2013: A Cloudy Forecast For Renewable Energy, With A Silver Lining

 

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On December 27, 2012, Bryan Walsh writes in Time:

On the surface, it looks like the renewable energy industry has never been healthier. This year, wind-turbine installation in the U.S. actually outpaced the installation of new natural gas capacity—despite the shale gas boom, which has pushed down the price of natural gas. In 2012 new wind capacity reached 6,519 MW as of Nov. 30, just edging out gas capacity and more than doubling new coal installations. Meanwhile new solar capacity in the U.S. reached nearly 2,000 MW, beating out 2011′s numbers. Globally the stock of installed wind and solar power hit 307 GW in 2011, up from 50 GW in 2004, while total investment in the sector hit $280 billion last year. Those are some bright numbers.

Yet there are clouds on the horizon for renewables. The wind industry faces the loss of the valuable production tax credit next year if Congress can’t get its act together to renew it—and indeed, some of the growth the industry experienced this year may be due to companies rushing to get their projects in while the credit is still in place. (And those capacity figures comparing wind to gas or coal are a bit misleading—the intermittency of renewables means that a MW of wind doesn’t deliver the same amount of actual juice as a MW of gas.) The solar industry faces serious global oversupply, which has driven a number of manufacturers in the U.S. and elsewhere into bankruptcy, and while helped depress the recent IPO of the major panel installer Solarcity. According to the Financial Times, total investment in wind and solar in 2012 may well fall compared to 2011—the first time that’s happened in nearly a decade.

So what’s the real forecast for wind and solar power?

I publish an architectural magazine, Ultimate Home Design (www.ultimatehomedesign.com) that advocates responsible green building initiatives, with respect to on-site energy generation. I also built the greenest home in America, the Optimum Performance Home (http://www.ultimatehomedesign.com/oph.php).

The United States should adopt the German model of “Feed-In-Tariff” (TIF) and ensure that anyone who generates power from solar, wind, or hydro is guaranteed payment from the local power company. Under such a program, local power companies are obliged to buy power generated by solar, wind, and hydro home and small business installations.

Germany pioneered legislation, and other European countries––including Spain, Portugal, Greece, France, and Italy––are implementing similar legislation. At present, unfortunately, local power companies in the U.S. are not required to pay homeowners for the energy generated  on-site beyond what the homeowners generate produce a “Zero Energy Home” (ZED) cost operation. Thus, homeowners with systems designed to generate excess electricity are not compensated. “Feed-In-Tariff” legislation, which offers cash incentives, will become the most important means we have to boost the solar and wind energy market, and significantly reduce our country’s dependence on foreign oil. Such legislation will make it lucrative for ordinary people to put solar systems on their roofs and wind turbines on their properties. The end result will produce a new class of homeowners who will be energy-independent and part of a network of clean energy producers.

Beyond the issues explored in the article regarding large solar installations, what is missing is the ownership structure of this advanced renewable energy system development. The article implies that the U.S. Department of Energy is involved. Should ANY power plant involve taxpayer monies, the government should require that the utility users/customers share in the private, individual ownership of the development, turning every customer into an owner of the power utility. This can be accomplished by forming a for-profit, professionally managed, citizen-owned “Community Investment Corporation” (CIC) or Citizens Land Bank (CLB) (www.http://cesj.org/homestead/strategies/community/cic-full-nk.html).

While the CLB would create new private sector jobs and entrepreneurial opportunities, its main accent is on widespread participation, particularly in the ownership of land, technology, buildings and infrastructure that must be fabricated upon the community’s land for expanding the local economy. The Citizens Land Bank is designed to serve as a for-profit land planner and private sector developer geared to rational innovation and change at the community level.

Using the most advanced tools of the free enterprise system––especially innovative credit and financing tools-the CLB would create new owners of newly created assets, without taking existing property away from present owners.

The CLB strategy and its institutional structure for mobilizing citizen action are easily adaptable to areas of virtually any size, such as land surrounding nodes of a mass transit system, a downtown renewal area, or an inner-city neighborhood. The CLB can even be adopted for an entire city, metropolitan area or natural region of the country.

The CLB would create new opportunities for corporate executives, real estate professionals and the best advisors that money can buy, but they would be accountable to the CLB’s lenders and shareholders through the CLB’s broadly representative board of directors. Local enterprises could then compete more dynamically in the global marketplace without special protections or subsidies.

Such policies, when implemented will provide a substantial amount of energy. We need to make the effort and advocate to our political leaders to pass the necessary legislation.

2012: A Good Year For Investors

APphoto_CORRECTION Wall Street

On December 27, 2012, Tom Petruno writes in the Los Angeles Times that stocks and bonds deliver sound returns while crude oil and cash accounts disappoint.

U.S. stocks. The public’s continuing distrust of the market was a good contrarian indicator in 2012. Investors who stayed aboard for the ride are looking at double-digit returns on U.S. equities for the year — the third calendar-year gain in the last four, as stocks have rebounded from the 2008 crash.

The blue-chip Standard & Poor’s 500 index was up 12.9% year-to-date through Wednesday. Add in dividend income and the return totals 15.4%. If it holds, that would be the best annual return since the index surged 26.5% in 2009.

What is amazing is that what is not discussed or explained is that financial capital, such as stocks and bonds, is just an ownership claim on the productive power of real capital. In the law, property is the bundle of rights that determines one’s relationship to things. Thus, we should be addressing the need to FULLY distribute the earnings of real capital to the owners of stock in corporations.
The stock market in its present structure is a gambling casino. While the pre-tax yield of corporate assets of prosperous companies varies from 25 to 60 percent, the yield on secondhand securities is around five or six percent. With capital gains, you can get a little more, but as binary economist Louis Kelso points out, “don’t forget, that’s a zero-sum game; for every gainer, there’s a loser. Wall Street doesn’t fly any airplanes or raise any corn or do anything else in the way of producing products and services. It just plays games with your dough. And when you take it out in pensions, you’re going to get less than the company put in for you. You have to; that’s the dynamics of it.”
While tax and investment stimulus incentives are excellent tools to strengthen economic growth, without the requirement that productive capital ownership is broadened simultaneously, the result will continue to further concentrate productive capital ownership among those who already own, and further create dependency on redistribution policies and programs to sustain purchasing power on the part of the 99 percent of the population who are dependent on their labor worker earnings or welfare to sustain their livelihood. By stimulating economic growth tied to broadened productive capital ownership the benefits are two-fold: one is that over time the 99 percenters will be enabled to acquire productive capital assets that are paid for out of the future earnings of the investments and gain greater access to job opportunities that a growth economy generates.
In order to maximize the economic rewards to the owners of capital, we need to encourage corporations to pay out all their profits as taxable personal incomes to avoid paying corporate income taxes and to finance their growth by issuing new full dividend payout shares for broad-based citizen ownership.
Starting with the business corporation, a legal entity created and sanctioned by state and federal government and judicial law, the government should provide tax incentives for full-dividend payouts to its stockholders, or alternatively dictate that from now on 100 percent of all profits be paid out fully as dividend payments to stockholders (thus, eliminating the corporate income tax), and be subject to progressive individual taxation rates during the short term. This would effectively prohibit retained earnings financing of new productive capital formation (reinvesting the corporate earnings already earned). The government could also limit debt financing by imposing some ratio formula to annual revenue under which a corporation could debt finance new productive capital formation with borrowed monies. Both retained earnings and debt financing only enhance the ownership holding value of the existing corporate ownership class and do nothing to create new owners. Thus, the rich get richer systematically and capital ownership concentration is furthered, facilitated by financing further productive capital acquisition out of the earnings of existing productive capital.

