Your Wealth Makes Me Wealthy

Friday, June 12, 2009 \AM\.\Fri\.

One of the concepts in economics that people seem to have difficulty grasping at an intuitive level is how other people’s income affects one’s own income. Many people instinctively ascribe to the “lump theory” of money, in which one may imagine all wealth to consist of a set amount of money, like a dragon’s hoard. If you capture more of it, that means that someone, somehow, has ended up with less.

In certain circumstances, this theory might describe things pretty well, but in most times and places wealth grows and shrinks with productivity. Basically, if I am able to produce more goods and services of value to othe people in the same amount of time, then my income grows.

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More Biden Merriment

Friday, June 12, 2009 \AM\.\Fri\.

Biden 

Joe Biden, Veep-in-charge-of-public-amusement , continues his one man war against national gloom Hattip to Ed Morrissey at Hot Air. In regard to a question about the new Hudson river rail tunnel on June 8, Joe said, ““Look, this is designed, this totally new tunnel, is designed to provide for automobile traffic.  It’s something, as you know, up your way, that’s been in the works and people have been clamoring for for a long time.”  The tunnel is solely for trains.

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Stagflation or Hyperinflation?

Friday, June 12, 2009 \AM\.\Fri\.

laffer-monetarybase

Hattip to Ed Morrissey at Hot Air .  Economist Arthur Laffer, he of the Laffer Curve, sounds the tocsin regarding the incredible expanision of the money supply.

“But as bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.

About eight months ago, starting in early September 2008, the Bernanke Fed did an abrupt about-face and radically increased the monetary base — which is comprised of currency in circulation, member bank reserves held at the Fed, and vault cash — by a little less than $1 trillion. The Fed controls the monetary base 100% and does so by purchasing and selling assets in the open market. By such a radical move, the Fed signaled a 180-degree shift in its focus from an anti-inflation position to an anti-deflation position.

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