Re: Laffer Curve

From: Johnny Marcos (johnny5_at_yahoo.com)
Date: 07/02/04 

Date: Fri, 02 Jul 2004 09:18:05 GMT

"smithaa02" <asdf@asdf.net> wrote in news:40e4c4f4_3@newspeer2.tds.net:

> zero-taxation with 100% rates is impossible. In reality as taxation
> increases, inflation increases such that as taxation approaches the

I thought mises said taxation fought inflation?

http://www.mises.org/efandi/ch18.asp

When you as an individual buy a government bond, you make a loan to the
government; you put part of your cash holdings into the hands of the
treasury. There is then no increase in the total quantity of currency or
credits available and hence no inflation.

However, it is different when government borrows from the banks' "excess
reserves." Their so-called "excess reserves" are not a tangible thing.
The term is merely a phrase indicating the limits within which the law
is prepared to tolerate credit expansion, that is to say further
inflation. The effects of loans from available "excess reserves" are
just as inflationary as the effects of issuing more paper money. It is a
mistake, therefore, to confuse this government "borrowing" from the
"excess reserves" of the banks with genuine loans.

Popular education is absolutely essential. It is clear that the efforts
of the U.S. government to collect the means necessary for the conduct of
the war by taxation and by sale of government bonds represent sound
measures for heading off inflation. Everybody should be made to
understand that the burden of high taxes and of making personal loans to
the government are minor evils compared to the disastrous and inexorable
consequences of inflation. Not only for the sake of the national
welfare, but for the sake of your own interests—whether you are rich or
poor, employer or wage earner—you should do your best to arrest the
further progress of inflation.

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