Three Audacities + One Assumption = Status Quo

It’s a shame that each one of you didn’t sit through Professor Treloar’s statistics classes with me at Ball State University. Well, come to think of it, it’s probably great that you didn’t because whatever you were doing instead probably did more to get you precisely where you are – reading this blog post – than would have been the case had you been sitting in the seat next to me. But the reason why it would have been great would have been my ability to point to the day I publicly confessed my heresy and became, well… the author of this blog post. For at least one of you, it would have made sense out of my passionate frustration with how little we concern ourselves with ourselves. To be specific, it was his class on parametric statistics – the one where we were discussing the ‘normality distribution assumption’ behind common statistics – where you would have seen my blood boil. Not only, did we learn, are we supposed to assume normally distributed frequency and scale in variables, but we’re supposed to accept that the variables ARE. Question either of these? Well, that would unravel all we KNOW (or at least the parts we know that we know).

Sitting on Charlottesville’s Downtown Mall with some new acquaintances talking about why philanthropy and corporate social responsibility have been incapable of system-level transformation, I was vexed with the incapacity for social entrepreneurs to intuitively contemplate the fact that their impulse to surrogate every impulse through money IS the principle reason why their actions are rendered impotent. While the use of money (like all of the other 5 dimensions of Integral Accounting) is a helpful and at times necessary utility, if it is the sine qua non arbiter of what is good, necessary, or doable, much will be undone. But more fundamental than this utility challenge was the seeming disregard for what I like to refer to as the “Three Audacities”.

Alleging to be sentient or proclaiming the designation for humanity is bold bordering on arrogant. Much of what we do as a species makes far less sense than, say the behavior of the average fungus. Join me, for a moment, on a whimsical journey through the Three Audacities and let’s see what happens when we test a belief system we don’t even believe we believe (for belief would imply that we’ve considered it).

You and I are marooned on an island with fresh water and a banana tree. Got the picture? Now, let’s journey through the Three Audacities – those unconsidered assumptions that underpin our existence and behavior.

Audacity 1 – we presume we are entitled to act. Confronted by the impulse of hunger and seeing a banana on the tree, we assume that we are entitled to take and consume our environment. Forget concepts like proprietary right enclosure (the bane of efficiency and collaboration) or the principles of the Commons (long lost in the transactions of the Magna Carta and its companion, the Charter of the Forest), when put on the stage, we presume that we have command of the stage and the props. The consequence of this Audacity is that we fail to actively consider perpetuation of life, materials, and resources for present use and future benefit because we assume that our ability to commandeer a thing entitles us to use it… and now.

Audacity 2 – we presume to interact. Let’s say that I know what a banana is but you’ve never seen one. When you see me eating a banana, even without knowledge or previous experience, you’re willing to eat one too. In other words, we’re willing to commute and surrogate our knowledge and experience to another and participate in consensus behavior because someone else is doing it. The consequence of this Audacity is that we mistake action for knowledge, expertise, discernment, or consideration. Michael Crichton observes that, “the characteristic human trait is not awareness but conformity.” In our Audacity to interact in the illusion of efficiency or civilization, our interaction places excessive reliance on the wisdom, morality, or discernment of unnamed, unknown “others” who “must have known better.”

Audacity 3 – we presume to transact. Now the cool thing here is that we can immediately construct systems of values and even morality. Let’s say that I know that you are hungrier than am I. I can choose to give you the banana and take less or none in which case I’m establishing a value transaction that can hierarchically determine that your satiation is ‘more important’ than mine. In our transacting, we can build social and tangible credits and debits based on our ability to variously defer, cooperate, horde, and consume. The consequence of this Audacity can lead to elaborate relationships of interdependence and can also lead to the notion of fulfilled or breached social contracts – the outcome of which can be what we call civilization or strife.

And then the Assumption: We presume that, presented with a similar set of circumstances, We the People would largely act in a similar fashion. This Assumption gives us the ability to thoughtlessly and effortlessly engage in the Three Audacities in a reflexive and unconsidered fashion.

