This is a readable economics book that teaches you to look for secondary consequences of any policy. It closely follows libertarian thought while debunking economic fallacies that unfortunately are still promoted today. Highlights:
Machines, technological improvements, economies and efficiency do not throw men out of work. […] It is a misconception to think of the function or result of machines as primarily one of creating jobs. The real result of the machine is to increase production, to raise the standard of living, to increase economic welfare.
[…]
There is first of all a misunderstanding of what it is that has been causing prices to rise. The real cause is either a scarcity of goods or a surplus of money. Legal price ceilings cannot cure either.
[…]
The best way to raise wages, therefore, is to raise labor productivity. This can be done by many methods: by an increase in capital accumulation i.e., by an increase in the machines with which the workers are aided; by new inventions and improvements; by more efficient management on the part of employers; by more industriousness and efficiency on the part of workers; by better education and training. The more the individual worker produces, the more he increases the wealth of the whole community. The more he produces, the more his services are worth to consumers, and hence to employers. And the more he is worth to employers, the more he will be paid. Real wages come out of production, not out of [minimum wage laws].
[…]
The real cause for the tremendous increase in real wages in the last half century (especially in America) has been, to repeat, the accumulation of capital and the enormous technological advance made possible by it.
[…]
If profits are limited to a maximum of, say, 10 per cent or some similar figure, while the risk of losing one’s entire capital still exists, what is likely to be the effect on the profit incentive, and hence on employment and production?
[…]
Inflation itself is a form of taxation. It is perhaps the worst possible form, which usually bears hardest on those least able to pay.
You’ll also learn:
- How when the profit motive is lessened through unions, regulation, or price fixing, producers will choose to invest abroad.
- How tariffs hurt both the consumer and producer
- How keeping interest rates unnaturally low creates economic distortions
The book leaned dry and read like a textbook at times, but chapters are short and examples lively. You want to keep going because you know you’re reading something that will arm you against bad economics spouted by the media and politicians.
Overall, this is an economic red pill work that is logical and intuitive, ultimately advocating for capitalism with minimal government interference. It reminds you that economics is zero sum, that for anyone who benefits from a certain policy, someone else suffers, and that you must see both sides of the coin. Even though I took economics for a full year in college (macro and micro), this book gave me a better perspective of its real-world applications. Recommended.
Click here to download the PDF.
Read More: “Economics In One Lesson” on Amazon
Hazlitt, in particular this book, is a great place to start for Austrian Economic theory. I’d also recommend anything by Murray Rothbard (What has government done to our money?, etc.) or even The Road to Serfdom by Hayek. I learned more from these books than I did at university studying Economics.
I’ve always said if I was going to teach a course on econ, particularly at the high school level, this would be my first lesson:
http://en.wikipedia.org/wiki/Parable_of_the_broken_window
Nice write up, Roosh.
“It reminds you that economics is zero sum, that for anyone who benefits from a certain policy, someone else suffers, and that you must see both sides of the coin”
Not exactly, the hidden effect of an action needn’t necessarily be negative, in free exchange (capitalism) it is positive, if I buy your book, you gain my money, I lose it, but I gain knowledge.
However generally when the action is by a government, then hidden effect is negative. Eg welfare benefits the lazy, the hidden effect is it harms everyone who works.
I phrased it poorly.
I meant that in any economic decision, one party’s gain is another’s loss.
Not exactly, gain/loss are an expression of value and any austrian economist (including hazlitt) will tell you that value is _subjective_ to the parties involved. This is why central planning (i.e. outside agents interfering in a given trade) always fails. There are doubtless a momento or two in your life that you would want compensation far above the nominal market value for if i walked in to your house and set them on fire. A family photo album would be a great example of this.
Point being, that’s the beauty of unrestricted trade, its NOT zero sum. As we share, trade, interact and haggle in every moment of our lives in a way not interfered with by outsiders, we enrich ourselves and others.
This logic, coupled with being a humanist, is why I am an anarchist (of the capitalist variety.)
Some might say this clashes with being a masculinist/mra/pua whatever, but in fact it is in direct accord with it. A rejection of pathological altruism/totalitarian humanism demands a replacement set of values, a eudomanic, noble ethic that enriches all who are willing to play ball and shuns those who are not.
Humanity’s future, if it can have one, does not lie in a return to the desecrated and failed traditions of the past, the moribund culture that exists today or a cynical exploitation of “red pillers”. It lies in refusal tolerate anything less than excellence, and a desire for every human to develop into being worthy of the name human.
