Manuel Rodriguez

Manuel Rodriguez

Manuel Rodriguez

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The Failed American Social Contract and the Betrayed Generation

Tuesday, 16 August 2016 11:08
Part II: The Failure of the American Social Contract Will Cause Profound Upheaval

The American Social Contract was the social and financial backbone for much of the economic progress made by America in the last 60 years. Its destruction will lead to the eventual and inevitable erosion of the middle class and meaningful prosperity for generations of future workers. The consequences of this disruption are profound.

As the middle class is slowly carved out and flattened, economic demand will continue to decrease, leading to stagnant and stalled economies. Monetary policies by central banks, which have traditionally primed the economic pumps through targeted interest rate cuts at key moments of crisis, have become largely irrelevant. These policies, which have rescued nearly every recession in the last 60 years, will become increasingly impotent. Currently, with interest rates in negative territory throughout the world, central bank monetary policies have been rendered ineffective in creating aggregate demand, the real culprit of the decades-long stagnation in Japan and most Western economies.

And economists are perplexed because the current cycle is unlike any they’ve ever witnessed. Keynesian intervention, long favored by the Democratic elite has, at one time or another throughout the last 60 years, been successfully applied to modern recessions to alleviate them. But most recently, monetary policy aimed at improving the economy following the Great Recession has largely failed to kick-start aggregate demand.

Supply-side fiscalists, the favored Republican Band-Aid to nearly every economic ailment, stresses that fiscal policy alone is enough to induce the expansion of businesses, which in turn would ultimately spur growth. This model, proposed and implemented by many Republican presidents, has markedly failed to remedy the country’s economic malaise, as overcapacity continues to plague most manufacturing countries.

Both remedies have failed to mitigate economic contraction, as the United States has steadily reduced overall tax rates for the last 30 years (fiscal, supply-side intervention), and interest rates have remained at historic lows for at least 10 years (monetary, Keynesian intervention), yet overall aggregate demand has remained stalled and barely budged.

The inevitable result of decreased economic demand and pervasive central bank interest rate manipulation are frequent asset bubbles. Interest rate manipulation has severely skewed asset allocation incentives in the United States, creating massive pricing bubbles in the stock market and real estate markets and among many other asset classes affected by this manipulation.

Banks and other traditional financial repositories have been stripped of any meaningful ability to provide investors with healthy returns on their invested assets, and these investors have turned to other investment vehicles for their funds. This outcome has driven up the value of these alternative investments to unrealistic valuations. These valuations have become meaningfully divorced from their inherent, income generating potential, and instead are based on fear and irrational expectations.


Category: The Economy

The Failed American Social Contract and the Betrayed Generation

Tuesday, 16 August 2016 10:51
Part I: The History of the American Social Contract and Why it Failed

The American Social Contract has failed, and with it the moral justification that generations of Americans accepted in order to educate themselves, marry, raise families, build businesses, retire and pass the torch to each successive generation of workers. The contract itself was deceptively simple and plain, but breathtaking in its sweep of moral, financial and cultural imperatives: the youth of our country were expected to reasonably educate themselves and prepare themselves for the responsibility of adulthood and their place in America’s economic engine, in return, the American workplace would provide a haven for these skills, successively greater pay and responsibility, and sufficient security and income with which to bankroll an early retirement.

This compact, though, has turned into a Faustian deal. No longer are successive waves of well-schooled young adults strutting into a secure world with nearly guaranteed jobs. They are being increasingly told there is no place for them at the table; instead, they’re on their own. Ill equipped to compete with each other let alone with their much older siblings, they feel betrayed.

In order to understand the failure of the American Social Contract, it is important to first understand how it came into being and became the driver for most of America’s post World War II economic expansion. After World War II had lifted the nation from the ravages of the Depression, it was this implicit contract that guaranteed the loyalty of successive generations of workers to corporate America. This bi-lateral understanding between the corporate aristocracy and the governed ensured a steady stream of educated and industrious workers eager to improve their lives over each preceding generation.

America, the only economic giant largely unscarred by the ravages of World War II, became the world’s financial and economic engine, driving much of the developed world’s innovation and manufacturing. America innovated, created, supplied and manufactured much of the economic output required by a post-industrial world-order, suffered from little overseas competition and assumed the mantle of technological giant and innovator.


Category: The Economy

Amazon, America's Dystopian Workplace

Thursday, 20 August 2015 23:28

Amazon’s workplace culture is an Orwellian edifice filled with sabotage, subterfuge and fear

As a technology and retail giant and forebear to the internet’s gilded age, Amazon was founded on the marriage of relentless technological innovation to volume driven discount pricing, and has brutally and efficiently eliminated vast categories of retailers, industries and product categories along the way. The retail carnage induced by Amazon has resulted in the closing of thousands of brick-and-mortar stores and even many “category killers”, but saved American consumers untold millions throughout the years. But, in a biopic reminiscent of the Grapes of Wrath, Amazon’s post-Orwellian dystopia was laid bare in an epic piece this week by the New York Times, here.

