Originally Published September 20, 2011.
What is a firm? This may not seem like a question in lack of an answer. In the United States, as in most other countries, it is a registered, regulated entity acting legally as a person. But economically, the legal definition is irrelevant: the economic function of the “firm” is not its legal status — if it were, then the law rather than the organization would provide the market with that function.
Today’s New York Times reports that unless the postal service gets some help from Uncle Sam, mail delivery will cease entirely this winter.
What about those TV commercials sponsored by the postal workers union claiming that no taxpayer money is needed to deliver the mail?
It is not a big stretch of the imagination that Europe is facing an economic crisis. Even optimists admit that there is some potential for a crisis to develop. However, my skyscraper model has issued a crisis signal. The signal comes in the form of the Shard, now the tallest building in Europe.
In today’s fiat-money world, money is mostly produced through bank lending. Whenever a commercial bank provides credit to, say, consumers, firms, and government entities, it issues new money, thereby increasing the economy’s money stock.
Economists from the Austrian School of economics call this kind of money production “money creation out of thin air,” as the increase in money through bank circulation credit doesn’t require the existence of real savings.
As Irene ravaged other parts of the eastern seaboard, causing millions to be without power, the eatery of last resort, Waffle House, kept its doors open in many locations, using generators and serving a limited menu designed specifically for emergency situations.
