Stimulate We the People....OR we the politicians?

Who caused this?
How did we get here?
What is an economical stimulation that is beneficial to We the people vs We the politicians and we the banks?

Some history about stimulus packages and the destruction they have brought with them.

Folks, government intervention in the US economy did not begin in 1933 under Roosevelt. Government had intervened in the economy from the very beginning; the first economic act of Congress, July 1789 was a comprehensive protective tariff. Banks faced detailed federal and state regulations. Branch and interstate banking were forbidden. Free market banking did not exist and and the gold standard was limited.

The Federal Reserve was born in 1913 by the big banks and politicians who decided a more regulatory regime was needed to keep the economy on an even keel. So, the Federal Reserve Bank is a government sponsored banking cartel.

History tells us that the worst to date US depression occurred 15 years after the Fed bank opened. Now, if you are ignorant of history someone might guess that the Fed Reserve Bank was setup to to prevent a repeat of the Great Depression, but he/she would be wrong.

Ben Bernanke made a remark at the 90th birthday celebration of Milton Friedman saying: "Regarding the Great Depression, you're right. We did it. we are very sorry."

How did they do it?

The Great Depression was marred by the Fed's inflation of credit. This is what is being done right now folks.

During this time the money supply (we will do whatever it takes and costs) grew by 62%. This is the government printing money.

Folks, history shows that the inflation of the 1920s was actually over by the end of 1928 and therefore from that time onward a depression to adjust the economy was inevitable. Why inevitable? To understand this we must understand the role of interest rates in a free market. We the People prefer goods in the present to goods in the future. If you defer (put off till later) consumption you typically must be compensated. This role of compensation is called - interest rate!

This time preference (deferred consumption) can vary greatly. One person may be willing to lend at money at 5% while another may be willing to lend at 9%. This variance in interest rates emerges from competition among lenders and borrowers.

It is important that you understand this: Changes in interest rates absent from government intervention, signal real changes in peoples time preferences. Interest rates rise when you reduce your savings and buy more. Interest rates fall when when you (we the people) decide to defer (put off) buying and save more. This information tells producers and investors when and how to invest, long term short term It is during this critical transition and time signalling function that this process becomes severely damaged when the Fed's expands the money supply.

Looking back the Fed's inflated in the 1920s precisely to lower the rates below the FREE MARKET LEVEL. Since the signals created by the Fed's were false in the sense that they were not aligned with the consumers true time preferences producers and investors behaved differently than they would have in a free market. So, the 1920s boom - built on false expectations induced by the Fed's easy credit was unsustainable. With the Fed's inflation over by the end of 1928 the BUST was just a matter of time. The stock market crash of of 1929 left banks with unpaid loans and their shaky condition eroded confidence and set off bank runs. Companies failed, unemployment rose all because of the Fed's getting involved and not understanding a free market. See anything familiar here yet with the Fed's current intervention.......?

Folks, this might have been a one or two year depression.This failure of the banks, stock market crash and companies failing creating a tremendous contraction of money was something the Fed's created and facilitated.

The central bank had been established as a lender of last resort to the banking system, obviating the markets own solution to illiquidity.

So, folks, with banks failing etc., people held on to their money and reduced consumption which in turn left businesses without customers hence the second depression. The government really made things worse by aggressively interfering with the market correction.

History tells us that in previous depressions where the Fed's typically CUT SPENDING and TAXES and LET THE MARKET LIQUIDATE BAD INVESTMENTS. By applying this method those previous depressions were relatively brief.

Let's take a look at fmr. pres. Hoover. He moved quickly to raise government spending and taxes of all kinds. The top rate went from 24% to 63%. Banks were subsidized, rail roads industries, home owners with mortgages, local governments and farmers.

Hoover urged the nations governors to increase public-works spending and had the federal government join the effort. Hoover even pressured companies to not cut wages. Now folks, when wages are rigid while all other prices are falling, unemployment goes up."We might have done nothing " Hoover said. "That would have been utter ruin. Instead we meet the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counter attack ever evolved in the history of the Republic." This was the Hoover New Deal. So folks, if interventionist economic theory were correct, Hoovers program should have been a smashing success and he would have been reelected.

Roosevelt became the president and he ran on a balanced budget, reduced government spending program. Well (we the politicians as always) changed tactics when he was elected. He raised taxes and spending to new heights and CONFISCATED THE PEOPLES GOLD.

His programs of the NEW DEAL is familiar, beginning with the fascistic National Recovery Administration (NRA) which cartelized the industry and this brought central planning to farming, banking and securities regulation incl the make work Civilian Conservation Corps.

This massive public works spending program helped Roosevelt politically but did little to employ those most desperately in need. Luckily the Supreme Court declared the NRA and public works programs unconstitutional. Thus began the 2nd New Deal which included Social Security, the National Labor Relations Act. Yet with all the government intervention and activism, the US economy, despite halting attempts at recovery, could not shake the Depression. In 1937 and 1938 the financial system went into an unprecedented secondary depression with a new stock market crash and unemployment climbing back over 20%. The New Deal further eroded banks, raised taxes, made hiring workers especially unskilled blacks, prohibitively expensive. Increased the price of most goods incl food and discouraged investment. Roosevelt really had no plan, instead he was a pragmatist ready to try anything, an approach that engendered stultifying uncertainty.

First, he mandated anti-competitive cartels; then he brought antitrust prosecutions against firms for monopolistic activity. Under these circumstances businesses were afraid to male long term investment plans.

What can we learn from all of this? That money is to important to be left to the state. One way or another, the government mismanagement of the monetary system wrecked the US economy. It is happening again folks. This is our money. The way it is supposed to be is "We the People and not We the politicians and government. The only permanent way to avoid a repetition is to place the system where it belongs; in the FREE MARKET.

Second, efforts to prevent liquidation of malinvestment caused by inflation bankrupt companies and only prolong economic agony. Bailouts are counterproductive.

Third, government stimulus spending, borrowing, taxation, and public works commandeer scarce private resources and prevent entrepreneurs from shifting them to investments aligned with consumer, not political preferences.

Fourth, individual liberty is at stake and is the first casualty when bureaucracy expands.

Remember, government cannot create wealth, it can only transfer it.

Pres. Obama has declared his intention to spend, NEW DEAL-STYLE, hundreds of billions of dollars to rebuild infrastructure, modernize schools,and expand the broadband network. No matter how meritorious these projects, they do not constitute a genuine recovery program.

Post your comments as always and become a member. Folks, this is our country and we elect the politicians. We need to remember this. We need to stand up and take our country back. We need to do this for our children. we can become a force that will report roll over politicians and hold them responsible.