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Rep. Ken Ivory & Dan Griffiths: Creating a Financial Emergency Plan for States

Utah is pioneering a bold new model
Sunday, May 19, 2013, 10:06 AM

In a country where insolvent states increasingly compete for Federal funds, Utah is bucking the trend. And in the process, it's showing the type of leadership this nation will need more of to deal with its national economic plight.

A recent slew of new legislation has been passed collectively known as the Financial Ready Utah (FRU) initiative to assess the state's greatest financial vulnerabilities and to identify the most promising programs for addressing them at the state, community, and household levels. As a result of its earthquake-prone geology, Utah has developed a robust statewide disaster-response system. The FRU initiative prudently asks: Shouldn't we also have a financial-earthquake preparedness program in case of another 2008-style (or worse) economic shock, which the math indicates is more than likely?

In this week's podcast, Chris talks with two of the driving members behind Financial Ready Utah, Representative Ken Ivory and CPA Dan Griffiths. Representative Ivory started the initial momentum behind the new legislation by pushing for a first-ever audit of the state's receipts of Federal funds, essentially asking each state agency: How much Federal money do you receive each year?

The results were sobering:

What we learned in this process is that the State of Utah is somewhere between 30%-50% dependent on Federal Funds for their state budget. Imagine you're a company and 40% of your revenues come from a single source that is telling you in their consolidated financial statements that they’re broke. You probably ought to have a contingency plan. 

Not only were no contingency plans on the table, but with the passage of the sequestration, the state is already seeing early efforts by the U.S. Government to reduce the annual funds to the state:

We’re seeing this already. Even over the last couple of months with sequestration, the Federal Government is reaching in and not just cutting its expenses; it’s cutting our revenue items – items that come right out of the land, the monies that were supposed to come off first to educate children. They’re not only cutting those back; they’re reaching back in time and saying you have to pay back what you've already spent. I mean, imagine that. That’s just unfathomable that they’re reaching in to do that.

They’re taking mineral release money from revenues that are extracted right out of the ground and taking that revenue out of local schools and local economies. That’s happening right now. That took the alarm bells to a new level. 

So, in response, the state created the Financial Ready Utah initiative, bringing together state, private, NGO, and community organizations to begin scoping readiness solutions. It's early days, but it's refreshing to see a public, adult-sized dialog amongst leaders on a critical topic with little short-term political value.

Chris and I have been pleased to note that much of the discussion so far has centered on the importance of developing greater resilience the same kind that is recommended in our Resilient Life section at various levels throughout the state. As well, we were glad to hear that there is growing interest from other states in what Utah is pioneering here. If Utah's example inspires other states to follow suit and bring their own ideas into the mix, we can accelerate our understanding of the most successful tactics, as well as reduce our national vulnerabilities:

Our system has evolved to something it was never intended to be. It was supposed to be 50 laboratories of freedom and of innovation. But we’ve consolidated that to a level now that we only have one firewall of risk. If the Federal Government has a hiccup, that affects everyone. Our system was never intended to be that way. We’ve got to restore balance in that partnership and pull that back down so that we can innovate in these 50 different laboratories and have these kinds of experiments in resiliency that you're talking about. 

Click the play button below to listen to Chris' interview with Representative Ken Ivory and Dan Griffiths (23m:31s):

Transcript: 

Chris Martenson: Welcome to another Peak Prosperity podcast. I am your host, Chris Martenson. Today, we’re recording our weekly podcast from the Utah state capitol building. Over the past day and a half, I’ve had the honor of engaging with members of the Utah State Legislature, who have just passed a series of bills known as the Financial Ready Utah Initiative. Financial Ready Utah was created to address the questions: How do we make the state less vulnerable to another 2008-style or worse financial crisis? How do we make Utah more resilient at the state level, at the community level, even at the household level?

Joining me today are representative Ken Ivory, who was instrumental in the passage of the Financial Ready Utah legislation, as well as Dan Griffiths, a representative of the Utah Association of Certified Public Accountants. The UACPA has partnered tightly with the State of Utah to bring a nonpartisan, data-driven voice to the movement to educate both politicians and citizens, that the need for greater financial readiness is not a question; that the need for greater financial readiness is not a question. It’s just math.

