Welcome to my first blog. I'm calling it the Midnight Blog for two reasons. First, it will always be done at around midnight. Since I can never go to bed before 1:00 (a little leftover gift from college), hopefully I can do something productive in this hour. Also, if what I write (actually speak, since I’m using voice recognition software) turns out to be absolutely ridiculous, I can always blame it on the fact that it's late and I'm tired. Hey, at least my parents will read it. There is not really going to be any rhyme or reason as to the topics that I write about; it will just be what I find interesting. Some of the things that I will probably write about are finance, sports, politics, Judaism, music, and things that are completely random and bizarre.
So here…we…go…
You ain’s seen nothing yet, baby you just ain’t seen nothing yet, here’s something that you never gonna forget, you just ain’t seen nothin’ yet.
Bachman Turner Overdrive 1974
So tonight we're going to talk about money, as this seems to be the issue of our times. I know this one will be a little dry, but hang in there. Basically, in a nutshell, a nationwide financial catastrophe is coming (that’s what the lyric above refers to, definitely not the blog). This will be much more serious and much deeper than the previous recession. The first few blogs will explain why this is going to happen and maybe give some advice about how to protect yourself.
Let's play Monopoly. You just taught your seven-year-old how to play, and he's gotten his first taste of the feeling that money is important. Unfortunately, the fake dollars in Monopoly are only good for purposes of the game. They can’t buy anything else; it is the ultimate example of a weak currency.
Think about dollars. Let's assume that one dollar can buy one Coke. Knowing this does not tell us whether a dollar is a strong or weak currency. We have nothing to compare it to. Now what if I tell you that one dollar can buy 2 Cokes. Since the second dollar can buy more, it is stronger than the first. If you're my age you can remember when a quarter would buy a Coke. Back then, instead of only buying one Coke, a dollar would buy four Cokes. It's the same dollar as today. However over time the dollar has weakened. It simply doesn’t buy as much as it used to, or, put another way, you need more dollars to buy the same things.
Why is this important? It's one of the major factors that has, and is, destroying our economy. It also destroys our personal finances. Let's assume that you make $40,000 a year. If all of the sudden the dollar gets weaker, your $40,000 can’t buy as much. You can't get as many Cokes as you did before. Since you're not really planning on drinking 80,000 Cokes this year, the important thing to remember is you will now only be able to afford less of the things that you want to buy. When the government inflates the currency (weakens the dollar) everything that you want to buy will cost more. Think back to the example of Coke. The car that used to cost $10,000 is now $40,000, just like the Coke you want to drink is now a dollar instead of a quarter.
The advantages of a strong dollar are numerous, and for most of our history were well understood by the government. Historically we have had a strong dollar policy, which was one of the major factors in the prosperity of the US. When you have a strong dollar, the money that you have in your pocket can simply buy more things. It also leads to price stability, as you know from year to year what things cost, and prices will not skyrocket. Unfortunately for us our government has been embarking on a weak dollar policy. Their public statements deny this, but 100% of their actions have been designed to weaken the dollar. I may discuss how they do this in another blog, but they include things such as printing money and keeping interest rates at unnaturally low levels. They have been extremely successful, as the dollar has recently hit record lows against many other currencies.
So why would the government do this? It is because the recent group of leaders does not understand how to grow an economy. When the United States dollar is weak compared to other countries, such as the Chinese renminbi or the Swiss franc, our exports are cheaper. So for example the Swiss can buy our products relatively cheap. The theory is that this leads to greater exports, which helps US companies sell more overseas. The problem is it simply does not work. We end up selling everything at a discount; basically the US is holding one big firesale. Manufacturing still suffers. Also, anything we import from another country becomes expensive. You will especially feel this if you travel to another country. Get ready to pay through the nose. Actually, we should be used to it by now, as our weak dollar policy is causing everything right here to be exorbitant, such as gas, clothes, groceries, commodities, etc.
It’s 1:00 A.M., and I know this is not exactly the most thrilling topic. Have a good night, everyone.
JR
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