Hey everybody, this is Alex Merced, and this is going to be the fourth discussion on Economics, and today I want to discuss Fiscal Policy. Last time I discussed Monetary Policy, one of the two methods that the government has to essentially affect the economy. In Monetary Policy we discussed essentially things like, managing the money supply, the value of the money, and the type of money, open market operations, essentially buying and selling of bonds from the Federal Reserve.
Now, today what I want to discuss is Fiscal Policy. This is another tool by the Government in order to affect the economy. This is essentially taxation; government spending, and other things are basically more decided in the Congress, than at Federal Reserve. So we will start off with taxation. Now, to say if you don't have the resources to do certain things, you will not do those things. If I don't have enough money to go to the movies, I will not go to the movies.
Point A. Now if you tax someone, they will have less resources, and they will have less resources to do certain things.
So essentially on one way the Government manipulates the economy, especially manipulating supply and demand of certain products, are like excise taxes. These are like the taxes on cigarettes and alcohol, by artificially increasing the resource limit needed in order to participate in certain activities, they force, they basically make decisions for you, saying, don't participate in these activities. My feeling is, this kind of freezes some people's rights of choice, and that, it's manipulating the market. It is kind of like nature. If you see or even seen an Ecosystem, when back in like, Middle School, High School, and you discussed the food chain, everything is balanced in a certain way ,so that, where you know, one animal eats another, and etcetera, etcetera, but it all balances itself out.
As soon as you remove one animal from the food chain, you create an imbalance. Essentially, since this animal is not eating this animal, now this animal is eating more of this animal, since there is more of them, and it creates an imbalance, and you actually have more chaos. This balance only occurs when you leave the Ecosystem alone, and when you remove something from an Ecosystem, it can be return to balance if you leave it alone, similar too, a forest. A forest will naturally have fire every once in a while, in order to restore the balance of that forest. It will be rebuild, it rebuilds naturally. You artificially try to enhance rebuilding a forest or something like that, there are negative consequences, or in either direction.
So, artificial manipulation always throws off the balance. That's the point. This is basically the overall point of my problem with Fiscal and Monetary Policy, Government is artificially manipulating a balance that is created by natural human behavior; again, in the market ,which is a function of what I want, which you want, and finding a place in between; a balance. So again, with taxation you see that the government is kind of messing up their balance, whether by limiting the resources, or people's income, or basically limiting their resources in another way, as they all affect the behavior in ways that might not be quite as conducive to the economy.
Because you give -- people have more money, they will spend more, creating more liquidity in the market in a natural way, without having to manipulate to do Monetary Policy, whether it would be by lowering or increasing the interest rates. The other thing I said was Government Spending. This is more of a Keynesian thought, in another video I'll discuss the different schools of economics, but basically through Government spending, by spending more, the Government can essentially create artificial jobs, and help deal with maybe unemployment. But then the point two is, when the Government spends, typically they overspend, more than they take in, no matter how you tax.
Basically you can read some books on why, when you increase taxes, you actually less money, and when you decrease taxes, you see it increases, but in the end they always end up getting a fairly stable amount of tax always at the of the end, just because people modify their spending habits in order to adjust how much they end up giving towards taxes. But again, back to Government spending, the Government will spend in order to have increase the liquidity in the market, I mean the money flowing through the system, or to create job by creating new departments. The problem is, is that the Government being a public system has hands tied in main regards. They can't necessarily shop for the best when it comes to contract, they can't search for the best people to contract, and so they search for the cheapest, because they are using public money. It's not their money, so they can't just spend it willy-nilly.
This is not the Government's fault, but it is also the reason why the Government is ineffective in affecting changes in a lot of ways ,which is why the money would be better left to be used in natural way in the market by individuals. And again, the market all it is, is the collection of individuals behaving naturally. Now, so basically when it comes to Fiscal Policy, to reiterate, the Government can either do taxation, or Government spending. Either of them will affect liquidity, and affect supply and demand, and etcetera, to manipulate how they kind of behaves. Again, I certainly have -- you have the freedom to be in a little individual bubble, and have resources, I believe when I make money, it's my money. When I have something, and I own something, it's mine, and shouldn't be necessarily manipulated by the Government, essentially egalitarian or old school conservative thought, but essentially that's the point I am trying to make, that this is the debate -- whether what side of the debate you are on, it's not a big deal, as long as you understand that this is the debate, and you should decide, and discuss it.
The point is, open up the dialog on all these economic issues that I feel aren't discussed enough, and these are essentially the real issues that need to be brought up during elections and things like that, because these are the things that at the end of the day are going to affect all other issues, such as racism, corruption, all that stuff, and stuffs that I am planing to getting into future videos. So in the next couple of video what I want to discuss is, "Corporatism Versus Capitalism," the affects of prohibition basically on drugs on the economy, and discuss regulation, those are the three next topics I would like to discuss. So keep an eye out for those, and again today we discussed the Fiscal Policy, so enjoy it.
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