PEACE TRADE Launched

Until All Life is Valued

The supply chain of human consumption is polluted. From the dawn of industrial trade, oppression and degradation of all terrestrial life has characterized the extraction and exploitation of the earth, its people and its resources. Seeing land, air, and sea, and their respective bounty and inhabitants as utilities for asymmetric wealth control has led to thoughtless consumption and violent oppression.

In the face of this stain on humanity, courageous efforts have emerged to begin to address these concerns ranging from efforts to end slavery to the Fair Trade movement. These great campaigns and their energetic supporters have raised the level of awareness that passive participation in unjust and inhumane practices merely reinforces the tyranny of the incumbencies. And now, in the face of the global indictment of unchecked greed and consumption, humanity has an opportunity to turn over a new leaf. We are invited to manifest Peace Trade.

Essential to Peace Trade is a fundamental belief that an informed humanity, in the main, will choose wisely if given adequate visibility. In short, if one knows that slavery produced a cheaper product and fair wages were paid for a more expensive one, the value of human dignity will be accepted at greater cost. If one chooses between renewable, farmed timber versus clear-cut virgin forest, the choice will be for the renewable material. If the consumer electronics product contains metal extracted by despot warriors and its alternative comes from recycled metals, the recycled will prevail. And if water and air were contaminated in the preparation of one product and were respected in another, a premium would be acceptable. In short, the economics of expediency is supported on ignorance. A call center that degrades its workers versus one that provides meaningful life status improvement will be preferred by those seeking its service. Silver and gold would lose their luster if each coin was stained with the blood of those whose lives were lost in its minting.

The mechanics of Peace Trade involve the interaction between producer and consumer. To achieve “Pacific Certification”, the producer bears the responsibility to tell the story of the product or service purveyed. This can be achieved in a number of ways which have become infinitely accessible given the expansion of digital communication. However, in its final manifestation, the Peace Trade “Pacific Certified” designation is verified when the public can access knowledge about every step of the process required to produce the good or service consumed. While a series of community standards will emerge within the Peace Trade program, only a few are inextricable to participation:

I. Conflict Free – all materials must be sourced from places and people who willfully, and with consent, participate in the stewardship of their local resources.

II. Oppression Free – all extraction, processing and production must be conducted with the consent of persons who are free to choose their engagement and are not engaged under duress.

III. Ecological – all methods and utilities used in the extraction, processing, production, and logistics must evidence active steps to transition from polluting to clean methods and must show year-on-year evidence of such transition implementation. Further, the consumer must be affirmatively advised as to how to recycle every component of a Pacific Certified product.

IV. Reciprocal – all end products, processes and their use must be actively shared with all participants in the supply chain allowing those at the origination of resources to learn how to manufacture, distribute and sell the by-products of their labor thereby building knowledge capacity for subsequent endeavors.

One will note that the standards set forth above relate to human and environmental Vitality, Harmony, and Prosperity – the essential standards of the Peace Trade’s Pacific Certification.

In its inauguration, applicants for Peace Trade participation will be required to provide written and accompanying photographic documentation of the people engaged in every part of the production of the end product. This will include a photo essay of the sourcing of raw materials and the place from which they come; the refining and processing of such materials; the preparation and packaging of the materials; and the utilities involved in bringing the materials to market (including transportation, storage, and distribution). To achieve the designation of “Pacific Certification”, a representative from each part of the process will sign an affidavit of compliance and their signed affidavit will be made publicly available through the Peace Trade’s Pacific Certification Registry.

Peace Trade is meant to be self-sustaining and require no grant or donor support. As a result, a Peace Trade good or service will pay a licensing fee of 0.5% of the published retail price to use the Pacific Certification. These fees will be used to cover administration and audit costs and any excess will be invested in sourcing communities for the development of schools and community centers. It is envisioned that these schools and community centers will operate in partnership with the World Peace Festival’s Peace Cells initiative where education materials on the promotion of peace will be made accessible to communities around the world.

