By Douglas V. Gibbs
Author, Speaker, Instructor, Radio Host
excerpt from my next book, A Promise of American Liberty
As the story goes, people became tired of lugging
around their gold, so they hired a goldsmith
to store their gold for them. The
goldsmith would issue receipts for the gold.
These pieces of paper were “as good as gold.” Hence, the birth of paper money.
around their gold, so they hired a goldsmith
to store their gold for them. The
goldsmith would issue receipts for the gold.
These pieces of paper were “as good as gold.” Hence, the birth of paper money.
After a while, the
receipts became a standard means of exchange for purchasing goods. The goldsmith held the same amount of gold as
the total of the values on the receipts that had been issued to the public, and
if anyone, at anytime, wished to turn a receipt in for their gold, they
could. It was such a secure and
convenient way of doing business, in fact, nobody ever thought about turning
their receipts in for their gold.
receipts became a standard means of exchange for purchasing goods. The goldsmith held the same amount of gold as
the total of the values on the receipts that had been issued to the public, and
if anyone, at anytime, wished to turn a receipt in for their gold, they
could. It was such a secure and
convenient way of doing business, in fact, nobody ever thought about turning
their receipts in for their gold.
The goldsmith
realized that nobody was going to turn in their receipts. Therefore, armed with that knowledge, the
goldsmith took action to make a profit by issuing additional receipts on the
gold he held. He accomplished his plan
by issuing the additional receipts in the form of loans, not only doubling the
receipts circulating through the community on the amount of gold he held, but it
created a scenario where he had the opportunity to earn interest when the loans
were paid back.
realized that nobody was going to turn in their receipts. Therefore, armed with that knowledge, the
goldsmith took action to make a profit by issuing additional receipts on the
gold he held. He accomplished his plan
by issuing the additional receipts in the form of loans, not only doubling the
receipts circulating through the community on the amount of gold he held, but it
created a scenario where he had the opportunity to earn interest when the loans
were paid back.
The loaning of money worked out so well, the goldsmith
continued to issue loan receipts, until his reserve of gold equaled about 10% of the value of the receipts he
had issued.
continued to issue loan receipts, until his reserve of gold equaled about 10% of the value of the receipts he
had issued.
What if, one may
ask, all of the people decided they wanted to turn in their receipts for their
share of the gold? If all of the holders
of all of the receipts decided to return to the goldsmith and demand their
gold, how many of the depositors do you think would be able to get their gold?
ask, all of the people decided they wanted to turn in their receipts for their
share of the gold? If all of the holders
of all of the receipts decided to return to the goldsmith and demand their
gold, how many of the depositors do you think would be able to get their gold?
In modern society,
the goldsmith is now a bank, and the holders of the receipts all returning at
once demanding their gold, or cash, is called a bank-run. In the face of a
bank-run, a large number of people would be going home without their gold, or
in the case of today’s society, without their cash.
the goldsmith is now a bank, and the holders of the receipts all returning at
once demanding their gold, or cash, is called a bank-run. In the face of a
bank-run, a large number of people would be going home without their gold, or
in the case of today’s society, without their cash.
In the U.S.
Constitution, Article I, Section 8 authorizes Congress the power to “coin
money”. Currency, back then, was coined
using precious metals so that if the coin was melted, it would still be worth
the same in terms of value. Paper money
was something the Framers of the Constitution were not fond of, therefore,
printing paper money was not originally authorized by the U.S. Constitution.
Constitution, Article I, Section 8 authorizes Congress the power to “coin
money”. Currency, back then, was coined
using precious metals so that if the coin was melted, it would still be worth
the same in terms of value. Paper money
was something the Framers of the Constitution were not fond of, therefore,
printing paper money was not originally authorized by the U.S. Constitution.
During the American Revolution, the government under
the Articles of Confederation issued paper money. However, unlike the goldsmith’s receipts,
there was no gold, or value, in the system to back the currency. As a result, when the veterans of the
Revolutionary War were paid the paper money as compensation for their service,
none of their creditors were willing to accept the fiat currency.
the Articles of Confederation issued paper money. However, unlike the goldsmith’s receipts,
there was no gold, or value, in the system to back the currency. As a result, when the veterans of the
Revolutionary War were paid the paper money as compensation for their service,
none of their creditors were willing to accept the fiat currency.