That’s no better a phrasing – it still implies that one party is being exploited by the other (which I don’t think is what you’re trying to say).
In a free economic decision, both sides exchange value – both win. I “lose” my money by buying your book, but I gain the knowledge the book contains and the enjoyment of the reading experience. You “lose” a copy of the book (metaphorically, it being an electronic rather than a physical copy) but gain the money I paid for it. The “loss” is only trivially present.
Thinking of economics in “zero sum” terms is poisonous, because it opens the door to marxian thinkers (like most politicians) who see any successful person or profitable business as a shameful exploiter from whom you need to be protected – the zero-sum thinking there being that they are only successful/profitable because they have poached from others what should be equal shares of a fixed pie.
non zero sumness is by definition enrichment. i’m confused as to your criticism.
Roosh may be refering to Pareto efficiency.
I am actually a die hard libertarian and i completely agree with you, but just because i like playing the contrarian here’s a question.
what would you say of all the work and technological progress and innovation the USG has created by funding and subsidising military, industrial and defense research (internet and web came out of applications of military technology to CERN, a global initiative by several governments to make the world’s largest particle accelerator)?
. this cost billions and would not have been possible without massive intergovernmental work (apple and google would never collab on such a level as governments can). The gigabit style internet can be attributed to innovations in optical fibre and programs as a result of initially military led research (up to date communications for modern war)
what about the stimulus of government spending on cold war tech and rocketry that led to NASA (the analytical systems, industrial and metallurgical processes that have come out of this, are some of the most valuable IP the United States has)
There are several key areas in research in physics, condensed matter, nuclear physics, electronics and engineering that are a result of ‘blue sky thinking’ i.e scientists given a huge budget for military tech, accidentally discovers or invents a tool to solve that problem that becomes way more valuable.
what about these sorts of positive effects of government intervention?
personally i am for a free market as far as possible, but our progression would be stunted immediately in areas that are not instantly designed from the outset to profit making (a ton of innovations come iteratively, not a one shot hit or miss type deal)
source: most of my colleagues work in research firms all over the world, including cern, defense companies, engineering etc. the tech they design is what’s led to 3G, 4G and the like
Absolutely. It’s so true just how critical government spending has been in terms of technological advances
I’m sure your tech research colleagues know all about Herbert Hoover’s strongly interventionist and heavy-handed legislation governing radio in 1927, right?
In case they don’t know much about it, I’ll help you out — it froze telecommunications technology at the level of development that existed in 1927.
The licensing scheme under the 1927 Act authorized the government to hand out radio bandwidth licenses. In only a few years, there existed technology to transmit (as we do now) on frequencies defined down to 5 or 6 decimal places, instead of only 1.
Look at the radio in your car, and notice how every radio station is not only defined to only one decimal place, but how the stations all take up two slots — there are no even-numbered radio stations. They all end in odd digits.
Had it not been for this licensing scheme, which completely took over ALL commercial use of radio technology, it would have been possible for many thousands of users of radio to utilize the technology, locally, much like the way the Internet would allow more direct-to-consumer communication 80 years later.
But the FCC is “needed” to prevent interference between stations, right?!
No. As early as 1940, frequency-hopping technology was invented, in part by Hedy Lamarr, aka the Most Beautiful Woman in the World (who was apparently also brilliantly intelligent). She and a partner developed the technology to prevent two users of frequencies to avoid interference, by moving around. Cell phones use this technology. She patented it, gave it to the US government for use in the military, and the US government sat on it, letting no one use it. That’s why the cell phone revolution occurred — the government decided arbitrarily to stop preventing it.
Even today — try starting a new cable TV company, see how far you get without government approval. Do you want cable TV without the Nature Channel or MTV? Tough shit. The government says you have to buy them too.
Or, how about the country’s electricity distribution network? It was created, and promptly heavily regulated, starting in the early 1900s. As you might observe, the same basic technology is still being used — centrally-produced AC power, distributed over massive wholesale lines, all at government-approved ways at government-approved rates.
Had it not been for the regulatory schemes in radio, TV or even electricity itself, 50 or 60 years ago we’d have seen the sort of revolutionary advancements we’re only beginning to see today, 80 years late.
The Internet could have been a reality in the 1960s. A freer market for telecommunications would have permitted it.
@Phinn
Enlightening post.
