Manifesto For The New Global Economy

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Manifesto for The New Global Economy – Moses Solemon !

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!! Preface The global economy is everybody’s concern. Without the stability of global economy there will be no peace or prosperity for the human kind on earth. The state of the global economy affects everyone from the Wall Street in New York and banks of London, to the jungles of Africa and deserts of Arabia. To find the way towards such goal, I revised some of the writing I made in the past four years. Some of such writings were thoughts that evolved as the 2008 global economic crisis broke. Some other thoughts were reflections that were never released before. And the rest is a reflection on the whole updated situation with some insights into the future of the global system. Our presence in the 21st century is very much affected by the collection of systems that we live by and through. Whether political, social or economic it all has to add value to our human renaissance and prosperity. Contemporary humanoids should not act like cave people with modern technology. We are more knowledgeable and therefore better equipped to develop better systems. We are a higher form of life that should help preserve life and not destroy it. The human being is not primitive any more. From the creation of clay tablet or pads in Mesopotamia valley to the invention digital iPad in the Californian Silicon valley, the human being travelled a long way in history. The loop of time is about to close. Let us all live together in prosperity, than die alone in poverty. Moses Solemon May 2011 !!!!!!!!!!!!!!!!!


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! The Long Road To Economic Recovery


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A World in Crisis: Who is Driving The Global Economy Bus? Wherever you look at the world map you see imbalances and disturbance in the global economy. Just to provide some examples:

• Destruction in Japan because of the March 2011 Tsunami. • Chaos in the Middle East North African nations • European debt and austerity Crisis. • North American Middle Class being hammered. • US economy is in need of fundamental restructuring. • Great Wealth and unequal distribution. • Uncertainty in stock and real estate markets. • Soaring prices of commodities and mainly food items. • Rising cost of energy and utility bills. • The incent relationship between business and politics that is leading to

widespread corruption. There never has been so much money and wealth in the hands of nations in the history mankind as in the 21st century. However, this money is in the hands of few. Perhaps as little as 90% of the wealth is in the hands of 10% of the population. While the rest of the 90% of the people fight over the remaining 10% of the wealth. Monopoly, banking regulations, corruption, and poor governance have deprived people from simple and basic rights. Such rights are access to clean water, healthy food, secure shelter, decent work opportunity, sufficient pay, and affordable education and health services. You add to this list now lesser retirement benefits and longer working life. The Middle Class is being blamed for exhausting earth’s resources by over-demand. The rich class is blamed for obsession with power after scooping all the wealth in post 2008 crisis. Some of the richer people know well that: “wealth is power”. They will not share that power with other people. The ultimate form of such power grip when wealth marries with the political leadership and alienate their own people on their own land. Such blind power transforms then into tyranny. If World Bank and International Monetary Fund and United Nations were efficient in the first place, and then the 2008 crisis should not have taken place. G8 and G20 meetings at their present level of effort will not do anything to stop. In fact they cannot because of their “guiding and recommending role” in fixing global economy. They have no reprimanding powers.


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In Which Face To Face The Nation? In the famous US television program “Face The Nation” politicians sit and talk about their own views of the national issues. The concept of such program is to ask some one to tell the nation the truth or hide their half-lies. The faces are sometimes happy, and more often grim in recent years. May be because they cannot deny or hide facts any more with the Internet and facebook, twitter, and YouTube around. Now, one should wonder in which face will some leaders of politics and businesses face their own nations. The truth is out there and it is hard. Few of the new realities are as follows:

• There is a global economic and financial reform. • The reform is structural, profound and universal. • There will not be cash available to all. • Cash will be given only to those who are trustworthy. • Liquidity is available for those who provide better proof on how they will

spend it. • Under-developed and unprivileged nations will suffer most. • Certain business sectors, jobs, and society classes will be more affected

than others. Tell this to any nation, and see how their faces will look like.


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He Did It. Or, Did He Not? Similar to a good murder story where the reader finds out the butler did it, many believe Paulson was behind the present financial crisis. Prior to his appointment as the US Treasury Secretary, Henry Paulson was CEO of Goldman Sachs. GS is the bank the bank that mastered risk management. Paulson had the know how to predict scenarios of global economy meltdown. After all no one else had the math modeling and supercomputers to create the economic “Black Hole”. This hole sucked global wealth and threw nations into turmoil and recession. But why would Paulson do such a thing or involve himself, as a person with good credentials, any way? There are those who think the threat to US economy from China was great. This should have been stopped at one point. Some saw the time was ticking for old world (Europe, Middle East and Asia) to take global business and trade lead again from the new world (USA). The way to reverse time was to break the clock hands so no one will notice. There would be many speculations and theories behind such assumptions. However without proof, all such talk remains no more than thought or wild guess. The truth is there are fundamental faults in the financial system worldwide. The global economy was, and still to this day, faulty. Such faults reside in the lending system, commodities business, and leveraging capital. And a long chain of greedy brokers and selfish speculators causes more of it. Some of those people may have ties also with organized crime rings that are involved in money laundering. One more thing added insult to injury. Despite it’s luster and attraction, the US real estate market was also overpriced, and full of bad economics, greedy people, and visible corruption. The system as it was run was based on doom and gloom. The only way to manage its possible chaotic collapse was to create a controlled demolition before wreck kills all.


