Can Fiscal Stimulus Revive the U.S. Economy?

[Kevin_Kennedy]

No Kevin I meant, collapse, that's why I used the word, "collapse".

No, I would not vote for those who ignored the warnings and attempted to do nothing to steer clear of this crisis.

 

[Kevin_Kennedy]

[youtube]Ss-k2H9ddtI[/youtube]

 

[BaronVonBigmeat]

Some guy from the "Ludwig Von Mises" Institute? Never heard of it.

Can you please explain to me why, every developed country on the planet is pursuing keynesian fiscal stimulas right now?

If these Baron Von Ludwig dudes are correct, and their argument so compelling and convicing, why are they being roundly ignored?

Because their prescription for curing the economy would have the government cut spending and return to sound money, which government officials do not want to do. They also say that banks should not be able to loan out money in excess of deposits, ie fractional reserve lending, ie writing hot checks, so the bankers don't like them either.

The Keynesian approach on the other hand tells politicians that they need to hand out even more pork than usual. This is music to their ears. Build bridges! Where? Who cares, it doesn't even matter! No, really--it doesn't matter, an economist told me so!

As to why (some) economists believe this?

Given that the bankers now had the power to create money, they moved to consolidate their privilege. They found an obscure school of economists (lead by two Wall Streeters named William Trufant Foster and Waddill Catchings). These people argued that creating money out of nothing was the “road to plenty” for a society. Foster and Catchings themselves never caught on because they were too obviously conservative and on the side of the rich. John Maynard Keynes saw this and rephrased their theory adding cue words and mathematical mumbo-jumbo to make it appear progressive, scientific and in sympathy with the poor. A group of New York bankers then literally bribed several of the leading colleges in America to accept Keynesian (or Foster and Catchings) economists on their staff. John Kenneth Galbraith’s Chair at Harvard, paid for by the Manhattan Bank (now J.P. Morgan Chase), is a good example.

With this advantage, Keynesian economists were infiltrated into all the major colleges in the country; the smaller institutions rushed to imitate the more prestigious ones. The result is that almost all economics taught in modern American colleges is crackpot and is devoted to serving the interests of bankers.

 

[Diuretic]

No, I would not vote for those who ignored the warnings and attempted to do nothing to steer clear of this crisis.

They're out of office and a good thing too.

 

[Kevin_Kennedy]

They're out of office and a good thing too.

Not in America. Most of the 110th Congress was re-elected to the 111th.

 

[Diuretic]

Because their prescription for curing the economy would have the government cut spending and return to sound money, which government officials do not want to do. They also say that banks should not be able to loan out money in excess of deposits, ie fractional reserve lending, ie writing hot checks, so the bankers don't like them either.

The Keynesian approach on the other hand tells politicians that they need to hand out even more pork than usual. This is music to their ears. Build bridges! Where? Who cares, it doesn't even matter! No, really--it doesn't matter, an economist told me so!

As to why (some) economists believe this?

I don't think Keynes said anything about pork. As I understand it he said governments should stimulate the economy. Handing out pork is what politicians do so they can bribe an electorate. And judging by the reports of the decaying infrastructure in some parts of the US then buildng bridges might just be the ticket. If I ran an engineering firm and the government accepted my tender to build a bridge because the old one was near collapse, I'd be pretty pleased to get the work. I get the work, my workers keep their jobs and houses and the public gets a beautiful new bridge which won't collapse when they're using it. Winners all round I reckon

 

[Red Dawn]

Because their prescription for curing the economy would have the government cut spending and return to sound money,

You and your Baron Von Ludwig Institute buddies keep asserting this as fact.

And I'll keep asking....where's the effing proof of this system of Baron Von Ludwig econmics actually working in the real world??. I don't see it. Until you can show me a modern nation state which has successfully applied Baron Von Ludwig Institute economics, all you have is a theory on a piece of paper. I'm not an international economic expert with a PhD. Neither are you. I try not to play armchair expert on subjects I'm not highly qualified in. All I can do in those areas is to identify what seems to be working in the real world. What seems to work, are liberal social democracies with relatively generous welfare states. There's not another system in the world that comes close.

which government officials do not want to do. They also say that banks should not be able to loan out money in excess of deposits, ie fractional reserve lending, ie writing hot checks, so the bankers don't like them either.

The Keynesian approach on the other hand tells politicians that they need to hand out even more pork than usual. This is music to their ears. Build bridges! Where? Who cares, it doesn't even matter! No, really--it doesn't matter, an economist told me so!

As to why (some) economists believe this?

I don't think Kenyes ever said anything about spending tax payer money to prop up a military industrial complex, a global military posture, hundreds of billions in goodies for defense contractors, or hundreds of billions of dollars of medicare money to private insurance companies.

Those are called pork, at best. Scams, at worst.

