Tag Archives: Financial Crisis

Financial Turmoil: Working the New Puzzle

It’s a strange new world, financially, for so many, one in which creativity, adaptability and an innate sense of self worth are the new gold standard.  I read some years back that every ten years or so, the financial ‘game’ changes and if you look at a graph for the Dow Jones Industrial Average over the past 100 years there is a reflection of that conventional wisdom.  The rules change and the people who make the rules – bankers, hedge fund managers and global corporations – generally skim the cream off the top, make record profits, change the rules in the play book and a new game begins.

In this particular case the game change has resulted in many people losing their houses, their jobs, their retirements, their nest eggs.   It feels like this change has left many dazed and confused.  Personally, I feel like I’m picking up the pieces of a puzzle that I once felt somewhat competent at working and trying to make the pieces fit together in a new frame.  For about twenty years prior to this economic downturn an individual with a good credit rating but no W-2’s could get a loan.  Now, unless you have the ability to show steady income – even if you have money in the bank and solid equity – you will likely not be granted a loan, a previously understood means of growing one’s wealth.

Those who found themselves without a seat at the table when the music stopped are having to learn new rules, reinvent themselves, make concessions about their living situations and let go of previously taken-for-granted lifestyles.  What I notice most in this time is that the shake up has shaken people out of their comfort zones. It has prompted reconnection.  It has prompted an acknowledgment of community as opposed to what before was an oft-articulated longing for community.  People who lived alone before are living with others. Some who lived in a kind of self-satisfied disconnect are having to find out who is actually there among their acquaintances, their families, their colleagues.

When I lived in New York City it was always delightful when there would be a huge snowfall.  People would come out of themselves in a way that was rare and warm and authentic.  Façades would disappear and spontaneous connections would happen. People would venture into Central Park at night because the entire tone of the city had changed, fear was replaced with wonder.

In a way this period of time feels a bit like that but in slow motion.  As the financial downturn unfolded and people were affected one by one there was this really lovely dialogue that began to emerge among those who had to surrender and become more supple in the face of the new normal.  I heard things like “I’m learning to live on the wind.” “I’ve never had to surrender so much in my life”, I’ve had to release the need to know how this is going to turn out and live more fully in the now”, “Appearances matter less to me than ever before” and the big one “I’ve realized that having money doesn’t mean I’m a greater master.”

It seems to me if we can approach this financial game change like a natural disaster and allow ourselves to come out of our fixed identities to reach out to others, spontaneously connect, offer our help, but more importantly offer our most authentic selves, then we have a greater chance of enhancing our creativity and adaptability. Certainly a sense of self worth is never so apparent as when we reach out to others.

I, for one, am using this time as an opportunity to reassess my values and understand more deeply what I am doing here on Earth.  I believe this is the challenge of these times and it can be met with an attitude of fatalism as though we are in a fin de siecle or it can be met with an attitude of curiosity and enthusiasm as though it is a brand new puzzle placed before us that, when worked, will reveal an astonishingly beautiful landscape.

 

photo by: epSos.de

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Get Out of Bed With the Bankers, Mr. President

Mr. President,

The signal from Massachusetts’ special election is clear: a major course correction is required to move forward your agenda over the next three years.

The first order of business is to pour your heart and soul into being a clear, public champion of Main Street against the interests of Wall Street. I do not doubt that Main Street has always been your prime concern but Wall Street has an insidious way of maintaining its grip on power and money.

When you took office in the midst of a global financial meltdown, it was understandable and perhaps even necessary that you hired a coterie of the old economic guard to help you chart the course of action. However, the Summers and Geithners of the world may be very smart and likely quite convincing, but they are fundamentally a product of Wall Street, Goldman Sachs and the like. Their fundamental DNA is that of big-time bankers.

You may be the man who makes the final decisions. But the people who determine what information you pay attention to and therefore what course of action is even thinkable are your advisers. You cannot create meaningful, true economic reform while surrounded with the likes of your current economic team. They may be wonderful people on a personal level, hard-working and well-intentioned. But they are products of an old, broken, and fundamentally parasitic financial system. They will not be able to see the pathway forward and they will ensure your ongoing blindness. For true reform, you need economic innovators, people who have been studying what is fundamentally flawed about the U.S. economic system and what reforms can begin to put America back on track and to get the engine of real businesses to roar back to life.

