Davos is a well-rehearsed event and everyone knows the part they should play. Business and political leaders gather each year to tackle the major challenges of a global economy while the rest of the world, or those of its citizens who are interested, look on from afar. But this year, for obvious reasons, things are different. The notion of leadership has been coupled in the public mind with that of responsibility. The tone here is a little more humble and the attitude more open-minded. There’s a recognition that new thinking is required. A suitable time, perhaps, to turn the tables on convention and have Davos delegates ask the questions they can’t answer and for global citizens to offer solutions.
Gamefully opening the discourse is Professor Klaus Schwab, Founder and President of the World Economic Forum.
If you’ve got suggestions for Klaus then use the comments section below.
The crisis has to run its course. The best resolution to this problem is to let the market eliminate the problems through bankruptcy. Attempts to prop up failed institutions and businesses is fruitless, these entities need to fail, otherwise we'll never have a solid foundation to build upon. Also, there has to be transparency and revision to central bank policy, we can't have central banks manipulating the markets the way they have in the past. Controlling market behavior through artificially low interest rates and currency inflation does not work...the present situation is a clear testament to the failings of current economic thought.
The failings of central economic planning we're supposed be have been killed off, yet here we are again trying to run a supposed free market economy through central economic planning.
Unless we cease this incessant meddling we'll continue to get more of the same. Let the liquidation of debt occur and allow better business managers to acquire the assets and move forward. The idea that we reward failure through bailout policy is absurd. And the idea that we reward private sector failure with public sector money is even more disturbing.
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BEST COMMENT? You have got be kidding! This guy wants to explore the depths of a true deep and real economic depression. It was letting the market place ‘do its thing’ that got us into this mess in the first place. Now he wants to allow them to run amok even more to do even more harm! It is time to face up to the reality that maintaining a national policy of ‘Greed is Good’ has been a dismal failure! Wake up from the dream!
America do need to clean up Corporate America and go through CEOs and replace them with CEOs with hands on experience, and NOT paper (degree and no hands on experience in the industry) CEOs. Take greed and abuse out. Do NOT sell foreclosed homes, but lease back if possible… stabilize citizens’ life and the market. Restructure loans for all homeowners need to be restructured due to poor economy… at least for a while.
Have profitable Exxon to assist bailout auto industries by restructuring, consolidating and up efficiency in exchange of reasonable incentive, but not to repeat oil company trying to keep cars on road and not mass transit as in Los Angeles in 1960 or 70’s??? Invest in alternative energy, R&D, education - teach dicipline << especially to those accountable executives… teach common sense and get rid of frivolous lawsuits… and much more… Global confidence is key to the success…
Personal liberties and Freedom are the key to a successful and prosperous nation.
The world financial crisis was engineered by bankers and politicians. They should be identified and prosecuted. It is now expected that the people of the world will call for change, and Govt will respond by more bad Governing.
We need a complete overhaul of Govts. We need to strip the billionaires of their assets, and allow them to keep 10%. We need to abolish the UN and all inneffective world institutions and start over.
We also need strict population control. And elimination of OPEC and any other cartels.
We need to fix the price of oil at $30 bbl. For at least 10 years.
The worlds oil reserves belong to the people of the world not the Arabs.
We need a full court press in developing hydrogen extraction from sea water using RF energy and the development of magnetic motors.
All corrupt politicians should be jailed within 60 days. For a minimum of 25 years.
All terrorist acts should be named for what they are …..murder. God needs no army
he just needs a few with brains.
All weapons should be banned.
Now that capitalism has prevailed, it is clear that we need an international bottom line of regulation to prevent a race to the bottom in individual countries and markets. The four freedoms, Freedom of Speech, Freedom of Religion, Freedom from Want and Freedom from Fear should be the essence of this bottom line and they are provided in the Universal Declaration of Human Rights.
Unfortunately, the UDHR is not legally enforceable. It is time to make it so, along with the twin Covenants on Economic and Social Rights and Civil and Political rights by drafting and adopting an International Convention on Human Rights. A draft International Convention can be found on our website http://www.2048.Berkeley.edu.
This website is part of the 2048 Project at the Berkeley law school and our mission is “to draft and international framework for enforceable human rights that can be in place by 2048, the 100th anniversary of the Universal Declaration of Human Rights.
We encourage leaders and participants at Davos to visit our website and make a comment about how this framework, “a new bottom line” based on the rule of law, should be designed.
Thank you for collecting ideas outside of your meeting, and we hope to participate with you.
