Basic Economics.

Prices Skyrocket

Pelosi and Dems Want Another Round of Rebate Checks

Okay, here's some really simple economics for you all.

Value is entirely based on perception. Everything is relative. The US dollar is valued because we, as citizens, value it. It is the commonly accepted mode of currency in this country, and, for awhile, was the strongest currency in the world. I won't get into the history of the gold/silver standard (though we should go back to it), but there's a lot more to this whole thing than I'm getting into.

Anyway, the dollar has become too common. It is losing value because it is easy to get. Basic economics - if something is common, it is less valuable than something that is rare. As you increase scarcity by reducing supply, the value increases. Conversely, if you decrease scarcity and increase supply, the value decreases.

This whole economic cycle is positively fascinating. Our prices are going up, in part, because of the industrialization of China and India. Fuel costs are soaring (though they're still only about half of what they are in Europe), and all other prices continue to rise.

Let's make it simple. Prices have increased 1.1% in June. What that means is, if a unit of sugar cost $10.00 in May, it now costs $10.11. If a boxed set of movies cost $100.00 before, it costs $101.10, etc. Therefore, the dollar is worth less now than it was worth before.

For example, I went to Italy last year on spring break. One US Dollar was worth approximately .80 Euros. Now, it's closer to .60 euros. Even the British pound and the Canadian dollar are kicking the USD's butt. So what are we going to do about it?

Well, we passed a round of tax rebates. Now, I'm broke, living on my own, about to get married, so in the short term, $600.00 helped. Heidi and I bought a washer and dryer, paid rent, and paid some bills. But the dollar decreased in value, because it became more available, more common. If you look at the link above, Pelosi and the Dems want to issue another round of rebate checks.

Great idea ... make the dollar even more common and, therefore, worth less. What needs to happen is hugely unpopular and political suicide ... but anyone who has the balls to do it would literally save this country's economy. Cut back. Raise interest rates. Reduce borrowing. Let the economy go through a recession, and ride it out. Cut spending. Pay back national debt. Raise taxes. (Yes, I'm a conservative. But we need to get the government out of debt). Decrease access to the dollar, make it more scarce, and thereby increase the value.

I'm writing my congressperson and senators. You should to. Tell them that tax rebates aren't the answer, and that we need to fix this economy and let everyone suck it up and do what's best, long-term, for the nation.