Richard J Grant

Published in The Tennessean , Sunday, November 28, 2010 Irish financial crisis has lessons for Americans by Richard J. Grant The current Irish financial crisis offers lessons to Americans. First, we can learn a lot about fiscal prudence and economic growth from the preceding Irish history. Through the mid-20th century the Irish, like their British neighbors, abandoned common sense in favor of the pseudo-intellectual promises of socialism (what we call “progressivism”). The role of state involvement in their lives grew and their economies stagnated. Just as the Thatcher revolution pulled Britain back from the precipice and restored, at least temporarily, the people's dignity, the Irish went one better. They cut government spending and tax rates aggressively. They removed trade restrictions and brought down their inflation rate. As a small country, with a population just under 4.5 million, they needed to offer clear advantages to business in order to stand out from the crowd. They le...

Published in The Tennessean , Sunday, November 21, 2010 European Union will bail out Irish mistake by Richard J. Grant Four years ago, the government of Ireland was running a healthy budget surplus. During the previous 20 years Ireland had transformed its economy into the envy of Europe. Until the early 1980s Ireland had been a big-government, high-tax, high-inflation, high-unemployment land of economic stagnation. Its main export was people. Government spending consumed more than 50 percent of its economy. The corporate income tax rate was 50 percent and the top personal rate was close to 60 percent. The inflation rate had been in double digits for much of the previous 10 years. Ireland had been phasing out its protectionist tariffs, but in the mid-1980s its unemployment rate reached 17 percent and its economic growth rate was still only about 2.3 percent. By 2006, Ireland's corporate tax rate was 12.5 percent, the lowest in Europe. Its top personal income tax rate had dropped alm...

Published in The Tennessean , Sunday, November 14, 2010 Burdensome regulations slow economic recovery Richard J. Grant It is unfortunate that the Federal Reserve Act gives the Federal Reserve System three different goals to promote: maximum employment, stable prices, and moderate long-term interest rates. Riding three horses at the same time can be dangerous. Fed Chairman Ben Bernanke simplifies matters somewhat by referring to the Fed's “dual mandate” to promote “a high level of employment and low, stable inflation.” But he is not shy about manipulating interest rates in his attempt to achieve the other two goals. With price inflation low and unemployment high, the Fed has attempted to raise employment by pushing down real interest rates. This is why the base money supply has increased so drastically since mid-2008 and why prices did not fall more than they did at that time. Chairman Bernanke still believes that the inflation rate is too low and that more inflation can help increa...

Published in The Tennessean , Sunday, November 7, 2010 The Fed continues to create money out of nothing by Richard J. Grant Federal Reserve Board Chairman Ben Bernanke reminds us that the Fed responded to “the worst financial crisis since the 1930s” by purchasing more than $1 trillion worth of Treasury securities and U.S.-backed mortgage-related securities. This action took several hundred billion dollars worth of risky mortgage-backed securities off the balance sheets of private financial institutions and put them on the Fed's balance sheet. How did the Fed pay for all these securities? It used its unique statutory powers to create money out of nothing. In the last few months of 2008, the Fed doubled the base money supply to $1.8 trillion, and by the beginning of 2010 had increased it above $2 trillion. Under normal circumstances, this would almost certainly have resulted in high double-digit price inflation. With all this new cash available, banks would have had plenty of excess ...