Download 1. An open letter to American on economic issues

An open letter to American
Dear American:
I have seen how the financial crisis, caused by greed in Wall Street, destroyed thousands
and thousands people livelihood. Four year has passed and still the unemployment level
is above 8% and GDP grows less than 3%. At this rate, US probably will have to make
even more compromise in cutting its huge deficit. Worst, US will have to keep borrowing
money from China. The part of the reason we still able to borrow so much is interest rate
is low. If inflation return and interest rate goes up, then interest payment to China will
soon become unbearable. Our foreign policy will become meaningless since we become
dependent on China. How we pay for defensing Taiwan, or South Korea if communist
China become the aggressor.
The only way USA can reduce its deficit is to make its economy grows faster and
achieves full employment (>97%). At the present time, our partner Europeans are still in
financial crisis, and Japan has its own problem with a stagnated economy. USA has to
rely on itself to reboot its economy.
I have seen that USA has tried both Keynesian economy model and Freeman monetary
policy to simulate the economy. After almost 4 year later, the combination of both
policies has stopped USA economy from sliding into depression, but the recovery speed
is at best moderate. While I am not formally trained as an economist, I have been very
interested in understanding what keep the world economy humming.
We know that Keynesian economy model had work in USA during Second World War.
The War demanded the government to spend so much that it pulled USA out of the Great
Depression. However in the 60s and 70s, Keynesian simulation seems only produce
stagnation and inflation. Monetary policy had produced remarkable recovery in
Argentina and Chile in South America during the 80s and seems to be effective in USA.
Yet monetary policy has not truly included the effect of globalization of the world
economy. After the world economy become more and more globalized, individual
country no longer able to control its interest rate and money supply. USA and China are
the only country in the world that can still truly have global impact on the world interest
rate and money supply. However, that situation in USA is going to change soon because
of its huge deficit. When the world realizes USA cannot pay its debt, USA monetary
policy will fail too.
One major factor that causes Keynesian and Freeman monetary policy to fail is that more
and more “smart” peoples who are the follower of Adam Smith “selfish invisible hand”
(Adam Smith is a British Economist that say that selfishness is the governing force of the
economy), become hungry for profit and protect themselves with self-interest regulation.
Both economic policy models have not factor in self-interest groups that can take
advantage of the system to benefit them. No matter how hard, how brilliantly the world
economists work to improve their models; they are outgunned and outsmarted by the selfinterest groups in today world.
In such a world, Adam Smith’s “invisible selfish hand” becomes the “Law” and every
economist, no matter how unhappy they are with such cruel, inhuman model, is forced to
build their model based on such “Law”. The result is that while USA is democratic
country, but its financial world is actually controlled and dictated by a few self-interest
groups. I am sure that this fact is not shocking to many knowledgeable Americans. I
believe even the president of United States cannot do any necessary reform to such
system because most economic advisers truly believe that the Adam Smith model is the
only working model and it is supported by numerous theory and researches from the
“expert” and by economists who reluctance agrees with such model.
I understand that USA must not decrease its consumption rate too much, or else the world
will be in recession. However, consumption model really driving USA into ground
because our trade deficit will keep increasing, and more money has to be borrowed from
China. It is because past US presidents believed that consumption is a mean of fulfilling
the American dream, they all support globalization of the world economy. Globalization
definitely allows cheaper good to be produced. Thus for US consumption base economy,
inflation should be lower and for the China production country, jobs will be created. The
only problem is that by promoting American to consume more and more, our trade deficit
become unsustainable. Worst, American high tech industries are no longer a dominance
force in the world since year 2000. As the rest of the world catches up in high tech, the
higher education, and high tech product, we have less and less export opportunity to
balance our trade deficit. With unregulated globalization policy and promoting
consumption as the American Dream, a few businessmen and international corporations
become very wealthy, but the unemployed Americans, the shrinking middle class
Americans, overwork American engineers (trying to stay competitive) has no dream at all.
I hope in this letter I can give American some insight on a new economic model call
“Fellowship”, which I developed while travelling in USA. In using this model, we have
to assume the following is true:
1. Middle Class American, especially Christian communities (15% American are
Christian) are always kind and generous toward the disadvantaged or poor.
2. All true American understand that we are in financial and economic crisis already.
3. US Companies have so much cash that they do not know what to do with it. (lack
of leadership in government)
4. US government is cutting NASA budget. Hundreds of highly trained space
engineer are unemployed.
5. Drug from Mexico are making many American to become drug slaves.
I believe in order for US economy to grow again at a higher rate and stay healthy, one
need to see the whole picture. For there are many factors that affect the US economy that
must be addressed:
1. The consumption economic model must be eventually replaced by Fellowship
model. With consumption model replaced by Fellowship model, globalization of
economy must be renegotiated to guarantee survival of local diversify economy.
