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Natural booms do exist. Technology booms do occur. I'm not arguing that they don't. What I argue is that expansion of the money supply exaggerates unnecessar
by stretchwithme 13y ago
Natural booms do exist. Technology booms do occur. I'm not arguing that they don't. What I argue is that expansion of the money supply exaggerates unnecessarily and causes other damaging distortions.
Government is the use of force. It makes sense that it is sometimes damaging to distort economic choices. Moreover, there is little proof that all the interference has any benefit. Usually, they benefit a tiny group of well-connected individuals, with the rest of us paying the costs.
- cromwellian 13y agoWell, another way of looking at the excesses of the market is that the rest of the world had a glut of savings, while America had a huge trade deficit and a lack of saving, so this naturally dictates a capital account surplus/net capital inflow. People in Europe and Asia have to put their money somewhere, and if the US is generating higher returns for less risk, they're going to go there, for either safety or opportunity. So if you have a huge influx of funds hungry for American assets, it is no surprise you see asset price inflation, as well as cheap, easy money. You could argue that perhaps, if it weren't for the fact that the US dollar is the world's reserve currency, we wouldn't be able to print dollars and run a trade deficit, and foreigners would never be storing up huge amounts of dollars to reinvest or loan to the US, but you could just as easily argue that raising taxes would increase national savings and reduce the trade deficit.
- stretchwithme 13y agoYes, there is a net capital inflow. If you're building a lot of oversized houses and financing a trillion dollar annual budget, you need to import everybody else's savings. I don't think financing these unsustainable things will be a good investment in the long run.