I’m very excited about what the State of Utah is doing here. It’s the first real example I’ve seen at the state level for frank, adult-sized conversation on the risks we face and the wisdom of adopting many of the resilience-building practices we recommend here at PeakProsperity.com.

Dan, Representative Ivory, thank you for taking time from your busy schedules for this interview.

Dan Griffiths: It’s great to be here with you.

Ken Ivory: Thanks, Chris. It’s been great to have you here with us.

Chris Martenson: A little background – so how did the Financial Ready Utah Initiative get started – just a summary? How did this go from idea to enacted legislation?

Ken Ivory: In a quick summary, it started when I was elected. I had been concerned about these things most of my adult life. It’s the reason I ran for office. When I got in, I realized we had no idea how dependent we were on Federal funds. I passed some legislation that required all state agencies to look at the percentage of their budget that is reliant on Federal funds and what their contingency plan was. That started in the education process and realized that was just some minor quantification. Now we needed to get into a more qualitative analysis. Dan had gotten back from some things with the AICPA (American Institute of CPAs), and they were pulling the alarm bell, if you will. We partnered together through a local Chamber of Commerce and started pulling the package together. We got a number of legislatures involved, and off we went.

Dan Griffiths: Yeah, it’s been a great experience, seeing how members of the community have come together to engage in these questions. This has not been a legislative effort driven by legislatures or party politicians. It’s been driven largely by Chambers of Commerce, CPAs, business leaders, concerned members of the community. Many from the preparedness community have gotten engaged and involved with this. So, it’s been fun to see it take a real grassroots approach, as opposed to tops down.

Chris Martenson: Those critical success factors – it seems there’s widespread involvement. When you first started taking this story out, what was the reception you received?

Ken Ivory: You made the comment of adult-sized conversations. People get that. I think all too often, people in public service, politicians, go on the fear factor and the least common denominator. But people get that. They understand that we’re in trying times. The numbers don’t add up. We’re printing; the debts don’t add up. We can’t do that forever. What does that mean for our kids? I found repeatedly in my campaigns and in this process that at least in Utah, people are ready to have adult conversations. What do we need to do? Lead the way. If it means sacrifice but there’s an end in sight, let us know what it is. I find that people are responding to that.

Dan’s experience in our community’s from the bottom up, that really is the key to the story. That’s the power of our system, if we really engage in it.

Dan Griffiths: What I’ve seen is two keys. First, giving people real information that they can believe in and trust, and not trying to spin them into some kind of action or result that we’re looking for, but just giving them the truth. It’s so refreshing when they hear someone one coming just willing to tell the truth. Accountants have a unique opportunity there because we’re perceived as independent and objective and honest and those sorts of things. So we can bring that.

The second thing is, giving people concrete steps they can take in their own lives to take small actions to begin to do something. Many will sit there and watch cable news programs, and get all worked up into a frenzy and get upset and afraid, and the uncertainty is what’s killing us. But opening their eyes to the fact that there are some steps that they can take as individuals, as communities, as families to begin to prepare – there’s great peace that comes from preparedness.

Chris Martenson: Excellent. This is a partnership then. Obviously the state legislature is working, and you've got the private CPAs and other private groups that are trying to come together. So let’s talk about the legislation for a second. What is this legislation, exactly?

Ken Ivory: Well, the cornerstone of the legislation is a bill that was run by Senator Deidre Henderson. What that did was create a Federal Funds Review Commission. What we learned in this process is that the State of Utah is somewhere between 30%-50% dependent on Federal Funds for their state budget. Imagine you're a company and 40% of your revenues come from a single source that is telling you in their consolidated financial statements that they’re broke. You probably ought to have a contingency plan.

So, as we looked at that, what the legislation does is it creates a Federal Funds Review Commission. We had the honor of having you be our first witness yesterday and kick off the vision for that commission. The mission of that commission is to number one: assess the risks. What are the various risks, so many that you talk about, that may impact that 40% that impacts how we educate children and provide public safety and roads and take care of sick people and poor people?

