Chapter  11

Looking into the future with imagination. I wonder what challenges mankind will be facing one hundred years from now. What will happen if we meet all of our challenges? Is this just a revolutionary period we are going through? Once our imagination has met all its challenges, will mankind settle down to a peaceful existence in a utopian environment, perhaps limiting its population to five or six billion people? (I doubt it.) The one challenge mankind will probably never completely conquer is to keep our “devil” bottled up, it is unfortunately the dark side of our human imagination. The best we can do is try to control it.

Peering into the future, via our imagination, can give us some hint of how things may be one hundred years from now. In the last hundred years we have and gained a lot of benefits. Our government and economy has grown into trillions of dollars in size. Our federal debt continues to increase because of huge tax cuts, unpaid for wars, and entitlement programs that start with good intentions that not only gobble up the wealth of our present generation, but also the wealth of our posterity.

It is like, we are on the Titanic blissfully sailing through treacherous waters with a captain and crew unwilling to set a safe course. Optimistically, if our creative entrepreneurs continue to create vast new wealth producing industries such as they have done in the past one hundred years our economy may have expanded sufficiently to absorb such a large debt. The continual creation of new industries along with the exploitation of our natural resources are the only things that have kept us economically above water so far.

Foreign companies sell us their merchandise and oil for our dollars (non-interest bearing IOUs) These non-interest bearing dollars are quickly traded for interest bearing bonds but the demand for these government bonds is so high and supply so low that the bonds pay hardly any interest. (It would cost us less if they just kept the non-interest bearing dollars.)

The foreign companies sell us their goods (anything that depreciates or is consumable - oil, automobiles, television sets, etc.) and buy our assets (real estate, companies, stocks, bonds, art, raw material, etc.). They prefer to buy the store rather then the merchandise within it. An ever larger percentage of our IOUs are now going to these foreign countries. This has made our dollar the world currency, everybody wants them. America's economy and productivity is so strong our treasury must keep printing billion of more dollars to keep their value down so our dollars will be competitive with other countries.

As long as our country and all of our citizens benefit from this tremendous wealth and it contributes to the well being of our country and its citizens it is good. It pays for defense of our country, its infrastructure entitlements, services, etc. Our government has finally passed a universal health care law now we will have to see if it works out OK. Every private business that contributes to the wealth of our country is a valuable entity. They create most of the wealth needed to maintain our high standard of living. We should not overburden them with too many millstones. Our government built infrastructure also helps creates wealth.

Dollars are simply IOUs. When the Fed prints dollars they are actually printing IOUs. That means they are pledging all American products, businesses, workers' labor, etc. for sale in exchange for the dollar IOUs. Americans stand ready to exchange their products, services, labor, food, businesses, stocks and bonds, real estate etc. in exchange for their dollar IOUs. America is for sale (at the right price)!! If the Fed prints more dollars then demand warrants its value will fall. Apparently they have not printed too many because the dollar's value is not falling. Hyper inflation would destroy the value of the dollar for both the foreign and domestic holders but we are far from this condition.

Since the Japanese and Chinese and oil producing countries together own trillions of US dollar IOUs they want to keep the value of these dollar IOU investments as high as possible. It is in their interest to keep the value of the dollar high and stable. If the IOU dollar holders start dumping their dollar IOUs too fast their whole dollar investment would tumble, so why would they do that? If anything - they would be delighted if the dollar's value increased. Besides who would they dump them too?? As long as the US maintains its high credibility this will never happen. Most foreigners are happy to accept these dollar IOUs because of their credibility value - right now these dollar IOUs are the world wide currency. America is for sale - you can buy most everything with the dollar IOUs. The exchange rate with foreign currencies remains strong.

The dollar holders get nervous when they think the Fed is printing too many IOUs. This goes on all over the world, the holders of large amounts of US dollars want to keep them as valuable and stable as possible. The trouble with the dollar IOUs like gold is that they pay no interest. That is why when the treasury bonds are put up for auction the dollar IOUs holders gobble them up even though they are paying ridiculously low interest (the demand for these bonds is very high).

The US treasury bonds are as safe as the dollar BUT they also pay interest. US treasury bonds are simply another form of government IOUs. They are probably the safest investment in the world - the US has never defaulted on a "treasury bond IOU" as far as I know. In time of world financial chaos (such as occured under the last republican administration) investors flock to the US treasury bonds for safety although they may as well just keep their dollar IOUs.

The treasury sells bonds through auctions (exchanges bond IOUs for dollars IOUs). This exchanging IOU bonds for IOU dollars takes the dollars out of circulation reducing the supply of dollars outstanding theoretically making the dollar stronger. If the treasury puts too many bonds up for auction, beyond the current demand, the bonds' interest rates will rise while the value of the bonds will fall so why would they do that?? It pays to keep the supply of bonds limited so demand is strong and US treasury doesn't have to pay so much interest. This is the way the treasury can also control the interest rates and dollar supply.