In place of retained earnings and debt financing, the government should require business corporations to issue and sell full-voting, full-dividend payout stock to more people to underwrite new productive capital formation, with the purpose of providing opportunity for new owners, both employees of corporations and non-employees, to participate in a growing economy. Of course, there needs to be a financial mechanism put in place that will guarantee loan risks; otherwise banks and lending institutions will not make the loans, and the system will continue to limit access to capital acquisition to those who already own capital—the rich. This is because “poor” people have no security or collateral, or sufficient income to pledge against the loan as security, and/or are disqualified on the grounds of either unproven unreliability or proven unreliability.

Criteria must be created to qualify the corporations subject to this policy and those corporations that qualify overseen so as to insure that their executives exercise prudent fiduciary responsibility to generate loan payback. Once the guaranteed loans are paid back, the new capital formation will continue to produce income for existing and future owners.

The Capital Homestead Act would make it possible for every American to become a viable owner of productive capital and not just for the tiny elite who now own our corporations. The CHA is primarily a tax-sheltered vehicle for the democratization of capital credit through local banks. According to its architects, it would “enable every man, woman, and child to accumulate wealth and receive dividend incomes from newly issued shares in new and growing companies, without being taxed on the accumulations (including property and shares gained through inheritance, savings, and arrangements like ESOPs, CSOPs, and CICs). In addition to serving as a source of capital credit for corporate workers, CHAs would also provide an ownership-building account for individuals who do not work for profit-making enterprises, such as school teachers, civil servants, military personnel, police, and health workers, and for individuals who have no remunerative employment, such as the disabled, the unemployed homemakers and children.

http://www.latimes.com/business/la-fi-investors-winners-losers-20121227,0,3932323.story

The Middle Class Languishes As The Super-Rich Thrive

Obama

On December 30, 2012, Michael Hiltzik writes in the Los Angeles Times that Washington’s proposed budget solutions are ever more irrelevant to the problems at hand while being protective of the 1 percent.

UC Berkeley economist J. Bradford DeLong observed last week that we’re not heading toward the fiscal cliff so much as waiting for the “austerity bomb” to detonate. The lighted fuse on that bomb, he computed, has already cut likely growth in real gross domestic product for 2013 to 2.5% from 3%.

The policy positions on both sides presage smaller government, which is not the right prescription for an economy still struggling to recover. There will be lower federal spending at a time when the government participation in the economy is still crucial; there will be less take-home pay for the middle class and the working class, who pump almost everything they have into the marketplace.

The disagreement in Washington is no longer whether to cut, but where and by how much; and whether the seemingly inevitable end of the payroll tax holiday for working men and women will be balanced by continuation of their reduced income tax rates.

Michael Hiltzik, as with his colleagues in the national media, continue to be oblivious to solutions that empower ordinary Americans to acquire and build over time a viable income-producing capital estate with ownership shares in existing and future growth company assets resulting from the constant, exponential growth of technological innovation and invention resulting from tectonic shifts in the technologies of production. Hiltzik et al are stuck in one-factor labor JOB CREATION thinking and are oblivious to the significance and absolutely necessity for broadened private, individual ownership of FUTURE productive capital formation and economic growth.

Hiltzik and his colleagues in the national media would do the people  a great service if they would the address the issue of CONCENTRATED OWNERSHIP of the productive capital wealth of the United States and explore solutions to broaden private, individual ownership in FUTURE productive capital economic growth to effectuate making EVERY American a capital owner, who over time can build a viable income-producing capital estate to sustain them during their lifetime. This is the ONLY real solution to a declining economy with less and less “customers with money” and increasing reliance on taxpayer-supported (taxation redistribution and national debt) government welfare, open and concealed.

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm

Sign the Petition at http://signon.org/sign/reform-the-federal-reserve.fb23?source=c.fb&r_by=3904687

Sign the WhiteHouse.gov petition at https://petitions.whitehouse.gov/petition/reform-federal-reserve/PhY3Jswk

http://www.latimes.com/business/la-fi-hiltzik-20121230,0,966732.column

Socialism For The Rich: CEO Of Bailed Out Green Energy Co. Tesla Buys $17M Mansion

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On December 29, 2012, Kyle Becker writes in the IJ Review:

The Democrat Party has been very good to millionaires and billionaires, provided they line up ideologically with the hard left’s platform of “fundamental transformation.” What does that mean, exactly? It means selective accountability, crony corporatism, and endless perks redistributed from American serfs to those loyal to the party above all, including the country and its Constitution.

Green energy scamufacturer Tesla Motors is the latest case-in-point. The recipient of a $465 million subsidized loan, the predictably bankrupt company’s CEO just bought himself a $17 million mansion — living large, Obama-style.

Once again, taxpayer supported government welfare is extended to the private sector without the stipulation of broadening private, individual ownership of NEW productive capital investment related to technological innovation and invention. This is in the form of government loan guarantees that are issued in the name of JOB CREATION, while oblivious to the CONCENTRATED OWNERSHIP CREATION resulting from bolstering the financial ownership interests of the awarded companies’ ownership class.
The REAL issue regarding the structural problem with the economy, which is rigged to further the CONCENTRATED OWNERSHIP interests of the wealthiest Americans at the expense of the American majority who are exponentially facing job losses and devaluation as tectonic shifts in the technologies of production require less and less labor workers to produce the products and services needed and wanted by our society, is ignored. This issue is NEVER address, which is the crux of the problem causing our declining economy.

