A New Economic Paradigm

Hanalei Valley, Kauai

What if there was a move we could all make that would redirect and dramatically improve our economy? In the game of chess it would be like taking your opponents queen out of nowhere or even a checkmate while being down several pieces.

I mean, at any moment, doesn’t the economy have a chance to boom, just like it does bust? So what if there was one move we could all make that would allow a boom, as opposed to a bust. A game changer to create a new economic paradigm. So what is it? Well, for each one of us the strategic move may be a little bit different, but conceptually it is the same for all of us. WE MUST INVEST OUR SAVINGS DIFFERENTLY.

So let me try to explain our next move. And let me please say that I hope you act to spread the word so that we can change the economic system that currently feels so vulnerable. Let me also remind you, this is a private sector solution, by the people, for the people, driven by the private markets. In other words, we the people have the resources and we don’t need permission to do this – just action.

What in the world are you talking about? One move to change our economy? I will now try to explain. For example, lets take the State of Wisconsin Employee Retirement Funds. What could they do to better their economic situation, even maybe create boom time for themselves and the people of Wisconsin?

First as pertinent background information, did you know that the State Employee Pension Funds are by far the richest entity in the State of Wisconsin – yup, that’s right, they invest $82+ billion dollars and have more cash in their bank account than anyone in the State of Wisconsin. I bet they and so many other Public Pension Funds didn’t even realize that, and maybe thats why they are investing their hard earned savings unconsciously, without sound reason, allowing it to leave the State economy of the very people that it is intended to benefit. And maybe that is why they mistakenly act like they are the poorest, always worried about their future obligations not being met, and forgetting to invest their riches in their present-day, real Wisconsin economy for the benefit of their own well-being. The retirees in Wisconsin can no longer afford to passively invest their retirement savings in other States or Countries through national and international investment markets. They must actively invest their $82+ billion dollars in the local State economy to become the biggest real estate owner, renewable energy utility and entrepreneurial lender in the State of Wisconsin – and QUICKLY!

With such investor might and strength within the State of Wisconsin, the State Employee Pension Fund would be able to address the local economy of their employees by investing in it, supporting the economy of the very people it is intended to benefit in the first place, all the while creating financial returns through rents, utilities and entrepreneurial loans to secure those future retirement obligations. The State of Wisconsin Pension Funds and other Public Pension Funds (i.e. TIAA-CREF) must reallocate their portfolio to invest 50%+ of its total funds for the direct benefit of the retirees, like into the local (i.e State or City) economy – specifically real estate, renewable energy (solar, wind and geothermal power) and entrepreneurs – in short time – before US dollar inflation literally eats up the value of a lifetime of savings. As a point of information, during the last 10 years, savings in US dollars have lost approximately 75% of its value in relation to gold and oil prices (hard to believe, but true).

So what if you aren’t a State Pensioner? Maybe you have a 401K. What if you were able to invest a portion of your 401K into your local economy? What if you were able to own a piece of the real estate, or a piece of the coolest little growth company or the latest solar panel technology, in your own town or county, through your 401K or IRA or Annuity? The reality is that with certain investment structures like local REITs, we could actually sell shares in these local investments to local residents with very minimal cash savings – say $10. I can assure you, such a redirection of our investment savings would redefine boom times in our local, present-day economic lives.

Lets take another example – the residents, entrepreneurs and institutions of Silicon Valley, California. Could they redirect their savings to avoid another “tech bust”? Is there a way that all those intelligent millionaires and billionaires could figure out how to pool their savings to cooperatively (i.e. local REIT) stabilize their cost of doing business by owning the local real estate and renewable energy of their very own economy. This time around they must be thinking – “What could we do to make sure the current boom in Social Networking doesn’t inevitably lead to increased operating costs like office rent and employee housing for our most innovative start-up companies?” In my opinion, these are the very costs that single-handily derailed the 1990s technology internet boom.

So what if the resident and institutional investors of Silicon Valley consciously invested their retirement funds in local real estate, local renewable energy and local entrepreneurs? Talk about a new economic paradigm! I could even envision some computer engineers flocking to the Valley for the sole opportunity to own a precious piece of Silicon Valley real estate through their 401K accounts. The local economy would boom as even more investment capital would be available to Silicon Valley entrepreneurs, and in theory the economy would operate more efficiently as local investors took pride in their local investments. The reasons why and how such a local investment fund would prosper are endless.

I appreciate its not so easy to see the vision as clearly while 100% of are precious “retirement” savings remain unconsciously stagnant and passive – typically invested far away from our communities, in other states, other countries and other continents. The problem with our retirement funds is not that the trillions of retirement dollars isn’t enough, but rather they are unconsciously being used against us as they propagate inflation, export labor, and increase transportation costs for purchased goods.

So which professionals are going to act first? Will it be the local banks? Pensioners? Utilities? Entrepreneurs? Real estate developers? Or lawyers, setting up new local investment structures (REITs, BDCs and others) to transfer 401K and IRA capital into them?

You see, I don’t believe it is our government’s responsibility, nor do I intuitively believe our government entities have the capability to solve our economic problems. In reality, they seem to be in the most financial trouble of anyone right now. As a result, I believe it will ultimately be our own responsibility to take care of our own economy. I stress the importance that we don’t wait for the governments to financially fail or go bankrupt like in Ireland, Greece, and Portugal; which are only at the beginning of their downward economic spiral, unless the people, through their savings (i.e. pensions), take financial and economic matters into their own hands.

In my opinion, those that do not act will get left holding perpetually inflating dollars. Conversely, those that shift their focus and take some so-called risk to invest their savings locally, will ultimately benefit in more ways than they can imagine. This new economic paradigm is upon us, a common sense system; where local investors, local entrepreneurs, and local renewable energy align with the local land.

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