Economics

[regent]

When Friedman said we are all Keynesians now was Friedman referring to American presidents? It's just possible that since FDR all of our presidents have followed the stimulus part of Keynes but no one has attempted to do the pay-back part. How long can we do the stimulus thing?

 

[EdwardBaiamonte]

ALL admit that FDR's keynesian efforts to spend the nation back into prosperity failed miserably for the most part and only prolonged the pain. Will history be any more kind to Obama?

yes!! the 1936-1937 depression was the inevitable bust that came after the FDR started inflating his bubble the second he was elected.

Liberals simply lack the IQ to understand that stimulus spending merely inflates a mal-investment bubble that will burst soon enough.

 

[regent]

ALL admit that FDR's keynesian efforts to spend the nation back into prosperity failed miserably for the most part and only prolonged the pain. Will history be any more kind to Obama?

yes!! the 1936-1937 depression was the inevitable bust that came after the FDR started inflating his bubble the second he was elected.

Liberals simply lack the IQ to understand that stimulus spending merely inflates a mal-investment bubble that will burst soon enough.

So why did Reagan use the stimulus?

 

[regent]

ALL admit that FDR's keynesian efforts to spend the nation back into prosperity failed miserably for the most part and only prolonged the pain. Will history be any more kind to Obama?

yes!! the 1936-1937 depression was the inevitable bust that came after the FDR started inflating his bubble the second he was elected.

Liberals simply lack the IQ to understand that stimulus spending merely inflates a mal-investment bubble that will burst soon enough.

The second FDR was elected was the banking bill, do you have any idea of what FDR's second bill was?

 

[Foxfyre]

ALL admit that FDR's keynesian efforts to spend the nation back into prosperity failed miserably for the most part and only prolonged the pain. Will history be any more kind to Obama?

yes!! the 1936-1937 depression was the inevitable bust that came after the FDR started inflating his bubble the second he was elected.

Liberals simply lack the IQ to understand that stimulus spending merely inflates a mal-investment bubble that will burst soon enough.

The second FDR was elected was the banking bill, do you have any idea of what FDR's second bill was?

It has been a long time since American history class, but I'm thinking it was most likely his Economic Act to cut federal spending. FDR started out as a strong advocate for a balanced budget.

 

[editec]

Keynesians understand that the economy is already a HUMAN CONTRIVANCE , Amazon.

They understand that there is no such thing as a FREE MARKET.

So do the right wing masters, of course, but they will not admit it because they also know it is contrived for the benefit of capital (hence our system being "capitalist") but have duped so many of us into thinking that an economy operates like GRAVITY and would exist sans any overarching human control.

Its a preposterous POV, of course, but that BIG LIE works really well on the macro-economically ignorant.

If you are referring to Laissez-faire, then you are correct. But a Free-Market doesn't require Laissez-faire. It requires small government intervention or small to the extent where economic sectors are not heavily regulated by the Government.

Laissez faire is a direction for how an economy can be run. It is not a state of being of an economy.

I am happy to read that you are reasonably in touch with reality and do understand that markets demand rules to work.

Hong Kong and Singapore are examples of a modern day Free Market economy. They're probably not as free as many Libertarians would like it to be, but that doesn't change the fact that they are the freest economies in the world right now.

What makes them FREEr than the USA?

If you want to see how the free market really works this is the place to come. - Milton Freedom discussing Hong Kong (Free To Choose, Volume 1 - The Power of the Market)

The Keyensian theory believes that most major downturns in the economy are the result of Free Markets run amok, which is generally not true.

Keynes understood that some DOWNTURNS in the economy are the result of imbalances between supply and demand. Not every economy downturn has the same source and no real economist imagines otherwise.

Not in the case of the Great Depression or the Great Recession. The economy doesn't operate like gravity, and no one ever implied that the Government is suppose to operate like a magic wand,

Well in this case you need to preach to those idiots on the right who IM<AGINE they know what Keynesian economic theory means because those notwits DO imagine that there are a single set of rules that will make economy run smoothly.

