Smallbrook's Dear Mr. President Letter sign now

President Barack Obama February 24, 2009
The White House
1600 Pennsylvania Ave NW
Washington, DC 20500

Dear Mr. President,

Our Great Country is in need of great solutions, and I cannot sit idly by. There can be no doubt as to the vital importance of economics to World security, reversing environmental catastrophes, protecting life on Earth and avoiding our own extinction. I hereby answer your call and the call of my fellow Countrymen and women for economic solutions.

I apologize for failing to present a thesis on Natural Law and Economic Inertia, however, as it is yet unfinished and time remains critical, I am forced to summarize theory and particularize practice.

As consolation, the very title accurately discloses the analytical focus thereby making extrapolation of lessons possible. Good economic thinkers should be able to apply this analysis to comprehend and identify the nature and balance of systems and to transform self-destructive markets into self-productive markets.

This presentation contrasts with the myriad of theories typically instructing us to hand over trillions of dollars to a handful of lucky people, then close our eyes, hold our breath, and hide under our desks while we wait and hope beyond hope that the lucky recipients will expand businesses to create jobs instead of buying more yachts, jets, mansions, and so forth.

Fruits of the economic philosophies employed herein are unique in that they guarantee the intended result. The intended result, in the example presented herein, being purchase and sale transactions in the residential real estate market. The cost of this program to the public treasury balance sheet is zero. Yes, zero.

Because natural law is revealed as the genesis of all economics, every principal herein is subject to verification by proof existing in the natural world. While not all natural laws are economic in nature (e.g., Gravity), theories discussed herein are soundly based on the simple; the undeniable economic laws of nature.1

A leap of faith is not required provided the following analogy is accepted:
Mankind did not create economics any more than it created time. Like time, our concept of economics is a mere tool for measuring natural phenomena.

All that remains is faith in Mankind.
ECONOMIC SOLUTIONS FOR THE UNITED STATES ECONOMY

A REAL ESTATE TRANSACTION INERTIA PROGRAM (RE-TIP)

Introduction

The following proposed Real Estate Transaction Inertia Program (RE-TIP) has been chosen over many other TIPs, because it is among the easiest to explain and it would be impractical to present more than one TIP, given the confines of a letter.

Though not an instant, 'silver-bullet' cure for the economic injuries suffered by most Americans, the following RE-TIP should in no way suggest that such cures do not exist.

Highly intelligent leaders and trusted advisors, including some top economists, have foolishly spoken out against the possibility of an instant cure or available road map to fix our country's current economic woes. Such naysayers are not foolish for having overlooked basic economics and failing to recognize what TIPs would result in reversing, overnight, our current economic problems. After all, failing to see the obvious is the Achilles heel of genius. Rather, the foolishness lies in asserting that an instant cure for our economy is impossible simply because they were unable to devise one.

To the contrary, there are several instant cures to our economic troubles. They are simple TIPs that I would be honored to offer up to criticism by any blue-ribbon panel of experts, in any appropriate forum. Despite the simplicity of these 'silver-bullet' economic solutions, divine contradiction requires a forum more appropriate than a mere letter to discharge the concomitant complex explication required to fully grasp their beneficial ramifications.

Many of the Transaction Inertia Programs I could share involve nothing more than exchanging equal value for value, just like the single example, the RE-TIP, presented below. Others relate to making use of trillions of dollars worth of existing resources and assets that the United States has already paid for, but perhaps, due to their simplicity and obviousness, have managed to slip under the radar of even the most accomplished economists. There is even a monumental opportunity to once again, change the standards of our currency to one which would outperform the benefits of the gold standard and the present currency combined. This 'Money-TIP,' could be employed by any country to gain immense economic superiority over all others and being first can make all the difference, thus it must be discussed with the highest level of security as it too, implicates matters of National Security.

These are wonderful times for the U.S. to gain immense economic advantage. Let us take advantage of those resources we have in abundance whose values have been overlooked and heretofore, untapped.






Background

Transaction Inertia Programs (TIPs) are programs designed to exert sufficient economic force to create economic inertia obedient to the economic laws of nature, thus, restoring balance to an economic system.2

True economic stimulation creates enough market activity, a.k.a. economic force, to move markets productively forward. Therefore, successful stimulation of the current real estate market is proven only by an increase in transactions and property values.

Evidently, all responses to date have failed.


A Brief Synopsis of Economic Function

As with any product of nature, economics carries the typical telltale signs of nature. One of those, a contradiction that makes logical sense and functions, divine contradiction, is attributable to economics because, like a daisy or blade of grass, economics is simple while at the same time, too complex for Man to duplicate. Deluded by arrogance, Man sees himself as superior to G-d or nature and often refers to such creations as "primitive." In spite of economic complexities created by Man or the institutionalization of its formal study, at its core, economics is simple enough to be understood by anyone.

