And So I Go: Yesterday, Today and Tomorrow

Newsletter from Project to Restore America

Posted on: April 5, 2012

This is an interesting newsletter from the Project to Restore America.  It is long but well worth taking a few minutes to look over and perhaps clicking onto one of the referred sites.  BB

A Golden Nugget Tucked Inside 
By Wendy Bidwell
Wednesday, 04 April 2012

As you may already know, I spoke at a conference in Dallas, Texas on Friday, March 30. Hank Mulvihill of Mulvihill Asset Management, LLC sponsors this event, which is called Fed Friday. Mulvihill presented material showing positive growth prospects for the U.S., tempered by the fact that the Fed is buying 60% of net U.S. Treasury issuance. Fred Richards of Strategic Investing spoke on the impossibility of solving global debt problems with more debt.

I spoke on sound money, a return to the gold-backed dollar, while my counterpart, Jason Saving, PhD, who works for the Federal Reserve in Texas gave an update on the U.S fiscal outlook if deficits continue at current levels. Jason also spoke about the improving Texas economy.  

Our viewpoints represented either side of the spectrum, which made for an interesting discussion. During a question and answer session at the end of the session, Saving said that when velocity plummets, you might have to put more money into the economy… I made the counterpoint that when velocity plummets, you should speed up velocity by lowering taxes, creating a simpler tax code, implementing something like a flat tax or the FairTax…  

To this, he said there are certain long term solutions and other short term solutions… He essentially eluded to the fact that adding new money is a short term solution… 

Well, here at the Project, we want long term solutions. As outlined in the Constitution, a sound currency is our birthright as Americans. We want to implement long term solutions…  

The golden nugget I came away with from the conference was this chart that Mulvihill put up on the big screen during the introduction. The chart attempts to answer two questions… Is federal borrowing greater under Republican or Democrat presidents? Do Republican or Democrat presidents generate greater GDP growth per amount borrowed? 

Mulvihill said “We built the chart to provide objective responses to people who bash various administrations. We went back to 1913, the year the Federal Reserve was authorized. What makes this chart useful is that all Debt and GDP figures are in constant 2012 dollars. The Debt and GDP figures are then calculated for percentage change, and total change, year to year. Those yearly changes are then added up during a Republican or Democrat administration, to see total change, percentage change, and whether there was positive return on the borrowing. There is a wealth of historical data here. The far left shows the effect of the Fed Spread on the Dow Jones Industrial Average. When the spread between Fed Funds and the U.S. Treasury 10 year bond is above 1, we usually have good stock markets.” 

As a Reagan fan forever grateful to President Reagan for essentially ending the Cold War, it is difficult to accept how much this cost America in dollars and cents… So, if you are like me, what you see on the chart might be a tough pill to swallow… Reagan had some of the highest percentage increases in national debt. For instance, in 1983, Reagan increased the national debt by 17.03%, in 1985, 12.45%, and in 1986, 14.47%.  

While President Clinton’s numbers look good, I argue he also benefited from leading during a time when the internet and technology bubble formed and grew by leaps and bounds… Although he only increased federal borrowing by 14.1% during his presidency, I would argue he could have reduced debt a lot more than he did. Despite the (deceptive) growing economy during which he presided, 2000 was the only year he significantly reduced debt by 3.25%… He could have done much better.

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The last thing I want to draw your attention to is the last gray column which reflects inflation… You need $2.69 today to equal one dollar from 1980. Do you see how low the numbers are for the last five years? Well, you can attribute this to high unemployment, underemployment, and an overall sluggish economy with little “get up and go.” In other words, this indicates we need more than our economic “Wheaties” to grow the economy… Interestingly, it looks like we need a long term solution…  

Once again, thank you for sending us your e-mails. We can’t respond individually, but we read and consider all of them. Send your question, comment, or complaint towendy@theprojecttorestoreamerica.com.

 Randy Loftin, candidate for U.S. Congress, 5th District of California will be interviewed for 1 hour on the FairTax and other related issues on Wednesday, April 4, 2012, 6:00 PM PDT or 9:00 PM EST. We invite you to tune in your computer to www.blogtalkradio.com/fairtax4ca. You may call the show and ask questions… so please participate if you wish by calling (619) 393-6478.  

Bidwell comment: Randy Loftin is a friend of the Project, and shares our goals and vision. I look forward to tuning in…  

I have no wish to re-ignite the “Cross of Gold” debate, and I realize that you are probably getting tired of hearing from me on this subject, but IF you are going to base the Project on the Constitution (and I believe that to be the only solid foundation for reforming America), you must at some point address the issue of bimetallism.

Although market forces, having driven the gold/silver ratio over 50:1, have made this a thorny issue, the Constitution (Article. I, Section. 10) states that both gold and silver be used (“No State shall … make any Thing but gold and silver Coin a Tender in Payment of Debts”). The Coinage Act of 1792 established just such a system of sound money and laid the foundation for America’s prosperity.

I submit that sound, Constitutional, money must include both gold and silver and that the deviation from that system and the start of our road to national bankruptcy did not begin with the Federal Reserve Act of 1913, but can be traced back to the Coinage Act of 1873, which demonetized silver.

In 1992, economist Milton Friedman concluded that abandonment of the bimetallic standard in 1873 led to greater price instability than would have occurred otherwise, and thus resulted in long-term harm to the US economy. His retrospective analysis led him to write that the act of 1873 “… was a mistake that had highly adverse consequences.” [Milton Friedman, Money Mischief (New York: Harcourt Brace Jovanovich, 1992) 78. See also Friedman, Milton (1990). “The Crime of 1873”. Journal of Political Economy(The Journal of Political Economy, Vol. 98, No. 6) 98 (6): 1159–1194.] – Pat 

Bidwell comment: Pat, you are correct… As outlined in the Constitution, we are to use both gold and silver for legal tender. We will be discussing sound money regularly for a long time, so I appreciate your feedback and do not see it as reigniting a debate. 

I will start researching this and asking the experts how bimetallism can be a part of the return to sound money and a 21st Century Gold Standard. Thanks again for writing, and stay tuned…  

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