@anon1
> “what about the stimulus of government spending on cold war tech and rocketry”
I realize you’re playing Devil’s Advocate. But I hope you realize that “stimulus” spending has to come from somewhere. There’s always an opportunity cost.
@mark, yep i do. to my mind, the modern state functions no differently (in the science/tech sector) to the renaissance era when princes used to act as patrons to scientists, artists and engineers such as galileo and da vinci. except it was a lot easier then because science in and of itself was seen as a desireable commodity, something to show off against other principalities and nations. it was a lot more straightforward.
in my breakdown i’ve only highlighted the areas that were the exceptions, and not the millions and billions of dollars on wasted r&D that comes as no use.
an excellent analaogy for the power of the freemarket is the recent usage of GPU’s from graphics card manufacturers Nvidia and AMD in supercomputers and to perform highly strenuous calculations for specific problems. This would unlikely have not come about had it not been for the profitability in the videogame industry driving forward development of graphics chips.
@phinn you are correct in that modern day infrastructure and archaic licensing restrictions in the past have led to a complete hodge podge of quasi static systems that are no longer fit for purpose.
(ask any civil engineer what they’d like to do to improve buildings, roads, and transportation systems if they had an unlimited budget and no red tape. most of their ideas will come from the 70s. we’ve largely solved a great deal of problems but can’t implement them because of the fucked static nature of bureaucracy and licensing).
As i posited in the beginning of my comment, i am actually a die hard libertarian but i like to play the contrarian.
in some areas of science and tech (that are not short term profit making, but can lead to huge huge long term profitability), having government subsidies is akin to the power HBO has to make programming that doesn’t have to appeal to the basest common denominator (for ad revenue). because it relies on subscription money which is relatively fixed, they can afford to test out new ideas and programs and fail and succeed while being insulated from short termism. Game of thrones, breaking bad, boardwalk empire, mad men, sopranos, the wire etc all came out of not having to be accountable to profitability instantly.
this allows ridiculous leaps forward in specific areas of information technology and computing to occur (which is the future anyway. that and biogenetics).
it’s like being in the pocket of a dictator, as long as you pretend to show him a shiny missile every other month, he’s content to let you go wild on just about every interesting idea or invention you need to get the job done.
obviously what i said is deeply unfair and to the whole society fairly undesirable, but it does allow you to get a super competitive advantage in specific industries way before other countries do.
ultimately though, the sad thing is that money does not lie in the value of products and services any more.
it lies on creating and exploiting distortions and regulations in the free market for short term gain, at the expense of long term stability. (see the FED, fiat money, banking systems, just about every kind of crazy law you can imagine that keeps business in bed with government)
>>> “@phinn you are correct in that modern day infrastructure and archaic licensing restrictions in the past have led to a complete hodge podge of quasi static systems that are no longer fit for purpose.”
That’s a good way of putting it, but I would add that these restrictions were, at best, obsolete at the moment they were enacted. They never advanced anything.
All government licensing schemes and control systems are designed to benefit some group and harm others. Their proponents lie very well, selling these acts of legislation to the public by inventing some non-existent benefits, solving some non-existent problem, and either ignoring or actively concealing all sorts of very real harms.
The Radio Act licensing system is only one example, but I use it because it was enacted so long ago that no one alive today was around when it was debated. As a result, it has receded into the background of our daily lives today, and few people question it, or even notice it.
But those political decisions shaped our modern world, and not for the better. Cell phones and wi-fi are just radio applications, and they would have all developed much differently (and sooner) had it not been for a series of controls laid down in the 1920s and 30s.
Consider the magnitude of the same bad legislative philosophy and its effect on electricity production and distribution. It’s incalculable.
As for long-term and short-term profitability, I don’t think what you say is always true. Both economic strategies are viable, under certain conditions. That’s one of the features of a free market, including the market for technological development — it allows a widely heterogeneous array of producers to find a niche and coexist. Not all broadcasters need to have the same radio bandwidth, for example, but the governmental licensing scheme makes them have it anyway. Likewise, some innovators will be focused on long-term profitability, but others will see the advantage to immediate implementation.
I don’t believe you can predict how market actors will behave once governmental influence is removed. That dynamism is a feature, not a bug.
Peter Klein exploded the myth of government being crucial for technological innovation:
Interstate Highways, Radar, Tang: Does War Promote Technological Innovation?
Crazy as it may seem, Hazlitt used to be the economics writer for New York Times. Remember that next time you wonder how a rag so incompetent/biased/clueless still manages to be referred to as some kind of “Paper of record.” They weren’t always this bad.
