Cyreenik Says

April 2016 issues

Building better cities: a next positive feedback industry?

Some of the economic characteristics of the 2010's have been slow growth, low inflation and low interest rates. What this combination indicates is low demand for investing money in general. What this low demand indicates is that there have been too few projects available that produce positive feedback -- the more that is invested, the larger the growth becomes. This problem of low demand is not talked about much but this is the big economic challenge of the 2010's. (related is the high level of acrimony the US governments have been experiencing, this discourages growth as well)

Based on some article reading this month, a solution, a positive feedback industry, may be emerging. It is the business of building high tech cities.

These have the potential of becoming positive feedback because they will allow people to do so much more, and so much more in quick, cheap and easy ways. This makes for positive feedback. But, new high tech cities don't come cheaply, they will take lots of money to build. This will increase the demand for investing money, which will increase interest rates and inflation.

All in all, the building of new high tech cities could become a big part of the Next Big Thing (NBT) that we are currently searching for that will bring us our next round of boom times. They could become the "heavy industry" of the 2020's.

This thought was inspired by several WSJ articles:

This 21 Apr 16 WSJ article, Five Cities That Are Leading the Way in Urban Innovation In an era of urbanization, Singapore, Houston and Medellín, Colombia, are among those redefining what cities can be by Michael Totty, talks about how some cities are doing more to implement a lot more tech in how the city operates.

This 24 Apr 16 WSJ article, Singapore Is Taking the ‘Smart City’ to a Whole New Level Government-deployed sensors will collect and coordinate an unprecedented amount of data on daily life in the city by Jake Maxwell Watts and Newley Purnell, talks about things happening in Singapore in particular.

This 26 Apr 16 WSJ article, Alphabet’s Next Big Thing: Building a ‘Smart’ City Unit of Google parent explores project to ‘create a city from scratch’ by Eliot Brown, talks about Google launching a project to do their part in developing smart cities.

Islamic State: the money has finally been followed

This 24 Apr 16 WSJ article, The Rise and Deadly Fall of Islamic State’s Oil Tycoon A document trove tells how Abu Sayyaf ran the terror group’s operations; approving expenses for slaves, dodging U.S. airstrikes by Benoit Faucon and Margaret Coker, finally talks about an issue that should have been talked about, and acted upon, years ago: Where is the IS getting its money from?

From the article, "Documents reviewed by The Wall Street Journal describe the terror group’s construction of a multinational oil operation with help from officious terror-group executives obsessed with maximizing profits. They show how the organization deals with the Syrian regime, handles corruption allegations among top officials, and, most critically, how international coalition strikes have dented but not destroyed Islamic State’s income."

This is the money that has been keeping IS powerful and its people contented. This fact should have been recognized years ago and become a target years ago.

That said, if today this income source has only dented, then this is where the anti-IS people should be putting lots of effort today. Without money IS will quickly start internal bickering and that bickering will lead to IS dissolving and becoming something different. Hopefully by now, after years of bloodletting fighting, what is different will become more peaceful.

How the "Panama Papers" scandal relates to Productivity Growth

The hot financial scandal of April is the "Panama Papers" which describes a whole bunch of shell companies and shell company owners.

Some of the owners are taking heat for illegal activity. But that's not the really big issue here. The big issue is one that is being missed entirely by the media, both social and Big.

The really big issue is: This is all wealth -- legal or illegal -- that is not being invested to grow our prosperity. It is not being plowed back into the activities that created it to create even more wealth. Instead it is being hidden in a high tech version of a mattress.

And shell companies are not the only "mattress" that has been growing in magnitude over the past few decades. Others are companies retaining profits and buying back their company stock.

What all these mattress equivalents have in common is: this is wealth not being invested to grow the world's prosperity. It is not being plowed back, it is not increasing the size of the resource pie that we all share.

This is the big issue that needs to be addressed. We address it by reforming the tax laws and policies to make saving -- and investing savings -- a much simpler, much more transparent, much more secure process for the saver. (Secure in the sense that some agency is not going to capriciously confiscate the wealth, the risks that come with investing will still be there.) And we need to make the process one that encourages growing the productivity of companies, organizations and infrastructures that grow our world's prosperity.

The more we do this the more the world, and all the people in the world, will be richer and happier.

This means the important moral in this Panama Papers scandal is: make our saving and investing systems simpler, more secure for the person doing the saving, and more encouraging of investing those savings back into growing our companies and other wealth creating organizations.

This 6 Apr 16 WSJ editorial, Panama Bernie Bernie Sanders’s politics produced the Panama Papers. by Daniel Henninger is expressing a similar point of view.

From the article, "Spare me the crocodile tears over the immorality of tax avoidance. Panama is an indictment of government greed."

This 7 Apr 16 WSJ article, Panama Papers: A History of Tax Evasion from Ancient Rome to the French Revolution to 19th-Century New Jersey by Jason Zweig, outlines the magnitude of the problem both in size and history.

From the article, "By some estimates, at least $20 trillion in financial assets — not counting art, real estate, precious metals and other physical wealth — is invested in the dozens of countries that offer secrecy and tax avoidance to anyone with a bank account."

This 9 Apr 16 Economist article, Pfiasco Open warfare breaks out between the White House and America’s tax-shy multinationals, is another good article on the topic.

From the article, "The backdrop is that America’s headline corporate-tax rate is far too high. It stands at 39%. That is roughly the same as it was in the late 1980s, but since then other rich countries have slashed their tax rates, to an average of 25%. At the same time big American firms have become more global. Financial markets have become more sophisticated. And the tax code has become far more complex, reaching 4m words."



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