The story goes something like this. I must first tell you that I worked 10 years as an investment advisor in real estate for these large pension funds like L.A. County Employee Retirement Fund. So back to the story. An Investment Advisor (that was me), in this case from Connecticut, convinces the Pension Fund Investment Board that it would be a good idea that they buy a 5-Star Hotel in Hawaii. Why, I can not tell you. I could think of many reasons then, but now I honestly can not think of one good reason.

The real reason is that the Investment Advisors for L.A. County Employees are making $100 Million annually (check annual report) on such unconscious, super-risky investments; like foreign currencies and swap agreements. Do you remember how many days or hours you thought the L.A. County Employees had to work to save $100M – well it goes right out the door…annually, to people that most of the L.A. County Employees have never met.

These stories are happening all over America. And in the end, as we are learning, the retirement dollars are not going back into our own pockets. That is stupid. I am personally guilty of it in my own 401K account. These savings are completely disconnected from our economic reality. What I am trying to say is that in my opinion, The L.A. County Employees, as do I, have much more important business to conduct at home, like taking care of ourselves and our own economy with our hard-earned savings.

There needs to be a conscious shift in the investments and assets that our pension funds, 401Ks, IRAs and good old-fashion savings, own in our economy. The simple reason: for the direct benefit of the hard working American – You! This shift will not only save a flailing economy, it will lead it towards unknown prosperity. Remember, these unconscious pension fund investment schemes have been going on since before the Great Depression!

Imagine the possibilities. I envision that local investments lead by these pension funds and individual retirement accounts will create the next Economic Boom! The institutional investments will include local renewable energy, local real estate, and local entrepreneurs; three simple, secure and diversified investment allocations. Imagine 100 Million Dollars invested in L.A. County renewable energy, local entrepreneurs and its real estate; instead of 3,000 miles across the Pacific Ocean in a 5-Star Hotel in Hawaii. These local investments will immediately generate true currency back into the people’s hands that simply created it in the first place . Otherwise known as consciously investing in oneself and one’s economy.

Illustration by Genna Wolkon

“Money Is the Root of All Evil”. I remember hearing it as a young boy but always thought, “if everyone is using it, how could it be true?” But now I have come to appreciate the unconscious evil in accumulating the paper mirage we so desperately desire called money. And ironically, the more you have the more you want, and the less you have the more you need. Whoever created it got exactly what they hoped for, a bunch of morons working for it as if it represents the higher vibrations of life like love, courage and energy. We must all realize now that it represents nothing more than a bunch of moronic humans using a simple paper, printed at will by the Wizard of Oz to distinguish life’s value.

I write this editorial from a tropical farm in Hawaii with food growing all around me. On one end, I must admit that Capitalism has treated me quite well. On the other end, I am fully aware that we must move on. We must figure out what we like about Capitalism and what we don’t like. Keep the likes, get rid of the dislikes and move on. Teach Capitalism in history class and no longer in our economic reality. Devise a new plan. A plan that is based on what is best for all the people, because the people will be carrying out the economic plan and the happier and healthier the people, the better our economic reality.

The change will come from each of us putting our individual entrepreneurial talents to work. We all think that the “Economy” is out there and I’m just sitting in my office. But if everyone just busted their hump working entreprenuerally out there, we wouldn’t have that disconnect. We’d understand that our economy is our reality, as opposed to percentages and numbers. The economy and our lives should be one and the same. We tend to allow the economy to be analyzed by government, economist, or financial analysts; yet as active participants in the economy, we are our economic reality. We are looking at it like it’s a school system. Its not a school system to be graded, its our lives, including the health and happiness of all those in our local community. We are all entrepreneurs. We all have something to give and create, yet we are looking to everyone else to do it or change it. The change will not come from government, political activists or wall street. It will come from each and everyone of us.

