Monthly Archives: November 2011

1126 2011 We need to blow up a home equity bubble using equity sharing methods, not debt, like how Silicon Valley blew up tech company stock market bubbles

Ben Bernanke and the Federal Reserve team please step aside, Silicon Valley please step up. We need to create some equity bubbles, not debt bubbles, to reflate our national economy in order to save our economic future. In particular, the national policy makers need to learn and use the equity bubble building techniques that the venture capitalists have been so skillfully creating wealth for themselves, their investors and the entrepreneurs in the past to apply to and to prop up the local property markets on Main Streets across the country.

Most economists, policy makers and concerned citizens probably have learned by now that it is the damaged credit distribution channels, not interest rate levels, that is blocking their desperate attempts to reflate the economic bubbles using debts alone. We all know that credit is a very funny thing. It is always plenty only to those people who do not need it. Therefore rich people have access to plenty and poor people can not get any. Excess money supply made possible by low interest rates have only been making the rich even richer and hence created more and more social tension on wealth distribution equality. Federal Reserve with its money pumping policies without the consideration of its negative effects of creating wealth inequality has hence been the henchman that has killed the middle class in America.

The only occasions when poor people could get credit is during the occasional irrational time of bubble building periods and when the credit process is being abused. When rationality returns, the supply of credit to the poor will come to a sudden halt as is what is happening now. On a further thought, this may not be a bad thing actually. Trying to re-energize the drug addicts with even more Cocaine in a desperate attempt is like kicking the can down the road to let other people solve the eventual real problems and could at most behave like a superficial temporary fix that may lead to much more expanded troubles down the road. A re-hab together with a new diet to create a new life would probably be a more prudent problem solving method.

Similarly, to re-energize our national economy, we will need to focus on alternative ways of financing, other than debt, to reflate our economy for both the short term and long term problem fixing purposes. As once students of finance, we all know that high risk ventures are usually financed by equities, not debts. For example, the entire industry of venture capital in Silicon Valley is focused on equity financing, shared equity financing in corporate ownership, to be precise. That same technique is exactly what we need now to reflate the home equity markets and hence our national economy.

FARJHO and SwapRent related new business methods that we provide only represent a few possible more superior business methods to implement this equity sharing or appreciation sharing economic concepts to attract more equity based fresh capital to resuscitate our national economy on a free market basis. In order to make it work, the national policy makers will need to learn and understand that the goal of rebuilding our national economy could be done through these equity sharing economic concepts. It does not matter whether they choose to use the new FARJHO and/or SwapRent methods or not. They need to open the doors and encourage free market investors to participate in all kinds of equity sharing business methods that utilize the equity sharing concepts so that there would be enough free market capital to flow back into local communities across America to re-create property market led economic booms on Main Street.

Using debt to blow bubbles should not be the only trick up their sleeves. It did not and will not work anyway since the credit distribution channels will not function properly in bad economic times no matter how low they make the interest rate levels to be. That is simply the nature of how credit works. On the other hand, as long as these new bubbles are not blown up through Other People’s Money (OPM), i.e. debt again, it would most likely be Ok for now to get us out of the recession and unemployment for most of the 99% population.

As I mentioned in earlier blogs many times before, asset bubbles are usually blown up by OPM using debt. It is a dangerous bubble that could be popped because it was blown up by hot air. Equity induced asset growth could act more like a hardened molten lava. Once it is cooled and hardened, it does not have to pop or shrink back again. This is due to the simple fact that if the asset was purchased by equity without using debt, when price level declines, there would not be any involuntary selling as would be the case if the asset was purchased with debt.

So the way to make this policy strategy works, the government will need to recognize the need to extend all kinds of smart and stupid property equity sharing methods on a massive scale and on a pure free market basis that include property speculators, not just to use these equity sharing concepts and methods on a limited basis to distressed home owners as a foreclosure avoidance tool only. That concept is similar to the same textbook difference in managing macro-economics vs micro-economics. We will need to use these new property equity sharing concepts and methods as a new way of doing massive macro-economic stimulus for our country.

