A vehicle for venting on philosophy, religion, and the general state of things. Proprietor: C. W. Powell

Saturday, February 14, 2009

Economics 101

There are only three ways the United States Government can get money. It can borrow it, tax for it, or print it. In reverse order:

1. Printing is really a tax on all the people that cheapens the money. This can been done a little at a time and prices will gradually increase. But people catch on after a while and they push for cost of living increases and such, so that the inflation does not work. If massive printing takes place financial institutions are destroyed including government banks. People pay off old debts in cheap money which will not buy anything. The open market disappears, black markets proliferate, liberty as lost as the secret police intrude into everything. Modern nations do not inflate primarily by printing but by easy credit and marginal reserve banking. The result is the same, but saves paper and ink.

2. Taxing is not politically valid, for the people will not stand for it, nor can it survive economically. If the rich are taxed, the money goes into hiding, off shore, in foreign investments, in long term investments in gold or silver, etc. The rich have ways. Most taxes on the rich are paid for by the lower classes because the rich just pass the taxes on through in the cost of goods and services. Business men must count them in the cost of doing business and pass them through to their customers. A little wiggle room can be achieved by lying to the people, promising tax relief until after the election and then reneging on the promises. The government has a couple years until the next election. Jobs and industry move overseas, and people blame the "evil" businessmen for taking their jobs overseas, because the people are too ignorant to see that it was government taxation that sent the jobs overseas.

3. Borrowing is even more destructive. The lending market always responds to supply and demand. If the demand for money exceeds the supply, the price of money [interest] goes up. This increases government budgets as the rates go up and up as they did in the Carter administration. This also slows business, because they must stand in line behind the government in order to borrow money and they must pay a higher rate. The economy slows, only helped a little by government money poured into favored businesses and banks to keep the inefficient ones alive and working. These compete with an unfair advantage over those who are not favored, but efficient, so that the quality of goods and services decline. When the inevitable scandal occurs, instead of seeing the villain in government, the government proposes more rules and regulations and government supervisors to see that quality is maintained. Just like Freddie Mac and Fannie Mae. The results are boringly predictable.

Solution. The problem is the people, and the people must provide the solution. As long as the people make government their god and the president their savior, there is no hope. The cycle will continue and Babylon will be overwhelmed in debt, despair, and oppression. The people must cast their gods to the moles and bats and look to the God who created them to provide their daily bread and the necessities of their lives. They way they are to do this is described in Eph 4:28 "Let him that stole steal no more: but rather let him labor, working with his hands the thing which is good, that he may have to give to him that needeth."

The foundation of economic health is not living off the labor of others [as government does] but doing honest work and showing kindness to those around you. Simple, isn't it.
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