What we need is for the Federal Reserve to stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income. The CHA would process an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets, The shares would be purchased on credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods and services produced by the newly added technology, renewable energy systems, plant, rentable space and infrastructure added to the economy. Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance back  by the government, but would not require citizens to reduce their funds for consumption to purchase shares. ALL subsidized loan guarantees would have the stipulation that the companies benefiting from the loan infusion demonstrate NEW owners be created among their employees and others in which ownership shares are purchased on credit wholly backed by projected “future savings” in the form of new productive capital assets.

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm

Sign the Petition at http://signon.org/sign/reform-the-federal-reserve.fb23?source=c.fb&r_by=3904687

Sign the WhiteHouse.gov petition at https://petitions.whitehouse.gov/petition/reform-federal-reserve/PhY3Jswk

http://www.ijreview.com/2012/12/27186-socialism-for-the-rich-ceo-of-bailed-out-green-energy-co-tesla-blows-17-million-on-mansion/

Post-'Fiscal Cliff,' Four Themes To Shape Markets In The New Year

Ben BernankeSince the financial crisis began in late-2008, the world’s major central banks have slashed interest rates to try to prop up the punch-drunk global economy. Above, Federal Reserve Chairman Ben Bernanke addresses a gathering of the Economic Club of New York in November. (Richard Drew, AP / November 20, 2012)

On December 28, 2012, Tom Petruno writes in the Los Angeles Times that housing, cheap credit, “yield desperation” and dividends loom large.

• The housing market’s rebound. As recoveries go, the turnaround in housing this year doesn’t look like much on the charts, certainly not compared with the bubble years of the mid-2000s.

But the gains in home sales and prices in 2012 were critical for underpinning confidence that the U.S. economic recovery had legs. To think of it another way, if the housing market had continued to sink, it could have done severe damage to consumer confidence, the banking system and the stock market.

An active new construction and reconstruction housing market strengthens developer and contractor companies and with growth there should be put in place incentives to broaden ownership of these companies, which do, in fact, create job opportunities for all sorts of construction-related labor work.

• Central banks double down. Since the financial crisis began in late-2008, the world’s major central banks have slashed interest rates to try to prop up the punch-drunk global economy. This year, worried that growth remains tenuous, the banks amped-up their support, ignoring critics who say they have set the scene for the next financial-system nightmare.

 This month, the Federal Reserve went a step further, saying it wouldn’t stop trying to keep interest rates at rock bottom until the U.S. unemployment rate fell to 6.5 percent from the current 7.7 percent.
On January 13, 2012, Don Lee and Jim Puzzanghera wrote in the Los Angeles Times that the Federal Reserve hopes to bring unemployment below 6.5 percent. The strategy marks a dramatic change in policy, made easier by low inflation.

In the final analysis, JOB OPPORTUNITIES for the majority of Americans is headed to a dead end due to tectonic shifts in the technologies of production, which are destroying and degrading jobs.

The Federal Reserve is dragging with in-action. There is no question that the Federal Reserve System needs to be reformed  to act as a purveyor of economic growth. The focus should be on OWNERSHIP CREATION, which will result in real JOB CREATION as a result of future economic growth.

Influential economists and business leaders, as well as political leaders, should read Harold Moulton’s The Formation Of Capital, in which he argues that it makes no sense to finance new productive capital out of past savings. Instead, economic growth should be financed out of future earnings (savings), and provide that every citizen become an owner.

The Federal Reserve, which has been largely responsible for the powerlessness of most American citizens, should set an example for all the central banks in the world. Chairman Benjamin Bernanke and other members of the Federal Reserve need to wake-up and implement Section 13 paragraph 2, which directs the Federal Reserve to create credit for local banks to make loans where there isn’t enough savings in the system to finance economic growth. We should not destroy the Federal Reserve or make it a political extension of the Treasury Department, but instead reform it so that the American citizens in each of the 12 Federal Reserve Regions become the owners. The result will be that money power will flow from the bottom up, not from the top down––not for consumer credit, not for credit that doesn’t pay for itself or non-productive uses of credit, but for credit for productive uses to expand the economy’s rate of growth.

The systemic injustices of monopoly capitalism can only be addressed by comprehensive reforms to the tax, monetary and inheritance policies favoring the top 1 percent at the expense of the 99 percent. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.

The unworkability of the traditional market economy is evidenced by the diverse and growing deficits––federal budget deficit, trade deficit, city, county and state budget deficits––which are making it increasingly impossible for governments at every level to function. The increasing deficit burden is the result of the growing numbers of people who cannot earn, from legitimate participation in production, enough income to support themselves and their families. Thus government is obliged to “redistribute” to starve off economic collapse. The key means of redistribution is taxation––taking from the legitimate producers and giving to the non- or under-producers––to make up the economy’s ever wider income and purchasing power shortfalls.

The fact is that political democracy is impossible without economic democracy. Those who control money control the laws that foster wage slavery, welfare slavery, debt slavery and charity slavery. These laws can and should be changed by the 99 percent and those among the 1 percent who are committed to a just and economically classless market economy, true equality of opportunity, and a level playing field in the future for 100 percent of Americans. By adopting economic policies and programs that acknowledge every citizen’s right to become a capital worker as well as a labor worker, the result will be an end to perpetual labor servitude and the liberation of people from progressive increments of subsistence toil and compulsive poverty as the 99 percent benefits from the rewards of productive capital-sourced income.

The question that requires an answer is now timely before us. It was first posed by binary economist Louis Kelso in the 1950s but has never been thoroughly discussed on the national stage. Nor has there been the proper education of our citizenry that addresses what economic justice is and what ownership is. Therefore, by ignoring such issues of economic justice and ownership, our leaders are ignoring the concentration of power through ownership of productive capital, with the result of denying the 99 percenters equal opportunity to become capital owners. The question, as posed by Kelso is: “how are all individuals to be adequately productive when a tiny minority (capital workers) produce a major share and the vast majority (labor workers), a minor share of total goods and service,” and thus, “how do we get from a world in which the most productive factor—physical capital—is owned by a handful of people, to a world where the same factor is owned by a majority—and ultimately 100 percent—of the consumers, while respecting all the constitutional rights of present capital owners?”

Sign the Petition at http://signon.org/sign/reform-the-federal-reserve.fb23?source=c.fb&r_by=3904687

Sign the WhiteHouse.gov petition at https://petitions.whitehouse.gov/petition/reform-federal-reserve/PhY3Jswk

http://www.latimes.com/business/la-fi-bernanke-stimulus-20121213,0,2161646.story

• “Yield desperation” deepens. For investors and savers, a major downside of central banks’ ultra-low-interest-rate policies since 2008 has been a dwindling number of investments that pay decent interest income. That situation got much worse this year.

