Wealth Takers v/s Wealth Creators Some food for thought

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The natural state of our economy is prosperity. Freedom guarantees that. The only force capable of undermining it is government. It is high time to realize that all important fact.

It is clear that we are still stuck today in the worst economic recovery since the Great Depression. Despite all the disinformation and market manipulation out there, our economic weakness has now become a top national security threat.

Did the market fail or did the government fail? If so, how? I have made my business career by asking the right questions. Are we working on the right problem? Do we have the right people? Are we close enough to the action? My strong suit is to ask questions until the bottom line is found. Are you asking yourselves these questions or taking at face value all what you’re being fed by our supposed “economic and market gurus” out there?

I believe even the most well-meaning government policies have unintended consequences that have harmed the economy. If government policies were held accountable the way private businesses are, the scoreboard would say government is failing to help people. What do you say?

In my humble opinion, there are few problems in the world that economic prosperity cannot help solve. Yet the engines of that prosperity are under fierce attack. The forces that seek power over others have gained the upper hand against those that seek freedom. By harming wealth creation, they cause even more strain on society. Historically, this is nothing new. State domination over its subjects has roots that connect statism, totalitarianism, communism, and socialism to more modern-day variants of liberalism and progressivism. It is a constant fight and we must win.

It is a fact that the forces against wealth creation accelerate when the Progressives are in power. More recently, they forced “Obamacare” and “Dodd Frankenstein Financial Deform” upon us. We now face a perfect storm. One only needs to observe the unrest across the world to imagine what life will become here if we don’t get our economy turned around very soon.

But how? It is not as though people lose sight of simple principles in a complex society as much as it is a Progressive tactic to confuse people. For example, if the world consists of two farmers, and one is paid government benefits, who pays? Exactly. The other farmer pays. Redistribution is a negative-sum game, and people understand that. In another example, if one farmer raises cattle and the other grows vegetables, they are both better off through voluntary trade. Making other people better off is the only way to satisfy your needs. Is it bad that some people make many people better off? Do you deserve a special attack by government if you make millions of people better off? Voluntary exchange is a positive-sum game.

After all, trade and wealth creation is not all upside. It is failure, too. Failure is a necessary component to growth and success. Babe Ruth struck out 1,330 times but also hit 714 home runs. We need to let failing entities fail. Only then will successful people turn these enterprises back into wealth-creating vehicles again. “Too big to fail” is a concept that perpetuates failure and saps vitality from the rest of the wealth creators to do so.

Bottom Line: Wealth creation is not a business suited to those whose skill set consists of voting “present.” It requires decision making, risk taking, hard information, discipline, insight, and intelligence.

We have clearly gotten away from the 10th Amendment. The only equal outcome for all that can be achieved by the federal government is misery for all. It is not that people shouldn’t be helped. It is that in most cases, it is not the role of the federal government to do so.

After all is said and done, in whose hands should you place your trust for improving the economy? An entrepreneur, whose job it is to solve problems for a profit? Or a bureaucrat, whose job it is to cause problems for a profit? I know where I put my trust, and I’m sure 90 percent of us agree.

We outnumber them, so let’s act like it. After all, the American Dream isn’t a house, or any property, or the consumption of any good. It is to be productive creating wealth.

It is real sad that the very people whose policies unleashed the attacks on our economic foundation are today waging a full-blown assault on the true wellspring of business formation, innovation, and job creation: the wealth creators.

When you see how the Washington–Wall Street corridor, which I call the “Chaos Industry”, profits at the expense of average Americans, what are you waiting for to take action?

The turnaround must come from outside of the Washington establishment. It must come from us.

Battle lines have been drawn. On one side of the battle are the fakers and takers. On the other side, all of the wealth creators. Who offers you more opportunity?

The Founding Fathers did their job. I strongly believe we must be the “Defending Fathers”. What do you say?

One of my favorite political lines on the campaign trail comes from former U.S. Senator Everett Dirksen. He once said, “When they feel the heat, they will see the light.”

Share your thoughts….

