Usually when it comes to discussing economic theories and policies there are two schools of thoughts: Keynesianism and Austrian economics.

The founder of Keynesianism is known as John Maynard Keynes. His philosophy of economics are very controversial and at times dangerous. Keynesians permit government to essentially fantasize that they have the power to raise living-standards, with the use of the printing press that the Fed is notoriously known to use (inflation).

Austrian Economics unlike Keynesianism, does not practice artificial economic stimulation. Rather Austrians tend to make sure basic economic principles are sound, which would indicate that resources are being allocated appropriately.

Analysis: How does an economy grow? It seems challenging, yet simple if one follows the basic principles of macroeconomics. Usually when a nation has high levels of productivity it is enjoying a decent standard-of-living. Why? Well because that specific nation is trading a good that they specialize in producing and utilize the wonders of trade.

Unfortunately for the United States it has been years since the labor force has actually been productive. One can argue that Hoover, then FDR created and funded the public sector. Such allocations of resources that go to the public sector is only hurting the private sector in which such jobs produce something at value. The religious fiction of Keynesianism has infected our economy, with the allusion that inflation and consumption are the only means to growth and booms. Such thoughts have permitted the government to pretend that they have the power to raise living-standards with the printing press that the Fed is known to utilize. Usually when economic principles are not sound, large banks and investment firms are more profitable in such environment. The Great Depression was the longest and most severe down turn in history. FDR made use of the Fed using Keynesian principles, it was the first economic issue that was dealt with using full range of such absurd policies. It is no wonder many Keynesians all study the New Deal heavily and excessively. As I have stated in the past using such theories only creates cheap money. The notion that government planners know what is best for civilians is simply absurd. Each individual person understands what is in their best interest not the government nor anyone else.

In a Keynesian environment, it is feasible to obtain consumer loans as interest rates are artificially low and inflation within the money supply is present. In such cases private lenders often tend to be influenced by the financial results of a loan rather its symbolism. Businesses that construct successful business models, are ran by owners with strong records of achievement in which they tend to repay loans at higher rates. As a result, such business plans tend to attract willing lenders. With such interest rates at historic low rates, currently loans made to individuals or enterprises have become feasible to the point where banks no longer analyze business plans rationally. (This is the outcome of monetary inflation). Low interest rates only visually makes an economy seem/look stable. Not only do low interest rates reflect false economic statistics, it also encourages borrowing and discourages savings. Though one can fairly speculate that purchasing power goes down, as the money one would have in one’s pockets would not not be worth the same, as inflation within the money supply occurs. (Reminder that the Fed is able to manipulate foreign investors in the treasury market to buy reserves thus inflating the dollar). Ironically the U.S seems to have transformed itself from a nation of savings to a nation of borrowers. As rates have been continuously low relative to actual capital or savings, such reports often send false signals to borrowers in terms of the current state of the economy (the health of the economy). When faulty statistics illustrate a healthy economy, banks are more willing to hand out loans as they are secured of being backed by the government.

A society that is continuously increasing productivity will allow more people to earn capital, and living-standards rise as a result. As a nation’s economy expands, its ability to export production abroad increases as well. When nations come in contact with one-another, trade is developed that furthers REAL stimulated growth. When allowed to flourish, free-trade benefits everyone (specialization). Each individual, or country trades what it has in abundance, or what it does best, for the things that it doesn’t have or cannot easily manufacture. Basic economic principles should not change no matter the size of the economy. As government spending is at an all time high, numerous claim that there is a lack of infrastructure spending. Infrastructure spending is only helpful if it benefits the excess costs. If not, the projects waste resources and hinder real growth. It is fairly easy for a politician to manipulate voters that large public amenities are meant to benefit everyone, even though such spending does not produce anything at value. In such an atmosphere, loans made to individuals or firms that do not succeed in creating a needed innovation or expanding productivity capacity tend to weaken the overall economy by wasting the supply of scarce savings (mis-allocations).

I’ll now throw in some Austrian thinking: The ability to be able to save money is not just a means to increase one’s ability to spend, rather savings are an essential buffer to protect an economy from abrupt events. In the past, the United States were notoriously known as a nation of savers. Such discipline helped build a huge supply of savings to finance ongoing industrial growth at the time. Such actions also helped families and communities endure unexpected tragedies (keep in mind such principles are sound, the capital that would be supplied all came from savings, which in terms was obtained from productivity within the labor force.)

In a politicians quest (usually non-academic republicans and socialists democrats) to save American jobs from overseas competition, the benefits of the world price are not carried out. When a foreign nation has the world price advantage it is wise to trade for the sake of positive outcomes. Since the 2008 presidential race following up to the most recent race in 2016, politicians have promised to provide jobs. It seems that whoever promises the most labor, turns out to be the winner. Well here is what they don’t tell you: It is not a job of the economy to simply provide jobs, rather create jobs that maximize labor productivity. It makes no sense to waste our labor making things that can be produced more efficiently abroad. If we focus on the things that we can make more efficiently than anyone else, then we can trade products for the things that others produce better. That beings said, instead of constant high consumer prices, prices would eventually lower. Natural efficiency and the uses of trade, traditionally lower prices down (note how inflation is no longer present).

Ultimately, inflation is the expansion of money supply, rising prices are the harsh results of inflation. Currently, our fundamentals are not sound and we cannot continue to borrow to live beyond our means, if our principles were sound we would not have such absurd debts and monetary policies that will continuously haunt the future generations.