Monday, July 28, 2008

Sometimes Life Gets in the Way of Blogging!

My mom-in-law was visiting this last week and went home yesterday. I try to post on my other blog every day. I would like to post on this blog on Mondays, Wednesdays and Fridays. However, this week it will be on Tuesday and Thursday. We've got a lot going on over the next several weeks and I need to be realistic about the amount of time I can spend on the computer.

Monday, July 21, 2008

Money, Part 3

Oh Boy! Things are a hoppin' in the comment section of the last post! I am really excited about it... even though my eyes are bulging and my brain is hurting. I've got some things to research and think about, but I would like to get to some of the things that have been said once I learn some more! In the mean time, I am going to continue onward... kind of. I said in the last post that I wanted to go deeper into the FED and get into Fannie Mae and Freddy Mac. I'm not going to do that quite yet because I'm still trying to figure out how best to explain it. I'm all about cutting through the big words and complicated explanations in an effort to really understand it. I am a blond afterall.

So... back to inflation. Remember inflation is an increase in the money circulating. Some people think prices rise because workers demand higher wages so the businesses must raise the prices of their goods so that they have the money to pay the workers. Because of the higher prices, the workers demand higher wages... and the businesses raise their prices again. Around and around they go. Wages and prices spiral upward. It makes sense right? Hmmmmm... but where does the money come from? Businesses can ask any price it wants for its goods, but, it will only get what it asks for if the money exists. Yup, you got it, someone printed it.

If the supply of money does not change then the only way for someone to have more money is for someone else to have less. When someones wages went up... another person's would go down. When one product's price went up... another products price would have to go down. The value of the money would not change. The only way for wages and prices to go up is for someone to print money.

Let's take a little look at oil prices, the hottest topic around these days! Some people think inflation is caused by rising oil prices. Supposedly... oil is involved in the production of just about everything. What about products made from oil... like plastic? Well, in the case of plastic and other products made from oil... like gasoline... the prices will sharply rise. But, what about other prices? Being a housewife, I do the grocery shopping and I see a sharp rise in the cost of food. Most attribute this to the rising gas prices. The goods need to be transported to the stores, right? If it is costing more to transport goods then it follows that the price of those goods will also increase. And they have. If people are spending more money on gas and other oil related items, they will have less to spend on other things. The prices of other things will fall... or should fall... unless more money is printed and put into circulation. Right? If money is not being printed, then each rise in price would have to be matched by a fall in some other price. What if the demands for money are faster than it is created? Think about it.

What happens if a business raises prices faster than the government inflates? People just won't have the money to buy those products... so the business will either lower prices or go out of business. In the case of unions... they try to push wages up faster than the government inflates. Then the employers don't have money to hire as many workers. They get machines to replace workers... or go to another country where the price of labor is cheaper. Strikers don't understand that when the price of their labor goes up, the demand for their labor goes down. Supply and demand people.

What about when the people cry out for wage and/or price controls? If the amount of money goes up, the value per unit goes down. That is a fact, not an if/or. If people are not allowed to increase their wages or prices during and inflation (that is causing other goods and services to rise)... the value of their money goes down and they can't get more to make up for the loss. They quit working. Whenever the government is asked to start controlling prices, shortages happen... and black markets develop.

A black market is simply the buying, selling or making of something that the government does not allow... or at higher prices than the government allows. Some people just don't get it... the wage/price spiral does not cause inflation. It is a result of inflation. Wage/price controls are not a good idea... it has never worked. Increases in the money supply always increases wages and prices. Decreases in the money supply are followed by a fall in wages and prices. Wages and prices simply do not rise without someone creating more money.

Now... any of you smart people reading this... help me out here. I just don't get some stuff. Like... if the FED were to be abolished what would that look like? What problems would arise from that? What would it mean for all the housewives out there like me? And... what if the government bailed everyone out that got into financial trouble? What kind of impact would that have on everyone? Who is really controlling the amount of money in this country? I want to know.

