Keynesian and Private Sector.

[pier34]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

 

[PoliticalChic]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

Welcome to the board.

John Maynard Keynes, in a letter published in the NYTimes, December 31, 1933, warned “ even wise and necessary Reform may, in some respects, impede and complicate Recovery. For it will upset the confidence of the business world and weaken their existing motives to action.” Even Keynes say the danger in treating the nation’s capitalists as an enemy, as “the unscrupulous money changers,” as FDR called them in his first Inaugural.

Now, if you believe in the efficacy of said policies, consider this:
In 1935, the Brookings Institution (left-leaning) delivered a 900-page report on the New Deal and the National Recovery Administration, concluding that “ on the whole it retarded recovery.” Articles & Commentary

 

[MikeK]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

Rather than embark on an academic debate on the respective theoretical virtues of John Keynes vs Milton Friedman, which would necessarily expand beyond the purposes of this forum, suffice it to say that neither socialism nor capitalism as exclusive socio-economic entities will accommodate the best interests of the majority of Americans. Instead, as the period between the 1940s and 1980s, the most prosperous and productive decades in our history (owing to FDR's New Deal), has clearly shown, the best possible system is capitalism with its more aggressive propensities held in check by appropriate socialist regulations.

Further evidence of the effectiveness of that arrangement is the decline in America's economic supremacy which began when Ronald Reagan commenced de-regulation of the finance and banking industries and reduction of the progressive income tax rate. This tampering with an effective system was continued by Bush-1, Clinton and, most eminently, Bush-2 and the virtual ruin of our economy occurred in almost perfect proportion with these ill-advised, destructive administrative actions.

 

[william the wie]

The strongest periods of economic growth in America's history were:

1789-1809

1842-59

1873-93

The New Deal with its stabilizers (technically a Fisher rather than a Keynesian solution) was designed to limit volatility and therefore growth. It is working and that is the problem.

 

[code1211]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

Rather than embark on an academic debate on the respective theoretical virtues of John Keynes vs Milton Friedman, which would necessarily expand beyond the purposes of this forum, suffice it to say that neither socialism nor capitalism as exclusive socio-economic entities will accommodate the best interests of the majority of Americans. Instead, as the period between the 1940s and 1980s, the most prosperous and productive decades in our history (owing to FDR's New Deal), has clearly shown, the best possible system is capitalism with its more aggressive propensities held in check by appropriate socialist regulations.

Further evidence of the effectiveness of that arrangement is the decline in America's economic supremacy which began when Ronald Reagan commenced de-regulation of the finance and banking industries and reduction of the progressive income tax rate. This tampering with an effective system was continued by Bush-1, Clinton and, most eminently, Bush-2 and the virtual ruin of our economy occurred in almost perfect proportion with these ill-advised, destructive administrative actions.

Your premise is wrong and all of the conclusions based on that premise are also wrong.

The combined military might of Nazi Germany, Imperialist Japan, Soviet Russia and the USA bombed most of the world into the stone age. It took the rest of the world 40 years to re-build. That is what caused the Golden Age you refer to.

Completely eliminating the competition allowed the growth of the ridiculous Union arrangements and the illusion that Americans are somehow "better" than other nations or races.

It is only by seeing reality that you might be able to use it to forecast the future.

 

[PoliticalChic]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

Rather than embark on an academic debate on the respective theoretical virtues of John Keynes vs Milton Friedman, which would necessarily expand beyond the purposes of this forum, suffice it to say that neither socialism nor capitalism as exclusive socio-economic entities will accommodate the best interests of the majority of Americans. Instead, as the period between the 1940s and 1980s, the most prosperous and productive decades in our history (owing to FDR's New Deal), has clearly shown, the best possible system is capitalism with its more aggressive propensities held in check by appropriate socialist regulations.

Further evidence of the effectiveness of that arrangement is the decline in America's economic supremacy which began when Ronald Reagan commenced de-regulation of the finance and banking industries and reduction of the progressive income tax rate. This tampering with an effective system was continued by Bush-1, Clinton and, most eminently, Bush-2 and the virtual ruin of our economy occurred in almost perfect proportion with these ill-advised, destructive administrative actions.

Your premise is wrong and all of the conclusions based on that premise are also wrong.

The combined military might of Nazi Germany, Imperialist Japan, Soviet Russia dn the USA bombed most of the world into the stone age. It took the rest of the world 40 years to re-build. That is what caused the Golden Age you refer to.

Completely eliminating the competition allowed the growth of the ridiculous Union arragements and the illusion that Americans are somehow "better" than outher nations or races.

