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Niall Ferguson Explains Why Keynesian Policies Are Dooming The World Economy To Round After Round Of Asset Bubbles
If there is one thing that everyone should watch to understand just why every policy attempt to fix the ongoing depression is doomed, it is the following short clip from Niall Ferguson in which he deconstructs the primary fatal flaw of Keynesianism. Ferguson explains why those who push for Keynesian policies in a globalized world are doing nothing to stimulate the economy, but merely inflate ever more bubbles. Quote Ferguson: "I wonder if it's worth revisiting the now familiar debate about whether or not Keynes can save us. Because I have some doubts about this. Deep doubts." Zero Hedge has no doubts about this - we are confident that the confines of a theoretical Keynesian system have been the recipe for the disaster unfolding now before our eyes (which is not to say that Austrian economics is necessarily better, although intuitively they certainly make a far more compelling case, and would certainly not have led to the current pre-apocalyptic economic situation, which only the most addicted to Kool Aid pig lipstickers refuse to acknowledge). However, that is not news - we have always made our position on the false voodoo religion of economics well known. We are, however, happy that more and more of the "mainstream fold" are finally starting to question the key flawed premise of this fundamentalist doctrine.
Ferguson continues "Remember what Keynes wrote in the 1930s about stimulus and the way in which government could get an economic going again really applied to a post-globalization world in which trade and capital flows had largely broken down, and most economies were quite isolated units. That's something that Keynes made clear in the German edition of the General Theory when he said the theory applies better in a closed totalitarian economy." The conclusion - in a globalized world, such as that preached by the BRIC pundits whereby developing nations will bail everyone else out, or so the legend goes, additional stimulus will always and inevitably merely lead to bubbles - either commodity or emerging markets. And all we have is a bunch of idiot Ivy League Ph.D.s' wrong interpretation of Keynesianism to thank for destroying the economic system as we know it.
Niall on the direct effect of existing failed Keynsian policies in a globalized world:
Globalization has not broken down. In fact the US economy is more open than it has ever been. That means that stimulus, both monetary and fiscal if very prone to what is called leakage. We've had an enormous of stimulus in the US, it's the biggest fiscal stimulus in the world, and huge unprecedented monetary stimulus. What's been stimulated? Not jobs in Michigan. What's been stimulated has been commodity markets and emerging markets. Because the liquidity just leaks out, and that's why another round of stimulus would not stimulate in the promised way. It would stimulate the wrong things. And those things, commodity markets and emerging markets, are already overstimulated to the point of being nearly bubbles.
So simple, yet so incomprehensible by the cadre of false Keynesian prophets who will never admit to this most elegant of realizations. It also means that America can expect more such farces as double stimulus roadsigns, and oil back at $140 (or much higher) before even another job is created out of all the excess money sloshing around.
Must watch clip.
And for those who would rather work in the confines of these two mutually exclusive worlds (Keynesianism and Globalization), there is one thing we would like to share with you, and that is the following extract from an interview by Peter Cook of the last person standing in Obama's economic team Tim Geithner:
They're also letting their exchange rate move up. And they're doing that because it's in their interest. Makes no sense for China to have monetary policies set by the Federal Reserve. They're an independent country, large economy. They need the flexibility to run their policies in a way that makes sense for China. And that requires that their exchange rate move up over time, as they're now doing.
That our economic leaders are stupid enough to utter the bolded is sufficient validation that we are all doomed: not only is the world being guided by a flawed economic religion, but its priests are the most intellectually challenged individuals ever to enter "public" service.
And as an aside, those who wish to hedge bubbling emerging market exposure, SocGen's Dylan Grice had a great analysis of various cheap inflationary (compared to rich deflationary) EM hedges (link).
h/t Credit Trader
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Looking forward to your opus. Good luck with that.
I see the current (and any) crop of politicians reluctant to be the one who ended TWAWKI.
They don't want to go down in history as the instigator. You know how "people" are! They grasp at the closest, most familiar public figure on which to blame every ill in the world, up to and including hemorrhoids. We see it here at ZH in the form of party politics and religious intolerance/zealotry. This is not fixable. It is human nature to lash out at the nearest "responsible" entity. Since it's not repairable it should be a part of any strategy to fix the broken systems. Embrace the flaw and use it to advantage. Magicians do it all the time: A flurry of the hand and a little patter to conceal the prestidigitation.
"Embrace the flaw and use it to advantage."
Given the reality of the situation just how do you do that?
btw Why would someone junk RR's reply? Don't be a coward, if you don't like it explain why!
Good question! And this is important: Assume that most people will be of no use whatsoever, and at most a hindrance. STOP trying to convince closed-minded people that things are going the way they are. They cannot/will not want to know or understand. Concentrate on those who will be comrades in arms. Family is included in that. I have family that will be of no use, and will be a burden when they have nothing to eat. Focus energy and resources where it will yield the best returns.
.
"Keynes would be rolling in his grave to see his policies and theories being used to justify the insane and corrupt protection of the very bankers who have caused the very mess we are now in."
While I don't believe Keynes to be the greatest thinker, or economics thinker to have ever existed, I do completely agree with your statement above.
And so would have John Kenneth Galbraith!
Well said.
your assuming the State is in charge. I see nothing to date that says "the next group won't go all in on Wall Street, too." When they're not literally in Vegas of course. That ought to be an interesting election.
