How an Economy Grows and Why It Crashes
by Peter D. Schiff, Andrew J. Schiff
Synopsis
EVER WONDER . . .
How An Economy Grows And Why It Crashes
Understanding how all the pieces of an economy fit together can be a daunting task—especially when the experts can't seem to do it. But when you get down to the basics, it is much easier than you may think. How an Economy Grows and Why It Crashes uses illustrations, humor, and accessible storytelling to take economics off its lofty shelf and put it back on the kitchen table where it belongs.
This straightforward story of fish, nets, saving, and lending exposes the gaping holes that lie hidden in our global economic conversation. With wit and humor, the Schiffs explain the roots of economic growth, the importance of trade, savings, and risk, the source of inflation, the effects of interest rates and government stimulus, the destructive nature of consumer credit, and many other economic principles that are so frequently discussed and so poorly understood.
The story may appear simple on the surface but it will leave you with a powerful understanding of How an Economy Grows and Why It Crashes.
Biography
Peter D. Schiff is the bestselling author of Crash Proof 2.0: How to Profit from the Economic Collapse and The Little Book of Bull Moves in Bear Markets. This is his first collaboration with his brother Andrew J. Schiff, a recognized expert in economic and financial communications.
Riverside Press Enterprise
June 20, 2010
Expect energy mess
The Merchant Marine Act (Jones Act) of 1920 prohibits foreign ships from working in U.S. waters. That's why foreign oil spill cleanup ships are waiting to help with the BP Gulf disaster. Saudi Arabia used all available cleanup ships and equipment available worldwide to deal with an oil spill from the 1991 Gulf War.
The Jones Act was waived for Katrina. Why isn't President Obama waiving the act for all the help we can get? Could it be that he is bending to union pressure and wants this disaster to linger to advance his green energy program at big oil's expense, while Gulf drilling is cut off, Gulf states' economies wither, and gasoline prices rise?
Meanwhile, the Senate just authorized EPA enforcement -- global warming regulatory tyranny -- of carbon emissions and other environmental administrative laws against the U.S. economy and the American people. Taken together, it is an energy disaster in the making -- one which could boomerang on congressional Democrats in November and President Obama in 2012.
Daniel B. Jeffs
Apple Valley, CA
Washington Times
June 22, 2010
Re: Obama's Gulf War - Editorial
O-blah-blah-blah-ma's green energy crusade
President Obama's Oval Office address to the nation was little more than what has become meaningless "O-blah,blah,blah-ma" talk -- this time promoting the administration's, "Never let a crisis go to waste" mantra to further his economy-busting green energy plan by telling us to alter our ways. Yet, he is exacerbating the Gulf oil leak crisis.
Obama said nothing about waiving the Jones Act to attract all the outside help we can get to clean up and control the BP oil disaster in the Gulf of Mexico. And nothing was said about using the underground nuclear option the Russians have used to seal similar uncontrolled gushers. The intention appears to be demonize BP and big oil, while riding-out the growing calamity on environmental rhetoric, and saddling the nation with energy legislation and the regulatory whip of the EPA.
If the president and Congress blindly pursue green energy at the expense of suppressed domestic oil production and refineries, our reliance on imported oil -- and the price of gas -- will continue to increase, just as it doubled from 30% in 1972 to the current 60%. Indeed, instead of calling on the nation to alter its ways, President Obama must alter his, lest we all suffer the long-term consequences.
Daniel B. Jeffs
Apple Valley, Calif.
THE GREAT RECESSION: The numbers tell the story
October 10, 2009
NEW YORK: A year ago this weekend, the Dow Jones industrial average had just
finished a slow-motion crash. Over eight days, it fell 2,400 points, or 22
percent, and stood at 8,451.
One year later, the Dow is at 9,865. It's up 51 percent from a 12-year low
of 6,547 on March 9. Then, some investors feared the financial world was
coming to an end.
Re: I blame you, but it's OK
By Joel Stein
Los Angeles Times - March 13, 2009
It's refreshing to read Joel Stein's take on who's to blame for the economic crisis. A little humor in these trying times doesn't hurt. Though Stein is on target with his finger pointing at the irresponsible and greedy people feeding from the money pot, namely many of us, he missed pointing out the underlying causes and concerns for most of us. In a similar tone, consider this:
We the people are the collective Don (Corleone) Citizen answering Don Obama's questions about voter vengeance against him or the salient culprits seated at the table of America: Don Carter, Don Clinton, Don Frank, Don Dodd, Don Raines, Dona Fannie Mae and Don Freddie Mac.
