Phasing Out – Phasing In – Phase Coherence and Dissonance: Part 2 of 3

During a presentation made by an Indian economist at a World Bank conference at PSG Technical College in Coimbatore, I did a double take when I heard reference made to the “mature call center industry” being on the wane in India. “Mature?” I thought. “How can anyone use that adjective for something barely a decade old?”

In Korea and Taiwan, semiconductor fabrication facilities took longer to build than the production cycle of products into which the devices would go. Singapore lured dozens of multi-nationals to the island nation with financial incentives only to find that Vietnam, Thailand and others offered skilled labor at a fraction of the price of Singapore’s citizens. Kodak famously bet its future on a phasing out of film and lost its legacy market dominance to digital five years sooner than the film obsolescence was predicted. GE was sure that technology transfer to India and China would be great for propping up sagging North American revenue but failed to anticipate the diaspora of engineers who were prepared to obsolete Connecticut-inspired innovation at a rate twice as fast as its own development cycles. Countless pension fund managers swooned with the promise of “fixed income-like” products – CDOs and CMOs – which promised great returns only to find themselves fleeced by the very investment bankers who pitched the sales (propped up by Rating Agency collusion) as investment grade. “Green” investors flocked to invest in carbon alternative energy ventures paying no attention to the infrastructure bond maturities which made grid-dependence an insurmountable obstacle for the adoption of new technologies.

When we think about Phase Coherence or Dissonance, it is important to realize that our present view of time has served us poorly. We are bombarded with “Breaking News” about a second kiss, the bombing of Tripoli, and a drunken celebrity ranting about his producer. In our careless intoxication with the immediate, we have lost all frame of reference for the consequence of the collective ‘field effect’ of inter-related – though possibly uncorrelated – events. When I was invited to provide some advice to the Japanese government at the request of the late Naoyoshi Suzuki and my friend, Norio Nakahara, I was gob-smacked when I heard them talk about the Japanese 100-year plan. Few Western politicians or strategists can comprehend the Chinese central government’s 5-year plans. We want quarterly financials, up-to-the-second stock quotes, real-time crawl on the bottom of our always-on TVs and PDAs. However, if one reflects at all, one realizes that we don’t see interconnected Phases – merely staccato, disjointed artifacts. I am humbled by my friends in Papua New Guinea who discuss time in thousand year memories and thousand year futures.

For an economy to optimally function, Phase serves as a critical, yet neglected dynamic. As I discussed in Part 1, the principle captures dynamism and consequence – not merely linear time nor punctuated periodicity. The absence of its recognition can be seen in 24-hours talking head causality banter. The markets rose on unemployment numbers. The markets fell on earnings which exceed analyst expectations. The markets couldn’t figure out what the hell the Fed was trying to do so they went…. you get the point. When you stand back from simplistic time dependent correlation and causation, you find that none of our present accounting, rating, trading, or reporting principles serve anything other than emotional reflexive behavior. Regrettably, this collective blindness fails to detect systemic risk or opportunity.

Phase, in my experience, is indecipherable without the capacity to observe systems from multiple perspectives. One cannot apprehend orthogonal convergence unless diverse, uncorrelated inputs are equally procured and valued. When Cisco was executing its acquisition frenzy a decade ago, it failed to understand interdependencies which, post-acquisition, would either cost multiples more to address or render the acquired company or technology useless. During the first three years of this millennium, we tracked over $1 trillion in write-offs of acquisitions where buyer’s remorse found it had overpaid for what was immature, obsolete or incomplete.

And this is not just a high-tech blindness. The central regions of Mongolia have fertile agriculture potential including vast tracks suited for the growth of potatoes. Devoid of the occupying Soviet central procurement aberration, over-production leads to episodic price suppression followed by post-consumption import requirements from neighboring China. Farmers, borrowing money from lenders for seed stock, become indebted at the beginning of the season and high rates of interest accrue until harvest. Without means of smoothing out crop distribution (like having cold storage for inventory preservation and phased sales), they are forced to sell en masse driving price and profit down. So, at the very pinnacle of commercial success, profitably is squeezed and debt-dependency is reinforced. With little gain left from a growing season, costly Chinese imports extract a toll which forces the farmer into indebtedness the following year. Tragically, this story is played out around the world. From the ancient story of Joseph stewarding the Pharaoh’s commodities in Egypt, we know that food storage and inventory management is central to wealth creation but, Phase blindness reinforces debt cycles which could be easily broken with rudimentary cold storage.

Governments around the world persistently engage in Phase Dissonance with public procurement. Military procurement routinely involves the acquisition of technologies in which the contracted deliverable is obsoleted or counter-measured before contract maturity. Municipalities use their credit-ratings to support public bonds for projects which have neither correlation to the implementation duration or the revenue derived from the project. Congresses, Parliaments, and Presidents alike most often budget and forecast financial performance with maturities incongruous with election cycles and, as a result, are correctly seen as charlatans rather than public servants. Infrastructure projects are budgeted and contracted without any visibility as to the innovation or obsolescence periods of the components and the public winds up paying multiples of budgeted projections in the form of ‘change orders’.

So what does Phase Consciousness look like?

In its most simple form, it looks like the formation of Rabobank – one of the great Phase Conscious historical successes. A bank started by and for the cooperative interests of grain growers and bakers, Rabobank’s roots came from financing the coherence of production cycles – both those of grain and those of bread-makers. By linking these interests in explicit interdependence, the bank became one of the world’s most well-capitalized and respected modern banks.

In another form, it looks like Sovereign Technology Credit Obligations. STCOs are financial instruments in which a company, municipality, or government can purchase a project and finance the component integration in synchronization with that component’s utility. By identifying all present suppliers and all parties innovating potentially obsolescing options, the buyer can invest in future innovation with money that would have been wasted on antiquated components or costly overruns.

In every instance, Phase Coherence serves to align value exchanges with underlying productivity or utility. Small-scale, distributed power is not promised immediately following a publicly financed 20 year bond issued for a central grid system. Pension funds are not put into speculative equities where maturities have no established basis. Corporations and municipalities resist the urge to raid pensions for short-term, politicized activities at the certain expense of the very constituency they seek to appease.

Now here’s the secret to the apparent prescience of this blog. The reason why I was able to identify the illiquidity of the FDIC and PBGC over 6-months prior to any media or economist reports was because I study Phase Coherence and Dissonance. The reason why we knew 2008 was what it would be as early as 1999 in a presentation to the Richmond Federal Reserve was because we observed incongruous short duration financial instruments wrapped into long duration instruments with long-established, uncorrelated default and insolvency profiles. The reason why we knew that business process outsourcing was going to irreparably harm many U.S. businesses is because we tracked university graduates returning to China, India, Korea, Taiwan and Vietnam for over 15 years before Jack Welch decided American innovation could never be challenged.