I thus believe that the first and most important act of course correction is to thank your current economic team for their service during a year of financial emergency, release them all, and bring in a new team bristling with innovation, reform, and pioneering ideas. The less time spent on Wall Street, the better.

The brilliant economist Hazel Henderson pointed out in a radio interview I did with her that the financial sector is 20% of our current GDP and that a truly healthy economy should not have more than 10%. That is because the financial sector is largely a game of intermediaries who don’t by themselves create products of value. A healthy financial sector greases the wheels of the real economy but an unhealthy one creates methods to siphon off a larger and larger share of the profits. An unhealthy financial sector is basically a parasite, taking nutrients in the form of money and undermining the health of the host. And that is what we have: a parasitic financial system that has come perilously close to killing the host.

Americans know that a $30,000/year teacher in Kansas is more valuable to our society than a middle-manager at Goldman Sachs who takes home $300,000 in bonuses. They also feel outraged that they are still unemployed while the bailed out banks are now paying outsize bonuses again. They sense that our system is rigged to allow Wall Street to profit off the backs of Main Street, all with the blessing of Washington, and that something very deep has to change.

It has to be clear that you are the champion of that deep, systemic change in the economic system or your presidency will fail.

I am no expert on the economy, but I have studied enough to know that there are plenty of forward thinking economists outside of the Wall Street club who can help you to rebuild the engine of innovation that is America. For your own understanding, try starting out with Ellen Brown’s Web of Debt, a brilliant survey of American economic history and what is fundamentally flawed. It’s an eye-opener. Or listen to Catherine Austin Fitts, a former assistant secretary for HUD who has detailed the "tape-worm" economy after her years on Wall Street and DC.

I’ll give you examples of the kinds of reforms I think should to be on the table for your economic reform work to be real:

  1. Federal Reserve reform – America needs to take back its constitutional right to create money rather than borrow it from bankers at interest (who simply create it out of thin air anyways). You are a fan of Lincoln and I think his Greenbacks were one of his most important stances our country has ever taken against the banking cartels. The Greenbacks were what allowed us to rebuild after the devastation of the Civil War and we need to do something similar now. One of the few financially healthy states is North Dakota, which has its own bank, a model the U.S. should emulate
  2. Transaction tax in the stock market – Even a quarter of a cent tax on trades could generate billions for the American people and slow some of the arbitrage and day-trading that poisons the financial system. This tax would not be felt by Main Street Americans but only by the elite who squeeze money out of the system through extremely rapid trading that games the system and does not create enduring value.
  3. Microlending fund for small businesses – The Grameen Bank of Nobel Laureate Mohammed Yunus has demonstrated success in empowering millions of entrepreneurs in Bangladesh with microlending and is now showing 99% repayment in pilot U.S. programs. What if we created a massive micro-lending fund for U.S. entrepreneurs with the same principles? It could even be profitable. That would spur enormous innovation without adding to the debt burden. You might use some of the repaid TARP money for this purpose.
  4. Full transparency of the derivatives market – What happens in secret almost always leads to no good in the long run. The trillions of dollars of potentially destabilizing derivatives simply must be brought out into the light of day. Before another financial bomb goes off, we need to know what is happening and to defuse as many bombs as possible.
  5. Too big to fail insurance – For any business that is deemed too big to fail, the American taxpayers should be paid for our insurance of that business. After all, we are shouldering the risk of their bad decision-making, just like an insurance company. A substantial and pricey insurance policy would motivate them to either move off the public too big to fail list (and it should be a clear, public list) or for the taxpayers to earn a decent profit in the good times. If a company is not on this list, then public investors need to know that it is free to fail and that the government will not intervene in its mistakes.
  6. Remove all corporate money from elections – this can be a bipartisan initiative, ensuring that the big banks and other corporations cannot buy votes.

These are audacious reforms to be sure, but they are only a handful of what is necessary to liberate our creative power from the predatory pirates that have taken over Wall Street and who are continuing to manipulate Washington.

