Obama Save the U.S. Economy by Paying Down the National Debt
Economics / US Debt Aug 04, 2010 - 07:19 PM GMTBy: Graham_Summers
Dear Mr. President,
The following is a plan that I believe would bring about a significant change not only in the US economy, but in the US mindset. The last 30+ years in this country have been dominated by an overall regression in moral character and beliefs.
Somehow, and I’ll leave the “how” up to the historians, our nation’s moral framework seems to have shifted from asking ourselves “is this right or wrong?” to “is this legal or illegal?” Even worse, we now seem to be shifting from “is this legal or illegal?” to “can I get away with this?”
This is most obvious in the financial community where a small sliver of our citizenry continues to make billions, if not trillions, of dollars, through ill-gotten means. I won’t bother going into details here, because the “ill-gotten means” have been well documented by others.
For now I will simply state that it is absolutely OBVIOUS that the market is manipulated, that insider trading and front-running of investor orders is permitted with impunity, that Americans got a RAW deal on the bailouts (that’s putting it mildly), and that the worst thing that happens to those who break the law in the financial and large corporate sectors is a fine equal to maybe a few days’ worth of profits.
The fact that this activity continues to be permitted and that those who engage in it make salaries in the six if not seven or eight figures sends several very clear signals to Americans, particularly those young ones looking to get ahead in life. They are:
- Those who work for financial institutions and large corporations are above the law.
- You should try to make money by any means possible.
- Look out for yourself and forget about everyone else.
I ask you, what do the above observations say about the American economy/ financial system? Moreover, what kind of mentality are we fostering in our nation’s character?
Here’s my proposal to change all of this.
First of all, I would create a new financial law in the US. It would be the following:
Any financial gain reaped by insider trading, manipulation, fraud, stealing, etc. would result in 100% of the gains generated by the action being confiscated by the Government and the company that committed the action being fined an amount equal to 10% of its (the company’s) net value.
Today, the most common punishment for financial or corporate entities that break the law is a small fine. A perfect example of this is the recent Goldman Sachs lawsuit in which the firm paid a $550 million settlement on a deal that helped the firm generate billions in profit. To put this in perspective, Goldman generates $500 million in profits in about a week of trading.
These fines accomplish little if anything. They are akin to fining someone $5 for running a stop sign. If that was the worst punishment for running a stop sign, no one would bother following motor traffic laws at all. So why do we impose similarly modest sums on those organizations that generate billions of dollars? It’s not like they DON’T have the money handy to pay off a sizable fine.
A fine of this size (10% of market capitalization or total assets, or Enterprise Value or whatever) as well as confiscating 100% of the ill-gotten gains, would act as a MAJOR DETERRANT to corporate and financial crime. It would, in plain terms, clean up Big Business’s (well, every business’s) act in no time.
So how do you go about enforcing this new law?
I propose the creation of a government agency titled The Bureau for Corporate and Financial Integrity or some such thing. This agency would be a kind of Department of Homeland Security devoted solely towards insuring that the money made in the financial and corporate sectors, is made honestly.
I realize that we already have several financial regulatory bodies in the US. However, it is clear from the ongoing fraud, corruption, and theft occurring today that these organizations are overwhelmed.
On top of this, the markets and economy today are very, VERY different from those that existed at the time most of these organizations were created. Changing markets call for changing mentalities and attitudes. Which is why I propose the creation of a new organization rather than simply reshuffling the ones already in place (this organization could work with the pre-existing ones too).
By creating a new organization you would create new jobs. More importantly, these would be permanent jobs rather than temporary jobs such as those created by the census and other temporary programs.
However, rather than simply offering the usual cushy public position consisting of a very stable salary and benefits, I would suggest you offer the employees at this new organization the following deal:
The employees involved in bringing about a case to fine a corporate entity take home 1% of the money brought in from the settlement should the case win.
I can tell you Mr. President, there are MILLIONS of smart, intensely analytical young Americans who would jump at the chance to stop corporate crime if you offered this type of compensation package.