Weak economic growth and the Fed’s continued massive purchases of longer-term U.S. Treasury bonds drove the 10-year T-note yield to a generational low of 1.39 percent in late July. It has since rebounded to 1.70 percent, but that’s still just half what the yield was in early 2011.

Investment in real productive capital growth will result in a far better profit dividend return than U.S. Treasury bonds. This action is related to the previous recommendation to reform the Federal Reserve.

Conventionally, most people do not have the right to acquire productive capital with the self-financing earnings of capital; they are left to acquire, as best as they can, with their earnings as labor workers. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital. Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively miniscule, as are their dividend payments compared to the top 10 percent of capital owners.

• The return of the dividend. Faced with an investing public that has largely turned away from equities, many U.S. companies are trying to attract buyers to their shares with an Eisenhower-era strategy: the promise of cash back.

Companies in the Standard & Poor’s 500 index are on track to pay $281 billion in regular dividends to shareholders this year, according to Howard Silverblatt, senior index analyst at S&P in New York. That would be a record for any year and a 17 percent increase from 2011.

Dividend payout is the key to future economic growth and combined with Federal Reserve reform would enable enable working and non-working people without savings to buy stock in their employer company or other companies and pay for it out of its future dividend yield––on the promise of the capital investment’s future income. This policy direction needs to be designed so that the workers and other owners receive the full property rights and full profit dividend earnings as owners, including full voting rights, not simply treated as beneficial owners with power concentrated at the top of the company, without any accountability or transparency. Under this scenario, employees and non-employees can acquire capital ownership in existing and future growth companies with the earnings of capital. National capital credit insurance would provide the necessary pledge of security for the payback of the capital investment loans.

Capital formation investments are made by companies annually based on projections a number of years out (at least 5 to 10 years) with the expectation that the investment will pay for itself as a result of sustainable growth and consumer demand. Thus, the concept embraces the idea that capital formation is self-financing. The question is who pledges the security and takes the risk of failure to return the expected yield from which to repay the loan.

Such polities, based on Kelsonian binary economic theory, avoids the gambling trade and Wall Street firms that play with your money. This would circumvent that. According to binary economist Louis Kelso: “In a single transaction, you finance tools for the employer and ownership for the employees. The pre-tax yield of corporate assets of prosperous companies varies from 25 to 60 percent. The yield on secondhand securities is around five or six percent. Sure, with capital gains, you can get a little more, but don’t forget, that’s a zero-sum game; for every gainer, there’s a loser. Wall Street doesn’t fly any airplanes or raise any corn or do anything else in the way of producing products and services. It just plays games with your dough. And when you take it out in pensions, you’re going to get less than the company put in for you. You have to; that’s the dynamics of it.”

Capital credit is far more rewarding than consumer credit to, for example, purchase a home. Capital credit is restricted to the purchase of assets that are expected to pay for themselves out of the revenue generated from the capital investment, which it financed, and therefore these assets are expected to earn a continuing flow of profit for whoever owns the assets. Consumer credit, on the other hand, does not generate its own repayment, and in order for the user to repay they must rely on other resources––for most Americans that means their labor worker earnings and personal savings.

What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security––those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it.

Thus, as Kelso asserted: “The problem with conventional financing techniques is that they address only the productive power of enterprise and the enhancement of the earning power of the rich minority. Sustaining or increasing the earning power of the majority of consumers who are dependent entirely upon the earnings of their labor, or upon welfare, is left to government or governmentally assisted redistribution of income and to chance.”

Once the national economic policy bases policy decisions on two-factor binary economics, productive capital acquisition would take place through commercially insured capital credit, resulting in a quiet revolution in which economic plutocracy will transform to economic democracy; and as well, economic growth would be free from the slavery of past savings.

Please see my article “Democratic Capitalism And Binary Economics: Solutions For A Troubled Nation and Economy” at http://foreconomicjustice.org/11/economic-justice/

Also please see my article “The Absent Conversation: Who Should Own America?” published by The Huffington Post at http://www.huffingtonpost.com/gary-reber/who-should-own-america_b_2040592.html

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm

http://www.latimes.com/business/la-fi-economy-markets-20121229,0,488696.story

 

Small-Scale Solar's Big Potential Goes Untapped

Small-scale solar plants

On December 29, 2012, Julie Cart writes in the Los Angeles Times that modest-size projects can produce electricity at a lower cost to consumers and the environment, bit government loan guarantee financing goes to big plants.

The Obama administration’s solar-power initiative has fast-tracked large-scale plants, fueled by low-interest, government-guaranteed loans that cover up to 80 percent of construction costs. In all, the federal government has paid out more than $16 billion for renewable-energy projects.

Those large-scale projects are financially efficient for developers, but their size creates transmission inefficiencies and higher costs for ratepayers.

Smaller alternatives, from rooftop solar to small- and medium-sized plants, can do the opposite.

Utilities charge ratepayers for every dollar spent building transmission lines, for which the state of California guarantees utilities an annual return of 11% for 40 years.

By comparison, small-scale plants can be built near population centers and provide power directly to consumers, reducing the demand for electricity from the grid.

Rooftop solar goes one step further.

I publish an architectural magazine, Ultimate Home Design (www.ultimatehomedesign.com) that advocates responsible green building initiatives, with respect to on-site energy generation. I also built the greenest home in America, the Optimum Performance Home (http://www.ultimatehomedesign.com/oph.php).

The United States should adopt the German model of “Feed-In-Tariff” (TIF) and ensure that anyone who generates power from solar, wind, or hydro is guaranteed payment from the local power company. Under such a program, local power companies are obliged to buy power generated by solar, wind, and hydro home and small business installations.

Germany pioneered legislation, and other European countries––including Spain, Portugal, Greece, France, and Italy––are implementing similar legislation. At present, unfortunately, local power companies in the U.S. are not required to pay homeowners for the energy generated  on-site beyond what the homeowners generate produce a “Zero Energy Home” (ZED) cost operation. Thus, homeowners with systems designed to generate excess electricity are not compensated. “Feed-In-Tariff” legislation, which offers cash incentives, will become the most important means we have to boost the solar and wind energy market, and significantly reduce our country’s dependence on foreign oil. Such legislation will make it lucrative for ordinary people to put solar systems on their roofs and wind turbines on their properties. The end result will produce a new class of homeowners who will be energy-independent and part of a network of clean energy producers.

