Thursday, March 11, 2010

Why the Tea Parties ?

50% of us have two primary complaints.
1. The government has printed money and inflated prices by over 4% every year for the past 40 years We can easily debase the currency by printing more money and we’ve done so undetected at the rate of over 4% per year for the past 40 years. In 1968 new cars were $2,000, now they’re $20,000. Houses were $30,000, now they same house is $300,000. Family health insurance was $600 a year, now it’s $12,000 a year; College tuition was $900 a year, now it’s $18,000 a year. Health Care and Education inflated 8% per year. A good family income was $10000 / year, now it takes $100000 / year. Most large purchases are 10 times higher than they were 40 years ago, except for health insurance and education; these are 20 times more expensive. The way to confirm changes in inflation is to look at the growth in the gross domestic product (GDP). It too has grown 4% per year for that past 40 years. (isn’t that interesting…) The purpose of announcing the GDP is to give us the illusion that we are making progress. Looking forward, because of the size of our debt and the diminishing value of our economic capability, we look forward to debasing the dollar at double the rate of the last 40 years.

Inflation is caused by the government printing too much money. In 1913 the congress passed the Federal Reserve Act giving it the right to tax income and print money. The Gold Standard Act was passed in 1900 defining the dollar’s value at 1.5 grams of gold or a troy ounce at $20.67. From 1930s through the 1970s, the government had debased the dollar to $35.00 per troy ounce of gold. Finally in the 1970s the government cut the dollar loose from gold or silver backing completely and printed Federal Reserve Notes instead of Silver Certificates and stopped backing the dollar with gold or silver. With nothing to tie the dollar to, congress could debase the currency at will, urging the Federal Reserve to print money and cause inflation. That’s when our current bout of overspending and inflation started. Rather than holding to balanced budgets, government continued to spend more than they took in revenue. The 1913 dollar is now worth 3 cents.

2. Since 2004, the government has increased the national debt from $3.2 trillion to over $12 trillion and, when added to the overspending in the trillions that began with the TARP in 2008 and the stimulus and bailouts in 2009 and 2010 could bring the national debt to $20 trillion in 2019. In addition, the government has $100 trillion in unfunded liabilities for our Social Security pensions and Medicare. It does not appear that government will ever reign in the spending when they can simply debase the currency and call it growth, or raise taxes and kill off any recovery.

We believe government should follow the same rules we follow: 1) Pay Principle and Interest when you pay off your debt. 2) Don’t let your debt exceed 2.5 times your annual income. 3) Don’t let your P&I payments exceed 28% of your annual income. Our federal debt is $12 Trillion. Our GDP for 2009 was $14 trillion. Our Federal Tax Revenue in 2009 was $2.4 trillion. Our Federal budget for 2010 is $3.9 trillion, with trillion dollar deficits planned to 2019. Our Interest is $480 billion at about 4% of the national debt, but interest payments will rise to $1 trillion by 2019. Our real total debt is well over $100 trillion and the total value of all property held in the U.S. is only $50 trillion. We need to reduce our government debt to $6 trillion or 3 times our annual revenue. We expect GDP to remain flat or even decline. Do the math.

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