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THE ECONOMY. Poll: Economy outpaces war on list of voters' worries. What's the big issue going to be for 2008? Remember the Clinton Campaign Slogan “ It’s the economy, stupid"? That was in 1992 -- the last time the U.S. had an economic election.
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Poll: Economy outpaces war on list of voters' worries • What's the big issue going to be for 2008? • Remember the Clinton Campaign Slogan “ It’s the economy, stupid"? That was in 1992 -- the last time the U.S. had an economic election. • Now, for the first time in more than four years, a majority of Americans, 57 percent, believe the nation is in a recession, according to a CNN/Opinion Research Corporation poll released Tuesday.
What is the state of our economy and how did it get in this condition?
Our Current Economic Condition Many economists say you cannot know if you are in a recession until after it happens; however economists can “forecast” predicted economic conditions. That is akin to the weatherman saying it will rain but the amount of precipitation can only be known after the storm! Here are a few forecasters predications for 2008:
Analysts lining up to predict recession in 2008Talk is rampant on Wall Street and Main Street that we are inevitably headed for a recession in 2008," said Stuart Hoffman, chief economist at PNC Financial Services Group, Downtown.Goldman Sachs sees recession in 2008The unemployment rate will rise to 6.5 percent in 2009 from the current 5 percent, it said.Recession 2008: How bad it can get "I can easily imagine [the economy] going into a free fall," said Dean Baker, the chief economist for the Center for Economic and Policy Research. "The danger is that housing prices continue to tumble and accelerate, people's ability to pull out equity will evaporate, and you'll see a serious downturn in consumption." David Wyss, chief economist with Standard & Poor's, said that among his biggest concerns is that overseas investors could pull back on investing in the dollar and otherU.S. assets.Edward McKelvey, senior economist at Goldman Sachs biggest fear is that home prices could fall much further in the coming months. In fact, Goldman and economists at Merrill Lynch have both predicted that home values could fall another 15 percent, on top of the 10 percent drop from earlier peaks that has already taken place.Paul Kasriel, chief economist at Northern Trust, said he thinks there's a good chance that the economic pullback will bemuch steeper than now widely assumed.Gary Duncan, Economics Editor in Davos, SwitzerlandA full-blown, prolonged recession in the United States is now inescapable, with the rest of the world set to be dragged into a severe slowdown despite this week's emergency cut in US interest rates, leading economists said in Davos yesterday.His bleak prognosis was echoed by Stephen Roach, former chief economist at Morgan Stanley
How Did We Get Here? Hindsight is 20/20 is true in most things, but it is certainly true in economics. A review of our monetary system history and economic comparisons will aid in telling us how we arrived at the present day economic crisis. Along the way we will review Ron Paul’s stances on the important economic issues facing our nation, ending our show with a look at his proposed economic plan.
1913Average Income $1,296.00Loaf of Bread $.06Gallon of Gas $.12Gallon of milk $.36Newspaper $.01Rental of 8 Room House $27.50New Car $490.00New House $3,395.00Dow Jones Index 78
TodayAverage Income $33,517.00Loaf of Bread $ 2.50Gallon of Gas $3.08Gallon of milk $3.13 Newspaper $.35Rental of 6 Room House $1600.00 New Car $27,800.00New House $163,500.00Dow Jones Index 12099
IncreaseLoaf of Bread 4200%Gallon of Gas 2600%Gallon of milk 870% Newspaper 3500%Rental of 3 Bedroom House 5800% New Car 5600%New House 4800%Dow Jones Index 15,500%
Today to have the same life style as the average person in 1913 individual income would be $115,684.29 Measuring Worth.Com The Unskilled Wage Rate is good way to determine the relative cost of something in terms of the amount of work it would take to produce, or the relative time it would take to earn its cost. It can also be useful in comparing different wages over time. The unskilled wage is a more consistent measure than the average wage for making comparisons over time.
After various financial panics, particularly a severe one in 1907, when the stock market fell 50%...
There were numerous runs on banks which lead to the closings of banks and businesses.
A consensus grew in the American financial community that some sort of banking and currency reform was needed.
The reform would provide a ready reserve of liquid assets in case of financial panics.
It would also provide for a currency that could expand and contract as the seasonal U.S. economy dictated.
Which called for the creation of a System that contained both private and public entities.
In 191312 private regional Federal reserve banks were established each with its own branches.
Ron Paul….…..The Federal Reserve, our central bank, fosters runaway debt by increasing the money supply — making each dollar in your pocket worth less. The Fed is a private bank run by unelected officials who are not required to be open or accountable to “we the people.”As a proponent of competition in currencies, I believe that the American people should be free to choose the type of currency they prefer to use. The ability of consumers to adopt alternative currencies can help to keep the government and the Federal Reserve honest, as the threat that further inflation will cause more and more people to opt out of using the dollar may restrain the government from debasing the currency. As monopolists, however, the Federal Reserve and the Mint fear competition, and would rather force competitors out using the federal court system and the threat of asset forfeiture than compete in the market.
What is “Fiat” Money • In economics, fiat currency or fiat money is money that has value primarily because a government demands it as legal tender, in payment of legal liabilities such as taxes, and is insured by the good faith of the government. • One problem with this system is when the Federal Reserve prints more dollars which in turn devalues all the existing dollars in circulation.