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Stop Procrastinating and Find a Reason to be Rich

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I believe each one of us has a financial genius in him/her that is asleep and just waiting to be awakened. It lies asleep because our culture has educated us into believing the wrong things about money. We’re taught to be employees and work for money rather than to be entrepreneurs and investors and have money work for us. We’re taught to not worry about our financial future because our company or the government will do that for us.

I also believe the best revenge against liberals and corporate bosses idiots is “obscene wealth”.

The message about money we’re taught from a young age is work hard, earn money, spend it, and when we run short, borrow some more. Unfortunately, 90 percent of the Western world subscribes to the above dogma, simply because it’s easier to find a job and work for money than to make your own way and build your own wealth.

But to those who want to buck the trend, I have 10 ways to awaken your financial genius which I’ll share with you over the next couple months.

The first is Find a Reason.

If you ask most people if they want to be rich, they say “yes.” But then reality sets in. They realize it’s a lot of work to become rich. There is no getting rich quick. Facing these obstacles, they throw in the towel and take the easy route—getting a job and handing investments over to a pathetic broker.

Yet, there are clearly those in life who don’t take the easy route. And there are those who are wildly successful where others aren’t. What separates the successful from the unsuccessful? The answer is found in a reason.

A reason is simply a combination of “wants” and “don’t wants.” My reason for getting rich began with my “don’t wants,” which defined my “wants.”

I don’t want to work all my life. I don’t want what my parents aspired for, job security and a house in the suburbs. I don’t like being an employee. I don’t want to be emotionally absent from my family and friends because I’m always working to make ends meet. I don’t want to have nothing to pass on at the end of my life.

Out of these “don’t wants,” I developed my “wants.”

I want to be free to travel the world and live the lifestyle I love. I want to be young when I do this. I want to be free financially. I want control over my time and my life. I want money to work for me. I want to be a “master of the universe” and say whatever I please to anyone without fear of being fired or looked upon as an outcast. Well, money is the only way to get me there and insulates me from all the dependence crap out there.

Personally, I’ve faced many setbacks in my road to riches. I’ve lost a lot of money and seen many deals fall through. I wanted to be financially free by age 30, but it took me until I was 34, with many learning experience along the way. But through it all, my reasons pulled me through.

Today is the day to determine your reason for getting rich. Make a list of your “Don’t wants” and your “wants.” Make sure that your reason is strong and determined. If you find the right reason, I promise you that you will find a way to get real wealthy But it all starts with you.

Stay tuned to my 9 other ways over the next few months… In the meantime, share your thoughts

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It is all about Money and the Media Stupid Wake up

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Seventeen years ago, I read a book called The Evolving Self. Though I didn’t realize it at the time, it profoundly affected the direction of my life.

Since reading that book, I have dedicated my life to coming ever closer to getting a glimpse of the universal order, and of our part in it.

After years of research and analysis, I’ve come to the conclusion that we, in fact, live in a neo-feudal society built on debt and mental slavery.

That may sound like over-the-top rhetoric, and it obviously sounds extreme to propagandized and conditioned minds, and yes, it is extreme. However, it is the unfortunate reality of the present situation. The facts are there for the rational and unbiased mind to absorb and comprehend.

Let’s start by giving some context and perspective on present circumstances by breaking down some economic data. As Thomas Jefferson once said, “Enlighten the people generally, and tyranny and oppressions of body and mind will vanish like evil spirits at the dawn of day.”

For the past 35 years, with technological advancements, there has been an explosion in production and profits, in wealth creation. That unprecedented increase in wealth, as many of you know, has gone to the top economic 1%. Most of it, the lion’s share of it, went to not even the top economic 1%, but to the top one-hundredth of one percent, to the modern day aristocracy.

After analyzing the most recent data, here’s the headline: US millionaire households now have $50 trillion in wealth. They have $39 trillion in legally accounted for wealth, and an estimate of $11trillion hidden in offshore accounts.

Most people cannot even comprehend how much $1 trillion is, let alone $50 trillion.

Only one-tenth of one percent of the population makes one million dollars a year, and, again, most of that wealth is in the top one-hundredth of one percent.