When free market based investors are aware that these proactive innovative economic stimulus policies have been understood and finally adopted by the relevant policy makers, being implemented on a massive scale and most importantly that they could also participate in, free market based fresh capital will start pouring in automatically to make America rich again. These investors would come in voluntarily simply based on their views that the government is willing to ramp up the prices and hence a timely profit making opportunity for themselves.

The strategy above is a repeat of what has been said many times before in a different way on how to use the equity sharing concept and methods to get our country out of the current economic dilemma ( http://wp.me/p1Cgsz-gI ). When the economy stabilizes, how the government could continue to use SwapRent and FARJHO related new business methods as a third new way of economic policy management tools to stimulate or to slow down a country’s economic growth through the real estate property values of a country was explained more in details in an article that I have published before back in 2009 ( http://www.box.net/shared/v24qtqip4hlgff5l1646 ).

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1125 2011 A Thanksgiving holiday message to OWS folks – make yourselves rich by occupying jobs created by FARJHO and SwapRent on Main Street

Once I went to a seafood restaurant in the village while I was vacationing in the South Pacific island resort. I saw many buckets of live crabs laying around the floor. All of them had a lid on but one. I was curious to ask the owner of the restaurant why this particular bucket had no lid on. The owner said, “Oh, those are the socialist crabs. They don’t need a lid. As soon as any crab climbs up higher, other crabs in the bucket will pull them down for sure. So no crabs could ever climb up higher and get out.”

Hmmm …. I sort of got it right away why they were called socialist crabs. The socialists simply spend too much time worrying about how other people would make more money than they do rather than spending time to learn new skills to compete in the free market and make more money for themselves. They seem to enjoy more on how to pull other people down rather than working harder to learn how to climb up themselves to get out of poverty.

Why bother asking us to support their cause to indiscriminately tax all the rich people after some of the 1% may have made their money legitimately through their hard work and intelligence under a free market system? There should be no problems for them to protest to get the people power to mobilize the mass to put those crony politicians out of office and those crony capitalists in jail but blindly ask the country to tax the rich indiscriminately seem to be shooting blank and will not get anywhere. It also seems rather unfair. If those brave OWS folks have the guts, why don’t they simply stand up, shout out loud and name those cronies that have brought our country’s economy to its knees so that there could be a fair trial to bring them to justice?

Our country’s problems are the abusers, i.e. the crony capitalists and politicians that abused the capitalism system, not capitalism itself.

So if there are innovative ways (e.g. FARJHO and SwapRent) created by organizations like PeoplesAlly Foundation that common people on Main Street could finally get to bring the housing finance business and hence the money back to Main Street and let Wall Street cronies become the losers in a fair competition under the free market system, why wouldn’t that be a better choice? It did not happen before due to the intellectual power that Wall Street had long held for them to hold our nation hostage. Wall Street always seem to have the money power and political power to suck even more talents to feed on their own success. That is the situation that needs to be changed, through competition, not revolution!

Why can’t we try to bring the brainy power from Wall Street back to Main Street and have them work for common people on Main Street? If we could deploy these new equity sharing based housing finance innovations of FARJHO and SwapRent provided by PeoplesAlly Foundation through the credit union industry and the local community banks to compete directly with Wall Street with their dysfunctional mortgage securitizations system and their loan shark culture to beat the hell out of them, wouldn’t that be a more glorious battle to fight for?

If protesting could do anything for the OWS folks why don’t they focus on rallying the political power to make sure Main Street could have a level playing field to compete intelligently with Wall Street in their own games of finance in order to bring the housing finance business back into their own hands and manage it intelligently to create wealth for themselves on Main Street?

As I said before, the OWS folks may be able to occupy themselves with many more new jobs created by these new equity sharing FARJHO and SwapRent related business opportunities and in the process, they could also get themselves much more decent and comfortable shelters on Main Street through FARJHO and SwapRent than simply sleeping in cramp tents in Zuccotti Park or other city squares.

