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Dancing On The Grave Of Keynesianism

Tyler Durden's picture





 

Authored by Gary North via the Ludwig von Mises Institute

Dancing On The Grave Of Keynesianism

The collapse of the Soviet Union in December of 1991 was the best news of my lifetime. The monster died. It was not just that the USSR went down. The entire mythology of revolutionary violence as the method of social regeneration, promoted since the French Revolution, went down with it. As I wrote in my 1968 book, Marxism was a religion of revolution. And Marxism died institutionally in the last month of 1991.

Yet we cannot show conclusively that "the West" defeated the Soviet Union. What defeated the Soviet Union was socialist economic planning. The Soviet Union was based on socialism, and socialist economic calculation is irrational. Ludwig von Mises in 1920 described why in his article, "Economic Calculation in the Socialist Commonwealth." He showed in theory exactly what is wrong with all socialist planning. He made it clear why socialism could never compete with the free market. It has no capital goods markets, and therefore economic planners cannot allocate capital according to capital's most important and most desired needs among by the public.

Mises's argument was not taken seriously by the academic community. Socialism was so popular by 1920 among academics that they did not respond to Mises for over 15 years. When finally one major economist, who really was not a major economist but was simply a Polish Communist, wrote a response to Mises, it got a great deal of publicity. His name was Oscar Lange. He was a hack. He taught at the University of Chicago. He had no theory of economics. Immediately after World War II, he returned to Poland, renounced his American citizenship, and became a major Polish government bureaucrat. He was Stalin's hand-picked first Polish ambassador to the United States. He was a Marxist. He was a Communist. He was a hack. He spent his career with his finger in the wind, seeing which way it was blowing. As for his critique of Mises, Poland never adopted his so-called practical organizational answer to Mises, and neither did any other Socialist Commonwealth nation.

So, the only major supposed academic refutation of Mises was made by a hack who switched sides to Communism when he got a better offer. Yet he was heralded as a brilliant economist because he had supposedly refuted Mises. The academic world never admitted what Lange was, which was a hack Communist. It never admitted that no socialist nation ever implemented his supposed alternative to the free-market system. The academic world simply clung for over 50 years to his completely hypothetical alternative to free-market capital allocation. The academic world would not learn the truth.

Finally, when it became clear in the late 1980s that the Soviet economy was bankrupt, a multimillionaire socialist professor named Robert Heilbroner wrote an article, "After Communism," for the New Yorker (September 10, 1990), which is not an academic journal, in which he admitted that throughout his entire career, he had always believed what he had been taught in graduate school, namely that Lange was right and Mises was wrong.

Then, he wrote these words: "Mises was right."

Heilbroner wrote the most popular textbook on the history of economic thought that has ever been written, The Worldly Philosophers. He became a multimillionaire off the book royalties. In that book, he did not even mention the existence of Mises. He, too, was a hack — a polished hack (though not Polish), but still a hack. Yet he was widely respected in academia. Academia made him rich.

The academic community is intellectually corrupt. It goes with fads, and it does not react to the truth. It suppresses the truth. I realized this very early in my career, long before I got a PhD. The guild in every university department operates as a guild, and it has no commitment to truth in matters controversial until one side or the other loses power. When one side is perceived as possessing power, which the Communists were perceived as possessing, 1917–1991, there is never any direct challenge by the academic community. Academia argued about this or that aspect of the Soviet system that was wrong, which generally related to freedom of speech. But, with respect to the basic operations of the Communist economic-planning system, there was never anything like a comprehensive critique of that system, and never did anybody inside the academic community look for the weakness of Communism in Mises's 1920 article.

The Soviet Union was always economically bankrupt. It was poverty-stricken in 1991. It was, in conservative journalist Richard Grenier's magnificent phrase, Bangladesh with missiles. Outside of Moscow, Russians in 1990 lived in poverty comparable to mid-19th-century America, but with far less freedom. Yet this was never told to students during the years that I was in school, which was in the 1960s. There were a few economists who did talk about it, but they got little publicity, were not famous, and their books were not assigned in college classrooms. The standard approach of the academic community was to say that the Soviet Union was a functioning economy: a worthy competitor to capitalism.

