Value systems' view on economics, How the financial crisis entered the US into the longest contraction since the Great Depression, and what lies ahead for the US Economy

1. W h o ’ s R e s p o n s i b l e f o r A m e r i c a ’ s F a l l

2.
THE
WORDS
OF
ONE
MAN
December
1996:
“Irra:onal
Exuberance”
wipes
out
$1.1
Trillion
from
global
equity
markets
in
hours.
December
2005:
“Frothy”
signals
the
burs:ng
of
the
housing
bubble.
Wipes
out
$6.3
Trillion
in
home
equity
and
starts
the
longest
recession/economic
contrac:on
in
US
history.
May
2001:
“I’
will
have
Tea”
was
taken
by
analysts
as
a
sign
that
expansionist
monetary
policies
were
over
and
interest
rates
were
on
the
rise.
Dow
drops
1,700
points
in
4
months.

3. SURVIVAL
SENSE:
Automa'c-­‐ins'nc've.
8
7
6
5
4
3
2
1
TRIBAL
ORDER:
Kinship,
Mys'cal,
Family
Bonds,
Loyalty
to
Chief.
POWERFUL
SELF:
Heroic,
Impulsive,
Exploi've,
Egocentric
and
Guilt-­‐free.
ABSOLUTE
ORDER:
The
One
True
Way.
Law
and
Order,
Rigid
Ideology,
Discipline,
Righteous
Living.
GLOBAL
ORDER:
Holis'c
&
intui've.
Meshing
of
Mind
&
Spirit.
Global
Brain
&
Global
Commons.
Interconnected,
&
interdependent
ENTERPRISING
SELF:
Strategic,
compe''ve,
driven,
scien'fic,
self-­‐
reliant,
manipula've,
and
risk-­‐taking,
INTEGRATED
SELF:
Big
Picture
view
of
the
world,
navigates
complex
systems
with
ease,
acknowledges
mul'ple
reali'es,
meshes
func'onal
systems
&
evolu'onary
flows.
Flexibility
&
spontaneity
EGALITARIAN
ORDER:
Seeks
Peace
and
Consensus.
Humanitarian,
Egalitarian,
Harmonious
and
Communitarian
THE
EIGHT
VALUE
SYSTEMS
Levels
of
Human
Development
and
Global
Economic
Output

4. GLOBAL ECONOMIC DEVELOPMENT ON THE SPIRAL
LEVEL
COLOR
H I S T O R I C E M E R G E N C E
V A L U E S Y S T E M S - S D i - M E M E N O M I C S
C O N T E M P O R A R Y
M A N I F E S T A T I O N
2nd
Purple
Reciprocity/Gifting/Barter. Chief distributes goods
based on need through loyalty and kinship
Remote Villages In Africa, Southeast
Asia, MENA, China, Russia & So.
America
3rd
Red
Feudal distribution system where the rich get
richer and poor gets poorer. Handful of men in
charge of entire economy
Most OPEC members, MENA region,
Africa, central & south America,
BRICs & PIIGS (EXITING)
4th
Blue
Basic standard of living will be raised through hard
work, discipline & saving. The powerful middle class.
Institutions insure access to system
US, Western Europe, Japan (exiting).
BRICs & PIIGS (entering).
5th
Orange
FREE enterprise. Strategically driven. Manipulative.
Private ownership of property & resources. “Invisible
hand” sets pay, price & perks. Commerce is a game;
the one with the most toys, wins
US, Canada, Western Europe, Northern
Europe, Japan, (exiting unhealthy)
BRICs & PIIGS (ENTERING)
6th
Green
Human bond above all else. Taxes private enterprise to
insure social equality. Community-based, seeks the
distribution of information and resources in the most
democratic way
Northern Europe, Western Europe,
Canada.
US and Japan (entering)
7th
Yellow
Economies that value People, Profit and Planet equally.
Values that stich together a scorched earth left behind
by First Tier. Global lean systems & functionality
Northern Europe, Western Europe,
Canada, US, Global Intelligent Cities
(All at various stages of entry)
8th
Turquoise
Trade alters greatly. Follows no economic ideology. No
entity, country or group taxes the resources of the planet.
Replenishment of the Global Commons. Biomimicry. Rise of
the Global Brain. Commerce copies nature’s ecosystems.
Will not emerge until the Seventh Level
system finishes its work. Pockets of
thinking in Northern Europe, Western
Europe, Canada and the US.
F
I
R
S
T
T
I
E
R
S
Y
S
T
E
M
S
2
N
D
T
I
E
R

