Wednesday, August 19, 2009


The Lender of Last Resort

So the Fed is printing dollars by the trillion now. A trillion dollars is a lot of money. How much? It's a thousand billion -- a thousand dollars apiece for a billion people. We don't even have that many people in the USA. Our population is less than a third of that. A trillion dollars is three grand apiece for us, with something left over. It is a lot of money. Twelve thousand dollars for a family of four. For every family of four.

And what is the Federal Reserve doing with all that money? Typically, they do one of two things: Either they lend it to the banks, or they lend it to the government.

So we have a "credit crisis" brought on by excessive debt, and the Fed's solution is to print more money and use it to create even more debt! Is that reasonable? There seems no way to make sense of it. One could say the Fed is too intently focused on its role as "the lender of last resort."

Wednesday, August 5, 2009

The Real Laissez-Faire

Apart from the level of taxes...

I am still in the midst of my Mises Month, reading and parsing the Mises Daily email and learning about Austrian economics. But today's Daily merits special attention. The article, by Art Carden, rejects the notion of rent control.

Carden says rent control "ignores the information-transmitting function of prices." That got me thinking about how strict the Austrians are regarding free-market principles. But even Austrians fall short, when it comes to taxes.

Saturday, August 1, 2009

On Money

...and plenty of money, wrapped up in a five pound note!

I'm not a "gold standard" guy. But sometimes it's useful to think in terms of money-as-gold when thinking about the economy. So let's say the U.S. base money is gold. M0 is gold.

Then M1 money is gold in circulation, and I suppose gold certificates, and checking-account money. And after that, M2, M3, whatever, we have "debt-backed obligations." Okay? So let's start up this economic model and let it run.