To show how consolidated the wealth is, even in the upper most portion of the top one percentile, the richest 400 people have as much wealth as 185 million Americans combined; that’s only 400 people with as much wealth as 60% of the entire US population.

Before continuing, let me defuse the reactionary propagandized mind’s instinctive response. This is not about demonizing people just because they have money. I am a wealth creator and I have the highest respect for them. There are in fact many people who are using their wealth and resources to improve the human condition. It’s important to understand that the focus here is not on the people who have a mere $10 million or so in wealth. When discussing the modern day aristocracy, the main focus is on the pathological, shortsighted and greed-addicted forces that are doing much more to limit human potential than enhance it.

Broadly speaking, the “aristocracy” is composed of governments, political parties, policy groups, think tanks, intel factions, private military companies, large global corporations, banks and media empires. Included in that are mega-wealthy billionaires and CEOs who have unprecedented control of wealth and resources. For example, the Business Roundtable, the people who run the 147 inter-connected corporations who control half of the world economy.

However, the ultimate point here is to show people that there is presently more than enough wealth and capabilities to solve societal problems. We can truly evolve society in unprecedented fashion. At this point, there is an overwhelming majority of the population, even a majority of the mega-wealthy, who realize that our present systems are obsolete, unsustainable and unstable. We don’t need to spend our finite time and energy fighting with each other. We already have a critical mass of aware citizens, we just need to inspire and organize them to build the cultural and political will. Once we do that, we will be an unstoppable force.

Let’s get back to that 50 trillion number, because we have had an entire generation of mind-blowing wealth creation that has been systematically withheld from the population.

Can you comprehend how much money $50 trillion is? Just to give a little context, we can end world hunger and provide clean drinking water to everyone on the planet for an estimated $40 billion. Again, one trillion is one thousand billion, and we are talking about $50 trillion.

Imagine what could be done with that amount of wealth. Imagine the implications, the possibilities. Imagine how we could evolve society, to the benefit of everyone, with modern technology and just a fraction of that staggering amount of wealth.

The average American cannot comprehend how much wealth there is because there is no frame of reference, no comparison of scale or historical precedent. If Americans had an understanding of how much wealth is being kept from them and the possibilities of what we could do with that wealth, we would have a full-blown societal evolution right now.

It is the denial of wealth that keeps you in check; it keeps you in debt.

Just at the point when technological advancement, production, distribution and wealth increases should have made everyone’s life much easier, just when basic necessities should have become much more affordable and easier to obtain, they became more expensive.

The cost of production dropped dramatically and efficiency of distribution skyrocketed. Housing, food, health and education costs should have plummeted dramatically. However, most basic necessities now come at a much higher price, and people are forced to take on increasing levels of debt to keep up. As most people are aware, student debt, consumer debt, medical debt and household debt have reached all-time record highs.
As an old wise person once said, “There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.”

We live in a neo-feudal system of debt slavery. The indentured servant is now the indebted consumer.

When you understand the wealth at hand, you begin to grasp the crime against humanity that is afoot. We live in the richest, most technologically advanced society humanity has ever known. Yet, here we are, in the 21st century, with an all-time record number of Americans living in poverty.

After careful consideration, it must be said that this is not only the greatest theft of wealth in history; it is also the greatest crime against humanity in history.

People can’t afford to pay their medical bills. Millions upon millions of American families have lost their homes, and millions more are on the verge of losing their homes. An all-time record number of children are going hungry. Meanwhile, record-breaking profits and record-breaking bonuses for the bailed out banana republic aristocracy.
Now that you are beginning to grasp the wealth at hand, and the possibilities of how that wealth can be used to evolve society, let’s take a look at how we got into this situation and how exactly it is that they got away with hoarding so much wealth.

To paraphrase a man who fought against the aristocracy, ‘The depravity and amount of suffering required for the accumulation of such a staggering magnitude of wealth, in the hands of a few, is kept out of the picture, out of the mass media, and it is not easy to make people see or understand this.’ Especially when you have an all-encompassing mainstream media propaganda system.

It is a fact that the  mainstream media is the most effective weapon of mass oppression humanity has ever known.