For instance, the guys who took on Goldman Sachs in this recent case would receive $5.5 million to split up among them. That kind of pay is handsome in any jobs market… but in one as tough as today’s? Let’s just say you’d be overwhelmed with applications.
But what about the rest of the money and the money confiscated (the money the company made via fraud or some other financial crime)?
I propose that you use it to:
- PAY OFF THE NATIONAL DEBT
- Fund various public programs (NEW ones, NOT old ones that don’t work)
Doing #1 would send a clear message that America is an honest, financially prudent country. Rather than lecturing other countries about finance when we ourselves are running a deficit and debt level that would take a private organization bankrupt, we would LEAD BY EXAMPLE.
This would also STRENGTHEN the US Dollar. I know many folks in the various economic bureaus and our central bank don’t like the idea of a strong Dollar… but I can assure you that the 300+ million rest of us WOULD LIKE IT VERY MUCH.
Regarding #2, by using the money fined/confiscated from organizations that break the law, you would find a large, ample supply of money to fund various governmental programs, which in turn would allow you to CUT TAXES.
After all, if the government didn’t have to rely on taxes to fund its programs and budget, it could lower taxes for its citizenry.
This would not only GUARANTEE you a 2012 re-election win, but would jump start the economy as it would mean MORE money available for private sector spending and consumption (particularly with a stronger Dollar) as WELL AS THE PAYING OFF CONSUMER DEBT (mortgages, credit cards, etc).
Obviously, there are a lot of details that would need to be worked out in my plan. But its results would be TREMENDOUS. Among other things, it would do the following:
- Rein in the corruption and fraud that is polluting our capital markets and economy (not to mention our national character on the world stage).
- Re-instill a notion of “right and wrong” to our nation’s public conscience.
- Create new, potentially high paying jobs for our best and brightest.
- Teach Americans, particularly the young, that you don’t need to break the law to get ahead in life, that you can do right by doing the right thing.
- Help with our debt and deficit issues while sending a strong message to the world that the US doesn’t just talk about prudence and solvency, IT LEADS BY EXAMPLE (this would also impact our national character as it would re-instill the old virtue of living a debt free life).
- Strengthen the US Dollar.
- Help jumpstart the economy by lowering taxes which would permit consumers to pay off their debts, and spend more if they chose.
- And of course, JUMP START YOUR APPROVAL RATINGS LEADING TO A GUARANTEED 2012 WIN (I know you’ve got to consider your political career in your policy-making).
I do not view this plan as a “fix all” remedy to our nation’s ills. The US economy and political/ financial systems are in dire straits and there are some issues which will simply require us to “take the medicine” if we do the right thing.
However, I strongly believe this plan would be the first step towards shifting our country’s course from one of corruption, greed, immorality, and lawlessness, to one of honesty, integrity, transparency, financial prudence AND solvency.
In plain terms, it would re-instill notions of doing the right thing and of making an honest living. It would also re-instill our confidence as a nation as we become proud members of a country that is financially prudent, virtuous, and which leads by example.
I realize there is a small portion of our population that would STRONGLY oppose this plan. However, I can assure you that the vast majority of Americans (99% of us) would be ALL FOR IT. If you put this matter to a public vote, it would likely be the BIGGEST VICTORY IN US HISTORY.
And, finally, I can guarantee you that introducing this plan would immediately JUMP START your approval ratings AND almost certainly guarantee you of a 2012 victory (I know this matters to you). If anything it would be a great start towards a new future in this country, one of strong national, corporate, and individual moral character.
Yours Respectfully,
Graham Summers
Good Investing!
Graham Summers
PS. If you’re worried about the future of the stock market, I highly suggest you download my FREE Special Report detailing SEVERAL investments that could shelter your portfolio from any future collapse. Pick up your FREE copy of The Financial Crisis “Round Two” Survival Kit, today at: http://www.gainspainscapital.com/MARKETING/roundtwo.html
Graham Summers: Graham is Senior Market Strategist at OmniSans Research. He is co-editor of Gain, Pains, and Capital, OmniSans Research’s FREE daily e-letter covering the equity, commodity, currency, and real estate markets.
Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.
Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.
© 2010 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
Graham Summers Archive |
© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