Unable to pay
their creditors because the paper money was worthless, the Revolutionary War
Veterans protested. They protested
government offices, and blocked the steps of courthouses so that their
creditors could not file lawsuits against them.
At one point, they even attempted to seize the munitions at the
Springfield, Massachusetts ammunition depot.
The reluctant leader was Daniel Shays, and under his leadership the
six-month rebellion led to the protesters taking over the Court of Common Pleas
in Northampton with the intention of preventing the trial and imprisonment of
debt-ridden individuals.
their creditors because the paper money was worthless, the Revolutionary War
Veterans protested. They protested
government offices, and blocked the steps of courthouses so that their
creditors could not file lawsuits against them.
At one point, they even attempted to seize the munitions at the
Springfield, Massachusetts ammunition depot.
The reluctant leader was Daniel Shays, and under his leadership the
six-month rebellion led to the protesters taking over the Court of Common Pleas
in Northampton with the intention of preventing the trial and imprisonment of
debt-ridden individuals.
The government under the Articles of Confederation had
no authority to raise an army to insure domestic
tranquility, nor could they tax to fund putting together an army. The States could not be consulted to activate
their militias to resolve the problem because the protesters were the members
of the State militias. The merchants in
Boston wound up putting together a mercenary force, which was used to quell the
rebellion, and restore order.
no authority to raise an army to insure domestic
tranquility, nor could they tax to fund putting together an army. The States could not be consulted to activate
their militias to resolve the problem because the protesters were the members
of the State militias. The merchants in
Boston wound up putting together a mercenary force, which was used to quell the
rebellion, and restore order.
Shays Rebellion revealed to the political leaders of the
time period that the government under the Articles of Confederation was too
weak, and needed to be strengthened for the purpose of protecting the union,
insuring domestic tranquility, establishing a central justice system, and
providing for the common defense. So,
the politicians met in Annapolis, Maryland in August of 1786, where they
decided to meet again, but this time in Philadelphia, in May of 1787, to either
fix the Articles of Confederation, or write a brand new constitution.
time period that the government under the Articles of Confederation was too
weak, and needed to be strengthened for the purpose of protecting the union,
insuring domestic tranquility, establishing a central justice system, and
providing for the common defense. So,
the politicians met in Annapolis, Maryland in August of 1786, where they
decided to meet again, but this time in Philadelphia, in May of 1787, to either
fix the Articles of Confederation, or write a brand new constitution.
Money is created
when value such as gold backs the money, or value is added to the system and
then is established by loans. If the amount
of currency exceeds the amount of value in the system, it takes more currency
to purchase the same item as before, which is a condition called inflation. Deflation
is when overall prices go down, carrying with it a whole host of new concerns.
when value such as gold backs the money, or value is added to the system and
then is established by loans. If the amount
of currency exceeds the amount of value in the system, it takes more currency
to purchase the same item as before, which is a condition called inflation. Deflation
is when overall prices go down, carrying with it a whole host of new concerns.
To illustrate
inflation, let’s examine educational diplomas and degrees.
inflation, let’s examine educational diplomas and degrees.
Most people in American Society have either a high
school diploma, or a G.E.D. equivalent.
Most employers require a diploma, or an equivalent, to be obtained by
prospective employees before the employer is willing to hire the individual. Sometimes, in entry-level jobs, one may be able to obtain employment without a
particular skill level, and before one has been able to achieve receiving a
high school diploma, or an equivalent.
school diploma, or a G.E.D. equivalent.
Most employers require a diploma, or an equivalent, to be obtained by
prospective employees before the employer is willing to hire the individual. Sometimes, in entry-level jobs, one may be able to obtain employment without a
particular skill level, and before one has been able to achieve receiving a
high school diploma, or an equivalent.
