Archive for the ‘ Guests ’ Category

The Fed, Explained…

There are some things I just don’t know enough about to go into with any credibility.

But I do have friends who do!

The following post was a Facebook post.  It was not written by me, and is being posted today with the permission of the author who has asked to remain anonymous.

I’ll say this.  We’re not related, but he is related to folks to whom I’m related.

He’s a friend to whom I’ve always looked UP, respected, and appreciated.

A friend who’s a few years older, just a few, four to be exact.

#GHSclassof66

He’s a dad, a grandpa, a brother, an uncle, and a friend.

He was not a jerk in high school, and he was not a bully, but he did get in a fight at the Burger Chef in Miamisburg after a church youth outing.

He didn’t start it.

Frankly, this is the kind of stuff I wish I could write!

Having said that, here’s what he had to say about the Fed.

*****

I’m going to ramble a bit about the Federal Reserve (hereinafter the FR) and inflation. Some people think the FR is engaged in a grand economic experiment the outcome of which is uncertain. I think the outcome is certain, and that the outcome will ultimately be inflation.

First, the FR is the Central Bank of the U.S. It is authorized to exist by an act of Congress, but it is not part of the government. It operates independently, theoretically to be immune from political pressure. The FR is comprised of several banks, and operates like a private corporation with a Board of Directors. The FR has three responsibilities. One is to stabilize the prices of goods and services within the economy. A second is to establish policies to maximize employment.

Together, these are known as the “dual mandate.” A third goal is to moderate long-term interest rates. The FR believes that the economy operates on an equilibrium model.This means that if the economy is running too hot, they can dial it down by raising interest rates. If they think it is running too slowly, they can rev it up by lowering interest rates. In recent years, the FR has been trying to create inflation by various means.

The short-hand definition of inflation is “too much money chasing too few goods”, that inflation exists when there is a general increase in the price of goods and services while purchasing power of money is falling. This can happen for several reasons. It may happen because there is an increased demand for goods which causes prices to be bid up. It could be that the costs of production increases, so that producers must raise prices in order to maintain profit margins. Or inflation may arise because there was simply too much money created. This over-supply reduces the value of each dollar, so more money has to be spent to buy things.

In the last eight years or so, lots of money has been created out of thin air. Despite the huge injection of money, however, inflation has remained stubbornly below the FR’s target of 2%. This is because an increase in the money supply alone will not induce inflation.The money has to move around in the economy.The more times each dollar changes hands (is spent), the “velocity” of money increases.

Velocity of the money supply is essential to cause inflation. Say a bartender gets a $5 tip. She spends the $5 to take a cab home after work. The cab driver uses the $5 to buy gas for his cab. The gas station owner uses the $5 to buy more gas to sell. The more that $5 changes hands, the greater the velocity of the money. But say the bartender decides to walk home rather than to take a cab. Because her bills are paid up, she deposits the money in her bank. Because people are still recovering from the last financial crisis, no one wants to borrow money despite low interest rates. Because the banks are still recovering themselves, the bank doesn’t want to lend the money because that’s how they got in trouble before. So the $5 sits in the bank, creating no velocity. If this scenario occurs commonly, velocity is low, and despite the printing of money, there is no inflation, at least as measured by the government.

The U.S. economy is consumer-based, and its health depends on people spending money. The FR wants everyone to spend, not save, in order to create velocity and inflation. That’s one reason the FR has kept rates so low. They think that if people can’t earn bank interest, they may think they might as well spend it. Or, perhaps even better, the FR would like you to take your money out of the safety of the bank, and invest it in more risky assets like stocks. And people have done so, choosing risk over safety. As the value of stocks rises, the FR believes this creates a “wealth effect”, making people feel that as they become “richer”, they will be encouraged to spend.

The stock market is the main place in the current economy where inflation (of asset prices) is obvious. A second reason the FR wants to create inflation is to devalue the dollar. There are two advantages in this for the federal government. First, our exports become cheaper for foreigners to buy, and we gain competitive advantage over our trading partners. Also, imported goods become more expensive for U.S. citizens to buy, and the price increases are inflationary. In this way, if we can’t create our own inflation, we can import it. A third reason the FR wants to create inflation is so that the U.S. can make debt payments with cheaper dollars. This is a stealth default. Perhaps most importantly of all, it’s not that the FR wants to create inflation, it’s that they want to avoid deflation at all costs.