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Grumpy Old Men! Why Allowed The Bubble To Grow? The present global economy situation seems to be, for thoughtful people, more of a comedy show. A crazy show like that looks like the Marx brothers excluding Mr. Karl Marx who is not a relative, of course. The logic of markets for the time being is out of context and does not follow any predictable rule. Such unpredictable performance is likely to repeat almost in all sectors of the economy. Capital markets behave funny enough like a bubble generator. But, who blows air into these bubbles? Despite the dispute over their actual value, real estate should never lose economic importance as solid asset in any economic system. If this happens it is a sign of fallacy of the system. There was lot of wrong doing in the US real estate market. But real estate itself was not to be blamed for the failure of the system. The inherent root cause lied in the lending regulations, and the banking system that allowed the bubble to expand beyond it’s holding capacity. It is very strange how the US Federal Reserve Bank under the management of Alan Greenspan in the 1990’s allowed the bubble to grow. The US Fed knew well that the real estate bubble in Japan in the 1980’s caused Japanese banks to fail. If this act was intended, then it is an indication of the presence of very good reason for such sacrifice. The stakes must have been sky high and the rewards are long term indeed.

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Should Damagers Be Saviors? Why the global economy has suffered is directly related to how the US financial administration mismanaged the crisis. The fundamental principles of Capitalism allowed it to happen. The system encouraged it to take place. World governments turned blind eye towards the progression of the problem and did little to stop it from collapsing. Even worse some administrators made wrong decision that led to worsening the speed and effect of the downfall. In USA, the major global market, some of such decisions were allowing non-worthy creditors to borrow money. They let them take money without enough assurances of the borrowers capacity to repay what they took. Even the rescue package proposed was selective in judging that financial institutions should be salvaged and who should be left to dissolve. The whole situation was violation to ethics, value systems, and breach of the social contract. With such record of poor financial management, should the world let those who led the global economy to fail to fix it now? If not, who deserves to lead and undo the harm and why? These are serious questions that remain unanswered because of the present international imbalance of power. Meanwhile, countries like Iceland are left to suffer from the sub-mortgage crisis, credit crunch and Globalization. They were all intelligently packaged and sold to good-hearted investors who trusted incompetent and greedy businessmen. These people are the ones responsible for finding drugs sold publicly in the malls and streets in major world cities. This happens when basic food items such as bread is becoming less affordable to the world population.


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Global Financial Crisis, And Unequal Local Recovery. Global recession as bad as it is now will continue to hit hard economic sectors and countries alike. Even great depression in early twentieth century did not destroy or paralyze the banking system as this crisis did. This fall is major and will change the way people do banking, carry out business, and handle money. The recent financial catastrophe was indeed a perfect storm. US, Europe, China, India and all are hit hard. As credit crunch continues, loans get tighter, and consumer spending gets less. Thus industrial production will slow down to adjust to lower consumption levels. Such lower production means less need for human resource. Unemployment increases and consumer spending becomes lesser. Company stock prices also fall resulting in market poor performance. And the recession spiral continues in a vicious circle. Now, “Governments” are “Partners” in the banking and insurance “Business”. The partners will agree to jumpstart certain economic sectors that spur growth and bring life to wider market segments. According to statistics the recovery happened in U.S. and U.K. first. It will take longer time before the plan spreads to other nations. The present world status enforces a status quo where larger nations having less developed financial systems will take longer to recover. Small and medium businesses in the North America and Europe offer better option to jumpstart the battered economies. They have what larger organizations don’t. That is the unbeatable personal determination to succeed whatever! The road to economic recovery took three years in North America. In Asia it will take longer. In Africa, it may take some countries more than a decade to overcome the aftermath of the collapse of the monetary system. In terms of business sectors the effects of market fall was different. Recession hit all sectors, but relatively some got less affected than others. Such variance proves that recession did not hit equally and that recovery will not be equal also. There were major price falls in real estate prices across the world and from New York to Dubai. At the same time, some sectors such as energy and information technology recorded strong growth. This reveals that the recession did not hit equally across business sectors anyway. The recovery in all nations will rely on how each world Government administration and private sector interacts together. Where such relation in some countries may be bad, the road to recovery will be long and painful.


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The Way To Faster Development Where there is true democracy, institutional systems, and strong bond and partnership between private and public sectors, recovery should be easier and faster. It takes two wings to fly. True effectiveness of democracy among nation depends on the following factors: level of education, cultural background, social fabric, and value systems in any nation. The social contract between the ruling leadership and the people should be governed by a clear and effective constitution. Such constitution must respect personal and group liberties and lay the foundation for governance, transparency, and institutional democracy. Needless to say that democracy and corruption do not work together. The same rule applies for free economy and monopoly.


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Capital Spending and Guided Development Capital spending to revive the national economy and keep it growing depends mainly on capital spending in productive sectors. Such sectors should benefit majority of the people and provide basic needs for their daily living necessities. Such sectors are: water management, basic food, housing, energy, utilities, education and total wellness. Such services should be available, accessible, and affordable to the public. Even better, the common people should be shareholders in the institutions providing such services either for profit or non-profit. It is the “bread” economy versus the “jewelry” economy. Governments must build their economies for fulfilling the majority of the people, equally and fairly. The national economy should be built to provide a state of welfare not the welfare of the “state”. There have to be wiser government and public spending guided to develop the real needs of the public. Any national economy should not be structured to serve the desires of a privileged minority.


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Fix Old Faults And Prevent New Ones. The road to global economic recovery and prosperity begins with fixing old faults. Then, prevent new mistakes from happening. This is easier said than done. There is no one system and no one management. The world is the economic Mosaic pieces that coexist together but not necessarily always integrate together. There is logic behind everything. If we exclude the possibility of “designed intention” to let the economic crisis happen, we end up with “faulty action” that triggered series of events which led to the crisis. The two possibilities are not pleasant to think of. However, whatever the causes may be, we now need a structured and permanent solution. G8 and G20 meetings had the way but do not offer long-term plan for the root-cause solutions. To find the way to recovery, we need to cure old mistakes and prevent them from happening again. The options are tough this time because it is different than any other time in history. Those who think that the 2008 economic crisis was a down cycle in a typical capitalist economy are wrong. Some financial systems and institutions are broken beyond repair. Humpty dumpty, which in this case is the world financial system, got a grand fall. All the Kings horses and all the Presidents men cannot bring the economy back again. There has to be a totally new economic system with fresh financial and monetary order. This may be a long road to recovery. However, it is the only path to safe destination. If we can ever write a formula for effective and fail-safe economy it will look like the following: (Capital Spending * Infrastructure + zero Interest) – (Monopoly + Greed) + (Effective Governance + Transparency) * (Equality of Wealth Distribution + Fair Opportunity To All Public) = National Renaissance.


