Grammar School Balance of Trade
A thought came to me the other day when I was reading all of the crap that Wall St has put out, along with their cronies at the Federal Reserve about out balance of trade. The American people are totally out of the loop on this one. The only thing that is apparent is the ability to grab a seat and complain or point fingers at anyone that looks successful.
So, I thought I would attempt to put this sensitive subject into perspective and try to explain what the “balance of trade” means to my little grandson that is in the 6th grade.
Got a better idea? Go for it. But don’t bother me with your opinions unless you put them in writing and they are either better than what we presently read or are subjective enough so that my grandson can understand you.
Enough, of this diatribe that has been coming from Washington, New York and wherever that ogre of “financial mirrors and games” resides. I wrote in some earlier article about the local high school football star that went to college and after becoming the campus hero, he decided to enter into a political career. So, he goes to Washington, “hell bent” on changing the system and don’t you know, something about the air or the food in that town, it seems to change people.
Today, this newcomer in politics has joined the club of “good old boys” and business as usual. Ask him to explain the “balance of trade” to anyone and you will surely get the biggest glob of trash that anyone can create. So, with all of the references to the truth accounted for, I am going to pull my grandson, Xavier Padriag Flaherty aside and tell him in my own words what I think it means. Want to come along? Let’s try.
If, we bought one-hundred dollars of oil from Saudi Arabia and paid them or gave them into their bank account a credit of one-hundred-dollars in American money, you would say it was an even Steven deal. Good so far. But, let’s add a twist to this scenario. Let’s say that in our banking system, we credited the Saudis bank account with only fifty dollars. Then we would owe them fifty dollars and our balance of trade now has a deficit.
How could that happen? Let’s analyze this. We just said we credited their account with fifty dollars instead of one-hundred-dollars. Why? Now plug into the equation what the Federal Reserve is doing to our value of money. The US Congress just approved the borrowing of billions of dollars. They go to the Federal Reserve and the gang of henchmen do not go to other countries to borrow money to loan to us. Hell, they simply go ahead and print more. So, now by printing more money without any assets or sufficient assets to back it up, such as gold, your money is now worth a lot less.
Let’s go back to the fifty bucks we owe the Saudis. We bought one-hundred-dollars of oil. We wanted to pay them back with one-hundred-dollars of money. BUT, our one-hundred is ONLY WORTH FIFTY because the value was cut by the action of the Federal Reserve. That tanker of oil is sailing to Galveston, Texas to unload its cargo and little did you know that we cannot pay them. So, multiply that by zillions of dollars and you can see how we actually buy something but end up paying one hell of a lot more for it because the value of our money has decreased. This is NOT the fault of any political group. Really, not the fault of a Republican or Democrat. It is the system that we are in and there is only two things that can happen. 1.) Suffer or 2.) Eliminate it. Easy to say but just after World War 1 we were still on the gold standard and inflation in this country had not changed in many, many years.
The value of the dollar was solid and our balance of trade was ZERO. But, after the “Creature from Jekyll Island” surfaced our national debt has gone from ZERO to where my grandson, Xavier Padraig Flaherty cannot pay any of it off, even if Bill Gates and Warren Buffet give him all of their money. Stupid, isn’t it? Now go over to “Willie’s Pool Hall” and tell him about our balance of trade and why we are in the situation we are in. Go, ahead and blame someone, anyone. Who can you blame?