Inflation is something we like when we’re in debt , which stays in constant dollars, and need more dollars (albeit of less intrinsic value) to repay it with.

Inflation is bad, however, because it reduces the dollar’s purchasing power and puts upward pressure on bond rates, which have to factor in inflation protection so that real yields will be attractive to investors. What we need to understand here is that our government has an interest in keeping inflation both secretly high and officially […]

A popular fallacy is that America’s transition from a manufacturing-based to a serviced-based economy is an example of progress comparable to its transition during the nineteenth century from an agrarian-based to a manufacturing-based economy.

During the nineteenth century, efficiencies made possible by capital investment financed with savings enabled more food to be produced by fewer farm workers. The increased farm productivity freed up labor to make a transition into higher-paying manufacturing jobs similarly created by capital investment financed by savings. The growth in farm productivity that made the industrial […]

Reserve currency status, a badge of America’s preeminence, has been both a blessing and a curse.

The U.S. dollar’s status as the world’s reserve currency has shielded the United States from the consequence of persistent and growing trade imbalances. The Bretton Woods accords made the U.S. dollar the currency used by other governments and institutions to settle their foreign exchange accounts and to transact trade in certain vital commodities, such as […]

In market economies, living standards rise as a result of capital accumulation, which allows labor to be more productive, which in turn results in greater output per worker, allowing for increased consumption and leisure.

However, capital investment can be increased only if adequate savings are available to finance it. Savings, of course, can come into existence only as a result of underconsumption and self-sacrifice. The fatal flaw in the modern economy is that any attempt to save and under consume, which woud surely bring bout a badly needed recession, […]

Labor incomes in rich countries are higher than in poor countries because rich countries have a larger capital stock to work with.

After many generations of saving, investing, and building a productive capital stock, the marginal productivity of labor is substantially higher than in poor countries. — Just as an economy does not need more money in order to produce more goods and services, an economy does not need more money to have more investment and more […]