Electromagnetic Money – A Novel…

The following post is entirely for amusement value only. This is a work of fiction. Names, characters, places and incidents are the products of the author’s imagination. Any resemblance to actual events, locales, persons living or dead is entirely coincidental. After all, sometimes, serious people like me need to have a bit of fun. Enjoy!

On July 22, 2011, the Washington Times published a report on information from a classified assessment from 2005 in which the National Ground Intelligence Center suggested that China may have electromagnetic pulse (EMP) weapons that could be used in future conflicts. This was not news. For years, China, Taiwan and others have joined the U.S. and Russia and several European states in assessing the viability of high altitude and non nuclear EMP (HEMP and NNEMP, respectively) as a means of crippling computers, communication systems and infrastructure. Like the Pakistani submarine capabilities developed using French and U.S. technology, the Chinese unmanned undersea vehicle programs which use seabed magnetism and topography for undetectable navigation and countless other systems, this ‘breaking news’ is neither breaking nor news.

In 1962 and in the subsequent years, projects like Operations Fishbowl, Starfish and others successfully tested EMP and HEMP devices with devastating effects to power grids and communication systems in Hawaii. The ability to detonate a nuclear device – and other impulse generators – and, in so doing, create blankets of electromagnetic disruption has been well known. The Commission to Assess the Threat to the United States from Electromagnetic Pulse (EMP) Attack issued its Critical National Infrastructures Report in 2008. The report details the nature of the threats and provides numerous indicators to individuals and institutions whose work is well documented. And, in recent years, Congress and the White House have publicly (if you actually pay attention) expanded budgets for shielding of Department of Defense Infrastructure.

So I was intrigued by the release, in the past week, of several reports about the Asian ‘threat’ of EMP and HEMP attacks. And I wondered whether these trickling leaks may have more to do with Leon Panetta’s June 9, 2011 confirmation hearing testimony than first meets the eye. While exceptionally well documented since the mid-2000s when the EMP commissions were organized, we’ve known about capabilities held by our nation and potential threats across the globe. However, as we’ve been nearing our unraveling fiscal crisis of confidence and accountability, the Secretary of Defense (the same man who had ample access to classified intelligence briefings of foreign and domestic capabilities at the CIA) decided to float the notion that an electromagnetic attack or cyber attack would enter military doctrine as a means to justify hostile reprisals on perpetrator states.

After taking a quick look at the GAO reports (from 2001 forward) about the infrastructure risks associated with the data centers that keep track of U.S. Treasury, Federal Reserve, and taxation records of the United States, I began to wonder if we may be building a narrative to explain one path to catastrophic resolution of our economic challenges.

Let’s take a step back. Facing a collapsing economic confidence in tandem with mounting costs of the Vietnam War, the U.S. balance of payments and trade deficits were undermining confidence in dollar investors. As foreign investors lost confidence in policies that failed to control domestic financial recklessness, many began demanding to redeem gold notes for gold. Switzerland, in July of 1971 demanded redemption of $50 million in gold. France, with considerably greater proportional exposure, decided to pursue redemption of nearly $200 million. With Congress recommending dollar devaluation during the summer and during acrimonious ‘debates’ between Democrats and Republicans, France decided to amp up their demand for the government to honor its commitment. And then, on a sultry weekend in August (really, we can’t even be creative with the dates when we choose to be dishonorable?) President Nixon closed the gold window sticking it to all of the Bretton Woods investors. Having defaulted in August 1971, Nixon began looking for a new interest who would be willing to invest in the U.S. and, lo and behold, he found an unlikely buyer – China.

Part of France’s incentive to support the dollar was the U.S. commitment to fight the war of liberation and democracy in French Indochina. When it was clear that neither the war nor our alliance with France was going to prove to be a winning strategy, we decided to target them to bear the brunt our accountability collapse and stuck them with the closed gold window. Now, in a world of digital and electronic records of trillions of dollars of Treasuries and in the face of a collapsing resolve from China to support our forty year excesses, we are beginning to condition the public to believe that China may ‘attack’ us with an EMP device. Is there a chance that we’re actually contemplating our own doomsday closure of the ‘Treasury Window’ by detonating, or inviting an erasure of the record of our obligations with, a giant EMP blast which, according to GAO reports, would wipe out considerable evidence of domestic and international financial transactions and obligations?

And wouldn’t it be convenient if, in the “I told you so record” (analogous to our post facto awareness about our terror enemies) we could show that Defense Secretaries and Directors of the CIA had been testifying that Iran, North Korea, China, or others were developing and testing EMP devices? You see, at 400 kilometers above the Earth’s surface, it’s hard to find the “Made in China” label on the side of the missile. All you see is what looks a bit like the sun. And then the power goes out, computers stop working, communications shut down, and the only thing left to work is propaganda. The whodunit story would be only told by the perpetrators / victims and the public would never know the truth. Best of all, we would have an opportunity to simply ‘forget’ that which we never intended to honor.

