Economic thought with any pretense of seriousness is all about removing all barriers to production. No doubt taxes are a barrier, as are regulations, tariffs, currency devaluation, and government spending. Whatever inhibits production is paid for right now.

The problem presently is that even the right-of-center economic religions, though they would nod their heads to much of what you’ve just read, don’t quite grasp the truth of it. It can be found in their commentary about tax day. A recently published piece at American Institute for Economic Research vivified this.

The opinion piece started out well, with a Bastiat-like lament about taxation and the “savings never accumulated, the investment never made, and the business never expanded because resources were first claimed by the state.” Yes, precisely. Taxes are a price, and they’re paid for dearly right away. Only for the piece to stray into accepted, but easily discredited economic wisdom.

While the author effectively clarifies the burden of direct taxation, government borrowing quickly becomes some kind of other, the pain of which is only felt deep into the future. He writes that borrowing allows politicians to “preserve the benefits of spending while muting the immediate pain.” Really? How?

Politicians substituting themselves for the marketplace in the allocation of resources is just another bit of phrasing for central planning. And the pain of central planning is immediate.

To add Nobel Prize-heft to his troubling navel gazing, the author quotes public choice founder James Buchanan (1919-2013) as saying that “The primary real burden of a public debt is shifted to future generations.” Sorry, but Buchanan was incorrect. So is the individual quoting him.

If this is doubted, merely contemplate the debt run up in 2020 by the first Trump administration to subsidize ($3 trillion Cares Act) lockdowns across the country. Were he alive, could Buchanan seriously contend that the horrors of government consumption were somehow postponed solely because borrowing, not direct taxation, informed them?

It all speaks to the dangerous obsession conservatives and libertarians have with government debt. They focus on nominal numbers and “future taxation” as though we’re somehow spared the burden of this wealth extraction in the present. It would be difficult to find a more obtuse line of economic thinking, but the AIER (where I’m a fellow) piece most certainly did.

As is the case with so many on the U.S. right, there’s a tendency to say that government borrowing is reduced by the Fed through dollar debasement. Oh well, if we ignore what’s true, that the dollar’s exchange value has never been a part of the Fed’s policy portfolio as is, we can’t ignore that if inflation were the policy choice to shrink debt, that there would be very little debt. That’s because markets are wise, and by extension markets for money exchangeable for all goods and services are incredibly wise.

Without defending a substantial majority of taxing or borrowing for even a second, and without foolishly arguing that there’s been no inflation since 1971, it’s just not serious for economic scholars to so blithely contend that the federal government uses “inflation” to shrink its debt burden. The latter implies that those with title to money would mindlessly direct it to government income streams that will soon be devalued. Again, not serious.

What requires much more serious thought is how much greater total national debt would be absent any inflation. This isn’t to defend inflation, but it is to defend serious economic thought that calls for all economic thinkers to recognize what’s true: as with currency devaluation (inflation), government spending is painful, and the pain of it is immediate.

Originally published on Real Clear Markets.

Balancing the budget will never, ever shrink the federal government opposite what the experts at Cato, Mercatus, and other right-of-center think tanks tell you. The reason why can yet again be found in national debt of $39 trillion.

The debt is a loud, market signal that government revenues in the future will make those of the present appear small by comparison. Markets aren’t stupid, and there’s no way there would be all this debt absent lender optimism about soaring government revenues in the future. That’s why a balanced budget amendment today, tomorrow or ten years from now would codify a massive and growing government burden for the sainted grandchildren.

What the various right-wing economic religions aren’t seeing is that the debt is a symptom of a much bigger, much more problematic rising tax revenue problem. Almost uniformly lacking in private sector experience, the various budget experts can’t see that as is the case with individuals and businesses, the greater the revenue intake the greater the ability to borrow.

All of which is magnified when government is the borrower. Since no one spends or borrows as carefully with money not their own, politicians with taxable access to the most enterprising people on earth borrow in uncaring fashion since the debt isn’t theirs. Even better, the bigger the government they create via soaring tax revenues that enable a lot of spending and borrowing, the bigger their retirement as they lobby the actions of a government the cost of which grows by the day.

Again, we have a too much tax revenue problem, and the debt is a logical symptom of it. That’s why spending cuts and entitlement reform will do less than nothing to shrink government. Instead, they’ll just free up dollars for the introduction of all new government programs that will grow to the sky, not to mention that a focus on spending cuts and entitlement reform is a focus on symptoms once again, as opposed to the too-much-tax revenue problem that enables all the spending, borrowing and big programs.

To which some respond that this column must be calling for a “starve the beast” plan. No, it’s not. Assuming “starve the beast,” the electoral response from an electorate that allowed all the spending and programs would be of the kind that un-elects the few (if any) politicians who grasp the too-much-tax-revenue problem.

Instead, the aim should be to feed the existing beast. Awful as Medicare and Social Security are, they’re priced. Let them consume greater amounts of increasing tax revenue. That way new programs are difficult to introduce.

From there, it would be difficult to find something more bullish than the cost of interest payments on the debt. The libertarians at the Cato Institute lament the latter, but it’s limited government personified. Let the trio of Medicare, Social Security and interest payments swallow growing amounts of government (yes, feed the beast) to avoid voter upheaval that would unseat the smaller number of legislators interested in containing government.

While this is taking place, as in while a large government is made large by very few expenses, acknowledge what's never been acknowledged: big government and debt spring from too much tax revenue.

From there, make it policy to fully fund what exists while substantially decreasing forward levels of taxation to ensure that tax revenues don’t explode in the future. In other words, feed the government beast, and pay interest on the debt now while capping future tax revenues to ensure that the beast doesn’t grow many more heads in the future.

