Geithner on TV – “Keynesian economics has failed”

Bruce Krasting's picture

Some refreshing words from the Treasury Secretary, Tim Geithner this morning on Meet the Press. He had this to say: (15:20 into this clip) Note: An 8 second clip of Tim's words: Link

We don’t have the ability (because of the overhang in housing and the problems in the financial sector) to artificially engineer a stronger recovery.


Imagine that! Geithner acknowledges what I (and many others) have felt all along. The structural issues in the economy trump the government’s ability to engineer a recovery.

The Fed has taken extraordinary measures on the monetary front. Since
2009 we have had $1.2 trillion of fiscal stimulus measures as well. We
have had TARP and the bailouts of Fannie and Freddie. But the evidence
is clear that it has not worked. Unemployment is today near a record and
the more important measure, U6, is at 16.2% (about where it was a year
ago) Nothing that has been done has moved the needle.

Geithner might have put it differently. He could have really put it on the line. I would have preferred that he had said:

economics has not worked. At best, it has given us a small reprieve
from the restructuring that must happen. Our government can’t fight the
forces of economics any better than we can fight the forces of nature.
Large stimulus measures will not bring the desired results. We have to
suck it up and take some pain. We can’t go on spending money that we
don’t have to fix a problem that can’t be fixed. If we tried, it would
be just be a waste of time and precious financial resources. We can no longer afford to throw good money after bad."

Of course Tim was not as blunt as that. But read his words. It means the same thing. Sorry Keynesians, I know the truth hurts.

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Cognitive Dissonance's picture

Sounds like the man is getting ready to exit stage right.

FeralSerf's picture

While I don't agree with much of his theory, in all fairness to John Maynard, the system we have is not what he had in mind.  It is not "Keynesianism".  Keynes suggested that the benefits of lowering interest rates should go to building infrastructure.  The only infrastructure that has been built so far is the bank accounts of Jamie, Lloyd and their ilk.  This has not helped the proles' unemployment problems much.

Mesquite's picture





Smiddywesson's picture

I agree that Keynes would not have approved of the economic baloney being practiced in his name, but he never had to answer the hard questions. He was a media darling, and was able to pontificate and not back up his theories.

Keynesian economics serves desert first. You only find out the cost later when they can deny any hand in the destruction of your economy.

FeralSerf's picture

I think his advice about reparations in Paris in 1919 was good.  The French didn't like it much of course.  Keynes quit.  If his recommendations had been taken, WW II might not have happened.

AnAnonymous's picture

I think his advice about reparations in Paris in 1919 was good.  The French didn't like it much of course.  Keynes quit.  If his recommendations had been taken, WW II might not have happened.


Yes indeed because it is well known that people crushed by debt can build up their military.

The reality is that the debt was soon to be relieved, freeing resources added to US fundings to build up the german military.

Flakmeister's picture

Do you practice at this stuff? You are taking politics shaping the perception of reality to a whole new level....

mrhonkytonk1948's picture

Funny you should mention that.  I have a first edition and was re-reading it the other day.  Keynes was no fool, despite the massive idiocy committed in his name.

Smiddywesson's picture

Coulda, woulda, shoulda. He was a smart guy, but much of his machismo ignored the long term repercussions of his opinions. For example, being an academic, he considered the gold standard as an obstacle to a well run government. I would say a well run government is an oxymoron. Keynes goes down in history as a genius, whereas people who could see where his candy shop reliance on government would lead. Smart guy, just a bit pie in the sky academic if you want my opinion. Apologists would say it wasn't forseeable, but plenty of people were shouted down when they said Keynesian economics would lead to heartache. And, now it has.

A.W.E.S.O.M.-O 4000's picture

Granted, maybe Keynes won't get us out if this mess (I don't think what we are seeing even closely resembles Keynsian economics). But what the fuck got us into this mess? 40 years of Voodoo / Supply Side / Pissing on your leg and calling it rain / De-regulation at all cost economics.

brian oblivion's picture

Exactly. This ain't Keynes. It's looting and corruption.


Keynes' important insight was that the natural business cycle can create a sub-optimal equilibrium featuring chronic under-employment and production. Keynes argued that only government spending could break this sort of death spiral or stagnation when it happens, not that endless money printing is a valid thing to do, especially to support zombie banks.

Rastadamus's picture

Fuck em...... Gold and Silvah Bitchez!

zorba THE GREEK's picture

 I hope the next leg down isn't going to be worse than 1928.

Smiddywesson's picture

Worse than 1928? Oh, I don't know. Having a global economy, massive derivatives, a financial economy instead of half agriculture and half manufacturing like in 1929, that can't all end bad, could it? Putting off the end for several years can't end bad, can it?

