An age of illusionists

In his latest Globe Asia article Professor Hanke describes the acceleration in government spending that has occurred during the Obama presidency and its effects. “The economic cost of a dollar’s worth of government expenditures is more than a dollar, because taxes must be imposed to finance government expenditures. These taxes impose distortions (costs) on the economy, and these distortions cut the economy’s potential and reduce economic productivity. The costs created by taxes are referred to as the ‘excess burden’ of taxation”.

While the US Federal Reserve has massively increased the quantity of state money (which makes up approximately 15% of the total money supply, the balance being bank money) the total US money supply has been flat.  “Bank money is the elephant in the room, and due to the anticipation of more stringent capital requirements (Basel III), bank money has been contracting. In consequence, the total money supply (Divisia M4, excluding treasuries) has slumped. “As a consequence of Basel III Europe is suffering “money supply gaps” while Asian countries do not have these problems.

The article contains graphs comparing the expenditure policies of the past eleven US presidents, US money supply figures, Eurozone money supply gaps, and selected countries that do not have similar problems.

Read the full article in the PDF below