"You talk about vengeance. Is vengeance going to bring your office back to you or my future to me? I forgo the vengeance of my lost jobs. But my taxes had to leave my paychecks because of this bad mortgage and financial business. So now I have to make arrangements to bring them back safely, cleared of all these false debts and promises.
But I'm a superstitious citizen. And if some unlucky accident should befall them, if they should be stolen by tax and spenders, or they should be hung out to dry, or if they're struck by a bolt of politics, then I'm going to blame some of the people in this room and that, I do not forgive. But, that aside, let me say that I swear, on the souls of my grandchildren, that I will not be the one to break the peace we have made here today."
San Diego Union-Tribune
March 13, 2009
Comparing Madoff with 'tax and spend' schemes
Bernard Madoff's Wall Street Ponzi schemes were not so different from congressional tax and spend schemes. Move other people's money around without them knowing what hit them until it's too late. More prosecutions, anyone?
DAN JEFFS
Apple Valley, CA
Letter to the editor published in the Times Record News, Wichita Falls, Texas - February 6, 2009
Taxed to excess
Dear IRS,
I am sorry to inform you that I will not be able to pay taxes owed April 15, but all is not lost.
I have paid these taxes: accounts receivable tax, building permit tax, CDL tax, cigarette tax, corporate income tax, dog licence tax, federal income tax, unemployment tax, gasoline tax, hunting licence tax, fishing licence tax, waterfowl stamp tax, inheritance tax, inventory tax, liquor tax, luxury tax, medicare tax, city, school and county property tax (up 33 percent last 4 years), real estate tax, social security tax, road usage tax, toll road tax, state and city sales tax, recreational vehicle tax, state franchise tax, state unemployment tax, telephone federal excise tax, telephone federal state and local surcharge tax, telephone minimum usage surcharge tax, telephone state and local tax, utility tax, vehicle licence registration tax, capitol gains tax, lease severance tax, oil and gas assessment tax, Colorado property tax, Texas, Colorado, Wyoming, Oklahoma and New Mexico sales tax, and many more that I can't recall but I have run out of space and money.
When you do not receive my check April 15, just know that it is an honest mistake. Please treat me the same way you treated Congressmen Charles Rangle, Chris Dodd, Barney Frank and ex-Congressman Tom Dashelle and, of course, your boss Timothy Geithner. No penalties and no interest.
P.S. I will make at least a partial payment as soon as I get my stimulus check.
Ed Barnett
Wichita Falls
The "Accident Tax," Coming to a City Near You
Local California Jurisdictions Want Accident Victims to Pad their Coffers Drivers beware in California. More and more local governments are attempting to levy a special tax on out-of-towners who are unfortunate enough to be in accidents - regardless of fault. This "accident tax" for emergency response services is in addition to what citizens already pay through local taxes.
These costs are not always covered by insurance, which can leave the accident victim facing a bill. And even when your auto insurance policy pays such taxes, they could result in higher premiums for all drivers.
Who are the thieves here?
By Daniel B. Jeffs, founder, DDC
February 22, 2009
Bernie Madoff's crimes against people who trusted him pale in comparison to government's crimes against taxpayers who don't -- both under the guise of investments. At least Madoff's Ponzi scheme moved victims' money around, with hope of some recovery, unlike irresponsible government waste on bad investments and programs of every description, which are lost forever.
Which points a guilty finger at the government's mortgage bailout and takeover of Fannie Mae, Freddie Mac for making and backing unaffordable home loans to unqualified buyers by means of lender intimidation, then sold them out on false hopes for political gain, at taxpayers' expense.
Nevertheless, unqualified buyers who should have known, opportunistic lenders, mortgage bundlers, and the fools who thought they were going to flip houses, or get more house for less until the interest rates adjusted up should not be bailed out. That's what caused the housing and economic crisis. If anyone needs help it is the real victims who suffer from the crash, not manufactured or greedy ones.
Stimulate economy with moratorium on immigration
By Daniel B. Jeffs, founder DDC
February 16, 2009
Under the dire circumstances of a bad economy, a moratorium ought to be placed on immigration until the crisis passes and the economy is healthy again. Indeed, Income-strapped citizens should not be required to support legal or illegal immigrants with welfare, healthcare or education.