“It reminds you that economics is zero sum, that for anyone who benefits from a certain policy, someone else suffers, and that you must see both sides of the coin”
Back to school Roosh. If economics were zero sum then there would be no such thing as value creation, economic growth or gains from trade.
Voluntary trade is not zero sum, but government is. Actually, government edicts are negative sum. They are always a net loss.
Voluntary trade only occurs when BOTH parties gain by the transaction. Otherwise, the transaction would never occur, since at least one party would be, at best, indifferent to trading, or actively opposed to it.
How do both parties gain? They each value the things in trade differently. Each values what he gets MORE than what he gives.
Government is not completely zero sum either guys, and taxes are taught in economics to be ok for business if they are predictable and reasonable.
It is hard to measure the more abstract services governments provide…like say the non-cost of war based on the global stability various Western militaries guarantee. The pooling of resources for common good projects such as the motorway/air/rail systems…universal education has always been accomplished by governments, etc.
These things are harder to quantify as benefits because the cost of not having them is a bill we never see.
Taxes are less disastrous when they are predictable, yes. The key to market success is predicting consumer preferences and production costs, so that you can identify the profit opportunities. Success in a government-controlled economy is a matter of being an insider, since (unless you influence “policy” through “lobbying”) predicting the government is impossible, since they make their decisions arbitrarily. Merely because less-volatile taxation is somewhat less harmful than more-volatile taxation doesn’t mean that taxation has no net cost.
Governments are the source of war, so you can’t count governments as a “non-cost” of war.
There is no “common good.” Everything the state does benefits actual, discrete people, to greater and lesser degrees, and harms others, to greater and lesser degrees. Slapping the label “common” on it is a way of avoiding any consideration of who benefits and who loses, which is the whole point of statist PR.
Education was more “universal” and effective in 1770 than it is now. Literacy is lower now. Government education is an unmitigated disaster. It’s day prison for young people, and a massive make-work project for government employees, especially women.
The things we will never see are the things that will never be built because the government took the resources necessary to create them. Bastiat described this as the “Seen and the Unseen” over 150 years ago.
“Voluntary trade only occurs when BOTH parties gain by the transaction. Otherwise, the transaction would never occur, since at least one party would be, at best, indifferent to trading, or actively opposed to it.”
sure, but third parties who aren’t a part of the transaction can be harmed. it’s called a negative externality, and every economist recognizes that it’s a shortcoming of market transactions.
“sure, but third parties who aren’t a part of the transaction can be harmed. it’s called a negative externality”
Smarter economists call that a “property rights violation.” If anyone’s behavior, whether part of a transaction or not, violates another person’s property, it should be prevented or remedied.
If the effect in question does not invade someone’s property (but, for example, third parties merely disapprove of it), then it’s not an externality at all, and thus not a problem.
If you want to cite a supposed externality, go ahead. Pollution? Yes — obvious property violation.
Driving the market price of X down (or up)? No — no one has a legitimate property right in the market price of something.
Yes, war is started by governments, and by in large war is the parent of national government…but if governments didn’t exist then people would form tribes for security, like they did in Iraq/Somalia/etc…which would be a form of government.
Hell, a corporation is a type of ‘government’ in that it pools it’s internal resources and uses them to raise the worth of the entire company; in fact a corporation is a mini-dictatorship or at least constitutional monarchy…which I have no problem with.
other points:
-There is a common good…if a giant asteroid never hits the Earth again…that is a ‘common good.’
-Also, how can you possibly say literacy rates were higher in the 18th Century? The rise of pervasive literacy, in most countries, has been a 19th and 20th Century phenomena propelled mostly by national governments (Canada had a 55% literacy rate in 1750’s…it wasn’t until the responsibility of education was taken away from the Church and given to the government that these numbers began to rise…a system that became exponential because of the large amounts of printing that was coming online at that time).
I’m all for capitalism, but I don’t understand, mostly American’s when they are so rabidly anti-government. I served in Iraq in 2006, trust me…you want a functioning government.
You go a little far to say economics is zero-sum. This is false; the evidence is the billions of voluntary transactions that occur every day.
What it teaches is that there are indirect consequences and second-order and higher effects, and opportunity costs are often not properly accounted for.
