Topic: Economics
More Money Does Not Necessarily Equal More Wealth I am a billionaire. Well, I would be if I lived a little farther south in Zimbabwe. You could be as well if you moved to the south-central African nation.by Kenn Jacobine
(libertarian)
Monday, December 22, 2008
Once known as the breadbasket of the region, Zim. (as it is affectionately called in southern Africa) is on track to be the country in the world with the highest billionaire rate. You see, through government mismanagement of the economy and extensive exercising of the printing press by the central bank in the country, inflation is in the millions of percent. The central planners answer, well, continue to print more money in larger and larger denominations so people can have the currency to buy things like bread and beans. Of course, as all Austrian economists know more money means even more inflation – prices double about every day in the capital Harare. Unbelievably, the most recent note issued was a $100 billion bill – equal to about $20 USD on the black market. The problem is that through the policies of its central economic planners Zim. is becoming the poorest country on earth. This is proof that more money in the economy does not necessarily translate into more wealth.
This would be a lesson that our economic central planners should learn. Now to be sure, our Federal Reserve Bank is not increasing our money supply anywhere near the rate of increase that Zim's central bank has imposed on that economy. After all, Zim's central bank is more like Bernanke on speed. But, Uncle Sam is spending a lot of money He doesn't have on programs that are not working to reinvigorate the economy. Take the $161 billion stimulus package passed earlier this year by Congress. It hasn't achieved its intended goal – consumer spending to induce economic recovery in the United States. Maybe it didn't work because Americans spend 61 percent of their consumer goods dollars on imports. Or maybe it didn't work because the American people are smarter than their leaders. They simply saved the money for the impending rainy day that is sure to come.
Then there is the $700 billion bank bailout bill hurriedly passed by Congress in October. In November over one million workers lost their jobs. Housing prices are still going down and Americans are still not buying from the Big Three automakers. The Administration can't even decide on a definite plan to use the money. First it was to buy bad assets from financial institutions, then to liquidate banks balance sheets, then to buy bad paper from corporations, and now it is to bailout the automotive industry. Since, oil has plunged to below $34 a barrel maybe the petroleum companies could use some taxpayer funds to tide them over for a while.
Speaking of the automakers, Bush once again showed exactly what kind of a weasel he is – the worst kind. He essentially threw $17.4 billion dollars of money we don't have down the drain so that Chrysler and GM would not collapse on his watch. The automakers belong in bankruptcy court. They have no chance of restructuring into something that is economically viable. The President has given them 3 months to shape up. Give me a break. The UAW has already rejected even the mention of wage and benefit concessions that would allow the Big Three to be more competitive against foreign car makers. Even though he has run GM into the ground, Rick Wagoner has been allowed to stay on as CEO. Lastly, there is an impression among American consumers, rightly or wrongly, that American automakers produce junk vehicles. By simply changing car designs, this impression of quality will not change and sales will not improve. The Big Three will eventually fail or they will become like many banks have become, wards of the state. The Big Three bailout is just the latest example of policies that will not even bailout the recipients of the money let alone reinvigorate the economy.
To come will be President Obama's stimulus package. It will be huge, probably in the neighborhood of $700 billion. It will include all of the things FDR was revered for – public works, welfare payments, and other Keynesian spending. Just like the Great Depression, this spending will not work today either.
Zim's problems began when President Robert Mugabe confiscated farms and handed them over to his non-farming cronies. Scarce resources were stolen from productive users and given to incompetent recipients. The U.S. government is doing the same thing right now. It is taking scarce resources away from productive individuals and businesses who are efficient and valuable to our economy, and giving them to banks, automakers and other corporations who through their performance are a drag on our economy and therefore must be liquidated. As Uncle Sam continues to spend money it doesn't have on programs that will not improve our economy like Zimbabwe the United States will be poorer for it. The only question is how poor?
Kenn Jacobine teaches History, English, and Information Technology in a Global Society for the American International School of Lusaka, Zambia. Visit his website at: The View from Abroad.
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Posted By: Jake, the champion of the constitution
Date: 2008-12-23 01:43:41
Good stuff Kenn! Reminds me of a couple quotes:
"Money is Money, Paper is Paper." - a German farmer quoted by Tom Paine in Dissertations on Gov't, 1786
"Gold is Money, and Nothing Else" - JP Morgan to Congress's Pujo Commission, 1913, in one of the final hearings before the Federal Reserve Act was passed
The amount of money in an economy is completely irrelevant as a measure of wealth. Money is a medium of exchange, a way of exchanging the goods/services you produce for the goods/services someone else produces using a common medium. Thus the only real measure of wealth is productivity.
The sad thing is that most economists today (particularly those who support central banking) see money as just a quantity which must be reduced or increased depending on various factors. This way of looking at money has produced a very distorted view of economics and has, in my opinion at least, given rise to this culture of "something for nothing" that has become more and more pervasive of late.
Comparing Zimbabwe to the United States is like comparing the moon to planet earth. Zim has no economy. They have 80% unemployment. 25% are infected with HIV aids. To make matters worse, western nations have imposed sanctions on the government. What the people of Zimbabwe need is food. You can't work if your starving.
What the United States needs to do with its economy is follow the Constitution. Congress needs to take back its authority to coin Money and regulate the Value thereof. Get rid of inflationary fractional reserve banking and nationalize the Federal Reserve. The Congress can issue money, without interest, backed by gold or silver. Feed the economy cheap, valuable capital to credit worthy entities and the economy will grow and weatlh will be created.
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