Monthly Archives: April 2011

Understanding Money

For a long time I’ve been convinced that we mostly don’t understand how money really works.  It’s way to easy to think that the government must operate just like a household, and ensure that it doesn’t overspend – thus many of the current calls for austerity.  And obviously there are limits – we all know about 1920s Germany and Zimbabwe and many other examples of runaway inflation.  But typically there are additional circumstances driving such situations (such as reparation payments and crazy dictators)!

I found this column “Not Enough Money” from the National Review’s Ramesh Ponnuru interesting, because he believes many of the folks warning of impending hyper-inflation are probably fighting “the last war” instead of truly understanding the current situation.  Here’s a taste:

In warning about inflation, conservatives are crying “fire” in, if not Noah’s flood, at least a torrential rain. It may be that they are stuck not so much in the 1930s as in the 1970s — the time when conservatism forged much of its current outlook on economics, and a time when monetary restraint was badly needed. Conservatives also tend to think that loosening monetary policy is a kind of intervention in free markets, and therefore to be suspicious of it. But this is an error.

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Conservative States / Liberal States

This posting over at Richard Florida’s Creative Class blog caught my eye: The Conservative States of America.  There he shows a number of statistical view of the 50 states, and some of the general trends that are evident.  Here’s an excerpt:

Conservatism, at least at the state level, appears to be growing stronger. Ironically, this trend is most pronounced in America’s least well-off, least educated, most blue collar, most economically hard-hit states. Conservativism, more and more, is the ideology of the economically left behind.  The current economic crisis only appears to have deepened conservatism’s hold on America’s states. This trend stands in sharp contrast to the Great Depression, when America embraced FDR and the New Deal.

Liberalism, which is stronger in richer, better-educated, more-diverse, and, especially, more prosperous places, is shrinking across the board and has fallen behind conservatism even in its biggest strongholds. This obviously poses big challenges for liberals, the Obama admiration and the Democratic Party moving forward.

But, the much bigger long-term danger is economic rather than political. This ideological state of affairs advantages the policy preferences of poorer, less innovative states over wealthier, more innovative, open and productive ones. American politics is increasingly disconnected from its economic engine.  And this deepening political divide has become perhaps the biggest bottleneck on the road to long-run prosperity.

In many ways I think this raises more questions than anything else:  is conservatism a reaction or a cause? how truly ‘conservative’ are conservatives, especially around programs like Social Security and Medicare?  But it’s all certainly worth thinking about!