Unions ruined american industry- turned theBig Three into bankrupt pension funds with car-factory subsidiaries
There are plenty who argue that economics is not a zero-sum system. One approach to making that argument is that relationships themselves are valuable (“social capital”), and many forms of trade — at least, those that are not (or are minimally) exploitative — generate relationships that can improve the situation of both ends of the deal. There may be positive externalities resulting from this as well.
In any case, this book sounds like an interesting primer on capitalism from the quotes you show here.
All trades improve both ends of the deal, compared to where each party would each be without the trade. That’s why the parties trade — they expect a net improvement.
When (on any given occasion) one or both of them doesn’t experience that expected benefit, he/they stop making that trade and find something better.
You don’t have to rely on some kind of phantom “social capital” to identify the mutual benefit in voluntary trade. It’s baked right in to every transaction.
Unions, regulation and so on do affect economic efficiency, but in moderation they can protect consumers and employees from the negative side effects of that efficiency. The nature of the profit motive is such that businesses need to be kept honest…capitalism only works if it’s something approaching a level playing field, there are still winners and losers but the winners don’t get to rewrite the rulebook (and neither do the losers for that matter).
Free and open markets are the most level playing field there is. That’s why people work so hard to eliminate that market freedom via government — to make it uneven, to their advantage.
Consider that the short version of the history of government.
One must really be careful with this level playing field argument. Sure Everyone wants a level playing field, but should a team of 5 year old girls be playing against FC Barcelona? Maybe then the field shouldn’t be levelled…
Do Indeed look at the two sides of the coin. Tariffs for example are not terrible in certain contexts. In fact The US became the economy it is today because of its tariff use and subsidy to manufacturing back in the 1800’s. Thank Alexander Hamilton for not following free market ideology for the development of the US .
This is entirely false. Henry Clay’s American System descended from Hamilton’s form of nationalism and the system of railroads and canals developed proved to be one of the most useless and costly boondoggles in history.
One of the most striking examples is railroad cronies, subsidized by the mile, creating the most circuitous and irrational routes; and the government slaughtering the Indians on behalf of the railroad cronies.
Meanwhile, some brave free market entrepreneurs built economical and profitable railroads and negotiated with Indians for buyouts or agreements, like James J. Hill and the Great Northern Railway.
the rise in labor productivity over the last half century in the US has turned into zero increase in wages. it’s all gone to capital holders. austrian economics is largely a crock of shit and free-market theory is essentially a compendium of the ground-reality-ignorant “pretty lies” we constantly hate on SWPLs and feminists for pushing. scylla, meet charybdis.
austrian economics predicted said wealth trend due to corporatism. the rest of your post is name calling.
Karl Marx did the same in the XIX century with respect the Capitalism, but guessing the future does not make your solutions valid…..
@ Sr. Pj, very good point.
“austrian economics is largely a crock of shit and free-market theory is essentially a compendium of the ground-reality-ignorant “pretty lies” we constantly hate on SWPLs and feminists for pushing.”
Examples? Austrian Economists haven’t really held any position of authority in 80+ years. Keynsianism has primarily been the order of the day in the West which has led to the destruction of sound money and creation of fiat currencies. Deficit spending and free lunches for all. Keynes basically told governments what they wanted to hear: that more government spending is always the answer. This is why the US has done nothing but borrow and spend since the economic downturn. Borrow and spend policies create distortions in the marketplace and shift resources from good investment to bad investment. Is it any coincidence that the areas which are least free market and most bureaucratic (health care, education) have seen the largest rates of inflation relative to the CPI?
Austrian theory basically teaches that savings and investment are important for growth and that the piper always will get paid. I wouldn’t call those “pretty lies”.
Hell, austrian economics has never really been in power
“Keynes basically told governments what they wanted to hear: that more government spending is always the answer. ”
Wrong, Keynes said: create a deficit during recessions, a surplus during booms. Unfortunately, that last part is hard to do, since politicians look at things in the short-tem (elections are always around the corner) and what better way to appease your constituents than to throw some of that surplus money their way in forms of earmarks.
Don’t blame Keynes for the government’s mistakes. His theory is sound and has been proven to work in numerous previous recessions.
Moving this to the top of my reading list. Economics is going to be one of my (four) majors at university from March, so this will come in handy.
It really won’t, you’ll just end up arguing with Keynesian economics ‘professors’ who feed you bullshit.
You’ll find you have two education streams: one where you spend a minimum of time ensuring you can pass your economics subjects (i stopped going to economics lectures, didn’t hurt me one bit), and one where you actually learn that economics is simply the aggregation of human behaviour and the more complex a theory the more wrong it is.