In our economic system, we the people are ignorantly enabling the system to increase our cost of living. If you have a bank account you are enabling the system. Plenty of the people “Occupying Wall Street” are enabling the financiers through their 401Ks, IRAs, or basic bank accounts. Wall Street and the rest of the financial sector is using that capital savings to invest and pay themselves handsomely in the process. I see nothing wrong with Wall Street acting like a used car salesman. Although they may not have the best reputation, the economy has a lot of used car salesman. We are not only all part of the problem, we are the problem. Each and everyone of us. Whether we are investing in gold that perpetuates strife in South Africa; or passively investing in golf course developments on critical farm land through our pension funds, we are the problem.

The most intelligent thing that Wall Street can do is to evolve itself based on a new decentralized financial system, as opposed to current Wall Street which is centralized. In a decentralized system, the money savings can be invested in the communities that it was originated in. Such a local system would consciously invest to produce both financial returns as well as lower living costs. And Wall Street employees could still be the active investors in that decentralized, local economic system, using many of the skills they have been taught. If Wall Street doesn’t see the writing on the wall that their time is up…that centralized banking has no profits left, they will die with the system. This was proven in the bailout. Just so we all understand, when placing a “bet”, there is no such thing as a hedge. Next time they will not be so LUCKY!

The biggest issue of the government is that they are supporting the enemies of a healthy economic future, because they are subsidizing things that are bad for the economy. We aren’t asking them to save the economy, we are only asking them to stop messing it up by subsidizing things like oil, financial service profits and supporting costly wars.

The greatest economists during the life of Capitalism knew that it would one day come to an end. Shumpeter new it, Say knew it, Hayek knew it and Marx knew it, to name just a few. In a nutshell, they knew as we now know the truth, that eating more of the earth every day does not constitute “economic growth” (i.e. GDP). And here we are, as Shumpeter termed it, creative destruction in action. I say it differently, that “The Great Depression” is finally coming to an end and a new, more efficient system bustling with entrepreneurial creativity to produce lower and lower living costs has been born. The protestors are a sign of things to come. The system is in its final inning. Evolve or Die!

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.

What if, we the people, tried something new, brand new. An original plan that not only invested to secure our savings, but also made investments to positively impact the quality of our own lives. What I am suggesting is we organize our investment savings differently.

Please consider the possibilities of an all new Local Investment Fund. A Local Investment Fund will create investment return by acquiring local real estate, as well as building and generating wind and solar energy. The Local Fund would even lend money to a few local businesses that had staying and/or growing power. The Fund would be a community-minded landlord, utility, and bank, all-in-one; formed by local residents to invest in their own Counties and communities. The investments would help stabilize living costs, as well as grow the local economy and generate a strong dividend yield to its local investors.

A Local Investment Fund will be the first of its kind to provide both an offensive and a defensive engine to the local economy. For example, if the local savings and investment community owned the real estate leased by the local coffee shop or brew pub, wouldn’t it think twice about raising their rents? Or said differently, wouldn’t such a rent rise just equate to a more expensive cup of coffee or draft beer for that local resident investor? Wouldn’t the investor be in effect, raising the rent on itself? The same balanced investment characteristics are true for local renewable energy investments as well.

The new strategy would make investments in our lifestyles, in the here and now, contrary to some unknown place and time like in “retirement”. I personally, don’t want to think about the future anymore. I want to invest in the now. To invest to organize our economies with minimal commutes, and educate our communities through the act of sustainability. To invest until we discover a way to lower our energy costs while minimizing our impact on the land that feeds us every day.

Could you imagine the implications of this new way of organizing our economy? Entire Counties would go completely off-the-grid. Local jobs would be humming with billions of dollars being directly pumped into the local markets, businesses and economies. Local innovation would sky-rocket as new ideas would flood the streets. Local tax revenues would also rise, bolstering the desperate city coffers.

Local Funds are the true contrarian play in today’s most finicky global economy. The people of each community have to be the ones to change the direction of their economy by investing in their own land, in their own energy, and in their own people; with their own savings.

The idea was a Local Investment Fund, with all the power and might of a national or international private equity fund; but funded by the residents of the County and for the benefit of the County. The Fund would be investing in high-yield real estate and renewable energy assets that a local investor could touch and feel as opposed to the digital or virtual investment world where most of us currently have all our investment eggs.

