Published 10/24/08 Sen. Ernest F. “Fritz” Hollings – Print Article
E-mail – editor@economyincisis.org

Editor’s Note: Informed and educated citizens will be able to make better decisions this election season. To cut through the hype that has served as a diversion from our real concerns, former senator Ernest Hollings’ article details the real trouble with our economy.

The trouble today with the United States economy is that the U.S. refuses to compete in the globalized economy, even though, as The Economist magazine reported recently, “Business these days is all about competing with everyone from everywhere for everything.”

In globalization, the so-called “comparative advantage” is no longer God-given or determined by the weather, as was the case two centuries ago, with David Ricardo’s English woolens and Portuguese wine. Now commercial success is largely created, or not, by government policies, and the United States government refuses to compete for such success. In fact, our high standard of living has become a “comparative disadvantage.”

In the United States we rightly require manufacturers, beyond competing, to comply with: clean air, clean water, labor rights, a minimum wage, Social Security, Medicare, a safe working place, safe machinery, plant closing notices, parental leave, etc. China requires none of this, and China, Japan, and Korea compete in international trade for market share, by closing or controlling their markets, trading at cost, and making up the profit in closed markets. Is it any wonder that Toyota is now the #1 automobile manufacturer as GM, Ford and Chrysler struggle just to survive?

We need to compete, to trade.

When I was in the Senate, I worked with Corporate America to keep our textile industry strong by passing a protectionist trade bill in 1968. President Lyndon Johnson, however, had Wilbur Mills, the powerful Chairman of the House Ways & Means Committee, block the measure.

Again with the assistance of Corporate America, I helped pass four protectionist trade bills through both Houses of Congress only to see each of them vetoed – one by President Jimmy Carter, two by President Ronald Reagan, and one by President George H. W. Bush.

As Sir James Goldsmith testified before the Committee of Commerce in the United States Senate in 1994:

“It must surely be a mistake to adopt an economic policy which makes you rich if you eliminate your national workforce and transfer your production abroad, and which bankrupts you if you continue to employ your own people.”

But sadly, that’s our policy today.

Denied protection by Democratic and Republican administrations, Corporate America began outsourcing and offshoring. Now Corporate America opposes our government competing in globalization with chants of “free trade,” “protectionism,” “don’t start a trade war.” Our nation’s business leaders and their economists, use every trick in the book to mislead on “protectionism.” They form organizations like The Trilateral Commission and The Business Roundtable, and promote books like “The World is Flat” to warn against protectionism. Even Time magazine joins the conspiracy by rating the United States #1 in the global-competitiveness race. The truth is globalization has become nothing more than a trade war, with the U.S. AWOL.

The irony is that we started the United States with protectionism. In his very first message to the first Congress in 1789, President George Washington counseled: “A free people should promote such manufactories as tend to render them independent on others for essential, particularly military, supplies.” And the first bill to pass Congress, on July 4, 1789, was a 50 percent tariff on numerous articles. We financed and built the United States of America almost entirely with tariffs for more than a century. We didn’t adopt a federal income tax until 1913.

Edmund Morris, in his remarkable book “Theodore Rex” about President Teddy Roosevelt, describes the United States winning the trade war with England. Roosevelt exclaimed at the time, “Thank God I am not a free trader.”

Yet as jobs and production hemorrhage in this century, rather than stopping the outsourcing, the President and Congress shortsightedly stimulate the economy over and over again – to the tune of over $4 trillion in the past eight years. And it is not just jobs and production we are offshoring, but also research and development, high-end services and critical military materiel.

Congress must vigorously (re)assume its responsibility under Article I, Section 8, of the Constitution for regulating trade. It must protect our important production and standard of living. It must make it profitable to invest and produce in the United States.

As Paul Krugman suggests, we must “engage in some serious infrastructure spending.” But a value added tax is in order, long overdue. Every industrialized country except the United States has a value added tax, which is levied on all imports and rebated to manufacturers whenever they export. Today, however, imports into the United States come without any taxes being imposed on them, and U.S. manufacturers not only must pay all corporate taxes but the VAT on their exports.