Measuring intent is a delicate and dangerous proposition. But, one thing’s for sure. You don’t have to be a rocket scientist (though it might be helpful if you were) to see that the recent co-emergence of default talks and the flurry of ‘news’ regarding information that was known for over a decade seem to make strange bedfellows. Having disclosed the EMP technology in patents issued to the U.S. Navy and U.S. defense contractors going back to 1969, our sudden concern seems to be responsive to some new, emerging narrative. And with the evidence of our obligations to the world’s investors all sitting in digital archives in centralized centers, and given our past willingness to default on those who assisted our economic growth, I sure hope someone’s watching the horizon a few minutes before a second sunrise over New Jersey, Virginia or Texas because following that contrail will help us figure out who erased our memory.

And if it never happens, it sure would make one killer Hollywood blockbuster…

From Russia with Love

This week saw the economies of scarcity – manifest in the Bretton Woods denominated (and now indicted perversions of) ‘promissory notes’ – teeter ever closer to the edge of their own demise. And we saw the soothsayers scurrying about in their frantic, ghoulish orgy of empty deferral as they rushed to find yet another potion to push back the hands of time (or defer the inevitability of accountability). No August 2 fix – neither by Democrats, Republicans, nor Tea Swillers – will alter the reality that the current system of disembodied consensus irresponsibility is irreparably damaged and is ripe for transformation. So, this post is NOT about the economy of the past but the agents of transformation. Specifically, this post is about a few great people who are working to transcend the requiem of scarcity into the anthem of abundance.

Years ago, I met Ken Dabkowski who, at the time, was working at The Arlington Institute. Tireless in his dedication to take the visions of TAI’s founder and render them accessible to a larger community, Ken struggled to find a path to help humanity wake up from the discordant stupor of present illusions. As TAI downsized, I invited Ken to sojourn with M•CAM for a season while he found a meaningful path to engage his passion and his destiny.

I can’t say I know, with any precision, where we are in that process but what I can say with absolute certainty is that Ken has found a path to render visions into reality. One year ago, Ken and I spent several weeks in Mongolia. Traveling from a camel herder nomadic community in the South Gobi to the highlands of Arkhangai – the ancestral core of the great Khan Empire – we noticed that, no matter where we went, the landscape was punctuated with old Soviet installations beside which resided vast mounds of vodka bottles. In fairness, present day Mongolians are adding their fair share of new glass to these troves but, there’s no question that vodka and its associated bottle litter is more pervasive than many other fixtures across the landscape.

During our journey, we were confronted with the refrain of need for better food security and agriculture infrastructure. Occasionally we saw greenhouses that had been built by Korean aid and development agencies. However, these aluminum frames, plastic draped constructions did little to withstand the violent sandstorms – a signature of the Mongolian climate – and as a result, many stood tattered in the windy desert and plains.

Using our Integral Accounting framework, we launched a program to take the native abundance – namely, vodka bottles – and use these to build windstorm resistant greenhouses. Ken undertook to develop this project and, in less than one year, we went from idea to construction. In partnership with people like glass engineer and artisan Bill Hess, beetle-kill lumber construction engineer Greg Smith, M-ICP logistics master Nergui Dorj, the ‘SoNo’ M•CAM Heritable Innovation Trust interns (lead by my daughter, Katie Martin), UVA’s Jefferson Public Citizens student grant recipients, Professor Bob Swap and a team from the Mongolian Academy of Sciences, together with countless others, the possibility of using the legacy of Russian vodka bottles to enhance food production in Mongolia went from concept to reality. None of this would have been possible were it not for the inspired leadership of Ken.

Is it possibly the case that if we look at the unconsidered litter of our industrial frenetic consumption, we may find that we have bypassed opportunities to confront today’s challenges with yesterday’s abandoned resources? Is it possible that the foundation for tomorrow’s transformation may come from a repurposing of today’s neglect? Is it possible that we could actually begin transforming our models for future engagement by repurposing what once served to foster dependency and addiction? Maybe the vodka bottle greenhouse is an anomaly that cannot be repeated. Maybe the world’s challenges are too great to be confronted with a re-imagined view of the ignored and abandoned. But then again, maybe not. What is important is that each of you knows that there’s a phenomenal young man who inspired an international team to transform the legacy of an addictive past into a fruitful future. His name is Ken and we’re all more fortunate to know that he’s in our world.

Make sure you take a look at the amazing slideshow at the bottom of the following website:

http://www.globalinnovationcommons.org/blog/mongolian-greenhouse

Let Them Eat Cake

As the Bureau of Labor Statistics reported its June 2011 employment data, I found myself nodding off in complete boredom as the pundits and economists recoiled in now predictable shock. Their much heralded recovery, it seems, was neither heralded or a recovery. Rather it was Mary Poppins-esque, you know, “if you say it loud enough, you almost sound precocious.” And yes, the several-week run up in stocks that we’ve seen is, well, in a word, a fattening for the coming slaughter. There is no data on any front that suggests that U.S. equities - save the defense industry - are ideally situated to weather the reckoning but, alas, we’re heading for a most intriguing convergence. As I have stated on several occasions, with all the haranguing about the debt ceiling, we seem to be overlooking the fact that, once issued, we need to have a buyer for the debt. There’s no question that the shuffling of a few trillion in assets in late July or early August is going to trigger another sweep by the keepers of the house as the giant roulette wheel of sovereign default continues its frenetic dervish impression.

