Category Archives

Archive of posts published in the category: Economics

Endless Tax Wars

Our biggest challenge is an endless appetite for government spending and an unwillingness and inability to raise taxes enough to support it. The idea that infinite spending can be supported by a small percentage of taxpayer defies basic math and principles of human action. This has caused record deficits and a belief that deficits do not matter and that tradeoffs are no longer required.

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We Have Run Out of Other People’s Money

Economist Greg George, PhD, noted in this environment that the problem with the states in the most critical condition before the Covid shock is not that they are too big to fail but that they are too big to save. We are being forced to face limits we have long ignored.

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The Opposite of Stock Repurchases

While we need to be concerned about the financial condition of essential industries, we should not lose sight of the need to be concerned with the financial condition of the nation they want to bail them out.

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An Addiction to Low Interest Rates

It seems that this can go on indefinitely because we cannot envision the central banks losing control of interest rates, but absence of evidence is not evidence of absence. Believers in Modern Monetary Theory mistake this trend for a true principle. Central banks will remain active in controlling interest rates because the debt is so large that any spike in interest rates would be disastrous. We are stimulating a zombie economy reliant on low interest rates provided by a central government even more dependent on low interest rates.

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The Paradox of Capitalism

Walter Williams properly noted that socialism works if you know everybody’s name; in small family and tribal units.  It is poorly suited to the dispersed knowledge that is the glue of an integrated complex world.  Capitalism is efficient but contrary to our biological nature.  It is no surprise that the growth of tribalism in politics is accompanied by anti-capitalist rhetoric. Capitalism, like democracy, depends on values that may be contrary to human nature, while serving the betterment of mankind in our complex world.

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Economic Growth and Inequality

The passion for equality and social justice often obscures the best way to achieve it. This is the epitome of virtue signaling; policies and results matter more than intent,

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Moral Agency

“The problem for Warren (who should know better) and others like her (who often don’t) is that there is a lot more juice in the moralistic account of economic problems than in the economic account of economic problems. To make things worse, the moralistic account offered by Senator Warren is untrue. Americans are not incapable of being anything other than passive victims of forces beyond their control. “

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Why Has Inflation Not Followed Our Debt?

But these explanations leave me uneasy. Without the pain of excessive government debt is there ever an end to it? It seems doubtful that scarcity has been erased from economic reality. The absence of short-term firewalls has historically led to large reconciliations, and it just seems immoral to spend more that you can pay for. In 50 years gold has risen from $35 to $1517.99 an ounce (1/1/20), does anybody care? The dollar is strong, and the American economy is performing better than any other in the world, even if that only provides a low bar.

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A Greater Display of Democracy

When activists complain of markets failing to serve our needs, they often are just unwilling to pay the market price and are seeking subsidies at someone else’s expense.  Progressives and socialists who insist on government control while speaking in terms of greater democracy are contradicting themselves; the market place properly regulated is the greatest display of democracy.

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Public Choice Theory

“From public choice theory, we also know that government actors have an incentive to pursue shortsighted policies that create highly visible benefits to voters now and impose uncertain costs at some point in the future.”

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A Want of Modesty

“To the contrary, it’s because they don’t believe politicians recalibrating the tax code in the name of the common good will bring about the moral economy. It’s because they don’t believe technicians redirecting capital investment will work, or that it can be had with no costs or unintended consequences. Above all, it’s because they believe that trusting Washington to give us a new and improved capitalism by repurposing private companies to serve the priorities of the government rather than those of their owners requires a faith far greater than any ever demanded by the Lord.”

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The New York Time’s Deceptive Reporting

“Those of you with $1,001 in savings worth have more in the bank than the great majority of all Americans. That is not because Bill Gates and you hoovered all the money up — it is because a great many Americans do not save very much.”

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Unfettered Government is the Greater Threat

Capitalism works best when knowledge and power meet.  Government is power without knowledge; regulation strips power from knowledge. It is suspicious when the answer to unfettered capitalism which does not exist is  unfettered government which is the greater problem.  It is hard to conceive of distant parties with no skin in the game making wiser decisions than people who have to face the consequences of their choices.  The problem is political actors who want to dispense benefits without paying for them.

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Bastardizing Capitalism

Like all ideologies capitalism evolves with experience and adjusts to failures and social evolution.  It never achieves perfection, but its endurance indicates a strength that competing ideologies lack.  We can learn much from the ones that failed, though it seems every generation is cursed to try them again.  The ones that succeed are subject to be taken for granted.  It is the job of the educational institutions to transfer the understanding of our critical institutions, and their failure is crippling.

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Is Inequality a Problem?

Relative poverty is a very different problem from absolute poverty.  If you were sitting in a room with a 100 executives making a six figure income and Bill Gates walked in, the inequality would skyrocket.  Is that a problem?

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Peter’s Wall

When you rob Peter to pay Paul you can count on Paul’s approval, but you can also count on Peter moving to another more friendly place.  When you try to build a wall to keep Peter in, you also discourage Peters from moving here, and you encourage young and enterprising Peters to move away BEFORE they become wealthy enough to be worth robbing.

Warren’s policy is as destructive of our long term financial health as any policy we can imagine. 

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Elizabeth Warren’s Wall

Warren uses ‘rich people’ as a scapegoat in the same way the classical bigots of history used religious and ethnic  vulnerable minorities and the ‘others’.  It is a form of intellectual bigotry and is clouded in the same lethal combination of ignorance and dishonesty.

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The Morality Tax

“Because Sweden is well-governed, it treats its tax regime as a question of revenue rather than a question of so-called social justice…”

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Another Failed God

“the worst forms of tyranny very much include majoritarian tyranny. One might think that the Trump presidency would cause progressives to think twice about what William F. Buckley Jr. dismissed as “the authority of political truths arrived at yesterday at the voting booth.”

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A Financial Warning Shot

The bailout of the overnight repo market by the NY Fed has raised a lot of questions. Why was the financial market unable to respond without Fed help? What caused such an unpredictable surge in demand that caused rates to double overnight? Such conditions are ripe for theories and I have mine.

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