Actually they really don't have to auction any treasury bonds at all, the dollar holders would just have to invest their dollar IOUs in other ways. When you buy treasury bonds you are actually just exchanging bond IOUs for dollar IOUs. The treasury could just "print" dollars electronically putting them in circulation through the banks and paying their obligations (infrastructure, military, social programs, employees, etc.) with them. The treasury should never pay more than 1% on their bonds. Why pay all that extra expense when the dollar IOU holders are already holding our debt at 0% interest. As long as there is enough demand for the dollar it will remain strong. One way to keep the dollar strong is to keep buying foreign goods in exchange for our IOUs. This keeps the demand for dollars from foreign manufacturers high and increases the potential demand for American products.

Actually the demand for the dollar is getting stronger in some instances! That means the Fed is not printing enough dollar IOUs - the demand is greater then the supply so its value is increasing relative to some currencies. A dollar can buy more goods then the same dollar could last year. Index of food sold to be eaten at home fell last year. Homes are cheaper, bread, milk, meat and eggs are all cheaper. Natural gas is cheaper, the cost of heating your home and hot water is less. The cost of labor remains relatively stable. The conditions supporting the inflationary growth of the last decade has abated (at least temporarily). The value of the dollar seems to be stable or appreciating. This means the demand exceeds the supply so the treasury will have to print more dollar IOUs just to satisfy the demand and keep our dollar competive.

With the trillions of American dollar IOUs circulating around the world - there is a tremendous amount of potential demand for American products, etc. out there. Now if only the foreign dollar holders would start spending them. Unemployment would fall and American factories would hum again! The only trouble with this is that many foreign governments around the world set up trade barriers to prevent or hamper their people from buying our products, they would rather just take more of our dollar IOUs then buy our products. The dollar IOUs may move from country to country for a long time - they are the international currency of the world. But eventually the dollar IUOs will come back to our country when American companies sell their product to foreign interests.

However nearly every week there are announcements of companies moving to other countries where the manufacturing climate is more economically favorable. Everytime a company is forced to close or move to another country, the revenues and jobs they generate are lost, we all become a little poorer. Our governments (federal, state, local, etc.) can no longer collect their taxes. The benefits (our infrastructure, social benefits, defense etc.) that these private enterprises support are lost. The national deficit becomes a little larger and the trade deficit (if it is not offset by an export) becomes a little larger. Unless a new business is created to replace the lost business the former employees will no longer be able support themselves, their families and their community, the factory is shut down and no longer contributes etc. We all lose when our companies can no longer compete. This exodus of American companies is abating somewhat and some of the companies are starting to move back to America.

This is good news and should continue if our government keeps the dollar relative competitive with foreign currency. This not only makes our products more competitive relative to the foreign products it also makes our assets and raw material cheaper to the foreign buyers. They have already purchased immense amounts of our prime real estate and companies with their strong trade surpluses. It also allows them to buy our raw materials. We should keep our dollar as strong possible but also very competitive with foreign currencies.

In the past couple of decades our country had lost hundreds of thousands of manufacturing jobs because our companies could not compete with manufacturers in the business orientated countries. All the jobs that these companies created is now gone. Also millions of workers have lost there jobs because they were displaced due to the tremendous increased productivity of the American factories and farms. It takes less and less manhours to make even more products. Most of these workers have found jobs from new companies that have come online with new products but there is still a small percentage of workers that are unemployed (around 8% at the present time).

One of the major reasons contributing to our inflationary labor costs is now abating somewhat. That is the trillions of dollars our country had to pour into the defense industry to protect ourselves from the Soviet threat. While much of our creative energy and resources were being invested in our defense industries, Japan and now China) was pouring its creative energy into consumer industries. While our debt grew with the cost of wars and defense spending their wealth grew. If all our creative imagination and capital had been concentrated on inventing, developing and manufacturing consumer products and competing in the marketplace it would be a much different story.

A lot has happened since this book was written in 1996. We were attacked by a new enemy when Muslim extremists attacked our country on September 11, 2001 and we invaded Iraq on trumped up charges that they had. Since then we have waged a very expensive war against these terrorists and racked up trillions of more debt fighting them for more then 10 years. No taxes were raised to pay for these wars it was all put on the debt side of the ledger by selling bonds to pay for it. To make matters worse two giant tax cuts added even more to the country's debt.