Originally published on Real Clear Markets.

To: Costa Rica’s Ministry of Economy, Industry, and Commerce (MEIC)
Subject: Opposition to Costa Rica’s draft Technical Regulation RTCR-525:2025 - Ban on Nicotine Pouches
Date: 4/12/2026

To whom it may concern:

My name is Jon Decker, and I am a senior fellow at the Parkview Institute based in Washington, DC. Our organization is dedicated to supporting free trade and economic freedom.

I am writing today to respectfully express my opposition to Costa Rica’s draft Technical Regulation RTCR-525:2025, which would establish a total ban on nicotine pouches.

Despite the unfortunate imposition of new tariffs under the current U.S. administration, the significance of the U.S.-Costa Rica trade relationship remains well understood. The total exchange of goods and services between our two nations amounts to roughly $30 billion annually. This voluntary exchange has enabled a shared prosperity and security that stands as a remarkable humanitarian achievement.

It is concerning, therefore, that Costa Rica would consider a ban on nicotine pouches that undermines the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR). Just as Costa Rican farmers are supported by American demand for exports like fruit and coffee, American tobacco farmers derive significant benefit from the ability to export products manufactured from their crops.

Furthermore, it should be noted that this non-tariff barrier would impact products already authorized by the U.S. FDA. These products have undergone rigorous scientific assessments which—contrary to the public health concerns cited as rationale for this ban—found that they carry a lower risk of serious health consequences than traditional cigarettes. In America and around the world, embracing this harm-reduction strategy has achieved demonstrable benefits for consumer welfare as smokers switch to less harmful alternatives. Given that Costa Rica permits the sale of cigarettes, which carry a significantly higher risk of cancer and other illnesses, this proposed ban on nicotine pouches appears to be more about protectionism than public health.

Lastly, global experience has revealed that blanket bans often fail to achieve intended outcomes and can even create new risks. A recent, similar attempt to ban vaping products in Mexico resulted in a new revenue stream for sophisticated cartels, strengthening the same supply lines used to commit even more serious crimes.

Given the increasing global demand for these products—driven directly by their potential for harm reduction—a total ban presents a real risk of creating an illicit market. This would undermine public safety and consumer health, as illegal alternatives often bypass the legitimate safety and quality standards adhered to by U.S. manufacturers. Furthermore, an illicit market would make it nearly impossible to enforce age-of-sale requirements.

For these reasons, the proposed ban on nicotine pouches should be rejected. This policy would damage a vital trade relationship and lead to potentially adverse impacts on public health and safety. I appreciate your consideration.

Sincerely,

Jon Decker
Senior Fellow
Parkview Institute
www.ParkviewInstitute.org 

No amount of Fed fiddling can keep credit away from production...

Continue reading on Forbes.

Filling up your car is a big deal.

George Gilder has made the crucial point that all the inputs for cars and gasoline are as old as the earth, but that cars and fuel only reached mankind for a tiny fraction of the earth’s existence: early 20th century to the present. Gilder notes that when we fill up our gas tank, we’re filling it not with fuel but with information.

Except there’s more. Think about what cars in modern times tell us upon filling the tank: usually the car’s computer indicates roughly how many miles the car will travel before requiring another fill-up. Depending on the car, it’s anywhere from 250 to 400 miles?

The total miles the car will travel before the next filling station trip doesn’t much matter, but the symbolism of it does. Contemplate the bigger, bullish meaning of it all.

Factoring in once again how small the 20th century to the present is to the total life of earth (are you listening, global warming alarmists), not to mention how tiny it is relative to when upright man stalked the earth, what a story of progress a full gas tank is. Think about it.

For the overwhelming majority of man’s existence, humans for the most part never traveled even a few miles beyond where they were born, let alone the number of miles a tank of gasoline gets us. No doubt the hunting and gathering nature of work in prehistoric and even relatively modern times (think the 19th century) required humans to walk many more miles in their lifetimes, but once again almost certainly within a very compressed stretch of land.

That travel was so limited for so long probably helps explain why the U.S. prospered, and did so very quickly. The people crossing oceans to get to the U.S. weren’t just anybody, rather they were the rarest of the rare not just willing to start all over again in return for freedom, but risking their lives to do so.

Yet once again, and once here, their travel was limited. Surely some crossed the continent, and many moved a bit more in smaller spaces given their restlessness amid abundance (that’s how Alexis de Tocqueville described Americans), but primitive transportation options almost certainly limited how much Americans could move. By extension, what a cruel existence it was.

No wonder those before us were so poor by comparison. People weren’t just disconnected by geography, but the disconnect also deprived most of the ability to match their talents with work that elevated their unique skills. They farmed whether they wanted to or not.

It’s so different now. Most of us fill up our cars and very understandably don’t contemplate the bullish meaning of doing just that. But for an increasingly small portion of our total earnings, we can buy mobility that most never had.

Is it a surprise that inequality has brilliantly spiked alongside leaps like this? What enhances our mobility not only frees us to move our human capital (the most important capital of all, by far) to its highest use, but it's also rapidly expanded the ability of the rarest of rare commercial talents to reach others with their genius. Translated, if Jeff Bezos had been born in 1864 rather than 1964, he likely still would have been prosperous, but much less so thanks to technological limits that would have substantially shrunk the number of people he could have served.

Going to the gas station is bullish. It’s probably a trite thought, but it’s meaningful. That’s because mobility symbolizes freedom, and most certainly prosperity.

Originally published on Real Clear Markets.