2. Make a full commitment to space program. Get all US high tech companies
involve. The space program will be financed by private companies which are cash
rich, but regulated by the US government. US must return to space because our
national security depends on it. President Donald Regan has proposed the “Star
War Shield” that defenses US from hostile enemy. President Regan vision is
correct and today we have hostile nations such as North Korea that threaten our
Pacific Coast, Japan and South Korea. There is also other reason as well:
a. Space program in the 60s generate so much job in high tech that we almost
enjoy full employment in the high tech area. Engineers started high tech
company in Silicon Valley. We enjoy unprecedented grow in 90s because
of high investment. In our new space program, all the private companies
must contribute engineer and engineering resource to the program. Again
all the companies must work as fellowship manner with one another. By
doing so, we hope to eliminate dog eat dog competitive environment in the
high tech world in USA. Man, companies must work in fellowship with
other in order to achieve great thing.
b. Today, US need a grand vision to jump start its high tech economy. By
setting a regulation agency to oversee the privately fund Space Program,
US can make sure that standardization of parts, mandatory genetic
screening of illness and disease among astronomers and space tourist.
c. US should definitely go back to moon soon (beside Mar) and setup
permanent station there because moon is much closer (Mar is really too far
away if using only chemical rocket). Mining the moon for mineral and
other rare element can be very profitable too.
Payoff from the space program is definitely going to be huge as the whole world
will once again look up to US for high tech leadership and advance high tech
product.
3. Infrastructure of US is waiting to be rebuilt. Since rebuilding infrastructure is
consider a future investment on US and paying off such loan is not difficult (by
polling), borrow money by issuing America Treasure bond to finance this project
is acceptable.
4. American is not really eating healthy at all. According to statistic, 30%
American is overweight. This is probably caused by eating too much fast food. It
is well known that organic food is good for the body and more and more people
have been benefit from such food. If more and more American know how to take
care of the body (by eating organic food, more exercise, less soft drink), then
illness like diabetic, heart problem, obesity, and mental illness will decrease. That
is very important because 50-70% of the Medicare money is spent on these
diseases. If US government could save so much money just by us eating healthy
food, then definitely USA can afford health care reform proposed by President
Obama. Extend coverage health care plan to the poor and disadvantaged without
increase our deficit.
Yet to produce organic food, you need a lot more manpower and different
methods to grow it. I know a lot of people are already employed or self-employed
in organic farming. We should start increasing our organic food production by
giving incentive to food companies to hiring lot of workers. We can also create
tax credit for people starting their business in organic food or organic farming.
The organic food price will definitely come down and more American will be
able to afford such food. If Americans are healthy, so is USA. Most Americans
have left farming in the past 100 year, but now I am proposing that a lot of
Americans should consider organic farming and organic food production as a new
career (no age discrimination there, outdoor work, fresh air). Such move
definitely creates thousands and thousands of jobs in the suburb surrounding US
cities. Convention farming will be unaffected because the world needs food from
USA.
5. USA is getting so much illegal drug from Mexico that DEA is fighting a
unwinnable war:
The cost of illegal drug to the economy is about 1 Trillion dollar/year. Definitely I
believe massive increase of surveillance using Drone, large reward offer to find
the Kingpins will eventually locate them and special force then can take them out.
However, this type of action only produces temporary result and very soon other
Kingpins will come. It is all because the local really have no other way of making
a living. The Fellowship economic model is designed to solve this problem. If
American Christian (15% of the population) are willing to send 5% of what they
brought in US, (such as 2 year old smart phone, 2 year old laptop, 2 year old
printer, sewing machine, new or used kitchen gadgets …etc.) to Christian Church
or DFA-College (a non-profit organization found by me) for a 6 to 8 month period.
Jump start the local economy will give local a sense of power and they will have
the mean to fight back any new drug lord. The beautiful thing about Fellowship
economic model is that US is still doing the consumption (no need to worry about
driving the world into recession), but suddenly, US
a. Have more money to pay off its deficit because of less drug addicts, more
workers, less health problem.
b. Much lesser crime caused by drug addicts.
c. A true friendship is built between USA and Mexico in personal level.
d. Mexico economy will grow significant faster than before and thus much
less illegal immigrant problem.
e. Investments in Mexico become much more attractive.
f. Both country will increase their trade and drive up both country GDP.
Remember Fellowship Model, US Christian, Church and DFA-College can be
applied to US improvised region, and many part of the world to improve
infrastructure, fight corruption, fight for injustice, and inspire spiritual grow of
local people.
I have said a lot here, I hope that I can work with Americans soon to fix up their economy.
Frank L K Wan (www.dfa-college.org)
May 25, 2012
Vancouver, BC