I was intrigued by the acquiescence to national security-inspired socialism represented by the ‘no big government’ advocates who had nary a whimper when, this week, they passed the Defense budget which, for those of you who didn’t read it, is organized around the following four themes: 1) taking care of people; 2) rebalancing and enhancing military capabilities; 3) efficiencies and reforms; and 4) supporting our deployed troops. While even the most casual observer realizes that much of this $650 billion budget goes to fund pensions and health care (uh oh, sounds like pesky entitlements to me) while another significant component goes to supporting employment in key conservative Congressional districts (can anyone say ‘pork’?), it is somewhat ironic to see this budget for our ‘security’ when put in the context of the present and future enemies we seek to defend against.

With the migration of our campaign against ‘terror’ moving eastward with all eyes now on Pakistan, we are confronted with the recognition that, according to the most aggressive estimates, including all Saudi, Pakistani ISI, U.S. CIA and other covert support from the late 1990s to the mid-2000s, our official ‘terror’ enemies have a budget between $2.5 and $3.0 billion. Pakistan’s total budget – spent in part with U.S. defense contractors – is about $6.4 billion. Iran’s budget estimated at slightly over $8 billion (not including the contingent funds they may have on reserve to purchase nuclear devices from Pakistan or other armed states) is in line with other regional defense allocations. Rounding out the all Bush-proclaimed Axis of Evil states, we’re looking at a total combined threat of less than $30 billion. And in spite of our willingness to out spend our enemies by 20 times, we still seem to be philosophically and actually losing our campaigns.

To put our $650 billion in context, the People’s Republic of China’s budget is just over $100 billion with France ($62 billion), the United Kingdom ($57 billion) and Russia ($52 billion) rounding out the top five. In point of fact, if you take the top 20 nations ranked by military expenditure, the U.S. accounts for 51% of the total global budgeted defense expenditure. And, our defense industry contractors, subsidized as they are by a very generous Congress and White House, supply a considerable amount of the defense hardware and systems for the top twenty nations’ militaries. So I was particularly intrigued to see that, in the face of protected government concessions insuring their on-going profitability, the defense industry has actually been one of the top employment terminators for the 6 months ending in June. According to the Challenger, Gray & Christmas report, the defense industry has been the third most job-cutting trailing only the government/non-profit, and retail sectors.

Among the G-20, there’s no question that military expenditures have been a significant component of the economic engine in modern economies. In the past two hundred years, the largest spikes in economic activity have included expansion of defense spending. However, there is a growing chasm of uncertainty around what is happening as we see Timothy Geithner’s August 2 looming on the horizon.

One of the last times the world saw conflict-fueled indebtedness at current scale was the Napoleonic Wars. France and Great Britain took economically divergent paths to fund their campaigns with far-reaching consequences. While both France and Great Britain went deeply into debt to fund their conflicts, Great Britain’s willingness to impose austerity and tax increases, combined with their commitment to maintaining a metal standard currency, made their debt a desirable investment at home and abroad. In contrast, France’s profligate indebtedness combined with its revolutionary ‘tea-party-like’ revulsion to taxes, put its debt in dubious desirability and, in the end, resulted in greater taxation and ultimate sovereign bankruptcy.

Where does this all come together? Well, for starters, we need to understand that the fiscal conservatism which seeks to achieve financial controls with the reduction of social programs while continuing to debt-finance ‘national security’ at a rate that is ten fold greater than the sum of all of our present and contemplated foes is, in a word, disingenuous. The notion that we can stabilize our war-thirsty budget without revenue increases has, as its historical justification, Napoleonic logic. Who would have thought that our Tea Party friends would be so 19th century French? On, or about August 2, 2011, the only winners will be those who fate and ignorance have protected. However, their win will be short-lived. The very dollars they seek to control will, shortly after the 2nd, erode in value and, in the end, their role in distracting fiscal discipline may lead the public to conclude that our fears made us less secure. Congress and the White House have looked at the American people and said, “Let them eat bullets.” That’s likely to be as popular as it was for Louis XVI and his lovely bride, Marie. And, after our current monarchists have been disarticulated, our economy will be well-suited for Napoleon and his economic genius. Here’s a thought. Let’s wake up and care BEFORE this happens!

Declaration of Interdependence

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Sitting on a beautiful boat in the Rock Hall marina last night I was captivated by one of the most delightfully comic July 4th dramas. Over the loudspeakers poised just inside the breakwater came the mournful strains of the ‘Star Spangled Banner’ sung in a dirge tempo followed by twangy crooners lauding their American pride. Just beyond the barge, a respectable quantity of explosives lit the night sky for a solid sparkling shower of what was probably 15 – 20 minutes. And on the bridge, a dozen of us celebrated the camaraderie of old and new friends. Anonymously assured yet clamoring for no attention in the towering skies behind the foreground antics was one of the most terrible and beautiful thunderstorms I’ve seen. With thunderheads scratching the ceiling of the atmosphere, massive discharges danced in antiphon with the Chinese pyrotechnics showering into the Chesapeake Bay. During Lee Greenwood’s ‘I’m Proud to be an American, where at least I know I’m free’, the lightning was flashing once every 7- 10 seconds, ever brighter and ever higher as if to say, “Look at me. Freedom, unconstrained, can soar to the heavens.”

