The Magic Transition

by Dick McDonald

When I tell people that the Rise Up America plan has a way to simultaneously

         1. place $1.3 trillion in payroll taxes annually collected by the government into personal accounts               owned by the tax payer and immediately invested in the stock market to ignite the creation of                 new businesses and jobs,
         2. pay $1.1 trillion in Social Security and Medicare benefits to participants, and
         3. magically increase the value of the US Dollar heretofore crippled by the overuse of the printing                 press

I get looks that can best be described as “Are You Nuts?”

So I best explain.

OK, let’s start with a fictitious country where we pretend it is worth $400. That is all its cash, bonds, stock, real estate, its ports, airports, roads, bridges, corporations, businesses – in fact all tangible and intangible assets owned by the private sector and the public (government) sector total $400.

Now let’s assume the people make $14 a year but after $3 in taxes they spent every dime leaving no money to invest in the economy. So the government decides because it is a capitalist economy to print $1 dollar every year for the next 40 years and give that dollar to the people and let them invest it in the stock market.

Because the way capitalism works the people would get a return investing in the stock market for 40 years. For the last 30 years the S&P 500 stock index had an average annual return of 12.8% so let’s assume the return the people of our fictitious country got was 10% annually. Under those circumstances the $1 invested for 40 years compounds into $443 at the end of 40 years.

Now let’s compare the results. Every year for forty the government printed $1 dollar for a total of $40 dollars. The investment by the people of those $40 dollars increased the assets of the country by $443. So we can conclude that there was a small devaluation of the dollar - $40 over 40 years – whereas there was an immense increase in the country’s net worth of $443, Quite a bargain wouldn’t you say?

Investing is the trick –The simple truth this example illustrates is that investing money increases value of a country even if you invest money you print. A country who’s net worth increases has a currency worth owning from an international a trader’s standpoint.

Consuming is at fault –The reason the value of our dollar has fallen regularly ever since we went off the gold standard in the 1930’s is that we insist on printing money to pay for our mistakes. The most recent example was our use of the printing press to enable the banks to lend money to home buyers at 1% which has resulted in a 40% fall in the value of the dollar. It has been a costly mistake the government supported. We needed help out of a recession but we didn’t need to leave the door to the vault wide open.

The magic transition –
Now – it is as simple as this. We take $1.3 trillion in payroll tax receipts, put them in the taxpayer’s personal accounts, invest them in the stock market and start the compounding miracle of $443 for a $40 investment. Simultaneously we print $1.1 trillion in new money and pay retirement benefits. As the recipients will be dieing off during that 40 year period and others will be self-funding their needs from the income off their personal accounts we will never print the entire $40.

Increase in the value of the dollar –Establishing an economic policy wherein investment in the country is the tool used to create wealth can only convince international traders into bidding up the price of the US Dollar.

It is just as simple as that.

A Historical Clue –It has been the international socialist movement that has encouraged consumption and the confiscation of property from the productive elements of society. Unfortunately the free market capitalists have failed to fully support the investment principle and have too long tolerated the inflationary effects devaluations have fomented because socialists always spend more than they have.

It is time America wakes up to the fact that socialism is a failed economic philosophy and adopts Rise Up America’s plan to vault the USA into the 21st Century..