Ask a D.C. insider what’s the best way to solve the debt crisis. Nine times out of ten, they’ll recommend taking on more debt. That’s how things operate in the Potomac swamp. Up is down, right is left, digging yourself into more debt is the best way to get out of it. But it wasn’t always like this. In fact, there used to be common sense when it came to the economy. So where did it all go wrong?
Politicians talk about the uninsured. Special interests argue on behalf of those with pre-existing conditions. But why is no one wondering how doctors are affected by the new law? They’re the ones on the frontlines dealing directly with new patients, as well as the red tape that makes bureaucracies go round.
Politicians proclaim the benefits of small business while on the campaign trail. But when they meet in the seedy halls of Congress, they have no problem doing whatever they can to stifle, regulate, and subdue their progress. Instead of siding with entrepreneurs, these politicians often side with political allies and cronies that helped put them into office.
Just because you’re retired doesn’t mean you have to stop working. Especially now that you have all the time in the world to do what you really want. Entrepreneurs don’t only come out of Silicon Valley. They come from all walks of life, from all different ages. If you’re retired and want to stay active while you relax, then find out the steps you need to take in order to start, manage, and grow your next small business.
Austrian economics does more than tell you what happens when the government disturbs market forces. In the hands of knowledgeable investors and entrepreneurs, it can tell you exactly what to expect from the market. Market behavior depends on how people behave. And how people behave is central to the Austrian perspective.
The U.S. dollar has been the world's reserve currency for almost a century, and already there are signs it may be in decline. But that doesn't mean it's not still valuable. On the contrary... As Chris Mayer explains, there are many reasons the U.S. dollar will remain relevant on the world stage for years to come. Read on...
World War II might have dragged the country out of the Great Depression, but it did so at a great price. Central planning took center stage, and politicans and bureaucrats suddenly knew what was best for America, the economy, and your life. On top of that, they replaced the free market with a new economic system… Creditism.
If you’re good at something should you be penalized so others have a chance at success? Should award winning actors and actresses be barred from future Oscar ceremonies to give other men and women the chance to succeed? Success should always be rewarded and encouraged. But what happens when you have a government that wants to even the playing field and take away the spoils of success. Gregory Bresiger finds out...
Practical people often pooh-pooh fiction reading as a time wasting dalliance, dominated by a Marxist coloring of the world. However, fiction readers were given a scientific reason recently for spending hours absorbing fanciful figments of someone’s imagination.
Argentina is suffering the ravages of government debasement of the currency -- i.e., inflation, the process by which government pays for its ever-increasing debts and bills by simply printing more paper currency. The expanded money supply results in a lower value of everyone’s money, which is reflected in the rising prices of the things that money buys.
When government expansion is allowed to continue unabated or when it casts a heavy regulatory shadow on America’s entrepreneurial spirit, the freedoms that we’ve come to know, and perhaps take for granted, slowly begin to slip away.
Its acceptance is as widespread as its justification is important, for it provides the rationale for the Federal Reserve’s unprecedented monetary expansion since 2008. While critics may dispute the wealth effect’s magnitude, few have challenged its conceptual soundness. Such is the purpose of this article. The wealth effect is but a mantra without merit.
Baron Rothschild, the famous French financier, was once heard to say that he knew of only two men who really understood money -- an obscure clerk in the Bank of France and one of the directors of the Bank of England. “Unfortunately,” he added, “they disagree.”
The new reality of Obamacare’s tax credits has left finance reporters to pen articles warning readers to “take care” when considering a tax credit and providing strategies for how best to “protect yourself.” So what do finance reporters know that the White House doesn’t?
Nihilo ex nihilo fit. Out of nothing, nothing comes. First put forward by ancient Greek philosopher Parmenides in the fifth century B.C., Thomas Aquinas and St. Augustine later used this axiom to prove that the universe needed a “first mover” to get things going. Even if the whole thing began with some kind of “Big Bang” moment, it still needed a banger to bang it. Who? God, of course.
