Wednesday, March 11, 2009

Even If We Survive the Crash, We Still Lose It All

What We Will Soon Face: Hyper-Inflation

In Florida, if anyone mentions the word, Charley, everyone else immediately recognizes the reference to a 2004 hurricane that devastated the state – and, for a generation, has raised the economics of living here to new heights. In Rhode Island, where I live in the summertime, a similar thing can be said of “the blizzard”, a massive snowstorm on February 6, 1978 that blanketed the Atlantic coast and dropped up to four feet of snow on Rhode Island. From that day to the present time, Rhode Islanders empty the stores of bread and milk if any kind of snow storm is predicted.

I was thinking the other day about that blizzard, and some of the things that happened then. Most automobile traffic was halted for days. I had several restaurants in Massachusetts and RI at the time, and could not get to some of them for a week. If you had snowshoes or cross-country skies you could get around a little, and if you had a snowmobile you were pretty well off.

I remember, on the second day, skiing up one block from my house to a main street, and finding a panel truck and a man there selling loaves of bread off the truck for $1.00 each. That won’t register with many people today, with bread selling for $1.00 to $4.50 per loaf, depending on quality, but at that time bread sold for $0.25, and I was outraged. Little did I know then that bread would one day sell for a minimum of $1.00 – and, with the debt being piled up by Obama, will soon sell for a minimum of $10.00 a loaf.

It has now become obvious that we have a Socialist in the White House, a man devoted to righting imagined wrongs committed by the moneyed class against poor people (and poor people are noble; wealthy people are not noble). He has set out to teach us a lesson by driving down the market and raising income taxes. He demonizes businesses and all investors and bankers. He fiddles with global warming and healthcare while a fire rages that he has the responsibility to put out; he and his supporters may or may not have driven the credit crisis to new heights before the election, but it is his responsibility now. If you have savings and are retired, not only are your savings being wiped out, but whatever you are able to protect will soon become virtually worthless when the printing presses start to roll.

History tells us that the trillions of debt he is accumulating can only be accommodated by devaluing the value of our money through rampant inflation. I have enjoyed a reasonable retirement; my children never will.

His spending plans must be defeated.

The first thing to do is to bring back publicity of the "misery index", the sum of the inflation rate and the unemployment rate, which was used so successfully to make Jimmy Carter a one-term, President. In his last term, the "misery index" reached an incredible 20.5 %, and Carter also saddled us with interest rates that reached 21%.

"Why did things get so bad under Carter? And that's a long story. The fundamental reason, however, is he made mistake after mistake, blinded by the leftist rhetoric his party adopted after the infamous '72 Democratic Convention, when the so-called New Left seized control.

In office, Carter adopted the Keynesian economics of the time, buying into the theory that there was a reverse "trade-off" between inflation and unemployment — an idea that proved spectacularly wrong. The U.S. became mired in "stagflation," with both inflation and unemployment rising sharply.

As things grew worse, Carter sharply boosted government spending. When that didn't work, he blamed the American people. "I think it's inevitable that there will be a lower standard of living than what everybody had always anticipated," he told advisers in 1979. "The only trend is downward. But it's impossible to get people to face up to this."

Those remarks were followed by his now-famous "malaise" speech in which he unveiled six proposals — including import quotas, windfall profits taxes and increased spending on alternative fuels — to combat higher oil prices charged by OPEC. Nothing about tax cuts. Nothing about finding more energy. In short, he told Americans to consume less, but pay more." Investors Business Daily


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