Considering the tens of $billions earmarked for welfare, healthcare and education in the $787 billion stimulus bill, much of it would not be needed for immigrants. In fact, much more could be saved if the handouts to immigrants were eliminated, or at least suspended to help state budget shortfalls.
California, for example, spends upwards of $10.5 billion per year on illegal immigrants alone, according to a 2004 study by the Federation for American Immigration Reform, which at today's costs would offset the proposed $14 billion in tax increases. Nationwide, the $billions spent on immigrants is simply absurd under these or any circumstances.
New Deal or Raw Deal: How FDR's Economic Legacy Has Damaged America
Author: Burton W., Jr. Folsom
Publisher: Threshold Editions
November 2008
A sharply critical new look at Franklin D. Roosevelt's presidency reveals government policies that hindered economic recovery from the Great Depression -- and are still hurting America today.
Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy
Tanked, and Government Bailouts Will Make Things Worse
Author: Thomas E. Woods Jr.
Publisher: Regnery Publishing
February 2009
Description:
If you are fed up with Washington boondoggles, and you like the
small-government, politically-incorrect thinking of Ron Paul, then you'll
love Tom Woods's Meltdown. In clear, no-nonsense terms, Woods explains what
led up to this economic crisis, who's really to blame, and why government
Daily Press
February 4, 2009
Tax rebate deductibility
California government's shameless and irresponsible spending created the $42 billion deficit, yet there has been no move toward preventing future irresponsible spending. Meanwhile, the state has no money for income tax refunds.
If and when the refunds are made, the same interest and penalties that the state charges taxpayers should apply to the refunds. And the same formula of interest and penalties should apply to federal tax refunds.
As for the federal fiasco in Washington, the near $trillion stimulus package should stripped of all pork and replaced with tax cut legislation that should include the return to all interest paid being deductable when filing tax returns. All interest earned by taxpayers must be declared as income, so all interest paid by taxpayers should be deductable, not just interest paid on mortgages.
Indeed, the federal tax insanity should be mitigated even further. State tax refunds should not be considered income. And all city, county and state sales taxes, and federal sales and excise taxes should be deductable.
Dan Jeffs
Apple Valley, CA
Wall Street and Congress are irresponsible
By Daniel B. Jeffs, founder DDC
January 31, 2009
Media critics bashing Wall Street for handing out $18.4 billion in employee bonuses fail to make sense, other than supporting President Obama's call for restraint, discipline and responsibility. Top executives' bonuses and expenditures were clearly excessive, however, most of Wall Street's rank and file depend on bonuses for most of their income.
The irony is not lost when the President calls the bonuses shameful and the height of irresponsibility, while Congress does the same by adding $billions in unrelated pork to questionable trillion dollar taxpayer-funded bailouts and stimulus packages. Both shameful and irresponsible excesses come from the same beleaguered pockets. Ours.
Lest we forget, the Barney Franks, Christopher Dodds and Franklin Raines bred and grew the shameful and irresponsible housing mess and economic meltdown. Wall Street exacerbated it, and Washington's blind leading the blind are making it worse.
Jeff Jacoby Bio
Money for nothing won't grow the economy
By Jeff Jacoby, Boston Globe Columnist
February 1, 2009
http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2009/02/01/money_for_nothing_wont_grow_the_economy?s_campaign=8315
An overoptimistic stimulus plan
By Jeff Jacoby, Boston Globe Columnist
January 28, 2009
http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2009/01/28/an_overoptimistic_stimulus_plan?s_campaign=8315
Frank's fingerprints are all over the financial fiasco
By Jeff Jacoby, Boston Globe Columnist
September 28, 2008
http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/09/28/franks_fingerprints_are_all_over_the_financial_fiasco/
The Great Depression Ahead:
How to Prosper in the Crash Following the Greatest Boom in History
Author: Harry S. Dent
January 2009
Synopsis
The first and last economic depression that you will experience in your lifetime is just ahead. The year 2009 will be the beginning of the next long-term winter season and the initial end of prosperity in almost every market, ushering in a downturn like most of us have not experienced before. Are you aware that we have seen long-term peaks in our stock market and economy very close to every 40 years due to generational spending trends: as in 1929, 1968, and next around 2009? Are you aware that oil and commodity prices have peaked nearly every 30 years, as in 1920, 1951, 1980 -- and next likely around late 2009 to mid-2010? The three massive bubbles that have been booming for the last few decades -- stocks, real estate, and commodities -- have all reached their peak and are deflating simultaneously.