I find so much of this Keynes/Austrian (with a constant ignoring of Chicago School) to be so very flawed and deceptive. Keynes was subverted so long ago and so completely... The bashing of him like old southerners use the N word makes it very difficult to hear any other parts of an argument no matter how well reasoned portions of it may be.
To be clear, I don't give a fuck about Keynes or any of the rest of these schools of thought... because they are all miserably inadequate, imo... for what we need now.
We need top drop the bullshit and work on answers. Demonizing dead people gives the current living criminal cabal entirely too much comfort.
The criminal rich took over good governance, governance even remotely interested in rule of law, much less a middle class portion of society as we knew it.
Until we restore rule of law, the rest of this seems moot.
My thoughts as well.
Look, this yet another shyster on bankers' payroll blaming Keynes for what is not Keynesianism. Bankers and corporate CEOs caused this GFC. Keynes did not create this parabolic debt blowoff along with unblanced global balance of payments associated with global trade.
+ 10,000
Exactly. While there is value in examining the fallacy of blind adherance to Keynes, the Keynes bashing is a smokescreen, an admission of cowardice to address the real problem, which continues to be lawlessness. The rules have been gutted. Dark pools dominate. Fraudulent accounting schemes have been codified into law and adopted across the board. The right to create financial weapons of mass destruction has been sanctified. The OTC derivatives market, formerly insignificant, other than for producers and end-users looking for trustworthy price discovery, has metasticized into a secret $700 trillion dollar megachurch casino, where dangerous bubbles are inflated in the dark, one after the other.
This is the beast that has to be killed. The tax-evasion, money laundering, institutionalized Ponzi scheme of the over the counter derivatives market.
none of your culprits described are possible without (Keynesian tool) centralized money planning, (keynesian tool) fractional reserve counterfeiting, and (keynesian tool) faith-based (fiat) money. Its all the same. paper, paper, paper. centrally planned money, centrally planned money, centrally planned money. counterfeit leveraging, counterfeit leveraging, counterfeit leveraging.
Keynes = friend of the "Too Big To Fails" and International Banking Cartel.
they didn't "cause the bailout."
This comment alone is so completely right that fools must instinctively junk it.
How did Meiji Japan industrialize in a generation?
How has China done essentially the same thing in the last 30 years?
Relying on observed data, distrust of any theory, flexible leadership, trial and error, logic.
These are what bring out the best in people. Stop relying on ideologies to demonize or place faith in. It's all just a waste of time.
Just another version of Democrats and Republicans, Boomers vs. young, race baiting, etc. All of these need to be ferreted out. Thanks for the observations to those of you on this thread nailing this.
I agree. BTW, I associate the, John Birch Society (if mommy is a commie you have to turn her in) and the Koch Brother's with the "Chicago School" and the Tea Party (Cato Institute, Heritage foundation, etc etc), same people "criminal rich who took over good governance" and money backing, different name. A little google research will confirm the money link.
The Tea Party is a spontaneous uprising of individuals no matter who tries to ride the wave and no matter what the TV tells you.
"Don't Tread on Me" is an individualist's motto which spurns collectivism of any kind.
"The bashing of him like old southerners use the N word..."
As a southerner I resent that. I would never shame my friends by calling a Keynsian a nigga!
UF
They (Keynesian policies) are ridiculous if they were intended to solve things, yes. But if they were intended to buy time then that was almost their only option. Austerity would/will kill this leveraged system within a month..So there are no 'answers' to save this financial system of claims. Fortunately we have lots of energy and resources to have lower throughput society once finance goes poof.
Fortunately we have lots of energy and resources to have lower throughput society once finance goes poof.
Ahhhh.... I think you need to do a little more homework. I would suggest you start with understanding what percentage of our "resources" that we need and how much of that is imported. If we have to remove the "needed" imported "resources" (oil) from our economy can we survive, even at a lower throughput?
If it occurs at a "slow rate" we can adapt, however if it comes in fast we may not be able to adapt, for example (one of many), our electric grid will crash (at best rolling brown outs). How about those "rare earths"? How long will it take to get our mines, etc back into production? And how do you do these things if your financial system has gone "poof"? There are alot more people to feed, our food production is energy intensive. And so on and so forth.
Is this another test Tyler?
Are you sure this isn't a test?
Keynes: The cure for alcoholism. Proceed to binge drink until sober.
"Drink Scotch Whiskey all night long...And die behind the wheel." Were you expecting something different from the "responsible parties"? Why else "kill the men (and women) in uniform"?
Sounds like a Kennedy bio, but she wasn't behind the wheel. What was her name?
For those who might forget who is buttering Niall Ferguson's bread, it is instructive to remember what he said (on March 17, 2009) regarding the origins of the financial crisis:
"We blame [the bankers] for much of what has gone wrong. It's just that we blame the politicians more... You have to ask yourselves, ladies and gentlemen, who was playing the music... Could it just possibly be that they're trying to divert our attention from Washington's own responsibility for the debacle?" Ferguson's colleague at this forum, John Steele Gordon, then went on to exclaim: "Blaming Wall Street is like blaming the atmosphere for thunderstorms..."
So in Niall Ferguson's world, the banksters buy the politicians, do really bad things because no one in government stops them, and then it isn't their fault because the politicans should have stopped them. Am I the only one who thinks this is a perverse way to view the origins of the GFC?
