As a new member on these boards, I see a lot of discussion about the minimum wage, the public debt and the poor economy, wealth inequality etc. and where the major parties stand on these issues. I do not see a lot of discussion about the root cause of these problems and the mechanism by which we continue to have boom and bust economic cycles that bring up many of the economic issues under discussion.
Well before most Americans began to view the government as a mechanism through which economic problems could be solved, the Federal Reserve was created. The Fed. is a private corporation and through the Federal Reserve Act, the US government created a banking cartel and gave it the power to control the money supply. For the last century, the Fed. has achieved it's primary mission which is to protect it's member banks in good times and to bail them out when they run amok. This has happened as at least three distinct times in the last century- Great Depression, Savings and Loan Scandal and Great Recession. Prior to the creation of the Fed., there was no inflation in the US. There was no need to have a minimum wage and continually raise it because there was no loss of purchasing power. However, having sound money does not leave the bankers a lot of opportunity because new money is not being continually created. Today, the US has a standard policy of de-valuing the dollar by 2% every year. This forces people into the financial system to try to earn returns in places like the stock market, the commodities markets and from bonds. The continual expansion of the money supply is what causes generalized inflation. Inflation is not a big deal if you work in a good profession or if you are wealthy. It is the lower class worker and the elderly who pay the price because they cannot keep up with inflation. This is a major factor in causing the increasing disparities of wealth. If you have capital and are even a decent investor, you can make large returns in the financial markets if you know how the system works.
Unfortunately, some bad ideas become institutionalized and some politicians are smart enough to realize that the more they promise to the public, the easier it is to get elected. For over 50 years, the government has turned to the Fed. to blunt the effects of continual deficits. If the government borrows money at 2% and inflation is 2% for example, the cost of borrowing the money is zero. Of course, they are not perfect and inflation does get out of control at times. In the end, the fault for many of these problems lies with the public. We want the government to do more and spend more but we do not want to pay higher taxes. The politicians turn to the bankers and their 'wizardry' to make this happen. Of course, the only reason all of this works at all and the currency does not collapse is the fact that the US dollar is the worlds reserve currency. This is also why some politicians do not want an increase in the minimum wage. Giving more money to more people will increase bad inflation (price of goods) and force the Fed. to stop supporting what they view as good inflation (asset prices).
In the end, there is no free lunch. We have turned to the bankers to support spending that we cannot afford. They have used this opportunity to make themselves rich and gain more power within society. However, make no mistake. We are all paying for this through the mechanism of inflation which is a hidden tax on every American. One might argue that is the most insidious and unfair taxes of all.
Well before most Americans began to view the government as a mechanism through which economic problems could be solved, the Federal Reserve was created. The Fed. is a private corporation and through the Federal Reserve Act, the US government created a banking cartel and gave it the power to control the money supply. For the last century, the Fed. has achieved it's primary mission which is to protect it's member banks in good times and to bail them out when they run amok. This has happened as at least three distinct times in the last century- Great Depression, Savings and Loan Scandal and Great Recession. Prior to the creation of the Fed., there was no inflation in the US. There was no need to have a minimum wage and continually raise it because there was no loss of purchasing power. However, having sound money does not leave the bankers a lot of opportunity because new money is not being continually created. Today, the US has a standard policy of de-valuing the dollar by 2% every year. This forces people into the financial system to try to earn returns in places like the stock market, the commodities markets and from bonds. The continual expansion of the money supply is what causes generalized inflation. Inflation is not a big deal if you work in a good profession or if you are wealthy. It is the lower class worker and the elderly who pay the price because they cannot keep up with inflation. This is a major factor in causing the increasing disparities of wealth. If you have capital and are even a decent investor, you can make large returns in the financial markets if you know how the system works.
Unfortunately, some bad ideas become institutionalized and some politicians are smart enough to realize that the more they promise to the public, the easier it is to get elected. For over 50 years, the government has turned to the Fed. to blunt the effects of continual deficits. If the government borrows money at 2% and inflation is 2% for example, the cost of borrowing the money is zero. Of course, they are not perfect and inflation does get out of control at times. In the end, the fault for many of these problems lies with the public. We want the government to do more and spend more but we do not want to pay higher taxes. The politicians turn to the bankers and their 'wizardry' to make this happen. Of course, the only reason all of this works at all and the currency does not collapse is the fact that the US dollar is the worlds reserve currency. This is also why some politicians do not want an increase in the minimum wage. Giving more money to more people will increase bad inflation (price of goods) and force the Fed. to stop supporting what they view as good inflation (asset prices).
In the end, there is no free lunch. We have turned to the bankers to support spending that we cannot afford. They have used this opportunity to make themselves rich and gain more power within society. However, make no mistake. We are all paying for this through the mechanism of inflation which is a hidden tax on every American. One might argue that is the most insidious and unfair taxes of all.
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