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    The Will to Create

    Entries in Keynes (10)


    Obscurantism vs Reality

    If I had to characterize the essence of the current argument between those who defend Keynesian economics and government interventionism and those who uphold Austrian economics and free market principles made possible by Constitutional limits on government power, I'd say it's the difference between obscurantism and reality.

    I watched a few cable news shows yesterday and this morning, and the administration is defending its 800 billion dollar stimulus plan of 2009 against criticism that it didn't work, or didn't work as advertised, or that it actually caused harm. The Left, represented by the likes of Paul Krugman, claims that the stimulus wasn't big enough or focused enough to work. Most Democrats claim it had a positive effect and stopped the downward spiral of the economy. Republicans mostly believe it was wasted, while some in the GOP think it could've been effective had the administration used the money wisely for pracical infrastructure projects. What I heard was obscurantism to create doubt about the effectiveness of the stimulus.

    Hardly anyone criticized the stimulus based on economic principles and historical evidence that Keynesianism and interventionism are fatally flawed. One argument I heard over and over is that the stimulus stopped the 800,000 a month job losses that were happening at the time. This is probably the most ridiculous defense of the stimulus. There were maybe two months where job losses were close to 800,000, but this was just companies acting during the same period to trim workers -- if the stimulus never happened, who thinks that 800,000 jobs would've been lost monthly for an extended period? Without the stimulus would all American workers have lost their jobs in a few years? It's so ignorant to make this claim that it boggles my mind when Republican commentators sit around tables listening to this claim, yet none that I saw explained why the claim is completely bogus and silly.

    Companies laid off and fired workers when the economy went into a recession caused by previous government interventions, and many companies laid off and fired workers at the same time, so that's what created the few months of high job loss, then the job losses trailed off naturally as companies waited for some sign that government interventions would stop and they'd know once again how to calculate and plan -- they're still waiting in 2014.

    It's not that the stimulus was ill-conceived, or that it was too little or too much, or that it was not focused -- the problem is with government stimulus per se. Government stimulus will never work to create sustained economic growth and new wealth. The best that could be said for stimulus in the past was that it could generate a short term burst of economic energy, but only in directions decided on by government planners. Now, government interventions have been so many and so disruptive that companies won't be fooled again. Investors will take advantage of money manipulation to generate profit as the Fed pumps billions into the market, but investors and entrepreneurs will not invest in manufacturing expansion or any type of long term business planning that could create job growth and new wealth as long as government keeps churning the market with centrally planned interventions. Keynesianism and the mixed economy have failed, and no amount of propaganda will change this.


    Dear Keynesians -- show me the money!

    When a follower of Paul Krugman thoughtlessly tells you we have to spend more stimulus money, show them this list and ask them if they're crazy.


    Keynes meant well

    Just as Progressives mean well, for the most part. I'm sure there are statists in DC who push for power grabs because power is profitable and it enables the good life, with respect and recognition and all the stuff human egos love to go along with the good life, but the purpose of Progressivism is surely to do good and make life easier, better for the "people".

    John Maynard Keynes wanted the same when he fought for government action and planning to end high unemployment as 20th century Britain's more conservative leaders opted for the regular, less generous government plan. I won't go down the old Hayek/Keynes battle over economic models, because we've never tried a real free market approach and Hayek never called for a true free market approach. The arguments over economics, mostly, have been over what forms of government interventions are best -- the Right/Republican Party has its ideas and the Left/Democratic Party has its ideas, but both assume a statist system.

    My point in this post is that the well meaning actions of government have brought us to a dangerous place. It's easy to understand the instinct to use government power during a recession to make things better. Especially once government becomes big and active in so many areas of our lives -- it seems natural that government should create jobs or provide welfare benefits to help the unemployed until the economy recovers. Unemployment benefits are paid for partially by employers, and if we need more taxes to fund the assistance for a while, we can simply raise taxes on the wealthiest citizens. It sounds like the compassionate thing to do and something that America should do for its people.

    The insistence that government provide welfare/assistance speaks to motives. The motive of statists is to maintain State power over the private sector. The ideal of government serving the private sector by protecting Americans against violation of basic rights has become a silly notion that many intellectuals see as quaint and out of touch with modern needs. One NYT's writer recently wrote that we should basically drop the Constitution. Modern society wants to drop reality. It's the restraints of reality that foil the good intentions of Progressives, so the restraints are denied or ignored. Most Americans can't even conceive of assistance to the poor and needy coming from the private sector.