A U.S. VAT would immediately remove a tremendous disadvantage to production in the United States and begin to deter outsourcing, and the revenues from it would help eliminate both our massive fiscal and trade deficits. Since it would take a year for business and the Internal Revenue Service to gear up for a VAT, in the meantime, we should institute a 10 percent surcharge on imports as President Nixon did so successfully in 1971.

We must also activate the Commerce Secretary’s list of materials critical to our national security. By placing tariffs or quotas on items necessary to our national security and producing them in-country, we will not only be better prepared to defend ourselves but we can put American workers back to work. In 1991, Admiral William Crowe, who was then Chairman of the Joint Chiefs of Staff, warned against the outsourcing of military supplies. In Desert Storm we had to await Japanese flat-panel displays before invading Kuwait. We had to await Swiss crystals before invading Iraq. Now we can’t produce planes unless we get certain parts from India, and helicopters unless we get parts from Turkey. This nonsense has got to stop.

As President Lincoln said: “As our case is new, we must think anew and act anew. We must disenthrall ourselves … and then we shall save our country.”

Here is your personal economic solution – www.magnet2wealth.com

“We need a bank to keep our ransom money,” said the Pirates’ leader “or maybe we will buy Ford and GM, we can stick our money in the glove compartmets”

That is too funny, but also too scary.  These are Crazy times.

The average American is hurting badly, thanks to the largest budget and
trade deficits in recorded history.
 
And now that Congress has approved an unprecedented $700 billion rescue plan, no one knows if it will work or not, so far they have changed the rules of the bail out several times, and the bail out money just keeps on getting bigger and bigger.
 
Where will the money come from in a country already running huge deficits? Hank Paulson’s (and soon to be Tim Geitner’s) printing presses of course, and it’s going to be an inflationary debt charged to all of us … and our children. Wall Street institutions are dropping like flies — and trillions of dollars of investors’ wealth are going up in smoke.
 
What are you doing to protect you and your family from the economic crisis? Do you have your head in the sand, hoping it will pass without affecting you too badly? Or are you taking action like some people who recognize that Crisis Breeds Opportunity.
 
We saw it after The Great Depression, We saw it after the 1987 stock crash, we saw it after Savings and Loans Crisis, we saw it After the Internet Bubble, and we will see it again….. let’s stop watching it go by and take action to Maximize, Protect and Build Income and Wealth…
 
your solution is here…. www.magnet2wealth.com

Somali Pirates Tell Their Side: They Want Only Money

It has become exceeding difficult, if not impossible, to keep separate our biases as taxpayers, employees, employers, entrepreneurs, consumers producers and just plain people who strive for a better life.

This year, will go down as the most significant year in our life spans. My question to you is What Will You Do Next Year? I am sure you have heard that in times of extreme crisis, extreme wealth is created. It is my belief that the stock market is reaching a bottom (a bottom that will remain volatile through Jan 1) and that a new Bull Market will commence after Barack Obama takes office.

www.magnet2wealth.com

I ask you to keep an open mind; to approach your role as someone who can control and manage your self in ever changing environments.  You can see the future if you plan to create your own future. You must be willing to take action on your plans.

Part of the difficulty we all face is that the media and mass communications today are pushing the one thing that will always get higher ratings “Fear”. Speech writers in Washington and New York have sold us a “$700 billion rescue package”. In their struggle to pass legislation that will benefit certain people more than others, the headlines and stories stuck to the notional concept of $700 billion for rescuing us from economic circumstances.

Yet, in our minds we know that the true figure – one that includes financial guarantees, related spending, funding of agencies like FDIC, and the like, is going to be at least more than double that $700 billion.

www.magnet2wealth.com

Within the disinformation and misinformation from which we are bombarded,  there are some real problems going on that we cannot ignore. Employment for example, according to The Department of Labor and Statistics this year will go down with more than 100,000 jobs lost every month, where will these people go?

Fundamental arguments that are being made today are completely opposite to those made by the same people just two or three months ago. Take oil, for instance, in July oil prices were almost as much as $150 per barrel, and $5.00 per gallon at the tank. For now enjoy the low gas prices, but beware there are forces at work who, want and need to have prices back at that level and above. Forces including: Russia, Saudi-Arabia, Iran, Venezuela, Exxon, Cheveron ect…

We know that fear sells – almost as much as greed. What is happening then is that the people’s emotions are being played by those who are control of the capital markets.