If a person
desires to advance in the marketplace as an employee, normally more education
is required, which often results in a certificate or degree. Among those instruments of achievement is a
Bachelor’s Degree. During the last few
generations, obtaining a Bachelor’s Degree was an accomplishment few achieved,
so the jobs available for people who had a Bachelor’s Degree were numerous when
compared to the number of degrees held by graduates. These jobs typically paid well when compared
to non-skilled jobs, or labor-intensive employment that did not require a degree
in the first place in order to obtain employment.
desires to advance in the marketplace as an employee, normally more education
is required, which often results in a certificate or degree. Among those instruments of achievement is a
Bachelor’s Degree. During the last few
generations, obtaining a Bachelor’s Degree was an accomplishment few achieved,
so the jobs available for people who had a Bachelor’s Degree were numerous when
compared to the number of degrees held by graduates. These jobs typically paid well when compared
to non-skilled jobs, or labor-intensive employment that did not require a degree
in the first place in order to obtain employment.
As society discovered that having a Bachelor’s Degree
meant a greater opportunity to make more money, and as government realized
subsidizing college education would garner some politicians more votes, the number
of people achieving a Bachelor’s Degree has increased substantially. As a result, more people in society have
earned a Bachelor’s Degree than ever before.
The number of employment opportunities for those with a Bachelor’s
Degree, however, have not increased at the same rate as the number of degrees
issued. As a result, the value of the
degree has decreased. Now, to achieve a
high level of employment, in many cases, a Master’s Degree is required.
meant a greater opportunity to make more money, and as government realized
subsidizing college education would garner some politicians more votes, the number
of people achieving a Bachelor’s Degree has increased substantially. As a result, more people in society have
earned a Bachelor’s Degree than ever before.
The number of employment opportunities for those with a Bachelor’s
Degree, however, have not increased at the same rate as the number of degrees
issued. As a result, the value of the
degree has decreased. Now, to achieve a
high level of employment, in many cases, a Master’s Degree is required.
When currency is
printed faster than the value inserted into the market, the value of the money
decreases, and it takes more dollars to purchase an item than it did
before. This is called inflation.
printed faster than the value inserted into the market, the value of the money
decreases, and it takes more dollars to purchase an item than it did
before. This is called inflation.
The ratio between
money in the system, and value in the system, normally remains fairly stabilized
when the economic system is based on democratic
and dynamic economic principles.
Today, we call that kind of a system “capitalism,” or a “free
market.”
money in the system, and value in the system, normally remains fairly stabilized
when the economic system is based on democratic
and dynamic economic principles.
Today, we call that kind of a system “capitalism,” or a “free
market.”
|
Boom and bust
Recession – A period of
Depression – A long and
Production
Market System – Network of |
A democratic and dynamic economic system is based on
individual decisions by the participants in the market, such as businessmen,
merchants, and consumers, and provides a dynamic model that allows persons to
rise and drop within the system based on their work ethic and economic
decisions within the market. In a free
market system, the ups and downs of commerce and financial values rise and drop
mildly like a road traveling through a hilly countryside, with slight uphills
and slight downhills that rise and drop based on the behavior of the market as
a result of manufacturing and consumer trends.
When government
attempts to regulate markets, the hills and valleys of economic activity become
more exaggerated, with steeper rises and drops, like you would see on a
thrilling rollercoaster ride. The boom-bust cycles put into place large
economic bubbles of prosperity, and severe recessions
and depressions. Government managed markets tend to be more erratic
in nature as a result of politicians and economists attempting to artificially manipulate
the system so that the rises and falls coincide with certain events so as to
make their political movement or party look more favorable.
attempts to regulate markets, the hills and valleys of economic activity become
more exaggerated, with steeper rises and drops, like you would see on a
thrilling rollercoaster ride. The boom-bust cycles put into place large
economic bubbles of prosperity, and severe recessions
and depressions. Government managed markets tend to be more erratic
in nature as a result of politicians and economists attempting to artificially manipulate
the system so that the rises and falls coincide with certain events so as to
make their political movement or party look more favorable.
The way to solve
the exaggeration of economic cycles is to return money to a value based system
where there is a standard behind the value of the money (such as gold, or
silver), and allowing currency to only be issued when value is added to the
system. To accomplish this government
and central banking systems would need to have less influence on the economy,
and allow the natural tendencies of a free market rise and fall based solely on
supply-side economics, or a production
driven system.
the exaggeration of economic cycles is to return money to a value based system
where there is a standard behind the value of the money (such as gold, or
silver), and allowing currency to only be issued when value is added to the
system. To accomplish this government
and central banking systems would need to have less influence on the economy,
and allow the natural tendencies of a free market rise and fall based solely on
supply-side economics, or a production
driven system.