Beyond the issues explored in the article regarding large solar installations, what is missing is the ownership structure of this advanced renewable energy system development. The article implies that the U.S. Department of Energy is involved. Should ANY power plant involve taxpayer monies, the government should require that the utility users/customers share in the private, individual ownership of the development, turning every customer into an owner of the power utility. This can be accomplished by forming a for-profit, professionally managed, citizen-owned “Community Investment Corporation” (CIC) or Citizens Land Bank (CLB) (www.http://cesj.org/homestead/strategies/community/cic-full-nk.html).

While the CLB would create new private sector jobs and entrepreneurial opportunities, its main accent is on widespread participation, particularly in the ownership of land, technology, buildings and infrastructure that must be fabricated upon the community’s land for expanding the local economy. The Citizens Land Bank is designed to serve as a for-profit land planner and private sector developer geared to rational innovation and change at the community level.

Using the most advanced tools of the free enterprise system––especially innovative credit and financing tools-the CLB would create new owners of newly created assets, without taking existing property away from present owners.

The CLB strategy and its institutional structure for mobilizing citizen action are easily adaptable to areas of virtually any size, such as land surrounding nodes of a mass transit system, a downtown renewal area, or an inner-city neighborhood. The CLB can even be adopted for an entire city, metropolitan area or natural region of the country.

The CLB would create new opportunities for corporate executives, real estate professionals and the best advisors that money can buy, but they would be accountable to the CLB’s lenders and shareholders through the CLB’s broadly representative board of directors. Local enterprises could then compete more dynamically in the global marketplace without special protections or subsidies.

Such policies, when implemented will provide a substantial amount of energy. We need to make the effort and advocate to our political leaders to pass the necessary legislation.

http://www.latimes.com/news/local/la-me-solar-future-20121229,0,4926686.story

It's Wages, Stupid! Progressive Tax Reform Alone Will Do Little To Close The Gap Between Haves And Productive Have-Nots

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On December 28, 2012, Christopher Petrella writes an Op-Ed piece in Truthout in which, according to Petrella, the key to reducing income inequality and assuring general prosperity is to tackle the widening wage-to-productivity ratio and assure everyone a living wage.

Surging income inequality is fundamentally attributable to the grotesque divergence of pay and productivity for low- and middle-income workers since the mid-1970s. Though wages and productivity rates tracked evenly from 1948-1972, according to the Bureau of Economic Analysis (BEA), hourly compensation for low- and middle-income workers has grown less than half as fast as gains in productivity since the mid-1970s. Beginning in the mid-1970s, employers began taking advantage of historically high levels of surplus labor by suppressing wages. US labor shortages, which were a mainstay of the national economy since at least the formal abolition of race-based slavery, all but disappeared in the mid-1970s as a result of emerging automated technologies, the growth of outsourcing, the introduction of women into the “formal” labor market, and the passage of pro-immigration statutes in 1964.

The widening chasm between productivity and pay helps to explain why in the third quarter of 2012 after-tax corporate profits achieved a record share of the GDP – while total wages simultaneously plummeted to their lowest-ever GDP ratio.

From 1979-2007, the after-tax income of the top 1 percent of income earners grew 13.5 times as fast as the after-tax wages of the bottom 20 percent of workers. But here’s the catch. The pre-tax income of the top 1 percent grew at nearly an identical rate – 13.9 times as fast – as the bottom 20 percent of workers over the same period of time. These data suggest in exceptionally clear terms that a regressive tax system isn’t the primary driver of our nation’s widening levels income stratification.

Christopher Petrella’s argument is seriously flawed because is it based on one-factor economic thinking in which productivity gains are attributed to labor.

The role of physical productive capital ––land; structures; infrastructure; tools; machines; human-intelligent machines; super-automation; digital computer processing; certain intangibles that have the characteristics of property, such as patents and trade or firm names; and the like owned by individuals––is to do ever more of the work, which produces income. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum. Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production. The mixture of labor worker input and capital worker input has been rapidly changing at an exponential rate of increase for over 235 years in step with the Industrial Revolution (starting in 1776) and had even been changing long before that with man’s discovery of the first tools, but at a much slower rate. Up until the close of the nineteenth century, the United States remained a working democracy, with the production of products and services dependent on labor worker input. When the American Industrial Revolution began and subsequent technological advance amplified the productive power of non-human capital, plutocratic finance channeled its ownership into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

People invented tools to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which products and services are produced from labor intensive to capital intensive––the core function of technological invention. Kelso attributed most changes in the productive capacity of the world since the beginning of the Industrial Revolution to technological improvements in our capital assets, and a relatively diminishing proportion to human labor. Capital, in binary economist Louis Kelso’s terms, does not “enhance” labor productivity (labor’s ability to produce economic goods). In fact, the opposite is true. It makes many forms of labor unnecessary. Because of this undeniable fact, Kelso asserted that, “free-market forces no longer establish the ‘value’ of labor. Instead, the price of labor is artificially elevated by government through minimum wage legislation, overtime laws, and collective bargaining legislation or by government employment and government subsidization of private employment solely to increase consumer income.”

Furthermore, according to Kelso, productive capital is increasingly the source of the world’s economic growth and, therefore, should become the source of added property ownership incomes for all. Kelso postulated that if both labor and capital are interdependent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property (and access to the means of acquiring and possessing property) must in justice be extended to all. Yet, sadly, the American people and its leaders still pretend to believe that labor is becoming more productive.

Technological change makes tools, machines, structures, and processes ever more productive while leaving human productiveness largely unchanged (our human abilities are limited by physical strength and brain power––and relatively constant). The result is that primary distribution through the free market economy, whose distributive principle is “to each according to his production,” delivers progressively more market-sourced income to capital owners and progressively less to workers who make their contribution through labor.

Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment––thus the political focus on job creation and redistribution of wealth rather than on full production and broader capital ownership accumulation. This is manifested in the belief that labor work is the ONLY way to participate in production and earn income. Long ago that was once true because labor provided 95 percent of the input into the production of products and services. But today that is not true. Capital provides not less than 90 to 95 percent of the input. Full employment as the means to distribute income is not achievable. When capital workers (productive capital owners) replace labor workers (non-capital owners) as the principal suppliers of products and services, labor employment alone becomes inadequate. Thus, we are left with government policies that redistribute income in one form or another.

Thus, as Kelso asserted, “the government continues to discharge its responsibility for the health and prosperity of the economy through coerced trickle-down; in other words, through redistribution achieved by the rigging of labor prices, by taxation to support redistribution and job “creation,” or subsidization by inflation and by all kinds of welfare, open and concealed.”