The inaugural corporation participating in pursuing the Peace Trade’s Pacific Certification is an organic farm in East New Britain, Papua New Guinea – Pacific Spices. In recognition of their courageous leadership and in light of the fact that Papua New Guinea has been the nexus of some of the most egregious violations of human and ecological dignity, the town of Rabaul, East New Britain, Papua New Guinea has been selected as the location for the Pacific Certification Registry. As the global headquarters for Peace Trade, it will commit to employing not less than 50% of its work force (at every level of administration) from the local community and shall serve as the location for the First Annual Meeting of Peace Trade participating companies.

Peace Trade has agreed to work in partnership with the World Peace Festival 2010 to assist in the process of certifying that every consumer product distributed at the Festival and event supplier achieves Pacific Certification on all products and services offered to the Festival. Fifty percent of the Pacific Certification license fee assessed to all vendors will be contributed to the World Peace Festival 2010 and will perpetuate past the Festival to support the Peace Cells initiative.

Peace Trade will operate with a board of twelve members elected from nominees submitted by participating member companies and organizations. Board members will serve for three year terms with one third replaced each year. Board members may serve up to two consecutive terms but shall be required at least one year furlough before being elected to a third term.

The management of Peace Trade shall include an Executive Director, Director of Accountability; and Controller. These positions will be appointed by the board and will serve at the pleasure of the board.

Inquiries regarding Peace Trade, Pacific Certification or any related matters may be directed to:
Dr. David E. Martin, Founder at dem@m-cam.com


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Launching the New Paradigm in Papua New Guinea

Well, for a week or so, you won't see me comment about the U.S. economy and the fact that the Washington Post, just this morning, finally decided to run a front page story on pension illiquidity. Ironically, they were behind all the European media in getting that information out into the public.

No, today's a day to celebrate. Together with 4 brilliant interns, we're formally launching a program that puts the "Impact on Global Human Welfare" or IGHW - a performance reporting metric developed by M•CAM - at the core of a new value exchange system. In the province of East New Britain, Papua New Guinea, we will be activating the world's first Heritable Innovation Trust (http://www.m-cam.com/display_news?id=301). To follow this exciting and developing story, make sure you're tracking our activities at pngsummer.wordpress.com.

And, if something comes up while I'm in PNG or onward in Vietnam, you'll hear about it one way or another.

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The Epitaph of Nationalization – Not It’s Inception

Defenders of the free-market façades which have permeated the economic zeitgeist of the past two decades lamented and lambasted the Obama Administration’s intrusion into the automotive heartland of America’s industrial ego. How could the government (please sneer here, a little gratuitous boo, hiss – thank you) dare usurp the likes of Chrysler and GM - these bastions of iconic industrial supremacy? Militant faux alarmists decried this latest intervention as “socialist” (you may wish to boo and hiss again here) and a threat to the very core of American enterprise.

However, watching this scene unfold from my euphemistic utopian armchair from which I philosophize, pontificate, prophesy and do other things which start with my alliterative “p”, I was struck with the irony that this act represents the end, not the beginning of nationalization. And, given the delightful complexity of economic implicit codependence, actually accelerates the transition that I’ve been discussing since 1997.

Indulge the following observations.

Nationalization of property. For the not-so-informed, a lien on something means that you don’t actually own something. In fact, the lien holder is the effective owner of whatever is financed. So when, in 1938, the Federal Government created Fannie Mae (as part of FDR’s New Deal) and Freddie Mac (1968), it established, under the public guise of home ownership, what amounted to the largest nationalization of residential property in US history. Ironically, many self-described conservative free market advocates actually saw this as liberation and failed to read the fine print in the lien provisions. The Bush Administration, in its post-9-11 rush to stimulate the economy further secured the effective lien-holder status of the federal government by liberalizing capacity for higher debt limits, lower loan to value ratios, and greater unsecured credit exposure.

