gpickett00
02-08-2008, 01:23 PM
Since I found out about Ron Paul I have read a lot about economics and I changed my major to economics. Im in a class right now and we had to write a page answering 3 questions about inflation. I admit, I kind of avoided the third question but I think I did a good job. If we do a good job we get extra credit so I put some work into it. Here it is:
Chapter 11: The Problem with Inflation
1. Inflation is commonplace in societies because federal governments have a tendency spend beyond their means. Companies lobby congress to increase government spending without considering that the government has no cash or gold reserves. Any time our government needs money to pay for programs or to go to war it must find a way to finance them. Currently, we are spending more money than we ever had yet we have the largest deficit in history. Since politicians aren’t willing to tell the American people that taxes need to increase dramatically to cover the costs of government spending, they indirectly tax us using inflation. Instead of increasing taxes the conventional way by increasing taxation on income, they create money that does not exist to finance their operations. In the short-term the American people are satisfied that they have relatively low taxes, but what they don’t realize is that in the long-term they will have to pay for the fiscally irresponsible government.
Private companies who are directly contracted by the government are the first to benefit from the newly created money. Since they receive money that is essentially printed out of thin air they do not suffer the effects of an increased money supply. Eventually the corporations contracted by the government spend this new money and it works its way into the economy. After the government contractors spend their money, the lower and middle classes feel the effects of an increased money supply, inflation, and pay higher prices before their wages increase.
The burden of a fiscally irresponsible federal government provides short-term prosperity by providing our country with services we shouldn’t be able to pay for. But when government contracted corporations are able to use the newly created money first, the lower and middles classes indirectly suffer the consequences.
2. The government cannot escalate inflationary tactics more than they currently do because if they do so, average Americans would notice their irresponsibility and pose resistance. Financing programs, wars and welfare not allowed by the constitution, we create a deficit that causes the government to create money that we do not have.
3. By reducing the average maturity of its debt obligations the government has an incentive to implement inflationary tactics. If a debts due date comes up and our government owes a foreign government 600 billion dollars we are forced to print the money to come up with the shortfall. It is convenient that we can simply create money to pay for real obligations, but eventually this will take its toll.
Worldwide people are beginning to understand that the integrity of a US Dollar is in no way linked to a commodity such as gold. Since there is nothing of value backing a dollar, there is no reason to think of the dollar anything more than a fancy piece of paper. Reducing the average maturity of debt obligations is a temporary fix to our debt but we need a long-term solution to ensure prosperity.
Government monetary policy needs to change if this country seeks to avoid a bankruptcy forced upon us by fiscal irresponsibility. Our empire is very strong militarily and technologically, but if we do not address economic misconduct, our debt will come due and the American people will suffer greatly for its years of poor monetary policy.
Chapter 11: The Problem with Inflation
1. Inflation is commonplace in societies because federal governments have a tendency spend beyond their means. Companies lobby congress to increase government spending without considering that the government has no cash or gold reserves. Any time our government needs money to pay for programs or to go to war it must find a way to finance them. Currently, we are spending more money than we ever had yet we have the largest deficit in history. Since politicians aren’t willing to tell the American people that taxes need to increase dramatically to cover the costs of government spending, they indirectly tax us using inflation. Instead of increasing taxes the conventional way by increasing taxation on income, they create money that does not exist to finance their operations. In the short-term the American people are satisfied that they have relatively low taxes, but what they don’t realize is that in the long-term they will have to pay for the fiscally irresponsible government.
Private companies who are directly contracted by the government are the first to benefit from the newly created money. Since they receive money that is essentially printed out of thin air they do not suffer the effects of an increased money supply. Eventually the corporations contracted by the government spend this new money and it works its way into the economy. After the government contractors spend their money, the lower and middle classes feel the effects of an increased money supply, inflation, and pay higher prices before their wages increase.
The burden of a fiscally irresponsible federal government provides short-term prosperity by providing our country with services we shouldn’t be able to pay for. But when government contracted corporations are able to use the newly created money first, the lower and middles classes indirectly suffer the consequences.
2. The government cannot escalate inflationary tactics more than they currently do because if they do so, average Americans would notice their irresponsibility and pose resistance. Financing programs, wars and welfare not allowed by the constitution, we create a deficit that causes the government to create money that we do not have.
3. By reducing the average maturity of its debt obligations the government has an incentive to implement inflationary tactics. If a debts due date comes up and our government owes a foreign government 600 billion dollars we are forced to print the money to come up with the shortfall. It is convenient that we can simply create money to pay for real obligations, but eventually this will take its toll.
Worldwide people are beginning to understand that the integrity of a US Dollar is in no way linked to a commodity such as gold. Since there is nothing of value backing a dollar, there is no reason to think of the dollar anything more than a fancy piece of paper. Reducing the average maturity of debt obligations is a temporary fix to our debt but we need a long-term solution to ensure prosperity.
Government monetary policy needs to change if this country seeks to avoid a bankruptcy forced upon us by fiscal irresponsibility. Our empire is very strong militarily and technologically, but if we do not address economic misconduct, our debt will come due and the American people will suffer greatly for its years of poor monetary policy.