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starbucks4ever (98.98)

The one reason the US IS recovering

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October 27, 2010 – Comments (11)

I've also read that article by TMFKopp, and I can say that he is right, but for the wrong reason.

Brand names is total nonsense. Anyone can find out how to make coke, or even how to manufacture Intel microchips. Give me ten billion dollars and some country that does not recognize the US patent law, and I will set up a second Intel for you. And the same goes for all other American brands. All of that is easy to reproduce.

The only reason it's not being reproduced in other countries is that those countries have no market for them. And this obstacle is crucial. Ten billion dollars will build you another Intel in Angola, only who is going to buy these microchips?  

Capitalism is a curious thing: it starts investing only AFTER the government has created enough consumer demand.

And which country is willing to apply Keynesianism to its economy, while advising every other country to shrink their markets by austerity programs? That's right, USA.

The first thing one notices when reading economic news is the incredible intellectual gap between American government economists and their foreign colleagues. Americans are the only ones who understand it's the government's job to create the consumer. Everybody else is parroting the outdated economic mantras that every American economist knows to be wrong.

To me, there is one and only one reason to be bullish on America: the way every other government is letting its consumers run out of cash, and then wonders how come their economies can never decouple from the US market. Being the only Keynesian country in the world is a huge advantage. You have other people line up to give you their consumer goods for free, and in exchange you offer them your willingness to consume them for free.

So as soon as even one other government gets its economic science right, the only competitive advantage will be gone and the US stock market will immediately become an obvious short. So far, there is no sign of that happening. 

 

 

11 Comments – Post Your Own

#1) On October 27, 2010 at 12:53 AM, MyunderratedLife (87.96) wrote:

Although I'm not sure I agree, that was beautifully penned.

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#2) On October 27, 2010 at 2:21 AM, ajm101 (32.27) wrote:

Didn't you get the memo that Krugman is a big old moron and Austrianism is way better than Keynesianism?  I used to think you were cool.

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#3) On October 27, 2010 at 5:58 AM, JakilaTheHun (99.94) wrote:

This blog really makes no sense, zloj.

If Keynesian economics works, then it works.  It doesn't suddenly "not work" when everyone else uses it. 

Regardless, I think using broad terms like "Keynesian economics" is sort of meaningless.  Keynes wrote about a whole lot of different stuff.  Most people seem to believe the only thing Keynes ever did was advocate government spending --- a view in total ignorance of Keynes.  Keynes was obsessed, more than anything, with trade deficits. His work was very much an extentsion of Adam Smith's in this regard. 

The thing that Keynes got totally right that many people ignore --- the disastrous effects of currency distortions and trade imbalances.  This is where the Austrian School is also completely out of touch with reality; because they tend to advocate anti-market currency pegs (particularly with gold) that have the same sort of disastrous results of other currency distortions.

Otherwise, I tend to view Keynesian economics, Monetarianism, and the Austrian School as all being "right", just in different ways.  Austrian School focuses more on business cycles.   Keynes focuses more on aggregate demand, spending, and trade.  Monetarianism focuses more on monetary policy.   They are all "right" to a large degree. 

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#4) On October 27, 2010 at 5:59 AM, JakilaTheHun (99.94) wrote:

Errr, I meant to write "Monetarism" not "Monetarianism"; though I guess it would mean the same thing; just sounds odd.

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#5) On October 27, 2010 at 9:51 AM, starbucks4ever (98.98) wrote:

ajm101,

I do not disagree with Krugman when he says the policy must be Keynesian. Two times two is still four, even if Krugman also thinks so. My only problem with Krugman is that his brand of Keynesianism is a horrible, elitist Keynesianism that stimulates the top 60% at the expense of the bottom 40%. This is the dividing line between good Keynesians like FDR and unacceptable ones like Reagan, Bush, Clinton, Baby Bush, and Obama.

Jakila,

Keynesianism would still work if everybody used it, but then it would work equally well for all. The US would no longer be the hub of the universe, which is priced in at the current market valuations. 

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#6) On October 27, 2010 at 12:30 PM, ChrisGraley (30.25) wrote:

zloj are you saying that the UK, France, Portugal, Greece, Italy, Ireland, Japan and China are all on Austrian economic systems?

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#7) On October 27, 2010 at 1:08 PM, starbucks4ever (98.98) wrote:

They have a toxic mixture. A bit of Keynesianism, Krugman-style - the worst kind of Keynesianism, but also plenty of Austerian garbage, especially now. China is not Keynesian at all.

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#8) On October 27, 2010 at 4:37 PM, FleaBagger (29.37) wrote:

You're wrong, and you're going to find that out when China passes America economically (if you're still paying attention). We tried money-pumping and huge deficits and "aggregate demand" solutions in the 1930's, and we got the deepest, longest economic contraction in our country's history. People would pick up littered newspapers and read about how much Roosevelt was doing to spur economic growth, then use those newspapers for blankets, because they were homeless and penniless (actually not quite penniless, because FDR had devalued the currency so much that they had pennies, but they were almost worthless).

Economic demand requires purchasing power - without purchasing power, it's just unmet wants. I want a rocket pack that I can fly around with, but I'm not going to get it. Why not? Because I don't have the purchasing power. I need to make/do a lot more stuff for my fellow man to get the money to pay for that rocket pack. It's the same with an entire economy. We don't get free stuff: we need to create the things we want, or create things we can trade for what we want. Saving (or "hoarding") allows us to accumulate capital to use to produce more with fewer man hours (or produce twice as much with 50% more man hours, or what have you). Without the accumulation of capital, productivity shrinks, and our purchasing power goes down. Loose monetary policy creates disincentives to save, reduces the supply of capital, and deepens and prolongs economic contraction. With conservative economic and fiscal policy (reduced government budgets and higher interest rates), prices go down, assets are purchased from inefficient operators by efficient operators, the cost of living goes down, and saving is promoted, thus increasing the supply of capital, increasing productivity and bringing us out of recession. This happened in the 1870's, in 1920, and countless other times in human history. Hoover and FDR decided that that worked too well, and they wanted to try something new, so they created the Great Depression, the formula we are following now.

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#9) On October 27, 2010 at 5:04 PM, starbucks4ever (98.98) wrote:

FB,

A correct Keynesian solution is not inconsistent with deflation and balanced budgets.

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#10) On October 27, 2010 at 8:41 PM, russiangambit (29.49) wrote:

> Being the only Keynesian country in the world is a huge advantage. You have other people line up to give you their consumer goods for free, and in exchange you offer them your willingness to consume them for free.

There is a lot of truth to that. My own unwillingness to consume for free comes from bitter erlier life experiences that taught me that nothing is free, nothing is produced ouf of nothing and nothing continues forever. Apparently most americans don't have such silly misconseptions since they grew up during the time of unparallel prosperity and don't know ny better.

So, what is the catch ? You don't believe it is actually "free" in the end, do you? 

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#11) On October 27, 2010 at 8:41 PM, russiangambit (29.49) wrote:

> Being the only Keynesian country in the world is a huge advantage. You have other people line up to give you their consumer goods for free, and in exchange you offer them your willingness to consume them for free.

There is a lot of truth to that. My own unwillingness to consume for free comes from bitter erlier life experiences that taught me that nothing is free, nothing is produced ouf of nothing and nothing continues forever. Apparently most americans don't have such silly misconseptions since they grew up during the time of unparallel prosperity and don't know ny better.

So, what is the catch ? You don't believe it is actually "free" in the end, do you? 

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