Kelso once wrote: “It doesn’t make any difference what’s going on in the scientific world or the business world or the industrial world, we still believe full employment will solve our income distribution problems. This is what major political figures have always maintained.”

Kelso also was quoted as saying, “Conventional wisdom says there is only one way to earn a living, and that’s to work. Conventional wisdom effectively treats capital (land, structures, machines, and the like) as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, ‘Voila! The productivity of the labor has gone up 900 percent!’ I say ‘hogwash.’ All you’ve done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don’t have it.”

In a democratic growth economy, based on Kelso’s binary economics, the ownership of capital would be spread more broadly as the economy grows, without taking anything away from the 1 to 10 percent who now own 50 to 90 percent of the corporate wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, also benefiting the traditionally disenfranchised poor and working and middle class. Thus, productive capital income would be distributed more broadly and the demand for products and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote economic growth. That also means that society can profitably employ unused productive capacity and invest in more productive capacity to service the demands of a growth economy.

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm

Sign the Petition at http://signon.org/sign/reform-the-federal-reserve.fb23?source=c.fb&r_by=3904687

Sign the WhiteHouse.gov petition at https://petitions.whitehouse.gov/petition/reform-federal-reserve/PhY3Jswk

Also follow the Center for Economic and Social Justice at www.cesj.org and http://capitalhomestead.org/ Join the OWN Team at http://capitalhomestead.org/group/the-on-team

Also see The Kelso Institute at http://www.kelsoinstitute.org/

Like the Just Third Way Group at http://www.facebook.com/groups/Justthirdway/

http://truth-out.org/opinion/item/13550-its-wages-stupid-progressive-tax-reform-alone-will-do-little-to-close-the-gap-between-haves-and-productive-have-nots

2012: The Year In Graphs

Posted on December 27, 2012 by The Washington Post‘s Wonkblog team:

As 2012 draws to a close, Wonkblog asked our favorite professional wonks — economists, political scientist, politicians and more — to see what graphs and charts they felt did the best job explaining the past year. Here are their nominees.

Sheila Bair — former chairperson, Federal Deposit Insurance Corp. (FDIC)

“There has been much discussion about income inequality, but not enough focus on its corollary: debt inequality. As real wages for the masses decline, they try to sustain consumption through borrowing from the wealthy. This economic model is, of course, unsustainable, and eventually collapses, as we discovered in 1929 and again in 2007. Unfortunately, our tepid recovery continues to rely primarily on asset inflation and cheap credit to support economic growth, even as real income for most people erodes, likely setting us up for another bust down the road.”

Jared Bernstein — senior fellow, Center for Budget and Policy Priorities; former chief economic adviser to Vice President Biden

“Here’s a simple one I keep thinking and talking about. While we’re all wound up in self-imposed fiscal madness, there’s still an economy out there that’s not working too well for a lot of people. Real hourly wages of middle-wage workers* have been drifting down for the past few years, a function of the persistently large amount slack in the job market. This figure also serves as a reminder that high unemployment doesn’t just hurt the unemployed — it hurts people with jobs, too. Finally, it’s a reminder as to why this is a lousy time to let the payroll tax cut expire. All that in one little line!”

*This is BLS hourly wage series for so-called production, non-supervisory workers (non-managers in services and blue-collar in manufacturing) deflated by the CPI.

Raj Chetty — professor of economics, Harvard; recipient, 2012 MacArthur “Genius” Grant

When a high value-added (top 5 percent) teacher enters a school, end-of-school-year test scores in the grade he or she teaches rise immediately …

 

… and students assigned to such high value-added teachers are more likely to go to college, earn higher incomes, and less likely to be teenage mothers. On average, having such a teacher for one year raises a child’s cumulative lifetime income by $50,000 (equivalent to $9,000 in present value at age 12 with a 5 percent interest rate).

 

The earnings gains from replacing a low value-added (bottom 5 percent) teacher with one of average quality grow as more data are used to estimate value-added. Discounting future earnings gains to present value, the gains are $190,000 with three years of data and eventually surpass $250,000 per class. If future earnings are not discounted, cumulative earnings gains surpass $1.4 million per class.

“Out of our own group’s research, the graphs that had the most impact on my own thinking — and, I believe the public debate — are the trio of graphs from our paper on teachers’ long term impacts. I was very surprised to see how sharp teachers’ impacts are — as soon as a good teacher enters, students immediately start to do a lot better — and how long their impacts last.”

Kent Conrad — Democratic senator from North Dakota; outgoing chair, Senate Budget Committee

This chart demonstrates that additional revenue has to be part of any deficit reduction package. It shows that the last five times the budget was in surplus (in 1969, 1998, 1999, 2000 and 2001), revenue was near 20 percent of GDP. Revenue is now at 15.8 percent of GDP, near its lowest level in 60 years. And under the House Republican budget plan, revenue would reach only 18.7 percent of GDP by 2022, a clearly inadequate level. Even with spending cuts and entitlement changes, given the retirement of the baby boom generation and rising health costs, it is clear we are also going to need more revenue.”

Source: Data comes from OMB historical tables and the House Republican budget proposal.

Peter Diamond — professor, MIT: 2010 Nobel laureate in economics

“Cutting Social Security benefits by changing the COLA is bad economics and bad politics. That the benefit cuts would hit a vulnerable population is shown in the graph. Keeping the politics of Social Security within the issue of Social Security, not as part of the annual budget process, is vital for good pension design. “

Chrystia Freeland — editor, Thomson Reuters Digital; author, “Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else

“This is my graph of the year — known as The Great Gatsby Curve. The Great Gatsby Curve draws on the research of Canadian economist Miles Corak and was widely popularized in a January 2012 speech by Alan Krueger, chairman of the Council of Economic Advisors. The Great Gatsby Curve is this year’s most important chart because it shows how social mobility declines as income inequality increases. At a time of rising income inequality, this is a hugely important finding because it suggests that the widening economic chasm imperils one of the characteristics many Americans believe is central to their society.”

Robert Greenstein — president, Center on Budget and Policy Priorities

“This is our ‘parfait’ chart that shows what drives our record deficits. We’ve updated it periodically since its first release, since we think it really captures how we got here, as we debate the best ways for us to address the issue.”

“Our second selection addresses the “takers vs. makers” claim and outlines households who owed no federal income taxes in 2011.”