Those who saw the lightning – and I’m fairly certain that there were a few – probably spent their time, in the main, commenting how glad they were that the thunderstorm was passing to our southwest so as not to rain on the festivities. But as the sparks persisted, I was lost in the discharges high above finding myself reveling in the enormity of the explosive power of polarity derived from wind, water and magic. And in the midst of my thoughts, I found a path towards another window on our present state of affairs.

Sitting on the waters of the Chesapeake, so many ironies flooded into the celebration of the birth of a nation which, in no small way, has a total incapacity to understand its roots or its destiny. Our national anthem, which has no connection to the birth of the nation, is the product of Francis Scott Key’s impotent musings on board the HMS Tonnant as he sat with American Prisoner Exchange Agent Colonel Skinner in the morning hospitality of British Officers Vice Admiral Cochrane, Rear Admiral Sir Cockburn and Major General Ross. Written during the bombardment of Baltimore in September of 1814 (during the optimistically named War of 1812 despite its 3 year duration with over 20,000 casualties), the poem questioned destiny rather than its modern wistful, illiterate celebration of assurance. Entrenched as our national anthem 80 years ago by the Hoover Administration during the carnage of the Depression, it is fascinating to see our modern fervor around the hymn in the face of looming certain erosion of our confidence and arrogance.

Ironic, too, that our celebration of independence from the tyranny of George is, once again marred by our desire for independence from the tyranny of another George – this one a wayward Republican who, as spender-in-chief, led the nation in an orgy of consumption befitting a thoughtless monarch for whom we are now all paying dearly. With his court still entrenched under the current administration, we find ourselves using Chinese explosives to mark our independence from… oh, that’s right, the makers of the fireworks.

And how fitting it is that our very name, the United States of America is unraveling as state after state confronts insolvency in the face of economic mismanagement and entitlement debauchery? One wonders precisely how many horses are in the stable of the apocalypse? Mind you, this is no catastrophic world-ender event. No, this is the apocalypse of our tired illusions in which Independent Supremacy is a fallacy around which we are all supposed to stand in Roman attention.

The pen that wrote our national anthem was sitting, at peace aboard the civil hospitality of an enemy. The President who, two generations ago vainly attempted to remind Americans of their manifest destiny, used a pensive supplicant poem as our anthem rather than a rallying march of confidence. And our celebrations of independence prophetically allow Chinese technology to define our highest moment of national pride. Are any of us capable of allowing the scales to fall from our eyes and realize that our aspiration to an exalted isolation is not only self-defeating but actually worsens the pain of our coming economic and civil realignments and necessitated austerity?

Chinese and Hindu tradition is filled with parables of the futility of these narrative-imposed conflicts. Morsels of wisdom fall from a table set rich with admonitions surrounding the conflict created by self-imposed illusions. I am particularly drawn to the wisdom lessons of Sun Wu Kong (the Monkey King in Chinese mythology) who is the audacious creature who, armed with invincibility and perfect clarity, spends his early incarnations fighting heaven, nature, demons, and everything with whom he can pick a fight. While he does a capital job of wrecking havoc throughout the universe, he finds it exhausting. Ironically, when cowed by the Goddess of Mercy, he finds obedience equally exhausting. It’s not until he sees his destiny to be a catalyst for change and an inspiration towards elevated purpose that he finds his place in the cosmology of the Buddha.

And, with a final stroke of irony, this mythical figure showed up in the lightning punctuated eve of our Independence Day. Thriruvananthapuram, home of one of the notable temples to Lord Hanuman (the Hindu deity counterpart of Sun Wu Kong) was the site of an archeological unveiling this week when a team found what may be one of the largest hoards of gold, diamonds and emeralds ever found in a single location. Reports of this cache predictably characterized it as ‘worth an estimated $17 billion’ which amounts to approximately 1 percent of India’s nominal GDP or 10 percent of the nation’s total revenue for fiscal year 2010. In a country so rich with cultural and religious awareness, I found it fascinating that such a revelation would be discussed in its Occidental, monetary consequence rather than its religious and metaphysical significance.

I wonder if we can, above the din of ‘bombs bursting in air’, take a moment to reflect on the experiment that is this country. We the People, are of necessity, not Independent. We are, in fact, fully dependent on a heterogeneous world. While our politicians debate debt ceilings and limits on expenditures, we seem to neglect a pathologically obvious assumption which is NOT a certainty – namely, that our neighbors across the globe actually will continue to extend us credit. This arrogance led the Federal Reserve into its uncomfortable position of having to be the buyer for U.S. Treasuries (conveniently termed Quantitative Easing). And, we will, before August 2, be confronted with a trillion dollar conundrum. Once again, we will need to present the world with a credit-worthy story about a country which honors its commitments. So, between the beer and hot dogs, toss a little tofu on the grill, douse it with some soy sauce and ask yourself what kind of neighbor are you? Because if we want interdependence to be palatable, we’d best learn to be guests on board a ship of another flag at least for a moment. Ponder that. Xie xie, Arigato, Danke, Shokran… you get the point.