Although we did invent much of this technology, we let other countries develop and manufacture it, (we have a lot of unimaginative executive decision makers running our companies, alot of them are mainly concerned about their bonuses - not the welfare of the company they run). Maybe now that our relations are more peaceful with Russia, these companies will somehow be able to redirect their efforts and become competitive in manufacturing new wealth producing consumer products and services. They are now in the painful process of transition to consumer product manufacturing. It may take them awhile to adjust. I hope they hire powerful creative visionaries to help guide them through this transition.

On the positive side, I envision our innovators will have invented a safe nuclear fission reactor/electrical generating system that needs no control rods or moderating water and generates enormous amounts of electricity without using steam turbines, thereby eliminating most of the radioactive waste. A real challenge for our creative imagineers indeed, but it can be done! Hundreds of these new plants will be stationed around the world generating electrical power as fast as they can. Over two hundred of these plants will be on line in Africa alone. Also renewable energy will be produced by harnessing the tremendously powerful and dependable ocean currents. A vast source of untapped potential energy!. Will American companies be building these new innovative energy plants? I hope so!

Recently vast new natural gas and oil resources have been discovered and are now coming on line making our country once again a world resource energy giant.

With this in mind in the 21st century energy should become cheap and plentiful. Electricity and electrically generated hydrogen will power almost all our machines including our rockets, ships, airplanes and automobiles. Computer guided machines and tools will continue to become smarter, taking on ever more complex tasks. While our manufacturing capacity will have increased tremendously, the manufacturing work force will continue to decline (relatively speaking). The work week should become shorter. People will have more leisure time, enjoy a higher standard of living both culturally and economically, be healthier, and live longer.

There will be a world wide network of superhighways connecting the major cities of the world. Automobiles will travel safely along these highways at over one hundred and fifty mph. Superhighways will run the length of the Americas, across the ancient trade routes of Asia and Europe. Major new highways will run the length and breadth of Africa with many new major cities sprinkled along them. The Sahara desert by then will have vast lush farms contributing food for the billions of new people who have come into existence in the last one hundred years. The standard of living of the people of Asia and Africa will be as high as the standard of living we enjoy in the United States today.

Recently, the exciting country of new South Africa has just been voted into existence. The political power has been transferred to its majority black population. This is a tremendous opportunity for these people to show to the world what they can do. They have the potential and exactly the same imaginative powers as the rest of mankind. One hundred years from now these citizens will be the leaders of Africa. They will have extended their ideals, economics, knowledge and infrastructure throughout Africa. President Mendela will be long gone but the imaginative ideas he planted and example he set will continue to guide and inspire its citizens long into the future. (just as our forefathers did with our country).

One hundred years from now the population of the world (at a staggering 15 billion people) will be kept extremely busy just replacing mankind's billions of machines as they wear out and creating the energy to run them. Large wild life reserves will have been established to protect what is left of our animal cousins. Large ocean spanning ground-effect airships will cruise one hundred feet above the water at four hundred mph, while airliners will glide above the planet's atmosphere at three thousand mph. In America's midwest, “tornado alley”, part of our country, gigantic tornado walls will stretch for miles protecting the towns and property from the devastation of being struck by a tornado?? They will also house, electrical wind generating systems and perhaps apartment houses, warehouses, etc.. They work on the simple principle; to prevent the strong, diffuse ground wind from concentrating all its energy in one small area at the base of a tornado.

Colleges and universities will still exist but most students will study in their homes or computerized learning centers, served by powerful computers, interactive television and communication technology. If a students in Africa want to take a course being offered in India they will simply be connected via satellite. When they graduate they may have credits earned from all over the world. English will be the common language of the world just as it is today in international air traffic and the Internet. Language is nothing more then a communication tool. We really need a world wide language! (China is becoming the largest English speaking country in the world.)

Unfortunately, long lasting marriages and relation-ships may continue to dwindle. Families will consist of a mother and children with potential fathers lurking in the background, (something like the African elephant groups). This will be far from universal however. Most people will be continue to value conventional family relationships. People will understand that although, religions are creations of mankind, and therefore far from perfect, they do nevertheless provide vital moral and spiritual benefits for family and society. They provide a pleasant place to worship God with a group of people who have; common beliefs and interests, and have dedicated people, as leaders, to provide strong moral and spiritual family guidance. They provide a place for; learning, gathering, ceremonies, singing and rituals (baptism, marriage, burial, etc.). Their beliefs embody guidance to keep the dark side of our human imagination (our“devil”) suppressed. Religion provides a link with the past and creates a positive cultural influence in our neighborhoods as long as we don't take it too seriously. Remember religions are just stories created by men and we must guard against any evil they may try to preach. The real "Word of God" the creator are the Laws of Nature not the words written by people.

¨ Our assets and raw materials will be very cheap when purchased by foreign buyers with strong currencies. Imported products from these countries will be more expensive while our exports will become less expensive due to our cheap dollar. There may be plenty of manufacturing jobs here again because of the weak dollar but many of the companies will be foreign owned. As long as they contribute their fair share to the wealth of our country they should be welcome. The foreign owners of the companies will manufacture their products where they reap the most benefit.