Michael Greenstone — professor of economics, MIT; director, Hamilton Project

“By unlocking vast new resources of natural gas in the U.S., fracking has transformed the energy landscape and dramatically reduced the price of natural gas. This graph summarizes the three types of costs associated with various sources of electricity generation: (1) the private costs of production; (2) external costs due to the release of conventional pollutants (primarily increased rates of morbidity and mortality); and (3) the external costs associated with the release of carbon dioxide and the resulting increase in climate change. When all three of these costs are considered, natural gas is the least expensive source of electricity.”

“This graph shows that children born to families on the high end of the earnings distribution have more resources available than did their counterparts in 1975, while children on the low end of the spectrum have fewer resources than low-income families in 1975. While there have been great increases in inequality over the last several decades, the figure suggests that further increases may be in store during the coming decades.”

Douglas Holtz-Eakin — president, American Action Forum

“AAF looked at 10 years of data and more than 230 regulations issued during the last 10 years to illustrate what drives regulatory spending by businesses and consumers; the bulk of the cost of regulations involves mandates to improve energy efficiency, with various environmental rules coming in second place. Together, those two categories account for roughly two-thirds of the economy-wide costs of complying with various federal regulations. Despite a pronounced regulatory slowdown before Election Day, regulators still managed to add more than $215 billion in final rules this year.”

Glenn Hubbard — dean, Columbia Business School; former economic adviser to Mitt Romney

“My all-time favorite graph is from the long-term revenue and spending graph in the CBO long-term outlook. In a holiday spirit of something different, I offer a chart from a pieceearlier this week by David Wessel, illustrating that tax changes for the rich are a small part of changes in the nation’s fiscal outlook over the past decade — just as they will be going forward.”

Paul Krugman — professor, Princeton University; columnist, New York Times; 2008 Nobel laureate in economics

Source: Bureau of Labor Statistics

“This is the labor share in nonfarm business. I chose it because it highlights a dramatic new turn in the story of rising inequality, which hasn’t yet made it into most of our discussion. The story is no longer about a rising education premium, as it was in the ’80s and ’90s; since 2000, we’ve been looking instead at a major redistribution from labor in general to capital.”

Maya MacGuineas — president, Committee for a Responsible Federal Budget

Source: Committee for a Responsible Federal Budget

“It is so important to put in place a sensible plan that stabilize the debt, and it is useful to have a tracking mechanism to see how various offers stack up. Let’s hope we don’t go any smaller than these.”

Bill McBride — Proprietor, Calculated Risk

“This graph shows the quarterly contribution to GDP from Residential Investment and State and Local governments for the last several years. Residential Investment is now adding to GDP growth, and it appears the drag from state and local governments is ending — two key stories going into 2013.”

Bill McKibben — environmental activist; founder, 350.org

“This shows that the fossil fuel companies have five times more carbon in their reserves than even the most conservative governments think would be safe to burn.”

Peter Orszag — vice chairman of global banking, Citigroup; former director, Office on Management and Budget

“This graph from S&P illustrates two key facts: health-care costs have decelerated over the past few years, and Medicare costs have decelerated more than other health costs. That pattern suggests at least part of the slowdown is structural (since if it were all just a reflection of economic weakness, we wouldn’t expect Medicare to slow down more than other health costs, but if it were partly structural, that’s exactly what we would expect). If this slower growth continues, the impact on our long-term fiscal gap will be much more meaningful than any plausible outcome of the fiscal cliff negotiations.”

Alice Rivlin — former director, Office of Management and Budget; co-author, Domenici-Rivlin debt plan

“Federal spending has risen since the recession, but over the long run the increases have been entirely in ‘mandatory spending programs,’ which reflect increases in the number of unemployed, low-income, disabled or retired people eligible for benefits. Discretionary spending appropriated annually by congress is heading towards its lowest percent of the economy since 1970.”

Cass Sunstein — professor, Harvard Law School; former director, Office of Information and Regulatory Affairs (2009-2012)

“There have been a lot of wild charges about regulation being “out of control.” True, we must control costs, but benefits matter too, and as demonstrated by this chart (produced by technical analysts in the federal government), the net benefits of final rules in the first three years of the Obama Administration exceed $91 billion. Not bad.”

Neera Tanden — president, Center for American Progress; former HHS senior adviser for health reform

“This year, Americans faced a choice between an America that works for everyone, and a top-down America that works only for the wealthy few. Voters chose an America where we create shared prosperity by strengthening the middle class. When America’s middle class thrives, America will prosper and maintain its economic edge.”

Ruy Teixeira — senior fellow, the Century Foundation and Center for American Progress; coauthor, “The Emerging Democratic Majority”

Source: Dave Troy

“In a phrase: density = Obama voters.”

Sam Wang — professor of neuroscience, Princeton; director, Princeton Election Consortium

“This XKCD speaks to most of the pundit class in 2012, even if they don’t realize it.”

Venture Capital Didn't Build That

Mark Zuckerberg, chief executive officer and founder of Facebook Inc., speaks at Facebook’s F8 developers conference in San Francisco on Sept. 22, 2011. From the Erie Canal to the Internet by way of the transcontinental railroads and the Interstate Highway System, the American state has played a strategic role in the deployment of the transformational technologies that have created a succession of “new economies.” (David Paul Morris / Bloomberg)

On December 27, 2012, William H. Janeway writes in the Los Angeles Times from railroads to highways to the Internet, it takes government to help drive innovation and economic growth.

 Can government play a positive role in economic development?

To understand who built what in the construction of the American economy from its pre-industrial origins, a look at one of the drivers of U.S. innovation — venture capital — is instructive.

A significant observation to take from this excellent article is that taxpayer monies via taxation and the pledge of national debt provides the financial means for the government to serve as  the principal financier of technical research and the principal customer for the products that result. The government is the advance entity that enables investment in fundamental science and in technological invention in its nascent stages. This is the precursory stage for the next generation of entrepreneurs and venture capitalist to have their opportunity to innovate and invent.

At every stage, the innovation economy depends on sources of funding decoupled from concern for economic return. As economists have long recognized, such funding will not be delivered by competitive markets. Only an active state in pursuit of politically legitimate missions — national development, national security, conquering disease — can play the required role.

While a wealthy minority has benefited as owners in FUTURE capital asset formation, the significant problem has been the systematic denial of participation as capital owners on the part of the majority of consumers. While the wealthy ownership class has essentially rigged the financial system to their benefit, and by that is meant to continually concentrate ownership of productive capital among the richest Americans, the majority of Americans have been and are dependent on JOB CREATION. Yet, no leaders or academia, or the national media addresses this imbalance with the richest Americans entitled to income growth associated with productive capital ownership and the majority facing further job losses and degradation due to technological advancement.