Tax deferred investments. Fair and Balanced™ defenders of “Truth” and the “American Way” are delighted to know that the “free market” was made accessible to American investors through contrivances like the 1978 market ruse launching the 401(k) and other tax-deferred investment programs. Ironically, these programs actually served to support, through fee income, those who allegedly managed programs who, in good times or ill, collected fees while the American investor was precluded – at pain of accelerated taxation – from following his or her instinct to exit a market that was tanking. By nationalizing retirement savings (and through the current administration’s on-going unwillingness to declare a tax holiday to empower the American public) the government insured that all retirement monies would enjoy the management monopolies created by tax policy which benefited institutional cabals – not the public they were supposed to benefit. And I can’t resist the impulse to remind you that your pension is “guaranteed” by the illiquid PBGC!

Nationalization of small business and US employment. Since the 1942 establishment of the forerunner to the U.S. Small Business Administration (which few remember as the Small War Plants Corporation), the engine of jobs growth in America has been dominated by the Federal Government. Through preferential federal procurement (1953) to loan guarantees (1958) to the Reagan administration’s venture capital inducement in the form of the Limited Liability Corporation’s propagation together with considerable venture capital tax incentives, the government has been inextricably integral to the formation, preferential selection of winners and losers, and instigators of small business across the country.

Nationalization of education. Spend any time in institutions of higher learning and you’ll find that the business of education long ago became the business of the federal government. The “socialization” of research and development throughout this country enjoys a long, colorful history of linking academic research to federal funding in its most recent incarnation dating to the Stevenson-Wydler Technology Innovation Act of 1980. Make no mistake. If you want to succeed in the grant funding which leads to tenure in the research institutions of this country, you will pass through the federal government.

These are but a few of the ways in which the recent automotive (and not so forgotten nationalization of the banking and insurance sectors over the past 16 months) “takeover” by the government should not be seen as a novelty but rather as the concluding footnote to a history where the private sector has become intoxicated on entitlements which are so cunning that they are labeled by cacophonous economist and pundits as “free market”. It's not the "end of American enterprise", rather its the conclusion of a process which will add impetus for a new process to emerge.

President Obama has injected a much needed call to action into our economic haze by calling for a renewed productivity in America. If only he took the time to listen to the overlooked facts below, we’d be in a better position.

1. On green jobs – America made a hubris-filled mistake in the late 1970s and early 1980s. By liberalizing patent laws, the US Patent Office allowed thousands of patents on hydrogen vehicles, fuel cells, wind and water turbines, biomimetics, biochips, alternative fuels and all other “green” technologies. These illusory inventions were never put into commercial use and now the patents that would, in a traditional sense, support Obama’s green industry are expired and in the public domain. Major innovations in “green”, much to chagrin of this Administration and to the detriment of “green funds” are not the exclusive domain of the US. In fact, most of the cutting edge is off-shore. Readers should remember that the Chinese government’s mandatory technology transfer programs of the 1990s mean that many technologies alleged to be owned by US companies are already licensed to China. So, we not only have to invent the technology of the future but we also have to invent the corporate structure that uses the “open source” technology recycling paradigm that our past excesses now demand. Proprietary is out – Innovation Recycling is in.

2. On environmental infrastructure – No pension fund is fully insulated from the 20-30 year bonds which pay for our oil addiction, or massive power grid infrastructure (generation and distribution). Those who would advocate for the adoption of environmentally aligned power and utilities must first confront the reality that accelerating the obsolescence of bond financed utilities will also accelerate pension and entitlement illiquidity. Therefore, the challenge facing the “green” infrastructure community is to not only innovate solutions but innovate how to factor the innovation futures of said innovations to offset the bond defaults their adoption will trigger. And after we deal with the obsolescence in the short-term, we will need to innovate entirely new investment vehicles to pay for the more rapid cycling adoption of frequently improved green innovations.

3. It’s a interdependent world out there – I was struck by the fact that a significant volume of the wind turbines which spin their vast arms against the generous celestial gradients have, in their blades, balsa wood harvested from Papua New Guinea. Huge stands of these generous trees are lumbered and laminated to create the green generators. Isn’t it ironic that we’re killing trees to go green? Now I’m not suggesting that we cannot use natural resources but I am interested in calling for what I’ve referred to as “Peace Trade”. What Peace Trade (a concept that we developed to help promote conflict free component and raw materials for consumer products) does is put the human and environmental face (literally pictures of who and where all components came from) on end products so that the consumer sees the all-in cost of consumption. As we look to the industrial transformation of America, we should acknowledge our abuse of resources – promoted by John Maynard Keynes in The General Theory of Employment, Interest, and Money (1936) as being “basically free” – and realize that innovation in supply must be inextricably linked to innovation in industry.