    As our government goes from one fiscal crisis to another, economic reality is forcing itself on the American economy while politicians find more ways to delay the fiscal reckoning. America possesses great resources, knowledge, skill, innovative ability, and potential, so we can likely ride on what we possess for a while longer, even though we aren't putting it all to productive use as we should, as other nations wait for us to face reality and make the necessary adjustments. However, we're sinking deeper into an economic fantasy world from which it will be difficult to extricate ourselves. We can only hold off reality for so long. Keynes said in the long run we'll all be dead, but this has been said for a long time and we're alive -- in the long run, which is upon us, we'll all be broke.


    The Perfect Pawn

    When you mention socialism to an American Leftist, he/she will snicker and dismiss socialism as a rightwing slur designed to increase the anxiety of the ignorant Republican base, but this is small ball politics that has to be avoided this year. We've heard the back and forth between parties, with one calling the other racist teabaggers and the other calling their opponents communists and such.

    The truth is that socialism has a heritage -- in America neo-progressivism is the grandchild of early socialism. The socialism of Engels and Kautsky died long ago, but the reformist varieties started by the likes of Eduard Bernstein have lived on all across the world. The American Left hid from the word socialism but has accepted the modernized version of socialism which even infects the GOP. There's presently an opposition faction on the Right, reminiscent of the Old Right, which is attempting to move the party away from statism toward limited government and a free market, but on the Left there's solidarity over the main principles of modern social democracy, which is basically modern socialism. Is Obama the mastermind and leader? Hardly. Obama is the perfect pawn, used by the likes of George Soros and Maurice Strong and those with global plans to implement an international coalition of socialists, a global economic council created through the UN, to complete the redistribution required for social justice on a global scale.

    The Left is anti-global only in relation to western neo-liberalism practiced through the IMF and World Bank (Please don't confuse neo-liberalsim with free markets, because neo-liberalism is statist). Modern socialists of all stripes want to reform these institutions to include representatives of poor countries, but they realize that the council can't be weakened by inclusion of every country, that a relatively few powerful, rich nations will have to cooperate to make this economic transformation work.

    To appease the rich, greedy and powerful corporate captains, the socialist intellectuals condescendingly assure them that it's for their best interest to enrich the poor countries. It's a Keynesian thing on a global scale -- it's investment. Many on the Left accuse powerful corporations of buying government officials, but it's the corporate captains who've been bought and protected for the purposes of the globalists who have big plans and need the help of industry to make the plans work.

    The Left didn't like it when the IMF loaned money to Third World countries then demanded the countries follow a capitalist blueprint in order to pay back the loans, so now socialists want the poor countries involved in their own solutions, but the socialists want powerful and rich countries to voluntarily support the poor countries' solutions, for a win-win strategy of global growth and prosperity, all accomplished in an environmentally friendly way and done humanely so that workers are given their fair share. This means a reduction in the standard of living in countries like ours. When the socialist planners say voluntarily, they mean that the leaders of the US will voluntarily reduce the standard of living at home to fund the investment in Third World countries -- the US will make a big profit later, for sure -- the planners promise it will it happen.

    This plan for a central, global solution to bring Third World countries up to par depends, of course, on the cooperation of Third World nations, many run by dictators. Michael Harrington understood this decades ago, but hoped that the more democratic countries could convince the dictators to play nice. It's funny how the world planners think about voluntary and involuntary -- to them, individual rights mean nothing. The planners see many nations with leaders who makle decisions for the nation, so if they can get enough major leaders on board to "voluntarily" go along with the new world order plan, then that's their idea of non-coercion -- however, if such a plan comes about, and there's a good chance it will, if America doesn't present a true opposition to the modern socialist movement, the American people will be forced to fund the plans, and it will likely lead to the power elite gaining universal control and America losing its sovereignty. This is will be heralded as progress, the inevitable march of social change for social justice, and we'll all be assured that everyone will benefit from the new global prosperity -- Global investment on a grand scale -- Globalized Keynesianism -- perverted Fordism implemented universally.