Supporters of a
production driven economic system, or Market
System, like the Austrian Economic
Model as presented by Ludwig Von
Mises, tends to support less government intrusion, while the Keynesian Economic Model teaches an
increased governmental presence in the economy (command economy, managed
economy), so that the government can print fiat money in order to “prime the
pump” of consumerism. The Keynesian
Model follows the theory presented by John
Maynard Keynes placing consumerism as the driving force of an economy,
while people like Von Mises and Milton Friedman argue that production and less
government interference drives economic growth.
production driven economic system, or Market
System, like the Austrian Economic
Model as presented by Ludwig Von
Mises, tends to support less government intrusion, while the Keynesian Economic Model teaches an
increased governmental presence in the economy (command economy, managed
economy), so that the government can print fiat money in order to “prime the
pump” of consumerism. The Keynesian
Model follows the theory presented by John
Maynard Keynes placing consumerism as the driving force of an economy,
while people like Von Mises and Milton Friedman argue that production and less
government interference drives economic growth.
The System of
American Liberty was developed based on the lessons of the trials and
tribulations of the colonists who attempted to use consumer driven models,
communitarian models, and free market models.
The American System was also heavily influenced by the writings of
economic minds of the era such as Adam
Smith.
American Liberty was developed based on the lessons of the trials and
tribulations of the colonists who attempted to use consumer driven models,
communitarian models, and free market models.
The American System was also heavily influenced by the writings of
economic minds of the era such as Adam
Smith.
In a free market
system, wealth can be created. In a managed
market where government control is increased in order to manipulate the market,
the belief is that wealth is finite – hence, the saying, “The rich get richer,
and the poor get poorer.” In a free
market system, it is believed the pie simply gets larger so that more of the
pie may be obtained by those around it.
system, wealth can be created. In a managed
market where government control is increased in order to manipulate the market,
the belief is that wealth is finite – hence, the saying, “The rich get richer,
and the poor get poorer.” In a free
market system, it is believed the pie simply gets larger so that more of the
pie may be obtained by those around it.
One of the most
basic principles of free market economics is supply and demand. The concept not only influences production
and consumerism, but can also impact, or be impacted by, other economic issues
such as taxation.
basic principles of free market economics is supply and demand. The concept not only influences production
and consumerism, but can also impact, or be impacted by, other economic issues
such as taxation.
Cutting taxes
reduces the penalty for working and producing, which encourages more working
and producing. Cut the cost of doing
business and you get more business, which in the long run increases revenue. Tax cuts are not a cut in revenue as some
politicians may claim. That said, the
primary problem is not whether or not the federal government has enough
revenue, the concern is about how much the federal government spends. In a report compiled by this writer in 2007, 85%
of federal spending was found to be unconstitutional, and/or repetitious.
reduces the penalty for working and producing, which encourages more working
and producing. Cut the cost of doing
business and you get more business, which in the long run increases revenue. Tax cuts are not a cut in revenue as some
politicians may claim. That said, the
primary problem is not whether or not the federal government has enough
revenue, the concern is about how much the federal government spends. In a report compiled by this writer in 2007, 85%
of federal spending was found to be unconstitutional, and/or repetitious.
The current income
tax system in the United States uses tax rates that are increased or decreased based
on the size of one’s income. Progressive taxation is a communist
strategy and is listed in Karl Marx’s Ten
Planks of Communism. Marx believed
in heavy taxation so as to establish a system of a redistribution of wealth, which is a policy designed to tax the
wealthy into poverty, and eventually eliminate the upper and middle classes.
tax system in the United States uses tax rates that are increased or decreased based
on the size of one’s income. Progressive taxation is a communist
strategy and is listed in Karl Marx’s Ten
Planks of Communism. Marx believed
in heavy taxation so as to establish a system of a redistribution of wealth, which is a policy designed to tax the
wealthy into poverty, and eventually eliminate the upper and middle classes.
Samuel Adams
recognized the existence of redistribution of wealth tactics even during the
Revolutionary era. His name for the
utopian strategy was “schemes of leveling.”
He said, regarding the policy, “The Utopian schemes of leveling, and a
community of goods (what we now call Socialism), are as visionary and impracticable
as those which vest all property in the Crown. [These ideas] are arbitrary,
despotic, and, in our government, unconstitutional.”
recognized the existence of redistribution of wealth tactics even during the
Revolutionary era. His name for the
utopian strategy was “schemes of leveling.”