Jungle Cottage

“Counties!”  I first realized it while staying in my jungle cottage within the concrete jungle of Downtown Ft. Lauderdale. Yes, it would be the Counties that would lead America through the Economic Revolution; the Counties, who are unencumbered by the high debts and expenses of our other authorities including towns, cities, states, and federal governments. Huh, Counties. What in the world are you talking about?

Lets use my former, Fairfield County, CT, which maybe the wealthiest County in America – a place where many billionaires and thousands of millionaires call home; Say that the residents (rich and poor) of Fairfield County allocated just 5-10% of their savings towards a local investment fund, which invested in local assets that an investor can touch and feel. This strategy would be executed at a time when real estate is having a fire sale. First, with billions and billions of dollars to invest, such an investment fund would ignite the Fairfield County economy, spurring job growth, creating competition in the energy markets, and replacing out of town or absentee landlords with a locally-minded investor fund.

As I travelled from County to County, my vision only became clearer in my mind. This will be the first of many blog posts on this topic among others, as this Mainland trip certainly got my juices flowing. With bond yields rising and inflation in the air, the time is now for Localism to take hold – County Style!

A New Local Investment and Credit System designed to grow renewable energy and strengthen local economies.

How Does the Solar Currency Work? Investors within the community fund the purchase of solar panels or windmills for Stores like farms and coffee shops to use, and in return receive goods and services from the Stores in the amount of their solar electricity used.

The Stores issue their Store credit, like a gift certificate, to be redeemed for goods and services. The Store credit is converted and transferred via a currency, Solar Currency.

So in essence, the Stores have bartered their goods and services, in the form of Store credit, in direct exchange for electricity savings. The Stores’ credit is pooled into a Community Investment Fund (The Fund) with other Stores. The Fund then converts the diversified pool of Store credit into a currency and issues it to the Community.

How Does the Solar Currency Circulate? The Solar Currency is circulated to Investors within the community through their return on investment, sold to Patrons in exchange for cash dollars, and Tradesman by trading for their services with Patrons and Investors. The Solar Currency may be redeemed at the Store during regular business hours.

* Click on image to enlarge

What If I Don’t Have Any Money to Invest or Exchange? As circulation increases, Tradesman may trade their individual labor skills with Patrons and Investors within the community in exchange for the Solar Currency.

How Does the Solar Currency Grow? Once the Solar Currency is redeemed for purchase at the Store, the Solar Currency is retired. However, an equal amount is always being produced by the solar power and used by the Stores, increasing the Solar Currency in circulation.

In addition, The Community Investment Fund reinvests all cash dollars from the sale of Solar Currency to Patrons in more renewable energy; and may always remain open to future Investors within the community.

What Is the Purpose Of The Community Investment Fund? The Fund pools the diversified Store credit and issues a common community currency to more easily trade goods and services in a diverse marketplace.

What Is the Investment Strategy? The Solar Currency initially seeks to invest in the renewable energy for a diverse group of local food producers (i.e. farms and fisheries) and complimentary retail Stores (i.e. farmers’ markets and fruit stands). This strategy is the most bang for the Solar Currency.

What Is the Initial Investment? On this island, a minimum of $500,000 of initial investment is estimated to get the Solar Currency into circulation. This assumes an average investment of $25,000 across 20 Stores. The $500,000 investment should produce approximately $40,000 in annual Solar Currency, $3,300 of monthly or $110 of daily Solar Currency (that’s a lot of lettuce!).

That being said, the more renewable energy the better. So all Investors, big and small are welcome, which will take advantage of the power in numbers. The Investors within the community will be attracted to the diversified and locally-backed credit, long-term dividends, and collateral of the renewable energy assets.

Why Will the Community Use the Solar Currency? The Stores that receive the generous gift of solar power in exchange for their retail priced goods are those that offer the greatest value to the Solar Currency Community. As a result, Stores are likely to offer creative discounts and sales to the Solar Currency Community (think Kamaaina rates and then some).

The Community Investment Fund is also naturally motivated to provide value to the Solar Currency Community in any way it can (i.e. information, education), since such value-added increases the value of the Solar Currency. The possibilities are endless as it is a win-win-win situation across the community. The Solar Currency Community, including Patrons, Investors, Tradesman and Stores are in essence working together to increase the value of the Solar Currency by generating more and more renewable energy to produce valuable Store Credit.