How does the Federal Reserve’s fiat money compare to foreign currency.
Value of the United States Dollar compared to the German Mark This illustrates that the government’s economic policies have devalued the US Dollar.
What Factors Cause the Dollar to Lose Value? There are three things the government can do that result in a devalued dollar: Over Spending vs. Government Revenues Borrowing money with interest instead of increasing taxes Instead of the government borrowing money they have the Federal Reserve print more money
This creates the Inflation Tax What is the “inflation tax”? “All government spending represents a tax. The inflation tax, while largely ignored, hurts middle-class and low-income Americans the most. Simply put, printing money to pay for federal spending dilutes the value of the dollar, which causes higher prices for goods and services. Inflation may be an indirect tax, but it is very real – the individuals who suffer most from cost of living increases certainly pay a ‘tax.’” - Ron Paul, 2006
Ron Paul…. Inflation Tax Today, the federal government burdens us with one of the most dangerous taxes it can impose — the inflation tax. When the federal government finds that it cannot afford its out-of-control spending, and is unwilling to directly tax the public, it resorts simply to creating the money out of thin air. Inflating the money supply is the easiest form of financing the government. The Federal Reserve, an unelected and unaccountable private organization, pumps more dollars into the economy whenever it chooses. Because the public is forced to accept these bills, the Fed essentially gets away with legally counterfeiting. We cannot possibly expect the government to control spending when it has a blank checkbook. This greatly benefits the politicians and special interests — they are able to finance the massive welfare-warfare state. But how does this inflation affect you? Basic economics tells us that the more there is of a good, the less valuable it becomes. This is also true of money. The dollar is worth four cents of what it was when the Federal Reserve was created in 1913. Day by day, every dollar you have is being devalued. You pay an inflation tax without even realizing it because you are forced by a falling dollar to pay more for goods and services. The disastrous fiscal policies of our own government, marked by shameless deficit spending and Federal Reserve currency devaluation, are some of the greatest threats facing our nation today. It is this one-two punch — Congress spending more than it can tax or borrow, and the Treasury printing money to make up the difference — that threatens to impoverish us by further destroying the value of our dollars. By legalizing competing currencies, we can end the Federal Reserve’s stranglehold on our money supply and begin to restore value to the dollar. But Congress will continue to spend extravagantly until we the people make our views known at the ballot box.
The money printed by the Federal Reserve in 1913was backed by eitherGold or Silver.
The gold standard is defined as a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold.
The gold standard ended on August 15, 1971, when President Richard Nixon ended trading of gold at the fixed price of $35/ounce.
The following graph shows the effect of this action on gold prices.
The proposed 1909 joint resolution of the 16th amendment is ratified by a majority of the states and on February 25, 1913, with the certification by Secretary of State Philander C. Knox, the 16th amendment took effect.
ConsiderFederal Income Tax1913$0.00 to $20,000.00 ………1%2007$15,650.00 to $63,700.00…15%
Compare NET income after taxes1913$1296.00 less 1%........$1283.042007$33,517.00 less 15% $28489.00
Due to the increase in the percentage of income taxes we only realize an actual increase of 2200% since 1913 in individual income instead of what should be 2800%.
Ron Paul……Working Americans like lower taxes. So do I. Lower taxes benefit all of us, creating jobs and allowing us to make more decisions for ourselves about our lives.Real conservatives have always supported low taxes and low spending. America survived and prospered for 140 years without an income tax, and with a federal government that generally adhered to strictly constitutional functions, operating with modest excise revenues. The income tax opened the door to the era (and errors) of Big Government. I hope my colleagues will help close that door by cosponsoring the Liberty Amendment.
Notice the cost of living rose exponentially with the cost of gold.
SOMETIMES RON PAUL MENTIONS SOMETHING CALLED AUSTRIAN ECONOMICS……WHAT IS HE TALKING ABOUT?.The thumbnail explanation is that booms followed by busts are "inflationary booms". They are caused, not by any real increase in productivity, but by credit expansion which creates an artificial boom. There are two players who can cause inflationary booms: bankers, and governments. Governments cause inflationary booms by printing money, and bankers cause inflationary booms by the fraudulent practice of fractional reserve banking (lending money you don't own, and depending on the government to protect you via "bank holidays" and "deposit insurance" when your customers return to collect their funds, and you haven't got it). As the credit expansion spreads through the economy, it results in artificially low interest rates, which in turn causes entrepreneurs to invest wildly and badly. Eventually, whoever is creating the fake credit expansion is brought to heel. Bankers are generally controlled by a run on their bank. Governments may slow down their reckless money creation because inflation is out of control. Or they may not slow down, in which case they enter the zone of hyper-inflation which led to Germans in the 1920's going to the grocery store with wheel barrels full of money. When the money supply is finally contracted back to it's natural level, there is a period of economic pain called a recession. People are thrown out of work as entrepreneurs realize that they have made bad investments and liquidate them at a loss. Eventually, the market returns to it's natural state, and healthy economics growth can begin. Sadly, usually what begins at this point is more government-backed credit expansion, followed by more illusory prosperity, and another crash.