Paul Samuelson was the most influential academic economist of the second half of the 20th century. He wrote the introductory textbook that sold more than any other in the history of college economics. In 1989, as the USSR's economy was collapsing, he wrote in his textbook that the Soviet Union's central-planning system proves that central planning can work. Mark Skousen nailed him on this in his book Economics on Trial in 1990. David Henderson reminded readers in the Wall Street Journal in 2009.

Samuelson had an amazingly tin ear about communism. As early as the 1960s, economist G. Warren Nutter at the University of Virginia had done empirical work showing that the much-vaunted economic growth in the Soviet Union was a myth. Samuelson did not pay attention. In the 1989 edition of his textbook, Samuelson and William Nordhaus wrote, "the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive."

The creator of the so-called Keynesian synthesis and the first American winner of a Nobel Prize in economics was blind as a bat to the most important economic failure of the modern world. Two years later, the USSR was literally broken up, as if it had been some bankrupt corporation. Samuelson never saw it coming. People who are conceptually blind never do.

The Keynesian Era Is Coming to a Close

I say this to give you hope. The Keynesians seem to be dominant today. They are dominant because they have been brought into the hierarchy of political power. They serve as court prophets to the equivalent of the Babylonians, just before the Medo-Persians took the nation.

They are in charge of the major academic institutions. They are the main advisers in the federal government. They are the overwhelmingly dominant faction within the Federal Reserve System. Their only major institutional opponents are the monetarists, and the monetarists are as committed to fiat money as the Keynesians are. They hate the idea of a gold-coin standard. They hate the idea of market-produced money.

There was no overwhelming outrage among staff economists at the Federal Reserve when Ben Bernanke and the Federal Open Market Committee (FOMC) cranked up the monetary base from $900 billion to $1.7 trillion in late 2008, and then cranked it up to $2.7 trillion by the middle of 2011. This expansion of the money supply had no foundation whatsoever in anybody's theory of economics. It was totally an ad hoc decision. It was a desperate FOMC trying to keep the system from collapsing, or at least they thought it was about to collapse. The evidence for that is questionable. But, in any case, they cranked up the monetary base, and nobody in the academic community except a handful of Austrians complained that this was a complete betrayal of the monetary system and out of alignment with any theory of economics.

The Keynesians are eventually going to face what the Marxists have faced since 1991. Literally within months of the collapse of the Soviet Union, when members of the Communist Party simply folded up shop and stole the money that was inside the Communist Party coffers, any respect for Marxism disappeared within academia. Marxism became a laughingstock. Nobody except English professors, a handful of old tenured political scientists, and a tiny handful of economists in the Union of Radical Political Economists (URPE), were still willing to admit in late 1992 that they were advocates of Marxism, and that they had been in favor of Soviet economic planning. They became pariahs overnight. That was because academia, then as now, is committed to power. If you appear to have power, you will get praised by academia, but when you lose power, you will be tossed into what Trotsky called the ashcan of history.

This is going to happen to the Keynesians as surely as it happened to the Marxists. The Keynesians basically got a free ride, and have for over 60 years. Their system is illogical. It is incoherent. Students taking undergraduate courses in economics never really remember the categories. That is because they are illogical categories. They all rest on the idea that government spending can goose the economy, but they cannot explain how it is that the government gets its hands on the money to do the stimulative spending without at the same time reducing spending in the private sector. The government has to steal money to boost the economy, but this means that the money that is stolen from the private sector is removed as a source of economic growth.

"The academic world rejected Mises's theory of socialist economic calculation. Everything in their system was against acknowledging the truth of Mises's criticisms, because he was equally critical about central banking, Keynesian economics, and the welfare state."

The Keynesian economic system makes no sense. But, decade after decade, the Keynesians get away with utter nonsense. None of their peers will ever call them to account. They go merrily down the mixed-economy road, as if that road were not leading to a day of economic destruction. They are just like Marxist economists and academics in 1960, 1970, and 1980. They are oblivious to the fact that they are going over the cliff with the debt-ridden, over-leveraged Western economy, because they are committed in the name of Keynesian theory to the fractional-reserve-banking system, which cannot be sustained either theoretically or practically.