The Time’s Jodi Kantor and David Streitfeld systematically portray Amazon as a soul-crushing, often brutal workplace more akin to Orwell’s “1984” rather than an enlightened, creative twenty-first century workplace, complete with its own thought-police, doublethink, Inner Party, Outer Party and Proles. Even the headline banner within the Time’s piece suggests a highly toxic workplace environment and nineteenth century vestige rather than that of a free-wheeling, free-thinking paragon of collaborative synergy. The article notes that the “company is conducting an experiment in how far it can push white-collar workers to get them to achieve its ever-expanding ambitions.”

What Kantor and Streitfeld brilliantly exposed was the amazing deception occasioned on an unsuspecting public and consumer, who for years has been accustomed to Amazon’s cheery and nearly zealous religious idolatry of its brand and image. The Land of Oz is revealed as a mere, nineteenth century sweatshop and cult, its unsuspecting victims the tens of thousands of young-ish workers, most with advanced degrees, who have been brainwashed to drink the kool-aid brewed by resident sociopath and psychopath Jeff Bezos, Amazon’s CEO.

The Bezos minions, called “Amabots” by fellow Amazonians, are encouraged to “become one with the system”. This is eerily reminiscent of Star Trek’s dystopian Borg Collective, which enforced the complete loss of individual identity to the greater “mother ship” and its goals and objectives.


Category: The Economy

Institutional Fraud: The American Medical System

Tuesday, 17 September 2013 04:37
The American medical system is perhaps the largest, "free-market" fraud being perpetrated on an otherwise, unassuming populace. This parasitic model continues to undermine our business competitiveness.

If I described a market with little to no transparency in its pricing mechanism, purposeful price manipulation, extraordinary barriers to entry created by market participants themselves, little competitive bidding, severe influence peddling by lobbyists and pricing that has no relationship to the underlying costs, I would essentially be describing a market severely manipulated by anti-competitive cartels and likely subject to antitrust regulation by federal and state authorities.

In fact, these characteristics describe the institutionally corrupt and highly manipulated “free-market” of the American medical system. In a series of articles published by the New York times, here, here, and here, the Times outlined the dirty secrets characterizing this purportedly free market system, and the severe disparities in costs to the consumer between the United States and the rest of the world.

As outlined below, what emerges is a portrait of an institutionally corrupt medical cartel that purposely distorts pricing, making meaningful evaluations between providers nearly impossible. Rather than going down, as prices invariably do as markets become commoditized, medical costs in the United States typically escalate over time.

Medical manufacturers dole out hundreds of millions of dollars annually for consulting, royalties and other activities to physicians in an effort to buy loyalty. The Justice Department has, in the past, accused medical manufacturers of paying kickbacks, and has assessed hundred of millions of dollars in fines.

While the government targets overt fraud perpetrated by criminals on the Medicare and Medicaid entitlement programs, it has failed to even acknowledge the presence of the institutional fraud that has been “baked” into the system by the pharma-medical device complex. As a result the United States has the highest medical costs of any established country, and essentially subsidizes the entire world, most of which has enshrined cost constraints and price caps into their medical systems.

The United States has long refused to acknowledge that price constraints, enacted by every major first-world country, are necessary and vital in controlling costs. Instead, the pharma-medical device and insurance industry complex continues to advocate and push for “denial-of-care” or service limitations as the primary tool in controlling costs. Denial of care has essentially become the only cost cutting tool available in the arsenal, while medical cost inflation continues unabated. The federal government has consistently refused to intervene directly, as Medicare has never negotiated directly with manufacturers, but offers instead all-inclusive payments for surgeries to hospitals to prompt them to bargain harder for better prices.

The extreme undesirability of imposing price constraints and caps on medical devices and drugs reflects the quaint notion that the American medical system is somehow a “free-market” and market driven. As the Times illustrated, the entire system is essentially manipulated and pricing is artificially inflated through coercive intrusion and pricing irregularities.

Category: The Economy

Institutional Fraud: Ossifying the American Empire

Monday, 26 August 2013 04:02
America continues to slog through the same path as our Roman ancestors, as it allows institutional forces from within to destroy what forces from without could not destroy

Fraud takes many forms, oftentimes it is disguised and deeply embedded within the cultural, economic or social systems that most take for granted. Other times, fraud is overt, specific and perpetrated by outside forces. The police, our local and federal governments, private investigators, or internal audits target the obvious, non-institutional frauds, whether personal, financial, social or economic.