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We Need A New Economic Order, Not Only A Neo Financial System. The basic principles of the fallen economic order were doomed with faults. Now, the world needs a new system to overcome a troubled past experience. Communism fell short of fulfilling its promise to the people. Now it is the turn for Capitalism, as we once knew it, to change in order to maintain the “prosperity promise”. Otherwise it has to go also. There is no fear that “democracy” will perish if “capitalism” is replaced. Milton Freedman put them once together in one book. However, each “democracy” and “capitalism” can survive on its own. There are effectively capitalist countries that lack the Western version of democracy. They did financially well even without “Free Speech” or the “Right To Choose”. An example for this is some oil-rich states. Some other democracies such as India still struggle to achieve prosperity for the masses. The magical solution is not a mixture of Demos-Cratos and capitalism together. It is true though, that a government by the people and for the people, to rule the people is a self-correcting system of choice. This is especially true when grave mistakes happen. Democracy is a viable social contract when “The People” are well educated, and morally and socially responsible. The present financial crisis, coupled with results of the U.S. Presidential Elections proved that even if Capitalism can go wrong, illuminated Democracy is a Fail-Safe system. Even if takes some time to produce results. Now we need a fail-safe “Economic Order” and not just cosmetically “Neo” Financial System to put the human race back on track. The new order should include a package of prosperity for all, social wellness to all, and equality to have access to good life needs.


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Interest And Inflation: Best Economic Growth At Zero. Economy grows faster and performs better at Zero interest rate. Moreover, there would be little or no sign of inflation. Is this good or bad for conventional Capitalism? And which should be the best means of national wealth creation: “Debt plus Interest” or “Production plus Value Adding”? Bankers try to convince the public always that “Debt” is good. It is like saying greed is good and legal. It is may be so for the banks, but not when there is so much interest. The prevailing world economic crisis proved that debt plus compounded interest is a sure recipe for catastrophe. Debt is the bankers’ way to make easy money and claim that, by doing so, they are “creating” wealth and growth. Truth of the matter is that economies grow fastest near “Zero Interest”. In practice, compounded interest succeeds in creating inflation and dangerous economic bubbles. Such bubbles explode and the whole economy dives into whirlpool. From a socially responsible point of view also, Interest allows few people to become richer by “lending money” to the masses. In the true economic sense, this is not a real value- added human effort. Zero Interest environment makes it impossible to create wealth without Production and Adding Value. It generates also strong drive towards innovation, high productivity and helps create competitive market economy. It encourages the liberation of treasured wealth from their hideouts to actively participate in building wealth and growth. In such case bankers will change their present role to become active and real partners. Maybe not all bankers are bad, but most of them certainly are greedy. We need to reduce inflation by removing interest from the system. We need to return to simpler and more representative of economic principles such as the supply vs. demand principles.


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Capital Growth in Between Two Times Investors and capital managers cannot continue capital growth by breeding money with money. Such breeding is accomplished by interest rate hiking, inflating assets and asset revaluation, profit on paper (POP) faking, and speculation. They cannot continue to shuffle money through the system. And they cannot rely on governments to print more paper money to feed their hunger for wealth, power, and control. Governments should not sacrifice the long-term national interests to benefit few cream-du-le-cream elite. This is common sense economics. They have to move towards growing capital by real production with multiplied value addition. Smart production will create jobs and enhance consumption. For production to be smart it will provide useful, quality, well designed, and easy to use products at affordable prices. Capital has to be transformed into sustainable development. Defying common sense and wrongful benchmarking is self-deception that will lead to nowhere. Capitalism will continue to arrive at the right results for the wrong intentions. The solution for real capital growth in the era of cash-tight times resides in three words: Demographic Domestic Demand.


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Taxation Concept: Good Public Money For Good Public Services. Or Is It Not? The concept of tax is as old as history of governments. How it is implemented is debated and the system is revised to make an imperfect system becomes better by time. The problem is, it does not always get better. The concept behind “Taxes” is to secure funding for the public and government services through the public money. It is not a bad idea, if implemented righteously and just-fully. The problem is that in practice it is so complex and very difficult to mange. In theory it should establish justice among people in how much is deducted. In practice, people try to find the best legal ways and system loopholes to minimize their tax deductions. Most people do not view taxes as “contribution” to public prosperity. General public view taxes mostly as personal wealth they must give away that otherwise, given the choice, they will not. This is so true when the level of public service is low and poor in quality. At that point, people fail to see the value in the money they provide since their tax money deductions are not used effectively. What commons perceive in the heavily taxed developed nations is that the good money they earned had lost its way. Such way leads to creating good quality public services efficiently and effectively using public money in the right priority and the right order. May be it is wise to review the Tax System to avoid the wrong doings of ancient Rome. In such days, it was better to be a broker than a farmer because of the taxation structure. Eventually there was not enough food for all and Rome starved to failure.


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Public – Private Partnership: Ethical, Transparent And Governed. The partnership between public and private sectors is a must for any economy to make it work effectively. However, an ethical value system has to govern this partnership. Auditing systems has to ensure also its transparency. The recent move of the U.S. Government to own and sit on the Board of banking corporations, show public and private institutions are now “real” partners. This may be viewed as good and as bad also. It is viewed well because the Government is able to exercise better control on business to ensure faithfulness to the public value system and social contract. To ensure such faithfulness we need to review Sarbanes-Oxley governance regulations to expand the scope of corporate governance. We need to implement systems and auditing tools to increase the effectiveness of compliance screening. Such screening will ensure the national and global economic goals and interests are met. Enhancement of corporate transparency is now mandatory more than ever. It is needed to preserve public trust and faith in our economic system. Such trust will not endorse companies only but also include stock markets. Trust is the basis of our stability and prosperity. This is why the new partnership must demonstrate it is trust-worthy. The financial crisis was created by greedy and affluent groups of people. Their greed should be stopped. The ethical and moral system had been and shall remain our prime guard and protector.


