By a continuing process of inflation, governments can confiscate secretly and unobserved…
the wealth of their citizens.
John Maynard Keynes
Advocate of fiscal and monetary measures to manage economic highs and lows
If some consider insanity to be doing the same thing repetitively, expecting different outcomes,
and the Federal Reserve contributed to the financial crisis
by creating short term growth at the expense of long term stability
after increasing money supplies before Y2K and after 9/11
while reducing short term interest rates from 6.5% in 2001 to 1% in 2003,
why would who want to repeat the same strategies after 2008?
Ponzi finance units must increase outstanding debt in order to meet financial obligations.
A transition occurs over the course of an expansion
as increasingly risky positions are validated by the booming economy
that renders the built in margins of error superfluous, encouraging adoption of riskier positions.
Eventually, either financing costs rise, or income comes in below expectations,
leading to defaults on payment commitments.
Hyman Minsky
Believed excessive debt causes financial crises
1 comment:
Beyond your observation, below is an observation by James M. Buchanan regarding the individual and tax increases. The observation is enlightening:
“The economist does, normally, attribute precise meaning to the terms "more" and "less." Moreover, if a similar model of rational behavior is extended to the collective-choice process, we are able to derive propositions about individual behavior that are parallel to those contained in economic theory. If the hypotheses are valid, the representative individual should, when confronted with relevant alternatives, choose more "public goods" when the "price" of these is lowered, other relevant things remaining the same. In more familiar terms, this states that on the average the individual will vote for "more" collective activity when the taxes he must pay are reduced, other things being equal. On the contrary, if the tax rate is increased, the individual will, if allowed to choose, select a lower level of collective activity. In a parallel way, income-demand propositions can be derived. If the income of the individual goes up and his tax bill does not, he will tend to choose to have more "public goods."
- James M. Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy, 1958
And then we have this observation:
… is from page 70 of Harry Kurz’s 1975 English translation of Etienne de la Boetie’s 1552-53 The Politics of Obedience: The Discourse of Voluntary Servitude:
“Tyrants would distribute largess, a bushel of wheat, a gallon of wine, and a sesterce: and then everybody would shamelessly cry, “Long live the King!” The fools did not realize that they were merely recovering a portion of their own property, and that their ruler could not have given them what they were receiving without having first taken it from them.”
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