The tax bills of many American families are falling during a period of exorbitant increases in federal spending due mainly to war. Odd? Not once we discover the record levels of government debt accumulation. It's the shell game of government finance at work. It is not the first time that government warriors have turned to debt and the printing press to pay for their military ventures.
The NBER says the recession ended 20 months ago, but where is the recovery? The labor market is not responding, and growth is weak and ambiguous. Christopher Westley offers an explanation of why this supposed recovery looks different from previous ones.
You buy a stock and the price goes down. Who accepts the liability for losses? The purchaser of stock, of course, who must always bear in mind that stocks are never foreordained to go up or down. As painful as they are, investment losses are necessary to work off the excesses of a bubble, and to re-allocate capital to more promising business ventures.
How powerful is economic law, that mysterious aspect of the structure of reality that causes prices to rise and fall and thereby give direction concerning the use of resources? More powerful than the US government, even more powerful than all the governments in the world combined. In Iraq, the US demonstrated that it can overthrow a despotic government but it can't finally control economic forces, particularly as they affect money.
In recent newspaper columns, Paul Krugman of Princeton University and Lawrence Kudlow have sounded deflation alarms. The solution to combat falling prices, they argue, is for the Federal Reserve System to increase the money supply.
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.
The measures of inequality on which analysts, policymakers, and armchair pundits typically lean may be misleading, argues Art Carden. Even when measures of real income tell us otherwise, the real differences in income and wealth generated by the free market may be much smaller today than they were 100, 50, and even 10 years ago. So maybe "inequality isn't growing fast enough" for some—it doesn't appear to be growing at all.
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.
The popular notion that an increase in the stock of money is socially and economically beneficial is one of the great fallacies of our time. It has lived on throughout the centuries, embraced by kings and presidents, politicians and businessmen. It has shattered numerous currencies, inflicted incalculable harm, and caused social and political upheavals.