He said, regarding the policy, “The Utopian schemes of leveling, and a
community of goods (what we now call Socialism), are as visionary and impracticable
as those which vest all property in the Crown. [These ideas] are arbitrary,
despotic, and, in our government, unconstitutional.”
To manage the
market utopians require a central bank.
The first central bank in the United States, The Bank of the United States, was established by the country’s first
treasury secretary, Alexander Hamilton.
The Second Bank of the United
States followed shortly after the expiration of the charter of the first
central bank. In 1833, President Andrew
Jackson declared war on the Second Bank of the United States, stating that we
did not need it, and that the Constitution supports the issuance of hard money, not paper money. One of his campaign promises had been that he
would end the existence of the central bank.
He used his
executive power to remove all federal funds from the bank, which, in the end,
did spell doom for the institution. The
Bank charter was due to expire in 1836.
The President of the Bank of the United States, Nicholas Biddle, made rechartering the bank a primary issue during
the election of 1832. President Jackson
moved federal deposits from the institution, distributing the funds to several
dozen private banks throughout the country in 1833. Biddle retaliated by contracting Bank credit,
inducing a major financial downturn. The
reaction by Biddle soured public opinion towards the bank and set financial and
business centers against what they considered to be a form of mercantilism. Between 1834 and 1836, knowing that Jackson
would likely succeed in stopping the bank’s recharter, Biddle arranged the bank’s
conversion to a private State chartered corporation in Pennsylvania. In 1839 Biddle resigned from his post as bank
president. In 1841 the bank failed and
was closed forever. Shortly afterward, Biddle
was arrested and charged with fraud, but was acquitted. He spent the rest of his life (He died in
1844) battling related civil suits.
market utopians require a central bank.
The first central bank in the United States, The Bank of the United States, was established by the country’s first
treasury secretary, Alexander Hamilton.
The Second Bank of the United
States followed shortly after the expiration of the charter of the first
central bank. In 1833, President Andrew
Jackson declared war on the Second Bank of the United States, stating that we
did not need it, and that the Constitution supports the issuance of hard money, not paper money. One of his campaign promises had been that he
would end the existence of the central bank.
He used his
executive power to remove all federal funds from the bank, which, in the end,
did spell doom for the institution. The
Bank charter was due to expire in 1836.
The President of the Bank of the United States, Nicholas Biddle, made rechartering the bank a primary issue during
the election of 1832. President Jackson
moved federal deposits from the institution, distributing the funds to several
dozen private banks throughout the country in 1833. Biddle retaliated by contracting Bank credit,
inducing a major financial downturn. The
reaction by Biddle soured public opinion towards the bank and set financial and
business centers against what they considered to be a form of mercantilism. Between 1834 and 1836, knowing that Jackson
would likely succeed in stopping the bank’s recharter, Biddle arranged the bank’s
conversion to a private State chartered corporation in Pennsylvania. In 1839 Biddle resigned from his post as bank
president. In 1841 the bank failed and
was closed forever. Shortly afterward, Biddle
was arrested and charged with fraud, but was acquitted. He spent the rest of his life (He died in
1844) battling related civil suits.
In 1913 a
centralized national bank returned to the United States in the form of the Federal Reserve. The Federal
Reserve Act surrendered control of the American monetary system to the
international banking cartel and guaranteed the eventual abandonment of the
gold standard. The Federal Reserve’s
debt-based money guaranteed the enslavement of every American under a crushing
debt burden. The Federal Reserve enabled the international banking cartel to confiscate
wealth through artificially created boom-bust cycles.
centralized national bank returned to the United States in the form of the Federal Reserve. The Federal
Reserve Act surrendered control of the American monetary system to the
international banking cartel and guaranteed the eventual abandonment of the
gold standard. The Federal Reserve’s
debt-based money guaranteed the enslavement of every American under a crushing
debt burden. The Federal Reserve enabled the international banking cartel to confiscate
wealth through artificially created boom-bust cycles.
