Economics

Why Low Rates and High Taxes Won’t Help Against Inflation

In addition to Croatia, there are six countries that have not yet joined the euro but should do so once the requirements are met: Bulgaria, the Czech Republic, Hungary, Poland, Romania, and Sweden.
The ECB concludes that only Croatia and Sweden meet the price stability criteria.

Inflation is here, but there’s also a shortage game in town.

Like the FED, the ECB does not have much room to raise interest rates without causing major complications in the financial market and the economy.

You may have already come across the following phrase ‘wars are good for the economy’, but you could not explain where the economic and logical errors were in such a statement, this text comes to help you understand what these errors are.

How are prices formed? The price is analogous to a tug of war, people will try to ‘pull’ you to the side that is most convenient for them. Each buyer subjectively values a product, so each person is willing to pay a different price. The seller, in order to increase his income, tends to prefer to sell to those who are willing to pay more, and the buyer, in order to keep his money, tends to prefer to buy from the one who charges the least. Thus, the price is the result of this bargain between sellers and buyers. The more sellers, the lower their bargaining power (they will compete for the sale), so, the buyers will have more options and they will tend to buy from whoever charges the lowest price.

After the financial crisis of 2008 the Austrian school of economics saw once again a resurgence in popularity both in public and the academia. This resulted from the fact that economists, financial analysts (Peter Schiff) and politicians (Ron Paul) that were familiar with the Austrian business cycle (ABCT) successfully applied it in predicting the boom and bust of the housing market. Today the theory gained popularity as people are looking for answers to high inflation, economic downturn, an extremely aggressive monetary policy pursued by central banks around the world. However even to this day the ABCT is widely misunderstood.

Who was Cantillon?

Richard Cantillon was an Irish-French economist known for the Cantillon Effect and for being the author of the great work; Essai sur la Nature du Commerce en Général (Essay on the Nature of Trade in General), a book considered by William Stanley Jevons as:

‘The cradle of political economy’

You, like me, must already know the fable The Cricket and the Ant. When I was younger, I heard it dozens of times, but I had not paid attention to all the important teachings of that story.

In this article, I will talk about the history of The Cricket and the Ant and about the connections I perceive between this fable and economics.

Throughout the history of economic development, banking, and the monetary sphere as a whole, has been the subject of widespread unease to people and a seductive opportunity for Governments. Indeed, there is likely no other institution that has seen such a wide array of Government controls in some form or another; whether that be the formation of central banks, regulations, interventions or monopolisations; all for the purposes, we are told, of maintaining stability and ensuring any economic crises is averted or lessened.

This however is not the case. In fact governments’ seizing control over any aspect of money and banking, has seldom been for the purposes of stability or fiscal reasoning.