Australian economy heading for meltdown, warns Access Economics

[Paulie]

If by "work" you mean high inflation rates, cyclical boom and busts that progressively get worse than the last, loss of purchasing power, and mass job loss, then yeah, I guess that policy is working out perfectly.

 

[Diuretic]

That describes capitalism itself.

Remember Keynes didn't set out to destroy capitalism, he set out to save it and he did so.

 

[Kevin_Kennedy]

Well in the long run we're all dead, right? Wrong. Welcome to the long run folks.

 

[gonegolfin]

I'd have to disagree. Keynesianism does work and it's been proven to work.

How well did the Keynesian policies in the US help over the last decade or so? How did these policies help when the bubble burst in 2000-2001? What happened as a result?

Why do you think financing economic growth via savings is a bad thing as opposed to financing economic growth via the creation of more debt? Note that I am implying that we should be saving, not going more into debt. Why do you think saving is a bad thing?

FDR's errors after the Depression were not down to Keynesianism, they were separate policy mistakes.

The policies of Hoover and FDR were the government interventionist measures championed by Keynesians.

Brian

 

[Zoomie1980]

This is the scariest thing I've seen all day:

Shipping rates hit zero as trade sinks - Telegraph

The best indicator of economic activity in the US is US Railroad railcar loadings. While abysmal compared to the same time last year, they are nowhere near as low as they were in 1982-83 recession and have been relatively flat since November, indicating a bottom has been reached. How long they stay flat we'll have to see.

 

[Zoomie1980]

That describes capitalism itself.

Remember Keynes didn't set out to destroy capitalism, he set out to save it and he did so.

He didn't save anything. They dumped most of his policies immediately after WWII and only then did the Depression truly turn around...

 

[Diuretic]

How well did the Keynesian policies in the US help over the last decade or so? How did these policies help when the bubble burst in 2000-2001? What happened as a result?

Why do you think financing economic growth via savings is a bad thing as opposed to financing economic growth via the creation of more debt? Note that I am implying that we should be saving, not going more into debt. Why do you think saving is a bad thing?


The policies of Hoover and FDR were the government interventionist measures championed by Keynesians.

Brian

Over the last decade, Keynesianism? Was it really? I thought Reagan instituted his trickle-down economics? Didn't have have that whizz kid David someone or other doing his economic policy? Friedmanite if I remember rightly, no I don't think the US has had Keynesian economic policies for quite some years but then I'm not an economist so I could be very wrong.

 

[Diuretic]

The Keynesian route does not work and never has. It will create even bigger long term problems.

Keynesian methods have been applied for some time. What we are experiencing is increasingly shorter (and less fruitful) boom cycles followed by larger (and more painful) down cycles. It then requires increasingly more inflation, than was required in the previous down cycle, to extricate ourselves from the present downturn. At some point the inflation will cease to work and you will have a depression. A depression much worse than if proper economic correction (aka, no artificial stimulus and government intervention) had been originally allowed. There are no free lunches here.

Brian

Well Brian whatever the US has been doing for the last few years wasn't Keynesian economics I think. And whatever it was has fucked up the system big time hasn't it? I suspect it's not about Keynes at all, I suspect, as I said before, it's Reagan's voodoo economics coming home to roost. Problem is it's fucked the rest of us over. I mean I'm not fussed if someone fucks up their own economy but when it's the US that's bad news for the rest of the world, the US having the world's largest economy. I think you might be watching Keynesian policies being applied to try and save the US economy from total collapse. And in any case, call it what you like, I just hope it works.

 

[Diuretic]

You're spitting into the wind. Some here will never truely understand the negative impact of Keynesianism until it is already too late. Even in the face of so much history proving its detriments.

Really?

Have a read of this:

Cover story: 'Where do we go from here?' by Robert Skidelsky | Prospect Magazine January 2009 issue 154

Note this

The new generation of economists abandoned Keynes and, with the help of sophisticated mathematics, reinvented the classical economics of the self-correcting market. Battered by the crises of the 1970s, governments caved in to the "inevitability" of free market forces. The swing-back became worldwide with the collapse of communism.

