***The following comments were received in response to the February 9-10, 2013 edition of U.S. Farm Report…
#1: Dear John,
You missed the major point of how our Republic is able to run chronic deficits as we have been doing for the last century. The key event of 1913 was the turning over the supply of money over to the Federal Reserve Banks. This was an unconstitutional act of Congress. [Article I, Section 8 (Powers of the Congress), paragraph 5. To coin money, regulate the Value thereof, and of foreign Coin, and fix the Standards of Weights and Measures;]
Prices were fairly constant from the beginning of our Republic until 1913. There was a statuary value of and ratio between gold and silver. Since Nixon totally separated the value of our money from gold, discipline in spending by the government has been removed. When I was younger one had silver certificates in his wallet from time to time which could be redeemed in silver. Something like 97% of the value of a dollar has disappeared in the last century. When one looks at inflation, it had been on a fairly consistent slope from 1913 until the last two years of the second term of Bush #43. Since then it has been on an asymptotical climb. It does not take a Ph.D.in economics to figure out that this is unsustainable. History verifies this statement. It happened to the Romans. It happened to Germany following WWI. It happened to England after WWII. We will lose the position of owning the world's reserve currency soon. That will be a disaster for our savings.
You, as a journalist, have a responsibility to be familiar with a topic that you speak about. As the host of a program with an audience of capable, influential people, you also have an opportunity to get the word out as to the disastrous situation our money is in. One third of our national debt has been racked up in the last 5 years. That alone should get your attention. You and I have a hard time getting our minds around a billion dollars. A trillion is a thousand billion and we are running deficits in excess of a trillion dollars per year.
You do have one problem though. If you were to familiarize yourself with the financial mess we are in and talk about it on a program such as you have, you would not last long in your job there. The same people who have gotten us into this mess own the stations you broadcast on!
This puts things into a much better perspective as to the present economic situation:
Lesson # 1:
* U.S. Tax revenue: $ 2,170,000,000,000
* Fed budget: $ 3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000
Let's now remove 8 zeros and pretend it's a household budget:
* Annual family income: $ 21,700.00
* Money the family spent: $ 38,200.00
* New debt on the credit card: $ 16,500.00
* Outstanding balance on credit card: $142,710.00
* Total budget cuts so far: $ 38.50
Got It ?????
David Snider - Minier, IL
#2: Perhaps the reason that we question those making the decisions is that they have been so spectacularly wrong so far:
“We do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.” — Ben Bernanke, 2007
“The Federal Reserve will not monetize the debt.” — Ben Bernanke, 2009
As for the latter, the Fed is even now creating over 80 billion dollars a month out of thin air!
I know we all make mistakes*, but when you get it completely wrong, isn't it time to rethink your premise? But then there's always an excuse...
#3: Sovereign-Debt is not really Debt. (Paraphrasing) John, you really drank the Fed’s cool-aid. Sovereignty may give a country the opportunity to create a fiat currency however later when it falters, and it will, prop it up from time to with tricks like monetizing and inflation to maintain some arbitrary value. But sooner or later the “free lunch” that gives you a warm-fuzzy will make the dollar not all that desirable.
Brad Dougan - Little Rock, AR
***Editor’s Note: Below is a transcript of John’s comments that sparked this viewer feedback…
Last week I talked about a survey that showed stunned economists how farm public understanding and theirs diverged on economic issues. One reason this occurs is we are all economic actors and we use our own experience in the market to form our understanding, regardless of economic theory or even real data to the contrary.
No issue shows this habit more than our understanding of the national debt. Sovereign debt as it is called is complex and with growing global inter-linkages, becomes more counter-intuitive every day. Our minds take a short-cut by finding parallels with economic models we understand, like household finances to try to understand. “I have to balance my budget, so the country should too”, we assert logically. But is the U.S. budget really like a household budget? Maybe, but there are whopping differences.
First of all, the U.S. has a working lifetime of essentially forever. The government cannot lose its job, and can even fix its income by varying taxes. But the biggest difference is we can pay off debts with IOU’s called bonds that people around the world eagerly take. Those enormous differences are why national debt mystifies us, and why low interest rates and inflation confound our predictions.
To be sure we have a serious long-term debt problem, but it cannot be understood by equating it to a household budget. In fact, once we get serious about how to control health care costs, our economic future looks promising.