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Front Page » May 25, 2010 » Opinion » Hiding and waiting
Published 1,670 days ago

Hiding and waiting


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By Jerry Stotler
Ferron

Editor:

Hooray for Tom McCourt and Mark Hendrickson for their articles in May 18 Sun Advocate. They are right on, except there was no good cop - only bad cop and not so bad cop. Big spender and bigger spender. Big spending Republican and bigger spending Democrat.

Economist John Maynard Keynes (Keynesian economics) believed that governments could and should spend money they don't have to affect and regulate business cycles with fiscal policy. And he believed there were no serious disadvantages to that policy.

Bologna!

There is a pool of goods and services that we all live on, including food, clothing, shelter, investments, everything. (the G&S Pool). Let's assume that the value of that pool is $1 million and that there is $1 million available to buy those goods and services. Certainly we all realize that all money gets spent and a whole lot more in the form of debt. So the price of the goods and services that we use is the sum of all the available money plus the available debt spent on those goods and services. Since all money gets spent, what happens to the price of G&S pool if we, say, double the amount of money available to purchase the G&S pool, from let's say, $1 million to $2 million? Remember, all money gets spent - on what? On the G&S Pool. So then over time that price of the G&S pool doubles. That is called inflation. All the money chases the all the G&S in the pool.

Now I realize the this is an over simplication of an extremely complicated issue, but this an article not a book. Two of the ways to rein in the too much money chasing too few goods and services is through higher taxes and higher interest rates charged by the bankers who print the money and loan it out (the Fed.). If the flood of money is not too fast, the taxes and interest rates can reabsorb that floating money and inflation can be kept under some sort of control. However, if the flood of money is too great, inflation can skyrocket, as we saw in Germany in World War II when people had to rush to the store on payday with wheel barrows full of currency to spend it before it devalued again. That has happened in many countries around the world. Romania, for example, recently revalued their money by knocking three zeros off the of each monetary note to counteract previous monetary irresponsibility. Consequently 10 thousand Lei became 10 Lei. (Both were roughly $3) That is a third method of compensating for massive inflation. Sounds simple enough, unless you had 10,000 Lei in the bank which became 10 Lei the next day.

Our Democratically controlled legislative and executive branches have taken steps that will necessarily cause inflation. They have borrowed trillions of dollars that will be spent into the economy - and on what? On the G&S pool that we all live on, unless of course, some people in Washington do some serious skimming from the top of the money supply, which may be happening. (In Las Vegas skimming is illegal, but in Washington the fox is guarding the hen house and refuses to give an accounting of where the money went.)

Therefore, Americans are in for some serious trouble unless we stop the spending in Washington. If you are on welfare or getting some kind of government handout, you are not safe either.How far is your check going to go if the prices double or triple? For example, what will you do if gasoline goes to $7.00 or $8.00 per gallon? All Americans must become financially responsible. You cannot spend what you don't have without consequences. The time lag may hide them for a while, but they are still there - waiting.

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May 25, 2010
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