Rotary Meeting June 23 (Jun 13, 2016)

There were 34 members present and one guest, who was Rick Brill, President Elect of the “noon” Rotary Club in Wilmette.

Mark Kotz did the Thought of the Day; Joe Nash led the Pledge of Allegiance; and Bernie Michna did the Dig and Grin.

ANNOUNCEMENTS: President Thomas clarified the Club’s policy that each member is expected to put $2 on the table (whether or not the Dig and Grin is amusing!), with the money going to the Rotary Foundation. Bob Baker stated that the installation dinner for our new President, Patti Van Cleave, is set for the evening of July 7^th at the WCH. There will not be a noon meeting that day and people should sign up for the dinner for the caterer to get a count. Patti told the group that there were only 18 members who gave to the Foundation during the year ending June 30^th. She encouraged everyone to participate, no matter the amount. Contributions can be done on-line and everyone should know that each Club gets a certain amount of “trickle back” from all contributions to the Foundation—last year our Club received $3700. Our WCH caterer, Donna, announced that she was giving $100, which was appreciated by all.

HAPPY BUCKS: Sam Badger started with a donation in honor of his 65^th class reunion at Miami University. Robert Mardirossian showed the old Cub “wait until next year” spirit by giving a Buck for a rare Cub loss that he hopes doesn’t become the norm again this year. Tony contributed in recognition of the Winnetka Park District leadership (including John Thomas) for the successful planning, developing and opening of the new park facility in Hubbard Woods. Patti contributed in honor of Tom Evans who recently received the Volunteer of the Year award at the Winnetka Congregational Church for various efforts there and for his work in support of a clinic on Chicago’s Southside. Rebecca contributed for the completion of the rehab project at the Winnetka and Northfield libraries in time for their summer programs to begin.

SPEAKERS NED MEISNER AND ROB ENGSTROM FROM CHARLES WM. FOSTER AND ASSOCIATES, LTD: In summarizing the “state of the U.S. economy” Rob said that we have become a debt based economy that is no longer based on savings and investment but one based on ever increasing debt and credit. In a debt based economy debt has to be growing faster than the underlying economy to continue its growth. For there to be increasing debt, there needs to be increasing credit which supports the debt. In order to provide increasing credit, there needs to be collateral that supports the credit. Collateral is property, such as stocks, bonds, and real estate. The Fed has an incentive to maintain or increase asset prices so that debt can continue to grow. This is a result of zero interest rate policy, ZIRP, by which lower interest rates result in an increase financial asset prices. The result of ZIRP is investors seeking higher yields from riskier assets, more than what they would have otherwise taken. Investors are seeking the higher returns in the same assets types, namely: stock, bonds and real estate. Since investors are all in the same assets, the price action becomes more correlated to each other. The result of this culminated in the credit bubble burst in 2008. The solution to this problem was to re-inflate the bubble again through the various Quantitative Easing Programs which benefited the banks and their management. The US is able to maintain its debt based growth in the economy because it is able to finance its national debt, which now stands at $19.2 trillion. The US is able to run up its debt, as well as its trade deficit, because the USDollar is the World/s Reserve Currency. China and Russia have a huge financial incentive to break the monopoly the US has on world trade. They are doing this by conducting trade using their own currencies and circumventing the USD. Over the past 8 years significant trading agreements have been signed circumventing the USD, with the sale of Russian energy to China in 2015 being one of the largest. Another significant event has occurred this year that will compete directly with the USD and that is China’s trading of gold in Yuan. This is significant because up until recently gold has always been quoted in USD. Over the past 8 years, China has become a major gold trading center for physical gold delivery, as opposed to a paper based system in the US. China’s gold strategy will eventually lead to its currency being backed by gold, giving it a significant advantage over the USD, which is currently not based on anything but “confidence”. The speakers said that this scenario was depicted in the movie “The Big Short”, and they recommended the movie. More information about these views can be obtained from our Club member Ned Meisner, as well as from Rob Engstrom at roberte@cwfoster.com.