Wednesday, October 21, 2015

What Really Happened To The US Economy?

For most of the twentieth century, the American economy was considered the "rock" that all economic indexes and guides were based on. The worldwide pricing of most of the world's commodities, such as gold, silver, oil, corn, etc., have been priced based on the U.S. dollar. Of course, in recent times, when the U.S. dollar weakens against many other currencies, commodities such as oil have, at least partially, responded to this weakening, by seeing their prices and their "future" prices go up by an additional amount, to at least somewhat offset this weakening. Of course, many also believe that items such as: supply and demand; possible manipulation; profit - taking; etc., are also significant factors.

Various economists have many different opinions as to what and who were responsible for this weakening in the American economy, and of the U.S. dollar. Those using historical perspective always point out that when in the middle of the twentieth century, the U.S. dollar transitioned from a Silver Certificate to a Federal Reserve Note, that it weakened the perceived value internationally, of the dollar. Others point to the trillions of dollars of accumulated United States government debt, that today has made the interest service on the national debt the second largest component of the U.S. budget, behind only the military budget. In addition, most companies today are multi - national, and thus, the American economy, is often intricately tied to the world economic conditions.

In the 2000 election, with then President Clinton leaving a surplus budget in his final year, Vice President and presidential candidate Al Gore kept suggesting that Social Security payments be placed in a "lock box" instead of how they are presently handled, as just another "kitty" of government funds. This idea was never adopted, and we are constantly reminded that Social Security is running out of money. Isn't it ironic that while President Reagan in the 1980's was famous for, and is remembered for his tax cutting and his tax reduction and government spending reductions, that the Social Security "tax" raised dramatically, and is now about three times greater of a non-tax "tax" than it was when Reagan made his pledge. Of course, Social Security is a tax, and it is a rather regressive one at that, because even those below the level for paying taxes, still must contribute to Social Security, and that higher income individuals only pay on a specific amount of their earnings (which has been consistently raised to considerably over one hundred thousand dollars in earnings). Therefore, shouldn't Social Security be considered an entitlement (because it was financed by taxes, etc), than a benefit, and shouldn't balancing other factors in the budget, be unrelated to this program?

A study of the way our Federal Reserve has manipulated interest rates has caused many to question how responsible that institution might be towards the overall economic mess. Of course, the entire banking fiasco that began in about 2005, and still continues (to some degree), has seen huge amounts of "recovery" funds thrown in to rescue institutions that were "too large to fail," yet selectively certain institutions such as Lehman Brothers was permitted to basically do exactly that - fail. When did inflation become a good thing, and lower unemployment become something less than optimal? NO wonder the economy is so confusing to most of us!

The more one reads about the economy, the more one finds identifiable villains. There is no easy answer, no matter how much either one political party or the other claims there is. No one can be sure that if the recovery funds were not spent the situation would have been even worse, perhaps devastating. That is pure speculation. However, the reality is, that until the politicians begin to study playing partisan politics, and make job creation, energy independence/ policy, and the economy the top priority, we will see a continuation of trying times. It is time for the American electorate to demand responsible government, now. Yet, observation of the political campaign rhetoric currently being employed, it is difficult to feel confident about any of the suggestions or approached!

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