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FreeMarkets (89.92)

Are Keynesians Really That Stupid?

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October 21, 2009 – Comments (37)

I got the idea to write this blog post after reading TMFDeej's post entitled "How Uncle Sam is killing your savings".

Keynesians say things like "The government has little choice" and "Without bailing out the banks our economy would have collapsed" as if the government MAKES economies.  They don't.  Governments don't have to set interest rates OR use fiat currencies.  They could just stop printing money and stop setting interest rates then let the market determine what the value of money is and where interest rates should be set.

Yes, it's true that due to 70 years of gov't intervention in the markets, the next 12 - 24 months would see a massive recession, but once the malinvestments the gov't created are gone we would once again experience real, sustainable growth.

Lets not forget, the reason the "Great Depression" was called such was NOT due to its severity, but its length.  The 1921 recession was just as severe, but the gov't stayed away and it lasted 12 months.  We are now experiencing 2 years of this recession with the only growth coming from inflation.  The fact that the FED has poured well over $3 Trillion into a $15 Trillion economy and we're hoping to see 1% growth is hard to fathom that anyone with a degree in economics can call that a recovery.

The problem with Keynesians is they believe their are methods to make bad things magically go away.  If we can just infuse trillions of dollars into an economy then pull it out at just the right time, we can live a hedonistic Roman lifestyle with no consequences.

But my BIGGEST problem with Keynesians is when they try to act like free market capitalists.  They are not - they are Socialists and sometimes Fascists and Communists.  They may have been brainwashed to believe they are capitalists and will make arguments like George W Bush's stupid quote "I've abandoned free market principles to save the free market system"

Are Keynesians really that stupid - or is the end plan to trick enough of us to create a massively dependent working class that kneels at the nipples of government handouts?

 

37 Comments – Post Your Own

#1) On October 21, 2009 at 9:08 AM, dickseacup (67.03) wrote:

Yes.

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#2) On October 21, 2009 at 9:24 AM, BravoBevo (99.97) wrote:

+1 rec

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#3) On October 21, 2009 at 9:46 AM, Rebkong1 (< 20) wrote:

i doubt you get any "socialist" that will give you a quality answer...why? b/c they can't...very well put

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#4) On October 21, 2009 at 10:09 AM, pastordisaster (< 20) wrote:

Yes, most of them are mindless puppets who subscribe to anything they were taught in school. They often lack the insight to think for themselves and have a follow the herd mentality. In short, they fail life.

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#5) On October 21, 2009 at 10:09 AM, russiangambit (29.35) wrote:

They are not stupid, they knowingly sacrifice the long term health of the economy for political expediency. Apres moi - le deluge.

 

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#6) On October 21, 2009 at 10:28 AM, SkepticalOx (99.50) wrote:

#5 +1 Rec. Exactly.

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#7) On October 21, 2009 at 10:28 AM, bigpeach (26.02) wrote:

russiangambit has it right. It's not politicians or Keynesians that are stupid. It's that the public punishes politicians that make tough yet wise choices in the next election. Can't blame them for wanting to keep their jobs. They are representative of the people after all, and if the people want short term fixes at the expense of long term health, then that's what we'll get.

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#8) On October 21, 2009 at 10:30 AM, whereaminow (< 20) wrote:

Brilliant!

Our solutions were too harsh, remember?  Just don't mention Japan to a Keynesian.

David in Qatar

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#9) On October 21, 2009 at 10:50 AM, JohnnyAngel33 (< 20) wrote:

Well said.

I went absolutely nuts back when I heard George Bush make that quote.

I'm 24 and I remember back in college a couple years ago an economics class I had to take.  When covering Reaganomics and supply side economics they tried to convince us that Reagan just got lucky and that those policies really don't work.

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#10) On October 21, 2009 at 11:50 AM, JakilaTheHun (99.92) wrote:

This is one of the dumbest, most substanceless posts I've ever seen and of course it gets a million recommendations, mostly from the same group of mindless ideologues that always recs these things.

The real success behind this blog comes from the fact that hardly anyone identifies themselves as "Keynesian."  It's just a new boogie-man term to dodge blame for problems created by dimwitted policies supported by many of the people in this thread.  

When I see people attacking Keynes, it reminds me of when Socialists attack Adam Smith --- it's normally based on complete ignorance.  Bigpeach is the closest to be correct.

In truth, Keynes never advocated most of the stuff being pursued by American politicians.  Rather, American politicians took Keynesian economics and twisted it to suit their own needs.  It was a slow process and eventually, they learned they could use some Keynesian ideas to manipulate things for electoral expediency.

