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DICK BAYNTON: Where Is All The Money Going?

Dick Baynton

Perhaps the most circulated pecuniary currencies in the world are the U.S. dollar, the British pound and the Euro. The Chinese yuan, Japanese yen and Russian ruble also enjoy wide circulation. The use of currency and its proxies such as promissory notes, buy and sell agreements, waybills, consignments, contracts and other forms of ‘promises’ pays for world trade that amounts to about $75 trillion dollars annually. The U.S. GDP represents about one quarter of all world trade.

The relative value of various currencies is at least partially governed by PPP (Purchasing Power Parity) of each nation. The most valuable currency is probably the British pound that is valued at 1.4178 (about $1.42) more valuable than the U.S. dollar. On the other hand, the Chinese yuan is worth just .1595 (about 16?), the Russian ruble is worth just .016 (less than 2?) and the Japanese yen trades at .009364 (less than 1?). The Canadian dollar is currently worth about 80? and the Mexican peso trades at less than 6?.

The national debt now tops $21 trillion. Here’s a number that we probably don’t hear enough about: household debt is up 39% to $19 trillion. That includes mortgages, car loans, student debt and credit card debt. Savings by individuals and families was $8.85 trillion in 2016. Ratios of savings by individuals and families has fallen from 11% (of disposable income) in 2012 to just 2.4% in 2017.

Some of the influences that affect personal savings that are postponed include furniture payments of several years, low interest rates on car payments and zero down payments on mortgages. Experian, a credit reporting firm reports that the repayment period for new cars has hit an average of 69 months, a new record. These special ‘deals’ often lead to delinquent payments. All these financial gimmicks are based on abundant supply resulting in highly competitive pricing and terms.

Consider the results of unrestrained spending: taxpayers have the honor and gnawing penalty of paying off student loans because government’s brainless repayment rules allow students to shrug off their debt.

Another problem is that some home mortgages require no down payment for buyers who couldn’t afford the monthly payments to begin with. Other flaws include monthly payments on durable goods (cars, swimming pools, a 72” wall-hung TV or a time share in Belize) that exceed earnings.

A big problem that often arises is the buyer’s inability to pay income taxes and then turning to tax adjusters to negotiate settlements with the IRS so the rest of us taxpayers can cover the delinquencies of our neighbors.

There have been 830,000 bankruptcies and 650,000 foreclosures in the past year. The reason is that 535 Congressmen have four priorities in this order: A. Getting re-elected, B. Raising money to get re-elected, C. Finding out what their heavy contributors need and D. Passing legislation.

Said as gingerly as possible, most governments are not good fiduciaries of incoming tax collections, fees, tariffs and judicial awards. Tax revenue since WWII has grown at a rate 15% faster than incomes; but spending by federal government has grown 50%.

It doesn’t take the mind of a PhD mathematician to understand that SNAP (food stamps), Medicare, Medicaid, Social Security and disability payments are all out of control and destined to run out of funding at some uncertain time in the future. Over the next year, payroll tax revenue will fall about $420 billion short of sustaining the costs of Social Security and Medicare.

In states like New Jersey, Connecticut and Illinois the answer is tax the rich but that strategy ends in a dead end when the rich people move to another state. Here are some economic realities: raising taxes reduces productivity, capital investment and jobs. At the present rate, our current national debt will probably reach $30 trillion in the next decade.

Government’s role must be to help increase private sector jobs exponentially while reducing government jobs in the same manner.  International trade imbalances must be reduced and a Balanced Budget Amendment must be passed and enforced; Drain the Swamp.

As individuals, we must buy what we can afford, create retirement savings to replace the money our government won’t be able to pay us some day and contribute to the economy by working productively.

Dick Baynton



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