-up to know any of this. However, in the interest of demonstrating just how much a geek I am, I decided that there was a bigger rat behind the ludicrous statement being made by U.S. Treasury-owned AIG. So I went down the rabbit hole of the CUSIPs (the Committee on Uniform Security Identification Procedures) which are the records of the assets actually toxic enough to qualify for bailout but now so desirable to own that the U.S. Treasury has decided that holding them is MORE ATTRACTIVE THAN HOLDING U.S. CURRENCY! While I won’t bore you with all of the assets, I wanted you to see exactly the “quality assets” which are better than the U.S. dollar according to the U.S. Treasury and the Federal Reserve Bank of New York.

Mortgage Obligations originated by…

Countrywide Home Loans Servicing LP's

IndyMac Bank, F.S.B. - Chapter 7 bankruptcy

Newport Management Corporation

Wells Fargo Bank, N.A.

Deutsche Bank National Trust Company


Yes, you’re reading this correctly. Assets of failed, bailed out, and civilly indicted (soon to include the prospect of criminal charges) banks are officially “better” investments than cash. And this determination is made by the organization responsible for maintaining the quality of U.S. cash! I wish you could make stuff like this up but reality is far more tragic than fiction could ever imagine.

Now, if you’re sitting there thinking to yourself, “Certainly someone somewhere out there knows what they’re doing,” I wish I could provide you some solace. However, in a painful experience this week with one of North America’s most respected news entities, I found out how anemic fiscal literacy is in our media and how horrific their attention span is to outright fraud. So, for the record, let’s simplify it and see if you can use your forwarding capacity on your browser to make sure others you know find out the simple truth.

In the public announcement made by the U.S. Treasury (owner of AIG), the Treasury has said that its own money is less valuable than toxic mortgage securities. The New York Fed, actually having to reflect on the sales offer – the same Fed that bailed out the Treasury for QE2 (the politically correct term for certifying counterfeit currency as the sale was NOT backed by an independent buyer thereby defying the “willing buyer” requirement for an independent transaction) – seems to agree that holding toxic mortgages is better than holding the dollar. And, every major financial media outlet, in their pathetic pandering to the propaganda that led us down the primrose path to Maiden Lane, regurgitates the LIE that this is good for the American taxpayer and the U.S. government. Ah, for the good old days of clear cut treason when people sought to destroy the country with tired trinkets like muskets and cutlasses. Now, treason is death by a thousand paper cuts of unread securities agreements written to blind the public in plain sight.

For years I pointed out that the 2008 collapse was not a “housing market” crisis but the fully forecast collapse of housing market financials when houses were used as ATMs and real estate became the basis for reckless consumer credit. Well, now we’ve got it. We really have the 2008 crisis that didn’t happen then. In this wholesale robbery from the public and in the broad light of fraud, the New York Fed, the Treasury, and their puppet AIG, are now solidly collapsing the dollar. I guess the Utah legislature is prescient in their decision to move towards a state-minted legal tender gold and silver standard. Because, what’s in your wallet is the ghost of a system built in 1913 which has now fully failed.

While most of the time, I end my blog posts with a “happy ending” I can assure you that this one doesn’t end happy. It ends with a warning. When we construct the next economic system, accountability and transparency not only will require an informed and educated population but it will require people like you, having read this, and having independently checked the accuracy of what I’ve reported, taking the next step and forwarding this to everyone you know who has a dollar or who has ever used a dollar so that, “no one saw it coming” can’t be said this time.

So go ahead, take a challenge from a Virginian who had the courage to actually call for Liberty and hit the "send" button. If a tea tax got in the craw of colonies - let's see if you know treasonous behavior when you see it and then, let's see if you do something about it!

Polarity of Insight – Staring at the Sun

When you grow up with a father who is an astronomer, you learn about optics long before others in your grade. As a little boy, I remember creating a pinhole camera in an attempt to see large sunspots or partial eclipses. I remember going to Rio Hondo Community College and using some of the telescopes to project images of the sun on white surfaces to resolve solar mysteries without blinding my beguiling eye. I also remember loving to start fires with magnifying glasses but that was not part of this story or part of my better childhood behavior so, enough about that! I remember driving across the desert and watching my brother Dan at a gift shop taking a pair of sunglasses and, while looking through them, turn them 90 degrees to see if they were polarized pronouncing to all of us younger siblings that this “polarization” was essential for some fantastical reason. From optics to audio, Dan could explain the importance of things with such a passion that you actually thought them to BE important. And so, at a National Park gift shop somewhere in the southwestern United States, I paid an extra couple dollars and got “better” vision. That I lost the glasses at the Grand Canyon is merely cause for you, the reader, to have great sympathy for me and then imagine what the loss of such value must have had on my psyche!

In collaboration with my M•CAM, Constellation, and other colleagues, I have revisited the notion of polarization realizing that this phenomenon is replete with natural philosophy and wisdom. Unwilling, however, to remain wed to conventional dimensions of polarization in which one filters perpendicular reflected light to reduce glare and sharpen edges, I would like to consider the values of the principles of polarization with infinite orthogonality.

In his most current work, my friend and colleague Richard David Hames explores the “civilizational worldview” in an epistemological criticism of unconscious sense-making assumptions. Using the context of global environmental changes, we work to see what ethnographic impulses can be deciphered when observing the SAME observed phenomenon by systematically shifting our observational vector. While we might, in the Occidental Lens, see crisis in climate change; in our Sinic Lens, we can see that the melting ice may be a godsend to those living systems that have been long starved for methane. By seeing things through different lenses, we find not only new perspectives on the same phenomenon but we… are you ready for this?.. might actually have sentient awareness of other facultative symbiots and see ourselves in-scale rather than in the glare of our own reflective Klieg egos.

Over the course of the past week, I have worked with a number of people to begin understanding the application and integration of Integral Accounting using the hexahedral optics (aka - a cube prism). Pulling a random article from a newspaper, I have asked people to annotate every word, phrase or concept in each of the six orthogonal dimensions of IA. An example is below. I am using a Reuters article entitled “US Corn Belt Braces for Major Flooding in Spring”.