Examples of these overt frauds are criminal activity, Medicare fraud, insurance fraud, personal infidelity, or the failure of corporate governance. These types of fraud, though, are relatively easy to detect and spot, and are generally correctable given sufficient remedial activity. Institutional fraud, on the other hand, is pervasive and endemic to our society.

History often repeats itself, and from it America can divine its future, or at least one version of that future. A brief history lesson will highlight the perils of ignoring deep institutional fraud domestically and the risks associated with it. The Roman Empire concerned itself with empire building, marching vast armies for years through conquered territories, but ignored the institutional decay that was ossifying the Roman homeland. Ultimately, it was not merely enemy armies that collapsed the empire, but the collapse of economic, social and moral structures deep within the empire.

Likewise, the United States continues to project formidable military and economic strength abroad, and is perceived as a protector of Western values and cultural institutions. This role protects the oligarchic military industrial complex and the enormous profits derived from these missions, but much like the Romans ignores the enormous costs and social impacts inherent in maintaining this infrastructure. The Chinese, much like the barbarians that faced the Roman armies, threaten to broach our economic and military borders not because of advanced technology or superior skill, but because of sheer brute strength and population size.

Similarly, the German Wehrmacht, the most formidable military machine ever assembled, was overwhelmed by waves of Russian divisions in World War II.  In spite of possessing advanced technology and brilliant military tacticians, the Germans were slaughtered by waves of Russian soldiers, even as Germans killed 20 Russians for every slaughtered German. Both China and Russia currently have a near endless supply of labor, both militarily and economically, with which to rout American interests in the very near future.

Why is this history lesson critically important to us at this juncture? Because, as a nation facing some steep challenges economically, socially and culturally, we have chosen to ignore the deep institutional fraud that is fraying our homeland institutions. Instead, we continue to see risks only abroad, and ignore the destruction of our own homeland. These risks will consume us long before the Chinese or Russians have imposed their will.


Category: Wall Street Fraud

You Know That I'm Not Easy

Saturday, 07 July 2012 05:11
Inside the Mind of a Pathological Narcissist, an Emotional Fraudster

Hey. Recognize me? I am the person who rebuilt your self-esteem, the one who became your soul mate. We were so compatible, you and I, we seemingly had everything in common. We feasted, entertained, and had meaningful and deep conversations among us. Our time together was a matter of urgency, with not a moment to waste. We needed to be together, constantly and continually. I called you repeatedly, sometimes 15 times daily. I built you up when you were down, and offered confidence when you doubted. I sparked your interest when you were bored and breathed excitement into your daily routine.

We slept together on our first date, careless and carefree, looked each other in the eyes that morning, and laughed through the afternoon at our careless abandon. I made you feel needed, wanted, protected, necessary, loved, and euphoric. I listened to you, sparked your interest, felt your pain, and made you feel alive. I was your inspiration and your role model, the one you aspired to emulate, the one who made you glow.

I brought you into my family, thrust my son upon you, and you felt alive. He bonded with you quickly, so much so that you nearly appeared to be his natural father. To the world, we were a real family, and I convinced you that you were a great father. My boy adored you, worshipped you, and emulated you. I made sure that you and he quickly adapted to each other and cared deeply for one another.

I made you feel young again, in love, carefree and passionate. We enjoyed much fun together early in our relationship. We danced, ate, partied and drank, all in the guise of love and seduction. I appeared to care, and learned to mimic your emotions. I observed you carefully, and mirrored your feelings, always careful to reflect back an empathic and supportive mate. Our sexual abandon made you feel wonderful and creative, and I complied with every one of your wishes, knowing how important this act was to you. You were exhilarated at my youthful imagination and energy. I mimicked compassion, caring, affection, emotion and tenderness, and reflected back your needs.


Category: Financial Fraud

A Matter of First Impression

Monday, 10 October 2011 22:53

In a matter of first impression in Puerto Rico, and applying Delaware law, District Judge Gustavo Gelpi dismissed all the claims against 11 defendants, all of whom were the most senior executives at Westernbank, formerly Puerto Rico’s second largest bank. Westernbank, a $10 billion bank with hundreds of branches scattered throughout the island, was closed by the FDIC in 2010 for reasons unrelated to the lawsuit. 

The derivative lawsuit, brought by a shareholder of the bank, alleged that the majority of the board of directors and senior management purposely ignored the warning signs of a massive, $200 million structured fraud initiated against the bank’s asset based lending division by a significant client of the bank. The shareholder claims included breach of fiduciary duties as officers and directors of the bank, waste of corporate assets, unjust enrichment, Sarbanes-Oxley violations, and violations of numerous Puerto Rican statutes.

Attorneys Carlos F. Concepcion, Manuel A. Rodriguez and Scott A. Burr, and Forensic Investigator and CPA Francisco Gomez, assisted the Special Litigation Committee of the board of directors in determining the viability of multiple derivative claims initiated against the bank’s officers and directors.

