A Simple Exploration of Federal Reserve Policy for Kids! (or Presidential Candidates who depend on advisors!) by Ted Williams
(libertarian)
Wednesday, January 30, 2008
Concerned with plummeting global stock prices, recession, and investor confidence, the Federal Reserve today lowered interest rates by 50 basis points. The market, like a petulant child, responded with a modest increase, and for the rest of the day, behaved in a semi-predictable manner.
What isn't being covered in the media is the obvious flip side of the Fed's action, the skyrocketing price of gold, and the plummeting dollar.
As of the writing of this article at 3:00 P.M. CST, the dollar was down a full half percent, (which is a huge move), and gold was up another $15.00 after the Fed's decision.
Ask any Presidential candidate (other than Dr. Ron Paul) what the Federal Reserve action implies, and you will get a string of responses. Some will insist it means the ever-competent Federal Reserve has yet again saved us from a potential crash or recession. Some would insist they really don't understand all this economy stuff, but selected experts are capable of worrying about such matters. The sad and simple fact is, very few Americans understand the horrific implication of today's action, or for that matter, the long litany of bad Fed decisions.
On cue, my Dear Readers, my fourth grader has just come home from school. He immediately checked the Internet, and asked me about "The Fed". He had read a news report.
This creates the perfect opportunity to explain to my son, and Presidential candidates other than Dr. Ron Paul, a little bit about the economy!
You see, Ron Paul Supporters have been taught to realize two simple economic truths. For every action, there is an equal and opposite reaction, and also, it is natural for markets to fluctuate between growth and contraction in a cyclical manner.
Because I am dealing with young children and economic neophytes, however, I have decided on simplified and monosyllabic words regarding these principles in the following segment. Here we go.
Hey Kids, It's Inflation!
The "Stock Market" is like a very big grocery store where people buy things called stocks. While the Stock Market sometimes goes up (sells more for more money), it will eventually (before long) suffer a decline (sell less for less money). This cycle (back and forth) is normal.
That's why God made "bonds" (not James) and "precious metals" (gold and silver), so that prudent (smart) investors (rich people) could put money in different places, and take advantage (make money) from natural cycles (ups and downs) happening in different economic arenas (places).
But the Federal Reserve (banks that secretly create money) decided at some point that cyclical stock downturns (regular fall down and go booms) should be a thing of the past, and that everyone should have as much money as they ever, ever wanted.
So the Federal Reserve began to give money to anyone who wanted it (or asked nicely), and started to watch the Stock Market very closely. If the Stock Markets became sad (went down), the Federal Reserve just made up more money, and gave it away, or sold it very cheaply. The Federal Reserve calls this "Lowering Interest Rates" but smart people who study the way we use money (Economists) call this "inflation".
After 10 years of giving away free money so that the stock market is always happy, the opposite happened. The stock market is now very sad. This is because our money has "devalued" (become worthless), because the Federal Reserve gave too much away. It is like when you eat too much candy, and it makes all your teeth so rotten, they all fall out!
Now the Stock Market is going to go way down anyway (fall down and go big boom), and our money won't be worth anything. Why is this bad? Remember those teeth that fell out when you ate too much candy? The Dentist who used to fix your teeth for $2000.00 will now cost $75,000.00.
The End
My fourth grader mulls over my explanation. He has watched many classic Saturday Night Live episodes. He pauses, and does an impressive imitation of Dana Carvey famously imitating John McGlaughlin, from The Mcglaughlin Group TV show.
"Lower Interest Rates to fix the markets? WRONG!...Pat Buchanan"
Even my fourth grader gets it.
To those not concerned or misinformed about our challenged economy, please encourage these folks to bite the apple of knowledge, and support Dr. Ron Paul for President. He isn't a dentist, but understands the menace of decay, especially decay due to economic overindulgence.
Time is now running out. America must wake up, or she will die in her sleep. Congress has repeatedly proven itself totally ignorant (and unworthy) of the difficult task of economic repair. The top candidates in the Presidential race promise more war and spending, with little or no comprehension of financial issues. Dr. Ron Paul is simply our last hope.
My fourth grader concludes our chat by asking if the Federal Reserve is American...I'm genuinely tasked to answer his query.
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