Thursday, July 17, 2008

Money, Part 2

The law of supply and demand says that when the supply of something goes up, the price per unit of that thing goes down. If there is not a lot of money, it is valuable, and will buy a great deal. If there is a lot of money, it is not so valuable, and it will not buy much.

Inflation is an increase in the amount of money circulating. World wide, government officials are creating so much money that the money is losing its value and prices are rising. Inflation is not the same thing as rising prices. Inflation causes prices to rise.

All governments inflate. Dictators... because they fear revolutions. If they raise taxes too much they run the risk of being overthrown or assassinated. In a democracy, revolutions are not a problem... elections are.

We all know politicians promise people what they want in order to get elected. Voters always elect the person who is offering what they want. Once elected they can't raise taxes enough to cover all they promised (Remember the first President Bush and his, "Read my lips, no new taxes!"). So what do they do? They print more money... or, in the U.S., they use The Federal Reserve.



Now, I don't really have a good grasp on the Federal Reserve (often referred to as the FED). This You Tube clip does a good job of explaining... better than I can. Ron Paul, as seen in this clip, drafted a bill to abolish The Federal Reserve.

Interestingly, JFK (President John F. Kennedy)signed an executive order in June of 1963 returning to the federal government, specifically the Treasury Department, the Constitutional power to create and issue currency without going through the privately owned Federal Reserve Bank. This meant that the certificates, or United States Notes (remember our money today is Federal Reserve Notes), were actually backed by silver held in the U.S. Treasury, giving them real value. President Kennedy was assassinated on November 22, 1963 (5 months after signing the executive order) and the more than $4 billion United States Notes he had issued were immediately taken out of circulation. There are many conspiracy theories about the assassination of JFK. I find this information interesting. (This is interesting if you want to read further).

More on The Federal Reserve... and the current hot topic of the Fannie Mae bail out next time.

"If the American people ever allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered." Thomas Jefferson

UPDATE 8-5-08: The fabulous blbeamer, who is not boring, did some super sleuthing and left me the following comment on another post:

Hi, I'm looking forward to your return.

In the meantime, please allow me to exhibit how boring I am: in an earlier post you provided a quote from Thomas Jefferson. I mentioned that something about it didn't sound right. Two Dogs provided a link to a web site where I could find the quote.

Not satisfied, I contacted the Jefferson Library in Charlottesville, Virginia. In short, the quote is bogus. Here is their reply:
--------------
Dear Mr. XXXX,

This is not a Jefferson quotation, as far as we know, but it has been
around (and attributed to Jefferson) since at least the 1930's. For
more information on this one, see our website at this
link.

I hope this is helpful!

Sincerely,
Anna Berkes
Research Librarian

Jefferson Library
P.O. Box 316
Charlottesville, VA 22902
----------------------------

In the interest of historical accuracy, and to hopefully elevate the discussion, I wanted to share.

Thank you very much Mr. blbeamer!!!

Tuesday, July 15, 2008

Money, Part 1

In the introduction and first post to this blog, we established how smart and accomplished I am. I am so very proud. As you can see by the title of this post, it is going to be about money. Why? Well... it is because politics are boring and there was so much I did not get. There is still much I do not get. However, when the girls were in 10th grade and we were homeschooling them, we were in a small five family co-op where us moms got together and team taught our girls. We met all day once a week in one of our homes. The host home provided lunch. Each mom took a different subject and was responsible for teaching the class and assigning homework. One of the moms taught Economics and the book she chose actually made a big difference for me in understanding politics.

Now, I took Economics at the Community College. I read the Wall Street Journal. I even got a good grade in the class. However, I didn't really get it. I knew enough to get the answers right on tests... but, I wasn't really clear on how those right answers worked. Does that make sense? Not to me either.

Anyway, the book is called, Whatever Happened to Penny Candy? by Richard J. Maybury. I liked this book so much that I used it last year when I taught two History classes with 20 students each when we covered Haym Solomon. You don't know who Haym Solomon is? Well, he was a Polish Jew who was a prime financier of the Revolutionary War and an important figure in the beginning of this nation. And if you are wondering how I taught a class with SD... it wasn't easy and I used a professional microphone. (for those not familiar with SD go here).