(Source for quotation: pages 258 and 259 of Suzanne McGee's Chasing Goldman Sachs)
The "banksters buy the politicians"? Huh? Freddie and Fannie were revolving door affairs CREATED BY and REGULATED BY Congress. I'm confused as to HTF Fannie and Freddie can be considered to have ever been part of a free market never mind part and parcel of "Wall Street." They are abominations, basically.
Ferguson, like all those other scumbags, is a member of the Bretton Woods Committee (brettonwoods.org), the lobbyist group for the international super-rich.
Screw him and the rest of those scoundrels.
http://www.brettonwoods.org/members/
In the epilogue of his commissioned tome "The House of Rothschild", Niall Ferguson states:
"It is worth asking, however, what exactly the relevance of a bank's past is to its present and future. For most of the nineteenth century, N.M. Rothschild was part of the biggest bank in the world which dominated the international bond market. For a contemporary equivalent, one has to imagine a merger between Merrill Lynch, Morgan Stanley, J.P. Morgan, and probably Goldman Sachs too -as well, perhaps, as the International Monetary Fund, given the nineteenth-century Rothschilds' role in stabilising the finances of numerous governments. Today, by contrast, the bank occupies a relatively small niche in the international financial services business, dwarfed by such products of corporate hypertrophy as HSBC, Lloyds-TSB and the projected banking behemoth Citigroup." (p. 479, The House of Rothschild - The World's Banker 1849-1899, Volume 2. Penguin Books, NY, 2000).
Ferguson's narrative throughout the book is an attempt to demonstrate that the full-spectrum domination exercised by the Rothschild trust in the 19th century vanished leaving behind a small family banking house proud of its past, probity and good deeds. The mechanism whereby the concentrated capital, dominant market share and political power simply disappeared as Ferguson argues is not explained.
Ferguson's attack on Keynes is a half-truth that serves to deflect responsibility from the living culprits, and to turn the issue into an inconsequential academic debate. Like in his Rothschild book, the whole purpose of the exercise is to hide bankster criminality behind the accoutrements of academic respectability.
Ferguson is a tool.
That's THE GFC.
Succint and effective point. Not aware of how much simpler it needs to be drawn that excessive access to cash or credit without any regard to risk in the past has stimulated TEMPORARY jobs and wages because the speculation and relative calm presents a false pricing. When the calm is removed and the shift is dramatic in the other direction those jobs and wages are lost as wealth is vaporized. When we are dealing with an economic climate where the Federal Reserve is rewarding a system that propagates careless risk taking well it is a certainty we will get the mother of all bubbles because of the banks are only becoming more careless with their leverage because they feel like they are walking around with the American Express blackcard backed by the middle class taxpayers of not only the United States but Europe now.
When populist events, anger, riots, revolution inevitably cut the credit card in half in coming years and decades and there are no more backstops..we are dealing with the end of all things reset button here on Zero Hedge that we are all awaiting.
JM, you have a way with words, the ladies must love ya.
This lady certainly does. I look for JM's comments, they are usually worth reading.
Hey, crony capitalism is working just fine for the upper crust thank you!
bread and games baby, bread and games!
http://themacronavigator.blogspot.com
"voodoo religion of economics"
pretty well sums it up for all of you who are still bickering over in the other economics thread
Here is where Tyler and I split.
There is a self-realisation that needs to occur for one to truly understand Keynes (& Krugman for that matter).
The problems occur in how his theories are applied.
One thing we can agree is that fraudulent Banksters should not be riding high.
Keep the faith! With my basic DDR style basic school I would kick your collective asses. Retarded AMIS gathering around the failed free market ideology and huffing and puffing even more!
Man, you guys are beyond stupid. Really hitting records down there!
Yah, Joe, Fidel, Mao and Rakosi were really enlighten and misunderstood. You my friend ride in their wake.
I've always liked Niall Ferguson. Perhaps he could have made his simple statement even simpler by saying the global economy has never been more complex than it is right now, which is why there is so much "leakage" and also unintended consequences from government stimulus.
http://peakcomplexity.blogspot.com/
Jee, this article couldn't possibly have a corollary here could it? http://www.zerohedge.com/article/indonesia-fire
Great stuff. This really does ultimately boil down to the obvious, doesn't it?
In the end, we will be left with the fundamental truth that there is really is no "magic" solution (LOL). Who would have thought! LOLOLOL.
Disclaimer... I am not a PhD Economist.
This is a good article - and Keynsianism is certainly a problem. However, there is a serious problem of oversimplification on both sides of this argument (and just about any political argument for that matter!)
The problems in this case are two-fold:
1) The Keynesian argument of deficit spending ASSumes that politicians will run surpluses to offset the budget shortfalls. Of course this came close to happening until we elected an administration who's mantra was: "Reagan proved that deficits don't matter"
2) Stimulating the economy requires DIRECT hiring of the workers who the program is intended to benefit. However, our government is lazy and just wants to "outsource" everything. I would like to see a study on how much money actually goes to someone unemployed in this case - I'll bet it's less than 25%.
Keynesian policies had a better chance of working in the 1930's partly because our country's balance sheet was infinitely better as a whole -- and after WW2 we got things back into shape with large surpluses.
To be effective, fixes need to address the ACTUAL problem. In our case it is unpayable debt -- mainly in the form of OTC derivatives -- but also in the case of government and consumers. Borrowing money is only going to make the problem worse. If the government wants to stimulate and inflate, they should just pay off everyone's credit cards, mortgages, and student loans so that individuals will be in a better position when the nightmare is over [disguise it as "bankruptcy reform" of course and just have a government program (or Fed printing press) pay creditors a significant percentage of their losses ].
