I voted for Ron Paul and supported his campaign, but this isn’t a party issue, it’s an American issue. (I also voted for a few Democrats).
Every time the Federal Reserve turns on the printing press for bailouts, it dilutes the value of our dollar. That’s why gold is so high right now (because gold holds stable value while the dollar crashes).
The companies asking for bailouts should be allowed to go bankrupt, making way for fresh and innovative companies to rise to the surface. That’s the American way.
In Detroit, the average General Motors employee makes over thirty-dollars per hour. They are far from struggling and make well-over minimum wage. Speaking of minimum wage, what about the working poor? People who make minimum wage are the true victims. The minimum wage increases that Democrats have fought like mad to pass are being negated as the dollar sinks.
But everyone wants to ride the Obama train, even though it’s a gangster-style wild west train robbery.
Think about it. If you had 100 dollars in the bank before all of this capital was appropriated, you now only have about 65% of its previous value. Your money was stolen without permission and given away. You’re not going to see it AND you and your children have to pay it back over the next 18 years in the form of taxes.
When the system isn’t meddled with, it can repair and adjust itself, allowing our ever-evolving and consumer-driven free market to eliminate these overextended corporations.
If companies can’t manage themselves, let them die off, this is how all innovation and new technology naturally cycle to the top.
For instance, when oil prices go too high for the taxpayer’s budget, it creates a natural demand for a cheaper energy source. THEN, the green companies able to offer cheaper energy solutions can step in and overtake the market on their own.
I have a difficult time believing our democratic elite is this stupid. It’s as if they want the dollar to crash as an excuse to replace the currency.
Pushing money into alternative fuels only stifles progress and delays incentives to meet market demand (because it removes the public incentive and only select companies, like General Electric, can get the large amounts of grant money). This is similar to the Haliburton fiasco, cornering a market with government contracts.
It causes these companies to lean on grants to spend big money in research and distribution and then expect a bigger return, because by then they have become bloated: over-funded and over-staffed (the green counterpart of big oil corporation fat cats).
The Federal Reserve poses a similar problem. Every time money is printed out of thin air, our currency is permanently devalued for a short-term spike in the markets.
Our country is like a diabetic patient with a sugar high, spiking up and crashing down. The Federal Reserve is the root cause of our problem because it has created a diabetic atmosphere.
Do something about it! Take 5 minutes out of your day to contact your representatives, ask them to co-sponsor and pass H.R. 833, the "Federal Reserve Board Abolition Act" as introduced by Ron Paul.
I agree with you that this is not a political party issue, but it ends there and here’s why. I am assuming that whoever is reading this has limited to no knowledge of economic theory, it’s not meant to be intellectually degrading.
Using the same economic theory, by definition money supply, M, is equal to [(P, the price level at time t)x(Q, the output at time t)/(V, the frequency in which money is spent in time t)] — or M =PQ/V. Now, P x Q is just the Real GDP multiplied by the price level in time t, which is the definition of Nominal GDP. M = NGDP/V or in words, the money supply in an economy is equal to how many units of money is produced divided by the number of times they spend the money all in time t.
NGDP = (G, Government expenditures) + (I, Business Investment) + (C, Consumer expenditures) + (NX, Net Exports) — NGDP=G+I+C+NX. The value of the dollar is a relative measure. That is, it is dependent on our price level. The price level is explicitly dependent upon output in time t, NGDP. Or, using Calculus, PL(Y,…), where L is the aggregate work effort of the economy, Y = NGDP, and (…) = the substitution and wealth effects in period t — or the error term if you’re using regression analysis. To clarify:
MV=PQ
PQ=NDGP
NGDP= G+I+C+NX
M = PL (Y,…)= M/L(Y,…) = P
The reason for the financial meltdown was due to derivatives and a financial industry nearly built upon quantitative equations for risk. Financial firms trusted the math and took on more risk than necessary. High risk households began to stop paying their mortgages due to increasing interest rates, or floating interest rates. This caused the firms with the mortgages to lose money, thus, eventually decreasing the supply of money. Using calculus, (%change in M, money supply growth)+(%change in V, the rate at which a unit of money is spent)=(%change in P, inflation)+(%change in Q, output). So, if M decreases, NGDP decreases, if NGDP decreases, then P increases, thus increasing the demand for money. Now there is a situation where the Fed has to ask themselves an important, but difficult question: “Do we stick with the free market approach, let the businesses crash and burn, eliminating their business investment contribution to the NGDP (I) (which is a large portion considering how wide spread the financial difficulties were). Or, do we subsidize these companies with loans that can be paid back, until they can get back on their feet and deal with inflation later?” Given the empirical fact that this was the worst recession since the Great Depression, it is hard to assume that if we were to just let the free market reign and reallocate market controls everything would be fine. I think that most free market economists would agree that we would be in deeper than we could handle right now and the decision the Fed made to buy these “bad” assets, mandate an interest rate on bank reserves and give out interest free loans was our best choice (essentially pump a heap of money into the economy). It’s just now the rumor is that we’re out of this recession, the Fed has to deal with inflation, or come up with an “exit-strategy.” This leads to your concern that the value of the dollar is decreasing.
