Additional Points

I’ll cover the next three points briefly as there’s not much new to be said about them.

(4) If we do not have a balanced budget amendment then something needs put in place where borrowing and spending is kept within reasonable boundaries.

It is difficult to create black and white rules that work with consistency.  There always seems to be times when rules need to be broken – as Solomon says, “There is a time and season for all things.”

The problem with our economy, and especially the spending part, is that it must be handled with good judgment and our elected representatives have a dismal record beyond what could have been imagined in this category.

We need to do two things to correct the problem.  First, we must change their job description as written about previously. Secondly, an independent body such as The Committee of Twelve mentioned earlier should approve any budget-busting spending.

And finally citizens themselves must serve as watchdogs and let their representatives know the full force of their will and that will is not to spend toward bankruptcy.

(5) Grow the economy through low taxes and business incentives.  A healthy economy strengthens the dollar.

This is a no-brainer and there has been plenty written on this subject.  Unfortunately, the tax and spend crowd just does not seem to understand that infinite taxation is not possible.

More taxation does not mean more corresponding income to the government, as the Left seems to mistakenly think.  There is a percentage point, which if crossed, brings less income and not more.  I have heard of no definitive study that proves what that percentage is but many guess that the rate is around 20%.  In other words, a tax rate averaging at over 20% may bring a diminishing return and is not productive.

In addition to keeping the tax rate low the tax collection system needs an entire overhaul.  Consider this:  The cost each year to businesses for all the accounting and record keeping to comply with the tax system is estimated to be $338 billion for just one year.  That is an enormous sum equal to over $1000 for every man, woman and child.  Add to this the $12 billion (and growing) to sustain the IRS and the lost production due to the diverted capital and energy we’re talking about some big money here. That’s plenty to cover any Social Security, Medicare, health care, or educational shortfall we can imagine.

Supporters of the Flat Tax claim that this would reduce the compliance expenses by 94%.  If this   is true than that alone makes a great case for implementing it.  In addition to saving all that money business owners would have much greater peace of mind since they do not have to place so much attention on pacifying the IRS.

An even more labor saving idea is a national sales tax.  Not only does this eliminate the need of the many billions spent on compliance but it increases the tax base.  Currently there are many who do not pay taxes, or fudge the books and just pay part of them. This not only includes many business and individuals but drug dealers, The Mob, and many others outside the law. With a national sales tax even the drug dealer who declares no income to the IRS would have to pay the sales tax when making a legal purchase.

It is indeed important to overhaul our tax system but we must not let this goal overshadow the necessity of making spending cuts, which are of equal importance.  We must achieve a working balance in both of these areas.

(6) Reduce the trade deficit. We have had a trade deficit since 1975.  Should we be worried?

The problem with deficits is they lead to us becoming a debtor to the nation that holds our dollars.  If we spend $100 million more in China, Japan or the UK than they do here then that nation’s banks will be just sitting on all that cash drawing no interest. This they do not like to do so they will take that money and loan it back to us if we are willing to take it – and we always are. These loans are usually made in the form of buying U.S. Treasury bonds.  They figure it’s better to have these bonds drawing interest than just sitting on the cash making nothing.

If you buy some tires on credit the problem is that sooner or later the tire company will want payment of some kind.  Even so, our debt to China is over a trillion dollars and this gives them a tremendous economic power and advantage over us.  We are in a similar disadvantage to a lesser degree with numerous other nations.

During the past decade our deficit has ranged from around $400 to over $800 billion.  The interesting thing about this is that the average deficit is not that much more than the cost of our oil imports.  If we were to become energy independent then our deficit would be minimal and very manageable.

Doing more manufacturing and developing resources at home could do a lot to solve the problem, but energy is the big item that could reduce the deficit and that is the core of the next point.

(7) Secure energy independence.  This is another no-brainer but the problem occurs in execution.  The Left and the Right have conflicting ideas of how to achieve this.

