Economics For Dummies Like Me

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What happened? Here we sit on another morning with news that the stock market dropped another five hundred (500) points yesterday and there’s renewed talk of another recession in double-digit percentage figures. What is that supposed to mean? Anything we have is falling away from us like Monopoly game play money while most of  the pundits in the media sit back in apparent opulent splendor and tell us just to stay cool as we quickly convert at least fifty per cent of our holdings into something liquid and away from stocks.

I’m one of those economic dummies who doesn’t quite understand all the laws of flight and gravity that effect our cash flows and real wealth in this world, if there is such a thing. When the market goes up, the gains never seem real to me – and that may be the front load on my problem because, when the market crashes, that also hardly seems real. And, in my lifetime, at least, if we have the ability to leave a stable, but still dynamic investment package on its own for a while, in time, the ship rights itself and everything is fine again.

Did some people ride out the Great Depression that way? Or were most people hit with stock losses that never recovered? I sure don’t know. I just have a hunch that our current problems stem from these fairly apparent factors: (1)  We no longer make the things we and the rest of the world needs. Our manufacturers have either folded, sold out to foreign concerns, or else, they’ve out-sourced the making of things to cheaper working forces of other countries. (2)  Our American cost of living has been inflated by the matching greed of management and labor. High level bonuses and salaries for CEOs and labor union pay scales have created a need for more  in dollars than we actually have. (3) Add to the debt pile our preference for running up a mind-boggling tab to pay for all the costs of entitlement programs, military budget rip offs, the high cost of running two and one half wars overseas concurrently while also serving in currently “peaceful” areas as the world’s policeman, the cost of education on a lifetime marriage of our children to student loan debts, the cost of transportation and home heating bills, the eventual trap to medical and drug bills that awaits us all and – what can we do to make things better?

Last week’s debacle between the forces of liberalism and conservatism was the most embarrassing display of special interests in conflict with each other that we have ever been forced to endure. Those people weren’t fighting for us – neither of them. They were battling to set this country up for the next presidential election in 2012.  I can no longer abide either camp, but, like the res of you, what good choice do I have beyond either?

In my simple way of thinking, we got into this mess years ago when we started operating as a nation like a young adult or married couple with a brand new credit card. What we thought we wanted, but lacked the cash to purchase, we simply put on the tab with no real plan for how we were going to pay these bills over time. This growing tab, plus interest, came to be known as our national debt.  Getting new programs for one’s vested interest constituents came to be the important thing a congressman could do to gain support for reelection – and getting reelected was far more important than the extra damage that was being done to our national solvency by a growing national debt.

Pretty soon, somewhere in the early 1960s, we simply became a whole society living on credit cards. Whereas, some of us are old enough to have grown up in families who bought only what they could pay cash for, we became a nation which didn’t stop at home mortgages and car loans. Now it’s everything. The other day, I found myself in the movie concession line behind a woman who was buying a bag of pop corn with a VISA card.

I may be wrong on this next step, but I don’t think I am. When a nation lives on credit, spending money they don’t actually have, it becomes necessary to print up paper money that is isn’t actually backed by gold or any real existing form of wealth. This “federal note” money represents little more than a promise to repay the redeemer with actual value, if the demand is made, but even governments like the USA have to back up their words with something tangible. – The USA does it with loans of real value from China.

What would happen if China called in their notes today? Would the USA be forced into foreclosure? Or would we just have to go into a war we always have said we never wanted?

I don’t have the answer, but I think we need to take these steps: (1) Go to a balanced budget in which we only have expenditures that we pay for with real income; (2) Do what we have to do to make sure that everyone pays their fair share; (3) Stop acting as the world’s policeman and stay out of wars as much as possible. We are not going to resolve thousands of cultural feuds with brute force, nor are we going to make every country we occupy democracy-ready before we leave. The more frequent result from that policy is that we shall end up in places we feel we ca never leave. (3) Stop foreign aid payments, except in the case of specific disaster relief payments. We buy neither love nor support from foreign aid. It is nothing more than a form of international extortion. (4) Adjust our corporate costs and labor-controlled income levels  so that we again can afford to make things that produce real income from American companies and labor. (5) Get back to educating our children through colleges with systems that are affordable to young people. As things now stand, university fees and student loans make most students little more than the cash cows of the universities that exist first to serve their own self-aggrandizing interests.

That’s all I’ve got. In a sick world, it’s time for America to take care of America.

5 Responses to “Economics For Dummies Like Me”

  1. mike Says:

    A few facts that you might wish to keep in mind- The last US Presidential administration in which we did NOT have a national debt? Andrew Jackson. That is not to say that all governments, like ALL corporations, doesn’t waste tons of money in many areas, but it is to say that the fact that we have a deficit is way over hyped for political purposes.

    Most US debt is owned by Americans, not foreigners.

    Pay disparity is at an all-time high. The average CEO of the S&P 500 companies received about $11.4 million in compensation last year, a rise of 23% in one year. Average American worker wages adjusted for inflation have declined over the last three decades. Or to rephrase- their take home pay, adjusted for inflation, is less than it was in 1979.

    In 1965, the average ratio of an American CEO’s wages to his workers wages was 26 to 1. Today it is well over 500 to 1. To put that in perspective, in Japan it is closer to 10 to 1. In Britain around 25 to 1.

    The financial worth (net worth minus the value of the primary residence) in the US breaks down thusly according to 2007 figures: Top 1% owns 42.7%; next 19% owns 50.3%; bottom 80% of Americans own only 7% of the financial wealth. That is in no way a healthy system.

    Stock brokers make money when the market rises, and they make money when the market falls.

  2. Pat Mulvihill Says:

    If we are a country founded and based on the concept of Liberty, then theoretically everybody should embrace that and build from there. But true Liberty is hard, which is why so many run from it’s responsibilities.

    The desire for security, guarantees, and “fairness,” over opportunity and personal responsibility have brought us to the edge of the abyss. Sadly, we remain unwilling to address the core problems which have led us to this point.

  3. Patrick Callahan Says:

    > > > the system is broken, career politicians need to go, term limits and prospective candidate background checks need to be legislated – however who are we going to find that will promote such laws – it’s like asking them to fire themselves – well that’s the way it should be – work them selves out of a job by making good – reasonable decisions for the voters and not for there own well being; how in the hell did people like B. Frank and C. Dodd reamin in office so long/ – the corruption is deep – and if it can be rectified it will take a long time and/ or some drastic changes

  4. BECKY WYATT Says:

    YOU’RE RIGHT ON DR BILL. WE’LL SEE WHAT THE FUTURE BRINGS..

  5. David Munger Says:

    It’s the Proverbial, ” this generation is going to HELL
    in a handbasket”. Handbasket? you can tell that saying has
    passed through a few generations.

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