With that as the premise, we need an Economic Marshall Plan, which will necessitate a long-term advocacy platform that requires our leadership, academia and the national media to educate themselves to the Just Third Way of economic democracy where we create an OWNERSHIP CULTURE whereby EVERY child, woman and man owns a viable income-producing capital estate and sources their income from the dividend earnings of their estate.

We need leaders who will put this issue before the national debate stage, and we need the media to put forth the questions whose answers will provide the financial mechanism specifics to reverse the ever dominant OWNERSHIP CONCENTRATION. Such concentration and the economic power that result is taking control of our representative government, with productive capital ownership channeled through plutocratic finance into fewer and fewer hands, as we continue to witness today with government by the wealthy evidenced at all levels.

We are absent a national discussion of where consumers earn the money to buy products and services and the nature of capital ownership, and instead argue about policies to redistribute income or not to redistribute income. If Americans do not demand that the contenders for the office of the presidency of the United States, the Senate, and the Congress address these issues, we will have wasted the opportunity to steer the American economy in a direction that will broaden affluence. We have adequate resources, adequate knowhow, and adequate manpower to produce general affluence, but we need as a society to properly and efficiently manage these resources while protecting and enhancing the environment so that our productive capital capability is sustainable and renewable. Such issues are the proper concern of government because of the human damage inflicted on our social fabric as well as to economic growth in which every citizen is fairly included in the American dream.

I hope ALL Americans will support our movement to “Reform The Federal Reserve.” Please sign the SignOn.org organization PETITION at http://signon.org/sign/reform-the-federal-reserve.fb23?source=c.fb&r_by=3904687 They want to support this petition and take it national but we must demonstrate that there is enough support. Supporters of For Economic Justice need to ensure the petition is sent on to President Obama and the United States Congress at https://petitions.whitehouse.gov/petition/reform-federal-reserve/PhY3Jswk. We have fought hard for a progressive change to energize our economy. We have an opportunity to build a 21st century infrastructure with renewable and sustainable energy development and new cities that will be looked upon as technology showcases. The petition deals with reforming the Federal Reserve Banking System such that the national bank lends the money to ordinary citizens to re-build America. This can be accomplished with low-interest loans. In addition to the lending authority of the Federal Reserve, people everywhere are willing to lend money to the United States at rates that are lower than at any point in history. This will free us from indebtedness to China and transform our anemic 2 percent growth rate to 10 percent or better annually and not only result in an OWNERSHIP CULTURE of new capital owners but also JOBS CREATION. The objective needs to be to broaden the private-individual ownership of new FUTURE productive income-producing capital investment simultaneously with economic growth. This will result is a far better balance between production and consumption and put us on a path to prosperity, opportunity, and economic justice for EVERY American.

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm

http://www.latimes.com/news/opinion/commentary/la-oe-janeway-innovation-govt-investment-20121227,0,7793938.story

The FHA: A Home Wrecker

On December 27, 2012, Edward J. Pinto writes in the Los Angeles Times that Federal Housing Administration (FHA) policies are disrupting the American dream for the families and neighborhoods they are supposed to help.

Imagine that a federal agency wanted to hurt America’s working-class families on purpose. How would it inflict maximum damage?

It might start by aggressively marketing homeownership to marginal borrowers. It would tell them that bad credit scores aren’t a problem. It would push them into homes they can’t afford, saddle them with loans that barely build equity and provide no incentives for fiscal discipline. And when many of these homes go underwater and into foreclosure, it would leave families in financial ruin.

In short, such an agency would follow the Federal Housing Administration playbook.

The  FHA mortgage insurance program is based on the principle that the number of people who receive loans for housing purchases from banks, with the loan monies guaranteed to the bank against failure of the purchaser, will be significantly small compared to the total loans amounts issued and guaranteed by the FHA. Of course, put into perspective, to purchase a home requires a separate, independent source of income to pay the monthly mortgage amount, which over time pays off the initial loan and the home then becomes an equity asset of the homeowner.

The point is that a separate source of income is necessary as the home is consumed as a habitat, not as a rental property or capital asset. The principle of insuring loans is based on the preposition that the majority of loans will be paid back over time, with few defaults covered by the insurance fee attached to each loan.

If we apply this insurance concept to the acquisition of productive capital ownership not only does the same principle apply but the capital assets financed with the loan actually generate their own income stream to pay off the investment. This is the financial mechanism used by wealthy Americans to accumulate capital ownership of FUTURE capital asset formation and benefit from the stock dividend income.

Binary economist Louis Kelso advocated the use of capital insurance to facilitate acquiring private, individual ownership in business corporations facilitated with private capital credit insurance or a government reinsurance agency (ala the Federal Housing Administration concept). Under the plan, the promissory note can be offset to the government’s central Federal Reserve Bank in return for the cash equivalent of the amount of the loan, less an administrative fee. The only cost to the direct lending bank in making a loan to the business corporation would be the administrative fee, or about 2 percent of the loan’s principal and then another 2 percent for capital credit insurance, with an additional quarter of a percent paid to the Federal Reserve Bank to monetize the loan and give the lender the same cash as it would have had if it had actually loaned money to the corporation. The lender’s cash loaned to an Employee Stock Ownership Plan (ESOP) trust or a Capital Homestead Account (CHA) is replenished with the Federal Reserve Bank cash. When the company pays the ESOP trust or CHA enough money to enable the entity to repay the lender, the lender has to retrieve the note and pay back the Federal Reserve Bank. Thus, the loan cost would be essentially not more than 5 percent to allow ownership broadening financial capital to be in­vested in ownership broadening ESOP trusts and CHAs to create new capitalists. Thus, national capital credit insurance is the key to pledged security.

To implement this approach, the  Federal Reserve needs to stop monetizing unproductive debt, including bailouts of banks “too big to fail” and Wall Street derivatives speculators, and begin creating an asset-backed currency that could enable every man, woman and child to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income.

The CHA would process an equal allocation of productive credit to every citizen exclusively for purchasing full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets,

The shares would be purchased on credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods and services produced by the newly added technology, renewable energy systems, plant, rentable space and infrastructure added to the economy.

Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance, but would not require citizens to reduce their funds for consumption to purchase shares.

Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm

Sign the Petition at http://signon.org/sign/reform-the-federal-reserve.fb23?source=c.fb&r_by=3904687

Sign the WhiteHouse.gov petition at https://petitions.whitehouse.gov/petition/reform-federal-reserve/PhY3Jswk

http://www.latimes.com/news/opinion/commentary/la-oe-pinto-home-ownership-fha-20121227,0,4564498.story