A decreasing currency isn’t a bad thing in a recession; it is actually something you want to happen. Intuitively, a cheaper dollar means cheaper prices on exports, which essentially increases output, which is a function of work effort, therefore increasing the demand for labor and helping the economy return back to a safe state. I’m curious of the source where you found that inflation, today, is at a rate of 35%, or $1 is 65% of its worth in the past, or $0.65. If that were true, then inflation would have to be at, for as long as I can remember, its highest ever in America. If you go to the Bureau of Labor Statistics, which supplies the inflation numbers you can see that the inflation rate for October is only at 0.3%, which means that a dollar today is worth 0.003 less than last month, that’s not even a penny.
http://www.bls.gov/news.release/cpi.nr0.htm
Going back to the beginning of the recession before the bailouts happen, the GDP Deflator, the method used to calculate the inflation rate, was at 109.69 and today is at 109.89, which is only a 0.2% change in inflation since the recession began. There were no spikes or inflationary pressures causing a mass volatility as your source may have suggested. Since the level is now at 0.3%, this means that prices would have had to of fallen a little after the recession began, and they did:
https://research.stlouisfed.org/fred2/graph/fredgraph.png?&chart_type=line&graph_id=0&category_id=&recession_bars=On&width=630&height=378&bgcolor=%23B3CDE7&graph_bgcolor=%23FFFFFF&txtcolor=%23000000&preserve_ratio=true&id=GDPDEF,&transformation=lin,&scale=Left,&range=Custom,&cosd=2008-12-01,&coed=2009-07-01,&line_color=%230000FF,&link_values=,&mark_type=NONE,&line_style=Solid,&vintage_date=2009-11-20,&revision_date=2009-11-20,&mma=0,&nd=,&ost=,&oet=,
So, I would revisit where your inflation numbers came from, because it could be a bad source for future research. If you find anything different, let me know…cont’d below:
I agree that taxes will increase in the future. But, the cost of an increase in taxes relative to the benefit of not going into another depression would seem to me to be a fairly good trade off, for myself and my future generations.
I disagree that the impetus of a change in demand for “Green Energy” is consumer, or taxpayer driven. Taxpayers do pay a lot of money for oil products, but so do producers. I would think that an increase in the demand for “Green Energy” due to an increase in oil prices would be driven prominently by the overall increase in price to everyone in the economy. Therefore, producers seek more efficient ways to produce, consumers search for more efficient ways to consume, there is an opening in an alternative market so people join those markets and a more optimal alternative to oil would be created. But in economic theory producers and consumers are not only driven by prices. There are many other factors. One of which is called an externality. This just describes the fact that producers produce more than a product. They also produce a by-product (ex. pollution or fertilizer). The by-product, or externality, could be good or bad. In this case, producers using fossil fuels as an energy base are creating an implicit cost that is hard to measure, but is predominately negative and invisible. So, when the costs of using these pollutants are more then they’re worth, Green Energy steps in, possibly by way of the government. It depends upon how much the government is involved as to whether these big companies lean on government contracts. All of this is speculative because Obama has his hands full with Health Care, dealing with the recession, dealing with structural issues on Wall Street, etc…There’s only so much he can do in 4 years.
As far as being both a supporter of free markets and an increase in minimum wage goes, you can’t be a believer in both, it’s counter-intuitive. The market fixes itself by lowering the minimum wage. But, if someone like the government or a labor union steps in, it is not a free market economy anymore. My point is that an economy that isn’t regulated by a governing body is doomed to fail. And, conversely, a government completely regulated by government is also doomed to fail. Ask all of the dead communist governments and socialists that are adapting to mutant forms of capitalism.
In economics there is a theory called learning by doing. It just says the more that someone does something the better they get at it. As far as GM paying their workers over thirty dollars an hour, I’m not sure because I don’t have a source to get that from. But, intuitively and historically it makes sense. The higher wage a person is paid the less likely it is that they will rent seek, or in other words, look for another job. Therefore, job retention, I’m assuming, is higher than other areas of the labor market. Also, I don’t think that the higher wage is caused by greedy GM executives. Labor unions restrict the amount of labor a firm can hire, therefore decreasing the supply of labor, increasing the firm’s demand for labor and ultimately increasing the wage of labor dramatically. Ron Paul supports labor unions:
http://www.youtube.com/watch?v=5cImJmZX74g
And in general, Democrats support it as well. Republicans do not support labor unions and usually are not for minimum wage increases. As a matter of fact, empirical economic facts debunk the widely held belief that a lower minimum wage impedes the working poor. A prominent labor economist, Dr. William Even, finds that the majority of the workers making minimum wage are 16-18. And that as people get older the more their wages increase above minimum wage. Yes there are some in the labor force making minimum wage that are considered the “working poor,” but the percentage relative to the aggregate is so low that there are a lot of other pertinent issues that must be dealt with. You can find Dr. Even’s article summary here:
http://www.epionline.org/study_detail.cfm?sid=16
The idea that not having a central bank is a good thing is hard to believe. The Fed regulates and maintains the general health of the economy; very well I might add, relative to its complexity. They are experts, where as our representatives and congress people are not. So, the thought that there will be a short term spike in inflation when the Fed prints money could intuitively be true. But, without any specific numbers and direction to the source of reference to the empirical findings that show an actual devaluation of the dollar, aside from the normal volatility seen on a regular basis, it’s impossible to assume that these supposed short run shocks have any effect on the long run, let alone enough of an effect to abolish the Fed. As a matter of fact, there have been less bank panics since the fed has been in charge, which seems to suggest a sort of psychological factor as well.
In conclusion, this was a great statement of how you feel on the issues. The only thing that I didn’t agree with was that there wasn’t an establishment of where your sources of information came from. I hope you do not take any of this personal; and all of this material, except for the empirical facts, are idiosyncratic and subjective to debate. I hope to hear from you soon and I look forward to conversing with you more about a wider variety of different topics in the future.
Sincerely,
Joshua Carpenter