What If the Price Of Electricity Goes Up? Then the amount of credit the Store pays will also rise. However, Stores may negotiate fixed retail prices in exchange for fixed electricity costs. In other words, because price increases for electricity often inflate prices for retail goods and services, a fixed exchange rate could be mutually beneficial. Such stable pricing agreements will eventually stabilize inflation for the entire Community.

Why Is the Solar Currency Valuable? The Solar Currency is secured by valuable solar systems and windmills; and their use is backed by the credit of the Stores. This is in contrast to today’s paper currencies. So as more traditional paper currencies increase their supply, like in the case of the U.S. Dollar, the value of the Solar Currency should rise in relation to them.

Can The Solar Power Be Taken Away From the Store? Yes. If the Store is not providing value to the Solar Currency, then the Store will not get the benefit of the electricity savings. This is supposed to keep the Store honest and motivated to offer a strong value to Patrons. To be fair, the Store also reserves the right to return the renewable energy to The Fund at a future date.

Who Decides Who Gets the Solar Systems? The Community Investment Fund operating team will execute a strategic investment plan focussed on the local production and distribution economy. The operating team will also administer the accounting and legal responsibilities of The Fund. The Team will receive an equitable percentage of the Solar Currency it helps create.

What If There Is Too Much Demand For a Particular Store’s Goods and Services? A Store is only responsible to redeem their credit owed to the Fund. However, in theory, if demand outweighs supply for a Store’s goods and services, the Community Investment Fund should provide additional renewable energy to the Store or its competitors to increase the supply in the marketplace. In other words, The Solar Currency will finance the energy demands of businesses as they grow to meet demand.

What Standard is the Solar Currency On? Originally, the U.S. Dollar and other paper currencies relied on “The Gold Standard”, a monetary system that used paper notes convertible into gold. However, The Gold Standard is not currently used by any government. Our money or currencies are “declared” valuable because a government accepts them as a payment for taxes, not because they represent a valuable resource or credit.

In contrast, Solar Currency can only be issued if renewable energy has produced the valuable electricity and useful Store credit to back it.

What causes the prices to go up and real value to go down? To understand what causes inflation, visualize using only one economic variable – LAND; because ALL material things we buy or use originate from the land.

The land may change form, but the wooden floor you stand on (trees), the fork you hold (metals), the road you drive on (asphalt, derived from oil), the T-shirt you wear (cotton plant), the boat you sail (fiberglass, from sand or silica), and the food you eat are all originally derived from the land.

And the cost of this single economic variable, land, is RENT. Because Mother Nature isn’t making any more land (supply is limited), all land use is valued preciously through its cost of rent.

Rent dominates our entire economy. For example, the production and distribution of a cotton T-shirt pays costly rent every step of the way. The cotton farmer begins the production process by paying land rent as well as rent for his tractors. Rent is also often disguised in words like “interest” and “price”. The T-shirt manufacturer pays “interest” on his mortgage or business loan, otherwise known as rent on money; and then pays to rent space on a truck to ship it (they are not buying the truck space, so they must be renting it for a period of time).

So the consumer eventually pays for the farmer’s, manufacturer’s, shipper’s, and retailer’s costly rent in the “price” of the T-shirt. Also hidden in the “price” is typically all the office rent for accountants, lawyers, marketing, healthcare and insurance services that may be involved in the process. And the consumer so often uses a credit card, which typically charges “interest” or rent on the money it lends. Finally, the consumer rents their own house to store the T-shirt. 

Labor wages are also derived from land rents, as wages and rents are mirror images of one another. The amount of labor wages we receive are directly proportional to the land rent we pay. For example, NYC has high rents and therefore high labor wages. As the rents rise or fall, so to do the labor wages, which we are clearly seeing today. The same is true in China, India and Mexico, as it is NOT their low labor wages that produce such cheap goods, it is their low land rents. Said differently, if land rents in China were high, labor wages must also be inflated proportionately to pay for them, not the other way around.