In 2008 (Custom & Culture: time), rains (Commodity: water) pounded (Custom & Culture: evocative of destruction) the northern Midwest (Commodity: land; Custom & Culture: place) from early June into July (Custom & Culture: time) and caused (Knowledge: hydrology) tributaries into the vast Mississippi River watershed (Technology: natural water conveyance) to overflow (Commodity: abundant water), flooding (Custom & Culture: evocative of destruction; Well-being: loss of employment, land, shelter) some tens of millions of acres of cropland (Commodity: land).

Grain prices (Money: grain sales) soared (Custom & Culture: evocative of abundance) during the summer of 2008 (Custom & Culture: time) on fears of damage (Custom & Culture: social response; Knowledge: anticipation of consequence; Well-being: (-fear)) to the bellwether U.S. crops. Iowa farmers (Custom & Culture: class of labor) received nearly $1.1 billion in insurance payments (Money: insurance) in 2008.

Next, take the time to observe each artifact of integral value and shift your optics. When viewed on a global scale of a need for fresh water, are pounding rains destruction or essential to recharge fresh water? And if we take this view, are there pathways which we could imagine which would take the devastation into a new value by using technology, new social narratives, or alternative values on land-use? Are there people or places around the world where knowledge could be shared to turn a narrative from animations of fear, destruction and loss into opportunity? Did anyone win? Did anyone lose? Could any of those dynamics been altered?

By taking the time to apply the polarizing optics of value dimensions into something as simple as a CNBC article, one can also begin to resolve the fulcrum around which the narrative could change. In the story above, fear drove up prices. In the story above, farmers benefited from fear while insurers lost. In the story above, the consumer lost all the way around. Without considering the single dimension consequences in multiple, orthogonal perspectives, we animate a fatalistic, helpless worldview in which there are only winners and losers.

A challenge for the week: pick a story in your newspaper or favorite on-line media and look at it through the six dimensions of Integral Accounting. Then, tilt the image 66 degrees and look at every artifact through one other lens. Repeat at least two more times. See if you are inspired to ask, “Why didn’t someone see it this way?” See if you’re inspired to learn more about something you would have otherwise glanced over. See if you’re inspired to go through your day with a little less of your own reflected glare and a little more direct Light.

Pushing the Elephant in the Room

Addressing an international audience of some of the world’s most influential CEOs, Rose Mapendo recounted her life experience as the recipient of the greatest forms of cruelty dealt at the hands of brutal, violent men. Listening to her presentation beginning with the haunting languid melody of the song of hope and forgiveness, the same one she sang for months as she heard the screams of the dying and the living tortured with physical and sexual abuse, one could not help but be transported to the anguish-filled nightmare of East-Central Africa. At the end of her presentation, the chorus of responses from the audience was singular.

“What can we do?”

When a room full of global industry leaders hear Rose’s impassioned plea for justice and peace and respond with a “what can we do?” impulse, I wonder which part of the orgy of consumer enterprise blinds so many from the recognition that it was the institutions celebrated as idealized titans of industry that are those who maimed, killed, raped, and tortured the very ones whose voices echo in the notes of Rose’s song. Do we ignore the fact that between 1950 and 1989, the U.S. delivered in excess of $1.5 billion in military equipment to the region? Under the sterilized name of Foreign Military Assistance – a code name for our subsidizing of U.S. defense contractors’ sales around the world – much of the military hardware came with our own name stamped on the weapons and munitions. And we are not alone. Chinese and European firms, with full knowledge of their ultimate genocidal use, continue to authorize the weaponization of conflicts which serve to distract local communities while their mineral, gem, and energy wealth is stolen.

But, to honor the question Ms. Mapendo asked, “What is the source, not the symptom of our violence?” we must confront a topic that is NOT addressed in sterile gatherings of global business executives. How many of us know the contribution of our own unconsidered consumption which funded the terror meted out to millions? Did we ask ourselves whether the imbalanced concessions provided to Chevron / Congo Gulf provided the liquidity that turned fossil fuels into human extinctions? Did we concern ourselves with the pension funds and investment banks that financed the oil, diamond, and metals businesses whose disproportionate wealth extraction created feudal despotism that erupted into genocide? When did any of us – from London to Toronto to New York to Australia to Hong Kong – actually demand that publicly listed companies in whom we invested report MATERIAL events – including known human rights abuses to local communities and expediency payments (the politically correct term for bribes) to “security” provided by governments or militias?

As the abolitionists of the 18th and 19th century faced the dehumanizing pragmatism of the profitability of slavery, in our modern economy, why do we refuse to see that genocide and abuse of human dignity are NOT relics of the past but utilities that give us cheap electronics, energy and extravagant luxuries? In a region with an estimated $26 trillion in energy, metals, agriculture potential, and other materials, why can’t we find any capital market that has the courage to stand up and say that, on our watch, humanity will refuse to create the economic disparities that lead to rebels deciding that shooting husbands and preserving wives, mothers, and daughters for sexual abuse and torture is “a good use of precious commodities like bullets?” With bilateral investment agreements with the U.S., Belgium, Canada, Denmark, France, Germany, Israel, the Netherlands, Switzerland, and others, which citizen will stand up and be the voice that turns Rose’s painful lament into a chorus of humanity?

Let’s be clear. We continue to dishonor the plight of the death camp survivors in Rwanda, the Democratic Republic of Congo and the rest of the region when we refuse to face the fact that it is OUR inhumanity that fuels genocide. But for the cash supplied by Chevron, Congo Gulf Oil, Citibank, Telecel, Mobil, Group Damseaux, Tabacongo/Rothman, BAT, PLC, and others, violence wouldn’t be directed at the tribal conflict over the single digit percentages of revenues and profits extracted from the region. In countries where foreign investors must invest at least 70 percent of their capital in foreign currency – making local despotism and mercenary arming far more convenient for the agents of death – why can’t we see that our money supply robbed Rose of her husband, her home, and peaceful dreams? When scarcity is manufactured in the face of abundance, violence has ALWAYS been there. We cannot, for one moment, sit back in horror and anesthetize ourselves from the reality that we are the torturer.

