Escaping old economic ideas is the real challenge not the debt that the US and the Europeans have built up.

It's time for Global realization not Globalization.

How to get a new economy rolling when US and European politicians try to pay for the old one.

by Tom Thorne

French President Nicolas Sarkozy and German Chancellor Andrea Merkel met yesterday in Paris to discuss what they can do about the European debt crisis. One notion they came up with was getting European member states to pass legislation to balance their budgets.

Naturally this idea went over like a lead balloon with most ECU members. Greece, Portugal, Spain and Ireland gulped at the prospects of a balanced budgets anytime soon. For these countries balanced budgets are fleeting at best and highly unlikely in the near future short of gutting social services and governments removing themselves completely from governing anything. It was all really public relations at the Paris meeting.

France and Germany with Great Britain are the biggest economies in continental Europe and they will have to face funding a lot of guarantees for the other debt ridden members of the ECU. However, their own economies are not in very good shape either and so whatever they do may be more window dressing than real.

What these European leaders need to do is first get away from the European focused approach to their problems and realize that they are part of a Global economy that will eventually right itself but with new economic imperatives. That will ultimately mean changing how people and politicians actually think about economics and how to generate opportunity. 

Just like their American political counterparts they need to swallow their Eurocentrism and realize that along with the US that they create an annual Gross International Product (GIP) of just about $30 trillion US dollars.

Debt ridden rich people...create opportunity for the world's poor.

They need to see that they are debt ridden rich people and get a much more strategic view of the effects of Globalization and the opportunities this concept can present in the future. Besides high technologies there are some golden opportunities for much lower technology applications to create economic growth. High technologies come in phase two.

For example the world is plagued by the excesses of Africa. Millions of people on this continent need very basic services to simply survive.  They need food, they need housing, they need sewage systems, they need safe water, and they need drugs to stem disease. The people need education of all kinds, they need jobs, family planning and they need safety from exploitation from thugs and criminals who claim to be their rulers. They need economic opportunity and they need to escape from ignorance.

They need to have freedom from the importations of weapons most of which come from China, the Russian Bloc and sadly also from the West. They need governments that can escape tribalism and clan affiliations. Africa in their own context has to escape old ideas and so does Europe and North America except in Africa these old ideas kill people. Africa needs to jump directly into the information-knowledge age. The West, China, India can help them do that and create positive economic activity that is mutually beneficial.

The direction is clear...seeing past old ideas is the problem.

Besides  Africa there is an opportunity to provide higher quality lives to millions in China and India. China and India are growing economic powers but before they join Globalization fully they need to look after their own populations much better. China could maintain its current growth rate by domestic production alone and by eliminating domestic poverty. It should reinvest its wealth into its own population. The same is true for India.

This is the first time in history that we can really take a world view. Globalization from an economic standpoint is a natural outcome of seeing the world as one unit. A blue marble hanging in space. A finite planet that has limited resources and humans with very basic needs to be met.

Why does the current economic model operated by the most sophisticated high technologies this planet has ever seen, seem unable to grasp that the world's inequities and turn them into major economic opportunities? The new economy, in my view, is not one of accruing wealth. It is an information-knowledge economy of ecology where social good is seen as profit because it creates more opportunity. It is a complete change and an economy were wealth is reinvested for the common good. The true meaning of Globalization is a global realization of human interdependency.

Global realization comes from content connectivity and an information base that tells us what we are doing and how we are doing it now has a finite end. If it continues it will bankrupt us all. At the moment the connectivity is still processing the old forms of the have and have not worlds. It is still not escaping the old ideas of economic domination of markets and politics. There is a new idea. Dominating markets is an old idea. Serving them  is our new conceptual ideas of  redefining profit.

© Copyright 2011, Tom Thorne, All Rights Reserved.

Even the quick stock market recovery is uncertain.

All that glitters is not gold.

The markets are rebounding. Gold prices are dropping slightly. There is a desire to return to normalcy. However, what will tomorrow bring?

One day of market nonsense took the markets down a lot. Suffice it to say that as the markets dropped world wide, gold went over $1800 US per ounce. Today as I write at 4:45 PM it seems to have settled to about $1763 US per ounce. In addition, the stock markets are rebounding for the moment.

As I said yesterday at these prices gold is an indicator of a lack of confidence in the performance of the world's markets and economic systems. This high price is not a vote of confidence. It is in fact a vote for hedging bets against another recession. It is also an inflated price against the US dollar. 

So where do we go from here? Again the US has yet to solve its debt crisis or even start the process. The European banks and the European Central Bank still have the same problems they had at the first of the week in Spain,Ireland, Portugal and Greece. Nothing really has changed.  

The market upswing today is not based on the modestly good US employment numbers alone. It is based on the fact that the mini crash yesterday set in motion smart money profit taking and provided a lot of market players with buying opportunities this morning.

How will all this market volatility change anything that the US government has to do? It will probably lull some US Congress members into another round of denial and posturing politics. 

In Europe they will all catch their breaths and President Nicolas Sarkozy will be able to return to his vacation that was so rudely interrupted yesterday by the economic crisis and the thought that some French banks may be close to defaulting.

The markets will recover. Perhaps there will be a dip or two but everything will now go back to normal. It is hard to believe that Standard and Poor's rating of the US could cause such a fuss. 

But I could be wrong. Maybe this fast recovery is the lull before the real storm and  meltdown.  Maybe President Sarkozy should remain in Paris? Maybe the status quo is so strong that we are pretending that nothing is wrong?  Maybe the recovery was just profit taking on the stock markets?

