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MONEY GROWTH DOES NOT CAUSE INFLATION by John Harvey
It is conventional wisdom that printing more money causes inflation. The only problem is, it’s not true. That’s not how inflation works. Hence, this is yet another of the false alarms being raised (along with the need to balance the budget) that is preventing us from doing what we need to do to recover from the worse recession since the Great Depression.
Explaining inflation would be much simpler if not for the need to first spend so much time debunking the popular view. But, that’s the way it is. And so, let me start with the “money growth ==> inflation” view. This is based on the equation of exchange:
MV = Py
http://www.forbes.com/sites/johntharvey/2011/05/14/money-growth-does-not-cause-inflation/#3979c8ba69b6
TAXES FOR REVENUE ARE OBSOLETE by Beardsley Ruml
While Ruml was writing about the merits of corporate taxes, it is his discussion about how the function of taxes changed after the nation exited the gold standard that make this a must read. As Ruml’s stated, with an “…inconvertible currency, a sovereign national government is finally free of money worries and need no longer levy taxes for the purpose of providing itself with revenue… It follows that our Federal Government has final freedom from the money market in meeting its financial requirements… All federal taxes must meet the test of public policy and practical effect.
http://neweconomicperspectives.org/2010/04/fed-chairman-ruml-got-it-right-in-1946.html
It is conventional wisdom that printing more money causes inflation. The only problem is, it’s not true. That’s not how inflation works. Hence, this is yet another of the false alarms being raised (along with the need to balance the budget) that is preventing us from doing what we need to do to recover from the worse recession since the Great Depression.
Explaining inflation would be much simpler if not for the need to first spend so much time debunking the popular view. But, that’s the way it is. And so, let me start with the “money growth ==> inflation” view. This is based on the equation of exchange:
MV = Py
http://www.forbes.com/sites/johntharvey/2011/05/14/money-growth-does-not-cause-inflation/#3979c8ba69b6
TAXES FOR REVENUE ARE OBSOLETE by Beardsley Ruml
While Ruml was writing about the merits of corporate taxes, it is his discussion about how the function of taxes changed after the nation exited the gold standard that make this a must read. As Ruml’s stated, with an “…inconvertible currency, a sovereign national government is finally free of money worries and need no longer levy taxes for the purpose of providing itself with revenue… It follows that our Federal Government has final freedom from the money market in meeting its financial requirements… All federal taxes must meet the test of public policy and practical effect.
http://neweconomicperspectives.org/2010/04/fed-chairman-ruml-got-it-right-in-1946.html
