A trillion cows

It's one thing when stupid people repeat stupid talking points because they are paid to be stupid. That's how the world works. They're not being paid to persuade anyone; they're paid to reassure their masters and scare the rest of the slaves.

But I find people especially irritating who try to pretend to be economists, who seem to think they're actually explaining something, and just botch the job. So we'll have a look at Larry Burden's monstrosity, Thoughts on money theory.

Burden wants to explain inflation.

[M]aybe an example will help illustrate how inflation steals our wealth. If a family woke up one day and found out they had the only cow on earth, the value of that cow either to sell or exchange for other needed goods would be immense. The family, being prudent, decides to save their valuable cow until next year when it will be worth even more. Meanwhile, the USDA gets word of this priceless cow and decides to clone it.

Unknowingly, the next year the family discovers that because of the government’s interference in the market, there are now 1 trillion more cows for sale. Sure, they can still sell or exchange their cow for things the family needs; but for much, much less than they could have the year before.

Oh, sigh. I cannot think of a stupider way to explain inflation. Cows are a real productive resource. If we could clone cows, we would increase our real wealth, making everyone better off. Indeed, our fictional family has lost none of their real wealth (they still have their cow).

Money, in contrast, is not real wealth. You cannot eat a dollar bill, nor can you use it to produce more food.

Burden goes on:

Similarly, the dollar in your bank account has had its purchasing power diluted. Between 2008 and 2012, the Treasury [sic] printed somewhere between \$3 trillion and \$7 trillion out of thin air.

(Just so you know, the Federal Reserve, not the Treasury, creates money, which they can use to lend to banks, purchase Treasury bonds, or sometimes buy assets. The Treasury does print Federal Reserve notes, i.e. paper currency, but I have no idea how many they printed, nor how many were destroyed because they had worn out. Maybe if Burden would bother to cite his sources, we might be able to check his numbers.)

A growing economy needs a growing quantity of money. We try to create just enough new money to cover economic growth, but it is better to create a little bit too much than not quite enough. We want to keep the money moving: we measure our national economy by the flow of dollars, not by the stock. If there are not quite enough dollars, people tend to hoard them, the flow goes down, and we produce less than we could. It is difficult to produce more than we can, impossible in the long run. It is easy to produce less than we can, and if we produce less than we can in one year, it is easier to produce even less the next year. No more staunch a conservative than Milton Friedman argues that spiraling deflation probably turned what would have been an ordinary recession into the Great Depression.

We print money to cover our national budget deficit every year. This year’s deficit is projected to be \$1.4 trillion. Our national debt will likely top \$22 trillion. This is the largest debt ever incurred by a nation in human history.

Oooooh! Scary big numbers! Googol! Googolplex! Ackermann functions! Are you shaking in your boots?

So what? We also have the largest productive national economy in human history. Indeed, the "national debt", denominated in real goods and services at today's prices (not a terribly useful measure), comes in at well under two years of our national income. In other words, the United States' debt to income ratio is less than that of most families who buy a house.

And we are going to pass this bankruptcy [sic] down to our children and grandchildren.

We will pass the debt (not bankruptcy) — or should I say "debt", because governments are not like households, and government debt is not like household debt — to our children, as well as the productive economy it has built.

All debt is present pleasure for a future obligation.

This statement is nonsense even regarding ordinary household or business debt. When a household borrows \$500,000 to buy a house, they are not consuming \$500,000 the day they buy it, to be repaid well into the next generation.

Every nation from the Greeks to Venezuela have inevitably collapsed because they debased their currency.

Tsk! Grammar, Mr. Burden. Does your paper have copy editors? (Sigh. Of course, there will be at least one grammatical error in this post even worse than Burden's. In my defense, I don't have a copy editor.)

And not every nation has collapsed, and those that have collapsed did not all collapse because of currency "debasement"; indeed hyperinflation appears to be a symptom of other causes, not a primary cause.

Our descendants should look back on us with derision and disappointment.

Not nearly as much derision and disappointment as people who know what they're talking about look on those like Burden, whose condescension is matched only by his ignorance.