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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MY SEVEN STEPS TO SAVING AMERICA
Taking toxic waste (In this case loans that are never going to be paid) and moving that waste to another county (in this case the US Treasury), then shipping it back 5 years later to the county it came from miraculously making potable soil is irresponsible dreaming!
STEP 1 (STOP FEEDING THE LIES)
The first thing that the President can do is stop the phoney-baloney that the Treasury Secretary, Federal Reserve Chairman, and people of the ilk of Robert Rubin, and the Media Like the New York Times are serving up to the public. ALL OF IT to date is complete and utter hogwash. The public can smell a rotten egg and if Obama doesn\’t come to terms with that fact quickly, then he will not spend more than one short term in office.
STEP 2 (BECOME REALISTIC)
All of this nonsense about the Government taking the failed debts of the banks \”temporarily\” to be repaid later is an effort to hide the fact that the Plutocracy of America is more important than the rest of the American People and as they all run for cover the rest of us will be left holding nothing.
STEP 3 (STOP PRINTING MONEY)
As the Goverment continues to print new currency at an alarming rate (that I might add is no longer reported due to M3 no longer being published), we risk Weimarian inflation. We will be carrying 100 Billion US Dollar Notes in the next 5 years at the current rate of inflationary dollar creation.
STEP 4(REVITALIZE MODERN FED.RES.GOLD CERT. RATIO)
There is no solution to the current financial problem that we face, other than creating \”The Revitalized and Modernized Federal Reserve Gold Certificate Ratio\” as per Sinclair.
STEP 5 (HIRE RON PAUL AS SPECIAL ADVISER)
Obama should also make Ron Paul his Special Advisor to work with Volker.
STEP 6 TELL THE ENTIRE COUNTRY THE ABOVE AND EXPLAIN TO THEM WHY IT IS NECESSARY.
Let the Bankers and the Motor companies and any other company that has failed, to fail. Then you will have the trust of the people and other Nations.
STEP 7 (USE THE BIBLE AS YOUR GUIDE)
That’s my solution and it will work if Obama tries it.
Well the comments here answer part of your question: if there is a mechanism for getting focused answers to the question you actually want to ask, this is clearly not it!
Something like a semantically-enabled wiki, with some level of permissioning and editorship (AKA gardening) would be a better route.
The technology to do this is not quite there, but it would help to have something where the ideas people put up are expected to reference established art wherever they can. Then if the referencing was somehow viewable or navigable, those wanting to make sense of the screed of comments and ideas could navigate things in the order in which they link into the wider global and academic conversations. Even original thinking, if it has value, is an original bringing together of existing thinking and existing facts.
At present the underpinnings of such a thing are in place in the form of the semantic web techniques and some of the existing research in semantic media wikis (I could provide references) but the imaginative stuff needs to be done.
You in the billionaire class, you elitists:
Fatally missing from your proceedings is the addressing of the inextricably entwined collapses of the world economy and of ecological services forcing mass extinction and, sooner than later - human extinction.
You folks have failed to factor in the life-support sustainability of the earth in your ruthless increase in wealth at the hands of the world’s peoples.
To avert looming extinction, the World Economic Forum must face the direct link between unregulated financial profiteering and the equally steep curve of the uncontrolled rate of its component rapacious consumptive-driven, greed-caused resulting climate change head-long descent into planetary environmental complete holocaust.
Real wealth has nothing to do with the non-productive gains realized from the financial bubble, now vanished.
Real wealth is measured by a steady-state, sustainable economy based on zero carbon emissions, reset to a CO2 neutral flux, an economic activity to 5% of the current levels and a redefinition of the global economy into a constellation of relocalized communities based on bio-regional determinism, watersheds, and local access to necessities of life, education, culture, health care for all.
this comment is as true as that tons of sickly swirling air polution effects our climate … there are many living in 55 states of denial in the US , a false cosmetic lie … obsessive compulsive illusions of being bulletproof as if life is a computer game .
while bail outs help stop the market panic short term they are a total waste of needed capital .
time to prepare them for the incovenient truth … buried as they fall for their inhumane ways of doing business … strength is in righteousness … the strong survive , and the vacuum can also be filled by government sponsored co-operatives where needed , those who play fair for the common good… an equilibrium of government and private business activity … it is like a natural order of balance .
but a sad fact is a lot of good people are financially trapped in these failed entities… it’s also like helping the morgage defaulters , some are from over indulgent selfish greed , some from inoccent circumstances …. which ones do we help first with our charity ? work it out quickly or the wasted $$$ supporting moral cowards will be a global disaster .