Economic theories don’t lend themselves to laboratory testing, so the work of a national appraisal firm is especially enlightening. A new study lends support to the Austrian business cycle theory, which says that the less government is involved, the faster a market will recover.
What positive steps can we take? The energy that is now expended by well intentioned, freedom-seeking individuals on the destructive course of politics can be turned into powerful steps that will have a positive effect on the future. All are moral, right and just. None require aggressing. Consider the following...
The Affordable Care Act creates a new health insurance marketplace (the exchange). But because of the great uncertainty about what buyers will enter the market and who will buy what product, the law creates three vehicles to reduce insurance company risk.
Politicians and bureaucrats are notorious for manufacturing euphemisms -- clever but deceptive substitutes for what they really mean but don’t want to admit. That’s how the phrase “revenue enhancement” entered the vocabulary. Some of our courageous friends in government couldn’t bring themselves to say “tax hike.”
It’s easy to be negative about the U.S. economy these days. Find a glint of silver, and folks come running to point out all of the dark clouds looming about. This, of course, is what we got last week when the monthly jobs report was released from the U.S. Department of Labor (DOL). Folks pooh-poohed the number of jobs and whining that they’re not enough or that it’s less than a bunch of economists thought that it might be. But you know what? Stuff ’em.
Facts are easy. You can check facts. What supporters of the Affordable Care Act are doing, on the other hand, transcends factual bungling. It’s far more advanced: a warping of reality so debauched it looks like something out of a tale by H.P. Lovecraft.
The east coast and parts of the southern U.S. were to varying degrees paralyzed by blizzards a few weeks ago. The snow as expected rendered the roads treacherous, and in anticipation of slick streets, shoppers flocked to the grocery stores in advance.The rush into grocery stores, and its aftermath, offers worthwhile lessons in economics.First up, […]
The highest form of charity, argued the 12th-century Jewish philosopher Maimonides, is when the help given enables the receiver to become self-sufficient.But our systems of state charity — aka welfare — have too frequently had the opposite effect: They have actually created dependency. It is time to rethink the way we help people.I’m going to […]
Last year was quite the year for Bitcoin. We’ve seen exponential growth in Bitcoin’s exchange rate and extensive coverage in the media. Another phenomenon we have witnessed is the proliferation of alternative cryptocurrencies, five of which we’ve provided below.What all of these cryptocurrencies have in common is that they rely on a decentralized network to […]
President Obama crowed in his State of the Union speech about the economy, even mentioning “a rebounding housing market.” Maybe he was referring to friends in high places, like the seller of Penthouse One in New York, which just closed for $50.9 million, all cash. Millions of mere-mortal homeowners likely wanted to throw something at […]
The nonpartisan Congressional Budget Office is acting in a bipartisan way to cover up the biggest single threat to the bipartisan political alliance that is stripping America of its wealth: the United States Congress.There is no question that the following policy is bipartisan. Democrats and Republicans in Congress are completely agreed that the following information […]
Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the HealthCare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor supply issues. Given the mounting difficulties with and growing concerns about the […]
In 2001, President Bush demanded that Americans immediately go out and spend, racking up more debt in the hopes of inspiring economic recovery. President Obama has done this too, and his central banking henchmen have rigged the monetary system to punish anyone who saves.
You might think it would work, and it has, among some classes. But the wealthy are different. New surveys from people who make more than $750,000 per year show a new record level of savings among them.
CNBC says, “According to research from American Express Publishing and Harrison Group, the savings rate of the wealthiest 1% in the second quarter rose to 37%. That’s up from 34% in the second quarter of 2012 — and more than three times their savings rate in 2007.”
In other words, their saving is actually increasing, even given the evidence that the everlasting recession has abated in some ways. The rich continue to act as if it is 2009 — which suggests that this class has little confidence that the high stock market and seemingly good news that trickles out are really sustainable. They are preparing for the next crisis in ways they wish they had prepared for the last one.
