Island Breath: TGI Column - Privatization of Hawaii

SOURCE: JUAN WILSON juanwilson@mac.com

POSTED: 27 JANUARY 2008 - 12:00pm HST

TGI #22: Time better than money

image above: Preliminary design of Kauai Two Hour Note designed by Jonathan Jay. Click to enlarge.

Editor's Note: After a week of review and research the Garden Island News has published a revised version of the article titled "Privatization of Hawaii". Some inflammatory language was removed (like "Marriage Made in Hell" and "This abomination will not stand"). The factual basis of the article was accepted as it was originally written. We would like to thank the TGI editor Adam Harjou for his courage in this matter.

Normally these columns are scheduled to appear every other Sunday in the Kauai Garden Island News.The final published version may vary from this text as TGI retains the right to correct and edit the material. The copyright to the published version is held by TGI owner Kauai Publishing. Some material in TGI columns may have appeared on www.islandbreath.org already.]

by Juan Wilson on 27 January 2008 Revision 5.0 080126

Panic in the street
After a disappointing Christmas shopping season, the U.S. economy has been in a funk. The housing market collapse and sub-prime mortgage crisis have been weighing heavily on Wall Street. People are not able to use the value of their homes as a supplementary income source - a cash machine. Instead of shopping, most Americans were just trying to get the next mortgage payment together.
Over the long Martin Luther King Day weekend, in the hours before the U.S. stock exchanges opened, a selling binge began in far the east markets. Fueled by doubts about the American economy, it spread from Japan to China and wrapped around the world to Europe.

As the fear descended on England, the futures trading in the Dow Jones Industrials were running more than 400 points down. A full blown panic was in the wind. Treasury Secretary Hank Paulson quickly organized a press conference early that morning. He stepped up to the podium and stuttered and sweated through a promise to offer a "stimulus" check for as much as $1,600 per American household, that was designed to get consumers back to their primary job... buying more stuff.

Paulson was immediately followed by an announcement from Federal Reserve Bank Chairman Ben Bernacke. Bernacke was not going to wait ten days for Fed's next scheduled meeting. He dropped interest rates immediately by a whopping three-quarters of a percent: A shot of nitro in the old carburetor.

Like smoking a cocktail of crack and meth, both announcements were parts of a short term stimulant fix that would have a nasty hangover later. The stimulus would mean additional debt to the tune of $150 billion dollars (only enabled by overseas borrowing). The interest rate drop would accelerate the downward spiral of the dollar's value.

Although both actions will weaken our economy further, they accomplished their short term goal. They staved off the panic that was engulfing the world. The American exchanges stumbled badly, but the worst case scenario, of a 1929 style market collapse, did not occur.

The Old Boy Network Fails
If you think Ben Bernacke and Hank Paulson have your best interest at heart, remember that Paulson was recently the CEO of Goldman Sachs.
Goldman Sachs is the firm that fueled much of the sub-prime mortgage meltdown by selling high-risk bad mortgage packages to suckers while they bet against those same customers.

Bernacke, is the chairman of the Federal Reserve Bank. The Fed is not an agency of the U.S. government, but an organization that is operated and controlled by the private banking industry for their own advantage and profit.

With the Reagan-era deregulation of our economy, the banking and investment community have become partners in leveraged, complicated, abstract and risky activities that have resulted today in what may now be trillions of dollars of evaporated wealth for institutions like CitiGroup, Morgan Stanley, Merrill Lynch and the like.

That loss is about to find its way to you, by evaporating the worth of your home and possibly even the existence your job. A $150 billion dollar federal "stimulus" may replace your Dell desktop PC, but it won't cover your next mortgage payment and monthly food bill too.

As this week's trading closed, triple-digit fluctuations on the DOW were the norm. Like a heart in fibrillation, this hyper volatility is not an indicator of vigor, but an indication of uncertainty and fragility. The coming week will be telling, but the gloomy traders seem to know that things are sour with our economy.

A a basis for our economic growth, debt in suburban sprawl is not working anymore. The mantra of the consumer based economy has been "Grow or Die!" In regard to our world ecosystems, this way of doing business might be better characterized as "Growth = Death!" This is certainly a dilema for the "American Way of Life."

