The Coming Nano Revolution

Nanotechnology will change our world radically. The economy will change radically too because objects will be manufactured atom by atom. Think what you can do by rearranging the atoms in coal, for example. You can manufacture diamonds!

The Christian Science Monitor reports that nanotechnology "may have found its Henry Ford" in Nadrian Seeman, chemistry professor at New York University. Professor Seeman, and a research team at Nanjing University, have created two-armed worker robots out of synthetic DNA molecules. Until now it has been possible to make DNA robots with only one arm. Why is this significant? Suddenly, mass nano-manufacturing appears possible.

Each robotic arm has a molecule on the end that can align other molecules as part of a manufacturing process. Professor Seeman and team are now working on developing the capacity to create programmable patterns. That's the next step toward developing a manufacturing process. Right now they can only form various shapes from molecules. Practical applications are limited. But don't expect new discoveries to be that far off. When nanotechnology hits full stride, we'll see the equivalent of another industrial revolution. It's that big.

To get a better idea of what nanotechnology is, here are two Quick Vue videos. Advance the cursor on the first video to 4:50 minutes.

A.I.G. Resignation Letter Worth Reading

A.I.G. executive Jake DeSantis has captured headlines with his resignation letter published in The New York Times. It's worth reading in order to gain a different perspective on the AIG bonus issue.

Some key points Mr. DeSantis makes include:

• He and many others in the Financial Products group were not involved in the credit default swaps that caused A.I.G. so much trouble.
• He lost a "significant portion" of his life savings which had been in the form of deferred compensation invested in A.I.G.
• He was asked to stay on and help fix the problems for an annual salary of $1 with the promise of a large retention bonus.
• He intends to donate his after tax-bonus to charity after it's known what happens with Congress' proposed legislation to tax the bonus at 90%.

This link will take you to the letter at The New York Times website.

http://www.nytimes.com/2009/03/25/opinion/25desantis.html?_r=1&ref=opinion&pagewanted=print

Quick Vue: Here is a Bloomberg news item on Mr. DeSantis' resignation letter.

"Quiet" Trends, Big Impact

While the recession continues to hold our attention, two important trends continue to evolve and intersect rather quietly. Yet they will change our lives profoundly.

This is what the newspaper of tomorrow looks like. This is the new website of the Ann Arbor News in Michigan. Starting in July, the paper will cease to exist as a newspaper and will publish via this community-oriented website. The Ann Arbor News, owned by Advance Publications, Inc., will become a Web company called AnnArbor.com LLC. However, a print edition of the .com will be printed twice weekly.

The pace of change in the newspaper industry, the subject of prior World Vue Letter posts, is quickening. To wit:

• The Detroit Free Press (Gannett Co.) and the Detroit News (MediaNewsGroup) will soon cease print editions most days of the week.
• The Seattle Post-Intelligencer recently went to a web site only format.
• Last month, Denver's Rocky Mountain News (E.E. Scripps) closed down.
• The Flint Journal, Saginaw News and Bay City Times, all in Michigan, will print only three days a week and provide other coverage online.
• Papers in other parts of the country are cutting pay, reducing staff, freezing pensions, and adopting other cost cutting measures. The Charlotte Observer, for example, will terminate 60 full-time and 22 part-time workers, 15% of its work force.

Meanwhile, sales of smart phones like the iPhone and the Blackberry may have reached the tipping point. Consumers are beginning to lose interest in having multiple hand help electronic devices. They are opting instead for the convenience of a single device that enables them to search the web, handle emails, download music, get navigation help, take pictures, text, and speak by telephone. Smart phone shipments are expected to grow 30% this year while sales of single purpose units are starting to slow.

These two trends, taking place rather quietly behind the headlines, will transform our society in many ways. With newspapers in decline what will happen to the free press function so important to our nation's governance? Will the public become a better informed electorate by using smart phones to tap infinite sources of information at any time including blogs? Or will we become an electorate awash in data but lacking in perspective and analyses?

No one can say right now. But one thing is certain. We can expect to see many more changes in how information gets distributed and how political candidates make their case to the public.

Quick Vue: Here's a rapid look at how the Apple iPhone compares with the Blackberry Storm.

Sources of this post included The Plain Dealer and The Wall Street Journal.

Immigrants Needed!

The stimulus bill recently passed by Congress places restrictions on the H1-B visa program. It usually permits U.S. employers to hire up to 65,000 specialized workers a year from other countries for 3-6 years. Most workers are from India, many with IT expertise. Is this the start of protectionism? Some fear that may be the case. Yet, we stand to gain a great deal through programs such as H1-B and other special visas, particularly as regards immigrants who are entrepreneurs with capital to start a new business. Are we missing opportunities?