My intentions in homeschooling my children were to educate them to the best of my ability. I am not all that smart and would often stress over the enormity of our decision. Initially, I would check books out of the library from the adult section to try to get smart so I could teach my kids. It was frustrating because I just couldn't get things on a level that I could then turn around and make my kids understand. I started hanging out in the Children's section. It was there that I was finally able to get things.

Now, before you start thinking that I am some awesome mom who goes the extra distance for her kids, I need to confess that I have my limits. As in Algebra. I just simply did not love my kids enough to re-learn that stuff (if you are a kid... as in Double Shot... you have to learn it anyway!). I started to. I even had my own notebook where I kept the lessons I did. I think I did 15 or so of them. One day Mr. Macchiato came home and I was near tears. I had done a problem and re-did it I don't know how many times. I did not know what I was doing wrong. I couldn't get the answer right. He took one look at it and told me I had the answer right and that the book was wrong. Whu?!?!?! That was enough for me. If I couldn't figure that out... I just didn't want to do it. You might be sitting there thinking that the fact that I actually had the correct answer should have spurred me on. Nope. I already told you I'm not that smart. All three kids had to take remedial math when they were put back in school. Sorry. (and so you know, I say that like Simon, one of the judges on American Idol).

So, here we are. I am starting a series on politics with money. Remember the famous line from the movie Jerry MacGuire, "Show me the money?" Well, I am going to have my own catch phrase, "Follow the money." In order to follow the money, you need to understand money.

I want you to go dig around in the bottom of your purse (in your pocket if you are a dude... or in your wife's purse... and please, for the love of Pete, not your mother's purse... unless she says it is okay and you are under 18... if you are 40 and living with your mom... get a job!). Pull out a penny, nickel, dime and quarter (most people don't have half dollars lying about in the bottom of their purse or in their pockets but if you have one, pull it out too. If you are 40 and living at home.... and your mom is over 70... she'll probably have a half dollar in her purse... and if the previous comment about getting a job offended you, I am sorry. You might just be a nice guy helping his mom out. In which case, you are all right!)... where was I? Oh, and pull out a dollar bill.

I want you to really look at this money. Look at the dates, what is written on them, and just get re-acquainted. Most of us haven't really looked at money since we were little kids. The penny and the nickel have smooth sides while the dime and quarter (and half dollar) all have groves. Take a minute and really look at the grooves. Do you see the copper layer there in the middle? The grooves are called reeding and the metal is nickel-zinc clad together with the copper. That is why they are called clad coins. Check out the dates. You will see that none of the clad coins are dated before to 1965. That is because prior to 1965 these coins were made of 90% silver. And guess what? None of these are really coins. They are tokens. Coins are made from precious metal like gold and silver. Hang onto that dollar bill. I will get to it later.

No one has ever liked taxes. They've been around a long time. In the bible the tax collectors were despised by the people. Do you remember the story of Zaccheus? The little dude who had to climb up a tree to see Jesus? Yeah, he was a tax collector. That meant he had no friends.

When the Roman government discovered that people didn't like being taxed they began counterfeiting by shaving the edges off of coins and using the shavings to mint new coins. It was called clipping. The Roman people weren't dumb. It wasn't long before they noticed some coins were smaller than others. They either wouldn't accept them or they reduced the value... as in something that cost one coin they would require two clipped coins.

Hundreds of years later, people developed reeding by cutting notches into the coins. If the notches were missing the coin had been clipped. Since reeding made clipping obvious, a new way of counterfeiting was started. When coins went through the treasury they were melted down and a base-metal like copper was added in. This is called debasing the money. Have you ever heard of Gresham's Law? I hadn't. It is a law of economics and says bad money drives good money out of circulation. The Roman people knew their money was losing its silver. They started saving the high silver coins and only using the low silver coins. This happened here in the U.S. Before 1965 the clad coins contained 90% silver. After 1965, they only contained 40%. Today they contain zippo, nada... none. The American people started saving their old silver coins and only spent the debased, clad coins.

