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Lesson in Economics

12 Jan

5a  by Tommy Davis

I do believe that the Republican Party will make a comeback. With the economy destined to fail under the Democratic leadership, it is our time as conservatives to educate the populace about the value of the free-market.

For those who are unaware, the current stimulus package obsession is leading our economy down the road to the inevitable—depression. Issuing free money in hopes to “stimulate” the financial system will reduce our purchasing power. In other words, newly printed money not backed by production leads to inflation over time. With higher prices, the poor becomes poorer.

Also, when prices rise, at the same time production costs rise. Higher production costs leads to a surplus of employees. This is what we call unemployment.

We Republicans will do well to truly educate the people about the peril of high taxes and stiff regulation of businesses.

An Obama presidency is already taking on the form of a disaster because his policies are based on Keynesian economics. John Maynard Keynes was a promoter of price inflation as a solution to unemployment. He championed the issuance of new money and credit. His philosophy never worked. It is a deception to raise workers wages and at the same time decrease their purchasing power. High prices are a result of inflating the money supply.

When FDR implemented wage controls and other regulation, he prolonged the Great Depression. The Great Depression lasted twelve years when it could have been over in under two.

Adam Smith, in his classic “The Wealth of Nations” understood the power of the free market to weed out unproductive businesses. It is the consumer who determines who survives —not government intervention. Rather than have a surplus of employees, those workers can be shifted in more productive employment at the “request” of consumer demand.

Observing this trend from a historical perspective, we must understand that our current paper we identify as money was historically a receipt or bank note that confirmed that we had a valued commodity in the bank. It was easier to carry paper than bars of gold or other commodities. On real terms, the printing of notes without being backed is fraud. This is where the laws of counterfeiting surfaced.

What we have today is legal counterfeiting that we are paying for through higher prices and unemployment.

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