5. POST WWII MANDATES THAT SHAPED THE 20TH CENTURY
A VALUE SYSTEMS INTERPRETATION
2. IMF and World Bank created to help the third world develop.
RESULTS: Western exploitation of Global Development (unhealthy Orange),
and the rise of local Exploitative & Feudalistic Red vMEME
1. Europe and Japan were rebuilt with a mandate to direct ORANGE
innovation towards peaceful pursuits. RESULTS: More complex First World
Orange. West entry into Green vMEME.

6.
PURPLE
LIFE
CONDITIONS:
6000-­‐2000
BC:
•
FORM:
BARTER.
GRAIN
-­‐
FOOD
–
GIFTING.
•
BLUE
FUNCTION:
PEACEFUL
COEXISTANCE
AMONG
TRIBES.
•
CATALYST/OPEN
SYSTEM:
TRIBES
BECAME
BIGGER
TRIBES.
FORMED
EARLIER
CITIES.
RED
LIFE
CONDITIONS:
2000
BC
–
1700
AD:
•
FORM:
EMPEROR’S
COIN.
•
BLUE
FUNCTION:
WIDELY
ACCEPTED
FORM
OF
PAYMENT
FOR
SLAVES’
LABOR,
MERCHANTS’
GOODS
AND
WAR
REPARATIONS.
•
CATALYST/OPEN
SYSTEM:
ENDED
WARS
BETWEEN
EMPIRES
AND
ESTABLISHED
TRADE.
BLUE-­‐ORANGE
LIFE
CONDITIONS:
1700
–
1970’s:
•
FORM:
NATIONAL
CURRENCIES
BACKED
BY
GOLD.
•
BLUE
FUNCTION:
PAID
FOR
BASIC
SOCIETAL
FUNCTIONS,
WAGES,
TRADE.
•
CATALYST/OPEN
SYSTEM:
ALLOWED
FOR
GLOBALIZATION,
SINGLE
CURRENCIES,
ABANDONMENT
OF
GOLD
STANDARD
AS
AN
OBSELETE/FALSE
BLUE
SYSTEM.
ORANGE-­‐GREEN
LIFE
CONDITIONS:
1970’s
–
PRESENT:
•
FORM:
FIAT/PAPER
MONEY
BACKED
BY
MERIT
OF
COUNTRY’
S
ECONOMY/GOV’T
•
BLUE
FUNCTION:
BECAME
SUBJECTED
TO
EXPLOITATION
BY
UNHEALTHY
ORANGE
IN
US
&
UNHEALTHY
GREEN
IN
EU.
STILL
PROVIDE
FUNCTIONS
UNDER
BLUE
LIFE
CONDITIONS.
•
CATALYST/OPEN
SYSTEM:
UNLEASHED
DEBATE
ABOUT
2ND
TIER
FORMS
OF
EXCHANGE.
HISTORIC
ROLE
OF
MONEY
IN
HUMAN
EMERGENCE
1.
PROVIDE
BLUE
ORDER
IN
WHATEVER
HISTORIC
LIFE
CONDITIONS
EXISTED
2.
ACT
AS
CATALYST/OPEN
SYSTEM
DRIVING
CULTURE
TO
NEXT
STAGES
OF
DEVELOPMENT

7.
1940s
-­‐
1970s
1980s-­‐Mid
1990’s
Mid
1990’s
-­‐20 10 ’s
Industrial
Economy
Industrial
–Service
Service-­‐Informa:on
Product
Engineering
Service
Engineering
Financial
Engineering
Industrial
Output
Determines
Stock
Value
Breaking
up
Companies
to
Smaller
Pieces
Creates
Value
Specula:on
About
Future
Performance
Creates
Value
Standardized
Market
Metrics
More
Liberal
&
Subjec:ve
Metrics
Highly
Specula:ve
Virtual
Value
–
No:onal
Value
Metrics
Industrial
sector
:
28%
18.0%
10.5%
-­‐62.5%
Service
sector:
28%
35.0%
51.5%
+83.0%
Financial
services:
1.2%
5.30%
18.6%
+1,442%
H I G H L O W
LO W H I G H
1940s – PRESENT
U S L A B O R F O R C E I N T R A N S I T I O N % C H A N G E

