Cato Institute on Keynsian ideas being rejected under continuous borrowing

[heymikey80]

I thought it was interesting.

Stealing from Future to Continue Borrowing

"The simple implication of Keynesian economics is that shifting aggregate demand from tomorrow to today means that employment and output will be higher today but must be commensurately lower tomorrow. Keynes suggested that governments could counter negative business cycle shocks by spending money borrowed from the future to "stimulate" the economy today. But he did not advocate the abandonment of fiscal discipline: Governments could and should repay the stimulus by amassing budget surpluses during good economic times — something we have failed to do."

 

[Wolseley]

Basically, our benevolent government has engaged in a free-for-all spending spree ever since at least 1933; first it was Roosevelt's New Deal programs, then World War II, then the Cold War, then Vietnam, and then beating the Russians to the moon. And since at least 1970, they haven't been restocking the kitty with what they've been taking out of it.

The party is over, and now the caterers are demanding to be paid, but the guy who hired the hall is now discovering that he's flat broke. Our politicians, with help from a few other sources, have driven us into bankruptcy.

Currently, we are $15 trillion in debt, and climbing: U.S. National Debt Clock : Real Time

 

[DaisyDay]

We're not in good economic times.

 

[SoldierOfTheKing]

We're monetarists when the economy is booming, Keynesians when it is in recession. That is the lethal combination that is just destroying us financially. It's the politically popular thing to do. Everybody likes low taxes and high government spending. In the long run though, you just can't have both.

There's a definite difference between Keynesian economics and the economics of Keynes. He can't really be blamed for what politicians have done in his name.

 

[EdwinWillers]

“We have tried spending money. We are spending more than we have ever spent before and it does not work.”

“I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. 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!”

...Henry Morgenthau Jr. — key architect of FDR’s New Deal. (emphases mine)

Source:

Simply put, Keynsian economics doesn't work, has never worked, can never work as a sustainable solution to ANY economic problem. At its very best, those with not enough to eat still having not enough to eat; it keeps unemployment static while inordinately increasing spending and debt.

One simply cannot throw huge sums of money at problems caused by massive over-spending and expect miraculously different results.

Democrats* (by their own admission) didn't keep good on their promises back then, and they certainly haven't kept good on their promises today.

Rather than admit defeat, they have instead adopted a strategy of blatant lying about the situation and blaming everyone but themselves.

*(Lest some be tempted to get their unmentionables in a wad by the use of the word "Democrats" and feel an involuntary urge to feel somehow personally slighted because they belong to a certain "group of members" with a similar name - let it be understood that that word refers to members of congress only.)

 

[Archaeopteryx]

Keynes Was Right

 

[EdwinWillers]

Keynes Was Wrong

Why Keynes Was Wrong

Where Keynes Went Wrong

 

[WalksWithChrist]

Basically, our benevolent government has engaged in a free-for-all spending spree ever since at least 1933; first it was Roosevelt's New Deal programs, then World War II, then the Cold War, then Vietnam, and then beating the Russians to the moon. And since at least 1970, they haven't been restocking the kitty with what they've been taking out of it.

The party is over, and now the caterers are demanding to be paid, but the guy who hired the hall is now discovering that he's flat broke. Our politicians, with help from a few other sources, have driven us into bankruptcy.

Currently, we are $15 trillion in debt, and climbing: U.S. National Debt Clock : Real Time

Who exactly do we owe the national debt to?

Yes, I'm really asking.

 

[heymikey80]

Who exactly do we owe the national debt to?

Yes, I'm really asking.

The World of America’s Debt | Views of the World

 

[WalksWithChrist]

The World of America’s Debt | Views of the World

So largely China and other foreign powers.

How does the Federal Reserve factor into all this?

I'm reading a book related to this stuff and I'm trying to wrap my head around it all.

 

[Panzerkamfwagen]

So largely China and other foreign powers.

How does the Federal Reserve factor into all this?

I'm reading a book related to this stuff and I'm trying to wrap my head around it all.

Basically, from what I understand, our monetary system isn't actually based on anything tangible, it's based on a variety of shell games with a healthy dose of creative accounting thrown it.

 

[WalksWithChrist]

Basically, from what I understand, our monetary system isn't actually based on anything tangible, it's based on a variety of shell games with a healthy dose of creative accounting thrown it.

From what I'm reading, it's worse than that. It's that and also our system is being artificially manipulated to create false boom/bust cycles that keep us either in debt or in a war and those that profit from the wars are the ones also collecting on the debts.

The key is interest. The amount of our debt is so large we can never reasonably pay the interest. We, as a nation, have agreed to take out these loans most likely knowing we can't pay them back.

We need to stop doing that.

 

[heymikey80]

So largely China and other foreign powers.

How does the Federal Reserve factor into all this?

I'm reading a book related to this stuff and I'm trying to wrap my head around it all.

A couple of ways. most relevant to the OP at hand ...

http://www.forbes.com/sites/traceyg...the-feds-16-trillion-bailouts-under-reported/

 

[WalksWithChrist]

A couple of ways. most relevant to the OP at hand ...

