Mar 19, 2008

"If you really love me, don't bail me out, let me struggle" says CEO/Author Craig R. Smith

The Federal Reserve panicked and cut interest rates by .75% Tuesday -- rather than trusting the free market to run it's natural, and sometime painful, course.

The Fed's action serves as proof that today's financial markets are purely based on credit (read: faith) rather than substance. The Fed hopes to delay the day of financial reckoning by re-inflating the economy during a time when we need an economic contraction to flush out the bad credit and debt.

Since when does spraying highly flammable liquidity onto burning U.S economic markets solve anything?

Sure, investors hit with margin calls today may have some temporary relief from being forced to sell out profitable positions in gold and other commodities, but after the high of this new injection of the debt wears off we can expect further declines.

Americans are losing confidence and faith in both their government and economy. They believe in the American Dream, but fear they may be face a political and economic nightmare in 2008.

But the U.S. economy has been amazingly resilient over the last year, given the rising cost of living and housing crash, however 2008 will be a year of surprises I think.

The Fed is systematically driving the dollar down to help save the housing market and the economy, but this is just a quick-fix. The Fed has once again bowed to public welfarism and Wall Street market pressures.

The story is told of the compassionate little boy who sees the struggling butterfly attempting to shed his cocoon and decides to help the process along by prematurely cutting open the cocoon, only to discover his shortcut may cost the butterfly his very life.

Sometimes I feel like that little boy when I see those struggling through some of life's toughest challenges, financial or otherwise. The universal economic law of “sowing and reaping” should not be altered nor ignored by individuals or governments. The reason: the possibility of failure is essential for human growth.

Hopefully in 2008 millions of Americans will learn these four economic truths;
1) A prudent man (or woman) should live within (or below) their means,
2) A home should not to be used as an ATM machine to fund consumption,
3) The buck may symbolize the American Dream, but in reality it’s just an IOU,
4) Gold is trustworthy money, accepted worldwide, and grows in value over time.

While millions of investors face a potential panic on Wall Street today, those wise enough to have put themselves back on a personal gold standard remained cool, calm and collected, knowing gold is the perfect safe haven during financial storms such as this.

All paper money has historically proved defective in terms of the classic function of money -- serving as a "store of value". Having lost 97% of it's buying power over the last century, the U.S. dollar is a perfect example of this defect.

I am a firm believer in the allowing the free market to function. As I told FOX's Neil Cavuto last week... If you believe in a free market you must agree that the best thing we can do is to get the government off our backs, out of our pocketbook and away from our kids.

The key to restoring hope for the future of the U.S. economy is to get control of the Federal spending. The more we spend the higher the deficit and the more we have to tax and borrow and inflate the currency. Spending cuts would help to restore a stronger dollar and purchasing power.

Craig R. Smith