When toxicity is inflicted with potentially lethal agents at dosages which kill 50% of the conscripted receipients (LD50) the experiments are halted by pathologists as it is known and guaranteed that LD70 or greater will wipe out the entire ‘population’. Also, serious epidemics, unchecked, coalesce rapidly into torrid pandemics with serious global consequences. It is not just foot and mouth, it’s, BSE too. The wretched toxic Bankers having released economic ebolas and marburgs simultaneously, surely, must be cast off on a far away desert island to spare the rest of commerce and industry from getting wiped out?
The justification given for the bank (and insurance/financial services/brokerage/auto) bailout was that they were “too big to fail.” No one should be too big to fail under capitalism. They should be free to fail just as they were free to succeed. Rather than an ill-conceived, knee-jerk, panic bailout with borrowed money by a basically bankrupt country, they should have been busted up into their parts and the viable parts sold off to help offset the bankrupt parts.
It would be ridiculous to think that someone who is virtually bankrupt would go out and borrow (if they could) a large sum of money and take it to Las Vegas and place the borrowed sum on a roulette wheel thinking that they would be lucky enough to bail themselves out of that debt, but that is exactly what our government has chosen to do - and it has not worked, and had about the same chance of working as the roulette wheel.
Now, it appears that we all get to experience first hand what the word “hyperinflation” means, probably sooner rather than later with the new “stimulus” plan, which will probably just stimulate the money supply more than anything else…
Klaus, that’s a great question, and I’m not sure you will like the answer. This medium is one of communication, and that requires a significant personal commitment. In my opinion, the most honest dialogs occur on bulletin board-type forums that cater to specific subjects (like say finance) and allow people to post anonymously. Although some people abuse the privilege, anonymity invites honesty and all ideas have to be judged on their own merits, not the name attached to them.
As for the question everyone is answering that you didn’t really ask, how to fix this thing… I think, at least in the USA, it’s a couple of things. First is an over-reliance on credit. We’ve got to turn away from that and encourage not only individuals to save more, but also companies. Problem is, this is counter to the belief that spending is what drives the economy. And I do expect it will hurt a bit at first, and may require the banking business to downsize, but it is necessary.
The other thing, which is somewhat related to saving: we need to encourage, and perhaps require, companies to pay dividends instead of keeping all their cash. This will do a few things. First, it will remove much of the speculation. Much of the “money” lost in this crisis was never actually money at all, but simply speculation in the future value of corporations. With dividends, price/earnings ratios are easily calculated to set the value, and the more CEOs steal the earnings, the more it depresses the stock. This will restore some honesty to the system, but it might require a hard pill to swallow for our current Democratic administration: cutting or eliminating capital gains taxes on dividends. I’m neither pro- nor anti- tax here, because I know in the end all tax is passed on to the consumer. But the psychology of it affects people and has to be dealt with.
Dear Prof. Schwab and other Davosians:
It is a natural, innate human tendency to seek to accumulate enough means to overcome perceived future threats to one’s own well-being, and that of one’s family, friends, and even clan. Globalized commerce, finance, and population growth to 6.6 billion have amplified the natural tendency of people to accumulate their means to an extent that is now threatening the viability–the genomic relevance–of our species within our living biosphere’s ongoing “mandate” to sustain Life. This is why the Davos gathering has such import: a new framework for a “sustainable capitalism” is badly needed. And bad behaviors have to be curbed without damping the creative spirit of entrepreneurship that yields so many astounding solutions to societal problems. We don’t need immense new regulatory superstructures. Taxpayers don’t have the means to support regulatory police states. But all people do have the means to insist on healthy bodies, communities, and ecosystems as their birthright.
Governments that have the capacity to regulate commerce within capitalist frameworks also have the power to harness this natural human tendency, and bend it towards a broader sense of “means”: namely, the means of our living planet to sustain ourselves, our communities, and our nations. Specifically, governments that have the power to tax corporate income could apply sustainability performance metrics to their taxation models. Corporations that achieve “top quintile” sustainability performance metrics in a two-year cohorts of similar SIC-code businesses, could be given tax-free status. Imagine it. All others in the cohort would receive their normal income taxes. Every two years, for-profit corporations would have the opportunity to be re-scored in comparison to their peers. Successful companies would attain “E-Corp” status (short for “ecological corporation”). But this status could be lost due to competition from below every two years. The pond would turn over.