Now I spend my time helping educate and inform the people about capital markets in order to facilitate their taking control. My basic message is that the owners of capital need to take control of their wealth and to stay away from debt, which is the only path to financial independence.

The Stock markets complete their Bull and Bear cycles with increased volatility, which is the case today. Bull cycles end when the actors run out of cash needed to push prices higher. Bear cycles end because cash holdings build up to very high levels amid the growing opportunities to buy value.

www.magnet2wealth.com

Presently the latter situation envelops the market. There are at least $4 trillion in cash now on the sidelines plus a couple trillion more in newly printed fiat money from the treasuries of governments around the world. There is sufficient cash to feed the coming Bull.

All we are waiting for is a decision by those in control of this market for the buying to begin. Yes, the market today is being controlled not by the people but by central bankers and finance ministers by way of recent decisions to put the people of today into more debt to be repaid, they hope, by future generations. This strategy is called reflation.

Reflation will work today, but will result in problems with more inflation and financial failures tomorrow. By tomorrow I mean in probably two, three or four years.

For our discussion, inflation means the destruction of paper wealth faster than the creation of real wealth in the form of newly produced hard assets like real property improvement and the mining of gold and other metals and minerals. To be balanced, higher interest rates are required, and higher interest rates are coming

www.magnet2wealth.com

As we all know that in many countries the present rate of real property foreclosures is skyrocketing, which threatens to put the domestic and regional economy into severe recession and possible depression, governments around the world need the time to legislate relief packages for families who are losing their homes. As the use of real property as a home is quite different than the investment in real property for financial returns, government is saddled with the difficulty, if not the impossibility, of finding a solution that eliminates (for a period of time) the equity in real property but at the same time permits families to stay in their homes. That legislation, at least in the US, will take 6 months or more.

Important to you, is the fact that legislators will return in January to start addressing this crucial issue. There may also be interim relief to stave the crisis from deepening.

Recently there have been high level conferences by international heads of state, finance ministers and central bankers to try to work out temporary and long term solutions to the global credit and economic crisis.

www.magnet2wealth.com

America has taken its bitter medicine first. Others will follow. Then they will re-start inter-bank lending at the levels required by credit markets.

The timing of such agreements will be linked to the kick-start of the new Bull market. My point in switching from Bear to Bull is to alert you to these important events among governments and bankers. You do not want to miss the beginning of the Bull run. You have been saving cash for that purpose. Now is the time to be thinking of using it.

Reduce your debt. Multiply Your Income.

www.magnet2wealth.com

Security
Economic Bust, Cybercrime Boom
Andy Greenberg, 11.19.08, 12:00 AM ET

www.magnet2wealth.com

The first ripples of a growing wave of cybercrime may be appearing.

In the physical world, the connection between declining business and crime is simple enough: As the above-ground economy suffers, the underground economy swells. The connection between economic trouble and cybercrime is trickier to prove. But as the economy slows, some crime watchers see signs that a portion of newly unemployed skilled tech workers are turning to the theft and exploitation of sensitive data even as the existing cybercriminal economy is finding new ways to exploit consumer confusion around the banking meltdown.

Meanwhile data on industry spending for security suggests that companies are preparing for the worst. Fear about the downturn’s consequences for data protection has kept the cybersecurity industry practically recession-proof, even as other IT spending slumps.

Gartner security analyst Avivah Litan reports that in recent months, banking clients have been warning her of a spike in fraud, much of it based on the use of stolen financial data. “There’s been a marked increase in the number of attacks and the number of successful fraud attempts,” says Litan, who plans to publish a formal report in December. “This is the busiest my practice has ever been.”

Litan blames the attacks on the thousands of IT workers who have recently found themselves jobless, with the technical abilities needed to steal data or perpetrate fraud along with specific knowledge of their former employer’s IT systems. “In times like these, people need the cash,” she says. “You have disgruntled IT employees that leave companies, take customer records with them to sell them on the black market.”

www.magnet2wealth.com

As the financial crisis spreads from the U.S. to other parts of the world, it will likely drive more laid-off employees into the Eastern European and Russian cybercriminal economy, says Scott Borg, director and chief economist at the U.S. Cyber Consequences Unit, a nonprofit organization that acts as a go-between for the private sector and government on cybersecurity issues. Borg says he’s spoken with local government officials about “identifiable pockets of engineers” that are migrating from legitimate computer work to the Internet underworld. “These are talented computer scientists, people who expected to be in positions of prestige, but are now unemployed without prospects, basically let down by their system.”