As the illness of the late Cato Institute co-founder Ed Crane escalated, and with it Crane’s pessimism about how much time he had left, I would tell him he had to stick around lest the members of our weekly lunch crew retreat into fallacious thinking, including – gasp – conventional conservative wisdom.

There was reason for worry. At Cato, a pattern had revealed itself. Once people left Cato and Crane’s counsel, they tended to stray.

The frequently disappointing evolution of individuals outside Crane’s orbit came to mind while reading Cornell economics professor Eswar Prasad’s new book, The Doom Loop: Why the World Economic Order Is Spiraling into Disorder. This is the third book by Prasad that I’ve reviewed, which is hopefully a signal to readers that I’m a fan of Prasad’s. While there’s broad disagreement with him about many things, there’s always been a lot of learning in between the disagreements.

Crane came to mind while reading The Doom Loop because I found myself speculating that if Prasad were to ever talk economics with me, he would likely sound quite a bit different from how he sounds with his regular crowd. Who is his regulator crowd? To Prasad’s credit, it’s big names. Think Robert Rubin, Fiona Hill, Raghuram Rajan, Lawrence Summers, and Janet Yellen, among surely many others. Those mentioned all blurbed his latest release.

About the names listed, more credit to Prasad is due for not joining the echo chamber against Summers for his past associations. The view here is that Summers’s prurient desires over the decades were quite a bit less damaging than the various fallacious economic notions he foisted on the world, which in some ways is the point.

Just as women dress for other women, economists write for other economists. The Doom Loop is a book written for prestigious economists, which is the problem. Thinking about Summers alone, he literally professed the view that Joe Biden’s alleged inflation was so bad that the U.S. needed years of high unemployment to fix it. Yes, conventional economists believe against all logic and empirical realities that economic growth is the cause of inflation, and Summers is rather conventional. Oh well, when the history of the Trump/Biden era is finally written, rational historians will correctly conclude that the 2021-2022 “inflation” had nothing to do with Biden or the Jerome Powell Fed. Yet I digress.

The point of this bit of throat clearing is that The Doom Loop’s very real problem is that Prasad yet again seemingly wrote it for fallacy-stalked individuals like Summers and Yellen. Yet to read the frequently insightful Prasad is to constantly wonder how he would write, and what he would conclude if he didn’t run in such high economic circles.

It’s something to wonder about simply because when Prasad is interesting and insightful, he’s a joy to read. I quote Prasad directly or reference him in lots of economics columns, along with my books. Which is why I’ll be a reader and reviewer of Prasad for as long as he writes books. When he’s good, he’s great. The previous assertion is validated by some of Prasad’s insights in Chapters Five and Six of The Doom Loop.

About the situation in China vis-à-vis Taiwan, he writes at the end of Chapter Five that rather than a bloody invasion, China (p. 205) “could achieve a de facto takeover of Taiwan in far simpler ways. Beijing has already initiated small steps, including incursions into airspace that breach Taiwan’s territory, each of which, on its own, would not be substantial enough to warrant relation but could over time establish new realities on the ground and in the air.” While my hope is that China and Taiwan very much remain separate, much worse than an incremental, bloodless takeover of Taiwan by China would be one involving guns and bombs that would be felt in brutal fashion by China and Taiwan. Worse, and given the importance of both economies to the rest of the world, such an invasion would be felt cruelly all over the world. Whatever happens between China and Taiwan, whatever their differences, war should not be the answer. Hopefully the growing economic ties of Taiwan to the mainland, and vice versa, are what ensure that guns and bombs are never involved. Prasad perhaps shows a way.

In Chapter Six, Prasad expresses worry that central bank digital currencies (CBDC) could be used (p. 210) as a tool for “social policy” such that they couldn’t be used to buy illicit items such as porn, alcohol and other market goods not approved by governments. Of course, the latter speaks to why “legal tender” is near meaningless. Instead, products buy products with money as the agreed upon measure that facilitates value for value. On p. 188, Prasad writes that “the dollar is the de facto national currency in many Latin American countries,” which instructs on the previous point. He also quotes Brazilian leader Lula (p. 61) as asking “who was it that decided the dollar was the currency after the disappearance of the gold standard?” The answer to the question is that producers decide what currencies circulate exactly because producers won’t bring goods to market for “money” that doesn’t buy relatively equal value.

Further on in Chapter Six, Prasad observes that bitcoin is (p. 218) “too volatile in value to serve as a reliable means of payment.” Yes, exactly. Bitcoin is not money contra the religionists who believe it’s the money of the future. Sorry, but it’s decidedly not circulated money if it’s not reasonably stable, which explains the dollar’s global circulation despite it not being “legal tender” in much of the world. Prasad believes (p. 235) that bitcoin “eventually crashes.”

About stablecoins, Prasad writes that they are (p. 218) “entirely at odds with the libertarian ideal of foregoing central bank money altogether.” So very true. No doubt stablecoins offer people in the poorest, most corrupt parts of the world an enhancement over paper money (including dollars) that can be confiscated in ways digital money can’t be, but how odd that the most circulated “crypto” monetary form derives its value 100% from the very “Federal Reserve Notes” that all the crypto religionists claimed would be rendered obsolete by private money.

Those who’ve read my 2022 book, The Money Confusion, know that I predict an eventual replacement of government money forms with crypto or private money. On this supposition Prasad’s books inform my commentary, that going back to the first fiat money in China, the debate even then was who would maintain a stable currency: private or government issuers. Prasad reported in The Future of Money that the Confucians sided with private issuers, but didn’t get their way. My sense is that private issuers will eventually win out, but not if stablecoins are their vehicle. More on money in a bit.

