The Problem With keynesian economics

[Quantum Windbag]

Sure.

It was called "The Great Depression".

And it didn't end until government started spending loads of money. First on infrastucture then on a war.

The government spent loads of money for years before the depression ended, did you forget about the New Deal?

And that spending greatly improved the economic situation. Then they listened to the tea party of the day and cut back. The economy fell back in to recession.

That was funny, and completely wrong.

 

[Polk]

The government spent loads of money for years before the depression ended, did you forget about the New Deal?

And that spending greatly improved the economic situation. Then they listened to the tea party of the day and cut back. The economy fell back in to recession.

That was funny, and completely wrong.

It's exactly what happened, so I'm not sure how it could be "completely wrong". Or even a little wrong.

 

[Quantum Windbag]

And that spending greatly improved the economic situation. Then they listened to the tea party of the day and cut back. The economy fell back in to recession.

That was funny, and completely wrong.

It's exactly what happened, so I'm not sure how it could be "completely wrong". Or even a little wrong.

Because the depression did not end until after WWII when the ramped up manufacturing capacity of the US was able released from government control.

 

[Polk]

That was funny, and completely wrong.

It's exactly what happened, so I'm not sure how it could be "completely wrong". Or even a little wrong.

Because the depression did not end until after WWII when the ramped up manufacturing capacity of the US was able released from government control.

So we were in a depression throughout the Second World War? Someone should tell that to the 2% unemployment rate. Also, the economy actually dipped in to a recession because of post-war demobilization.

 

[itfitzme]

...there is also the famous example of paying people to dig holes.

l find this one curious. I even had an econ professor that claimed this. Except Keyenes never said it.

In his book, "The General Theory of Employment, Interest and Money",Book 3, Chapter 10, Section 6 pg.129, Keyenes wrote;

""If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines 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 (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing."

"In fact, Keynes knew the example was absurd and was using it to parody his critics. Replace the old bottles with gold and you have exactly what happens to deflationary economies on the gold standard: as the value of gold rises in relation to the currency, the economy devotes more resources to digging up gold until the money supply expands enough that deflation stops. It is not hard to see from this example that embracing deflation is about as silly paying someone to dig holes in the ground, and actually much worse given the enormous social costs of mass unemployment you have to suffer in the meantime." - https://news.ycombinator.com/item?id=2973154

 

[Widdekind]

In 1929, real-estate & stock prices plummeted, leaving many borrowers deep in debt. For four years, nobody was borrowing any money -- interest-rates fell from 6% to less than 1%, signaling that banks were offering their loanable cash for lower & lower rates, and still nobody was borrowing. That means money gets "stuck" in the banks & credit-markets, as people (slowly) save into banks, without those monies being re-borrowed, re-spent, and re-circulated. That slowed spending, which didn't rise again, until everybody began borrowing again, from 1934 onwards.

Keynes insight, was for Government to exploit such situations, to borrow all that loanable cash, being passed over by the private sector, as they focused on saving, to pay down their debts. Government could wade into the credit-market, without crowding out private sector borrowers, and gobble up gobs of funds, for low-low interest-rates. Government would be a "borrower of last resort", borrowing, spending, and circulating cash that otherwise would have sat in banks, decirculated, and deflating the money supply. Hypothetically, Government could have borrowed billions of dollars, at low interest rates, to

• buy up farm crops (and ship to soup kitchens in cities)
• buy up farm & house mortgages, eliminating foreclosures, and keeping US citizens off their streets
• pay for rent & utility bills, eliminating evictions, and keeping people off the streets

Those would have been the kinds of focused borrowings that Keynes would have advocated (to my understanding).

Keynes did not advocate the ratchet-effect, whereby Government budgets refuse to reduce.

 

[Widdekind]

During the GD, increasing Government expenditures were only weakly correlated with decreases in unemployment. The New Deal may not have been very monetarily efficient. Rather, the New Deal may have been more of a "throw money at the problem" sort of "solution". Overall, FDR's "Alphabet Soup" of Government programs may not have been the best use of public money.

 

[EdwardBaiamonte]

During the GD, increasing Government expenditures were only weakly correlated with decreases in unemployment. .

Here's what Henry Morgenthau, FDR's Secretary of the Treasury (the man who desperately needed the New Deal to succeed as much as Roosevelt) said about the New Deal stimulus: "We have tried spending money.We are spending more than we ever have spent before and it does not work... We have never made good on our promises...I say after eight years of this administration we have just as much unemployment as when we started... And an enormous debt to boot!"

"The New Republic"( at the time a FDR greatest supporter") noted. In June 1939, the federal public works programs still supported almost 19 million people, nearly 15% of the population" [page 313]

In fact in 1939, unemployment was at 17%, and there were 11 million additional in stimulus make work welfare jobs. Today when the population is 2.5 times greater we have only 8 million unemployed. Conclusion: legislation to make Democrats illegal
is urgently needed

 

[EdwardBaiamonte]

Government would be a "borrower of last resort", borrowing, spending, and circulating cash .

of course the problem is government spending is bubble spending because libturd bureaucrats don't spend with the discipline and consistency of those who actually earned the money or of the banks who must earn positive returns to survive. Now even you understand how capitalism works.

 

[Quantum Windbag]

It's exactly what happened, so I'm not sure how it could be "completely wrong". Or even a little wrong.

