Category Archives: Policy

The Road To Serfdom Is Paved With Austerity OR The Interest Rate Bubble That Isn’t Yet

By Walter Borden

Have low interest rates formed an economic bubble? They are significantly lower than their 10 year average measured against similar conditions. Stephen Schwarzman of the Blackstone Group thinks so. He and others predict the next great fortunes will arise from precise timing of its bursting. Yet, fortunes and reputations have diminished over the past four years or so as a consequence of betting on its collapse ex ante. The markets continue to signal low, unchanging default risk for U.S. debt in both Credit Default Spreads (CDS) and the Exchange Traded Funds (ETFs) which short US debt.  Economist and housing market expert Robert Schiller sees a cloudy outlook for mortgage rate increases. Paul Krugman, who correctly called the housing bubble in 2005, doesn’t see any evidence for a rate rise in the short and mid-runs.

CDS Spreads US.Brazil, Russia, China, Source:  Deutsche Bank Feb. 2013
CDS Spreads US, Brazil, Russia, China, Source: Deutsche Bank Feb. 2013. Click to Enlarge.

Keynes famously said that in the long run we’re all dead. And, this is not only an Apres Moi, la Deluge argument. Time scales for ending our employment crisis matter to our children and grandchildren as well. History shows that economic policy and social policy timescales are often not commensurate. In policy circles and television talking head broadcasts, conventional wisdom categorically assumes sans empirics, interest rate trajectories with a strong upward bias. Yet, this bias distracts us from the real problem: the national U.S. employment problem and the long term damage of which seriously threatens our economy, our infrastructure, and our children’s future. How to bend this curve downward?

Further, ample evidence shows that debt stabilization comes more surely from economic growth at ~4%. Unemployment will definitely come down, as will the federal debt, if we grow the economy by this 4% benchmark just as we did in the last four years of the Clinton Administration. For example, in 2000 the unemployment rate averaged 4% per month and the U.S. had a budget surplus.

Two caveats–first, a contemporary growth path must be a sustainable one focused on infrastructure investment, education investment, and clean energy. Growth need not require a trade-off between pollution and high carbon emissions. Much is made of the high growth in India and China and their resultant carbon emissions. Less oft mentioned is that both have nascent Cap and Trade programs to offset their rampant pollution of vital natural, economic resources. Financial deregulation, fossil fuel extraction subsidies, and privatization schemes — such as selling our roads to Australian speculators — need to be put on hold because we have no evidence that they create sustainable jobs. Secondly, health care costs are driving our deficit, and while the ACA, or Obamacare is already bringing healthcare inflation down, more needs to be done such as preventing rampant regulatory capture that leads to $28,000 per vial drugs to reworking Medicare Part D to allow US taxpayers to negotiate with drug makers on price just like the VA and Medicaid. An NIH study states:

Extension of existing price setting mechanisms to Medicare could save tens of billions of dollars if prices similar to those already achieved by other federal programs could be reached. Whether or not this is a political or economic possibility, the magnitude of these savings cannot be ignored.

Low unemployment and reasonable wage growth will signal the time for focusing on national debt.

Logic dictates that simply because two things can happen, their probabilities aren’t equal. And, key economic and social indicators signal little inflation and interest pressure on the horizon, even if low rates can lead to bubbles. So the government can borrow now at historically low interest rates and invest the money in an infrastructure for a clean economy with a low probability of inflating a bubble in the short to mid runs. This in one of the ways a government that controls the world’s reserve currency is significantly unlike a household budget.

Prediction markets probability of US Recession in 2013. Source: PredictWise. Click To Enlarge.
Prediction markets probability of US Recession in 2013. Source: PredictWise. Click To Enlarge.

Many observers point to how Federal Reserve policies have kept interest rates low since 2008.  However, the Federal Reserve announced during their December meeting that it will begin reversing its easing policies when the job market improves substantially, when the unemployment rate falls to 6.5%, or when inflation exceeds 2.5% per year. Current forecasts call for ~2% growth in the US in 2013 and ~15% chance of a recession — admittedly not an immaterial probability. So here again, 2013 likely will not vindicate interest rate speculators and bond short sellers.

In 1946 the debt was 120% of the GDP. It went straight down to about 32% in 1973. We had increased spending and deficits almost every year. The debt in dollars almost doubled. Real median household income surged 74% while CEO’s earned 50 times what their workers earned; it is 500 times today. The GDP averaged 3.8% growth. The U.S. resolved a debt crisis with more debt. Interest rates will rise eventually. That is not all bad. This would likely mean the unleashing of pent-up demand.  And, the resultant weak dollar would boost exports of solar panels and the produce of sustainable agriculture for which there is strong demand in Europe and Japan. So, household books balance and run surpluses while the government takes on debt as the lender, consumer, and with QE, even borrower, of last resort.