Therefore, good economic thinkers would do well to approach economic inquiries from the most basic principals first, then move from the simple to the more complex, and upon stumbling, return back to the basics.

The laws and nature of economics apply to all things. Therefore, in the world of Man, economics is in play and can be described for each individual human being. It may sound silly or trivial, but this is an important concept because when we speak of Economic Inertia, we mean it literally, as if there is something tangible to move or halt; economic forces are real.

Thus, economics can be conceived of as the gears of a clock. Every citizen and every individual can be described as a singular economic force, a spinning wheel. A productive economic system, no matter how tiny, is like a wheel, and if the wheel spins fast enough, it can act like a gear causing other wheels to turn in the same productive direction.3 Thus, the Economic Inertia of an economic system can become self-sustaining as well as cause other economic systems to grow.

A healthy economy runs like clockwork, with numerous gears influencing the motion of others. As with any other model of nature, there are systems within systems. In the vastness of independent cycles, many systems can fail without having enough inertial force to affect a healthy, productive economic system on a larger scale. Thus, to a certain degree, our economy can withstand the deaths, unemployment and financial ruin of its citizenry, provided it is not so great, widespread and sudden to exert sufficient economic force to alter the course of existing Economic Inertia away from a productive direction and toward a destructive direction.

The productive economic systems we imagine as spinning wheels possess inertial properties derived from transactions.4 The housing market is not spinning. Too few transactions are taking place to exert enough force to move the market wheel forward and alter the course of current economic inertial forces.


Proposed RE-TIP

Examination of Real Estate Market Participants:

Category A:
Potential Buyers who are able but unwilling to purchase a home for fear property values will continue to decline.

Category B:
People who presently own a home, but seek to move. These Buyers are ready and willing to transact, but unable to do so because their purchase of a new home is contingent on the sale of their existing homes.

Category C:
Market participants who are unable to purchase homes because they have been financially damaged by wealth abuse, waste and a self-destructive market economy.


These categories represent the majority of real estate market participants failing to transact, thus, insufficient economic force can be derived to set the market wheel in motion. What we need is to replace destructive Economic Inertia with productive Economic Inertia.

Furthermore, this poorly constructed system illustrates a self-destructive market:

If homes would sell, then property values would increase (or at least stabilize), thereby inviting category "A" people to buy homes; if category "B" people could sell their homes, then they could buy other people's homes, and those homes would sell as well, and so on.

In summary, homes are not selling because homes are not selling; the economic inertial force at play is the tendency for a market at rest to remain at rest. Thus, the real estate market is a self-destructive economic system.

The simple solution, therefore, should take the form of some guarantee that houses are bought and sold; a guarantee that real estate transactions take place.

FOR EXAMPLE, this RE-TIP is a program whereby money from the public treasury is used to guarantee viable demand in the marketplace for real estate, similar to what stock markets accomplish for publicly traded companies. Thus, in this example, establishing a RE-TIP authorized to distribute public funds to guarantee the purchase of homes belonging to category "B" Buyers enables this category of market players to complete real estate transactions, and move into new homes. The ability for category "B" Buyers to shift equity and detriment (e.g., mortgage liability) from one home to another results in increased home sales, a force known to create Economic Inertia.

The obvious guaranteed outcome here is that for every home the government purchases from a category "B" buyer, will result in at least one wholly private real estate transaction. This may take the form of a dual closing, to ensure the private transaction completes as a condition of the government's purchase of the buyer's existing residence.

In many cases, however, the completion of a category "B" transaction means the Seller may likewise, purchase a property elsewhere now that they are relieved from owning their home and need to seek a new residence, and so on.

To ensure such successes, the government can screen for party intentions and give priority to transactions with the greatest likelihood of on-going, domino effect-like realty transactions.

Even if an ultimate Seller does not engage in the purchase of a replacement property, they would be financially free to take whatever gains received from the proceeds of the sale of their property and possibly avoid foreclosure by paying down the mortgage on a second, primary residence they may own, or venture into a prosperous business they've been waiting to start, or become a well funded consumer, able to stimulate the economy with the purchase of consumer goods, such as an automobile. In an even worse scenario, such as where the Seller has only the one property they are selling but cannot afford to carry it, this RE-TIP program will have directly avoided the societal costs and economic ramifications of foreclosure, allowing a viable owner to enter while a struggling owner is freed; the house remains cared for and it's value stabilized.


Like one spinning gear affecting another, as more of these transactions take place and complete, the real estate market will get a boost of confidence and prices will be seen to stabilize. Once real estate values stabilize and/or rise, additional populations of market participants, such as category "A" Buyers, who have been sitting on the sidelines will eagerly partake in purchasing realty in a rising market.