Helping the trade deficit is just one of the benefits of securing energy independence. There are numerous others.  Among them are:

• Producing most of our energy at home will create many American jobs and reduce the unemployment rate creating more prosperity and a sounder economy.

• It will reduce power from many who wish us harm such as Iran or Chaves from oil rich Venezuela.

• It will remove the securing of oil in foreign lands as an incentive for us to go to war.

• The United States will be seen as less intrusive which would improve our reputation around the world.

With all these potential benefits it is almost criminal that our fearless leaders have not had the common sense to devise a workable plan for energy independence.  One thing we know for sure and that is the mere speaking of words is not enough.  Here are a few we have heard in the past.

“At the end of this decade, in the year 1980, the United States will not be dependent on any other country for the energy we need.”
Nixon 1974 when oil imports were at 36.1%

“We must reduce oil imports by one million barrels per day by the end of this year and by two million barrels per day by the end of 1977.”
Gerald Ford 1975. Oil imports still at 36.1%

“I am tonight setting a clear goal for the energy policy of the United States. Beginning this moment, this nation will never use more foreign oil than we did in 1977 — never.”
Jimmy Carter, July 15, 1979. Oil imports – 40.5%

“While conservation is worthy in itself, the best answer is to try to make us independent of outside sources to the greatest extent possible for our energy.”
Reagan 1981, Oil imports – 43.6%

“When our administration developed our national energy strategy, three principles guided our policy: reducing our dependence on foreign oil…”
George H. W. Bush 1992, Oil imports – 47.2%

“The nation’s growing reliance on imports of oil…threatens the nation’s security…[we] will continue efforts to…enhance domestic energy production.”
Bill Clinton 1995, Oil Imports – 49.8%

Unfortunately, by the time George W. Bush assumed office the rate had hiked to 61% and continued to get worse forcing Bush to act. In 2006 when imports reached 65.5%. He said:
“Breakthroughs…will help us reach another great goal: to replace more than 75 percent of our oil imports from the Middle East by 2025.”

Finally in 2009 when imports had reached 66.2% Obama added:

“It will be the policy of my administration to reverse our dependence on foreign oil while building a new energy economy that will create millions of jobs.”

A couple years has passed at the time of this writing and nothing much has changed.

All of our presidents have meant well, but the lesson we get from them is not how to achieve energy independence, but that words alone without a workable and executable plan is meaningless.

What should we do then beyond just speaking the words – “We must get off foreign oil!!!”  “We must become energy independent!!!”

First we must realize that adding exclamation points to out desires does nothing.  We must have a plan.

A book could be written on a reasonable plan but I just have space here to cover some essence.

The pure essence of our energy policy should be this:

Do everything possible to maximize domestic energy production of current energy products and methods. In addition to this we must encourage practical forms of alternative energy and do what we can to bring forth new energy sources.

It is possible that new energy sources like fusion, or wave energy will be perfected in the next couple years and our troubles will be over but we can’t risk letting down our guard on conventional sources until their replacement is secure.

Right now their replacement is not secure so we must drill for oil, mine coal and build nuclear plants.  The advantages of securing energy from conventional sources far outweighs the disadvantages of discarding them too early.

Without sufficient energy we would wind up polluting our country much more than we would by burning fossil fuels.  If you do not believe me then check out the quality of the environment in third world countries where there is a dearth of conventional energy sources.

Environmentalists do not want us to drill for oil in America because of potential damage to the planet but if we do not get domestic oil then we will get it from some foreign country and that country is still part of the planet.  If we look at the earth as a whole what is the difference between drilling in the United States or Mexico, Venezuela or Canada?


If we can continue to supply the energy we need and advance in technology then we should have viable alternatives to coal (the worst polluter) and oil within 50 years, maybe less.

If we sabotage ourselves and shoot ourselves in the foot by cutting off our energy sources then technology will suffer and it could be hundreds of years before environmentally friendly alternatives are perfected.