Why is spurring demand and high employment more critical than deficit

Federal Minimum Wage. Source New York Times. Click To Enlarge.
Federal Minimum Wage. Source New York Times. Click To Enlarge.

reduction in 2013?

Most Baby Boomers will be hard pressed to fund retirement either by both having saved too little and suffered poor investment advice, or perhaps simply needing to draw down funds in a prolonged down market. A cursory look at the math gives us numbers that seem to fall into place like a game of Tetris. By 2030,

Taking these numbers into consideration with the fact the consistent austerian policies very likely mean the U.S. faces a multi-decadal drop in aggregate demand — the main driver of growth which is in turn the most tried and true process for debt reduction — serious policy challenges face the US.  This underscores the need to create jobs first and build a strong revenue base around a clean economy so that pollution does not eat away the gains via increased healthcare costs and decreased land values. Austerity mostly leads to more lay-offs, comparatively weak job creation (with low wages and benefit packages requiring taxpayers to pick up the costs, and a environment where wages stagnate or fall. Stunted wage growth may bode in the short run for the Oligarchy, but not the well being of the the majority of U.S. citizens whose labor and tax-dollars are used to finance its mighty military and Too-Big To-Fail-or-Jail banks.

Continue reading The Road To Serfdom Is Paved With Austerity OR The Interest Rate Bubble That Isn’t Yet

A Clean Slate for 2013: Rejecting the Politics of Plutocracy, Singularity, and Pollution

By Walter Borden

To address the long term unemployment crisis in 2013, the U.S. must increase investment in its clean economy and infrastructure. U.S. citizens own the world’s most robust non-profit, namely the United States Government. The U.S. can act now for a reason that trumps profit: the General Welfare.  Renewable energy, infrastructure, and pollution remediation increase labor demand and thus, long term, sustainable employment. By contrast, the dirty energy sector primarily provides temporary and short term jobs. Fossil fuels,  automation, and de-unionization have converged to aggressively drive down the middle class share of profits generated by our national economy. The outlook for labor is further complicated by rapid uptake of capital-biased technology: machine intelligence that further shifts profit away from labor by replacing its participation in the economy with robots.

The TAKRAF RB293 is a giant bucket-wheel excavator used in coal mining. (Click to Enlarge)
The TAKRAF RB293 is a giant bucket-wheel excavator used in coal mining. (Click to Enlarge)

Dirty energy outputs unsustainable amounts of seemingly cheap energy and goods. Coal extractionists value coal at low domestic prices to skip large royalty payouts when mining federal land all the while fetching much higher prices on international markets. The inevitable societal costs of damaged environments and cleaning up pollution reveals this bargain to be Faustian and, as such, provides a diminishing benefit.  Further, environmental protections and clean energy factor into job growth with wages and salaries that accrue to the economy as opposed to rentier payments that primarily fill Swiss bank accounts.

Restraining dirty energy shifts capital to labor thereby counterbalancing the decadal trend of asymmetric capital accumulation to a shrinking few. Corporate profits continue to surge to multi-year record highs. Yet, as a share of GDP, wages have declined over the past thirty years. This has become in its own way a kind of hidden inflation. Clean energy policies address this imbalance with greater quantities of quality jobs.

Currently in the U.S., our most pressing problem is one of high, long term unemployment. Deficit and debt to GDP ratios matter; yet, the primary driver of deficits is a lack of employment growth. History and empirical evidence show how these ratios, as well incomes inequalities, quickly come down as revenues grow due to greater employment at living wages. Further, industry sits on record hoards of capital, yet chooses not to invest. Now is the time to increase public sector spending to create low impact demand. Clean energy is an optimal starting point for increasing demand per capita in sectors that are sustainable and regenerative.

Resource Rents North America vs. East Asia and Pacific (Click to Enlarge)
Resource Rents North America vs. East Asia and Pacific (Click to Enlarge)

The moral dimensions are plain and demand constant consideration. Most people in most societies feel that extreme inequality is problematic and favor an equitable distribution of the benefits and burdens of their society. Psychologist Lawrence Kohlberg‘s proposed a stage of moral reasoning which considers life to be more valuable than  property rights or profits, and that this is a more adequate moral position for making policies to achieve distributive  justice. Immanuel Kant held  that morality presents itself as an categorical imperative.  Aristotle observed, “It is in justice that the ordering of society is centered.”

