My wife and I sponsor online classes that prepare homeschooled high
school students to take Advanced Placement exams so that they can earn
college credit. I teach AP Macroeconomics, but we have teachers working
with us that teach many other subjects.
At the beginning of this school year I was talking on the phone with
Rachel Califf, the teacher of our AP U.S. Government course. I remarked
that the registrations for her course were coming in heavier than ever.
She pointed out that there was a presidential election coming up and
interest in politics was higher than ever.
Economists don’t like to be upstaged, so this year they produced a
worldwide recession. It certainly has increased interest in economics,
Debt & Taxes
Economists haven’t blown it this badly since 1929, when the Federal
Reserve, following their advice, let credit almost disappear from the
American economy. Since then, economists have learned how important it
is to keep credit supplied to the economy. But they still haven’t
learned how important it is to keep debt from growing, and that’s what
caused the current worldwide recession.
We have been importing much more than we have been exporting. That means
that we have been piling on the debt. When an individual piles on credit
card debt, there finally comes a time when he or she can no longer
borrow more money. The same thing can happen to a country as a whole.
Asian countries have been manipulating their currencies in order to sell
more to us without buying from us. They lend our banks the dollars
earned from trade instead of using those dollars to buy our products.
Banks then lend those dollars to us. Thus we have slowly but surely
become a nation of debtors instead of a nation of owners, producers, and
For example, Americans have been taking out more and more loans from
banks on their houses. They thought that house prices would just keep
going up and up. Some people took out second mortgages (i.e., home
equity loans). Some people took out mortgages for second or third
houses, planning to sell them at a profit. But when houses started
coming down in price, many people stopped paying off their mortgages.
The banks got stuck with houses that were not worth the money that had
been loaned, so the banks started going broke. Debt caused this
The advisors to Presidents Bush and Obama were not very competent. They
didn’t see these problems coming. They still don’t understand them. They
think that even more debt will solve them!
Not all economists are blind to what is happening. My father, my
homeschooled son Jesse, and I predicted a crash in our early 2008 book
Trading Away Our Future. Like a few other economists and business
leaders, we have been calling for balanced trade to solve these
problems. We understand that Americans cannot afford to keep borrowing
In our book we recommended replacing our entire tax system with the
FairTax (a national sales tax) in order to tax imports without taxing
exports and also encourage savings.
We also recommend using Import Certificates (originally proposed by
Warren Buffett) to balance trade. Exporters would get them by selling
exports, and importers would need them in order to import. Exporters
would sell them to importers. They increase exports at the same time
that they reduce imports.
If our plan were tried, it would stimulate enough American production
and savings to get us right out of this recession.
Character Has Consequences
What Is a Derivative?
A derivative is a bond or stock that is derived from some other asset. A
mortgage derivative is derived from collecting a bunch of mortgages into
a single bond, which pays investors dividends using the cash flows
generated by the mortgages. During the housing price bubble, various
financial institutions were collecting mortgages into derivatives and
selling them. They were using the derivatives as a way to finance the
mortgages. In order to better sell the derivatives, banks and brokerages
were giving them artificially high ratings, making them appear to be
safer than they really were.
But America’s problems go much deeper than just foolish economic
policies. Not only have we ceased to be frugal, we have also permitted
dishonesty, promoted incompetent people, and ignored our country’s good
for too long. All of these made our economic problems worse.
Cheating in schools turned into cheating on mortgage ratings. Promotion
of incompetent people into higher management led to one bankruptcy after
another. Lack of patriotism resulted in one self-destructive government
policy after another.
Good Ideas for Hard Times
Recessions are not entirely bleak times. Although some families will be
stressed by financial problems to the point of falling apart, others
will become closer and pull together. Reminisce magazine has published
several great books on how families built good lives, with titles such
as When the Banks Closed, We Opened Our Hearts and We Had Everything But
Money. These books are made up of true stories and family photos
submitted by Reminisce readers. See if you can find them online or in
Now would be a good time to read aloud some of the great books that take
place during other hard times-books like Mama’s Bank Account, A Tree
Grows in Brooklyn, the “Little Britches” series by Ralph Moody, and the
Little House books.
A great book for showing how “Dad losing his job” can actually inspire a
child’s future success is Down a Sunny Dirt Road by Stan and Jan
Berenstain, creators of the “Berenstain Bears.” Both Stan and Jan’s
fathers used periods of unemployment to do creative things with their
children, and little money was needed for both future artists to have a
Our homeschool graduates may worry that they will have a hard time
entering the workforce and keeping the jobs that they do get. But they
do not have to work for others. Some business ideas actually are more
profitable in times of recession. For example, they can go into
business for themselves repairing used items, selling used items for
others through Ebay, or collecting and recycling used items. (Used items
become much more valuable when people can’t afford to buy new ones!)
Some vital and growing job markets, such as nursing, are not likely to
collapse no matter how much the economy sputters. And graduates with
superior character, social skills, and communication skills will always
rise to the top of the placement market in any field.
Homeschooled teens and young adults should continue to develop job
skills through volunteer work, apprenticeships, and/or higher education.
They should especially try to get involved with the new technologies
that will create new business opportunities. New technologies will
eventually get the world out of this recession, no matter how many
mistakes governments make.
The next several years will be bleak from an economics standpoint. Our
incomes will likely contract and some of us will lose our jobs.
Inflation will likely rise, and that could cause a dollar crash that
drives up interest rates and the prices of everything imported,
including gasoline. But no recession lasts forever. Once the recession
reaches its depth, perhaps with a dollar crash, the recovery will begin.
We are going to have challenging times ahead. But there is no reason why
financial troubles should prevent us from pulling together as families
while educating our children in the honesty, judgment, and patriotism
that are so needed by our country.
Also be prepared to put all of your savings into innovative businesses
once this recession reaches its bottom. No recession lasts forever, and
those who invest once the bottom is reached will see their wealth
multiply during the recovery.
For Further Study
Trading Away Our Future: How to Fix Our Government-Driven Trade Deficits
and Faulty Tax System Before it’s Too Late by Raymond, Howard, and Jesse
Richman is available for $12.95 (including shipping) from the online
store at pahomeschoolers.com. You can follow their latest economic
writings at tradeandtaxes.blogspot.com.
Dr. Howard Richman has been prominent in homeschool circles for years as
the founder of Pennsylvania Homeschoolers, a statewide support
organization now in its 26th year.
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