YOu happen not to be so ignorant but you are ascribing beliefs to Keynes that he NEVER held as IN

The Keyensian theory believes that most major downturns in the economy are the result of Free Markets run amok,

but some policies makes more sense than others. When I see centrally planned policies, I generally see good intentions gone horribly wrong.

When YOU see centrally planned policies?!

Give me an example of what you mean please.

Isn't the entire system CENTRALLY PLANNED?

If not what the **** is the FEDERAL RESERVE?

 

[regent]

yes!! the 1936-1937 depression was the inevitable bust that came after the FDR started inflating his bubble the second he was elected.

Liberals simply lack the IQ to understand that stimulus spending merely inflates a mal-investment bubble that will burst soon enough.

The second FDR was elected was the banking bill, do you have any idea of what FDR's second bill was?

It has been a long time since American history class, but I'm thinking it was most likely his Economic Act to cut federal spending. FDR started out as a strong advocate for a balanced budget.

You are absolutely correct. FDR when elected believed the key was a balanced budget and his second bill was asking for the powers to cut the budget. Congress gave him the power and FDR began slashing, he cut salaries including Congress and bingo, Congress quickly took that power away from FDR.

 

[Rshermr]

yes!! the 1936-1937 depression was the inevitable bust that came after the FDR started inflating his bubble the second he was elected.

Liberals simply lack the IQ to understand that stimulus spending merely inflates a mal-investment bubble that will burst soon enough.

The second FDR was elected was the banking bill, do you have any idea of what FDR's second bill was?

It has been a long time since American history class, but I'm thinking it was most likely his Economic Act to cut federal spending. FDR started out as a strong advocate for a balanced budget.

A balanced budget was of interest to FDR. But when faced with the reality of what was handed to him, as in a 25% ue rate, the balanced budget quickly became secondary.

"But the fiscal orthodoxy of budget balancing did not match the reality of the economic situation of an America with nearly a quarter of its working population unemployed. From 1933 to 1937, FDR maintained his belief in a balanced budget, but recognized the need for increased government expenditures to put people back to work"
http://www.fdrlibrary.marist.edu/aboutfdr/budget.html

 

[regent]

The second FDR was elected was the banking bill, do you have any idea of what FDR's second bill was?

It has been a long time since American history class, but I'm thinking it was most likely his Economic Act to cut federal spending. FDR started out as a strong advocate for a balanced budget.

A balanced budget was of interest to FDR. But when faced with the reality of what was handed to him, as in a 25% ue rate, the balanced budget quickly became secondary.

"But the fiscal orthodoxy of budget balancing did not match the reality of the economic situation of an America with nearly a quarter of its working population unemployed. From 1933 to 1937, FDR maintained his belief in a balanced budget, but recognized the need for increased government expenditures to put people back to work"
http://www.fdrlibrary.marist.edu/aboutfdr/budget.html

FDR quickly recognized that his balancing the budget was a form of madness and the nation had to spend money. Perhaps one of FDR's problems was always his desire to get back to the balanced budget thing. A slight improvement in the economy ( 1936) meant the depression was over and they could stop spending. He simply misjudged the spending needed and the length of time. It took the spending of a war to get the nation back on track, and it was OK to spend that kind of money on a war but not a depression.

 

[CrusaderFrank]

No, sorry, FDR didn't "Pull back the stimulus"

What do you call a 17% cut in spending and a big tax hike, Frank? "Stimulus?"

By 1937, President Roosevelt and the Federal Reserve thought self-sustaining growth had been restored and began worrying about unwinding the fiscal and monetary stimulus, which they thought would become a drag on growth and a source of inflation. There was also a strong desire to return to normality, in both monetary and fiscal policy.