8. T H E P R O F O U N D S H I F T I N U . S . C A P I T A L I S M
How the investor class killed the working & middle class
Ü U N R E G U L AT E D C A P I TA L C O M B I N E D W I T H
L O O S E L E N D I N G P O L I C I E S A LT E R I N V E S T M E N T
P H I L O S O P H Y F R O M L O N G - T E R M , L O W - R I S K ,
L O W - Y E I L D R O I ( B L U E ) , T O H I G H LY S P E C U L AT I V E ,
S H O R T - T E R M B U Y & F L I P ( R E D - U N H E A LT H Y O R A N G E )
Ü S Y S T E M I C S E C U R I T I Z AT I O N O F B U S I N E S S
A S S E T S O F A L L S I Z E S A N D C L A S S E S .
Ü R E P L A C E D L O C A L O W N E R S H I P & S TA K E H O L D E R S
W I T H WA L L S T R E E T A N A LY S T S A N D G L O B A L P O O L
O F I N V E S T O R S

9. 0
10
20
30
40
50
60
70
80
1930's
1940's
1950's
1960's
1970's
1980's
1990's
00-­‐06
G R O W T H
O F
G L O B A L
C A S H
( F I X E D
I N C O M E
A S S E T S )
L O O K I N G
F O R
S A F E
I N V E S T M E N T
( I N
T R I L L I O N S
U S D )
S O U R C E :
I M F
$34
Trillion
from
emerging
markets
and
middle
east
Legi:mate
investment
vehicles
can
only
absorb
$1.8
Trillion/year.
Shady
Investments
were
invented
to
absorb
the
excess

10. V A L U E S
I N C R E A S E
1 0 -­‐ 1 2
%
A
Y E A R
Commercial Mortgage Backed Securities (CMBS’s).Used for:
• Commercial and residential construction loans
• Acquisition of retail, office & industrial properties
Mortgage Backed Securities (MBS’s). Used for:
• Sub-Prime , ALT-A
• Other exotic mortgages
I N S U R A N C E
P O L I C I E S
A G A I N S T
ASSUMPTION:
Copyright
©
The
MEMEnomics
Group,
LLC.
ASSUMPTION:
Credit Default
Swaps (CDS’s)
Collateralized Debt Obligation (CDO’s)

11. 0
100
200
300
400
500
600
700
Global
Under-­‐
ground
Markets
(under
$1
Trillion)
US
Annual
Federal
Budget
($3
Trillion)
US
Annual
GDP
($15
Trillion)
World’s
GDP
of
All
NaXons
($50
Trillion)
World
value
of
real
estate
($75
Trillion)
Total
value
of
world's
stock
and
bond
markets
($100
Trillion)
2008
valuaXon
of
world
derivaXves
($618
Trillion)
SOURCE:
MARKETWATCH
SEPTEMBER
2008
C o p y r i g h t
©
M E M E n o m i c s
G r o u p

12. T H E E V O LV I N G F I R S T T I E R F U N C T I O N O F T H E U S
F E D E R A L R E S E RV E B A N K
ENTORPY
OF
CURRENT
EXPRESSION
OF
CAPITALISM
1913
1930’s
1950’s
1977
1980
2000
2010
2015
ACTUAL
FED
POLICY
MOVEMENT
THROUGH
THE
VMEMES
FED
POLICIES
DESIGNED
FROM
SECOND
TIER
7TH
LEVEL
SYSTEM
FOURTH
LEVEL
BLUE
SYSTEM
FIFTH
LEVEL
(HEALTHY)
ORANGE
SYSTEM
FIFTH
LEVEL
(UNHEALTHY)
ORANGE
SYSTEM

