A Free Way to Create American Jobs

The recent stimulus bill focused on creating new jobs, especially in alternative energy startups.  The cost creating these jobs is probably going to be high.  What if there were a way to create good American jobs that did cost anything out of pocket, up front?  I believe that startups are the quickest and easiest way to create  good, new jobs and new, lasting value for an economy.

Paul Graham has a suggestion that I think is not only reasonable, but also timely.  He argues that “[t]he single biggest thing the government could do to increase the number of startups in this country is a policy that would cost nothing: establish a new class of visa for startup founders.”  He says that it isn’t tax policy, employment law or Sarbanes-Oxley, but rather our immigration policy that is holding back the number of startups.  He advocates creating a new class of visa, the “Founder Visa” that would be open to 10,000 founders of startups who want to do business in the USA.

I think this is a great idea.  Unlike other types of visas, nobody can argue that immigrants on Founder Visas were taking American jobs.  In fact, they are creating American jobs.  If an immigrant on a Founder Visa creates a new startup, at some point they will need employees.  Since the startup is located in America, they will have to hire Americans.  This process creates jobs.  Not only does it create jobs, but it also increases the chances that the US will be the home of the best new companies, thereby generating more tax revenue at a time when the US has a huge amount of debt.

Graham contends that 10,000 Founder Visas could create up to 2,500 new companies per year.  Obviously, not all of them would be successful, but one would assume that at least some of them would be.  These new companies would be great for our economy and country as a whole.

Is the Dollar America’s Achilles Heel?

“…the US government has a technology, called a printing press (or, today, it’s electronic equivalent) that allows it to produce as many US dollars as it wishes at essentially no cost. By increasing the number of US dollars in circulation, or even by credibly threatening to do so, the US government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”  Ben Bernanke, 2002

Throughout history, the world’s economic powers have had to decide how they should be paid for their goods and services.  At first, gold, silver and precious stones were stores of value that could be exchanged for goods and services.  As currencies were developed and became widely accepted, countries had to decide which currency or currencies they would accept for their hard work.  The most widely accepted currency is usually known as the reserve currency.  Countries hold these reserves as a store of value and as national savings.

Until the early 1900s, there was no official reserve currency, but some currencies acted in a de facto reserve status.  Starting in the 1700s, the de facto reserve currency was a combination of the French Franc, the British Pound and the Dutch Gilder.  Later, in the 1800s, it was a combination of the British Pound, US Dollar and the Russian Ruble.

By the 1900s, many currencies were backed by gold.  This means that a person could exchange paper money for an exact amount of gold.  After World War II, the global powers signed the Bretton Woods Agreement, which made the US dollar the central reserve currency.  It allowed countries to exchange their currencies for dollars or gold at fixed exchange rates.  This system worked well while the US had a much stronger economy compared to other countries, but as Japan, Europe and Asia began to recover after WWII, the Bretton Woods Agreement began to to show signs of strain.  The US felt it was paying more than its fair share.

In the 197s0s, the Bretton Woods Agreement broke down as other countries rose to prominence and began demanding gold from the US in exchange for their US dollars that they had accumulated through trade.  After Nixon closed the gold window and permanently detached the US dollar from gold, the United States was in the unique position of being able to print the reserve currency, but not have it convertible into anything tangible.  The US could print money out of thin air and use it to buy cars from Japan.

Since the US can issue the world reserve currency, it receives huge economic benefits in the short term.  The US can simply print as much currency as it wants, as long as the rest of the world is willing to accept dollars in exchange for goods or services.  This process allows the US to live beyond its means for as long as foreign countries are willing to continue to accept dollars.  Countries, like China, accumulate US dollars and loan them back to us at low interest rates.

This process has been going on since the 1970s, but has accelerated since globalization has taken hold.  The United States lost its manufacturing base to China, India and Asia and has been paying for goods and services through increased leverage and increased running of the “printing press.”  Printing press is a misnomer, as most of the new money that is created is just created out of thin air and deposited by the Federal Reserve into the world economy via banking reserves.

As the US continues to go into more debt, we are forced to either raise taxes or print more money to pay off our debt.  Since raising taxes is politically unfeasible and cutting spending is even harder, the US will most likely pay off the debt by printing even greater quantities of dollars.  China now holds over 1.95 Trillion dollars in its foreign reserves, most of it denominated in US dollars.  They are worried that the US will simply print itself out of debt, rendering its hard earned savings worthless.

We saw how extreme debt and leverage destroyed the big investment banks.  I am worried that the US is in a similar situation.  The national debt is currently $11.2 trillion dollars, or $36,000 per man, woman and child in America.  We pay $3.6 billion dollars per day in interest.  It is compounding at its worst.

If China decides that it no longer wants to continue purchasing US paper, the dollar will decline precipitously and interest rates will rise.  There even could be a run on the dollar.  This would be disastrous for the United States.

China and Russia have already started to push for a new global reserve currency, either backed by gold or backed by a basket of currencies at the United Nations or the World Bank.  China’s equivelant to Ben Bernanke recently posted an essay advocating a new reserve currency.  I fear that the US dollar will lose its reserve status, as the rest of the world has grown tired of watching America print prosperity.  Its not logical that these countries will continue to allow this to happen.  They know that they cannot defeat US hegemony in a military war, so they realize that if they wish to dislodge the US as the hegemonic power, they must use a different strategy.  I believe it will be attacking the US where it is weakest: the reserve status of the US dollar.  It is our Achilles Heel.