For now, those hints of a trend are difficult to back up with numbers. Security researchers at McAfee, for instance, report an explosion in the number of different strains of malicious software plaguing the Internet in recent months. Dave Marcus, McAfee’s director of security research, says the most recent uptick began in March–when the company began detecting around 170,000 strains a month versus 30,000 or 40,000 in earlier months. This was around the time of the collapse of Bear Stearns but still several months before the brunt of the credit crisis hit the technology sector.

At least one sort of cyberattack can be linked directly to the downturn: scam e-mails that exploit consumer confusion resulting from the banking crisis. E-mail security firm Message Labs has tracked floods of so-called “phishing” e-mails following practically every rumor of a bank merger or collapse, impersonating official bank statements and asking users to “verifying your account details.” That string of new scam targets has pushed the total volume of phishing e-mails from a maximum of around 400,000 a day in August to nearly 800,000 a day in November.

www.magnet2wealth.com

There’s also some evidence that the scams are more profitable than ever. MessageLabs researcher Maksym Schipka, who often monitors Russian-language cybercriminal Web forums, says he has seen dozens of advertisements for stolen identity information that have doubled or tripled their prices over the last month. A stolen identity that once cost $5, for instance, now sells for $15, he says.

Schipka believes that’s a result of two factors: Consumers are using a smaller fraction of their credit cards’ credit limit, leaving more to be stolen by fraudsters, and a higher fraud rate has led to more demand for personal information. “This is a market driven completely by supply and demand, and a rise in demand is driving the change in the shadow economy,” he says.

While that kind of data remains largely anecdotal, the evidence is enough to keep corporations spending on cybersecurity technology even as they trim expenditures on other information technology. According to a report earlier this month from Gartner’s Avivah Litan, banks plan to keep spending on fraud prevention systems through the downturn.

In another report last month from research firm IDC, less than 10% of companies planned to cut security spending, the least of any category of tech expenditures. More than a quarter of those companies, by contrast, planned to scale back spending on business intelligence software and collaboration software.

Another report from Forrester Research in September showed that IT spending would increase during the banking meltdown to account for 10% of total IT budgets. The bulk of that money, says Forrester analyst Jonathan Penn, will go toward systems designed to keep former employees or disgruntled workers out of proprietary systems and to prevent business-killing data breaches.

“In periods of recession or slow growth, companies are going to turn their attentions to customer retention rather than customer acquisition,” writes Penn in an e-mail. “The last thing you need in that environment is a data breach and the associated brand damage.”

See Also:

www.magnet2wealth.com

Cybercrime Gets Its Game On

The State of Cybercrime

Our Hackable Democracy

It is time for that choice to be offered the American people again.

Here are some key principles from the Reagan-Thatcher model of solid growth, increased personal opportunity, and stronger countries.

1. First, the Federal Reserve should return to protecting the dollar against inflation. A sound dollar would bring down the cost of energy and provide a basis for real economic growth measured in a real currency.

2. Second, the Federal Government should return to a fiscal policy of controlled spending. Both Thatcher and Reagan believed in limited government. Both advocated fiscal discipline to enable the lowest possible interest rates so the private sector could grow.

3. Third, institutions that are too big to fail have turned to be too big to manage. It is vital to get Freddy Mac, Fannie Mae and AIG away from the Washington politicians, lobbyists and bureaucrats. A method of orderly receivership and sound return to market disciplines is essential. A policy of capitalism for the successful and socialism for the failures is unsustainable. A policy of welfare for the Wall Street rich will sicken the entire political system and cripple the economy. Fannie Mae and Freddie Mac clearly should be broken up into smaller companies because they are clearly far too big to manage and far too dangerous and over time they should be weaned from their government endorsements and they should cease to be government sponsored enterprises with future loans made only with market security.