Now back to that dollar. What exactly is money? It is the most easily traded item. A real coin is a disk of gold or silver and has a hallmark stamped on it. The hallmark is the name of the mint that made the coin. The weight of the coin and the fineness of the metal is also stamped on it. The hallmark lets you know how good the coin is... not unlike trademarks today, such as Nike. During the Middle Ages there was a mint that made a one-ounce silver coin called a Joachimthaler (the Joachimthal mint in the Czech Republic). Over time it was shortened to thaler, then to daler, then to dollar. Dollar means one ounce of silver.

People worried about what to do with their gold and silver when they weren't using it. The money warehouse was invented and people would be given a receipt saying they had deposited a certain amount and that the owner of the warehouse had to pay the person that amount... like an IOU. The warehouses became banks and the IOU's banknotes.

Check out your dollar bill. Above Washington it says, "Federal Reserve Note." Up until the 1960's it said, "Silver Certificate," and could be exchanged for one ounce of silver. To the left of Washington it says, "This note is legal tender for all debts public and private." The government printed too many Silver Certificates to pay for what it was buying and didn't have the silver to back them up. Only Federal Reserve Notes are printed now and they are just paper printed in large quantities. The legal tender statement is what gives it value.

In 1270 A.D. a bad dude named Kublai Khan was in charge of a government ruling most of Asia. He wanted to buy a bunch of stuff but was afraid to raise taxes. He invented paper money. If he needed gold he would write the amount of gold on a slip of paper and sign his name to it. Only people wouldn't take it. So he passed a legal tender law saying they would be punished if they didn't accept it. Everyone was scared of him so they took his paper money. In the 1790's the French did the same thing and if you didn't accept the phony money, you got your head chopped off by the guillotine. During the Revolutionary War anyone who violated the legal tender law was charged with treason and thrown in jail. Today, if someone owes you money and you refuse to take the Federal Reserve Notes... their debt is cancelled and they don't have to pay you.

You might be wondering why this information is important. You might already know this stuff. I did not. I went to public school and dropped out of Community College and I had never heard any of this. Well, it is important in helping you understand inflation and recessions. It was for me anyway. You might be smarter.

In the next installment of The Uneducated Housewife's Guide to Politics for the Uninterested, we will take a look at inflation and recession.

Monday, July 14, 2008

Introduction

**Note: I originally posted this on The Righteous Buzz on July 7, 2008. After some thought, I decided to put this series onto a blog of its own.

I've been kicking this idea around for awhile now. Well, for a couple of hours. This is an election year and well... I would like to do my part. First of all, I would like to lay out my stellar qualifications for y'all. Just so you know.

I graduated 242 out of a class of around 500 in 1984. That's high school I am talking about. And, if I weren't lazy I would find out the exact numbers. But I am, so I won't. One of my father's favorite things to ask me when I was in high school was, "Are you going to be satisfied with mediocrity?" Apparently so. We moved the day after I graduated from California to Pennsylvania.

I did not go to college straight out of high school. I wanted to be a paramedic so I went to an Emergency Medical Technician (EMT) class at a Vo-Tech after a stint working in the gift shop of a honeymoon resort in the Poconos. I passed the state test and was issued my official patches. They never made it onto a shirt because my father retired from the Army and we left Pennsylvania after one year.

My father went to college at night while I was in high school and graduated Suma cum Laude (and I totally do not know if that is spelled right or what it means exactly... other than he's smart) with a degree in Finance. He felt that with his success and experience in the Army and his shiny degree that he would get a great job in no time. We spent most of the summer gallivanting around and ended up back in San Diego at my grandparents before school started. Things started getting stressful on the job front. My brothers had been enrolled in school but by the time November rolled around they decided to pack it up and go back north to Seattle. I'd been staying at my aunt and uncle's a few miles away and decided to stay in California until my parents got settled.