Covalent Commerce

Chemists Gilbert N. Lewis and Irving Langmuir should be household names given the degree to which their contribution to chemistry is mentioned daily in the press. And 92 years ago this month, it was GE’s Irving Langmuir – the patent holder on the incandescent light – who introduced the principle of ‘covalence’ into our understanding of the chemical structure of molecules (Journal of the American Chemical Society, Vol. XLI, January – June 1919, pgs 868-934). While we wouldn’t understand things like carbon dioxide or water without this basic understanding of the cooperation of electrons within molecules, what I find more intriguing is the wisdom contained inside the code of Lewis’ and Langmuir’s treatises. And, for those regular readers of InvertedAlchemy, you’ll recall my affection for the Coulomb Effect, described by Charles-Auguston de Coulomb two centuries ago which helped Lewis and Langmuir understand atomic polarities and helped us describe what I have called ‘Fusion Enterprise’.

A decade ago (and posted in reprise last week), I gave a speech on the ‘Knowledge Economy and the Cross of Gold’. In this address I focused on the systemic risks that I saw emerging in our delusional migration from productivity to disembodied ‘knowledge’ economic principles and practices. My concern, borne out entirely since then, was that dissociation between commerce and productivity would threaten the very core of our economic ecosystem. Further, I suggested that, as we saw the expanding chasm between productive engagement and irresponsible detachment, we would undoubtedly see a frenzy of phantasmal ‘solutions’ to our accountability failures. In short, as we found ourselves increasingly foundering in the cold dark seas of our own illusions, we would simply play ‘Nearer My God To Thee’ louder to drown out the noise of the sinking Titanic and its passengers.

The ‘knowledge economy’ is dead. Tragically, it died because we failed to learn from our Greek forbearers the difference between knowledge borne of consideration and experience and knowledge derived from passive, superficial observation. In our made-for-sound-bite world, we mistook the noise of cacophonic ‘information’ hawkers for knowledge. Inquiry and careful analysis withered with our obsession to quantify learning through standardized tests and, at its zenith, standardized knowledge became the ultimate oxymoron. We adopted a consensus and it was an illusion.

This proclamation is not a calamity in any form. It is, in fact, the cause for great celebration. It turns out that the term ‘Knowledge Economy’, attributed by Peter Drucker’s Age of Discontinuity (1969) to the work of his colleague and fellow Austrian, Fritz Machlup in 1962, was popularized by a man who also posited in 1984 that compensation inequities (CEO’s making anything in excess of 20 times the rank and file) were “morally and socially unforgivable and we’ll pay a heavy price for it.”

Preening its wings in the early dawn of the Covalent Commerce economic cycle is a red-crowned crane – historically Sinic symbols for longevity, peace, friendship, fidelity and good luck. Arguably one of the most painted life forms in China, I find the crane as an interesting metaphor for the economic cycle to come.

Covalence is a bond that is formed by the sharing of electrons. However, what makes covalence particularly poignant is not the presence of shared energy but the fact that, for the bond to work, the electrons are sharing utility in action. And what makes this principle so attractive as a commerce metaphor is the recognition that covalent bonds exist between identical and dissimilar atoms alike. The atomic nuclei in molecules that enjoy covalent bonds retain their unique identities however achieve their molecular destiny through shared energy. As with the iconic crane, each individual has grace and elegance in isolation but achieves its symbolic utility in the presence of others.

The principles of covalent commerce are quite simple. Priorities shift from divisional, defended enclosures, to marginal benefit optimized collaboration. Benefit is derived from bounded, quantified recognition of interdependence rather than extractive tariffs on intersections and intermediaries. And, above all, detached isolationism is rejected for jointly accretive associative action in which greater utility is a direct consequence of entanglement.

In a world where the captains of the incumbency have all become marionettes in an macabre dance of destruction and denial, it is appropriate to consider that, We the People, are confronted with an opportunity to take stock of our future. We can listen to the chaos of desperation as we figure out how to concoct euphemisms for default, dereliction of duty and breach of public trust or, as the red-crested crane, take flight and find our fortunes in fidelity with other covalently bound energy.

The Knowledge Economy and a Cross of Gold

The following is the text of a speech presented nearly a decade ago. Next week, I plan to publish a follow-up to this perspective.

2001 Bluffton College Presidential Leadership Lecture
Dr. David E. Martin, CEO M•CAM
October 2, 2001

“I come to speak to you in defense of a cause as holy as the cause of liberty – the cause of humanity.”
- William Jennings Bryan, 9 July 1896

Winds of change fanned flames of controversy one hundred years ago. Across the country, upheaval caused by geopolitical and economic power realignment left Americans searching for a standard, a basis upon which they could denominate their existence. With the industrial machine drowning out the sound of the plow and scythe, a revolution was brewing – one that would change the landscape of the globe for a century. Productivity, industrial might, and cash now measured wealth, once denominated by property ownership. The idle holders of idle capital vilified by William Jennings Bryan at the Democratic National Convention in 1896 were the educated industrialist elites who, according to him, turned a deaf ear to the working masses. While all acknowledged the need to establish a currency standard, fierce battle lines were drawn on the 11th meridian of the Periodic Table of Elements with impressive skirmishes in the “A” section.

