JimPinto.com - Connections for Growth & Success™
No. 257 : 4 November 2008

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

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The world banking system sham

My international travel during the ongoing financial crisis gives me some objectivity regarding our system and current way of life.

Everything we are doing and have done to generate growth in recent years is based on DEBT. Private institutions, Banks, have simply been "printing" money to finance the debt. The collapse of the world banking system has been predicted for several years. But no one heeded the warnings.

Throughout history, banks were supposed to be places where people put money IN to safeguard it; the image of a secure vault. But today, banks make money through lending money, not storing it. Imagine if Bank of America was called "Money Lender of America" - which is really what it is. Somehow, the image has been swapped.

The sham is that banks don't actually have the money they loan. They simply create money.

Here's some simple theory: Banks are allowed to lend much more money than their actual capital through "leverage" - high debt/equity ratios - to increase returns. In good times, high leverage is a great way to make huge profits with very little capital.

Bank regulations limit maximum leverage to something like 5 or 10:1. But some banks had much higher leverage at mid-month, sometimes 45 or 50:1, lowering this at month-end to satisfy regulators. They thought they were being "clever". The government sponsored mortgage giants Freddie and Fannie were using leverage closer to 100 to 1,

In bad times, even small losses on a highly leveraged portfolio can cause insolvency. On top of this, due to trading losses banks' capital is reduced. Unless they increase their leverage even further (against Govt. regulations) they become insolvent (go bust).

The plan behind recapitalizing banks, rather than buying up their bad assets, is for the government to buy preferred shares to restore the banks' capital as a means to improve leverage. Key question: if the Government is "printing" money, why do they need banks as intermediaries? Actually, they don't. But that's the "system".

One wonders when the system will "break" - or perhaps the current financial crisis is evidence that breakage has begun. While politicians continue to claim that recovery will come, no one, anywhere, knows when things will bottom out.

Paul Grignon's 47-minute animated presentation of "Money as Debt" tells in very simple and effective graphic terms what money is and how it is being created. It's a hard-hitting educational tool regarding the present unsustainable monetary system.

Click How money is made - a film by Paul Grignon

Click Paul Grignon website - Money as Debt

Click Leverage 101: The Real Cause of the Financial Crisis

Click The Collapse Of The Modern Day Banking System

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Europe is torn between two souls

I'm on the first part of my trip, now in England with my brother Paul who lives in Hemel Hempstead, some 30 miles North of London. I thought I'd share some impressions with you.

I used to live in England (for about 10 years, 40 years ago) and have been back a few times over the years. This time I stopped long enough to get more than just brief travel impressions.

In the UK privatization is everywhere, courtesy of Prime Minister Maggie Thatcher decades ago. My brother in Hemel Hempstead has a choice of several providers for Gas, Electric, Telephone and Cable, even though all the utilities are delivered over the same pipes, lines and cables.

Railways have also been privatized. British Rail primarily looks after the rail-lines and the trains are run by independent companies like Virgin and First/Great Western and lots of others. You can find websites that compare competing fares and schedules, with widely varying prices to the same destinations depending on the time of day and when you buy.

I must tell you this: Everything is VERY expensive. In spite of the improvement of the US $ against the British Pound, 1.6 compared with about 2 just weeks ago, the cost for food, clothing, travel, gasoline (petrol) is about DOUBLE.

By contrast, the British and French seem generally satisfied with their health and social welfare system. This provides help for anyone who is raising a family or who is elderly, sick, disabled, unemployed, widowed or disadvantaged. While medications are free, many are disallowed because they are too expensive. So only the wealthy can afford their choice of drugs and doctors and private insurance.

Europe has two souls; Socialism is still in evidence, but straining under the burden of higher taxes plus the hidden cost of rampant Capitalism via banks and widespread privatized services.

Click Privatization of British Rail

Click The British Health and Welfare System

Click Is Britain too expensive?

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Bucket List Report #1

Aside from visiting friends and family, going hither and thither, my brother and I traveled together to experience two of his choices for our bucket-list.