On the fiscal side, Roosevelt was under pressure from his Treasury secretary, Henry Morgenthau, to balance the budget. Like many conservatives today, Mr. Morgenthau worried obsessively about business confidence and was convinced that balancing the budget would be expansionary. In the words of the historian John Morton Blum, Mr. Morgenthau said he believed recovery “depended on the willingness of business to increase investments, and this in turn was a function of business confidence,” adding, “In his view only a balanced budget could sustain that confidence.”

Roosevelt ordered a very big cut in federal spending in early 1937, and it fell to $7.6 billion in 1937 and $6.8 billion in 1938 from $8.2 billion in 1936, a 17 percent reduction over two years.

At the same time, taxes increased sharply because of the introduction of the payroll tax. Federal revenues rose to $5.4 billion in 1937 and $6.7 billion in 1938, from $3.9 billion in 1936, an increase of 72 percent. As a consequence, the federal deficit fell from 5.5 percent of G.D.P. in 1936 to a mere 0.5 percent in 1938. The deficit was just $89 million in 1938.

http://economix.blogs.nytimes.com/2011/07/12/are-we-about-to-repeat-the-mistakes-of-1937/?_r=0


The Fed also pulled back on stimulus.

At the same time, the Federal Reserve was alarmed by inflation rates that were high by historical standards, as well as by the large amount of reserves in the banking system, which could potentially fuel a further rise in inflation. Using powers recently granted by the Banking Act of 1935, the Fed doubled reserve requirements from August 1936 to May 1937. Higher reserve requirements restricted the amount of money banks could lend and caused them to tighten credit.

This combination of fiscal and monetary tightening – which conservatives advocate today – brought on a sharp recession beginning in May 1937 and ending in June 1938, according to the National Bureau of Economic Research. Real G.D.P. fell 3.4 percent in 1938, and the unemployment rate rose to 12.5 percent from 9.2 percent in 1937.

And the stock market fell by 50%.

If that happened today, conservatives would blame Obama.

In 1937, he doubled down on his Jihad on the US economy by confiscating gold and proposing an "Undistributed profits" tax.

He confiscated gold in 1933, not 1937.

Executive Order 6102 - Wikipedia, the free encyclopedia

He also devalued the dollar against gold. Countries that went off the gold standard or devalued gold recovered sooner from the Depression.

The undistributed tax on profits was introduced in 1936 and was 27%. It was abolished in 1939.

Undistributed profits tax - Wikipedia, the free encyclopedia

Confiscated individual gold in 1933, but implemented a Gold sterilization program in 1937. So combined with the Jihad on "Undistributed profits" he sent the economy (the economy is not the same as the US government) into a tailspin

 

[Kimura]

Which is akin to living on credit cards. You'd live pretty well for a while...until you can no longer make the minimum payments. Then the shit hits the fan.

The Keynesian idea of stimulating the economy is like me robbing the local grocery store of its till, keeping some of the money for my efforts, then giving the rest to a bum....then, when that bum goes into that grocery store to buy beer, we call it stimulus.

Worth reading:

Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts by Hunter Lewis | 9781604190441 | Paperback | Barnes & Noble

Just curious. Have you ever actually read anything actually written by Keynes? Have you ever read a biography of Keynes? Have you ever read a summary of Keynesian macrotheory written by someone other than a political blogger?

I've not only read Keynes, I had it rammed down my throat by many professors during the course of obtaining an advanced degree in economics. I have no interest in 'bloggers'.



You'd be wrong.

I believe you have no conception of Keynes economic theory and if your life depended upon being able to identify it in a list of quotes, you would surely be dead.

What you believe is of no consequence. If I have no interest in bloggers, you think your opinions matter? Please.

If I'm wrong prove it by in your own words explaining:

1. Aggregate demand - We all understand that AD includes spending by consumers, companies and government. What you fail to understand is that government can't spend without first taking from consumers and companies...all under the false premise that government knows how to centrally control the economy at a given point in time. I reject that notion. So did Mises and Hayek and many others whose opinions I respect.