    Obama and those like him are pawns. Obama has a long time to work with the master planners. Obama and Clinton might be partners yet. Don't get me wrong -- I have nothing against Third World nations prospering. The whole idea that if poor nations become wealthy it will help everyone in the world, even the rich nations, is true, but unless the poor nations transform and allow economic freedom to reign, and unless they make education a priority, and unless they limit the power of government, it's not going to happen. No global council can suspend economic laws just because a warm and fuzzy idea like social justice drives them. This whole scheme is a cover for global power mongers to have their way because they hate the uncertainty and unpredictability of free markets and free people.


    The emptiness of Ron Paul's critics

    Critics of Ron Paul such as Noah Millman and David Frum make general claims denigrating Paul's "radical"  proposals, but they don't have any substantive criticisms. Anyone who thinks that protecting the status quo is reasonable after years of statist/interventionist decline which have brought us to the edge of collapse is not qualified to analyze the current political conflicts.

    Politically motivated monetary policies inflicted on us by the Fed have kept afloat a corrupt system which has finally stagnated the economy and created such uncertainty among entrepreneurs and investors that the very middle class with which the likes of Millman and Frum are concerned have been shut down and shut out. You don't have to be an economist to understand which side of the current battle between Keynesian and libertarian economics operates in reality, but it helps to have read Krugman and Thomas E. Woods, and to possess the ability to reason - Millman and Frum have obviously not compared the two, or, if they have, lack the ability to honestly reason. Anyone of average economic intelligence who isn't a hopeless partisan who reads Krugman and Woods in light of our current economic problems can only come to the conclusion that vulgar Keynesian has crippled economic growth.

    In his book Rollback, Thomas E. Woods addresses the housing boom and bust:

    During a boom, labor and physical resources are attracted to sectors where, it will later be discovered, they did not belong. During the housing boom some 40 percent of all new jobs were in the housing sector. That could not continue.

    Failing firms need to be allowed to go bankrupt. The structure of production undergoes considerable change during the recession period, and the sustainable pattern of consumption and production that results will not permit all firms to continue as before. Bankruptcy permits new owners to take over the assets of failing firms, and either conduct those firms according to a different business model, or simply sell off assets and compensate as many of the creditors as can be accomodated.

    The government's predation on the economy, in the form of spending and taxation, should be reduced. Resources are thereby released that entrpreneurs can use to realign the capital structure in light of the changed conditions that the bust brought to light.

    This strategy was followed in the depression of 1920-21, which saw unemployment shoot up to 12.4 percent and production decline by 17 percent. Wholesale prices fell by 56 percent. The political class today would be screaming for all kinds of "stimulus" to reverse this death spiral. But the federal government at the time cut its budget in half from 1920 to 1922 and cut the national debt by one third over the course of the 1920s. Income tax rates were lowered for all income groups throughout the decade, but these lower taxes took effect after the recovery was already in progress. The Federal Reserve, for its part, did not engage in open-market operations ( in which the Fed purchases assets with money it creates in order to increase the amount of money in circulation) to increase the money supply. The economy was allowed to adjust without the so-called countercyclical government policies that we are told are essential. Signs of recovery were evident by the late summer of 1921, which is when the National Bureau of Economic Research says the depression ended. Joseph Schumpeter, one of the eminent economists of the twentieth century, believed that the 1920-21 case "shows better than any theory could how the system pulls itself out of the troughs under its own steam."

    This is what Frum and Millman call radical ideas proposed by Paul -- they would likely say that things are different in the 2000s. What we're talking about, though, are economic principles, and this is what makes Paul different -- he adheres to time tested principles, whereas the Frums and Millmans praise pragmatic tweaks and ignorant government interventions which fail over and over.

    Also, anyone who's read the history of American interventionism overseas, especially in the mideast, can only praise Paul's non-interventionist position as the right course for America in the 20th century. Neocons and progressive hawks have led foreign policy astray, and the sad situations of Iraq, Afghanistan and Libya reveal the failures of foreign policy. A strong defense and appropriate responses to terrorist attacks are one thing, but the attempts to remake the mideast are doomed to failure -- history has confirmed this.

    If Paul's critics have any substantive reasons why Paul is wrong, then they ought to explain their reasons rather than continue the empty attacks and smears.