Have you heard this one? The USA has a "Consumer economy". What drives the economy is consumption. Did you ever think to look behind the curtain? If you did, then you would know that this whole concept does not add up. That is the objective of this blog.
Let's keep this simple so that we can understand it better. My first case is that we have two people who bake bread. Person "A" bakes a loaf of bread and sells it to person "B", and person "B" bakes a loaf of bread and sells it to person "A". Now let's look at this picture. Is either of these two people any better off or do they have a higher quality of life because of their "consumption"? No! It would have actually been better if they had just baked their own bread and eaten it.
What if we had the same two people above and person "B" did not know how to bake bread and the government gave him money to buy bread from person "A"? We have a problem here because, now person "A" has no bread. He goes out and finds person "C" who is a baker and has a loaf of bread to sell him. Next, you have to ask where the money came from for the government to give to person "B"? The government taxed both person "A" and "C" at 50%, that's how. Now look at the picture. Person "B" is happy and votes for the liberal politition while both "A" and "C" can not afford shoes for their children. I'm not done yet.
Rather than the example above, person "B" finds that he can buy a loaf of bread from China for 50% of what both person "A" and "C" want to charge. Person "B" is now very happy because he has money left over from the government to buy shoes for his kids. When the government tries to collect taxes from persons "A" an "C", they have no money and can not pay the tax. The government then goes to China and borrows enough money to pay person "B". When the interest comes due on the loan from China, the government does not have any money so they borrow more from China to pay the interest on their loan. Are you starting to see where this is going? Eventually China will own the USA and all it ever cost them was one loaf of bread.
I could have put the farmer into this model and you would see that he grew the wheat that he sold to China for them to make the loaf of bread. Eventually the farmer would get very rich by the exploitation of our rich natural resources if the government does not tax him to death.
What I am trying to do is to point out the importance of natural resources and to put value added in its proper place. Of the three examples above, there is only one situation where the USA gets any wealthier and that is when the farmer sells wheat to China. The other examples are like chain letters of Ponzi schemes that always go bust in the end. The end is closer than you think!!!
PS--Just think about what would happen if the government imposed a minimum wage for bread bakers? The bread made in China would then cost even less than the bread baker here. The only ones who would make out would be those with no competition. Who do you think those people are? Try government workers, like teachers or lawyers and doctors. Why else would our school teachers be the best paid in the world and produce the worst educated product? Same for doctors. We pay by far the most in the world and rank about 35th in life expectancy. We don't export doctors, we import them. Same for teachers and lawyers.
Let's keep this simple so that we can understand it better. My first case is that we have two people who bake bread. Person "A" bakes a loaf of bread and sells it to person "B", and person "B" bakes a loaf of bread and sells it to person "A". Now let's look at this picture. Is either of these two people any better off or do they have a higher quality of life because of their "consumption"? No! It would have actually been better if they had just baked their own bread and eaten it.
What if we had the same two people above and person "B" did not know how to bake bread and the government gave him money to buy bread from person "A"? We have a problem here because, now person "A" has no bread. He goes out and finds person "C" who is a baker and has a loaf of bread to sell him. Next, you have to ask where the money came from for the government to give to person "B"? The government taxed both person "A" and "C" at 50%, that's how. Now look at the picture. Person "B" is happy and votes for the liberal politition while both "A" and "C" can not afford shoes for their children. I'm not done yet.
Rather than the example above, person "B" finds that he can buy a loaf of bread from China for 50% of what both person "A" and "C" want to charge. Person "B" is now very happy because he has money left over from the government to buy shoes for his kids. When the government tries to collect taxes from persons "A" an "C", they have no money and can not pay the tax. The government then goes to China and borrows enough money to pay person "B". When the interest comes due on the loan from China, the government does not have any money so they borrow more from China to pay the interest on their loan. Are you starting to see where this is going? Eventually China will own the USA and all it ever cost them was one loaf of bread.
I could have put the farmer into this model and you would see that he grew the wheat that he sold to China for them to make the loaf of bread. Eventually the farmer would get very rich by the exploitation of our rich natural resources if the government does not tax him to death.
What I am trying to do is to point out the importance of natural resources and to put value added in its proper place. Of the three examples above, there is only one situation where the USA gets any wealthier and that is when the farmer sells wheat to China. The other examples are like chain letters of Ponzi schemes that always go bust in the end. The end is closer than you think!!!
PS--Just think about what would happen if the government imposed a minimum wage for bread bakers? The bread made in China would then cost even less than the bread baker here. The only ones who would make out would be those with no competition. Who do you think those people are? Try government workers, like teachers or lawyers and doctors. Why else would our school teachers be the best paid in the world and produce the worst educated product? Same for doctors. We pay by far the most in the world and rank about 35th in life expectancy. We don't export doctors, we import them. Same for teachers and lawyers.