In other words, we have to advance to clean energy on the back of not so clean energy.  Sometimes you have to wade through some mud and grime to get to the cleansing current of the river.

Abundant domestic energy is crucial to our economic prosperity and economic prosperity is crucial to achieve a lasting clean environment.

May we follow the sensible path.


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Copyright 2011 by J J Dewey

Copyright by J J Dewey

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The Fed and Common Sense

This entry is part 5 of 31 in the series 2011B

We have spent a lot of time covering the gold standard for a good reason. Most people who want a return to some type of gold standard are reasonably informed and are thinkers. They understand the importance of having a sound monetary system, of not overspending and the genius incorporated into the original Constitution. Having one of these on your side is more potent than a dozen of those who formulate their views from media soundbites.

Therefore, I have presented what I consider to be logical information on what will and will not work as far as gold as a standard goes. I will add a few more things as we continue. For instance, the market value of gold could be used as a standard to formulate the value of a dollar to increase the stability of the current or future fiat system.

We’ll discuss more later about how the dollar could be backed but for now we’ll continue on the ten points that are under consideration to create a sound money system. The gold standard was merely the first consideration. Let’s take a look at the second.

(2) Eliminate the Federal Reserve.

A great number of books, articles and treatises have been written on this subject. Since I am trying to present ideas and information that may be new to readers I will only cover this briefly as a simple Google search will bring up a plethora of material.

A good deal of the information is either from conspiracy theorists or from those just who loath the organization and want it abolished.

It didn’t help that it was created during the progressive era of Woodrow Wilson and passed in 1913, the same year that instituted the Income Tax. Then it was supposed to create enough malleability with currency so a depression could not happen again yet it was powerless to either prevent or cut short the greatest depression in our history.

In addition, there is something about its name that really get’s its critics blood boiling. It is called The Federal Reserve. They say it is called such to deceive us into thinking that it is an arm of the government, but they maintain this is a big lie because it is a private corporation ran by greedy bankers. Some believe the insiders make an unfathomable amount of wealth that is hidden from the public and this is why it has never been audited.

Ron Paul has always been suspicious of the Federal Reserve and has introduced H.R. 1207, The Federal Reserve Transparency Act, which would require it to be audited and force it to operate in the light rather than the dark.

Some critics give a distorted view of the Fed when they stress that it is a private business, as if it were entirely divorced from the government and keeping all the profits. It might more accurately be called a quasi governmental organization for all members of the Federal Reserve Board, including its chairman and vice-chairman, are chosen by the President and confirmed by Congress. The government also sets the salaries of the system’s highest-level employees. This doesn’t happen with a purely private business.

In addition the U.S. Government receives all of the Fed’s annual profits, after a statutory dividend of 6% on member banks’ capital investment is paid. The Federal Reserve returned $78.4 billion to the U.S. Treasury in 2010. This was an increase of $31 billion over 2009 because of earnings on stocks that they bought up to pump up the market.

Congress has oversight with them and can change the rules at any time, but overall the Fed has, at present, pretty much unrestrained freedom in dictating the rules for America’s currency and banking systems.

So if the Fed must return profits to the U.S. Treasury, and their salaries are controlled by Congress, why do conspiracy theorists paint the Fed as a sinister entity that is stealing America’s prosperity with insider bankers becoming wealthy beyond the imagination?

Part of the reason is that some critics do not fully understand the linkage between the government and the Fed. But for those that do the problem is the Feds’ secrecy. Yes it is true that a set amount of profits go to the government and their salaries are set by them but because they can operate under the radar with so much secrecy it is suspected that insiders have giant expense accounts and channel funds in directions that will enrich them.

The Fed also plays the stock market to assist the economy and who knows how many employees trade with insider knowledge.

If the Fed were fully audited on a regular basis and all its dealings were available to the public then we could know the truth and we could lay the basis for a more honest and stable economy.

