May
27
The economy works the way Adam Smith, David Ricardo, J.B. Say and Josef Schumpeter said it does. Private enterprises generate profit by allocating resources the way consumers want – the price of the resources is driven by other uses, thus if you can generate a greater profit from one use than from another, that means the consumers, in the aggregate, want them put to that use.
Profits tell producers what to produce. They tell investors where to invest capital. Reinvestment of profits is the most efficient way to fuel growth / wealth creation. The more you tax profits, the less reinvestment, the less ‘natural’ growth, the more the Fed, politically, must fuel growth artificially and temporarily via monetary means, ultimately producing inflation (1930s-1970s).
Tax cuts allow the economy to reinvest its own earnings and grow naturally, allowing the Fed to focus solely on inflation and maintain stable prices, thus creating long expansions (1980s-Today).
Gotta be the Lib quote of the week – “who the heck is Josef Schumpeter” – - – - while posting an opinion on economics…… Kind of like spouting off about baseball and then asking “who the hell is George Brett?”
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Comments
7 Responses to “Inflation, Taxes, the Economy and the Fed – For Dummies?”
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Though no question was posed, your analysis is spot on.
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Exactly. Liberals hate that because it leaves them no room for vote controlling power.
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Who the heck is Josef Schumpeter?
Better read old good “Das Kapital” by Karl Marx.
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Did Bush enact tax cuts so that we can afford the increase in gas prices? Please enlighten me economics major I am high and do not want to agitate my brain cells.
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Abolish the federal reserve!
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Unfortunately, it all assumes that the wisdom of the individual consumer is supreme.
One of the reasons we have governments is to enforce controls that individuals cannot – we have police because not everybody will play by the rules, etc.
Similarly, since not everbody is playing with the same amount of money, different people have different levels of influence in the model you describe – and can “bully” in ways that the market WILL NOT prohibit.
Raw capitalism, though extremely efficient, is cruel.
Pure socialism is unimplementable – mostly because it lacks reasonable incentives for productivity. This is why workable human societies fall somewhere inbetween.
Here’s the purest example: The elderly generally have less resources and produce less – do we put them out on the ice flow?
The pure capitalist model says “No, individuals will step up to the plate to take care of them if it is the right thing to do.”
However, those individuals are getting fewer and fewer as more and more of one’s wage goes to food, housing, energy and most of all medicine.
The model above is an extremely efficient economic model and wholly inadequate for human beings.
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WRONG!!! Capital or money is created by banks for the government. The federal reserve bank is not a government institution. You have less purchasing power now than you ever had before. Inflation is a product of greedy banks and a complacent government, it should not exist on the level it does. Read article 1 of the constitution, paper money in itslef is illegal!!