The derivative nightmare cannot be solved because the bets on both sides (such as CDO cubed, synthetic CDO's, swaps on bankrupt entities like Greece) are many times larger than the underlying assets - so no matter which side bet wins it will bankrupt the other.
Major congratulations, pyite, on the perfect explanation.
Bravo!!!!!!!!!!!!!!!!!!!!!!
half of every transaction is worthless paper sprung into life by the fingertip of a middle aged cretin
hows that for oversimplification.
I would call this simplification not over-simplification :)
Nice synopsis. Don't forget that it is impossible for stimulative money to get to where it is needed, and to where it would cause the most bang for the buck.
Special interests through highly paid lobbyists would make sure that the money only goes to union groups, and other members of the circle jerk bubble blowers club.
The corruption and political bribes along with their accountants and lawyers would diminish any beneficial longterm structual changes to the present system. The rich would continue to get richer and the middle class and poor more poor.
There wasn't as much of this complex convoluted bullshit to get things done in a more direct way back during the first depression; this is the main reason the second is will be dragged out for soo long.
Wonderful explanation!
,
The Tea Party explains it all... http://nursingspins.blogspot.com/2010/10/about-mice-and-men.html
Mice with human brains controlling the FED?
Or are there some humans with mice brains? I dare to say that I know a few with lemming minds...
Yet another "Keynesian doesn't work" rah-rah article describing actions the administration took which don't create jobs and don't improve infrastructure. That makes it something other than Keynes would have proposed. $26 trillion in loans to the "bankers for bonuses" program, $800 billion to hang on to public jobs and provide tax cuts, lowering interest to provide a pool of money so deep the wealthy need galoshes to walk through - none of that is what Keynes would have proposed, and this write (as well as many others) darn well know it. But they write to a dumbed-down audience or partisans who will use any excuse to trumpet their hot air.
When this government decides to invest $4 to $6 trillion dollars in rebuilding manufacturing and hiring some of the 15 million unemployed, or 15 million underemployed or dis-spirited workers, THEN, and only then, will we know if Keynesian policies will work in the 21st century. (Btw, it is working very well in China). Will it be conflated with other policies such as loaning trillions to one's banker friends so they can glean interest from treasuries, or keeping interest rates low so that those who can afford to move capital can profit at the expense of everyone else? Of course.
Authors such as these, by authors who know better, are created not to provide good information but to create output for output's sake. It's great for the low-standards crowd, barely a hitch above many of the comments, which seem to come from some alchoholic fog.
Easy tiger. I am trying to enjoy my Gruner Veltliner.
Whoa Trigger, you forgot about this...
http://www.youtube.com/watch?v=bF4i7JEOzzM
Question for everybody. If humans NEED energy to exist, do they:
a) bash each others brains out in order to get their hands on the combustible.
b) work together to figure out a way to make nuclear energy happen
Do you really want these any of these corner cutting, lying, bribe taking, lobbyist infested, corrupt motherfuckers to be the ones who bring us nuclear energy?
Not particularly. However, these people have been digitally stained.
When the going gets tough, you find out alot about people.
Tyler is a hero.
Edit: Matt Taibbi is a hero also.
FEAR MONGER
3 to 4.3 Billion Barrels of Technically Recoverable Oil Assessed in North Dakota and Montana’s Bakken Formation—25 Times More Than 1995 Estimate—
http://www.usgs.gov/newsroom/article.asp?ID=1911
Great, but how much will it cost to produce that oil and refine it???????? (or did you not think to ask that question?)
FEAR MONGER
3 to 4.3 Billion Barrels of Technically Recoverable Oil Assessed in North Dakota and Montana’s Bakken Formation—25 Times More Than 1995 Estimate—
http://www.usgs.gov/newsroom/article.asp?ID=1911
"Technically recoverable" does not mean "economically recoverable".
EROEI, beeeyatch.
"That makes it something other than Keynes would have proposed"
Blah blah blah. That's kind of like saying that when Stalin killed 30 million of his own people, "it wasn't something that Marx himself proposed." Its really irrelevant at this point. What matters is that people who call themselves Keynesians are ruining everything and they must be stopped.
Keynesian economics empower central government planners. central government planners murder their own people.
http://en.wikipedia.org/wiki/Ukrainian_Famine
ITS SO SIMPLE!!!!
wow, you're so "enlightened".
Keynesian economics empower central government planners. central government planners murder their own people.
http://en.wikipedia.org/wiki/Ukrainian_Famine
ITS SO SIMPLE!!!!
again, "is it a theory or a thesis." Presented here shows the "human condition." Theory, theory, theory. So "let us argue over theory!" Well "here's a theory for ya." Governments have cash flow, too. Needless to say "they use different terms to describe it." Let me give you a "word thought" which is "my speciality" apparently. How does one "mark time march" since "that is process of stopping said march"? And if that is "said process of stopping" why do we then need to "order a halt"? Hmmm. You can learn a lot from a drill Sgt.
Based on what I am reading, for Keynes to work, we either have to bring the rest of the world to US standards or close our boders to imported finished goods?
Looks as if Benji Big-bucks is trying the first approach through leakage and Congress is slowly working its way to the second approach.
Who wrote this article ?
Austrian is not better or worse ?
That is like saying a round earth is not better or worse then a flat one.
++
Hahaha, +1492
Double post. so ... +2984?