What are those risks so that we understand them, we look at them with our eyes open, start to formulate plans, and analysis at a state level - which is going to be hard. Clearly there’s no way from a state budget standpoint with the size that the risk could be, that we could solve all those problems.

So, the third step becomes, how do we begin to engage our very rich community assets – our churches, our community groups, our people – in nontraditionally providing public services? I shouldn’t say nontraditionally. It’s almost going back traditionally to provide public services in a way that we used to when we cared for each other and built the kind of resilient communities that you talk about so effectively.

Chris Martenson: All right. So, now that the legislation – it’s been passed. Is that right?

Ken Ivory: The legislation has been passed. There are a number of other bills that require – in our legislative budgeting process, our governor’s budgeting process, our rainy day funding process – to take into account the risk of reduction in amount or value of Federal funds and other risks that may impact our budget and what we do. So, we had about seven different bills that have all passed as a package. So now we begin the process of figuring out how we build this model and move forward.

The presentation we just had this morning took 20 or 30 House and Senate members – what a great step. Yesterday with our Executive Appropriations Committee, the presentation you gave as well there, that really sets that vision so that as we start moving forward to implement, we know where we're going. We may not know necessarily how to get there, but we have a good vision of what needs to happen and how we may be able to set the model for other states to rally and to work together. We know the answer is not going to come from Washington.

Chris Martenson: Now, to set the stage for listeners, we’re in a room. It’s got a big, horseshoe-shaped, mahogany table of some sort, a lot of chairs. How many state legislators were around the table?

Ken Ivory: Probably about 25 to 30.

Chris Martenson: Yep, and I got to deliver basically a Crash Course Lite, and we were talking very honestly about the risks. My perception was there were a lot of nodding heads. They are people who are very aware of this. I saw a few eyes go a little bit wide at a couple of points, but I really felt that the message was received. So, this is interesting to me that Washington – in a lot of what I read in the newspapers – is just projecting that everything is recovering and that any discussion that there might be other than recovery is somehow off the table. Here we had, I thought, a very open conversation, which I felt was received relatively well. What was your perception of it?

Ken Ivory: I thought it was received very well. When you talk about exponential debt requiring – demanding – exponential growth, and the impossibility of that doubling perhaps even one more time, let alone repeatedly in an exponential sequence, that seems to resonate – well, we feel that, right? We feel that. As representatives of the people, we feel that, but sometimes it’s hard to put your finger on it. But I think that really hit home. That creates an opportunity.

I think in Utah, we come from a pioneer heritage, many of us. That’s the starting of our history – people that grabbed a handcart and walked 2,000 miles, some of them barefoot, to come to a desert and make it blossom as a rose. We see maybe an opportunity to kind of lead out into a new pioneering experience, muster up some of that DNA, and figure out, how do we go through this pioneering experience that doesn’t necessarily have to be worse? It could be something different but better.

Dan Griffiths: Likewise, one of the things that really resonates in Utah is earthquakes. We live on a fault line and everyone here is very accustomed to planning/preparing for earthquakes. So, to be able to take that planning and preparation, and those planning and preparation networks, and then say well, we need to be preparing for financial earthquakes.

There’s some serious things that are on the horizon, and we hope we don’t ever have to use these disaster plans that we’re putting in place. But it will be so much better for all of us if we can help our communities get mentally and emotionally prepared for an event that might happen. It’s no different than having schoolchildren do a drill where they crawl under their desks so that they know what it’s like if an earthquake were to happen. Some of that fear might go away and allow them to better deal with it. We’re trying to do the same thing here from a financial standpoint and say, what happens if we have a financial earthquake? And, let’s put a plan in place. We hope we never have to use it. But, if something did happen, at least we’ve prepared ourselves and we’ve braced ourselves for that impact.

