Interesting bit on Keynes

[Paulie]

You didn't even read it, did you?

As for your assertion, that all depends on whether it works or not.

I've read the book on Keynesian economics. It doesn't work, period. There are plenty of studies to prove that it doesn't work. As a quick example, Japan spent hundreds of billions on Keynesian public works schemes after 1991, and economic growth averaged only 1.1 percent. On the other hand, other economic theories have been proven to work. Here's a Harvard study entitled "Fiscal Policy, Profits and Investment" in 18 large economies by Profs. Alesina, Ardagna, Perotti and Schiantarelli. The data is overwhelming:

http://fmwww.bc.edu/EC-P/WP504.pdf

If you apply an economic theory that has been proven to fail, it will fail. So why would anyone do something so foolish? Politics.

I tried to wade throught that...but it was difficult. Could you summarize it for me in your own words? Methinks they suffer a bit from confirmation bias.

Translation: "Me duzzn't understands a darn thang, so it rong"

 

[editec]

I've read the book on Keynesian economics. It doesn't work, period. There are plenty of studies to prove that it doesn't work. As a quick example, Japan spent hundreds of billions on Keynesian public works schemes after 1991, and economic growth averaged only 1.1 percent. On the other hand, other economic theories have been proven to work. Here's a Harvard study entitled "Fiscal Policy, Profits and Investment" in 18 large economies by Profs. Alesina, Ardagna, Perotti and Schiantarelli. The data is overwhelming:

http://fmwww.bc.edu/EC-P/WP504.pdf

If you apply an economic theory that has been proven to fail, it will fail. So why would anyone do something so foolish? Politics.

I tried to wade throught that...but it was difficult. Could you summarize it for me in your own words? Methinks they suffer a bit from confirmation bias.

Translation: "Me duzzn't understands a darn thang, so it rong"

I'll ask again...how did the USA get out of the depression of the 1930s?

 

[Paulie]

I tried to wade throught that...but it was difficult. Could you summarize it for me in your own words? Methinks they suffer a bit from confirmation bias.

Translation: "Me duzzn't understands a darn thang, so it rong"

I'll ask again...how did the USA get out of the depression of the 1930s?

Time.

 

[xsited1]

I listened to the NPR clip on Keynes. Thanks for posting it!

The basic gist is Politicians and their advisers love to tweak taxing and spending our money. The idea is that the government "steers" the economy. They aim to balance an effective demand between the public and private sector and attempt to permanently eliminate recession.

They conclude that Keynesian economics has no answer for inflation. There is no proof it will work and there is proof that it might not.

There is overwhelming proof that it doesn't work. However, NPR obviously cannot admit it so they simply say they don't know. Now why would they do that?

Because there is no proof...only several studies that draw a conclusion. I'm sure we can dig up several that draw a different conclusion.

btw, Manu, I don't think your oil analogy is the right.

The problem is that some economists and politicians (and people in general) force the data to fit their beliefs. The data is very clear when it comes to Keynesian economics - it doesn't work. Obviously the Obama camp (and the Bush camp during his tenure) has a vested interest is pushing economic policies that don't work. And, of course, people in the media, academia, etc., who support these candidates will do everything they can to rally behind their candidate.

Why don't we just find the best solution and go with that? Because politics and the human ego won't allow that to happen. Some people just like living in the dark ages. It's like a religion to them.

 

[xsited1]

I tried to wade throught that...but it was difficult. Could you summarize it for me in your own words? Methinks they suffer a bit from confirmation bias.

Translation: "Me duzzn't understands a darn thang, so it rong"

I'll ask again...how did the USA get out of the depression of the 1930s?

FDR's monetary policy did the trick. He doubled the fixed exchange rate for the dollar relative to gold. This makes sense when you realize that it was monetary policy which sent the country into depression in the first place (i.e., the Federal Reserve’s sharp reduction of the money supply in the late 1920s). War doesn't get anyone out of a recession or a depression in modern times. Just look at the Iraq war as an example.

 

[Ravi]

Now if the Miseians had been in charge, we couldn't have borrowed all that money to fight that war.

And we're probably still be in a depression or possibly we'd be speaking German.

This is exactly right and something the "libertarians" never consider. They'd be perfectly happy to sit and watch a hostile nation take us over as long as it wouldn't impact their tax return.