What is more, because a Buyer's bounty in a rising market is greatest at the earliest possible buy-in time, category "A" Buyers will also purchase hastily and with a sense of urgency. Returning to our wheel analogy, the more rapidly an economic system or market wheel spins the greater its influence on other markets and sub-market wheels to spin and spin rapidly. Once category "A" buyers start participating as described, the rush will be as an open floodgate and Economic Inertia toward a productive economic system will take hold of the real estate market.

The cost to the public treasury balance sheet is zero because where $200,000 is spent to purchase a home with a $200,000 market value, taxpayers retain a valuable asset. Moreover, because the RE-TIP program increases market values, the public treasuries stand to realize a direct gain from this program. The program could offer even value or a 5-10\% reduced price off the determined market value.

Moreover, when a RE-TIP home is sold by the government to a member of the public, those sale proceeds will replenish the RE-TIP fund account, thereby avoiding any additional costs to taxpayers and public treasuries as the program is perpetuated.

Further study is required to determine appropriate funding for such a program, but an educated guess suggests that $25 Billion may be more than sufficient to achieve the desired effect. If run well, the program will profit from its sales and become self-sustaining to the point where it can even begin to repay all or part of the initial dollar investments while the program is still running. After this RE-TIP stabilizes the real estate market and the program is discontinued, any remaining inventory of government owned RE-TIP homes can be sold off to repay the public treasury by transforming its real estate holdings back into dollars.

The ripple effect of this program saves banks and investors world-wide who gambled on the ability of the American homeowner to afford their mortgages. This is so because as house values increase, the ability to refinance at lower rates returns, and the motivation to continue paying a mortgage rather than effect a short sale or give a deed in lieu of foreclosure is reinstated. In other words, nobody wants to struggle to pay a $600,000 mortgage on a home that is only worth $400,000 and losing value daily.

Funding of this RE-TIP will not only be replenished by the sale of RE-TIP homes, whereby those funds can be re-used to purchase more homes in need of market demand, but this program could also save money that is presently targeted to be spent on other programs such as homeowner stabilization and foreclosure avoidance programs (due to begin March 4, 2009). While these existing programs are important and noble, they are better categorized as "damage control" programs rather than stimulus programs, because avoiding foreclosures does not create productive Economic Inertia any more than use of drain plugs increases water level. The RE-TIP presented here, may obviate at least some of the public need for such damage control programs.


Additional Benefits:

While in the possession and ownership of the government, RE-TIP homes can be fitted with solar panels, wind turbines and other green oriented improvements. This will provide "green" jobs, demand for renewable energy industries and innovations, avoid the costly burdens of updating and expanding the National Grid, and protect National Security concerns by reducing independence on oil and decentralizing sources of energy within our country. Attacks on key, centralized power plants (or even accidents) could cripple our country, while scattered and independent, renewable energy sources would provide viable diversification and avoid the vulnerabilities inherent to a system prone to centralized targeting. The renewable energy sources created will inure to the public benefit for decades to come, both environmentally, through public safety and security, and financially.

Viability through diversification and decentralization is a characterization and law of nature. We've seen the dangers of what can happen when corporate conglomerates grow so large so as to achieve constructive sovereign power, in that our society becomes dependent on the success of a business that need only make one bad decision. We've seen the dangers and destruction of what can happen when our drinking supplies, toy supplies, or food supplies all come from the same sources (e.g., peanut recall due to shortcomings of Peanut Corp. of America.). Laws against monopolies are one way in which the dangers of over concentration or centralization have been controlled. However, because nature is patient, if these systems take more than a generation of people to fail, through the untrained eyes of Man, they may appear to be successful and healthy. Note further, that certainly concentrations of power are not inherently bad. On the contrary, they can be vitally necessary, but seeing as how this gets into matters of divine contradiction, it is a topic best left for a different occasion.

As can be seen, the potential for success employing this RE-TIP strategy would take some time, but results could be expected over a period of several months. Much depends on coordinating the roll-out of this program simultaneously, nationwide.

As a worst-case scenario, "failure" would mean taxpayers are left with valuable and useful assets because residential real estate has intrinsic value, it can provide housing within the structure and food upon the land. Exchanging public money for real estate, homes and renewable energy sources that pay energy dividends, create jobs, and serve the public good for decades to come would be a welcome failure in stark contrast to existing 'bailout' strategies.

I would be humbled to serve my fellow Countrymen by consulting on this and other TIP programs for the good of our nation and our world.

God Bless America. God Bless Mother Earth.

Respectfully submitted,


Brian Smallbrook
Natural Law Economist


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We the undersigned hereby pledge our support for the Real Estate Transaction Inertia Program (RE-TIP) described in the Dear Mr. President Letter dated February 24, 2009 by Economist, Brian Smallbrook.

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