It was when I first heard of Ron Paul rejecting the idea of international trade and wanting to block trucks coming north from Mexico from entering the country, which is now allowed, that I wondered why he would attempt to run for president.
I then heard him say that the Federal Reserve was unconstitutional, unnecessary, and the cause for the "worthless" dollar. I say worthless because his statistic of the dollar being worth 4 cents for every 1920s dollar would make everyone think just that.
However, consider this. We have all heard our grandparents tell of a bottle of coke costing $0.05 in 1920. This is confirmed by most recorded accounts. (see http://www.foodtimeline.org/foodfaq5.html#cocacola)
Sounds pretty cheap, eh? Especially compared to the price of a similar bottle of Coke at $1 today. However, further analysis proves sightly different. Many analysts estimate the average wage in 1920 to have been somewhere around $30 a month. So lets estimate that to $1 a day in 1920s dollars. To buy a Coke, it took 5% of your gross daily income.
In today's terms, let's use the minimum wage of $5.85 in today's dollars to compare to the daily wage of $1. Working a full time job at minimum wage, you would earn $46.8 gross. (It should also be noted that many workers in 1920 probably worked longer than 8 hours a day.) So in those terms, the cost of a $1 Coke of today takes just over 2% of your daily gross income to buy. In effect, the cost of a Coke today is 238% less than it was previously.
Which would you rather have? A Coke for $0.05 costing 5% of your daily wage, or a $1 Coke costing 2%?
Another argument that Ron Paul brings to his campaign is the idea of doing away with the Federal Reserve. Such a move would be ridiculous. Since its formation in the post 1929 crash era, the Federal Reserve has insured that we have not suffered a depression as the one experienced at that time. This is even more important considering the 1987 Crash -Of which this current month is the 20th anniversary.
The 1987 Crash was the worst in US history. The Dow fell a whopping 23% in one day, out-shadowing the 1929 Crash. However, the Federal Reserve was in large part responsible for keeping the economy from going into a depression. In fact, if you were to have bought shares after the 1987 crash, you would likely be up ten fold today -A much different result than in 1929, when by July of 1932, the Dow had lost 89%, and did not close above the peak level in 1929 until nearly 25 years later in 1954.
How can someone who is running for president justify his stance on dissolving institutions such as the Federal Reserve? And more disturbingly, how can even 1% of the Republican voters be following him? (according to the latest Fox News poll.)
I think the economy will develop into a very important issue for 2008. I just hope that the rest of the 99% of voters, republican or democrat, will be more informed of the workings of economics.
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