Because the depression did not end until after WWII when the ramped up manufacturing capacity of the US was able released from government control.

So we were in a depression throughout the Second World War? Someone should tell that to the 2% unemployment rate. Also, the economy actually dipped in to a recession because of post-war demobilization.

Recessions are not defined by employment.

 

[Joe Steel]

Why do you continue to wallow in this nonsense? Do you get some kind of perverse pleasure from being wrong?

The stimulus was not a failure. It saved jobs and kept the economy from total collapse.

Sure it did, and you can prove this by pointing to all the times the economy failed after a crash where there was no stimulus.

Or can you?

Sure.

In 1937, FDR became concerned with the debt and began an austerity program. Economic growth, slow as it was, became worse. The economy was slipping back into a depression.

 

[Joe Steel]

Why do you continue to wallow in this nonsense? Do you get some kind of perverse pleasure from being wrong?

The stimulus was not a failure. It saved jobs and kept the economy from total collapse.

If I told you I was a democrat and one of my talking points was if guys named Joe Steel empty their bank account into mine i'll save half the world's children from eventual starvation would you oblige?

No. If I gave you every penny I have and every penny I ever have had and every penny I ever will have and if Bill Gates did the same, it wouldn't be enough to make a difference. We need stimulus on a huge scale.

 

[Joe Steel]

Except, as usual, he is being misrepresented. What he actually said was.

"If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines 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 (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing." Book 3, Chapter 10, Section 6 pg.129 "The General Theory.."

Not even close to what you thought he said, is it?

This is pretty much what the Obama stimulus did.

What's your point?

 

[Quantum Windbag]

Why do you continue to wallow in this nonsense? Do you get some kind of perverse pleasure from being wrong?

The stimulus was not a failure. It saved jobs and kept the economy from total collapse.

Sure it did, and you can prove this by pointing to all the times the economy failed after a crash where there was no stimulus.

Or can you?

Sure.

In 1937, FDR became concerned with the debt and began an austerity program. Economic growth, slow as it was, became worse. The economy was slipping back into a depression.

And it bounced right back up again the next year despite no large increase in spending.

Want to try again?

 

[Quantum Windbag]

Except, as usual, he is being misrepresented. What he actually said was.

"If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines 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 (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing." Book 3, Chapter 10, Section 6 pg.129 "The General Theory.."

Not even close to what you thought he said, is it?

This is pretty much what the Obama stimulus did.

What's your point?

The Obama stimulus had people doing things they were going to do even if it hadn't passed, all it stimulated was letting states delay budget cuts for one year. Krugman specifically said that was the best type of stimulus, yet the states still had to cut their budgets because the recovery did not happen.

My point is you are an idiot.

 

[Joe Steel]

Sure.

In 1937, FDR became concerned with the debt and began an austerity program. Economic growth, slow as it was, became worse. The economy was slipping back into a depression.

And it bounced right back up again the next year despite no large increase in spending.

Want to try again?

Take your own advice.

New appropriations in the spring of 1938 totaled $5B. The economy resumed its recovery.

 

[Joe Steel]

This is pretty much what the Obama stimulus did.

What's your point?

The Obama stimulus had people doing things they were going to do even if it hadn't passed, all it stimulated was letting states delay budget cuts for one year. Krugman specifically said that was the best type of stimulus, yet the states still had to cut their budgets because the recovery did not happen.

My point is you are an idiot.

Wrong again, dumbass.

Spending is all that matters but it has to be large enough to meet the need. Thanks to Republican obstruction and obfuscation, this one wasn't.

 

[Polk]

During the GD, increasing Government expenditures were only weakly correlated with decreases in unemployment. .

Here's what Henry Morgenthau, FDR's Secretary of the Treasury (the man who desperately needed the New Deal to succeed as much as Roosevelt) said about the New Deal stimulus: "We have tried spending money.We are spending more than we ever have spent before and it does not work... We have never made good on our promises...I say after eight years of this administration we have just as much unemployment as when we started... And an enormous debt to boot!"

"The New Republic"( at the time a FDR greatest supporter") noted. In June 1939, the federal public works programs still supported almost 19 million people, nearly 15% of the population" [page 313]

In fact in 1939, unemployment was at 17%, and there were 11 million additional in stimulus make work welfare jobs. Today when the population is 2.5 times greater we have only 8 million unemployed. Conclusion: legislation to make Democrats illegal
is urgently needed

You do realize Morgenthau was a right-wing hard money type, right? Of course you don't.

 

[Polk]

Because the depression did not end until after WWII when the ramped up manufacturing capacity of the US was able released from government control.

So we were in a depression throughout the Second World War? Someone should tell that to the 2% unemployment rate. Also, the economy actually dipped in to a recession because of post-war demobilization.

Recessions are not defined by employment.

You're right, but employment is a pretty strong indicator of overall economic health. Recessions are defined by falling GDP. So what happened to GDP during the Depression? On the upswing from March of 1933 to May of 1937. Spending restraint kicks the economy back in to recession from May of 1937 to June of 1938. From there, the economy grows every month until February of 1945.

 

[Avorysuds]

The real reason the stimulus failed is the money went to prop up state budgets instead of being spent in a way that would have helped.

Why do you continue to wallow in this nonsense? Do you get some kind of perverse pleasure from being wrong?

The stimulus was not a failure. It saved jobs and kept the economy from total collapse.

lol...