Every modern, successful, and prosperous nation wisely spends its public treasure on roads, schools, education, science, and techonology. Do some politicians love the pork? Yeah, we all know that. But, that's not kenynsian economics at it core, and you know it.

 

[BaronVonBigmeat]

I don't think Keynes said anything about pork. As I understand it he said governments should stimulate the economy. Handing out pork is what politicians do so they can bribe an electorate. And judging by the reports of the decaying infrastructure in some parts of the US then buildng bridges might just be the ticket. If I ran an engineering firm and the government accepted my tender to build a bridge because the old one was near collapse, I'd be pretty pleased to get the work. I get the work, my workers keep their jobs and houses and the public gets a beautiful new bridge which won't collapse when they're using it. Winners all round I reckon

Keynes just said spend it on whatever. Bury money in mines, and then pay people to dig around trying to find it. No really, that was one of his examples. You can see why his theories were such a hit, and why Nixon declared "we're all Keynesians now".

The payment to the bridge repair firm will certainly boost their bottom line. And there is *some* benefit to bridges, of course. Certainly more so than paying one guy to dig a hole and the other guy to bury it. And probably more than squandering it on foreign wars.

But a good economist doesn't just look at what is seen (the engineering firm), he looks at what is not seen. In other words, the businesses who had to lay people off because of the taxes to pay for that bridge. Or the borrowing that drove up their interest rates. Or the inflation.

 

[BaronVonBigmeat]

I don't think Kenyes ever said anything about spending tax payer money to prop up a military industrial complex, a global military posture, hundreds of billions in goodies for defense contractors, or hundreds of billions of dollars of medicare money to private insurance companies.

Those are called pork, at best. Scams, at worst.

Every modern, successful, and prosperous nation wisely spends its public treasure on roads, schools, education, science, and techonology. Do some politicians love the pork? Yeah, we all know that. But, that's not kenynsian economics at it core, and you know it.

I agree with you that they are scams. However, Keynes didn't seem to care what it was spent on. If I'm wrong here, someone please correct me. (Side note--Ronald Reagan's allegedly free market economics was nothing more than Keynesianism in drag, or military-Keynesianism if you prefer. The government grew faster than it had in decades. Instead of bridges, we got missles.)

He wrote this in his magnum opus, General Theory of Employment, Interest, and Money (1936).

"Ancient Egypt was doubly fortunate, and doubtless owed to this its fabled wealth, in that it possessed two activities, namely, pyramid-building as well as the search for precious metals, the fruits of which, since they could not serve the needs of many by being consumed, did not stale with abundance. The Middle Ages built cathedrals and sang dirges. Two pyramids, two masses for the dead, are twice as good as one; but not so two railways from London to York." (p. 131)

He was a defender of government make-work projects. When we were children, teachers assigned us busy work to keep us occupied. Eventually, we caught on: the work was not meaningful. It was wasting our time. Keynes advised the governments of his era to imitate our teachers.

"If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well tried principles of laissez-faire to dig the notes up again." (Ibid., p. 129)

While Keynesian economics textbooks rarely quote his words, which are too embarrassing, they present equations that show – or seem to show – that the solution to unemployment is government spending. The government can spend its money on projects that will create demand for labor.

When the Tooth Fairy Meets Goldilocks by Gary North

 

[mash107]

No. "she" isn't. She is referring to the fact that because of deregulation, corporations, including banking institutions, were able to act without restraint. This has been an abject failure. The market does not correct itself because the MIDDLE CLASS only exists if it is protected by regulation. Laissez faire capitalism, an abject failure, resulted in only two classes.... rich and poor. A recipe for disaster.

Unless of course you want to live in a banana republic.

You really shouldn't blame the only reason there is a middle class. Empirically, look at the evidence. The freer the markets are, the more strong and profound the middle class. Compare North with South Korea, and the list goes on and on. Banking institutions were drugged by the Federal Reserve with free money, when Alan Greenspan lowered rates into the negative real interest rate region, and that's precisely what generated this and all asset bubbles. The abject failure has been government interventionism, which has proved fatal for any economy that has tried it, time and time again.

In true laissez faire capitalism, our money wouldn't depreciate over time, what we do in life and who we work for would be completely our choice, rather than dictated by the government, and all people would, obviously, be much happier and prosperous, except those that have the ability to use government for their own benefit, which are the rich and powerful. Sadly, government has to rain on this parade because, like anything it does, it simply wants more and more control.

 

[Paulie]

I agree with you that they are scams. However, Keynes didn't seem to care what it was spent on. If I'm wrong here, someone please correct me. (Side note--Ronald Reagan's allegedly free market economics was nothing more than Keynesianism in drag, or military-Keynesianism if you prefer. The government grew faster than it had in decades. Instead of bridges, we got missles.)