Phase Coherence exists when the magnitude, period, impulse or field effect of an action or effort aligns with the expectations built and performance manifest, around the value exchange between participants in the ecosystem participating therein. Phase Dissonance exists when asymmetries are formed in scalar misalignments which are opaque – either willfully or inadvertently – to one or more participants. The greater the Phase Coherence, in most instances, the more disintermediated are surrogates – both people and value intermediaries and currencies – as the absence of inefficiency derived deferral does not foster opportunities for mistrust and performance latencies. Phase Dissonance animates debt (derived from the Latin root for ‘one who owes’) while Phase Coherence animates credit (derived from the Latin for ‘one who trusts’). ‘Too good to be true,’ is an intuition of Phase Dissonance. ‘Beyond my wildest expectations,’ is a manifestation of Phase Coherence.

Take another look.

Phase and State Coherence - Part 1 of 3

Note: Regular readers will note that I did not post on April 24. My lovely bride surprised me with a birthday trip to St. Martin and I connected to abundant nature rather than the net. I trust this post was worth the wait. If not, take a vacation to St. Martin and it will make more sense.


Should you wish to have your cognitive boundaries stretched, read Joseph Jaworski’s Synchronicity, Karl Popper’s The Open Society and Its Enemies, and Jared Diamond’s Collapse in the space of a month on the shores of three different oceans separated by at least one transit of the dateline. Immersed, as you would be, in consciousness and nature, the works take on dimensions that remain illusive if absorbed in an armchair sipping a beverage. In each of these works, you see the effort of diplomats – emissaries from both the prophetic and the prosaic – who passionately seek to awaken humanity from narratives of obsolescence, self-destruction, and shared epochal tragedy to illumine a possibility for a more suitable humanity. Along with my most recommended of authors – Gregory Bateson – they attempt to navigate dimensions of inquiry with words which belie the vision they seek to describe. Each one seeks the elixir of essence through the coarseness of language constrained by archetypal metaphor.

I am embarking on an expedition of sorts in this, the first of a series of three posts. Unlike the Homeric tomes referenced above, I will, in brevity, seek to convey essence which I have come to understand as an imperative in the understanding of our economic frameworks but, which through careless neglect, is passed over unconsidered. It is not accidental that most deist traditions include in scripture the prohibition of graven images. Divinity instructed that essence, not artifact, should be the object of veneration. It is also without puzzle that the epic of spiritual traditions involved journeys – not stasis. For it is in the physical and temporal transience that revelation can evoke clarity of purpose unimpeded by monochromatic redundancy. So too, we need to understand that in economies (remember the etymology of the Greek word meaning “management of the household”), it is in the journey through exchanges that value is manifest. In our insular view of post-Modern consumerism, we have lost the recognition that hording – an artifact of fear and mistrust – shares no association with wealth. Wealth, in its ideal form, is the capacity to engage fully without limitation, not the capacity to survive an uncertain (and feared) future.

Upon this canvas I would like to explore the concepts of Phase and State Coherence and Dissonance and the role these dynamics play in the understanding of value exchange. Notwithstanding the limitations of language mentioned above, I have chosen these terms as I see them representing a dynamism which is lacking from many of our economic nomenclature. Let me simply introduce what I mean by each of these and, in the weeks to come, I will attend to a deeper explanation of both in a variety of contextual frameworks.

Phase – the period or pulse (measured in time, magnitude, or field effect) in which essence and value are manifest, recognized, transacted, utilized, exchanged, and retired or unseated. This concept incorporates principles such as invention, innovation, incrementalism, obsolescence, duration, maturity, and life-cycle but transcends them in that Phase is perceived through cycles and consequence in totality – not in punctuated episodes.

State – the form (measured in commodity, custom & culture, knowledge, money, technology, well-being) in which community consensus coalesces to denominate a manifestation of matter, energy, surrogation or experience. This concept includes science, mathematics, social order and convention but transcends them in that State incorporates the unconstrained completeness of matter, energy, or experience.

Coherence – expressions in which amplification, propagation, transfer and transcendence are complimentary, promote efficiency, and optimize common access.

Dissonance – expressions in which interference and friction impede or restrict propagation, promote discord or obfuscation, and thwart transfer.

To understand these concepts in a practical application, let me explore a few examples and remind you of some earlier references to these principles.

When one prepares an umu in Samoa (a cooking method in which food is prepared on the ground with heated stones covered by leaves), one of the dishes which may be included is palusami (a dish that puts creamed spinach to shame). This mix of taro greens, coconut milk and salt is prepared in large waxy leaves and placed in the umu. The cooking stones are heated with a fire made from the coconut husk and leaves from previous umus. The State condition is that the whole of the coconut and the taro are used – in an unaltered state – to supply nutrition. The “waste” – in an unaltered state – is used for fuel to heat the cooking stones. The Phase involves a complete first use (food), second use (fuel), third use (ash to the garden) engagement of every State (coconut and taro). In this example, we find Phase / State Coherence as there is no point in the process where the State of a thing requires alteration and, save the caloric input of manual labor to collect, prepare and consume the food, the system achieves its utility without significant alteration. A State change occurs to the coconut husk at its burning, but is harvested for a Phase utility – the heating of stones. This example serves as a representation of an efficient value exchange with high coherence.

When, incentivized by Federal tax policy reinforcing the centrality of home (real estate) indebtedness as a means of serving innumerable purposes, the U.S. government encouraged patriotic consumption in the wake of the September 11, 2001 events, by inducing re-financing of home mortgages allowing them to serve as the ATM for stimulating consumer spending. Our economy didn’t grow. The illusion of perpetual asset value increase grew. The State of real estate did not alter. The Phase of indebtedness – that wonderful, insurance-driven actuarial 30-year intransigent fixture of Occidental finance – didn’t alter. But what did alter is the decoupling of actuarial assets – homes and real estate – to purchases of consumer goods and services. The Phase dissonance made the 2008 financial collapse perfectly predictable (as evidenced in my speeches in 2006) as the Phase of consumer credit operates in 3-5 year oscillation periods where, on the second attempt to prop up the illusion, the absence of assets becomes visible and, voila, the market fails. In short, the economic policy of the G-7 was to seek to create State dissonance (use real estate to prop up consumer spending) by forcing – albeit unconsidered by most economists due to professional courtesy and wholesale irresponsibility – Phase dissonance (attempting to blend 3-5 year duration risk with uncorrelated 30 year duration risk). In this instance, the combined Phase / State dissonance led to collapse and, to this day, no substantive policy or regulatory change has been possible as, to date, no one still is paying attention to the systemic dissonance.

CNN recoiled with the breaking news today that gasoline prices were crossing a $5.00 per gallon price. Economists quoted in the Wall Street Journal and Financial Times all talked about the effect of high energy prices on slowing consumer spending. Somehow missing from all these conversations is the Phase / State coherence of what’s driving gasoline prices. We know that states are all suffering economic shortfalls and we know that approving taxes has become taboo in Washington courtesy of the pro-limited government conservativism of tea party elephants (the same ones who spent like drunken sailors the last time they controlled the purse). The collusion between the oil industry and the government is a wonderful example of Phase / State coherence. States derive significant benefit from taxes levied on fuel. Many states collect revenue as a percentage of the price of fuel. Not surprisingly, states with the most bleak economic conditions represent a disproportionate number of those who also tax gasoline at high percentages. So, using State Coherence, the gasoline price is encouraged to spike in Phase with the revenue benefit to the state. While we may find this Phase / State coherence reprehensible (or, God-forbid, collusive), one thing is certain. We are having taxation incented energy price spikes where NO external Phase or State condition warrants the spike. And the reason why we won’t have anti-trust oversight on this (notwithstanding President Obama’s Facebook appearance where he wanted to ‘connect’ with real people), is that the State Attorneys General who would need to launch such an inquiry draw their salaries from – you guessed it – the racketeers.