The Federal Reserve is not a government
entity. It is owned and operated by
independent international bankers. The
result is that the U.S. Government, and the bankers in charge of the federal
reserve, can manipulate the economy simply by the amount of money they decide
to pump into the system, and by how much they raise or drop interest rates.
entity. It is owned and operated by
independent international bankers. The
result is that the U.S. Government, and the bankers in charge of the federal
reserve, can manipulate the economy simply by the amount of money they decide
to pump into the system, and by how much they raise or drop interest rates.
The United States monetizes its debt when
it converts debt to credit or cash. The
bank puts the debt on its balance sheet. It literally creates the credit out of
thin air.
it converts debt to credit or cash. The
bank puts the debt on its balance sheet. It literally creates the credit out of
thin air.
The Federal Reserve monetizes the U.S. debt when it
buys U.S. Treasury bills, bonds, and notes (bills of credit).
buys U.S. Treasury bills, bonds, and notes (bills of credit).
Government spending, in relation to the
National Debt, has a direct impact on the economic cycles we experience. The more the government borrows, the more
fiat money is pumped into the system.
The result is increased inflation, and a stalled economy. Cutting spending results in less money being
borrowed, which then returns value to the dollar, and in turn reduces the level
of inflation.
National Debt, has a direct impact on the economic cycles we experience. The more the government borrows, the more
fiat money is pumped into the system.
The result is increased inflation, and a stalled economy. Cutting spending results in less money being
borrowed, which then returns value to the dollar, and in turn reduces the level
of inflation.
The damage created by the new Federal
Reserve expanded the size of the lower economic class. As a result, the welfare system was created
to compensate for the damage caused by the Federal Reserve and the direct income
tax.
Reserve expanded the size of the lower economic class. As a result, the welfare system was created
to compensate for the damage caused by the Federal Reserve and the direct income
tax.
A combination of the creation of the Federal Reserve,
and the advent of direct taxation (16th Amendment, also in 1913) has led to a
steady increase of federal spending, and a growing political appetite for a
soaring national debt. A number of financial crises, including the Great Depression, have occurred as a
result. Ongoing debt problems in Europe
has illustrated what may be in America’s future should we continue down this path
of debt.
and the advent of direct taxation (16th Amendment, also in 1913) has led to a
steady increase of federal spending, and a growing political appetite for a
soaring national debt. A number of financial crises, including the Great Depression, have occurred as a
result. Ongoing debt problems in Europe
has illustrated what may be in America’s future should we continue down this path
of debt.
Historically, America’s strong growth and
high living standards were the result of the country’s system of limited
government. The ongoing expansion of the
size of the federal government, and the coinciding surge in federal spending,
has been undoing its prosperity, thus, reducing the competitive advantage the United
States has been enjoying when compared to her global competitors. The result has been increases in taxation,
and a less robust economy which offers fewer opportunities.
high living standards were the result of the country’s system of limited
government. The ongoing expansion of the
size of the federal government, and the coinciding surge in federal spending,
has been undoing its prosperity, thus, reducing the competitive advantage the United
States has been enjoying when compared to her global competitors. The result has been increases in taxation,
and a less robust economy which offers fewer opportunities.
Deficit spending has exploded. Keynesian economists, faced with the dawn of
the Great Recession at the end of
the first decade of the new millennium, decided that consumer spending needed
to be encouraged with a government fueled stimulus package. The Economic Stimulus Act of 2008 was signed
into law on February 13, 2008 by President
George W. Bush with the support of both Democratic and Republican members
of both Houses of Congress. The total
cost of this bill was projected at $152 billion for 2008. Federal Reserve Chairman Ben Bernanke
testified before Congress that quick action was needed to stimulate the economy
through targeted government spending and tax incentives. The impact of the stimulus package was
minimal, and the recession increased momentum despite the demand-side strategy.
the Great Recession at the end of
the first decade of the new millennium, decided that consumer spending needed
to be encouraged with a government fueled stimulus package. The Economic Stimulus Act of 2008 was signed
into law on February 13, 2008 by President
George W. Bush with the support of both Democratic and Republican members
of both Houses of Congress. The total
cost of this bill was projected at $152 billion for 2008. Federal Reserve Chairman Ben Bernanke
testified before Congress that quick action was needed to stimulate the economy
through targeted government spending and tax incentives. The impact of the stimulus package was
minimal, and the recession increased momentum despite the demand-side strategy.