The short-hand definition of deflation is “too little money chasing too many goods.” In deflation, price levels fall, and they keep falling. This means the value of money increases.These are recessionary conditions that can become depressions. (There are almost no people alive that can remember living through The Great Depression.) In deflationary conditions, as prices fall, people will not spend their money today to buy something that will be cheaper tomorrow.People will hoard cash the value of which is creating more purchasing power. When people stop spending, corporate profits decline, there are lay-offs, and increased unemployment. (By the way, if the FR thinks we have now reached full employment, the unemployment rate has nowhere to go buy up.)

As people lose jobs, there is even less spending, and the economy goes into a downward spiral, perhaps into depression. Now, say that Employee A is living in conditions where inflation is absent. Prices are not increasing, He earns $100,000 per year.He gets a 10% raise up to $110,000 per year. His purchasing power has increased by 10%. Employee B is living in an economy where prices have fallen by 10%.He makes $100,000 per year, and he does not get a raise. His purchasing power has increased by 10%. Is either employee better off than the other in terms of purchasing power? No. They ended up in the same place. But the government likes Employee A’s circumstances better. They can tax his increased purchasing power. The government cannot tax Employee B’s incensed purchasing power. These are the reasons why the FR wants to create inflation slowly, so that it is almost imperceptible. In fact, until it gets out of control, inflation feels pretty good. The price of your house inflates.

You might get a decent return on bank deposits. You could even get a raise that will match the inflation rate, or maybe a little more. So, at first people don’t mind a little inflation. You can pay down your fixed rate mortgage with cheaper dollars. Right now, the economy is in the slowest, longest recovery on record, if we are in recovery at all. We are on a tightrope balanced between inflation and deflation. Even if we fall into deflation as some expect, in the end inflation will win. Even though the FR hasn’t been able to budge the inflation rate they will find a way, because inflation advantages the federal government. Deflation will destroy it.

Like I said, this what I wish I could write…

Revelation

Guest post from Marie Bryant

The water came out of the shower head like needles hitting my face and neck, hot and fast.

The bathroom had been my refuge so many times, a place to cry and think about things in a safe space away from hateful looks, barbed words, fisted hands, slamming doors.

My plan was to cry it out, feel sorry for myself, wonder whose fault it was, until I couldn’t feel the sadness I thought would fill my heart.

But the sadness never came, and instead all I felt was relief and a maybe a pinch of regret for whatever reason, not enough to elicit even a tear down my cheek.

He’d said he didn’t love me anymore, probably never had, then he’d turned, looked at me with a smirk on his face, and walked out the door.

I realized that night that I didn’t love him either, that I was afraid of him and despised him much of the time, and that I felt relieved, renewed, and ready to live again.

 

Each week, the lovely and talented Ivy Walker hosts a link-up challenging writers to spin a tale in six sentences – no more, no less. Click on the link right here to find out more and link your own post. While you’re there, click on the blue frog button to find more stories from some wonderful storytellers.

This week’s prompt was fault.

 

An Unusual Love Story

This is a guest post and love story written by my sister-in-law, Diane Burns Brads.  She and my brother, Charlie, will have been married 49 years this June.  They’ve been a couple for as long as I can remember…here is her contribution to the month of love…
An Unusual Love Story
My great-uncle Walter Roberts was born in the mountains of Eastern Kentucky on June 10, 1888 in the area of Little Bullskin Creek,Clay County. He was one of thirteen children, not all of whom survived. The family lived by a creek and he enjoyed playing with his brothers in the fields, skipping rocks in the water and fishing. He worked the farm with his father and brothers until he got the wanderlust and decided to join the Army. After one calm enlistment period, he joined up again and this time saw action in WWI. He returned to his mountain home after the war but something had happened. Unexpectedly, he had fallen in love.

Walter is the last boy on the right.