The "R", "D" and "C" Words
What is becoming clear is that America has entered a recession. The question now is how bad will it be? There are three commonly used terms to describe ascending orders of economic bad times.

• Recession
is the widespread decline in Gross Domestic Product (GDP) with no economic growth for six months.

• Depression
is a severe of protracted Recression of at least one year with a contraction of GDP.

• Collapse
is a severe Depression that is usually accompanied by long period of hyper inflation in the prices for consumer goods like fuel, food, and clothing.

Japan, Germany (and most of Europe) experienced economic collapse after W.W.II. Fortunately for them, the U.S. was at its peak industrial strength and initiated efforts, like the Marshall Plan, to rebuild the economies of our allies as well those we had firebombed into submission. There is no White Knight today, unless you count China and Suadi Arabia.

The unanswered question is whether the entire world economy will be dragged down when the U.S. falters ? This is pertinent because for the last fifteen years we have been strengthening the bonds of the "Global Economy" so that the fates of widely separated markets are linked. In the past, a recession in one market might manifest itself as growth in another. At this point a deep recession in the U.S. economy might just stall the world economy. A contagion of cascading economic failures could lead the worldwide depression that would end the visitor based economy we know now. A new way of doing business may be in store for all of us.

Investments on Kauai
One of the few things we can do to insulate ourselves from economic hard times is to be more self reliant. Hawaii should invest in its own economic independence. Each island must find what it can do to stand on its own and then reach out to its partners for trade.

Instead of putting money in indexed derivatives, or credit default swaps on sub-prime mortgage pools, maybe those here with some wealth should invest in our island's future. There are some things we will need that require capitol to start up. Many will be "safe bets" in the coming economic environment; especially the operations that will provide things we really need. Here are ten items that occur to me;

1) Dairy farms
2) Organic food cooperatives
3) Wind energy cooperative
4) Zero Waste Recycling Center
5) Renewable forest lumber mill
6) Sailship building yard
7) Village scaled retail chains
8) Timeshares conversions to housing
9) Biodiesel fuel plantations
10) Bamboo products processing plant

Some of these projects are already underway. Others won't be in demand for a few years. All will have a place in our community as the world economy transforms here to an island economy.

A Kauai Currency
We are constantly witnessing the funneling of capital away from the islands. About 90% of the food and fuel we buy is from the off-island and that expenditure is immediately transferred to the mainland. Mainland corporations get the lion's share of our remaining shopping dollar, and even the tourist dollar too. Obviously, in response to this, we can conserve, cultivate local food and the generate electricity through community-owned and operated wind farms. But there is more we can do. How about printing our own money?

Monetary systems are useful because they allow people to store real value for later exchange. If the money bleeds away or loses value over time it is not so useful. An effort we can make now, as an investment in our own future, would be to develop a local currency. This could be vitally important when the U.S. economy tanks.

Several successful local currencies have been created. Perhaps the most renowned is the Ithaca Hour (www.ithacahours.com) that is based on trading in hours of labor. Inspired by such efforts, Jonathan Jay has proposed creation of the Kauai Hour as a unit of currency emblazoned with the motto "In Kauai We Trust". He has even designed an example of a few denominations to generate interest in the concept.

A unit of Kauai money would be backed up with an hour of real work. An hour of one persons time could be traded for an hour of another persons time. In 1997, for tax purposes, the original Ithaca Hour was pegged to $10 an hour work, but this exchange rate was variable. The Kauai Hour could be used to by goods or services if an exchange rate were set.

U.S. Dollars could be converted to Kauai Hours at a rate we set. Tourists could use Kauai Hours for discount purchases from local businesses, or be given change in Kauai Hours. Tourists could even buy Kauai Hours to take home and frame as quaint native craft , as long as their dollars stayed here.
The Kauai Hour would need to have its own Reserve Board to manage the quantity and distribution of Kauai currency, as well as set exchange rates. It would need the support of local businesses and tradespeople. It would ultimately need the support of the County Government. Imagine paying your property taxes in Kauai Hours.

In the long run, a local monetary system would ease the flight of currency to mainland corporations and act as a hedge against U.S. dollar devaluation and inflation. Will it work? As Jonathan says; "People love to spend time on Kauai."

The Garden Island News Column Menu Listing of all "Island Breath" articles submitted to TGI

13 January 2008 - 4:00pm HST

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