Such an iterative system would harness the modern profit incentives that drive individuals and corporations, towards broad-based sustainability outcomes, in a manner that would reward and recognize that their “green” efforts are actually lowering the carrying costs of their governments–and deservedly so! Focusing the profit-seeking behavior of individuals and corporations on the “triple bottom line” of true biospheric sustainability is the challenge of our day, our century. A simple tool like the incentive of zero income tax for “top quintile” sustainability performance would represent a major “stimulus” on behalf of a smart and sustainable capitalism.
I welcome further input opportunities, if you think this idea has merit.
Let’s put aside our anger and think carefully about what we really need. Because being angry with Banks or Banking regulators or Governments are wasteful exercises. We will have to spend more money to investigate and also spend money on maintaining Jails.
If you truly believe in Capitalism & Free Market, then you have to let it go through its natural flow. We are all afraid and it is affecting our judgment.
Blaming conspirators and Secret world powers is again useless because, if they are indeed very powerful then you cannot do anything against them.
But I remember a western leader/philosopher who said, Democracy is bound to fail because once people understand that they can vote themselves unlimited money, the system will fail.
What that guy was saying is that people should not be allowed to vote themselves money. But this is exactly what is happening in US and Europe where Banks are using their votes (purchased) in Parliaments to vote themselves easy money.
I am completely sure that we should allow everyone to get the same opportunity. Not just farmers or auto companies or Banks but all other producers.
Meaning if someone is making any product, he should be issued subsidies for producing it. That subsidy will ensure he continue to manufacture that product and provide economic growth. His earning will contribute to purchase more products from others.
When some products are not sold out, Government should accept the products and can issue around the world as donations just as it does today with agricultural products.
The Government will become more powerful than what any war machine can achieve.
All Governments can do the same. Japanese can donate cameras. Chinese can donate cheap toys. Indonesia can donate handicrafts. Important is start giving money for production rather then GOLD.
The method of printing money based on GOLD is the single most anti-Capitalist element which is causing all the economic disasters. The reason is simple.
When money is printed for Gold, Everyone will sooner or later search for gold. It allows them to print money and issue it to others for interest.
So why waste time working. Start finding ways to get gold. right? Stop that and Capitalism will be a smooth system of never-ending growth. Because only production will provide money. Governments will be there to regulate any products that are found useless or unwanted.
For those who are wondering why Islam is growing, please learn that Islam forbids usury. Against all media advertisements against Islam and branding of Islam as bad extremist religion, people are adopting Islam. Even in modern country which provided western style economic growth such as Malaysia and Turkey, Islam is growing. This is because of the Corruption of Capitalism with extreme usury. Productive activities are not valued correctly but is being suppressed. This is forcing people to find alternative Governments which today is only Islam.
In Eastern Europe and Russia people are yearning for the return of Soviet style Socialist Government which provided money for work and not credit.
I am not a Muslim and I urge all thinking Capitalist to start understanding the true danger ahead and start amendments.
I am one of the increasing numbers of persons who have consistently shown that the Banking System and Exchanges Regulatory system as it exists and the Regulatory system direction belong to Jurassic Park. They have outlasted their time, by being supported by Advanced Country Governments who also foist these on the rest of us. In Kenya, Mpesa the SIM based money transaction system has several times the number of customers as banks and has shown that the banking system is a dead weight. In Sri Lanka, we proved that our equity conversion of rehousing (of slums at that!!) is superior to all the jacked up methodologies of loans and collateral. Enterprises all over the world have proved that the Accountant and the Lawyer in commercial practice today are the wrong “storytellers”. As VISA founder and President of the world’s first trillion dollar organization Dee Hock put it, we have to discard the old “storytellers” and create the finance industry that matches our times. Otherwise the Western Taxpayer will just be bailing out the source of ruin so that they can crash resoundingly again. That time a trillion will be surpassed as the unit of bail out calculation.
It seems to me the world economies are in a self perpetuating circle of disaster that has to be broken and throwing money at the banks, who are at the root cause, is not, in itself, the ultimate solution. Of course they need funding to maintain their liquidity levels but this has not made them able or willing to lend again. Banks have always operated a policy in “bad” times of calling in loans, bankrupting businesses, foreclosing on properties and then selling off the assets at whatever price they can get, showing the losses in their balance sheets but recovering the loss from customers by increasing bank charges and or interest rates on “good” loans. I don’t see them changing this philosophy. The problem now is that the extent of their potential losses, the so called Toxic Loans, is so great that if they follow their normal practice they would all be bankrupt and hence the need for government bail outs.