So what do land rents have to do with inflation? Everything. As our population grows and/or we desire more ways to use our limited land, the land becomes more precious and our rents rise, causing inflation. In other words, as we demand more and more things from our limited supply of land, land rents go up and up, which in turn inflate prices of everything, resulting in a decline in the real value of things.

So what causes inflation? Rising land rents.

According to the National Association of Realtors total housing inventory at the end of April rose 8.8 percent to almost 3.97 million existing homes available for sale. So how do these inventory numbers equate to price? Well, even if you didn’t major in economics, at some point you were taught that supply must meet demand to establish a true market price; or a price where the product will sell. For example, in the stock market, a stock price is continuously reset up or down in order for supply (sellers) to meet demand (buyers) for a stock.

In contrast, sellers of houses are asking one price (we are assuming they are truly sellers) and buyers are demanding another; so supply is increasing without regards to demand, and thus true price remains undetermined. However, we can definitively determine that as large inventories remain, home prices must go lower for supply to meet demand. So how much lower? 

Well imagine if all 3.9 million homes currently for sale were forced to sell in real time, like in the stock market or any other fluid or liquid market. Imagine if home supply met demand and a real price in real time was actually established. Yes, every home for sale in Florida, Southern California, Arizona and Nevada and every luxury condo with a “For Sale” sign (again, we are assuming they are truly sellers) scattered across America had ONE DAY to sell regardless of the price. Imagine…

That price, determined in that one day, is where supply meets demand. How low would the sellers have to go to meet the prices demanded of buyers in order to liquidate all 3.9 million homes? Whatever that number is, it represents the real market value and thus real market price of our homes. 

So as you can imagine, prices still have a long way to fall before supply meets demand.

That doesn’t sound so bad now does it? I can assure you that just like there are certainly benefits to drinking raw green vegetables, an Economic Detox strengthens community, drives innovation, stabilizes trade and employment, provides essential economic education and slows down time, all out of economic necessity. However, a detox also requires discipline and some level of sacrifice in order to come out the other end leaner and meaner than before. 

So what does that mean for the economy? Well, the same virus that has exposed the inefficient nature of our financial sector will soon inflict itself on our obese corporations with a domino like effect. These corporations were built to scale-up while increasing their fixed costs such as lease payments and debt levels every step of the way; without regard to ever having to scale down. Walmart, Monsanto and McKesson, to name a few, all operate on super risky 1-5% profit margins after consuming billions of dollars of revenues. In contrast to their more nimble Mom and Pop competitors, they can not get smaller, make less widgets or afford to take a strategic vacation. 

And for better or for worse, these “so-called” monopolistic communities, symbiotically rise and fall together. For example, the recent failures of Linen N’ Things and Circuit City will negatively impact the buying and manufacturing power as well as the retail foot traffic of their closely tied corporate brethren, and one by one their big box retail neighbors (think struggling regional malls) and related raw produce suppliers (i.e. Dole and Tyson), transporters (i.e. Fedex) and manufacturers (think China) will also suffer losses and eventually fall as well. 

As the deadly combination of lower sale prices and less volume eat their highly sensitive income statements alive, they will collectively lose their ability to buy and operate the only way they know how – on mass production scale. Land and labor prices will continue to deflate, yet the obese corporations will be unable to do anything about their huge fixed costs (that’s why they call them “fixed”); and with it the erosion of their slim profit margins (did I mention they were only 1-5%) will force them to close. In summary, the death of the corporate monopolies and birth of The New Game is coming soon to a small local theater near you (For now, I invite you to read the book).

So what are the politicians to do? Nothing. They will be quick to bow to the dominating powers of the free markets as their hugely inefficient, bureaucratic, and socialistic operations, which have grown to be the largest employer and lender in the U.S., as well as the largest borrower in the world, will also prove too fat for the economy to digest. The deadly combination of falling income taxes (revenues) and rising interest payments (expenses) will erode the “non-profit” income statement of the big business of big government. The smartest politicians will wisely support the mom and pops by being ones themselves. 

