In my tireless dedication to 3.2 regular readers, I am providing this map, which will be updated live beginning this evening as polls close, showing you in color-coded splendor as the end of the world happens before our very eyes. Enjoy:
Well, today is the day all the hullabaloo comes to an end and we find out who our next
antichrist President is. I recently predicted a win for Obama, and I’m standing by that. Bush has been pretty bad, and McCain won’t be any better, let’s face it. Not that Obama will…he’ll probably be worse than McCain, but most Americans don’t have the two brain cells to rub together that it would take to arrive at that conclusion. They’ve been so lobotomized by the media that they think any change is good change, and Obama is the Messiah. Ho-hum. I’m glad I trust in God as my provider, and not our nation, or economy…otherwise, I’d be royally screwed…like the rest of America.
I had considered making part 2 of this series about the Fed, and its (unconstitutional) control of interest rates, and the monetary system. However, to truly understand our economic and monetary problems, one must first understand what money is, where it comes from, and how it’s created. I’m not talking about the giant printing presses owned by the Federal Reserve, I’m talking about the intrinsic value that your paper dollar conveys when used to purchase goods and services.
In US history, we’ve had two different types of currency: the gold standard (which we departed from in 1971), and our current fiat currency. Fiat Currency works sort of like your parents’ rules when you were a kid . . . it works because “They said so.” With a currency that is backed by some tangible good with intrinsic value (gold, silver, etc), the dollar is set at a fixed exchange rate with the unit of the good. For instance, when we were on the gold standard, one ounce of gold was worth $35. What happened if the value of Gold went up like it has over the last few years? The value of our dollar went up. Which meant that we could buy more with the same amount of money. If the value of gold went down . . . the same thing happened. We could buy less with our money.
Then our world changed in 1971, and we went to a fiat currency. The dollar had value because the government ordered that it be used in monetary transactions. But with nothing of any real value backing it, it could fluctuate up and down, based on what the market said its value was. Basically, if a Briton looked at America, and saw our financial systems, corporate power, and strength of our economy, and decided that it didn’t compare favorably to the past, he could say, “Yesterday, I was willing to trade 1 pound for 1 dollar. But today, if I give you a pound, I want 1.25 dollars instead.” So, in that way, the international money market determined the value of the currency.
But that’s only part of the equation. In addition to market forces determining our dollar’s buying power, inflation was also at work. Inflation is the economic force that causes things to be more expensive tomorrow, than they are today. That’s why you used to be able to buy a candy bar for 5 cents, now it costs 69 cents. It’s a by-product of economic growth. Prices are based off of supply and demand. If the supply for something is low, and the demand is high (Imagine if there was very little water), you will pay more for that good. If the demand is low (no one wants it), and the supply is high, companies will basically give it away, just to get it off their shelves. If you’re making more money, you have more to spend. If everyone has more to spend, demand for goods rises. If demand is high, as we just learned, prices go up. So, there’s more money in the economy today, than last year, and year before . . . etc. But where does this money come from? What underlying value is increasing, to allow us to have more real money in our monetary system? The answer may surprise you.
It turns out that the very thing we despise the most, debt, is what makes the world go ’round. Money, in our economy, is created by debt. I just want you to take a minute and let that sink in. Ben Bernanke will tell you, somewhat obfuscating the point, that the Great Depression was caused by a lack of credit. This was certainly a contributing factor, and was the primary cause of the length and severity of the depression. Our monetary system was collapsing. The banks simply didn’t have the money to give their customers when they asked for it (sound similar to Part 1’s situation?), and with no credit, there was no way to create money. When the U.S. abandoned gold in 1933, (not to be confused with our abondonment of gold in 1971), we were able to begin recovering more rapidly, by issuing loans, and allowing the amount of money in the economy to rise.
I’m sure right now, if you’ve stuck around to this point, you’re scratching your head and saying, “huh?” Let me invite back Jim Bob to help us demonstrate how this works. Jim Bob needs a loan. He’s been feeling lonely lately, and wants a nice hot new car to get himself a woman (We already know Jim Bob makes bad financial decisions). So he goes to his local bank, and takes out a loan for $25,000. As we discussed yesterday, that $25,000 belongs to you, the person depositing money at the bank. Now, Jim Bob buys a convertible sports car with his money, gets himself a little hot blonde, and rides off in to the sunset. But take a look at what happened. Jim Bob had $25,000. But YOU still have $25,000. If you went to the bank to take your $25,000 out, it would be there, and you could do that. When Jim Bob pays back his loan, he still has a car worth $25,000, the automobile company, still has his $25,000. Let’s follow the money:
You have $25,000 —> You put $25,000 in the bank —> The bank gives $25,000 to JIm Bob —> Jim Bob gives Chevrolet $25,000.