This is no different than how multinational corporations will often evoke free market ideology (a la Smith) when it suits their needs, but will become the biggest fans of government intervention whenever they need help.  

In reality, American policy has very little to do with Keynesian economic theory.  Claiming Japan is/was Keynesian shows a complete lack of understanding of Keynesian economic theory, as well.  The problem isn't Keynes --- the problem is special interests.  The problem is that special interests control the system.

The end result is a new Mercantilism, or neo-Mercantilism if you will.  Mercantilism in early Modern Europe was an economic system where the interests of large corporations and the state intersected.  Adam Smith was extremely critical of this system because it favored inefficient corporations that were politically connected rather than small, more efficient operations. Japan was one of the first post-War nations to drift into a Neo-Mercantilistic system; it was never Liberal nor Keynesian. 

We don't need Socialism or Libertarianism or Keynesianism or any other -ism; we need a system (and call it whatever you want) that encourages entrepreneurship, efficiency, equal opportunity, and small business.  Instead, this economic crisis has only resulted in the interests of the state and large corporations becoming even more entangled than they were before.  

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#11) On October 21, 2009 at 12:13 PM, whereaminow (< 20) wrote:

JakilaTheHun,

Have you ever read General Theory?
Would you like to debate it?
Can you refute anyting in this blog regarding Japan?

I do however, agree with this statement:

we need a system (and call it whatever you want) that encourages entrepreneurship, efficiency, equal opportunity, and small business. 

That system is called free market capitalism.

David in Qatar

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#12) On October 21, 2009 at 12:14 PM, carcassgrinder (41.39) wrote:

#10....brutal opening...intelligent, articulate arguement.  +1 rec.

Freemarket....provoking post.  +1 rec. 

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#13) On October 21, 2009 at 12:16 PM, russiangambit (29.35) wrote:

>In truth, Keynes never advocated most of the stuff being pursued by American politicians.  Rather, American politicians took Keynesian economics and twisted it to suit their own needs.  It was a slow process and eventually, they learned they could use some Keynesian ideas to manipulate things for electoral expediency.

OK, let's agree that we are talking about that twisted version. What the pure version is we'll enver know the same way we'll enver know what the pure version of Marxism is. Any theory is always tainted by human element.

My personal view is that anybody who thinks they can control natural forces can only stall the immediate effect for a time, but when it is finally unleashed it is many times more destructive. And this is exactly what FED and Treasury are doing.

I see liquidity to be the same thing in the financial markets as energy in the universe. So, imagine what would've happened to this world if energy was increase/ decreased at will. Where the sustained energy increases would come from? Whould they be used efficiently, who would benefit? What would be ininetended consequences. And lastly - is one or 10 people can really foresee the consequences.

The only thing that saves our financial markets from the disaster from all the meddling so far  is that they are minuscule when compared to the universe. The mistakes are not fatal yet. But as they grow bigger, so will the consequences of mistakes. Just like with weapons , now we have weapons we cannot use because they will destroy us.

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#14) On October 21, 2009 at 12:25 PM, whereaminow (< 20) wrote:

Unlike Marx, Keynes did not write 100 volumes of work.  Sure, he wrote a lot which contradicted other things he wrote, and he wrote some completely illogical things like "the paradox of thrift," but there is not enough Keynes that it can be twisted into every meaning like Marx's work.  General Theory is online.  It can be read by anyone.  For follow up, here is an excellent work: "The Hayek-Keynes Debate, 1931-1971."

David in Qatar

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#15) On October 21, 2009 at 12:34 PM, dudemonkey (37.86) wrote:

I would say that a blanket condemnation of or subscription to an economic (or political, for that matter, since they seem to be incestuous Roman twins here on CAPS and TMF) theory is plumbing the depths of stupidity.  Somewhere between "bacteria" and "plankton" on the intelligence scale.

To think that you are smart enough to fully understand all the implications of an economic theory is hubris, plain and simple.

Not defending nor criticizing Keynesians nor anyone in this thread in particular, I'm firing a broadside into the massive ship of Stupid that I see sailing by on a daily basis.  Here, in the news, (especially) in the government, on Main Street, and on Wall Street.  A giant, captainless ship of Stupid with Glenn Beck as the topless crying mermaid on the bow.

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#16) On October 21, 2009 at 12:39 PM, dudemonkey (37.86) wrote:

Again, I'm not criticizing anyone here DIRECTLY, but if you're the kind of person who lets other people make up your mind for you, and refuse to think critically about your own positions, then I am most definitely talking about you.  I see a lot of that, and it's not unique to any one position or viewpoint.