Chris Martenson: That’s so refreshing to hear. I’ve spent a long time in my work of pushing the story, and then to find that there’s a receptive audience for it – this is just common sense, right? It’s math. It’s common sense. We add it up. And, it’s interesting that in businesses – so as a CPA, I’d be interested in your response to this – my experience in business is that what businesses do is they look at their competition, they look at their assets, they look at the risks, and they have plans. If plan A doesn’t work, they go to plan B. But no business just has a single sort of response. I think the request we’re being asked at the national level is you're going to have to depend on the Federal Government, and whatever it does, you're just going to have to accept.

To plan that it might not turn out as hoped just seems prudent and rational. I’m wondering, is that the right framing? Is that what you’re experiencing at the business level?

Dan Griffiths: It’s one of the reasons why I think the conversations started with chamber groups, with CPAs, with others, because business people really get this. When they look at the Federal financial statements, their eyes bug out, and they think if this were a business, this would be crazy. Then, when we break that down, we say, what about the states?

Representative Ivory mentioned that approximately 40% of our government spending here in Utah comes from federally sourced funds of one sort or another. If I were a business and 40% of my revenue were derived from a single source, I would have a whole set of contingency plans – plan B, C, D, E, F – to ensure that if anything happened to that source of revenue, we’d have some plan in place to deal with that.

We met yesterday with the Utah Association of CPAs, and the president, Kent Thomas – who is a CFO for a company down south of here – said he’s working with a company who had 25% of their revenue coming from a single Fortune 500 customer. They knew that the customer was having some internal struggles. They were having some ownership transitions and changes. They were having some leadership issues. There were all kinds of things going on. So, they didn’t wait for a call to say, oh by the way, your orders are going to be cut in half. They had a plan in place well ahead as they saw some of that writing on the wall. He said last fall they had to use that plan because this customer ended up having some major hiccups and their revenue got cut in half from that single customer. We need to be doing the same thing here in our state, and hopefully other states are doing the same.

Chris Martenson: All right. So now that the legislation has been passed, Ken, what are the next steps here, how will you identify them, and where does it go from here?

Ken Ivory: Your visit here has been a great starting point, launching point, for the next steps. Assessing the risks – we think we’ve got a reasonable idea. I mean, you've elaborated on a number of them. We’ve kind of known them. But, we’re seeing this already. Even over the last couple of months with sequestration, the Federal Government is reaching in and not cutting its expenses; it’s cutting our revenue items – items that come right out of the land, the monies that were supposed to come off first to educate children. They’re not only cutting those back; they’re reaching back in time and saying you have to pay back what you've already spent. I mean, imagine that. That’s just unfathomable that they’re reaching in to do that.

They’re taking mineral release money from revenues that are extracted right out of the ground and taking that revenue out of local schools and local economies. That’s happening right now. Those alarm bells, we’ve been seeing them from the dependency, but that took it to a new level. So, looking at those contingency plans…the kinds of things you talked about. We led the nation in passing gold and silver as legal tender in the nation. Now it’s a matter of, how do we implement that? How do we look at some transaction mechanism that, again, we hope we never have to use. But, to not think about this exponential money system, having risks and potential hiccups, and having a Plan B, as you say – that’s certainly one area to look at.

The other area that we're working on with the CPAs – and we’re so fortunate to have groups like that and the Chamber and others in – how do we begin building the community links? So, we develop the information, develop the legislation that allows communities to have more flexibility in their rainy-day and contingency planning. Those are the kinds of things we’re going to look at from now to the next legislative session to build those mechanisms.

Chris Martenson: Has there been any interest from any other states in what you're up to? Is anybody looking over your shoulder and maybe showing interest in that?

Ken Ivory: Yeah, there have. I just came back from a national meeting of state legislators in Oklahoma a couple weeks ago. The Oklahoma speaker is working on some things. I understand there’s some legislators in Texas we’ve talked to, legislators in Arizona, North Dakota, New Mexico, and a number of other places, that they’re feeling and seeing the same things. I mean, in Wyoming, for example, this mineral lease issue $53 million. They just get a letter out of the blue saying that revenue that was yours, we’re going to call that ‘cutting our expense’ and just take it away from you. It’s unheard of.

