Author: moderator

Cryptocurrency seems to serve two functions: it facilitates money laundering, and it provides a speculative investment. It is an extreme example of the absurdity of having a form of money be a tradable asset. The whole idea that a single Bitcoin, whose value was set at 30¢ in 2011, could have a market value of…

When a metaphor like “the market” is used to describe something as complex as the institutions and practices associated with the producing and selling of goods in a modern economy, the term will inevitably carry with it the feelings of familiarity and ordinariness associated with the more literal meaning of a market like the one…

If the government can “print” all the money it needs to pay for its activities, why do we need taxation? Eliminating taxes would surely be a campaign platform that everyone would love to vote for. Unfortunately, except for libertarians who view all taxation as theft, no one believes it is possible to eliminate taxes. Even…

The free flow of capital is often associated with devastating financial crises such as the ones in Mexico in 1994 and Asia in 1997. Some will argue that there is an essential difference between free trade of goods and the free flow of capital. A distinction is also made between direct equity investment in foreign…

The hopeful myth about foreign trade is that each country has its own unique resources and skill sets so that international trade functions as a kind of division of labor that benefits all. Your climate is conducive to growing cotton; our technology and population density are conducive to textile mills. You sell us cotton; we’ll…

There is one aspect of discussions of inflation in mainstream economics which is particularly crucial in government policy: the relationship between inflation and unemployment and the concept of the “non-accelerating inflation rate of unemployment (NAIRU).” It began life as the “natural rate of unemployment,” and its current form is an attempt to improve on its…

Regardless of what causes it or how it is measured, inflation is a real phenomenon. The most common explanation of inflation is the monetary theory focusing on the correlation between inflation and the amount of money in circulation or the availability of credit. Milton Friedman famously said that inflation “is always and everywhere a monetary…

Most people assume that the government is an entity like a household or a business where expenses must be covered by income. If a business consistently spends more than it earns, it will “go out of business” and cease to exist. If an individual lives beyond his means for too long he will be forced…

Theoretically the justification for our vast “financial system” is to channel savings into investment. People who are foregoing current consumption in order to accumulate funds for future expenses are supposedly making it possible for the economy to invest in enterprises and prosper. A cynic might be inclined to point out that what the textbook actually…

One of the fundamental assumptions of mainstream economic theory is that long-term growth is the key to raising everyone’s standard of living. Obviously economists are having to grapple with the fact that unlimited growth is not possible with limited natural resources, but their approach to the problems of pollution and climate change are often hampered…