Thursday, November 11, 2010

CRASH: Idiot Time Reveals True Cause Of Hyperinflation

Idiot Time (nominally called Time) has a piece posted under The Curious Capitalist which is WAY the hell past "curious".  It we would expect...anti-capitalist, and simply loopy.
Nonetheless, inflation, so far. Not so much. Palin herself seems to have missed the fact that prices in the past year or so have barely budged. So for the past few months, Leeper and Davig and another of Leeper's colleagues Todd Walker have been looking into why. Turns outs that it is very unlikely the Fed would cause hyper-inflation. That's why near zero interest rates and the Fed's early efforts to drive down long-term interest rates have done little to boost inflation. The real threat of inflation comes from tax policy, namely lower taxes. Lower taxes and the government will have a harder time paying back its debt. Investors run from our bonds and currency. Inflation ensues.  [bold in the original...really]
Ah-HA...!!!  The cause of high inflation is LOW taxes!  Well, that certainly explains a lot.  Except, no it doesn't, because it is daft.  Those of you with some economic literacy, just try to think of the historical models supporting that.  Those of you with no economic literacy, let me assure you...the author is nucking futs.

Essentially the author is saying that lower tax rates cut revenue.  We know historically this is a lie, but it is a favorite Collectivist lie.  We know it empirically and because we understand human behavior.  When you raise the cost of anything, you will cut its demand.  When you raise the cost of making "income", people will find other things to do besides producing "income".  Duh.  If you cut the cost of "income" (within reason), people will be happy to show more "income".  This results in MORE revenue from taxes AND MORE economic health in the nation.

Oh, but wait!  The lunacy does not end there!
But here's the trick. Leeper doesn't just model actual tax policy. He is looking at tax expectations. You don't actually have to lower taxes for inflation to rise. Nor do you have to raise taxes to get inflation to fall, for that matter. Leeper says as we get closer to the point that is looks like the government is unwilling to raise taxes people will get increasingly nervous about our debt. And that's the problem with the Tea Party.  [bold in the original...honest]
Hence, all you have to do is suggest lower taxes, and YOU are guilty of causing inflation.

Wow.  So, the problem in the Weimer Republic was all those TEA Party types after all.  The monetary policy of the central banks had NOTHING to do with it.  It was all those low taxes Germans were getting away with that made their money so worthless they burned it for fuel!

But, but....  What about BEFORE there were central banks with the power to control an entire currency?  Where is the historical model showing how lowering taxes caused rampant inflation back then?

Oh, and the Idiot Time author seems to forget that inflation IS a tax, and that it really IS caused by monetary policy (as proven by one Milton Friedman, who got a Nobel when those meant something).  How is inflation a tax?  Well, if you have anything of value right now, you are going to lose part of its value in a period of high inflation.  Like equity in your home.  Or like your savings or retirement account.  Or like a contract with fixed dollar amounts.  The government benefits by your loss, since it can pay back its creditors with cheapened money (what we call "cheating").

We can DEPEND on seeing more of this kind of madness as the Collective gets more and more desperate to find some way to frighten Americans into turning against the TEA Party's common sense approach to government.  We spend too much.  We need to stop spending what we do not have.


  1. I wonder if inflation might be more effected by, oh say...THE FED DUMPING 600 BIL INTO A BOND BUY or maybe printing currency, monetizing the debt and devaluing the dollar?

    Nah. Must be tax cuts?!? Sheeeesh.

  2. What? How could ANY of that have the slightest effect on inflation.

    You must be one of those religious nut right-wingers who hates sound science...