Since the early 1900’s and World War I, a massive propaganda system has been in place. This is not a conspiracy theory; it is all well documented. Research Edward Bernays, Walter Lippman, Ivy Lee, George Creel and the Committee on Public Information for starters. In fact, you don’t even need a conspiracy theory; you just need a basic understanding of propaganda, social psychology and behaviorism .
Speaking from personal experience, I have come to realize that even the most independent minded among us vastly underestimates how mentally conditioned we all are. Most people are no more consciously aware of this mental domination than they are aware of gravity. It’s like the air we breathe.

For two obvious examples, let’s start with television consumption and advertising. The average American watches more than five hours of TV a day, every single day of their life. American children view more than 40,000 per year, every single year of their life. Think about that. That’s intensive mental domination administered on a daily basis, from the cradle to the grave.

I guess it’s what advertisers have known all along: if we just keep the exposure rate up, people will be influenced. It’s all about repetition.

Repetitive messages fill our mental atmosphere. To paraphrase Philip Lesley in Managing the Human Climate, ‘When a message appears all around you, you tend to accept it and take it for granted. You find yourself surrounded by it and your subconscious mind absorbs and becomes immersed in the climate of repetitive ideas.’ They form the origins of your thoughts. It’s where your desires, opinions and perspectives are born.

Well, the mainstream mass media is the software on which our minds run; it’s our operating system. It’s an extension of our nervous system. Repetitive mainstream propaganda creates a belief system, popular reference points, symbols, archetypes, mental patterns, a mindset and groupthink, all based on repetition – and groupthink is a highly contagious infectious disease.

It’s hard to escape groupthink. As with freedom and democracy, you must be ever vigilant to avoid the tyranny of groupthink and cultural conditioning.

Malcolm X said it best, “The media’s the most powerful entity on earth. They have the power to make the innocent guilty and to make the guilty innocent, and that’s power. Because they control the minds of the masses.”

The mainstream media keeps everyone isolated inside a false reality, a pseudo mental environment. People are trapped in a bubble of status quo supporting reality, in a bubble of what’s good for shortsighted, short-term corporate interests.

People’s consciousness and awareness gets conditioned and contracted, they become isolated and detached from wider reality.

People are born and raised inside mass media created illusions. The majority must resign itself to the consumption of fantasy. Illusions of wealth are sold to the poor, illusions of freedom to the oppressed, dreams of victory to the defeated and of power to the weak.

The censorship that is most prevalent today is the most dangerous form. Not censorship of explicit words, sex or violence, but censorship of any thoughts outside of shortsighted corporate ideology. Any thoughts that lead to critical thought on the established power structure or veer outside of the spectrum of status quo supporting opinion are left out of the debate, out of mainstream public consciousness.

The mainstream press does not cover the most vital social, economic and political issues. The more important something is, the less they report on it. If mentioned at all, it’s mentioned in passing, with little, if any, in-depth reporting, discussion and debate on it.

It’s censorship by omission and bullshit on repetition.

Imagine wall-to-wall 24/7 news coverage of the trillions of dollars in fraudulent activity that got us into this mess. Imagine in-depth coverage of the corruption of our political process through a system of bribery that makes the mafia look like amateurs.

What about the staggering consolidation of wealth? Imagine if the media kept discussing how a small percentage of the population has 50 trillion dollars, then they started debating how we could use just a fraction of that money to solve problems, create solutions and evolve society.

What if they reported on all the wealth and resources that a small number of corporations control, then debated how that wealth and those resources could be redeployed to get us onto a sustainable and thriving path?

When you understand what is possible, you see how truly corrupt, shortsighted, ignorant and obsolete our system of rule is. You then realize that our mainstream media system is pure propaganda.

When you see the reality that they don’t tell you about, it becomes all too clear. If you were to just look at what they don’t tell you, you would see. Mainstream media is the most effective weapon of mass oppression humanity has ever known. It’s hard to break free, when you are always told you are free.

As Huxley put it in Brave New World Revisited, “The victim of mind-manipulation does not know that they are a victim. To them, the walls of their prison are invisible, and they believe they are free.”

