Simple Economics According to Neal

In a recent article I provided the following quote from Barack Obama, taken from an interview with NBC’s Brian Williams, “But I do think that the extreme position that you hear that says government has no role to play in growing our economy that the federal government has no function to play in building a strong middle class is absolutely wrong. I reject that view.”

I know that some people immediately saw the absurdity of that statement, yet I think that others saw nothing wrong with it…and that bothers me. So, I decided to go over why I believe Mr. Obama is wrong.
First of all, although people spend it all the time, I do not think they truly understand the nature of money. Money is merely a tool, a means by which people may obtain goods. It is a promise that the paper or coin that they are giving in return for a good, or service, is of value.

In Article 1, Section 8 of Constitution it states that Congress shall have the power to “To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures…” Also, in Article 1 Section 10 it states that no state shall, “…make any Thing but gold and silver Coin a Tender in Payment of Debts…”

In 1792 the U.S. Congress passed the Coinage Act, which in Section 9 states, “And be it further enacted, That there shall be from time to time struck and coined at the said mint, coins of gold, silver, and copper, of the following denominations, values and descriptions…”

It was clear that, at the time, gold and silver were considered the accepted currency, or money to be used by the people of this country. However, as large quantities of gold and silver coins were cumbersome and heavy, paper money came into existence. The paper money was merely promissory notes that were redeemable in equal amounts of gold or silver.

Take a look at this old $1 bill and read the caption underneath the image of George Washington, “IN GOLD COIN Payable to the bearer on demand,” Old Dollar Bill

But paper money is not something that is new to our century, it was also used by the colonists prior to the Revolution, and their economy was flourishing. That is due to the fact that “In the colonies, we issue our own paper money. It is called ‘Colonial Script’. We issue it in proper proportion to make the goods pass easily from the producers to the consumers. In this manner, creating ourselves our own paper money, we control it’s purchasing power and we have no interest to pay to no one.” Benjamin Franklin

Within a short time, the Bank of England put pressure on Parliament to stop the colonies from printing their own money…and the economy suffered immediately. Once again, from Franklin’s notes, “In one year, the conditions were so reversed that the era of prosperity ended, and a depression set in, to such an extent that the streets of the Colonies were filled with unemployed.”

In fact, according to Franklin, “The refusal of King George III to allow the colonies to operate an honest money system, which freed the ordinary man from the clutches of the money manipulators was probably the prime cause of the revolution.” It was not tea, it was not taxes, it was the ability to coin and print their own currency…to control their own economy.

I can probably say with absolute certainty that everyone who is reading this has noticed that prices are going up on almost everything you purchase. While there are cyclical patterns that cause prices to fluctuate due to supply and demand, the overall cost of EVERYTHING is going up. People attribute this to inflation and give it little thought. But what is inflation? Inflation is not simply the price of goods and services going up, according to the dictionary it is “an increase in the supply of currency or credit relative to the availability of goods.”

So what does all this have to do with what Mr. Obama said? First of all when Congress created the Federal Reserve Bank, they gave up their Constitutional authority to coin our nation’s currency to a cartel of privately owned banks. Sure they are under some form of discretion, with the government appointing the chairman, yet they have never been audited or their books examined for fraud.

It has been said that Mayor Amschell Rothschild once said, “Permit me to issue and control the money of a nation, and I care not who makes its laws.” That is because if you control a nation’s currency, you control the nation…or you own it depending upon how indebted they are to those who lend them the money to operate.

Getting back to money for a second, say you have three one ounce silver dollar coins in one hand, and three $1 Federal Reserve Notes in the other. On face value they are equivalent and you could not buy a gallon of gas with either. BUT, if you consider the melt value of the silver dollars, that is the value of the silver in those coins, then you would be surprised to learn that those silver dollars are worth a whole lot more than that worthless paper you hold in your other hand. The current melt value for one ounce of silver is $30.98 an ounce. So in reality those three coins are worth almost $94, more than enough to fill up your tank and leave you with some pocket money.

Remember, the Constitution said that Congress had the power to “… regulate the Value thereof…” in regards to the currency of this nation. So why, pray tell, are two currencies, both with equal face value actually not the same value?

It is because the Federal Reserve Bank has inundated our country with these Federal Reserve Notes, decreasing THEIR value to the point where there are almost worthless. According to the Bureau of Labor Statistics, the value of a $1 Federal Reserve Note has gone from $1 down to about $.13, that is THIRTEEN CENTS! That is inflation! Inflation is NOT the cost of goods going up, it is the loss of buying power of the money you have in your wallet or purse. That is why those 3 silver dollars will buy you more, because that is REAL money, and it still retains its value.

Again, what’s all this have to do with what Mr. Obama said? Allow me to explain; Let’s say I am broke, bankrupt, in the red up to my eyeballs, but somehow I manage to qualify for a loan for $100,000. Now I take that money and hire contractors to fix my house, making much needed renovations and repairs. I HAVE provided jobs for people who otherwise might not have had them. I have stimulated the economy. But think about it, I borrowed that money with no means to pay it off. So what I did was to transfer DEBT to those laborers who did the work on my home. They, in turn, spend the money to buy groceries or clothing for their children. While they too may be stimulating other sectors of the economy, they are merely passing the debt on to others, just as I passed it onto them.

That is what Mr. Obama is proposing, borrowing money to create jobs. So, in reality what he will do is to induce more worthless currency into the economy, therefore decreasing its value even more, and further adding to our nation’s already astronomical debt.

It is NOT the purpose, nor function, of the federal government to CREATE jobs. Imagine them as a farmer getting ready to plant. If they throw their seeds directly upon the ground it will not provide them with a profitable yield. Yet if they prepare the ground properly for the planting, they will have a bountiful harvest. That is the purpose of government, to prepare the economy for economic growth.

When the government over taxes industry, imposes a multitude of regulations and restrictions upon it, allows unions to run roughshod over companies abilities to run their businesses, they are creating a climate in which businesses either move their operations overseas, or they simply cannot compete and close down.

No matter how many incentive programs, job stimulus packages, or Quantative Easing’s the government and the FED pass, the economy will continue to suffer until the climate is right for business to create jobs in the United States. Add to that the fact that the money people earn is worthless, and you have the recipe for a complete economic meltdown.

What we need is for the monkey that is government regulations and control, to get off the backs of companies. We need the government to stop infusing the economy with more worthless paper money. Only then will we see our economy begin to thrive. However, it will never happen as long as people continue to see nothing wrong with statements like the one made by Barack Obama.

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