13. A L P H A
F I T
( C V -­‐ 2
C V -­‐ 3 )
B E T A
C O N D I T I O N
( C V -­‐ 4 )
DELTA
SURGE
CV-­‐7
HEALTHY
EXPRESSION
5th
LEVEL
“ENTERPRISE-­‐DRIVEN”
VMEME
UNHEALTHY
EXPRESSION
5th
LEVEL
“ENTERPRISE-­‐DRIVEN”
VMEME
SHIFTS
IN
4TH
LEVEL
“AUTHORITY
STRUCTURE”
VMEME
HISTORIC
EBB
AND
FLOW
OF
3RD
LEVEL
“EMPIRE-­‐DRIVEN”
VMEME
REAGANOMICS
1920s
1930s
1940s
1950s
1960s
1970s
1980s
1990s
2000s
2010s
2020s
FDR’S
NEW
DEAL
THE
GREAT
CONTRACTION
G
M
M
A
T
R
A
P
N
E
W
A
L
P
H
A
C
V
-­‐
1
D
E
L
T
A
S
U
R
G
E
C
V
-­‐
7
B
E
T
A
C
O
N
D
I
T
I
O
N
C
V
-­‐
5
THE
GREAT
DEPRESSION
V
A
L
U
E
S
Y
S
T
E
M
C
O
M
P
L
E
X
I
T
Y
G
M
M
A
T
R
A
P
HEALTHY
EXPRESSION
6th
LEVEL
“EGALI-­‐
TARIAN”
VMEME

14. MODERN
US
ECONOMY;
HOW
VALUE
SYSTEMS
RISE
&
FALL
FDR’s
NEW
DEAL
“THE
TEST
OF
OUR
PROGRESS
IS
NOT
WHETHER
WE
ADD
MORE
TO
THE
ABUNDANCE
OF
THOSE
WHO
HAVE
MUCH;
IT
IS
WHETHER
WE
PROVIDE
ENOUGH
FOR
THOSE
WHO
HAVE
TOO
LITTLE”
REAGANOMICS
“GOVERNMENT
IS
NOT
THE
SOLUTION
TO
OUR
PROBLEM;
GOVERNMENT
IS
THE
PROBLEM..
IT
CAN
AND
MUST
PROVIDE
OPPORTUNITY,
NOT
SMOTHER
IT;
FOSTER
PRODUCTIVITY,
NOT
STIFLE
IT.”
1930’s-­‐1950’s
1960’s-­‐1970’s
1980’s-­‐1990’s
2000’s-­‐2010’S
BLUE
VISIONARY
BURDENSOME
DIMINISHED
INFLUENCE
SYSTEMICALLY
INEFFECTIVE
BUILT
MODERN
NEW
DEAL
INSTITUTIONS:
•
SOCIAL
SECURITY
•
FDIC,
HUD,
SEC,
FTC,
FHA
,
FANNIE
MAE,
FREDDIE
MAC
•
FAIR
LABOR
ACT
HEAVY
COST
OF
VISIONARY
MANDATES:
•
WAR
&
EUROPEAN
RECONSTRUCTION.
•
SOCIAL
WELFARE.
•
SUSTAINED
BLUE
PRESENCE
GOVERNMENT
IS
THE
PROBLEM
DEREGULATION
OF
ENTIRE
ECONOMY:
BANKING,
COMMUNICATION,
TRANPORTATION,
ENERGY…
NO
BARK,
NO
BITE
•
CLUELESS
TO
BANKING
•
CLUELESS
TO
CAPITAL
MARKETS
.
•
CLUELESS
TO
DERIVATIVES
•
CLUELESS
TO
HIGH-­‐TECH
HEALTHY
&
INNOVATIVE
BURDENED
&
NON-­‐COMPETITIVE
MOSTLY
OPPORTUNISTIC
SYSTEMICALLY
DAMAGING
ENCOURAGED
TO
DO
GOOD
BY
VISIONARY
BLUE/ORANGE
•
ESTABLISHED
U.S.
AS
NON-­‐
DISBUTED
INDUSTRIAL
SUPERPOWER.
•
CREATED
THE
MOST
ECONOMICALLY
POWERFUL
MIDDLE
CLASS
IN
WORLD.
INFLATION,
GAS
&
TRADE
•
INFLATION
DIMISHED
PROFITS
•
EXPENSIVE
CAPITAL
FOR
EXPANSION
•
IMPORTS
GAINED
COMPETITIVE
EDGE
DAWN
OF
FINANCIAL
INNOVATION
TOOK
FULL
ADVANTAGE
OF:
•
STOCK
MARKETS
•
COMMODITIES
MARKETS.
•
BUILT
INFRASTRUCTURE
FOR
SECURITIZATION/DERV
•
GLOBAL
FINANCE
•
OUTSOURCED
FOR
PROFIT
DESTROYED
NEW
DEAL
INSTITUTIONS
•
BANKRUPTED
FREDDIE
&
FANNIE.
•
OFFSHORED
LABOR-­‐
INTENSIVE
JOBS.
•
RESHIFTED
WEALTH
BACK
TO
THE
WEALTHY
•
GUTTED
SEC,
FED
RSV.