You can’t break free until you see the walls. The whips and chains have evolved into TVs and radios. Propaganda is to democracy what violence is to dictatorships. If television was around in the 1770s, we would still be living under British rule.

In the land of propaganda, tyranny is democracy. It’s “enlightened despotism.” When it comes to oppression, it’s all cyclical yet evolutionary. Most people live in a mental cage now, they toil on mentally conditioned plantations.

In revisiting the reactionary propagandized mind, when you confront a member of the consumer cult and expose their mental conditioning processes, the false reality and illusions that people are trapped in, they will instinctively dismiss or attack you. People will bite your hand when you try to remove the mental leash from their neck.

Anything that deviates from the conditioned norm is ridiculed and instantly, instinctively dismissed before critical thinking skills are activated. The repetitious conditioning process leads to an amputation of critical thinking faculties. That which people are not familiar with becomes odd, evil and damaging to their mental construct, to their thought patterns, to their fabricated self-image.

For instance, we tend to look for anything that confirms our pre-existing beliefs while ignoring anything that goes against them. This is how confirmation bias works, to paraphrase Bertrand Russell: ‘If people are offered a fact which goes against their instincts or their cultural programming, they will refuse to believe it. If, on the other hand, they are offered something which falls in accordance to their cultural programming, in accordance to their conditioning, they will accept it, even on the slightest evidence.’

No one wants to believe that they have been manipulated or taken advantage of. This will stir up an instinctive dismissal, a powerful emotional response. We are creatures of habit, and it is much easier, over the short-term, to just stay on a path of denial and ignorance. Hear no evil. See no evil.

So what are we to do?

I believe the task upon us is to consciously counter conditioned consciousness. The most difficult and important prerequisite to freedom is the ability to see past all of your culturally programmed biases. It takes great personal inner-strength and determination to achieve this; you will inevitably have to face many facts that will go against your programmed, conditioned beliefs. If one can endure this, one will eventually come to experience true freedom.

However, even if one is strong enough to have an awareness of their conditioning, it is another level to confront and transcend it. As Nietzsche said, “Even the most courageous among us only rarely has the courage for that which they really know.”

The big question becomes: Are you brave enough to see? Do you want to change it?

Most Americans are aware of the fact that we are on a disastrous path. However, many of us feel powerless to change things. These feelings are only a result of our conditioning and induced delusion. We have become so propagandized that many of us do not realize the significant position that we are in. We are not poor people trapped in a third world existence. We are a mass of people who have the power to evolve society and change the course of history.

It is stunning to hear all these people, so many people saying that they can’t do anything about it. Far too many people think that we can’t create change; that is why we don’t.

Why do you think that we can’t change the world? How did you come to that conclusion? Who taught you to believe that?

The overwhelming majority feels powerless to create political change. If they would just realize that they are the overwhelming majority, they would no longer feel this way.

Thanks to the Internet, to the cyberspace underground railroad, people are now freeing their minds from conditioning and entrenched power censors. The Internet is to our generation what pamphlets were to our forefathers’ generation during the first American Revolution. People are going to the Internet to find out all the information that the corporate mainstream media is not letting people know about. As a result, we now have a critical mass of informed and outraged citizens who are also using the Internet to organize. They are now transcending conditioned consciousness and expanding their awareness on a scale unprecedented in human history.

The inevitable demise of our current neo-feudal system was summed up by George Orwell when he said, “For if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realize that the privileged minority had no function, and they would sweep it away. In the long run, a hierarchical society was only possible on a basis of poverty and ignorance.”

If you are still wondering if we can truly create change, consider this simple truth from Strobe Talbott, “All countries are basically social arrangements, accommodations to changing circumstances. No matter how permanent and even sacred they may seem at any one time, in fact they are all artificial and temporary.”

People are the world over throwing off their mental shackles and are realizing their potential…. You can’t stop it no matter what…. you wait and see what’s coming.

Share your thoughts.

