Inflation. Yes, again.

Note: I had written a whole play-by-play analysis of this section (pages 366-373) of Basic Economics by Thomas Sowell, but it is so boring and long I’ve decided it isn’t worth being put on a blog. 

We are going to whittle this down drastically and not trouble ourselves with all the different ways Sowell errs on inflation. I’ll try to simply give an explanation of what inflation is while keeping his errors in mind. There will be coverage of this section of Basic Economics in more detail in an eventual upcoming e-book and you can join The Mean Austrian email list for updates on that.

So, let’s get down to it: (Pry those eyelids open and try to not run away. It may sound familiar, but I promise it’s – relatively -short.) 

– The Mean Austrian


Scarcity is one of the key features of money and an important feature to keep inflation from drastically hitting an economy. When government has control over the money supply, and that money supply is paper backed by nothing of true worth – as the U.S. currency is today – there is nothing to stop the government from printing out more money. And more money. And more money still. This inflates the money supply (i.e., inflation).

The result is that as more gold comes on the market, it is valued less. The more there is of something the less it is worth. On the flip side, generally speaking, the less there is of something the more valuable it becomes. This is true of everything from bread to baseball cards. Pretty basic stuff.

“Hold up, Mean Austrian! Might gold ever be affected by inflation?”

Yes, inflation can happen even with gold. Enter, History:

After the New World was discovered by Europeans, gold mines in America were opened and gold flowed back to the old country where this new money bid up the price of goods. But it was very minimal and happened gradually over the course of a century.

The difference between gold mines in the New World and printing presses in the U.S. is that to mine gold out of the ground and ship it across the Atlantic was a costly and risky venture. It took a lot of tangible resources to bring that gold into circulation and thus the inflation was limited by the pocketbooks of the entrepreneurs and their backers. Under the Federal Reserve, there is nothing limiting the the increase in money. It is little more than a matter of paper and ink. No risk, high “reward”.

While there can be inflation with gold-based currency, that inflation would never be runaway inflation. The only thing keeping us from experiencing the runaway inflation the Wiemar Republic went through, and that Venezuela is currently experiencing, is the relative good sense of Janet Yellen.


Governments, in some sense, ultimately rest upon the acquiescence of the people. If the taxes get too high, people become unruly. The solution then is to tax as much as you can get away with, and for whatever expenditures remain unmet, simply print the money.

Yes, you guessed it: This inflates the money supply! It devalues the money already in circulation and it steals the purchasing power of every consumer in the country. This is a hidden tax and the most regressive tax. A sales tax may be at 8% of every dollar a poor man spends, but inflation takes 2% of every dollar the poor man doesn’t spend every year. This flat-out discourages saving money and if the man wishes to improve his current financial situation it makes it all the harder.

I’m pretty sure we’ll deal with other aspects of inflation as we move forward.  Deflation is right around the corner, so I’ll leave it here for now… I wouldn’t want to overexcite anyone all in one post.

I should also apologize for the delay. Blame my cows and computer. I know I do. For those of you who are still following along despite the delay, I really do appreciate you!

The Truth about Taxes

Bernie’s tax returns are out. He just lost NY so maybe it’s irrelevant now, but there’s still a point to be made and a lesson to learn. I listened to Jason Stapleton’s Show, I guess on Monday, where he really lays into Sanders for wanting to give the shirt off of everybody else’s back but then only gave 8% of his earnings to charity. It was also mentioned, and it’s been mentioned by others as well, that Bernie only paid 13% in taxes. But, guess what? And, here’s the bombshell.

He didn’t pay ANY taxes! This is a difficult concept for a lot of people to grasp when they can see, with their own eyes, a check made out by Bernie and sent to the IRS. How can I say that he doesn’t pay any taxes?

I guess we should start with asking, where do taxes come from? They come out of the produce of the economy; people and businesses produce wealth and the government takes part of that wealth in taxes.

The second question is, where does Bernie’s income come from? Taxes of course. Not quite all of his income but most of it comes from his salary from being a Senator from Vermont.

Consider these two points for a moment and you’ll realize that Bernie Sanders contributes very little in the way of producing wealth and the majority of his income is derived from taking the wealth of others.

So then, he contributes nothing to the U.S. treasury.

Let’s think of it another way. If you give me $100 and I turn around and give you $10, it is only an accounting statement to say that I gave you $10. In reality, I gave you nothing. On balance, you only gave me $90.

