Economic Chains of the modern age

There is so much to say about Economics. I hope that I can express all of my views and make all my points clear in future articles. For now I would just like to make a quick-overview of some of the most pressing issues today.

To be fair, economics is simple, it is beyond reason, it is deeply engraved in our beings, it’s instinct. However somewhere along the way people seemed to turn it into a complex science, which seems hard for people to understand, and that may very well be what they want.

They main camps of economics we can distinguish are the following.

-The keynesian, which I talked about before. These are the State apologisers

-Classical, being most of what was written and said before the keynesian era.

-The Austrian, a pretty accurate interpretation and very politically relevent too, if that’s what you’re into, I would suggest visitng the mises.org page. This is quite a minority sadly, not the kind of things you would learn at school.

-Supply-side economics. I have found lately that this is the most complete and accurate interpretation of most economic phenomena. it’s followers include people such as Steve Forbes and Nathan  Lewis. Again, this is quite a minority of economists too.

So, by now you know, the guys who are right are a minority. In fact, most of the real issues undermining our economy aren’t being even discussed at this point. I have little faith in things changing in the short-term, but we are moving towards greener pastures. If not by more understanding, simply by the the undeniable failure of the policies put into practice today.

Pardon me, I’m digressing. Let’s get to the important stuff.

There are two main issues that are misunderstood and are responsible for our lack-luster growth beginning in 1975 or so.

1-PUBLIC SECTOR GROWTH. I strongly believe there is an overrelience on government. A fallacious idea that government con do things better than the free market, and most importantly, the fact that most Western economies rely so heavily on debt. This is partly due to the “keynesian” bias that most governments have. Naively believing that they can spend their way out of anything.

Debt has two problems:

-It will inevitably lead to higher taxes, which is a HUGE economic deterrent. In fact low taxes, are one of the two items in the magic formula for growth. It is a well known fact, that low taxes bring prosperity. More money in the private hands is more money better spent. Simply put.

-It leads to a debt cycle. It is another well known fact, that many countries have gone into the habit of paying their debt with newly issued debt. Now think about it this way. You wouldn’t think of paying your mortgage with a credit card now would you? In effect, you might even call it a Ponzi scheme.

And as always this is all happening at the expense of the taxpayer.

2.SOUND MONEY-This is the second item of the magic formula. So to recap. LOW taxes+SOUND money=prosperity.

Sound money, is that something you had thought about before?

Do you stop to think what happens to the value of your money when the Central Bank prints some out of nowhere? how this might affect prices?

I could go on for days on this subject and things like, inflation, interest rates, exchange rates, the gold standard…

For now I will explain like this. Sound money is the principle that money should be a stable measure of value. In other words, it’s a measuring stick which you use to measure everything else against. Doesn’t sound so strange does it. In olden times you had a gold coin and that gold coin was worth its weight in gold. Simple right?

This is something you can hardly say about todays fiat, paper money. Suffice to say that since the U.S. abandoned the gold standard in 1971 the value of the dollar has dropped by about 44 fold. Or in real terms. In 1971 an ounce of gold could be bought with 35 dollars, now it would cost you around 1000+ and counting.

So in conclusion. Government too big+mismanaged currency= great misfortune

Food for thought people.

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