Monday, January 3, 2011

I'm a Trillionaire

The picture above is me brandishing my shiny new 100 trillion dollar bill.  I know it looks like monopoly money but it is actual legal currency. (or at least it was until April 12, 2009)  The Zimbabwe Dollar was the official currency in the country of Zimbabwe but after it become completely worthless they abandoned it.  Trading in Zimbabwe consists primarily of the US dollar now.

You may be asking yourself, why did Jeff decide he needed to acquire a now defunct currency?  There are two primary reasons:
1. It's awesome.  Did I mention I'm a trillionaire?
2. This week a crowd of newly elected congressmen will be taking office.  I wanted to use my 100 trillion dollar bill to make a point about the role our government plays in our every day lives.

You see, over the past two years a new political movement has formed.  It is largely a grassroots movement, but there have been a number of people who have tried to appear as heads of the tea party patriots.  I don't consider myself a member of the tea party, because there are enough versions of the tea party out there that I'm not really sure what they stand for all of the time.  I will just say that I'm a conservative, and I ally myself with anyone who espouses conservative beliefs.

But I do want to talk a little bit about the tea party.   Many of them have been criticizing our current administration for the exorbitant amount of spending that has gone on.  President Obama has responded by saying, "They should thank me, many of them are now paying less in taxes."  First of all, that statement is deceptive.  He has lowered taxes in some areas but raised them in others.  But the issue really isn't about taxes.

Let me try to make an analogy.  Let's say that my wife and I agree that she can spend $100 a month on shoes.  (Keep in mind this is a fictional analogy.)  Every month, $100 gets removed from our account and she goes and buys shoes.  But then one month she decides she needs $150 worth of shoes.  She knows that I won't want to spend the extra on shoes, so she opens up a credit card.  She only takes $70 from our bank account and she puts $80 on the credit card.  Then she says, "He should be thanking me.  I saved us 30 dollars."

In the analogy, my wife is the government, taxpayers are me, shoes could be all sorts of social programs or any other government spending and China is the credit card.  Is she really saving us money by increasing our expenses and financing a large chunk of it?  Cutting taxes is definitely good.  It stimulates the economy.  It's like if I took that 30 dollars and invested it.  I might come out ahead of the interest rate on the card.  But if you cut taxes while raising expenses you are just digging a whole that is harder to get out of.

Eventually the credit card gets maxed out.  China doesn't want to lend us any more money.  Then the government has basically two options:
1. They can increase taxes
2. They can print the money.

Neither option is good.  If you get taxes too high it strangles the economy.  Herbert Hoover tried that during the depression.  After that, it became the Great Depression.  

If you print money you turn into Zimbabwe.  

In 1980 when the Zimbabwe dollar was established it was worth more than the US dollar.  It was worth about $1.47.  Things went well for a while.  They started by printing money just to pay off some debts.  Each time they printed a little more the problem got worse.  By July of 2008 an egg cost ZW$50 billion.  Teller machines would not allow you to withdraw more than ZW$100 billion per day.  Unfortunately, that wasn't enough to buy a loaf of bread.

People say it can't happen here.  Well, why not?  We are governed by the same laws of economics.  A United States Federal Reserve note only has value because we all agree it does.  If the government starts printing trillions of them, they become as worthless as the paper they are printed on.

So, back to my point.  We have a new congress with a Republican majority.  Republicans are still the minority in the Senate but with a few more seats.  In November, Americans gave a resounding message that we are looking for fiscal responsibility and constitutional government.  (It all happened just as I predicted it would a year ago.)

Republicans have a chance to give the people what they want.  They may not necessarily accomplish their goals, but it's important for them to try to get some conservative legislation passed, particularly targeting spending.  If this happens, even if it is blocked by democrats in the Senate and in the Presidency (perhaps especially in that case) we will be looking at a Republican majority in the Senate and a Republican President in the white house come the next election.

If Republicans turn out to be as crazy spenders as the democrats (as they have many times in the past) the American people will be fed up and it could mean that democrats retake the house in 2012.

Of course, I hope I'm completely wrong.  I'd love to see President Obama turn things around.  I'd love to see him curb his spending.  I'd love to see him create some certainty in the market place.  I'd love for democrats to govern a little more from the center, even if it means they won't be swept out in future elections.  I'd love for the United States to remain a bastion of freedom and hope to the world.

What do you think?


  1. I think I need $100 for shoes each month! What? Not a good plan?

  2. I love that analogy! And taxes are lame. Why can't you just be president?

  3. I agree with many of your points. But I dislike your comparison to Zimbabwe. Yes it is possible that the US could become like that but it would not be one or two steps away. We are not on the verge of having to use spend millions of dollars on a loaf of bread. I think a better analogy could have been drawn that would more resemble our economic situation. While it is sometimes useful to draw analogies to extremes, I feel overall they are used as a scare tactic and it oversimplifies things.

  4. Patty, you're right. And I don't think that we're on the verge of becoming Zimbabwe.

    However, since 1932 when we left the gold standard our dollar has lost (approximately) 95% of its value.

    My point wasn't too scare people into thinking the dollar will completely collapse. I am somewhat of a dramatic person and perhaps over dramatize to make a point. But I did want to illustrate that inflation is stealing from your pocket. It's a hidden tax that averages about 3.5% a year. That means that, in addition to the taxes you already pay, the government takes 3.5% of your savings on an annual basis. Most people don't even realize that their money is losing value.

    I know that I oversimplified things. Especially considering that it isn't congress that even has the power to monetize the debt. All of that is tied up in the federal reserve.

    I just wanted to make the point that if the government doesn't slow spending there will be a day of reckoning. Of course, the collapse of the dollar would be a complete global meltdown, I don't think that's around the corner. But that doesn't mean that the dollar is going to get any stronger.

    Thanks for your thoughts. I apologize if my over dramatization distracted from my intended message.

  5. Valid points. I appreciate the response.


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