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Why Wealth Bashing? – Financial Policy Council

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It is an oft-repeated axiom that a person can learn a whole lot about a society by how it treats its poor; but just as much may be learned by looking at how that same society treats its rich. Indeed, the economic future of the poor—and our nation—will be determined in the coming decades by how we treat the people in this country who create great wealth. It will be determined by our understanding of the so-called rich and by our need to foster and protect this minority of true wealth creators.

It is an unpopular thing to say, I know. Rich people need help? Rich people need to be protected? Rich people a minority? “Give me a break,” people say. “They just seem to keep getting richer!”

I am talking here about the entrepreneur who risks all of the capital he can muster from his family and friends to build a company that fills an underserved niche in the market, provides a needed service, or develops a new technology. These are the people the plundering bureaucrats and career politicians have deemed “the rich.” These are the people they have targeted for appropriation to support their unsustainable way of life.

In their narrow view of the world, rich people become “rich” by either inheriting their money or appropriating wealth through manipulation of the system with their cronies, or are self-made entrepreneurs.

The first group is so small that they don’t really matter. The second group is easy for the bureaucrats to intimidate and the politicians to plunder with ever-widening regulations and more oppressive oversight; but, again, there are not that many people who fall into the crony-capitalist category. The overwhelming majority of people I refer to as “the rich” are independent-minded, maverick entrepreneurs and business owners who risk their own capital, sweat, and tears to provide a good or service of value to the world around them.

Regrettably, too many Americans, and far too many of the intellectuals and politicians, understand neither these people we call “the rich” nor the methods they have used to become rich in the first place. Did hedge fund managers and investment bankers game the system and walk off with a lot of money? Yes. But, again, having a lot of money no more makes you rich than growing up next door to the Greenwich Country Club gives you class. The rich are people like Bill Gates, Warren Buffett, Larry Page and Sergey Brin, and Michael Dell. They have provided value to the world and been rewarded for their efforts. They also know, better than the federal government, how they should best utilize that wealth.

Most people don’t think they actually know anyone who is truly rich. Not really. They experience them in the abstract, through magazine articles, newspaper stories, or Lifestyles of the Rich and Famous clips. They catch a glimpse into their psyches through statements they make in the media or interpretations of their latest business maneuver. They try to quantify their importance in their own lives by studying policy statements and annual reports or poring over ratings and statistics that rank their net worth and their influence; but the study and the analysis is always through the prism of someone else’s ideological lens. In that respect, our opinions about the rich are a sort of societal inkblot test, revealing more about ourselves than anything else. Our analysis of the raw data confirms our deeply held notions about the rich and, in the end, has more to do with our views on capitalism itself.

Those who are vested in the philosophy of the Left, believing capitalism creates unfair outcomes, have statistics to confirm their outlook. It seems absurd on its face that the top 1 percent of American families control 90 percent of the nation’s wealth. Wouldn’t it be possible, they ask, to contrive an economy that is just as prosperous but with a fairer distribution of wealth? Couldn’t we cap the earnings of the rich at $50 million? Or even $100 million? The defenders of capitalism and free markets on the Right say “no.” They contend that the bizarre inequalities we see are an indispensable part of the processes that create wealth. They imply that capitalism doesn’t make sense, morally or rationally, but it does make wealth. So don’t knock it, they say.

What nonsense! It has very little to do with the reality of the rich. It is really quite sad that defenders of the rich or even the rich themselves can’t come up with a better economic or moral case! Quoting Adam Smith and supply side economists just doesn’t cut it. American novelist and homespun philosopher Mark Twain reportedly noted that a person can lie with the numbers but the numbers don’t lie. The rich have most of the money. That’s why they are called “the rich.”

So who are the rich?

To begin with, you probably won’t find many rich people in the Who’s Who or Most Likely to Succeed lists compiled during their high school or college days. They probably didn’t get the highest SAT or ACT scores in high school, and they probably weren’t considered a member of the popular clique by their classmates. They are certainly not the best looking, and they probably didn’t get where they got through the force of their personalities, charisma, or celebrity. A great number of the richest among us never finished high school, and many who did manage to get into college never graduated. That’s because the rich in this country are chosen not by blood, credentials, education, or service to the establishment. The rich become rich based on their performance and their relentless desire to serve the customer. The entrepreneurial knowledge that is the crux of wealth creation has little to do with glamorous work or with the certified expertise of advanced degrees.

