FROM THE PEA PATCH (Economics for imbeciles…like me)

Okay, it’s the Federal Reserve, Fannie Mae, Freddy Mac, the House and Senate Finance Committees, the Mint, the Federal Deposit Insurance Corporation…and on and on and on.  So, you think our economic system is a little complicated?  It’s only because we’ve allowed it to become so…the fact is, it’s very basic, and if we understand those basics, maybe we can straighten out the mess we’ve allowed it to become.

It’s time we went back to basics.

I’m not an economist, or a mathematician, or a statistician or actuary; I’m just an ol’ country boy who, I hope, knows right from wrong and tries to do the right thing.  And it seems to me there are some basic laws of the universe that we must respect, like it or not.  Like gravity, and knowing that water will seek it’s own level, and such as that….   Like economics,…and the basics of that so-called science are not so complicated as you might think.

There are some basic laws of economics that have seemed to drive mankind since he discovered that if he worked hard and grew more squash than he could eat, he could trade some for Igor’s fish…as Igor caught more fish than he could eat, even if he dried some for the winter.

So, trade, supply, demand, price, utility, emotion, money, interest, debt, are all part and parcel of what developed from that first trade of squash for fish.

Trade started it all.  And how many fish you could get for your squash depended upon how many fish Igor had, how fast he had to get rid of them before he added value by drying them, and how many cousins Igor had who also wanted squash for their fish, so supply and demand became a factor of trade.  And that factor was price, and price was simply how many squash you had to give up to get as many fish as you wanted.

Utility was also a factor.  What could you do with what you got.  Of course you could eat fish with your squash and satisfy that basic need.  Could you trade fish for grain?  You bet, and you could make bread, and maybe more bread than you could eat, and you could trade it, and on and on.

But utility was not the only basic factor of trade.  Emotion has long been a factor of economics.  If your woman wanted a necklace of beads, you could trade squash for fish and fish for beads, and that fulfilled her emotional need, and consequently some of yours.

Of course utility was always more basic than emotion.  Best illustrated by the man dying of thirst on a desert island.  Offer him the Hope diamond or a gallon of fresh water and see which he takes.  Utility is more important, more basic, than emotion.

So where does money fit into the equation?  Well, squash and fish both spoil, so there needs to be an element of trade that doesn’t spoil, and more so, can be traded for fish and traded again across the lake.  All money is…is a medium, to fit in between trades.  It’s the vehicle that spans time and distance.

And money, too, is subject to supply and demand.  If there’s too much money out there, money is not as valuable as if there’s only a small amount.  And that’s why those who govern trade, which we’ve allowed, probably mistakenly, our federal government to do, can’t merely print money drunkenly.  The more dollars that are merely printed, the less valuable they’ll be…and that’s inflation.

Who cares how many dollars there are out there and how much they’re worth?  Those on a fixed income of dollars care, for those dollars they receive will buy less and less as the supply of dollars increase.  And those who have saved their dollars will find they are worth less and less, particularly if interest rates are artificially held low so money is worth very little.

And money has value, and interest is the value of money.  What will you pay in order to use someone else’s money to buy squash to trade for fish to sell to make more money than you borrowed so you can pay back the loan and the interest charged thereon and have some left over as profit.  When there’s too much money out there, it’s worth less and will earn less in the way of interest, so those who’ve saved their money will receive less for it, and that will discourage the saving of money and that will mean there is less money to borrow to buy squash to trade for fish…or basically less business.   Another reason not to merely print money.  In fact, it will mean that profit is less valuable, and that’s a catastrophic thing to happen to a free enterprise economy such as the United States of America.

All this is leading in a big circle from the time that first harvest of more squash than the grower could eat to now, when we have a government who’s paying no attention to the basic laws of economics, to free enterprise, to self-reliance and freedom.  To your savings and mine, and to the fixed income of retirees.

