Tuesday, March 31, 2009


As a great thinker, let me Freddie L. Sirmans, Sr. give another short lecture on the basics of how an economy actually work. 

The solution to solving the auto industry’s problems is very simple, cut all taxes to the bone and get government the hell out of the way. That is the only thing that is going to save the auto industry or the entire economy.

Our biggest problem concerning the economy is hardly anyone understands how a free market economy is supposed to work anymore, not even learned economist. I will try to make this lecture as simple as possible. 

Point #1: The government is not part of the economy and will never be able to run a successful economy. In economically terms the government is a parasite that is needed for protection of the whole society.

However, most governments have a different take on the matter, and also have the guns and the power to have it's way. Point #2: The government can’t run an economy because there are too many variables. 

A law of nature is the thing that runs a successful economy. This law was first recognized by Darwin many, many years ago. It is the law of “Natural selection.”

A simpler definition is the process of “Supply and demand.” The seller is the supplier and the buyer is the demand. Also, the seller is the same as merchant and the buyer is the same as consumer. 

That said, there are only two parties that make up an economy no matter how modern and advanced we are today, they are the seller and the buyer. The reward of profit is the only thing that drives an economy.

Also, great profit is what creates great wealth. Great wealth cannot be created in a nation without people willing to take great risk. And no one is going to be willing to take great risk without the expectation of making great profits. 

Let me do a walk through example: This farmer grows enough food for him and his family to survive on plus a little extra that he can use to barter or sell for a profit.

This farmer want to be come wealthy but he alone can only produce just a little extra to sell for a profit. He decides if he wants to become rich he must make much more profit. 

In order to make more profit he decides to hire a helper, but, out of that extra profit he must pay his hired helper first and only what is left is his profit. 

He is now a business man and he can keep hiring more help as long as he pays them first and have enough profit left over to make it all worth while.

Now, when the government comes in and demands a little cut it may not damage the system. But, when the government starts demanding almost the whole pie and the business man is no longer making a profit that is a horse of a different color. 

That is what causes people to loose jobs. That is where we are today, the welfare state tax load is just too heavy and without severe tax cuts the whole system is going to collapse, there is no doubt in my mind.

The welfare state in its provider role is standing between the seller and the buyer and as a parasite is siphoning off almost all of the sellers profit. With no profit it will soon be every man for himself and nobody producing any jobs. 

That is why if taxes are not soon cut to the bone its going to be impossible to save the auto industry or the U.S economy.

Beginning with the “New deal” our welfare state started off small but now after eighty years the tax bite has reached a saturation point and now it is cut taxes to the bone or back to the Stone Age. 

As I have said before there will be no safety latch great depression. Our welfare state has destroyed the infrastructure to support that, we no longer have a strong culture and moral code in place; we no longer have a necessary nuclear and extended family system, and we have almost no emergency fallback bartering capacity with small farmers and home gardeners.

When this economy collapses we face total chaos and possibly back to the Stone Age, there is no doubt about that. 

Point #3: A healthy economy must have a boom and bust cycle to get rid of the build up of moral and all kinds of inefficiency and decay. 

That is why no economy can be healthy without a strong nuclear and extended family system. A time may come when if you don't work you don't eat. 

Then the family and extended will be there for those too young, too old, too sick, or whatever to carry their share of the load. Sorry I went longer than planned. Class dismiss!