You get deflation when TPTB want to save the system, you get hyperinflation when they are positioning to profit from its death. It is crystal clear at this late date what is going to happen and it isn't good.

ping's picture

I've been preparing by collecting recipes for people burgers. Got to be an optimist.

Incubus's picture

Don't use the fats from the indulgent American types: I don't believe they're that healthy to eat.

PaperBear's picture

The next leg down is going to be much worse than 2008.

PaperBear's picture

But the federal reserve was supposed to stop these shocks.

After it had failed once it should have been abolished.

Now it has failed a second time it should be abolished yesterday.

djrichard's picture

Still a believer in liquidity pumps.  He won't throw the Fed Reserve under the bus, and that's where the real problem is.

A.W.E.S.O.M.-O 4000's picture

I guess 3rd time ain't the charm as US Central banks go.

OS2010's picture

If TurboTimmy is leaving, saying that the prime philosophy of his tenure cannot work, and The Bernank has said that real life trumps an Ivy League education, does this all mean that the actual Keynesian in the Administration is the man behind the curtain, the Big O himself?

Salah's picture

We should never "re-flate" the residential real estate industry; its old incarnation is dead and as Christ himself said, "let the dead bury the dead". 

We can however, reconfigure it.  First, it must be stripped of its hopelessly outworn mystique, it's not 'motherhood, apple pie, and baseball' no matter what the corrupt NAR says.

Second, it must be treated for what it genuinely is: the largest consumer durable...right up there with cars, refrigerators, big-screen TVs, and jet-skis.

The industry badly needs to jettison a "whole lotta friction"...i.e. paperwork intensive processes in favor of faster, more transparent ones where every little provider cannot dip their pinkie into the cash-flow-financing scheme to skim some cream.  Why is it in a number of states closing on a simple house loan requires a manadtory lawyer's approval, and in others it can be done at the title company with competent clerks making $15.00 an hour? 

A serious look at how the auto industry works for a model of marketing, financing, and distribution efficiency is needed.  Why can't the US govt create the real estate equivalent of highly capitalized private "residential property dealers" who have access to "wholesale real estate auctions", a la the car biz?   And as far as the ditzy real estate sales force in America (90% NAR members), how many Mercedes or Cadillac salespeople do you know who make 6-7-10% on the gross, and they work for someone (a dealer), who has an actual inventory risk at stake??

Residential real estate in America has finally reached its end-state: the total economic anachronism.



earnulf's picture

One big change that the residential sector has not yet embraced is the idea of 4bd, 3 bath suburbia with a two car garage and a quarter acre.   The new model is going to be 1000 sq/ft on a lot not much bigger.   Less maintenance, less cost and less property taxes.

Smiddywesson's picture

Does anyone else sense that everyone is quitting the O administration (of Change)and setting themselves up for their tell all book that makes them seem like the only sane politico while Rome burned?

I don't care what this piece of fiat says.

jmcadg's picture

How about a war with Iran for the new cover up.

disabledvet's picture

The Bernank just got reappointed so he's not going anywhere. At least not for 3 plus years--which "happens" to be after the off year elections. Insofar as "Keynes is dead" that is definitely true. The idea that "governments have no role to play when governments themselves are collapsing" is the most ridiculous thing i have ever heard of in my laugh. This much i can guarantee you--if that mouth Larry Kudlow tried to go through what i did he'd have jumped off the Brooklyn bridge after 5 minutes. Thank you mean, nasty Ranger guys.

hooligan2009's picture

Not that it matters, Bruce, but you might join to the two seasonally adjusted numbers together to get a smaller "no change". What I find curious is how this relates to the participation rate and the correlation with food stamps. Seems to me even U16 is not being measured correctly by dint of the fact that the definitions do not capture all those not attached to the labor force, like those with no phones or living rough. The reconciliation of social security benefits, income tax receipts and census data is required to make this more "real". Though sometimes, you don't need a doctor to tell you that you just lost arm in an explosion, since it simply isn't there any more. 

zorba THE GREEK's picture

 I wonder if Timmy ran it by Obummer that he was going to admit to the world that the

 administration has just been pissing in the wind all along?

Mr Lennon Hendrix's picture

Bruce:  Did you order the code red?

Timmah:  I did the job I...

Bruce:  Did you order the code red?!

Timmah:  You're Goddamn right I did!

pitz's picture

How about calling the real engineers in to clean up this mess (ie: rebuild America), instead of leaving it to the fuck-up MBA and finance clowns?


HungrySeagull's picture

The same way German People started collected good bricks and seperating out the bad bricks in the bombed out cities?

Roight then, where do you want the wagon?