In the face of this tumultuous time, another debate was growing equally rancorous. As the 20th century dawned a movement was afoot to establish the infrastructure to consolidate the movement of wealth throughout the nascent continental country. Financial panic, alleged by many to have been instigated by proponents of a central bank, provided a stimulus to create the Federal Reserve Bank by 1913. The centralization of the mode of wealth and knowledge transfer, be it tangible or intangible, has long been known to be the path to dominance. After watching the Duke of Wellington defeat Napoleon at Waterloo, Baron Nathan Rothschild was reportedly quoted as saying, “I care not what puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man that controls Britain's money supply controls the British Empire, and I control the British money supply.” While observing that, “whoever controls the volume of money in any country is the absolute master of all industry and commerce,” President Garfield provided the inspiration for today’s presentation in his words spoken in 1880. “I am an advocate for 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.”

One might reasonably ask, at this moment, “How do Bryan, Garfield, Rothschild, and Morgan find themselves visiting us in October, 2001?” After all, isn’t today the day most of us mourn the 1780 hanging of British Intelligence Officer Major John Andre and celebrate the President Johnson’s swearing in of Supreme Court Justice Thurgood Marshall? An appropriate question may be the most eloquent uttering of the 1992 Vice Presidential Candidate Vice Admiral James Stockdale, “Why am I here?”

Today, we will explore the realities of a crisis of humanity more polarizing than the debate of gold or banking. We will probe the enigma of the knowledge economy that has no standard – a wealth without denomination. We will address the challenge presented by President Garfield 120 years ago and resolve to valiantly seek to address the problems we encounter. What is knowledge, how is it’s quality assessed, and who controls its distribution? Informed by the debates of yesterday, we will seek solutions for the challenges we face today.

Let me begin by making the following observations. At the turn of this century, the International Leadership Forum estimated that the adult global literacy rate was 73%. That means that the written word was meaningless to over 1.3 billion adults. With many countries boasting rates of 95%, many had rates under 50%. An UNESCO report estimates that approximately 250 million children between the ages of 5 and 14 are working and going to school. Fifty percent of this group works full-time. When one considers the numbers of people trained beyond nominal literacy, the numbers are more poignant. Less than 40% of the world’s population, over the course of their lifetime, can enter tertiary educational institutions. Sixty three percent of the world’s literate population lives in economically “developed” countries with African, Central and Southeast Asian countries disproportionately illiterate. These statistics should, in themselves, hold considerable weight. However, this is not a lecture on education of the masses. No, today, I’m concerned with a far more complex topic that, while impacted by the numbers above, is far more unnerving.

We find ourselves at a point in history where considerable acclaim is cast upon those who have achieved greatness in the pursuit of corporate goals. Forbes and Fortune herald one after the other multi-millionaire whose fame is built on success in entrepreneurial imperialism of one sort or another. During the last four years of the past decade, more millionaires and billionaires (in economic adjusted terms) were created than in the cumulative running of all of human history. Are we really that much smarter and that much more productive than all civilizations that preceded us? Are our institutions of higher learning producing genius with every diploma? Do we live in Garrison Keillor’s mythical town where, “every student is above average?” Or is it possible that we have built a tower of Babel?

Let us examine three elements of the knowledge economy.

First let us ask the question posed by Mr. Bryan. In the knowledge economy, we must ask ourselves the unsettling question of basis. In antiquity, wealth was denominated by raw materials. Those who had the most land, the most gold – in short, the most tangible property – were the wealthiest. In the evolution of economies, these basic elements were replaced by the metrics of the industrial age. In industrial economies, productivity, distribution, and market share served as the more abstract surrogates for the wealth of ages gone by. Now, in the knowledge economy, we find ourselves confronted by an economic reality without basis. Prior to the dot bomb, we were told that value was measured in “eye-balls” and “stickiness”. Billions of dollars flowed into the creation of a virtual presence that conveyed virtual information virtually anywhere. Pause; let us consider what virtual means. Our faithful Webster tells us that virtual refers to a hypothetical particle whose existence is inferred; being in essence though not formally recognized. In other words – NOT. When value is ascribed to virtual reality, how is it denominated? More importantly, how is one to know whether it is real or imagined? As the educator and the educated, how can we learn to discern reality from that which is not? Revisiting President Garfield’s conundrum – we need to know that face value is based on value or it’s a lie. Is “knowledge” the presence or absence of literacy, the letters of degree conferred on an individual, the prestige of institution or commercial affiliation, nationality, race, creed? Or, is knowledge something more than these?

I would suggest the sine qua non of knowledge economy is the need for a gold standard. Copyright law of the United States established that facts have neither owner nor value. The organization and presentation of facts in various expressions have value. Our society is filled with data; our challenge is to transform that into usable information leading to wise deployment creating value. Yes, here’s where I appeal to the student populous movement – educational assessment should not be based on the recitation of facts established by U.S. law as valueless – now here comes the part where I shamelessly pander to the faculty – but in the useful synthesis and application of the same. Knowledge built on rout memorization is valueless, knowledge built on application and problem solving has value.

