The idea of resorting to work and entrepreneurialism as a means to material well-being has historically become a poor second to the idea of acquiring resources through theft. This robbery is always most effectively perpetrated when disguised and when legally underwritten by the threat of political violence–-i.e., when it is committed by the State.
There is something about monetary phenomena that make them a particularly misunderstood aspect of economic life. Deflation is no exception. There seems to be little understanding as to what it is, what causes it, and whether or not it is something that should be prevented. The effects of deflation, like the quality of drinking water, cannot be considered without regard to its source.
The Federal Reserve is continuing to experiment with new, more counterfeit-proof paper money. Recently, it was big faces, along with the introduction of a variety of other difficult-to-counterfeit characteristics into our Federal Reserve Notes. Next, maybe, it will be color. Or, writes Clifford Thies, perhaps the real issue is not the color on the back of the money, but money’s real backing.
The trouble with lowering the interest rate, writes Frank Shostak, is not that the Fed may lose a tool to fight a further downturn; the problem is that a lower rate now will make things much worse rather than better. Fifty years of experience suggest it will set in motion a much more painful economic adjustment in the months ahead.
News reports now indicate that WorldCom's overstatement of its profits in the last few years may exceed initial reports. But, writes George Reisman, whatever the ultimate figure may be—$7.1 billion or even $10 billion—it pales into insignificance in comparison with the overstatement of profits regularly engineered by the U.S. government.
Argentina and now Brazil are the latest chapters in Latin America's long financial history of foreign debt and default, writes Antony Mueller. It is a consequence of bad policy, underwritten by international financial institutions and subsidized from a pervasive culture of debt.
The present unstable financial system cannot be fixed by means of a monetary policy that targets the price of gold, argues Frank Shostak. This framework, favored by supply-siders, is likely to further destabilize the economy. What is needed is not a reversion to the bankrupt Bretton Woods system, but a genuine gold standard, where gold is money.
Fannie Mae's monopoly privileges have given it an ever-increasing share of the secondary conforming mortgage market, writes Robert Blumen, and it currently is seeking to expand into other parts of the mortgage market. The net result has been a nightmare of resource misallocation and massive systemic risk.
The U.S. government's plan to introduce an improved Consumer Price Index that theoretically would measure inflation more accurately is an exercise in futility. Inflation is not about a general increase in prices; it is about increases in the money supply. Hence, whatever the improved index would measure has nothing to do with true inflation.
Using changes in the margin regulation as a stick to beat the stock bubble does not work, fails to solve the underlying problem, and further injures investors by restricting their choices. What Fed Chairman Greenspan didn't know is something that the young Greenspan and his mentor Ludwig von Mises did: that monetary freedom is the way to end market bubbles once and for all.