Dr. Kirk Boyd
Executive Director
2048 Project
University of California, Berkeley
School of Law
kboyd@law.berkeley.edu
The MacGuyver engineered Solution (for today & now: get us started -> interim before more elegant solutions are found)
Re-hire generally qualifed people (ie. engineers, IT, welders, mechanics, administrators, financiers, UAW/CAW) whom have recently been laid-off en masse, to engage in a 2yr Fed/Municipal work assignment targeting \”green + clean\” energy production. Their salary comes from a portion of the Un-employment insurance they normally would receive + Fed infrastructure funding that has already been, and is being committed in Fed Gov budgets. Hire industry specialist contractors, to lead and guide and train this labour pool through the design, procurement, implementation and initial management phases. Employ them initially through Fed Gov funded start-ups targeting naturally abundant energy sources:
1) Solar Photo/Thermal energy
2) GeoThermal energy
3) Wind energy
4) Other (eg. conservation initiatives; Rain energy; Kinetic Energy via rollers in roads; Potential Energy storage via gravity or chemical storage solutions; -> any solution that does not require *incineration)
*Note: keep incineration derived energy for huge cities whom have land-fill problems and need to divert & convert garbage into energy. See Tokyo example.
Design \”green + clean\” energy solutions that take into account mass aggregration/economies of scale for town or city size populations < 250,000. With \”green + clean\” new energy creation by town/city, current transmission line distances (and losses) can be reduced, thereby also reducing the production load on current Energy Plants. (ie. encourage and enable down-turn of dirty energy production from coal-burning plants). Total Cost of Ownership for each \”electron\” produced should be equal to or less than oil/coal/natural gas based energy if you factor in \”subsized\” labour pool + benefit of meaningfully employed people during recession, reduced transmission losses, avoidance of CO2, increased manufacturing demand for \”green + clean\” materials.
In return for sustaining their current Fed Gov Income Tax incentives, and perhaps providing an additional 5-10% Tax incentive for those who go beyond, build a demand market by mandating that all Large Building Owners + Businesses (ie. this segment represents 35-50% of all energy use in a country) must purchase at least 30% or more of their energy from \”green + clean\” energy sources and must invest in technology solutions which help reduce by 20% their energy budget. Legislate that the Utilities who produce and distribute this energy today, must initially buy this \”green + clean\” energy from these Fed Gov funded startups. In 3-5 yrs time, when these ventures are properly established (and hopefully the recession fully over), the Fed Gov may privatize these assets selling them to the highest market bidder or giving them to the Municipalities or selling them to the Utility companies.
Probably very simplistic view, yet we have many technologies and idea\’s in place today … they just have to be \”holistically\” networked with some community passion and attitude.
Courageous Politicians are needed to sell the idea to the population and generate the passion/attitude needed from communities. Then Hire Engineers to run the \”green + clean\” startups. They will get it done.
Here is
1.The Alternative Stimulus Package Outline.
The goal of the Alternative Stimulus Package is to allocate extra capital of $1 Trillion in the USA
economy in a relatively short period of time. This economic stimulus might stop the
downward momentum the US economy is experiencing now. This package tries to allocate extra capital
efficiently, and potentially without adding to the US long term deficit. It also would strengthen
the US financial system.
Here is the outline.
The US Treasury borrows $1 Trillion at around 2.5% for five to ten years with the goal to invest
profitably this pool of money in the US economy. The conduit for this investment could be
the US banks.
The US Treasury would offer banks the opportunity to profit by investing money from the pool
without risk. The US Treasury would offer banks money at 4%. All the money a bank is able to
place successfully above 4% would constitute its profit. The bank would not earn any money, if
its total return from the money pool does not exceed 4%. The bank will not lose money
in case its total return is lower than 4% or even negative. However, the bank would lose future access to
access to the money pool in case of negative returns.
Therefore, all the profits from the money pool are shared between the US Treasury and banks,
all losses are the US Treasury’s.
The relationship between the US Treasury and a participating bank is similar to the relationship
between an invsetor and an agency. Agency is hired by investor for the purpose of investing.
The banks will be willing to participate in this arrangement, because there is no downside risk
for them.
This plan does not describe many details. What is the distribution mechanism of the money between
different banks, small banks, big banks, banks from different states ?
However, this is only an outline of a plan.
2. Close GSEs,FNMA and Freddie Mac. Honour all the commitments made by GSE’s in the past, but liquidate
them. No implicit government guarantees which manipulated
housing market for tens of years. The GSE’s function should be handled by private companies, banks, mortgage
originators.
