San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Friday, May 20, 2016

An Economics Test

So you think you are pretty smart, eh?  So you think you are qualified to vote on who should lead the free world the next four years, huh?  So you think you know what makes the economic world go round, do ya?  Well, here is a simple test to see if your self-appraisal is accurate.  Each of the following statements about economic reality is either true or false.  Take the test and then scroll down to see how connected you are to economic truth.  (My apologies for the changing fonts in this post.  I have spent way too much time trying to fix the problem and most of my fixes only made it worse.)
  1. Amerikans are saving too much money and the result of all of this hoarding will be a decrease in the rate of economic growth that could bring on a recession, if one is not already upon us.
  2. Amerikans do not save enough money and the taxpayers will likely be called upon in the future to give money to retirees as a direct result of the fact they are not saving enough for themselves.
  3. Jobs are created by career politicians via the laws they enact and once those jobs are created they become the property of the hard working, middle class families who fill them.
  4. Evil, profit-seeking businessmen immorally destroy jobs by sending them overseas so they can make more money even though the jobs they send overseas were created by the government of the Socialist Democracy of Amerika and owned by the socialist workers who filled them.
  5. Raising the minimum wage is good for the economy because it gives more people more money to spend and, since consumer spending is 70% of Gross Domestic Product, a higher minimum wage will stimulate economic growth as those workers go out and buy lots of shiny things.
  6. The best way for the economy to grow is for the Federal Reserve Bank to create more money, inject it into the economy via loans and the "multiplier effect," and then sit back and watch the magic happen.
  7. If stingy and stupid citizens save too much money the best way to solve the associated reduction in economic growth is for the federal government to step up and create jobs by spending money on infrastructure, thus ensuring that the economy will keep growing as well as improving the lives of all citizens of the Socialist Democracy of Amerika.
  8. Income inequality, the glass ceiling, the disparate net worth between the rich and the poor are all problems created by greedy businessmen and corporations operating in the the free market that can only be eliminated by the creation of more government regulations that will force the evil profit seekers to behave morally.
  9. It is possible for people who are smart enough, generally career bureaucrats in government jobs, to manage the economy so that recessions and boom-periods no longer take place, thus ensuring steady and equal economic growth for all citizens.  
  10. Whenever a recession does take place the one thing we know with absolute certainty is that it was created by profit-seeking corporations operating with too much freedom.
Answers:
  1.  False.  Hoarding is a term that was utilized by John Keynes (father of Keynesianism) to cast a negative light on personal savings.  Keynes was a worshiper of government who believed that all people except those in government are stupid.  When people were left to their own devices, said Keynes, they would always end up saving their money, thus reducing something he called aggregate demand.  When people do stupid things like save Keynes believed the only way to avoid recession was for the government to engage in deficit spending.  As you can imagine, people in government loved Keynes. They still do.
  2. False.  I put these two questions back-to-back to illustrate how career politicians and their media lackeys knowingly and willingly contradict themselves all the time.  When career politicians want to alarm us about the economy they inform us that we are saving too much.  When career politicians want to alarm us about the teetering social safety net they inform us that we are not saving enough.  Either way the populace becomes alarmed and the mission is accomplished.  We all turn to government as our savior.  There is no such thing as saving too much nor is there any such thing as saving too little.  Each person is free to save as much or as little as he wishes.  
  3. False.  There are actually two falsehoods in the third statement.  Government and the career politicians who run it do not create a single net job.  At the same time, the jobs that are created in the economy are the property of the people who create them, not the people who operate within them.  Every single politician I have ever heard speak takes credit for creating jobs.  Although it is true that government spending can "create" a do nothing job for a period of time, the taxes associated with creating that job destroy more than one job in the private sector.  The net result is that no government program ever creates any real jobs.  Jobs are created in only one way....when profit seeking businesses and corporations expand and need more people to help in their expansion.  When corporations expand the jobs they create belong to the company, not to the person who agrees to do the work.  
  4. False.  This is a partial restatement of statement three.  The new item added here is that profit seeking businesses destroy jobs when they send them overseas.  Clearly this cannot be true.  If a job exists in this country and a profit seeking businessman decides to send that job to a foreign land the job still exists in that foreign land.  No job has been destroyed.  Furthermore, even if the profit seeking businessman decided to destroy the job, it is his job to destroy.  He is free to do what he wants with the jobs he creates.  He is under no moral compunction to employ anyone, especially if the terms of employment cause him to make less money or suffer losses.  Anyone who does not like this truth is free to go out and start his own company.