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Public Resources and Utilities Must Become “Public” Ownership. All people have to use power, water, and gas. May be it is time to consider the general public to become owners of their common utilities. According to the proposed new system every user in a town or city will instantly own equal share in the community utility company. Users in cities and townships must pay for life to use utility services which without they cannot sustain a living. Primarily a few able, and willing investors own the utility companies. They collect profits from users. Despite utility company any person can own shares, they are only always available unless they’re offered for sale. It is fair if users of such utilities become owners of their utility companies. They start ownership from the time they begin using them. The person who pays a utility bill is a person entitled for part of the profit the utility company makes. Each user will have an equal share, even if they do not equally consume utilities. It is unlikely that people will consume more to increase their end of year profits. On the contrary, it is almost certain to make them wise and conservative in their consumption. Such system will increase the level of governance also in utility companies not to raise tariffs or impose fees without real need. Such approach serves as added protection to suppress prices levels within market-conditions and within reach of the rich and the poor alike. They will equally enjoy good service at reasonable rates. To create genuine prosperity, we need zero monopolies and fair distribution of wealth.


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! What’s Next?


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Check The Pulse of Global Economy Economists agree that a business cycle is composed of up turn and a down turn over a certain period of time. Or what some people refer to as times of boom and then bust. What had been noticeable in the recent history that such cycles have been shorter in time span and more severe in amplitude. Therefore, we have been experiencing more cycles with sharper rises and deeper inflations so often. That is why for example the banking system failed in the least cycle of recession while it did not in 1939. Surprisingly, several remaining banks after the crash did remarkably well, mainly because there were not many good ones left. Another probable reason is that they enhanced the numbers more aggressively to avert crisis. Some just had a “number job” and “earning uplift” by the Accounting Plastic Surgeon. Few others did extremely well because they enjoyed unfair advantage acquired by political network, classified information and top technologies. Such non-conformity in establishing the right basic definitions and standards on how to measure economic performance leads the present economic system into ambiguity about the reality of recovery. The global economic indicators may show signs of recovery. However, we need the to witness the reflection of such recovery on “Joe The Plummer” spending ability. There is no doubt that the recent financial crash will lead many world economies in the less privileged parts of the world to live in a state of “vegetable”. This is where the economy shows signs of living but no real life or activity. For those who lived in the so-called then “The Great Depression”, they should rethink again what to call this one.


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Two Conflicting, And WRONG OPINIONS Who decides who is right and who is wrong in any given market analysis? Is it the name of the institution? Is it the analyst reputation? In a perfect world it may be is the case. However, in the real world it is the market de facto. Those who see the world economy doing well are wrong, and those who see it doing bad are also wrong. The vision for the world economy that it is a composite of “economies” and not one single “dominant economy”. Therefore, given that view, some are doing well and some are doing bad. This is so true, not only in terms of “countries” but also in terms of specific business “sectors”. The majority of economists realize that but they tend to oversimplify facts to make explainable to the public. The common person needs to know the overall status quo of the world economy in few words to help him decide whether to panic or relax. Listening to some chaotic analysis is enough to freak any sensible person with moderate education about the economy. Take the World Bank statement for the last three months, for example. James Wolfenson, World Bank ex-director, confirmed then swallowed the statements that said that the “worst is yet to come”. The chaotic analysis is flooding the market. It is a situation similar to the famous anecdote of the six blind men trying to identify what an “elephant” is, each from his blind perspective. They all got it wrong.

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! 22!

Hiding Dust Under The Carpet Almost 80% of the US banks said that they were saved by President Obama economic plan. This means they escaped bankruptcy because they got free money. This means also that they hid so much dirt under their carpets that no one exactly knew how clean or dirty their actual financial position was. The seriousness of the matter that the “80%” figure shows how wrong the system is and how deep and profound the structural reform should be. Let alone it will be lengthy in time and some times painful. Such results is a sign that the time has come to re-think and revamp the business ethics and system standards in accounting and revisit management principles. It is a time to reconsider what is acceptable and what is appalling in the practices of Capitalism. These faulty businesspersons cannot keep hiding their dust under our carpets. The blinding greed that killed most of the failed banking institutions was based on the belief that public money is free and sweet. They finally choked of what they could not swallow or digest anymore. Another wrong belief was the myth of debt is a good way of life through “Credit Cards”, “Loans” and all. The truth is “Cash is King” and that the net-worth of an individual resides in what he or she owns and not in what they borrowed! This is the striking and simple truth about what is considered as an “asset” and a “liability”. The recent global correction is wake up call on fundamental economics.


! 23!

Real Issues Need Real Solutions Jobs for the people Real Trade Growth Protecting Economic Stability Regulating Cash Flow Fair Currency Exchange There is little justice in world trade today. There is an absolute unfair advantage throughout the supply chain from the source to the consumer whatever the product is. There is much profit made and long line of brokers without real added value or real effort. There is also a lot of deceit and deception in financial data released by most monetary institutions, and even countries. Many who mastered the numbers game try to massage and polish the numbers as much as the acceptable practices allow them to do. The objective is to look better and brighter. The accounting practices today are so much like cosmetic surgeries where the goal is hide reality by removing extra wrinkles and pounds in undesirable locations. Such virtual economy is unreal. In most cases the published figures and statistics about the economy in a country does not reflect the actual status of majority of the population. Nor do such data discuss the pains and aspiration of the ordinary citizen. Instead, the economists’ over analysis and politicians brag while citizen “X” strives to meet ends meet between income and expenses on weekly basis. Likewise world currency exchange system needs justice to move forward. The world needs real trade growth with real data and real numbers. The economic stability should be protected also from monopoly and manipulation, and by securing raw material sources and global trade passages. The money cycle has to be fair also where there is equality in flow and just distribution of wealth. Unless such solution is realized the saga of troubled economies will continue to haunt humanity.