Economics is a social field, and the more they treat it like a hard science the worse it gets.
“Economics is a social field, and the more they treat it like a hard science the worse it gets.”
+1
Pete is absolutely right. Pdog, There are only a handful of universities in the US that would welcome discussion of Austrian theory. It’s 90% big government, Keynesian crap on most campuses.
It would be like trying to discuss manosphere ideas in a Women’s studies class. Don’t even bother.
Unfortunately if you study economics in the university you will have to spend more time outside the classroom teaching yourself the actual principles of economics and forgetting the pseudo-math they will teach you.
So many comments so quickly? Did everyone read the book?
Ok. I’ll say that based on the quotes, I’m about 70% /30% agree/disagree.
The problem is much of this thinking is old-fashioned and theoretical, and doesn’t account for the destruction of economies by governments through uncontrolled deficit spending, which necessarily siphon away wealth and impoverish producers — regardless of the level of education, training, and productivity (which in and of itself is measured in constantly inflating dollars–a changing yardstick).
Here’s the fundamental economic issue of the 21st century that must be dealt with an intractable situation where practically every government in the world has enslaved their respective populations by BORROWING MONEY (note: not printing their own currencies) and obligating their citizens to repay monies that their so-called leaders obligated them to repay WITH INTEREST.
The problem is the exponential compounding of said interest and the hard-cold fact that no one on the planet — and I mean NO ONE, can formulate a plan for even the greatest economy on earth – America’s — to deal with it’s debt obligations.
We’re have an inconceivably large interest-only debt to the privately owned Federal Reserve and unfunded liabilities of an estimated $85 Trillion above and beyond that, for a staggering number of near $100 TRILLION DOLLARS.
If you want to talk about theory, then given the number of individual tax payers in the system, each one would have to stroke a check for nearly ONE MILLION DOLLARS to handle that kind of debt. And, the gubers guberment just keeps adding on to that number.
If you think the wealthy and big corporations are going to help with that bill, think again! It’s their refusal to pay much of any tax combined with guberment’s constant need to spend money that got us here and will just continue to destroy what’s left of our economy.
Just to put things in perspective…
Official Federal Debt: $16,432,631,489,854.70 (just looked it up)
Walmart Profits 2012: $119,950,000,000
Apple Profits 2012: $ 41,740,000,000
——————————————————-
Walmart+Apple profits $161,690,000,000
So, at 2012 revenue and profits, it would take WalMart and Apple COMBINED over 102 YEARS just to tackle the current national debt. And, that wouldn’t even deal with the $85 Trillion of unfunded liabilities (Nail Furgeson actually has this number around $238 Trillion, but who’s counting anymore).
Want to look at this this way, let’s take the American GDP at $16 Trillion and divide that into the current debt and unfunded liabilities. If every man, woman and child, every corporation and wealth producing entity in this country diverted it’s production to the national debt, it would take over a year to extinguish the current debt (assuming a balanced Federal budget HA) and over 6 years to cover the unfunded liabilities @ $85 Trillion. Now, if the number is closer to the $238 Trillion that the Nail Ferguson estimates, then you’d have to divert the entire economic output of the US for nearly SIXTEEN YEARS to cover that bill. How would that go over as an “austerity” program here?
Now, that’s just the US Federal guberment. You’re state, county, local gumerment and just about every quasi governmental agency doesn’t seem to be able to live within its means, and deficit spends too. They’re racking up trillions in debt though muni bonds and other subsidized and insured loans programs. I’m not even going to bother looking up those number.
THEN, take this situation and start adding up the debts and interest payments of all the debtor nations on earth (most are) and you’ll understand the utter hopelessness of the situation.
Congress squabbles over miniscule measure to manage the INTEREST PAYMENT on the debt through tax and economic policies, not the actual reduction of debt principal itself. It’s like a credit card junkie just trying to figure out how to make their next interest-only minimum payment by getting a credit limit extension.
These are the realities that are our economy. If you have the numbers, simple math tell you that there’s a day of reckoning coming that no man, or institution of man can withstand. There will, and must be, a global default of debts and restructure of monetary systems. Anything short of that is just dealing with nice theories that keep the mind occupied, but little else.
Totally agree, Prepman.
It’s always frustrating to watch Ron Paul listen to a couple of dolt Beltway-types blathering on about whether some federal program should cost $110 billion or $120 billion, when they don’t even understand how the monetary system works in the first place.
