Wednesday, September 17, 2008

How to Avoid the Great Depression 2 in 5 Easy Steps 

Once upon a time, the US Dollar was worth something. That something was based on Gold and Silver. A dollar, printed by the US Government, was actually a certificate worth a fixed weight of silver or gold. When the supply of dollars equaled the available gold or silver reserves of the US, that was it. No more dollars would be printed. The money supply was fixed. Rather than being an infinite printing press, the government was instead a source of a stable currency. Oddly enough, major economic problems, like the inflation of the 1860s or the recessions of the 1880s and 1890s were caused by, respectively, war and market manipulation by monopolies.

And so the US Dollar was strong and secure until... in 1913, during a recess Congressional session in which a bill was quickly passed after the quorum rule was voided, the US no longer became the banker of the nation. Instead, the Federal Reserve was created, and their job was to print money. Print and print and print, then sell this money to the US -- with the Federal Reserve getting the much better part of the deal. Basically, the US charged the Fed nothing, but promised to pay interest on this created money.

Is it any coincidence that this was the same year that the 16th Amendment was passed under equally dubious conditions, imposing an income tax on the American People?

One year later, the US entered WW I -- at that time called the Great War. Uh -- greater than what? Greater at dropping bleach into ammonia and destroying the lungs of countless soldiers on both sides?

But I do digress...

America is on the brink of financial disaster. Since our business since the 90s has been to produce "service" instead of "things", we've had nothing tangible with which to back up our currency. There is no man behind the curtain. All that lovely paper is worth next to nothing, only propped up by illusory pep rallies by the Federal Reserve Chairman -- the last two of whom have done an abysmal job.

You want to avoid the Second Depression, one which will make 1929 look like a cake walk? Want to save this country and the planet? Then these are the hard steps that must be taken right now...

  1. Write Off Existing Debt: First and foremost, consequences be damned, the US has got to say, "Okay, enough. We have X amount in assets, Y amount in debts. Any amount by which Y exceeds X will not be repaid. Debt which we cannot cover we are defaulting on. If you want to call this "bankruptcy", so be it. Bankruptcy is just teh first step on the road to solvency.

  2. The Federal Reserve Bank has got to go. Period. No golden parachutes, no severance bonuses. By Congressional Act, this organization ends, it's charter voided, its services no longer needed.

  3. The value of the dollar has got to be set to a tangible asset, and I would suggest gasoline. Again by Congressional decree, the new dollar is worth the cost of one gallon of gasoline, based on the average price per gallon in the most expensive place in the US. The amount of new dollars issued cannot exceed the value of gasoline currently available from all US sources. Foreign gasoline is not allowed in the equation.

  4. Sad but true -- existing dollars must be revalued, to the tune of the reciprocal of the pre-evaluation cost of a gallon of gas. If the New Dollar is set at a $ 3.50 gallon of gas, the old dollar is instantly worth 1/3.5 (or 2/7ths) of a New Dollar. This applies only to assets held on the date of changeover. Future payments -- i.e. paychecks -- will be paid in New Dollars om the same absolute amount agreed to before the change. In other words, if your paycheck was $ 4,000 a month before the evaluation, your next paycheck will be worth New $ 4,000, or $ 14,400 old dollars. However, if you had $ 4,000 in savings, they would be re-valued at $ 1,143. Sorry. But the increase in pay makes up for it...

  5. Finally, another sad but true -- for this revaluation to work, the US has to increase its supply of the fixed commodity (oil convertible to gas), which means that we would have to drill everywhere -- ANWAR, right offshore, in your backyard. Every last ounce of oil under our land would have to be squeezed out. The difference is that, this time, more extraction benefits everyone, because each extraction increases the money supply, and therefore credit availability and lower interest rates.
One side benefit of the above program? Income taxes would become unnecessary. If the value of the dollar were pegged to the price of oil at the beginning, but then not re-indexed as oil were re-valued by increasing supply, each dollar would begin to accumulate excess value -- and the difference would accrue to the guarantor of those Dollars -- the US government.

Ultimately, the steps above are part of step one in a grander plan -- to switch the country to a renewable energy source, then peg the dollar to that. Say, perhaps, the value of a kilowatt hour of solar energy. Research and make solar technology accessible to anyone, and you essentially turn everyone into part of the banking class. Passive activity leads to an increase in supply of hard assets, which leads to the necessity of printing more money in order to keep the paper supply on a par with the availability of tangible assets. Switch the US to the Solar Dollar, and we could make everyone in this country a self-sufficient millionaire in a time when having a million Solar Dollars would actually mean something.

Don't think this system works? Google or wiki Dubai, then get back to me...


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