3. Securitization should be restructured. Before any type
of security is offered, it should be approved by regulatory body. Any type of security should be transparent to the potential end buyer. For instance,
mortgage backed securities could be conglomerated by
city or town, so that could be rated. The rating agencies should be paid by buyers of the securities, not
by issuers.
4. Bank CEO compensations, Wall Street bonuses is just a
small part of a big problem. The real problem is not just
with banks and Wall Street, but with all publicly owned companies. The compensation is determined by Board of Directors of publicly owned companies. The Board of Directors in reality is controlled by management, not by stockholders. There should be corporate governance reform.
5. Many current structures have builtin systemic errors.
They are similar to engineering systems. However, there
is no engineering group, that analyzed the existing systems from the point of stability. If it were, the current financial mess could have been predicted and avoided.
The global dynamic system has been expending because of relatively inexpensive inputs like energy, productivity gains, labor, easy access to commodities. Going forward we will encounter bottlenecks in energy and probably commodities(all the big and easy deposits have been found and exploited). So we face a choice, stop growing and declining or find alternative solutions. Things got complicated because the system has been leveraged to price in a perfect scenario of abundance. Energy was the first bottleneck and showed us the limits. The result was a shock that combined with a housing bubble and extreme leverage caused the cascading domino of last year. In a paper/debt based monetary system we are all standing on the shoulders of previous generations. Meaning new debt supports the debt and investments of earlier times. It makes absolutely no sense to let this system collapse by bankruptcy and forced liquidation. This would destroy the dreams and living standards of billions of human beings. What we have to do is to save the system by increasing the money supply, monetizing some of the debt and aggressively addressing the bottlenecks. Most importantly the current crisis should be used to increase (alternative)energy capacity to a very rapid pace. Ultimately we will have to live and adjust to a higher price level because conventional hydrocarbon supply is limited and causes global warming. Central banks need to accommodate this quest for new energy. Ultimately the market will solve energy and commodity imbalances but at a higher price. Policy has to be to anticipate these bottlenecks and direct capital in their direction before the worst shortages and price effects occur. We have no other choice than to accept a, at least temporary, higher price level and ultimately let the market play out. Leverage has to be regulated to no more than a factor of 10 and derivatives need to be supervised in a (global) clearing house. Stable inflation rates and economic growth will be impossible because of declining oil reserves, a deflationary collapse would be a catastrophe for humanity and needs to be avoided at all cost. This means that central banks need to ignore higher prices at least temporarily. We need to increase free/low cost inputs into the global, dynamic, economic system by way of new technologies so that it can continue to expend and to lead humanity into a better future.
If the business “leaders” were to look forward past the end of this economic mess-(”we will get through it” warren buffett)- the parties involved expecially the bankers who got us into this mess with bad products-need to bite the bullet and mark to market assets in their portfolios. For those with the stomach to hold onto some then they can perhaps breakeven or proift a few years down the road. For those who cannot or whose mbs cdo or other bad paper is causing their credit quality to erode should shed these. the “global” buyers that buys up these mark to market assets(like junk bonds) using the bidding system that may drive the value up or even down will spread the risk over numerous other businesses that see light at the end. If investors buy stocks at 5 year lows looking forward then why doesn’t a tool and die maker with no exposure make a long term commitment much like an investor does. If a going concern has minimal risk then the right thing to do is to pitch in and help shoulder the burden not view the world as every business for itself as is now the case.
First, thanks to Prof. Schwab for letting the little folks offer their 2 cents. I think that rather than bailing out failing institutions, business or governmental, we need to think about smaller markets, smaller growth, and locally relevant economics. I’d say that in the short term pulling the plug on quarterly dividends, paying down outstanding debt, and refusing to invest in hybrid securities ought to be in every corporation’s play book. Decentralization of businesses, looking toward local or regional co-operatives rather than global corporations would be a better model in the near term. And focusing on manufacturing and construction in local areas with local resources with human appropriate technologies would be a good way to restart the economy.
Thoughts?
repeal bankruptcy laws.
eliminate banks lending to other banks.
Eliminate short selling on wall ST. or put 36hr freeze on short selling.
create or increase incentives for farmers growing grains, vegetables and livestock.
Increase or eliminate income limit for receiving food stamps and WIC. Increase amount of WIC and food stamps given.
Build additional oil refineries within the US.
universal health care.
A message to CEO’s and Boards of Directors.
