Jeremy J. Jones – Stranded in Thought

May 9, 2009

I’d Like Some More, Please

Filed under: Opinion,Politics — Jeremy @ 7:41 am

Another $75 billion for the banks is needed. Brilliant. Let’s give them $150 billion for good measure.

There are roughly 300 million citizens in America. $75 billion divided evenly among them is $250 per person.

But wait. Since the banking crisis began, the U.S. government has given out over $2 trillion to needy companies, many of them banks. So again, let’s do the math: $2 trillion (by the way, that’s 2 million times 1 million) divided by 300 million comes out to $6,666.67 per American.

Since we’ve “injected” this $2 trillion into “the banking system,” basically nothing has happened. I suppose the number of jobs lost is slowing, but there were still another half-million new unemployed people in April, so I don’t see what this amazing expenditure has provided us but a greater tax burden.

Suppose that instead we had given $6,500 to every American citizen? (Notice I used the word “citizen”; that’s another article for another day.) It’s theoretically possible that Americans would have been too afraid to spend any money, and instead would have shoved it under their mattresses; if that had happened, we’d be no worse off since that’s essentially what banks have done. But more likely, people would have spent like they’ve never spent before. $6,500 is a huge amount of money to most Americans, and people would have used that money to buy cars, pay down debt (including their mortgages), go on vacation if so inclined, and so on. This would put something like, let’s say, half that $2 trillion directly into the economy.

Of course, that could cause severe inflation, so it could be a dangerous move. But the amount of money that would have been directly given to businesses, small and large, and by extension banks in the form of cashflow would have been far greater than it is right now, so we might have been better off risking the inflation; besides, all us middle-class people know very well that prices aren’t going through the roof on things (check the price of lettuce, or milk, or flour lately?).

I think our political leaders suffer from the same misconception that most Americans do (so at least they seem to represent us in this way): the stock market and economy are controlled and fueled by banks. That is false. The stock market and economy are fueled by consumers. That is a free-market economy. If these things are controlled by banks, we are going down a very dark path.

It’s basic economics, but most of it don’t understand. If we buy less as an economy, prices go down and vice-versa. It’s important to note that the “economy” is now global. It’s not enough for America alone to change things these days; we have China, India, and Europe that influence things greatly as well. But if everyone understood principles and applied them, we could resolve this crisis.

Let’s take gasoline for example. Last year, it increased until the American national average was more than $4.00 per gallon. Then something amazing happened. People worldwide started using less gasoline, and the price of a barrel of oil dropped from about $150 to below $60, and gasoline dropped back below $2.00 for the first time in years. We can talk about speculators and their effect on crude oil prices if you want, but I believe we are responsible for price fluctuations rather than some group of greedy people somewhere who are trying to ruin us.

So, with gasoline below $2.00, what happened? The world, with its typically short memory, has gone back to the old times. We’re using more gasoline, and the prices have been steadily climbing for weeks. This will continue until people get wise to the way capitalism works again, and the prices will fall. Hopefully, we don’t end up in a depression from it.

But that’s the way a free-market economy works. We buy more stuff, and prices are raised so increased revenues can be used to make more, because the supply has increased. This also has the counter effect of decreasing the growth of demand, so companies can continue to meet that demand. When we buy less stuff, prices go down to encourage demand, and therefore, companies have to decrease cost; the easiest way to do that is with mass layoffs. If we spend more money, jobs are created and kept.

I realize there are an awful lot of newly-unemployed people out there; my wife is one of them. I’m not talking to them. I’m instead speaking to those of us who have as of yet been unaffected by the recession in this way. We should be finding ways that make sense for us to put our capital into the system and thereby create jobs. Of course, this would have been much easier if we’d all received $6,500 per person in each family.

Let’s not forget that it is the People who control the American and the world economy. This means all people: American, European, Asian, Australian, and African.  We are all in this vehicle together, and we’re letting a blindfolded idiot drive the car. It’s time we dropped that guy off at the next bus stop and took the wheel ourselves.

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4 Comments »

  1. You make some interesting points, Jeremy. Especially: “We can talk about speculators and their effect on crude oil prices if you want, but I believe we are responsible for price fluctuations rather than some group of greedy people somewhere who are trying to ruin us.”

    Causality aside, would providing cash to the public address the question of the financial markets, through which money flows? In other words, how would your plan affect money market funds?

    Comment by steve — May 9, 2009 @ 11:24 am

  2. Good question, Steve. It more than likely wouldn’t. That is really a whole other discussion.

    Probably the biggest reason that the People aren’t controlling the financial markets is because collectively, we don’t understand them very well. We trust what all the expert analysts tell us because it’s easier than learning the information for ourselves. As a result, we’ve been led wildly astray.

    If we fail to properly educate people on these matters, then government fails at its most basic level. I feel government serves three purposes: protection, the defense of that state’s borders; administration, mostly because it costs money for defense, and therefore taxes must be levied, and therefore someone must administer them; and finally, but probably most importantly, education.

    However, this is not to say that a government should administer the educational system; we’ve all seen how well that is working. Rather, government should set visions for educational goals (with wise advisers, of course) and see that those goals are met. Notably, this education starts with the adults, not the children. The best way to correct hardships in a community is to first educate the adults, then have them help educate the children. A school cannot do this by itself. Governmental action in the form of real, substantive outreach is necessary to address the lack of education in many areas.

    Once that system is in place, we should be teaching people how their checkbook really works, how compound interest really works, and how the stock market really works, all starting in middle school and continuing through high school. We should encourage and incentivize all people to go to college, and see to it that everyone has that opportunity, but we should not rely on college as a gateway to such basic, critical knowledge.

    For too long, our educational program at the seventh through twelfth grade levels have taught only basic concepts, albeit many of them, relying on college to teach people the real nuts and bolts of things. This fails to recognize that more than half our population does not attend college for various reasons. As a result, we have a largely under-educated populace who simply doesn’t comprehend how the world works.

    And by the way, better education on all fronts could help with defense as well; if we were a touch more aware of global events and their significance, we might not have some of the troubles we do in America.

    Comment by Jeremy — May 9, 2009 @ 3:10 pm

  3. Good points, I agree with it all. We need to stop letting idiot politicians run the country an find people with real knowledge to do it.

    Comment by Merriweather Jones — May 18, 2009 @ 12:05 am

  4. Don’t even get me started about idiot politicians. If I can achieve one great deed in my life, it will be the simultaneous failure to reelect all incumbent politicians in America.

    I realize that will be a tall order. But it would sure as hell get some politicians’ attention.

    Comment by Jeremy — May 19, 2009 @ 5:50 pm


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