When a Chinese gaming company buys a U.S. gaming company for several hundred million dollars, can we see in the fantasy war-game the actual violence that made the graphics processor optimized with metals from the anonymous dead? In a culture of business executives that applauds the miniaturization of genomics processors so that science can automate the synthesis of “life”, can we see that the components that run the computers and sequencers rely on the lives of real humans for whom clean drinking water is a luxury for less than 1 in 12 and where life expectancy is 47 years?

It is time to change the narrative. “Corporate Social Responsibility” is not enough. If we are going to be remembered for anything other than the scourges of immoral and unconsidered consumption, we must practice – and demand from all parties with whom we do business – an accountability that says that profits built on the dehumanization of others are no longer tolerated. And let’s be honest. The only reason why we don’t take the time to inform ourselves about the source of the metals in our iEverythings and mobileApp everything else is because we want to remain blind. In a world which could watch in rapt attention as Egypt collapsed and Libya consumed itself with blood, we don’t want to know that with knowledge comes responsibility. We call it a knowledge economy but we’ve actively chosen a path of ignorance. This must end.

Every stock exchange on the planet must institute a listing requirement requiring every listed company to comply with the Universal Declaration of Human Rights in all business practices.

Every securities oversight authority must have a public reporting mechanism to enable transparency provided by local communities directly impacted by the businesses conducted by public companies.

Every public company must be required, at its annual meeting, to have local representation from the workers or landowners of every place where business is conducted.

Every pension fund and investment manager must represent and warrant (at pain of financial and International Criminal Court censure) that it confirms that no funds are used for the use of force to effectuate or optimize the conduct of business.

Too radical?

Tragically, in our present trajectory, the mournful song of a woman in a death camp is likely to join the massive choir of those whose songs have been extinguished until a few of us start singing a “sweeter song”.

Rose named her story “Pushing the Elephant” in honor of the traditional African story that teaches that, to move an elephant, one must act with others because a lone actor cannot push the elephant. I would suggest that Rose’s challenge is infinitely more difficult given our denial of the existence of the elephant.

Trickle Down Morality

As I am wont to do, I left a conversation this week with an aspiring U.S. Foreign Service enthusiast puzzling over why, after millennia of seeing the futility of military ideological indoctrination, madness seemed more the rule than considered reason. In a country where, absent wartime procurement, we’d have a shrinking GDP for the 12th year running, I reflected on the roots of our incapacity to imagine an economy in which we genuinely built value on an aspiration for the reflected choice of liberty rather than the dogmatic zealotry of “freedom” at the end of a gun. Drenched in nostalgia for the heady days of the Reagan years – so banally celebrated on the centenary of his birth – and the glorious sponsorship of “Freedom Fighters” who in their modern incarnation, armed with our defense industry, have turned their weapons on us so as to be now referred to as “terrorists”, I mused at the intractable predictability of our impulse to support mayhem.

On a gloriously balmy day – more April than February – I probably would have let this topic pass but for a gnawing sense that a systemic, fatal error is lurking just under the surface of the Middle East and North Africa paroxysms. What struck me as alarming is the fact that I recognized the sequence of failures in governments corresponding with a very old, very forgotten, much abused law from the 1960s. To be precise, the collapsing countries of the past few weeks all seem to be the beneficiaries of the 1961 Foreign Assistance Act (Public Law 87-195). In fact, there is an ominous correlation between the nature of certain funding programs and the sequence of uprisings. This Act, which has been the proximate cover for overt and covert acts by the U.S. government for the past 50 years is worth the read if you want to see why we abandoned any hope of moral leadership on a global stage – unless you consider gunpoint to be a moral persuasion.

One only needs to read Section 620E of the Act to see precisely how far from a moral compass we’ve chosen to stray. Our assistance to Pakistan – including our arming of Afghans now killing coalition forces – was not only authorized under the animation of the Soviet occupation but, included providing Presidential authority to waive Arms Export Control Acts. My favorite section of the “Aid to Pakistan” program is the condition that, “lethal military equipment provided under this subparagraph shall be provided on a lease or loan basis only and shall be returned upon completion of the operation for which it was provided.” And who can forget the moral clarity of Section 620G which stipulates that the U.S. should withhold assistance to countries that participate or sponsor terror however, this can be waived, “if the President determines that furnishing such assistance is important to the national interests of the United States…”?

In the creation of the Foreign Assistance Act of 1961, the United States made a fatal error in judgment – neither the first nor the last. And the events of the past 6 weeks are showing the seismic risk of this error; the failure to apply Integral Accounting appraisal to a value exchange. You see, our thinking in the late 1950’s until well into recent history, was that we could exchange “aid” for politico-economic allegiance. If we fed, trained, armed, or defended a country, we reasoned, we would gain lasting stability and loyalty. While this type of bribery may work in postwar reconstruction in Japan, Europe, or at home (with our public works programs), it fails to adequately calculate the, “Commodity”, “Custom & Culture” and “Money” dimensions in Integral Accounting.

Since the first Mongol-Sino traders crossed Afghanistan to the ports in North Africa in the first century BCE, trading involved the exchange of tangible artifacts. What started in the East as silk or spices, could wind up in Alexandria or Tunisia as grain or gold. This transformation involved several principles that are present to this day in the cultural memes in the region and are immune from the hegemony of the Bretton Woods dollar. The trade routes of Asia, Persia, the Middle East and North Africa relied on a transitive commodity mandate as much then as now. Willingness to transport or trade was based on local needs or abundance as much as it was based on some remote “market demand”. If you needed food and had a bunch of gold, in the moment of the arrival of food, it had greater value than gold so you exchanged what was unusable yet reserved for what was usable and demanded. As a result, exchanges were seen in light of pragmatic expediency, not in terms of absolute supply and demand in invisible, distant markets.