We will explore, in the coming two weeks, a deeper discussion of Phase and State coherence. We will look at how, by viewing economic and social systems through these lenses, we can unravel inefficiencies and willful incumbent power systems which, when exposed, allow us to consider alternative forms of engagement.

CSI: US Senate – Autopsy on the Wrong Body

NOTE: This blog post preceded S&P's April 18, 2011 'negative' outlook on the U.S. economy in which they warned of a loss of AAA rating but, as this post reveals, failed to have the independence to tell investors the true risks facing the illusion of investment grade.


Let me begin by saying that Senators Carl Levin and Tom Coburn had a thankless job. Together with their staff, they were asked to investigate the Wall Street and Financial Crisis of 2008 and following. To their credit, they did an amazing job of wading through documents and testimony and came up with copious evidence of theft, fraud, greed, and most of the customary Deadly Sins. And, if I had CEOs lying under oath in front of me, I would probably have to appeal to my higher angels not to want to submit a one page report – in lieu of the 639 pages – with a simple conclusion…

“They lied, we paid, our economy is toast. But, the real perpetrator is running amok and ready to strike again.”

Instead, in the hundreds of pages, they detail the breakdown of a system that was engineered to serve the interests of the likes of Goldman Sachs at the expense of the people but they conveniently ignored the real beneficiaries. Before I get to that, however, I thought it might be nice to comment on their ‘recommendations’ which, in the main, are agreeable. So, at the end of this post, I’ve copied their recommendations and added my commentary on what I see.

However, given that some of you might not get to the end, let me observe that the committee focused on the a) WRONG BODY; and, b) WRONG PERPETRATOR. And, no, I’m not going to rehash my now vindicated assessment from 2006 that this was never a ‘housing’ or ‘real estate’ crisis but rather a profligate consumer credit orgy that led to a persistent vegetative state of brain damage. Regrettably, that would sound like an, “I told you so.” No, rather we need to understand that the BODY that needed the autopsy was the Congress and its use of tax and monetary policy to incentivized mindless behavior. And the PERPETRATOR was and remains the Reserve Corporation and its progeny – the unholy alliance of life insurers and Fed banks – who led the monetary coup d'état in 1913 and who continue to staff both sides of the feeding trough.

Congress’ tax and monetary policy has been used to dictate unconsidered social policy for a long time. It is no surprise that it was in 1913, the same year that the Federal Reserve was established by, and for, fixed income investors in the life insurance industry, that the U.S. ratified the Sixteenth Amendment allowing Congress to levy income tax. By collecting income tax and apportioning it “without regard to any census or enumeration,” Congress solidified its capacity to use income tax (and deductions thereto) as a primary means of influencing public behavior. By allowing interest to be deducted from income tax in the same year the Fed was established, Congress introduced a statutory bribe to the American people to co-opt them into the belief that duration matched investments would be good for them and that the best way to insure systemic adoption would be to link mortgages, life insurance premiums, and federal bonds in actuarial, perpetual wedded bliss.

Oh, and anecdotally, is it any wonder that the fixed income terminal horizon of the past century – the much venerated 30-year duration (life insurance, bonds, and pensions) – matches the productive life expectancy of an adult male in 1913?

Linking home ownership – backed by the creation of the Federal Housing Administration in 1934 – to the hegemonic monetary returns for life insurers at the creation of the Federal Reserve; and by combining mortgage and life insurance as necessary public financial utilities, the Congress incented (and the public acquiesced to) the mindless embrace of debt-based citizenship. Our collective indebtedness on a personal and national level is NOT a surprise – it exists by statute. Wall Street is not the problem, it’s merely the utility used by the perpetrators. If Levin and Coburn really did their job, they’d realize that it is the tax and monetary policy of 1913 that created the Crisis and NONE OF THEIR RECOMMENDATIONS change that one bit.

As long as we have “fixed income” requirements in banking, insurance, and other regulated finance (including pensions) where independent rating of risk (including the ability to call U.S. Treasuries the junk that they truly are), we will have done NOTHING to treat the present contagion or spare us from future shocks. As long as we have a debt-based monetary system architected by and for life insurers and reserve bank members which continues to enslave every productive citizen to transfer wealth to the incumbent coup leaders (for the moment, Goldman Sachs), we will have done NOTHING to build a stable future.

The U.S. bankruptcy has little to do with mortgages. They were merely a symptom in the massive immunosuppressant-induced lethargy observed in the deceased prior to expiration. No, this virus was introduced by Presbyterians (in their corrupt invention of life insurance), was mutated by the likes of Metropolitan Life, Aetna and others (despite the valiant, albeit futile vaccination injected by the Clayton Act of 1914), and became contagious through the combined vectors of tax deductions, pensions, and life insurance. Our reincarnation – should it appear – will only be possible when we realize that 639 pages of evidence on the wrong body will neither solve the crime nor prevent the serial felon from striking again.


From the Senate Report
Recommendations on High Risk Lending

1. Ensure “Qualified Mortgages” Are Low Risk. Federal regulators should use their regulatory authority to ensure that all mortgages deemed to be “qualified residential mortgages” have a low risk of delinquency or default.

2. Require Meaningful Risk Retention. Federal regulators should issue a strong risk retention requirement under Section 941 by requiring the retention of not less than a
5% credit risk in each, or a representative sample of, an asset backed securitization’s tranches, and by barring a hedging offset for a reasonable but limited period of time.

3. Safeguard Against High Risk Products. Federal banking regulators should safeguard taxpayer dollars by requiring banks with high risk structured finance products, including complex products with little or no reliable performance data, to meet conservative loss reserve, liquidity, and capital requirements.

4. Require Greater Reserves for Negative Amortization Loans. Federal banking regulators should use their regulatory authority to require banks issuing negatively amortizing loans that allow borrowers to defer payments of interest and principal, to maintain more conservative loss, liquidity, and capital reserves.

5. Safeguard Bank Investment Portfolios. Federal banking regulators should use the
Section 620 banking activities study to identify high risk structured finance products and impose a reasonable limit on the amount of such high risk products that can be included in a bank’s investment portfolio.

InvertedAlchemy: The real problem here is the separation of Origination and Retention. When incentives are in place to induce the public to indebt, the ‘bank’ to loan, and the ‘fixed income market’ (as evidenced in statutory investment policies for ‘stable investment products’) to compulsively purchase bundled instruments, the demand for inventory of financial products to satiate the asset allocations mandated under statutory and pension policy will always favor origination at all cost. As a result, until we limit the appetite for ‘fixed income’ we will, unfortunately, persist in careless origination. The worse the U.S. dollar and economy get, the more illusory inventory will be required so we’re going to get worse – not better. Note that Goldman Sachs has upped its municipal exposures well out-pacing market wisdom not because these represent good investments but rather, because statutory rating bumps are valued when risk isn’t correctly measured.