As I said, whatever has been happening isn't down to Keynes, it's actually your free market types at it.

But the main source of instability lies in the financial markets themselves. And here it is clear that the battle of economic ideas still needs to be fought. Keynes is important in this because he produced the most powerful case for supposing that financial markets are not efficient in the sense required by efficient market theory. As he explained in The General Theory of Employment, Interest, and Money (1936), classical economics had ignored the two main causes of systemic financial failure: the existence of (unmeasurable) uncertainty and the role of money as a "store of value." The first led to periodic collapses of confidence; the second led investors to hoard cash if interest rates fell too low, making automatic recovery from collapses difficult. The function of government was to remove the depressive effect of both by giving investors continuous confidence to invest.

And Keynes saved capitalism, I would have thought you pro-capitalist types would have appreciated him:

TIME 100: John Maynard Keynes

Keynes' basic idea was simple. In order to keep people fully employed, governments have to run deficits when the economy is slowing. That's because the private sector won't invest enough. As their markets become saturated, businesses reduce their investments, setting in motion a dangerous cycle: less investment, fewer jobs, less consumption and even less reason for business to invest. The economy may reach perfect balance, but at a cost of high unemployment and social misery. Better for governments to avoid the pain in the first place by taking up the slack.

The notion that government deficits are good has an odd ring these days. For most of the past two decades, America's biggest worry has been inflation brought on by excessive demand. Inflation soared into double digits in the 1970s, budget deficits ballooned in the '80s, and now a Democratic President congratulates himself for a budget surplus that he wants to use to pay down the debt. But some 60 years ago, when 1 out of 4 adults couldn't find work, the problem was lack of demand.

As the Depression wore on, Roosevelt tried public works, farm subsidies and other devices to restart the economy, but he never completely gave up trying to balance the budget. In 1938 the Depression deepened. Reluctantly, F.D.R. embraced the only new idea he hadn't yet tried, that of the bewildering British "mathematician." As the President explained in a fireside chat, "We suffer primarily from a failure of consumer demand because of a lack of buying power." It was therefore up to the government to "create an economic upturn" by making "additions to the purchasing power of the nation."

Yet not until the U.S. entered World War II did F.D.R. try Keynes' idea on a scale necessary to pull the nation out of the doldrums — and Roosevelt, of course, had little choice. The big surprise was just how productive America could be when given the chance. Between 1939 and 1944 (the peak of wartime production), the nation's output almost doubled, and unemployment plummeted — from more than 17% to just over 1%.

Never before had an economic theory been so dramatically tested. Even granted the special circumstances of war mobilization, it seemed to work exactly as Keynes predicted. The grand experiment even won over many Republicans. America's Employment Act of 1946 — the year Keynes died — codified the new wisdom, making it "the continuing policy and responsibility of the Federal Government ...to promote maximum employment, production, and purchasing power."

 

[Kevin_Kennedy]

Central planning, fiat money, high deficits are all Keynesian policies, not free market policies. We've had all that before, during, and after Reagan.

 

[sealybobo]

I used to think Australia was the bee's knee's but then I heard something about Australians being part of the new world order, illuminati, rich bankers that own the world/our finances, etc.

Then I learned Rupert Murdoc's wealth came from Australia, and we all know what a prick that guy is.

I hope Australia isn't filled with people like Bush.

I wish America was like Australia. Great country and no one hates them. They mind their own business, usually.

 

[Paulie]

Well Brian whatever the US has been doing for the last few years wasn't Keynesian economics I think. And whatever it was has fucked up the system big time hasn't it? I suspect it's not about Keynes at all, I suspect, as I said before, it's Reagan's voodoo economics coming home to roost. Problem is it's fucked the rest of us over. I mean I'm not fussed if someone fucks up their own economy but when it's the US that's bad news for the rest of the world, the US having the world's largest economy. I think you might be watching Keynesian policies being applied to try and save the US economy from total collapse. And in any case, call it what you like, I just hope it works.