Second, we explore the problem of ownership. There was a time when ownership was rather unambiguous. Possession was 9/10ths of the law. Land, buildings, shipping lines and trade names were clearly defined by title. In the knowledge economy, we are confronted with the timeless problem of counterfeit. When he realized that conventional warfare was not swinging in his favor, Hitler, in an effort to decimate the United States and Great Britain economies began the process of printing counterfeit dollars and pounds. The French tried the same technique in Vietnam and the U.S. introduced 20 Peso notes in Cuba for the infamous Bay of Pigs invasion. Why is it that from Duke Sforz of Venice in 1470, to Napoleon, to Hitler, to Kennedy counterfeiting has been an integral part of war? Because savvy tacticians know that economic chaos is one of the world’s most effective weapons. Introducing counterfeit undermines all economic systems as confidence is lost in the representation of legal tender.

So too, in the knowledge economy, counterfeits are an untold tactical weapon. In a recent study made of United States patents, our company found that over 35% of all current patents are intellectual forgeries. This means that the patent claims rights already secured by another party or already existent in the public domain. One cannot help being overwhelmed in Malaysia with copies of Microsoft Office being sold for $2 in the shopping malls of Johor Bahru. Passing off as proprietary that which is not is an unmitigated disaster looming over our current economic system. For the knowledge economy to have any viability, forgery detection must be implemented.

Last Spring, the University of Virginia gained national attention when one of its faculty implemented a computer system to determine whether term papers submitted by students were plagiarized or authentic. In certain sections, as many as 25% of the papers were copied, in part or in whole from other sources – often the papers of classmates. Is it any wonder that we go on in life to copy the works of others in business, education, and other walks of life when, in high school and college, we get away with intellectual theft? I think not. However, I believe that educators and students alike must realize that these patterned behaviors establish foundations that lead to ruin.

Finally, let us consider trade. Many have proposed that with the ubiquitous nature of the internet, we are becoming a boundary-less world. Traditional geopolitical barriers are eroding. People are interacting with one another irrespective of time zone, language, tradition, or status. In real time, I collaborate with business partners overlooking Tiananmen Square, Big Ben and Tierra del Fuego. However, in these times of heady multinationalism, we must consider the often-overlooked dependency that is being created in this unrestricted world wide web. Knowledge must be transferred and shared for it to achieve its greatest impact. However, as we see the expansion of telecommunications-facilitated trade, we see an equally expanding malignancy of inadvertent isolationism.

Local vendors close their doors while we shop on-line. All the while, we lose the priceless, informal interactions with our neighbors telling us of places, people and events that once were intrinsic to the broadening of our minds and perspectives. We miss the touch of the hand, the warmth of a smile and the sharing of a friend’s tear – in our wealth, we gain poverty of soul and mind. In the midst of this efficiency, what has the knowledge economy lost? Is the local ISP the Rothschild of the knowledge economy?

We have sacrificed human interaction. In our global economic conquests we have lost the innovative impact of observation. Rather than go to places, we visit them virtually (remember, that means we DON’T). I would like to suggest that one of the greatest threats of the knowledge economy is that we will actually see a reduction in global understanding.

We will see, hear and trade with only those who are wired into the web. Rather than learning from the wisdom of the cultures that have passed before us, we will see only that which the content providers deem appropriate and, in so doing, we will see a contraction, not an expansion of knowledge. In short, we will choke the inventory of innovation and inquiry in the morass of irrelevancy. We must resist the centralization of information and knowledge. Efforts must be made to learn from the richness of indigenous knowledge that may never find its way to a web browser. We must develop multiple venues and vehicles for the exchange of knowledge so that the trade routes are not the monopolistic empire of the few.

So today, we must heed the warnings of history and listen to the voices of the past so that we build a legacy of renaissance, not repression. We need to encourage one another to add value, not volume, to the knowledge of the ages. We must commit ourselves to respect and value the uniqueness of the intellectual property of each member of the human race and decry piracy of the same. And finally, we must vigorously resist the temptation of sloth and in its place actively participate with the global community. We must resolve to move forward the democratization of knowledge and be relentless in our efforts to bear the standard of substance in the face of maelstrom of virtual value.

Let now ring true the statement made by Mr. Bryan on that hot July day in 1896, “The humblest citizen in all the land, when clad in the armor of a righteous cause, is stronger than all the hosts of error.”

Uneven Integrity

Fed Chairman Ben Bernanke has been desperate to find the linguistics to encode his self-imposed integrity paradox. This week, he referred to the “frustratingly slow” and “uneven” recovery. Thank heavens he’s not a doctor. “You may walk with a limp,” he would advise a patient prior to bilateral amputation of both legs. “Your feet will not recover as quickly as the rest of your body.” Really? When the evidence is overwhelmingly against the much heralded repair of the carnage of the debt fueled spending frenzy of the past decade, one has to wonder why, prior to the election cycle, he finds it impossible to tell the truth. The Chinese SAFE reports at the beginning of the week – so damning that the government had to censor their own transparency by removing public comments on U.S. economic instability from their own websites setting a new standard for censorship – leave no doubt that the market for more U.S. debt has soured beyond already abysmal standards.