Our system has evolved to something it was never intended to be. It was supposed to be 50 laboratories of freedom and of innovation. But we’ve consolidated that to a level now that we only have one firewall of risk. If the Federal Government has a hiccup, that affects everyone. Our system was never intended to be that way. We’ve got to restore balance in that partnership and pull that back down so that we can innovate in these 50 different laboratories and have these kinds of experiments in resiliency that you're talking about.

We’re thrilled that there is the urgency building to start making that happen, because that’s going to have benefits on a number of levels that go beyond economics, that go beyond politics. It goes back to how we preserve our liberty and our prosperity and our peace.

Chris Martenson: Well, speaking of that federal rebalancing against state powers and rights and things like that, is the Federal Government showing any interest in your actions so far?

Ken Ivory: Consolidating powers tend to continue to consolidate that. Body in motion tends to stay in motion. So no, it’s going to have to be a team effort among the states. We’re working on that very, very diligently. But, that’s the nature of our system. That’s why having a state sovereignty and a federal sovereignty was actually the genius of our founding system. So you would have not only checks within government, but checks between and among governments. We’ve kind of forgotten who we are because we’ve had our hands out for so long.

Now, the hand out is not getting filled. In fact, they’re taking away. That raises a lot of really fascinating questions about the balance in this partnership and what is a partnership and what should it be. So, that’s moving forward that I think is going to be a very interesting dynamic in starting to build this economic resiliency as we go forward.

Dan Griffiths: But the system is open to it. I mean, the Supreme Court opened the door wide open in the Affordable Care Act decision where they said states are sovereigns. Sometimes they just have to act like it. That’s directly out of their opinion. So, the door is certainly open to those conversations, but as Ken said, it’s going to take having states stand up and act like states, because otherwise bodies in motion stay in motion and the federal consolidation will just continue.

Chris Martenson: Interesting. So Dan, from the private sector, the CPAs, what role do you see the CPAs playing in the internal state partnerships? How are you going to help bring this financial readiness initiative forward and enact I guess really bring home the meat that’s in the bills that have been passed.

Dan Griffiths: So, here in Utah, we have about 4,000 CPAs and across the country there’s about 400,000 that are members of the American Institute of CPAs. Our hope is that some number of those CPAs can go out into their communities and can share some of the things that you've been here sharing with us today – can talk about how do we start building resilient communities? CPAs have a tremendous amount of credibility when it comes to the numbers. So, when we come in and show the AICPAs evaluation of the Federal Government’s financial statements and show that even in their financial statements – which probably lack some credibility in certain ways, especially since the GAO (Government Accountability Office) can’t even issue an unqualified audit opinion but even if you can take their statements at face value, the total liabilities reflected there exceed the net worth of all U.S. citizens.

When we can come in as CPAs and go into PTA groups, chamber groups, Kiwanis clubs, gatherings of educators, and we can have these conversations with them and say look, this is totally unsustainable. Guess what? We can do something to prepare and we can build resilient communities here in our state. Hopefully that begins to happen all across the country. I think CPAs do have a role to play, and we can speak probably in ways that legislators aren’t at liberty to speak because of their positions and needing to get re-elected. But we’re in a place where we can be independent and say look, the math just doesn’t work. We need to start preparing.

Ken Ivory: I think the power of what Dan is talking about is this transience politics. It’s a math problem. It’s not a political problem. So, to lay that out and look at, how are we going to educate our children, as we’re already seeing the Federal funds that make up 40% of our revenues go away? How are we going to take care of sick people and poor people? Because as they’re taking that money back, the Federal Government is not saying we’ve got an alternate plan to educate your children or take care of your sick people or poor people or maintain your roads and provide public safety. So, that’s a very real responsibility that’s on us, but those things aren't partisan.

So, the opportunity to really kind of get beyond some of the toxicity that we’ve been seeing in politics, mostly at the Federal level, but it runs downhill a little bit. To get beyond that and say, guys, we’ve got serious things to consider and we’re all in the same lifeboat, we’re all in the same boat moving forward. The CPAs have a big role in helping transcend that because it is a math problem.

