The parallel money system
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Why has the government been questioned when deciding to interfere with the economy? Why do we have recessions and even depressions in the first place?
Milton Friedman was an American economist who questioned the government’s position when it interfered with the economy. Opposite to Keynesian economics, which supports government intervention, Milton claimed that the government was a guilty one who constantly caused the economy to run into recession and occasionally into depression.
Why was the government bad at the economy?
The government likes to tell people what they should and should not do. However, the government has no better understanding of the economy than people do. They got resources and do not face any consequences even if they make mistakes.
The market is a price system
Price is information transmitted from buyers to sellers. It assesses the relative values of exchanged goods and services. If the market sets prices, it shows consumers and producers are at the agreement that the market is the most efficient route to complete such transactions. Price usually contains the most important information between buyers and sellers before completing the transaction. Any distorts of such information will make the route inefficient and lead to waste. The government is wasteful simply because they usually distort price information through its influence, make unilateral decisions that impact the economy incorrectly, and waste resources for the general public to determine what is going on.
In the current high inflation environment, the government made a mistake regarding the inflation assessment and made mistakes likely again during the recession and turned the economy upside down into recession faster than they anticipated.
What is the function of the market?
The market is meant to distribute resources according to people’s needs, not their ability to pay. However, the…
