The Economy – There is no magic wand!

Today’s labor department job report shows initial claims for unemployment benefits increased 31,000 to 473,000. There are now approximately 14,577,800 officially unemployed Americans. That is almost 9 million jobs lost since mid 2007.  

Further aggravating the situation, the Producer Price Index for Finished Goods rose 1.4% in January. This increase followed a 0.4% increase in December and a 1.5% increase in November. The index for finished goods excluding foods and energy rose 0.3 percent in January. This is a meaningless number as we all require both food and energy. The bad news is about 75% of the increase last month was due to a 5.1% jump on food and energy goods. Prices for finished goods moved up 4.6 percent for the 12 months ended January 2010, their third consecutive 12-month increase.

Here is your warning sign; the 1.4% increase in January could easily translate into a 10+% inflation rate if the trend continues. Unless this is an anomaly we could be on pace for a significant inflation ramp. All the rescue efforts by the Federal Reserve has set the stage for this inflation, so now the Fed is going to have some decisions to make at its next meeting to try to stop it. This is why Bernanke has been saying we’re probably going to have to raise rates soon.

We have dug ourselves a very deep hole. China is no longer buying our treasury bonds and they sold off many that they had. Japan is now the biggest foreign holder of U.S. debt. Now the Federal Reserve holds the biggest share of our total debt, over $5 trillion. With our AAA credit rating at risk, the next step will be to raise the interest paid on our treasury bonds to get new investors. Do you see where this is going? It is a vicious circle. So now the Fed will drive up interest rates to try to stop the inflation and reduce the money supply which will ultimately kill economic growth.

Remember both Bush and Obama administrations said, we must spend to fix the economy. We were told that printing money, borrowing money and spending money would stimulate the economy. We were told not to worry about inflation. Now all of a sudden inflation is barreling down the road at us. We’re repeating the mistakes of many European nations such as Greece, Italy, Spain, etc. all of whom are currently in deep shit! Keynesian Economics do not work!  

Wake up, America! It is time to face the truth. The only way out of the mess we are in is to cut – spending and taxes – a lot! We have built a model that is unsustainable. We have to come to grips with the idea that big government is not the answer – it is the problem. I am not just talking about the federal government either. The federal government will have to reduce its’ services to only those which are essential – national defense, infra structure and basic services. Social programs and luxury pork barrel spending must be eliminated. State governments must get smaller too. States need to narrow their focus to the basic services they should provide. We are going to have to rely on communities to pull together and help their own. People are going to have to learn to fend for themselves. Everyone is going to have to sacrifice to fix this problem. Each citizen must be allowed to keep as much as possible so they can reinvest in their savings, communities and build businesses that will restart the economy. This is the only sane road back to prosperity. The alternatives involve deals with the devil which will lead us to a loss of sovereignty, a world government or some form of socialistic government where we can all live together as peasants.

Restore the Republic, Reject the Agenda of the Progressive Left, Eliminate Big Government! This is the only answer. 

“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” – Ronald Reagan  

“Entrepreneurs and their small enterprises are responsible for almost all the economic growth in the United States.” – Ronald Reagan

2 responses to “The Economy – There is no magic wand!

  1. Oh so true. I don’t know if you read anything at http://www.mises.org, but they are against Keynesian economics. The whole Federal Reserve and federal government interference with the free market system has caused most of our economic problems.

  2. Pingback: The Economy–There is no magic wand!…. | Project World Awareness

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