The first was the Eden Project in Cornwall. This has large biomes constructed in an old clay pit, with climate control to simulate the weather and vegetation in various parts of the world. It was amazing to walk amidst tropical surroundings, while it was freezing outside. (see weblink below).

On the way back to London, in the Truro, Cornwall station a cute little lady was standing near us, waiting for the train and lugging a big wheelie-bag. We started chatting, and she told us she was 89 years old. With her permission, I accomplished another item on my bucket-list I kissed the most beautiful girl in the world. And I have a picture to prove it.

We went to Paris by train, the comfortable and efficient Eurostar rail line which goes through the channel tunnel (Chunnel). In about 2 1/2 hours we floated on smooth rails (no clickety-clacks) from St. Pancras in Central London to the Gare du Nord in Central Paris. Waiting rooms, passport control and baggage search were much like a modern airport.

Even though he has traveled extensively in Europe, my brother had somehow never visited neighboring Paris. So we did all the usual tourist sight-seeing.

The Eiffel Tower was all lit up with beautiful blue at night, with red bands and white stars. I watched in amazement as my 84-year-old brother climbed 500 steps to the Sacre Coeur without any trouble. We sipped beer in a sidewalk cafe, before walking the gauntlet of gaudy sex-shops along the Pigalle. "Sorry," we told the aggressive hustlers who invited us in, "We're too old." They replied, "Oh!" and let us pass.....

The next day we visited the Louvre to view the Mona Lisa (bucket-list item) and spent a few hours looking at paintings and sculptures, recognizing that it would take days or weeks to do this properly.

We viewed the Arc de Triomphe traffic, walked along the Champs Elysees, strolled along the bridges of the Seine, visited Notre Dame cathedral and sampled the shops along the Rue de Rivoli. All this with a 3-day Metro (underground) travel pass.

Well, next I'm off to Johannesburg South Africa, with a visit to the "Big 5" thrown in courtesy of my hosts (bucket-list item). And then on to India, with who knows how much bucketeering in store......

Click Eurostar Overview

Click The Eden Project

Click eNews Oct. 9 2008 - Pinto Bucket-list trip

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Mining, Manufacturing & Process 2008 Conference

If you live in South Africa, or in any country which does business with this fast advancing country, you're invited to attend MMP 2008.

This important Conference for the region will be held November 12-13 in Johannesburg at The Forum, Dimension Data Campus, Bryanston, Gauteng, South Africa. The theme is "Winning strategies and best practices for enterprise automation & IT in mining, manufacturing and process".

Topics include:

  • Strategies for manufacturing of the future
  • IT and control engineering convergence
  • Process performance enhancement
  • Alarm management
  • MES selection for mineral processing
  • The value of standards - ISA S88
Dick Hill from ARC Advisory Group and I will present keynote addresses and participate as panelists, along with leading local, S. African and international specialists and industry analysts.

MMP08 conference presentations will focus on providing attendees with real knowledge they can apply immediately. CEOs, CIOs, CTOs and engineering professionals in the mining, manufacturing and process industries should attend to update their knowledge of key global technology trends, and to discuss practical and profitable applications.

Business leaders who attend will ensure that their companies emerge from the current financial crisis leaner, meaner and more competitive. MMP08 offers an excellent opportunity for delegates and presenters to network and share problems and solutions with peers as well as industry executives, locally from South Africa and from the US, Europe and Japan. Please register as a delegate to meet me there (weblinks below).

The Conference is organized by Technews, high-tech publishers, and co-hosted by the ARC Advisory Group. Sponsors include Honeywell, Rockwell, Siemens, Beckhoff and many others. If you're interest in South African markets, it's not too late for your company to also become a sponsor.

