When the good news on Wall-Street these days is that a Singapore fund is bailing out Merrill Lynch, there is no good news. Citibank is being propped up by Middle East investors and the U.S. stock market gurus say that foreign investment is your best bet.
Now if that doesn’t give you a warm fuzzy feeling about your future in the U.S., what would?
Many market analysts and money mangers suggest shedding dollars in lieu of foreign currency. The reason is that the buying power of the dollar in shrinking. Had you held Canadian currency over the last several years, you would have gained about 30% over the dollar. The Euro has performed even better.
As the FED continues to print money based on nothing more than their ability to tax the good citizenry, we move closer to the edge of sustainability. It takes more and more dollars to buy the same products. The problem is that wages have not followed the equivalent trend. Competition from cheap producing foreign nations have eliminated the ability for most U.S. based companies to raise wages.
So then is recession coming? Or is the “D” word rearing its ugly head? I’m going to assume that if you are one of the thousands who have lost their jobs and homes this year of 2007, that depression is already a fact of life. But, let’s talk about the rest of us for a minute.
I have a 52 page booklet that I have read several times cover to cover. The title is “The Chief Cause Of This And Other Depressions.” The author is Leonard P. Ayres, Vice President of the Cleveland Trust Company.
Mr. Ayres wrote the booklet at the request of Josiah W. Bailey, Senator, North Carolina.
The read is nothing less than marvelous, the perspective, nothing less than amazing. I won’t bore you with the base content, as only sick people like myself enjoy the study of economics. I will however give you Mr. Ayres synopsis which states that certain guidelines should be adhered to, should a depression not be the desire of the nation.
Operating in a stable and predicable environment is the key to our economic woes. As Mr. Ayres so well stated, “That kind of fundamental stability is the product of the drab and un-dramatic exercise of national integrity and self-restraint.” In other words, we have already failed the first principal.
Following are the points that Mr. Ayers suggests would keep our economy on an even keel. He begins, “It involves persistent adherence to at least seven national policies.”
1. Peace, and the enduring prospect of peace. 2. A sound money in which both our citizens and those of other countries have full confidence. 3. Balanced national budgets. 4. A sound banking system, independent of political influence. 5. The limitation of bank credit to loans fully justified by the demonstrated earning power of the assets on which the loans are based. 6. The restriction of speculation financed by credit. 7. Such negative regulation of business operations as experience may have proved necessary to prevent abuses, dishonest competition, and exploitation, but with a minimum of positive regulation designed to control wage and price competition, or to favor special group interest.
Let’s grade our federal politicians on adherence to these policies. It seems that they have scored an F-, getting none right and creating the exact opposites.
What do you think of Mr. Ayres advice? Seems like he knows what he is talking about to me. It also seems that we wouldn’t be in this terrible predicament if we had followed his guidelines.
Oh, did I tell you that Mr. Ayres wrote his book in 1935? Six years into the longest and most severe depression that this county has ever known. You see, he had some real time experience going for him. Senator Bailey, who requested Mr. Ayres study and opinion, headed the federal committee who had been charged with determining why the depression occurred.
Which candidate for President of the U.S. adheres to these policies? Just one…Ron Paul. The others are still trying to figure out what went wrong in 1929.