I wanted to remind everyone who is on board for the "$100 for 200 in 2010" project, we are supporting Sasha this month. If you'll recall, our children did a fundraiser for Sasha last month and collected $300.00 to gain the little blondie a strong start. Let's finish strong, shall we?
If you go to http://www.reecesrainbow.org/ and click on "Waiting Children", you will find him under the tab for Down Syndrome age 0-2. (He is in orphanage number 2 and is wearing a red and blue outfit) To make your donation, either mail a check directly to Reece's Rainbow OR pay through paypal on the Reece's Rainbow site. Make sure to designate your donation as follows : Sasha (orphanage 2) for the "$100 for 200 in 2010" project. If 200 people would donate $100.00, the international adoption fee for Sasha would be covered and a family could go rescue him and bring him home. I can't think of a better way to spend $100.00 in the first month of 2010!
On an economic note, I did receive a question about yesterday's blog post in regards to recession vs. inflation. I pulled out the "Whatever Happened to Penny Candy" book by Richard J. Maybury and found the following (hope it helps):
1. Inflation is an increase in the amount of money (money supply). When the amount of money goes up, the value goes down. When the value goes down, people need more of it. Rising prices are not inflation; they are a result of inflation.
2. At bottom, inflation is an ethics problem. It is a result of The Lie that is popular with voters. The Lie is, I will give you what you want and I will make someone else pay for it.
3. Inflation causes business people to make mistakes. When inflation stops, the business people see their mistakes and start making corrections. They must fire workers, and unemployment goes up.
4. If the inflation starts up again, the corrections stop and the workers go back to work. A recession has happened.
5. If the inflation does not start up again, the corrections are completed. Unemployment stays up for a longer time because the workers cannot go back to their old jobs; they must find new ones. That is a depression.
6. Inflation causes recessions and depressions. The only way to have no recessions or depressions is to never inflate. Once inflations has started, there is no known way to avoid the results.
This particular chapter then goes onto express the importance of understanding TANSTAAFL (there ain't no such thing as a free lunch). When people lose the value and motivation that comes from producing what they need through hard work, they start looking for handouts.....and....handouts = inflation.
Maybury tells a story of the "German Miracle" that took place near the end of WWII when Germany was in ruins. The country had been bombed out and destroyed, millions had been killed, and lines of transportation and communication had been completely "demolished". As a result, robberies, murders, poverty and starvation ravaged the nation.
This is the true story about a small group of economists led by Ludwig Erhard who took the hopeless situation of Germany and completely turned it around:
"Erhard was able to persuade the people who were governing Germany the wage/price and all other controls must be lifted. He convinced them that taxes must be lowered and inflation must be stopped. Most controls were lifted, taxes were lowered dramatically, and a new, hard (noninflated) currency, the Deutsche-mark, was introduced. Almost overnight things got better. People who had been stealing and killing began working, and people who had abandoned the cities came back. Everyone knew that their hard work would be rewarded with hard money and the things hard money would buy. An eyewitness said: Shops filled with goods from one day to the next; the factores began to work. On the eve of currency reform the Germans were aimlessly wandering about their towns in search of a few additional items of food. A day later they thought of nothing but producing them. One day apathy was mirrored in their faces while on the next a whole nation looked hopefully into the future."
In closing, if we see taxes go up, inflation increase (the dollar lose value), and spending continue to rise.......we are going in the opposite direction of the "German Miracle". Friends, we just need to be wise. I encouraged yesterday, and want to encourage you again, educate yourself. Do not get caught up in "politics", because that is not what this is about. Our current situation just "is what it is", and it is trending into a scenario that is ripe for inflation. If that becomes the case, a wise man/woman will be prepared and will not be impacted as much.
Keep in mind, one of the very best ways to hedge against the (good) possibility of inflation is to purchase "hard assets"....something tangible. Don't have enough cash? Consider going in with friends or family and purchase something together.....land, rental property, etc. Free advice from someone who makes it a daily habit to keep up with economic trends based on historical evidence. (Whoa, and you thought I was going to ONLY be talking about adoption and raising special needs kids....ha! ha!)
"The rich rule over the poor, and the borrower is servant to the lender." Proverbs 22:7