Writing about artificial intelligence (AI) in Chapter Six, Prasad writes with worry (p. 225) that AI “robs my students of the clarity of thought that comes from shaping inchoate ideas into words and organizing those words into a coherent narrative.” Yes, he’s so right. It’s why I don’t fear AI, and I don’t because I’ll never stop writing such that my thinking will be constantly evolving. Which is why I also don’t worry as much about students letting AI do most of their work for them. Surely they’ll let AI handle what doesn’t interest them (a good idea), but they’ll skip AI on subjects about which they’re passionate on the correct supposition that writing out their thoughts, doing the math problems, and conducting the experiments will position them to evolve, and thrive.

About China, the U.S. and AI, Prasad crucially writes that the two countries have sadly and very unwisely turned AI (p. 229) “into a forum for competition rather than a platform for collaboration that could benefit humanity as a whole.” AMEN. This isn’t said enough. Trade is not war. Applied to AI, the way for the U.S. and China to “win” the AI war is for governments to get out of the way so that talent can combine with talent. What prevails now is anti-progress.

From what readers have read so far, ideally they’ll see the very real value in Prasad’s book based on the end of Chapter Five, combined with various useful insights offered in Chapter Six. So, while Prasad is an important read, it’s disappointing to report that by far, Chapter Six was the book’s best chapter. It’s largely free of fallacy and platitudes, which unfortunately can’t be said for the rest of the book.  

Just consider the book’s title, and its subhead. Prasad has written a pessimistic book, which means lots of platitudinous commentary along the lines of (p. 6) “now, however, the feedback loop between economics, domestics politics and geopolitics is spiraling out of control.” Yellen et al would embrace such a well put thought about very little, but who else might? Economies aren’t blobs, or machines, they’re just people. Who among us, other than those who blurbed Prasad’s book, thinks about “feedback loops” involving domestic and geopolitics while going about our daily processes?

Prasad similarly writes on p. 6 that “the benefits of globalization have been distributed unevenly.” Which is a line so unoriginal as to be trite, but it’s also one that’s eminently debatable. Implicit in Prasad’s musings about the division of labor with a growing number of hands and machines around the world is that what works brilliantly in a local sense (see Adam Smith’s pin factory, Henry Ford’s assembly lines) loses its genius if some of the hands and machines are located in other parts of the world.

Prasad is surely wise, which means he must secretly know his globalization line is nonsensical. All it takes to see why is to drive the largely empty roads of states like South Dakota, only to see that the tiny towns that occasionally reveal themselves are invariably populated with Walmarts, Targets, Kohls, not to mention that Amazon serves these remote locales online.

The major retail names are evidence that globalization loves the little guy like nothing else does, plus it powerfully indicates that the narrative about the little guy seeing his or her economic chances ruined by an increasingly interconnected global economy is utter and complete nonsense. Walmart et al don’t populate these towns because they’re charitable, but because production buys production.

Which is just a reminder that globalization has no victims. None. Does that mean that some neighborhoods, towns, and cities around the U.S. don't struggle today relative to how things used to be? Certainly not. Just the same, what reduced Aliquippa, Flint and Milwaukee to also-ran status wasn’t globalization that revealed itself through the closing of factories, rather it was the exit of human capital that couldn’t get away from the horrid factory life quickly enough. It’s a long way of restating that globalization has ZERO victims, but that some people can’t be bothered to migrate to opportunity in the freest zone of opportunity the world has ever known. And despite their layabout ways, they still enjoy abundant living standards plainly born of the globalization that would stagger previous generations.

The problem for Prasad is that his crowd is economists, and economists love to self-flagellate while at the same time extolling the virtues of globalization. It’s terrible for others. No, not really. Always "dressing" for his fellow economists, Prasad’s pessimistic book wouldn’t be complete without at least one bone thrown to global warming alarmism. On p. 8 he writes of “floods and hurricanes exacerbated by climate change.” Keep in mind that Prasad grew up upper middle class in India, and the bet here is that he was familiar with floods long before the experts decided to tie what’s as old as the earth to industry.

One guesses Prasad is a New York Times reader (as is your reviewer since it’s the world’s greatest newspaper), and it was recently reported in the Times that over 40% of Americans live in coastal locales, the same coastal locales that warming alarmists have been promising for decades would be underwater cities absent a re-engineering of the sun or industry or whatever to cool the earth a bit. If so, is this 40% - and rising – cohort just stupid, as in are the markets stupid, not to mention investors who place their capital in all manner of coastal businesses that will soon enough be wiped away by warming? Barring that, how much of Prasad’s own net worth would he bet on unchecked global warming soon enough wiping U.S. and global cities off the earth’s face? He would be rich if and when reality mugged the so-called global warming “deniers.”

On p. 22, Prasad observes that “on the world stage, power comes mainly from economic size.” Yes and no. What Prasad leaves out is that the U.S.’s economic size is an effect of its enterprising creating must-have products and services (if McDonald’s as a place impress dates in Africa doesn’t make you weepy in a very good way, it’s hard to know what does) for much of the world, and that vastly enhance global living standards. As for the downside, foreign aid’s economically static or impoverishing track record is well established. Said another way, U.S. support passed around globally holds the world down substantially as opposed to lifting it.

Contemplating alleged economic power in China, Prasad writes that (p. 24) its “rare earths” dominance gives it “a major  weapon against its economic and geopolitical rivals.” Except that it doesn’t. Short of Chinese producers bankrupting themselves, they extract rare earths to sell to a ravenous global market. Some reading this will say Chinese producers can cut American buyers off, but they can’t. Assuming they're required to "embargo" American buyers, it's of no consequence. Those the Chinese producers can sell to will quickly turn around and sell the rare earths stateside with the sotto voce blessing of Chinese producers.