At this point, the bank is owed $25,000, which Jim Bob repays. At the end of this scenario, you have $25,000, and Chevrolet has $25,000. $25,000 was created by Jim Bob’s debt. Good boy, Jim Bob.
And that’s where money comes from. That’s what our economy is based on. It’s a very large and complex system, that balances debt, risk, inflation, market pricing, supply, and demand. Manipulating one or more of those factors, impacts the money flowing freely in the economy, and the value of that money. If confidence in the bank industry erodes to the point where people don’t put in their money, or the banks have no more money to lend out, the system freezes up, and collapses.
Remember the $700 Billion (read $2 trillion) bailout? Where will that money come from? That is the wrench in this system: The Federal Reserve. If you manipulate any of those factors, you manipulate the value and amount of money in the economy. If the Fed floods our system with $2 trillion dollars that it just printed up from no where, what happens? Remember our supply and demand scenario? If the supply of something goes up, people will pay less for it. If the supply of Money goes up, it’s worth less. This makes inflation sky-rocket, and screws up the balance of our economy. But what happens if we do nothing?
Part 3 will be coming up soon, on the Fed, interest rates, and what I think will happen if we convince congress to pass on this bailout.
Perhaps you’ve already seen this clip, but I just had to share it. Obama makes a startling revelation, via a slip of the tongue. I won’t spoil it for you. Go to about 1:20 and just watch and see the truth:
Lately, one of my favorite topics to rant and rave about while at family or friendly gatherings (so much so that I typically make everyone else uncomfortable) has been the Financial Crisis. And with Washington and policy makers playing this giant smoke and mirrors act with the facts, most people don’t really understand what has happened that has led us to this point. Just a couple of weeks ago, people were on the news saying, “Our economy is strong! We’re not really in a recession!” And now we’re on the brink of total economic collapse. “What happened?!” is a very fair question. So…here is a laymen’s explanation:
In the Beginning
To truly understand what’s happening here…we need to look at the precipitating causes of the Great Depression. Now Ben Bernanke will tell you all kinds of things, but what he knows as a basic truth is this: people made really really really stupid decisions with their money. Decisions that not only do we generally hold as stupid today, but decisions that there have been laws against, ever since then. Basically, the stock market was booming. It was seen as a “sure thing” investment, and many people, even your average Joes, decided to start investing. And there was the problem…Joe Blow didn’t have much money to invest…but when he did put a little into the stock market, and saw those dollar signs…there was only one thing to do: Take out a loan, to get more money, to invest. With interest rates low, and returns high, it was pretty much a sure bet that he was still going to make gobs of money.
Credit can be a great thing, when used properly. But it also increases the risk of any investment. If the stock market tanks (which we know it did), then you haven’t just lost your money that you invested, you’ve lost everything. People mortgaged their homes, and took our unsecured lines of credit, to invest in the stock market. When it crashed, they lost it all. Multiply this nationwide, and you see why the economic system collapsed. People couldn’t pay their bills, 1/3 of banks failed, businesses went under. It was bad.
Let’s skip almost 80 years into future, to about a year ago. We have laws governing who can borrow for investing in the stock market, and how much they can borrow, to help prevent another similar scenario. But when the .Com Bubble burst in 2000, and stocks fell, people began looking for other places to invest their money. Because the economy was struggling, the Fed lowered interest rates (more on why this happened in another post), to help stimulate the economy. Low interest rates makes it really easy and cheap to buy things on credit. With 9/11 and the economic turmoil that followed, and rates hitting their lowest points in history, it became almost free to take out a loan and buy some property to resell. The lower the rates went, the more people bought. The more people bought, the higher the prices went. The more the prices go up, the more people look at real estate as a great way to make some money.
What we then saw (as evidenced by numerous TLC shows, like Property Ladder and Flip that House!), was average Joe Blows, with no investment or Real Estate experience, deciding they could make money buying and selling property. They took on massive amounts of debt to do so, and the real estate market began cooling. What we have then, is a repeat of 1929. People made really stupid decisions, took on massive amounts of debt in order to invest, and got screwed when the market started falling. Only this time it’s the real estate market, and not the stock market. People can’t pay back their loans, so banks start losing money. Economic collapse will be forthcoming soon enough.
How did it Happen?