When the Tooth Fairy Meets Goldilocks by Gary North

There's no distinction in Keyenesian spending. As long as the government intervenes and spends money to supposedly spur growth.

Red Dawn tried, but failed. All Reagan did was appease the OTHER end of the spectrum, the conservatives. It doesn't make his policy of spending any less Keynesian.

 

[editec]

Why? Things aren't Dickensian enough for you yet?

'Are there no prisons?' asked Scrooge.
'Plenty of prisons,' said the gentleman, laying down the pen again.
'And the Union workhouses.' demanded Scrooge. 'Are they still in operation?'
'They are. Still,' returned the gentleman,' I wish I could say they were not.'
'The Treadmill and the Poor Law are in full vigour, then?' said Scrooge.
'Both very busy, sir.'
'Oh. I was afraid, from what you said at first, that something had occurred to stop them in their useful course,' said Scrooge. 'I'm very glad to hear it.'

A Christmas Carol

 

[editec]

Keynes just said spend it on whatever. Bury money in mines, and then pay people to dig around trying to find it. No really, that was one of his examples. You can see why his theories were such a hit, and why Nixon declared "we're all Keynesians now".

The payment to the bridge repair firm will certainly boost their bottom line. And there is *some* benefit to bridges, of course. Certainly more so than paying one guy to dig a hole and the other guy to bury it. And probably more than squandering it on foreign wars.

Honest of you to notice that investing in infrastructure does have some social benefit.

But a good economist doesn't just look at what is seen (the engineering firm), he looks at what is not seen. In other words, the businesses who had to lay people off because of the taxes to pay for that bridge. Or the borrowing that drove up their interest rates. Or the inflation.

That is very true.

If taxes are raised to fund the stimulus.

But this money is not being raised by taxes...it is being created by the outcome of the labors of those being paid.

Here's the thing about wealth that the Miseians seems to forget.

Wealth isn't the money in the bank..that is but the respresentation of the promise of wealth that somebody will have to create.

The actual wealth is the goods and services produced by labor.

Now, because the economic meltdown vaporized out money supply, there isn't enough money in circulation to pay for all those goods and services we can AND MUST CREATE...but there can be ...if the government creates that money...by fiat.

What I find troubling is that we have to pretend that this new cash into the system is a debt we owe to somebody

"A debt to whom?" I ask..."the idiots bankers who broke the system to begin with?

Just print the fucking money so people can go back to work and stop screwing around.

Shut down private banks (who let's all recall lend us money they didn't have anyway!) and let's let the Fedeeral treasury, start lending money directly to the people and corporations which borrow money to fund their businesses and purchases.


What the HELL do we need private bankers for anyway?

To lend us money THEY DON'T HAVE AT INTEREST??!

Hell, if it's a choice between a government that doesn't have any money, Lending us money, and private bank that doesn't have any money, lending us money...why give that power to INVENT MONEY a private bank?

 

[BaronVonBigmeat]

Well, the problem with a government agency in charge of all lending is, you're talking about putting economic decision-making in the hands of politicians. That never works well. The government is bad at picking good investments, even worse than private bankers.

(Example: Eight years ago, they would have heavily funded a hydrogen pipeline infrastructure. After all, H2 is the fuel of the future! Just like Betamax is the storage medium of the future. Thank god that never happened, because lithium batteries are better. But I digress.)

Private lending is okay, if it's not fraudulent. Unfortunately, banks are always lending out money they don't have--you could say that banks are inherently, well...bankrupt. If you or I did that, they would call it hot checks and we'd go to jail. When bankers do it, they form a government-approved quasi-private cartel to cover their asses. This is one of the few regulations the austrian school supports. Inflation is fraud when governments do it, but also when private parties do it too. All the other regulations are just band-aids on gaping chest wounds.

 

[Paulie]

Well, the problem with a government agency in charge of all lending is, you're talking about putting economic decision-making in the hands of politicians. That never works well. The government is bad at picking good investments, even worse than private bankers.

(Example: Eight years ago, they would have heavily funded a hydrogen pipeline infrastructure. After all, H2 is the fuel of the future! Just like Betamax is the storage medium of the future. Thank god that never happened, because lithium batteries are better. But I digress.)

Private lending is okay, if it's not fraudulent. Unfortunately, banks are always lending out money they don't have--you could say that banks are inherently, well...bankrupt. If you or I did that, they would call it hot checks and we'd go to jail. When bankers do it, they form a government-approved quasi-private cartel to cover their asses. This is one of the few regulations the austrian school supports. Inflation is fraud when governments do it, but also when private parties do it too. All the other regulations are just band-aids on gaping chest wounds.

Yeah, you keep the fractional reserve lending ratio down to something sensible and managable, and I have no problem accepting it. I'm always going to argue against the practice in theory, but there's a way to keep it at least managable.