Thomas Jefferson and Banks

Thomas Jefferson was one of the greatest Presidents of the United States. He helped shape the ideal of a citizen’s democracy for America.  He was a visionary and evidently a futurist.  Here is what he said in 1802 about banking institutions:

“I believe that banking institutions are more dangerous to our liberties than standing armies.  If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered”

What  would he  think and say about the Occupy Wall Street phenomenon?

In my last column I wrote that humanity is in transition from one Age to another and that the global financial collapse is a painful part of that transition.  This occurs during any major historical transition period.  In addition I wrote:

“There are four words that keep coming back to me as I view the landscape of what lies ahead in 2009 and beyond.  They are contraction, cleansing, reorganization and transformation.  It is these four words to keep in mind as you read the forecasts here and look around you”

I repeat that because most of the economic predictions below are about contraction and cleansing.  However I am not a pessimist as I believe that we are in a process of reorganization that can lead to transformation.  Please keep that in mind as you read on.

The U.S. economy has been in a recession for close to a year, with the fourth quarter being one of the worst quarters on record.  During this fourth quarter the global economy joined the U.S.  When all the numbers come in for this quarter they will show a major contraction probably in the range of 4-7%.  In a column in mid-October, I wrote:

“We will witness one of the worst holiday retail seasons in history on a year to year comparison basis.  People who feel that they have no control over the performance of their investments will realize that the only control they have is in the area of spending which they will …

A global shift in consciousness has occurred during October.  Trust and confidence have given way to fear and uncertainty. Plans and expectations have been completely altered or dashed altogether.  Governments, entire industries, equity markets and the majority of the adult populations in the developed countries of the world are staring into a financial abyss that has no correlation to anything any of them have experienced (unless they are 80 years or older).

Governments separately, and then in consort struggle to stay ahead of a financial catastrophe they can’t quite fathom.  Hundreds of millions of people feel as thought they have been punched in the gut.  Standing on solid ground becomes a metaphor desperately longed for rather than a reality.  For every theory about what to do with one’s money there is an opposite one put forth.  Financial volatility seems omnipresent.   All of this has produced a shift in consciousness that is palpable.

When belief systems come under attack or are shown to be false, when institutional reliability becomes highly questionable,  when what used to work no longer does,  when it feels that events point to not just change but disruption, then it is time to do two things.

First, one must change one’s behavior.  As I have written here, it is clear that consumerism will take a severe hit and that the next two years will be a time of a massive economic downturn.  Thrift will become a dominant value in countries around the world.  Risk and debt will become four letter words …

A  column here two weeks ago placed the financial crisis within a historical context. The financial meltdown is part of the disruptive transition from the Information Age to the Shift Age.  We are moving through a period of turmoil when the old order is being replaced by a new order.  The nation state economic model is being replaced by a new global model.  We are at a time when the old ways no longer seem to work and yet the new realignments are not yet clear.

In the United States there have been three great waves that have arced over our society during the last 30 years.  The incredible run up in residential real estate values since the late 1970s was the first arc.  Except for a short period in the early 1980s and then again in the 1990s, the value of residential real estate seemed to go ever upward.  This of course created a great sense of wealth for those that benefited.  In the early part of this decade millions of households took advantage of historically low interest rates to take out billions of dollars of equity to use for purchases.  This 30 year cycle obviously came to a crashing halt two years ago.

The second arc was the historic bull market in stocks that started in 1982 and, with a correction in 1987 and again in 2000, continued to its historic high in 2007.  This arc also created a great sense of wealth for millions of …

More than a year ago, I wrote a column about two damaged brands. One damaged brand was the “Made in China” brand and the other was the well respected financial brand of Wall Street.  At that time China was dealing with the fact that pet food produced in China was killing pets all over the world and that toys produced in China had extremely unsafe levels of lead.  Also at that time Wall Street was beginning to deal with the meltdown of the mortgage backed securities market.

This column immediately came to mind last week.  In the same week that the $700 billion bail out was being discussed in Washington, China was basically shutting down its’ dairy business due to criminal negligence and bribery.  More than 50,000 Chinese infants have been stricken with life threatening kidney ailments due to the addition of melamine to most baby formula and milk products.  There are two things that are similar to both these crises.  First, the dairy industry in China and the mortgage backed securities market in the U.S. were woefully under regulated.  Second, those in power made firm assurances that changes would be made and that consumers and investors did not have to worry, that the worst was over.   Lack of oversight combined with outright fraud in both cases now results in two brands that will need years to resurrect themselves. They both made me think of the man standing in the alley opening up his overcoat to reveal stolen …