Ferguson is worse than wrong, he's simply misinformed. He writes:
"We've had an enormous of stimulus in the US, it's the biggest fiscal stimulus in the world, and huge unprecedented monetary stimulus."
Not true. The Obama stimulus amounted to around $450 billion per year in real spending, a measly 3% of GDP. This was enough to avoid 25% unemployment, but not enough to counteract the effects of $15 trillion in financial wealth destruction. The BRICs launched much bigger programs, which is why they're doing fine.
The problems of the US are really, really simple. We're going broke by spending trillions on failed colonial wars, and multiple trillions on tax cuts for the fat cats and failed bankster scams.
Instead, we need to invest that money on green jobs, science and education.
"Instead, we need to invest that money on green jobs, science and education."
Let me re-phrase that for you:
"Instead of merely wasting trillions of dollars in give-aways to Obama's corporate donors, the government should confiscate even higher portions of everyone's personal property and dole it out to General Electric, global warming scam 'scientists', and liberal public universities."
Who is "we"? If you want to invest in "green jobs" (lol, wut?) then do it with your own nickel. You have no right to force me to support junk science, worthless university philosophy departments, "women's studies" programs, etc anymore than I can force you to donate to my church.
Then you're cool with your church paying taxes now? Thanks!
Don't piss on subsidy without recognizing your own, Chief.
Churches are subsidized? That is news to me. Seems to me that in a free country, you can collect money for the poor without taxing the person who is pooling it.
And churches pay property tax, payroll tax, etc. just like everyone else. Pastors pay income tax and social security like everyone else. So I don't see the analogy to forcing people to give money to scientists. You make a lot of ignorant comments on this site.
If I recall correctly, Pres Bush was responsible for providing a nice chunk of TAX PAYER money for church sponsored community programs. My money (taxes) went to your church programs.
Key word being "church sponsered" like a soup kitchen or a daycare. I assure that neither my church nor the vast majority of churches in the USA were willing to accept Federal hiring requirements in exchange for the money. And also I don't agree with the program so your point is mute, since your only point was to try and make me a hypocrite, not to demonstrate that my original point was incorrect.
I believe the Federal hiring requirements were waived. One of your original points was that you disapproved with federal tax dollars spent on science or education unless said science and education conformed to your personal religious beliefs. This, I take issue with.
With regards to being a "hypocrite".... have you ever wondered what economic theories and policies Jesus would support? Would Jesus be a capitalist? What party would Jesus belong to? What was it that Jesus said about the poor?
He would absolutely support the free market. Please examine Old Testament law and governance. Here's one of the rules: "Thou shalt not steal." Also, I don't care if the science and education "conforms with my beliefs" - what I object to is the government feeling it has the right to take the money from me and mine in the first place. If you were a Democrat, lets say, would you appreciate being mugged, even if the mugger donated to Obama's campaign?
Gov't gives nothing to my Church except a hard time, and a really bad definition of the First Amendment.
They get a 501C3,write off.Sure as hell is not a subsidy..the money given has already been taxed ONCE.
Just like the Socialists get 501C4's.............(go figure).
Churches do not get DONATIONS of Taxpayer dollars, as in subsidies.
Like ACORN, PEOPLE FOR THE AMERICAN COMMIE WAY,etc.etc.etc.
Political action pacs, that are anti American, and trying to destroy the USA.
+1, DosZap. you're the man.
Danka Bro,
Have you ever wondered why some animals eat their young?
Look around.
Dumb SOB's.
ha, ha. +1
+1776
Green Jobs = Energy Return on Investment that is half of oil = Economic Suicide.
Science and Education = 5+ slaves working for a principal investigator who then gives away any innovation to present day social engineers (the banks, oligarchs, whatever).
The real problem is the individual can compete against high cost corporate structures but is unable because any small-scale operation bypassing all the beauracratic bullshit designed to protect the cartels is either branded a criminal or worse, a terrorist. You order a flask to a garage and YOU'RE A FUCKING TERRORIST.
The people who want big government "solutions" (nuclear, investment in "science") are simply more helpless dependents waiting for someone to save them.
I just don't understand the love/hate for these various economicist's theories.
It seems painfully obvious that "our problem" in the USA is that the labor market, having recently changed so dramatically thanks to our globalization technology, is just going through a period of readjustment.
All the problems with employment in the USA will be fixed just as soon as our labor rates are competitive with China/India/Bangladesh/etc. Some time after that occurs, asset/commodity prices in the US can also be expected to decline so that the "average US employee" has some reasonable expectation of being able to afford enough food/water to survive on median wages.
There's nothing any government can do about this. It's just market price-discovery. The USA is a relatively rich country, but there's no reason to expect any of that wealth to be shared by the citizenry.
It's a damn shame that guys like Ferguson and Krugman and whoever else won't just come out and say it. Unpopular idea? Not well-received by the masses? Too bad.
It is what it is.
Then there is no reason for me, the laborer, to hand over $1 in taxes no matter how it is disguised (aka "insurance", transaction fees, etc) either. See, your pathetic ideologue neoliberalism bullshit is only applicable to me, not you. Its "rules made up as we go to benefit ourselves".
In other words,
Neoliberalism = NO LAW WHATSOEVER
Thanks for clarifying that. Amerika, just another banana republic.
Well, this isn't a matter of what I *prefer*--this is an obvious outcome of the policies we've been employing for the past 20 years or so. NAFTA/GATT/market liberalization of emerging markets, etc.
