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Some Non-Covid Links

Nicolás Cachanosky explains why today’s inflation is not chiefly caused by supply-chain web woes.

Also writing about inflation is my intrepid Mercatus Center colleague Veronique de Rugy.

The Editorial Board of the Wall Street Journal is unimpressed with the Fed’s current handling of inflation. Here’s the conclusion:

Mr. Powell’s strategy seems to be to steer through his confirmation by talking tougher on inflation while doing little about it anytime soon. The Senators can decide if they feel as confident as the Fed chairman does that he has it all under control.

Also unimpressed with Jerome Powell’s handling of inflation is Robert Barro. A slice:

Powell continues to insist that today’s high inflation is all about temporary bottlenecks and supply-chain problems stemming from the pandemic-induced recession and the subsequent uneven recovery. According to this view, the Fed is merely a passive agent, trying its best to provide enough liquidity so that the supply-side inflation does not disrupt financial markets and the overall economy.

Powell’s interpretation of current events reminds me of the German central bank’s view in 1923, when it was presiding over that country’s post-World War I hyperinflation. According to the Reichsbank, the inflation derived from goods shortages was attributable to foreigners, whose unreasonable reparations payments had caused a sharp depreciation of the German mark. In this scenario, the Reichsbank was a passive agent, trying as hard as possible to print currency to keep up with the rise in prices. As with Powell, the blame for inflation was put elsewhere – in this case on foreigners – rather than on the central bank’s own policies.

GMU Econ alum – and Pepperdine University professor – Julia Norgaard reviews Armen Alchian’s and William R. Allen’s Universal Economics. A slice:

The book starts out by stating its quite cheeky intent. The authors admit that the reader will become brainwashed, but it is in the “desirable” sense. By “desirable” brainwashing they mean that the reader will begin to see their erroneous beliefs about the world for what they arewrong. Some commonly held beliefs that the economic way of thinking illuminates are “property rights commonly conflict with human rights” and “rent control improves and expands housing.” The authors pose economic challenges to these widespread economically unsound beliefs in an intellectually stimulating and an enjoyable way. The first thirteen chapters lay the foundation for the economic way of thinking and basic price theory. These chapters cover the concepts of costs, marginal thinking, efficiency, and property rights, among many other basic principles. Chapters 14 through 29 use the foundational concepts in the previous chapters to build the economic framework for decision making in organizations like firms. Chapters 30 through 42 apply economic thinking and price theory in the realms of labor markets and money.

Liz Wolfe reports on Elizabeth Warren’s charge that, because of the tax code, Elon Musk doesn’t “actually pay taxes.” A slice:

Time had just named Musk its Person of the Year, so Warren tweeted: “Let’s change the rigged tax code so The Person of the Year will actually pay taxes and stop freeloading off everyone else.” Musk tried a few different responses on for size, including “You remind me of when I was a kid and my friend’s angry Mom would just randomly yell at everyone for no reason,” “Please don’t call the manager on me, Senator Karen,” and then “Don’t spend it all at once … oh wait you did already.”

Musk’s best response was to counter the claim that he won’t pay taxes this year—a common talking point from those who won’t acknowledge that many ultra-rich founders and CEOs accrue such high net worths not via traditional salaries alone (or in some cases at all) but via a mix of stock options, capital gains, interests, dividends, and business income. Though Musk did not pay federal income taxes back in 2018 (because he took out loans against Tesla shares), he will be on the hook to pay an extreme amount this year: potentially between $9 billion and $10 billion, if he exercises soon-to-expire stock options.

Sen. Warren might want to read GMU Econ grad student Dominic Pino’s explanation, at National Review, that the U.S. income-tax code is indeed very progressive.

Also from Dominic Pino is this report of Elizabeth Warren’s truly comical take on inflation. (DBx: How can anyone encounter pronouncements from the likes of Warren, or of almost any other successful politician, and not conclude that these politicians are either dangerously stupid or demonically dishonest?)

Cato’s Colin Grabow reports that Sen. Mike Lee (R-UT) “proposes paring back protectionism to address port woes.”