In truth, I don't think any economic theory, Keynesian, pure Free Market, or socialism, have much chance of success over the long term because none of them works in all cases. There will always be cases, like the crisis last fall, the asian crisis of 1997, or stagflation, that torpedo any system.

IMO, socialism might be the most robust because the highs are going to be lower and the lows are going to be higher, but it's not really a system that's attractive to individuals.

My guess is that a blend of systems is probably the most likely to succeed.  

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#17) On October 21, 2009 at 12:47 PM, mikecart1 (98.79) wrote:

I'm doing a final exam related to Keynesian theory for my Global Macroeconomics class.  I HATE MY FINAL EXAM! (take home and harder than diamonds, sicker than swine, would of gone for an A, but a B will do just fine)

:)

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#18) On October 21, 2009 at 12:48 PM, whereaminow (< 20) wrote:

So basically, you haven't really investigated any of these ideas rigorously, but you can tell that some people here are really stupid. Fantastic.

I've read thousands and thousands of pages on economic theory. I'd be happy to teach you.  You can visit my blog for more information. But to start I would try these ten books:

Socialism by Ludwig Von Mises
Capitalism and the Historians by Frederick Hayek and others
Man, Economy, and State by Murray Rothbard
Economics in One Lesson by Henry Hazlitt
General Theory by John Maynard Keyes
The Failure of New Economics by Hazlitt
Liberty and Property by Mises
Money, Bank Credit and Economic Cycles by Jesus Huerta de Soto
Das Kapital by Marx
The Road to Serfdom by Hayek

David in Qatar

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#19) On October 21, 2009 at 12:49 PM, whereaminow (< 20) wrote:

Comment #18 was directed at comments 15 and 16.

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#20) On October 21, 2009 at 12:56 PM, outoffocus (23.19) wrote:

JakilaTheHun

Well said.  However, outside of labelling these people Keynesians, Freemarkets makes some good points.

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#21) On October 21, 2009 at 1:24 PM, dudemonkey (37.86) wrote:

Comment #18 was directed at comments 15 and 16.

Just because you read a lot about economic theory doesn't mean you have the ability to completely understand the full implications of an economic decision.  This is EXACTLY what i was talking about. 

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#22) On October 21, 2009 at 1:33 PM, dudemonkey (37.86) wrote:

So basically, you haven't really investigated any of these ideas rigorously,

It's possible that you didn't read or understand my post, so I will attempt to restate:

No one is smart enough to fully understand something as complex as a global or national economy.  If you think you do, you are probably wrong.

Maybe I'm wrong.  Maybe you are Economic Jesus, in which case I suggest you run for public office immediately so that you can take your perfect understanding of billion-variable linear math to Washington and fix the national economy.  I assume you'd be able to take the time to do that with the fortune that would almost inevitably be aquired with this kind of ability. Just like Plato envisioned back in the day.

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#23) On October 21, 2009 at 1:35 PM, whereaminow (< 20) wrote:

dudemonkey,

Well duh, that's the point of free market economics, that unintended consequences (the bridge not seen) is always the result of government intervention (in other words, somebody that can't understand the full implications of an economic decision.)

Congratulations, you just passed the first lesson.

David in Qatar

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#24) On October 21, 2009 at 1:38 PM, whereaminow (< 20) wrote:

dudemonkey,

Hey, you're the jackoff that came out here calling everyone stupid while admitting you have no idea what you're talking about. Go piss in someone else's cheerios.

David in Qatar

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#25) On October 21, 2009 at 1:48 PM, dudemonkey (37.86) wrote:

Hey, you're the jackoff that came out here calling everyone stupid while admitting you have no idea what you're talking about. Go piss in someone else's cheerios.

I did nothing of the sort.  I simply said that if you don't have the ability to reflect on your own positions and, instead, slavishly adhere to someone else's imperfect understanding of a complex system, you are probably stupid.  It's really up to you which category you want to fall into.

The reason why I say this is because of exactly what you were talking about, unintended consequences.   To assume that you are correct and that everyone else is, to quote the OP, stupid exposes you to risks that you are unwilling and unable to acknowledge due to their nacreous nature.  This, to me, is not a wise path. It's an extremely common one, but it's not a wise one.  

When I say "you", I mean it in the plural.  I don't know anything about you, in particular.

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#26) On October 21, 2009 at 1:58 PM, whereaminow (< 20) wrote:

This is for dude and JakilaTheImbecile. 

Of course I can't speak for everyone, but here's why I know that FreeMarket is smarter that your average bear.