Chris Martenson: I love hearing that this is happening. To me, it’s common sense. It also seems rational and prudent. It’s such a relief to know that there’s an entire state – as it were – that’s decided well, we’re going to pick ourselves up and we’re going to be responsible for our own outcomes and we’re going to manage this predicament as well as we can and get started on this. That’s really just – that’s wonderful. I’m sorry that it has to be done, but I’m glad that it is being done.

So, I’m wondering, Representative Ivory, if you have any advice for any other state legislators that might be listening to this, how they might get started on something like this in their state?

Ken Ivory: I think getting started is an amount of education – drilling down to the basic facts. Your site does a great job in laying a lot of those out. I strongly recommend the Crash Course. I was converted many, many years ago and had the cottage meetings and brought the friends over and said you got to see this. You've got to listen to this story, and maybe our story is going to be different. Then, it becomes very consistent with the other things that we’re seeing, when you see the exponential debts and deficits and the international actions. We sense that. We know that. So, education is the number one key, and then just understanding our responsibility.

This isn't about a next election at this point. I think we sense that as well. This is about the next generation and what does that look like and how do we prepare for our states in a way that – unfortunately, we're not seeing that guidance out of Washington, and fortunately, how fortunate we are that in our system, we still have that opportunity to effect change at different levels.

It’s not about hitting the home run in Washington. It’s about my community and how great that one CPA in one Chamber of Commerce with one city can start pulling things together and affect state policy, and as we begin to work with other states, affect multi-state policy that then starts to change the dialogue nationally. What a great system that is, right? It’s still here if we simply engage. Of course, with the things you point out, it’s time to engage.

Chris Martenson: Absolutely it is. Well, Dan, Representative Ivory, it’s been a real pleasure talking today. I wish you all the success. Of course I’m going to be in contact with you over time because I’m tracking this very closely. Anything we can do to help, Adam and I are obviously on board, and I’m sure the Peak Prosperity community is as well, because this needs to be done. Bringing it out into the open is a refreshingly needed and unfortunately bold thing to do. But, hopefully will become less bold overtime as the trailblazers show that it can be done and that nothing bad happens when you do, just good stuff. So, thank you so much for your time today.

Dan Griffiths: What a pleasure. The door is open in Utah for you always. Thanks for coming.

Ken Ivory: Thanks. We’re thrilled to have you here.

About the guest

Financial Ready Utah was created by Utah’s CPA community, chambers of commerce, state legislators, community leaders, educators and others who are invested in taking action on securing a sustainable future for our families. Individuals have come forward to leverage their voices in an effort to prepare for a “financial earthquake” in the spirit of Be Ready Utah.

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8 Comments

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Good

The rest of the world sees the USA as the nation that drops bombs relentlessly on kids.

This is a much better way of representing yourselves.

 

LesPhelps's picture
LesPhelps
Status: Platinum Member (Offline)
Joined: Apr 30 2009
Posts: 728
US Bombs

I know it may sound like splitting hairs, but it's not the US in it's  entity dropping bombs.  I think you'd be hard pressed to find a meaningful minority of voters in the US wo agree with having permanent troups in 150 countries or the US spending as much on military as the entire rest of the world combined or starting one war after another.

Our vote has no meaningful impact these days.  The US Government is out of control and unresponsive.  It's the equivalent of blaming the citizens of the USSR for the Kremlin's actions.  Just because we are a "free country" doesn't mean we have any control over or say in our government.

If it makes you feel better, the US is doing exactly the same thing the USSR did.  They, not us, are fighting and spending their way into financial collapse.  I can't see this continuing much longer and the end will likely be just as fast as the end for the USSR.

We're mostly just along for the ride.

LesPhelps's picture
LesPhelps
Status: Platinum Member (Offline)
Joined: Apr 30 2009
Posts: 728
This is a great event

I'm delighted to see this.  It would be fantastic if this movement caught on with other states.  Even though it's too late to do much good, perhaps the federal government will even notice the concern.