Another problem is that the Constitution gives Congress the authority to create money. Many feel that it is wrong for them to have given away this power to a secretive semi private organization. Thus there are many calls for the elimination of the Federal Reserve and to ether give the power to create money back to Congress or directly to the people. We’ll talk more about this later on.

(3) The third suggestion to strengthen our economy is a balanced budget amendment.

This sounds like it should be a no-brainer, but is it? Why hasn’t Congress ever taken this seriously?

There is a great mystery surrounding the fact that Congress just cannot balance their budget or even come close to living within their means. They are like a teenager who has been given a large credit card and then he decides to blow the whole thing on everything that feels good to him. Then when the limit is reached he comes home to Daddy (the taxpayer) and pleads for more money.

The mystery is this. The people we elect are the among the best and brightest of us, yet they act like stupid teenagers in their job performance, especially as far as spending money goes.

These people are not stupid as rocks so why are they fulfilling their jobs with the competency of drug addicts higher than a kite waiting for their next fix?

It appears that our representatives are either out of their minds or just plain hate America and all taxpayers.

We know that this is not literally true, but we also know there has to be a reason for such self-destructive behavior, but what that is seems elusive. It is amusing to see Joe Q. Public of average intelligence watch these screwups and exclaim in exasperation, “What’s the matter with these guys? They are spending millions on golf videos for the Irish, elevator attendants to push buttons for lazy congresspeople, research to see if volunteering is helpful, millions for unneeded golf courses for military brass when we are short changing the brave soldiers who are risking their lives for us, bridges to nowhere projects and the biggest boondoggle of them all – a nearly trillion dollar stimulus that was used for political payback costing $228,000 for each job created and causing untold misery for many others who lost jobs. Are these guys out of their minds?” asks Mr. Average? “I know better than to waste money like this. Why do they not know?”

There are two reasons for this apparent stupidity. The first was mentioned previously in chapter three and that is our President and Congress see, as part of their job description, that they are supposed to spend money to please voters. Since every employee wants to do a good job then our elected officials feel they have to spend lots of money to receive praise from their employers, the taxpayers. Unfortunately, this illusionary job description is reinforced when they bring home the bacon to their home state and the few who are on the receiving end give lavish praise whereas the ones paying the bills are too busy working to protest much. Representatives therefore receive the lopsided idea that they are performing well by sinking us into unprecedented debt.

The second reason for the stupidity is addiction. Now if a person is not exposed much or has little access to smoking or drug use the chances are that he will not become addicted. But if everyone around him is a user then it becomes difficult to resist and most will join the crowd.

Spending money can be an addiction  like drugs. There are many shopaholics that just cannot resist spending more money than they can afford.

Congress is a club where most members are spendaholics and when a person who is not an addict arrives he is met with two major temptations. First he is given trillions of dollars to spend. Maybe in the past the most he has blown has been a couple grand, but now we’re not only talking millions, but thousands of millions and even millions of millions – or trillions.

If spending money created a high for him in the past then being a member of Congress will blow his mind.

The second problem that sucks him into addition is he is surrounded by spending addicts who gleefully spend money like they are little gods with unlimited power.

Anyone with a weak will who goes to Congress doesn’t have a chance. He will become addicted.

Will he vote for a balanced budget or term limits? Not likely. He may talk a good game but when it comes down to taking action the true addicts will side with keeping their power to spend intact.

And what would happen if we did pass a balanced budget amendment? Does a mere law prevent an addict from getting his fix?

Not really.

Did the constitutionally mandated gold and silver standard prevent us from throwing it out the window and then spending money we didn’t have?


Even so, unless we cure the addiction of Congress and the Presidency they will find a way around any terms of a balanced budget amendment just as they have other limitations that have been there in the past.

In a health emergency it may be necessary for a non addict to take some drugs. Even so, during a war or national emergency it may be necessary to spend extra money. Because of this and the willingness of the addicts to break their own laws a balanced budget amendment may cause as many problems as it solves.