2. Liquidity trap - High interest and low savings can pose a challenge for the Fed. I do not believe in central price controls...not for milk or money. End the Fed.

3. Keynesian cross - A massively over-simplification of Keynes work. OF COURSE, there can be disequilibrium of capital. The question is, who should 'fix' that...a free market or central planners.

_______________________

I advocate the Chicago and Austrian school of economics, with a nod towards the latter.

You sound like a central planner. Pass.

Orthodox economists view that stable inflation is a preferable condition for economic growth in the long term. From this context, the liquidity trap tends to come with the extreme and illogical position that monetary policy is simply an instrument which must somehow be neutral at all times. These are generally the same people who claim that when the economy enters a liquidity trap that monetary policy loses its ability to stimulate aggregate demand and that only fiscal policy can be effective.

JM Keynes went over the liquidity preference in the General Theory where he talks about the transactions-motive for the holding of actual cash balances. Simply put: people will hold cash to enable them to purchase real goods and services on a day-to-day basis. There are several reasons for people to hold cash which he covers in later chapters.

The Keynesian cross, Phillips curve and IS-LM torpedoed the neoclassical/Keynesian axis once stagflation reared its head. This basically led to the end of certain aspects macro theory from a neoclassical standpoint.

By the way, governments don&#8217;t have to take from consumers and companies when they spend. Operationally, under a fiat system, that makes zero sense. All money creation is ex-nihilo under a fiat system, nothing more than a balance sheet operation. In point of fact, spending precedes taxation and &#8220;borrowing&#8221;, so the government is effectively taxing what it has already spent so to speak.

Lastly, there isn&#8217;t some finite pool of savings in the US economy. Savings is a direct byproduct of national income. When we have an increasing national income, we have increased savings. If government spending increases economic activity, which increases national income and GDP, savings will automatically increase. The Austrians are out to lunch on basic monetary operations and macro. It&#8217;s as if they think we&#8217;re still on a gold standard and fixed exchange rate.

 

[regent]

I see economists as cheap historians. They pretty much try to describe what the politicians have done and are doing with the economy. They also create a large jargon of economic terms to do the describing and much of economic education is spent learning the jargon. They also learn theories of economists, the schools of economics, and economic history. But in actually having some control over the economy or directing the economy they are powerless except through the few politicians that might listen to them. To this day economists have not come with, nor agree on, the prevention of recessions/depressions or the cures of same. That would be their biggie. They certainly cannot seem to educate the public, we still believe in economic myths, and only one economist seems to have had any impact on the world--Karl Marx.

 

[Foxfyre]

Yes I wasn't arguing with that. That is the macro view of economic times during the advent of the "New Deal" economics; i.e. FDR's version of keynesianism. The big picture is what you look at re the effects of economic policy and not to the anecdotal incident in which somebody received help and therefore deems the system good.

That is one of the most damning aspects of keynesian economics, American style. It takes from some taxpayers in order to feed an ever growing, ever more bloated, ever more inefficient, ineffective, authoritarian and hungry federal government/bureaucracy and just enough extra to funnel bribe money to enough people to ensure that the government will be allowed to continue unimpeded by much, if any, resistance from the people.

Even many receiving the doled out assistance deplore the growing deficits and unsustainable debt. But not enough to forego that government benefit. They just shut out the warnings that once government has all the power and the people can no longer resist it, they will no longer be of any use to that government. Thus there will be little reason for the government to continue that subsidy.

I labored without success to find an economic argument in your political rant. Is there one?

I thought the definitions of the terms had already been addressed. I did not see any reason to address them again. But okay, if you don't see why I don't embrace Keynesian economics as practiced by the U.S. government, so be it. I could explain it in more simplistic terms, but so far you have not been interested, so why bother?

 

[Toro]

No, sorry, FDR didn't "Pull back the stimulus"

What do you call a 17% cut in spending and a big tax hike, Frank? "Stimulus?"

http://economix.blogs.nytimes.com/2011/07/12/are-we-about-to-repeat-the-mistakes-of-1937/?_r=0


The Fed also pulled back on stimulus.