See this is where you're showing your complete lack of knowledge on the subject.

Keynesian economics is always the way the economy is run. Reagan's economics was still Keynesian. Clinton's policy was Keynesian. Bush's policy was Keynesian. When you run deficits, you are practicing Keynesian economics. When you print money and offer it as "tax rebates" you're practicing Keynesian economics. You're blaming it on capitalism in general, but Keynesian economics depends on capitalism, they're virtually mutually inclusive. The purpose of it in theory, is to stimulate production in the private sector. There's not much necessity to stimulate the private sector in a non-capitalist economy, because the private sector has limited to no relevance, as the state controls most of the production anyway.

Everything you've seen in your lifetime, that has happened to the US economy in particular, has been the result of Keynesian policy. The booms, the busts, the bubbles, the recessions, etc. It's all been Keynesian, with the only differences being exactly how MUCH intervention each administration and congress has been willing to undertake.

It's disheartening, and quite a shame actually, that you're so strictly in support of something you so obviously don't seem to even understand.

 

[Diuretic]

I used to think Australia was the bee's knee's but then I heard something about Australians being part of the new world order, illuminati, rich bankers that own the world/our finances, etc.

Then I learned Rupert Murdoc's wealth came from Australia, and we all know what a prick that guy is.

I hope Australia isn't filled with people like Bush.

I wish America was like Australia. Great country and no one hates them. They mind their own business, usually.

Hah! Small economy, out of the way bit of the planet, people forget we're here.

Sorry about Murdoch, nothing we could do about him I'm afraid.

 

[Diuretic]

See this is where you're showing your complete lack of knowledge on the subject.

Keynesian economics is always the way the economy is run. Reagan's economics was still Keynesian. Clinton's policy was Keynesian. Bush's policy was Keynesian. When you run deficits, you are practicing Keynesian economics. When you print money and offer it as "tax rebates" you're practicing Keynesian economics. You're blaming it on capitalism in general, but Keynesian economics depends on capitalism, they're virtually mutually inclusive. The purpose of it in theory, is to stimulate production in the private sector. There's not much necessity to stimulate the private sector in a non-capitalist economy, because the private sector has limited to no relevance, as the state controls most of the production anyway.

Everything you've seen in your lifetime, that has happened to the US economy in particular, has been the result of Keynesian policy. The booms, the busts, the bubbles, the recessions, etc. It's all been Keynesian, with the only differences being exactly how MUCH intervention each administration and congress has been willing to undertake.

It's disheartening, and quite a shame actually, that you're so strictly in support of something you so obviously don't seem to even understand.

I'm not surprised I'm showing a complete lack of knowledge - I'd be worried if I weren't revealing it

But - the man who wrote that very interesting article in Prospect I linked to - he said that Keynes had been abandoned. I don't think Reagan used Keynesian economics. Remember Reagan banging on about how bad govermnment was? Hardly Keynesian. Thatcher certainly didn't use Keynes, she was a Friedmanite nutter in government. In my country for the past 12 years our federal government went all neo-liberal on us and dumped Keynes. What has happened in the US, as the man wrote, is a failure in free market theory and practice. The failure is in the theory because in practice it broke when exposed to the real world rather than in a textbook. Did you notice the financial system in the US is in a bit of trouble? Nothing Keynesian there, just a simple failure in the free market mechanism. The engine, pushed to the limit and with all its governors removed, blew up.

I mightn't know much about economics but I can smell a bad argument miles away You're pretending everyone was Keynesian because it turned to shit in such a spectacular manner. You can't accept that the free market is just a theory, like absolute liberty, that might look nice between the pages of a textbook but once it's put in practice just breaks because it fails to take into account the effect of the real world. So, the free market experiment is over. Your cognitive dissonance is kicking in in a huge way, your way of dealing with it is to accuse those who have been down the Friedmanite road of actually practising Keynesian economics, which simply isn't so.

