The idea that governments can’t lower taxes because there is a deficit, but are free to raise all expenses even if there is a deficit can be found in many political manifestos these days. Central planners always see the economic challenges as a problem of demand, and as such cringe at the idea of prudent investment and saving. When GDP growth, gross capital formation, and consumption are lower than what Keynesians would want, they always blame the alleged problem on “too much saving”, a ridiculous premise based on the perception that economic cycles and excess capacity do not matter and if companies and citizens don’t spend as much as the government wants, then the public sector should spend a lot more. Continue reading High Government Spending Leads To Stagnation
In this seventh episode of my video-blog, we discuss negative rates. Why do central banks implement them? What are the alleged benefits and risks? Is it true that economic agents spend more and take more credit when nominal rates are negative?.
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The Federal Reserve, through its president Jerome Powell, has indicated that it is preparing to increase its balance “organically”. The effort to separate this latest monetary policy change of course from a full-blown new QE (quantitative easing) is, at the very least, amusing. If we look at what is being discussed, it has nothing to do with organic expansion and looks a lot like a new repurchase program. Continue reading Quantitative Easing Is Back
US deficit is rising due to excessive spending increases, despite rising tax receipts. The federal government’s revenue went up by 4%, to $3.46 trillion in the 2019 fiscal year, according to the CBO report. However, spending went up by more: 8%, to $4.45 trillion. Continue reading The US Deficit Problem Is A Spending Problem