The most notorious of unions has been the American Medical Association. They successfully control which schools can be accredited to teach doctors. Thus, they control the exact number of doctors available for the market. Anyone who thinks that there are plenty of doctors available should go to the emergency room at two in the morning with the hopes of being home by sun up. The most recent area of union growth has been amongst government workers: teachers, policemen, sanitation workers, and virtually every other venue of government employment. These unions do not deal with the taxpayers who pay their members salaries, they bargain with the government for high wages and benefits. Montgomery County, Maryland has the highest per-family income in the nation and is not surprisingly one-quarter employed by the government. Their incomes and pensions are directly linked to the cost of living and inflation.
In addition to protecting its own employees, the government has adopted a host of laws aimed towards protecting the working class. Workmen s compensation, child labor, minimum wage, and OSHA are just some of the areas that the government has tried to extend its umbrella of protection. All of these acts have done little beyond raising expenses of business and limiting the number of employees that they can afford to employ.
The following chapter delves into the subject of inflation. The authors first define what money really is. As such, it is actually just pieces of paper or metal with images printed on them. However, what these items stand for is what is difficult to explain. Money represents a value that the spender and the receiver must have a sort of faith in. A person needs to believe that they can rely upon this coinage to be redeemable for goods and services. Thus, money is linked to the reliability of the country that prints it. This is why the American dollar holds such value in other nations and why the money of countries such as Russia and India are virtually worthless outside their native soil.
The proximate cause of inflation is that the supply of money increases more rapidly than the output of goods and services. While a free market is closely tied to the output of goods and services, it is the government that can increase and decrease the supply of money. Economic output is limited the expansion of resources and technology and the expansion of money is limited to bookkeeping entries which have no physical limits. The three main causes for the increase in money during the past years have been the growth in government spending, the government s full employment policy, and the policies pursued by the Federal Reserve System.
Higher government spending alone will not cause monetary growth if it is funded through additional taxes or by borrowing from the public. Since both of these methods are politically unattractive to the public, there remains only one option. That is for the government to finance it s spending by printing more money. This is a very attractive method for the government to pursue because the money seems to magically appear for the government to fund public programs.
In a dynamic world and a dynamic economy, new products and businesses will appear and disappear quite frequently representing shifts in demand. Between these shifts, there will be periods of unemployment while people are switching between jobs. Likewise, it is much more common these days for people to switch jobs more often due to the availability of different fields of work. Either way, people will be unemployed during these periods. In order to keep these unemployment numbers low to please the public and demonstrate that they are effective leaders, the government has attempted to employ more people and spend more money to keep our economy busy. As before, taxes and borrowing are unattractive, so the government prints more money to spend on these programs.
The Federal Reserve s has attempted to exert powers that it does not have in order to support these government objectives. Not only do they control the flow of money, they have attempted to control interest rates. These actions have created a roller coaster affect upon our money and interest rates.
The solution to this problem is very simple, but it is equally difficult to do. Just as an excessive increase in the quantity of money is the one and only important cause of inflation, so a reduction in the rate of monetary growth is the one and only cure for inflation. Unfortunately the effects of inflation are similar to that of a drug addiction. Initially, the user feels only the good of drugs. As the use continues, some of the harm begins to show itself. When attempting to quit, the addict will feel a great deal of pain while waiting for the positive effects to show themselves. People enjoy the initial effects of inflation as they feel the prices of what they sell go up along with their income. It is only with time that they realize that everyone else s prices are increasing too, so that the benefits have been negated.
The final chapter is called, The Tide is Turning. This title is based upon the political climate that is beginning to turn against big government and socialist programs. People are realizing that higher inflation is a form of taxation without representation. This concept never has been and never will be popular. Voters are now turning out in favor of the candidates who pledge to reduce the role of government and shrink the budget. These opinions are showing up with a growing favoritism towards adopting a balanced budget amendment to the constitution.