! 24!

Social Justice Or War Of Classes Quality jobs and Fair Pay Taxation Reasoning State Welfare Fulfilling Basic Needs Pay is unfair and people cannot get quality jobs that pay them enough money in almost any country worldwide. The reality is that “Fair Pay” is about expectation levels and workers’ perception of what is just and what is not. A fair pay is a pay that provides decent reward for the added value, deed or know-how delivered. People need that pay to suffice their basic needs and save some to fulfill their higher goals in life. Sustainable jobs such as in the Japanese “Nenko” style is not available anymore. A sustainable job is a job that pays more than it takes on annual basis. Money in the real world is only equal to human life because without it no civil progress and no human development can be imagined or accomplished. Economists should work on redefining the concept of “good” pay on a national standard for various levels and types of labor work, professions and expertise. The goal is to make basic needs more affordable and quality of life is much better for all people. Fulfilling the public basic needs must be accomplished to protect any nation and immune its security. A sound and reasonable reasoning and overhaul for the existing tax system and structures should be the next target after banking overhaul. This is a vital and necessary action in most developed nations. The current taxation system has resulted in bubbling up costs and prices and therefore wages in most nations. This in itself led to kill the global competitiveness of most nations. A serious side effect was the destruction of the social fiber of a nation. This was the result of dismantling the components and definition of the “Family” and “marriage” leading most of the developed nations into lesser births to be aging or extinct nations.


! 25!

Social And Economic Divide One year ago it was less imaginable that students will invade the streets of London and attack the car of the Crown Prince. It did happen. It is notable also that public riots in Europe have not been witnessed in US streets. Was it a better luck for America or better public administration? There is one thing for certain. Social class-divide and economic discrimination will continue in Europe. The state of welfare may have vanished under global economic pressures. After all David Cameron the British Prime Minister have dismantled the social security system that had matured for fifty years before him. People have to work more for less. They will work longer years and get lesser benefits. Retirement age is heading towards the age of seventy. Pension cut will be more if the public deficit grows more. At the same time the cost of living is not less expensive. On the contrary it is going higher. Simple logic tells us that such conditions will lead to poorer communities, and richer elite. It is a rebirth of the 19th century class system again in a 21st century style. Such economic divide will be more visible between countries and nations all around the world. The haves and have-nots will be torn apart by knowhow, capital and accessibility to resources. For all those who search for the roots of French revolution, please look no further. Europe will soon be revolting again.


! 26!

! Think Strategy


! 27!

The Art of Surviving The Times Your personal and business survival depends on the way you think in times of crisis. These are times just like today. Amidst of global economic demolition and rubble, you need to cruise your way to success and prosperity. Therefore, Think strategy for the long run. When business times get edgy and you feel there is an uphill battle, think strategy. This is exactly what will help you win in the end. High risk short term betting is a gamble that is dangerous. Such gamble can gradually destroy your valuable and probably scarce resources. Those who thought short term, in the past two years, made some profit and lost more by now. Those who got stuck in unfavorable investment positions found quitting, with little or no loss, was impossible. Others went into the cycle of revaluation of their over-priced and high-ticket (but low value) assets. Those unfortunate investors ended up losing considerable percentage of their wealth. In reality the market free fall was paid for by all investors. I encourage all investors to take long term positions based on good and solid strategies. Such strategies are based on true market sense rather than speculation, brokerage, and number crunching behind a computer. Please hit the floor and stay in touch with reality. Shield your investment by sticking to good business fundamentals and sound mercantile sense. Define your true North and go for it. This is the way to go!


! 28!

Starvation For Enough Liquidity Some cash is back. But, It is not enough for all. Almost 70% of world financial institutions are starving for cash. Not everyone will get enough of it. In 2008 major banking institutions had fallen and they took away liquidity and much more money on books with them. The rescue plans adopted in more than fifty countries including US and UK still has to prove effective correcting status quo. It will take until Q3 of 2010 to show results. To save their assets from further devaluation, the smarter investors try buyouts and mergers and acquisitions as means of capturing continuous influx of cash. Once the conditions are right they may sell acquired assets for handsome profit. The most important five lessons learnt for future are as follows: 1. Your net worth is cash you generate not that you borrow. 2. Value resides in assets and resources you utilize now and not in those that has “future potential”. 3. Keeping operational expenses low is key for staying competitive and staying in business. 4. Equal diversification of investment is good for sustaining total net worth and ensuring sustainable cash flow. 5. Rapid expansion in the open market is not good strategy. Long lines of logistics will exhaust resources and often lead to trips and falls, especially at time of crisis. The situation is bad even for high wealth, high growth and small population nations. The Gulf Cooperation Council countries in the Arabian Gulf, for example, were struck hard by the crash. Much of foreign investments they made have decreased the value of their acquired assets by 45% to 55% of their original purchase price. Money is plenty only in Abu Dhabi, Doha, and Riyadh. The rest, like many, still pray for continued better oil prices.


! 29!