It is only by seeing reality that you might be able to use it to forecast the future.

Excellent point!

Let me support that, from H.W. Brands, "American Colossus:"

An interesting historical anomaly is the period 1945 through 1965, a golden age in many ways. This was the period after the war, when any of our potential competitors were rebuilding from the devastation, making it impossible for the United States economy not to thrive. Beneficiaries included the unions and blue collar high school graduates…who were assured of high paying jobs. That is no longer true, and probably won’t be again, short of a third World War.

Rep on the way!

 

[pier34]

but, still, yet, there is no evidence without government interference to boost aggregate demand during recession, than the private or free market would fix itself. Unless, someone can point out in history, where, privates able to sustain and recovers by itself from a business cycle. Regardless of the time of prosperity, what would people do during recession? what is the role of the government? what do the privates do during that time besides cutting jobs and halt investment? I, clearly, see recession is like a wound, you can wait till it heals itself ( which takes a long time ) or you can let it get infected, get worse. Is it appropriate to put a bandage (government interference) during the time of healing? Later, take it out ( cut spending and raise tax )?

 

[code1211]

but, still, yet, there is no evidence without government interference to boost aggregate demand during recession, than the private or free market would fix itself. Unless, someone can point out in history, where, privates able to sustain and recovers by itself from a business cycle. Regardless of the time of prosperity, what would people do during recession? what is the role of the government? what do the privates do during that time besides cutting jobs and halt investment? I, clearly, see recession is like a wound, you can wait till it heals itself ( which takes a long time ) or you can let it get infected, get worse. Is it appropriate to put a bandage (government interference) during the time of healing? Later, take it out ( cut spending and raise tax )?

This is a very complex economy. Not only our national economy, but the world wide economy. It is woven together and fragile as the recent credit crisis demonstrated.

That said, the impact of governments on the economies should be one of stabalization. The TARP was needed to stabalize the credit problems that were created by the inteferance of the US Government on the credit business.

If the government had not interfered with the credit in the first place, TARP would not have been needed in the second place.

Our current problems are the direct and undeniable result of the interference of government into the normal and reasonable accounting measures that would have protected the economic system from this disaster if it had been allowed to function as it should.

It is Government interference that created the problem. After TARP came the Failed Stimulus and the actual and threatened further interference into the private sector by government in the forms of regulation and moratoriums.

Government caused the problem and now prolongs it.

 

[william the wie]

This is a very complex economy. Not only our national economy, but the world wide economy. It is woven together and fragile as the recent credit crisis demonstrated.

That said, the impact of governments on the economies should be one of stabalization. The TARP was needed to stabalize the credit problems that were created by the inteferance of the US Government on the credit business.

Quite true.

If the government had not interfered with the credit in the first place, TARP would not have been needed in the second place.

Our current problems are the direct and undeniable result of the interference of government into the normal and reasonable accounting measures that would have protected the economic system from this disaster if it had been allowed to function as it should.

It is Government interference that created the problem. After TARP came the Failed Stimulus and the actual and threatened further interference into the private sector by government in the forms of regulation and moratoriums.

Government caused the problem and now prolongs it.

Generally true but not always true. Network economies and software distribution in particular create increasing contribution margins. When that happens some sort of crash is inevitable because making more units resulting in higher profits per unit cannot be modeled for an optimal strategy. Therefore the shakeouts involved get catastrophic compared to normal free market shakeouts.

Since money is a form of communication the computer and telecommunications revolutions have been causing banking problems worldwide since at least the early 70s. Brick and mortar banks are quickly becoming buggy whip manufacturers. The meltdown was caused in large part because the Fed and other central bankers were clueless as to how far along this process was. It was the breaking of the buck at money markets due to deliberate but incompetent Fed action that caused the launching of TARP and EU equivalents. It seems central bankers did not realize how much of demand deposits had migrated to interest paying money markets.

But some sort of banking panic, probably a whole lot smaller, would have happened any way without any non-criminal governmental financial regulation in the banking industry. Too much money was flowing out of high cost traditional banks too fast and ways of moving risk off the balance sheets were being developed too quickly with computer models. Traditional banks are industrial age dinosaurs.

 

[MikeK]

Your premise is wrong and all of the conclusions based on that premise are also wrong.

The combined military might of Nazi Germany, Imperialist Japan, Soviet Russia and the USA bombed most of the world into the stone age. It took the rest of the world 40 years to re-build. That is what caused the Golden Age you refer to.

Completely eliminating the competition allowed the growth of the ridiculous Union arrangements and the illusion that Americans are somehow "better" than other nations or races.

