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I Know the Problem: What's The Fix:

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U.S. NEWS: What a shocker, 63,000 jobs were lost in February following 41,000 lost in January. How could this possibly be happening in the land of smoke and mirrors? After all, the only problems that we have consist of building being near all time lows, consumer spending is down, the financial markets are in total turmoil, the dollar has fallen off a cliff, oil passed $109.00 per barrel, saving are negative, Americans are in debt up to their eyeballs and the Three Stooges are running for president.

As those of you who read this column on a regular basis know, I believe that we will look back on today as the good times. Ben Stein, the financial columnist, announced that he sees no end to the falling dollar. The lower the dollar goes, the more foreign goods cost in the U.S. And since there is a little sticker on the bottom of nearly every product that we consume in our daily lives that proudly announces, made in China; the price of life is going up.

Don’t get too excited about those who claim that this is good for U.S. exports. Until such time that we reach parity with Chinese labor, it will have little positive effect in the mainstream. And, noting that Chinese labor is around 30 cents per hour and also noting that the average American spends more than 30 cents per hour on toilet paper, it’s going to be awhile.

So what about fuel? Must be Bush’s fault huh? Not hardly; it isn’t our fuel. The U.S. hit maximum oil production in 1970, which only gave us 38 years to prepare.

How is the U.S. Congress supposed to take action on such short notice?

Let’s turn the tables around. Say we had the oil and the Arabs were asking for a discount, but the rest of the world was willing to pay more. What would you say the Arab’s chances of a reduction were? Exactly, the same chance that the tax rebates will turn the economy around.

How many of you believe that ethanol is the answer to our fuel crisis? I’m sorry, corn farmers can’t vote. Okay, taking the farmers, politicians and ethanol producers out of the voting and counting the hands; that leaves exactly nobody. How many of you think ethanol production is a crisis? Darn right it is.

So what’s the solution for moving away from our current mess? Bronco Ben Bernanke thinks inflation is the answer; regardless of the question. Other than doing what is right, the only option the FED has is to fan the flames of inflation, just like they did to get us into this situation. I know I use this quotation a lot, but when the shoe fits… “If stupidity got us into this mess, then why can’t it get us out?” ─ Will Rogers.

So purposely induced inflation it is; one more time. But it won’t work this time for more reasons than I have time to write. Mostly because the resulting inflation is intended to create more borrowing, greater spending, and increased pressure to raise wages to repay the borrowing.

The latter is the problem. Go back to the Chinese working for .30 cents per hour and add Mexican labor at $1.25. Raising U.S. wages will only make American workers less competitive, resulting in greater unemployment.

Let me explain inflation. In economics, inflation is described as “an increase in the general level of prices of a given kind, in a given currency.” General inflation is described as “a fall in the purchasing power of money within an economy.” Or, a buck don’t go as far as it used to.

While the above is the text book description of inflation, I prefer the following, stated by futurecasts online magazine : “Monetary inflation is a kind of tax with which government — by expanding the money supply — transfers wealth from its people to itself. It also results in the transfer of enormous amounts of wealth from the hands of ordinary people to the hands of those speculators shrewd enough to take advantage of the price volatility inflation causes in the markets.”

So what is the best way to protect yourself from inflation? That is a subject that deserves a little more ink than we have space for today, so stay tuned for the next episode of King of Simple News. Together, we’ll beat this thing. Well, in any case, we’ll make it better.

 

www.kingofsimple.com

Mike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics. The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, (more...)
 
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Ron Paul, and Ron Paul alone. Check him out.... by wgadget on Tuesday, Mar 11, 2008 at 11:34:52 AM
Yes, Mr. Paul understands this quite well, but Ame... by Mike Folkerth on Tuesday, Mar 11, 2008 at 11:57:21 AM
To the Editor - Dear Friend, The stark face o... by MyTwoCents on Tuesday, Mar 11, 2008 at 12:14:21 PM
Insanity: doing the same thing over and over again... by K Butler on Tuesday, Mar 11, 2008 at 2:06:35 PM
I have a statement from David Walker on the back c... by Mike Folkerth on Tuesday, Mar 11, 2008 at 2:57:11 PM
The trouble with the US economy is the result of m... by Dwight Black on Wednesday, Mar 12, 2008 at 10:01:10 AM
In a nut shell, you are ignoring macro-economics a... by Mike Folkerth on Wednesday, Mar 12, 2008 at 10:28:07 AM
am not sure I understand the macro/ micro comment.... by Dwight Black on Wednesday, Mar 12, 2008 at 2:50:41 PM
I would love to discuss this with you further. Is ... by Mike Folkerth on Wednesday, Mar 12, 2008 at 7:06:18 PM