People talking about economics without grasping the monetary system is like people opining about cars without knowing what roads are.
Wrong…people look at the current debt ‘crisis’ with the wrong mentality. Sure, if you’re a normal person and you owe way more money than you can ever pay back, you’re done for.
The US government on the other hand, CAN PRINT ITS OWN MONEY. What person do you know of that can pay his debt with money he printed himself?
Read this:
http://www.forbes.com/sites/johntharvey/2012/09/10/impossible-to-default/
However I do agree that state, city and municipal debt is an issue (simply because those entitities don’t owe debt in a currency they print themselves)…I would read Boomerang by Michael Lewis. He describes how and why certain munnis got so much debt and how some of them are simply defaulting on them now. Most of the debt is pensions etc, so public workers (who in these cases get way too much pension money) get the short end of the stick.
But it does not spell economic doom. It simply means that a retired policeman will perhaps get $20k in pension instead of $80k. That’s really it.
…which would be great. one of the worst things the retiring generations are doing to the young, albeit inadvertently, is sticking them with the accumulated bills of running defined benefit public pensions rather than defined contribution plans – which should go over like a lead balloon here given the economic tenor of this group.
“The US government on the other hand, CAN PRINT ITS OWN MONEY. What person do you know of that can pay his debt with money he printed himself?”
How absurd does that sound? That wealth can be created by printing more pieces of paper is insane. The only reason the US gets away with this is because they are still the world’s reserve currency. All fiat currencies eventually return to their intrinsic value, which is zero.
Eventually, there will not be a buyer of US debt. Could be in 5 years, 10 years, or 50 years, i don’t know. But that is an unsustainable path and poor policy.
Sorry, you’re just dead wrong. And I’ll prove it in one question…
IF the Federal Government can PRINT its own money, then why do you hear anything in the news about Congress having to RAISE THE DEBT CEILING?
What? Debt Ceiling? I though the government can print its own money. But wait, printing money is not debt, it’s just a transaction. As you say, if I could print my own money, I’d simply do so to pay off my credit cards each month, and buy anything and everything simply by loading up Microsoft Word and printing some more currency. But I can’t. And the Federal guberment doesn’t. It borrows, and it borrows big!
The problem is even though the congress is granted the authority to coin money, US Constitution Article 1 Section 8 and control the value thereof, it doesn’t. It has an unconscionable arrangement with the Federal RESERVE to BORROW MONEY as well as to sell sovereign debt instruments to investors and foreign nations in various Treasury issues. Why would the guberment borrow money from anyone if they truly could print it?
They don’t because they sold-out Amercia’s financial sovereignty to others long ago through various deals and pieces of legislation that now obligate us to the system of DEBT that we’re in today. This is not conspiracy theory. This is FACT.
So, while economic theory may be of some lively discussion with those who are “enlightened” to the various schools of thought and mathematical models, the simple math is crushes all and takes the wind out of your sails anytime you want to pontificate the virtues of one view of economic understanding.
Now, the nation debit is either a real DEBT, that demands repayment at some point in time, or it’s a fictional political football designed to give congress and the political parties something to squabble about — a mere construct of actual economic practice.
Of course, there is the reality that the debit is an actual interest-only loan, which Congress must battle to balance revenue collections (taxes, fees, tariffs, etc) with the interest payment on the national debt. That figure, if you’re wondering was $133,728,304,681 for Federal fiscal year 2012. That’s on Federal Direct revenues of about 2.4 Trillion, or about 5.6% of revenues. Keep in mind, the operation of the Federal government and defense are paid out of that 2.4 Trillion. Problem is that in FY 2012, the *enacted* Federal budget was 3.8 Trillion, leaving a DEFICIT of roughly 1.1 TRILLION. However, Congress, always seizing the opportunity to spend more, enacted legislation to allow a 1.3 TRILLION deficit for FY 2012.
The reality of economic theory is that given a fixed and predictably increasing GDP and all privately held assets, inflating the money supply just means more dollars to assign value to the same number of assets. Americans may add an estimated 16Trillion in value (GDP), but congress immediately sponges up 1.3 Trillion in deficits along. Then, there’s the outstanding issues of existing unpaid debit, interest on the debt, and unfunded liabilities.
Bottom line, I don’t think any schools of economics, Autrians included, have built models showing the devastating affects of such economic inversions. However, we have plenty of 20th century history that serves as case studies for what can, and must happen when governments perpetuate their spending through the ponzi scheme of ever increasing deficits and debts ad infinitum.
