Reason for Liberty

One of the greatest fallacies on economic depressions is that it is caused by overproduction. “Overproduction is the natural tendency of capitalism to expand the production of commodities that does not acknowledge the limits of the market (demand). Since the production and circulation of goods is not planned and firms are in constant competition for larger profits and greater market share, capitalist’s booms are always followed by busts as we see in the business cycle. In short, capitalist markets are NOT self regulatory.” This Marxian myth is based on the fact that in a depression there are unemployed factors of production and unsold surplus of goods.The adherents of these fallacy conclude from this that the capitalistic system produces too much in the period of boom,which is cleared away in the depression period.

Recently on Tuesday, October 16th 2008, RBI announced to inject Rs 2000 crores to help the mutual fund crisis of the Indian banks.
On first account, it may sound like a real example where the government proves its significance to help and foster the economy of country, but on a little deeper analysis, it will show simply that… Continue reading

The Nobel Laurete Paul Krugman,in his shockingly offensive article has put forward some solutions to the present economic crisis-Each one of them wrong and a dangerous step to take.He says that the nonfinancial economy is too desperately need of “help”. “The government should spend and spend.Let fiscal responsibility go to hell.We shouldn’t be

Cost-Push Doctrine

The believers of the cost-push doctrine think that an increase in demand would not raise prices in a situation where unemployment exists. They think that it would lead to more employment and hence, more production. They blame the price rise on some arbitrary

Whatever be the popular perception, in reality, the tendency has been that the supply increases each and every year. If so, the real effect has to be that the prices should fall every year. In fact, the impact of rising supply has been so overwhelming that in United States, prices have fallen every year from the mid half of the eighteenth century to 1940, with the sole exception of Napoleonic wars, Civil war and World War I. It was only during the wars when Governments ran the printing press at full blast that the prices had to rise. There was of course, paper money in those days, but the exceeding supply offset those increases in paper money. Continue reading

Oil and commodity prices are soaring. Inflation has reached a sixteen year high. As the thief who cries “Catch the thief!” the politicians are blaming it on everyone else, except their own policies. Economists are placing the blame on a food shortage. Everywhere, the effect is being confused with the cause.

Take a look at a person who invests $5 million dollars in bank for 10 years, and he earns (at 6%) $300,000 per year, a salary good enough for a 5 years exp project manager in America. You might say, that man is not working at all, and he is living off the interest. This is no labor, but here is the thing, he is deferring his enjoyment of those $5 million dollars. He is surely getting $300,000 every year, which is a quite a large sum of money and he is surely enjoying that too, but if he uses that $5 million dollars he can do a zillion things, he can buy a big house, a big yacht, a helicopter and scores of other things. BUT he is not able to do all those thing, for next 10 years. He is simply waiting, the 5 million dollars are right now being used by someone who needs it, and using it to make more money.

He is doing the labor of waiting. Continue reading