In this ecosystem, value was a combination of the traded artifact with the reward of a “good deal”. Against this backdrop, it’s no wonder that when the Occidental moralists came calling with “aid” for which there’s no artifact exchange, mistrust is implicit. Clearly no one ever offers something for nothing. And in a world where the notion of artifact for ideology is the prima facie exchange, there is a certainty on the part of the recipient that a trap is being set. The Occidental policy failure was to mistake the counterparty who would accept our deal – the puppet autocrat who we’d promote into political supremacy – as an evidentiary party to the acquiescence of a country to our values and our proposed terms of engagement. We didn’t build alliances, we bribed malleable characters. And now, we’re watching as the façades fall.

While the covert abuses – from Reagan’s Nicaraguan Iran-Contra illegal activity to Bush-Cheney’s Bulf Oil and Greek Olympic “Security” financing of the weapons which are killing coalition forces – accelerate the failure of our misguided ideology, the overt, reported financing of moral exceptions to our stated values shows a level of hypocrisy which undermines any honor or credibility we might otherwise have. In the minds of an Asian or African observer, our willingness to place expediency as a paramount value when it comes to ideology amplifies the instability in countries around the world and erodes our ability to have any significant impact on transitions which are breaking out across the globe. In contrast, Chinese success in Nigeria, Afghanistan, Southeast Asia and even “liberated” Iraq, comes complete with good old-fashioned trading – not on ideology but on assets – the way it’s always been done. The Chinese are no more amenable to theocracies than their democratic, capitalist competitors. However, in commodity value exchanges, ideology is subservient to transactive interest.

Tunisia, Egypt, Israel, Haiti, Greece, Portugal, Russia, Jordan, Saudi Arabia, Taiwan, Bahrain, Burma, Cambodia, Cuba, Columbia, Peru, Afghanistan, Cyprus, Pakistan, Democratic Republic of Congo, Libya. If you made it on this list, you’re already in a fraternity where you may not want to be. You’ve been the recipient of a Cold War inspired doctrine which values frail ideological adherence over food, shelter and security. And if we, as conscious global citizens want to act before all the world is alight in unemployed, hungry anarchy, we would do well to figure out how to be part of a new narrative in these and related places around the world.

It is time for the U.S. to end the Foreign Assistance Act of 1961. Not because we shouldn’t actively assist those in grave need around the world. No, we should repeal the Act because it’s built on ideology long destroyed by termites and dry rot of our own fears and our collective neglect. In a world where the world’s fastest growing economy is communist (turned oddly market-capitalist), the end of the Act will be a wholesale loss of any last vestige of credibility. We’re not at war with communism – we’re in denial. We need to align our Foreign Assistance with those who are in need of genuine help so that they, and the world, can see a cascade of moral leadership in which those who genuinely care for humanity, the environment and the ecosystem of Earth champion wholeness rather than animus. Will this be an American enterprise or will it, at long last, be a global enterprise in which “isms” are placed into the realm of philosophical debates while we get about doing the work of being human? Let justice roll down.

Starting with the Universe

"The function of what I call design science is to solve problems by introducing into the environment new artifacts, the availability of which will induce their spontaneous employment by humans and thus, coincidentally, cause humans to abandon their previous problem-producing behaviors and devices. For example, when humans have a vital need to cross the roaring rapids of a river, as a design scientist I would design them a bridge, causing them, I am sure, to abandon spontaneously and forever the risking of their lives by trying to swim to the other shore."

- R. Buckminster Fuller, from Cosmography


Muhammad Hosni Sayyid Mubarak was not attuned to new artifacts. As a result, history will remember him not as the man that stood with Egypt’s peacemaker President Anwar El Sadat – close enough to be injured in the grenade blast that killed Sadat and propelled Mubarak to the Presidency in 1981 – nor the man who did much to bring Egypt onto the international scene as a vital source of power and stability. No, he will likely be remembered for the legacy of his perpetuation of the Emergency Law 162 (1958) which gave him sweeping powers so expansive that he believed himself to be above the law. And, on this week in 2011 he departed on the 32nd anniversary of Iran’s Shah’s exile in Cairo. He will be remembered as one of the first globally recognized powerful elite to fall to a new breed of social activism. While the U.S. would never allow a change of government like the one that we just witnessed in Egypt to take place in Washington D.C. without far greater human rights abuses and loss of life, I wonder if leaders across the globe took this week’s message to heart. The 363 year old Nation State is ending and a new social order is emerging.

And what took down Mubarak’s illusion of power – and will take down many more in the coming weeks, months and years – is the failure to honor the third tenet of Westphalia; namely, the covenant not to interfere with the sovereignty of states by any non-state actors or foreign interests. While it’s easy to point to the United States’ violent intervention as a clear affront to this revered principle, the more profound and consequential violation of the tenet is the prohibition on letters of marque, reprisal, and privateering. As I’ve written and spoken many times before, the transnational Corporation State, launched in the banking and corporate coup d'état which began in Europe in the early 19th century and whose cancer killed representational democracies across the globe by the early 20th century, thought that it could hide behind the façades of puppet heads of state in perpetuity. But when you build systems which remove the wealth of nations through agreements with despotic leaders for the benefit of foreign interests, the system will fail. The most ominous specter in the demise of Mubarak is sharpening his scythe for parasitic corporations who saw themselves beneficiaries of heads of state who did not care for their people.

Ironically, the wisdom in the Peace of Westphalia came from a multi-ethnic consciousness awakening that recognized that, left unaltered, petty religious and territorial conflicts animated by control of resources and trade, would lead to violent ends. Seventeenth century humanity was more awakened than most of their progeny today. And, at the core, one can discern the consideration of four dimensions of social consciousness that is required for such awakening. In an effort to simplify the concepts that I believe represent the environment into which alteration and new artifacts need to be inserted, we need to first understand our roles as Citizens, Leaders, Parents, and Provisioners



Citizens. We’ve long abandoned the recognition of the centrality of citizenship to all human endeavors involving any social structure. In our race toward the cult of the isolated identity, we failed to see that we only apprehend full identity in a context defined by the community in which we operate. Our awakening requires us to see that our liberty empowers us only when we are aligning our efforts and resources for their optimal use benefiting ourselves while insuring that others have suitable equivalent benefit and use.

