Friday, June 24, 2022

Value of the American Dollar (part 2)- What is the Effect of printing dollars without creating anything of value?

The right way- Well, let's say a new beneficial drug is created and produced. The creators benefit. The new drug requires ingredients. Suppliers of the ingredients benefit. 
Truckers have to move the ingredients to the drug factory. The trucking industry benefits as do the truck building industry and the diesel producing industry. 
Pharmaceutical scientists' learn how to produce the drug. Their education and value increases. 
New workers are needed to produce the drug. Our work force benefits. 
Truckers have to move the new drug to the pharmacies. The trucking industry benefits as do the truck building industry and the diesel producing industry, a second time. 
A doctor has a new medicine to help his patients, his/her business increases. 
Retail employees have another product to sell making their jobs more valuable and secure. They and their company benefit. 
The consumer has to drive to pick up the drug. The automobile and gasoline industry benefit. 
The consumer's health improves and he/she again become contributing members of society. Society benefits. 
As you can see, not just the pharmaceutical company's position is improved but other businesses, all of which make up a portion of the economy, improve too. This is an example of how one thing lifts up many other sectors of the economy. This increases the actual wealth of the United States' economy and if no additional dollars are put into circulation, each dollar is a bit more valuable. 
The wrong way- Now let's look at what happens when the tail wags the dog! More dollars are put into circulation without any increase in the economy (no new products, no new gold, no increased education, etc.). 
 Okay, time for an extreme and exaggerated example. Say an ounce of gold is worth 100 dollars. So each dollar is worth 1/100 of an ounce. Next day the amount of dollars in circulation doubles. That means that each dollar is now only 1/200 of that ounce of gold! So, your dollar is only worth ½ as much. 
Our Government giving money away whether to all citizens, irresponsible borrowers, illegal aliens, or foreign governments creates no value. This devalues our economy and our dollars. Although giving money away is advertised as a stimulus for those receiving the money, the stimulus effect only lasts a short time then results in increased inflation a few months later. (Kinda like getting drunk to solve your problems- works until the next morning when all your problems are still there and you're hung over.) 
A better way- Make loans with interest to foreign governments (like China does). Modify how we treat illegal aliens. (Insure they are productive naturalized citizens before allowing them to join our society.) Make government benefits earned (anyone remember CETA? Or WPA?). “If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.” 
                                                                    ___________ 
 Okay, I admit that choosing the pharmaceutical companies was a bad idea. I find them charging U.S. Citizens ten times what they charge citizens of other countries is disgraceful as is the entire financial side of the medical industry (10 different prices for the same
 procedure is wrong!).

The Value of the American Dollar. (part 1)

The wealth of the U.S. is based on the gold in Fort Knox, the natural resources we have, the land we own, the businesses we own, the homes we own, the cars and boats we own, medicines, even computers and TV sets we own as well as more abstract things like the education level of our citizens, the values we hold, the faith that others around the world have in the stability of our government and our free market system that allows any one of our citizens to excel in the field they choose and possibly get rich with their ideas and inventions. These all put together are called the economy. 
These are some of the things which create the value of a dollar. Intrinsically, a dollar bill's value is just ink and the paper it's printed on. It is the fact that it represents the extrinsic value of all those things mentioned above that gives it it's value.