Now I am not suggesting that there’s a cosmic “right” or “wrong” with the fact of these reflexive behaviors. I’m sure that there’s ample reason to accept that some degree of these elements in combination are responsible for the species being here. But what I am suggesting is that the absence of consideration of these attributes of what constitutes our behavior on Earth is a fundamental basis for the predictable failure of our impulses to “change”. Worst of all, when we include the controlled utilities of incumbent systems – money and reliance on ‘expert’ knowledge most frequently abused – in our efforts to change our behavior or the values of systems, we are assured that the outcome will be the lowest common denominator of the weakest moral link in the system.

Let me give you an example from this week. Addressing a concern raised by a shareholder regarding equity ownership in mining company Rio Tinto, PAX World Fund was asked to clarify its position. Specifically, an inquiry was made into Rio Tinto’s participation in destabilizing communities ranging from Bougainville Copper in Papua New Guinea to Mongolia’s Oyu Tolgoi metals project in which the government of Mongolia has entered into a devastating credit agreement which could bankrupt the country. In response, PAX World Fund Sustainability Research Analyst Laura Huober (on behalf of Richard J. Badger) responded that the fund’s participation is justified at the outset because, “a great deal of our standard of living depends on metals…” That’s right. Corporate social responsibility was about picking the lesser of evils rather than calling for interactive accountability. At no point did she address any material issues confronting real people – just consolidated a justification for being in public equity metals producers and an obtuse apology for Rio being among the leaders of its peer group. Amazing! For a company that relies on injustice, conflict, and economic abusive concessions supported by “Development Banks”, they’re the best in class! Wow, why don’t I feel better now? If you’re an investor in PAX World Fund, you should realize that your expectation of investment returns for your money, unless it comes with explicit statements of YOUR accountability expectations, supports an emotional illusion preying on your belief in social justice and sustainability.

Change begins when we are willing to suspend the true opening assumption that plagues us – namely, that we actually are capable of considered, reflective inquiry. Once we build a means to question this assumption and constantly hold it in our consciousness, we can then repurpose the Three Audacities and the One Assumption and contemplate an equation that leads to transformation of ourselves and our experience together.

Quis custodiet ipsos custodes?

The JOBS (SWINDLE) Act Revisited

Obviously people who have forgotten that fallaces sunt rerum species et hominum spes fallunt (Appearances are deceiving and the hope of men is thus deceived).

I was supposed to be marginally impressed with the President’s signing of the Jumpstart Our Business Startups (JOBS) Act this week. After all, who could be opposed to something called a “JOBS Act” when so many Americans are without work. And in a world in which employment woes are impacting so many, how could anyone not be patriotic and celebrate this Act which, according to the President, addresses the “attack” on the American Middle Class and its sense of balance and fairness. Heck, even retyping these words makes my chest fill with an emotion that wants to croon, “I’m Proud to be an American, where at least I know I’m free…”

Having read this Act, I think it should be called the Subtle Wealth Inducement Neatly Delivering Losses to Everyone (SWINDLE) Act and given the boisterous celebrations surrounding the Act’s passage, I’m amazed at the number of advocates for change who are celebrating its signing with Hemlock-laced Kool-Aid.

The American JOBS Act is not good for our economy. In fact, it reinforces one of the most compelling sirens whose melodious songs have crashed aspiring economies around the world. Tragically, it cements the illusion of capital and wealth creation that was started in the 1930s by the 99%-friendly Guggenheim and Rockefeller families. And why we think that somehow democratizing an opaque system so that more losses can be accelerated is a good idea seems…, well…, NOT like a good idea.

A little history. Funding start-up businesses with venture capital and private investment has NOT been the magic bean that has lead to the Golden Goose. In fact, while I don’t wish to belabor a point I’ve made in the past, it was tax policy enabling the one-percenters to lose money in new ventures and deduct the losses from their ordinary income tax that seduced wealthy families into funding the technological run up to the World War II technology boom. Remember that it was 1938 E.I. Nemours du Pont Corporation President Lammot du Pont who stated that “Venture Capital” was needed address the inability for banks to meet the needs of new companies. And Congress responded by giving the wealthy tax breaks for loosing money in speculative ventures – a policy that over 70 years later justifies the adage – invest in 10 deals so that you win in 1. For the average investor, this doesn’t work. And the JOBS Act is more appropriately the SWINDLE Act because losing in one deal will crash the small investor. “Losing” in 90% of the deals in which you invest doesn’t tank the wealthy investor because he or she WINS with the tax loss!

