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A Homeschooler’s Guide to the Recession

By Howard Richman
Printed in Practical Homeschooling #86, 2009.

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Howard and Susan Richman


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, hasn’t it?

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 savers.

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 recession.

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 from abroad.

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 your library.

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 great childhood.

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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