Sunday, May 31, 2020
Bailouts and the Destruction of the Buying Power of Money
In the first chapter of Capitalism, I wrote, “In the absence of a widespread, serious understanding of the principles of economics, the citizens of an advanced, division-of-labor society, such as our own, are in a position analogous to that
of a crowd wandering among banks of computers or other highly complex machinery, with no understanding of the functioning or maintenance or safety requirements of the equipment, and randomly pushing buttons and pulling levers.”
Those words describe the recent actions of Congress in enacting multi-trillion dollar legislation the alleged purpose of which is to offset the loss of trillions of dollars of sales and incomes caused by the imposition of “lockdowns” allegedly required to combat the coronavirus.
What Congress has done is not provide any kind of genuine relief for the damage caused by the lockdowns, but rather added to that damage. It has added to a massive forced reduction in the supply of goods and services a comparably massive increase in the quantity of money.
The consequence of this will be that when the economy recovers from the lockdowns, it will face a major increase in the quantity of money and volume of spending, which will substantially raise prices. Tens of millions of elderly people will suffer a major loss in buying power.
What will Congress do then? Create still more money to “bailout” the elderly? As the Constitution makes clear with respect to the power of the states, the Federal government too should have no power to make anything but gold and silver coin or bullion legal tender.That would protect us from further arbitrary increases in the quantity of money. It would prohibit all new attempts to destroy the buying power of money in the delusion that in doing so, one is rescuing the economic system.
P. S. The Destruction of Hospitals
Since mid-March, elective surgeries have been radically reduced in anticipation of the need to make hospital facilities available for a flood of coronavirus patients that never materialized. The revenues lost from these surgeries have threatened the solvency of hospitals.
How is it possible for such policies to be continued? Are hospital managements robots, unable to change decisions that have been proven wrong? Or are they working under orders from robot-like government officials, who have no financial stake in the fate of the hospitals?