It was military and science nationalist (I hesitate to call it what it really was…industrial collectivism with state-sponsored inducements… can anyone say socialism?) policy that took the Small War Plants Corporation legislation (1942) – the direct forerunner of the Small Business Administration – and the Defense Advanced Research Projects Administration (DARPA) authorized by the Department of Defense in 1958 and used these two government procurement incentive programs to create non-competitive consumer subsidies for small corporations who flowed their income back to the tax-incented wealthy that led to the birth of today’s venture capital. And even that was not enough. Much of the technology that was funded in the early years of the “Silicon Valley” miracle was the product of Third Reich German innovations taken as war reparations at the end of World War II and placed in California and Massachusetts-based firms. Government-backed Small Business Investment Corporations (SBIC) which, at their initiation, provided more than three times the funding than their venture capital peers were expressly enabled not by the joy of entrepreneurship but by the promotion of a pathway to generate tax deferrals and losses.

There is no question that capital access – as a utility – is vital for the creation and nurturing of new ventures. But unimaginative capital access that seeks to white-wash an ill-conceived model of tax incentives for greater wealth hording is far from something to celebrate. The JOBS / SWINDLE Act is equivalent to setting up more slot machines and Crap tables in casinos in Las Vegas, Atlantic City and on reservations across the country and lowering the minimum bet. We are stimulating the creation of greater opacity in disclosure; promoting greater democratization of participation with lower minimum bets; and, doing NOTHING to inform the public that the system in which they’re participating did NOT make millions of people wealthy – it made millionaires and billionaires out of a few people – most of whom were already there or well on their way.

Now I know, here come all the anecdotal rotten tomatoes. “I know somebody who…”, and that’s somehow supposed to justify a system that is built on one of the greatest illusions of all times. Remember, it was not until the Employee Retirement Income Security Act (ERISA) of 1974 that the venture capital industry really started to soar. And that was when “professional investment advisors” industrialized taking the public’s money that came from – you guessed it, tax-deferral inducements – and pumped it into transactions which created the – you guessed it – ONE PERCENT!

What would help kick-start our economy would be legislation which would allow new ventures to partner (without tax or licensing penalties) with companies with excess capacity and get off the ground without defining their corporate status for extended periods of time. In some instances, we would find that the new venture isn’t really a stand-alone company at all – rather a component that helps build relevance in someone else’s ecosystem. What would really help would be reforms that would not tax illiquid values so that collaboration without basis could happen without creating corporate and tax burdens. What would really help is a reform of our accounting and regulatory regimes that would recognize that many ventures do not fit into Internal Revenue Code-defined structures and, as such, should be able to operate in forms that are suitable to a changing world. What would help is the ability to compensate members of an enterprise in ways that don’t have to require monetary consideration for the taxation on things that don’t involve monetary transfers. What would really help would be a government who required truth in innovation, accounting, finance, and law rather than being a party to the perpetration of fraud and illusion. But these things would help the people – yes, ordinary humans. I, for one, will not be counted among Qui tacet consentire (The silent give consent). Have the courage to stand up for a future that is built on a foundation of transparency. Send this around and get the word out!

One Trillion is Not Enough

This is April Fool’s Day or, as my Iranian friends remind me, the Zoroastrian-inspired Sizdah Bedar (the day that celebrates that evil cannot exist in the presence of laughter and joy). One of the Persian traditions of this day is to celebrate outdoors, to honor happiness in your life, and to invoke Spenta Mainyu - the ‘Spirit of Goodness’ - to vanquish the forces of evil.