Those who evidence mastery of this efficiency and inspire others by their mastery are ones worthy of the mantle of Leadership. I am deeply disappointed to see universities and business schools promote “Leadership”. The world doesn’t need leaders. Leaders emerge as being worthy of being followed – not by perceiving the direction the masses are facing and then racing to the illusive “front” of the milling masses and being the loudest voice in the room. Quality leadership empowers others to teach those characteristics that bring about a more harmonious system without pandering to self-interest or the interest of loyal sycophants.

Parents (both biologic and those acting as mentors) need to reclaim their role as both the nurturers of emerging citizens and as models of deliberate action emanating from a confident, powerful center. Rather than teaching lessons of scarcity and fear-based hording and consumption, parents need to convey the wisdom of suitable adequacy to manifest the individuated role of the provisioner.

Most radical in this understanding is the replacement of the role of the “individual” or the “consumer” popularized by our psychological or commercial memes with the omni-dimensional Provisioner. Beginning with you making sure that your own identity and well-being are sufficiently sated, you take on the capacity to understand your own productivity, consumption, and access to resources directly or through networks and then create the capacity to keep all of these in balance. Having done so for yourself, you can both steward that which you have while also engaging your capacity in the milieu of providing for those around you. Inward directed provisioning recognizes that the impulse to consume is replaced with the impulse to be adequately equipped. Outward directed provisioning recognizes that the need to be identified with what has been horded is replaced with the impulse to demonstrate the capacity to expand provisions for and to others. Identity, in this dynamic sense, fosters a perpetual reminder of one’s role as Citizen and thus the fortuitous cycle persists.

When this system is fully functioning, Presidents and CEOs won’t spend the majority of their energy reinforcing their grip on power by the suppression of others. History has demonstrated that this Tolerant Citizenship model fosters unprecedented prosperity and stability. And, to that end, let us engage in transformation by introducing new artifacts whose utility will necessitate their utility for safe transit to new behaviors – not in futile revolution.

From the Land of Pharaohs

Against the backdrop of CNN’s broadcasts of the protests in Cairo and throughout Egypt, I took a great deal of time to reflect on the events that served as catalysts for the new wave of self-determination evidenced across the Middle East and North Africa. For years, I’ve been lecturing, writing, and conducting business inspired by a central tenant that all value exchanges must, at their core, represent a bounded correlation to production. In the last several decades, under the guise of “financial innovation” the largest monetary asset transfer has occurred in which a select few have egregiously abused monetary systems for their benefit without considering the consequences of their amoral acts. The modern dead and the defiled reliquary artifacts in the Egyptian museum are but the latest casualties of this callous indifference to the global commons and its stewardship.

Egypt is no stranger to food-inspired social unrest. And, in point of fact, one of modern history’s oldest economic models was born at a time such as this. I decided to revisit the oldest known account of Egyptian unrest to see what wisdom could be discerned to inform events of today both in the region and in the broader macro economy.

In the Biblical account of the famine in Egypt (Genesis 47: 13-26), the following story is reported.

47:13 But there was no food in all the land because the famine was very severe; the land of Egypt and the land of Canaan wasted away because of the famine. 47:14 Joseph collected all the money that could be found in the land of Egypt and in the land of Canaan as payment for the grain they were buying. Then Joseph brought the money into Pharaoh’s palace. 47:15 When the money from the lands of Egypt and Canaan was used up, all the Egyptians came to Joseph and said, “Give us food! Why should we die before your very eyes because our money has run out?”

47:16 Then Joseph said, “If your money is gone, bring your livestock, and I will give you food in exchange for your livestock.” 47:17 So they brought their livestock to Joseph, and Joseph gave them food in exchange for their horses, the livestock of their flocks and herds, and their donkeys. He got them through that year by giving them food in exchange for livestock.

47:18 When that year was over, they came to him the next year and said to him, “We cannot hide from our lord that the money is used up and the livestock and the animals belong to our lord. Nothing remains before our lord except our bodies and our land. 47:19 Why should we die before your very eyes, both we and our land? Buy us and our land in exchange for food, and we, with our land, will become Pharaoh’s slaves. Give us seed that we may live and not die. Then the land will not become desolate.”

47:20 So Joseph bought all the land of Egypt for Pharaoh. Each of the Egyptians sold his field, for the famine was severe. So the land became Pharaoh’s. 47:21 Joseph made all the people slaves from one end of Egypt’s border to the other end of it. 47:22 But he did not purchase the land of the priests because the priests had an allotment from Pharaoh and they ate from their allotment that Pharaoh gave them. That is why they did not sell their land.

47:23 Joseph said to the people, “Since I have bought you and your land today for Pharaoh, here is seed for you. Cultivate the land. 47:24 When you gather in the crop, give one-fifth of it to Pharaoh, and the rest will be yours for seed for the fields and for you to eat, including those in your households and your little children.” 47:25 They replied, “You have saved our lives! You are showing us favor, and we will be Pharaoh’s slaves.”

47:26 So Joseph made it a statute, which is in effect to this day throughout the land of Egypt: One-fifth belongs to Pharaoh.

One cannot help but see in this narrative the harbinger of conditions which are being played out – merely by a new set of actors. Remember, that the context for this story was the storehouses that Joseph stewarded for seven years prior to the launch of the famine. In Genesis 41: 46-49 you read that an “immeasurable” amount of grain was collected during the seven year period preceding the food shortage – and this from excess abundance – not from forced scarcity. What is unspoken but implicit in this story is that the infrastructure and technology for food storage and security became one of the most significant public works projects in history. In a time when we don’t have food security for most of our population in any part of the world, ancient Egypt had abundance that afforded caloric resilience for 14 years!