It’s fascinating too to consider their investing and spending habits. CNBC further notes that only 40% are looking to invest anything in new companies over the next two years, and only 16% are considering doing that over the coming months.
This is a deep psychology of risk aversion. The Fed has driven interest rates to zero and attempted to put the screws to anyone who undertakes this Scrooge McDuck strategy of financial preservation. But it still doesn’t work. The rich won’t let go. They will not be fooled again.
Economists tend to forget the impact of past events on people’s current behavior. My mind often drifts back to the lady who lived in the house behind mine for years. She grew up in the worst of the Great Depression and recalled just how hard it was to get pans for the kitchen or basic materials for making dresses. Everything was precious. Nothing could be taken for granted. Therefore, she threw nothing away, no matter what. This habit persisted to the end.
After she died, her children went through the house and found hundreds and hundreds of foil pie pans, stacked higher and higher. There was a room with pillars of them. She loved pies and bought many at the store. But she could never bring herself to throw away the foil pans. To her, this was an item of high value. She couldn’t shake the feeling that it would be gravely irresponsible to toss away something that might have cost a week’s wages in 1937.
It’s common to dismiss this sort of attitude as evidence of senility. Surely, it is irrational! Her kids, of course, just rolled their eyes and tossed it off as sheer nuttiness.
I wouldn’t say so. If you live through times of grave privation, you never quite get over it. You come to understand a great truth that people who grew up amid plenty do not understand. You see the physical prosperity around you as a contingent condition that can be wiped out under the right circumstance. You no longer trust those in authority to bail you out. You come to understand the obligation to provide for yourself no matter what.
In short, you come to realize that no economic value is permanent and all is subject to change.
The savings behavior of the rich today is evidence that they are much like the old widow and her pie pans. They were burned very badly in the great collapse of 2008. It affected mainly real estate, a sector every respectable voice said would never fall. This was a safe haven, a permanent asset, and the best investment you could ever make. In a few short months (and in some cases even weeks), all those assumptions were blown away. Then the contagion started: The banks, the stock market, commercial real estate, old-line investment firms — everyone suffered.
That lesson tends to last, and it accounts for why it is so difficult for the federal government to stop this tendency to hoard cash and prepare for another rainy day.
What’s more, this approach is actually socially beneficial. You have to ask the question: Where does investment come from? Of course, people like Obama never ask this question. To him, the answer is obvious: The Fed can just print money and people will invest it. Or the federal government can just tax people and use the money to “invest” in his favorite sectors, like electric cars and electricity-generating windmills.
This is sheer fantasy. There is only one source of genuine investment. That is savings. Savings comes about from forestalling consumption. You have to give up things today so that you can have more tomorrow. There is no other path. The attempt to skirt that savings obligation and replace it with fiddling by the central bank and the government is pure folly. At best, it creates another round of false booms that end in busts. At worst, it destroys wealth and creates nothing at all.
What’s interesting is how individuals and institutions seem to understand something here that government and its economists do not. Despite every attempt to stop savings altogether — under the misbegotten theory that consumption causes growth — savings in general actually soared after 2008. Only recently has the rate dipped among most of the populace, even as it has continued to increase among the smart set.
You will note that the same thing happened at the attacks of Sept. 11, 2001. The president went on television to demand that everyone immediately go out and buy something. But Americans were at the point of assuming that whatever the president wants is probably not what is best for them and their families. Savings went up. But this was nothing compared with what happened after 2008. This was when people really started stuffing their mattresses.
The beautiful thing about this example is that it shows that government can’t always get what it wants. In fact, it rarely gets what it wants. The whole of its economic policy models are predicated on the idea that people respond to economic signals like machines. Change the signal and people fall in line. But that’s not how it works in the real world. People have brains and they have memories. The memory of 2008 is still with us, and it’s a good thing, too, for the prosperity of the future can come only from the savings of the past.
Let’s hear it for the Scrooge McDucks of the world. They dare to disobey, and, in so doing, they are building for the future, from which we will all benefit. We might all consider emulating them. Saving money is the ultimate revenge.