If anyone knows me, they know that I am a very fiscally minded person. I really enjoy economics because it really is the study of people. It includes things such as behavior (what people buy), psychology (why people buy things), trends in society, gives metrics for shifts in social behavior, shows what a society and people value (things that make money tend to have the support of society). Economics is very interesting because, in its most fundamental form, it can transend all other social or cultural barriers errected over generations. Trade is the answer most cited when explaining the reasons for the European Renaissance (J. Bradford De Long and Andrei Shleifer (October 1993), "Princes and Merchants: European City Growth before the Industrial Revolution", The Journal of Law and Economics (University of Chicago Press) 36 (2): 671-702 [678]), and as such trade is still very important in shaping the events of future generations. This is why I believe that the "rules" toward partication in the economy should be as simple as possible. The more that different types of people participate, the more reason each of these groups of people have to maintain constant warm relationships. Even after the bloody, highly idealistic crusades trade routes remained between the Middle East and Europe. The reason trade relationships maintained was due to the simple fact that the one party had something the other party wanted, and visa versa.
Our current "economy" in the United States has a huge flaw when evaluating this simple, yet essential fact and premise of trade... Others have things we want, however there is a growing trend that we no longer have what the other party wants. Post WWII the U.S. Greenback (dollar) was the stablizing force for any economy destroyed by the war. The principle reason for this trend was because of the amount of industry that the U.S. was able to produce during wartime. After the war, in an effort to "redistribute" this wealth and to rebuild Europe/Asia out of ruins, the United States began to sell off its industry so that others could have a stablizing economic base (Germany/France began producing steel and coal due to the Rhineland, etc.). This development of foreign industry worked so well that the United States began realizing that it was much easier to sell off industries overseas because of the amount of cheap labor available.
In 1971 President Richard Nixon took the U.S. Greenback off of the goldstandard http://en.wikipedia.org/wiki/Gold_standard (which offered a gold guarentee for every dollar in cirrculation) due to the fact that the U.S. was spending well beyond its means, and also financing a war in Vietnam that it could no longer afford. Since 1971 the U.S. dollar has been backed by absolutely nothing, and currently has no "check-and-balance" system to prevent massive amounts of money from being essentially produced out of thin air. This is the current trend, and I believe that this is why the U.S. is beginning to see such a drastic decline in GDP. I am not alone in my thinking, and this Chicago SunTimes article hits at the popular concensus:
The American people are fed up with their government's irrespondsiblility, and rightfully so. What the public does not fully comprehend is that the fundamentals of our "live well beyond your means, easy credit" society are very flawed. Something is no right when a society has a negative savings rate! The blame for this, however, can be partically placed upon our government's fiscal irrespondsiblity, and the failure for our government to educate people of the dangers of debt. It is time for a new way of trade for the American economy, one in which we produce things that other parties want, rather than just us printing less valuable and less valuable pieces of paper out of thin air. We need an economy that is based on real wealth and respondsible production rather than one that is based on the premise of "American Superiority". The United States did do a hell of a job freeing the world after WWII, however the international community is beginning to ask "what have you done for us lately", and if all we can respond with is create needless wars, and donate more valueless dollars, then I'm afraid those others parties are going to begin calling in their debts.
I will leave you with an analogy, and a very simple graph. The analogy goes like this:
If you had an oz of gold in 2001, you could essentially trade it in for $250. If you were to save this oz of gold and set it on your table until right now, you could essentially trade that SAME oz of gold (to which nothing has happened to it) for $1050. This is not a scheme, or a story of gold becoming more valuable, but a story of how weak the U.S. Dollar is becoming. This can be easily explained through a quick glance at the monetary (amount of dollars in cirrulation, credit) base published by the Federal Reserve. This jump comes after the financial crisis, and should be looked at with the notion "if you have more of something, isn't it worth less?" If you had $100 in 2001, your $100 has essentially been printed 4 more times, making your money worth less (in net wealth). You may have even gained another $100, however your same 2009 $200 would only be worth $50 2001 dollars. Here is the reason why:
I hope that someone learned something from this, and begins to question the basis of our economy now.
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