Correct me if I’m wrong, but Keynesian is the “mainstream” school while Austrian is a “fringe” or “alternative” school, right?
Now, that’s funny! I will email him your response. We will be playing Spring 42 all next week. What’s real money to a Keynesian?
Well, if you use the wording “real money” you can get into a semantical argument.
BTW, the US doesn’t just run defecits in war; I think it has done so ever since WW2(except the Clinton years). I may be wrong about that though; some other president may have had a surplus
Umm, how does pretending to be a Keynesian help you win, if you don’t play that way?
Also, I’m not sure how inflation is a tax. Yes, people have less buying power, but that weath wasn’t transfered to the government, right?
Also, keep in mind that a Nobel prize doesn’t automatically validate a theory. One of the Austrians who won said that a Prize for Economics is misleading since it gives the winner a authority that wouldn’t exist in the other sciences, since the other scientists’ work are directed at fellow experts, while economists’ are directed at laymen
Calvin,
Wealth manager here - Inflation is a “hidden” tax.
Calvin has $100 of 2010 Dollars - he stores them under his bed/puts them in the bank/etc. In 2010, the inflation rate is 100%. Calvin spends no money whatsoever, yet he only has $50 2010 dollars in 2011, due to inflation.
See the insidious nature of inflation?
I completely agree that you lose purchasing power. However, I’m saying it’s not a “tax” since the government doesn’t gain what you lose. A tax is not just a loss of money; it’s the loss of money to the government.
BTW, why call it hidden if most people are aware of it?
Also, when inflation happens, your wages also increase(albeit more slowly).
Thanls for the help. I try to learn as much as I can about different topics so I can at least be knowledgable enough to know when someone is BSing me.
As for the “warfare-welfare” state, I probably agree with you that many wars, which are funded by defecit spending, do not need to be started and that the budget for the military can be cut significantly without much harm. I also think that too much money should not be spent on welfare, but I do want everyone to have a minimum standard of living which, in the current world, welfare seems to give, looking at Western Europe.
BTW, I’m not sure our discussion is off topic, since we are talking about what the title says. If we do get flagged, it would be for being too political.
I completely agree that you lose purchasing power. However, I’m saying it’s not a “tax” since the government doesn’t gain what you lose. A tax is not just a loss of money; it’s the loss of money to the government.
BTW, why call it hidden if most people are aware of it?
How do you think the money inflates? By the government printing money. So the government gets money and the people lose money value (basically money) - a “hidden tax.”
I completely agree that you lose purchasing power. However, I’m saying it’s not a “tax” since the government doesn’t gain what you lose. A tax is not just a loss of money; it’s the loss of money to the government.
BTW, why call it hidden if most people are aware of it?
How do you think the money inflates? By the government printing money. So the government gets money and the people lose money value (basically money) - a “hidden tax.”
I see. I have a question about that though:isn’t inflation proportional to the amount of money in circulation? I.E if the gov’t doubled the nominal value in circulation, the value of the dollar would halve. Doesn’t this mean the government has the same purchasing power as before?
Yes - but you are forgetting dollar-denominated debt.
Most debt (including US Gov’t debt) is held in dollars. By doubling the nominal value, you are in effect halving your debt.
The debt isn’t inflation adjusted :-o :-o :-o
Wow.
Hence the phrase, “inflate your way out of debt”
It is not a pretty sight in the short run (Weimar Republic, Argentina).
How do other countries not see this, since the exchange rate is inflation-adjusted?
The underlying assumption has been (falsely, in my view) that US Gov’t obligations are “risk-free” for much of the 20th and 21st centuries.
Heavy inflation is a curse and a blessing. If done properly, it allows payment of foreign debt and cheapens your cost of doing business (labor, etc) relative to other countries, allowing for more export which in turn eventually stabilizes inflation. The curse is that individual people see their bargaining (purchasing) power drop dramatically.
Yes, inflation by the Fed is a good tool, IF the government uses it correctly. I presume that you and other Austrians don’t really trust the gov’t to be able to do a good job at that, correct?
The problem is not economics, it’s politics. Today we have:
That we need is more democracy, not less as we saw in Greece and Spain (stingy ZP, you traitor). Also, we need control financial power somehow (now it has free reign worldwide). I know the Austrian school a bit and I think they are totally wrong, but we need able politicians first or any solution we try is damned to fail utterly. Current situation only serves to give more power to the powerful (financial power, that has governments as puppets) and less to the common people
A politics thread (economics = politics ) … interesting indeed but will be closed soon or later
I think reps are only chosen by the party in parliamentary systems. In the US, everyone votes for a Rep, a Senator, and the President
However, I agree with the rest of what you said. I’d like to add that rich people/corporations are able to bribe polititions, and thus we have a plutocracy instead of a democracy
I think reps are only chosen by the party in parliamentary systems
That’s true (agreed as well about the bribing and the plutocracy)