The best way you can handle this is to man up and admit it. The idea of a perfect market is not possble due to the variables of human behaviour - number one relevant variable being avarice. That's what fucked it all up, avarice. Money stopped being a tool and became something that individuals had to pile up. Money became totemic. A person's worth as a human being was measured in terms of how many billions of dollars they could point to as being theirs. Avarice put the lie to the free market theory. Markets are good, but because of the human tendency to avarice the individuals operating them - yes, individual humans actually pull the levers, there may well be a collective invisible hand but there are lots of claws pulling at the machinery - they have to be regulated and those regulations have to be enforced.

Nope, Keynes has been deader than the Dodo since the 1970s, but unlike the species-expired bird he's back

 

[Paulie]

I'm not surprised I'm showing a complete lack of knowledge - I'd be worried if I weren't revealing it

But - the man who wrote that very interesting article in Prospect I linked to - he said that Keynes had been abandoned. I don't think Reagan used Keynesian economics. Remember Reagan banging on about how bad govermnment was? Hardly Keynesian. Thatcher certainly didn't use Keynes, she was a Friedmanite nutter in government. In my country for the past 12 years our federal government went all neo-liberal on us and dumped Keynes. What has happened in the US, as the man wrote, is a failure in free market theory and practice. The failure is in the theory because in practice it broke when exposed to the real world rather than in a textbook. Did you notice the financial system in the US is in a bit of trouble? Nothing Keynesian there, just a simple failure in the free market mechanism. The engine, pushed to the limit and with all its governors removed, blew up.

I mightn't know much about economics but I can smell a bad argument miles away You're pretending everyone was Keynesian because it turned to shit in such a spectacular manner. You can't accept that the free market is just a theory, like absolute liberty, that might look nice between the pages of a textbook but once it's put in practice just breaks because it fails to take into account the effect of the real world. So, the free market experiment is over. Your cognitive dissonance is kicking in in a huge way, your way of dealing with it is to accuse those who have been down the Friedmanite road of actually practising Keynesian economics, which simply isn't so.

The best way you can handle this is to man up and admit it. The idea of a perfect market is not possble due to the variables of human behaviour - number one relevant variable being avarice. That's what fucked it all up, avarice. Money stopped being a tool and became something that individuals had to pile up. Money became totemic. A person's worth as a human being was measured in terms of how many billions of dollars they could point to as being theirs. Avarice put the lie to the free market theory. Markets are good, but because of the human tendency to avarice the individuals operating them - yes, individual humans actually pull the levers, there may well be a collective invisible hand but there are lots of claws pulling at the machinery - they have to be regulated and those regulations have to be enforced.

Nope, Keynes has been deader than the Dodo since the 1970s, but unlike the species-expired bird he's back

I'm sorry, but you're ignorant of history. You should probably stick to opining about your own country.

Reagan ran huge deficits, Diuretic. That is Keynesianism. He actually took a 3 pronged approach, and utilized Keynes in deficit spending, Friedman in monetarization (Volcker), and his own brand - supply side econ - in tax cuts.

His rhetoric about government "getting in the way" doesn't change the simple fact that REAGAN USED KEYNESIANISM. Deficit spending, and government intervention, is the Keynes model.

Not that it's so much on Reagan's shoulders, as it is Congress, but that is somewhat irrelevant when the ultimate fact is that Keynesianism has been alive and well ever since its inception. Aspects of it are continuously put into policy with each new government.

As far as England, or Australia, I don't really care. I'm talking about the US here.

Expand your knowledge beyond op-ed's and obscure articles. Actually read a BOOK, maybe you'll learn something.

 

[gonegolfin]

Over the last decade, Keynesianism? Was it really?