How much money do you need? How much house do you need? Stop the rewards for failure. Stop Enroning us. Stop the bonuses. Stop behaving as if you are above the law. Pay your fair share of taxes. Stop the miscellaneous fees you take from share holders to pay upper managements taxes. Your work is not more important than the work of others. You are committing crimes against humanity.
Sincerely
Paula Grieb
School Nurse
NOW IS THE TIME TO RE-INVENT OUR MONETARY SYSTEM FROM THE GROUND UP.
Central banks create money OUT OF NOTHING…OUT OF THIN AIR, like a magician pulls a rabbit out of a hat. They loan it INTO EXISTENCE and charge interest on it as though it actually represented some sort of risk assumed by the bank.
Our current system of money creation GUARANTEES perpetual inflation and guarantees collapse. This has been predicted by monetary theorists such as Bernard Lietaer, Thomas Greco and others for ages.
Our current monetary system also guarantees perpetual accumulation of wealth by those who create money. As Anselm Rothschild put it, “Give me the power to issue a nation’s money; then I do not care who makes the law.”
Like a cancer that eventually consumes its own host, this system will eventually kill our planet if allowed to continue.
Borrowing more deficit money from banks to stimulate the economy may provide short term help but will only exacerbate problems in the future. That money will still be owed, plus interest, back to where it came from. Future generations will be reduced to indentured slaves, with their tax dollars gobbled up by futile attempts to pay off that gargantuan interest.
(Hmmm…What’s the annual interest on a trillion dollars?)
For a solution to the problem, create regional business to business mutual credit networks, such as the very succesful WIR Bank in Switzerland, which has been credited with stabilizing the entire Swiss economy.
Through such networks, business do not have to rely solely on interest-bearing bank credit, but can offer interest-free credit TO EACH OTHER in the form of goods and services.
In this way, such networks act as shock absorbers to the global casino economy, creating stability, prosperity and regional self-sufficiency.
For a detailed explanation of how modern money is created, Google “Money as Debt” in Google video. You can watch the whole film there. In my opinion it is one of the most important films ever made.
For a detailed explanation of the WIR Bank, and how to get us out of this mess, PLEASE go to the website of Bernard Lietaer, http://www.lietaer.com/
A wealth of information on monetary reform is also available on the website of Thomas Greco at http://www.reinventingmoney.com.
In 1919, Woodrow Wilson stated,
“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is now controlled by its system of credit.We are no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.”
He was referring to the creation of the Federal Reserve Act of 1913.
Now is the time for President Obama, and the rest of the world to turn this around, before it’s too late.
I think that the question is how people can be more involved in the solution creating process. The idea being that three heads are smarter than one and 1m heads are smarter than 100.
I would say that considering 2008 marked the first time in our history that more than 50% of the population of the world is living in urban areas we can assume that internet usage will continue to grow. The information and communication gateways that Prof. Schwab mentions in his question are important but they mean nothing if there is no way to filter the quality content out of them.
For example, the Professor poses a simple and open ended question in this video, but I went through three pages of comments and suggestions, none of them addressing the question. I would suggest creating a small advisory group to the WEF that would focus on developing a backend information gathering system that will focus on “listening” to the internets users. This way you can anticipate new trends in the way people interact with each other.
In addition the new campaigns should take advantage of systems that allow users to find content that they are interested in. Web 2.0 allows users to connect to like minded individuals without looking at all the other information that is unrelated to their interests. This way you can have a more natural exchange of ideas over the virtual platform that simulates the way we gravitate towards people with common interests in the flesh for a lack of a better word.
The economy is closly tied to the integrity of its peoples. There is no way for it to prosper and grow without an authority that has strength in itself as well as morality and integrity.
The only way to change the economy to a long, sound and long lasting, satifying state is to change its government and authority; but beware which authority you choose.
The choice is always between life and death!
Ask these questions:
1. Who rules the world and
2. Who has the final authority?
These are two different systems alltogether.
First if you want retail sector to pick up: Eliminate Sales Tax nationwide. Secondly make it more affordable to get to the places by Eliminating the tax on Gasoline.
Give businesses a tax break. NO TAXES in hard times. But they must plow the money saved into providing incentives for customers to spend money with them.
Reduce tax burden for a flat tax of 10% across the board for everyone worldwide. No need for accountants, taxpreparers. Easy to calculate your tax also. It should be taking out once a year for simplicity sakes. Get rid of payroll social security taxes in favor of the individual in charge of their retirement savings. Social security is a failed institution under the federal government.
Allow individuals to take out of their retirement for whatever reason they need to without penalties.