The focus on local resiliancy and local resources is timely.

I always blanch, however, when people put churches in the mix of local resources.  Churchs, no doubt do a trememdous amount of good world wide.  

However, first, religions are notoriously bad about seeing overpopulation as an issue.  Overpopulation is the 800 lb Gorilla that we still rarely talk about directly.  We only address the impacts of over population by discussing pollution and resourse depletion as if they are separate unrelated phenomenon.  

Second, wars are still being fought over religious intollerance that began thousands of years ago.  My wife read in the paper yesterday that blasphemy has been elevated to a criminal offense in Eqypt.

Perhaps, we need to grow up in order to have grown up conversations.

Les

 

 

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Sorry Guys. My mistake.

I know that Les. You know that.

It takes a lot of effort to build a good reputation. The reputation is destroyed with one violent action. Unfortunately, when the rest of the world thinks USA they think bombs, drones, surveillance, they think of cops pepper spraying kids. It is not a good look.  I had the same view of Russians until I married a Communist.

I am hoping that these initiatives help to turn that perspective around to viewing the people as people.

I regret having written the words. However I wanted to juxtapose the two philosophies together to highlight the opposing positions of what is being attempted here by the citizens and the other unspeakable actions that are being perpetrated in your name. Because that was my honest reaction.

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1758
Appreciate foreign viewpoints

We in the USA need to know how the world sees us.  

Every American that I know personally is completely opposed to the extrajudicial murders being conducted world wide via remote controlled drones and high altitude bombing.  Yet to the outside world, these are being committed by "the Americans."

I interpret this immense distrepancy between public desire and national behaviour as indicating that a psychopathic and organized group of some kind actually runs the country.  (Is it as organized as a "cabal" or just the pooled influence of the military-industrial complex?)

As an aside, everyone knows that "karma is a b*tch."  Our chidren may well feel the backlash.

 

SagerXX's picture
SagerXX
Status: Diamond Member (Offline)
Joined: Feb 11 2009
Posts: 2219
A big piece of the resilience puzzle at the gov level...

....will be whether gov can incentivize folks to invest money in resilience-related things/projects.  With the heinous ZIRP (soon to be NIRP?) environment, folks (and pension funds, etc.) are chasing return by putting their money into the same sort of paper scams that will eventually blow up same as the MBS scams (and dot-coms before them, etc.).  This horrible misallocation of capital on a society-wide basis will eventually end up destroying much of the precious capital that is desperatelly needed to fund resilience-related projects.  Can you imagine a pension fund that would invest tens of millions in putting a solar hot water heater on every house/building in a given state (see CM's interview w/Kloster on this sort of idea [he talks about windpower generation investment] http://www.peakprosperity.com/podcast/81857/francis-koster-deploying-our...)?  Dr. Chris has quoted a real rate of return on such an investment in his house in the area of 10%+ per year.  Sure beats buying corporate junk at 5-3/4% -- better return, and it actually *accomplishes* something useful (actually, several things).

I've been gradually coming to understand the long-term ill effect of consistent misallocation of capital in this big-picture sense, and it scares the dickens out of me now that it really sinks in...

We're throwing our society's seed corn onto the ground in hopes of attracting pigeons that we'll then shoot, so as to feed them to our hunting dogs, which we'll then take out on a fox hunt -- so we might catch and eat a single fox.  Hm.  There's a vastly superior metaphor waiting to be discovered, but that's what I have instanter...

But eventually we get to an event horizon where QE and ZIRP/NIRP have run their course, and there's essentially no capital remaining to fund the work needed to maintain society as an ongoing concern...

Yikes...

Viva anyway! -- Sager

gillbilly's picture
gillbilly
Status: Gold Member (Offline)
Joined: Oct 22 2012
Posts: 423
Liberty, Systems, and Math

It is nice to see this kind of dialogue happening, and many of the points made by Griffiths and Ivory are good. But I would challenge both to look deeper into the systemic causes and to question their own roles within the system. Too many of our cultural decisions are being made to fit this pathological system. Assumptions need to be rigorously challenged. Since this might be one of my only chances to have the ears of these two leaders (maybe they will read this?), I'll expand...