4. Fourth, the institutions in receivership should be barred from hiring lobbyists or encouraging political contributions. It is intolerable to have those who are soaking the taxpayers use the taxpayers own money to manipulate the system to get even more money out of the taxpayers. .

5. Fifth, we should insist on new transparency for financial systems so people in the future will know when cunning and clever people are manipulating reality in the pursuit of ill-gotten wealth.

6. Sixth, we should replace the snapshot, instantaneous measures of the current mark-to-market system, which has created the worst of all worlds. Because it is instantaneous in changing values, on the way down, it makes the deflation dramatically worse, and it bankrupts companies that otherwise might survive. And on the way up, it increases the amount of liquidity beyond reality, and allows companies to be overleveraged. What we need is a rolling three year average mark-to-market system, and in the interim, we may need to suspend it for six months to a year, to allow the system to get right, because people don’t yet understand, that the adoption of these accounting rules is a major factor in the liquidity crisis which is leading companies to go bankrupt, and it is pretty destructive to have artificial accounting rules ruin companies that would have otherwise survived under previous rules.

7. Seventh, we should adopt a tax code which encourages investment, savings and job and productivity growth within the world market. Start with the Irish corporate tax rate, which is 12 %, eliminate the capital gains tax so we can match China and Singapore, which have no capital gains tax,  restore strength to the markets by eliminating the capital gains taxes rather than by increasing the power of bureaucrats, lobbyists, and politicians.

8. Eighth, repeal Sarbanes-Oxley. It has clearly failed. It didn’t get the job done, and yet, it adds enormous costs to small businesses, it is driving companies to go private. Virtually everyone I’ve talked with who is actually in business has said it is amazingly destructive, and the right answer is we need real  transparency and real accountability, but since Sarbanes-Oxlyey has failed, it should be repealed, and we should start over with a fundamentally different and more modern system .

9. Nine, adopt an ‘all sources, all of the above” American energy policy which combines drilling for oil and gas, oil shale, clean coal, biofuels, flexfuel cars, wind, solar, hydrogen and nuclear power into a deliberate strategy of creating the most abundant energy economy in the world. Return to the American economy at least $500 billion of the $700 billion a year we currently send overseas for energy. The result would be an explosion of new jobs and new prosperity. Foster a building boom in St Louis, Cincinnati and Detroit rather than in Dubai and other countries which are currently getting our money so they can come back and buy our companies.

10. Ten, recognize the central role math and science will play in economics and national security in the 21st century and adopt a science driven research and development budget. Replace the current anti-investment, anti-growth Budget Act with a new 21st Century Budget Act for Investment. Increase in science investment including research, development and education to the level science opportunities make desirable, not the level some political budget bureaucrat defines.

11. Eleven, put children first and replace “No Child Left Behind” which has focused on improving change resistant unionized bureaucratic failures with “Every American Gets Ahead” which would put children before bureaucracies and use technology, incentives and competition to give every American of every age a chance to learn what they need when they need it.

12. Twelve, extend the 21st Century Budget Act for Investment to include new approaches to rebuilding our infrastructure so our economy can regain its advantage as a continent wide system of travel and transportation that can compete with any other country in the world.

13. Thirteen, create a space based air traffic control system which increases the air travel in the Northeast by 40% with no delays and cuts the airline use of aviation fuel by 10% thus improving the environment,  increasing jobs, increasing economic efficiency and increasing traveler satisfaction simultaneously.

14. Fourteen, replace the current deadlocked and failed efforts at health reform with two major initiatives and these come from the Center for Health Transformation. First, create a health based health reform which identifies every best practice in the country and incentivizes federal health spending to migrate the weak practices to best practices. The result will be a huge savings in lives and a massive savings in money (maybe as much as $160 billion a year by 2012).

Second, create a National Defense Electronic Health System with every American in a paperless modern system by December 2012 (that is seven months longer than it took America to win World War Two). Change the Budget Act to count savings from fraud reduction and better practices to both pay for the electronic health system and to use the surplus savings to create a tax credit for every uninsured American to buy their own health insurance.

15. Fifteen, reform the litigation system so it is no more expensive or destructive than our global competitors.

16. Sixteen, pass a substantial increase in H1b visas so high quality, well educated workers can help America become a wealthier and more successful place.

