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Economics not understood by majority of Americans

February 11, 2008

While reading news and commentary in the wild today, I came across an AP article posted on the MSNBC web site, titled “To boost economy, Americans want out of Iraq” with the subtitle:
“Stimulus checks welcome, but AP poll reveals desire to cut war spending.” I have to admit I’d like to see our forces out of Iraq, but for different reasons. Not that I don’t think we need serious budget cuts to preclude economic disaster.

Simply withdrawing from Iraq and Afghanistan would save the US approximately $190 billion per year. That sum will not provide a long-term solution for our critically damaged economy. Even with $190 billion cut from this year’s budget, our national debt will be increased by approximately $620 billion. Added to the $9+ trillion dollar national debt and you begin to understand that we the people may soon find ourselves in bread lines.

The flaw with spending cuts in one program, in this case, defense, is that our elected representatives tend to view any money “saved” as available to fund their pet projects. I’m sure that you’ve heard the old adage “robbing Peter to pay Paul.”

To make any budget cuts even the least bit effective in reviving our economy and the flagging dollar, those cuts must be permanent — not merely shifted from one spending project to another. Lawmakers must understand that their lack of fiscal discipline is directly responsible for our $9+ trillion national debt. If not for that debt, the personal income tax burden could be lifted off the backs of the American working class. And by the way, the “Fair Tax” only shifts money from one revenue stream to another without producing any real reduction in the size of government.

The article also presented that 56 percent of those surveyed blame mortgage lenders for our economic woes. 44 percent of those surveyed blamed the President. Some blamed Congress, Wall Street, consumers themselves and last but not least, the Federal Reserve. If that doesn’t convince you that the majority of Americans do not understand simple economics, I’ll explain.

Mortgage lenders are not to blame for the economic debacle unfolding before our eyes. Those mortgage lenders did what the American legal system not only allowed, but encouraged them to do. I disagree with the criteria used to determine loan worthiness, but they broke no laws.

While the President can surely veto legislation, his impact on the economy is in reality limited to use of the bully pulpit. This President has demonstrated again and again that he does not object to spending tax payer dollars. It’s difficult to effectively use the bully pulpit when you don’t lead by example.

Congress is where laws and regulations originate. It is here where most feel-good legislation starts without regard to unintended consequences. The Federal Reserve System originated here with a single Bill.

That brings me to the Federal Reserve. According to the survey, 55 percent of Americans polled expressed “a great deal or some confidence in the Fed to turn things around.” Without the help of the Federal Reserve, mortgage lenders and credit lenders would not have been able to advance consumers the credit necessary to buy homes and goods. The Fed did so by cranking up the printing press. The problem with a fiat monetary system is that with nothing to back the currency, its value is diluted with each new note printed.

Last but certainly not least, the American consumer. The average American is driven to keep up with Jones’. The plug-in-drug provides not only visual images to drive the desire to purchase, it also advertises a list of those willing to advance the credit necessary to allow one to live out any dream.

Since our government doesn’t understand economic theory, it believes that the way to salvage our flagging economy is to provide an economic stimulus package with the intent that the recipients of said stimulus package will head out to the mall to spend the government’s generous offerings. The package is currently estimated at $168 billion dollars. Those dollars will be borrowed, leaving the taxpayer to pay back the sum – with interest. Our government hard at work for us!

What do I suggest? Cash the check and go pay off a bill or two. It may not seem satisfying at the time, but it’ll mean extra money in your pocket in the coming months.

Until next time,
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2 Comments leave one →
  1. Leslie Jones permalink
    February 27, 2008 2:55 am

    I’ve enjoyed your blog entries….I will be buying a little bit of gold with my ” stimulus package “. It’s not really what King George wants me to do, but so far it’s still a free country, as of right now. I found your blog on the RP meetup profile. Keep up the great work.

    In Liberty,

    Leslie

    In the begining of a change, the patriot is a scarce man, brave, hated and scorned. When his cause succeeds, however, the timid join him, for then it costs him nothing to be a patriot.–Mark Twain

  2. chosun1 permalink*
    February 27, 2008 3:13 am

    A wise choice 🙂

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