Apologies to Samzidata readers if you have already seen this, but I had not, and boy, this is just gooooooood.
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A classic treatment of Mr KeynesJuly 5th, 2010 |
 10 comments to A classic treatment of Mr Keynes |
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The sad part is that Keynes only argued for government “stimulus” packages in the case of the government having little or no debt, and a certain amount of cash on hand. The modern “borrow until you drop” form would put him in a coma.
Even Keynes agreed that once you realize you’re in a hole, you should stop digging.
I wondered why our new Lords and Masters were so intent on increasing the cost of energy, (and thus the price of virtually everything), with their carbon credit shemes and emission trading scams.
It’s the cargo cult vision of stimulating output by increasing prices.
Well, if the dead look back on life, it must be incredibly heartening to be so respected that people force their own opinions into one’s dead mouth, to give them credibility.
Did even Marx do this well?
Best regards
Government Spending Divides, Does Not Multiply
The Obama administration and almost all Democrats in congress push the idea that it our current spree of government taxing, spending, and credit expansion is going to save us, just like the spending of World War II saved the U.S. from depression in 1941-1945.
Robert J. Barro is an economics professor at Harvard. He found that spending in World War II decreased GDP by 20% (a multiplier of 0.8). Government spending actually killed GDP, even assuming that the spending itself was useful.
An economist quipped: If you think WW2 ended the Great Depression in the U.S., then we can carry out the same enlightened policies without needing a war. Conscript most of the able bodied men and have them build tanks. Then destroy the tanks. Impose rationing for good measure. At the end, everyone is supposed to be rich.
Actually, this isn’t so funny. Keynesian economics recommends to do just that. And Obama and many in congress are Keynesian in their thinking, because they like the recommendation that the government should tax a lot of money and spend it on signs saying “Brought to you by caring Democrats”.
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Keynes, Digger of Holes
No one should trust a theory that predicts greater prosperity from digging holes. Yet, this is the theory by Keynes that Obama is following, and many past presidents have followed, to forcibly change our society. We will supposedly create even more wealth in the future by wasting our current wealth today.
I know. I must be wrong. No one could believe such a thing. Certainly no President of a great country would listen to a dead crank who spouted such nonsense. But, there it is.
How many obviously false statements must a person make before the quality of his entire thought is in question? The limit has not yet been set for government economists and politicians.
While I can appreciate the article, WWII did NOT get us out of the Great Depression.
If stimulus packages and make work government projects destroy productive capital by putting it to unproductive uses, war destroys productive capital by putting it to equally unproductive uses- turning it into bombs and dropping it on other productive capital like roads, buildings, and bridges.
The depression ended because after the war, America enacted the most radical spending cuts in its history, freeing up productive capital to go to work creating value and jobs in the economy.
“While I can appreciate the article, WWII did NOT get us out of the Great Depression…
The depression ended because after the war, America enacted the most radical spending cuts in its history, freeing up productive capital to go to work creating value and jobs in the economy.”
Correct. Also, inflation reduced real wages, allowing the labour market to clear again.
My favourite bit of Keynes’ wisdom – when questioned about his theories in the long run the sagacious reply was – in the long run we are all dead. Alas that has not applied to his economic theories in the long run!
Millie, the “long run” has arrived for some, viz. Greece, Spain, California, and while Keynes and FDR may be dead, those alive today get the bill, with interest. The sadder part is that there is a well-concerted effort in Europe and the US to avoid “the loneliness of the long-distance runner”. As long as politicians hold the purse, and someone has money that can be hoovered into it, we will all be running along with the profligate and wasteful… actually, even after that too. To those who think the Weimar Republic or Zimbabwe cannot happen in the our modern, enlightened societies… care to enter a long-term swap? It’s easy money if they really believe what they claim. Say, on $10,000 notional… I pay in 2020 $16,290 (that’s $10K at 5% interest – just because I am generous, since $10 should be enough), and I get paid the price at that time of 140 barrels of Brent crude oil (that’s $10K divided by $71.45 – today’s price of a barrel of Brent crude).
It’s amusing how loud the crickets chirp when Keynesians with their phobia of deflation are offered to put their money near a defunct economist’s derriere – which is where there mouths can be found too.
Blah… “since $10 should be enough” should read “since $10K should be enough”, as I am sure the Samizdata commentariat has figured out.
I am a bit rushed today – however, “rising prices” are NOT a good thing.
So the detailed differences between Keynes and FDR (or Keynes and the policies of FDR – as the man himself did not think about economics) are not as important as the FALSE starting point they share.