Tag: inflation

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Accountability folly free trade & free markets general freedom moral hazard property rights responsibility too much government

Poison Is Poisonous

poison, inflation, Venezuela, socialism, free markets, capitalism

Venezuela’s socialist economy has been collapsing. 

No big mystery. If, out of hostility to capitalism, a society keeps destroying everything that production, trade, and prosperity depend upon, the economy suffers. The benefits of markets don’t flow no matter what.

One assault has taken the form of hyperinflation — runaway printing of currency, done in part to dissolve government debt. Many Venezuelans are resorting to barter. It’s easy to understand why. 

Or is it? A Reuters reporter says that economists say that “the central bank [of Venezuela] has not printed bills fast enough to keep up with inflation, which … reached an annual rate of almost 25,000 percent in May.”

So go faster!?

Dude. Dude. The massive expansion of Venezuela’s money supply is what’s causing massive jumps in prices. Just like any other economic good, the medium of exchange is subject to the laws of supply and demand.

Other things being equal, enormously increasing a supply of a good will enormously lower its market value or price. Money, too, has a price — in terms of the non-​monetary goods being bought. If the pre-​hyperinflation price of a dollar in terms of bread is one loaf and the post-​hyperinflation price is one bread crumb, you won’t reverse the decline by printing even more dollars or bolívars even faster.

If you’re ingesting poison, you can’t fight the effects by being poisoned more and harder. The very first thing to do is stop ingesting the poison.

This is Common Sense. I’m Paul Jacob.

 

 

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Accountability folly ideological culture nannyism responsibility

Venezuela’s New Firing Squad

Maduro, Venezuela, socialism, collapse, illustration

We’ve watched Venezuela’s big-​daddy socialism descend into dystopia:

  • Arbitrary arrests of political opponents;
  • An economy managed by government decree, in which inflation “may top 700 percent this year” and toilet paper, food and medicine are in terribly short supply;
  • The once oil-​rich country has become “the worst performing economy in the world,” with hundreds of thousands of Venezuelans clogging border crossings with Colombia;
  • Meanwhile government workers “enjoy” a two-​day work-​week to save electricity, avoiding the wasted hours caused by daily blackouts;
  • And President Maduro has decreed that citizens can be conscripted — drafted into service — for 60 days, forced to pick crops.

“Venezuela brings back fedual [sic] serfdom to try to alleviate food shortages,” read one online headline. (Don’t laugh, that may be how we spell “feudal” someday.)

Still believing in magic … “Maduro ordered a 50 percent increase in the minimum wage last month,” informed the National Post, “but the latest studies show that salaries still fall far short of the amount needed to obtain basic household goods and food.”

Socialism has failed, again, and in doing so demonstrates something more than economic shortcomings. As the late President Ford warned, “A government big enough to give you everything you want is a government big enough to take everything you have.”

The Venezuelan people have the right to recall the president enshrined in their constitution, a particularly popular right at present … but the Maduro dictatorship refuses to take prompt, lawful action to facilitate the recall.

Not to mention unjustly arresting citizens circulating the recall petition or telling high government ministers to fire any government worker who signs.

So much for the socialist revolution … now tyrannically blocking a real revolution.

This is Common Sense. I’m Paul Jacob.     

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Maduro, Venezuela, socialism, collapse, illustration

 

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folly nannyism national politics & policies

Doom Fails to Arrive on Schedule

DOOM

Doom is not always bad. I’d appreciate the doom of nonsensical doomsaying, for instance… although I doubt that that glorious day will dawn anytime soon.

Equally unlikely is an apology from ABC and Chris Cuomo for pitching, back in 2008, a muddled ABC special, “Earth 2100,” about all the disasters expected to arrive by 2015, among other years.

The idea? Forecast the harm inflicted by allegedly man-​made global warming and collateral calamities, via the scientific methodology of being safely vague or just making stuff up. One way the network secured data was to ask viewers to pretend they’re in the future and then “report back.” (Well, it was 2008, a more primitive era. They did things like this back then.)

Here’s a sample of what ABC purveyed as possibly impending:

  • “Temperatures have hit dangerous levels.” (Time for air conditioning and/​or heat!)
  • “We’ve got more people, less and less resources. That’s a recipe for disaster.” (Let markets be fully unfettered so we can be sure to get more and more instead!)
  • “It’s June 8, 2015. One carton of milk is $12.99.” (Unless that’s a big carton, no. Try $3 or $4 a gallon.)
  • “We’re going to see more floods, more droughts, more wildfires.” (Good work, Nostradamus!)