Recommendations on Regulatory Failures

1. Complete OTS Dismantling. The Office of the Comptroller of the Currency (OCC) should complete the dismantling of the Office of Thrift Supervision (OTS), despite attempts by some OTS officials to preserve the agency’s identity and influence within the OCC.

2. Strengthen Enforcement. Federal banking regulators should conduct a review of their major financial institutions to identify those with ongoing, serious deficiencies, and review their enforcement approach to those institutions to eliminate any policy of deference to bank management, inflated CAMELS ratings, or use of short term profits to excuse high risk activities.

3. Strengthen CAMELS Ratings. Federal banking regulators should undertake a comprehensive review of the CAMELS ratings system to produce ratings that signal whether an institution is expected operate in a safe and sound manner over a specified period of time, asset quality ratings that reflect embedded risks rather than short term profits, management ratings that reflect any ongoing failure to correct identified deficiencies, and composite ratings that discourage systemic risks.

4. Evaluate Impacts of High Risk Lending. The Financial Stability Oversight Council should undertake a study to identify high risk lending practices at financial institutions, and evaluate the nature and significance of the impacts that these practices may have on U.S. financial systems as a whole.

InvertedAlchemy: CAMELS doesn’t work. The notion that we somehow play in a world where we can ‘call our own fouls’ doesn’t work in lacrosse and it doesn’t work in an economy. I completely agree with the OTS recommendation but I would encourage the OCC to actually amplify its own enforcement to take a more central role than it has in the past.

Recommendations on Inflated Credit Ratings

1. Rank Credit Rating Agencies by Accuracy. The SEC should use its regulatory authority to rank the Nationally Recognized Statistical Rating Organizations in terms of performance, in particular the accuracy of their ratings.

2. Help Investors Hold CRAs Accountable. The SEC should use its regulatory authority to facilitate the ability of investors to hold credit rating agencies accountable in civil lawsuits for inflated credit ratings, when a credit rating agency knowingly or recklessly fails to conduct a reasonable investigation of the rated security.

3. Strengthen CRA Operations. The SEC should use its inspection, examination, and regulatory authority to ensure credit rating agencies institute internal controls, credit rating methodologies, and employee conflict of interest safeguards that advance rating accuracy.

4. Ensure CRAs Recognize Risk. The SEC should use its inspection, examination, and regulatory authority to ensure credit rating agencies assign higher risk to financial instruments whose performance cannot be reliably predicted due to their novelty or complexity, or that rely on assets from parties with a record for issuing poor quality assets.

5. Strengthen Disclosure. The SEC should exercise its authority under the new Section
78o-7(s) of Title 15 to ensure that the credit rating agencies complete the required new ratings forms by the end of the year and that the new forms provide comprehensible, consistent, and useful ratings information to investors, including by testing the proposed forms with actual investors.

6. Reduce Ratings Reliance. Federal regulators should reduce the federal government’s reliance on privately issued credit ratings.

InvertedAlchemy: The Rating Agency industry is a Sherman Act violation and should not be exempt from racketeering and related civil and criminal penalties. The monopolistic nature of the industry is problem number 1. The compensation structure for incentivizing rated customer rather than public investor interest is problem number 2. These problems will be unaddressed until Rating Agency executives are jailed for their complicity in the theft of assets from municipal, academic and other pensions across the country. The Attorneys General from the 50 states should lead where no federal regulator will have the courage to go. Indictments, lawsuits, and recoveries are the only path to reform and waiting for the SEC to get there is a fantasy.

Recommendations on Investment Bank Abuses

1. Review Structured Finance Transactions. Federal regulators should review the RMBS, CDO, CDS, and ABX activities described in this Report to identify any violations of law and to examine ways to strengthen existing regulatory prohibitions against abusive practices involving structured finance products.

2. Narrow Proprietary Trading Exceptions. To ensure a meaningful ban on proprietary trading under Section 619, any exceptions to that ban, such as for marketmaking or risk-mitigating hedging activities, should be strictly limited in the implementing regulations to activities that serve clients or reduce risk.

3. Design Strong Conflict of Interest Prohibitions. Regulators implementing the conflict of interest prohibitions in Sections 619 and 621 should consider the types of conflicts of interest in the Goldman Sachs case study, as identified in Chapter VI(C)(6) of this Report.

4. Study Bank Use of Structured Finance. Regulators conducting the banking activities study under Section 620 should consider the role of federally insured banks in designing, marketing, and investing in structured finance products with risks that cannot be reliably measured and naked credit default swaps or synthetic financial instruments.

InvertedAlchemy: I would love to agree with this recommendation but for my knowledge of both regulators and policy makers and their collective illiteracy surrounding financial products, their use and abuse. The report is correct as far as it goes but Congress needs some serious IQ enhancement so that it can adequately understand what it thinks it’s regulating. And the Tea Party is NOT helping this at the moment. By appealing to sound-bites, they are diluting their message of accountability and making it come out sounding like pandering.

A Cinderella Story – If the shoe fits

Long ago in the Ancient land of Egypt were the green water of the Nile River flows into the blue water of the Mediterranean Sea lived a young maiden named Rhodopis, she born in Greece but was kidnapped by pirates and carried down into Egypt where she was sold into slavery. Her owner turned out to be a kind old man who spent most of his time under a tree sleeping. Because of this he never saw how the other girls in the house, all servant girls, taunted and teased her because she looked differently from them. Their hair was straight and black while hers was golden and curly. They had brown eyes and she had green. Their skin had the glow of Copper, but she had pale skin that burned easily in the sun causing them to call her Rosy Rhodopis. They also made her work hard shouting at her all day, "Go to the river and wash the clothes," "Mend my robe," "Chase the geese from the garden, "Bake the bread."

Now she had no friends only the animals. She had trained the birds to eat from her hand, a monkey to sit on her shoulder, and the old hippopotamus would slide up on the bank out of the mud to be closer to her. At the end of the day if she wasn't too tired she would go down to the river to be with her animal friends and if she had any energy left from the hard day's work she would dance and sing for them.

One evening as she was dancing, twirling around lighter than air with her feet barely touching the ground, the old man woke from his sleep and watched as she danced. He admired her dancing and felt that one so talented should not be without shoes. He ordered her a special pair of slippers. The shoes were gilded with rose-red gold and the soles were leather. Now the servant girls really disliked her for they were jealous of her beautiful slippers.

Word arrived that the Pharaoh was holding court in Memphis and all in the kingdom were invited. Oh how she wanted to go with the servant girls. For she knew there would be dancing, singing, and lots of wonderful food. As the servant girls prepared to leave in their finest clothes they turned to her and gave her more chores to do before they returned. They poled their raft away leaving a sad girl on the bank.

As she began to wash the clothes in the river she sang a sad little song--"wash the linen, weed the garden, grind the grain." The hippopotamus grew tired of this little song and splashed back into the river. The splashing of the water wet her slippers. She quickly grabbed them up, wiped it off and placed them in the sun to dry. As she was continuing with her chores the sky darkened and as she looked up she saw a falcon sweep down, snatch one of her slippers, and fly away. Rhodopis was in awe for she knew it was Horus who had taken her shoe. Rhodopis now with only one slipper put it away in her tunic.