So, on this April 1, I was pondering the week-ending meeting of finance ministers in the eurozone where they concluded that the $1.1 trillion of emergency funding that they’ve assembled for shoring up their wobbling economies did not meet the IMF’s minimum security blanket of $1.3 trillion. It seems that most international markets feel that anything less than $1.3 trillion would be insufficient to support the assistance that is likely to be needed by Spain and Italy. And according to reports out of the U.S. Treasury (who failed to sell their bank investments in 6 TARP exiting banks this week at par losing money on their investment of taxpayer money) and the Congressional Budget Office, the U.S. government’s $2.5 trillion of “firewall” investments – supported by international debt buyers and generous domestic currency manipulation – give little confidence that the long-term outlook for such “support” represents a good fiscal future. In the spirit of this day, however, I found that the more I focused on the illogical, empirically disproven economic plans being promoted in the eurozone, the more I found myself reflecting on Angra Mainyu – the Persian angel of darkness and destroyer of good.

Which is why I decided to spend this day departing from my typical Inverted Alchemy topics to celebrate the outdoors, to honor happiness, and to invoke the Spirit of Goodness.

First, this morning, my lovely bride of 24 years and I rode through Southern Albemarle County on our tandem. Having moved 12 cubic yards of mulch in the yard on Saturday, we were blessed with a constant reminder of the tons of weight we’d moved with each contraction of our quadriceps muscles punctuating each pedal stroke. With over one half mile of elevation and across 31 miles, we cycled through the chilly, grey morning light past sweeping meadows, rushing rivers, and blooming foliage – dogwoods, mountain laurel, redbuds and azalea. The green erupting from the towering oaks, wind-swept willows, and carpets of lilies seemed to have more vibrancy than years past. Set against the backdrop of the low grey clouds, the colors were even more pronounced. Returning home, we set our first plants out in our freshly tilled garden and then sat in the sunset watching the massive koi in the pond while listening to the chorus of frogs chanting their off-spring into the next circle of life. What an amazing place we call home!

I was reminded, during a weekend dinner conversation, how much I have relished the experience that was set in motion in the Farea Model Village in Papua New Guinea with my dear friends Clemence Kanau and Theresa Arek. The Farea Water Utility – the first community-owned and operated public utility in Papua New Guinea – is now awash in fresh water. For those of you regular readers, you will know that this project provided displaced people a new social, community and economic future having had their previous existence erased by the Exxon LNG project. However, what struck me during a conversation this weekend was something else that the Farea project delivered – joy! For those of you who do not know them, my parents are people who have lived their lives with a sense of purpose – frequently frustrated by situations that have presented more struggle than gratification. However, on the trip to Farea (as you can read in my father’s account), the community that joined together to make the miracle of water happen on the plain east of Jackson Field International Airport instilled in my parents a joy that has not yet erased from their faces nor their stories. And for this, I am grateful beyond words!

Which leads me to the Spirit of Goodness. I am the beneficiary of countless individuals who, at various times in life, have been capable of providing encouragement and motivation that have often gone unnoticed. So, in honor of the embodiment of the Spirit of Goodness, let me call your attention to a few people who, in the recent past, have infused my life with hope and light. Through their passion for Goodness, Goodness has grown in my life. Zach, Bob, Julie, Stuart, Denise, Colin, David, Adam, Katie, Colleen, Theresa, Dex, Dylan, Paul, Ray, Greg, Kim, Bill, Stephanie, Megan, Rod, Jacoby, Ken, April, Jimmy, Linda, Ian, Todd, Nick, Vaida, Josh, Meredith, Hayden, John, Clemence, Lawrence, Chip, Ditrick, Rodney, Allison, Jay, Naomi, Tim, Elaine, Dan, Cyrus, Frank, Patrick, Sandey, Peggy, Elana, Michael, Dustin, Gilson, Baagi, Nergui, Elizabeth, Tony, Moustapha, Omar, Mohammad, Connie, Dan, Mark, Sacha, Edward, Leo, Peter, Luis, Ran, Sharadha, Gustavo, Christine, Erik, Jan, Keld, Krishna, Larry, Laurent, Dori, Michelle, Richard, Leland, Lisette, Lino, Mike, Pieter, Randy, Simon, Tiantian, and so many more that one trillion lines would barely be enough… Thank you!