We’re lucky. The end of one cycle is here. If we take the time to embrace the agnostic realities of the compromises we’ve directly and indirectly accepted and see that our way forward will involve centralized leadership – not from Washington D.C. but not at its exclusion either – we have a shot at some really cool futures. We can redefine what "Washington" means and what the "economy" means if we collectively engage in creative alternatives rather than lament our nostalgia over a past that really wasn't what we thought it was. So, let’s enjoy the sunset because a new day is just about to dawn.


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Why 44 million Americans should get to know PBGC

On the same day that GM announced that it would be trading bonds for equity – a proposition that every pension fund manager must love to hear – it is notable to observe that we’ve had a mysterious one month hiatus in the PBGC stepping into guarantees of illiquid pensions. During the month of March, 4 large pensions were taken over and then, with little explanation, April appears to be passing with no more than a peep.

Now, you all know that I’ve frequently written and spoken on the much-larger-than-the-bank-failure risk in our nation’s pension programs for quite some time and you’ll note that no public official has stepped up to the plate to address this issue head on. In fact, the Obama Administration spent another $30 billion in attempt to bury the reckoning that will be triggered when AIG finally is forced to disclose the fact that it’s managed annuities are no more. But we shouldn’t worry. The Pension Benefit Guarantee Corporation has put the best minds on positioning their obligations for success in the hands of companies with an impeccable reputation for getting the market right. It has contracted management to BlackRock, Goldman Sachs, and J.P. Morgan who manage “very significant real estate and private equity allocations and supplement staff with a full range of services…at a fixed price”.

A little piece of data that would be helpful to realize is that the PBGC actuarial report (the “stress test” if you will for insurance companies) reported that, on September 30, 2008, their single-employer program exposure included $57.32 billion for the 3,850 plans that have terminated and $12.61 billion for the 27 probable terminations. This number was calculated prior to September 30, 2008. There is no evidence that it included things like the Bernard Madoff-triggered pension collapse of East River (taken over by PBGC on March 10, 2009. The anticipation of pension assumptions of Propex (3,300 pensioners on March 23, 2009) and Intermet (4,500 pensioners on March 13, 2009) are also rounding errors in the face of the massive automotive and supply chain challenges that lie ahead in the coming days and weeks.

PBGC seeks to reassure the American public that it’s in good shape (and is obviously well managed with BlackRock, Goldman, and J.P. Morgan) but there are some details that should be considered that may suggest another story. Let’s look past the fiscal year end deficit of $11.5 billion and the current $69 billion in known liabilities. Let’s also look past the recently reported 6.5% drop in returns on professionally managed assets. Rather, let’s look at the fundamentals that drive the actuarial data which is supposed to tell us that all’s in hand.

You’re welcome to review the fine print yourself (I would encourage that by the way) but it’s important to note that over the past nearly two decades, SPARR or the Small Plan Average Recovery Ratio, has dropped from 12.01% in 1991 to 4.26% in 2008. The SPARR is the percentage of assets recovered by the PBGC from plans that they have taken over in the year of termination compared to the outstanding liability assumed. So a dropping SPARR is a BAD thing. And, a dropping SPARR together with a negative asset return on managed funds is a really bad thing.

In short, if you still are scratching your head wondering why you keep hearing about things being “too big to fail”, realize that they are all being propped up to avoid the musical chairs conundrum that will soon be sitting at every dinner table. The real problem, unlike those economists who want to blame 1930’s economic theory for velocity and money problems, is the one no one has the courage or accountability to face. That is that we made a number of promises that are now in default. And, we will all have to understand that we all must find our way, together, out of this mess. It will begin by extending the table to those who are about to find out that what they were planning to live on isn’t going to be there.