Now the Pharaoh, Ahmose 1, Pharaoh of upper and lower Egypt was sitting on his throne looking out over the people and feeling very bored. He much preferred to be riding across the desert in his chariot. Suddenly the falcon swooped down and dropped the rose-red golden slipper in his lap. Surprised but knowing this was a sign from Horus he sent out a decree that all maidens in Egypt must try on the slipper, and the owner of the slipper would be his queen. By the time the servant girls arrived the celebrations had ended and the Pharaoh had left by chariot in search of the owner of the golden slipper.

After searching on land and not finding the owner he called for his barge and began to travel the Nile pulling into every landing so maidens could try on the slipper. As the barge rounded the bend in front of the home of Rhodopis all heard the sounds of the gong, the trumpets blaring, and saw the purple silk sails. The servant girls ran to the landing to try on the shoe while she hid in the rushes. When the servant girls saw the shoe they recognized it as Rhodopis's slipper but they said nothing and still tried to force their feet into the slipper. The Pharaoh spied her hiding in the rushes and asked her to try on the slipper. She slid her tiny foot into the slipper and then pulled the other from her tunic. The Pharaoh pronounced that she would be his queen. The servant girls cried out that she was a slave and not even Egyptian. The Pharaoh responded with "She is the most Egyptian of all...for her eyes are as green as the Nile, her hair as feathery as papyrus, and her skin the pink of a lotus flower."

From Strabo 64 BCE – 24 CE


I was intrigued in the past few weeks by three encounters with ‘due diligence’. In one instance, the examination was directed at me; in one, the diligence was directed at a particular transaction upon which our team is working; and, yet a third where diligence was directed at the organization I lead. In each of these cases, I found myself amazed at the degree to which we’ve grown accustomed, as a society, to the assumption of mistrust. However, I’m equally perplexed by how we’ll ‘trust’ unknown ‘independent’ parties with whom we have no connection to confirm or deny the veracity of a fact or opinion giving no regard to their character.

In the personal due diligence, a firm was hired to inquire about my character and my background – academic, professional, and personal. The contracted firm was filled with former law enforcement and intelligence types who are accustomed to background checks. Not surprisingly, given their penchant for intrigue, they found artifacts of information on websites – many of which I monitor – and then sought to contact people with whom I interacted at events across the world. What I found most fascinating was the degree to which the artifacts collected and the persons solicited for opinions reflected a very narrow spectrum of my life – a life which, had I been asked, would have been more completely understood by asking me directly for a list of friend and foe – fan and detractor. Ignoring the subject of diligence and following a standard operating procedure for background checks, the contracted firm touched an insignificant amount of my life and, as a result, drew conclusions on an anemic set of observations. And somebody paid good money for that.

In the case of the transaction, a group elected to send some of their team to visit to explore a potential business relationship. The team was assembled in haste with limited knowledge of what we do as an organization and with even less knowledge about the environment in which the contemplated transaction existed. As I observed the delegates confront the unusual nature of our operation and the opportunity, I mused about what precise value was being served by having strangers in a strange context observe phenomenon for which they had no context. Could they really provide discernment or insight into anything that went on? Would anyone conclude that they ‘understood’ the opportunity based on the experience?

And in the third instance, a government entity with several decades of experience in being abused and mislead by countless business, NGO, and multi-lateral entities, decided to do ‘due diligence’ on our firm. Having worked for months with this entity and having performed countless services for them in business practices which they report never having experienced before, they elected to demand a ‘due diligence’ checklist prior to consummating a business for which they stand to benefit greatly. Ironically, the questions that they asked are questions that are drawn from convention. Ironically, the questions that they wanted answered have NO bearing whatsoever on the transaction. Yet, as if compelled by some unseen hand, they needed their diligence questions answered before they could move forward. In this instance, the true tragedy is that there is no person associated with the entity who would actually have the business or financial experience to understand the materials requested but, somehow, the knowledge that documents were exchanged would comfort those who have already experienced a transformative engagement – one that they simple can’t believe is possible.

In each of these three cases, I was entertained, in a Greek tragic sense of theater, in the delusion which is passed off as diligence. And central to the failings of each of the three exercises is a fundamental human assumption which is patently false. You see, when you ask a question, you are already making the assumption that: a) you know what you should ask; and b) you’d recognize the substantive answer or data when you saw it. These two assumptions are the height of hubris and are the proximate cause for most flawed decisions. If you want to know about a person, the only way you can truly understand or gain confidence in them is to actually interact with them and observe their behavior in a representative set of circumstances. By assuming that the right people to ask about me are people that show up in media, for example, the diligence firm gained no insight into how I interact with interns who build houses with me in Honduras or Mexico. By assuming that they knew how to judge a business opportunity, the transaction team relied on inferential projections of legal and business conditions familiar in their ecosystem but entirely foreign to the opportunity at hand. And by assuming that an enterprise is merely the sum of its shareholder communication, a government failed to trust its own experience of performance.

Every business and social undertaking in which I engage is done using insight and methodology which is unconventional. Whether it was establishing intangible asset collateral enhancement in the 90s or whether it’s optimizing international trade imbalances to realign national economic engagement, if you are working with me or with the organizations I lead, you’re not experiencing convention. That’s a given. So why in the world would you seek to understand something which you know defies convention with conventional questions? The reason you can’t find what motivates me is not because I’m not motivated. It’s because I’m motivated by values which you may not recognize. The reason why we find untraditional opportunities for business creation is because we look at the world through intangible asset lenses – lenses we’ve yet to meet any other organization who can use or even comprehend. The reason why we’ll work with governments for years without monetary consideration is because we believe in building ecosystems in which business can develop – not in taking resources from those who we know to be deficient in the capacity to fully and transparently engage.

“How can we make sure that our leadership can speak to the right people in the government?” I was asked by a diligent assistant of a business executive.

At once I felt compassion and grief. My impulse was to answer the only way I know how. In truth, the answer would be, “Have your leadership sit down with us for a few days and learn how we build trust. Then, have them go on a trip with us and experience our engagement methodologies as apprentices so that they can have mastery of skills built on experience.” However, what was being sought was a short answer. “Talk to this person.” “Address this topic”. And, yes, in expediency, you may get an outcome that you recognize as satisfactory but you’ll never get the full taste of what would be possible if you don’t change You – the questioner – to recognize that life’s answers are lived and experienced – they’re not on a two dimensional piece of paper.

Which leads me to the fascination of the story at the beginning of this post – in its modern incarnation – Cinderella. What I find fascinating about this story is the fact that, in truth, the story is more about the epistemology of inquiry than it is about a rags-to-riches transformation. You see, in every incarnation, the protagonist is beautiful. She was not made beautiful by looking like the others. In every version, she is a hard worker who overcomes adversity in ways that build envy and derision. And in every version, convention loses as there’s only one foot that fits the shoe. Anyone who has shopped for shoes with a woman knows that the idea that there’s only one shoe for one woman’s foot knows the delusion in the story. Women, of all people, can muster the illusion of things fitting better than men can ever do (O.J. Simpson notwithstanding). No, the point is that true transformation can only be achieved when the mode of inquiry opens up to an unconsidered possibility. And that, my friends, is a fairy tale that needs to be retold again.