I recently used this example explaining things to a friend of mine. Just to warn you, this is a very simplistic view of how the banking and monetary systems work, but it’s basically the way it goes. Let’s say you have $100,000, your life savings. You go put it in the bank to earn some interest. The bank says they’ll pay you 3%. The next day, Jim Bob walks into the bank, and requests a loan for $100,000, to buy a house. Jim Bob has only mediocre credit. But the housing market has been so great, the bank gets greedy and says, “Hey! He may not be able to pay, but then we’ll just sell the house for a 25% profit! Everybody wins!” The bank tells Jim Bob he’ll have to pay 6% interest on the loan. He agrees, and the bank gives him your $100,000, and he goes and buys the house. Here’s the current situation. Jim Bob pays 6% annually on the loan. The bank pays you 3% on your deposit. The bank gets the difference, 3%, as profit. That’s how they make their money.
Now, Jim Bob was stupid, and got a variable rate mortgage…so as interest rates go back up, his payments begin to go up too. Jim Bob can’t seem to get enough money to pay his bills, so he defaults on his loan. The bank repossesses his home. Poor Jim Bob. But wait… the bank now has lost the income it was getting from Jim Bob, but they still have to pay you 3% on your money. They try to sell the house, in order to get your money back, but the real estate prices have dropped, instead of rising, so they can’t get your full $100,000 back. They can only get $80,000. In the meantime, you’ve been watching the news, and decide that you don’t want to keep your money in the bank, because you’re scared it will go under . . . and you’ve got a little over the $100,000 FDIC limit in there now, so you better move quick. The bank only has $80,000 of your money left, so they have to take $20,000 of their own money (or borrow it from another bank) in order to pay you all they owe you. Imagine this happening nationwide, and you have what happened last Wednesday night. The economic system freezes up . . . people won’t lend money to the banks, because they’re concerned about them collapsing, and the banks don’t have enough cash to pay out to their depositors.
And this brings us to today . . . the banks simply don’t have enough money to give their depositors their money, much less meet all the interest payments they owe, pay salaries of their employees, and stay in business. They were greedy. They made unbelievably poor financial decisions, and took on way too much risk, because they were betting on a booming real estate market. They’re trying to get this bailout to happen, so they stay in business. But this is America . . . a free market economy. The possibility of total failure is supposed to help you make good financial decisions. The Bailout is not the answer. No one will get a home back, because of the bailout. No one will be able to pay their bills, that wasn’t able to previously, because of the bailout. The banks will basically just get to dump off the bad debt, and go back to business as usual.
I’m going to refrain from expounding on my opinions on that for now, and save it for another post. But I hope this has helped shed just a little light on where we’re at, as a nation, and just how dire the situation is. Make no mistakes. We are on the precipice of a Financial Crisis. Perhaps the worst in our history. Bailout, or no Bailout, we are still on the precipice of a Financial Crisis. The form it takes, and circumstances that happen because of it will be different, depending on how or if the bailout happens. But nothing is going to stop this from happening. Next time, I’ll be talking about what effect this bailout may have, and what effect doing nothing may have, as well.
On that note, have a nice day! 🙂
Well, it has been quite some time since I’ve written (and I shall explain about that later), but I felt it necessary to encourage everyone of age to make sure you are registered to vote now. If you’ve known me long, you have no doubt at some point grimaced as I bellowed on about our civic duty as Christians to get out and vote for our leaders, and make our voices heard. To write congressmen…anything we can do to make an influence in government toward better leadership and legislation. One thing I, myself, have never deemed quite important enough to take part in is primary voting.
The Arkansas Primary Vote is going to be on February 5th, 2008 (as well as many other states). This is an incredibly crucial time for us to make our voices, beliefs, and values heard, and to position the right candidate to run for President later next year.
Ron Paul is a Republican candidate that has been typically overlooked by the media. In fact, many of you have probably never heard his name. He’s conservative, against big government, is for securing the borders, lowering and reforming taxes, and allowing us to take advantage of the economic and civil liberties that we are entitled to as citizens.
A candidate touting such ideologies is nothing new, but Ron Paul has the track record to back up his claims. His nickname in Congress is Dr. No, because he refuses to vote for any measure that is not authorized by the constitution. What does this mean for us? This means that the government will stay out of our churches (are you aware that Sen Chuck Grassley is intending to start delving into church finances in a move that will ultimately give the government power over limiting pastors and preachers income, and putting regulations on charitable works?), out of our phone conversations (wiretapping FTW!) and out of our pocketbooks.