He actually knows about the Great Depression of 1920-1921, which puts him in a very select group.  You see, that GD doesn't fit very neatly into The Official Version of History, which states that anytime the economy turns sour, it's up to the government to fix everything.  In 1920, the government did nothing, and the economy rebounded in 18 months, yet it was a bigger contraction than 1929.

State Worshipping Historians, duped by this perplexing oddity, have been desperately searching for some justification of this obvioulsy impossible event for 70+ years, so they simply ignore. That means that FreeMarket had to augment his regular education in order to find out about it. Kudos to him.  Perhaps Jakila will find the answer and save the State's rep once and for all, forever justifying endless stimuli of the monetary matter.

As for me, I'm just going to go about my business, recing posts that I like, and ignoring ones that I don't.  

Keep on, keepin on.

David in Qatar

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#27) On October 21, 2009 at 2:03 PM, dudemonkey (37.86) wrote:

The internet is the only place where people you agree with will argue with you. 

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#28) On October 21, 2009 at 2:11 PM, whereaminow (< 20) wrote:

I was looking for a fun fight. 

Economic Jesus. I like that.  Can I use that for my new account?

David in Qatar

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#29) On October 21, 2009 at 2:22 PM, dudemonkey (37.86) wrote:

I was looking for a fun fight. 

Economic Jesus. I like that.  Can I use that for my new account?

Healthy debate is always welcome, especially when the alternative is working :)

I was pretty proud of "Economic Jesus" as well.  I almost took it out because I didn't want to be too confrontational, but it was too good to pass up.  It's all yours and I can't think of a better person to have it.  I've been enjoying your blog posts for longer than I've been a CAPS player.

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#30) On October 21, 2009 at 2:32 PM, whereaminow (< 20) wrote:

I also will note that these types of fights also happen often in bars, and can be just as amusing.

David in Qatar

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#31) On October 21, 2009 at 2:54 PM, dudemonkey (37.86) wrote:

I also will note that these types of fights also happen often in bars, and can be just as amusing.

If I'm ever in Qatar or you're ever in New York City, we can prove your theory out.

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#32) On October 21, 2009 at 2:57 PM, whereaminow (< 20) wrote:

LOL, I think the latter is more likely, but you never know!

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#33) On October 21, 2009 at 3:02 PM, eldemonio (98.63) wrote:

Stupid is as stupid does.  Is it really that simple? 

If we assume that everybody wants and is trying to accomplish the same thing, then we can call people stupid for implementing policy that clearly goes against our common interest.  But what if we aren't aiming for the same goal?

It is stupid to suggest that Keynesian economics doesn't work without understanding the desired outcomes of this administration's Keynesian policies. - What if economic growth and turnaround is not their goal?  What do they hope to accomplish?

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#34) On October 21, 2009 at 6:54 PM, PdoBear (< 20) wrote:

Sadly, Bigpeach is right. The citizenry gets the government it wants in a democracy. The majority of Americans are now beneficiaries, in some form, of the state. The result is that voice of primary producers goes unheard due to the din coming from the shouts of hungry Octomoms.

All democracies gravitate towards Keynes. He tell the masses sweet fairy tales of a benevolent state protecting them always. The corrupt capitalist oligarchs of China versus a nation of state dependent Keynesian high school drop outs? I'll put my money on the oligarchs.

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#35) On October 21, 2009 at 7:33 PM, devoish (96.50) wrote:

Eldemonio,

I would suggest the goal of Mises is to rule.

David,

As you know the  1919 - 1921 recession was nothing more than an economy ramping down from WW1. American GDP doubled in response to funding a war effort, and then it fell to 150% of where it was when the war had begun.

It was guided lower, allowed to go lower by a President and Congress who understood that a war time economy is too high for an after war time environment.

Along the way the President and Congress handled labor rights issues for the railroad, wage controls were readily available to be used if wages fell to far.

 There was nothing free market about it then, or now.

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#36) On October 22, 2009 at 12:53 AM, DarthMaul09 (29.77) wrote:

The original post was fun to read.  I really doubt that real politicians spend much time trying to understand economics.  When you have a job that gives you everything you want for free, the only thing you are interested in is keeping that job.  No point in retiring, just ask Senator Byrd.

 

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#37) On October 22, 2009 at 6:16 AM, devoish (96.50) wrote:

When you have a job that gives you everything you want for free, the only thing you are interested in is keeping that job.  No point in retiring, just ask Senator Byrd.

Or better, ask any investment bank or health insurer CEO. That's where the big money is.

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