It is only by seeing reality that you might be able to use it to forecast the future.

It's certainly true that the absence of industrial competition contributed somewhat to America's phenomenal economic growth during that period. But what you've said here tacitly implies that America, the land of unlimited resources, which gave the world electricity, the automobile, flight, telephony, railroads, radio, television, computer technology and penicillin, would not have prevailed in spite of whatever competition it faced from the rest of the world.

It was not the rewards of exceptional success in commerce alone that enabled our amazing growth during the 40 year period prior to Reaganomics. It was the equitable distribution of those rewards facilitated by the "ridiculous union arrangements" and regulations imposed by the New Deal that put wealth in the hands of the working class which actually created it. Their spending of that money is what set the wheels of cyclical economic growth in motion.

In the very simplest, uncomplicated, non-academic terms, redirecting the flow of wealth, which is what Reaganomics and the Conservative influence has done, is the cause of the economic downturn we've been watching for the past three decades.

 

[Sallow]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

Rather than embark on an academic debate on the respective theoretical virtues of John Keynes vs Milton Friedman, which would necessarily expand beyond the purposes of this forum, suffice it to say that neither socialism nor capitalism as exclusive socio-economic entities will accommodate the best interests of the majority of Americans. Instead, as the period between the 1940s and 1980s, the most prosperous and productive decades in our history (owing to FDR's New Deal), has clearly shown, the best possible system is capitalism with its more aggressive propensities held in check by appropriate socialist regulations.

Further evidence of the effectiveness of that arrangement is the decline in America's economic supremacy which began when Ronald Reagan commenced de-regulation of the finance and banking industries and reduction of the progressive income tax rate. This tampering with an effective system was continued by Bush-1, Clinton and, most eminently, Bush-2 and the virtual ruin of our economy occurred in almost perfect proportion with these ill-advised, destructive administrative actions.

Not much more to add to this except to say Friedman advocated for bailouts by government..only with no strings attached.

So much for two fisted free market capitalism..right?

 

[Sallow]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

Rather than embark on an academic debate on the respective theoretical virtues of John Keynes vs Milton Friedman, which would necessarily expand beyond the purposes of this forum, suffice it to say that neither socialism nor capitalism as exclusive socio-economic entities will accommodate the best interests of the majority of Americans. Instead, as the period between the 1940s and 1980s, the most prosperous and productive decades in our history (owing to FDR's New Deal), has clearly shown, the best possible system is capitalism with its more aggressive propensities held in check by appropriate socialist regulations.

Further evidence of the effectiveness of that arrangement is the decline in America's economic supremacy which began when Ronald Reagan commenced de-regulation of the finance and banking industries and reduction of the progressive income tax rate. This tampering with an effective system was continued by Bush-1, Clinton and, most eminently, Bush-2 and the virtual ruin of our economy occurred in almost perfect proportion with these ill-advised, destructive administrative actions.

Your premise is wrong and all of the conclusions based on that premise are also wrong.

The combined military might of Nazi Germany, Imperialist Japan, Soviet Russia and the USA bombed most of the world into the stone age. It took the rest of the world 40 years to re-build. That is what caused the Golden Age you refer to.

Completely eliminating the competition allowed the growth of the ridiculous Union arrangements and the illusion that Americans are somehow "better" than other nations or races.

It is only by seeing reality that you might be able to use it to forecast the future.

Besides Pearl Harbor..what part of the USA was "bombed into the stone age"?

 

[kaz]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

I'd say by your question you don't know what Keynesian economics is. And we don't practice it in this country or anywhere.

Keynesian economics in a nutshell is the belief that a Central authority, government, can make better macro-economic decisions through planning then individual players (companies, consumers) in a free market. They then regulate and spend to make that happen. It's a load of crap. Basically most people just think of it as big government spending.

It's not practiced anywhere because even so called proponents of it don't make decisions based on creating a "better" marketplace, they just spend on government and their own interest. Hence my comment it's not actually practiced anywhere.

 

[editec]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

I'd say by your question you don't know what Keynesian economics is. And we don't practice it in this country or anywhere.

Keynesian economics in a nutshell is the belief that a Central authority, government, can make better macro-economic decisions through planning then individual players (companies, consumers) in a free market.

You have been misinformed, Kaz.

Perhaps it would behoove you to read The General Theory of Employment, Interest and Money so that when you posit a theory about Keynesian economic theory you do so based on what it is, instead of what you imagine it must be.

Just a thought, of course.

I totally understand that some of you prefer to battle straw-men than real ones.