There really is only one conclusion to this story: the standard of living in the United States is fated to fall.  Nobody knows how far it may fall, but there is no way that the last twenty years of prosperity, brought to you by leverage and the printing press, is sustainable.  At some point, China and the rest of the world will say enough is enough and will demand real, tangible payment for their hard work.  This will be disastrous for the average US citizen and for US power in general.

When Should We Meet?

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“When Should we Meet?”

It’s a tough question, especially if you are trying to schedule a meeting with more than two or three people.  My friend Jason Strutz, who also wrote ExchangeHut, just completed a new project aimed at answering this very question.

MeetingWhen is a free , easy to use tool to help you schedule meetings.

Instead of bouncing emails around trying to guess good times for everyone to attend, MeetingWhen allows you to take control of the scheduling, and ensure that you maximize the chances of high attendance.

The more people in your event, the harder it is to schedule manually. But with MeetingWhen you can schedule large meetings without any fuss!

MeetingWhen.com allows you to:

  • Create an event
  • Input your availability
  • Invite others to input their availability
  • Pick the best time for everyone involved

I was one of the beta testers and really like the idea.  Check it out for yourself and see what you think.  You do not have to register and can use it for free!

College Students and Essay Mills

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The Chronicle of Higher Education’s March edition includes an expose into  how Essay Mills work and their impact on college life.  For those who do not know, essay mills are companies that write original essays on demand for students.  They are different from companies that sell stock essays because essays from essay mills cannot be detected by plagiarism software.

The article traces the business of EssayWriters.net, one of the biggest essay mills in the world.  Essay Writers allows anyone, mostly American and British college students, to upload paper topics, specifications and due dates into an online form.  From there, Essay Writers puts these “writing requests” into a database that its freelance writers can browse and bid on.

Freelance writers can come from anywhere.  According to the article, there are many writers from Asia, Nigeria and some from the United States.  Once a writer bids on the project, the student gets a quote, usually between $19.99 and $42.99 per page, depending on due date, degree of difficulty and other specifications.

The article claims that students from all backgrounds are using essay mills:

Some customers of Essay Writers are college freshmen who, if their typo-laden, grammatically challenged order forms are any indication, struggle with even the most basic writing tasks. But along with the usual suspects, there is no shortage of seniors paying for theses and graduate students buying dissertations.

One customer, for example, identifies himself as a Ph.D. student in aerospace engineering at the Massachusetts Institute of Technology. He or she (there is no name on the order) is interested in purchasing a 200-page dissertation. The student writes that the dissertation must be “well-researched” and includes format requirements and a general outline. Attached to the order is a one-page description of Ph.D. requirements taken directly from MIT’s Web site. The student also suggests areas of emphasis like “static and dynamic stability of aircraft controls.” 

The explosive growth, as well as acceptance by college students, of these essay mills is a troubling, not to mention scary, phenomenon.  Students from all levels of college are buying papers and not learning how to actually write or do proper research.  They treat a college degree as a credential, a piece of paper that is needed to get to the next step.

 The students come from all disciplines and all parts of the country. They go to community colleges and Ivy League universities. Some want a 10-page paper; others request an entire dissertation.

As these student graduate and enter the workforce with their credentials from American universities, are they going to be able to actually do any work? When they get an assignment at the office that they do not like, think is boring or believe is beneath them, what will they do? Will the mechanical engineer be able to actually design anything and will the freshmen ever learn how to write?

I am worried that many in my generation of workers are lazy and are not prepared to compete in the global economy.  I think that we are heading toward an economy that rewards those with skills, but does not offer as many opportunities to people without.  Students who are too lazy or uninterested in doing any actual learning are going to lose out in the global economy.  The Nigerians, Chinese and Filipinos writing American college students’ papers are going to be the ones who succeed in the global economy.  In essence, they are getting a college degree for free.  Others in developing countries are taking advantage of opportunities like these, whereas many Americans are not.  These workers are willing to work hard and go the extra mile in order to succeed, something that is seemingly lacking in many American college students.

So what is the solution?  I am a realist; plagiarism has been around forever and I would guess that many, if not most, college and high school students have engaged in some form of it during their academic careers.  There is a continuium between writing one’s own work on one end, to buying a paper from an essay mill on the other, with paraphrasing wikipedia somewhere in between.

Just like with drugs, sex and alcohol, simply telling students its wrong will not come close to making a dent in the problem.  I think educators, starting in middle school, should begin to show students why its necessary to get a good education.  Plagiarizing is simply robbing oneself of part of the opportunity to succeed in a future job.  I would start by telling students about globalization.  I would teach them about outsourcing and how the entire world is interconnected.  Let them know that there is probably a kid in China, Korea, India, Brazil or Nigeria working as hard as possible to succeed in life.  I would keep teaching these lessons through their academic careers so that they can see real life examples of the people they are competing against in the job market.  Simply telling students that plagiarism is wrong will not work.  People need concrete examples of why it will hurt them in both the short and long run.  I am not optimistic that any of this will ever happen, but it would be a good experiment to see if cheating could be reduced using some sort of curriculum like this.

HT: Freakonomics