Libertarian Ramblings

Posts Tagged ‘Bernanke’

Taxes aren’t the issue

Posted by gravisman on November 24, 2008

NBC on Obama-nomics

In the above link, NBC talks about Obama’s plans to revive the economy, and most of the article focuses on taxes. What taxes may or may not be increased or decreased and when. The reality that the American people need to realize is that traditional taxes are essentially a red herring when it comes to government economic management.

So, here’s the big secret, if you haven’t heard it yet: the government doesn’t need to collect taxes to finance its expenses! The reality is that the government can fund every expense it wants through inflation. That is, it prints money via the Fed. If the government needs money to pay for something, it has the power to create that money. This is already widely practiced today.

The problem is that every time the government creates new money, it makes every other dollar in existence worth a little less. It’s exactly as though someone started printing Mickey Mantle rookie cards. There worth a lot now, but as soon as everyone has them, they’re not worth much. 

Because of this we can essentially classify inflation as a tax. What makes it really bad is that inflation affects every single person without mercy, because it devalues all our money, rich and poor alike. Even Fed Chairman Bernanke agrees that inflation is a tax.

So, the bottom line is that traditional taxes are really not the issue, and they distract people from what is the real issue: spending. No matter what the government does with taxes, they will find a way to finance their expenses. Lowering taxes just makes people feel better. We keep them at a high enough rate that people believe the distraction that they really are what’s important. Unless the government wishes to sink further into debt and inflate the dollar even more, there’s only one response: cut spending.

UPDATE: So, I just came across page 142 of Ron Paul’s book, The Revolution, where he explains inflation by comparing it to Mickey Mantle baseball cards. I can assure you that I wrote this post before reading Ron Paul’s words, so hopefully nobody accuses me of plagiarism. In any case, all respect for Dr. Paul.

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Getting it right

Posted by gravisman on October 12, 2008

“They should FIRE Bernanke and Paulson, and have people like Peter [Schiff] on the helm of US economy.”

The above is a response I read to this video of Peter Schiff dispensing his usual free market based economic wisodom. I felt this worth a comment because it’s important to not simply recognize who is speaking with logic, but to get the whole picture right.

What’s wrong with that quote is the idea that someone should be “at the the helm of the US economy.” The logic that makes Peter Schiff’s words ring so true is based on markets doing what markets do: setting prices and exchanging goods based on supply and demand. The idea of free market by definition shuns leadership (dictatorship) by some individual or set of individuals.

So, while I see little wrong with firing Bernanke and Paulson, let’s remember to get it right – we don’t need Bernanke, Paulson, Peter Schiff, or anyone running the economy – markets and the players in those markets can handle themselves.

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