Dakota Beacon

Definitions:

Depository Institution – A private bank, savings and loans, or credit union that pays interest on savers’ deposits and charges interest to borrowers. The goal of any such institution is to profit by charging more interest on loans than it pays interest to depositors. Competition between banks theoretically prevents excessive profits in a “free market” (not centrally planned) economy.

Federal Funds Rate – The interest rate that depository institutions charge each other for overnight loans. Excess cash of one lending institution is loaned to another institution with deficient cash. Cooperatively, the institutions “balance their books” on an overnight basis.

Discount Rate – The interest rate that Federal Reserve Banks charge private banks, savings and loans, and credit unions for overnight loans.

Inflation – An annual rate of increase in the Dollar cost of goods and services (or equivalent loss in value of the U. S. Dollar).     

Deflation – An annual rate of decrease in the Dollar cost of goods and services (or equivalent gain in value of the U.S. Dollar).

Inflation Target Rate – Since year 2012, an explicit 2 percent rate of inflation of the U.S. dollar, as targeted by the central bank of the U.S. (Federal Reserve, created in 1913). Between the mid 1990s and 2012, a 2 percent target was implicit. Prior to the year 2000, the deficit had been kept under control, with the exception of the period surrounding WWII.

Treasury Bill - A “T-Bill” is a short-term U.S. government debt obligation backed by the Treasury Department with a maturity of one year or less. They are usually sold in denomination of $1,000 but can reach a maximum denomination of $5 million in non-competitive bids submitted to the New York Federal Reserve Bank.

When was the last “balanced annual budget” in the United States?

Prior to the year 2000, the deficit had been kept under control, with the exception of the period surrounding World War II.

Democrat President Clinton and a Republican House and Senate balance the budget from 1998 to 2001.

What are the current values of the above defined terms?

Federal Funds Rate – 5.05% (May 2023)

Discount Rate (Primary/Secondary) – 5.25%/5.75%

Inflation – 4% (May 2023)

Inflation Target Rate – 2%

One Year T-Bill Rate – 5.24%

Questions

Q: Why is the Fed Target Rate 2% and not 0%?

A: The Federal Reserve Board is occupied by banking “experts” that are subject to intense scrutiny by federal government elected officials such as U.S. Senators and U.S. Representatives. These politicians’ number one goal is re-election, so they are eager to spend as much taxpayer revenues as possible on their constituents to insure re-election. They are obviously unconcerned about what happens to future generations after they die. 2% inflation reduces the value of U.S. Dollars paid out as interest on the national debt. 0% inflation would retain the value of U.S. Dollars, making it more costly to pay interest on the national debt.

Q: How would term limits affect federal government spending?

A: Term limits of 12 years, for example, may result in increased rates of spending during all but their last term in office to satisfy constituents within the time limits… and it may result in decreased spending during the last term (last 6 years for Senators and last 2 years for Representatives) due to the lack of the benefits to them of re-election. For the House of Representatives, where all spending is supposed to originate, it could mean more spending in five of the six two-year terms. For the Senate, it would likely be a wash for the two six-year terms. Term limits is thus a bad idea regarding the reduction of spending, even though it may reduce the average age of elected officials. The value or lack thereof due to younger elected officials is a separate discussion for some other time.

Q: What can individual voters do to improve our economy?

A: First, demand that the Federal Reserve set a 0% goal for inflation to eliminate the current incentive to spend more than revenues allow. Second, demand a balanced budget to prevent further increase in the national debt that will eventually have to be paid by future generations. Third, demand the establishment of an “America First” foreign policy agenda that requires our so-called “allies” to pay us fully for supplying their national security requirements when we do so. Fourth, demand reforms of all entitlements to “sustainable” levels. Lastly, vote for politicians that understand economics and choose the path of selflessness… even when it means not getting re-elected. One good term in office is better than a lifetime of selfishness in office.

Commentary

When we vote selfishly for our and our friends’ benefit, we should expect selfish politicians that mirror such selfishness.  Government was and is necessary to regulate evil; it is an efficient vehicle to punish wrongdoing. Our societal culture of individual responsibility, including the obligation to perform good deeds for others in need, must be re-invigorated and replace our mistaken assumption that considers government to be what it will never be… a benefactor. The goodness that is America is derived from its individual good citizens inspired through “faith in something bigger than ourselves”. This “something bigger” is not an earthly central authority we call government… it is the inherent beauty that comes from within each of us. Some of us call this inner beauty “God”; others deem it nature. Either way, we are surrounded by goodness.

The godless Utopian Marxist concept of “Heaven on Earth” supposedly derived from government threatens to replace beliefs that previously motivated humans to be good on earth in order to receive the “Blessings of Heaven” thereafter. We are doomed if we do not wake up to our individual responsibility to society while discarding self-worship that only leads to the “Hell on Earth” that we are beginning to experience in the Marxist swamp.

Love = Work + Courage