Seriously, does anyone believe Chinese producers would kiss off such a large market for their wares? No chance. Along similar lines, OPEC’s Arab (Iran is not an Arab nation) members only “embargoed” the U.S. in 1973 in the sense that they sold to non-Americans who sold directly into the United States. Embargoes are symbolic, and they are because there’s no accounting for the final destination of any good in concert with the even bigger truth that no producer turns the proverbial nose up to buyers.

Writing for economists employed by central banks in large numbers, Prasad contends (p. 40) that “central banks have become indispensable for well-functioning economies,” and that (p. 41) “they can help in offsetting episodic failures of fiscal and other government policies.” Reading this while fully cognizant of Prasad’s audience, does Prasad himself really believe this? Ignoring all the wacko Austrian School mysticism about central banks, let’s state the obvious: they have no resources. Which means they can only fiddle with credit and interest rates insofar as market signals are suffocated. Translated, Prasad wants readers to believe that central planning with a gruesome track record of stupendous failure somehow works when economies are struggling. Sorry, but history is clear that dead economies don’t come back to life until the government’s inept hand is removed, not re-inserted. Too bad Prasad is writing for economists who believe almost to a man and woman that the bigger problem with central planning was that they weren’t at the controls.

With currencies, Prasad is a good teacher who unfortunately is pulled into lots of "two-handed" economist thinking as he pretzel-izes himself to say what economists believe. Take his comment on p. 70 that “appreciation in the exchange rate of the country’s currency usually makes imports cheaper.” He immediately follows the latter with “Dollar appreciation is good for American consumers but makes it harder for domestic manufacturers to compete with foreign counterparts.” Hopefully readers see the obvious contradiction: all production is an effect of global cooperation, including imported imports rendered cheaper by the appreciating currency. From this, we can conclude that whatever producers allegedly lose from an appreciating currency (this wasn’t a problem for Japan in the 1980s…) they gain from cheaper production costs. Are you dizzy? You should be.

Prasad contends (p. 77) that the Fed is “the guarantor of the dollar’s stable value,” but that’s just not true. The dollar’s exchange value has never been part of the Fed’s policy portfolio, and if anyone doubts this they need only ask ChatGPT why Fed Chair Eugene Meyer resigned in 1933, only for him to buy the Washington Post as a vehicle to fight FDR’s inflationary policies. Meyer was utterly powerless to fight FDR’s dollar devaluation in 1933, and so was Fed Chair Arthur Burns in 1971 powerless vis-à-vis President Nixon, Paul Volcker, and administration insiders like Milton Friedman who promoted odious monetarism (Keynes, albeit in a monetary sense) to Nixon. Burns’s diaries are explicit about how passionately he was against Nixon severing the dollar’s link to gold, but also that he was powerless to stop Nixon’s explicit devaluation.

Considering Prasad’s audience yet again, he naturally included an attack on the always gracious Judy Shelton (with whom your reviewer has found much disagreement with modernly on what inflation is) as having brought (p. 77) “unconventional ideas” to her Fed nomination, including advocacy for what Prasad deems a “failed experiment of tying the dollar’s value to the price of gold.” Prasad claimed about my review of his frequently informative The Future of Money (my review here) that I didn’t like it solely because he disdains pegging the dollar to gold (not true, my critiques were broader than that), but the bigger critique is that Prasad routinely describes a gold exchange standard that coincided with remarkable growth for the U.S. (see the beautiful inflows of people the world over into the U.S.) as a “failed experiment” without offering any evidence supporting his problem with what, by is his very description is the opposite of bitcoin (see yet again p. 218 – bitcoin is “too volatile in value to serve as a reliable means of payment”) exactly because it imbues money with remarkable stability as a measure of value.

Indeed, as Prasad might sheepishly acknowledge with economists well out of earshot, the whole point of gold as a definer of money the world over was the stability that the commodity lent to paper money. Economists reading this, and who buy into Friedmanite mysticism about central banks controlling so-called “money supply,” will of course say that the real problem with a gold exchange standard is that it limits so-called “money supply,” but for the consistent global fact that it never did. More realistically, what’s stable as a measure massively increases in circulation, and that’s surely what happened with dollars given the previously mentioned desires of producers to get value in exchange for value. Even better, and citing Prasad’s wise disdain for bitcoin once again (“too volatile in value to serve as a reliable means of payment”), it’s volatile bitcoin that are supply constrained, which is yet another reason why bitcoin will never be money. There's quite simply no limit to credible money. With gold-defined money, or for that matter any money measure that’s credible, it’s the credibility of the measure (meaning its stability as a measure) that coincides with its ever-increasing circulation.

Prasad adds that (p. 89) “prices would tank” if central banks tried to sell “tens of billions” worth of gold, but that’s just not true. If it were true, then central banks wouldn’t hold all the gold that they do, nor would gold have become global money in the way that it did. Gold’s constancy as a measure is confirmed by Prasad and the central bankers he caucuses with who hold it in large amounts, which means his attacks are non sequiturs more than anything.

Which brings me to the question, or realistically questions, that I’d most eagerly pose to Prasad. It references his comment on p. 96 that so-called “dollar dominance” is “hardly an uplifting story of American exceptionalism, rather it is a melancholy one of the frailties in the rest of the world.” While the view here is that Prasad overstates so-called “dollar dominance” (if it ever takes on the turbulence of bitcoin, its “domination” will decline substantially), what would he guess the result would be if President Donald Trump, rather eager to cause derangement among economists, were to announce alongside Treasury secretary Scott Bessent a plan to redefine the dollar in stable fashion as a fixed amount of gold. Does he suspect Trump doing so would mean the dollar would no longer be the “de facto national currency in many Latin American countries” (p. 189), that Saudi Arabia would cease pegging its currency to the dollar (p. 62), and that the world broadly would sever implicit and explicit currency pegs to the dollar? All that, plus would Americans gradually ditch the stable dollar for unstable measures like bitcoin? What about stablecoins? Would they exit their 1:1 dollar relationships for euros, yen and yuan?

