In Summation

In summation, I offer this suggestion.

The reserve currency is a golden orange which offers the juicy benefit of free purchasing power.

Are there many countries that won’t accept the U.S. dollar as a form of payment?

Are there any countries whose currency is more respected and/or accepted in more countries?

This subsidization of a country’s overall consumption through this free purchasing power, in return for the export of a fiat (paper) currency, demands a sufficiently healthy economy in order to maintain the reception of these juicy benefits.

Fortunately, the US has yet to fully squeeze all of the golden juice out of the reserve currency orange…but we’re pushing it.

Accordingly, we can stabilize consumption at a justifiable (and still enjoyable) level while enhancing the economy through a fiscal stimulus.  This enhancement stems from a necessary overhaul of our tax system by making it more efficient (e.g. competitive) for a leading economy.

Too many young professionals with an understandable marginal propensity to consume (MPC) of 1 are being forced to pay too much in tax.  Lowering their tax is efficient because the consumption by these young families with an MPC of 1 will serve as an important piece of stabilizing consumption levels at the point discussed above.

More importantly, it is unfair for so many folks with reasonable incomes to spend so much of their income on their tax bill.  I am not saying that we should tax the rich more, it is merely that everyone should pay less of a tax on their earned income.

Fortunately, we have the luxury of lowering taxes in a fiscally-stimulative policy, which is more likely than monetary policy to deal with the unemployment issue, which is also in an important step in addressing the structural problems in our economy.

It is time to reconsider continuing on with ineffective (though well-intentioned) overly-expansionary monetary policy which is more targeted primarily at the banking system.  Nominal interest rates need to be positive once again.

I genuinely believe Chairman Bernanke would agree with the sentiment expressed in the above paragraphs.  I believe he feels he must do what he is doing because Congress is not allowing the economy to thrive optimally due to an inefficient tax and regulatory system.

If Congress made the adjustments suggested, Chairman Bernanke would not have to be concerned about the ‘flation issues and debate which have led to suboptimal policy.

The increased deficits would not be fiscally shattering for the economy in the short run, as long as the Social Security system is adjusted to an alternative such as “means testing,” although no one over the age of 30 would lose any current benefits under an optimal alteration.

It will potentially require some folks under the age of 30 to get less than what they might theoretically be entitled to receive when they retire based upon what they’ve contributed so far, but I am confident they would prefer the tax cut that would come from a more insurance-esque system built to thrive for the long run.

It would be ridiculous and embarrassing for folks not to realize how valuable it is for a nation to issue the world’s reserve currency.  It would not require an inordinate amount of human capital and backbone to make the necessary changes to ensure the U.S. economy continues to be the world leader in this regard.

I am confident we will realize the urgency soon enough to make these changes as part of our continued enjoyment as a nation.

2 thoughts on “In Summation

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