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The Credit Crisis and the impending collapse. Economics 101

Our economy has become based on credit. Not real wealth, but funny money.  Our leaders and our media tell us that the economies of all developed countries depend upon credit, and then they act like it is a good thing and try to develop plans to keep it going.
It doesn't work.  It can never work. 
 
There is a basic premise to Economics.  You cannot, indefinitely, consume more than you produce.  It's sad that our politicians who make up our budget cannot understand this simple premise.  As citizens, we can not run our personal finances like that(although too many try), so why do our politicians think they can run our national finances like that?

Let's make it simple. I owe you $20, and you owe me $15. If we cancel our debts, I end up owing you only $5. That means that $30 in fake money disappears.

Lets say we don't cancel it out, and I will use the $15 you owe me as collateral, or as an asset, and you do the same thing. Now, instead of one of us having $5, combined we now have $35 in wealth.

We are a very 'wealthy' nation, but only because we are using fuzzy math. We both know that there is really only $5, but on paper we can make it look like there is $35.

That kind of math catches up to you when people start trying to collect. The only way to keep such a silly system going is if we keep borrowing from each other, and keep 'accumulating wealth'.

In today's economy, people are on the brink of realizing that any 'money' they let people borrow has the potential of not being paid back. The news media describes it as 'credit is drying up' or 'credit is getting tight'.

The only way to encourage more lending is for the gov't to back some of that fake debt with fake money, hence the '700 billion dollar Bail Out Plan'. All the bail out plan does is extend the cycle for a few weeks, or a few months. Don't get me wrong, people will still make 'money', but it isn't real. It's just shuffling numbers around.

Me and you could develop millions of dollars in wealth between us. I borrow a million dollars from you. You sell that asset to somebody else for a little less than a million dollars so they can make a 'profit.. Now, we both have a million dollars. We keep doing it until nobody will buy up our debt, since it is obviously bad, and they keep selling the original debt to others. Then we wait for the gov't to pump in more money so people will keep buying our pretend debt, while we are making money the entire way.

There is not enough money in America to settle all of the accounts, and even if there was, it would wipe out trillions of dollars worth of 'wealth'...much like our settling up effectively made $30 disappear.

It's called a 'bubble', and they all eventually collapse, so why is the government trying to postpone the inevitable?  The larger the bubble, and the longer the collapse is delayed, the worse it will be when it happens.
 
Let's get it over with, I would rather live my life in the rebuilding stage, than the prolonged collapse stage.
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Unions: The Good, The Bad, and The Ugly.

I will not argue the changes for the better that a union can achieve. Coal mining is an excellent example. As is the meat packing industry. Anybody who has read The Jungle cannot be completely critical of how a union of workers can make changes.

But, the quick point, is that it freezes out those who are not part of the Union, or cannot get in the Union's good graces.

And the more extended point is most changes start out for the better. It's the unintended consequences that I find evil. For a union to organize to protect the worker's rights, I do not find incredibly distasteful. What I find distasteful is what the Union does after it gets it's complaints resolved. After you get job security, and what you think of as 'adequate' wages, the Unions continue to push, and push, and push. Why? Because if they didn't the Union leaders wouldn't have a job, and would not be able to justify the 'dues' that they steal from the workers.

A union creates a monopoly, by definition. When you unionize all of the available workers and place them in a collective pool, the union becomes the sole source of labor, and by default, the jobs in a certain field.

Once they achieve that, they can go on strike to coerce employers into giving up more of their profit. Now we get to the problem. How much is enough? After a point, it becomes unsustainable and the employer is forced to increase prices, which leads to inflation and a larger class difference between the employer and the employee who now has to pay more for goods.

The ACLU is a close parallel. I commend the work they did in their early years and it was absolutely necessary. Now, they just look for fights to pick to get publicity so they can get more money. It is no longer about civil liberties, but it's about propaganda and sensationalism.

That is where I have seen all Unions end up. No longer doing what they were designed to do, but just trying to get more and more.

Also, because of the set pay-scale of most unions based on seniority, it removes the initiative and drive to get ahead from most of its employees. In effect, it makes lazy people work no harder than they have to, and makes people who would normally work hard, work less so that the lazy people don't look bad.

Kind of a 'negative peer pressure'.

No, not all Unions HAVE to end up that way, but given enough time, they all do. When you take away the benefits/consequences of hard work, or laziness, and make everybody in effect 'equal', it NEVER brings everybody up to the level of the best worker. It inevitably brings everybody down to the level of the least effective worker.

The novel that has influenced me most in life, was Atlas Shrugged. Many of the ideals that I had always had are written in that book. It wasn't until I read it that I realized I wasn't alone.

Our media, our church's, and our schools preach equality until it made me feel abnormal because I did not believe everybody was equal. I always believed everybody had equal potential, but some people work very hard to reach a level above their peers.

I will not be throttled by the weakest link in an organization. I do not believe I would fit in well with a Union because I do not believe everybody should have a job with equal pay and equal benefits. We need people to dig ditches, and thankfully, there are many people who aspire to do nothing better.

Regards,
Kerb

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Tax and Spend Idiots...I mean liberals.

Lets explore this realistically...If Barack raises taxes for, say, people who make over 250,000 a year, who will benefit? The 'people'? How?

We'll assume for the sake of argument that it actually increases Gov't revenue(which it never has in history).

What is the gov't going to do with the money? Are they going to commission more projects to study the DNA of bears in Montana? Or build more bridges to nowhere? Or more projects like the million dollars for a Woodstock Museum?

I can't for the life of me understand why taking money from people who are successful at investing it, and giving it to the gov't who is horrible about spending it, could possibly benefit anybody.

Heres what it will actually do: lower gov't revenue, reduce investments, encourage outsourcing to foreign countries, lead to a work force reduction, and generally destroy the economy.
 
Its time that the Robin Hood fairy tale be put to rest.
 
Who is John Galt.
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