Prasad adds on p. 89 that gold “severely constrains monetary policy,” but wouldn’t that be a feature of gold rather than a bug? If we gloss over the happy fact that money has always circulated wherever there’s been production, and utterly without regard to the actions of Mints, Treasuries or Central Banks, we can’t ignore Prasad’s frequent observations in his various books that there are very few currencies liquefy global exchange, the dollar the biggest liquefier of all. If the previous truth isn’t evidence of what a powerfully awful job most governments are doing conducting so-called “monetary policy,” it’s hard to know what is. As for the former assertion about money circulating wherever there’s production without regard to Mints, Treasuries or Central Banks, Prasad’s books confirm this truth too as his lament about “dollar dominance” yet again indicates. And if his claim is that the dollar circulates globally thanks to great “monetary policy” from Fed, please tack back to the previous paragraph: does Prasad honestly think the dollar’s global circulation would decline if the greenback had a gold definition?

Bringing the discussion back to globalization, part of the desire to focus on it so much in this review is to address Prasad’s attempts at evenhandedness on the presidency of Donald Trump, and why people voted for him. My thinking is that Prasad has mis-analyzed why Trump attracted votes. See Prasad’s quote of Trump (p. 100) saying that tariffs are “the most beautiful word in the dictionary.” Ok, but watch what Trump voters do (shop at Walmart), not what they don’t even really say. Translated, the vote for Trump was never ideological, never about economic desperation (sorry, but Cracker Barrels aren’t that cheap, and they’re full of Trump voters), as much as it was and is about style. As in, Trump could have just as easily made Prasad’s economics popular, or those of your reviewer. And that’s because increasingly prosperous Trump voters like to get in return for their work in the way we all do.

The good news is that while Trump is leaning against the genius of trade, he’s nearing lame duck status. Better yet, the rest of the world isn’t keen to embrace Trump’s protectionism. Prasad reports in optimistic fashion that (p. 100) China views globalization as “an overwhelming trend of history.” It is, and it is because no one loses from it. Which requires the mildly sentient (Prasad is quite sentient despite his associations) to stop apologizing for what relentlessly lifts us. There are surely down and depressed people the world over, but they’re not that way because the world is increasingly connected economically. Quite the opposite.

It’s also not true (p. 105) that globalization is about a search for “cheap labor.” Total nonsense. If there were any truth to such a view, New York City, San Francisco and Los Angeles would be bereft of human capital rather than the biggest capital importers in the world, plus the citizens of the world would have no need to take their talents to prosperous, high-compensating locales. Say it repeatedly that productivity that correlates with rising pay is the biggest magnet for global capital, and nothing else comes close.

As with The Future of Money, Prasad routinely makes a variation of the odd claim that countries like the U.S. are (p. 108) “borrowing money from the rest of the world to finance their trade deficits.” That’s quite simply not true. The U.S. floats no “trade deficit” bonds that global investors can buy from a federal government needful of trade finance. It’s all nonsense. The U.S. has so-called “trade deficits” precisely because the world’s greatest and most prosperous corporations are located here. Great U.S. corporations attract enormous amounts of investment, though shares in U.S. corporations don’t count as exports while the import of shoes, socks and t-shirts does. Prasad has to know this, right?

He adds that so-called “trade surpluses" (so-called because trade balances, by its very description) allegedly (p. 118) strengthen country currencies, which is absurd, but also a contradiction. If the faux correlation had any validity, then it would be true that the dollar would have long been in freefall due to the U.S.’s persistent “trade deficits.” If so, the dollar wouldn’t “dominate” as Prasad laments.

Prasad claims (p. 119) Japanese cars and something he calls a “China Shock” led to the loss of “millions of manufacturing jobs,” but in reality progress, most of it in the U.S., thankfully freed Americans of manufacturing jobs. Contra Prasad, President Trump, Oren Cass and others who overwhelm us with trite commentary along the lines of “why did globalization fail to deliver on its promise?”, people who actually worked in factories loved globalization more than anyone else, and as evidenced by factory and mill workers in places like Aliquippa demanding that their children get out and away from the jobs that eventually exited quite mercifully. While economists near universally loathe Donald Trump, they sound quite a lot like him with their endless laments about work divided.

Funny about the odd relationship between Trump and the self-flagellators inside economics is that Prasad (p. 249) contends that a “fragility” of democracy “is the tendency of free markets to be characterized by self-reinforcing inequality, which can lead to political capture, allowing the wealthy to tilt government policies in their favor.” Oh well, luckily Trump likes “free markets” about as much as prestigious economists do, which is not much.

While Prasad makes sheepish, even well-put arguments for free markets, ever the two-handed economist he invariably qualifies his pro-market opinions with lots of qualifiers. The biggest howler was his lament that since free markets afford us (p. 251) “so many options, the fear of marking the wrong choice can be paralyzing, potentially deterring someone from making any decision at all.” Oh the shame! Of course, lost on Prasad is that no act of saving ever subtracts from the consumption that excites economists so much. Production is always matched by consumption, and that's true even if every producer lives a monastic existence.