Consider these arguments made recently in The Wall Street Journal by Richard S. LeFrak and A. Gary Shilling. Mr. LeFrak is CEO of LeFrak Organization, a real estate developer. Mr. Shilling is an investment advisor and president of A. Gary Shilling & Co.

• There are 2.4 million houses for sale left over from the recent housing boom.
• Excess inventory means lower prices for existing homes.
• Why not offer permanent residency to foreigners who commit to purchase one of these homes?
• The government should expand the EB-5 visa program to promote this type of immigration. EB-5 visas are for foreigners who have $1 million to invest in a new enterprise (less in depressed areas) that will create at least 10 full-time jobs.

"Granting permanent residence status to foreigners who buy houses in this country will curtail a primary driver of the deepening recession and financial crises," the two gentlemen wrote in an op-ed piece. "Since the people who will buy these houses will tend to have money, education, skills and entrepreneurial talents, they will be substantial assets to America in both the short and long runs."

It's a compelling argument.

Quick Vue: Here is a brief report from India's NDTV (New Delhi) about changes to the H1-B Visa program for workers with specialized knowledge and certain academic credentials.

Media Morphing

The media is continuing to morph into a new model. It hasn't yet materialized from the fog of declining profits, political biases and changing consumer preferences. But recently there were two new indicators of change worth noting.

Yesterday, the Seattle Post-Intelligencer, owned by Hearst Corporation, announced that it will no longer publish in print. It will continue to publish on-line only. Many reporters and other staffers will lose their jobs as operations are scaled back. It's the first major newspaper to go the on-line route solely.

Then, last week, Jon Stewart of Comedy Central's The Daily Show interviewed Jim Cramer of CNBC's Mad Money show. The two had captured attention through a running feud, with Jim Cramer taking criticism for failing to warn viewers about the demise of Bear Stearns and the stock market drop. Mr. Stewart demonstrated how to conduct an interview with sharp intellectual focus, knowledge of his subject, effective preparation and humor. It's a potent blend. Hopefully we'll see more such interviews by more correspondents. Jim Cramer was a gracious guest who acknowledged making mistakes.

You can watch the interview by clicking on the link below. Once at The Daily Show site, click on the interview for March 12.
http://http//www.thedailyshow.com/full-episodes/index.jhtml?episodeId=220533

Sources for the post included The Wall Street Journal.

Is this Change Permanent?

Headlines proclaim that Americans lost up to 18% of their wealth in 2008. That comes to an astounding $11 trillion. (See post dated January 13, 2009 for how to picture a trillion dollars.) The Federal Reserve equates this decline to the combined annual output of Germany, Japan and the U.K. No wonder Americans are living more frugally. Economic constraint is "in." But for how long?

No one can say for sure. But consider these data points from The Wall Street Journal:

• "The decline in Americans' net worth, which was the first in six years, followed an extraordinary boom. Not accounting for inflation, household wealth more than doubled from 1990 to 2000, and then, after a pause, rose nearly 50% before the bust of 2008."


• "Past downturns have been mere blips compared with the losses Americans faced last year, which set them back to below 2004 levels. "

Wait a minute. 2004? In one sense, that doesn't sound so bad. At least it's not, say, 1984, or even 1994. (Admittedly, this viewpoint is a little bit like looking down on storm clouds from 40,000 feet. The white froth below looks fairly benign. But to those on the ground life is very unpleasant.)

We may be better off than we now perceive. Perhaps frugality will eventually go by the wayside.

On the other hand, optimism about the economy is in short supply. A recent Gallup poll shows that 82% of Americans are concerned about the amount of money being added to the federal deficit. Further, 78% are worried about inflation growing.

Housing statistics also suggest that there is a cloud of uncertainty. A recent article on Fast Company.com states that the Metropolitan Institute at Virginia Tech "predicts that by 2025 there will be as many as 22 million unwanted large-lot homes in suburban areas." Life in the "burbs" may never be the same as more people discover the economic and lifestyle benefits of living in more urban areas.

Only time will tell whether the changes in economic attitudes are temporary or part of some type of tectonic shift. Stay tuned!

Quick Vue: Here is an Associated Press report on the new savings habits of American consumers.

Sources for theis post included The Wall Street Journal, FastCompany.com and Associated Press.

Lead by Example

The Marines have concluded an investigation into the crash last December of an F/A-18 Hornet in a San Diego neighborhood. It hit two homes and killed four people on the ground. Out of this tragedy comes a hopeful example of responsibility and accountability.

Four senior officers were removed from duty as a result of the crash investigation which concluded that the tragic mishap was avoidable. Other Marines have been disciplined as well. A series of wrong decisions had been made.