The proposals for a “Bad Bank”, or even a State Bank, I believe has its merits as long as it is handled and controlled in the right way. I wonder how many of the Toxic Loans would be recoverable if the borrowers could have their loans restructured to make them affordable, in the shorter term, particularly mortgages. This would enable people to remain in their homes, stop the foreclosure sales, which is helping to depress the property market, as well as taking out of the market all the properties currently for sale by owners trying to sell in order to reduce their burden of debt. This action would enable the property market to stabilise more quickly and the removal of these loans from the banks balance sheets would free up funding for mortgages to those wishing to buy and able to do so as well as financing good businesses.
Properly managed the Bad Bank may well recover many of the debts, albeit over a period of time, but at a much lower cost to the taxpayer than some of the policies currently being promoted. It seems to me that if no direct help is made available to both home owners and good businesses what we will see is more foreclosures, more businesses laying of staff or becoming bankrupt resulting in more unemployed people unable to keep up their mortgage payments followed by more Toxic Loans and the banks needing more funding to cover them.
The world has become polarized: global, yet local.
Many local people complain about the excess of greed and lack of accountability of the global set. But the big guys only mirror us. Madoff would not exist without thousands or even millions of greedy smaller investors willing to surrender their savings and reason to the comfortable illusion of miraculous returns.
Any change, global and local, will have to start with the people’s mentality: we need to be better educated and accountable, lower our consumeristic expectations. The rule should be “do less with less” (resources). Each of us needs to get involved in government, starting at the communal level.
Globally, we need some government. Most large companies are global, yet governments are isolated and struggle to recruit and finance competences. Smaller counties, states, nations are fighting battles for which they cannot be equipped. Incompetence and power create the perfect bed for corruption. We need to fight graft everywhere.
Since market economies ended up begging state governments for bail-out funds, we need to shape up a new economic model with great respect for the natural cycles. That new model should be based on reason and control and yet still be entrepreneurial and flexible, locally and globally.
Well said Josef. I like your sintetic thinking.
Explore ways of creating a system that works for humans, rather than finding more clever ways of enslaving humans to the system.
HIGHER STANDARDS!!!
Is the only way out of this crisis.
It is about time we change our habit of consuming substandard products and services. The quality of such products and services can not be in the mercy of the markets anymore, it has to be regulated by law. One can argue that it is already regulated, but the bar has to be set much higher. Better and safer products, longer lifetime products, higher ethical standards on corporations and financial institutions, will translate in more jobs, stable markets, better education, healthier population and will go a long way in preserving the environment and global natural resources.
Utopic?! No at all. Wherever this standards are set higher the crisis impact is not as bad as in other parts of the world and their way out will be even easier. Lets follow the best.
Since almost ever in humans lives moneys are a centerpiece of everyone’s lives. Thats why it was for a very long time considered as sacred; and to do fake money was an horrible crime as it could ruin the confidence of the people into the world they live in. To give the power of issuing money to the private hands of bankers, who run their own agenda of self enrichment, and use the money swindled through the interest rates for their own goals, was or the most stupid thing a government may have done, or a treason. To bailout banks is just the continuation of the former treason; it is just more visible and so, more scandalous.
Based on the results from the first round of TARP bailouts, continued bailouts probably will not help. Since taxpayers are funding the bailouts and 2/3’s of the U.S. economy is consumer-driven, perhaps taxpayers are the ones who should be bailed out, not the “smartest guys in the room” who created the problems in the first place.
Some general thoughts:
Governments should not allow corporations to become too big to fail. Such efforts will decrease the fallout when a firm fails, promote competition, and protect jobs. For instance, Pfizer should not be allowed to acquire Wyeth period. And particularly with $50 billion in loans from banks bailed out by TARP funds. If the acquisition is allowed to continue, the taxpayers are essentially paying for an acquisition that will cause at least 20,000 more layoffs (and all that entails) and will lessen competition in an industry that is already compromised. Further, the pharmaceutical industry should be a matter of national security, not some financial game played by masters of the universe who seek large bonuses and ego gratification with no regard for society.
Banking firms that have required bailouts should take back all bonuses paid in 2008 and create a fund to help taxpayers who are being foreclosed. That, or give grants to communities most affected by the recession to create jobs and provide emergency assistance to those in need.
The U.S. government should consider means-testing Social Security benefits. For instance, the top 5% do not need social security benefits, nor do the top 25%. Further, there should not be a phase-out for Social Security and Medicare taxes - meaning SS and MC should be taxed on 100% of earned income. Social Security and Medicare funds should no longer be poached and used for other sources.
