This idea, as I will discuss in a subsequent post, explains the insanity of most mathematics teaching.

The bottom line is that we are experiencing a false, inflation-driven recovery. When it is finally unable to ignore the signs of inflation any longer,the Fed will raise interest rates and terminate QE2 (scheduled to end this month). At that point the economy will begin to stagnate like the Japanese economy of the 1990s and we will face a protracted period of extremely slow growth and high unemployment. This will compound the problem of getting our runaway deficits under control. The alternative to this grim scenario is even worse: if the Fed persists in its inflationary policy then it will usher in galloping inflation like the U.S. experienced in the 1970s combined with high unemployment–and I do not think that price and wage controls will be too far behind.

As I wrote here, the central purpose of our federal government, as defined by the manner in which it spends money, is to transfer wealth from the young and the middle-aged to the elderly. This is, at best, an odd vision of the purpose of government. I am not aware of any political theorist or politician who has ever advocated it–openly, anyway. But, as AARP reminds us, this transfer of trillions of dollars in wealth is not just odd but perverse, since the elderly are already the wealthiest segment of our society:

Medvedev’s political future is very much in doubt, as is Russia’s ability to realize his free-enterprise vision. But it is striking that even in that benighted country, hard experience has driven home the lesson that the free market works, and government control doesn’t. So this is not exactly occult knowledge.

Would our governing officials be able to retain their offices if voters were fully aware that we subsidize corporate farmers but cut food aid to poor people?

Realizing that we are not entitled to others’ labor, and that we are ourselves responsible for the choices—and the consequences of the choices—that we make is bracing and can be, depending on where our moral heads were to begin with, startling. But it is the only way to respect human dignity, both in ourselves and in others. And it implies the only freedom worth the name.

Some of my readers have noticed – and a few ingrates complained – that I have not been posting here very much. Oddly enough, there’s a reason for that

In my view, the main reason that all the recent ”stimulus” that began with the Bush tax rebates in 2008 has failed to stimulate a self-sustaining economic expansion of any real power (and failed to materially affect the course of the evolving 2007-9 downturn) is that no matter how much extend and pretend accounting is done, the accumulated capital required for real economic growth has been, to a large extent, dissipated in the booms. It takes time and real savings to rebuild new capital. If and when that is accomplished, then and only then will a larger proportion of the infinite “demand” of the American people be able to be satisfied.

So, again, it would be closer to the truth to say that Bush-era spending rather than Bush-era tax cuts caused the deficit.