#153 How to Destroy an Economy

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#153 How to Destroy an Economy

Four policies are attempting to destroy the US economy.  Let’s pray they don’t.

 

In the history of mankind, countries, and economies have come and gone.  We know what destroys them.  I’m sorry to observe that the United States economy, the greatest economy in world’s history, is taking steps toward destruction.  

I’m an academic, and I’m pleased and proud to give citations where necessary.  Today’s idea comes from an article in the Epoch Times by Victor Davis Hanson titled, If you really wanted to destroy the US.  He knows more about political history than I do, and his article goes in that direction.  My observations, predictably, are about the economy.  

 

Destroy the Dollar

I unpacked some of this idea in podcasts #101 titled Inflating Inflation, and in podcast #62 The End of Fed Independence

As covid was ending and demand was rising, the government used fiscal policy to spend trillions.  The Fed kept interest rates low, as they increased the money supply.  That’s a classic formula for inflation.  If you increase the supply of dollars and keep constant the products they are buying, the currency will depreciate.  Inflation harms the poor, who we Christians care about.  The last two quarterly reports had inflation at 8.5%, then 7.1%.  You realize, that’s four times the goal of 2%.  Think about it: If a sophomore in my econ class was hoping for a B, by earning 80%, and she actually earned 20%, would a parent be proud of that achievement?  But that’s what the administration is doing: They are bragging that, at 7.1%, inflation is only four times what they want it to be.  See if your kids are happy with four times fewer toys at Christmas.  

Why is the dollar still strong on the foreign exchange?  Because, even though the US is doing terrible, the other developed countries are doing terriblier.  We are the best house in a bad neighborhood.  

 

Increase the National Debt

When my sophomores at Dallas Baptist University were born, the national debt was about $5 trillionIt’s now $31 trillion.  But, millions, billions, trillions, it all gets confusing, so let me give you some context.  When my sophomores were born, the debt to GDP ratio was 56%.  It’s now 121%.  It has more than doubled in twenty years.  And, the last six years have been really frightening.  National debt has ballooned from $20 trillion when my sophomores were in high school, to now $31 trillion, and they’re only half way through college. 

SOME debt is not so bad, it depends on what you do with it.  Using debt as leverage is good.  That’s where Dave Ramsey and I depart.  He says you should have NO debt.  It seems to me that debt as leverage makes you richer.  Of course, there’s risk.  There is always risk.  But the current debt that the United States is accumulating is not being used to build capital infrastructure that creates more value, it is being used to maintain social programs.  Which, by the way, the church is supposed to do, but I’ve spoken quite a lot on that in the last few weeks.  

This year, the government will take in almost $5 trillion and spend almost $6 trillion.  That’s not sustainable.  There is no free lunch.  Spending 15% more than you take in, is a formula for disaster.  And it violates the eighth commandment, because it’s stealing from the next generation. 

 

Raise the cost of energy

The modern economy runs on energy.  Rich nations were built on the assumption of low cost energy, which just happened to come from fossil fuels.  As Christians, we believe God put the oil in the ground, and gave humans made in His image, the innovativeness to extract, refine, distribute, and use it.  

I spoke about this in a recent podcast #119 titled Demand Destruction of God’s Creation.  I made the point that God gave us fossil fuels, and Americans have used them to enrich the poor.  Now, prices of gasoline and home heating fuels are being driven up by as much as 30% while government officials essentially respond, “Let them eat cake.”  

It’s pretty simple supply and demand.  The government has reduced new gas and oil leases on federal lands to the lowest levels of any president in history.  They’ve made war on the coal and nuclear power industries.  During the 2020 Presidential campaign, candidate Joe Biden told a young woman at a Presidential campaign event in New Hampshire, “I guarantee you we will end fossil fuels.” After that statement, why would a rational decision-maker invest in that industry?

My doctorate is in Strategic Management, so when I notice that the President has reduced the supply of oil in the Strategic Petroleum Reserve, my antennae start to quiver.  The stated purpose when the reserve was founded by President Ford in 1975 was to strategically supply our military in the time of a national threat.  President Biden used it as a means of lowering gas prices before the election, to gain a strategic advantage.  

Quoting now from the afore-mentioned article by Victor Davis Hanson, in his scree against the Presidential administration, “Cancel the Arctic National Wildlife Refuge oil and gas field. Block pipelines such as the Keystone XL oil pipeline and the Constitution natural gas line.”  Again, that’s more simple supply and demand.  When the President lowered the supply, the price went up for consumers.  

The Executive branch has also created more regulations for fracking and horizontal drilling of gas and oil wells.  I’ve often commented that there needs to be chapter in our Econ textbooks about regulation, because it favors large producers at the expense of smaller producers.  This is a simple control mechanism used by government.  When there are fewer suppliers, the government can control the industry.  Regulations have driven small suppliers out of the gas and oil industry, into the arms of larger companies that the government can more easily control.

 

Redistribute Wealth

Mr. Hanson again, “Spread the wealth by sending money to those who already have enough, while making it less valuable for those deemed to have too much.”  I unpack more details on this in podcast #90 titled Equality or Equity.  The Bible doesn’t have much to say about income inequality.  It has a lot to say about justice.  Unequal distribution of goods is normal and makes markets necessary.  Think about it: If we were all equal, why would we need markets?  If my neighbor could slam dunk like LeBron James and throw a football like Aaron Rogers, why would I buy a ticket to watch those guys do it?  If Ginger could sing like Reba McEntire, I wouldn’t buy Reba’s recordings.  

Someone wrote to my YouTube account quoting Matthew chapter 19 where Jesus tells the rich young ruler, “Sell all you have.  Give the money to the poor.  Then come, and follow me.”  I was tempted to ask the writer whose computer he was typing on, but I dismissed that temptation.  But here’s what I noticed about that scripture.  Jesus TOLD the man what to do, and gave him the CHOICE to do it.  We believe Jesus was God.  Why didn’t he forcibly make the man do what was best for him, as socialists in our current age do?  Think about it: If that really was the best thing for the man, shouldn’t Jesus have used his power to force the rich young ruler to do what’s best for him?  He didn’t.  He allowed him to have the CHOICE to sell his goods.  Socialists don’t give their constituents that choice.   

 

Redemption

OK, I’m the Christian Economist, so I’m not going to leave you with only doom and gloom.  Yes, our leaders have embarked upon four steps that could destroy the greatest economy in the history of mankind.  But, we believe in a God who guards and guides.  We believe in a God who put leaders in their places of power.  And, we believe in a God who redeems.  Let’s pray that these economic mistakes that were intended for bad, are redeemed for good.  

 

FEAR GOD,
TELL THE TRUTH,
EARN A PROFIT.

 

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