And the stock market fell by 50%.

If that happened today, conservatives would blame Obama.

In 1937, he doubled down on his Jihad on the US economy by confiscating gold and proposing an "Undistributed profits" tax.

He confiscated gold in 1933, not 1937.

Executive Order 6102 - Wikipedia, the free encyclopedia

He also devalued the dollar against gold. Countries that went off the gold standard or devalued gold recovered sooner from the Depression.

The undistributed tax on profits was introduced in 1936 and was 27%. It was abolished in 1939.

Undistributed profits tax - Wikipedia, the free encyclopedia

Confiscated individual gold in 1933, but implemented a Gold sterilization program in 1937. So combined with the Jihad on "Undistributed profits" he sent the economy (the economy is not the same as the US government) into a tailspin

That's an interesting theory. I've never heard of it before. There's a paper at NBER making the sterilization argument.

 

[Foxfyre]

I see economists as cheap historians. They pretty much try to describe what the politicians have done and are doing with the economy. They also create a large jargon of economic terms to do the describing and much of economic education is spent learning the jargon. They also learn theories of economists, the schools of economics, and economic history. But in actually having some control over the economy or directing the economy they are powerless except through the few politicians that might listen to them. To this day economists have not come with, nor agree on, the prevention of recessions/depressions or the cures of same. That would be their biggie. They certainly cannot seem to educate the public, we still believe in economic myths, and only one economist seems to have had any impact on the world--Karl Marx.

It depends on what economists you read. Milton Friedman, for instance, was not flawless, but his grasp of history was pretty darn good. And I don't believe I've ever caught Thomas Sowell or Walter Williams, both with PhDs in economics, in a historical error. But these gentlemen and the school of economics they embrace is one rooted in appreciation for modern American conservatism/aka classical liberalism, and none have any social agenda to push other than a desire for what is real and liberating, and they are therefore trustworthy.

 

[regent]

I see economists as cheap historians. They pretty much try to describe what the politicians have done and are doing with the economy. They also create a large jargon of economic terms to do the describing and much of economic education is spent learning the jargon. They also learn theories of economists, the schools of economics, and economic history. But in actually having some control over the economy or directing the economy they are powerless except through the few politicians that might listen to them. To this day economists have not come with, nor agree on, the prevention of recessions/depressions or the cures of same. That would be their biggie. They certainly cannot seem to educate the public, we still believe in economic myths, and only one economist seems to have had any impact on the world--Karl Marx.

It depends on what economists you read. Milton Friedman, for instance, was not flawless, but his grasp of history was pretty darn good. And I don't believe I've ever caught Thomas Sowell or Walter Williams, both with PhDs in economics, in a historical error. But these gentlemen and the school of economics they embrace is one rooted in appreciation for modern American conservatism/aka classical liberalism, and none have any social agenda to push other than a desire for what is real and liberating, and they are therefore trustworthy.

Friedman and I went to school together, we were just not in the same class. But one statement by Friedman, on the Donahue show, has stuck with me and that in effect was that all capitalistic nations run on greed. If that's true and I believe it to be, I guess it is this greed that makes it difficult to keep capitalism, capitalistic, hence all the regulations.

 

[Foxfyre]

I see economists as cheap historians. They pretty much try to describe what the politicians have done and are doing with the economy. They also create a large jargon of economic terms to do the describing and much of economic education is spent learning the jargon. They also learn theories of economists, the schools of economics, and economic history. But in actually having some control over the economy or directing the economy they are powerless except through the few politicians that might listen to them. To this day economists have not come with, nor agree on, the prevention of recessions/depressions or the cures of same. That would be their biggie. They certainly cannot seem to educate the public, we still believe in economic myths, and only one economist seems to have had any impact on the world--Karl Marx.

