Saturday, February 7, 2009

My National Stimulus Plan - 970 bil, problem solved (Oh - make that 970.1 bil)

The Robertson Suite of Acts

Everything I have read or know suggests that not only is the following the recommended plan, but it is what will occur. There is a tremendous force based on basic principles of double sided national accounting always present. Every asset has a liability and vice versa. Books will balance just as waters will find their level. This is why in past work I constantly evoke Pacioli - the monk in the Renaissance who invented double sided accounting - as the obvious logic of national accounts settling is perhaps a more important driver now than Keynes. Perhaps.

What one should always remember is what we take for granted - national accounting system of GDP and various sectors is a recent invention coming post-Great Depression. That Keynes's failure to capture FDR's attention (where the one time FDR met Keynes he was very unimpressed and baffled with all his "numbers") was there was little if no data set to work off - Keynes was all conceptual and abstract. It wasn’t until Simon Kuznets "invented" the national accounting system (based on his 1941 academic work) that we had a temporal and quantitative base to discuss the qualitative Keynesian theories.

So with the data record of national accounts available and understanding the inevitable power of national dual sided accounting - here is not only my suggested plan but, given the unassailable power and position of the USA in reality, what will occur as water seeks its natural level.

We will do the following either through thoughtful deliberate pre-emptive and anticipative policy or we will have to respond to foreign and domestic pressures in ad hoc approaches that produce the same. The later will be painful and likely have to go though the crucible of war and internal revolt to achieve what can be implemented now.

There are two major areas to address - the international accounts and the domestic accounts.


The international accounts clearly produced massive imbalances which are the root to the entire current crisis - Wen to the contrary regardless. The USA has to return to exemplary exceptionalism and both realize and accept the extraordinary power differential between the USA and everyone else as well as the fact that the USA has to be the beginning and the end of any solution. With the admirable goal of world peace and stability, the USA has allowed key regions to produce capacity that the only use of is exporting, or the USA has allowed commodity producers to form cartels and have extraordinary pricing over and above any reasonable cost of production or utility of the commodity. These trade imbalances were allowed to occur at first to offset the importance of the USSR and also to relieve domestic pressure of the exporters so that dangerous instability did not occur. It should always be remembered that Pearl Harbor was the direct results of not allowing these imbalances to occur.

But now those imbalances have to be administered and managed, recognized for what they are, identified and quantified, and accounted as a good the USA allows and applies. The true nature of USA strength and scope has to be acknowledged by the exporters and peace and stability guaranteed. The imbalances can exist but they must be controlled by the central monetary policy of the USA and just as weekly "float" in various money supply is "sterilized" by monetary policy devices offset, so must these imbalances be "sterilized". Imbalances must not be allowed to be invested in any USA assets but for a foreign account ledger on the balance sheet of the NY Fed. If other, private sector US dollar assets are sought by the exporter by money raised through imbalances - then currency adjustment must be insisted upon so the exporter hasa choice - either that the imbalances are allowed to be controlled by the USA Fed are a equitable terms of trade imposed such the imbalances cease to exist.

This is similar to the rules Rome imposed on much of the areas where they held suasion but were not provinces - it was pax Romana. A pax Americana must be developed.

The UN based on equal votes for any nation state unit must be either revamped or eliminated so that it is inline with the realities of pax Americana. The problem of course is few will believe that the USA is of such a status and likely will require a war to prove it out.

But in the end the following policy will have occurred:

1. Eliminate the UN, mandate all global US dollar imbalances resulting from trade or commodity sales to the US must be kept on the balance sheet of the Federal Reserve as a "customer account".

2. Chinese membership in GATT to be rationalized and re-examined. GATT with voting based on GDP replaces the UN.

3. All countries accept the above in terms of trade with the USA or they have USA tariffs applied or embargos such that un-economical terms of trade are eliminated.

4. All excess capacity in exporters to the USA that is basically human capital is examined and all people that meet certain qualitative standards and wish to seek it, be allowed a visa for immigration to the USA and the process form visa to Green Card to USA citizenship be expedited to a few years. A massive immigration wave to the USA is to be encouraged and developed. Qualification is based upon fluency in English, oath of allegiance, bonded to not be wards of the state for one year, health, and base education of trade, high school, or net worth. The standards to be applied to only the individual or nuclear family not extended family. The goal is to double the USA population and rejuvenate the cities and to move excess capacity abroad to some degree onshore. (National Act of Relocation and Processing 20 bil - administered through Homeland Security)

5. The standards of a two front war and nuclear deterrence are increased to Petraeus 4 locale at one time surge capability. Necessary expenditure applied. ROTC and educational programs expanded. (National Defense and International Peace Act 200 bil)

6. A permanent rapid deployment international welfare capability is developed distinct from the military developed. Force to have world wide "strike" capability. Intent is to supplant and replace most welfare NGOs eliminating their power and improving their effectiveness. Size of this "Peace Force" to be comparable to the military in reach and scope. (National International Support and Stabilization Act "The Peace Force" State Dept 100 bil)


Domestically, phase two of the "city on the hill" has to occur. In a nutshell this is to return the national government as adjunct to the state and local as the constitution outlines: "powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." This is very important in this current crisis not in terms of what prompted the Civil War, but in terms that the state and local are the only efficient channel to provide the stimulus spend required.

