Monday, October 18, 2010

Crimes Against (and by) Humanity

This week marks the two year anniversary of Inverted Alchemy. Two years ago I was encouraged by Global Business Network pioneer Napier Collyns to continue the multi-year tradition I had established as the economist at The Arlington Institute. We were in the throes of an economic collapse created by willful, reckless opacity in which the Bush Administration, the U.S. Congress, investment banks, rating agencies and insurers were all co-conspirators. In a contorted coup d’├ętat, the public sector, in one month set in motion the nationalization of assets in an exhausted, last-ditch effort to consolidate the U.S. economy for the convenient bankruptcy filing with our largest creditor – China.

I chose the title “Inverted Alchemy” as a challenge. After millennia of esoteric efforts to turn substances into gold, I thought it would be a fascinating proposition to encourage humanity to end its gold addiction and see if we could turn gold into something that built a better humanity. Given that our only alchemical success to date is the transformation of natural beauty, homelands and cultures, and human blood into gold, I thought that there needed to be at least one voice persistently challenging us to act differently.

Two years later:

- the bankruptcy is complete as we see Treasury Secretary Geithner officially “recognizing” China’s currency policy against which the U.S. can do nothing (including the announcement this week delaying a statutory deadline of currency reporting in an election-year stunt);
- blog readers are familiar with the growing illiquidity of the Pension Benefit Guaranty Corporation (PBGC) which continues to assume failed business pensions at a record rate;
- blog readers saw Inverted Alchemy break the story on the illiquidity of the Federal Deposit Insurance Corporation (FDIC) months before the FDIC made the information public;
- the Toronto Stock Exchange, the London AIM and the Australian Stock Exchange continue to provide global investors the opportunity to launder their cauterized consciences while they mint brokerage fee income on mining operations operating illegally across the globe;
- we’ve seen authors and artists like Peter Buffett and Chip Duncan wake us up to hope in places devoid thereof;
- we’ve explored and deployed accessible Integral Accounting and have provided pathways to start acting and thinking differently;
- we’ve investigated the roots of our financial system and learned about interdependencies in ways not discussed before; and,
- we’ve seen a community of several thousand become part of the Inverted Alchemy blog conversation.

The most popular (based on download frequency and persistence) post in the history of Inverted Alchemy has been the March 2009 post on the AIG shell game. This post had a bizarre cameo relevance this month as SNL Financial reported what, on its surface, appeared to be a rather innocuous analysis that life insurers had a net loss of $900.3 million (down from an income of $8.9 billion last year). While their reserves were increased 17% from the previous year, their total REVENUE off of investment income increased only 3%. In short, they’re making a lot less with a lot more money in their control. This is ominous in light of the “Shell Game” post. On the superficial level we know that when Prudential, MetLife, TIAA-CREF, New York Life and AIG catch a cold, the global flow of capital gets…well…seriously congested! However, when you understand that since the establishment of the U.S. Federal Reserve system, it was life insurers who were at the foundation of the racket you realize that this loss has a long tail. Absent the actuarially dictated long-term investment allocations from life insurers, a major component of the global economy seizes up. And as we surmise from the extinct brontosaurus, a long tail can do a lot of damage when controlled by an un-evolved brain.

Building an economic system on actuarial management of life-expectancy is an experiment whose time has run. While the past 90 years saw excessive benefit flowing to a select few, the disparity of access to dignified living conditions for huge populations in the world grew disproportionately larger. And now, when we are confronted with the alignment of phenomenal growth in marginalized countries and the rare moment for humanity to actually back up the promises made at the millennial milestone regarding human rights, dignity of women and children, poverty eradication and global accountability, the response is to horde cash. Profits made on fear of death, profits made on covering end-of-life consumer credit leverage excesses, profits made from illegal resource exploitation operations, profits made on engines of warfare and death – now line the actuarial treasuries of those who see no future save the yawning void filled with the ghosts of their callous neglect.

We must break the cycle of a monetary system that rides of the mortality of human life for this is the insidious, pervasive Crime Against Humanity.

The last century worked (albeit, poorly) with the Keynesian notion that “natural resources” were free, that “labor” was a variable commodity (regrettably and ignorantly celebrated by the Nobel Prize in Economics this year), and that autocratic, central control of the public under partisan “isms” served as the expedient way for a few to lord over the masses. In 2010, we now have evidence that each of these conditions precedent are erroneous and prone to abuse. And, more importantly, we know that in their careless rush to option every food, metal, and energy resource on the globe, China is experimenting with a new imperialism which is on a collision course with the reckoning of its own neglect of China’s massive population still in poverty. Let’s face it. While we breathlessly watched as 33 miners were pulled to the surface after spending two months underground, the same week saw more than that number killed by rockslides, cave-ins, and actual violence against workers by mine owners and operators. The justification? Great copper and gold prices justify reckless mining practices for the benefit of….oh, that’s right, the investor. When mining agreements with countries call for “within economically feasible” standards for safety for workers and the environment, it is the INVESTORS and CONSUMERS who are actively or ignorantly supporting and enabling crimes against humanity. Whether it’s toxic sludge in the Danube, poison in the water in the Niger Delta, collapsed mines in China, Ecuador, or Chile, or silt slides in the Tabar Islands which bury gardens which sustain the food for a community, our addiction to metals and electronics is currently supporting the deaths of thousands. And we can stop it.

Much like public awareness contributed to the end of Apartheid, you can act today. The money that flows to those companies who trade on human lives passes through listing exchanges. The Toronto, Australian, London, and New York Stock Exchanges are directly involved with laundering these funds – insulating their investors from the expediency of having to confront business practices which result in the loss of lives and livelihoods. Today, begin the process of raising your voice to their compliance departments to call for an accounting standard that actually has listing eligibility requiring:
- local land owner and country interest participation in the LISTED stocks of companies benefiting from minerals and energy rather than in phony, illiquid shell corporations which accrue debt and expenses with no control of revenues;
- local land owner and country grievance procedures ON EXCHANGES so that shareholders are informed of business practices which violate human rights and environmental laws;
- de-listing for any company which resorts to contracted violence (mercenary or police action) to manage labor disputes; and,
- de-listing for any company which illegally by-passes customs and audit authorities and procedures in the host countries.
These are simple recommendations and, if a few of you begin to take the trouble of beginning the communication with exchanges, we’ll begin to be accountable for crimes done in our names. The ecosystem – including humans – is waiting for us to Invert Alchemy.

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Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave