Reducing the Budget… Pelosi Style

pork-bustersSo a review of the Chosen One’s stirring speech is coming soon, maybe as a second posting tomorrow night. I already have tomorrow night’s posting written, and it will be a good one titled “American Revolution Part Deux”, but I digress. What I want to pull from last night’s farce is his bold promise amid the economic spendulus bill’s passage that he will “cut the deficit in half over the next 4 years”. That is a pretty bold thing to say just a week after you signed into law the largest spending bill in America’s history, a mere $787 Billion. It is a really bold statement given the White House’s estimate that they will have a budget shortfall of 1.5 Trillion dollars this year alone. That is more than triple last year’s record $484 Billion.
 

But I am sure congress has his back. After all, Nancy Pelosi jumped up and clapped liked a seal at Sea World when he mentioned cutting spending and reducing the deficit during the speech. I won’t laugh at the fact that she seemed really excited about his stating he was going to stop spending after she engineered the largest spending bill in history. Perhaps she had a change of heart and wants to look out for America, honor her President’s wishes, and cut spending from there on out. 

They are Laughing at YOU, Gullible Americans

They are Laughing at YOU, Gullible Americans

So imagine my surprise when I read today that the House, run by Speaker Pelosi, quietly passed another $410 Billion spending bill today, just hours after his speech. What’s that you say? They passed a spending bill the next day? This can’t be true! Oh but it is. The vote went 245-178, pretty much right down party lines. And I know the Democratic response. Start with this gem from Democratic Congressman from Massachusetts, James McGovern, who said “The same people who drove the economy into the ditch are now complaining about the size of the tow truck”. It is all the Republicans fault, they spent this country into the ground and now the Democrats are just trying to save us from the damage Bush and his evildoers did to us. 

This rhetoric is getting old. Go ahead and take a look back at the votes in Congress over the last 8 years. You won’t find much opposition from the Democrats in Congress on spending bills. Remember, Congress spends money, the President just signs the check. And Democrats in Congress the last 8 years spent money. They got just as many, if not more money in earmarks during those 8 years as Republicans did. So they are just as responsible for the out of control spending in Washington as the Republicans. Liars and hypocrites. Just tell those stupid Americans what will make them go our way. Doesn’t matter if it is true or not. They are too lazy to look it up and call us on it. 

But again I digress. Can’t seem to maintain focus tonight. So the Democrats voted through another massive spending bill just a day after the messiah’s speech. The bill was intended as the “keep government working” bill that pays for government operating costs through September. But a few caveats to this. Interestingly the bill increases the federal budgets of government agencies by an average of 8% per agency. Increase in government anyone? Nice that they are cutting costs to reduce the deficit.

earmarkpigBut here is the kicker folks. This bill, intended to keep the government afloat, had a little pork in it. By a little bit of pork I mean that it had 8,570 earmarks in this one bill alone, according to auditing group taxpayers for common sense. That’s right, you read it correctly. In a time when our President is talking out of the left side of his mouth telling concerned Americans that he is going to reduce spending and cut the deficit in half, the right side of his mouth is telling Nancy Pelosi to go ahead and put an extra 8,570 earmarks into the budget bill. 

I won’t get into nitpicking what the earmarks were. But there was a lot of junk in there. According to Representative Mark Kirk of Illinois, the bill did include at least a dozen earmarks for clients of PMA Group, a lobbying company now at the center of a federal corruption investigation. PMA President Paul Magliochetti just happened to also be Democrat John Murtha’s top aide. After eight years without control of the White House, congressional Democrats also used the legislation to target several policies of former President Bush. 

Bush administration restrictions on travel to Cuba were loosened in the legislation, to permit more frequent visits and expand the list of family members permitted to make trips to see relatives on the Communist nation-island. Sucking up to a communist dictatorship now?  Another provision could vastly broaden the government’s ability to invoke the threat of climate change to halt economic development. “Most all of the shovel-ready projects on the trillion-dollar stimulus bill would in fact be at risk,” said one Republican Representative. 

The provision halts implementation of a Bush-era regulation that lists the polar bear as a threatened species. Democrats also inserted a provision into the bill to end a program that allows students in the District of Columbia to use federal funds to attend private schools of their choice. Representative John Boehner, who helped establish the program as part of a political bargain several years ago, called the move “hideous.” The move makes sense, Democrats can’t control the curriculum in private schools. 

But hey there was good news in this bill. Amid all the massive spending and earmarks and expansion of government and reversal of Republican policies Democrats didn’t like, the House did give us one symbolic token of their empathy for the American people: Democrats included in the spending measure a prohibition on a cost-of-living increase for members of Congress for the year. I won’t mention that they just voted themselves a cost of living increase in November, so a promise not to give themselves a second one by September isn’t much of a nod to the pain of the American people now is it? Man I hate Congress. The torch brigade lines up behind me. Pitchforks on the left, hoes on the right. That almost sounded like a rap song.

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Comments

  1. Very good article. I afraid a hoe and pitchfork won’t be what I would bring to the party so I must decline the invite. But believe me I am as pissed off as you are.

  2. If it were a few instances of spending money we do not have, it could almost be tolerated…but it is every day we are hearing of more spending. I heard, but have not substaintiated, that this new administration has spent on the average of about 39 billion dollars per DAY since he took office…

  3. I plead innocent in ever having studied economics. Actually, this may be a plus for me since I hear “experts” routinely contradict each other.

    Over the years I have come up with the following understanding of “money”. Money at one time consisted of a valuable commodity, gold or silver. As population increased, this
    “hard” currency coiuld not keep up with economic expansion. Paper money was issued. Initially it was a promise to pay in “hard” currency. Perhaps not a very sincere or plausable promise, but a promise nonetheless. In 1932, gold “hard” currency was removed from the equation. In 1965, silver.

    Since that time, money has been a “construct”. It is valuable because we say so. It is also valuable because it can be exchanged for goods or services. I pay you, you give me something, the guy I pay uses it to buy a good or service for himself. Somewhere back there are noble words about, “The full faith and credit of the Federal Government”. Well, with the TARP, and stimulus, it has become obvious, even to the most dense, that there is nothing backing money any more not even full faith and credit.

    So here is my question to the rest of you, what happens when everyone wakes up at the same time and realizes that these little pieces of paper are just little pieces of paper? I’ve spent the better part of 60 years, cautiuously investing, diversifying and never living above my means. I have counted in every eventuality, except one, hyper-inflation. I would be interested in how the rest of you, who I have developed great faith in as “out of the box thinkers” over the past few weeks see this.

    Thanks for your comments

  4. TruthSeeker says:

    A quote I wish to share:

    “You can not legislate the poor into freedom by legislating the wealthy out of freedom.
    What one person receives without working for, another person must work for without receiving.
    The government cannot give to anybody anything the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. you cannot multiply wealth by dividing it.”
    A QUOTE BY DR. ADRIAN ROGERS, 1931

  5. Agreed. Very disturbing how this bill flew in under the radar. Combined with the stimulus bill passed last week, there is $680 billion allocated for government agencies and programs. This is an increase of 80% over last year. I find it hard to believe that this is a prudent use of funds. I do feel compelled to mention that many of the earmarks are at the request of Republican house members, even Republican members who did not include themselves with the 16 Republicans who voted for the bill. Wasteful spending has been rampant in the House for as long as I can remember, regardless of who holds the majority. Hopefully the Senate and the President will show some restraint and reject this bill.

    On the issue of Cuba, I really don’t see how easing travel restrictions is “Sucking up to a communist dictator”. There are millions of Cuban-Americans (the majority of which have absolute disdain for the Castros) who have never met many members of their family. Today, Cuba is most definitely not a threat (politically, economically, or militarily) to the United States. I’m quite confident that this move was in no way an attempt to appease Castro. There is no reason to keep Cuban-Americans from visiting their families.

  6. Karl from Esom Hill says:

    US,
    If Obummer the all Knowing and Wise has his way a hoe and pitchfork may be ALL you have to bring to the revolution. This spending crap is getting ridiculous. No, I take that back. It’s been horrificly ridiculous for a while now. My God in Heaven help us all. I don’t think this Nation can stand 4 years of this fool! I am beginning to get really scared for my country. The most amazing thing to me, is all the folks who are STILL, like Pelosi, looking at him like they want to have his babies! Clapping like a trained seal, while apt, was not what I was thinking when I saw her. Looked more like “lusting for his bod” to me.

  7. Just another short comment about this.

    I read this morning that Obama has spent 39 Billion Dollars a day since he took office. This is absolutely freakin stupid.

    Just more reason to get this fool out of the office!!!

  8. I see someone else already posted this number..So for the repeat.

  9. 39 Billion or Million? Per day? Is this amn insane? Wait, never mind, I believe I know the answer to that question. They are all insane!

  10. SK: The result is called Hyperinflation. The kind that you and I can remember in South America, and even Mexico at one time. The kind that destroys Nations.

    By the way, there is nothing wrong with a paper money system, as long as the supply of money is held in check to match the amount of money needed to conduct commerce. That means slow growth in supply to match GDP. If supply was controlled by the printing press instead of borrowing or buying notes, we would be debt free and the interest we are paying on the national debt would be in our pockets, not theirs( ie. fed bankers). I know, seems to damn easy doesn’t it. But from all I have read it appears possible. Our country started with this system, back when we rose out of the revolution to become a major force, then again in late 1800’s early 1900’s. Gold wasn’t the key it was that our money was used only to support our need for trade of actual goods and services.

    Clear as mud now, huh!

  11. Karl from Esom Hill says:

    Der Feurer Obama and the Politburo are going to destroy this nation before 4 years are up. We will be lucky if we last two. I am just waiting for the bill to come up abolishing 2 term limits. Only 2/3’s Congress is needed to change the Constitution so don’t think it’s impossible. With the things that have already come to pass, there is nothing else that is not possible.

  12. To all who feel ill over this, let me finish you off.

    We currently owe, either ourselves, the bankers or foreign nations, about 60 trillion dollars. Those are the liabilities on the books, including the Fed’s undocumented ones (we think). Most of this debt comes due within 50 years (ie soc sec and medicare)

    If we started paying this off today, yes this year, and assume a lowly 3% interest on the debt (it is now lower but was higher few years ago–so lets average) the yearly payment is…..ready….drum role please……..!!!!!!!!!!!

    $ 2.332 Trillion per year, for the next 50 years.

    Our annual expenditures have been around $1.4 Trillion the past couple of years. Now there is some double counting here because the $1.4 includes interest on debt. So lets assume that our future budgets include $10,000,000,000/yr (10 billion)for health care (thats Obamas 1 trillion over next 10 years divided by 10)plus the $484 billion current omnibus bill (which is current gov’t continued) plus approximately $300 billion to cover other spending already approved for this FY (more current gov’t continued). That is a total annual budget of about (I don’t and no one does, have precise numbers) $794 billion. If we can keep inflation in check then the $794 billion will grow at about 3% per year, without new programs. So the annaul budget of $794 billion will be 1.067 Trillion by year ten and 1.434 Trillion in year twenty, to hold where we are today.

    So, in twenty years our kids will be paying taxes to support an annual budget of 3.766 Trillion dollars. Depressed yet!

    In reality somewhere around $20 Trillion of the total liabilities (aka debt) actually comes due in 10 years (that would be the unfunded Medicaid obligations).

    By the way, for those who want to talk about national health care insurance, lets make some more fun ssumptions. If there are 150 million households and using an annual health insurance premium cost of $12,000 per year it would actually cost the gov’t, that’s would be us again, $1.8 Trillion per year to insure everyone. This is the total cost, whether you pay it in taxes or hide it in the cost of labor with required employer provided programs. Either way, we all pay!!!

    And that folks, is the bottom line. Enjoy your day!

  13. Concerned4USA says:

    Thank you for the invitation to come look around here.
    I came, I saw, I read.
    It appears to me that an intelligent angry portion of America is starting to wake up. That is good news.
    It appears that for the most part it is an intelligent discussion and a forum for even opposing views to be heard.

    That said;
    It bothers me when ‘you’ (USWeapon), the author, mediator and owner denigrate yourself and this blog with comments like, “Nancy Pelosi jumped up and clapped liked a seal at Sea World”
    and “the messiah’s speech”.
    IT is unnecesary.
    It is readily apparent by any visitor that you (USWeapon) are unhappy with the current administration and the Government as it currently exists.
    It only hurts our common cause to return the US to the Constitutional Republic our founding fathers envisioned.

    You aptly pointed out in your post, “OK, OK… My Thoughts on Gay Marriage” November 24, 2008 that name calling does not help anyone with a reasonable compromise.

    Just a thought…

    • Concerned4USA,

      Thanks for your thoughts. I use a lot of language like that because it is entertaining and makes the articles a little more fun to read. Sir Spend-a-lot Bush has been replaced by Sir Spend-a-lot Obama. I don’t feel it denigrates the blog that much to have a little fun while discussing how to move forward. Does my humor piss off Democrats? Certainly does when I talk about Democrats. Same thing happens for Republicans when I talk about their Representatives. But for those that read regularly the message gets across. We are peeved with those in power and have decided that America needs a new course forward.

      You bet I am unhappy with the current administration. I am unhappy with the previous one too. In fact I am unhappy with just about everyone in Washington these days. I am unsure how it hurts our common cause to return the US to a Constitutional Republic. What is your solution? The moves made by this administration appear to be taking us towards a more socialistic system. Is that what you would prefer? I am interested in hearing your path forward.

  14. SK, I am thinking in terms of the Depression. I will likely have a garden this year for the first time. I may stockpile seeds as well as ammo. I will also look at items you might get from a hardware store, and think the may become scarce or very expensive. Any appliances/vehicles that may need replacing, do now and finance at fixed rates if your income is secure.
    Would welcome feedback on this, that I may be looking at this wrong.
    To all I recommend a book. Unholy Alliance: Radical Islam and the American Left by David Horowitz. This situation could not occur without the media being an active partner in keeping the masses uninformed.
    Karl, I agree completely! Obama was elected by telling the “Big Lie”.

  15. Stockpiling is not a bad idea. I believe there will be a multitude of goods and services that will become scarce over the next couple of years. I think my biggest fear is that we are on a path that we may not be able to deviate from if Karl is right. Moving to another country may not be a bad idea either.

  16. Concerned4USA says:

    Re:Kristian
    “Stockpiling is not a bad idea…fear…may not be able to deviate”
    There is an old Military axiom:
    Hope for the best, plan for the worst.
    1. So we try to bring about change restoring the Republic.
    2. We stockpile and position ourselves in case that fails catastrophically
    3. Investigate other possibilites (moving to another country). There are two very large problems with moving to another country:
    A: Their political system may not be any good – see San Felipe, a US/Canadian retirement community in Mexico. Those living there are subject to rampant corruption.
    B: As an Emigrant to another country, you have less rights than citizens. [The US has one of the most liberal ‘rights’ for emigrants policies in the world. Where else could ILLEGAL aliens SUE a resident for detaining them until authorities arrived?]
    Unless you are married to a foreign national or naturalized dual citizen, the choices and loss of rights is a major concern.

    -I can say that based on 20+ years of international travel (courtesy of the US Military) – having lived on 3 continents and visited six (traveling in more than 20 countries).

    Life of Illusion:
    AS for the Big Lie – it has as much to due with the ‘Big Lie’ as it does with quote by Dr. Adrian Rogers that ‘TruthSeeker’ posted.

    The reality is that no government can survive once the general populace determines that they can ‘vote’ themselves money from the government.
    Which is what is starting to happen here.

  17. G. A. Rowe says:

    Concerned4USA;

    Read your post. So . . . Your point is?

    Since you seem to think that this blog is a good forum for discussion, and by your moniker you state that you are concerned for our country, why is it that you appear to be upset at the titles we give to “His Royal Spendiness Sir Oh-Bummer the Magnificent”? I, for one, truly believe he is a Communist in a Socialists clothing posing as a Liberal by being a member of the Democrat Party of the USA. His followers remind me of the poor hapless receiver of the sandwich in a commercial I see on TV. All agog over nothing.

    Do you have anything to contribute to this blog?

  18. Black Flag says:

    SK Trynosky Sr. and Just A Citizen

    Actually, this may be a plus for me since I hear “experts” routinely contradict each other.

    What do you get when you put three economists in a room?

    4 different answers.

    Kidding aside – the problem is that economists believe what they do is ‘science’.

    It is not.

    Economics is the study of human beings.

    Probably the best way to get a grasp on understanding economics is to read:

    “On Human Action” by Mises. I warn you, this is a 2,000 page book. He establishes the basis for understanding economics by studying human action.

    Non-Austrian economists try to establish a reason for a particular policy – that is justify ‘this action’ or ‘that action’ by some economic theory. Thus, the vast number of economists are ‘interventionists’ who believe tweeking this or that with money or taxation will fix things.

    Austrian economists (ie: students of Mises) do not evaluate policy – thus, do not justify any thing. They simply will tell you the consequence resulting from such policy. The only evaluation will be to say if the consequence is consistent with or contradictory of the stated reason for the policy.

    With no surprise, Austrian economists are incredibly accurate in predicting outcomes of economic policy.

    Money

    If there was one concept that bedazzles most people is the understanding of money, and what it does.

    Both of you are half-right.

    Let me drawn on Mises again, from both his The Theory of Money and Credit and Human Action

    “The function of money is to facilitate the business of the market by acting as a common medium of exchange”

    Direct exchange is barter. Barter is associated with a low division of labor.

    But within an economy with a high division of labor (like ours – a concept of ‘specialization’) the goods produced are not equally marketable. Thus, a more granular means of exchange other than barter needs to exist. It has hard to make change for a cow when trading for a pair of shoes.

    Thus, the economy naturally evolves to use a commodity within the economy that is most easily exchanged – which will be the commodity most people want.

    With this high desire, it becomes easy to trade for it, and the trade with it to get what you really want.

    “It is the most marketable good which people accept because they want to offer it in later acts of impersonal exchange

    Other things come into play. The commodity must not rot and must be transportable – because the people may have to hold and carry it somewhere else – it has to be ‘divisible’ – that is making it into smaller pieces does not degrade its value – the sum of the little parts must equal the whole. And the key, it must rise above emotional attachment – it must be seen as valuable by people I do not know.

    Because the future is uncertain for everyone, people want to hold on to a very high, marketable, commodity for use ‘in the future’ in times of personal turmoil and risk. They save.

    Thus money servers two, very distinct purposes – exchange of wealth and store of wealth.

    Traditionally, gold and silver have satisfied these demands. But it is not because gold and silver are ‘money’ – but because they solve all the issues I raised previously.

    To be clear, there is no rational need to have money, regardless of type, to grow or maintain any equivalency with GDP or the economy (sorry to contradict you, Citizen). The natural trade of the commodity automatically adjusts the price of the underlying goods dynamically.

    Becoming a very desired commodity, theft became a great risk – and instead of carrying the commodity, paper representing the commodity was carried instead – originally called “Certificates”. Eventually, no one carried the actual commodity, and traded certificates and ‘bank notes’ representing the actual commodity.

    It became obvious that a bank or government could issue more notes than gold on hand – and allow trade for these notes – as long as the notes were not redeemed before they were returned to the bank or government.

    Fiat money – was created.

    Fiat money separates the two purposes of money – fiat money is used for exchange. As long as the underlying issuer of the fiat money accepts back the paper in trade for a real good, it works fine.

    The problem is when the underlying issuer continues to manufacturer the money beyond his ability to accept it back in trade of a real good.

    Fiat money, therefore, is not a store of wealth – inflation ‘rots’ the value over time – contradicting one the needs of money.

    Thus in our economy of fiat money, saving ‘money’ in its fiat form is a serious mistake.

    When the issuer of fiat money continues to expand the amount of fiat in an economy, without the ability to trade real wealth for the increase, inflation occurs.

    The only cause of inflation is when the underlying issuer of money expands the amount of fiat in an economy.

    The only cause of deflation is when the underlying issuer of money reduces the amount of fiat in an economy.

    SK,
    What to do….

    As with everything, it depends.

    Are you retired or about to retire?

    Is your job at risk in inflation or is it inflation proof?

    Is your job at risk?

    How old are you?

    What is your personal risk ‘temperature’?

    Where do you live?

    What is your debt level?

    So, very generally, hyperinflation is coming – when, no one – including God – knows. I’d guess within the next 8 to 24 months. It takes time for the inflation to circulate in an economy.

    Fixed incomes will be destroyed.
    Savings will be destroyed.
    Fixed Debts will be destroyed <– which is why government inflates.
    Variable interest debts will explode.
    Long term lending will halt.
    Short term lending will explode.
    International trade will be seriously disrupted.
    Gold will go up in fiat terms.
    Land will go up in fiat terms.

  19. BF: If Fiat money serves one purpose of money then it must by logic serve the other for as you said money serves two purposes, the exchange of wealth and the storage of wealth. If it serves to exchange wealth then it must represent wealth and therefore it must also be able to store wealth.

    There is no inherant connection between the practice of increased printing of fiat money and its mere existance. The decision to print or not is a government function, oh that awful G word, sorry.

    Your discussion only addresses the supply side, don’t forget the demand side of the money equation. Demand is also a primary force of inflation or deflation. You could stop printing money today and if everyone decided to start spending everything they had, we get inflation. Or you could print like crazy (as the treasury is now doing) and if people keep hording it, you still get deflationary pressure, which I submit is what is going on right now.

  20. Black Flag says:

    Just A Citizen

    If Fiat money serves one purpose of money then it must by logic serve the other for as you said money serves two purposes, the exchange of wealth and the storage of wealth.

    No.

    That is why we use the adjective “FIAT” – it describes a core difference from mere “MONEY”.

    Other terms like “REAL” money attempt to distinguish the missing half of the use of money – a “Store”.

    If it serves to exchange wealth then it must represent wealth and therefore it must also be able to store wealth.

    It can serve as an exchange without being wealth itself.

    Your IOU to me is not wealth – I have nothing but an inked piece of paper in my hand – but it could be an exchange of wealth – as long as the party I pawn trade it believes you will honor it.

    There is no inherant connection between the practice of increased printing of fiat money and its mere existance.

    I’m not quite understanding what you are trying to say here.

    Your discussion only addresses the supply side, don’t forget the demand side of the money equation. Demand is also a primary force of inflation or deflation. You could stop printing money today and if everyone decided to start spending everything they had, we get inflation.

    The cause of the inflation is not the spending. The cause is always the amount of fiat in the economy.

    You merely describe a delay in the realization of the inflation. For a real example, China stores its US dollars and (as yet) does not spend them. If they did, the US would suffer an explosion of inflation. If they did not have the dollars stored, they could not cause inflation. If they spent the dollars as fast as they got them, we would have had massive inflation decades ago.

    Therefore, it is merely a delay.

    It is the excessive dollars that causes inflation – and as you’ve agreed, it is government that determines the quantity of dollars in this economy, government is the sole cause of inflation (or, equally, deflation).

    Or you could print like crazy (as the treasury is now doing) and if people keep hording it, you still get deflationary pressure, which I submit is what is going on right now.

    A couple of points:

    1) I agree there is deflationary pressures.
    2) I agree that some people are saving.
    3) I do not agree that saving creates deflation.

    The deflationary pressure is due to entities and people converting the fiat currency into debt cancellations. Fancy way of saying entities are paying of their debts with cash.

    As the debts are being cleared – money is not being re-lent back into the system by the banks. They, too, are banking their money with the Fed.

    Since the largest increase of fiat currency if via debt (by the fractional reserve system of banking), a decrease in amount of debt outstanding will decrease the fiat currency in the economy.

    Only in the US could paying off a debt be ‘bad’ for the economy – everyone has to realize that something is seriously wrong with the fractional reserve theory when this becomes the case…..

  21. Black Flag says:

    Addendum:

    Paying off debt by default is also occurring. That has the same deflationary effect as paying off debt with cash.

  22. Concerned4USA says:

    It appears I was misunderstood.

    I am certainly concerned about the state of the Union.
    I absolutely want to return it to a Constitutional Republic.
    I am not pleased with the current or previous administrations.
    Yes, they should all be fired.
    We need people in Washington that are concerned about the country, not getting rich.

    BUT calling people names does not encourage dialog.
    You can’t convince a Democrat or Republican that they might be wrong, if you are also “pissing them off” intentionally.

    In case you haven’t noticed WE [those that want to return the power of the government to the people, reduce waste and abuse by the government, and give a damn about the future] are either a vocal minority or a silent majority.

    So MY POINT is you can not win friends and influence people by insulting them. And WE will not prevail without help from the dissatisfied from both sides.

  23. The stimulus bill was mismanaged by the House, in that a relatively) small amount of pork and earmarks was allowed into it, thereby giving Republicans ammunition to use in opposing it. But overall it’s a good bill and a necessary one. Not one Republican has an alternative vision for getting us out of the mess we’re in, so they focus on the small-beer stuff in the bill that appears wasteful. Bobby Jindal’s career-ending self-immolation the other night, when he railed against a volcano detection provision in the bill without offering an alternative vision for recovery, is a harsh indication of where Republicans are headed if all they can do is say “no”.

    Evan Adamson
    readtakeover.com

  24. Gabby in Florida says:

    Nathan,
    I have thought alot about Cuba and the travel there. Why though did they have Russian ships in the waters recently so close to America that was a little alarming. True though about family members not seeing even thier children for years because they can’t go back but even if they could they may not be able to get back to the US due to being wanted in Cuba. there is more to the Cuba US story than many know. AND when they stole land from Americans that invested there that was sad. That is why we must keep a close eye on this government we have now. Cuba was once free.

  25. BF: Sorry for the delay but I had chores to do. You seemed to have jumped the tracks my friend so lets take this trip one bridge at a time. My simple mind can’t take to many issues at once.

    I will confess to messing up by inserting Fiat up front in my argument. I thought we could skip over the first steps but guess I miscalculated, sorry.

    First, remember we are discussing your hypothesis or assertion (per the quote provided) not mine. Your stated premise is “Thus money servers two, very distinct purposes – exchange of wealth and store of wealth.”

    One: I maintain they are not distinct from a logical point of view. By purpose of money, I assume this means the utility or function or use of rather than the cognitive intent of, after all money can’t think, at least for now. If the function of money is to facilitate the exchange of wealth then it necessarily follows that money must “represent” the wealth being exchanged. (I did not propose that money is wealth itself only that it represents wealth.) If money represents the wealth to be exchanged, at a later time or place, then it is also necessary that that wealth has been stored in the form of money used in the exchange. Thus money can not idependently funciton as storage or exchange of wealth, as by its very nature it can only function as both simultaneosly. You seemed to have mistakenly missed my use of the word “represents” when formulating your counter argument.

    Two: My position is that money may take any form as long as what ever is used is rare enough that everyone can’t make their own whenever they want. The old high school point that rare metals or stones were used in ancient times, instead of sand (smart guys those ancestors). Whether it is money backed by gold, silver or the “good faith” of some gov’t doesn’t change the function of money. What ever is used matters not, it is used to store wealth so that it may be exchanged at a later time or different place, or both. Therefore, Fiat money serves the same purpose, or function as money backed by metals or by tin coins minted by the gov’t.

    Therefore,if Fiat money serves the same function as any other type of money, and money serves both functions of storage and exchange simultaneously then Fiat money must represent both the wealth stored and the wealth exchanged.

    Let me preempt a restatement of your prior argument about inflation nulling the storage function. The intended use of money, or its intended function (aka “purpose”), to store wealth is an independant from the discussion of what inflation may do to that wealth stored. Thus my restated point is that the existance of Fiat money does not automatically create the existance of inflation, and the existance of inflation does not require the existance of Fiat money.

    This does not mean the two have not existed together in the past but that the presence of one does not require the presence of the other.

    Without inflation the value of wealth stored in Fiat money will not change any more than any other type of money. Inflation depends on the change in the amount of “money” (regardless of type) in the market. What would the value of gold coins do if Russia started dumping gold on the market, like they have done before. What happened then was a significant drop in gold and gold coin prices.

    Can we agree on these points so far? Also, I suggest that in the remainder of our exploration of inflation, etc. we distinquish between pressures for expansion and contraction (economy) versus inflation and deflation (money value/prices). I think some of your other points were due to us using these terms synonomously when they are in fact different.

    Best Wishes
    JAC

  26. Black Flag says:

    Just A Citizen

    You seemed to have jumped the tracks my friend so lets take this trip one bridge at a time. My simple mind can’t take to many issues at once.

    No worries.

    Sometimes I drive the stage coach too fast so +hat it drifts into the wrong lane on some curves…. 😉

    Your stated premise is “Thus money servers two, very distinct purposes – exchange of wealth and store of wealth.”

    Darn spelling “servers” is really “serves”

    One: I maintain they are not distinct from a logical point of view. By purpose of money, I assume this means the utility or function or use of rather than the cognitive intent of, after all money can’t think, at least for now.

    While I believe the two functions of money have been separated by the existence and creation of fiat money, your statement of the utility I can agree with.

    If the function of money is to facilitate the exchange of wealth then it necessarily follows that money must “represent” the wealth being exchanged.

    Representation is not the same as reality.

    There is a famous painting of a Smoker’s Pipe. The caption underneath it says…
    “This is not a Pipe”

    It is, of course, a picture of a pipe, not a pipe in reality.

    So back to Mises’ definition of money – “It is the most marketable good which people accept because they want to offer it in later acts of impersonal exchange”

    Fiat money is the most marketable – because everyone has to pay taxes in with the fiat currency – however, it is depreciated in its ability to offer “later acts of impersonal exchange”…that is, it ‘rots’.

    (I did not propose that money is wealth itself only that it represents wealth.)

    I am resistant to move away from Mises’ definition.

    Money does not ‘represent’ wealth – though a currency may…

    I would refer back to Mises definition above….a most marketable ‘good’ (ie: commodity and an object of wealth) ….

    Money, at the end of the day, is wealth

    Fiat money or currency is a representation of real money.

    If money represents the wealth to be exchanged, at a later time or place, then it is also necessary that that wealth has been stored in the form of money used in the exchange.

    A component of money is the ability to not ‘rot’.

    Fiat money ‘rots’.

    Therefore it is not “real” money.

    There is absolutely no problem having fiat currency as merely a medium of exchange – Mises had no problem with this concept.

    As a “store”, we are talking about a completely different set of requirements.

    Gold does not rot. Silver does not rot.

    Wheat rots. Salt dissolves. Both were once “money”, but did not pass the test of rot.

    Fiat money rots. It too, fails the test of “real” money.

    Two: My position is that money may take any form as long as what ever is used is rare enough that everyone can’t make their own whenever they want.

    Again, I refer to Mises.

    Rarity rarely is a necessity. (Sorry for the embedded pun). Salt and Sea shells are not rare.

    Rare simply makes “counterfeiting” difficult. It actually has nothing to do with making it ‘money’. Salt is hard to counterfeit as are Sea Shells.

    Sea shells are money.

    Salt was money.

    As just a couple of examples, rarity is not a necessary component – but inability to counterfeit (that is fake) money is important.

    The old high school point that rare metals or stones were used in ancient times, instead of sand (smart guys those ancestors).

    Again, referring to Mises… sand was ‘not desired’ – thus, did not qualify as money.

    Whether it is money backed by gold, silver or the “good faith” of some gov’t doesn’t change the function of money.

    Correct. The market place actually determines what money is…. thus, as exampled in Zimbabwe, the local currency is no longer ‘money’. It matters not what money is ‘backed’ by…all that matters is that it is the ‘most desired’ good.

    What ever is used matters not, it is used to store wealth so that it may be exchanged at a later time or different place, or both.

    Ah, but it does matter.

    If the choice rots – say, wheat – it does not last as money very long (about a season).

    Fiat currency rots.

    Gold, as an example, does not.

    Therefore,if Fiat money serves the same function as any other type of money, and money serves both functions of storage and exchange simultaneously then Fiat money must represent both the wealth stored and the wealth exchanged.

    But Fiat currency rots.

    It cannot, thus, be a store of wealth.

    Thus my restated point is that the existance of Fiat money does not automatically create the existance of inflation, and the existance of inflation does not require the existance of Fiat money.

    I agree to your statements.

    The mere existence of fiat does not automatically preclude its rotting….

    However because there exists no physical constraint on the creation of fiat money (unlike gold as an example) there is a predominate tendency to inflate fiat currency – ie: rot.

    There is no cost to the creation of fiat money to forestall its creation.

    If you are a government, and make it a law that only you can create money, fiat currency becomes the primary tool to fund your existence.

    Without inflation the value of wealth stored in Fiat money will not change any more than any other type of money. Inflation depends on the change in the amount of “money” (regardless of type) in the market.

    I agree.

    What would the value of gold coins do if Russia started dumping gold on the market, like they have done before.

    I agree. It would inflate (ie: the cost in currency to buy gold would decrease).

    However, there is a finite amount of gold in the world – unlike the amount of fiat currency.

    Quickly, the Russians would run out of gold – and like the Hunt brothers with silver, would suffer the rebound.

    Best Wishes
    JAC

    And to you, sir.

  27. Karl from Esom Hill says:

    Evan,
    The Republicans did in fact have an alternative bill to the Spendulous Package. When they tried to preset it to Obummer and the rest of the Politburo, they were told by them and I quote that, “WE WON”. Would their plan have been better, we’ll never know now. But I do know one thing. It was half the cost of Pelosi’s. It was also supposed to create twice as many jobs. Of course, all that is moot now ain’t it?

  28. Remember this started with Bush….

    http://newsvote.bbc.co.uk/2/hi/business/7893317.stm

    There is nothing like visualization to demonstrate the issue and the problem.

    Read the link – and prepare!

  29. Black Flag says:

    http://www.nytimes.com/2009/02/13/nyregion/13jerome.html?pagewanted=1&_r=2&sq=jerome%20churchill%20bond&st=cse&scp=1

    Very interesting article – but one can get a grasp on how inflation destroys debt, and how fiat destroys savings.

    The city comptroller is not certain how much debt was originally issued through the bonds, but a previous estimate put the figure at $278,000, reflecting the fact that hundreds of bonds were probably sold originally, some of them with shorter maturities. Today, nearly 100 of the bonds, with a face value of $66,000, have yet to mature. By the time they do, the city will have paid out nearly $1 million in interest.

    That debt is not large by modern standards, when the city currently borrows about $7 billion a year and has an annual debt service of about $3.7 billion.

    But in the early years after the Civil War, when money stretched further, $70 a year in interest was a substantial sum, enough for a down payment on a middle-class house of good construction, which cost about $300.

    “People who bought the bonds might say: ‘This is really cool; generations of my family will benefit from this,’ ” said Richard Sylla, a financial historian and a trustee for the Museum of American Finance. “For the issuer, if you don’t have to pay back the principal for 100 or 200 years, that’s an advantage, too.”
    … yeah, especially if you bet on inflation.

    So, SK – here is another answer to your question of “what do we do?”

    The piece of land, today, is probably worth a couple of billion dollars – and was bought for $278,000 in 1868.

    If you buy land, mortgage it for as long as possible at a fixed rate, the inflation will erode your debt faster than your payments.

    “The fastest way to become rich today is the borrow $1 million today, buy cheap land and let inflation pay it off.”

    If you have 20% down, and excellent credit – you can get a 30 year, fixed rate @ 5%.

  30. Black Flag says:

    Sorry, more fun conversations for SK, JAC and others;

    The gold standard has advocates, but the problem is, there
    are competing versions. The government-enforced gold standard is
    the one that gets all the space in the history textbooks. This is
    because it is the only version governments allow.

    The Private Money Guy (PMG) continues to cross examine the
    State Money GUY (SMG), who advocates a government-enforced gold
    standard.

    PMG: What are the main features of a government-enforced gold
    standard?

    SMG: The government fixes the price of gold by selling gold at a
    specified price or buying gold at this price.

    PMG: Where does it get the money to buy gold?

    SMG: From the Federal Reserve System.

    PMG: Where does the Federal Reserve System get the money?

    SMG: It creates it.

    PMG: Out of nothing?

    SMG: Out of nothing.

    PMG: Isn’t this inflationary?

    SMG: Not at all. It removes the gold from circulation.

    PMG: Why can’t a commercial bank do this?

    SMG: That was what commercial banks did for years, until 1933.

    PMG: Then why can’t I do this?

    SMG: You can. Just be sure you store the gold in a safe place.
    Your promise to pay gold on demand is a warehouse receipt.

    PMG: How could I afford to do this? That’s money out of my
    pocket.

    SMG: I guess that’s why you don’t do it.

    PMG: Then how can the Federal Reserve afford to do it?

    SMG: Because it makes money lending money to the Treasury.

    PMG: By buying Treasury debt.

    SMG: Yes.

    PMG: With money created out of nothing.

    SMG: Yes.

    PMG: What can’t I do this?

    SMG: You’re not a central bank.

    PMG: But how did commercial banks pay money to buy gold at a
    fixed price, then store it?

    SMG: Because they lent it out again at interest.

    PMG: You mean they did not keep the gold in storage?

    SMG: They didn’t. They turned it over to the Federal Reserve,
    which stored it.

    PMG: Why did they did this?

    SMG: Because the FED counted this gold as legal reserves, which
    allowed the banks to issue new loans and earn interest.

    PMG: But isn’t issuing more receipts for gold than you have gold
    in reserve inflationary?

    SMG: Yes.

    PMG: But isn’t the idea of the gold standard to restrict the
    expansion of money?

    SMG: Yes.

    PMG: Then why should commercial banks be allowed to inflate?

    SMG: Because that’s how they stay in business.

    PMG: But that’s how counterfeiters stay in business.

    SMG: But they don’t make loans to people.

    PMG: No, but they spend money. Isn’t that good for the economy?

    SMG: They spend too much money. They are not scientific in the
    amount of money they spend.

    PMG: But bankers are.

    SMG: Yes.

    PMG: What makes them scientific?

    SMG: They are afraid of runs on their banks.

    PMG: When people demand gold.

    SMG: Yes.

    PMG: And currency.

    SMG: Yes.

    PMG: What happens historically when there are runs on banks?

    SMG: Some banks collapse.

    PMG: The unscientific ones.

    SMG: Yes.

    PMG: This shrinks the money supply.

    SMG: Yes.

    PMG: Like in the Great Depression.

    SMG: Yes.

    PMG: So, Roosevelt made it illegal for Americans to own gold.

    SMG: Yes.

    PMG: So that banks would not have to pay gold.

    SMG: Yes.

    PMG: Then the Federal Reserve bought the gold from the Treasury.

    SMG: Yes.

    PMG: Was that the end of the gold standard?

    SMG: No. The dollar was still backed by gold.

    PMG: And Treasury debt.

    SMG: Yes.

    PMG: Lots of Treasury debt.

    SMG: Yes.

    PMG: Mostly Treasury debt.

    SMG: Yes.

    PMG: But there was still a gold standard internationally.

    SMG: Yes.

    PMG: Until August 15, 1971, when Nixon ordered the Treasury to
    stop delivering gold to foreign nations and central banks.

    SMG: Correct.

    PMG: When did the United States government go off the gold
    standard?

    SMG: August 15, 1971.

    PMG: Not in 1933.

    SMG: No.

    PMG: Why not in 1933?

    SMG: Because the government still bought and sold gold at a fixed
    price.

    PMG: Who did it buy gold from?

    SMG: Gold mining firms.

    PMG: That got rich in 1934 because of a 75% increase in gold
    prices.

    SMG: Yes.

    PMG: Which was why gold mining shares were a great investment in
    1933.

    SMG: Yes.

    PMG: Because gold was not a free market commodity.

    SMG: Yes.

    PMG: Because it had a government-guaranteed price floor.

    SMG: Yes.

    PMG: Is a government-enforced gold standard is a rigged standard?

    SMG: It is a scientifically administered procedure for balancing
    supply and demand of gold.

    PMG: Increasing the supply of gold by a 75% price hike.

    SMG: Yes.

    PMG: Decreasing demand for gold by making it a felony for
    Americans to own gold.

    SMG: Temporarily.

    PMG: Until 1975.

    SMG: Yes.

    PMG: What is the scientifically administered price for balancing
    supply and demand today?

    PMG: $42.22.

    PMG: With gold over $900.

    SMG: Yes.

    PMG: I would like to buy gold at $42.22.

    SMG: I would, too.

    PMG: Why can’t we?

    SMG: Because the country went off the gold standard on August 15,
    1971.

    PMG: Not 1933.

    SMG: Correct.

    PMG: So, under a government-enforced gold standard, the
    government can buy gold at a fixed price.

    SMG: Yes.

    PMG: And it can change that price at any time without warning.

    SMG: Yes.

    PMG: Commercial banks could buy gold at the government-fixed
    price until 1933.

    SMG: Correct.

    PMG: And they could make loans based on the gold in their
    warehouses.

    SMG: Or stored at the Federal Reserve.

    PMG: Which means the banking system could issue warehouse
    receipts for more gold than they have gold is reserve.

    SMG: Yes.

    PMG: Just like they do with currency.

    SMG: Yes.

    PMG: But private citizens are not allowed to do this.

    SMG: No.

    PMG: Why not?

    SMG: Because they are not licensed by the government or regulated
    by the Federal Reserve System.

    PMG: In a scientific way.

    SMG: Correct.

    PMG: Banks do not store gold today.

    SMG: Correct.

    PMG: Why not?

    SMG: Because the government removed the gold at $20 an ounce in
    1933 and sold it to the Federal Reserve System for $35 in 1934.

    PMG: So, depositors lost their gold.

    SMG: Yes, but that didn’t matter.

    PMG: Why not?

    SMG: Because, beginning in 1933, it was illegal for them to own
    gold.

    PMG: But foreign central banks and governments could buy gold
    from the U.S. government.

    SMG: Yes.

    PMG: Until 1971.

    SMG: Yes.

    PMG: Why was the law changed in 1971?

    SMG: Foreign governments and central banks were buying gold.

    PMG: So, governments could buy gold from the Treasury for $35/oz
    until they actually did.

    SMG: Yes.

    PMG: Then they couldn’t.

    SMG: Correct.

    PMG: And that was the end of the gold standard.

    SMG: Yes. A tragedy.

    PMG: Because governments could not trust our government.

    SMG: Yes.

    PMG: So, with a government-enforced gold standard, the government
    winds up owning the gold.

    SMG: Correct.

    PMG: Other government can buy gold.

    SMG: As long as they don’t sell it to the public.

    PMG: Or until the U.S. government starts running out of gold, as
    it did in 1971.

    SMG: Correct.

    PMG: With a government-enforced gold standard, the money is as
    good as gold.

    SMG: Yes.

    PMG: Until the rules change.

    SMG: Yes.

    PMG: Who has the right to change the rules?

    SMG: The government.

    PMG: So, money that is as good as gold really is no better than
    the government’s willingness to honor contracts.

    SMG: Yes.

    PMG: So, the government-enforced gold standard is a government
    standard.

    SMG: Yes.

    PMG: We need a gold standard to keep governments honest.

    SMG: Correct.

    PMG: Then we turn enforcement over to government.

    SMG: Correct.

    PMG: Why not let anyone mine gold, or coin gold, or store gold
    for a fee, all based on contract?

    SMG: It’s not scientific.

    PMG: Because there is no government-fixed price of gold.

    SMG: Correct.

    PMG: Because it’s not a free market price based on supply and
    demand.

    SMG: Correct.

    PMG: Then why do we need government money?

    SMG: Tradition.

    PMG: But the tradition is that governments wind up with the gold
    and then debase the currency.

    SMG: Except for the Byzantine Empire, 323-1453, yes.

    PMG: What made the Byzantine Empire different?

    SMG: Just lucky, I guess.

    PMG: Not because the public used gold coins and there was no
    central bank.

    SMG: Highly doubtful.

    PMG: But you favor a gold standard.

    SMG: If it’s scientific.

  31. Black Flag says:

    JAC

    Another way to view the purposes of money:

    First purpose is to transmit value over space.

    I can sell something here, go across the world, and buy something there.

    Second purpose is to transmit value over time.

    By holding on to money, I can exchange for it for something of value in the future.

    Fiat money does (1) well, and (2) badly.

  32. I just wanted to thank everyone up to this point for their ideas and comments. I feel I’ve gotten a crash (no pun intended) course in economics.

    Re: stockpiling, I was told years ago to go with .22 LR. Not fancy, but gets the job done, is an easy commodity to trade, takes up little space, is inexpensive and of course almost everybody has access to a rifle. can’t say that about a .35 Remington for example.

    Thanks again

  33. G. A. Rowe says:

    WOW, get a load of this semi-quote;

    “It is all the Republicans fault, they spent this country into the ground” – So the Liberal/Socialist/Communist/Democrats spend another $410 Billion on top of another $750 Billion?

    Once upon a time, a very, very, very long time ago when I was just about knee high to a grasshopper, I got a shovel and attempted to “dig to china” just to see if all those starving chinese children loved to eat rutabagas and broccoli. After I had dug this hole so deep that I couldn’t get out, my mother told me to stop digging because no one ever got out of a hole by digging it deeper.

    I think that was my Conservative beginnings. Too bad that our Liberal/Socialist/Communist/Democrats never did learn that lesson!

  34. BF: You have come full circle and now support my original premise with your arguments then reach a conclusion independent of the reasoning described. I truly thought you capable of a logic based discussion on this issue. But you jumped off the stagecoach at the first turn. It is my own fault for assuming you were up to the task and therefore apologize to everyone for stirring up the hornets nest. BF, we reached an impass at the very beginning, so the rest was moot, and completely off the subject. Although it was a little insightful. For me fiat money is money period. It is what ever it is at the moment. Whether silver or gold coins, paper, clam shells, it matters not.
    For you, you have connected an object to the actions by other forces that affect that object, making them one and the same. Therefore I bid you farewell on this issue.

  35. Just A Citizen

    BF: You have come full circle and now support my original premise with your arguments then reach a conclusion independent of the reasoning described.

    Though I doubt that is the case….

    …however, if it is, so be it.

    I am not seeking to my demise that I am the all-knowing King of all things and knowledge.

    If reasoning and logic demonstrate ‘a thing’, then, logically it is what it is!

    I will admit that rarely does logic contradict my position – I am truly old and wise, and been around the block more than once.

    However, that does not mean I’m perfect. As USWep knows, I’ve been systemically corrected before, and therefore had to marry her 🙂

    Don’t worry, if you prove me wrong, I won’t marry you 8)

    I truly thought you capable of a logic based discussion on this issue. But you jumped off the stagecoach at the first turn.

    Illusions are powerful, so I doubt you’ve seen the reality (yet).

    For me fiat money is money period.

    Oh, I knew that from the beginning.

    Anyone who believes ink on paper is the same as “value in real” would hold such an opinion.

    And, further, I’m not saying you are alone. Most Keynesians, as you, agree with each other.

    However, not one of the Keynesian theories explains the current fur-ball.

    …though Hayek called the extent and the timing of the disaster to plus/minus a year.

    I’ll stick with the Austrians, and you can bet on Keynes.

  36. Black Flag says:

    As a (near) final note, let’ consider one more aspect.

    Your Great-great-Grandparents want to leave you a legacy.

    The save, and come up with $300 – enough to buy a house in their day.

    Should they…buy a house today, and hope you want it 150 years from now.

    Should they hold on to the $300 – and give it to you 150 years from now.

    Or should they buy 15 oz. of gold….

    Which one would you have them do for you if you could time travel back into their time.

  37. Nurse Betty says:

    To SKY Trynosky:
    For my money sir, (pun intended), the only real wealth left in America are the services/skills you are able to render or the goods you are able to produce. I recommend we revert back to a barter economy. Any one up for the 12th century?

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