One thing we agree on is that our elected officials must run this country as efficiently and with as much common sense as a wise family. They may borrow money now and then but they operate their budget on common sense principles. Government must do the same and we the people must be the last line of defense in making sure they comply.

Read This entire series. Here are the links.

Copyright 2011 by J J Dewey

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Creating Sound Money

This entry is part 8 of 50 in the series 2011A

Part 2 in this Series

An increasing number of people, including economists, politicians, pundits, bloggers etc are coming to the realization that something needs done to create a sounder dollar and money system.

Here are some of the steps that are put forward.

(1) Put us back on the gold standard. Those who support this are far from being united as there are several camps on this:

(A) A purist gold standard with no fiat money.

This was the standard through parts of ancient history, the Dark Ages and attempts were made toward this goal on and off up to about 100 years ago.

(B) A gold standard with fiat money, but with redemption. This usually consists of fiat money created on a 10:1 basis.  That is for every once of gold on deposit there would be ten ounces worth of money in circulation.  Under this system the consumer can redeem his money for gold, unless there is a run on the system that depletes the gold supply.

(C) A gold standard with fiat money, but with no redemption. This is basically what we had from FDR to Nixon. The value of the dollar was set at an arbitrary value assigned to gold which was $35 an ounce, but a citizen could not possess monetary gold with the exception of rare coins.  Other nations and some banks were allowed to exchange money for gold.

(2) Eliminate the Federal Reserve. These advocates may or may not want a return to the gold standard.

(3) A balanced budget amendment. This sounds like it should be a no-brainer, but is it?  Why hasn’t Congress ever taken this seriously?

(4) If we do not have a balanced budget amendment then something needs put in place where borrowing and spending is kept within reasonable boundaries.

(5) Grow the economy through low taxes and business incentives.  A healthy economy strengthens the dollar.

(6) Reduce the trade deficit. We have had a trade deficit since 1975.  Should we be worried?  Some are more concerned than others.

(7) Secure energy independence.  This is another no-brainer but the problem occurs in execution.  The Left and the Right have conflicting ideas of how to achieve this.

(8) Expand alternative currencies.  These are already in play to a degree.  Examples are Time Dollars and Ithaca Hours which are community currencies.  Then companies are issuing their own form of monetary credits that are used like money. Many want the monetary laws changed to allow for the creation of private currencies that directly compete with the dollar. The belief is this would strengthen our currency as a whole.

(9) Barter. Barter has been sold as an alternative to authorized currency. Some claim barter strengthens the financial position of the individual. Barter companies became popular in the Sixties and Seventies.  One reason for this was that many were under the illusion that they didn’t have to pay taxes on items gained through Barter. However, the IRS had different ideas and went after many of them and now there are few bartering companies left.

Here is the IRS rule on Barter: “Barter dollars or trade dollars are identical to real dollars for tax reporting. If you conduct any direct barter–barter for another’s products or services–you will have to report the fair market value of the products or services you received on your tax return.”,,id=187920,00.html

If you have to treat gain through barter as regular income then one might as well deal with cash and get more leverage with currency.

Even so Barter is far from dead thanks to Crag’s list and other internet sources.  Many are now doing barter on a one-to-one basis through classified ads.  Participants must be warned, however, that they are still not beyond the reach of the taxman as they comb through internet sources to find barterers who may be trying to escape taxes and do go after them.

Even though small businesses and individuals are limited today in their use of barter big business and even countries are using it on grand scale.  These two entities exchange goods and services on a scale of which the average person is completely unaware.

(10) Restoring the power to create money to our elected representatives, as specified in the Constitution, instead of farming this out to private enterprise.

Next we’ll expand on some of these points and see if any of them offer hope to take us out of this financial malaise.

Read This entire series. Here are the links.

Copyright 2011 by J J Dewey

Copyright by J J Dewey

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