Macroeconomics, Growth and Prosperity in a Free Society

I was recently discussing the economy with a friend and something that he said got me to thinking. He said that as far as giving to Haiti, that our government should just fire up the printing presses and print a lot of money and give it to Haiti. He suggested that they also do that for shovel ready jobs (primarily road construction and repair) and put people back to work. Now one could argue that this would help usher in inflation, and in a sense that would be quite correct, but it got me to thinking.

Hypothetically speaking, if I created a new country today, how would I go about issuing currency and distributing it throughout the economy? How would I get it into the hands of the people? How much would the total economy be worth?

Well, at one point in our history, the United States of America faced this very same dilemma, So how did our country become the most wealthy nation on earth? Because the founders who fought for freedom took huge risks. They bet the farm so to speak. They pledged their fortunes to finance the revolution. Some of them lost everything, many lost their lives. There is one man who borrowed $2 Million dollars from the French and pledged his personal property as collateral. He was unable to repay it and not only did he lose his property to France, but he was also thrown into prison where he subsequently died as a pauper. He funded the fight for freedom and in the process gave up his own.

Of course great rewards can only come from taking great risks. But there has to be a balancing point somewhere. Macroeconomics is the study of the the economy as a whole whereas microeconomics is the study of a more narrow focus like the pricing points of a particular company. Our country's treasury began issuing currency that was backed by gold. A modest growth was expected and occurred, albeit cyclically. That is that the growth was not constant, it raced ahead for a while and then it went through a contraction. This is the normal cycle for economies, expansions followed by contractions. Growth is naturally regulated by contractions. The very idea of sustainable growth, which means indefinite growth is not realistic. There is only so many workers, only so many consumers and that only supports a reasonable and realistic rate of growth that is as cyclical as birth rates will support.


But how did our economy grow to such an astronomical size int the first place? At the end of each growth cycle, during a contraction, we financed renewed growth with debt. This has continually pushed up the net worth of our entire economy. Advances in technology have also fueled growth. Innovation is an economic growth engine, and only in a free society could an economy grow as ours has. What other country has contributed to the world as we have? A partial listing of contributions to global society is; AC power generation on distribution, Interchangeable parts and mass production, aviation, super computers, personal computers, radio and wireless, radar et al.

So when Obama states that we should eradicate the cycles of growth followed by contraction, he shows two things. The first is that he just does not understand the natural order of economies. The second is that he believes that sustained growth can be achieved by suppressing the naturally occurring highs and lows. The problems with this view is that it stifles creativity, retards innovation, which in turn minimizes both risk and reward.


There will always be winners and losers. To attempt to manipulate the markets to create only winners is folly. There can not be winners if there are no losers!  if it were so then there would only be gliders, people just getting by the skin of their teeth, not reaping any rewards for risks taken.


If the treasury's printing presses run all day and all night, and they (central banks) do not destroy older currency at a raster rate than they are creating money, then that can result in inflation if confidence is lost in our ability to start the next cycle of economic growth. it (inflation) has very little to do with the currency itself (it has not been backed by gold for several decades now), it has more to do with the attitude of the people regarding hope for their future. That hope is not found in any book, or politicians platform, or party's agenda; it is found in the hearts and minds of the hard working men and women that drive our economy forward with risk taking, innovation, ingenuity and entrepreneurial spirit that only a free people can foster.


So let the printing presses rattle and hum, pump the economy with fresh new money, but stop trying to regulate the hell out of the economy. Deregulation is crucial to the recovery that we now need. No new government agencies are needed to oversee and regulate and consume an ever larger percentage of our GDP to regulate growth. Get big government out of the way, so we can all have the opportunity to prosper.