17. Seventeen, control the border for national security reasons and create a guest worker identity program and a serious enforcement process to restore legality to the American economy.

18. Eighteen, pass a 21st Century Social Security system giving every young American the opportunity to profit from the rebuilding of the American economy as we return to the fundamentals and become once again the most successful economy in the world.

Rebuild the American and the world will follow.

Why don’t we skip the failed policies that created a bad decade and go straight to the successful policies that created a great decade?

But this perk has its benefits as well as its pitfalls, affecting both performance and career advancement. We talked to several people who work from home to get a sense of the best and worst aspects of their work arrangements.

The comforts of home

The flexibility gained from working at home is the biggest bonus. “This is truly the best aspect, as my husband travels quite a bit,” shares Sandra Diaz, a publicist for TCI-Smith Publicity in New Jersey. “I have two children; I am here to spend time with them before school and when they get on the bus and off the bus.”

With gas prices at a record high, avoiding a commute is another big plus. Tom Stanton is an employee of Jaffe Associates, a business development agency in Chicago. He likes the 10-step commute to his office. “With gas prices and Chicago winters, that’s really valuable to me. Plus, it saves so much time that I’m able to get work done.”

Some workers who find office environments are filled with distractions enjoy working from home to bypass those interruptions. David Wegner, director of communications, marketing and public affairs for McCombs School of Business at the University of Texas, is one of these people. “I realized how much time is used up in the office by conversations about what a co-worker did the night before, a retelling of a TV episode or whatever; 20 or 30 minutes could go by with idle chatter.”

The flexibility of working at home also appeals to workers in creative industries. “I find the organic movement in and out of the home space very good for creative businesses,” reports Dr. Linda Seger, an author, screenwriter and script consultant. “From a creative standpoint, it allows the mind the variety it needs to think creative thoughts.”

The downside of distance

Working at home may not be an ideal scenario for everyone. “It requires greater time-management skills and boundaries between work and family,” declares Janet Scarborough Citivelli, a career development expert with Bridgeway Career Development. “Most professionals find themselves working more when they work from home if they don’t take charge of their schedules.”

Many workers feel that perceptions about their work — and the value of that work — are inaccurate. As writer Heather Corley notes, “Working from home doesn’t seem as official to many people.”

Wellness expert Beverly Beuermann-King agrees. “Others may not value that you are working just as hard. In a time where telework is becoming more and more valued by employees, company structures and attitudes have not adjusted to value output as much as face time.”

America’s Best Work From Home Opportunity 

These perceptions can have an impact on the career path of a home-based worker, who may miss out on job advancement opportunities as a result. A recent Workplace Index Survey, commissioned by office furniture manufacturer Steelcase, indicates that 64 percent of workers believe their lack of daily contact with their employers hinders their chances for a promotion.

Some employees feel that they miss out on the benefits of interacting with co-workers. Rob Graham, vice president of training at The Laredo Group, misses the feedback he gets from those interactions. “Without office mates to use as a sounding board for ideas, you have the tendency to become a focus group of one and start to believe that every idea you have is brilliant,” Graham remarks. “It’s not a bad thing to have dissenting opinions from time to time.”

Home-based employees can also run into communication issues, making it very easy to feel out of the loop. “Phone, e-mail and instant messaging do an OK job of communicating business needs, but sometimes nothing beats the value of an office hallway chat to help pull things together,” Graham says.

Avoiding the pitfalls

America’s Best Work From Home Opportunity

Employees who work from home should take some steps to avoid drawbacks and capitalize on the benefits that this arrangement provides.

- Keep the lines of communication with your managers and co-workers open, and use them frequently. Schedule a check-in time every day (or several times a day). Keeping everyone in the loop will help dispel any negative perceptions about your performance.

- Avoid isolation, which can have professional and personal repercussions. If you are feeling constrained by the four walls of your house, vary your surroundings and hit the coffeehouse, park or zoo with your laptop.

America’s Best Work From Home Opportunity

- When there are complicated projects or staffing shortages, consider heading to the office for at least part of your workweek. Striking the right work/life balance is a constant, ongoing process, and you may need to make adjustments to address demands in your professional and personal life from time to time.