Of Guns and Butter The Path of Arrogance Article

Of Guns and Butter The Path of Arrogance - hold ExampleOriginally, the macroeconomic reference was Guns or Butter? meaning that society often has to choose among those two opposites guns representing military-type goods, while butter represents civilian goods. It was clear throughout most of the decades of the mid-Twentieth Century that no country could have as much as it might desire of both guns and butter, as that would violate the design of production possibilities based on limited economic resources. Therefore, every society has to pick and choose its products. Sometimes, the limit is made between capital goods versus consumer goods, with the same conclusion we cannot continually expand the production of both types of products and function without running grave economic risks. One of the most serious of those risks is that the monetary, fiscal, and liquidity policies needed to make us produce the maximum of both guns and butter will inevitably lead to hyperinflation, as th is vast regalia of government demands is added to existing and growing non-governmental demands for consumer and capital goods. As the Federal government, in particular, uses trillion-dollar deficit spending to finance its own purchases, running the monetary printing presses to cover those costs, the value of our currency will inevitably decay. That decline is the essence of inflation, and it is likely to escalate as the overspending by all sectors of the economy continues and grows. As prices rise alarmingly, money will begin to become worthless, as happened in numerous countries which followed such policies in the past.