MichaelFitz's picture

Functional idiots all.  Perhaps we could find a high school Econ. teacher somewhere???

HungrySeagull's picture

Call me stupid.

I did endure 6 months in my freshman year faithfully learning to balance a checkbook while the other 49 idiots in my class room totally ignored the material and the poor teacher.

To this day I still don't know what drives him to get up in the morning to go to work in that school knowing no one gives a shit. Except one or two in the entire student body.

Diogenes's picture

Same as any other teacher these days, the pay check the benefits and the pension. Both a lot more generous than anything he can get in the private sector.

Incubus's picture

My high school econ teacher used to just go to sleep in class when no one would listen to him.

snowball777's picture

A dire lack of other career opportunities. I had a science teacher in junior high that become good friends with my folks who had to go work an underwater welding job on the weekends (and some substitute days, I inferred) just to make rent.


A.W.E.S.O.M.-O 4000's picture

Maybe he could still get one of those kick ass Micky 'D' jobs at the golden arches.

cosmictrainwreck's picture

yeah....kick-ass jobs (bitchez).... "jobs, jobs, jobs" Joe Biden

NOTaREALmerican's picture

Re:  Keynesian economics has not worked.


That would be like the Pope admitting God doesn't exist.    Not sure humanity is ready for either reality yet.    Infinite debt and God kinda go together, actually.

ping's picture

Does Keynes shit in the woods?

Sudden Debt's picture

I sometimes get the feeling that Timmy would really like to tell the truth but the real forces in America are preventing him to do so.

These are very brave words comming from a man who has to directly answer to the overlords of the US.


SwingForce's picture

I wish somebody would tie it all back to WTC7.

blindman's picture

.."He called me a few weeks later. He had rented the Presidential Suite at the
Waldorf Astoria New York for me where they had JFK’s rocking chair, and he and his
partners would fly in to see me. When I asked what was the meeting about, he replied they
now wanted to talk about “serious” money. I responded $4 billion was not serious? He
replied, that was just his personal account. Now they wanted me to advise their
businesses. Aside from picking up the phone and patching me into OPEC meetings on speaker
phone and the occasional war the knew when it would start, my eyes were now wide open. By
the end of the decade, I was advising on portfolios more than half the size of the US
National Debt. I had graduated – I was now beyond TOO BIG TO FAIL – it was a new world of
The real touch of irony came when the government stole the Princeton Economic Computers,
they were taken to a special lab at the old Salomon Building which became WTC7. The
computer was affectionately called Socrates for its tenacity in exploring the world
economy that appears to have pist-off some just as Socrates did the same in real life. It
was perhaps a cruel fate that it should end its days in the belly of the beast in a
building that was the headquarters of one of the greatest manipulators of all time - the
place of “Big Swinging Dicks” and the “Bonfire of the Vanities.” Katharine Gresham of the
SEC delivered the news letter claiming all files were destroyed in the 911 Terrorist
Attack at WTC7. Even Mayor Bloomberg of NYC came from Salomon Brothers. ..."

cpnscarlet's picture

This is all well and good, but the same GHOST STORIES were swirling through the air on the 70s and 80s of how WE were to blame for the Soviets hating us. Sorry folks, I have to worry about protecting my family in the HERE and NOW and can't afford drab and banal debates on history. Let's save the lectures for AFTER  the Great Correction. And I'll eat some humble pie then.

"I've been thinking about our fortune,

and I decided that we're really not to blame.

For the love that's deep inside us now

is still the same."

BigJim's picture

So, genius, because some stories about how one bunch of people have reason to hate us are false, that means any explanation regarding why a completely different bunch of people have reason to hate us... must be false, also?

Please don't expand your family beyond its present size. We have enough morons to deal with as it is.

NOTaREALmerican's picture

Re:  I wish somebody would tie it all back to WTC7.


The problem with this line of "reasoning" is that it lets the real culprits off-the-hook.  "It" didn't happen "just" ten years ago.  


The problem is applied-socialism / crony-capitalism.   The problem is the concentration of power in the hands of the few.   The US was doomed when corporations were "declared" people.   The US was further doomed when the power of currency creation was placed into the hands of the nobility.    It was further doomed when Big-MIC was never dismantled after WW2.     It was further doomed when infinite debt creation allowed for an explosion in size and resulting concentration of power in DC (the official end of the gold standard).     Many many many generations of sociopaths made NOW reality.   No SINGLE event caused "it" to happen.


If you want Representative Democracy you'll have to get into your time machine and go WAY WAY back to stop the nobility from taking us to exactly where we are now.   You'll also have to ask your parents what-the-hell THEY were "thinking" about when they let all this happen.