On that note, don’t be ashamed to go bankrupt since basically every country in the world that borrowed money internationally while ignoring their asset collateral (i.e. gold standard) will soon be unable to pay their global debts on a current basis (except maybe countries that are exclusively food exporters like some Caribbean Islands which may see the value of their asset collateral rise). 

But don’t worry about credit, because if everyone has bad credit, its like no one has bad credit, right? The dollar as well as other closely related paper currencies will be much less valuable on an international trading level as an over supply of dollars flood the market to create the perfect inflationary storm. China, Russia, and the Middle East among other large holders of U.S. currency reserves will soon be forced to spend their large dollar savings to defend their own buckling economies at the same time that the U.S. is seeking to borrow trillions of dollars of new money to fund our ever growing socialistic activities. In other words, as supply of dollars will be increasing, demand for dollars will be decreasing. The net result is that interest rates will soar to 20%+ as the useless paper currencies will be worth less and less in relation to economic essentials such as food and electricity.

You are probably asking, so where do I put my money during all of this change? Gold should be a stable currency due to its scarce nature; which is in direct contrast to easily manufactured paper currencies. However, this will be a short-term phenomenon as even gold will yield in value to more truly useful currencies such as electricity and food. In terms of prices, such essential items as food and electricity will rise dramatically; and luxury items (i.e. big homes and flat screen TVs) will surely be discounted again and again. 

The real cost to transmit electricity over long distances will veer its ugly head as the central power plants (i.e coal) will also lose their ability to operate on scale and thus their costs per unit (i.e. kilowatt of electricity) will rise perpetually. We are already witnessing this. For as electricity demand is starting to falter, the utilities are being forced to raise rates to cover their huge fixed costs such as long distance transmission and maintenance thereof; which again were built to scale up, without regard to ever having to scale down.

So now we come to the raw green vegetable part of the Economic Detox. For there must be something we can do to gain our economic balance back, right?

First, Mom and Pop entrepreneurs must keep their heads down to weather the storm. For as the monopolies get taken out at the knees, the Mom and Pops should flourish (assuming they have minimum debts and relatively low rent in energy efficient locations) from less and less global competition and more and more local symbiotic competition. Yes, the local hardware store, suburban dairy farm and local fruit and vegetable stands are back; and with it a bit of pricing power over their landlords as well as their customers; and true sustainable communities built together from the bottom-up will emerge once again.

But there must be another silver lining in the death of the monopoly. You know, a way for investors to ride the coat tails of the rising entrepreneurial communities, recent technological innovations, and most current economic education. Well, the combination of increases in electricity prices (numerator) and lower prices for renewable energy technology (denominator) make investing in renewable energy technology and its labor force the greatest returns for the lowest risk in The New Game.  

“Decentralized Power” or “Distributed Generation” of renewable energy feeds our most competitive Mom and Pop entrepreneurs. And in return for the renewable energy utilities, these entrepreneurs provide stable and secure dividend payments to our starving retirement and pension funds, which naturally gravitate the majority of their investments towards the most conservative and “hottest” risk-free rate of the local sun. 

Such an investment in renewable energy would not only be seeking relatively high returns, but also to lower our cost of living by stabilizing our future cost of energy; a strategy that our current economic system is so obviously missing. For what is a financial return without attacking the other half of the equation: the future cost of living? Our retirement funds are unfortunately finding out the answer: irrelevant.

No longer are such branded terms like “Treasury” or “Money Market” enough to convince the new generation of savers to invest their hard earned money with people (i.e. banks) they never met in exchange for an “IOU” and no collateral. Due to our most recent hard financial lessons, we are now seasoned and experienced economists that are aware that the true risk-free rate of our new economic system, by definition, must be renewable (i.e. The Sun), and must be locally asset secured (i.e. solar panel), with a proven and trustworthy yield (i.e. 4 hours of sunshine a day). Yes, whatever the cost, which is decreasing, and whatever the yield, which is increasing, renewable energy is the the only true risk-free rate of any economy. 