The logic here is simple: if the American people see you as in bed with the bankers, the 2010 elections will be a bloodbath and most of the other reforms you want to see will fail.

You have to decisively, publicly break your linkage with Wall Street — which first means eliminating the Wall Streeters from the White House — and then take up the mantle of true, deep reform.

When you have shown that you can stare down Wall Street and clean up the corruption and piracy, the American people will again rally by your side. And then you will have the political and social capital to stare down the health insurance giants to create real health care reform.

5 Tips – Stretch Your Recession Dollar Like A Rubber Band

Long gone are the passive money-making opportunities. Even the Suzi Orman financial experts are touting saving money as the new key to financial success. Security is not locking in a year CD at 2.8%, The new ticket is frugality, watching your spending, “count your pennies”, as my Grandma would say.
Don’t buy it if you don’t need it. A new concept for our ravenous blinged-out-culture, obsessed with the obsession of buying the latest electronics, dining at the trendy restaurants, and impulsive compulsive shopping. Now is the opportunity to save money on a daily basis on those things that you truly need.
Want a few coins left in your pocket? Here’s some money saving tips to recession-proof your life.

1.Buy in bulk. If an items on sale. Buy three if it’s a staple or an item you use often. If you’re eating oatmeal to lower cholesterol buy it in bulk. Don’t impulse-buy that $10 cake near the check-out stand, and dont’ drive yourself nutty thinking about it all the way home.(I have first hand experience on that one). To avoid that sugar craze, have a dessert on your list, which is the next tip.

2.Make a shopping list. Have it handy when you enter the grocery store and stick with it. Calculate that you’re spending $2.00 a minute in a grocery store, the longer you stay, the more you’ll spend. If you’re single you feasibly could be spending as much as a family of three. Produce and meats along with condiments, cleaning supplies make it more expensive. Store brands are often using the same food packagers as the brand names. Studies have shown an overall 20% savings when buying in-house brands.

3.Have Potluck Dinners – Instead of going out for dinner, have friends over and share the meal preparation.. Arrange ahead of time, who will bring the salad, main dish, dessert, etc. Good idea for singles, as well. But, you may find you can eat out a few times a week for what you are spending shopping.

4.CUT BACK $5.00 morning coffee habit. Make your coffee at home, carry a thermos and brown bag your lunch at least twice a week. Give up the notion that left-overs suck. Last night’s broiled chicken makes a good sandwich with mayo, lettuce, and tomatoes. Bring some fruit and you’ll be eating healthy and wise.

5.Suze Orman tauts to drive your car for ten years. Keep a car well maintained, and unless you have a lemon, no car payments can add up to a needed vacation. Suze is down on credit cards. Pay cash. Get a debit card. The theory: Don’t buy it, if you don’t have the money. Consolidate debt, if possible. Lowering credit cards interest rate, adds up to more expendable cash. And, in these precarious times that adds up to stress reduction and more time to enjoy life.

What My Old House Can Teach Us About the Economy

 

My house is old. Not old compared to my friend’s house in England that was built in the 1600’s, but old for Los Angeles. My house was built in l927. Much of the house we have restored and kept just as it was in the 20’s. We have the original built-in ironing board complete with built-in swinging iron holder. We still have the old ice box. The top compartment was where you put your ice and your food went in a separate cupboard below. There is an opening in the wall (we sealed it but you can still see it) where the milkman would deliver the milk. There are archways and niches and high ceilings and although the house is small, it rarely feels that way. 

The closets are very small. They are what were normal size for the 20’s, but compared to the walk-in monsters people have today, they are tiny. For us, this is actually good and where my house can teach us about the economy. People in the 20’s had less stuff. They didn’t need huge walk in closets with shelves just for shoes and racks and racks for all their clothes. They didn’t have that much to choose from. Why do we need more today? My house has taught me that we don’t. It has also taught me that our stuff will expand to fill whatever space we live in. Maybe the same principal as a project taking the entire amount of time you allot, even though you could finish it faster.
 
