Of Guns and Butter The Path of Arrogance - Article Example

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Of Guns and Butter The Path of Arrogance

Originally, the macroeconomic reference was “Guns or Butter?” meaning that society often has to choose between 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 concept of production possibilities based on limited economic resources. Therefore, every society has to pick and choose its products. Sometimes, the contrast is made between capital goods versus consumer goods, with the same conclusion: we cannot continually expand the production of both types of products and services 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 this vast array 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 money will inevitably decline. 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. ...
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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 concept of production possibilities based on limited economic resources…
Author : vherman

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