For instance, Griffiths' remark..."When they look at the Federal financial statements, their eyes bug out, and they think if this were a business, this would be crazy." The tendency to want to apply micro level economics to macro can be dangerous. "Bottom-lines" of federal governments should not mirror the bottom-lines of corporations for obvious reasons of differing ultimate goals. I'm sure the Griffiths and Ivory realize this, but I've heard this statement too many times in the past 20 years and it's often assumed it that it makes logical sense.  CPAs often confine their math to the predefined models of balance sheets based on economic models that factor out most external costs (societal, cultural, environment, etc). Maximization of utility or profit reduces human lives to output-input ratios. The costs to culture and community is never, or hardly ever, factored into these balance sheets. Governments on the other hand must take into account the value (however you might measure it??) of culture and community.

One of the first big assumptions that needs to be challenged is...that human behavior can be approximated by non-cultural models/methods (i.e. math). Why should we do this? In the past, before the disciplinary/mathematical approach to economics (through econometrics), self-interested behavior was kept in check by community values and culture. Through econometric analysis, these checks were removed and continued to move the "system" in the pathological direction of only considering efficiency, profitabilty, and productivity. In essence, we replaced living human beings with mathematical models. These models are then named "the free market" and our behaviors need to "fit" the models.

The second assumption that needs challenging is... that production of goods and services has a small effect on the biosphere. This is definitely being challenged, but by no means on a level that shows meaningful consequences. The economy needs to be put under the biosphere. I'm not saying that people don't understand this, but our economic "models" and balance sheets do not acknowledge this. The concept of throughput in our economic visions/models carry no exchange with the environment...our economies still remains separate and are viewed as isolated systems. The rational gap between these two separate systems is bridged in our society with the belief in technology. The problem with this separation is what we face...that economic growth becomes the solution for all our ailments.

The third assumption...the evolution of economic measurement only applies to the mechanisms internal to  the economy (market, free trade, and globalization). This leads to the market "fundamentalism" that has brought devastating consequences through the inherent mantras the accompany it. Mantras such as... if we don't engage in free trade we will be left behind. (left behind what?)

All these assumptions paved the way for human beings to be reduced through the disciplinary "science" of economics to create an enormous amount of "facts and mathematical theories" that have the appearance of being exact/scientific. 

Ever increasing "growth" relies on continual specialization, and the application of this specialized knowledge and technology. Galbraith describes how corporations over the past hundred years had to change to assimilate this knowledge which led to the organization of what he called the "technostructure." We need to challenge these assumptions and specialization!

Finally, to get to liberty. The concept of liberty needs to be clearly defined, or redefined, in light of the interconnectedness of life and the environment. Entrepreneurship seems to be the right spirit, but a balance needs to be struck with how much one person's right to choose effects another's as well as the biosphere on which we all depend. I finish with a quote from Griffiths...

Griffiths wrote: I think CPAs do have a role to play, and we can speak probably in ways that legislators aren’t at liberty to speak because of their positions and needing to get re-elected. But we’re in a place where we can be independent and say look, the math just doesn’t work. We need to start preparing.

If the system doesn't allow those "in charge" of changing the system to speak freely then who is in charge? The system?

Please be courageous to challenge the authority of your own specialty!

 

 

LesPhelps's picture
LesPhelps
Status: Platinum Member (Offline)
Joined: Apr 30 2009
Posts: 728
Arthur Robey wrote: I regret
Arthur Robey wrote:

I regret having written the words.

 

I don't regret you having said them.  I'm sure what you said is completely true, even if unfortunate.  

Communication is the key to clearing up misunderstandings.

I could rant about the power structure over hear, but, to a large extent, I'd be repeating things I've learned or had reinforced on this website.

A thought that has crossed my mind once or twice is that, when things start getting dicey, those who control the weapons over here could use them to control us the same way they are currently using them around the world.

Somehow, I just don't see the people in our government just packing up and going home when the dollar becomes worthless.

Les

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