Future Of World Trade Most financial analysts agree that world economy has regressed. Some nations are prepared also for trade protectionism. They are ready to adopt such option to hedge from further damage the trade globalization had brought to their already-troubled economies. The financial crisis is still echoing across the globe and is bringing repeated waves back to the epic centre. It will take years to settle. Meanwhile, the surge in trade will continue affecting banks, money, jobs, consumption and manufacturing. In fact, the 2008 crisis had caused the whole dynamic motion of the world economy to spin out of balance. Nations like Iceland had transformation shock from fishing to banking to fishing again in one generation. Countries like Greece, Ireland, Spain, Portugal, and soon enough Italy feels the pinch of austerity. Such punishment was the result of poor financial management that kept ongoing for decades. In the case of Africa and poor parts of Asia, people are still striving to learn the truth. In the ancient past there was the Silk Route that connected traders from Asia to Europe and to the heart of Africa. Such route connected people and cultures by road and by sea. During such days, rock salt was a currency and commodity. The major players were India, China and Arabia under the Ottomans rule. Until today, 90% of all cargo is shipped by sea and by road. The Silk Road was the best example of globalization at that time. That road was replaced in the 17th and 18th century. The new emerging powers in UK, France, and Spain took the world commodities to Europe and then brought some of it back to the colonized nations. In the pre-globalization era, in the 1970’s the world was split into three major trading blocks: Asian, European, and North American. Africa followed Europe mainly, and Australia belonged to the Commonwealth. The mostly American Mutli-National Corporations (MNCs), including major international banking corporations, played a great role in uniting markets. Such unity came through standardization business norms. Most of it came through popularizing the American style of life worldwide. Such style was actively promoted among the young generations across Asia and Europe. The regression of globalization coupled with the global financial crisis, threatens the world to go back into Three Block Trading instead of Global Trading. That means a dramatic shift of shipping lines, products and capital to reside in new centers. Most successful business centers will be where there is the highest demographic demand.


! 30!

Which Global Currency? And Why? For many good reasons the US Dollar will dominate the world, for a longer while. The United States dollar may suffer in terms of value losses in 2010. But, it is not out. It will stay around as the dominant world currency for at least ten more years. The Euro-zone is still striving to resolve its own problem and overcome its own internal hurdles. Accordingly, the Euro as currency will have to demonstrate better strength and global acknowledgment to become a world dominant currency. This will not happen overnight and will take few more years to happen. Asian currencies, such as Japanese Yen and Chinese Won may be popular within South East Asia. However, they are hardly favored beyond that region. Russia foreign investment is almost entirely in US dollar. China is trading heavily with USA. And OPEC countries continue to price their oil and gas in US dollar. In such global business environment it is hard to replace the dollar just because it’s value is fluctuating. It takes strong reasons, and a very good currency supported by highly stable political system to capture the vital role the US dollar plays in global economy. No currency can fill in the shoes for the greenback. Even precious metals such as gold is not widely accepted or recognized as means of paying for services and goods. The gold itself is currently being priced in terms of US dollar. For replacing the US dollar with another currency it takes war, crisis, and another globally approved monetary system. This will not happen in the next day morning.


! 31!

The End Is Not Near It is not end of recession, yet. It started some time a go and it has not ended. The global economic crisis has created echoing waves in the world economies. Such waves have to settle before the extent of damage is really known and not just estimated or forecasted. The global economy is so much interwoven, interconnected and integrated together. Globalization made it so close in such way that even the most complex mathematical-modeling super computers will have to re-compute many times the impact of the shock on each sector and each nation. The main factors affecting globalization are also many. Each factor has direct and indirect effect on other main elements that make the big economy. As the waves travel back and forth for the time being, there may be more dynamic forces intervening in a form of new economic tsunami. Potential disturbances can result from US dollar value, credit card crisis, political turmoil, and certainly regional military conflicts. The recent economic crisis in 2008, has created waves of recession and pockets of depression in various countries and across many economic sectors. Such waves will continue to dynamically travel and bounce in a rhythmic motion until the whole new economic system settles or collapses. The success in ending recession depends on addressing the real trade issues and curing the faults in the financial system, processes and institutions. Above all, a new generation of different set of values has to take over from those who made greed good and legal. Such success shall be founded on the stability of industrial production and safety of trade routes. It will depend also on a stable and fairly valued currency exchange system. It will succeed also if managed by good people, along with strong auditing from the political institution. For such to take effect politics and business shall remain apart to avoid conflict of interest from happening. Conflict of interest means another global and massive catastrophe.


! 32!

The Shape Of Recovery Curve For some, the economic recovery curve may look like a U-shaped “Grief” curve. The bathtub curve of long recession looks like the one for human grief. However, this is not funny. The money lost in the last crisis has yet to be found, since that was the greatest cash robbery ever in the recorded history of mankind. The shape of Economic Recovery curve will be different for each and every economy. Such curve may be “V” shaped for economies of US and UK. However, it may be a long bottom “U” shaped for African nations and a “W” for the oil rich MENA nations. There is no one common shape of recovery pattern for all. Each is a case by itself based on its own economic structure, model and factors affecting its own domestic economy. The jolting effect of the recent crisis on the less diverse economies may leave them in state of paralysis for few decades. Whatever the “shape`’ of economic recovery is, it should not only reflect on the national numbers. It should express itself clearly in the streets, home, and schools of the nation. It should reflect the healthy performance in its factories and banking institutions. The objective of economic recovery is to provide people with better standards of living and not only keep the budgetary books in order.

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! 33!

Buy, Or Say Good Bye The severe economic climate change has created endangered species of industries that are fighting for life. Auto industry, shipping, and aerospace are few to name. If the Governments work on their survival, public consumers must buy the products to ensure their wellness. It is now a situation where people have to buy or say goodbye to products and brands they grew up with in the past. If economic severity prevails longer, people in many countries (perhaps as much as 60% or world nations) will have only enough money to pay for basic needs, such as shelter, food, and fire. Capital spending has to be guided into strategic industrial and service sectors to sustain their existence and make them grow. Consumption has to be encouraged through job creation and liquid cash affordability at reasonable rates. Debt levels has to be restricted to avoid its climbing to uncontrollable levels that causes damage of the whole system. Food industries, health industries, energy systems, utilities, steel industries, defense, communication, and transport, are all examples of vital industries. Such industries are part of the national security of any nation. If a nation cannot produce, or will not consume the basically vital products of any given sector then such sector will migrate or vanish.