Personally, I lean more towards restricting capital flows, providing some tariff support for domestic industry, and basically recognizing that if you WANT to maintain any kind of national borders, you can't expect "international trade" to function without any regional restriction.
Without getting too emotional about it, I agree with you completely that if I am forced to compete with Chinese/Indian/whoever laborers for my ability to survive, the US government is doing me no favors and deserves no cooperation from me. I'm free to starve in the USA.
My point is simply that if globalization continues to privilege movement of capital MORE SO than movement of labor, there's no "solution" for the (formerly) high-standard-of-living countries.
In Adam Smith's day, labor was mobile and capital was not. We've inverted that relationship. Traditional Wealth of Nations economic models just can't work the same way anymore.
Has nothing to do with capital seeking the best return. Why? Because there are laws preventing me from attracting such capital. Therefore, its all about social engineering. And social engineering = Marxism.
You're not rational on the subject. Good day, sir.
+10,000
I appreciate your very dry sense of humor. LOL
Weird. First, mechanics to allow redistribution of wealth. Second, mechanics can not be justified in any way.
But no, there is no reasonable expectation the average US employee will be able to afford enough food/water other than the large subsidize system implemented by the US at nearly all levels.
On the contrary, the reasonable expectation is that the average US employee will be less and less able to afford enough food/water.
The US general environment keeps getting better and better and there is no way for this to induce a decrease in price in the US.
I would agree with the statement with this clarification, they are NOT idiots.
Having said that, the conclusion to be drawn is that "destroying the economic system as we know it" is by design. Or maybe nobody noticed that we've got a communist in the White House and Progressives in control of the Congress and the Supreme Court.
All this blather about economic theory is just a web of smoke & mirrors built by the corrupt to distract the observers. It's a layer of deniability for the criminals. What was it Greenspan said, "I never thought the banks wouldn't regulate themselves."
Using raw data from here
http://www.realtor.org/research/research/ehsdata
I noticed an interesting trend -- the rich get richer, the middle class and poor get chased out of their houses at low prices.
The richest home buyers were the only segment that saw year over year gains. The rich get richer. Are they smart? Locking their money into hard "assets", or just stupid because they don't see just how bad things are? Time will tell, but in reality a house is a highly illiquid investment that could easily fall 50% from here.
Check it out - orig chart by Hawaii Trading
http://oahutrading.blogspot.com/
Check out Exter's Pyramid for a glimpse of what happens to the value of real estate once monetary breakdown commences.
Using raw data from here
http://www.realtor.org/research/research/ehsdata
I noticed an interesting trend -- the rich get richer, the middle class and poor get chased out of their houses at low prices.
The richest home buyers were the only segment that saw year over year gains. The rich get richer. Are they smart? Locking their money into hard "assets", or just stupid because they don't see just how bad things are? Time will tell, but in reality a house is a highly illiquid investment that could easily fall 50% from here.
Check it out - orig chart by Hawaii Trading
http://oahutrading.blogspot.com/
http://www.nytimes.com/2010/10/24/weekinreview/24herzenhorn.html?_r=2&pa...
WILL THEY DO IT?????????????????????
Yes, they will. Don't forget, the MSM, even in my morning Sunday paper, are trying to blame "entitlements" on the fiscal problems. According to them the $700B TARP has been "paid back" and they are making a "profit" on it. They never mention the trillions in backstops, special lending facilities, etc. So El Dumbo J6P doesn't blame the banks and Wall Street, they blame mexicans, welfare moms, etc. They don't blink an eye about the 2 wars' costs (3 if you count Pakistan) or the cost of the biggest new government entity (Homeland Security) or the Drug Wars and CIA shenanigans all over the world.
J6P is gobbling up the propaganda whole hog. The people I talk to on a daily basis, supposedly, educated, intelligent, profession people who think they are so smart have not a clue. Drowning in Kool Aid. They won't know what hit them when the austerity card gets played after the elections.
I actually planned a business trip out of the country for a week before and after the elections. I think some strange shit is gonna hit some weird fans. Might be a good idea to watch from a distance, like ya would with fireworks.
Yes, I've a nasty feeling TPTB are gearing up to give us all another koolaid jolt, and it will involve some mass murder.
One problem with Keynesian economics -- whether or not people describe it correctly, or apply it as designed -- is that it gives a mental framework and intellectual cover for increasing governmental command and control of the economy.
Economy doing poorly? We need increased 'countercyclical' federal spending to stimulate the economy and close the demand gap.
Economy doing well? Well, it wouldn't be fair to let the private sector have all those gains, would it? We need increased federal spending to 'share the wealth' and let all sectors of society participate.
So the federal government size or debt never shrinks, over any part of the business cycle. 'Keynesianism' thought (misunderstood, if you like) has served very well as a mental crutch supporting central planners' deepest desires.
More useless private-public arguments that have no meaning. The hordes of parasites the working stiff has to support on either side of your fictional divide is HUGE. And since the criminals shuttle back and forth between the two, there really is no categorical difference to begin with.
Definitions:
a) Politics (greek): Poli - many Tics -blood sucking insects
b) Politician: One who applies many blood-sucking insects to an economy.
Keynesian economics, designed by central planners to serve central planners.
...every Rothschild knows this.
The priests are to important and arrogant to be ever wrong about anything and lets be honest where is the credible opposition to anything at all nowadays.Most of the people who oppose are too busy trying to survive in a system that gets harder everyday,the system the priests are taking to oblivion.These characters are so educated they have no idea about the real world,in fact the world is more educated supposedly than ever,trouble is education and not experience is making it worse and worse.Wonder how many bits of paper Bernanke has that gives him the power to destroy the whole f*****g system.
