A rise in the level of saving can reduce aggregate activity temporarily but only a sustained high level of saving makes it possible to have the sustained high level of business investment that contributes to the long-run growth of output.
A second reason why science cannot replace judgement is the behavior of financial markets.
After all, an overvalued dollar gives us the ability to
buy foreign goods at lower prices. And the existing volume of exports brings
more yen and euros than they would if the dollar were more competitive.
Although economists have studied the sensitivity of import and export volumes to changes in the exchange rate, there is still much uncertainty about just how much the dollar must change to bring about any given reduction in our trade deficit.
An increase in the relative price of products from the low wage manufacturers in Asia and Latin America will also make those products less attractive to American consumers.
And when the dollar decline makes foreign travel much more expensive, I will do more of my vacation traveling in the United States.
But because we in the United States finance our current account deficit by borrowing in our own currency, we can move to a more competitive dollar without the adverse effects that followed currency declines in other countries.
But the primary reason for wanting the dollar to become more competitive in the near future is that we may need an increase in exports this year and in 2007 to sustain the economy's current pace of expansion.
But then in April of 1985 the dollar began a sharp decline. The dollar's trade weighted value fell 23 percent in just 12 months and by a total of 37 percent by the beginning of 1988.
Domestic inflation reflects domestic monetary policy.
Even if the dollar does decline during the coming months, the delays in the response of exports and imports to the more competitive dollar will mean that the increase in aggregate demand from this source may not happen for a year or more.
Homeowners who refinanced their mortgages took out cash and reduced their monthly payments at the same time. Much of the cash obtained by refinancing was spent on consumer durables, home improvements and the like.
If the Federal Reserve pursues a strong dollar at home while the dollar becomes more competitive in global markets, we can achieve both price stability and a more balanced path of economic growth.
Increased government spending can provide a temporary stimulus to demand and output but in the longer run higher levels of government spending crowd out private investment or require higher taxes that weaken growth by reducing incentives to save, invest, innovate, and work.
Inflation is lower and more stable and the real business cycle fluctuations are more modest.
Of course, everything is not perfect. We see high unemployment and low productivity growth, but these are (as previous speakers have emphasized) the result of poor structural policies rather than inappropriate monetary policy.
Refinancing allowed households to take out cash to spend on other things while also reducing their monthly mortgage payments.
The good news is that a competitive dollar in the global
market and a strong dollar at home are compatible in both the long run and
during the transition to a more competitive dollar.
Thirty years ago, many economists argued that inflation was a kind of minor inconvenience and that the cost of reducing inflation was too high a price to pay. No one would make those arguments today.
We are particularly poor at the open economy issues.
I'd call it a new version of voodoo economics, but I'm afraid that would give witch doctors a bad name.
There are 10^11 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers.
Ask five economists and you'll get five different answers (six if one went to Harvard).
Economists state their GNP growth projections to the nearest tenth of a percentage point to prove they have a sense of humor.
If you have to forecast, forecast often.
Money is the fruit of evil, as often as the root of it.
But no one can praise Roosevelt for doing this and then insist that he restored our traditional political and economic systems to their former vitality.
Most people in this country believe that the American
Communist Party and its dupes are the chief internal enemy of our economic
system and our form of government. This is a serious mistake.
The Communists were interested in getting into key positions as union officers, statisticians, economists, etc., in order to utilize the apparatus of the unions to promote the cause of revolution.
Health economists have estimated that an injection of $250 million per year in Indigenous clinical care, and $50 million in preventative care, is required to provide services at the same level as for any other group with the health conditions of Indigenous Australians.
Reconciliation requires changes of heart and spirit, as well as social and economic change. It requires symbolic as well as practical action.
A major source of objection to a free economy is precisely that group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself.
Consider Social Security. The young have always contributed to the support of the old. Earlier, the young helped their own parents out of a sense of love and duty. They now contribute to the support of someone else's parents out of compulsion and fear. The voluntary transfers strengthened the bonds of the family; the compulsory transfers weaken those bonds.
Governments never learn. Only people learn.
Hell hath no fury like a bureaucrat scorned.
History suggests that Capitalism is a necessary condition for political freedom.
I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible.
If even a small fraction of the money we now spend on trying to enforce drug prohibition were devoted to treatment and drug rehabilitation, in an atmosphere of compassion not punishment, the reduction in drug usage and in the harm done to users could be dramatic.
Inflation is taxation without legislation.
Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.
Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another.
Nobody spends somebody else's money as carefully as he spends his own. Nobody uses somebody else's resources as carefully as he uses his own. So if you want efficiency and effectiveness, if you want knowledge to be properly utilized, you have to do it through the means of private property.
Nothing is so permanent as a temporary government program.
The black market was a way of getting around government controls. It was a way of enabling the free market to work. It was a way of opening up, enabling people.
The economic miracle that has been the United States was not produced by socialized enterprises, by government-union-industry cartels or by centralized economic planning. It was produced by private enterprises in a profit-and-loss system. And losses were at least as important in weeding out failures as profits in fostering successes. Let government succor failures, and we shall be headed for stagnation and decline.
The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.
The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses generally prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise.
The greatest advances of civilization, whether in architecture or painting, in science and literature, in industry or agriculture, have never come from centralized government.
The most important single central fact about a free market is that no exchange takes place unless both parties benefit.
The most important ways in which I think the Internet will affect the big issue is that it will make it more difficult for government to collect taxes.
The only way that has ever been discovered to have a lot of people cooperate together voluntarily is through the free market. And that's why it's so essential to preserving individual freedom.
The price works so well, so efficiently, that we are not aware of it most of the time.
The problem of social organization is how to set up an arrangement under which greed will do the least harm, capitalism is that kind of a system.
Underlying most arguments against the free market is a lack of belief in freedom itself.
Universities exist to transmit knowledge and understanding of ideas and values to students not to provide entertainment for spectators or employment for athletes.
We have a system that increasingly taxes work and subsidizes nonwork.
What does it mean to say that government might have a responsibility? Government can't have a responsibility any more than the business can. The only entities which can have responsibilities are people.
What kind of society isn't structured on greed? The problem
of social organization is how to set up an arrangement under which greed will
do the least harm; capitalism is that kind of a system.
Debt is the worst poverty.
If your desires be endless, your cares and fears will be so too.
There are two kinds of people, those who do the work and those who take the credit. Try to be in the first group; there is less competition there.