1120 2011 Discussions and feedback from the OWS folks in early October

Over a month ago out of curiosity, I had my first encounter with the Occupy Wall Street folks on-line. Although the majority of them seemed to be quite hostile to anyone who do not share their extreme left-wing oriented views, there were a few others that did set themselves apart from the madding crowd by showing some intellectual capability.

Now that they have been kicked out from occupying Zuccotti Park, I think they clearly need some intellectual leadership in setting some clear actionable goals in an OWS 2.0 movement effort next. Trying to solicit sympathy alone will most likely get them no where and offer really nothing to remove the crony establishments out of our system.

As far as our recommendation of actionable goals goes, how about trying to bring housing finance from the crony hands of Wall Street back to the common people on Main Street? That will immediately create many jobs that they could occupy themselves with, let alone getting a decent shelter for themselves, back on Main Street.

For a detailed plan, here again is the link to our public response officially submitted to FHFA, the regulator of the Fannie and Freddie, from PeoplesAlly Foundation in early September. http://www.box.net/shared/hpfqqajd1aremco716lr

Here below are some excerpts of our blog post exchanges on their site that I would like to give them an equal chance to voice their views to readers of our site.

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Oh, I see. PAF makes the mistake of living in utopian-capitalism-fairy-land, and judging others from atop the throne in his ivory tower there – all the while just dividing himself from the common ground and letting himself be conquered by oligarchs who would laugh at him behind his back …

My short message to all the Mises / Libertarian crowd:

I know that the current system is not the “capitalism” you regard religiously as near-utopia. But how in the hell do you not realize that the real world that people are living in today could not be brought to your free-market utopia for many, many, many years? How do you not realize that the money powers will not ever give you your utopia? This system is a one-way ticket to permanent, institutionalized, oligarchical collectivism. Oligarchy for the elites, collectivism for the masses.

Free-marketeers: you will be disenfranchised in the near future the way this system is going. Your idiocy is useful in think tanks and editorial pages when it comes to encouraging or justifying neoliberal economic globalization, or the latest privatization scheme, but your pesky idealism and your essential anti-authoritarianism leaves little room for you in the future of real capitalism – the capitalism of the real world. You need to realize that you are part of the 99.9% too, and you have to act on common ground with the rest of us now before we are divided and conquered into oblivion.

The unrealistic progressives are in the same boat as you are, and if you won’t help them now, they won’t be able to help you in the near future when Big Brother starts coming to oppress you, you unrealistic libertarian. This is about putting the brakes on a runaway capitalist machine heading for total fascism.

Why are you so paranoid that the Occupy Wall Street movement is more dangerous than the status quo? I too have grave reservations about what may come of nationalizations. The solution must be to come to the table and stand up against any tyranny that may come from any socialism that we enact to break the power of the big banks and the modern big politicos.

We don’t want to become the tyranny we despise. We don’t want to create a worse system. But the system right now is selling us out, totally abandoning us, and it will abandon you too. You won’t get your utopian free market capitalism from the status quo, ever. Just hold onto your highest ideals of liberty, opportunity, and justice and come to the table with us, and demand an end to the political bribery system, and an end to the power of the massive money-lending institutions known as the big banks and the Federal Reserve.
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Okay, I checked out your website for the first time.

I see you are pitching a new way of home-ownership. By all means, continue your business and continue trying to convince people who have jobs or savings that your business is a better way for them to own a home.

Your system, which pretends that the dollar won’t collapse, and pretends that “equity” isn’t just debt-based dollar ponzi speculation, is woefully inadequate to re-empower the people. As long as money only comes from debt, the banking money cartel will be the true government of governments and of corporations.

The “free market” is predicated in large part upon rational individuals using their money, their savings, or their capital to make free economy. It requires a fair and just system of law. But our very system of money is too far corrupted at this point to pretend we can use a free market to save ourselves. Likewise with our system of law.
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But I do respect your attempts to engineer something more fair for the common, Main Street people. Maybe your ideas will come into greater utility after we break up the money cartel and the Federal Reserve System.

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