Life Arbitrage

Having returned from Dubai at the end of this week, I had intended to write a post about the decade of my experience there and the observations I made about the state of the region. However, the U.S. government’s announcement today that it was paying $50,000 per death in the recent Afghan homicides and $11,000 for every wounded victim trumped my plans. At a ceremony in Kandahar Province, the families of the dead were assembled to receive this extraordinary compensation. Extraordinary in that the going rate for previous civilian casualties had been typically $2,000. That’s right, the going rate for a human life authorized by a country that has a significant percentage of its population described as “pro-life” values human life at $2,000. Or maybe I’m mistaken. Maybe the only life that is valued is those born in the right jurisdiction.

Now before I dive more deeply into this matter, I trust that you pause for a moment and let this fact settle in. Our response to show that we, as a nation, care about the human tragedy of recent events is to pay the families of victims $50,000 per life extinguished. How are we feeling about this? Is this the ‘family values’ that we want for our legacy?

Let’s dig a bit deeper. Under the Military Compensation schedule, the U.S. Department of Defense offers a tax free “Death Gratuity” of $100,000 to surviving family members of those who fall in conflict. And government contractors, the class of citizens who have experienced the greatest number of reported casualties since 2010 in Iraq and Afghanistan, have much more opaque consideration for loss of life. L-3 Communications employees lead the somber statistics with the leading casualty count. Civilian government employees killed in conflict are entitled to a $10,000 Death Gratuity – reduced by burial allowances and costs associated with being terminated from employment by virtue of death. Mind you that civilian employees operating in areas under the United States Central Command (CENTCOM) are authorized to be paid (during their 'living' employment) up to $230,700 in a calendar year (capped at the annual salary of the Vice President of the United States).

At what point in our history did we decide that the principle of “blood money” was a legacy of the human experience worth keeping? In a world where we campaign against slavery of all sorts – child labor, sex trafficking, sweatshops, and the like – where is the impulse of William Wilberforce to finish the abolitionist movement he had the courage to pioneer for 26 years before the passage of the 1807 Slave Trade Act? When thousands of people in organizations across the globe are philosophizing about the prospect of an evolutionary leap in human consciousness, where are the voices saying that exchanging money for life is a stain on civilization that must be ended?

Mind you, it’s not just the extermination of life where we’ve got this wrong. We’ve told our children that, when marriages don’t work, we can transact parental care for money. We’ve decided that when life pulls marriage apart, the finality of separation is transacted by paying the marriage ‘death gratuity’. Have anyone of us ever met anyone for whom this transaction actually worked? Was the settlement really worth the loss of intimacy? Did we ever see the wound of a loss of life and love healed with the ointment of money? There is no Legal Tender that can hold a candle to the tenderness of humanity.

The families who suffered in Afghanistan are not whole because we paid them $50,000 for their loss. The families of L-3 contractors are suffering as well – just with far less publicity and under the President’s ruse that has reduced troops while expanding anonymous contractors in harm’s way. They need an America that actually shows up with a humanity that values their lives. They have stories to tell, wisdom to share, and means of engagement that must be valued. Their children need access to education and sanctuary. Their mothers and fathers need opportunities for peaceful engagement in a global value exchange. Their grandfathers and grandmothers need to see the cessation of conflict that for generations have kept their homeland in constant violence. And until their lives are valued in their living, no blood money will absolve us our collective inhumanity.

“You may choose to look the other way but you can never say again that you did not know.” - William Wilberforce prior to the 1789 Abolition Bill vote in Parliament.

Don’t Call the Plumber for a Liver Transplant

Over the past several months I have been intrigued by the number of people who are certain that the economy’s getting better because companies are sitting on loads of cash. And as we come sneaking up on the infamous anniversary this week – you know the one, March 23, 2006 when the Federal Reserve Board of Governors ceased the publication of M3 – I find myself puzzling over why the selective erasure of a metric makes us think that the problem it measured can’t come back. (For those of you too young to remember, M3 was a measurement of monetary supply which included large denomination deposits, repurchase agreements, and Eurodollars – a key indicator to measure the threat of inflation.) It’s kind of like saying that by destroying all cholesterol tests, we can eliminate heart disease. After all, having an ability to measure the liquidity trading between extreme large financial players, governments, and banks shouldn’t impact the economy that much, right?