The first failure of government came when they allowed themselves to incur debt.  When the first federal agency thought they could operate merely on the good faith and credit of the United States of America, and not on sound economic principals.  That means “business like.”  Borrow money, okay, but pay it back.  Operate within your means.  Budget, a unique concept wherein you pay your costs out of income and even if you have nothing left, i.e. profit, you’ve broken even so you don’t end up in debt.  Actually, those aren’t unique concepts, but were born from the first time Igor didn’t receive the squash he was promised and beat the bejesus out of the debtor with his fishing pole—we should have learned from that lesson.  That’s basic economics.  And to be truthful, I’d like to beat the bejesus out of most those in Congress, past and present, who’ve incurred $10,000 in debt this year for every man, woman, and child in the United States of America.  Who now have a national debt of $40,000 for every man, woman, and child in the United States of America, presuming there are 350,000,000 of us and $14,000,000,000,000.00 in national debt…that’s fourteen trillion, in case you get lost in the unfathomable numbers of zeros as do I.

When Social Security was established, money was taken from workers for their retirement.  Had that money been invested with sound economic principles, then income in the way of interest would have been received and those accounts would have built up until, when retired, Social Security recipients could receive a monthly stipend as they were no longer working, but a stipend earned by the money they’d deposited, entrusted, to the government.  How much could they receive?  It depends, or should have continued to depend, upon how much was paid in by that prospective recipient.  A hard concept?  Not hardly.  But a sound economic one.  Except when you consider that Congress does not operate on sound economic principles.  They pilfered it, stole it, bought votes with it…that’s your Congress, ladies and gentlemen past and present.

And we allowed an “entitlement” mentality to invade our sound economic principles, and to overrule them and common sense.  When did it become mandatory to pay someone retirement or any benefit that wasn’t economically viable, that didn’t comply with the laws of economics.  Now, public employees, receive a retirement that equates to more than the value of all the pay they received during their so-called service.  Let’s say, for instance, that a man worked twenty years as a police or fire chief, and retires (as one I am familiar with recently did), for an annual sum of $160,00 a year.  The current value of money, i.e. bank savings rate, is ¾ of a percent.  That’s what you receive on your savings.  That police chief would have to have deposited $21,333,333.00 in the bank in order to receive that amount annually.  That’s $1,066,666.66 a year for every year he served.  That’s most likely ten times what he earned, gross, during that period.  Ludicrous, you bet it is, and that’s what’s breaking most of the states in the union.  That’s what we get for trusting our elected and appointed officials, and we should take a club to them all.

This ol’ country boy is no mathematician, but he can add and divide and multiply, even though he doesn’t have enough fingers and toes to keep up with current numbers.

Had Social Security, the Federal Deposit Insurance Corporation, Fannie Mae, Freddie Mac, and all the rest of the federal agencies been operated on the sound economic principles under which they were founded, there would be no economic problem in the United States, no fourteen trillion dollar deficit, no spending of more money in the last congressional session than in all the prior congressional sessions combined.

It’s time to get back to basics.

Whose fault is it?  Well, who held the purse strings?  Congress, that’s who.  Congress, who obviously can’t read the clear language of the Constitution, the ultimate law of the land…or is supposed to be.  And the Supreme Court, who’s mission was, and should be, to make sure Congress and the Administration operate in strict compliance to that document which is the law of the land, which is the guiding light that allowed this country to become the go-to country in the world, the most economically successful, the most giving, the most sought haven in the history of mankind.

And it’s the fault of every other elected and appointed government official in the land, state, county, city, who didn’t and doesn’t operate their trust under sound economic principles…i.e. pay as you go.

And under the Constitution.  It’s the basic law of the land, the only original law of the land, and we must get back to basics.

It’s time we rebel if Congress does not operate on sound economic principles.  It’s time we fire any administrator in government who doesn’t operate on sound economic principles…in case you’ve forgotten, that means within budget, and budget comes from income, not some mythical number selected by Congress or state, county and city officials who we already know can’t count, and can’t read, or they’d follow the basic law of the land, the Constitution, and the basic laws of economics.

It’s time we made damn sure we get fish for our squash, not empty promises.

It’s your fault and mine,…we’ve been imbeciles as well.

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