REAGANOMICS
By Craig R. Smith
CEO, Swiss America

Jun 10, 2004

INTRODUCTION: A PERSONAL TRIBUTE TO MY HERO

Ronald Wilson Reagan was one of the three greatest presidents we have had in our nation's history. His love of God, country and family has been an example to me that has kept my priorities right throughout the years.

President Reagan represented everything that is good about America. While not perfect (none of us are) he pursued excellence and truth at every opportunity. He believed in people and the goodness and greatness that exists in each one of us.

Ronald Reagan brought back financial greatness in America, destroyed communism in Russia, ended the cold war -- which gave America her dignity back after the Viet Nam war and the humiliation of Iran taking America hostage. His contributions to our country and the world will be felt for many generations to come. He was a man of the people, by the people and for the people. I know he will be deeply missed by many of us who truly appreciated what he did for our country.

President Reagan was the last president...
... to take a bullet.
... to end the cold war.
... to stop runaway inflation.
... to cut government spending.
... to call a Presidential Commission to study returning to the Gold Standard.
Heaven is blessed to have him as a citizen.

In light of his passing, and in memory of his great life, Swiss-America will be closed for business Friday, June 11, 2004. I hope and pray this week we all take a moment to reflect about how grateful we should be to live in America.

WHAT IS REAGANOMICS?

"Reaganomics" set the stage for major growth of the 90's, but not without a fair amount of pain to see the eventual gain.

Reaganomics appears to be the model that Bush is following so far with his massive tax cuts and defense spending boosts. However, unlike Reagan, so far Bush is not interested in major spending cuts, interest rate increases or inflation fighting.

This is the primary difference between Reagan and Bush. Reagan was willing to make hard choices that required Americans to sacrifice, but Bush knows that today Americans are spoiled with cheap money and a return to the discipline of Reaganomics could easily cost him the election.

The whole idea of trickle down/supply-side economics brought us out of the recession in 1982 and set the stage for the greatest growth the world had ever seen in the 90s.

* Tax rates were cut from a high of 91% to 28%, creating 19 million jobs.
* Reaganomics brought a drop in the inflation rate from 13.5% to 4.8%,
* Interest rates dropped from 22% to 11%,
* Unemployment dropped from 7.5% to 5.4%
* The Dow grew from 860 to 2753. Prior to Reagan taking office, the highest the Dow had seen was 1020. Reaganomics was responsible for doubling the Dow from the old high -- or tripling it from the time he took office.
* GDP doubled from 2.7 trillion to 5.4 trillion.
* Debt grew from $930 billion to $2.7 trillion and was on it's way down until government spending fired back up by a democratic Congress and continued under Clinton until he passed welfare reform.

True, Reagan ran deficits to accomplish this turnaround, but they were not as big a problem back in the 1980s as they are today.

INFLATION-FIGHTING VS. INFLATION-INVITING

We can draw some very clear parallels to what is going on today in the Bush economic strategy and how Reagan got us out of a bad spot with tough fiscal actions.

A major difference between Bush and Reagan is that Reagan was an inflation-fighter and Bush is an inflation-inviter. In 2004, inflation is again taking its toll on the value of our money. Government estimates that inflation will run 5% and interest rates are 1.25% (after hike in June).

Remember, inflation was rampant after Vietnam and LB Johnson did nothing to stop it. Then Nixon came along and took us completely off the GOLD STANDARD (closing the gold window) and implemented wage and price controls to stop the inflation. All that did was cause lines at gas stations. Remember ... odd and even days based on your license plates? Then, Nixon left office humiliated over the Watergate scandal and along comes the country bumpkin peanut farmer that was no more qualified to lead the nation than you or I.

What happened next? Iran takes hostages. ABC births Nightline with Ted Koppel. "America Held Hostage" day 72, day 73 etc. Russia invades Afghanistan. Our response? Send Bo Gritz to train the Mujahadeen Freedom fighters and they kick the Russians butt. During this period inflation is now at 12% and climbing.

Reagan then beat Carter in a landslide, the humiliation ends as our hostages are returned the day after Reagan takes office. Reagan convinced America to believe in Herself again. Then he and Paul Volcker Meet at Camp David and formulate a plan to stop the inflation by raising interest rates and reversing the massive financial destruction the country suffered from.

Reaganomic prosperity lasted until the dot-com bubble came and the 9/11 attack and the normal cyclical recession after such incredible growth.

CONCLUSION

The legacy Ronald Reagan left was that he not only ended Russian Communism (although it still exists in China)-- which was great for the world -- but really didn't matter that much to Americans. Let's face facts, we had a "mutual destruction" understanding with the Russians.

The most important thing that Reagan did was to give America back her economic greatness, Her courage, Her ability to believe in the goodness of this country by defeating the main economic foe of any free people - INFLATION.

Remember what Lenin said; "The best way to destroy the capitalist system is to debauch the currency. The process of inflation engages all of the hidden forces of economic law on the side of destruction, and it does so in a manner that not one man in a million is able to diagnose." All Americans need to protect their assets from the ravages of growing inflation with gold.

I say let's win in the War on Terror like Reagan won the Cold War, but let's ALSO win the War on Inflation! Americans know that higher interest rates will cause some short term pain. Maybe we won't be able to buy that new car, new house or borrow on our credit cards, but for the sake of our children let us sacrifice a little bit today for the sake of future generations.

We've recently witnessed a media blitz on "The Greatest Generation" and how they sacrificed. This week we are honoring a man who showed us all that sacrifice is worth the price. Come on Mr. Bush -- Let's tear down that Wall of Inflation... We can do it!

