Sunday, March 27, 2011

that damn Obama !

Whenever you hear a sentence that starts out with “that damn _________”, you can be fairly certain that you are about to get an earful of distorted facts.

Case in point:

The other day, I was having a phone conversation with an old friend (at my age, ALL my friends are old) and he commented that he had heard that the Obama administration has printed more money in the last two years than the government has printed since the time of George Washington.

Although the “fact” sounded a little unrealistic, I “humped” a few words of agreement so that I could hear the rest of the story. After we ended our conversation, though, I went to my trusty computer to do some research , and found some very interesting information.

I wasn’t able to determine WHO came up with this story originally, even after researching “the usual suspects”. The closest that I could come up with were some comments made on the air by Glen Beck on October 28, 2009. On that program, he stated that our ACTUAL national debt is really $105 trillion, and that we have increased the money supply by 120% in the last year.

I was an Economics major in college. While attending the University of Minnesota, I passed 11 Economics courses, and I took 2 more additional post graduate courses before I taught college level Economics classes for 7 more years.

Glenn Beck barely graduated from high school, and NEVER attended college. For some reason, though, there’s a large number of people who think that he knows what he is talking about when he gives his opinion about Economic theory.

I will have to admit, though, that Glen Beck knows more about money than I do.

He made $32,000,000 last year ..

and I didn’t.

If you look at the chart below, you’d probably conclude that the Democrats have REALLY gone nuts in the last two years.

chart of the U.S. money supply

If you dig deeper, though, you’ll also discover that there are SEVERAL kinds of money. MO (the chart represented in the link above) is simply money in circulation AND bank reserves. It has “spiked” in the last two years due to the fact that banks have been hoarding money during the credit crises and the real estate collapse. Another REALLY big reason that banks apparently started “hoarding” money is that the Federal Reserve started paying interest on depository institutions’ required and excess reserve balances on October 6, 2008.

If we, as individuals, were suddenly offered a higher interest rate on our savings accounts, isn’t it logical that we’d put more money into our savings accounts, and less into consumption?

That’s exactly what lending institutions have been doing since October 6, 2008.

The Federal Reserve uses TWO money supply measures.M1 measures currency, travelers checks, and checking account deposits. M2 includes M1, savings accounts, time deposits under $100,000, and money market mutual funds.

Glen Beck IS right about a couple of things:

(1) the supply of money in circulation HAS increased since Obama took office.

(2) the national debt has ALSO increased since Obama took office.

However, he IS a little off on his numbers. According to the Federal Reserve (on March 24, 2011), M1 has increased roughly 10% since a year ago, and M2 has increased about 4%.

The LAST time that there was a Democratic President (Bill Clinton) , the outstanding public debt was on track to have been ELIMINATED by the year 2010. That grand plan got sidetracked by the Bush Administration, who used the projected budget surpluses to fund tax cuts for the wealthy, and then added to the financial hemorrhaging by invading Afghanistan in 2001and Iraq in 2003.

As of March 27, 2011, the U.S. public debt is $14,221,945,669,739.50, which works out to a total debt for each man, woman , and child of $45,836.07, and an estimated 90% of that debt is due to the policies of the Bush Administration.

Thanks a lot, George.

Does an increase in the money supply automatically lead to more inflation? WeIl, it sure did in Germany in 1923, when people needed wheelbarrows to haul around their nearly worthless Deutschemarks:

To determine whether that is still true today, I went to the Federal Reserve website, and found the following opinion If you have trouble reading it, I’d suggest that you jump ahead to the conclusion on page 59. If it STILL doesn’t make any sense to you, I’m afraid that Glenn Beck isn’t going to be of much help either.

Most of us remember the rampant inflation of the late 1970’s and early 1980’s (when prices increased more than 10% each year), and none of us want to see a repeat of that.

Concerns have been expressed that policies of the Obama administration will lead to runaway inflation. However, the fact remains that the first year of the Obama administration (2009) was the first time since the Eisenhower administration that the CPI (Consumer Price Index) went DOWN from the prior year.

If Glenn Beck does not renew his contract with Fox News at the end of 2011, I’d recommend that the network play the following clip in the closing minutes of his program:

However, as nutty as he is, Glenn Beck isn’t a guy that we need to worry about.

Wisconsin Representative Paul Davis Ryan Jr is really the ONE person who has the ability to create havoc in the American economy, largely due to the fact that he is the chairman of the House Budget Committee.

Prior to his first election to office, in 1999, Ryan worked as an economic adviser to Empower America, one of the many conservative organizations (including the Tea Party) that have been founded and funded by the billionaire Koch brothers. Ryan, like Scott Walker, has received a substantial amount of money from the Koch brothers since being elected to office.

Ryan is one of the three co-founders of the Young Guns program, an organization dedicated to helping Republicans gain and retain offices. He also created the Roadmap for America.

In brief, the Roadmap for America advocates:

reduction of income tax for the wealthy
reduction of the capital gains tax -
elimination of the corporate income tax -
elimination of the estate tax -
elimination of the alternative minimum tax =
privatizing Social security -
the elimination of traditional Medicare and Medicaid programs -

Like his fellow “cheesehead", Scott Walker, he'll be a person to watch in the future.

For most us, Ryan has been "under the radar", and he definitely is not a household name. However, if enough people (especially voters in Wisconsin) start saying "that damn Paul Ryan", our country will be a lot better off.

No comments:

Post a Comment