25 May 2016

How Governments Use Inflation to (Partially) Cover Deficits, Part 2

Lara-Murphy Show 6 Comments

The scintillating conclusion to our 2-part series at the Lara-Murphy Show.


Also, since I’m such a fair guy, let me point you guys to a critical comment that came in regarding an old blog post about the minimum wage. I thought this was a pretty good critique (though I still think making unskilled labor more expensive means that employers buy fewer hours of it).

6 Responses to “How Governments Use Inflation to (Partially) Cover Deficits, Part 2”

  1. Major.Freedom says:

    I wonder if any whistleblower in the centralized counterfeiting operation will in our lifetimes reveal all the unpublished inflation that goes on, financing who knows what that they don’t want the public to know about.

    We already learned of the $40 billion the NY Fed sent to Iraq to finance the reconstruction there, which was left of course to US interests.


  2. Matt says:

    FWIW, taking the Perry graph up to the present shows only an 11% gap as of 4/16, which is right in line with what it shows prior to the increases.

    The minimum wage is an awful policy, but Perry’s graph is not a bullet in our gun.

  3. Bitter clinger says:

    Milton Friedman wrote an article (op-ed?) a couple of years ago titled “Why Paper is Better than Gold”. I Googled for the article but could not find it. What he said was that if the public will tolerate 2% inflation every year and the increase in population and productivity is 2% every year; you can create, from nothing, 4% more money every year and have stable prices. As Dr. Murphy points out this is a tax on all holders of currency, domestic and foreign without any paperwork to fill out or reports to file! The problem as I see it is, “who gets the money?” Don’t you ever wonder why debt is a problem, when the opposite side of every coin of debt is engraved “someone’s savings or investment”? I mean, how can you have “too much” savings and investment? Am I nuts? L-K might argue that Federal Reserve Notes have “investment” engraved on the obverse but it is definitely NOT savings and this is the problem. In the 80’s, I wrote an article for Reason Magazine on the scam of the Federal Reserve, Virginia Postrel told me to “Get lost, we got all we can use”. (As you can see I am not a good writer and she was probably justified) The point I would like to make though, is that the octopus of banks and lending institutions that are attached to the Federal Reserve; not only skim the difference in interest rates between the money created by the Fed and the money they lend out; it skims the interest on EVERY dollar created since 1914. The total debt, public and private, that everyone talks about is a measure of the amount of money created since 1914 and every year the banksters get their share of all of it. Because I believe in a fiat currency (because of the money you can make for free), I believe the Fed should be part of the Treasury and just issue, as you say; “newly printed money”. It would print the difference between tax revenues and spending. There would be no national debt. The United States public (all right Government) would be the beneficiary of the created money and not the banksters. It would also, for your Keynesian friends, be counter-cyclic. If the economy goes into recession, tax revenues would fall and you would increase the amount of money in circulation, during boom times the tax revenues would go up and the growth of money supply would dwindle. You guys are smarter than I am so you can chew this up. I hope you can find the article, I may remember it incorrectly. Thank You.

    • guest says:

      “Because I believe in a fiat currency (because of the money you can make for free), I believe the Fed should be part of the Treasury and just issue, as you say; “newly printed money”.”

      Why the Greenbackers Are Wrong (AERC 2013)

      “A subset of the end-the-Fed crowd opposes the Fed for peripheral or entirely wrongheaded reasons…. Their other main complaints are (1) that the Fed is “privately owned” (the Fed’s problem evidently being that it isn’t socialistic enough), (2) that fiat money is just fine as long as it is issued by the people’s trusty representatives instead of by the Fed …”

      Gold Bugs and Anti-Gold Bugs

      “The only exceptions within the anti-gold special-interest group are the Greenbackers. They assume the following, and are willing to say so: The economic outcomes of policy decisions made by a congressional committee are superior for the nation to the decisions of millions of owners of gold coins, who seek their own interests.

      “But the Greenbackers refuse to admit that there is a second presumption: The decisions of this committee will be faithfully implemented under the authority of the Department of the Treasury, which is under the authority of the president, and whose employees are protected by civil-service rules against being fired.

      “Ultimately, this debate is between the logic of the free market as a social organization versus the logic of central planning. The battlefield is monetary theory and monetary policy.”

      Something to ponder: Why does your belief in fiat currency only work when *I’m* forced to use it? Can’t you just print to your heart’s content, since more paper apparently means more wealth, in your view?

  4. Andrew_FL says:

    The objection of Ponta is nicely answered by an analysis I did and linked to on a more recent post of yours.

    If you follow this comment thread, I have created a simple regression model with the “real” minimum wage (ie deflated using either the consumer price index or an index based on the gdp deflator, which I would argue makes more sense) and prime age unemployment to explain the youth unemployment rate. This effectively controls for the business cycle and the fact that “Unemployment for teens *always* rises at a higher rate than does general unemployment rate during and immediately after a recession. Every time.”

    Guess what? The minimum wage as part of the regression model improves the fit and has a positive coefficient. In english, there is a correlation between minimum wage hikes and youth unemployment increases.

    Also, this statement is wrong: “younger workers have jobs in industries which suffer more during recessions (retail, restaurants, other hospitality); quite simply, they work where jobs are most lost when the economy goes bad.” On the contrary, retail and hospitality are not harder hit by recessions than other industries. The hardest hit is typically durable goods manufacturing.

    • Andrew_FL says:

      BTW Bob I responded to him but the links I put in my comment sent it into moderation. When you dig it out, can you fix the unclosed hyperlink tag?

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