Great wealth rarely comes from speculating and creating nothing. The John Paulsons of the world are a very small and very lucky group. Most major wealth creation comes from doing what other people consider insufferably boring: navigating the tedious intricacies of software languages, designing more efficient garbage collection routes, or designing a system for stocking fresh products on the shelves in grocery stores is not glamorous. These people don’t immediately conjure images of mansions, limousines, and vacations in the hottest spots of the world in Gstaad, Monte Carlo, or Cabo San Lucas.

Improving the speed and efficiency of butchering livestock, customizing insurance policies, or tramping the wilderness in search of petroleum leases seem far removed from the glamorous life. Memorizing building codes, speeding up the delivery of a hot pizza, or hawking pet supplies all seem like mundane and tedious tasks, but these are all paths that individuals have taken up the mountain of accumulating wealth in America. In short, America’s best entrepreneurs usually perform work that others overlook or spurn. They do it better, faster, and at a better price than the competition. For that, they become the rich.

Because these men and women often overthrow rather than embrace established norms, the richest among us are usually considered rebels and outsiders. Often, they come from places like Omaha, Nebraska; Blackfoot, Idaho; or Mission Hills, Kansas—places usually mentioned in New York either with a condescending smirk or as the punch line of a comedy routine. From Henry Ford to Apple cofounder Steve Wozniak, much of America’s greatest wealth creators began in the “skunk works” of their trades, with their hands on the intricate machinery that would determine the fate of their companies. Bill Gates began by mastering the tedious intricacies of programming languages. Sam Walton began with a nickel-and-dime Ben Franklin variety store in Newport, Arkansas. Larry Page became the first kid in his elementary school to turn in an assignment from a word processor because his parents were both computer science professors at Michigan State University. Familiarity with the core material, the grit and grease, the petty tedium of their businesses liberates entrepreneurs from the grip of conventional methods and gives them the insight and confidence to turn their industries in new directions.

The truth is that great wealth is often created by the launching of great surprises, not by the launching of great enterprises. Unpredictability is a fundamental part of great wealth creation, and, as such, it defies every econometric model or centralized planner’s vision. It makes no sense to most professors, who attain their positions by the systematic acquisition of credentials pleasing to the fraternity of their peers. By their very definition, innovations cannot be planned.

From the outside looking in, one would assume that once wealth is acquired, life becomes one endless vacation full of idle play and relaxation. One would be quite wrong. The richest among us are faced with another equally daunting task once they have accumulated great wealth. Just as a pot of honey attracts flies as well as bears, it doesn’t take long for a seemingly endless stream of bureaucrats, politicians, raiders, robbers, relatives, short-sellers, long talkers, managers, missionaries, and manipulators to come calling. They all have this strange notion that they can spend your money better than you can and are somehow entitled to a portion of your money for granting you the privilege of their expertise. They are, for the most part, leeches, con artists, and moochers.

Leading entrepreneurs in general consume only a tiny portion of their holdings. They are often owners and investors. As owners, they are initially damaged the most by mismanagement or exploitation or waste of their wealth. Only the person who created the wealth has a true appreciation of its value and what it represents. As companies such as Oracle, Lotus, and Google have discovered, a software or tech stock can lose most of its worth in minutes if fashions shift or investors question management decisions.

A Harvard Business School study recently showed that even when you put “professional management” at the helm of great wealth, value is likely to grow less rapidly than if you give owners the real control. A manager of Google might benefit from turning it into his own special preserve, making self-indulgent “investments” in company planes or favored foundations that are in fact his own disguised consumption. It is only Sergey Brin and Larry Page who would see their respective wealth drop catastrophically if they began to focus less on their customers than on their own consumption. The key to their
great wealth is their resolution not to spend or abandon it, but to continue using it in the service of others. They are as much the servants to as the masters of Google.

This is the other secret of the richest among us and of capitalism itself. Under capitalism, wealth is less a stock of goods than a flow of ideas. Economist Joseph Schumpeter set the basic parameters when he declared capitalism “a form of change” that “never can be stationary.”