The investigation involved a review and analysis of over 100,000 documents related to the fraud and interviews of nearly 40 bank officials, directors and officers with knowledge of the events leading to the fraud. The Committee’s report, a nearly 200 page single-spaced report detailing its factual and legal analysis, was ultimately filed with the court along with the Committee’s motion to terminate or otherwise dismiss the case. The factual investigation also required detailed analysis of Westernbank’s internal control systems and their remediation that resulted from nearly a dozen third-party reports and analysis.

Category: Financial Fraud

Inside the Mind of a Fraudster: Profiling a Criminal

Monday, 10 October 2011 03:26

The overwhelming amount of fraud occurring and uncovered in South Florida, including mortgage, banking, securities, and regulatory fraud demands at least a cursory analysis of the personalities and behavior that typify these fraudsters. Stanford, Rothstein, Freeman, Tolz, etc., are merely the tip of a very large iceberg penetrating South Florida.

I am often asked to explain, or even justify, criminal behavior, not merely for the sake of curiosity, but to prevent being swindled by these schemers. We believe that if we can understand the criminal mind, we can identify their attributes and prevent from getting swindled. Unfortunately, the pathology of crime is far more complex than we dare imagine.

There are two ways of preventing a fraud from occurring. One technique is quantitative, and involves the use of sophisticated due diligence to ferret out the fraud or any inconsistencies in the fraudster’s “stories”. These quantitative techniques take the form of pre-investment financial due diligence, background checks, verification of financial history with third-party sources, current customer verification, etc. These quantitative techniques are typically performed before investments are made and throughout the history of the investment. Unfortunately, very little of these techniques are actually performed, witness the Madoff scandal. Here, very little, if any, investigative due- diligence was ever performed, and even when it was, the SEC summarily dismissed it.

The second technique, the subject of this article, is far more complex and qualitative. It involves understanding and profiling the criminal pathology as a means of detecting potential firestorms later. This subtle technique involves profiling the types of personalities that might be inclined to commit criminal fraud.



Category: Financial Fraud

The Guy in the Gray Range Rover

Saturday, 27 August 2011 06:18
The US has begun a long slog into the cycle of decay and vacuum of leadership that characterizes all great empires whose suns are fading.

We have witnessed the hubris of endless cycles of war and conquest that have characterized the Roman, Greek, British and Spanish empires, and more recently, the German Reich and the Soviet Union. Nearly every continent and empire has held unbridled power briefly, but none has been able to hold it for long. The Romans succeeded chiefly because of the relative weakness and tribal instincts that characterized their vanquished enemies, but even they were ultimately defeated by their own demons and internal failings.

These failings were principally characterized by an inability to recognize the unsustainable nature of their societies and the economic models on which they were premised. Marching vast armies through multiple continents became economically and politically unsustainable for the Roman Empire, which entrusted its unceasing demands for territory and power to professional armies that would spend years abroad and far removed from the Roman homeland. The German Army would march its Panzer units abroad for years, virtually requiring that these specialized army units reposition themselves as occupiers, rather than conquistadors.

Meanwhile, the local populace, ignorant of the back-breaking cost of these armadas, continued to cheer the endless conquests and territorial expansion of their homelands. Nationalistic fervor and pride, bordering on nihilistic self-approbation, continued unabated. No sacrifice was required, no penalty or tax was paid for this unceasing expansion, until virtually the end of their empires. The populace was ultimately deluded into a vision of guilt-free expansion, politically and economically, that required no excessive or burdensome levy on their current lifestyles.


Category: The Economy

The Failure of Predictive Modeling and Irrational Thinking

Tuesday, 12 April 2011 21:33
Can human behavior be accurately predicted, or is it too complex and nuanced to quantify and discern through  modeling?

Predictive modeling, the process by which a model is created or chosen to try to best predict the probability of an outcome, has lost credibility as a forecasting tool. Overly simplistic models have failed to account for the sheer complexity of human interaction and the degree to which most people behave irrationally. Most predictive economic models presume that people behave rationally most of the time, a premise which is terribly flawed but which serves as the intellectual foundation of many current economic models (See the Wall Street Journal article on this issue, here).

Predictive modeling has seeped into nearly every facet of our decision-making. It has been the cornerstone for most economic models for decades, and lately it has even attempted to predict consumer behavior. Companies like Amazon use predictive modeling to determine what consumers will purchase, and even suggest purchase alternatives based on what other consumers have purchased after reviewing the same item that the consumer initially looked at.

These models are quite good at predicting outcomes provided that the input variables, or human choices, are extremely limited. Thus, Amazon’s ability to predict what a consumer might purchase after having reviewed a particular item on its website is quite good, because the range of inputs and variables necessary to make that prediction is low.

Category: The Economy
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