Assorted links

1. Neurodiversity and fandom.

2. Photo of Titan.

3. Why it's hard to inflate away the debt.

4. What are the highest circulation periodicals?

5. Beryl Sprinkel passes away at 85.

6. Reihan's web project; "Eventually, I’d like it to be a buzzing hub of Reihan-related activity:
illustrations, videos, posts, perhaps a podcast, crushed skulls,
diamond-encrusted elephant tusks, and more."


reihan's project is just what the web lacks...on to other news, I bought a t.v. in calipornia yesterday and they charge you 16bucks (added to price then taxed, btw) for proper disposal of your old tv set....if you have one or not. So, in my mind I see the kids in africa standing around a pile of toxic smoldering tv's looking for precious metals....oh, that "proper disposal"....thank you mr. big box store for caring....where's reihan.

The Titan photo is from four and a half years ago... surely it didn't escape your attention at the time?

What I find fascinating is the idea that Obama is seeking to deal with the deficit with inflation, when nothing he has said or written suggests anything other than efforts to create jobs, jobs, jobs through investment, investment, investment.

On the other hand, the past decade has been characteristically tax cuts to inflate asset, real and intangible, prices, while doing everything to drive down prices of consumer goods by lowering labor rates.

If we look at the methods and means to reduce deficits and debt burden, the solution is very simple: tax hikes to higher taxes. It worked well in the Clinton years thanks to both the Bush and Clinton tax hikes. The high taxes of the 50s and 60s dramatically drove down the debt burden even as the public infrastructure needs demands great spending for education (building and teacher and professors) and roads, water, sewer for new houses, and their financing, not mention the cold war driven make work, plus useful DARPA/NASA/NSF R&D.

Higher taxes didn't hurt explosive employment growth from 33-37, from 39-47, high taxes didn't hurt in the 60s, and the bracket creep tax hikes didn't prevent the 4 years of Carter showing high employment growth even with inflation, and employment took off after the 1982 tax hikes and the half dozen that followed.

The worst economic growth measured every way is during the decade of tax cut after tax cut.

And Obama has called for tax hikes, but given the clear virtuous record of tax hikes, I am baffled by the lack of support for Obama's tax hikes, especially be economists who are concerned about the economy, deficits, debt, and long term prospects.

Surely the past decade has proved the failure of tax cuts and the fallacy of individuals being smarter than government in making long term investments.

Since monetary inflation (as distinct from price increases due to supply constraints) enriches debtors and impoverishes savers, transferring wealth from the latter to the former, the answer to the question of whether debt can be inflated away must depend on the scale of the debt relative to the wealth available for transfer, and the side effects of that wealth transfer.

Clearly, if there's more debt than wealth, even transferring all of the wealth to the debtors cannot cancel the debt.

And even if the debt is less than the wealth, we know from history that there are levels of debt/wealth ratio at which attempting to cancel debt by confiscating the savers' wealth will have such negative economic and political effects as to begin destroying wealth and send a nation into a death spiral.

In the 1970s, much debt was inflated away, and large amounts of wealth transferred from savers to debtors, without sending the nation into a death spiral. But I believe the debt/wealth ratio at the time was surely much smaller than it is today.


"Examine Graph 1, which depicts both federal outlays and receipts as a percent of GDP from 1940 to 2008. Two things stand out. First is the striking behavior of federal tax revenue since the Korean War. Displaying less volatility than expenditures, it has bumped up against 20 percent of GDP for well over half a century. That is quite an astonishing statistic when you think about all the changes in the tax code over the intervening years. Tax rates go up, tax rates go down, and the total bite out of the economy remains relatively constant. This suggests that 20 percent is some kind of structural-political limit for federal taxes in the United States. It also means that variations in the deficit resulted mainly from changes in spending rather than from changes in taxes. The second fact that stands out in the graph is that federal tax revenue at the height of World War II never quite reached 24 percent of GDP. That represents the all-time high in U.S. history, should even the 20-percent-of-GDP post-war barrier prove breachable."

Inflation doesn't redistribute wealth generally. It only redistributes entitlement to consume from one set of monetary title holders to another. If you hold ten pounds of gold before an inflationary period, you still hold ten pounds of gold after the inflationary period. If you hold a house before the inflation, you still hold the house after.

If you extend credit at a fixed rate for the purchase of a house you hold before an unexpected inflationary period, the inflation effectively transfers title to the house at a lower real interest rate than you expected and can even transfer the house at a lower, inflation adjusted price than you expected.

If all of your "assets" are financial, like Treasury notes and mortgage backed securities, you're most susceptible to inflation, and I suppose you should be. If you don't like the risks of extending credit, then don't play the game.

Deflating the value of Treasury notes is in some respects equivalent to defaulting on these notes. If entitlement to tax revenue is not the sort of "wealth" we want, why not default on the notes? No libertarian proposes to forbid defaults on privately issued bonds.

If you hold ten pounds of gold before an inflationary period, you still hold ten pounds of gold after the inflationary period. If you hold a house before the inflation, you still hold the house after.

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