Now, as far as actual physical printing of bills and coinage, the US mint does so with the permission and under the direct control of the Federal Reserve. Congress does not direct the mint what to mint or how much. Maybe that’s a source of confusion here that I hope to clarify.
Prepman, the debt ceiling is a political sideshow and unrelated to printing money.
Parth, being a sovereign that can print money does not eliminate the risk of default. Those that believe otherwise have their heads too far into abstract mathematical/accounting theory and do not understand the real world. There are two broad reasons that default can still occur:
1) It can be a political decision. The value of a currency is solely based on trust, and excess printing will eventually destroy trust in a currency and the currency itself. Therefore it may cause less damage to default than to print. Russia in the 1990’s is a good case study; LTCM operated on models that saw Russia’s default risk as zero and it blew them up.
2) With the right debt structure you can still be caught in a position where default is inevitable, even after printing begins. The Japanese situation is instructive;if they achieve their 2% inflation target it will destroy their bond market and the yen. Printing will be totally ineffective.
You cannot print indefinitely with no adverse effect. This has been true as far back as the Romans who devalued their currency to pay for war, and it eventually collapsed (yeah…history tends to rhyme).
Sorry, it’s
http://www.silverdoctors.com/niall-ferguson-us-unfunded-liabilities-top-238-trillion/
All modern economic theory, in my opinion, is at best half the story. At best.
This is because they usually hide the nature of CURRENCY. All the talk of goods and services is fine, but, as Ron Paul says, money is 50% of every single transaction!
In short, the central banks (here in the U.S., it’s the Federal Reserve) puts the governments in debt which is LITERALLY impossible for them to pay back because their debt exceeds the money supply. But to mistakenly repay their debt to the Fed, the government actually borrows more money from the Fed to pay the Fed back! This new load from the Fed also has interest, which compounds….etc.
What does all this mean for the common man? First, higher taxes, as the government also increases taxation to try and repay the Fed (and other creditors). Secondly, inflation, as the Federal Reserve then injects into the economy nine-times the amount of capital that they just loaned the government. Finally, debt, as the money that the Fed injects into the economy is injected by way of mortgages which are, of course, debt.
And, of course, all of this was arranged and is controlled by Jews.
“I care not which puppet is placed upon the throne of England to rule the Empire on which the sun never sets. The man who controls Britain’s money supply controls the British Empire. And I control the British money supply.”
-Nathan Rothschild
So please, Roosh, don’t fall for pop economics silliness and half-truths. You must understand central banking to understand economics. Check out the great documentary, ‘The Secret of Oz’ for free on YouTube to understand more.
Lol this is ridiculous. The Secret of Oz is nothing more than a silly conspiracy theory movie.
As for the Federal Reserve…it returns all its profit to the government:
http://www.federalreserveeducation.org/faq/topics/fed_basics.cfm#4
I haven’t seen the Oz movie, and I’m not much up on my Jew theory, but he’s right about one thing — the existence of the Federal Reserve is a crime.
The fact that it nominally returns its profit to the Treasury is a meaningless smokescreen. Who owns the Fed? Private banks. The Fed is just the mouthpiece for the banking cartel. Do the member banks return any of their profits to the Treasury for the privilege of being able to operate inside a protectionist cartel system? No.
All the nitpicking here and there about wages and free markets and taxes means nothing as long as the government’s bankers control money itself.
Don’t be seduced by the pretty lies of the Greenbackers:
Why the Greenbackers Are Wrong
“Why the Greenbackers are Wrong” has very poor arguments. The Fed is indeed a private institution.
That is actually a very blue pill book. You only told us what society dictates us to believe.
The only books that I know of that really explains the core of present day economics are written by
Ha-Joon Chang.
Thank you for the recommendation. I am definitely reading his stuff.
hmm, lot of biting and scratching and hair pulling here. I’ll have a read of this.
“Economics is zero sum”? That’s got to be the most retarded phrase I’ve read from you.
So no matter what we do our combined “worth” on some (relevant) meter of economics remains static… Really now.
Business schools and schools of economics brainwash students with lousy theories that only benefit the financial/industrial and political elites.
Neoliberalism, structured products and humans as natural born killers competing for limited resources are nothing but trashy theories.
I prefer Thomas Sowell’s “Basic Economics.” His interviews on youtube are also very informative.