 

[pier34]

that put wealth in the hands of the working class which actually created it. Their spending of that money is what set the wheels of cyclical economic growth in motion. .

In short, supply and demand. Thus, I do not see how the market would correct itself based on consumer confidence when people are not spending and if that's the case, it would take a very very very long time when people are able to spend or the private sectors start to invest, expand and hiring people.

Yet, I have not seen true evidence without government interference during recession, private sectors able to recover quickly. As far as I'm concerned, keynesian approach is to stimulate the aggregate demand - wouldn't that be considered an approach to restore capitalism back on its feet?

 

[pier34]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

I'd say by your question you don't know what Keynesian economics is. And we don't practice it in this country or anywhere.

Keynesian economics in a nutshell is the belief that a Central authority, government, can make better macro-economic decisions through planning then individual players (companies, consumers) in a free market. They then regulate and spend to make that happen. It's a load of crap. Basically most people just think of it as big government spending.

It's not practiced anywhere because even so called proponents of it don't make decisions based on creating a "better" marketplace, they just spend on government and their own interest. Hence my comment it's not actually practiced anywhere.

I think you are wrong and misunderstood about keynesian approach. It has nothing to do with central authority or government control to make better macro-economic decision. I think this is where people get confused and assume, just because government does some actions in economic policy - its socialist!

 

[Truthseeker420]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

Welcome to the board.

John Maynard Keynes, in a letter published in the NYTimes, December 31, 1933, warned “ even wise and necessary Reform may, in some respects, impede and complicate Recovery. For it will upset the confidence of the business world and weaken their existing motives to action.” Even Keynes say the danger in treating the nation’s capitalists as an enemy, as “the unscrupulous money changers,” as FDR called them in his first Inaugural.

Now, if you believe in the efficacy of said policies, consider this:
In 1935, the Brookings Institution (left-leaning) delivered a 900-page report on the New Deal and the National Recovery Administration, concluding that “ on the whole it retarded recovery.” Articles & Commentary

The reason we are in this mess is deregulation of banks. If they said the New Deal retarded recovery they arte very ignorant.

 

[pier34]

The reason we are in this mess is deregulation of banks. If they said the New Deal retarded recovery they arte very ignorant.

The problem with the US govt, they use keynesian during good and bad times. They should use keynesian during recession and cut spending and raise the tax during good times to pay off the debt. But again... politics!

 

[psikeyhackr]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

In a way there are two Keynesian policies not one.

Keynes said that when the economy was weak the government should borrow and spend to bring it back up, the "priming the pump" business. But Keynes also said when the economy was good the government should build up surpluses.

Keynes called FDR an economic illiterate. Before WWII FDR would not do what Keynes said to the degree Keynes said he should. But World War II forced FDR to borrow and spend BIG and the economy took off. But stuff that was being manufactured was being sent off to be blown up. Rapid depreciation!

Anyway WWII was taken as proof that Keynes was right. But politicians only want to use 50% of Keynesianism. When did they ever build up surpluses? So after 60 years of being half-assed they either want to blame Keynesianism or apply it to circumstances that Keynes probably never even imagined. Around 1999 Lester Thurow, an MIT economist admitted that the economy was in a state he did not understand.

We are off the charts dude. Nobody knows what is going on. Everybody is just talking BS without a clue.

psik

 

[Wiseacre]

Can someone tell me if keynesian policies actually interfere with the private sector? EG: the recovery of the US economy post-1929, at how much keynesian policies undermined private-sector confidence and how the similar short-sighted policies are crashing or collapsing today.

In a way there are two Keynesian policies not one.

Keynes said that when the economy was weak the government should borrow and spend to bring it back up, the "priming the pump" business. But Keynes also said when the economy was good the government should build up surpluses.

Keynes called FDR an economic illiterate. Before WWII FDR would not do what Keynes said to the degree Keynes said he should. But World War II forced FDR to borrow and spend BIG and the economy took off. But stuff that was being manufactured was being sent off to be blown up. Rapid depreciation!

Anyway WWII was taken as proof that Keynes was right. But politicians only want to use 50% of Keynesianism. When did they ever build up surpluses? So after 60 years of being half-assed they either want to blame Keynesianism or apply it to circumstances that Keynes probably never even imagined. Around 1999 Lester Thurow, an MIT economist admitted that the economy was in a state he did not understand.

We are off the charts dude. Nobody knows what is going on. Everybody is just talking BS without a clue.

psik

The thing about WWII was that yes the gov't did spend a lot more money but they got a lot of production out of it. We didn't give people money, we gave 'em real jobs. Not sure how it would have panned out if there had been no war.