A Clean, Compassionate Economy Is A Path to Sustainable Prosperity 

Alleviating contemporary unemployment and ensuring that its does not become a long term crisis requires rejection of  classical economic conventions, namely, that labor is only a cost to be mercilessly driven down and that search frictions are a hard, growing reality: i.e. in the real world, it’s expensive to relocate and retrain.  For the long term unemployed, it is next to impossible.Yet, social innovation and impact investing policies can restore balance.

Some argue that the subsidies required to launch a green economy are too steep. But, that assertion has little evidentiary support and fails a common sense test as well. In reality, clean energy drives labor demand via its need for large, scaled up amounts of infrastructure, operation, remediation and, of course, R&D.

Jobs fell much further and faster during the Great Recession than in the previous 2 (marked by the lines to the left of the zero point on the x-axis) yet job growth in the current recovery is similar to job growth by this point in the previous 2 recoveries. (Click To Enlarge)
Jobs fell much further and faster during the Great Recession than in the previous 2 (marked by the lines to the left of the zero point on the x-axis) yet job growth in the current recovery is similar to job growth by this point in the previous 2 recoveries. (Click To Enlarge)

Reduced labor costs are not resulting in shared prosperity. Does the private sector truly want a continued collapse of labor prices in the U.S.?  Labor is a cost in classical economic thinking. Lower costs mean cheaper goods and services; a greater general welfare in principal – as long as producers do not loose their incentive to pass on cost efficiencies to consumers. Yet, in an era of record corporate profits, employment growth has steeply decelerated. Core CPI has been low, but when stagnant wages are considered along with higher education and healthcare costs, the benefits of lower CPI seem rather ephemeral.

Here again, a green economy points a way forward. A recent MIT carbon tax study lays out scenarios where a carbon tax could either be revenue neutral or partially so when the excess revenue is used to reduce debt or build infrastructure. In addition to raising revenue, it would reduce pollution by incentivizing the transportation industry to generate more efficient products.  This is an instance where the tax code can help create more progressive outcomes, and in this era of ever rising inequality, which recent data suggests is increasingly decoupled from recoveries, can address that inequality. Restructuring the code needs to be a major, bipartisan goal.

The Private Sector Isn’t Using Its Multi- Year Trended Record Profits for Shared Prosperity

Continue reading A Clean Slate for 2013: Rejecting the Politics of Plutocracy, Singularity, and Pollution

Annie Lennox to Narrate Documentary centered around Haitian Artist Frankétienne, 2009 Nobel Prize candidate.


 Annie Lennox to Narrate Documentary centered around

Haitian Artist Frankétienne, 2009 Nobel Prize candidate.

ScreenHunter_01 Jan. 11 00.25
Click image above to donate through IndieGogo

NEW YORK, N.Y.  The New York based Haitian Cultural Foundation is proud to announce that internationally celebrated recording artist and activist ANNIE LENNOX will serve as principal narrator for the powerful, moving, and inspiring documentary film In the Eye of the Spiral.

The film, now raising money on Indiegogo, features seven of Haiti’s most prominent living artists, among whom 2009 Nobel Prize candidate Frankétienne, and proposes a truly new narrative for Haiti – a long-embattled country steeped in vitality and built in no small part on the courageousness of the creative spirit.

Continue reading Annie Lennox to Narrate Documentary centered around Haitian Artist Frankétienne, 2009 Nobel Prize candidate.

Fund Balance Recommends: The Social Change Film Festival (SCFF)

The partners at Fund Balance are delighted to recommend to our friends and subscribers the Social Change Film Festival (SCFF). SCFF is led-up by economist Cynthia Phillips and her Global Change Media initiative.

The event features Robert Redford’s new movie Watershed, the new movie about climate change called Chasing Ice, the new fracking film, Dear Governor Cuomo, along with Angelina Jolie’s film In the Land of Blood and Honey, among many fine entries.

Additional highlists of the event include:

SCFF, New Orleans, La, 2012
  • 8 Feature-length world-class social change films (plus
  • Shorts) at multiple venues
  • 4 days of workshops led by our international faculty of
  • filmmakers and industry professionals
  • Town Hall: Communities of Resilience – Sharing and supporting ideas, dialogue, and action in the face of crisis
  • Activist Awards Gala – A Celebration of Local and
  • Global Activism
  • Filmmaker “Behind the Scenes” & “The Making Of” discussions
  • Crowd-sourced social action ideas related to film topics
  • Global Online Screening Room
  • Television Distribution available to over 20 million households
  • Awards ceremony honoring the world’s most poignant and
  • inspiring social change films
  • Lively networking events with industry professionals
  • broadcasters and distributors
  • Multicultural relationship building and global networking

Both the SCFF app and screening room are up on the web.

