A Bunch a Maroons, they are

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Not often I write here, anymore (now that I've got all these 'apps' that hook everything to everything).

But I wanted to point out that what's about to happen was written in stone from the get-go.  I had no idea I understood economics so implicitly (my professor in college's opinion notwithstanding).

Governments lie.  That's the way it works.  If they told the truth, very little at all would ever change.  People don't want change (says so in the Declaration of Independence, right up front).

So it should be no surprise to you, gentle reader, that the lies about WMDs in Iraq were false.

Just like the lies about the Vietnamese attacking American ships were false.

More important are the lies that keep us the way we are, rather than motivate us.  For instance, when I grew up, I was trained to believe that the reason that America was in the position we were was because God wanted freedom to triumph over dictatorship.

I was trained that the reason we were so prosperous was because of God's grace and American 'know-how and ingenuity'.

These lines are as false as the ones that drive us to war.

During my teen years, America fell into a 'malaise' which was 'cured' by the Reagan Revolution, and that 'cure' caused the fall of communism.

So, let's set the facts straight.

The 'rise' of America was based on a simple set of facts:  We were the only industrial power not ravaged by world war, and we were the only country left with MONEY at the end of the war.

AND, we became the world's 'reserve currency' as a result.

That last item is the part which we need to attend to most.  There's a curious problem called 'The Triffin Paradox' which comes to bear most in this issue.

Now, back when I was a kid, and I was first learning about this stuff, I realized implicitly what we must do as a nation (tighten our belt and find ways to spend less).  This is actually the only proper solution to the 'dilemma'.  I didn't know that the problems in Britain were caused by this same equation playing out with the Pound Sterling, but it was.  The Seventies was an interesting decade.

This was when we were still the largest creditor nation on earth.  This is when gold settled to about $200 an ounce (was $42 when I was a kid--but Vietnam, yano?).  A loaf of bread was a quarter, as was a extra size comic book.

Then, that brain-damaged idiot, Reagan got into office, with his 'voodoo' economics, and did exactly what Triffin said not to do.  He borrowed us into 'prosperity' (it's really the only way to deal with the trade-deficit problem of being a reserve currency).

Reagan turned us from the largest creditor to the largest debtor on earth.  Not many people give him credit for that, but they often give him credit for what the Germans and Russians did in spite of his help (free themselves).

So, in short, what he set up was the fall we are about to experience.  You see, the fact that we've printed dollars twice in this administration has our 'friends' a bit skittish.  One doesn't want to hold a reserve that loses value.  They will stop doing it soon (probably on the next printing run).

Then, we will stop being a reserve currency.  We will have to do as the other countries do (pay as you go).  We can print more dollars, but nobody will want them.

There was a BIG economic summit last fall.  We weren't invited.  We are not going to be a reserve currency for much longer (less than a decade by that article).

And then, we will be RIGHT back where we were in 1980, except for one little difference.  NOBODY will lend us any money anymore.  So we'll finally have to do what Jimmy Carter ran on, austerity, taxes, and common sense.

One other good truth to point out?  Iraq, Iran, and Venezuela all committed the cardinal sin (also not very often reported).  They started accepting payment for oil in Euros.

One other interesting fact to note is that there's oil off the coast of Vietnam, and we've known this since before that war.

The other half of this problem is inflation.  Inflation is a way to tax the poor.  Rich people don't have their wealth in cash, they have their wealth in investments (which have cash value, but aren't cash).  Rich people mostly like not having to pay for poor people, and generally always have.

Now, the fact that it exists at all is wholly and utterly unconstitutional.  If you examine the parts which deal with money, it very clearly says that the Congress will set the value of money.  It hasn't done that properly since the creation of the Federal Reserve System.

It's not that the Fed is a bad idea, it's a really bad implementation of a good idea.  The only real problem is that it's not owned by the government.  If it were, then we COULD set the value of money, and the job of the new Fed would be to destroy excess money, and create needed money, depending on the situation.

In other words, in times of inflation, government should tax and destroy money.

In times of deflation, it should create money and lend it out at interest.  That interest should be returned TO THE GOVERNMENT (not to a bunch of privately held companies).  One might even construe that (well run), taxes might not be necessary to achieve deflation.

In any case, the way it should work is the Congress should say how much a dollar is worth, and the Fed's job is to keep it that way.

That way, a penny saved again is a penny earned.  Right now, if you have dollars, they are about to turn into potential origami art.

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This page contains a single entry by writch published on January 2, 2011 8:06 AM.

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