Walter’s sweetheart was Mary Agnes Flanagan, who was born December 25, 1889 in the area of Springfield, Massachusetts. He had met Mary at a dance when he returned from Europe and the Great War.  Mary’s father had immigrated to the USA from Ireland with his family when he was a young child.  He started out as a child laborer working in mills in Chicopee, Massachusetts but his story was that of the classic American dream. Mr. Flanagan was listed as the president of a brewery in the 1910 census, the Springfield Brewery. Mary was counted in the census that year but she was not at home. She was an art student in Switzerland. She attended a convent school, where she sharpened her artistic skills and learned French. She toured Europe and no doubt worshiped in elaborate, historic cathedrals. She viewed masterpieces of art in great museums and even attended a World’s Fair.
I know about these stories because I knew Aunt Mary. I was a schoolgirl and she was an elderly widow, living alone. We both lived in the same small town and I frequently stopped by to see her on my walk home from school. I was enthralled by her stories of living in a family of 9 brothers and no sisters. I was thrilled when she showed me her sketchbooks and her writing exercises in French. I could barely imagine her leaving her family and going to school in Europe. At some point as I grew older, I realized that now she lived in one side of a small double home and that the only fancy things that I saw were figurines in a china cabinet.
I know nothing of the courtship of Walter and Mary after they met but they married in April 1920 in Springfield, Massachusetts. As luck would have it, the home in which Mary lived at the time of her marriage is still standing in downtown Springfield, surrounded by modern office buildings. It is a large home of great beauty. I can picture the interior with lovely woodwork, lace curtains, fine art and an elegant staircase. Her status as the only daughter was no doubt privileged. She would have had the most stylish of clothing, hats and jewelry. Mary’s family was devoutly Catholic and worshiped at the stately St. Michael’s, a large and historic church.
What could have drawn these two together? In contrast to Mary’s lovely home in the city, Walter grew up in a log cabin on a creek. If he went to church, it would have been Baptist, and the building would have been a humble log one with wooden benches for seats, oil lamps for light and a country preacher spreading the Word. Other than his service in the Army, all that Walter knew was farming. He, like Mary, had traveled to Europe, but as a soldier in a grim war. She traveled as an elite child of wealth.
Nevertheless they married, against the wishes of Mary’s brothers. Mary and Walter were both about 30 years old and could make their own decisions. Her father could not object as he was deceased, but the citizens of Springfield must have wondered about the disturbance at St. Michael’s Cemetery when he turned over in his grave.
The newlyweds suffered a sorrow in their first year of marriage as they lost their first daughter on the day of her birth. They were living in Dayton, Ohio, away from all family. In the following years they were blessed with 2 healthy daughters.In the 1930 and 1940 census records, they are shown as living in Preble County, Ohio and Walter was a poultry farmer.
I will close by repeating the tale that Aunt Mary told me personally about the young family’s first and only trip to visit Walter’s parents. The trip was about 3 years into their marriage with their first baby daughter. They took the train as far as they could, from Dayton to possibly London,Ky. Then they traveled by wagon, presumably pulled by mules, on rutted “roads” , at best, and miry and muddy, at worst. When they arrived at Walter’s home place, Mary told me that her mother-in-law was chewing tobacco and spitting it off of the porch. Culture shock was a mild description.
Since I knew Aunt Mary as a child, I could only have a child’s perspective. Other family members have told me that Aunt Mary was an unhappy person. I can see that her plunge from wealth to being a farmer’s wife could have been very difficult. She probably knew nothing about cooking, keeping house, and doing laundry as her family of birth had servants. Their baby daughter who visited Kentucky had an accident as a young child and suffered brain damage that rendered her ineducable in that day and age. The parents and younger sister cared for her at home. I hope that the love that drew Mary and Walter together sustained them through their marriage. In her later years, Mary seemed to be very lonely. I hope that my visits brought as much pleasure to her as they did to me. Those visits allowed me to know about an unusual love.

My Thirteenth Year

Marie Bryant joins us this week in the Six Sentence Story challenge.

The cue word is “turn.”

Mom spent most of her day, every day, taking care of six kids in ways for which we’ll be forever grateful, in ways we probably didn’t appreciate until we got older.

So when she woke us up on Sunday mornings to get ready for church, we sometimes grumbled, but always obeyed, and dressed quickly to be ready to go when she opened the front door.

At thirteen, my thoughts were mostly about my giggly friends, what I was wearing to school the next day, and the boy sitting next to me in study hall; yet what I didn’t know was that the most important person I’d ever meet came from that church.

He knocked on our door, that humble, genuinely loving man, and sat down on the back porch of our shabby little rental home in town.

“Do you know the Lord?” he gently asked as he turned to face Mom, Dad, and the four oldest of us kids.

That wonderful man, Rev. Brads, the man who became more special to me than my own dad, the one who cared enough to sit and explain to me how to accept Christ as my Savior – he changed my life that year, and I will eternally be grateful.

Each week, the lovely and talented Ivy Walker hosts a link-up challenging writers to spin a tale in six sentences – no more, no less. Click on the link right here to find out more and link your own post. While you’re there, click on the blue frog button to find more stories from some wonderful storytellers.