The Bismarck Conspiracy

29 March 2011, 0500 GMT

Heading: 5.22˚; Distance: 45 Miles; Winds: 8 knots NNW; Barometer: Falling

Some days just deserve remembering. So it is that I depart from my intended post to share with you an account of my crossing of Straits at the eastern edge of the Bismarck Sea between Tokua, East New Britain and Namatani, New Ireland in the Independent State of Papua New Guinea.

Courtesy of unpaid royalties to the customary landowners in Kavieng, the airport was closed. One charter company could fly us into Namatani but couldn’t manage a plane in the morning to get us back. One charter company had all its planes in service or being serviced in Brisbane. And no helicopters were available out of Rabaul. If we were going to make it to take part in Custom in Konos, we were going by boat. The boat was the Fire Fly – a 22’ open fiberglass boat with a 45hp outboard.

We landed in Rabaul and went across to the Ropopo Beach Resort to meet the Fire Fly. No boat. I walked down to the beach to make my habitual visit to the coral snakes which frequent the shallows off the coast of East New Britain and, instead of snakes I saw thousands of small fish feeding in the tepid water, darting en masse at once in one direction and then the next. Twenty feet off-shore, the glassy surface was punctuated by the occasional flying fish learning how to flout destiny but for a moment.

The Fire Fly came late, fully laden with locals seeking transport across to the St. Georges, a small collection of islands in the Straits. Our host sternly clarified that ours was to be a charter and sent them skipping across the eight miles to deposit their fares and return for us. As I watched the wake of the boat disappear on the water line, I could see massive afternoon cumulus clouds darkening over the distant New Ireland mountains. Still waiting, the deluge began its afternoon deposit long before the Fire Fly re-emerged speeding towards our impatient lot.

“You may need these,” Theresa said as she handed out recently acquired rain coats.

Securing our overnight cargo under well worn tarps and heavy plastic, we climbed aboard and slowed across the luxuriant coral in reverse until we were well beyond risking propeller and reef. Turning north, the engine snarled to life and we lit out across the water.

The Bismarck Sea holds the bluest water I’ve seen on Earth. Even with the sky shrouded in afternoon storm clouds, to look into the Bismarck is to look into a Utopian past long before seas were choked by the despoiling of humankind. These waters once embraced humanity’s oldest persistent cultures; entombed many Japanese, Australian, and American combatants (and their death machines) during the Second World War; and, now, once again were resplendent in deep azure. The white spray from the outboard launched hundreds of flying fish – now quite a bit larger as we left the shoreline – for their mature flights lasting from seven to ten seconds and transiting thirty to forty meters at an altitude of half a meter above the water. Life, in small scale was awake.

I have not seen marlin feeding in a pack before. On the occasional fishing show that I watch with Zach, I’ve seen an angler straining against a lone magnificent fish who, in panic launches from the sea in desperate defiance. But, in a flash, about twenty minutes into our crossing, a school of the mighty hunters were dancing – their great spears presaging the majestic fish as they pierced the surface in a feeding frenzy evidenced at times with smaller prey visible in their hungry mouths. Enchanting. This was worth the wait.

The seas roughened as we neared the St. Georges with the hull of the boat slapping the surface sending a hot sea spray across the boat and its occupants. And then, as soon as it roughened, in the tidal shadow of the Islands, it once again pacified into a pond.

Beyond the St. Georges, the inevitability of the burgeoning storm was apparent. Trying to circumnavigate the wall of rain would add hours to the lateness of our journey and would take a toll in fuel that, alas, exceeded our provisioning. So, steady at the tiller, we made for the wall.

And then They came. First, about fifty yards to port, three dolphins broke the surface. Soon another five and then several off starboard. We were in the middle of a multitude of the playful mammals as they darted and leapt all around the boat. The driver started a staccato foot stomp at the back of the boat and, with the stomps several dolphins would launch themselves into the air. He, in some communication beyond my grasp, was encouraging them to join us on our transit and they, filled with exuberance obliged. And then, cresting the water once again on the port side were massive porpoises, their giant dorsal fins slicing the water in advance of their graceful arc punctuated by tail splashes.

“We don’t see porpoises often – certainly not like this,” Byron commented.

All around us – abundant life – all racing for the storm.

They knew that intelligence dictated going underwater when confronted with airborne tempests. We didn’t have the option. The heavens opened and were most generous. The best of Chinese waterproofing did little but slow the ingress of water and, in a moment, water resistant utility was substituted for portable sauna as precipitation and perspiration locked in mortal combat inside of a plastic suit. There is a moment when resistance is futile and you surrender to forces well beyond any semblance of control. Being in an open boat in torrential rain happens to be precisely one of those moments. I reflected on how deeply I cherished my life and the richness of experience that has graced my days. I found myself celebrating the absence of flight without which the sky and sea’s bounty could not have been apprehended on this day. I found myself lost in the scale of the present where my pulse of life was merely one beat in the orchestra of All. The storm, the sea, the wildness all drenched me through.

Thirty minutes from our destination, the storm relented and gave way to late afternoon blue patches and broken clouds. A frigate bird drifted in the currents coming off the land. A freshly washed New Ireland materialized all around us and we raced the coming dark.

Three more hours of driving to Konos to share Custom with over 200 people from Simberi, Tabar, and Tatau Islands… but that’s another story for another day. For today, my celebration of sensing life is sufficient and we’re all wealthier for it.

Calling All Pens

True, This! —
Beneath the rule of men entirely great,
The pen is mightier than the sword.

Richelieu; Or the Conspiracy , Act I, Scene II
Edward Bulwer-Lytton, 1839

The ink of a scholar is holier
Than the blood of a martyr.

Attributed to the Prophet Muhammad PBUH

On January 8, 2002, then President George W. Bush signed the “No Child Left Behind” law. Like dogs to the Pavlovian bell, governors across the country, together with state legislatures rushed to embrace either this clarion call for quality education for all Americans. Either that or they succumbed to the monetary inducement to “play ball” in which Federal funds could be used to offset dwindling state resolve to support education. Um, let’s see, I wonder which one of these might have been the case?

So when Wisconsin Governor and Tea Party darling Scott Walker decided to pick a battle on how to deal with the state’s budgetary profligacy, he ripped a page from the playbook of Pope Paul IV in 1559. After all, if you want to build an electorate who will warmly embrace nostalgic eras like, oh, let’s say the Inquisition; the place to start is by rooting out the evils unleashed by the “freedom of inquiry”. Anyone betting on how soon we’ll see the forests of Wisconsin cut down to stack around the stakes to rid the state of heretics? And, not to be outdone, governors and legislatures across the country and around the world are deciding that tough economic times call for drastic measures so, what better place to save than silly incidentals like education?

Now, before every NEA blogger places me on their most-favorite-blog referral, beware. Ever since organized education sold out to standardized testing and propped up pathetic attempts to show education metrics to justify their existence, they put their own tinder at their own feet. You see, long ago Educators abandoned their destiny for an Industrial Output model where “passing” and “minimum competency” replaced excellence at most turns. And, while there’s still room under the bus, parents, in their quest to “make ends meet” decided that schools were more daycare than life preparation and relegated discipline failures to schools while they were off selling their hours in pursuit of an American dream.