Forbes published an interesting note yesterday by Michael Pollaro entitled, “Money Supply booming, seeds of the next Greater Recession”. For those of you who find my blog posts somewhat tedious and in great need of simplification, I would commend this article to you. In it he argues that we are poised, yet again, for another even more pronounced recession triggered by yet another credit bust. Both U.S. and European Central Bank activity – pumping productivity-uncorrelated money into circulation (well, not so much circulation – more congealing in a few nearly dead organs) – has put us in a position where our only exit will be inflationary accompanied by equally unpalatable credit busts. Forex commentator Sean Lee largely dismissed Pollaro’s concerns suggesting that despite another jump of $15 billion in monetary supply last week, we should not have correlated crises because were in what he described as a Keynesian ‘liquidity trap’. Kind of like a gunk filled trap under your sink only filled with soggy money.

Quietly attracting no attention is the piece of the economy that troubles me more in its anonymity than in its actual gravity. Receiving too little attention in the recent Olympic Greek drama is the fact that it was pensioners who took the biggest proportional consequence of the default. These are the same ones who vote. They’re the same ones who need to spend money for an economy to work. And they just had half of their mandatory pension contributions erased. In a macabre sort of way, this tragedy seems to be rather Promethean. You know the story. The titan Prometheus steals fire from Zeus and brings it to mortals and, for this crime, Zeus has him bound to a boulder where, once a day, a giant eagle comes and eats half of his liver. The bummer is that, over night, his liver grows back only to have said bird come and gnaw it out again. In our story, the IMF plays the role of Zeus. Opportunistic investors and bank reserve investors are the eagle. And last but not least, Central Banks are the mysterious regenerators of the liver – pumping more blood into the system just in time for the eagle to devour it again.

Now, to be clear, Prometheus in our story is humanity. And lest we wish to invoke a pity party on our sorry lot of being chained to a rock for wanting to have fire, we need to clear up a few things. We have all participated in a system that has dripped soporific tranquilizers into our veins encouraging us to ‘work’ less, ‘consume’ more, and keep the hamster wheel spinning. We’ve been presented with Herculean challenges and petty drivel and have, for the most part, decided that a tweet-attention span consciousness is to be desired over something that takes, look it up, considered thought! Too many of the chains that are holding humanity to its rock awaiting the daily visit of the eagle have been forged not from Thor’s anvil but from the swipe of our credit and debit cards. And, as if to portend the gift of Pandora (another one of the great works of Aeschylus), we’re seeing that at the nadir of the housing market, younger people are using reverse mortgages to pump liquidity into their own consumption. And this isn’t just for taking that extra trip to Florida. At present, nearly 16% of seniors are officially in poverty – a number that’s growing. So at a time when we already know that entitlements are bankrupt, pensions are gutted and/or underfunded, the Pension Benefit Guaranty Corporation is stuck in a zero return interest rate environment courtesy of the Fed so it cannot fulfill its mandate, we’re awash with money that is more decoupled from productivity than ever before.

The process set in motion during the Nixon Administration is nearly run its course. Cut from any mooring in the form of assets, we are now harvesting the crop of uncorrelated debt-based monetary policy. Massive wealth transfer has concentrated more money in the hands of fewer people than at any other time in our industrial history. Far from a system falling apart, we need to understand that the system is working to near perfection for its designers. The mistake most people make when they’re looking at what’s happening is to actually think that the system was designed with their best interest in mind. It wasn’t.

At the end of this particular Greek tragedy we know that there will be a number of people – disproportionately senior citizens – who will be hardest hit. Sure, there will be pain to spread around as is always the case in Great Recessions / Depressions. So before the full bloom of the next bust, why don’t we work to build some support infrastructure for those upon whom the furies might fall hardest. Let’s work to engage our seniors in our present endeavors and reignite the spark that once burned brightly in our history – a flame of industrious production in which the young and old worked together throughout all of life – not for some arbitrary time to retirement. Having just spent several days with my parents building a windmill in Papua New Guinea, I’m here to tell you that my experience with them showed me that it was this cross generational richness that seemed to unleash the only thing Pandora didn’t let escape her jar – Hope.

