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Friday, December 31, 2010

Understanding the economy- a cheat sheet

Economics and global finance are complicated concepts to fully understand. This is intentionally so.  It makes it easier for those in power to deceive by throwing a statistic or two and using the media to push the propaganda of optimism.

Just like when you look up in the sky and see dark clouds, its a signal that rain is coming, economics and finance works in the same way. The problem is since Sept. 2008 and the massive government injection of free money to banks and the stock market, all the normal signs of what makes a healthy v. unhealthy economy are now skewed.

So here's a quick cheat sheet for the everyday person to understand--

1) Stocks- No translation to everyday main street economy or job creation
    If stocks go up-  bankers get Big bonuses; media & govt tout 'Recovery'
    If stocks go down- more stimulus needed; larger national debt

2)  Dollar-  Fiat currency- pieces of paper not backed by anything
    If dollar goes up-  people can buy more goods/services with less $$
    If dollar goes down- businesses can export cheaper; prices go up, Up, UP

3)  Gold-  Precious metal that used to back US Dollar until 1971
    If gold goes up-  dollar is weaker, losing confidence- economy worsening
    If gold goes down- dollar strengthens, sincere optimism- economy improves

4) Commodity prices- Corn, Wheat, Soy, Oil, etc...
    If they go up- investors making Profits; don't trust stocks, basics cost more
    If they go down- investors can make a killing elsewhere; basics cost less
5) Taxes & National Debt
    US Govt spends $1.20 for every $1 it takes in with taxes
    $19,396,316,137.56 ($19+ billion) - November's Interest on National Debt

6) Unemployment
    Currently at 9.8%- definition of 'unemployed' changed during Clinton
    True Unemployment- approximately 18% of Americans

~  Points 1 - 4 apply to all economies, not just USA.  There is no correlation between the global markets growing and national economies prospering.  The Euro, Yen, etc.. are also pieces of paper backed by nothing.  All investors of all nationalities are economic sociopaths- oil can go up.. food can go up.. as long as he/she is making a profit off it.

Questions (these are not a multiple choice 'questions')

1)  Who did the Gov't (including the Fed) bail out in 2008 w. your tax $$?
     1)  Banks and financials like AIG, Goldman Sachs (continuing)
     2)  Credit card companies like AMEX & Discover- allowed to become 'banks'
     3)  Foreign banks in various European nations and in Japan
     4)  Freddie & Fannie Mae (continuing)
     5)  The automotive industry- Chrysler & GM
     6) Non-banking entities like Harley Davidson and McDonald's
     7)  IMF, which US holds majority in weighted vote-18% (continuing)
     8)  ECF, which made it possible for EU to bail out some of its member states

2)  How to tell if Economy is truly improving?
    1)  Unemployment drops; people working
    2)  Jobs provide real wages and benefits- fast food & temping do not count
    3)  Decreasing stats-  # of welfare recipients, food stamps usage, etc..
    4)  Housing prices stabilize w/out Govt intervention; propping
    5)  Regain some form of manufacturing base domestically
    6)   Price of gold per oz. drops

 Economics and global finance are very intricate concepts but this basic 'cheat sheet' will allow any person to quickly understand what signs to look for to determine whether there's a sincere recovery on the horizon or just more government and media Lying.

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