Right now, we tax work (income) and thrift (we tax saved earnings, and then we keep taxing it until it is all gone). We seek to make it hard to get rich by working. I think that the best incentive structure should be to tax consumption and wealth. I would eliminate the income tax, payroll tax, dividend tax, capital gains tax, death tax and the corporate income tax. I would replace them with a VAT and a wealth tax (above $X). The tax structure should favor social mobility and wealth creation, while taxing spending and wealth. I would also like to see the Federal government's take of the economy limited to a certain percentage, such as 17%.
QE3 directly reduces the federal debt by reducing the level held by the public. Every dollar of debt that the Fed buys is subtracted from the national debt.
The most dramatic example is the Great Depression. When it started, everyone was on gold and NGDP was falling as central banks deflated to maintain the gold value of their currencies. Every country on gold experienced severe deflation. Then, when everyone went off gold in the 1931-33 period, currencies were reflated, the price level rose, the real value of debt (which had been growing under deflation) declined sharply while the value of collateral (which had declined) rose, thus reversing the debt-deflation spiral. Nominal and real growth rebounded globally between 1933 and 1936. There was never a better time to buy stocks than on FDR's inauguration day in March, 1933.
If I told you that I would lend you $1 million for two years at a zero interest rate, and I guaranteed that the overall price level would rise by 10% over that period, you'd take the loan.
The Fed controls the size and growth rate of the nominal economy via the money supply. We will never see 4-5% real growth again unless we first have 6-7% nominal growth. That requires a tolerance for above-target inflation while we play catch-up. Economists came up with all sorts of plausible "structural" reasons to explain the collapse of the economy in the Depression. While they argued, FDR inflated the currency and caused a massive boom. No amount of micro supply-side tinkering can create real growth in the face of low nominal growth. To make an extreme example: if the Fed announced that it will start buying condos and houses without limit at their current appraisals, the economy would grow as the fed removed thousands of residences from the housing market. Ditto used cars or farmland or gold or anything that can be valued. The Fed's market power is unlimited because its liabilities are money backed by nothing.
I agree. Protectionism would benefit our unskilled workers, whom we are turning out by the millions. Since both parties are hostile to China, I don't understand why they can't pass the Schumer-Graham tariff bill.
Zimbabwe is one of the more recent of many historical examples that illustrate the ability of any central bank to create inflation. That's why is is foolish to say that US monetary policy "has lost its efficacy". The Fed can create any level of inflation that it chooses.
Don't Expect Miracles From The New Japanese Government [View article]
utah H, I would like to see the Federal government sized and composed as it was in 1914, before the progressives decided to "reinterpret" the Constitution. However, that includes a central bank, which is not a "progressive" institution but rather a capitalist one. Even countries with tiny governments, such as HK, need a monetary authority. The monetary authority must choose a policy, either an external anchor, a targeted rate of inflation, or something else. The market monetarist school, to which I belong, advocates that the monetary authority target either a rate of nominal growth or an ascending nominal growth level. There is no doubt that a central bank can successfully target a nominal GDP level or nominal GDP growth by controlling the money supply. It should be obvious that, whatever the desired rate of real growth, the targeted rate of nominal growth must be higher. For example, right now we might wish to see the US economy grow at 5% in real terms; that isn't going to happen as long as it continues growing at 4% in nominal terms. (This is something Bernanke understands, but which the ECB and the BoJ do not.) To be a libertarian or a conservative, it is not required that one desire a low rate of economic growth. Indeed, subpar growth creates unemployment and hardship which leads to class warfare and the passage of socialist legislation that hobbles the economy's potential growth rate (such as high taxes and "free" entitlements). Also, the only way that we can change the trajectory of our D/GDP ratio is to grow both nominal fiscal revenue and the size of the economy faster than the federal government can waste it. Low growth equals high deficits and an unsustainable debt burden. Herbert Hoover may have been a conservative, but he did nothing for the conservative cause in America. He caused the New Deal.
What An Abe Win Means For Japan And The USDJPY [View article]
Japan has not used the printing presses in a very long time. In this century, money growth has averaged around 2%, never reaching 4%. I will be very surprised to see the BoJ grow money fast enough to create a sustained 3% growth rate of NGDP. For a minute, yes. For a year, never. http://bit.ly/T8hczD
What An Abe Win Means For Japan And The USDJPY [View article]
Your conclusions are based on the assumption that it makes a difference which party is currently "in power" in Japan. It certainly has never made a difference in the past. Furthermore, the LDP has never been and will never be the party of change. In Japan, the only constant is stasis.
Cyprus: The Dog That Did Not Bite...Yet [View article]
I am very skeptical of the quality of the statistics published by Cyprus and Greece (among others). In my experience, when a borrower is under stress, it will falsify its statistics which is only revealed after the explosion. I am told by those in the know that Cypriot statistics are more reliable than Greece's, but I don't believe it. I am unclear on the role played by Eurostat in "auditing" national accounts in the eurozone, but I doubt that it has (or really could) guarantee the accuracy of Greek or Cyprus stats.
2013: The Year Of Printing Money [View article]
2013: The Year Of Printing Money [View article]
2013: The Year Of Printing Money [View article]
2013: The Year Of Printing Money [View article]
2013: The Year Of Printing Money [View article]
2013: The Year Of Printing Money [View article]
2013: The Year Of Printing Money [View article]
2013: The Year Of Printing Money [View article]
2013: The Year Of Printing Money [View article]
2013: The Year Of Printing Money [View article]
2013: The Year Of Printing Money [View article]
Don't Expect Miracles From The New Japanese Government [View article]
I would like to see the Federal government sized and composed as it was in 1914, before the progressives decided to "reinterpret" the Constitution. However, that includes a central bank, which is not a "progressive" institution but rather a capitalist one. Even countries with tiny governments, such as HK, need a monetary authority. The monetary authority must choose a policy, either an external anchor, a targeted rate of inflation, or something else. The market monetarist school, to which I belong, advocates that the monetary authority target either a rate of nominal growth or an ascending nominal growth level. There is no doubt that a central bank can successfully target a nominal GDP level or nominal GDP growth by controlling the money supply. It should be obvious that, whatever the desired rate of real growth, the targeted rate of nominal growth must be higher. For example, right now we might wish to see the US economy grow at 5% in real terms; that isn't going to happen as long as it continues growing at 4% in nominal terms. (This is something Bernanke understands, but which the ECB and the BoJ do not.)
To be a libertarian or a conservative, it is not required that one desire a low rate of economic growth. Indeed, subpar growth creates unemployment and hardship which leads to class warfare and the passage of socialist legislation that hobbles the economy's potential growth rate (such as high taxes and "free" entitlements). Also, the only way that we can change the trajectory of our D/GDP ratio is to grow both nominal fiscal revenue and the size of the economy faster than the federal government can waste it. Low growth equals high deficits and an unsustainable debt burden. Herbert Hoover may have been a conservative, but he did nothing for the conservative cause in America. He caused the New Deal.
What An Abe Win Means For Japan And The USDJPY [View article]
http://bit.ly/T8hczD
What An Abe Win Means For Japan And The USDJPY [View article]
Cyprus: The Dog That Did Not Bite...Yet [View article]