Steve Hanke and Caleb Hofmann write about the quantity theory of money and the Fed:
Thanks to the Federal Reserve’s monetary mismanagement, Americans are suffering from economic whiplash. Americans enjoyed a post-Covid economic boom. Then, they were hit with high inflation. Now, they are staring down a recession in 2023. How did this happen in just three short years?
All roads lead to the Federal Reserve, where chairman Jerome Powell has rejected the quantity theory of money (QTM), a theory which states that inflation and economic growth are inextricably linked to the money supply (measured by M2). It’s a theory that was famously championed by Milton Friedman, who was unquestionably the master of monetarism (read: the QTM).
Jon Hartley and Jackson Mejia write about why a trillion-dollar coin would create inflation:
The idea is not new. It first emerged over ten years ago in the midst of a similar debt-limit standoff that ultimately resulted in S&P downgrading U.S. debt and a significant market selloff (this was also in the same era as the Bowles-Simpson debt commission). More broadly, governments around the world and throughout history have frequently resorted to currency debasement during fiscal crises.
The trillion-dollar coin would, in essence, permanently add new currency to the liability side of the Fed’s balance sheet. This type of money creation sharply contrasts with the quantitative-easing strategies of the past. With quantitative easing, the Fed issues temporary bank reserves to fund bond purchases rather than issue new currency altogether. According to research by one of the co-authors, quantitative easing has a marginal effect on long-term bond yields and minimal effect on inflation. On the other hand, economists since David Hume have known that helicopter-money drops — which are permanent additions to the balance sheet — are highly inflationary. A trillion-dollar helicopter drop, which would equal about 5 percent of the M2 money supply, would be one of the largest in American history.
Jim Harper writes about IRS lawlessness:
Congress recently gave the commissioner of the Internal Revenue Service (IRS) a chauffeur as part of a $1.7 trillion spending bill that nobody actually read. In another such bill, Congress required reporting of individuals’ payments of as little as $600. The hypocrisy, and the problem, arise from Progressive Era reforms that centralized power in the federal government and created the income tax.
Worse, however, is the deep and serious inconsistency between the income tax and our nation’s foundational protection of privacy, the Fourth Amendment. In tax investigations, the courts essentially give the IRS carte blanche to seize and search financial information without regard to constitutional limits. The modern era of digitization has made this hugely consequential for our financial privacy, personal autonomy, and security.