The landscape of capitalism may seem solid and settled and ready for seizure, but capitalism is really a mindscape. Volatile and shifting ideas, and the human beings behind them, are the source of our nation’s wealth, not heavy and entrenched establishments. There is no tax web or bureaucratic net that can catch the fleeting thoughts of the greatest entrepreneurs of our past or our future.

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Why don’t we let Banks Fail?

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Bloomberg had a story, a couple of days ago, about BofA moving Merrill Lynch derivatives to its retail-banking subsidiary.

The story was quite long and hard to follow: there were lots of detours into explanations of what a derivative is, or explorations of what the BAC stock price was doing that day.

It seems that regulators care much more about Bank of America, the retail-banking subsidiary which holds depositors’ money, than they do about BAC, the holding company which owns Merrill Lynch. And the senior executives at Bank of America have a fiduciary duty to Bank of America — never mind the fact that their shareholdings are in BAC.

The Fed, in allowing and indeed encouraging this transfer to go ahead, is placing the health of BAC above the health of Bank of America. And that’s just wrong. Holding companies can come and go — it’s the retail-banking subsidiaries which we have to be concerned about. The Fed should not ever let risk get transferred gratuitously from one part of the BAC empire into the retail sub unless there’s a very good reason. And I see no such reason.

Comparing this to the Iceland banking crisis and three years after the collapse of their banking system and the country teetering on the brink, Iceland’s economy is recovering, proof that governments should let failing lenders go bust and protect taxpayers.

In fact, the lesson that could be learned from Iceland’s way of handling its crisis is that it is important to shield taxpayers and government finances from bearing the cost of a financial crisis to the extent possible.

Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net. It imposed temporary controls on the movement of capital to give itself room to maneuver. No wonder it is doing today much better than virtually all of the countries which have let the banks push them around.

Rather than bailout the banks — Iceland could not have done so even if they wanted to — they guaranteed deposits (the way our FDIC does), and let the normal capitalistic process of failure run its course.

Unlike other nations, including the U.S. and Ireland, which injected billions of dollars of capital into their financial institutions to keep them afloat, Iceland placed its biggest lenders in receivership. It chose not to protect creditors of the country’s banks, whose assets had ballooned to $209 billion, 11 times gross domestic product.

Countries with larger banking systems can follow Iceland’s example.

As the first country to experience the full force of the global economic crisis, Iceland is now held up as an example by some of how to overcome deep economic dislocation without undoing the social fabric.

While the conditions in Iceland are in many ways different from the conditions in the U.S., Iceland’s lesson applies to America, as well.

Specifically, a study of 124 banking crises by the International Monetary Fund found that propping banks which are only pretending to be solvent hurts the economy:

Existing empirical research has shown that providing assistance to banks and their borrowers can be counterproductive, resulting in increased losses to banks, which often abuse forbearance to take unproductive risks at government expense. The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to finance bank bailouts, and even more severe credit supply contraction and economic decline than would have occurred in the absence of forbearance.

Cross-country analysis to date also shows that accommodative policy measures (such as substantial liquidity support, explicit government guarantee on financial institutions’ liabilities and forbearance from prudential regulations) tend to be fiscally costly and that these particular policies do not necessarily accelerate the speed of economic recovery.

All too often, central banks privilege stability over cost in the heat of the containment phase: if so, they may too liberally extend loans to an illiquid bank which is almost certain to prove insolvent anyway. Also, closure of a nonviable bank is often delayed for too long, even when there are clear signs of insolvency (Lindgren, 2003). Since bank closures face many obstacles, there is a tendency to rely instead on blanket government guarantees which, if the government’s fiscal and political position makes them credible, can work albeit at the cost of placing the burden on the budget, typically squeezing future provision of needed public services.

Bottom Line: I still strongly believe that our economy cannot and will not recover until the big banks are broken up.

If the politicians are too corrupt to break up the big banks (because the banks have literally bought them), why don’t we break them up ourselves?

Your feedback is as always greatly appreciated.

Thanks much for your consideration.

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