Over the past couple weeks in my school we've had the nice opportunity to have a small class on personal accounting, budgets, banking, taxes, etc. Everyone made a rough budget estimate for necessities they would have to provide for themselves once they were out on their own in the real world. Basics like rent, food, utilities, clothes, and so forth were all covered.

Then our guest teacher (who is a local accountant) got into taxes. And goodness gracious, that really made an impact on all the students. Now, I am lucky enough to go to a very small private school where the students are well informed on current events and have a very realistic and balanced approach to life. I think for all of us in the class, though, taxes for that one instant didn't make any sense at all. The IRS never made sense to me, but this really hit it home. Now, for the people reading this, I'm sure it isn't anything new. I've had more experience and exposure to taxes than most of my friends, but still this class managed to smack us all in the face with reality a little bit. The amount set aside for taxes in our de facto budget outdid any of the other categories.

I've said it before and I'll say it again, basic common sense is something that is lacking right now, especially when it comes to government, but even with individuals and businesses as well. This will be the first year that I have to file taxes, and even though what I pay (roughly 12%) is a relatively small amount, it doesn't keep me from already getting frustrated in this system we're forced to tolerate and comply with. Most of my taxes go to Social Security, a flawed government program that will most likely be bankrupt within 15-20 years. (That and probably many other areas of our government.) Just the rules that people come up with for this sort of stuff is pretty funny. Everyone in the class started cracking up when our teacher started to explain 401(k)'s, because none of us could see how such absurd rules and regulations could be justified. And our teacher was explaining it in all seriousness; the whole philosophy of taxes and the rules that come with them are what really got to the students. Taxes make saving and investing so much more difficult than they should be; any exchange of money is basically penalized. Basic common sense says this is not a system the Founding Fathers would have appreciated. 

I think young people, both teens and young adults, are picking up on the ideas that it would be nice to just live their own lives without so much intrusion from the government. I've been constantly discussing politics and policies from the perspective of Austrian economics for more than a year, and the ideas simply make sense to them. Education is the number one way to spread the ideas of liberty, personal responsibility, and a non-intrusive government. I think all of us in the class started to realize that the IRS gives the notion that the government owns your labor and your property. This is not a good way to motivate young people to go out and get a job. Heck, it's already hard enough to get a consistent job with the strict labor laws in the U.S. Now that we get a chance to go out and get a real job, we have a relatively massive tax burden to deal with. 

When you analyze the IRS and Federal Reserve, both of which were created in 1913, you start to realize that this country is a lot less free than politicians would have you believe. The way I see it, the U.S. is becoming hostage to a huge national debt, over regulation, and central power. I honestly don't think the young people of this country will want to sit back as they start to feel the accelerated impacts from these socialist, centrist policies. There is no way that our current policies are paving the way for a more prosperous future. Debt, inflation, regulation have all been tried countless times throughout history in many different shapes and forms, and they never work. Logic says they can't and won't work, and as much as politicians in Washington might hope they can, the market cannot be suppressed forever. Luckily, more and more people are picking up on this across the country and starting to ask questions. The movement for liberty, responsibility, and a simple return to the Constitution can only go up from here. 

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FDIC Fund Strained by Bank Failures May Lift Premiums

14 Aug 7:54am
Posted by pencils2
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FDIC Fund Strained by Bank Failures May Lift Premiums

By Alison Vekshin

Aug. 11 (Bloomberg) -- The failure of IndyMac Bancorp Inc. and seven other banks this year may erase as much as 17 percent of a government insurance fund and raise premiums for all banks, from Franklin National of Minneapolis to Bank of America Corp.

The closing of IndyMac in July, the third-biggest U.S. bank failure, may cost the Federal Deposit Insurance Corp.'s fund $4 billion to $8 billion, in addition to an estimated $1.16 billion for seven closures through Aug. 1. Premiums for insuring deposits will likely rise, FDIC Chairman Sheila Bair said in a July 30 interview. A decision is due by the fourth quarter.

``It's going to be a bloody, expensive mess for the banking industry,'' said Bert Ely, president of Ely & Co. Inc., a bank consulting firm based in Alexandria, Virginia. ``Healthy banks are paying for the mistakes made by failed banks.''

The pace of bank closings is accelerating as financial firms have reported almost $495 billion in writedowns and credit losses since 2007. The FDIC's ``problem'' bank list grew by 18 percent in the first quarter from the fourth, to 90 banks with combined assets of $26.3 billion. A revised list is due this month. The insurance fund had $52.8 billion as of March 31.

This is not a cheap thing going on with these banks. Playing with a system and allowing the federal government to just step in may very well lessen the pain in the short-term, but few are looking at the long-term picture and whether or not the system itself is flawed. It has gotten to the point where a $300 billion homeowner bailout bill is passed almost without a second thought. Seriously, $300 billion? Fannie Mae and Freddie Mac received an unlimited line of credit to the Treasury. We are constantly assured by Paulson and Bernanke that the company's are in fine shape and its simply a precaution. In their most recent quarterly reports both companies lost a huge amount more than expected. In the end, who is going to pay the bill? While I would like to say that the hundreds of billions of dollars being used to bailout anyone who cries for help will not come out of thin air, it most likely will. Such is the fiat monetary system.

The unfortunate thing for the individual here is that the end result from this relentless printing will come in the form of more inflation and a further decline of the dollar. Heck, just today the Fed "auctioned" (*cough*printed*cough*) another $25 billion to banks in an effort to sort out the wide array of problems in the industry. I honestly don't know how people could believe that you can print trillions of dollars out of nowhere in the matter of a few years and not expect to face severe consequences as a result. It is nothing more than a counterfeiter sending counterfeit bills into the marketplace. The currency gets diluted, prices go up, and the hardships start.

Believe it or not, the Founding Fathers were some of the few who actually understood this. Paper money was briefly tried by the colonies in an effort to pay off the massive debt accumulated during the Revolutionary War with a great lack of success. Once the war was over and a monetary system had to be put in place, paper money was very unpopular and with the 1792 Coinage Act the mint was established and the backed-money system put into place. The penalty for counterfeit, embezzlement, and fraud from any employee or officer of the mint? Death. Times sure have changed.

I am not exactly saying that the best way to go is to return to the monetary policies of way back when. What I am saying is that Founders had firsthand experienced and seen what harm paper money brought to the economy and country. Fiat monetary systems have been played and experimented with dozens of times throughout all of history all around the world. The one thing all these experiments have in common is that the system collapsed and was no longer sustainable. Fiat money leads to a worthless currency, higher prices, and economic stability. And while I absolutely hope that I am wrong, I don't see why today it would be any different with the U.S. and the major economies around the world.

A fiat monetary system has other negative impacts. Easy money and easy credit from the Fed has taken a lot of the focus off of long-term results and sustainability and has rather put all the attention on short-term results, regardless of where that road leads. While the blame will most likely continue to be on capitalism and lack of regulation, hopefully somewhere along the line the blame will finally be brought to the Federal Reserve. I'm keeping my fingers crossed.

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