The More Things Change...

It's as true today as it was then...people don't know history...they are clueless about how the economy works...and don't know or care about the consequences of the way they vote.  People STILL believe that the Great Depression was a failure of the Free Market.  Why?  Because those really at fault, government, told them so.  But Friedman tells a different story:

"So the Great Depression was not produced by a failure of business.  On the contrary, it was produced by a failure of government...and a failure of government in an area in which responsibility had been assigned to government since the founding of this country...We have learned from that failure.  The Federal Reserve will not fail in the same way again.  This time it will fail in a different way.  This time it has been failing, not by producing a Great Depression, but by producing an inflation.  Because just as you will hear the story that it was business that was responsible for the depression, so you will today  hear the story that it is labor and management that are responsible for inflation.  It is the same kind of a myth."

The inflation he is speaking of here is in the 1970s when interest rates were in the double-digits and much of the American manufacturing base, such as steel, collapsed.  President Gerald Ford ran on a W.I.N. platform, which stood for Whip Inflation Now.  It was a time of what was being called "hyper-inflation," and it was devastating to our economy.

Today, we are on the verge of another devastation to our economy.  The Federal Reserve is printing more and more money.  This causes the value of the dollar to drop, and therefore, prices to raise...this is inflation.  But who is to blame.  Once again, Friedman tells it like it is:

"Inflation is made in one place, and one place only...Washington D.C.  And in Washington D.C., the chief source...immediate source of inflation...is a Greek temple on Constitution Avenue, which houses the Federal Reserve Board.  An accomplice, and a major accomplice of course, sits in the halls of Congress in Washington.  They are a major accomplice because you tell 'em to be.  The American people have been telling Congress for many years, 'Spend more money on us, please.'  But they've been telling us, 'Don't raise our taxes.'  Congress has been listening.  It's been spending more money on you, but, on the other hand, its been very unwilling to raise taxes.  As a result, its imposed inflation as a tax. That's one tax you don't have to vote for...but you have to pay."

I fear, though, that things are building to be even worse.  With the debt as high as it is, many in government today seem to have no problem both causing inflation and increasing taxes.

Watch the whole video.  It's an interesting history lesson, one that is very relevant for today.

Are You Getting It Yet?

In several past posts, I have given information on the size and scope of the federal debt.  I have supplied some very good videos from others...and some of you still think that it's just not that bad.  Some think, like multimillionaire, hypocrite Michael Moore, that America is awash with money and if we just take it from the evil rich, we would all be okay.

In this video, self-described independent, and motivational speaker Tony Robbins uses information originally compiled by blogger IowaHawk and updates it for 2012.  This takes a look at what would happen if we did soak the rich.

This should be a real eye opener.  It is abundantly and mathematically certain that we cannot tax our way out of the mess our politicians have gotten us into.  We must CUT SPENDING...DRASTICALLY.  And if we don't, we will have a collapse of our economy.  It's not too late...I think...but that time is quickly coming.  Are you getting it yet?  We can't tolerate the status quo.  We cannot continue to allow our elected officials to use OUR MONEY to buy votes, power, and influence.    We cannot take care of everyone...cradle-to-grave.  We have to cut the size and scope of government dramatically!

Are You Getting It YET?

Serfdom? ... Or Worse?

This video by Stefan Molyneaux of Freedomain Radio puts our national debt and the oligarchical Federal Government in grim focus.  It asks the important question, "Where is your government going to get the money to pay off its creditors?"  The answer is chilling..."Governments have only one asset that they can use as collateral. Your leaders are selling you."



For text of video, CLICK HERE.

The Value of Higher Education

There was an excellent column in the Washington Examiner recently by Gene Harlan Reynolds that discusses the higher education"bubble" that has been building over the last few decades.  Just as with the housing bubble, college education has become "an overpriced good, propped up by cheap government-subsidized credit, luring borrowers and lenders alike into a potentially disastrous mess."

This is a subject I have been talking about for a long time.  With tuition increasing at more than two-and-a-half times the rate of inflation over the years (1), we have to ask ourselves when it will stop.  Additionally, we have to ask what it is we're paying for and if it's all worth it.  Especially when the real-world value of that education is dwindling, as reported in a NY Times article: "...a college degree is no longer the guarantor of a middle-class existence. Until the early 1970s, less than 11 percent of the adult population graduated from college, and most of them could get a decent job. Today nearly a third have college degrees, and a higher percentage of them graduated from nonelite schools. A bachelor’s degree on its own no longer conveys intelligence and capability."

I have particular interest in this subject on two fronts...my own educational history, and the fact that I am now paying for my son to go through an engineering degree program, probably/hopefully culminating in a master's degree.