The Fed's $16 Trillion Bailouts Under-reported - Forbes

It really does look like a massive shell game. We lift up the shell and find trillions...but no one seems to be able to do anything to correct the problem. To end the shell game.

 

[heymikey80]

It really does look like a massive shell game. We lift up the shell and find trillions...but no one seems to be able to do anything to correct the problem. To end the shell game.

There are reasons for the fractional reserve system that's in use by the feds -- the intent is to allow for the circulation of currency that is registered with the banks, and the expansion of currency is needed to do more than stimulate inflation. However, as I see it the problem is that the inflation of currency is well beyond what it would be calculated to be under any recognized circumstance occurring in the economy. And at some point that means the currency will float much lower in purchasing power, I think about the same time as the global economy stabilizes and grows again.

 

[EdwinWillers]

It really does look like a massive shell game. We lift up the shell and find trillions...but no one seems to be able to do anything to correct the problem. To end the shell game.

At this point, with so much debt, so much borrowing, and so much spending - and the mentality for it all ingrained into everyone taking advantage of the system it's virtually impossible to "fix" it.

To coin Harpuia's phrase, the only thing that will "fix" the system is a "hard reset."

Personally, I'd like to see it done in terms of "Jubilee" - an across-the-board statutory forgiveness of all debts, public and private. But of course, that ain't going to happen.

 

[WalksWithChrist]

There are reasons for the fractional reserve system that's in use by the feds -- the intent is to allow for the circulation of currency that is registered with the banks, and the expansion of currency is needed to do more than stimulate inflation. However, as I see it the problem is that the inflation of currency is well beyond what it would be calculated to be under any recognized circumstance occurring in the economy. And at some point that means the currency will float much lower in purchasing power, I think about the same time as the global economy stabilizes and grows again.

As I understand it (and this is a recent thing for me), fractional reserve methodology is a scam. It's a means of economic manipulation on a massive scale. And it works as designed!

What you are describing would be ok if the boom/bust cycles we experience were not planned.

At this point, with so much debt, so much borrowing, and so much spending - and the mentality for it all ingrained into everyone taking advantage of the system it's virtually impossible to "fix" it.

To coin Harpuia's phrase, the only thing that will "fix" the system is a "hard reset."

Personally, I'd like to see it done in terms of "Jubilee" - an across-the-board statutory forgiveness of all debts, public and private. But of course, that ain't going to happen.

Or as I just said in another thread today...Reboot the Matrix.

Anything short of that won't do it like you said. This isn't a system that is failing. It's a system that is working exactly as designed. Until we all realize that, nothing is going to change.

 

[EdwinWillers]

As I understand it (and this is a recent thing for me), fractional reserve methodology is a scam. It's a means of economic manipulation on a massive scale. And it works as designed!

What you are describing would be ok if the boom/bust cycles we experience were not planned.

Or as I just said in another thread today...Reboot the Matrix.

Anything short of that won't do it like you said. This isn't a system that is failing. It's a system that is working exactly as designed. Until we all realize that, nothing is going to change.

Yeah, I saw your comment there and commented the same. Reboot.

As to the system "working exactly as designed," hmmm, that has a load of nefarious overtones. Frankly, I don't think anyone is that smart to manipulate such a complex system in such a fashion. True enough however, what we do have is the result of a multi-faceted philosophical / ideological approach to economics; and while it might be working quite well for some, the system is entirely unsustainable. That's a key point. It is indeed failing inasmuch as it can't continue like this indefinitely. That doesn't speak design; it speaks naivete, ignorance, corruption, short-term thinking, etc. etc.

 

[heymikey80]

As I understand it (and this is a recent thing for me), fractional reserve methodology is a scam. It's a means of economic manipulation on a massive scale. And it works as designed!

What you are describing would be ok if the boom/bust cycles we experience were not planned.

Yeah, I can't really comment on what it'd be if someone did it privately. I do think the politicization of fractional reserve is intentionally stacking the deck, and does lead to massive inequity in the banking system compared with free enterprise.

It's not capitalism.

OTOH there seems to be a need for circulation to work differently as the population grows and economic involvement grows with it, and I'm unsure how to deal with that. I would particularly not put the use of fractional reserve banking in the hands of legislators, for reasons demonstrated since 2008.

 

[WalksWithChrist]

Yeah, I can't really comment on what it'd be if someone did it privately. I do think the politicization of fractional reserve is intentionally stacking the deck, and does lead to massive inequity in the banking system compared with free enterprise.

It's not capitalism.

OTOH there seems to be a need for circulation to work differently as the population grows and economic involvement grows with it, and I'm unsure how to deal with that. I would particularly not put the use of fractional reserve banking in the hands of legislators, for reasons demonstrated since 2008.

I think more to the point, putting the use of legislators in the hands of bankers is an even worse situation. And that's what we've had for a long time.

Good post.