Prasad writes of the “negative externalities” markets allegedly foist on us, including (p. 251) corporations “releasing pollutants into nearby waterways.” Ok, but can he name one instance of this in modern times? On the next page (p. 252) Prasad asserts what’s not true, that “it’s widely accepted that a government should implement antitrust regulations to limit the formation of monopolies.” Ok, can he name a true monopoly that government has broken up, or broken? Prasad cites Google’s “dominance in web search,” which supposedly “allows it to dictate terms to advertisers and users,” but as evidenced by the profound change in the nature, scope and helpfulness of Google searches in 2026 versus November 30, 2022 (when ChatGPT was released), Prasad’s critique of Google’s “dominance” is baseless.

While he makes a previously mentioned case that a possible takeover of Taiwan by China will be bloodless, and makes an even more important case for AI innovators in the U.S. and China to work together to build the future, Prasad oddly cheers (p. 255) “the Chinese government’s extensive involvement in the economy,” which on its own is discredited by all the remarkable progress that China has enjoyed since the 1990s when the government finally began to retreat in substantive ways. Of greater relevance, Prasad ignores just how much American investment has factored in China’s economic renaissance, particularly in the technology space. If talking to non-economists, the bet here is that Prasad would say American investment paired with growing economic freedom has factored exponentially more in its prosperity than has “the Chinese government’s extensive involvement in the economy."

Though Prasad seemingly agrees way too much with Trump about so-called “trade deficits” and the alleged downsides of globalization, he chides Trump for spending cuts (seemingly DOGE) that (p. 273) “will inevitably undermine the reliability of and trust in U.S. economic data.” Oh stop! Who’s better at measuring unemployment? The BLS or a payroll company like ADP?

On the matter of inequality, Prasad contracticts himself (p. 285) with the assertion that inequality doesn’t trouble people, “but the lack of opportunities” does. Except that as we see routinely, those with the least always, always, always migrate to where inequality is greatest, including the United States. And once here, they migrate to the richest U.S. cities, not to Flint and Detroit.

Coming to the close of The Doom Loop, Prasad gives readers platitudes, including a comment about how (p. 297) “the world needs more compelling visions – both for countries and for humanity at large – that speak to common needs and aspirations.” No, what would help the world much more is if Prasad would write books that address the beauty of human action (the only economics), not what’s on the minds of Janet Yellen and Larry Summers. Put another way, Prasad's mind is too good to be wasted on economists. 

Originally published on Real Clear Markets.

War symbolizes economic decline like nothing else precisely because it’s defined by the extermination of the very people who create all the growth. The sad fact that economists near unanimously contend that war has a growth upside discredits the profession like nothing else.

The speculation here is that American Institute for Economic Research fellow Julia Cartwright would agree with much that’s just been written. That’s because in a recent piece at the Washington Post, she raised much more than an eyebrow to the popular notion inside the commentariat (and fed by GDP-worshipping economists) that “Military spending is good for the economy.”  

Cartwright reminds readers correctly that the consumer spending and investment that add to GDP are different from government spending that similarly adds to GDP because consumer spending and investment are “disciplined by reality.” There’s no argument with Cartwright there, but there is a substantial quibble with a crucial omission from her.

Let’s start with the obvious: GDP is less than worthless. Most of us, including the individual you’re reading, can’t calculate the GDP of the street they live on, but economists think they can measure a nation? The obnoxious conceit informing government statistics thoroughly discredits them.

Next, contemplate the notion of economists adding government to a growth number. What Cartwright omitted is that such an addition speaks to double counting on a level that would horrify the most crooked of crooked accountants. Governments have no resources, which means they can only spend insofar as they’re consuming the fruits of economic growth that already happened.

No doubt some will say (Cartwright does) that some government functions are necessary, after which wise minds can debate the good and the bad ones. That debate can and should happen, but it’s still true that government consumption subtracts from growth despite GDP suggesting otherwise.

With war, it’s all about economic decline. See above. People drive all growth, yet people are exterminated during war. Worse, war forces the people not being exterminated to redirect their production to armaments necessary to kill more people and destroy more wealth. War is depression. Cartwright adds that contra economists who tragically claim to this day that WWII revived the U.S. economy, that actual Americans suffered mightily as production was halted in favor of war production such that Americans suffered the rationing of “meat, butter, gasoline and shoes.”

Where Cartwright could perhaps be convinced to rethink her argument is in her assertion that to pay for war, governments frequently borrow “which shifts the burden to future taxpayers.” No, that’s not true. See Cartwright’s description of life during WWII. All government consumption, particularly war consumption, is a tax felt right now in terms of less production, and less progress in all ways. As evidenced by the low rates charged to Treasury for borrowing, “future taxpayers” have it relatively easy simply because markets keep telling us through low Treasury yields that debt payment is the easy part. The real crisis is what we suffer now as governments substitute themselves for the marketplace in the allocation of precious resources.

Cartwright is surely correct that post 9/11, the Bush administration weighed us down with surges in spending. Still, markets are forward looking. That they are calls into question her puzzling tie of the spending to the so-called “financial crisis of 2008.” Sorry, but there was nothing “financial” about the latter. The “crisis” was government intervention in the natural workings of the market by the Bush administration, nothing else. When governments don’t interrupt correcting markets, there’s never a crisis.

Which is perhaps a digression as is. The main thing is that Cartwright is right about the fallacy of war and economic growth, but arguably understates her case.

Originally published on Real Clear Markets.

My friend Michael Toth, director of research at the Civitas Institute, could perhaps be persuaded that he's incorrect about capital gains taxes. While he’s correct that the long-term tax on capital gains should be zero, he overstates the growth implications.