As for my own story, my parents had no money to send me to college. Neither of them were very well educated themselves. When my father graduated high school, it was the very intelligent, or privileged who ever got to go to college. At that time, with a high school diploma and some good skills, a person could do okay for themselves...maybe even some low to mid-level management position.

By the time I was in high school, the game had changed. You now needed some additional schooling to obtain the same kind of life-style. I tried college for a year, but changed my major 3 times in that year and was getting ready to change it again. I was also the one going into debt to finance the education. I could not justify growing the debt even more if I had no idea of what I was going to do, so I dropped out. About a year latter, I enrolled in a two-year electronic technology program at a local technical school...which I completed. I also took additional college-level courses over the years, but never did get a bachelor's degree.

One of the things I really appreciated about my tech school program was that there were no "useless filler" classes, as I referred to them. I was there to learn electronic technology, and that's all we studied, along with applicable mathematics. There were no history, or psychology classes...no basket weaving or art appreciation...just technology. Now, don't get me wrong, I think a person needs to know how to communicate well to succeed in business. That is why I took two writing classes in my first year at college and a technical writing class later at another college. But this really should be taught in high school, if you ask me.

With my measly little tech school diploma, I have traveled to Europe where I sat in a room of master's degree and PhD  engineers and gave them advice on how to design their product...which they had  largely followed when I checked back a year later.  I have been a regional engineering manager for a large telecommunications company.  And, I currently work in a position where many of my peers have bachelor and master's degrees in engineering...and by all accounts, I'm doing well without such degrees.

What I have found over the years is that a degree does not impart intelligence or ability.  Would Bill Gates or Michael Dell be even more successful if they had just stayed in college instead of starting their businesses?  I doubt it.  Yes, there are good reasons for education to train you for a chosen field...yes, good language skills are essential, but, are all the extra classes that are packed into a degree program in the name of a "well rounded" education...the useless fillers...necessary, or even useful?  

My lack of a degree has not undermined my abilities, though it has restricted my opportunities.  And that is the question, should a lack of a piece of paper stating that I completed a course of study be the major requirement for success and promotion?  It wasn't a diploma that made the Scarecrow smart, just as Reynolds points out that because "professional basketball players have expensive sneakers...it's not the shoes that make them good at dunking."  And a degree, "on its own no longer conveys intelligence and capability."  If we're honest with ourselves, it never really did.

Now, with a kid of my own in college, I am living the pain of years of  educational hyper-inflation.  We are happy to be able to provide him with an opportunity that I was never given,  to get his engineering degree.  He has worked hard all throughout his schooling.  He is very intelligent and a great student...better than his old man ever was.  But, I'm glad I only have one child to put through college.

Many families are not fortunate enough to be able to provide for their child's college as we have. What this means is that more and more students are forced to begin their working life with huge education debts, and less prospects for good paying jobs. And, just as with the housing bubble, more and more of these students are defaulting on their debt.

I have advocated for rethinking our higher-education system in this country for years.  But now, I think, we are soon to be forced into such a reevaluation.  Colleges and universities are going to have to curb their spending and control their costs.  No longer can they continue to build huge, elaborate monuments to their magnificence.  A little more practicality in their building designs will be required, if any expansion is needed at all.  They also cannot continue to subsidize programs with little or no real-world applications and very few students.  Any course who's title ends in "Studies" needs to be seriously assessed...and probably most eliminated.

Not only do the institutions of higher learning need to be questioned, but businesses also have an important role to play.  If corporate America did not place such a high, artificial premium on the degrees designed by academia, colleges and universities could not charge such an artificially high price for their product.  The business community needs to reevaluate their requirements for employment and promotion.  What education is truly needed for an employee to perform their job?  As I have seen in technology companies, most jobs, unless they are high-level design or theoretical positions, do not really require four or six year degrees.  And, an MBA certainly should not be a prerequisite for positions in management...don't even get me started on that.

The final part of the puzzle is us...families with children.  We need to realize that college is not necessarily right for all kids.  Technical and trade schools are a great choice for many.  We are losing skilled trades people in this country.  The demand for these trades will grow in the next decades.  As Reynolds states in his column, "We need people who can make things, and it's harder to outsource a plumbing or welding job to somebody in Bangalore.  Of course, the thing about skilled trades is that they require skill.  Even with training, not everyone makes a good welder or machinist any more than just anyone can become a doctor or lawyer."

But, one way or another, the change must happen.  The bubble is about to burst.  Government can no longer afford to subsidize the current system.  The game is changing...again.

(1) Source: InflationData.com - Sky Rocketing College Costs, 10/19/2011