Governments worldwide must consolidate their functions. Example: The town where I live got together with 9 other towns are now only one town. They closed municipal building, sold them and consolidated services saving the average taxpayer over $3,000USD yearly. Now that is a true stimulus to boost the economy, not a measely $500 or $1,000(Thats a joke).
Banks: Top management need to be rewarded based on profits and losses. If the company losses money, the executives need to receive only $1 and give up their stock options. If the company makes money, yes they deserve a small portion for doing so but only after the employees who work hard receive their profit sharing for putting them thru the ringer.
Dear Sir,
The current problem is defined as Credit Crisis because Banks are not willing to give credit. The reason is simple enough. The Banks have already given enough credit and cannot issue more credit. They need to get the credit paid back.
The US Government have issued cash infusion for Banks to stay alive. but technically Banks still cannot issue more credit without risking failure.
The world needs to calm down and focus on identifying the debtors and all these debtors to pay back. This is going to be very painful because most of these debtors bough inflated assets that are not worth as much today.
If Banks push for Bankruptcy of these debtors and write off the debts, Then the Banks themselves will go into Bankruptcy.
The guys who sold the inflated Assets are the ones who should be helping here. But they will not. They are the winners. why should they?
Printing more money as US is suggested to have done. is actually the best way to go forward and introduce inflation.
However, the best way to introduce inflation is through salary increases for the common man earning less then US$20,000 a year. Only that will increase consumption, inflate Housing prices again and allow economy to climb back to health.
Providing more money for Construction projects as Obama has proposed will only send more money to Developers and not common man. This Construction Corporations are the companies who sold inflated houses and earned all the money. Why is another Trillion is allocated for them. The construction workers on this projects will earn less then they earned during the good times. It will not boost the economy.
Stop credit. Stop spending.
Start issuing cash to corporations who employ workers. I am saying issue cash not provide further credit.
It should be similar to subsidizing farmers.
Start giving the money.
Ford, GM, and all manufacturers should all be provided subsidies. and Unions should be encouraged to provide better salary.
Blind Globalization which is depressing wages worldwide should be put on hold for a while.
Laws which provide equal pay for man and women should be amended to include clause for equal pay for all world citizens. So that Corporations cannot find cheap worker from Asia to work in America but find ways and means to improve real productivity.
I read about the idea of a “bad bank” currently thought of by the US Treasury in order to free the banks of the toxic assets and enable them to reinstate the credit lending and kick-start the “Main Street” economy.
However, is it possible to do the opposite i.e. create a “good bank” instead? The Treasury could set up a bank in charge of lending to the Main Street economy and allow the credit facilities to flow again. In such a scenario, the US government can allow the market forces to determine which of the financial institutions to survive the ordeal and save the worries of using taxpayers money to rescue the banks that involve further regulations in e.g. executive remunerations etc since it would have full control over the new “good bank”. And when some of the banks do fail, the good bank could take over the depositors liability (i.e. equivalent to guarantee deposits) to protect the common folks deposits in the bank. And the borrowers that such failing banks may force to foreclose their properties may be rescued by the “good bank” i.e. offer a fresh new loan. The taxpayers’ money that are used to to support the good bank can then be directly pumped to revive the Main Street economy. And finally, after some years when things stabilize i.e. the Wall Street had cleared its excesses, the US government could then issue shares or simply sell the assets of the “good bank” (hopefully at a premium to earn a return for the taxpayers) to the financial institutions who survived.
Hope this is a worthwhile suggestion for the US Treasury to ponder over.
World leaders need to change the mindset of the global growth model. The world is much smaller now. Endless growth is not sustainable and cannot continue to work. Look at sustainability. We have a growing population, dwindling resources and global climate change. An economic model that ignores these facts cannot be resuscitated.
Stop trying to boost consumer confidence. Economic contraction is a good thing right now. Focus the economy on how to retool for sustainability - energy efficiency, sustainable agriculture, etc. Promote regionalism where people consume and produce locally. This will increase small business growth. Rethink the urban/suburban model that requires commuting that eats energy and time.
This global economy is killing us. Sure, we get cheap goods from China, but we’re not including the costs of environmental degradation, both in lax environmental control in developing countries and all that shipping. I’m not talking about protectionism, but it simply doesn’t make sense to import goods when people that are unemployed can produce goods locally - it is not sustainable.
Quit trying to privatize social functions that are best served by government - health care, utilities, prisons.
Any economic system needs controls. Quit fighting regulation.
1. Abolish the Federal Reserve.
2. End the fiat currency so that our money represents actual value.