 

[Ravi]

There is overwhelming proof that it doesn't work. However, NPR obviously cannot admit it so they simply say they don't know. Now why would they do that?

Because there is no proof...only several studies that draw a conclusion. I'm sure we can dig up several that draw a different conclusion.

btw, Manu, I don't think your oil analogy is the right.

The problem is that some economists and politicians (and people in general) force the data to fit their beliefs. The data is very clear when it comes to Keynesian economics - it doesn't work. Obviously the Obama camp (and the Bush camp during his tenure) has a vested interest is pushing economic policies that don't work. And, of course, people in the media, academia, etc., who support these candidates will do everything they can to rally behind their candidate.

Why don't we just find the best solution and go with that? Because politics and the human ego won't allow that to happen. Some people just like living in the dark ages. It's like a religion to them.

I think the bigger problem, and an issue most refuse to see, is that nothing works forever. Keynsian policies worked well for thirty years but they didn't work forever. What works in on situation doesn't work in another.

 

[editec]

Translation: "Me duzzn't understands a darn thang, so it rong"

I'll ask again...how did the USA get out of the depression of the 1930s?

Time.

And the massive amount of fiat dollars we spend arming the world to fight the Axis powers made no difference then?

Interesting theory.

 

[Kevin_Kennedy]

Now if the Miseians had been in charge, we couldn't have borrowed all that money to fight that war.

And we're probably still be in a depression or possibly we'd be speaking German.

This is exactly right and something the "libertarians" never consider. They'd be perfectly happy to sit and watch a hostile nation take us over as long as it wouldn't impact their tax return.

I'm willing to bet you don't know half as much about Libertarianism as you think you do.

 

[editec]

Translation: "Me duzzn't understands a darn thang, so it rong"

I'll ask again...how did the USA get out of the depression of the 1930s?

FDR's monetary policy did the trick. He doubled the fixed exchange rate for the dollar relative to gold. This makes sense when you realize that it was monetary policy which sent the country into depression in the first place (i.e., the Federal Reserve’s sharp reduction of the money supply in the late 1920s). War doesn't get anyone out of a recession or a depression in modern times. Just look at the Iraq war as an example.

It did in 1941.

Of course in 1941 we went from a free market to a completely socialized economy, too. We imposed price controls and we imposed rationing, and then we invented enough debt to fund the war which put millions of people in uniform, and even more millions to work building the weapons of war.

And how did we finally get things back into economic kilter AFTER world war II.

Take a look at the TOP TAX BRACKET post WWII.

You see the 90% rate that the wealthy were paying for far into the 1950s?

That is how we repaid those debts that we essanially owed to oursevles.

We borrowed (by issuing money based on nothing but faith) and then when we were done, we paid it back by TAXING the ever lovin shit out of the industrial class which made fortunes during the war.

 

[cunclusion]

Translation: "Me duzzn't understands a darn thang, so it rong"

I'll ask again...how did the USA get out of the depression of the 1930s?

Time.

Actually no they got out of it the same way that Sweeden the first country and then Germany and Great Britain in that order how through deficit spending. The only difference is that Sweeden was not building up for war.

 

[Kevin_Kennedy]

I'll ask again...how did the USA get out of the depression of the 1930s?

Time.

Actually no they got out of it the same way that Sweeden the first country and then Germany and Great Britain in that order how through deficit spending. The only difference is that Sweeden was not building up for war.

If deficit spending got us out out of recessions we wouldn't be in one.

 

[Diuretic]

...........

If deficit spending got us out out of recessions we wouldn't be in one.

But Kevin, doesn't that beg the question? By that I mean that you're assuming the cause of the recession was government deficit spending. But was it?

 

[Richard-H]

If you flood the market with oil, the price goes down. If you flood the market with money and create jobs, you give people money to spend. Spending is really what the economy is all about.

Of course the key is when to stop, and I don't think Keynes ever addressed that point. Not knowing when to stop is basically what caused these policies to fail thirty years after they were started, no?

Very interesting thought.

It reflects what is the overwelhming problem of our time: ideological extremists holding whatever they believe to be the absolute and only truth for all time.

Reality dictates that, in most things, a balance of various approaches works best and that there is no one formula that works for all time.

