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Robert Wright’s review of my book captures the essence of my journey in America.
“There is a right way and a wrong way, always choose the right way.” Abraham Sabrin (1914-2001)
Every Wednesday at 11:05am talk show host Gary Nolan and I discuss the economy and politics.
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, (sic) promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America. Preamble to the Constitution
In the “Other Voices” column this week Paul Sheard makes the assertion, “The government creates money (injects it into the economy) when it spends and destroys money (withdraws it from the economy) when it taxes.” This is economic nonsense.
When the (federal) government spends, the money must come from taxes and/or borrowing from the public and/or the central bank (the Federal Reserve in America) buying the new debt issued by the Treasury directly (called monetizing the debt). The central bank could buy the Treasury bonds owned by the banks, which in turn could then buy the new debt issued by the Treasury. A central bank thus creates money when it buys new or old government debt.
In other words, how the federal government finances its budget deficit(s) will determine if new money is created—monetary inflation—which causes price and asset inflation.
Government does not “create” money when it spends and taxes. Money is “transferred” coercively from the private sector to the public sector. If Jones is taxed one dollar and the government spends the one dollar on Smith for a welfare payment or for any other program, purchasing power has shifted from Jones to Smith. (I am assuming there is no cost to collect and disburse the funds from a government bureaucracy. That’s another issue.)
New money has not been “created” nor “destroyed” because of the government’s tax and spend policies. Government spending and taxes imposed to support the welfare-warfare state “distort” the economy, because it is not based on “democracy”—people spending voluntarily on the goods and services they want.
There are numerous myths about the economy. Rothbard outlines Ten Great Economic Myths that is a must read for anyone who wants to know when the politicians and pundits are spouting bullshit about deficits, inflation and other issues.
This year marks the 60th anniversary of Rothbard’s two major contributions to our understanding of money and the Great Depression. The latter book demolishes the myth that President Hoover was a ”laissez faire” president and details how the Federal Reserve’s policies created the unsustainable boom of the 1920s. Is history repeating itself in the 2020s? More on this in a future column
Wednesday the CPI will be reported and the PPI on Thursday. I’ll review the latest price inflation numbers this week.
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My latest piece on the economy was published in Fortune, https://fortune.com/2023/03/27/ -2023-layoffs-tech-finance-unemployment-outlook-fed-rates-murray-sabrin/ This is an update of my 2021 forecast, https://fortune.com/2021/12/09/next-recession-heres-everything-bubble-markets-2021-2022-covid-murray-sabrin/
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Murray Sabrin, PhD, is emeritus professor of finance, Ramapo College of New Jersey. Dr. Sabrin is considered a “public intellectual” for writing about the economy in scholarly and popular publications. His new book, The Finance of Health Care: Wellness and Innovative Approaches to Employee Medical Insurance (Business Expert Press, Oct. 24, 2022), and his other BEP publication, Navigating the Boom/Bust Cycle: An Entrepreneur’s Survival Guide (October 2021), provides decision makers with tools needed to help manage their businesses during the business cycle. Sabrin’s autobiography, From Immigrant to Public Intellectual: An American Story, was published in November, 2022.
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