Daily Press
December 24, 2008
Barney Frank lit the fuse
Re: Praising the regulators -
December 15, 2008 letter
Mike Ranger must be overdosing on liberal Democrat kool-aid when he says Barney Frank and Chris Dodd are innocent heroes and blames the Republicans for the housing meltdown. Or maybe he uses the New York Times as his bible.
In the lastest New York Times special series on the financial crisis (three pages), "The Reckonong; White House Philosophy Stoked Mortgage Bonfire," published on December 20, 2008, the Times blamed President Bush for the mortgage meltdown. Either it was a mistake, or the Times must be the most naive newspaper in the nation. President Bush and congressional Republicans tried to rein-in Fannie Mae and Freddie Mac's massive risky lending, but the Democrats blocked it. The only mistake Bush made was being a compassionate conservative and not trying harder to stop the bleeding.
In case the Mr. Ranger and Times missed it, the seed to the housing collapse was planted by President Carter with the Community Reinvestment Act of 1977.
President Clinton used the Act to intimidate banks and mortgage lenders which made it worse. Then Barney Frank, Christopher Dodd and Fannie Mae CEO Franklin Raines knowingly lit the slow-burning fuse.
Dan Jeffs
Apple Valley, CA
Letter to the New York Times
By Daniel B. Jeffs, founder DDC
December 23, 2008
New York Times special series on the financial meltdown Re: THE RECKONING; White House Philosophy Stoked Mortgage Bonfire December 21, 2008 (Three pages)
I was stunned by the New York Times blaming President Bush for the mortgage meltdown. Either it was a mistake, or the Times must be the most naive newspaper in the nation. President Bush and congressional Republicans tried to rein-in Fannie Mae and Freddie Mac's risky lending, but the Democrats blocked it. The only mistake Bush made was being a compassionate conservative and not trying harder to stop the bleeding.
In case the Times missed it, the seed to the housing collapse was planted by President Carter with the Community Reinvestment Act of 1977. President Clinton used the Act to intimidate banks and mortgage lenders which made it worse. Then Barney Frank, Christopher Dodd and Fannie Mae CEO Franklin Raines knowingly lit the fuse.
Government hurts the economy
By Daniel B. Jeffs, founder DDC
December 19, 2008
Historically, when Congress is in session the stock market pulls back. When Congress is not in session the stock market does well. During this economic meltdown mess, Congress has remained in session and the stock market is oversensitive to everything. Coupled with an outgoing president in a hurry to make a legacy, and an incoming president bent on changing everything, at best, our economic future looks bleak. Particularly, when Congress is about to go into high gear lawmaking.
California's economic suicide
By Daniel B. Jeffs, founder DDC
December 15, 2008
Facing a forecasted $41.8 billion budget deficit, California's brilliant Air Resources Board environmental agency continues to impose ridiculous global warming emission reductions on vehicles, refineries, industry, business, use of electricity, and electric energy producers that will cost consumers dearly. Cap and trade carbon auctions won't do anything for us. And, it will only feed the belly of the government beast, a snack.
Letter to the editor:
Re: Property tax haul climbs as values fall
USA TODAY, Dec. 4, 2008 front page
As if beleaguered homeowners don't have enough problems with making mortgage payments in the face of sinking property values, adjustable rate interest inflation, irresponsible government and unscrupulous lenders, they still have to pay rising property taxes.
The reason for this is that the majority of property taxes go to fund public education, plus school bond measure payments. With taxpayers being forced to bail out all the failing financial institutions, mortgage lenders, insurance companies and automakers, why does the biggest, most costly failure of them all -- the public education system -- go unattended? Because they are a monopoly, they don't have to answer to anyone, they have guaranteed funding, and they don't need a bailout. What the public needs is a bailout from public education. Privatize education and get two or three times the quality of education at less than half the cost.
Dan Jeffs
Apple Valley, CA
From the Los Angeles Times
Budget deal would include steeper car fees
Under the agreement, GOP lawmakers would vote to triple the vehicle tax in
exchange for a ballot measure that would impose rigid limits on future state
spending.