RONALD REAGAN ON THE GOLD STANDARD

"I will remember Reagan as the last President to date who commissioned a study into the re-adoption of the Gold standard in 1981 ... and the last to take a bullet." -Dave Lewis, LeMetropoleCafe, 6-8-04

Another reason to honor Ronald Reagan is that he had at least some understanding that gold should be a part of the foundation of a sound money system. Here are some relevant Reagan quotes on the subject ...

Remarks and a Question-and-Answer Session on the Program for Economic Recovery at a Breakfast for Newspaper and Television News Editors, Feb 19, 1981
The President. "One economist pointed out a couple of years ago ... when we started buying the oil over there, the OPEC nations, 10 barrels of oil were sold for the price of an ounce of gold. And the price was pegged to the American dollar. And we were about the only country left that still were on a gold standard. And then a few years went by, and we left the gold standard. And as this man suggested, if you looked at the recurrent price rises, were the OPEC nations raising the price of oil or were they simply following the same pattern of an ounce of gold, that as gold in this inflationary age kept going up, they weren't going to follow our paper money downhill?"

Remarks and a Question-and-Answer Session at the Target '82 Fundraising Reception in Santa Barbara, California August 27, 1981
The President. "The gentleman wants to know if we went on the gold standard, would interest rates be 3 percent? Well, I'm old enough to remember when they were, and we were on a gold standard. But I don't think I have the answer to that, although we have a commission that is studying that very subject of gold and its place in our economy."

Written Responses to Questions Submitted by France Soir Magazine, November 3, 1984
Q. Do you believe a form of gold standard can still have a role to play in the monetary system?
The President. "Early in my administration, I appointed a commission of 17 distinguished men and women -- economists, public servants, and people in business -- to study the question of the future role of gold in the monetary system. After careful deliberation, the majority of this commission, which was chaired by Treasury Secretary Regan, recommended that we should not return to a fixed gold standard. Some members felt that a gold standard would provide needed long-term discipline over monetary policies, but the majority view was that restoration of a gold standard would not be a fruitful way of achieving either domestic or international monetary stability."

Did you catch the correlation between oil and gold ... and between gold and long-term discipline? This issue is not going away soon, especially now that we have radical Islamical terrorists who are hell-bent on bringing the U.S. dollar and economy down (See FINANCIAL TERRORISM AND THE GOLD DINAR

I would like to suggest that we need to reexamine this vital issue of returning to a gold standard, perhaps with a new Presidential Commission Chaired by Cong. Ron Paul -- who has been an advocate of the gold standard for many decades.

Dr. Gary North summed Reagan's accomplishments up well in his latest "Reality Check" newsletter; "Reagan took us from what looked like military Armageddon to the last days of the cold war. He never got the budget balanced. It is doubtful that any President ever will -- not without a prior default, either openly or through inflation. But he talked the talk even when he did not walk the walk. He walked enough of the walk to deliver us from a great evil. He turned Communism into a joke -- the same way he handled every other bad thing he ever encountered, even Alzheimer's. He said, "The good thing about Alzheimer's is that you meet new people every day."

Ronald Reagan may be gone, but his economic legacy and uncanny sense of humor lives on. Here's what else I learned from Reagan ... -CRS


ABOUT CRAIG R. SMITH

Craig R. Smith is author of REDISCOVERING GOLD IN THE 21ST CENTURY: The Complete Guide to the Next Gold Rush. His book clearly explains how to diversify assets based on historical principles, why U.S. gold coins are; timeless wealth, the basis for all money and offer financial protection, privacy and profit potential. He is an advocate for the return of the gold standard in America. More ...


RELATED NEWS STORIES:

THE GREAT REAGANOMICS DEBATE ON CBNC Craig R. Smith had a lively debate on Thursday, June 10 on CBNC Morning Call on the topic of Reaganomics with Center for Economic Policy spokesperson who said that Reagan years did not leave a legacy of growth. MORE ...

Ronald Reagan on the Gold Standard - LeMetropoleCafe.com - Jun 8, 2004 - "While each man has his vices and virtues I will remember Reagan as the last President to date who commissioned a study into the re-adoption of the Gold standard in 1981 and the last to take a bullet." MORE ...

'REAGANOMICS' REMEMBERED -CNNfn Former president's tax-cutting, deficit-running legacy remains hotly debated. June 7, 2004 MORE ...

REAGANOMICS IN RETROSPECT -Salt Lake Tribune, UT - June 8, 2004 ... Fifteen years after Reagan left the White House, views of what came to be called "Reaganomics" are as sharply different as they were during his presidency. MORE...

REAGANOMICS, A GLOBAL THING - National Review Online - June 8, 2004 The passing of Ronald Reagan has transfixed the nation on the legacy of a great leader and reopened a debate on Reaganomics. MORE...

FDR FANCIERS FLIP OVER GOP PLAN FOR REAGAN DIME - PSN By Lisa Friedman, Washington Bureau, Pasadena Star News Dec. 4, 2003 - FDR, get off the dime. That's the command from a handful of Southern California Republican congressmen involved in an effort to replace Franklin Delano Roosevelt's image on the dime with Ronald Reagan's. "It is particularly fitting to honor the Freedom President on this particular piece of coinage because, as has been pointed out, President Reagan was wounded under the left arm by a bullet that had ricocheted and flattened to the size of a dime,' Souder wrote to colleagues in rounding up support for his bill." MORE ...

UP FOR DEBATE: REAGANOMICS - PBS - Devastating stagflation signaled the exhaustion of Keynesian economics in the 1970s and contributed to President Jimmy Carter's loss to Ronald Reagan in 1980. With Reagan's blessing, Federal Reserve Chairman Paul Volcker tightened the money supply by raising interest rates to unprecedented levels, sparking a recession but effectively taming inflation. MORE ...


DISCLAIMER: All of the information in this story is believed to be true, however errors are possible.
Past performance is no guarantee of future performance. All investments have risk.

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