Whats really funny about this site is the universal "riots just around the corner" prediction thats always pushed off to next year. Its every bit as absurd as Mako saying: "Collapse is imminent. Fractional reserve mechanics deem it so. Look at the Feds report. Credit inflation is maxed out. 4 billion unfundable liabilities must be liquidated RIGHT NOW. BUT I COULD BE OFF BY 20-40 YEARS"....
I mean what the hell is the point of idolizing math "experts" if even the "ones in the know" (a complete guess like 40 - 70 years max) are basically fucking guessing. Come back to this site a year from now and headline : "Keyenesiam crap killing us all, total collapse imminent, gold to 50,000".
Will us doomers die of old age before THE GREAT RIOTS OF AMERIKA?
You must have the last name Rotshchild.
Niall as usual is confusedly meandering around somewhere not so far from right. Leakage is a fatal flaw in Keynesian theory - but of course it's not the only fatal flaw.
With Keynesian public works funded by public borrowing, the investors are repaid regardless of whether the projects they funded actually succeeded in creating any new wealth with which to repay them. Inevitably you get all sorts of malinvestment, and excessive spending on do-good altruistic projects exactly when people can least afford them. Fatal flaw No. 2. And that's what's happening with the roughly half of stimulus that's being spent by government.
With the other variety of Keynesian stimulus in which the government borrows from the wealthier part of the public to fund tax cuts and/or pay-outs to the middle and lower classes who are most likely to spend, you get investors who must be repaid despite the fact that their money wasn't invested in anything, it was spent on consumption. The Keynesian theory only works if the elevated consumption incentivizes enough more successful private investment than would have occurred if the government had not borrowed that money from the wealthy and instead let them use it however else they would have used it. In essence, it relies on private investors to be fooled into believing that the elevated consumption is natural and sustainable. That has never worked, and it's not working now. Fatal flaw No. 3.
Especially the second variety of Keynesian stimulus (tax cuts and pay outs), and in practice usually also the first (public works), pay no attention to structural problems in the economy. They assume that it is enough to raise the aggregate demand. But there are always important structural components to recessions, such as the massive unemployment of homebuilders in the current one. Raising aggregate demand will not put those homebuilders back to work, as their skills are simply not what the economy needs, and they are mostly going to be unwilling to accept the sharp cuts in wages that they would have to take if they shifted to other jobs. Fatal flaw No. 4.
I could go on, and I'm sure others could, too.
Kudos to Niall though for picking up that bit that Keynes added in the German edition of the General Theory. The English edition takes almost no account of international trade and financial flows, so it's interesting that Keynes implicity accepted in the German edition that his theory makes little sense except for closed economies. Although actually it makes no sense even for closed economies.
Very good post.
Only one thing:
Actually Nial is streching Keynes words to fit what he wants to say. What Keynes wrote exactly is:
So it does not really talk about a closed system, although it is true that authoritarian regimes tend to be more closed while laissez-faire are more open. Source: http://mises.org/daily/3693
Thanks for clarifying that and providing the original quote!
Keynes is THE key to the problems we have now and will have in the future. My bad typo previously,
GUNS DON'T KILL PEOPLE, RAPPERS AND KEYNESIANS DO.
Its easy. The rent is to high !!!!
It's easy. The rent is too high.
You mean... the RENT is 2 DAMN HIGH!
http://www.rentistoodamnhigh.org/
You know, I laugh at that guy (mainly because of the facial hair), but if we adopted a Georgist approach to property taxation, rather than assessing property based on *developed* real-estate value, he might have a better case.
The banking elite (who run America now) don't care about Keynesianism. They don't care about anything except debasing the dollar, as Bernanke has clearly stated, and they look for opportunities to debase the dollar slowly without setting off any alarms.
Federal stimulus to the economy is just another way to debase the dollar.
Toxic asset purchases are just another way to debase the dollar.
Any problem they throw money at is just another way to debase the dollar.
The most effective way to debase the dollar is destroy the economy, and that's exactly what we see happening.
Why are they trying to keep gold price down? Because gold price shows how much they're debasing the dollar, and they don't want people to know how much they're debasing the dollar.
so you're saying they're debasing the dollar?
"[Austrian Economics]...would certainly not have led to the current pre-apocalyptic economic situation, which only the most addicted to Kool Aid pig lipstickers refuse to acknowledge)."
You forgot Titanic deck chair rearrangers.
Didn't Keynes also say governments should SAVE during "good" times?
Here's Mr Ferguson a year or two ago on BNN.ca. Very interesting to look back upon his predictions. He's a banksters' man through and through.
http://watch.bnn.ca/special-presentations/trading-day-special-coverage-d...
he nailed 2009
+1Best contribution!
I knew he is a thug, but now one can see he is less than crap! Just look at his insinous body language!
I know, his face says," I'm a messenger to the gods of money and I know more than you". What a little biatch. Sure wish I'd run into his punk ass and have the pleasure of spitting in his face.
Indeed, the only thing missing was the "Muhahaha."
Where can I get the full recording of wherever this clip is from?
http://fora.tv/2010/07/28/Niall_Ferguson_Empires_on_the_Edge_of_Chaos
Watch the whole speech before putting words in Mr. Ferguson's mouth. Other than the fact that he's full of himself, I found the speech to be candid and educational.