The majority of Sanders’ income is a drag on the economy. He isn’t a producer and he isn’t a contributor; he lives like a leech at the expense of others.

Now that we’re done picking on Sanders, we can expand on the principles.  If the majority, or if all, of a person’s income comes from the state, they are tax recipients and not taxpayers.

This would apply to EPA agents and OSHA regulators, the guys who work for the Anti-Trust Division of the Department of Justice, and the people who fill all the government agencies from the FCC to the DoD.

Yes, I went there. A full time soldier whose sole income comes from the Military is not a taxpayer, but a tax recipient. It is just a gimmick to have federal employees and soldiers pay taxes, it is not much more than propaganda. For the sake of efficiency, they should only be required to file if they have some other source of income, and most do not.

If they do, it could get tricky. There are Senators who do contribute to the economy, and there are those who take tax money who are mostly private individuals or companies. Privates in the national guard who make $150 a month for drill, but earn $2,500 a week in the market are still tax payers, though that changes when they get deployed, and their sole income comes from being a soldier.

The question to ask is whether or not an individual on net takes out of the Treasury, pays into it, or breaks even.  I try my best to break even; I don’t want the state to get my money, and I don’t want to end up with someone else’s hard earned money either.

Meet in the Middle: Abolish Taxes on Overtime & Second Jobs!

So here is a novel idea. I believe it is an idea that should be nearly unanimously supported by both parties, though perhaps for different reasons. Still, I do not think it will be supported by either side because the political class often does not really mean what they say. They only say the things they say because they believe that is what they need to parrot to get votes and win elections.

I will first lay out my idea, and then I will go over the rationale behind it.

First, a disclaimer: I do not support the income tax. It is a vicious and destructive, as well as immoral, tax. The fact that the state is able to determine how much of a man’s earnings he should be able to keep is abhorrent. If I had things my way, the income tax would be abolished immediately.

Clearly, the majority do not agree with me on this point, so I propose the following counteroffer:

  1. The government should only tax an individual on one job—naturally, whichever job grosses the most would be the one to be taxed.
  2. Taxes should not be levied on overtime pay.

It is really that simple. Those on the Right, everyone from Rand Paul to Jeb Bush to Donald Trump, all advocate for cutting taxes. Obviously, this proposal constitutes a significant tax cut. Though it would arguably be but a minor dent in the overall revenues collected by the government, the proposal would nonetheless lift a huge burden off the shoulders of the poor, single mother with 3 kids who is working 2 jobs. For our hypothetical taxpayer, she would actually get to keep all of her overtime pay, and all of the money she makes from her lower paying job.

Now for those on the Left, this idea appeals to many of their stated objectives (e.g. empowering of the poor), but it carries with it some challenges. For one, there is no vilifying and soaking of the rich. Additionally, even though it will greatly help minorities and women, the proposal is not expressly geared towards them, and so the Left may fear that they will not be able to pander to and receive credit from the constituents whom they are seeking to save.

But here is the thing: top income earners more often than not do not get paid hourly wages, and they very rarely have multiple jobs that they hold at the same time. Poor people do work multiple jobs, and they do work overtime. Generally, physicians do not receive overtime pay, nor do they work second jobs. The same is true of lawyers, executives, top level bankers, and CEOs.  In other words, this is a proposal for the little guy, and one that middle class workers will also benefit from when they work overtime.

Keep everything I have noted about income taxes in mind, and recognize that there is a big difference between making $50,000 a year as an office professional working 40 hours a week, and making that same amount by working in a warehouse 60+ hours each week. Alternatively, we could compare the mid-level manager who makes $100,000 a year working 40 hours a week with the factory worker who works 70+ hours a week to hit that 6-figure mark.

Insofar as our system continues with a progressive income tax, we should consider the manner in which the the money is being earned. There are compelling distinctions- human reasons-that support the notion that overtime money and income from 2nd jobs should not be taxed. In short, the taxes from one job- the taxes from 40 hours- should be enough for any working man (or the poor, single mother with 3 kids) to be deprived of by the government.

I am not rich, so I cannot speak to whether or not the rich are paying their fair share or not, but I do know that the poor and the middle class are paying more than their fair share. This needs to stop, and this proposal is the perfect opportunity for both sides- Right and Left- to meet in the middle and achieve the objectives of their respective ideologies. Can you hear it now? The sweet Kumbaya of the Democratic Socialist (whatever that means) and the Tea Party Republican, at once united in a common cause for the little man and economic freedom: “Abolish taxation on overtime wages and second jobs!”