The U.S. needs universal health care. It could be paid for in any number of ways. There should be no debate about this. Health care should be a right, not a privilege and it should not be tied to employment. The former health insurance execs and their lackeys could be put to work processing universal health care claims. Let them devise methods to improve claims processing efficiency, rather than devise draconian methods to deny applications and reject claims that result in poverty and early death for an increasing number of U.S. citizens.
Globalism has not worked. Each country needs to become self-sufficient, creating their own food, goods and services, selling and trading their excess, and helping each other during hard times. Further, within geographically large countries, regions should generally be self-sufficient. Globalism as we’ve seen it practiced has been used for exploitative and crass purposes, not for any noble purpose. The ideas expressed here are not “protectionist” or “nationalistic.” They are common sense.
The U.S. needs to end the wars in Iraq and Afghanistan. The war on terror has been an unbelievable power grab - a grab for oil, a grab for American’s civil liberties, a grab for taxpayers money.
We need to develop alternative fuels that are clean and renewable. This should be the top priority after stabilizing the economy, ending the wars, and providing universal health care.
My two cents.
What I have a hard time believing is that (at least regarding the financial descisions of the United States government) our current plan is to spend even more money. Have all of the funds of th original $700B bailout been used? And now we’re a senate majority away from spending another $819B? What for? For infrastructure? To create jobs? To loosen bank lending? I think this whole crisis is ridiculous. I’m worried about a new administration rushing in to amend a situation 10 days after taking office - when this problem has been developing since December of 2007. And I don’t think the US can afford a $819B mistake. If they want to create jobs and stimulate the economy, don’t spend money….lose it…federally. Have Washington cut every income, capital gains, state, federal etc. tax for a whole fiscal cycle. I mean, Washington is losing money anyways right? And quite frankly, since this stimulus bill is coming out of my pocket for the second time, I’d much prefer they just cut my taxes as opposed to spending more of my hard-earned money. Oh, and please don’t go through with the ‘bad-bank’ idea. I don’t understand how removing debt from a bank and handing it to Washington is going to do anything but divert the issue. Toxic assets need to be liquidated or settled, moving them to a new location is a temporary solution. And then what happens if the banks, now free of their bad debt, incur more losses in the future and credit tightens up again? Are we going to create another bad-bank for that too? You can’t sweep trillions under the rug. The major outcome of all of this that I fear most however, is that once all is said and done, the feds will have a hand (financially) in EVERYTHING. And then, ‘re-distributing the wealth’ as the Obama adminstration puts it, will be much easier for a federally owned and regulated economy and a democratic-controlled house and senate. Say goodbye to Capitalism; hello Socialism. You think I’m wrong? He’s been in office 10 days and he’s already going after the excessive bonuses on Wall Street and strengthening the ‘working class’ to have more leverage on employers. And also, all those billions of our tax money that went into GM and Chrysler, AIG and Citigroup? I want dividends, and shares of stock. Since when does the American taxpayer aid a ‘too-big-to-fail’ corporation?
Can the World Economic Forum, with input from the major finance departments of the group of 7 leading countries(plus more as possible)develop a monitoring group who can provide a public (and non biased) advisory to governments and national regulatory bodies in order to manage financial risk. This would not interfere with free markets, but may alert us to major risks due to things such as subprime mortgages, collaterized debt obligations, and even inaccurate inflation data and other economic indicators which risks may not be known and yet can destroy our economies? In addition such a group may be able to monitor the ‘integrity’ of global currencies which for example you might expect the US Treasury to have done for the US dollar, but apparently they didn’t do so, and they ignored the risks caused by low interest subprime mortgages and easy money over the last few years. Looking forward, the current increases to the US money supply are being soaked up due to uncertainty in other currencies, but unfortunately when we start coming out of this recession and some money transfers back into the foreign currencies then the USD will fall, the FED’s will increase the interest rates which will kick start inflation that may exceed expectation due to the excess money in the system. Hmmmm, if the various regulators don’t keep track of this inevitable sequence of events, then maybe I can figure a way of making money out of this, but then I’d just be another greedy trader?
MORE ACTION FOR THE LESS FORTUNATES, LESS TALKING, LESS GREED, LESS SELFISHNESS FROM ALL THE POLITICIANS AND MANAGERS ASSEMBLED IN DAVOS, AND THE WORLD WOULD BE A BETTER PLACE!