Thomas Sowell

China is the largest foreign holder of U.S. government bonds. But, instead of buying more of those bonds as our skyrocketing national debt leads to more bonds being issued, China has been selling some of its U.S. government bonds this year.

The Chinese are no fools. They know that all this unbridled spending-- even when it is called "investment"-- means that inflation is coming. That in turn means that the dollars with which U.S. government bonds will be paid off will be worth a lot less than the dollars with which the bonds were bought.

Governments around the world have played this game for centuries, robbing those who trusted them enough to buy their bonds. Like Bernard Madoff, they call it "investment."

Inflation also means that all the talk about how higher taxes will be confined to "the rich" is nonsense. Inflation is a hidden tax that takes away the value of money held by everyone at every income level.

Abraham Lincoln once asked an audience how many legs a dog has if you count the tail as a leg. When they answered "five," Lincoln told them that the answer was four. The fact that you called the tail a leg did not make it a leg.

It is too bad that Lincoln is not still around today. He might emancipate us all from our enslavement to words.

When you call something a "stimulus" package, that does not mean that it actually stimulates. The way individuals, banks and businesses in general are hanging onto their money suggests that "sedative" package might be more accurate.

This is not a new phenomenon, peculiar to this administration. President Bush's "stimulus" package did not stimulate either. The same was true back in the days of Franklin D. Roosevelt's "pump-priming" by spending government money to get private money flowing.

The circulation of money slowed down back then the way it has slowed down today.

Some of our biggest political fallacies come from accepting words as evidence of realities. "Rent control" laws do not control rent and "gun control" laws do not control guns.

The big cities with the tightest rent control laws in the nation are New York and San Francisco. The nation's highest rents are in New York and the second-highest are in San Francisco.

There is a very straightforward explanation for that. Strong rent control laws can bring residential building to a screeching halt. Once politicians have milked the political advantages of passing rent control laws, they have to avoid a backlash if all building of apartments stops.


Thomas Sowell

Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.

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