The Festival is happening now in New Orleans. The gala event is Friday November 30, 2012, and the festival wraps Sunday December 2, 2012. The content is going out on LiveStream and is being recorded for the launch of a new satellite and LiveStream channel in January. If you are in the area stop and participate. Or for $25 in the U.S. and $10 for international, you can engage and enjoy the SCFF activities and content online.

This is a great opportunity for anyone at the intersection of culture and social change, impact investing, cleantech and social enterprise.


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Haiti: Culture, Sustainability & Social Enterprise – “In the Eye of the Spiral” Preview Screening June 14th

Fund Balance is pleased to present this event as part of of our ongoing demonstration that culture, sustainability and social enterprise provide a better organizing principle than predatory debt finance and unrestricted globalization.

In the Eye of the Spiral

Private Preview Screening

Thursday June 14, 6PM-8PM

@ The Olivia, A Stonehenge Property

315 West 33rd Street (between 8th & 9th Ave.)



In the Eye of the Spiral is a documentary film project featuring seven of Haiti’s most prominent living artists.Taking as its point of departure the notion of dynamic chaos incarnated by the incomparable writer-painter-philosopher Frankétienne, this film proposes anew narrative for the embattled Haitian Republic – a narrative steeped in the vitality, the mysticism and, ultimately, the hopefulness of artistic creation.

We sincerely hope you will join in our efforts to finish this film and to bring an amazing community of artists and visionaries to the attention of the world. It is our aim to raise $250,000 to complete the documentary. We look to you for help in reaching this goal.

Panel Discussion: Raynald Leconte (Exec Producer and Co-Director In the Eye of the Spiral), Michael Stern (Creative Director, Stonehenge), Eve Blouin (Co-Director and writer In the Eye of the Spiral), Linda Mellon (Friends of FOKAL), Leland Lehman (Partner, Fund Balance)

Gratitude to FOKAL (OSI Soros / Haiti) for their generous support.

With dignity, profundity and clear sighted visionary power
and wisdom, the Haitian artists we encounter in In the Eye of the Spiral uphold the cultural, spiritual identity of an incredible country
– Annie Lennox

Please RSVP to 

Annie Lennox has confirmed to be the Principal Narrator for In the Eye of the Spiral film.

Linda Saetre is coming onboard as Executive Producer. Her credits include: (March of the Penguins, A Jihad for Love, The Beauty Academy of Kabul, Tarnation)

For more info visit


Sponsored by Stonehenge, the Manhattan-based real estate company with 2,500+ apts in their luxury rental buildings.

Learn more

Press Release:

Screening to Preview Acclaimed Haitian Documentary

“In the Eye of the Spiral” Previews Thursday Evening

NEW YORK, N.Y.  (June 11, 2012) The Haitian Cultural Foundation will host a special preview of the powerful, moving and inspiring documentary film In the Eye of the Spiral Thursday night at The Olivia – a Stonehenge Property – allowing viewers a rare opportunity to dialogue with the creative team after watching the trailer.

The captivating film, which features seven of Haiti’s most prominent living artists proposes a new narrative for embattled Haiti – a country steeped in vitality and mysticism and the video ultimately seeks to provide hopefulness for a country built upon great artistry and talent.

“If the film is only half as brilliant as the trailer, Haitian art will finally find its seat at the international table of culture where it belongs,” said Jim Luce in The Huffington Post. The nine-minute trailer has also received interest from Rolling Stone. The movie will feature Annie Lennox as the Principal Narrator.

Featured in the film is the incomparable writer, painter and philosopher Franketienne, who was a candidate for the Nobel Prize for Literature in 2009.

Five UN Ambassadors have already RSVP’d to the event as well as Executive Producer Linda Saetre (whose work includes March of the Penguins, A Jihad for Love and A Beauty Academy of Kabul). In addition to the screening, the evening includes a cocktail reception, storytelling with the guests, a dance by Peniel Guerrier and a panel discussion.

Raynald Leconte, CEO and Chairman of the Haitian Cultural Foundation is serving as Executive Producer and Co-Director of the Film. He brings over 20 years of experience in media and technology to the project, which has garnered significant support from Art Basel Miami and FOKAL (OSI Soros/Haiti).

For more information, please visit