KONY 2012 – His Invisible Employers

Joseph Kony is, without question, one of the most heinous criminals of our time. His elaborate scheme of exterminating the innocence of childhood through the Lord’s Resistance Army (LRA) represents a level of sociopathic cruelty that must be ended. Having had numerous interactions between our organization and Invisible Children, I have been impressed with the passion with which the Invisible Children team has persisted to shine a light on the human tragedy unleashed by the LRA.

I encourage you to watch Invisible Children’s KONY 2012… but, here’s one tiny caveat. Joseph Kony is not a deranged sociopath who came out of a vacuum and exsanguinated the life-blood of children in Uganda and the Central African Republic simply because he’s incarnate cruelty. Joseph Kony’s impunity was possible because an ecosystem was created which celebrated injustice and inhumanity. He represents the malignant end of a disease that KONY 2012 does not address.

Central Africa is a land filled with diamonds, timber, oil, gold, tantalum, tin, tungsten and other minerals. And the cold reality is that the funds that arm the LRA are not anonymous donors sworn to promote genocide – they’re the consumers of the products that are being ripped out of the ground and have been for years. In compliance with Dodd-Frank Section 1502 – a law that was passed to allow public companies to report and justify the “necessary functionality or production” of the use of “conflict minerals” – companies like Intel report the fact that they are aware that part of their supply chain funds “human rights atrocities.” Now, the reason I’m highlighting Intel is because, while admitting their ‘potential’ role in the conflict metals genocide, they also have been leading industry efforts to deal with this issue.

What’s missing, however, is the recognition that the Joseph Kony phenomenon is not without its patronage. Children are being robbed of their innocence not merely by ruthless warlords. Girls are not being forced into sex-slavery and death because there’s a #1 bad guy indicted by the International Criminal Court in the Hague. Young boys are not killing their parents because there’s a rogue scout troop that took things a bit too far. These crimes are happening because real companies are supporting a supply chain that they, and their investors have allowed to operate in opacity. And remember, the same Congress that authorized military trainers to go to Uganda, the Central African Republic, the Democratic Republic of Congo and wherever Kony may run to hide, is the Congress that passed a law stating that companies can justify their use of resources produced through genocide!

Ten percent of Facebook’s users have watched the Invisible Children video. That’s awesome. But most of them watched that video on an appliance that holds the ghost of a killed family, a raped girl, a childless gun-toting boy, an Asian indentured laborer…, and the list goes on. And until we realize that Kony is just the homicidal end of a road that our consumption has paved, we’ll stop him while hundreds of his inspired spawn operate in anonymity. As long as Section 1502 of Dodd-Frank is the best we can do; as long as we don’t pay attention to the corporate profits and the investment banks who finance the corrupt industries that provide liquidity to warlords; we will continue to inherit a world in which Joseph Kony will continue to rob, abduct, kill, and maim.

On April 20, 2012 – let’s also name the real beneficiaries of the LRA and the chaos they maintain so that corporations and investment banks rob the countries where the LRA operates. Look at your diamond ring, look at your mobile device, look at your 401(k) and realize that the ghosts in the mirror are the Invisible Children – the one’s you still don’t care about. And then, get informed and cut off the money supply so they cannot persist. How about having a day of NO ELECTRONICS PURCHASES? How about having a day where NOBODY GETS ENGAGED WITH A ‘GIRL’S BEST FRIEND’? See, if we really want to make a change, we have to stop merely naming the ‘bad guy’ and start realizing that it is US that made him and WE HAVE TO CHANGE OURSELVES to exterminate his kind in our world.