! 34!

Right, Or Wrong? In the absence of credible and reliable reference it is tough to build a balanced and just global economic system. Let alone that we can actually end the present problems, or provide right solutions for the long term. This is dangerous. It simply means that same problems that happened in the past can occur again. They can be sudden and surprising to us as the older ones were. The human-made economic disasters are not force majeure. In reality they are wrong choices. Therefore, the logic and the design behind systems and the processes should be smart enough to eliminate the possibility of crash. We need a global economy fail-safe system. Such idea should be discussed in global forums all around the world. We need it to protect human prosperity, social justice, to protect world peace. Fail-Safe design is enforced in industrial systems, so why can’t they be integrated into financial systems? If engineers can do it, why economists and bankers cannot think of one? As The World Moves Towards New Economic System, More Turmoil And Imbalances Are Expected. The way we did business for the last fifty years had now changed forever. The way we work, live, play, do banking and get paid is now on the verge of complete change. Even the classification of society levels is being redefined all around the globe. However, the change will not come so fast, although the process started.


! 35!

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The World Economy Looks Like This: Instability Caused by Mixing of Two Systems. No Equality In Wealth Sharing Or Distribution. As the transformation from one phase to another happens, it is expected to witness irregularities in the behavior individual economies. Economists should deflation in the leading economies and regression from globalization to economic protectionism in China and India. There will be a drop in per capita income all around the world. There will not be regular or equal capital flow until further notice. Perhaps the function of capital and money has to be re-defined in the neo economic and monetary system to arrive. Those who decide how it will look like in the future are the ones who helped demolish the old one. They will not share wealth nor distribute some. There is uncertainty in the world markets now. Short-term brokers are eternal losers. It is the game of long-term position now. Long term means two years plus in strategic investment. The problem is few people have enough cash, and fewer can wait for two years or more to harvest fruits of success. Our conundrum is to hold world peace and stability amidst economic changes. From human past history, economic changes were associated with world wars.


! 36!

Nations And Trade Routes Are Hit By Terror And Piracy, One At A Time. Is Global Economy Short Of Trouble? Ruthless groups of indiscriminate mass murder are hitting the business centers and nervous system very hard. They threaten the world to return to 19th century protectionism and colonial era. The recent attacks on Karachi, Mumbai, and acts of piracy in Somalia are not the brainchild of faith or hunger. They are the monster-child of one ideology: “Terror”. The global economy now suffers insult added to injury by political instability caused by acts of terror and piracy. Terror is a multi-national business working across borders and cultures. It has its own financing schemes, organization structures and recruiting methods. There are politicians also who benefit from such business. The brutal masterminds behind such acts lack the courage to build civilizations. This is why they are after destroying the present one. Force is one way to stop them. The other way is to uproot the school of thought that programs their brains to become minds of human holocaust. Forget higher education. When and where there is more poverty and hunger, there will be higher crime rates. The war on terror is more sophisticated than most people imagine. It has far reaching effects in space and time than some expect also. Hotels in world cities that represent cosmopolitan business centers seem to be targets for terror. Trade routes at the merchant marine straights of Malaga, Hormuz, Mandeb, and Suez, to Gibraltar are all candidates for piracy also. If the civilized world fails to unite against terror, the cost can be our civilization.


! 37!

! The Plan For Future


! 38!

Build Your Business For The Neo-Economy Business leaders will have to rethink how to build and run business for the future. New economic times have arrived. New banking regulations are drafted, and new economy emerges. This is the dawn of Neo-Capitalism where the Government is not a mere regulator, but a guardian, a partner and the cash custodian. In a fair democracy you can some how trust the politicians, but what about other political systems? Never mind. Whatever the answer may be, it is time for business managers to re-think future and long-term. This begins with business strategy, corporate structure, systems, staff, and ways of running the business. It is not business-healthy to think or act conventional anymore. The prevailing atmosphere is an early warning sign for small, medium and even large organizations of the arriving times. The task gets more critical for small business. Small businesses, that constitute the larger labor employer in a capital economy, will have to manage. They will do this with little resources and limited financials to overcome the high tides of market powers. This is where Governments in North America must intervene to protect the basic fabric of the economy by providing solid support for Small and Medium Enterprises. If SME’s fail then up to 80% of any national economy will fail. The Large conglomerates will not be able to outsource services anymore. If Governments wants to play in the market with guts, they will have to consider such scenario, from the perspective of a player not a cheerleader or a referee.


! 39!

The Internet Economy Is a Challenge To All The most proficient in Internet still explore how to best use it for business. Although the Internet economy is fairly young, it rapidly became a powerful business tool. Email, SMS, blogs, websites, and download sites have become the strategic means of communication between people and businesses. Whether the model is Business to Client (B2C) or Business-to-Business (B2B) it all revolves around digital highways. My email is my global identity, and the Internet is my window to the world. It is my means to stay in touch with others, and it is my tool to gain knowledge and to do business. I can leave home without my laptop, but I cannot go to sleep without my blackberry beside me. I have relatively large family, but this is how technology altered my lifestyle. There is more technology tools are under development than already had hit the market. Most technology users and Internet addicts cannot even cope with the tech gadgets and sites that offer endless promises for business. Some serve as marketing and publicity tools. Some are for family and friends. Other sites offer exchange of business information, close deals, or wire money. And the tasks and functions of the Internet are growing. At the same time our dependability is also growing on these tech tools. Such dependability calls to seriously defend the net and defuse terror and sabotage threats that may endanger our communication lifeline. 2010 will hold the promise for further breakthrough Net-based technology that enhances the quality of life and advance business and fun further.


