Two Thoughts Related to Economics
Thomas Allen
The following discusses two errors related to money that Brandon Smith makes and protective tariffs and wages.
Brandon Smith’s Errors
Brandon Smith’s “Simple fixes to our economic problems that establishment elites won't allow” contains at least two errors.
1. “Basically, the Fed bankrolls the corruption through fiat money creation while government officials and corporations utilize the money to wreak havoc on our living standards. Ending the Fed would solve the fiat money problem” Eliminating the Fed would not eliminate the fiat money problem. The federal government can just print and issue government notes and their electronic equivalent. It did so during the Lincoln administration with the greenback, which was a fiat currency, that significantly reduced the purchasing power of the dollar. Merely cutting out the middleman, the Fed, does not solve the fiat money problem.
2. “[W]hile it is true that the Constitution explicitly states that the U.S. Treasury becomes the only issuer of U.S. currency, this was done at a time when our currency was backed by gold and silver and there was no corrupt middleman in the form of a central bank.” The Constitution does not make the US government the only issuer of US currency. It only delegates the federal government the power to coin gold and silver and to fix the weights and purity of the coins so minted. Also, the U.S. Treasury is not mentioned in the Constitution. Moreover, the federal government never issued paper money until the Lincoln administration. Before then, private banks issued all paper currency, and they continued to issue paper currency until Franklin Roosevelt’s administration. During that time the federal government issued several types of paper currency (US notes, gold certificates, silver certificates, and Treasury Notes of 1890). It continued to issue silver certificates until the 1960s and US notes until the 1970s. When the drafters of the Constitution removed the authority of the federal government to issue bills of credit, they thought that they had removed the authority for the federal government to issue paper currency.
Protective Tariffs and Wages
Many people support protective tariffs because they believe that the tariffs will protect jobs and raise wages. If tariffs raise wages and protect jobs, it is only for those in the protected industries — and because of immigration, they may not even do that. However, they raise prices for everyone and, by that, they reduce the standard of living.
Historically, manufacturers have been the proponents of protective tariffs. They want protected markets for their inefficient companies. Also, they have been big supporters of large-scale immigration to suppress wages. Increasing the supply of workers suppresses wages and thwarts innovation.
Often, companies will use the argument of a lack of skilled workers so that they can import workers to work for less pay to suppress labor costs, i.e., wages. For example, companies may claim that a shortage of computer programmers exists because they have to pay computer programmers higher salaries than they want to pay. Consequently, these companies import foreign computer programmers who work for less pay. Importing foreign computer programmers to fill computer programmer jobs at lower wages prevents the market from signaling via higher wages that a shortage of computer programmers exists. Thus, fewer domestic workers learn computer programming skills. Allowing the markets to signal that a shortage of computer programmers exists encourages more people to learn the skills of computer programmers.
If people want to raise wages, they should severely restrict immigration. Fewer workers lead to higher wages and innovations that lower the cost of production. Moreover, immigration restrictions do so without increasing the cost of living.
Copyright © 2023 by Thomas Coley Allen.
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