We keep hearing about the Federal Reserve “tapering” its quantitative easing exercise in money creation. But a tweet from the St. Louis Fed says: “adjusted monetary base rises by more than $65 billion over the past two weeks to $3.963 trillion.” The sum of currency in circulation plus deposits held by banks at the Federal Reserve, this measure of money supply stood at less than $900 billion before the financial crisis. What will happen to prices in the economy once banks start lending this money out to customers?
Did you get that? Our money supply increased from around $900 billion to almost $4 trillion in the last few years. This goes beyond tinkering—it has been and will continue to be hugely disruptive to our economy and standard of living.
In this article, I explain why, even if the revisionist empirical studies are accurate, it still does not follow that the proposed hike in the minimum wage will be a boon for low-skilled workers. I also argue that, because critics have raised many troubling concerns about these studies, we should not accept them at face value. I conclude that economists should maintain the standard view that employers have a downward-sloping demand for low-skilled labor and that raising the minimum wage will tend to destroy job opportunities for many of those whom advocates of the higher minimum wage wish to help.
"What if government and media looked at paper money the way they do at Bitcoin?"
World governments announced a plan today to allow citizens to anonymously carry parts of their wealth on their person and exchange it with others using small pieces of colorful paper printed with nationalistic and Masonic imagery along with numbers that purportedly represent the amount of wealth each piece of paper represents (if the paper is not a counterfeit). These pieces of paper are formally a “note” from each nation’s central bank, but they are also called “cash” by many - this is a technical matter that is too complex to cover in our basic primer; Suffice it to say, that it is representative of the complexity and user-unfriendliness of this new system….
In what will come as a surprise to generations who have grown up with calculators and computers, ‘bills’ only come in fixed denominations, requiring users to maintain a large number of these pieces of paper that must be aggregated to execute a transaction and then re-aggregated to ‘make change,’ a complex process of returning to the payee the excess of the payment using yet other bills. (Don’t worry if this sounds complex, we had trouble understanding it ourselves at first and it is certainly not ready for the average consumer in its current form.) …
To undertake the direction of the economic life of people with widely divergent ideals and values is to assume responsibilities which commit one to the use of force; it is to assume a position where the best intentions cannot prevent one from being forced to act in a way which to some of those affected must appear highly immoral. (244-5)
One has only to visualize the problems raised by economic planning of even an area such as western Europe to see that the moral bases for such an undertaking are completely lacking. Who imagines that there exist any common ideals of distributive justice such as will make the Norwegian fisherman consent to forego the prospect of economic improvement in order to help his Portuguese fellow, or the Dutch worker to pay more for his bicycle to help the Coventry mechanic, or the French peasant to pay more taxes to assist the industrialization of Italy? If most people are not willing to see the difficulty, this is mainly because, consciously or unconsciously, they assume that it will be they who will settle these questions for the others, and because they are convinced of their own capacity to do this justly and equitably. (243)
The administration thus acknowledges that its policy creates a perverse incentive and orders employers not to act upon it. But that can’t be enforced. A business will take into account all relevant factors, including the additional costs imposed by ObamaCare, in making decisions about hiring and firing, including whether to terminate employees for poor performance, sell a division, etc. In practice, the new rule is a ban—under threat of criminal liability—on acknowledging the perverse incentive. Call it OmertàCare, a government-imposed conspiracy of silence.
[God] said, “I need somebody in that Congress savvy enough to realize that farming means food, and food means nutrition, and nutrition means good things to voters, so farming means food stamps. Somebody to call to make that assistance bigger and forever, tame howls over soaring deficits, and plant the seeds of perpetual votes. Somebody to threaten to label anybody pushing for reform as rich, cruel and downright hateful of happy, cornfed children playing in hay lofts—and mean it.” So God made a Democratic Party.
God said, “I need somebody willing to spend five long years complaining about overspending, big government and special-interest giveaways. And get up and vote for $1 trillion in overspending, bigger government and special-interest giveaways—in the name of farmers. Then—when reminded of his reform promises—dry his eyes and say, ‘Maybe next year.’ I need somebody to fret about drought, wax about food security, and muse (in private) that heedless government shutdowns really do have consequences. Including pressuring parties to prove they can accomplish something by voting for 949-page spending extravaganzas that nobody has bothered to read. Somebody willing to put in 40 hours spinning excuses for abandoning his principles and then, pained from the camera lights, put in 70 hours more.” So God made Republicans. […]
Finally, God looked down on all he’d created and He said: “Now I need somebody who really will work hard. Somebody who’ll get up day in and day out to plow through traffic to work, come home to help the kids and make the dinner and do the laundry, and struggle with the bills, and get up to do it all over again.
"Somebody who will limit himself to dreaming about that Ram pickup truck he can’t afford—because the IRS bill is due, and because the government-inflated cost of groceries and gas sure do make things tight, and because his own small business, which he built with his own sweat, doesn’t qualify for any handouts. I need somebody to spend his life paying for this week’s farm extravaganza, somebody who Congress made sure had no damn choice in the matter.”
A good example of confused deregulation was the Gramm-Leach-Bliley Act of 1999, removing some barriers to what banks could do. It was heralded by conservatives at the time as free market reform and then blamed by liberals in 2008 as reckless deregulation. But both critics and defenders tried to defend and explain Gramm-Leach-Bliley outside of its context. Here’s the context. The 1933 law that created the FDIC was sponsored by Senators Glass & Steegall […]
In addition to creating the FDIC, Glass-Steagall also prohibited bank holding companies from owning other sorts of financial institutions. Basically, commercial banks couldn’t also be investment banks. In the event of the financial crisis of 2008, when liberals were blaming deregulation for our problems, most of the blame was placed on “the repeal of Glass-Steagall.” This was a reference to Gramm-Leach-Bliley, signed by President Clinton in 1999. But Gramm-Leach-Bliley did not repeal Glass-Steagall. If it had, it would have abolished the implicit bailout provided by the FDIC. But instead, it just removed the regulation that had tried to contain some of the moral hazard created by the FDIC. In other words, the market used to regulate banks; Glass-Steagall killed the market regulation and replaced it with government regulation; Gramm-Leach-Bliley killed the government regulation but didn’t replace it with anything.