Economics 101

Dear Liberty;

Someone once told me that you couldn’t run the government like it was a business… sadly, this individual was one of my college Political Science professors and needless to say, I spent the next several minutes offering my opinion as to why I believed that he was incorrect. Keep in mind that he was of the school of thought that Jimmy Carter was an economic genius…nuff said.

For those who subscribe to the discipline of “tax and spend” let me point out some basic principles that fall under the category of common sense rather than political philosophy.

COMMON SENSE PRINCIPLE #1

YOU CAN NOT SPEND MORE THAN YOU TAKE IN and expect to have enough money to continue to pay all of your bills. UNLESS you plan on borrowing money to cover the gap between what you earn and what you pay out.

Here in lies the problem…remember that when you borrow money there is a thing called interest and interest actually increases your debt, ergo decreasing your net worth by increasing your income to debt ratio. Borrowing money to pay your bills is an economic term known as “kicking the can down the road” but ultimately the chickens will come home to roost and the time will eventually come to pay the piper…for those of you who are considering the concept of borrowing money and investing it with the hopes of covering the cost of the interest AND turning a profit…that’s just plain dangerous and its done on Wall Street every day…it’s gambling and not a sound business practice especially when you are speaking about gambling with someone else’s hard earned money (mine and yours)…so what to do? This brings us to our second principle.

COMMON SENSE PRINCIPLE #2

YOU CAN’T PRINT MORE DOLLAR BILLS and expect them to hold their value. Remember the concept of supply and demand? The more there is of something, the less expensive it becomes. Well, the same principle holds true for our dollar bill. While increasing the physical number of dollar bills into circulation creates the illusion that there is “more money” the fact of the matter is that the actual value of each dollar decreases…and it actually decreases in direct proportion to the number of bills that were increased (printed).

Now, since the dollar has a physically decreased value it makes it appealing for countries like China, who have a huge export surplus, to purchase extremely large quantities of our dollar bills on the open market…after all, our dollar is a tradable commodity. This sounds good on the front end from a supply and demand standpoint and the thinking person might ask “well, doesn’t the mass purchase for our dollar increase its value while at the same time limiting the supply and again increasing its value?”. Not so fast, the answer is yes, but for a short term only. Remember, now there is less money in circulation and so the tendency is to???…You got it…Print more money. Now do you see what begins to happen?

What happens when the “investors” want to call on their investment? In other words they want to sell their dollars and make their profit…Right again, more dollars back in circulation and more than there were to begin with and therefore a further devaluation of the dollar.

Remember when the dollar is worth less it will take more actual dollars to purchase the same product, to make the same product, to market the same product…on and on and on. So companies find ways to cut costs because their materials are more expensive, their labor is more expensive…quality goes down, staff is reduced, unemployment goes up, less products are purchased, prices go up to “make up for lost business”…hmm does this scenario look or sound familiar?

Not So Common Sense Principle #3

The “green thing” happens…while on the outset it sounds like a wonderful concept… “We’re going green!” hmmm everybody loves the idea of saving the environment and being “responsible” (Not just Liberals) but face it, no one likes inferior products either…no one likes opening a bottle of water and having it squirt all over their clothes because the bottle is feeble…that’s a result of “green”… A company will claim “We used less plastic in making this bottle” to appear to be environmentally friendly. Even though they used less plastic they will still charge their customer the same price while the consumer gets the crap end of the stick and the wet lap.

Here’s the funny thing…in an effort to “save the environment” our plastic bottle manufacturers use less plastic; about 1/4 less plastic per bottle in fact..but they have produced almost twice as many plastic bottles as before the “green movement”. The fact is that there is just as much particulate matter put into the atmosphere from manufacturing the “green” plastic bottle as there is with the “un green” plastic bottle (the quality bottle)…but there are more of them being made…umm…ya more pollution…less green…and right again, more profit for the inferior product at the expense and aggravation of the consumer…even the green consumer.

Dear Liberty, can we just start applying a little common sense?