It depends on what economists you read. Milton Friedman, for instance, was not flawless, but his grasp of history was pretty darn good. And I don't believe I've ever caught Thomas Sowell or Walter Williams, both with PhDs in economics, in a historical error. But these gentlemen and the school of economics they embrace is one rooted in appreciation for modern American conservatism/aka classical liberalism, and none have any social agenda to push other than a desire for what is real and liberating, and they are therefore trustworthy.

Friedman and I went to school together, we were just not in the same class. But one statement by Friedman, on the Donahue show, has stuck with me and that in effect was that all capitalistic nations run on greed. If that's true and I believe it to be, I guess it is this greed that makes it difficult to keep capitalism, capitalistic, hence all the regulations.

And Walter Williams says capitalistic 'greed' is silly talk for the profit motive that drives a free market system to everybody's benefit. And there is nothing wrong with it as it serves us all very well.

As Adam Smith said, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

Some of the regulation is necessary to secure our rights meaning that we must be prevented from doing physical, economic, or environmental violence to each other. And some arises out of another kind of greed - that which furthers the interests of those in government to amass more of the bounty of those profits for itself without having to work for it.

 

[Kimura]

It depends on what economists you read. Milton Friedman, for instance, was not flawless, but his grasp of history was pretty darn good. And I don't believe I've ever caught Thomas Sowell or Walter Williams, both with PhDs in economics, in a historical error. But these gentlemen and the school of economics they embrace is one rooted in appreciation for modern American conservatism/aka classical liberalism, and none have any social agenda to push other than a desire for what is real and liberating, and they are therefore trustworthy.

Friedman and I went to school together, we were just not in the same class. But one statement by Friedman, on the Donahue show, has stuck with me and that in effect was that all capitalistic nations run on greed. If that's true and I believe it to be, I guess it is this greed that makes it difficult to keep capitalism, capitalistic, hence all the regulations.

And Walter Williams says capitalistic 'greed' is silly talk for the profit motive that drives a free market system to everybody's benefit. And there is nothing wrong with it as it serves us all very well.

As Adam Smith said, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

It also seems like Walter Williams has never bothered to write about rent-seeking behavior in some of his more geriatric diatribes. Or how concepts such as marginal productivity theory should be relegated to the dustbin of history.

There's no such thing as a free market. Yeah, we had a "free market" when humans were hunter-gatherers, but once humans started to organize city-states, we entered the realm of political economy.

 

[Foxfyre]

Friedman and I went to school together, we were just not in the same class. But one statement by Friedman, on the Donahue show, has stuck with me and that in effect was that all capitalistic nations run on greed. If that's true and I believe it to be, I guess it is this greed that makes it difficult to keep capitalism, capitalistic, hence all the regulations.

And Walter Williams says capitalistic 'greed' is silly talk for the profit motive that drives a free market system to everybody's benefit. And there is nothing wrong with it as it serves us all very well.

As Adam Smith said, "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."

It also seems like Walter Williams has never bothered to write about rent-seeking behavior in some of his more geriatric diatribes. Or how concepts such as marginal productivity theory should be relegated to the dustbin of history.

There's no such thing as a free market. Yeah, we had a "free market" when humans were hunter-gatherers, but once humans started to organize city-states, we entered the realm of political economy.

Well I'm sure you are a very smart man, but I frankly don't have any issues with Dr. Williams theories on free markets and economics in general. What specifically do you have to quarrel with in his illustration of the modern supermarket and the can of tuna that is sold there? See Post #39.

 

[regent]

Pressure was on FDR to balance the budget. Here for example is a bit from the "New York Times" of June 2, 1937 concerning the economy:

"Here is the real nub of the matter. As the demand for the economy continues to grow, the president's failure to balance the budget is becoming more and more embarrassing to him."


By 1937 the depression had seemed to exceed all previous depressions in time, and many thought by 1937 with the improved economy it was pretty much over. Many wanted the budget balanced including FDR, so believing prosperity was just around the corner slowed the stimulus, It was too quick and bingo.