15. Copyright
©
Ecovest
Advisors,
LLC.
1999-2002 MEMETIC MILESTONES LEADING TO THE FINANCIAL CRISIS
1. THE
RISE
OF
THE
WESTERN
UNHEALTHY
ORANGE
The
World
becomes
flat.
Emerging
Economies
flood
US
with
liquidity
looking
for
safe
investments
other
than
us
treasuries
giving
rise
to
wall
street
securi:za:on
2.
THE
DISAPPEARANCE
OF
BLUE
FROM
BANKING
REGULATION
A:
November
1999
Congress
repeals
Depression-­‐Era
Glass
S:egel
Act
allowing
Commercial
Banks
to
enter
field
of
SECURITIZATION.
B:
In
2000
Congress
fails
to
regulate
financial
deriva:ves
and
exempts
Credit
Default
swaps
from
State
gaming
regula:ons.
Risky
securi:es
become
insurable
&
appearance
of
risk
is
muted.
3.
THE
POST-­‐ENRON
REVENGE
OF
THE
UNHEALTHY
ORANGE:
Sarbanes-­‐Oxley
Act
leads
to
offshore/off
books
ac:vi:es
by
major
banks
and
to
AIG
London
and
Lehman
Bros
London
which
underwrote
most
risk
without
detec:on
4.
POST
9/11
ECONOMIC
POLICIES
OF
THE
BUSH
ADMINISTRATION
(RED/ORANGE)
A:
Need
inexpensive
ways
to
finance
wars
in
Afghanistan
&
Iraq.
B:
Call
to
Arms:
“BUY
BUY
BUY
or
the
terrorists
win.”
C:
Fed
drops
Prime
rate
to
40-­‐
year
lows.

16. Part I. Players on the Demand Side: The removal of the
BLUE vMEME from the Marketplace:
v Red predatory values create RED agents, brokers, appraisers, and
fraudulent document preparers.
v “Anyone Can Buy” values created RED buyers, straw buyers, speculators,
and buyers using stolen identities.
v Purple/Red victims left holding the bag when it all crashed.
Part II. Players on the Money Supply Side: Removal of BLUE
from Banking Regulation
v Red/Orange mortgage bankers, brokers & originators.
v Red/Orange Wall St securitizers/fund managers (Subprime, Alt-A, CDO’s)
v Red/Purple & unsuspecting Blue/Orange victims/securities buyers made
up of institutional investors, sovereign wealth funds, pension funds, mutual
funds, and all types of securities sold on global capital markets.
THE HOUSING BUBBLE
How Wall Street Destroyed Main Street

17. q Obama, like Bush, thinks what’s good for Wall Street is good for America.
q Over 85% of Wall St activities still deemed non-productive.
q Dodd-Frank Consumer Protection still allows for TOO BIG TO FAIL risk.
q We are continuing to reward those who got us into our current problems.
q Pre-crisis levels of risk, speculation, debt, and poor leadership persist.
q Un-employment at 9.0% (Structural, long-term un-employment over 16% and
getting worse).
q 6.4 M homes facing foreclosure. As much as 18M in shadow inventory.
q 46 M Americans live below the poverty line. Highest since tracking began.
q Structural problems have not been addressed.
q Per capita income down 2.5% (first time since the early 1970’s).
q 157 Bank failures in 2010, second highest on record
WHILE THE STOCK MARKET RECOVERED 86% OF ITS LOSSES, ALL OTHER
ECONOMIC INDICATORS POINT TO A PROLONGED MALAISE

18. A CULTURE OF DEBT
B I G G E S T C O N S U M E R D E B T G A M M A T R A P I N U S H I S T O R Y
SOURCE:
FEDERAL
RESERVE
BANK,
AUGUST
2010—COPYRIGHT
©
MEMENOMICS
GROUP
R A T I O
U N D E R
1 0
T I M E S
N E E D E D
F O R
D E L T A
S U R G E
0
10
20
30
40
50
60
70
1920'S
1930'S
1940'S
1950'S
1960'S
1970'S
1980'S
1990'S
00-­‐07