Marchbooks' Blog

March 23, 2009

An Economic House of Cards by Janus Kane

Filed under: Uncategorized — marchbooks @ 6:52 pm

I am curious. How many of you out there actually believe that our economy will have any integrity at all when the dust settles? Will the American dollar have any value after this recession has finally leveled out? First the disclaimer – I am by no means an expert. My one undergraduate course in Economics did not go well. I think I recall a C+ for my efforts. But, I have been successfully managing my own finances for over 30 years and I believe I have developed a sense of what works and what doesn’t. I had no love for ‘the Bush administration’. I do like Barak Obama and what he stands for. I think he is the shot-in-the-arm that this country needs. I do realize that ‘doing nothing’, in light of this recession, was not an option.

Having said all of that, I have to add emphatically that I am not in favor of, nor do I understand the current bailout philosophy. This is not the first time we have helped to bail out an industry (several years back it was the Savings and Loan organizations) and it will probably not be the last. But, where is this money coming from and are we placing no restrictions on its use? A wise man once told me; ‘if you are going to give  money – give it with the understanding that you will, in all likelihood, never see it again’. The context here was loaning money to a family member. The banking industry is not a family member, unless we consider it the shiftless uncle that drops in only when he needs some cash, and this money was not a gift. At least I hope it wasn’t.

But, I am not sure. In all of the congressional hearings, I don’t remember any mention of interest rates or repayment terms. How odd that the American people would give money to financial institutions that survive on one thing alone – the interest that they charge us for the use of their money. So now, if I am understanding this correctly, we are giving money to the banks so they can loan it back to us at the going interest rate. ????

I suppose that the original logic was based on the trickle down theory – that these large amounts of money would eventually trickle down and benefit the general populace. Unfortunately, the only trickling seems to be happening within the hierarchy of these major corporations.

But, if we put that questionable plan aside, that still leaves the question of where this money is coming from. How is it that we have suddenly gotten access to over a Trillion dollars that we are free to loan/give to whomever we choose? Is there a little back room at the Treasury where we are printing this special EXTRA money? Is this money backed up by gold bullion? If so, where was it when our government was running a financial deficit of its own?

Again, I acknowledge that math is not my strong suit, but it still does not add up. We had a Trillion dollars sitting around collecting dust while we had elderly who were shivering in the cold, while kids were dying for lack of health insurance and while mothers had to send their children to bed, hungry. I ask again, where did this big influx of cash come from? And while these corporations happily pad their bonuses and use this money unscrupulously, what will it do to the American dollar.

Are we creating a world where our children will have to carry thousand dollar bills around like we carry twenties? Are we edging toward the fifty dollar cup of coffee or the twenty dollar tank of gas? I have to wonder, because that is the one thing I took away from my Economics 101 course – supply and demand. In this instance, have we increased the supply of greenbacks in circulation to the point where they will loose their value? I suppose only time will tell, but one thing seems pretty clear – we are not going to fix our current economic problems by throwing more money at them.

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