American Economics 101 - A short view


I have come to realize that many, if not most people in America don’t have a basic understanding of what makes our American Economy work. Of course our economy and what drives it is complex, but here are some basic principles that apply. Pardon my over simplification.

First we must understand that our economy is part of the multi-national economy. What affects one has effects on all. Much of this affect is driven by emotions.

At the end of World War 2, the strongest most stable economy in the world was the American dollar. For that reason the Dollar was made the World Reserve Currency. Anything bought or sold internationally is paid for in American Dollars. Recently there has been a movement to remove the U.S. Dollar from this status, but the majority of all international transactions still use the U.S. Dollar. This status helps to stabilize the Dollar.

The Federal Reserve Bank has been given the task to manage our economy. Two of the tools used are Interest Rates and Currency in Circulation. If the Fed raises interest rates, it will slow the economy or cause a recession. Likewise if the Fed lowers interest rates, the economy will grow, and/or cause inflation. Currency in circulation works the same way. With more currency in the economy, it will grow, or cause inflation. With less money in the economy, it will slow or cause a recession.

Another thing that affects the economy is government spending, debt and taxation. Increased government spending can create a short term growth in the economy. The problem with increased government spending is increased debt and taxes, which will slow and eventually destroy the economy and the nation. There is a belief that the only way to control the debt (which is now out of control) is to grow the economy faster than the debt. This is primarily done by inflation. With inflation the value of the dollar goes down, making the debt worth less. This may sound crazy, but that is the way Washington thinks.

Minimum Wage Laws also have an affect. When Minimum Wage laws are in affect, the minimum wage becomes the ‘base wage’. When the minimum wage goes up, the base wage going up causing all salaries to go up accordingly. The increased wages, forces companies to raise their prices, causing inflation, which then triggers another increase in minimum wage. It becomes a self feeding cycle of inflation.

Disasters (natural and man made),war and rumors of war all have a great affect. Disasters cause shortages of resources that affect economies. War causes government spending, causing growth and debt. Even a rumor of war can send economic emotions crazy.

In a true ‘free-market economy’ it is individuals and business that make or break an economy. The place individuals and business play in our country is the work we do, things we purchase, and the investments we make. 

Of course the most volatile part of our economy is public perception, or emotion. Perception affects jobs, purchasing, and investments. Since Donald Trump has been elected President, the economy has been growing. A pro-business president has fueled our economy with optimism. 

It is understood that all these things affect our economy, and we will continue to have ups and downs. 

I believe there are 2 events that can/will destroy our economy. 

- First is a result of social collapse. There are forces working in America today to destroy our way of life and our government. If our society falls, our economy will follow. 

- The second way will be a result of our massive debt. If we look at the world today we see that it is not just America, but the entire world that is in debt. The primary holders of all that debt is the international bankers (part of the World Bank). At some point it will be declared that our national debt is no longer sustainable. Under pressure from the World Bank (world bankers, Federal Reserve), the United States will accept the One World Currency, and the rest of the world will follow. I believe this One World Currency will be electronic, not paper or coin. The Bible speaks clearly that in the end of days there will be a One World Government, Religion, and Economy. All the signs in our world today are saying, ‘that time is coming soon’.

Written by Ronald Stange - September 2017