I actually went back and forth between there and my grandparents for several months. I looked into work as an EMT and learned that the EMT certification I had worked for was only good in the state of Pennsylvania. I got a job at Burger King. In January my parents bought a house even though my Dad still did not have a job. I flew up the day after they closed on the house and day before our things arrived from storage. We had all been basically living out of suitcases for seven months.

I saw an add for EMT's in the paper and decided to go check it out. The job was for an ambulance company and even though I did not have a Washington certification I thought that maybe they would work with me until I did. I learned that the state requirements at that time were that you had to have three years street experience as an EMT before you could be sponsored to enter a paramedic program at one of three schools in the entire state. I could not get a job as an EMT because I was only 19 and company insurance required EMT's be at least 21. I could have worked as a volunteer but you needed to have your own car, which I did not. So... I got a job at a pizza joint.

I met my husband soon after I moved to Washington. He was dating someone else, but that is a story for another day. Anyway, we became friends and then started dating in July of 1986. Twenty two years ago.

In the fall he went back to his state college two hours away and I enrolled in the local Community College. We got engaged on Christmas Eve in 1987, nearly a year and a half after we started dating. I dropped out of the Community College in the spring of 1988 and spent two months in an eating disorder unit of a hospital which you can read about here. When I got out, I went to work for his Dad as his secretary. In June of 1988 my frat boy president husband graduated from college with a degree in Finance. Don't worry, it wasn't that kind of Fraternity and there was no Frat house. Their parties did include a lot of drinking but they all stood around talking about politics at most of them. The one party that was fun was the last one I was allowed to attend because one of the frat boys tried to pick me up.

In July of 1988 we found out I was pregnant and a week later my parents split. We went through some pretty tough stuff and after three different wedding dates, got married in November. I was six months pregnant and in 3 1/2 years we had three children. Needless to say, we figured out what was making that happen and bought a TV. Sorry. I just had to throw that in there. That was the big joke back then. You know... like, we got asked all the time if we didn't have a TV...ha ha... you got it, right?

We are Christians and have been regular attenders since I was pregnant with our first child. We homeschooled our kids for nine years. My Dad likes to joke that that is how I finally got educated. As you can see from my style of writing I fly a little loose in the grammar department.

So you know up front I find politics to be painfully boring. There are many things in my life that fall into the painfully boring category but are necessary evils of life... such as laundry, cleaning toilets, picking up dog poop, dusting, vacuuming, and when your children are small... changing diapers, cleaning up puke, and continually picking up after them.

I've tried to keep this blog anonymous. I have stated my real first name on here on several occasions... and some of my closest friends and relatives are aware of this blog but it is not something I share with people in my everyday life. If you live in my town and you read this blog and you feel like sharing it with other people in our town... talk to me first. There might or might not be money involved. Okay, there won't be but I make great pumpkin bread and I'll give you some if you keep quiet. All that to say... I must confess a few things. Partly because I am honest and partly because my best buddy in this town reads this and is probably laughing her butt off at the thought of me giving any sort of political tutorial. You see, she's lived here all of her life except for a few years when her kids were tots. She is very politically savvy and one time... I just didn't want to do the research to figure out the local stuff... I may or may not have asked her who to vote for and Mr. Macchiato and I may or may not have taken her advice. And we may or may not have been happy with one of the people we voted for due to her advice. Although, recently, we may or may not have been thinking that maybe it was okay that we voted for him and we may or may not vote for him again. Also... we voted for Ross Perot. And I may or may not have just voted the party line once or twice.

That was cathartic and freeing!

What I want to attempt here is to just give a few little tutorials here and there when I feel like it. Non-partisan, of course. And, hopefully, not boring. And so you know, I'm not one of those wives that just repeats what her husband says... there are many areas we don't exactly see eye to eye on. Eventually, he comes around though. That was to see if Mr. Macchiato is reading. Because I am a girl... well, a woman... but really sometimes still a girl... this will be from that perspective.

So, be on the lookout for the next installment of The Uneducated Housewife's Guide to Politics for the Uninterested, written by the bored housewife who dropped out of Community College and has never made more than $11,000 in one year and that was in 1988. Yeah, I got that little Social Security Statement in the mail today.