By Evan Halper
November 21, 2008
Reporting from Sacramento - State lawmakers began moving toward a deal this week to close California's deficit with the help of steeper car fees that would cost many drivers hundreds of dollars annually, according to people involved in budget talks.
Under the plan, GOP lawmakers -- most of whom have signed anti-tax pledges -- would vote to triple the vehicle license fee that owners pay when they register their cars every year in exchange for a ballot measure that would impose rigid limits on future state spending. Motorists' annual license fees would rise from 0.65% of the value of their vehicles to 2%. For a car or truck valued at $25,000, the increase would be $336.
Daily Press
November 30, 2008
Fool's gold
As if California's economic train wreck isn't bad enough, the governor and the legislature are poised to increase the sales tax, triple vehicle taxes, and break consumers' backs with unreasonable energy costs.
What should be called "Taxifornia's" government, simply doesn't get it. The People of California do, and we're getting it where it hurts the most. The cost of living and jobs.
Thanks to decades of incessant raids and claim jumping by tax and spending Democrats, California's gold has been reduced to little more than fool's gold.
Dan Jeffs
Apple Valley, CA
Prohibit adjustable interest rates on mortgages and credit cards
By Daniel B. Jeffs, founder DDC
November 25, 2008
The era of "irrational exuberance," superficial greed, reckless economics and financial extremes are out. Government rescue is in. But at what price to the people? Deficit spending in the $trillions, instead of $billions.
As a condition to the financial and credit industry bailout mania, Congress ought to at least protect consumers by including legislation prohibiting adjustable interest rates on mortgages and credit cards. Fixed rates only. And no hiking of credit card rates for late or missed payments. Reasonable penalty charges only. If that had been done long ago, the credit mania and economic nightmare might have been little more than a brief bad dream.
THE FREE MARKET CONSENSUS 1989-2008: RIP
By DICK MORRIS & EILEEN MCGANN
Published in the New York Post on November 26, 2008
The subprime mortgage crisis is only the Sarajevo which caused the financial collapse. The real reason is the massive explosion of debt at all levels and in all forms that has engulfed the world. Since 1992, the total of debt in the world has gone from a level equal to global GDP to a level that is now 3.7 times as much as global GDP. This debt explosion, explained in Charles Morris' book (no relation) The Trillion Dollar Meltdown, consists not only of mortgages, but bonds for corporations that can't repay them, credit cards for consumers who are neck deep in debt, car loans for drivers who can't meet the payments, student loans that are swamping young couples, and default insurance sold by companies that can't make good on their commitments. This massive debt has to be sweated out of our global economic system like a heroin addiction.
Daily Press - published letter
November 23, 2008
Democrats protect their own
Those who wonder why House Financial Services Committee Chairman Barney Frank, Senate Banking Committee Chairman Christopher Dodd, Senator Chuck Schumer, former Fannie Mae CEO Franklin Raines and many others aren't being investigated for their participation in the collapse of Fannie Mae and Freddie Mac -- and the domino-effect on the financial market, which caused the economic meltdown -- need only look as far as Jimmy Carter's Community Reinvestment Act, Bill Clinton's perversion of the CRA, ACORN, the Left-wing of the Democratic Party and others of their ilk. Indeed, a corrosive nanny government culture has become firmly entrenched throughout the entire government bureaucracy. With rare, unavoidable exceptions, they simply don't investigate or punish their own.
As if the economic train wreck wasn't bad enough, government environmentalists and their private activist counterparts are bent on making it even worse. Unreasonable regulations have escalated the cost of living for all Americans. Now that they are in control of government, the highly questionable global warming crowd are stepping up the crusade for alternative renewable energy sources to replace existing energy resources.
And to do it immediately without taking the time to advance technology, to consider the massive costs of energy transmission infrastructure, or to expand existing resources to soften the economic blow. Of course, California government learned nothing from the previous energy crisis. Instead, the state's incompetent ideologues are blindly pushing for inflated energy costs with legislation to drastically reduce greenhouse gases -- with conservative turncoat Governor Arnold Schwarzenegger now leading the way -- regardless of the consequences, or consideration of voters' clear rejection of excessive alternative energy proposals.
Albert Einstein said that insanity is doing something again, expecting a different result. Surely, applying radical environmentalists' disoriented thinking is what will undoubtedly drive California's economy on a fast track to bankruptcy.
Dan Jeffs
Apple Valley, CA