We still get storms. (Always had ’em; always will.) And inflationary Fed policy and other bad governance still swirl on the horizon. So let’s have shelter, fire departments, umbrellas, and market-​friendlier policies; and let’s not reside on hurricane-​prone beaches.

Thanks for the heads-​up, Chris.

This is Common Sense. I’m Paul Jacob.

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DOOM

 

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free trade & free markets ideological culture too much government

Their Solution Is Our Problem

J.D. Tuccille at Reason took on journalist Matthew Yglesias’s vox​.com video that I wrote about yesterday, focusing on Yglesias’s pooh-​poohing of the sheer size of the national debt. Tuccille noted that Yglesias under-​reported its humungosity, and that the Congressional Budget Office finds, counter to Pollyanna-​liberals, no small reason to worry about the ballooning debt.

But I’m still shaking my head that Yglesias really did argue the federal debt is no problem, because — get this! —  the Fed can always just print more money. 

We know! What he sees as a solution we see as a problem.

The modish government-​as-​savior view of society seems pure simplicity: major inputs and outputs — money supply, fiscal spending, debt, inflation — all of which liberal-​progressives will “expertly” adjust.

Fed this, no wonder people ask questions like “why haven’t we seen inflation, following the huge influxes of quantitative easing?” Well, it is not just about consumer prices, but investment prices, too, which we have long known to be more volatile than consumer goods; investments can easily suck up new money to create an unstable boom, which bursts.

The biggest problem for today’s market recovery — aside from subsidies and wage controls and all the folderol that directly discourage new jobs — is federal government irresponsibility itself (symbolized neatly by the federal debt) which signals to investors and other market participants that they cannot make viable long-​term plans.

Economist Robert Higgs called this effect “regime uncertainty.” It’s the uncertainty bred by bad policy.

Just the kind Yglesias and his comrades adore.

Fiddle with the economy’s dials, oh wise ones, and uncertainty seems a certain result.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets ideological culture too much government

Not a Problem?

Increasing public debt is bad for a number of reasons. Journalist Matthew Yglesias, speaking on vox​.com, gives voice to a very different, very Pollyannish perspective: “Debt is just not a problem right now,” he says.

Why?

“The U.S. can never run out of dollars.” After all, the Fed can just print more.

That’s not an uncommon view where I live, near the center of privilege, Washington, D.C.

The video starts with an instruction: “Stop freaking out about the debt.” It sports nifty, simple graphics and comforting music. Matt Yglesias sounds convinced himself.

Nothing he says convinces me. But I’ll concentrate just on the frank inflationism.

Yglesias mentions inflation. But it’s obvious he means CPI numbers, even though he offers the short-​hand “too much money chasing a fixed amount of stuff” definition to stand in for the “supply of money increasing faster than the demand for money” definition that I hear from competent economists.

But while he admits that price inflation can be a problem, what he is promoting is inflationism. That’s the doctrine that central bank fiddling with increases in the rate of money growth is the way to control the economy. And that it’s costless.

Like money cranks of the old days, he only sees the costs of not inflating the credit system.

It never enters into his ideologically-​driven thoughts that maybe artificially lowering interest rates fakes out investors and consumers, getting them to make bad investments that destabilize relative prices that, when they unravel, wreak havoc.

Inflationists are folks who are always trapped by the cure they prescribe. We’re left with boom-​bust forever and ever.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

Banning Consequences

When bad government policies create problems, government officials often pretend that the causes are unrelated to the effects. Instead they enact further bad policies. They may even seek to outlaw the effects, as if prohibiting puddles could stop the rain.

Suppose a government greatly expands the money supply, which leads to a general rise in prices obvious enough to cause people to complain about sticker shock. Governments may try to “solve” the problem with slogans and price controls.

In Argentina, which is lurching toward 30 percent inflation, they’re skipping the Whip Inflation Now buttons and going straight to the price controls. The government has temporarily frozen prices in the largest supermarkets. The two-​month freeze is the result of an “agreement” between the trade group representing big stores and the Argentine government.

Now what happens?

Well, customers will race to the big stores, but small stores won’t lose business except in the short run. As the inflated demand outstrips a deflating stock of goods, the big stores and their suppliers won’t see much point in replacing goods that they can sell only unprofitably or at a loss. If they do replace the sold-​off stock, they’ll likely do so with shoddier stuff in smaller packages.

Monetary inflation imposes hardship; price controls worsen the hardship. By the same logic, you help somebody whose leg you just broke by smashing his other leg too. You may think that this procedure would restore health, but actually — no.

This is Common Sense. I’m Paul Jacob.

Note on the illustration: The French assignat was an early instance of paper money inflation in Europe.