Much greater growth would come from zeroing out taxes on short-term capital gains. To see why, just consider what is accepted wisdom among economists, politicians, pundits, and supposedly even scientists: the power of compound returns is profound. Which is the point.

The potential for long-term wealth gained from investing is substantial, and this is true despite the certain horrors of long-term capital gains taxes. Toth is right that the tax is wrongheaded, and that zeroing it out would boost growth for, if nothing else, freeing up any realized gains for reinvestment. Just the same, the truth about the genius of compounding remains so powerful that tax or no tax, rare is the investor who will let taxes deter investment in pursuit of long-term compounding. 

What’s true about long-term capital gains isn’t as true about short-term gains. In the short-term, the power of compounding is less visible. Since it is, the cost of investing for the short term is enormous, and logically an investment deterrent. This has the potential to sap economic growth for a variety of reasons. This opinion piece will touch on at least three.

A short-term tax on capital gains logically limits price discovery in the marketplace simply because the cost of being right about a corporation in the short-term is so substantial. The reduction in short-term capital flows born of excessive taxation has the potential to corrupt market prices to the economy’s detriment.

Only for the story to get worse. Investing for the long-term carries with it odd nobility inside the political class, and among investors who should know better. To believe this faulty, thoroughly simplistic, "quarterly capitalism" narrative, short-term equity market gains are those of seemingly nefarious “trading” in and out of stocks, while long-term gains are those of investors sticking with an investment theme over the long haul to the economy’s betterment. The viewpoint is total nonsense, and yet again inimical to growth. Think about it.

Since near-term exits from shares can be so costly in a taxation sense (gains are taxed as income), there’s a logical incentive among shareholders to hold purchases to avoid any kind of taxable event. Contemplate the economic negatives of just such an incentive.

Rather than capital rapidly flowing to its highest use as quickly as possible based on information reaching the marketplace in a manner as frictionless as possible, confiscatory taxation on short-term capital gains encourages investors to do not what is most economically efficient, but tax efficient. The consequence is precious capital locked up in ways that deter natural economic progress that's an effect of capital finding its best use right away.

After which, buying-and-holding “great companies” for the long-term might be the most overrated, economy, and return-sapping notion in investing. If readers doubt this, consider that when the 21^st century began, GE (the bluest of blue chips) was the world’s most valuable company, Tyco the next GE, Enron the smartest corporation, Lucent the future of communications, and AOL/Yahoo the gold standard of the internet.

No doubt Toth is right. Long-term capital gains taxes should be zero as with short-term taxes simply because there should be no penalty for saving and investing. Still, and contra Toth, the real growth will come from taxing short-term capital gains the least.

Originally published on Real Clear Markets.

What’s your limit on a typical credit card in your wallet? And if your borrowing limit is higher today than it was when you turned twenty-one, ask yourself why.

To say you can borrow more today relative to twenty-one is likely a blinding glimpse of the obvious. You likely earn quite a bit more now, not to mention that you have greater wealth stored.

Moving on, let’s contemplate Nvidia. Its debt in 2026 is somewhere in the $8-11 billion range. Which is interesting only insofar as it’s certainly true that in 1996 and 2006 Nvidia for the most part couldn’t have even borrowed $1. Why? The answer is simple. Twenty and thirty years ago Nvidia’s near and long-term odds weren’t very promising, and this reflected in its capacity to borrow. 

In 2026, Nvidia not only has $60 billion in cash or cash equivalents on its books, it’s also valued above $4 trillion. To say it can borrow now, and in size amounts, is another one of those blinding glimpses of the obvious.

An individual or business’s ability to borrow is directly an effect of near-term incomings, but much more importantly, market expectations of long-term incomings. As we progress at work and in wealth stored, lenders expand our borrowing capacity alongside the progress.

Do individuals and businesses routinely borrow at those limits or close to them? Some do, and some don’t. Ted Turner was known to routinely borrow as much as the markets would allow, Rupert Murdoch has long had the same reputation, while their good friend John Malone is known to be a bit more careful.

Which brings us to governments. Why does Russia “only” have around $480 billion in total debt versus the U.S.’s total debt of $39 trillion? Is Vladimir Putin a closet classical thinker who believes government spending and borrowing are a tax on freedom and prosperity? It’s a clown question.

Furthermore, no individual, business or nation gets to choose how much to borrow in the first place. Money is production, which means exacting, ruthless markets for money make these decisions opposite what the experts tell you. Translated, Russia has relatively small amounts of debt because lenders aren’t enamored of its long-term growth prospects.  

All of which explains the size of the U.S. Treasury’s debt. It’s $39 trillion not because U.S. politicians are socialist where Putin is a free market capitalist, but because lenders are looking into the distant future and seeing tax revenues flowing into Treasury that make present incomings appear small by comparison. And they’re lined up to lend to the U.S. with the latter in mind.

Could the U.S. political class be more prudent about borrowing against such enormous prosperity, no doubt it could but then as history has long made plain, no one spends the money of other people nearly as carefully as they do their own. Certainly not politicians. Which means they spend enormous amounts, while borrowing a lot more because they can.

Why can they? Because the U.S. has been growing for decades, and is expected to grow much more in the future in ways that will shower Treasury with much more tax revenue.

Yes, it’s the soaring tax revenues born of growth that are driving the debt, yet the experts continue to say we’ll “grow” our way out of the debt. Their naivete is almost appealing so at odds is it with reality.

Growth is sadly and comically the consensus solution for fixing the debt. That’s why debt will continue to go up alongside falling borrowing costs for Treasury.  

Originally published on Real Clear Markets.

On the matter of market prices, the Fed just doesn't matter...

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