Saturday, December 26, 2009

Money Supply & Health Care

Let me give you a little food for thought. The grass root issue with our economy is low money supply. That is, it requires X amount of dollars in circulation for each of us to have enough to go about our daily business.
Over the past thirty years we have been shipping money out of the country to the tune of net $750 billion more than we are bringing in from exports. This put a tremendous strain on our money supply. If we look back on things we can probably, don’t quote me on this, go back to the Carter years. To increase the money supply Regan lowered taxes and built up a very big government debt. The economy needed this, but it was a band-aid. It didn’t cure the basic problem of money leaving the country.
Along came the Clinton years and we still had a short money supply. What did we do to increase the amount of money in circulation? Simple, we created new money in the form of consumer credit. This was a stop gap measure which didn’t address the real problem: Trade Deficits. It was also a time when we began to see a wholesale exit of jobs from this country. Due to the zealousness of other countries we saw nearly our complete manufacturing base leave the country. And, money was pouring out of the country at an even greater rate. But our economy was robust because of all those credit cards adding to the money supply.
Depression, or recession, happens when the money supply gets too low. And during the Bush years when greed became the byword, money began to go out of the country at a crazy pace. Just think about every time you buy a gallon of gas or anything from Walmart, just how much of that dollar goes overseas.
The Bush years added a new wrinkle, “Let’s get the government out of our business, so we can get even richer”. And, they did. A new channel was opened up for the money outflow: private pockets of those who were in a position to grab it. By this time everyone had their credit cards maxed out, so a new source had to be found to keep up. The bankers and other power brokers began to look around and see that Americans were sitting on a gold mine, a new source of money supply that would benefit those who wanted it, the elite. So they sold Americans on the idea of taking equity out of their homes and spending it. This was a real boon for our money supply. All those years that people had been paying those mortgage payments and accumulating equity was set up to be tapped. And to help this government relaxed and rescinded many of the regulations put in place to insure that our economy didn’t run amok.
Thus, this is where we are today. The money supply is concentrated in too few hands. Now before you start jumping up and down yelling “redistribution of wealth”, think about it. The once money supply that was in the hands of consuming Americans is now in banks in China and Saudi Arabia. Sure, they return it to us in the form of loans and investments, but remember loans are expensive and have to be paid back and investments means we are selling part of our country.
In order for us to stop hemorrhaging money supply we are going to have to begin to stop up those areas where it is squirting out. For instance, stop sending so much money every day to the countries in the Middle East. Oil is too expensive to use the way we have always used it. Offshore drilling provides no answer. First, it is expensive and it would be ten years before we see the first drop of that oil. No, the answer is to rethink the way we get energy. Carbon based fuels are a thing of the past. We have to look at new areas. I was raised in western Kansas where the wind blows all the time this is such a great source for energy. But, let’s manufacture the equipment to change to wind power in the United States, not China.
It has become somewhat of a moral imperative for employers to pay for worker health care. There is nothing wrong with this if it can be done in a sensible way. But, that too has gotten out of hands. Some twenty years ago I read that the cost of steel in a new car is much less than the cost of worker healthcare. The onus of providing healthcare for workers is a good part of the reason that America is no longer a major player in world manufacturing. This burden must be taken off the manufacturers. In most of the industrialized countries in the world, who are major players, it is the government who provides for healthcare. If we are going to stay in the market place, we are going to have to start thinking along these lines. Those that say that health care reform will bankrupt American need to stop and realize that it is already bankrupting America.
The things Americans consume must start to be produced by American workers. Outsourcing must be replaced with insourcing. It is only then that we can stop this flow of money supply out of the country and keep some of it at home.

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