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Europe Under The Rock Hammer Europe is a turning point in its history. The Euro is under pressure and so is the social structure of the Euro-zone middle class. Central Governments in Europe proved their incompetence in feeding all the hungry mouths, under one united flag. It is clear now under the pressure of the global economic crisis that European Governments cannot manage their economics efficiently. The centralized command and planning system is in fiasco. The system is too diverse, too slow and disunited. Therefore governments bypass that by delegating more autonomy to municipalities, regions, and smaller communities. The natural result in the end will be a fragmented Europe rather than a united one. Germany was clear in its refusal to bail out Ireland. It was clear and loud also in abstaining from taking larger responsibility for saving European spaghetti economies. The debt lines were so tangled and complex it takes centuries to resolve even with the help of super economists, mathematicians and the deep blue. The year 2011 will force leaders of Europe to take harsher measures towards their unity, after they did that to their nations. Austerity killed the state of welfare across Europe and created a state of misery and class divide. The rock solid appearance of united Europe had been hit by economic crisis. That effect is apparently has a worse effect than a rock hammer. Europe will fragment one piece at a time.


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China Facing The Gunpoint China feel targeted as a result of its global economic success. At the same time it is not denying the need to play responsibly in the global economic arena. China is willing to float its currency the Yuan and restructure the export system and allow more imports. However, it wants this to happen slower then USA and Europe are demanding. Chinese financial logic and Western priorities do not necessarily meet in all aspects. It takes time to get to middle grounds and stick to the terms of agreement together. Even Japan eyes China as a source of future risk in Asia. Playing the human rights card and negative publicity can make so little effect. With public protests in London and political chaos in Washington the “Free-World” public is less interested in Chinese civil rights. People now pay most attention to those who help them pay the bills and put a hot meal on the table. Marking 2011 it will be a turning point for China in terms of getting stronger amongst other global world economies. Whether it will sustain such precedence after that is debatable. Only time will tell. The giant global manufacturing production which makes more, better and less expensive still dominate world markets. With Japan facing political vision dead-end and Koreas at war no one else can compete. Betting on Vietnam and Philippines takes at least a decade to make them credibly competitive. Until then, China will remain facing the gunpoint.


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USA: The Bull is Back To Wall Street Guess where all the action will be in the second quarter of 2011 and onwards? Wall Street seems to be in the center of attention, and yes, the bull will be back to the stock markets. After all that may be the only place left now to make a good quick buck if you make a good pick and stick to good choices. Why stocks on the street will be better? This is simply because there are no other good options out there. There will be slow but firm recovery in the US markets. There will be better job opportunities but not necessarily more jobs in the employment markets. Hard-hit families, by the 2008 economic crisis, will be able to regain partial prosperity in 2011. Home-based investors who used to make small money gains in the FOREX market will flee to the stock market. Large capital from around the world, fearing slow growth and loss of wealth, will move to Wall Street also. Other good opportunities, for fast and large growth of capital, will exist elsewhere in USA and niche business sectors in Europe. At times where banks fail, countries default on debt and black holes appear in cooked books, it is tough to re-establish investors confidence. Lessons learnt from the recent 2008 global economic crisis revealed it is different and severe. The US economy that was structurally changed by the crisis is never the same again. Investors going into such market must learn the lesson and act accordingly. The challenge in US production machine is that brokers are more than producers. In every mega industry there are few Original Equipment Manufacturers (OEMs). If such OEMs shut business entire business sectors will be shut the next day. We saw this happening in Japan after the Tsunami, where entire families and communities were wiped out and so the businesses that used to support the “Big Fluffy” corporate names.


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Bretton-Woods System Change: Oil vs. Gold It may thick, black, sticky, and smelly but it is a much accurate indicator of human economic activity than the glittering gold. It is the Crude Oil, or as the ancient Romans once named it: “Petroleum”. And according to Robert Zoellic of the World Bank, it is time to reconsider gold as reserve for world currencies and replace the whole system. The Bretton-Woods system should die. It is outdated, inefficient and wrong to keep. The objective is to have more precise and accurate measure of the value of a currency based on economic activity. After all the wealth of a nation should be measured against it’s activity and added value rather than how much the treasured gold it has. Consumed and not treasured commodities such as crude oil will reflect the economic prosperity of a nation. Neither the production of oil is a measure nor it is an indication of such prosperity and vitality of a given economy. Oil, for the last hundred years, played a developmental role in the lives of great people in the modern era. The quantities of reserves, production and consumption are well known and are transparent to a large extent all over the world. We can rely on these figures to a greater extent more than gold. Also, consumption data of petroleum products is an accurate index of economic activity in countries. The Crude oil distillates consumption, such as gasoline and kerosene reveal the economic strength or weakness of any given world economy and business activity in such economy.


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Moses Solemon

President and CEO Canada Business Holdings Inc. Moses Solemon is an engineer by education and a businessman by profession. He looks younger than the 53-year-old man he is. He is a father of five and grandfather for two and he is proud of the family ties that bind. In few occasions you will see Mr. Solemon wearing expensive suits. His favorite business casual is jeans and a simple shirt. He is not normally the habitual tie-guy. “My business focus is Public-Private Partnership (P3) projects.” Mr. Moses Solemon adds. “There is a lot of potential there and large number of population to create development, make markets, and ensure synchronous supply and demand”. Mr. Solemon adds: “ When you create a P3 project, you must think of an economic framework that fits all classes of the society. Such formula must respond and work for the majority population needs. It becomes difficult sometime to provide world-class affordable services in less privileged societies. That is where you need to be creative.” “There is no magic in creating prosperity. There is vision, determination, smart planning and effective effort to make people and resources interact and work together. We pay special attention to people’s needs and priorities. We focus on delivering what is more vital and creates greater value over the long run.” !!!.&@>%ABCDEDACBBEBCDEDF%