The cracked economics of government “help”

Trump has pretty much endorsed socialism. Yes, socialism. He said he looked favorably on the idea of government buying “equity stakes” in companies (the companies the government has injured). So the plan is: we shut you down, you lose revenue, we steal from others to get cash to buy shares of your stock, thus partially nationalizing your business. (It typically takes only 10% stock ownership to have de facto control over business policy.)

I expected statist economics from Trump but not from supposedly right-wing TV commentators, like those on CNBC. (Is talk radio any better?)

Everyone seems to believe that the government has its own wealth and thus can “fix things” by supplying some of that wealth to those who most need it.

They’re going to send a trillion dollars in checks out to people. Where is the physical production that those checks draw upon? It’s not in lots of government warehouses stocked with the things you need to buy. It’s in Amazon’s warehouses, Walmart’s warehouses, the warehouses and shipping containers of all businesses and in the fields and storehouses of agribusiness.

Government can only transfer wealth. How, in a nationwide crisis, is it going to help to take the citizens’ goods, then give them back to them?

“Oh, we’ll take them from the rich and give them to the needy,” some people say. Really? What do you think the goods of the rich are? They are investments. They are capital. They are factories, machinery, land, and payments of wages and salaries. That’s where over 90% of the wealth of the rich is. How is turning that over to the needy going to help make up for lost production?

The plan advocated is something even worse than “tax the rich.” The plan is to create new (phony) money.

So people will be able to buy their food and pay their rent with government-created new money and credit. Which means people don’t actually pay anything for that part of the goods they get. How, then, is production supposed to continue? There is no money—no real money—to spend on replacing capital and equipment. How is Amazon going to survive giving away products for free? How are investors going to fund the new businesses to replace the normal percent of business failures (let alone crisis-level of failures) when investors’ real wealth has been looted by the inflation?

The cleaner solution (being used in some places) is to impose a moratorium on rent and mortgage payments. Coupling that with an increase in food stamps is slightly less bad than distorting the price system, which is what inflation does.

Inflation is government counterfeiting of the money supply. That perpetrates a fraud on the entire economy. Fraud is an indirect form of force. Inflation is thus equivalent to the direct force of taxation. Because it disrupts the price system’s coordination of all economic activity, inflation is the worst kind of taxation.

It’s evil to have the government rob Peter to pay Paul. But it’s evil and crazy to have the government rob Peter and Paul to pay Peter and Paul.