During the first year
of the first term of the administration of President
Barack Obama, a 2009 stimulus package of more than $800 billion was put into
place. It, also, failed to halt the
march of the recession.
of the first term of the administration of President
Barack Obama, a 2009 stimulus package of more than $800 billion was put into
place. It, also, failed to halt the
march of the recession.
The federal spending spree, rather than encouraging
economic growth, suppressed private-sector activities. The resulting lowered economic confidence reduced
investment activity and further stagnated consumption demand.
economic growth, suppressed private-sector activities. The resulting lowered economic confidence reduced
investment activity and further stagnated consumption demand.
For businesses, every economic obstacle
represents an increased cost of doing business.
Higher interest rates push up interest costs. Increased taxes, insurance prices, and
regulatory costs also represent an increase in the cost of doing business. Private sector businesses respond by making adjustments
to ensure they may maintain a particular profit
margin. Cost reduction tactics may
include an increase in price, a reduction in quality, a reduction in quantity
per unit, or a reduction of costs associated with employees. Those reductions, in regards to a company’s
workforce, may include layoffs, a reduction in hours, a reduction in raises or
bonuses, or a reduction in the costs associated with benefits. During a recession cost increases occur in programs
sensitive to economic cycles, such as unemployment insurance.
represents an increased cost of doing business.
Higher interest rates push up interest costs. Increased taxes, insurance prices, and
regulatory costs also represent an increase in the cost of doing business. Private sector businesses respond by making adjustments
to ensure they may maintain a particular profit
margin. Cost reduction tactics may
include an increase in price, a reduction in quality, a reduction in quantity
per unit, or a reduction of costs associated with employees. Those reductions, in regards to a company’s
workforce, may include layoffs, a reduction in hours, a reduction in raises or
bonuses, or a reduction in the costs associated with benefits. During a recession cost increases occur in programs
sensitive to economic cycles, such as unemployment insurance.
A steady increase in federal spending may
influence the rising costs of doing business in various ways. In order to service the debt, the government
uses confiscated capital (taxation), thus, extracting resources from current
and future taxpayers. However, the
resources consumed by government are not used to produce goods in the private
marketplace. Therefore, government
projects may actually take away opportunities in the private sector. For example, personnel needed to build a government
project will no longer be available to build other projects in the private sector
of the economy. Therefore, while public
works projects may create government-connected jobs, such projects also take
away resources from potential private activities.
influence the rising costs of doing business in various ways. In order to service the debt, the government
uses confiscated capital (taxation), thus, extracting resources from current
and future taxpayers. However, the
resources consumed by government are not used to produce goods in the private
marketplace. Therefore, government
projects may actually take away opportunities in the private sector. For example, personnel needed to build a government
project will no longer be available to build other projects in the private sector
of the economy. Therefore, while public
works projects may create government-connected jobs, such projects also take
away resources from potential private activities.
A deadweight
loss can be created by government spending and taxation, which may actually hinder the
economy. The larger a government grows,
the more severe the deadweight losses. As
the government expands further, it engages in less productive activities. Private sector activity and average income both
fall as the government expands. Only tax
cuts, a reduction in regulations, and major federal spending cuts will boost our
economy and allow it to begin its journey back towards its free market
foundation.
loss can be created by government spending and taxation, which may actually hinder the
economy. The larger a government grows,
the more severe the deadweight losses. As
the government expands further, it engages in less productive activities. Private sector activity and average income both
fall as the government expands. Only tax
cuts, a reduction in regulations, and major federal spending cuts will boost our
economy and allow it to begin its journey back towards its free market
foundation.
Alexander Hamilton supported the idea of
perpetual debt, claiming that it ensures that a country maintains a favorable
credit rating, that a national debt serves as a protective measure against
States seceding since they bear a share of that debt, and he believed that
government spending was good for the economy.
He also supported the idea of having in place a national bank to manage
that debt (hence, the reason he lobbied for the Bank of the United States).
perpetual debt, claiming that it ensures that a country maintains a favorable
credit rating, that a national debt serves as a protective measure against
States seceding since they bear a share of that debt, and he believed that
government spending was good for the economy.
He also supported the idea of having in place a national bank to manage
that debt (hence, the reason he lobbied for the Bank of the United States).
— Political Pistachio Conservative News and Commentary