The House Wins

Breathless commentators on the major “news” media outlets over the past week have dared to dream that we may have seen the bottom of the greatest economic downturn since the 1930’s. Could it be that we’ve tested the bottom? Can anyone afford to sit on the sidelines as we see the market so deeply discounted?

A tiny note that is worth considering: finally the Financial Times has put into the public awareness in an April 5, 2009 article (see article here) data that I discussed at the last Arlington Institute SpringSide Chat – namely, the only winners right now are the “house”. What I mean by that is that the only real wealth extraction that was taking place during the last quarter (and if we’re serious, for the past several years) was the money being taken off the table by banks and brokers that charge fees for “managing” investments and trades. It turns out that over 50% of the profitable revenue for many of the world’s leading banks came from transaction and trade fees. This was not creating value for investors. Rather it was charging them for moving investments between equally ephemeral classes.

And here we go again. Just before earnings season when we’ll see the devastating consequence of on-going unemployment and when record numbers of workers around the world will be seeing their unemployment benefits expire – two pending market shocks which will add to the pension collapse that I’ve written about earlier – you’re being asked to put money back into the market. For the record, this advice is for two beneficiaries only. First, it is for the benefit of your broker/banker/fund manager. And second, it’s for the same hedge funds that shorted the market into oblivion before. As investors are lured back into the rock of the sirens, the very professionals who are pumping the market’s value are positioning themselves for the next drop when, you guessed it, they’ll be more than happy to take your cash again.

It feels like Las Vegas because it is. The fundamentals that soured the IBM / Sun Microsystems deal over the weekend are as termite-infested as ever. The massive pending debt refinancings that are necessary on corporate balance sheets – a phenomenon which will emerge in April and May – are as problematic as they were and no amount of accounting wizardry nor accounting obfuscation (just approved this past week by an unconsidered U.S. government reality deferral) can save us from the fact that until the market constituents generate value, investors will keep losing. The winners are those who are trading on quantitative models which profile investor behavior – your behavior – and the bankers and brokers who collect the fees for rearranging the deck chairs on the Titanic. If the Obama Administration really wanted to help the average investor, it would provide an asset balancing tax amnesty where pensions, 401(k) and other tax deferred retirement plans could be really moved and managed by the individual rather than keeping them trapped in the nepotistic cabal where the House is the Winner.


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Is Balance Sheet “Cleansing” PC for Money Laundering?

Open Subscription for the Bair, Bernanke & Geithner LP Hedge Fund.

The cover story in the March 25, 2009 Financial Times discussed the conundrum created by the ill-conceived FDIC and Federal Reserve “Toxic Asset” purchase program. By establishing a heavily discounted “fair market” reverse auction price for these assets, reserve liquidity required by banks post sales will actually need to be enlarged in a market where capital flows are already severely constrained. It came as no surprise that neither Citi nor Bank of America would comment to FT on this fly in the ointment. It came as no surprise that the market celebrated the government’s plan with the same lack of critique that they accepted, well…, no-doc loans, CDO, CDS, TARP, and any other acronym you can imagine and the market lurched forward on shrilled enthusiasm that we may have turned a corner.

Well folks, we haven’t. As the AIG bailout remains a diaphanous money-laundering exercise to pad CDS alleged counterparties at the taxpayers’ expense (the Treasury couldn’t officially just give them money), so the “Toxic Asset” program is a less-thinly veiled racket that, in the final analysis, may temporarily create the illusion that the Federal Reserve and FDIC are not as insolvent as they actually are. After all, as a partner in the purchase of these heavily discounted “assets”, the resulting accounting scams that become options to create illusory variable value assets for both the Fed and FDIC come at a critical time in both organizations’ histories. And the best part about this is that the newly constructed Bair, Bernanke & Geithner LP Hedge Fund is that Congress has no mechanism to oversee or control its actions. Seldom, if ever, have so few been granted such unsupervised control. After all, Congress is only now considering whether it should regulate hedge funds while the Executive branch of government is creating the mother of all hedge funds! And, are we surprised that the same fund managers who tanked billions of dollars of managed funds in the now discredited, careless CDO and CDS mess are stepping to the front of the line saying that they’re in on this scam?

