Spending is based on what government "taxes" but also on what government borrows and inflates. It's quite simple. If government spends it, we can't spend or save or invest, and that's bad. As Murray Rothbard explained, deficit spending leads either to inflation or to crowding out private capital investment. Either horn of the dilemma reduces wealth.
In a free market, what a person is is determined by how well a person does. But it's different in state-controlled professions. You can be a great doctor but without the license to practice, you are guilty of a serious crime. The same is true in aviation and law. It is not enough to be good at what you do. You must jump through hoops held by politicians and bureaucrats.
It isn't altogether clear that increasing inequality has brought with it pronounced deleterious consequences. In spite of claims to the contrary, the United States (which still enjoys more freedom than almost every other country on Earth, in spite of its own massive regulatory/welfare state) outperforms mixed-economy welfare states on a number of margins.
The Fed is powerful but it can't create economic growth, writes Frank Shostak. Contrary to Monetarist claims, even the attempt to flood the markets with money can backfire if the conditions that allow for sustainable investment don't exist. More pumping destroys real funding and destroys more businesses, which in turn makes banks reluctant to expand lending.
In the same way that the advent of peace makes it easier to talk about the horror of war, a new technology that has changed the world of typing, making it possible to actually speak publicly about our wounds from typing class.
How much comfort can the U.S. take in the sufferings of Japan? In a side-by-side comparison of the productivity of the two economies, the U.S. comes off looking worse than one might expect, while Japan, long in the mire of recession, not as badly as one might assume. Example: in the past 12 months, government spending in Japan fell by its largest amount in at least 22 years.
Why is the dollar falling? Many commentators blame the balance of payments deficit. In fact, writes Frank Shostak, this has nothing to do with it. The main influnce on exchange rates is the purchasing power of money, which is mainly determined by supply and demand. The dollar is falling because the Fed has been pumping money.
"There can be no such thing as a nation flourishing alone in commerce: she can only participate; and the destruction of it in any part must necessarily affect all." Thomas Paine.
As we observe the current frenzy of lawyers preparing to sue McDonald's and Burger King—and even suing Kraft Foods, the maker of Oreos—for allegedly causing their clients to suffer from obesity, we cannot help but wonder what lunatics have taken over the U.S. legal system.
Some commentators have tried to revitalize the old Keynesian idea of the liquidity trap. Although the trap itself follows from the J.R. Hicks IS-LM analysis, the basic idea is borrowed from J.M. Keynes. In fact, Japan has not been been in such a trap in the years following 1990, and the whole idea of the trap is gravely flawed.