Having small closets means we have less to choose from, but we know what we have. I read somewhere lately that we wear 20% of our clothes 80% of the time. Maybe we only need that 20%. We have to get rid of something when we get something new because we don’t have the space to just keep adding things. That is a good thing. As comedian Steven Wright says, “You can’t have everything because where would you put it?”
 
The other thing my old house can teach us is perspective. The previous owner told me that he was under the house one day, fixing something, when he saw a piece of the Los Angeles Times from 1927. It happened to be the real estate section.  Without picking it up he read the listing for a house in Monterey Park (near downtown Los Angeles) that had 5 bedrooms, 4 baths, and 3,000 square feet. That was a huge house for the time, by the way. The price was $5,000. When he went to pick up the newspaper it disintegrated.
 
So my house knows a few things. It knows that we don’t need that much stuff and that, in fact, we are better off with less. It also knows that what is going on with the economy today will pass. Prices will eventually go back up, and even higher than they were. Maybe not today, or tomorrow, or even 2 years from now, but eventually things will get better. So clean out your closets, and look forward to better times. From my house to yours…
 
Originally posted on The Huffington Post.
 
If you want to make contact with Irene you can find her at www.eatingdisordertherapist.com.

 

It Takes a Year

 Six months ago turbulent financial markets gained national attention. From a journal entry I wrote last September…

 "Every friend I have seen in town over the past days brings up the falling Dow and failing banks as a conversation topic. This was not supposed to happen. They are struck by how very smart Harvard MBAs constructed this mess and the government let it all occur. What can they trust? As I type, I wonder what the effects of this mass loss of faith in our government and the financial system will yield in the days and weeks ahead. What would this paragraph say six months from now?

Carrie explains, ‘I lived outside of San Francisco during the large earthquake of 1994. I remember friends struggling for months afterward since the ground had moved underneath their feet. Somehow it didn’t bother me since I believed it could and had prepared for an earthquake such as the one we experienced. But, now with the economy falling apart around us, I feel like the ground is unstable and I understand for the first time their panic.’

Fantasies of hording money between the mattresses filtered in as I drifted off to sleep last night. Before bed after the Dow lost nearly 1,000 points over two days, my husband Bruce sat on the couch, face lit by his black Mac Book and scanned online newspapers. He read off to me the Wall Street Journalheadline ‘Worst Crisis Since ’30s, With No End Yet in Sight.’  A CPA and tax lawyer, his radar is tuned to the financial markets, and I rely on the blips and beeps that appear on his screen to send off my own alarms. Although a man of understatement most of the time, I could tell even he was concerned.  While visualizing hording soup in my basement, I can hear my alarm system is screaming, ‘warning, warning…’”

Six months later, I still have periodic soup stocking fantasies depending on the week…and WSJ headlines. I wish I did not.  I’d rather consistently possess optimism and poise with a dash of clarity, but that seems beyond my reach.

Six months has a special connotation for me as a mother.  I usually got disheartened about a ½ a year into each child’s arrival. After our first son,  I remember thinking, “I should have lost all this baby fat by now,” “We should be settled into this new family configuration,” and “Why is this still so ridiculously hard?” Six months is a long time to endure chaos and confusion; by then I have used up most of my just-muscle-it-through reserves.

To survive, my logic became if our culture’s standard mourning, or better said, “adjustment” period historically was a year, then shouldn’t I give myself the same? We knocked off an old life when each new baby arrived. The metaphoric gravestones could have read:

  • Young Couple – RIP June 1989.
  • Family of Three —  B: June 1989, D: March, 1991.
  • Moving from one-on-one play (two adults to two kids) to zone defense — June 1994 (I was raised in hockey country)

For my children – if any of you have read this far –  what we got in exchange was worth more than any loss we experienced.  There was never a need to wear black, although, I do like how I look in that color. Understand that by recognizing that we were in an adjustment period culturally prescribed as a year, I relaxed and let go the need to have it all together.  As an older, wiser mother once told me, “You are not supposed to be graceful during this phase.”