"This wasn't damage control," wrote columnist Peggy Noonan in The Wall Street Journal, "it was taking honest responsibility. And as such, in any modern American institution, it was stunning."

Stunning indeed. It says a great deal about the strength and quality of our democracy.

Ms. Noonan interviewed a Marine aviator who remarked on how the decision contrasts with buck-passing elsewhere in government and on Wall Street.

Per Ms. Noonan: "By contrast, he says, when the economy came crashing down, 'nowehere did we see a board come out and say: "This is what happened, these are the decisions these particular people made, and this was the result. They are no longer part of our organization."

No one in government said, "These are the people who allowed Freddie and Fannie unlimited rein over mortgage securities."

But the Marines are leading by example. And that is a sign of hope. May that others follow their lead.

Quick Vue: Here is an Associated Press report on the Marines' investigation.

It's Almost Spring!

Winter has a few weeks left to go but it sure feels like Spring! The sun has been shining and the days are getting warmer. Nature presented one of its more dramatic vistas today along the North Coast. Here is a photo of Lake Erie frozen in time--a truly spectacular sight!

Are More Taxes in Your Future? To Find Out Look at Yesterday's Tax Rates.

It may sound like a dull thing to do, but stop and take a look at what has happened to federal tax rates over many years. You might just say "Aha!"

Some economists argue that President Roosevelt lengthened the Great Depression by raising federal tax rates. Could that be? I'm no economist but I have gone to the Tax Foundation's website where I was able to scan through federal tax rates going back to 1913 when the 16th Amendment to the Constitution made the federal income tax permanent. I was surprised by what I found.

For the sake of consistency, I looked at federal tax rates for the highest levels of income listed in the charts and for an income of $60,000. I limited my search to rates for taxpayers who are married and filing jointly.

One of the things that jumped out is how widely incomes in the highest tax bracket have varied over the years. For example, in 1936, during the Great Depression, the income level for the highest tax bracket was $5 million. Nine years earlier, in 1925, during a period of prosperity, it was $100,000. 1982 saw one of the lowest numbers for the high bracket, $85,600.

What was most interesting were the dramatic increases in tax rates at very critical moments. In 1916, a year before the U.S. entered World War I, the highest tax rate was 15% on incomes of $2 million or more. For an income of $60,000 the rate was 4%. But in 1917 tax rates jumped dramatically as the U.S. had a major war to finance. The highest rate leaped to 67%. For those with an income of $60,000, the tax rate quadrupled to 16%.

In the mid-1920s rates at the upper end of the range moved back down precipitously accompanied by dramatic changes in the income brackets. The highest rate in 1925 was 25% on incomes of $100,000 or more. For $60,000 the rate was 20%. These rates stayed in place through 1931.

Could it be that the prosperity of the roaring 20s was due at least in part to a dramatic lowering of tax rates? I'm sure economists will point to several causes. But I submit that tax rates play a major role in determining how people feel about the economy and the economic choices they make. If true, does the economy contract when rates are expected to go up?

That's where the economists come in who claim that the Great Depression lasted longer than necessary because government increased taxes. In 1932, under President Herbert Hoover, rates jumped to a whopping 63% from 25% for incomes of $1 million or more. The $60,000 rate went from 20% to 35%.

Then rates really took off. Starting in 1936, President Franklin Roosevelt increased rates until in 1944 the top rate was an astounding 94%--on income of $200,000 or more. The $60,000 rate was also in the stratosphere at 78%.

Fast forward to 1964. That's when President John Kennedy lowered rates to 77% (from 91%) at the highest bracket (income of $400,000 or more) and 56% (from 62%) for the $60,000 level. By 1965 these rates were 70% and 53% respectively. President Reagan lowered them dramatically in 1982 to 50% and 44%. Rates dropped even lower as the economy took off.

President George H. W. Bush raised rates in 1993 to 39.6% at the high end. President George W. Bush lowered them in 2003 to 35% for the highest bracket and 25% for $60,000. Today the rates are 35% and 15%.

What might we conclude from all this? It suggests that:

• There is credence to the argument that lowering tax rates helps bring about economic prosperity.
• We can expect the federal government to raise rates dramatically now that it has begun to spend money at a vastly accelerated pace. It happened during World War I, the Great Depression and World War II.

We'll have to wait and see to be certain. Perhaps we will soon find ourselves saying "Aha!"

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Key federal tax rate increases - $60,000 Income Bracket:

• 1917 - World War I - 4% to 16%
• 1932 - Start of Great Depression - 20% to 35%
• 1936/44 - Great Depression & World War II - 37% to 78%