Shark-fin Soup

One of my greatest professors – quite possibly the greatest – was Dr. Bruce Craig at Ball State University’s Human Performance Laboratory. Armed with the Gospel of Arthur Guyton he guided his graduate students through the labyrinth of neurophysiology with maddening precision and monotonic poise that conveyed complete command of one of the world’s most complex electrochemical systems. And to this day, there are few facts that he imparted that I would not be able to recite if I was under even the slightest duress. Under extreme pressure, I could regurgitate it all (including his not-so-P.C. quips that offended the more sensitive of his students). So it was, as I trudged through the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union which was heralded as a significant step forward for the stabilization of the Eurozone, I found myself wishing that at least one policymaker or economist would have been a classmate of mine with Dr. Craig.

Allow me to explain using a simple lesson in neuromuscular physiology. Most reflexes are dumb. Now, before you rush to judgment about this dismissive assessment, allow me to clarify. They are mindless, as it were. There a few things you learn about reflexes (and how they work) that support the empirical truth of this statement. When a stimulus triggers a receptor it causes a nerve membrane to go from its resting state (a -70mV charge) to an activated state (a +100mV charge). But, here comes the dumb part. That “all-or-nothing” stimulus goes racing up the nerve to the spinal cord where it executes a hardwired response – hyperactivating certain muscles and rendering others flaccid. At no point does the brain kick-in and say, “Hey, let’s think about whether our response is actually helpful or whether it might do more harm than the thing we’re avoiding.” No, the brain plays no role whatsoever. It just hangs out and hopes that nothing too catastrophic happens. Like the nerves that stimulate them, the muscles go through the same “all-or-nothing” response and respond with unmodulated, unconsidered, unconscious action. Tragically, having been thus activated, the whole system goes into a refractory state where the ions that flipped the switch on have to re-equilibrate during which time no movement can be effectuated. Now, if your reflex, let’s say, had you punch a shark in the nose to get it to swim away and it worked, you’re in luck. If, however the shark decides to chase you, well your myoneural refractory period will get you well acquainted with the digestive juices of a shark.

And here’s the kicker: the Member States of the European Union just punched a proverbial shark in the nose. The stimulus in this case was the on-going contagion that has rendered the Greeks, Italians, Spanish, and Portuguese as at-risk states (with debt to GDP ratios of 142%; 120%; 60%; and, 93%, respectively). In the treaty, 60% debt-to-GDP is the resting nerve state over which the reflex of this treaty is activated. But, as if to evidence the absence of a cognitive involvement to attenuate the reflexive error of the theory of this treaty, the Member State that fails to get its fiscal house in order is subject to a variety of penalties adjudicated in the Court of Justice. However, assiduously absent from this treaty is any sanction for the Member State(s) who aids in the reckless indebtedness of a State by PURCHASING debt issued by the violating state. During the week where the Chinese continued to alter their purchasing of U.S. debt realizing that our investment-grade status is not likely to re-emerge with the impotent policies of the present administration – to say nothing of the sheer madness coming from the leading contenders to make the Obama’s join the ranks of the jobless and homeless in 10 months – it’s particularly noteworthy to see the European leadership fail to lead. The Chinese know that part of fiscal discipline includes NOT BUYING what is toxic. It would seem obvious that this lesson should be self-evident to a Europe awash with banks that don't have Tier 1 capital courtesy of bad sovereign debt.

The central problem that this treaty fails to address along with all the other ‘trained-economist-proposed’ solutions that preceded it is the fundamental problem of decoupling credit from productivity. In the name of efficiency, our central bank and capital markets’ impulse that leads to capriciously setting interest rates on debt issuance based on political winds rather than actual economic productivity is the curse from which we can’t seem to escape. Uncorrelated returns – a necessary corollary to enterprise-ignorant debt – is the malignancy which, if supported by mindless purchasers will insure on-going fiscal malaise. We may stimulate. We may artificially manipulate interest rates. And like the stupid spinal reflex, we’ll get a twitch. But also like the reflex, without cognitive engagement in which rates and productivity are linked, we’ll continue to create debt instruments that are fundamentally unsubstantiated. And, as long as buyers can consume these debt issues without consequence, the crisis of confidence will spread its malignancy across the markets. So, get used to the digestive juices of sharks ‘cuz there’s some sharp teeth sneaking up behind us.