Prior to the storming of the Bastille in 1789, over 700 authors, printers and book dealers were reportedly held for sedition, radical thoughts and inciting rebellion in a legacy of the 1550s banner decade for edicts (the 1551 Edict of Chateaubriant and the 1557 Edict of Compiegne) setting forth death penalties for heresy and the burning of nobelwomen at the stake for promoting the reading of books. After all, when autocratic governments wish to control masses, their first line of defense is to attack the educated class and restrict the role of schools. It worked for the Church in the Dark Ages, in France in the 17th century and it will work for Wisconsin in 2011. Unless, a few people realize that both the governor and the educators are engaged in a meaningless Quixotic battle while the real tragedy goes unaddressed.

To be clear, most states (including Wisconsin) are in the pickle they’re in at the moment because of illiteracy. During bumper crop years of state surpluses; state pensions, union pensions, and the like were signed away to charlatans and swindlers who promised safe investment vehicles which would allow state coffers to fill on the heady markets. In the run up to 2008 and buoyed by the insanity of political forces in Washington who saw equity markets as the cure for all social programmatic ills, massive allocations were made to investments which were NOT investments. Why would state funds fall for such pathetically transparent schemes? Simple, because not a single legislature in the country has a modicum of financial literacy sufficient to make fiduciary decisions informed of all the facts. And we don’t have the literacy because we have failed to educate.

Our current education system is a product of an industrial system gone horribly wrong. Students are programmed to be consumables in an industrial system. Why is it that universities are rated based on their job placement success rather than their graduates’ contributions to the world? Why is it that we choose math and science as our flagship socialized priorities? Was this mandate a product of aspiring to greatness or were we playing out the madness put in motion by the Reagan Administration’s spectre of the Japanese dominating the world? Hey, Gipper, if you’re out there – Japan was never something to fear…. ignorance was and is!

I have been dealing with civil and criminal acts committed by mining companies – listed on the Toronto, Australian, and London stock exchanges – for the past several months. I have also been dealing with reporters who are conducting investigations into these abuses. Ironically, NO compliance arm of any of the markets in question have provided ANY evidence whatsoever in enforcing material disclosure requirements (and relevant compliance failures of the companies in question) which will directly and adversely impact the value of shares traded on their exchanges. Market regulators and the media believe that places like Mongolia and Papua New Guinea are “too far away” to really get a handle on the story. Mind you, they’re not too far away to rob and swindle. But they are too far away to warrant regulatory compliance oversight. If educated, they would realize that these countries are on the way to even more remote places where regulated markets flourish. They would realize that in both countries, English competency outstrips multi-lingual competency in their own countries. In the countries in concern, walking governments through basic agreements in which publicly traded corporations have ripped sovereignty from the hands of the country – in executed agreements – begins not with a sense of outrage but rather, incredulity. “Are you saying that they’re misleading us?” is a refrain that has echoed in every corner. “No,” I respond, “I’m saying that they’re stealing from you and insuring that you and your country remain impoverished.”

And then, the bough breaks.

Impoverished people, oppressed by the licensed tyranny of market forces which steal resources and leave no benefit for the communities, rise up and demand that their voices be heard and their interests served. Some countries chose to nationalize their assets and, in vindictive reprisal, rating agencies like Moodys, S&P, and Fitch down-grade the country as being “risky”. As long as you are being robbed and don’t complain, you’re an acceptable risk. Stand up against abuse and you’re “too unstable”. Some countries acquiesce and invite unfettered corruption while multi-lateral organizations stand aside and lament the “Dutch Disease”. And, We the People, stand by and shake our heads as bombs rain down on countries where, in a single day, we blow through more money in the name of national defense than we spend in a year in education in most states.

You see, it’s all related. Cartoon characters in State Houses, incensed labor marching in the streets, bombs in Libya. At the core, we have failed to truly hold up the standard of unfettered Freedom of Inquiry. Educators have too often abandoned their post of moral leadership insisting that a child prepared for a complex world needs excellence in communication and civil engagement – not monotonous drills for standardized tests. Public figures have succumbed to public opinion narcissism where short term is measured in CNN-years (7 times faster than dog – or is it Fox? – years). Market regulators have focused on post facto gotcha rather than preempting crisis. And We the People have elected to Twitter about Charlie Sheen.

Now, I know, this post has required some of you to actually re-read sentences. Some of you have actually opened up another browser window to do real-time Babel Fish on my selection of words. And, as I sit in Port Moresby, Papua New Guinea, that sight makes me laugh. For, in the end, my point is to preserve the hope that one day, we’ll regain the capacity to think in paragraphs and prose, we’ll regain the capacity to debate in rich metaphors and hyperbole, and that, We will once again value the inalienable curiosity of the human spirit and empower it with a rich, educated foundation.

Transforming our Economy At Last - Our World’s New Beginning

A speech delivered on March 17, 2011 in Carpenter’s Hall, Philadelphia
By Dr. David Martin, Executive Chairman of M•CAM Inc
Batten Fellow, University of Virginia

O Lord our Heavenly Father, high and mighty King of kings, and Lord of lords, who dost from thy throne behold all the dwellers on earth and reignest with power supreme and uncontrolled over all the Kingdoms, Empires and Governments; look down in mercy, we beseech Thee, on these our American States, who have fled to Thee from the rod of the oppressor and thrown themselves on Thy gracious protection, desiring to be henceforth dependent only on Thee. To Thee have they appealed for the righteousness of their cause; to Thee do they now look up for that countenance and support, which Thou alone canst give. Take them, therefore, Heavenly Father, under Thy nurturing care; give them wisdom in Council and valor in the field; defeat the malicious designs of our cruel adversaries; convince them of the unrighteousness of their Cause and if they persist in their sanguinary purposes, of own unerring justice, sounding in their hearts, constrain them to drop the weapons of war from their unnerved hands in the day of battle!

Be Thou present, O God of wisdom, and direct the councils of this honorable assembly; enable them to settle things on the best and surest foundation. That the scene of blood may be speedily closed; that order, harmony and peace may be effectually restored, and truth and justice, religion and piety, prevail and flourish amongst the people. Preserve the health of their bodies and vigor of their minds; shower down on them and the millions they here represent, such temporal blessings as Thou seest expedient for them in this world and crown them with everlasting glory in the world to come.


Reverend Jacob Duché
Rector of Christ Church of Philadelphia, Pennsylvania
September 7, 1774, 9 o’clock a.m.

Two hundred thirty seven years ago this invocation set in motion the First Continental Congress and set the world alight in a war against perceived tyranny and oppression. Two hundred thirty seven years later, we gather this evening in a world alight in a war against perceived tyranny and oppression. Kneeling under the illumination shining through the south window of this hall, resplendent in the light of morning, the Rector of Christ Church of Philadelphia could not have imagined that his prayer, so passionately constructed, would, in two centuries find itself more prophecy than supplication.