You see there is still uncertainty and therefore there is still negativity in the air. I sense change is coming but it is only after the old economic ways are stretched to the limit that it can emerge. Actually the new economy is emerging. More on that later after as the marketeers and central bank bureaucrats go at each other before the weekend.

© Copyright 2011, Tom Thorne, All Rights Reserved.

The contemporary economic system seems broken. It's time for something new.

The general sense of economic malaise persists. Let’s create a Cloud Dollar web based economy.

by Tom Thorne

When Canadian Prime Minister Stephen Harper says the current alleged economic recovery remains “fragile”, I think he is telling us to prepare for another downturn. The signs are everywhere. Blackberry maker Research in Motion is laying off staff and retooling their battle with Apple iPhone and other smart phone competitors. The Canadian federal government is cutting staff and playing hard back to work legislative games with its labour unions. In addition, the Obama administration is hovering on a budget supply crisis that could shut down the Government of the United States. Also, North American personal debt loads are the highest in history.

Add to this that the stock markets have been down for six weeks as confidence wanes. Youth unemployment among the well educated stubbornly continues wasting brains and talent. The creaking economic system seems poised for another correction probably brought on by record government debt, and especially the debt crises in Europe focusing on Ireland, Greece, and Portugal. 

After the last Meltdown nothing really substantial happened to rebuild the economy except governments printed money as  their meagre response to maintain the economic status quo. The mess financial institutions created with their shabby reselling of doubtful mortgages and other junk paper has gone largely uncorrected. That leaves a lot of people still suffering as a result with home foreclosures and stubborn joblessness.

Traditional economics is in the hands of fools

Unemployment remains high and growing.  Economies like China fix the exchange rates of their currencies with other world currencies helping to mount up debt for the Western world who buy their goods. It’s a kind of economic warfare where debt is held to maintain the status quo. There is no way that Chinese nine percent growth rates can be sustained without the world economy buying their goods as we and the Chinese all found out during and after the Meltdown. However, the Chinese continue their same economic policies of fixed currency exchange with no relief in sight.

The Chinese were shocked when they learned about a free economy’s “unseen hand” as their overheated economic activity and blatant use of resources began to slip when customer demand fell off in the West.  And although Chinese internal demand is large because people there still want to escape poverty as their main goal, it needs a lot of work to really serve the internal demand of the bulk of the Chinese population. 

It’s better for the Chinese government to export rather than serve the poor of their own countryside. The Chinese poor’s daily survival is a long way from building a middle class lifestyle that a few Chinese experience inside their hermetically sealed economic zones. Internal Chinese “progress” is a house of cards as long as a two-tiered economy is allowed to continue.

If the US can’t pay its way and continues to run up multi trillion dollar deficits, the result will be a devaluation of the American dollar as a world standard.  It is doubtful that the Yuan from China will gain world confidence in its inflated form and the Euro is also remain under pressure with defaulting countries along with the debt ridden British economy and its weakened Pound. There is only so much shoring up that Europe can do to stem economic collapse.

The modest proposal

Perhaps it is time for a virtual currency to arise on the web to really become the world standard. We could call this new virtual currency The Cloud Dollar. We could open virtual banks and capitalize them with Cloud dollars and if we could all agree to use them, then this new virtual currency could become the world standard.

Imagine logging onto iTunes for your favourite music or app and using Cloud Dollars to buy your choices? Why not? A Cloud Dollar is every bit as good as a US dollar or a credit card that is mired in debt. The US dollar could be renamed President Pictures and become collector’s items. 

Here’s how this new economy would start up. If you have an internet connection that is in your name, then you get a credit of 1000 Cloud Dollars which is equivalent to the value of $1000 US dollars. You start the ball rolling in this virtual economy by banking your 1000 Cloud Dollars in a Cloud Bank of your choice where you are paid 100 more Cloud dollars for making a deposit and interest of 3 percent per annum on balances.

You are laughing now aren’t you?  Well if you accept Cloud Dollars as a medium of exchange on the internet to start the internet economy you will be removed from all the current nonsense we have in the alleged “real economy”.  Each web transaction can only be made in Cloud Dollars. You start this economy going by spending and circulating your Cloud Dollars.

Cloud Banks can generate money. For each Cloud Dollar on deposit they can lend or create capital on a 5 to 1 ratio.  So your $1000 Cloud Dollar deposit in a Cloud Bank generates $5000 Cloud Dollars to lend out. If you need more Cloud dollars then you go to a Cloud bank for a loan. This Cloud money lends out at five percent. So the Cloud banks get a two percent spread. Since they are fully automated on Cloud servers they don’t have huge costs to cover.

Cloud loans are given to start up web businesses that use only Cloud dollars for their transactions. Soon people in the “real economy” will offer products and services in the Cloud Mall which will only be available on line for payment in Cloud dollars. When this happens Cloud Dollars will take on a value the same as any currency.

Cloud dollars made on the web will only be banked in Cloud banks and then loaned out at the 5 to 1 ratio to create more Cloud economic activity. This circumnavigates the now passé currencies of the US dollar, Euro, Pound and Yuan. 

Soon there will be Cloud entrepreneurs and likely Cloud millionaires. They will create more economic activity on the web. Imagine a Cloud Exchange where valuable companies with great ideas will be capitalized without Wall Street, or any other entity of the old economic order. Is it a dream? You be the judge.

© Copyright, Tom Thorne, All Rights Reserved