Signs of six-month financial chaos exhaustion are appearing in my circles. It seems we are asking similar questions including, “Shouldn’t have this mess figured out by now?” and  “Why is this still so ridiculously hard?” Yet, we could have a memorial service for a past leader in our community, Mr. Stable Banking Industry – From 1935 To 2008.  As we adjust to our new family configuration without our dear “big brother,” I realize I need to allocate a full year. Someone wonderful may appear to fill our past protector’s position, but in the meantime, I’ve still got a six-month excuse to be less than graceful as we traverse this uncharted territory. Know that I accord you the same.

Let’s shift the ground beneath the cynics, the greedy, the powerful

Obama said it. Now Forbes is saying it: the wost is yet to come. The fact is, we haven’t seen nothing yet when it comes to our economic downturn.

So, why am I optimistic?

One thing is because in situations like these, when what we take for granted fails us, there occurs a window of opportunity where people are open to new ideas, new ways of doing things. Several times in his inaugural address, President Obama alluded to this.

The state of our economy calls for action: bold and swift. And we will act not only to create new jobs but to lay a new foundation for growth… …What is required of us now is a new era of responsibility — a recognition, on the part of every American, that we have duties to ourselves, our nation and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character than giving our all to a difficult task.

These words combined with the economic condition we face represent an unprecedented opportunity for those with the insight and daring to do it differently – in our national economy, in our workplaces, in our relationships and in our personal lives. As we respond in disgust at greed-oriented, clueless corporate executives intent on business as usual and preserving the status quo, we have the opportunity to shift the ground beneath them and create something that will support connections between all people, yes, even those who lavish themselves with French executive jets and thousand-dollar wastepaper baskets.

For, remember what a dynamic Spiritual Leader once said long ago: "Forgive them, for they know not what they do."

It is fitting that our financial downturn hit us in full in the winter. For winter is a time to turn energies inward, to store that energy and build up our reserves for the coming spring. Our economic winter may last well beyond the coming of the spring, but its duration and severity allows us to look deeply into our hearts and souls and ask: is there a way we can do things differently that offers a more promising future?

I say there is…

The financial

Bear with me. It’s 3 a.m. Saturday morning and I may be crazy for writing that headline, but hear me out. Friday was a whirlwind day: a photo shoot for my new company, meetings to discuss potential opportunities with a local chamber of commerce and a wellness center, strategizing about how to follow-up on my Obama home meeting that occurred Thursday, a final dinner meeting to plan 2009 collaborations with a business colleague and friend. Got home, took a nap and slept through an evening at an improv event I wanted to see. Obviously, this body needed rest. Woke at 2 a.m., finished a deep meditation and coming out, I thought about my Friday. I thought about my week. I thought about the huge numbers of people coming out to support my start-up plans, wanting to see me successful. I thought about the real and tangible wealth-creating ideas my supporters and I discovered in just one day of meetings, and realized that there are so many opportunities ahead of me, it’s a challenge to know where to start.

This is your reality too, even in the midst of the financial crisis and recession. There are a huge number of opportunities waiting for us all to seize. Focusing on the financial “crisis” is to deny the reality that nothing has changed at the level of “universal nature” which is abundance. Sure, the layoffs, cost reductions, budget restrictions, companies going bust – this is what is happening right now. People are scared, wondering what they will do next; how will I pay the rent? How will I feed my family? Who should I lay off? These are real questions that must be answered. And even in the midst of these questions, there is opportunity: A neighborhood bake party could support others in need, hosting a Meet-Up event called “Think times are tough? ME TOO, let’s talk about how to maintain our positive outlook” and asking $10 for every attendee can net $80 if 10 people show up ($100 minus meeting setup fees of $20). You’ve just manifested $100. Could you feed your family on $80? Probably.

One thing I learned at Intel Corporation, where I worked in global corporate social responsibility before resigning two weeks ago to start my own socially responsible venture was that recessions, especially deep ones, are the time to invest, not conserve. It is one of the hallmarks of Intel’s “secret sauce of success.” Yes, trimming fat and reducing discretionary spending is needed in times like these, but so is investing in new opportunities, especially as an individual.

Why?

Because other companies and people aren’t. Which means, when the recession wanes you’re prepared with new ideas, new products and new ways to wow customers or manifest abundance. As leaders in consciousness we should role model this behavior. The financial crisis is only a crisis if you see it that way. Seen another way, it is a huge opportunity.