That being said, the auto industry must make a 90 degree turn towards the energy efficient consumer of tomorrow. Trains and renewable energy technology will be what’s popular in the future, not cars. I really hope I didn’t have to tell you that. With estimates of 1.2 cars per U.S. licensed driver and unused car inventories increasing every day, why in the world would we want to make any more cars? So if Detroit and other want-to-be manufacturing cities of tomorrow have any chance for survival, they will jump into these industries head first. The same goes for Wall Street, as renewable energy mortgages will be sure to revive Wall Street and what’s left of their ailing mortgage industry. The construction and steel industries among others must also follow suit; and we can all thank Silicon Valley for already being there ready to innovate. With skyrocketing electricity prices and lower renewable energy technology prices upon us, I am as psyched as you should be to be alive during what promises to be a renewable energy revolution (is there any other kind?).

I don’t think I need to scare you, but just in case you think this economic crisis is going to just go away, realize that in a consumption driven economy, which ours’ certainly is, unemployment is contagious. To explain it, every time our number of unemployed increases, which is now happening, our consumption in turn decreases, which in turn forces a further increase in unemployment. And there is no monetary or fiscal “stimulus” to stop such a vicious cycle. 

So are we finished with our Economic Detox? Can we flush the toilet now? Honestly, you can never be sure with such a bad case of diarrhea. And I can assure you that this diarrhea will continue unless we truly acknowledge what is good for us and act on it. For every time we think we are finished or at a “bottom”, we will soon be sprinting back to the toilet preying to make it in time, hoping the seat is down and worrying if there is enough toilet paper. 

In short, let’s be sure to eat our raw green vegetables.

But somehow our freedom of choice that once so clearly encompassed the American Dream changed. Not sure when or how, but it clearly changed. For as I grew older, the American Dream became all about owning a home. What house, in what neighborhood, with how many bedrooms was all that we seemed to dream about. But then suddenly, the dream became a nightmare. 

It has always been kind of a weird dream anyway. These are the biggest assets in our possession by far, yet we don’t really own them. The vast majority of us do not have $20,000 for the car we drive or $300,000 for the house we live in. Instead, we borrow the money to use them. Basically “I’ll pay ya later!” became the status quo.

The nightmare seems to last longer now than it did just a month ago or even a week ago. Houses and cars continue to sit empty while more are still being built and others are being defaulted on. Inventories are still increasing as supply and demand run further away from meeting each other. Commercial real estate is the next big shoe to drop as hyper-deflation kicks in at the asset level across all property types. It will be a falling knife, so I would not try to catch it.

So what happens? Does the nightmare continue or can we get back to dreaming about freedom? Well you remember the old motto, “you’re throwing away money paying rent”. Or, “it’s much better to own a home than to rent one”. Well, that is a fallacy in the face of the “Credit Crisis”; as credit to buy things has gone the way of the absence of trust that once reinforced it. Just like low mortgage rates and appreciating home prices ignited home ownership; now with real mortgage rates on the rise and prices falling, renting is and will be the default currency of choice.

Cash will be king and the ability to pay anything today, as opposed to promise to pay tomorrow, will rule the day. Current “For Sale” signs will convert to “For Rent” signs as previous sellers rationally decide to get what they can by renting. When they will sell again, nobody knows. All we do know is that if you want to make something, anything of that vacant property, you better get somebody to rent it. 

So in a depreciating real estate environment (i.e. falling rents), there are a lot more landlords than “credit”-worthy tenants. As a result, landlords better cozy up to any and all quality renters, because the savviest renters are now in charge.

Waking up from The American Dream will not be easy for everyone. But those that figure out how to take advantage of rents that seem to be in a perpetual free fall will be the next big economic opportunists (hint: renewable energy utilities).

But just as the economic game has changed, so has the dream. Things that used to seem so expensive like education will suddenly seem free (think internet not college); while suddenly other items like food and electricity will get relatively more expensive, but worth it at any cost (like in most other countries where food typically comprises at least 70% of living costs). So when dreaming about what you want to be when you grow up, focus on such essential items that are vital to power the sustainable cities and towns of the future.

I assure you that The American Dream is certainly alive and well, it just may take time to get back to sleep after this nightmare. 

Now let me go back to dreaming about what I want to be when I grow up.