When a food commodity price shock hits – like the famine of old – the first response was to collect all of the money. Remember, at the time, this meant that there was a “rush to metals” not unlike our present day. One can readily see how the Pharaoh had gold sufficient to line tombs when you realize that, in the first year of famine, nationalization of gold assets was the first step to a new economy. This is the first record of a national reserve bank impulse in human literature.

In the second year, Joseph provided grain in exchange for livestock. To understand the modern implications for this, one must revisit the ancient and modern understanding in much of the world that livestock was the primary indicator of heritable assets and wealth. In short, by taking all of the livestock, Joseph enacted an inheritance tax and created a state-owned pension monopoly. Sound familiar? This move is in ancient times what Social Security and entitlements are today. Further, this move represented a recognition that the units of wealth and status needed to be subordinated to a broader social good. At this point, I wonder how many of our religious right politicians take the time to realize that their Bible actually used nationalized socialism as a primary means of enacting “God’s plan”?

And then, the coup de grâce, the nationalization of private property. While the assumption of land and productive labor sounds harsh in modern times, this move is indistinguishable from the effective analog we have in the U.S. where all forms of enterprise and means of production have been usurped by the Federal Government under the guise of the Commerce Act. Once all artifacts of value and means of production were controlled, you have one of the most overlooked, yet vitally important concepts that can be deduced from this story – a flat tax. But, note the important differentiation between Joseph’s tax and what’s in place today. Tax was 20% of productivity – NOT a percentage of assets, efforts or wealth. And, while those with more communist leaning sympathies may loathe the carve-out for the priests – antiquities’ bureaucrats – note that they are NOT expected to be productive and are subsidized from the government’s share.

Upon close examination, I find this productivity-based national economic and revenue policy something dramatically missing in present day Egypt and in the rest of the industrialized world. Today, we don’t have the wisdom that allocates abundance for mass resilience; we don’t have leaders who understand the courage required to lead in time of crisis; and, we don’t have a sense of civil society and social responsibility that inspires the transcendence of the citizen over the self. Do we have a food price crisis in Egypt? Do we have a political crisis across the Middle East and North Africa? Is there a risk of contagion for violent populist uprisings around the world?

Absolutely and not really. What happened in Tunisia and Egypt is a symptom of a more fundamental problem. When the much heralded and lauded construct of “leadership” fails to stay rooted in citizenship and common accountability, volatility grows as a latent potential in any system. The more wealth transfer extremes lead to conspicuous, asymmetric consumption by the few in power at the perceived expense of the many, the greater the volatility. “Qu'ils mangent de la brioche” (“Let them eat cake”) was not a good idea in monarchist France and it’s not a good idea in Goldman-inspired modern economies. When markets preserve economic asymmetries in the face of known social inequities, there are no surprises when revolution breaks out.

So the wisdom awaiting re-emergence is the recognition that at this very moment, there are abundant excesses around the world which would meet the needs and ameliorate the fervor of the disenfranchised in Egypt. If we really want considered democratic reform, we should focus on insuring that change comes from satiated reflection, not from hungry desperation. Despotic leaders are half the problem; callous hoarders of wealth are the other. Until we address both, we will look primitive in the light of a Pharaoh and his visionary deputy.

Drinking Tea with Elephants

President Obama, Republican responder Paul Ryan and rightward gazing Tea Party evangelist Michelle Bachmann all need a time-out. Together with their respective constituencies, the gross lack of awareness of structural deficits in both their diagnosis and proposed treatment for our economic ailments is reminiscent of the “nobody could see it coming” lunacy of 2008. And, before I waste more words – economies are built with customers exchanging value, not on investment. The next time you hear “access to capital” as an excuse not to succeed or as the treatment to enable success, realize that there’s no greater illusion in the global markets than the myth of private equity and venture capital carefully built over the past 45 years.

The siren song that venture capital is an integral component to stimulating an innovation economy has served to create a class of usurious despots, not economic efficiency. Despite its decades of existence, private equity in the form of venture capital has a hideous failure rate that is masked by those who have a few exceptional successes. Under the guise of “high risk”, funding failure rates in excess of 90% are not indicators of risk. Rather, they are indicators of a more problematic misconception and consistent, willful ignorance on the part of those who administer funds belonging to others. In short, not all innovations or technologies merit the creation of a business and, absent that merit, most fail along with the capital that supports them. No economy in the world has honestly and reliably developed the processes (or the courage) to recognize that an innovation does not a company nor an investment make. With over 95% of the world’s patents never associated with value accretion (most are useless and many others are defensive negotiating tools alone), the belief that patents and venture capital alone will create an economy is totally unfounded. These are among the many tools that can build value but they are not a prerequisite foundation. Missing from the calculus of economic promotion is the recognition that a customer, not an investor, is the key to creating enterprises. Every dollar of investment is a single dollar spent with subsequent investors often squeezing early investors out of the picture all together. The same dollar as a purchase can be leverage 3-10 times based on the form of capital sought by an enterprise. Governments who truly want to stimulate innovation economic development would be far better served by purchasing at a premium from local enterprises aligned with domestic innovation priorities rather than throwing investment dollars at everything that claims to be a company. Billions of dollars of wasted venture capital did not create IBM, Oracle, Siemens, or Sharp. Government procurement did and government procurement – often at premium prices – continues to be the lifeblood of many of the mislabeled equity successes of the modern economy.

When President Obama, Paul Ryan and Michelle Bachmann stand before the American public and the world and talk about fiscal discipline evidenced by decreased spending, they ignore the fact that the U.S. economy has been in a technical Depression but for the very spending they rail against. To be clear, if we didn’t have the public and private wars in Iraq, Afghanistan, and now Pakistan which support over 10% of our GDP and ALL of our national GDP growth, we would be pushing wheelbarrows full of worthless currency to buy loaves of bread. When the top five places the U.S. spends its money are ALL aerospace companies who deliver “shock and awe”, I find the government’s innovation mantra tragically ironic. The industry that we built on the minds of expropriated technologies from the Germans is the life blood of our economic life-support. Representing over $144 billion in market capitalization and over $112 billion in government expenditures last year, these five companies (Lockheed Martin: LMT; Boeing: BA; Northrop Grumman: NOC; General Dynamics: GD; and, Raytheon: RTN) are as much of the “too-big-to-fail” dynamics as their financial cousins that were bailed out in the last two years. We spend more government procurement money on private armies (KBR) than we spend on healthcare and medical technologies. And, for the record, let's remember that the last 4 years of the Bush - Republican administration (2005-2008)saw national spending rise by $1 trillion not counting the 2008 financial services bail-out set in motion by a lameduck President.