I have no doubt that truly unbiased research would show an abundance of failures of both supply-side and keynesian economics as well as an abundance of successes for both - it's the time and circumstances in which they're applied that matters.

We've had 30 years of rule by supply-side economists and now our economy has gone bust.

Before that 30 years of Keynesian policies caused a downturn in the economy, but it was NOTHING compared to what's happening now.

My bet is that a good 10 years of Keynesian spending is just what this country needs.

Hope someday people can figure out that there is no one almighty way that always works for all time and they figure out a kind of dynamic middle-road for managing the economy.

 

[Kevin_Kennedy]

...........

If deficit spending got us out out of recessions we wouldn't be in one.

But Kevin, doesn't that beg the question? By that I mean that you're assuming the cause of the recession was government deficit spending. But was it?

It was certainly part of it. Though I still maintain that the main cause of the recession is the Federal Reserve.

 

[editec]

...........

If deficit spending got us out out of recessions we wouldn't be in one.

But Kevin, doesn't that beg the question? By that I mean that you're assuming the cause of the recession was government deficit spending. But was it?

It was certainly part of it. Though I still maintain that the main cause of the recession is the Federal Reserve.

The FED was one of the monkeywrenches they used to stop the machine, that's true.

One of them.

 

[FistyTheBadger]

Yes, Roosevelt expanded government spending, with an alphabet soup of programs. But he never spent as much money as Keynes said he should have. He also did all sorts of things that Keynes opposed, like raising taxes and trying to balance the budget. Keynes said those steps would cancel out any positive effect from spending. Roosevelt bothered Keynes so much that the economist sent him at least one scolding letter.

Then, finally, geopolitical events took over, and World War II forced Roosevelt to spend as much money as Keynes wanted.

yep.....and then the feds tried to get banks to lend money at zero interest....

now we flood the market with money.......

what happens if i flood the oil market with oil.......

If you flood the market with oil, the price goes down. If you flood the market with money and create jobs, you give people money to spend. Spending is really what the economy is all about.

Of course the key is when to stop, and I don't think Keynes ever addressed that point. Not knowing when to stop is basically what caused these policies to fail thirty years after they were started, no?

But just like with oil, flooding the market with money causes the value to drop. With money not worth as much per unit as before, people need more of it to get the same stuff. This cancels out any benefit of having more units of it. This is why inflation is so harmful and misguided. Has anybody posted this yet, because I don't think that this concept is very original or unique.

 

[FistyTheBadger]

we know trickle down economics does not work. so what do we do?

Trickle down economics is better than the alternative, and even when the money trickles nowhere, at least it is in better hands than the government.

 

[FistyTheBadger]

xsited1, shoots the messenger, NPR. now let us see him pick apart ravi too.

sigh

NPR chooses what to messenge. It is not like they are an impartial party that just ran up to you and said "Oh, I've got some facts for you that you might not like, and neither do I, but war is not the answer."

 

[Ravi]

Yes, Roosevelt expanded government spending, with an alphabet soup of programs. But he never spent as much money as Keynes said he should have. He also did all sorts of things that Keynes opposed, like raising taxes and trying to balance the budget. Keynes said those steps would cancel out any positive effect from spending. Roosevelt bothered Keynes so much that the economist sent him at least one scolding letter.

Then, finally, geopolitical events took over, and World War II forced Roosevelt to spend as much money as Keynes wanted.

yep.....and then the feds tried to get banks to lend money at zero interest....

now we flood the market with money.......

what happens if i flood the oil market with oil.......

If you flood the market with oil, the price goes down. If you flood the market with money and create jobs, you give people money to spend. Spending is really what the economy is all about.

Of course the key is when to stop, and I don't think Keynes ever addressed that point. Not knowing when to stop is basically what caused these policies to fail thirty years after they were started, no?

But just like with oil, flooding the market with money causes the value to drop. With money not worth as much per unit as before, people need more of it to get the same stuff. This cancels out any benefit of having more units of it. This is why inflation is so harmful and misguided. Has anybody posted this yet, because I don't think that this concept is very original or unique.

Flooding the market with money MIGHT cause the value of money to drop. But we aren't talking about flooding the market with money in the same way...the money isn't going nowhere, it's going to create jobs.

How long after FDR started his jobs program did we go without inflation?

Now we are hovering around the edges of deflation. Which is worse?