You don’t have to go vote for the person I’m telling you to vote for, but I want to encourage you to stand and be counted during this important time. We have Republican candidates who support abortion, increased government spending, increased taxes, increased debt, AND amnesty for illegal aliens invading our borders, endangering our roads, and taking our jobs! These are not the stances that represent me…and probably don’t represent you. So please, whomever you decide to vote for, get educated on your choices and what issues they support, and vote for the issues you want addressed during the next 4 years. If we don’t turn out at the polls in February, we’ll end up with a president from either party who doesn’t support our beliefs.
Remember the date: February 5th! Register now
The lovely wife and I have recently been mulling over what school to put our 3 yr old daughter in, when it’s time to go to kindergarten. I know…right? We plan early. We started putting together a wish list and comparing the pros and cons of our local public school, a nearby town’s public school, and a private Christian school in town when I was hit by a stunning revelation, which I’m sure I will bring up if I ever run for public office. I’ll get to it in a second, first I’d like to outline some pros and cons.
Pros of Public School:
- Theoretically decent education
- Access to better and more classes (at least in our town)
- Real certified teachers (again…our private school is not a "top tier" private school)
- Extra curricular activites galore!
- Bad influences
- Relatively unconcerned teachers
- Easy for underperforming kids to slip through the cracks
- School bombings (hey, it happens)
Pros of Christian School:
- Lower student/teacher ratio
- Smaller sports teams and less competitive environment means all kids get to play
- Teachers relatively more concerned with students, and are stricter on unwanted behavior
- Few or no real certified teachers
- Teens who are growing in their walk with God often have no one to witness to (that’s more important than it seems)
- Lack of many or most advanced classes.
- Teachers of higher level classes seem lost in the subject matter, as few have ever even attended college
In our small town, going to private school for a superior education is not factor. What it boils down to is protecting your kids as best as you can from drugs and other unwanted influences in public schools. Ideally, Christian parents across America would be good citizens and get involved with the PTA/PTO and make changes that reflect our beliefs in the school system. We would encourage teachers that they’re doing a good job, and that they’re making a difference. We would teach our children to stand up for what is right in the face of peer pressure. But what is happening is that many Christian parents are taking their children to Christian schools so they don’t have to "deal with it." I call it the City on a Hill Syndrome. Of course public schools are bad and getting worse…it’s because the light and salt have left and gone somewhere else.
I feel very strongly that I should be involved…but at the same time, all of my daughter’s friends from church will pretty much be going to the Christian school in town. She’ll experience nearly a spiritual desert upon entering the public school system. If she were older, perhaps she could witness to people and win souls to Christ and redeem her on group of friends. But we’re talking about kindergarten here. The good influences are gone. We are forced to choose between two unattractive options: 1. Go to public school where she will have no friends raised in CHristian homes; or 2. Go to the Christian School and accept a sub-par education.
I believe the answer lies in the total privatisation of all schools. I have been the only conservative I know for quite some time who has been opposed to school vouchers. I don’t believe in abandoning our public schools. But what if there were no public schools? What if schools were forced to compete for our voucher money? All schools would be equal. If I valued a good Christian atmosphere and daily Bible studies more than a top-notch education, I would be more than welcome to send my child to the local Christian school. If I was looking for both, or perhaps just a good education, I could compare our current public schools offerings with other schools in the area. Public schools have little to no competition. They have nothing driving them to excel, to be better than they were last year. No…worse, they increasingly are concerned with nothing more than maintaining the status quo, with making sure no one gets killed, and at least most kids graduate. What if their money was really at stake? What if profitability mattered to schools? They’d need to compete for the voucher money that’s out there in order to increase profits. Would they cut corners? Maybe, but parents are smart…it wouldn’t take long for that to catch up and the school to start losing money to competitors. I think that this drastic overhaul is by far the BEST solution for grade school education in this country. I welcome your thoughts.
- The wall between us and Mexico will be extended to cover the entire border. Guard dogs and robots will be used to "neutralize" any fence-jumpers.
- Any illegal immigrants face immediate deportation to Mexico, unless they agree to change their name to Paco and work only in approved Tex-Mex restaurants.
- English as the official language of the United States of America.
- Iraq: America’s 51st state. This serves 2 purposes: #1. Prove that GW never went to Iraq for the oil…but he should have. #2. Cheap oil.
- CIA technology director renamed "Q."
- No smoking in all public buildings.
- Iran and North Korea threat nutralized by throwing water balloons and shouting "Booga booga booga!"
- German candy "Rittersport" will be sold in all Wal-Marts.
That should do it for the first 100 hours. Again, I am grateful to have your vote, Pennsylvanians…you shall always be my top priority, as soon as I find where you are on the map.