At the outset, we must understand that the last 30 years of Western economic development and hegemony have been built on several significant misconceptions leading many emerging economies into vast, inefficient policies and practices that fail to produce meaningful results. There are two fundamental misconceptions that we should examine.

First, we need to revisit the understanding of the mis-used term “innovation”. For the sake of loyal InvertedAlchemists, this is a reminder, for others, this is news. Without realizing it, this word has blurred the vital distinction between:

Invention: the process whereby something fundamentally new emerges from a flash of creativity and brilliance;
Innovation: the assembling of one or more components from prior existing knowledge for a new assembly or application that achieves a repurposed use not contemplated when any of the components were discovered or first assembled; and,
Incrementalism: the subtle modification of a thing for a particular market niche or the minute alteration of a good or service to impair a competitor’s activity.

Failure to distinguish between these three discrete concepts has lead to ruinous policy not only in the developing economies but has led to the wholesale failure of much of the private equity in the West. In the case of invention, a novel platform for highly diverse opportunities often emerges. However, invention infrequently serves as an ideal basis for a corporation as the enabled products or services are often much later in creation. Innovation, by contrast, often is integral to a successful commercial endeavor as innovators translate the creative work of invention into a context that people can use and consume. Incrementalism serves as no basis for entrepreneurial activity but rather is a tool for established businesses to defend or negotiate positions with the market place and modify pricing dynamics for consumers. Absent a clear process allowing policymakers to understand and differentiate these concepts, most economic development policy is grossly inefficient and capital deployment is wasteful. Neither the President nor the respondents following the State of the Union understand or animate responses with this awareness.

Second, we should closely examine the national innovation economic models that have lead to both the successes and challenges of the past. For the purpose of this discussion, I would like to provide four case studies which are informative about these models which include: Build It; Leverage It; Serve It; or Option It. I will explain each model when it is being discussed.

Build It – the greatest modern example of this model is Germany between the First and Second World War. Germany was (and remains) a very proud country that sought to control its own industrial and economic destiny. As the world increasingly isolated Germany after World War I, the national resolve to build a strong national economy led to the wholesale alignment of public funding priorities in both education and commercial activities in an unprecedented fashion. During this period, German enterprises, supported by strong government procurement incentives, created unprecedented advances in Chemicals, Materials Science, Communications, Transportation, and Finance. The significance of this work is evidenced by the fact that, until the very recent past, all scientists were required to study German to read the foundational work in any basic science field. By balancing a commitment to education (which enables the mind to creatively think) and training (which allows for efficient industrialization), Germany avoided the pitfall that most countries since have fallen into – namely, the subjugation of creativity at the expense of free and creative thinking. The great German companies of today stand firmly on the foundation built almost a century ago. In a modern irony, this same isolation policy is leading the Islamic Republic of Iran – also a very proud and educated people – to many of the same outcomes. In fact, if you want to look at some of the best bioengineering, materials science, and natural resource processing technologies today, many truly inventive and creative ideas are emerging from Iran. Iran, like Germany eight decades ago, has struck a balance between education and training that could serve as a vital development model.

Leverage It – There is no country on earth that has done more to leverage innovation (both its own and that of the rest of the intellects of the world) than the United States. Supported by two, irreproducible events – the Bretton Woods conference in 1944 establishing the dollar as the global trade currency and the post war expropriation of both German inventions and innovators which fueled a majority of the U.S. science and technology imperatives – the U.S. had the ability to sell its debt to finance unprecedented expenditures in technology. Most Americans, including every State of the Union pundit and protagonist ignore the fact that Obama’s “Sputnik” admonition was one of many off-spring of the Allies’ reparations in which they distributed German technologies and scientists as spoils of war. It was German technology that built our aerospace and computer industries – not American ingenuity. We were the post-war beneficiaries of the intellects of others and we make a grave and irreversible mistake when we claim American ingenuity to support our aerospace, chemical, and information technology supremacy. We didn’t invent it – we innovated. And, unfortunately, nobody in Washington has a clue how to actually stimulate an “invention” fueled economy! Technology in the U.S., measured both as R&D funding as well as vast commercial incentives is aligned on a mortality imperative. We fund technology for war and healthcare. In an ironic sense, our major S&T priorities are to develop military capabilities for use on others and, at the same time, spending an irrationally disproportionate amount of money on end of life “health care”. Our institutions of higher learning, over the past 40 years have educated the world’s scientists and engineers but, what is often forgotten is that those students, many of them from India, Taiwan, China, and the rest of Asia, serve to stimulate the productivity of U.S. laboratories. The contribution of graduate students – often seen as merely the beneficiaries of our educational largesse – is ignored at our policy peril. Without our global currency attraction which provides ready cash and our military spoils – including our ability to control energy priorities by force – our S&T would be severely impaired.

Serve It – Singapore serves as the ideal study in serving innovation. Realizing that the small island nation needed to rapidly distinguish its economy from its neighbors, Prime Minister Lee Kuan Yew instituted an inducement-driven economic policy to attract foreign companies to Singapore to exploit what he viewed as Singapore’s greatest natural resource – its well-trained, low cost workforce. While ExxonMobil’s roots in Singapore date back to the 1890’s, the first major coup for his post-Independence effort was attracting Texas Instruments to set up chip-making operations in 1968. The “Singapore Economic Miracle” was a fortuitous union of a new technology – the integrated circuit – with a new country. Selected as one of the first manufacturing locations for this burgeoning technology, Singapore rode a tsunami of success with TI that went on to include over 2000 companies, the vast majority of which are U.S. corporations. Singapore and its Economic Development Board have attempted to manage a delicate balance. How, on one hand, do you continue to serve as an attractive location for foreign direct investment while, on the other, stimulating endogenous economic opportunity? How do you provide constant training for multinational corporation (MNC) servicing while creating a creativity-based educational system that relies on local innovation and imagination? Singapore’s greatest challenge is its entire dependency on one foreign economy and, as a result, its fortunes will rise and fall on the same as the country did not build a foundation for creative autonomy in its abiding commitment to serve the innovation of others. Recently, an exodus of firms from Singapore is the first indicator that the differentiator of well-trained, low-cost workforce is no longer the competitive advantage it was 40 years ago.