The best work I have read on this is Jane Jacobs "Cities and the Wealth of Nations" which seems a bit over strident in promoting a return to nothing but "city-states" does make key discoveries as to the reality of economic flow and the process of growth. She also successfully shows how cities are also the "kernels" for trade and commence. The stimulus flow must be directed through large metropolises and administered through them as much as possible, then the states, and then the national levels only in terms of how this augments or assists the cities - such as transportation and communication. The national level is also where oversight and policing of financial markets occur.

But if the stimulus does not follow the state and local channels it will be at best ineffective and only serve to provide a "power grab" by national entities or will simply be lost in corruption.

It is critical to understand where we are in energy. All green policies must be in terms of not carbon or global warming, but in terms of zero emissions standards or close to it and not for global warming but just for smell, taste, and health reasons. If the immigration wave is to occur we require a clean healthy place to live. Therefore, as before, it will be commerce which will drive environmental improvements. Bio fuel policies must be eliminated - they are solely an attempt to avoid the harsh facts of national security and to be a windfall for the likes of Archer Daniels - it is similar to why we gave such a disgusting gift to rich Cuban immigrants in the form of sugar plantations in the Florida Everglades - this was solely for national security sugar availability. I put bio-fuel in the same relam as the Florida Everglades sugar policy.

So the programs domestically:

7. The National Metropolis Development Administration. Chaired by a rotating mayor of a qualified USA metropolis. 300 bil

8. The National Bridge Tunnel and Port Authority (modeled after the one Moses created for NYC metropolis) Oversight by board of Senators, Congresspeople, Sec HEW, and State Governors and chaired by a rotating state governor. 200 bil

9. The National Transportation Administration Dept of Commerce Charged with developing a national high speed passenger and freight capability, national internet broadband, and commodity transportation (pipelines) 150 bil

10. The Appease the Gullible Mass Hysteria and Wishful Thinking Authority Dept of HEW and Dept of Commerce Explore new energy sources and go where no man has gone before. 10 million.

It is critical that the stimulus measures be understood not only to solve the immediate problems but to set a livable template for the next century for the USA ad given our massive footprint also for the world. It is also critical to understand that we are designing this bill currently in the wrong branch of government.

Obama has to declare a national emergency - similar to war measures act - and take the responsibility for the design of these programs and their implementations to the executive. Congress is to only use their veto capability and only in terms of "appropriations" powers. We will never have success with congress designing and implementing these needs. So, given that the stimulus as written is assured to fail and given the extreme emergency such failure will produce, the executive will be in charge of this area in any case. It would be best not to go through that stage.

A summary:

Immigration.............................20 bil
Defense....................................200 bil
Peace Force.............................100 bil
City Bank.................................300 bil
Bridge Tun Port Auth............200 bil
Nat Transp..............................150 bil
Green..........................................10 mil
Total.........................................970.1 bil

Phase in: over 3 years - all placed in near "escrow" type facilities so financing arranged and certainty provided so expectations can price accordingly.

Back to Keynes - this will be an offset to the critical drop in consumption and rise in savings we are observing. This will forestall a depression. Size can be increased but it should be noted that almost all of this expense will result in a public investment of high utility which can be privatized down the road or maintained in the public sector to make available these channels in the future.

It should be noted as well that it is impossible to end with a solution, especially if we approach this solution the hard way via evoking a crisis from failed policy, that the military elements are crucial. Without a doubt we will either have a war before this is over or come close to one. Massive increase in military capacity might very well prevent a war. There is a dangerous idea of equivalency in most geo-political considerations as thats what gets certain academics jobs and writing assignments with extra-national entities like the UN or NGOs or even teaching posts with most universities. It is a very dangerous myth as the USA has never been stronger and other key international states comprably weaker. This myth along with extreme political pressures at home, as the world discovers how high the correlation their economy is to the USA, will lead to neo-fascist international adventures to alleviate pressure directed at national leadership. We must show quickly that any hard power is not an option.

1 comment:

  1. 970.01bn

    Agree that imbalance accounting and eventual smoothing is key. I still have trouble visualizing the form that war takes in a MAD world... unless it involves non-nuclear powers.