  5. False.  Everything about statement five is wrong.  Wages are determined by the free market.  When government gets involved in the process of wage setting it is inevitable that distortions will occur.  When wages are set at an artificially high rate the logically and economically necessary result of that policy will be a reduction in the total number of jobs available.  All companies that are operating on the margin will be forced to reduce the total number of jobs they have if they have any chance of remaining profitable.  Furthermore, the wrongheaded idea that spending is a part of Gross Domestic Product is ridiculous.  Product is product.  Spending is not product, it is spending.  It really is that simple.  Lastly, if a higher minimum wage really could create wealth the government should establish $1000/hour as the required minimum wage.  Then we could all sit back and watch the wealth multiply like never before.  Indeed, we would soon find that we are all spending ourselves to prosperity
  6. False.  To quote Hans Sennholz, "The popular notion that an increase in the stock of money is socially and economically beneficial and desirable is one of the great fallacies of our time.  It has lived on throughout the centuries, embraced by kings and presidents, politicians and businessmen.  It has shattered numerous currencies, inflicted incalculable harm, and caused social and political upheavals."  Adding new money to an economy only devalues the existing money.  No real wealth is ever created.  Real wealth is created by profit seeking businessmen and corporations operating within the free market.  When the Fed attempts to create wealth by inflating the money supply the only result is economic harm.  Always
  7.  False. This is another Keynesian fallacy.  Career politicians love to talk about how they save our economy by sponsoring, voting for and legislating new construction projects on "infrastructure."  These projects are always economic boondoggles that inevitably fleece the taxpayers.   Government spending never aids the economy.  Government spending always has a harmful impact upon the economy.  The reason for this truth is simple:  all government spending is financed either by taxes or inflation, both of which are capital destructive.  Only savings and investment by private citizens and profit seeking businessmen and corporations can keep the economy growing.  However, since we live in a land populated with citizens filled with sinful envy, when wealth disparities come about as a result of the division of labor career politicians come in and pander to the envy of those making less money than the entrepreneurs by demonizing their wealth creative activities and calling for programs of wealth redistribution.  Those programs are always popular with the majority.
  8.   False.  Statement eight is partially true.  Income inequality, the glass ceiling and net worth disparity are most certainly created by the free market.  On that point we all agree.  What makes this statement false is the sinful belief that income inequality, the glass ceiling and net worth disparity are evil.  Income inequality is a good thing.  It gives sinful and lazy human beings an incentive to work.  The same is true for the disparity in net worth found among the citizens of this country.  The glass ceiling is simply the free market's recognition of the fact that, as a class, the work of women is worth less to the consumers of this land than the work of men.  You can allow your sinful emotions of envy, covetousness and hatred take control of you and complain about this economic reality or you can embrace it for what it is and purpose to be one of the more productive members of society. The choice is up to you.
  9. False.   The presuppositional bias that exists in the minds of almost all citizens of the Socialist Democracy of Amerika is that a person who works for the government is altruistic and a person who works for a profit seeking company is greedy, evil and immoral.  This is true despite the fact that, generally speaking, government employees are overwhelmingly filled with avarice and will seize any opportunity to feather their nests at taxpayer expense while profit seeking businessmen are constrained by the free market to behave in the best interest of their customers.  Want proof?  Where would you rather have to go to mail a package, the post office or Fed Ex?  I rest my case.
  10. False.  The Federal Reserve Board was created by the federal government to manage the economy so that the citizens of this God-hating country would never experience another recession again.  How have they been doing?  The number and strength of the recessions experienced since the creation of the Fed are worse than prior to its creation.  You would never know that fact since the government propaganda machine known as the media purposefully and successfully blames the free market for every recession that takes place.  Blame is usually assigned to evil Wall Street bankers or other financial institutions that allegedly only make money by shuffling paper around.  That argument always plays well to envy filled workers who are quick to blame someone who makes more money than they do while, at the same time, giving the government power brokers who really caused the recession a free pass.  This activity is called state worship and it is everywhere in this idolatrous country.

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