Just this past week, China re-emerged after 500 years as the world’s leading producer economy while, we the People for whom this prayer was spoken, find ourselves in a relentless struggle to “defeat the malicious designs of our cruel adversaries.” However in a tragic irony, this time maliciousness and unrighteousness are not directed to foreign powers but at our own countrymen. Having fled the rod of the oppressor, we have, in larger part, been seen as the oppressor. Rather than assembling in honor for the “best and surest foundation” we instead have scorned wisdom for the tyranny of intolerance.

Once again, now in the light of the waxing Lenten moon, I would like us to consider our precise condition so that we can find a path to a supplication more fitting a New Beginning. Tonight, I would welcome you to consider the animating values of ourselves, our businesses, our nation and our world and recognize that it is in this consideration in which we can reconcile ourselves to our callousness and find a path towards a More Perfect Union.

Earth Dwellers to Resource Conquerors
On the waning notes of the prayer which opened this Hall, Adam Smith in An Inquiry into the Nature and Causes of the Wealth of Nations described the Earth as not our sanctuary and home but rather the compilation of commodities to exchange and consume. The Earth and its “resources” were objects of dominion and Labor – not human engagement and stewardship – serving as the determinant of value. In this view, and in its present manifestation, we find ourselves in persistent conflict to lay claim to perpetually lower “cost” resources and labor to leach profit from every source. In the late 1990s as we encouraged profit maximization by reducing domestic employment, did we profit or did we create an ecosystem where our own citizens have atrophied in their capacity to produce and contribute to a national wealth and identity? We prayed for nurturing care but decided that University of Chicago shareholder value maximization was supreme. Rather than seeing ourselves as stewards of an ecosystem, we sought piety through blood. Is it then, any wonder that the words “human trafficking” and “conflict metals” are as synonymous in our day as slavery and plunder were in 1774?

Sanguinary Purposes vs. Effectual Harmony
In the formation of the current Federal Reserve at the turn of the last century, we frequently recall the debate about States’ rights of currency. We remember William Jennings Bryan and J.P. Morgan variously advocating for agrarian interests in state currency and silver vs. gold and industrial credit, respectively. However, we spend little time considering the centrality of mortality in our Federal Reserve system. After all, it was the life insurers – like Aetna and Metropolitan Life – who provided life insurance premiums for the capital formation of our current monetary system (a practice persisted to this day). It was, after all, the cash compiled by insurers from 1905 to 1913 which provided the first “fixed income” capital to buy the first Federal Reserve debt. To this day, life insurance premiums and pensions require, as “safe investments” the very debt that animated the Fed’s founding. As founding members of Reserve Corporation and persistent members of its Board of Directors, what’s in your wallet is merely a debenture against your very mortality. And, given that most Americans die in debt, there’s no wonder why the dictum of near compulsory “death benefits” are structured to repay, in death what we failed to honor in life.

While we have layered equity markets, financial engineering, celebrated monetary hegemony on top of our modern, self-congratulatory assessment of our now threatened economic power, at what point in history did we actually stop and ask ourselves the considered question: “Does money based on actuarial management of Death serve as the best metric of performance or success?” Is a business the sum of returns to shareholders or is it an organizing endeavor which values the participants in a community; which builds value through employment; which spreads value through exchanges within and between communities; and, which engages value in practicing exemplary stewardship?

Expedient Blessings to Indebted Consumption
When the Reverend implored the Almighty for “expedient” blessings, is it conceivable that expediency and blessing are in existential tension? “Truth and justice, religion and piety prevailing and flourishing”? In this time, in fact our greatest perceived threat is coming from religion and piety prevailing and flourishing. The challenge for us is that, in our focus on our own interests, we failed to engage with our neighbors and, in the vacuum, other religions – built on strict adherence to the values of community and ideology over the individual and built on community values rather than isolated consumerism – flourished. While we can debate on the proximate causes for piety-animated extremism, there is no question that poverty is a fuel for radicalization and we were too busy swiping our credit cards using our houses as ATMs to recognize that we were contributing to the animation of our shared greatest fears.

Friends, we now live in the full measure of the prayer that opened this hall. Our manifold successes remain bound to tyranny and oppression. Our technological advances have been energized by resource exploitation which ravages countries and spreads the scourge of poverty-fueled reprisals to our shores.

Make me an instrument of peace;
where there is hatred, let me sow love;
when there is injury, pardon;
where there is doubt, faith;
where there is despair, hope;
where there is darkness, light;
and where there is sadness, joy.
Grant that I may not so much seek
to be consoled as to console;
to be understood, as to understand,
to be loved as to love;
for it is in giving that we receive,
it is in pardoning that we are pardoned.

In the Industrialization of the past century, we observed and were willing participants in an economic system which detached the value of business and human endeavors from the ecosystem, integral values, and a sense of perpetual stewardship not only for ourselves but for future generations. Rather than aligning capital and its flow to productivity, we sought extraction optimization and celebrated the same as the pinnacle of celebrity achievement.

We are more than the sum of this failing indebted currency metric.

What does the New Economy look like? How will we recognize it when it shows up? What can we do to align our efforts with its manifestation?

Productive Currency
Money is an artifact of value transfer – not the value itself. Since we stopped using metal coinage, this has been the case. Experiments in new currency – including Utah’s recent vote to reinstate gold and silver as legal tender – are emerging at community, State and international levels. Intrinsic to all of these is absolute commitment to reconnecting the exchange with productive engagement. Currency is a call option on future goods, services or interactions – not a draft against looming debt and mortality.

Collaborative Access
Humanity shares some basic traits – not the least of these is the shared impulse to be creative. Whether it’s the Inca pumping water up a mountain 800 years ago or the survivor of Hurricane Katrina in New Orleans, when water is where we don’t want it, we move it. From the farmer who goes from sharpened stick, to plow, to no-till agriculture to the metallurgist who goes from cast iron to single atomic thickness gas phase deposition of conductive materials, when we see our world, our impulse is to change it. This shared impulse must serve as the core for accessing active participation in the global exchange of value. Rather than seen as a commodity of labor, we will succeed when creative collaboration is a calling card equally valued regardless of race, creed or geography.

Transparent Accountability
Value is an inclusive experience which counts the all-in consequence of our activities. Coal isn’t free. It costs a forest, epochs of time, pressure, heat and space and our assumption that its value starts at its digging denies its replacement value. Metals don’t show up in ingots or bars but they start with a dynamic earth that quakes, heaves, and transforms phase and state. From materials to our final interaction with goods, services and experiences, accounting for ALL components of our experience is the only way we’ll manifest a viable economy for all. Poverty’s blight must be transformed from the absence of things to the willful disengagement from communities and networks. Wealth must take on the stewardship mantle where the best of us are the ones who remove the most barriers of access for the masses.

This is happening now.

So, in the waning hours of this evening, let us consider a new prayer for the New Economy.

Led by humanity’s Unquenchable Light,
We pledge…
… to live as stewards of our sanctuary Earth;
… to honor the inalienable value of the creativity intrinsic to all;
… to orient our actions to the removal of barriers of access and opportunity;
… to define our wealth by our character rather than our artifacts; and,
… to fully live in abundant grace in a spirit of tolerance and mercy;
So that we, dwellers of Earth, may be embraced in the illumination of everlasting glory.
Amen