In a ‘shocking’ and ‘unexpected’ turn of events, equities ended the week at a low that wiped over $1 trillion in market value away in 6 weeks – the longest slump since October of 2002. The financial media concluded the day on Friday with a record number of “weaker than expected” and “less than estimated” hyperbolic descriptors of the events of the past 6 weeks. Blackrock’s Bob Doll was quoted in Bloomberg saying, “We’re at the end of the recovery and the beginning of the expansion.” And, the casual reader may carelessly overlook the fact that his enthusiasm has more to do with Blackrock’s international exposure – including their massive Asian market interest – than reflecting bullishness on the U.S. economy.

I’ve frequently commented on the fact that sound-bite information is, in fact, misinformation. If a comment is taken out of context or, worse yet, presented without context, it may contain literal ‘truth’ without being contextually true. Most bank executives have basked in the comfort of this defense when they perjured themselves in Congress by ‘truthfully’ answering questions all the while knowing that they were hiding behind the error in the inquiry.

Visa and MasterCard both were appalled that Congress wouldn’t delay the imposition of new fee limits on charges to debit card transactions. In May, the Republican controlled House Agriculture Committee – yes, you read this correctly – AGRICULTURE – voted to delay implementation of transparency and regulation of credit default swaps. For those of you who aren’t familiar with CDS, you would be pleased to know that these traded bets against organizations meeting their financial commitments have ballooned to over $600 TRILLION – over 10 times the inflation-adjusted world’s GDP. To be abundantly clear, in addition to nonsensical deferrals of accountability like the Federal Reserve and U.S. Treasury Ponzi scheme – sorry, I mean Quantitative Easing or QE2 – the ‘recovery’ which has been so illusive is a hologram created by illegal and illusory utilities. And, the deferred enactment of regulation on CDS has been cued perfectly for the electoral calendar. You see, just before the Presidential elections, the Agriculture Committee, supported by the House Financial Services Committee - has set the CDS device to detonate just before the election.

To be clear, financial institutions like Bank of America, JP Morgan Chase, Goldman Sachs and Citigroup – all beneficiaries of the largesse of government bailouts and other concessions have achieved significant profitability arranging CDS trades. An estimated $55 billion in annual revenue is generated from these products and, without these bets and the speculation around the bets (yes, I know, this could seem confusing but this is what the recovery has been all based on, so you’ve all been drinking this illogical cool-aid), we wouldn’t have a recovery.

If you take one step back from the pathologic lying that passes itself off as news and analysis, you may be wondering why detonating another market melt-down on the eve of the next election would make sense. Apart from the obvious response seen in the Bush Administration’s eleventh hour ‘intervention’ which pumped billions of dollars into financial interests and the automotive industry as massive bonuses for aiding and abetting his 8 years of post-9-11 fiscal distractions, there is a more intriguing thesis that could be explored.

Over the past two weeks, the Department of Defense has decided to socialize a theme that I discussed years ago – namely, the growth of ‘cyber-threats’ against the U.S. Now, what follows is merely my musings around why one may want the CDS implosion and the DoD’s cyber threat marketing to be introduced at the beginning of the Presidential campaign season. CDS exist in digital form. They are private transactions and, courtesy of the Agriculture Committee’s crack oversight (please read the disdain-filled sarcasm) they have no regulation to speak of. As of this week, the U.S. and Europe are on track to break the all-time record for financial institution security breaches (at least the ones that are reported). Bear in mind that just at the end of this week, the IMF was reportedly ‘hacked’. Is this news or is it socializing a concept to make the actual event more plausible? Just a question.

So wouldn’t it be convenient if, long about September of next year, on the verge of a complete collapse of the government’s giant CDS – Ponzi racket, for a cyber attack to wipe out the records of CDS obligations? Rather than facing the messiness of the Greek bankruptcy predicament, a simple electromagnetic pulse (and EMP blamed on a hostile source) could wipe out all the records just in time for all of them to be on a single clearinghouse. If you could add Treasury records on the same platform, we could actually ERASE our financial obligations and, voila, get a fresh start. Best of all, we could blame the cyber attack on, say China or Iran, and get ourselves a whole new economic stimulus in the form of another war. The Department of Defense RF and EMP hardening budgets wouldn’t have anything to do with this scenario, would they? And best of all, in May and June of 2011, we could have been told the ‘truth’ of the plan and, as a society, ignored it.

Now, I’m not suggesting that this Dan Brown-style conspiracy could ever happen. Obviously our leadership wouldn’t be that nefarious. Obviously, somebody with integrity would insure that such a cataclysm of conscience wouldn’t actually happen. Nobody would seriously consider aggregating opaque financial obligations in a single place and then create a terrorist event to justify equally opaque wealth transfer. Right?

We, the People, need to stop hiding behind the complexity of synthetic financial products dismissing them as ‘too difficult to understand’. There’s been no recovery. There’s no plan in place to actually address our systemic problems. And chronic economist oracular failure is not due to complexity. It’s due to the fact that the court astrologers are being promoted to continue to sell the illusion. PIMCO’s Bill Gross has had the decency to try to set off the alarm surrounding the Treasury delusion and, for his recent activism, InvertedAlchemy applauds his efforts. Let’s hope that a few others decide to follow his lead and, together, we may avert a much larger crisis. Be informed. Put the puzzle together. It’s not hard – just sobering!