By Steve Goebel
Special to The Globe
JOPLIN, Mo. —
In 1936, Franklin Roosevelt asked the voters if they were better off than they were four years earlier.
Unemployment had been cut almost in half. Roosevelt won every state except two in 1936.
In 1937, Roosevelt became fearful of inflation and slashed government spending, the country fell into a second recession. Republicans called it the “Roosevelt Recession” to distinguish it from the “Hoover Depression.”
What causes inflation? It can be caused when government pumps more money into the economy than it needs. When Lyndon Johnson introduced the “guns and butter” policy during the Vietnam War, he slowed inflation.
Inflation can be caused when demand exceeds supply, During the Jimmy Carter years, OPEC held oil off the market to raise the price. Gas prices soared, and inflation rippled throughout the entire economy.
Inflation can be caused when wages rise faster than productivity.
When prices rise faster than wages, inflation can be caused by corporate executives receiving oversized salaries, supersized bonuses and stock options. When the value of company stock is higher than it was a year ago, the executives have the option to borrow money from the company, buy the stock at the lower price and then sell it back to the company at the higher price. The executives are profiting at the stockholders’ expense. When the value of the stock goes down, they don’t buy at last year’s price. They aren’t losing money, but the stockholders are. When a lot of stockholders sell at once to cut their losses, they can bankrupt the company.
Corporate executives can then use their golden parachutes.
I hope this explanation isn’t as clear as mud, but executives hope it is.
No Billionaire Left Behind is a separate subject that should not be confused with executive compensation. If I were as smart as these guys, I would be dangerous if I were crooked. They can rob you blind and never spend a night in jail. They don’t cause inflation; they create recession. They make their money the old-fashioned way: They steal it from the investors and put the money in offshore banks.
In 2008, they cost the economy $11 trillion. None of them went to prison. They make Bernie Madoff look like an amateur.
Some politicians don’t know how to fix the problem, so they pump money into the economy. Other politicians are paid to see the problem isn’t fixed.
It’s “a real choice,” but it isn’t a good choice.