Click View MMP08 agenda

Click Venue & accommodation

Click Register for the event (use response code J002H)

Telephone registrations: +27 (0)11 469 3825
Contact Corine Scheepbouwer: Click corine@dalani.co.za

Click MMP08 sponsorship opportunities

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ISA goes International

In October 2008, society delegates voted overwhelmingly to change the name of ISA to International Society of Automation. This name signifies that ISA is now focused on the broader aspects of "automation" and aims to be a catalyst for creation and promotion of the automation profession of the future, marketing the society's core competencies to automation professionals around the world. In a global market environment, international growth is vital to the future success of ISA.

Today, one can sense a spirit of new drive and determination within the ISA organization to make it much more than it has been for several years. In addition to strong volunteer leadership, the existing team of dedicated people with years of industry knowledge and experience has been expanded to generate new growth through several focused objectives.

Tim Feldman, director of global operations, is working to transform ISA into a global organization. Feldman travels the world holding meetings in key markets with suppliers, end-users, integrators, government officials, and academia to assess needs and review potential business partners who can deliver ISA's core competencies to the automation profession.

No other organization anywhere in the world covers these important functions to serve the global automation business. Stimulated and rejuvenated by its new name, ISA expects and intends to expand world membership and become truly international.

There are some ISA members who don't like the change. One long-time German member resigned because he felt that the change of name "implied claim of ISA to world dominance in automation engineering." Read Walt Boyes' weblogs (links below) for the text of the open-letter and the Jim Pinto response.

Click ISA goes international

Click ControlGlobal blog - Open Letter - Resignation from ISA

Click Jim Pinto Response - Dueling Open Letters

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Harry Ebbeson [hlestringman@hotmail.com] worries about the current financial crisis and wonders how we'll find solutions:
    "Unfortunately many of us middle class Americans will not see retirement, or at least not like we had planned. The drop of the stock market and our 401Ks make it so. I don't know what is better, low 401K or a company pension in peril?

    "I have listened to the Presidential "debates" and come away wondering how either of the two candidates expect to pay for anything they talk about. Why talk about tax cuts when they are paid for by deficit spending? I wonder what the tax situation would look like if someone proposed a balanced budget with tax increases to pay for it - just take the current tax structure and ratchet it up to cover the deficit in one, two and four year increments.

    "Neither of the two candidates are candid about where the money will come from. Just like Fannie Mae and Freddie Mac they want us to trust them to manage things? How is that possible? They are part of the original problem.

    "I see a social conflict brewing that pits the remaining working class against the non-working class and over-privileged classes. We are indeed dangling as you stated. If the top 1% already pays ~30% of the taxes, how much more will they have to pay? Almost any amount envisioned will not cover the amounts needed. We seem to be marching toward a socialist-based market with government ownership of nearly all basic services.

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Bob Fritz [rfritz@avtron.com] comments on US Companies selling out the core essence of American Manufacturing:

    "Selling out to foreigners or moving overseas is simply a matter of costs. Our corporate tax rate is 14% higher than the average of the European Union.

    "As for R&D, Honeywell is building a major research facility in Mexicali, Intel is building one in China, and Microsoft is building one in British Columbia. This is simply because the USA will not allow foreign scientists to enter and work in our country.

    "A Congress made up largely of inane lawyers instead of businessmen, engineers, or scientists has no appreciation of the relationship of their tax policies to the long-term decline of our country."

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Steve Curran, [scurran@cityofsparks.us] gives us his views regarding solutions for American health-care:

    "Our education, health care and economic systems are driven by free enterprise. They have the need to make money. And if they make money, they want more money. This is the root cause of the problems we face.

    "In Europe they got this part right. The education and health care systems are all run by the government. There is no cost; it's all free. Not that we need our screwed up government running anything more than they have to, but it is the only way to fix the problem.

    "Personally, I believe the health care system should be turned over to the military. The infrastructure already exists and would only need to be expanded. Once everyone gets a government health care card that is only valid at a military run facility, for-profit health care systems would be absorbed in.

    "Now all we need is to find someone to run the government who isn't an idiot and actually has the best interests of the citizens at heart. This person, if he exists, is NOT a politician. Therein lies the other problem."

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