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national politics & policies too much government

Biden’s Peculiar Odor

William F. Buckley used to say that there is always a presumptive case for order.

Philosopher Joel Feinberg argued that there’s always a presumptive case for freedom.*

This notion of a strong case for or against something prior to specific data can keep philosophers and economists and folks like you and me awake at night.

Here, I’m just going to bring it down to the politics.

Of inflation.

Why are prices — especially fuel prices — rising so?

The Biden Administration has been trying to argue that it’s caused by the war in Ukraine, and Americans’ need to sacrifice to defend that beleaguered country. 

But, as with his talk of “food shortages,” the war is almost certainly an exacerbating, not the prime, factor. Both fuel price spikes and bare shelves demonstrated an alarming trend before Putin invaded Ukraine. 

The cause seems obvious. Do we really need careful studies to show that both were caused by (a) COVID lockdowns and (b) a blizzard of lockdown bailout checks during Trump’s term in office and eagerly pushed also by the current president?

And Biden’s current kick, of demanding that gas stations (!) freeze or reduce prices to “match the cost of production,” has all the odor of cranky, old-​fashioned soapbox socialism.

There is a presumptive case that inflation is caused by monetary policy, just as shortages are usually caused by regulations. Trump and Biden and Congress all contributed to over-​spending, financialization, and regulatory hits.** But the stink of the growing mess must also affix especially to Biden. After all, one of his campaign promises was to cut production of oil on all government lands and offshore.

This is Common Sense. I’m Paul Jacob.


 * Joel Feinberg, Social Philosophy (1972), pp. 20 – 22. Where Buckley discussed his presumptive case is your guess or mine. Probably a column back in the 1970s or ’80s.

 ** A few weeks ago an interesting exchange occurred in this website’s comments section, between two friends of this program.

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free trade & free markets too much government

Fed Up

No one is really fit to “run the economy.” The pretense of the ability can be fun to watch, amongst economists as well as pundits. But because they’re doing the impossible, what they say can lurch from wisdom to utter folly in the space of a paragraph.

Neil Irwin, at the Washington Post, admits that the Federal Reserve’s current policy of pumping more and more money into the economy may finally be working, “but that may not be a good thing.”

I suspect he’s right.

But not for the right reason.

Irwin notes that the Fed “in September introduced a policy meant to boost housing and stock prices, and now, nine months later, housing prices and stock prices have risen quite a bit. Enough, indeed, to (so far) offset the impact of higher taxes that went into effect Jan. 1 and federal spending cuts that took effect March 1.” But the problem, he goes on, “is that these channels through which monetary policy affects the economy tend to offer the most direct benefits to those who already have high incomes and high levels of wealth.”

Irwin sees the problem as inequality: the policy helps the rich get richer and does little for the poor. His solution is fiscal policy that throws more money directly at the poor.

Yet there’s not much reason to believe his preferred giveaway would actually “stimulate” the economy. The Fed’s current policy, on the other hand, may stimulate, a bit, but will lead to a new boom-​bust cycle.

The poor need jobs; the rich need to invest. But all this requires a degree of stability and trust and sustainable prices — not government-​knows-​best tinkering with the money supply. Or yet more deficit spending.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets links

Townhall: The Next Thing in Money

More about Ziggy?

This weekend’s Townhall column takes off on a subject broached here at This Is Common Sense last week. But there’s a lot more to it, so check it out. And come back here if you want a complete, easy-​to-​access full list of the column’s links:

For further reading, please consider:

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free trade & free markets ideological culture national politics & policies video

Video of the Week: Quantitative Easing Explained

Earlier this week I did a short Q&A about the latest in monetary policy: quantitative easing. This video goes into much more detail. And is pretty funny:

For an extended, non-animated explanation of QE, try a helpful article by monetary economist Leland Yeager: “The Fed’s Easy Money.”

Categories
national politics & policies

QE Q&A

It’s one of those terms seemingly designed to conceal something ugly, dangerous, or unnerving; this example of contemporary policy jargon just looks like a euphemism. It’s “quantitative easing” (QE) and it’s Federal Reserve policy.

What does the “quantitative” part refer to?

The quantity of money in bank reserves.

Is this all about increasing that quantity?

Yes.

Isn’t that synonymous with inflation?

According to the old definition — where inflation is the increase in the supply of money — yes. But since economists became obsessed with the price level, and “correcting” the price level, today inflation usually designates a general rise in prices. Of course, more money will tend to raise prices. But because demand for money can offset supply moves, price levels are not affected on a simple input-​output, one-​to-​one manner.

Is this what we call “printing money”?

Yes, but in the digital ledgers of banks, not in terms of paper dollars.

So this “easing” is just “easy money”?

Yes, but not “just.” Because the new money hits bank reserves, it eases banks’ pressure vis-​a-​vis risk. So banks can lend more.

Will banks, helped out by QE, actually follow through and make loans?

Big question. They didn’t, much, after the bailouts. Banks loan funds only when they can expect a return. Monetary manipulation doesn’t, presto chango, solve the problem of the future. If the future looks especially unstable, or uncertain, no loan.

Will this necessarily jump-​start the economy?

No. Our elite experts’ desperation is showing.

This is Common Sense. I’m Paul Jacob.