Option It – Options are forward rights to purchase something that will have a differential value at a later date. The country that has optioned its innovation future in an unprecedented sense is the People’s Republic of China. In the latter part of the 1990’s, China instituted a policy of mandatory technology transfer, much to the chagrin of many MNCs. In addition to buying power generation, transportation, medical, or civil infrastructure technologies, corporations were required to sell the enabling proprietary know-how that underpinned the purchased technology. For years, the Chinese government was sorely abused as it had a problem (and still is impaired) in knowing whether such transfers were actually legitimate or complete. Many of them were not. However, over a decade, China has acquired options on vast innovation estates from many of the world’s largest companies. In addition, China elected to educate (in contrast to Singapore’s and India’s training focus) many of its citizens in basic sciences. Linking technical commercial know-how with basic scientists is an integral component of the long-term economic strategy of China, the first byproducts of which are emerging only recently. However, taking lessons from all historical models, the Chinese have the cognogenitive environment from which invention and innovation can organically emerge. Systemic challenges of establishing national S&T priorities in a country that is quite regionally governed presents obstacles in the short run and the emerging awareness of the degree to which China did not fully get what it thought it was buying in its technology transfer will impair the efficient execution of its strategy. However, it is reasonable to expect that with a growing population in a resource constrained and environmentally taxed world, China will achieve considerable breakthroughs as its survival and economy depend on it. In short, the Chinese government has acquired the world’s best technology and acquired, thereby, a series of innovation options at a very low cost. While the White House and Congress may wish that there was an innovation strategy that would save the economy from mismanagement, they’ve grossly underestimated the power of China, Brazil and other beneficiaries of technology transfer that propped up international business expansion over the past decade while no one was paying attention. Like the German technology expropriation at the end of the Second World War, the Chinese and others who were excluded by the superpowers at the Doha WTO meetings have exacted a more subtle revenge. They’ve optioned Occidental technologies and now they, not we, will control where growth happens next.

We are in a place no different from the foundational skirmishes at the birth of our modern economy. I find no modern public figure with the clarity of perspective rivaling James A. Garfield in his Congressional Address in 1866.

“Mr. Speaker, there is no leading financier, no leading statesman now living, or one who has lived within the last half century, in whose opinion the gentleman can find any support. They all declare, as the Secretary of the treasury declares, that the only honest basis of value is a currency, redeemable in specie, at the will of the holder. I am an advocate of paper money, but that paper money must represent what it professes on its face. I do not wish to hold in my hands the printed lies of the government. I want its promises to pay, signed by the high officers of the government, sacredly kept in the exact meaning of the words of the promise.”

“Let us not continue this conjurer's art, by which sixty cents shall discharge a debt of one hundred cents. I do not want industry, everywhere, to be thus crippled and wounded, and its wounds plastered over with legally authorized lies.”

And from his January 2, 1879 address to the Honest Money League of Chicago:

"Successful Resumption will greatly aid in bringing into the murky sky of our politics, what the signal service people call "clearing weather." It puts an end to a score of controversies which have long vexed the public mind, and wrought mischief to business. It ends the angry contention over the difference between the money of the bond-holder and the money of the plow-holder. It relieves enterprising Congressmen of the necessity of introducing twenty-five or thirty bills a session to furnish the people with cheap money, to prevent gold-gambling, and to make custom duties payable in greenbacks. It will dismiss to the limbo of things forgotten, such Utopian schemes as a currency based upon the magic circle of interconvertibility of two different forms of irredeemable paper, and the schemes of a currency, "based on the public faith," and secured by "all the resources of the nation," in general, but upon no particular part of them. We shall still hear echoes of the old conflict, such as "the barbarism and cowardice of gold and silver," and the virtues of "fiat money" but the theories which gave them birth will linger among us like belated ghosts, and soon find rest in the political grave of dead issues. All these will take their places in history alongside of the resolution of Varsittart, in 1811, that British paper had not fallen, but gold had risen in value, and the declaration of Castlereagh, in the House of Commons, that the money standard is a sense of value in reference to currency as "compared with commodities," and the opinion of another member, who declared that the standard is neither gold nor silver, but something set up in the imagination to be regulated by public opinion."

"When we have fully awakened from these vague dreams, public opinion will resume its old channels, and the wisdom and experience of the fathers of our constitution will again be acknowledged and followed."

"We shall agree, as our fathers did, that the yardstick shall have length, the pound must have weight and the dollar must have value in itself, and that neither length, nor weight, nor value can be created by the fiat of law. Congress, relieved of the arduous task of regulating and managing all the business of our people, will address itself to the humbler but more important work of preserving the public peace, and managing wisely the revenues and expenditures of the government. Industry will no longer wait for the legislature to discover easy roads to sudden wealth, but will begin again to rely upon labor and frugality, as the only certain road to riches. Prosperity, which has long been waiting, is now ready to come. If we do not rudely repulse her, she will soon revisit our people, and will stay until another periodical craze shall drive her away."

There was a time when public service and her stewards actually took the time to couch their analysis and recommendations in a context of reflected wisdom from the past. There was a time when Congress and the halls of power echoed with calls to accountability and integrity. It is time that, we the People, model such wisdom in our own practice and hold our leaders to the same standard. Otherwise, pull up a tiny chair in the playhouse and have an imaginary cup of tea with a forgetful elephant.