Absolutely. Let's look at the economic intervention executed earlier in the decade following the stock bubble collapse (which was also preceded by excessive cheap money and credit in the 90's) ...

Massive manipulation of the supply of money and credit by the Federal Reserve that led to a 1% target for federal funds. This is anything but a free market. This cheap money and credit circus led to the biggest housing bubble in the nation's history. Government distribution of "tax rebate" checks to get the economy moving. This was repeated several years later in 2008. It did not work earlier in the decade and did not work this time. Increases and extensions in welfare benefits during times of tougher employment. The icing on the cake was the accumulation of massive deficits and a national debt that is now north of $10 trillion. Tax cuts were executed without corresponding government spending cuts (not that I am not in favor of tax cuts, but government spending must be cut). Government spending went through the roof and it resulted in massive deficits and significantly increased debt to foreign nations. Meanwhile, these interventionist measures have led to a currency that has declined significantly, a stock market that had a real negative return this decade (even before the most recent collapse), massive trade deficits that continue to escalate, suffocating individual debt, and soaring Gold and commodity prices.

And now we are playing the same record again! That is the definition of insanity ... doing the same thing over and over again (except in this case, in increasingly aggressive amounts) and expecting a different result in the end. The same measures that caused our present problems are the solutions being proposed to extricate ourselves from our present problems. Except that we now need a stronger dosage to artificially inflate our way out of this mess.

I assume I do not need to list all of the interventionist measures the government has executed this time around ... which are more aggressive than the last cycle. Keynesian solutions once again, just more of them, more variety, and more intensity.

Each bull cycle is increasingly less fruitful and shorter (but requires increasingly more inflation to artificially generate), while each down cycle is more intense and more difficult to emerge from.

I thought Reagan instituted his trickle-down economics? Didn't have have that whizz kid David someone or other doing his economic policy?

Yes, and your point? We went massively in debt to finance our way out of the 1980 recession. We ran large deficits and racked up a sizeable national debt. We relinquished the status of being a creditor nation. Of course we were helped (and continue to be helped) by our status as the world reserve currency. But as each year passes, that gets called into question more and more. Remember all of the bank and S&L bailouts?

Yes, the US has had Keynesian policies for some time. And we are paying for them now and I believe we will continue to pay for them in cyclic fashion until the music stops. Whether we can squeeze out one more reflation cycle or the music stops this time ... I do not know.

Brian

 

[xsited1]

I can't believe there are still people on this planet who believe Keynesian economics works.

 

[Diuretic]

I'm sorry, but you're ignorant of history. You should probably stick to opining about your own country.

Reagan ran huge deficits, Diuretic. That is Keynesianism. He actually took a 3 pronged approach, and utilized Keynes in deficit spending, Friedman in monetarization (Volcker), and his own brand - supply side econ - in tax cuts.

His rhetoric about government "getting in the way" doesn't change the simple fact that REAGAN USED KEYNESIANISM. Deficit spending, and government intervention, is the Keynes model.

Not that it's so much on Reagan's shoulders, as it is Congress, but that is somewhat irrelevant when the ultimate fact is that Keynesianism has been alive and well ever since its inception. Aspects of it are continuously put into policy with each new government.

As far as England, or Australia, I don't really care. I'm talking about the US here.

Expand your knowledge beyond op-ed's and obscure articles. Actually read a BOOK, maybe you'll learn something.

Yeah, you're right, I haven't got a clue about this stuff, I should keep out of it.

Reagan was a Keynesian. That puts me right out of the ring then. I should know better than to take you on Paulie. Oh well, back to the drawing board wth me.

Reagan was a Keynesian. I need to remember that.

 

[Diuretic]

So Brian. The free markets failed right?

 

[Diuretic]

I can't believe there are still people on this planet who believe Keynesian economics works.

Me too and you know some even believe in the myth of perfect competition?

Those economists, I tell ya, they're a crazy mob!