While I’ll write more on this linguistic cultural observation, I thought I might introduce a tiny window into an observation which may bear deeper consideration. We may benefit from a consideration the terms “credit” and “debt” as I believe that has been in the blurring of these important words and their attendant constructs that we may have lost our way. Credit (from the Latin term meaning to confide or entrust), a term that implies a productivity or character based future option, was created to provide capital in the present for a bountiful, more than adequate return derived from accretive value. A farmer received credit in the spring which would be repaid – with return – from the excesses of the harvest. And a letter of credit – made ubiquitous by the Knights Templar – was a conveyance of trust ensuring that there was adequacy in provisions at either end of a counterparty exchange. Debt, on the other hand, was an instrument of scarcity and bondage. Inherent in debt was the control by those who minted the lendable resource over those subordinate to them by virtue of scarcity or station. Anecdotally, you never heard of a credit prison did you? In our less-than-a-full-century addiction to balance sheets, we blurred the line between debits (not to be confused with debts) and credits. And when we took the industrial revolution’s balance sheet, for which this accounting innovation was a means of measuring industrial output efficiency, and applied it to the financial markets, we fully confounded the notion of credit and debt.

When the Nixon administration formalized our modern belief that without debt markets, neither our currency nor our wonton consumption could be supported, we lost our way. When CNBC, CNN, Fox News and others say that we need to open the credit markets, unfortunately neither they nor the politicians for whom they serve as mouthpieces get it. We haven’t had credit markets since we decided to discontinue our productivity-based GDP in favor of debt-ridden, knowledge and service-based consultancies which generate value in the immediate with limited future excess productivity and value. Our plan to repay our debt doesn’t come from an abundant surplus. Rather it comes from our ability to refinance. And that’s the bet that BB&G LP are banking on. In short, the whole system is wired to keep in place a dependency which, in a perverse sense, can only survive when consumers blindly spend themselves into ever deepening holes. The way this mythical Colossus falls is when one component of the scam disengages from the madness.

Last night on CNN’s Larry King, I watched Ed Norton promoting the energy-conserving hour long black-out known as Earth Hour scheduled for this Saturday evening. Let’s take it one step further and give the over-taxed raw materials of the earth a breather too. For one day, let’s agree to go debt free. Let’s learn from our religious friends (Mormons, Muslims, and others who fast routinely) to go a day consuming nothing save the gifts that nature has given. Spend nothing that you don’t have in your pocket. Finance nothing. Extend credit only when and where you know that more than adequate bounty is befalling a counterparty. And then watch to see the Colossus crumble. After all, if we cannot model a life free from the debt-laundering nonsense that has enslaved our leaders, we’re ill-prepared to condemn it.

And one more thing – look around your community and find someone who still makes things – a small factory, a bakery, a printing shop, a semiconductor facility, a steel mill, an artist – and spend a few minutes seeing what productivity is again. And then ask yourself – isn’t it time that America re-discovered the value of credit linked to a bountiful, productive future?

Blood Into Gold

CNBC Captured the Inverted Alchemy message in their coverage of the Blood Into Gold release...
http://www.cnbc.com/id/29883286/


Following a meeting with Peter Buffett in January, I had a dream in which I saw all of the attempts at alchemy in the world. In the dream I saw that the only thing that had been successfully turned into gold was the blood of humanity - both those explicitly oppressed and those who are enslaved by their obsessions. Peter and recording artist AKON took that dream and created a masterful song calling for accountability which will be debuted at the UN International Day of Remembrance of the Victims of Slavery and the Transatlantic Slave Trade, March 25, 2009. Please share this video with all you know and join in the effort to see the wealth in the essence of things and people rather than in the gold that from them can be extracted...

http://think.mtv.com/044FDFFFF018195C2001700996974.
(Copy the link and paste it into your browser to avoid the mtv homepage)


Think, Inform, Act....