The citizens who live a hundred years from now will have to bear a heavy tax burden. They will be paying for the extravagances that our present generation voted for themselves. This is a major weakness of democracy. The present voting generation taking advantage of the nonvoting future generations. Most of our future citizens’ wealth will be paid, as interest, to the owners of government bonds. As long as we have this increasing debt burden there will always be pressure on the government to reduce benefits. One hundred years from now most of the benefits we enjoy will no longer be available unless we can balance our budget now. The longer we wait the harder it will be. This is what I envision will come about IF we do not change our course from the debt ladened American style “consumer orientated society” into the successful Japanese style “business orientated society”.

We should be more concerned about the competitiveness of our private industry so it can continue to create additional new wealth and our citizens can remain profitably employed and consequently remain powerful consumers. We should consider the millstones our businesses must bear very carefully. We should strive to protect the competitiveness of our manufacturing and service companies without sacrificing the value of our assets and raw materials and environment. Fortunately, the imagination and entrepreneurial spirit of our country remains strong. So far, new creative entrepreneur capitalists have been able to replace many of the lost industries and jobs with new wealth generating industries. Our manufacturers are producing amazing new products and services that are at the leading edge of world technology. Our citizens' economic good fortune depends upon the continued creation, development and manufacture of this state-of-the-art technology.

¨ At Pearl Harbor in 1941, Japan inflicted the most devastating military defeat our country has suffered in its entire history. At the present time they are giving us another trouncing economically (Their $60 billion plus annual trade surplus with our country). In both cases they were able to accomplish these feats, because of the limited imagination and resolve of our economic and political leaders. Economically, they have successfully kept our unimaginative trade negotiators off balance for over forty years. President Clinton is, at last, trying to change this situation. Japanese negotiators love to talk (they talked right up until the time their bombs struck Pearl Harbor in 1941). They will talk from now until doomsday if it prevents our negotiators from taking any positive action in our country's behalf. Many of their markets remain closed to imports while ours remain open. Our trade deficit continues to grow larger and our dollar grows weaker. As I write this, the Japanese inflation (with the value of their yen rising so fast they are actually in a deflationary economy) and interest rates remain extremely low while the price/earnings ratios of their companies (the hope level) remains very high. The Nikkei P/E ratio is 89 compared to the S&P 500 P/E ratio of 20. (Those “millstones” are heavy). Their business orientated government, tough trade laws and regulations, imaginative business entrepreneurs and industrious population have built their country into the mighty economic power it is today. They are worthy competitors.

A simple way to deal with the trade deficit is to begin a trade policy that would create an incentive to buy our products. The way it would work is to do away with tariffs altogether with countries that we have a trade surplus. With countries that we have a trade deficit tie the amount of “across the board” tariffs to the size of the deficit we suffer. The larger the deficit the larger the tariffs would be. This would do much to discourage foreign countries from building up huge trade surpluses with us.

Back in 1801 when our country was still very young, at his first inaugural address Thomas Jefferson stated; “I look with encouragement for guidance and support, which may enable us to steer with safety the vessel that we have all embarked, amid the conflicting elements of a troubled world”.

This small vessel that President Jefferson so eloquently referred to has now grown, beyond his wildest imagination, into a mighty ship bristling with sophisticated technology and high tech armament, its engines (economy) the most powerful in the world. It is still pretty well on course, sailing courageously through these troubled seas. Its constantly changing crew and passengers have grown tremendously over the years, people anxiously jumping on board from all over the world. It is still the haven for freedom and opportunity that President Jefferson and our other forefathers created through their noble imagining so long ago.

It is far from unchallenged however, the seas through which it sails are fraught with danger. Far below decks it is taking on water (debt) fast and will eventually be in danger of sinking if the leaks are not repaired and the water pumped out. It is up to each crew, as they take over the helm, to make sure that our precious vessel is kept in good repair and the noble course that Jefferson and his partners set stays true so that it will remain seaworthy and its entrepreneurial spirit will remain prosperous as it sails on into the uncharted waters of the future.

Our great country is the result of the philosophers, statesmen, storytellers, patriots, etc. who put their “minds” together to establish the framework of its laws and philosophies and their posterity who kept it going for the next two hundred years though thick and thin. It is truly a product of the Mind of Mankind.

Looking into the future is fuzzy at best. Only time will tell if any of this conjecture comes to past. God gave us an imagination to use as we see fit. We are in charge of our own destiny. Man is capable of any accomplishment he may, visualize through his imagination, as long as he has the resolve and technological ability and it does not go against any of nature's laws. This we cannot do.

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