Thursday, September 30, 2010

Greenspan's toxic legacy!

Dear Colleagues

One of the nice things about the modern Internet is you can easily see thought provoking material. This is such a piece. It talks about "The World's Most Destructive Currency Terrorist: The Fallout of Alan Greenspan's Toxic Legacy" Its URL is:

I do not agree with all of what messages like this are saying ... but they do serve to remind me of the many arguments that are in play all the time and influencing important decisions. They motivate me to continue working on The Burgess Method for value accounting since the prevailing system of metrics is deeply flawed!

The common denominator of most economic dialog capital market analysis is that it is going on with an important set of data completely missing. There are no easily accessible data that address the progress and performance of socio-economic development at the community level. We do not need more and more national level statistics to know that there are huge problems with global and local development performance.

With probably more than 4.5 billion people poor and hungry at this moment ... and billions sick and unable to get basic medical treatment ... there is a huge development failure. What we all need are data that show that this specific activity worked in this place during this time. We need the before activity state, the after activity state, the cost of the activity and the value adding resulting. Things that work well should be replicated. Things that do not should be stopped, and deep questions asked about why the activity was funded. Far too much failure is because the money is mis-managed in a whole variety of ways!

Most national level monetary and fiscal policy moves markets because of correlation ... but actually doing something tangible requites an thorough understanding of cause and effect. There is a need for management information that facilitates decision making, and the sort of data that will advise decision makers whether there is adequate progress and performance. These same data serve to provide for an oversight capability and accountability!

I listen in on the oracles of finance ... but expect them to be wrong unless there is an underlying foundation of good decision making, real investment and real results. Most of Greenspan's apparent success was because there was a successful technology bubble, a huge housing bubble at the same time that inflation was handled by exporting employment to India and China where low wages replaced high wages.

When you do TBM value accounting there has to be employment in order to have progress ... but who cares about employment in the United States or Europe when low cost productive labor is available in India, China and elsewhere and the only metrics are about profit!

The mis-management of the US and global economy during the Bush era ended up with the biggest financial crisis since the Great Crash of 1929 and the subsequent depression. Many powerful leaders of the corporate sector and around capital markets want to return to this era because they made money even while they almost wrecked the world. TBM value accounting suggests that a new era of responsible corporate business and economics is needed ... driven by value as well as profit. I am convinced that with TBM value metrics many of the money abuses that have become front page news over and over again in the past four years can be avoided in the future.

A toxic legacy from Greenspan ... a toxic legacy from the bankers! Thankfully we have survived the worst, but it will take more than what bankers and the elite corporate leaders are proposing to put quality of life back on track for the rest of us!

Despite what has happened I remain an optimist ... with the right sort of metrics all sorts of good things can happen!

Peter Burgess

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