‘Tis the season for Top 3, 4, 5, X lists as we look back on 2011. But a list of the lists would not be complete without a list of the top things in the economy that affected us personally.
So without further adieu, but with a degree of aplomb, here are the top 3 economic stories of 2011, and how they affect you:
- BANKING. Yep, banks try to convince us of their tremendous stability and financial strength. But 2011 revealed the cracks in the banking system that have resulted from the now 4-year so-called Great Recession. Forgive me I don’t overtly acknowledge that, as some economists define the term “recession”, it apparently ended in June 2009. It’s semantics (see #3!). It just doesn’t feel like there’s been any end. But the toll on the banks has been, potentially, 10 times worse, because of their reliance on fractional reserve banking. Because commercial banks are allowed to loan out 10 times their reserves, they’re able to make scads of money … as long as people pay back their loans. But in 2011, more people are NOT paying back their loans. This puts stress on bank reserves as banks charge off unpaid debt. Further, when a bad economy and high unemployment make it less likely that people will pay back loans, the banks have to get picky in loaning out money. Since banks earn money through the interest on those loans, and since there are less loans, the banks have to find other ways of making money. High penalties on late payments, higher bounced check charges, fees to talk with someone and pay a bill by phone. None of these fees are for a service rendered. They’re just for the bank to make more money. And even though Bank of America eventually backed off its effort to charge its customers a monthly fee for using a debit card, that is very representative of the efforts banks made in 2011 to charge us money. Our banks are following the banks in Europe. And it cost you in 2011. Expect it to cost you even more in 2012.
- EUROPE, HERE WE COME. European banks function similarly to American banks, in that they also employ the inflationary practice of fractional reserve banking. But Europe as a whole has an additional feature … huge government benefits that are threatening to bankrupt their respective countries. The United States moved much closer to the European model in 2011. Astounding, given Greece’s insolvency, and how precarious the economies of Italy, Spain, Ireland and France are. The creation of government guarantees to its citizens against the ills of either bad planning, or just bad luck, makes for buying some people’s votes. But it also means redistributive taxes. And every single effort to tax one group in order to benefit another group brings us to the European-style government – with the inevitable European results. You paid more in 2011 because of government intervention in the economy. And if they defined you as “rich”, you also probably felt like there was a big red target on your back.
- SEMANTICS. Yes, semantics. Why? Because the government is attempting to charge people money based on undefined words and phrases. Yes, it makes no sense to extract quantities of money based on non-quantitative criteria. But that’s exactly what the government is currently doing. To be fair, politicians have done that since time immemorial. How does this work? Well, here are the 2011 top undefined words: a.) “Pay your fair share.” What, exactly, is “fair”? We’re not told, except that “fair” is more than some people are paying. Which people? b.) “The rich.” Who is rich? We’re not really sure. We’ve heard they’re people with annual incomes of anywhere from $150,000 to over $1 million. c.) “Income”. What is “income”? Again, we’re not sure. It might include even revenues that come into small businesses. But it might not include income from capital gains. Frankly, the next time a politician says, “Every rich American should pay their fair share,” every person should ask, “What exactly do you mean by ‘fair’? Who are the rich? And what income would you tax them on?”
The 2012 presidential election has every element necessary to make it a true turning point. Not just some personal scandal, but a bad economy, and deep philosophical debates – freedom vs. government interference. The 2011 economy has made 2012 a year to watch.
Speaking of which, watch for this author’s predictions for the Top 3 drivers of our economy in 2012.