Thursday, May 15, 2014

Explaining Purchasing Power To Robert Reich

By Chris Rossini

In his quest to cure government-created "inequality" with the use of more government force, Robert Reich spins in circles:
If consumers don’t have adequate purchasing power, businesses have no incentive to expand or hire additional workers. Because the rich spend a smaller proportion of their incomes than the middle class and the poor, it stands to reason that as a larger and larger share of the nation’s total income goes to the top, consumer demand is dampened.
First of all, what constitutes "adequate" purchasing power? I would love to know the official definition.

And if the problem is purchasing power, all fingers should be pointed in one direction only ==> The Federal Reserve and its fractional-reserve appendages. They are the destroyers of purchasing power. Does Reich want to End the Fed? Ha!

That should be the end of the story right there. Sound money and businesses "expanding and hiring additional workers" without The Fed creating a boom/bust cycle a ruining everything.

But let's address "the rich" and their supposed stinginess with money. Even if "the rich" were to take their paper dollars, not spend them, and bury them in the ground, it would increase the purchasing power of everyone else's dollars. Isn't that what Reich wants? It's simple supply and demand for pete's sake!

"The rich" are not the problem when it comes to purchasing power. The Fed and fractional-reserve banks are. Robert Reich offers nothing more but a continuation of economic folly.

Chris Rossini is on Twitter


  1. Robert Reich is a complete economic ignoramus and always has been. He regurgitates an infantile, populist, brain dead form of Keynesianism that even Keynes would laugh at. He is the perfect embodiment of what Robert Higgs calls Vulgar Keynesianism.

    His "solution" to the "problem" of aggregate demand that Keynesians obsess over is to assume that the Federal Government is like the Yahweh of the Old Testament. When the Israelites wandering in the desert began to starve to death Yahweh saved them by performing a miracle - He rained magical manna from Heaven for their sustenance. If one is predisposed to believe that mystical nonsense then I suppose Reich's babbling might make sense. Otherwise take no heed, the man is just a fool.

    1. @Anon 2.08 PM

      Thou fool.

      Manna is not mystical nonsense.,9171,723060,00.html

      Keynesianism, on the other hand.......
      But that wasn't me.
      That was Lucifer. The guy was always too fond of math.


  2. Doesn't the "super genius" of Mr. Robert Reiiiiiiisshhhhhhhhhh (as R. Limbaugh referrs to him) also know that in addition to spending and burying in the ground "the rich" (whomever this undefined group is) also have a thrid option which is most commonly used by them: Investment/Saving

    I am not an "economic wizard" like R. Reich but doesnt investment/saving always result in more jobs and a better economy since it is the capital that allows business to expand, produce more and hire more workers.....

    Typical Keyesian myoptic focus on debt and consumption.....

    1. ahem, case in point. Well worth 2 minutes of your time to watch this.

    2. Cosmo - dude thanks for the link......yeah, that pretty much sums it up!

      What is freaky-scary to me is that video is what, 30 or 40 years old......yet today's "(pro)regressives" sound exactly the same as the self-righteous old hag complaining we had "too many millionaires"........who we of course should just kill, eat, steal their money.....have one big party buying as many "40s" of Malt liquor, cigs and pizzas we can.....before we find out we have ate all the "seed corn" and have no more capital to loot!

  3. Just what is it with Keynesian statists and "demand"? As Chris explained, wouldn't less demand increase the purchasing power of our money? But as it is always with Keynesians and other Socialists, they don't give a rat's hairy behind about intellectual consistency but with expediency.

  4. The Fed actually restricts money printing in a fractional reserve system. The Fed enforces the reserve requirement. Without the Fed, there is no reserve requirement. You take the reciprocal of the reserve requirement to estimate how much money printing a deposit can support. So if the reserve requirement is 20%, then 100 dollar deposit can support $500 of credit. If the reserve requirement is 10%, then it can support $1000 of credit. And if it is ZERO? What's 1/ZERO Einstein? ∞

    1. Man you are cluless. 20% reserves? LOL Go read about repo's genius and you'll see how foolish what you wrote really is.The reserve rate is probably closer to 3% when you factor out repo's and in Europe closer to 1%. The central banks not only know this, they enable it. The reserve requirements are probably they lowest they have even been in the history of fractional reserve banking. Fractional reserve banking is nothing but legalized theft based on an estimate of how much you need to keep on hand to meet fund outflow needs.

    2. The reserve requirement is basically non existent, Einstein.

    3. The percentage is not the issue. It's the fact that the banks know taxpayers are there as the "lender of last resort", which encourages risky business practices. Fear of failure without that convenient safety net would be far more effective than any phony Fed restrictions.

  5. Reich has some pretty wild ideas, and that's ok, but he seems to base them on things he does not appear to grasp. I tried calling him out on things he stated about US Tax policy, law and history in his last book that was flat out wrong. Not even close. I think he is intellectually lazy and not concerned with being right as much as producing content for which left wingers will gladly pay him.

    My opinion is that he only grasps purchasing power in the nominal sense in that having more money automatically fixes things.