Buy Books!

I read a commentary yesterday from someone who said that bailing out the auto industry is like investing in CDs when the rest of the world has moved on to downloads and iPods.  It’s a waste of money.  What we should be investing in is alternative modes of energy and transportation.  I agree.  The auto makers got themselves into this mess, why do we have to get them out?  We need a new dynamic, not more of the same problems that got us into this situation.

i’m a member of the Author’s Guild, and I got an e-mail from the Guild this morning that I would like to share with you.  It is interesting, though not surprising, how the financial crisis has hit every sector of business:

<"I’ve been talking to booksellers lately who report that times are hard. And local booksellers aren’t known for vast reserves of capital, so a serious dip in sales can be devastating. Booksellers don’t lose enough money, however, to receive congressional attention. A government bailout isn’t in the cards.

We don’t want bookstores to die. Authors need them, and so do neighborhoods. So let’s mount a book-buying splurge. Get your friends together, go to your local bookstore and have a book-buying party. Buy the rest of your Christmas presents, but that’s just for starters. Clear out the mysteries, wrap up the histories, beam up the science fiction! Round up the westerns, go crazy for self-help, say yes to the university press books! Get a load of those coffee-table books, fatten up on slim volumes of verse, and take a chance on romance!

There will be birthdays in the next twelve months; books keep well; they’re easy to wrap: buy those books now. Buy replacements for any books looking raggedy on your shelves.  Stockpile children’s books as gifts for friends who look like they may eventually give birth. Hold off on the flat-screen TV and the GPS (they’ll be cheaper after Christmas) and buy many, many books. Then tell the grateful booksellers, who by this time will be hanging onto your legs begging you to stay and live with their cat in the stockroom: "Got to move on, folks. Got some books to write now. You see…we’re the Authors Guild."

Enjoy the holidays.

Roy Blount Jr.
President
Authors Guild>

 

Capital and Risk-Sharing: Smart Crisis-Fighting Tools That Should Be Used Much More

I’m glad to see the government is finally using 2 “smart” tools – capital and risk sharing –  to help address the financial institution panic and resulting failures we have seen since earlier in 2008, which have seriously escalated the financial and economic crisis facing the US and global economies today. While these tools don’t comprehensively address the myriad of financial and economic issues facing the US or the world today, they:

 
·         Help stabilize Banks when no other 3rd party can/will do so — this is critical to stabilizing consumer sentiment, the markets and economy.
 
·         Are leveraged in their impact to the real economy — because banks typically lend $10 to $20 for every dollar in capital they hold.
 
·         Help minimize the tax-payer bill from all this government investing and intervention by acknowledging the uncertainty around where the housing and credit/financial markets will bottom out, and putting a “cap” on the maximum losses a private investor can incur on an investment  
 
·         Help establish a floor for asset values (by limiting downside risk for investors): and therefore support and encourage the return of private investors into the capital markets
 
The need for government provided capital was obvious to me months ago at Indymac since such a significant capital infusion would likely have prevented the Bank’s failure and no private capital was available for the job. Every investor who had invested capital into any financial institution in the 12 months leading up to Indymac’s failure had lost all or a big portion of their money by the summer of 2008, so this lack of private capital was a rational market outcome. And risk sharing can and should reduce the size of the loss the government creates by selling Indymac’s assets as it will help mitigate the negative financial impact of the fact that Indymac’s assets are being sold by the government into the worst housing asset market since the Great Depression.    
 
A wise man once said it was possible to “transform a breakdown into a breakthrough” and I think the tools above can be powerfully applied to the global economy today. After all, no large company is just a “US” company today. All major American companies are generally global in the markets they serve, the organizations they work with, and the workforces they leverage (even “little Indymac” which only operated in the US supported over 1000 employees in India). So by supporting US Banks and Financial Institutions the US government is already supporting the global economy (not just the US economy).
 
Why not do this more directly and on a bigger scale worldwide? As someone who is optimistic about the global economy’s long term prospects, I think we should. The US taking an ownership stake in a wide array of businesses all over the world could indeed help turn this breakdown into a breakthrough.
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