1) He rips Keynesian economics a new one.
2) He rips Krugman too.
3) He points out the the U.S. debt, military misadventures, and fraudulent banking practices have left the U.S. teetering on the brink.
4) He speaks to the topic of fat tails and complexity and how changes in the financial world are sometimes cyclical and at others more of a punctuated equilibrium type scenario.
I'm not sure why he's been vilified by many ZH commentators. Aside from the fact that he's not high on gold, he seems to be tackling many of the "right" topics.
Is he a Bilderberg, Bretton Wood's new world order, Trilateral Commission etc. wolf in sheep's clothing?
Seems to me he slammed banking fraud, academic economists, the unsustainable U.S. debt, and lack of political will to do the right things, etc.- things ZH'ers have been discussing all along.
Am I missing something about Niall?
i believe the idea is that NF has endeared himself through empathy, or by restating why "we" are upset and what "we" see, as if he is one of us rather than a journalist with great access to and connections with financiers in the international banking cartel. if NF befriends you, the disgruntled public, then he can offer "solutions" that do not include buying gold as a protest and ending the welfare state as we know it. He is seemingly a cheap salesperson for correcting the flaws in "regulations" or "practices" rather than abandoning faith-based (fiat) currency outright for the benefit of true individual liberty.
desperate times for these central planners, desperate times indeed. ...just some thoughts.
I see your point. Having Mr. Ferguson restate and re-frame the crisis may endear him to the masses, but just because he doesn't say "buy gold" doesn't make him evil.
I own gold as an insurance policy against bad money and bad government. I see it as a useful thing, but bad people reigned terror down from on high when gold was money, just as they are in power now under fiat (though it does make it much easier for them). I haven't heard him say "don't buy gold", but rather that it's "not necessarily a great investment during a deflation" which is what he thinks the world will be experiencing for some time.
With some reservations, I'm willing to delay judgment on Niall for now.
If the robo-hedge assholes know what's good for them, they'll tank the market this week to set the scene for Uncle Ben's announcement next week.
How can he save the economy if the S&P is hitting an annual high?
In fact, given enough pre-annoucement hype, he might actually have to temporize about what he wants to do.
Hell, round after round of asset bubbles I can live with. Story of my life in fact. That's the best case scenario in a Keynesian world. It's hyperinflation, sovereign defaults and Mad Max type collapse that we should be worried about.
"And I keep thinking
that maybe I should be valuing my portfolio not in terms of this or that currency
but in terms of the barrel or the ounce—in terms of commodities like oil and gold."
That was his last insight at peterson institute this summer. Special guests: Rotschild and JPM! last page pdf:
http://www.petersoninstitute.org/publications/papers/niarchos-ferguson-2...
The country having the world reserve currency cannot pursue neo-Keynesianism
Well said chopper. Nonsense can't comprehend sense.
I don't think Keynesian stimulus will work, but let's face it, it hasn't been tried.
Well over 80% of the "stimulus" money spent thus far has been for monetary stimulus (recapitalizing the banks, quantitative easing, ZIRP, bank bailouts and tax cuts), and the fiscal "stimulus" was applied to stop further reductions in aggregate demand, not to increase aggregate demand (i.e., to stimulate). The few remaining Keynesians out there were arguing that monetary stimulus wouldn't work because of the liquidity trap (which is what leads to Ferguson's "leakage") and that a lot more fiscal stimulus was needed to actually stimulate demand.
When over 80% of stimulus spending was on monetary stimulus spending that Keynesians said wouldn't work, you can't lay the blame on the Keynesians. No, point the finger at the neoliberal Chicago School monetarism of Milton Friedman, which is what Mr. Bernanke practices. The guy simply isn't a Keynesian.
Bernanke is a keynesian. He is just in charge of the Fed and does not control fiscal policy, so all he can do is monetary injections. The fact that he does not control fiscal policy does not mean that he does not believe in it.
Also, modern keynesians, like Krugman and the rest of the gang, have adopted monetarist/chicago school ideas in monetary policy matters. So its not like keynesianism and monetarism are opposites. They share a lot of theory.
Tao, pure Keynsianism (which even in theory is very questionable) will never bee applied.
Why?
When politicians dole out money and decide who wins and who loses, it will always be doled out inefficiently because the incentives of politicians is to hand it out to their political cronies. The only cost/benefit analysis performed is the one that applies to them personally. Thus, Keynsianism will never ever work in practice even if it worked in theory (it doesn't, IMO), because of the involvement of politicians.
Take away the involvement of politicians and you basically get Austrian economics.
So, unfortunately, Keynes leads us from a liquidity trap to a Keynsian trap. The liquidity trap is far easier to overcome.
If Austrian economics wouldn't have led to bubbles and (i.e., would not have severely distorted the economy Keynsian style), then isn't that NECESSARILY better?
Why are you trying to tip toe around the superiority of free markets, unmolested by political interests. In fact, you are saying that Austrian economics is superior because it is less interventionists. You're right. OWN IT, Tyler.
"government regulations", designed by lawyers to serve lawyers (and corporate/labor welfare recipients).
"fractional reserve counterfeiting", designed by bankers to serve bankers.
"fiat money", designed by (keynesian) central planners to serve (keynesian) central planners.
keynesian = "we can do it better than you" = "some pigs are more equal than others".
austrian = "stop meddling in my affairs" = "end central planning".
it's so simple!