The problem we are going to face at some point as a nation and in fact as a civilization is this: there is no well-developed economic theory inside the corridors of power that will explain to the administrators of a failed system what they should do after the system collapses. This was true in the Eastern bloc in 1991. There was no plan of action, no program of institutional reform. This is true in banking. This is true in politics. This is true in every aspect of the welfare-warfare state. The people at the top are going to be presiding over a complete disaster, and they will not be able to admit to themselves or anybody else that their system is what produced the disaster. So, they will not make fundamental changes. They will not restructure the system, by decentralizing power, and by drastically reducing government spending. They will be forced to decentralize by the collapsed capital markets.

When the Soviet Union collapsed, academics in the West could not explain why. They could not explain what inherently forced the complete collapse of the Soviet economy, nor could they explain why nobody in their camp had seen it coming. Judy Shelton did, but very late: in 1989. Nobody else had seen it coming, because the non-Austrian academic world rejected Mises's theory of socialist economic calculation. Everything in their system was against acknowledging the truth of Mises's criticisms, because he was equally critical about central banking, Keynesian economics, and the welfare state. They could not accept his criticism of Communism precisely because he used the same arguments against them.

The West could not take advantage of the collapse of the Soviet Union, precisely because it had gone Keynesian rather than Austrian. The West was as compromised with Keynesian mixed economic planning, both in theory and in practice, as the Soviets had been compromised with Marx. So, there was great praise of the West's welfare state and democracy as the victorious system, when there should have been praise of Austrian economics. There was no realization that the West's fiat-money economy is heading down the same bumpy road that led to the collapse of the Soviet Union.

It was not a victory for the West, except insofar as Reagan had expanded spending on the military, and the Soviets stupidly attempted to match this expenditure. That finally "broke the bank" in the Soviet Union. The country was so poverty-stricken that it did not have the capital reserves efficient to match the United States. When its surrogate client state, Iraq, was completely defeated in the 1991 Iraq war, the self-confidence inside the Soviet military simply collapsed. This had followed the devastating psychological defeat of the retreat of the Soviet Union out of Afghanistan in 1989. Those two defeats, coupled with the domestic economic bankruptcy of the country, led to the breakup of the Soviet Union.

The present value of the unfunded liabilities of the American welfare state, totaling over $200 trillion today, shows where this nation's Keynesian government is headed: to default. It is also trapped in the quagmire of Afghanistan. The government will pull out at some point in this decade. This will not have the same psychological effect that it did on the Soviet Union, because we are not a total military state. But it will still be a defeat, and the stupidity of the whole operation will be visible to everybody. The only politician who will get any benefit out of this is Ron Paul. He was wise enough to oppose the entire operation in 2001, and he was the only national figure who did. There were others who voted against it, but nobody got the publicity that he did. Nobody else had a system of foreign policy that justified staying out. His opposition was not a pragmatic issue; it was philosophical.

The welfare-warfare state, Keynesian economics, and the Council on Foreign Relations are going to suffer major defeats when the economic system finally goes down. The system will go down. It is not clear what will pull the trigger, but it is obvious that the banking system is fragile, and the only thing capable of bailing it out is fiat money. The system is sapping the productivity of the nation, because the Federal Reserve's purchases of debt are siphoning productivity and capital out of the private sector and into those sectors subsidized by the federal government.

After the Crash

There will be a great scramble ideologically among economists and social theorist as to why the system went down, and what ought to replace it. On campus, there will be no coherent answers whatsoever. The suppression of the truth has gone on so systematically on campus for half a century, as manifested by the universal praise of the Federal Reserve System, that the reputation of campus will not recover. It shouldn't recover. The entire academic community has been in favor of the welfare-warfare state, so it will not survive the collapse of that system. It will become a laughingstock.

It is not clear who is going to come out the victors in all this. That could take a generation to begin to sort out. There will be many claimants, all pitching their solutions, all insisting that they saw the crisis coming. But that will be hard to prove for anybody except the Austrians.

This is why it is important that people understand what is wrong with the prevailing system, and that they say so publicly.

This is why the Christian churches will not have much of a say in any of this, because the churches, and Christianity in general, have had nothing independent to say about the development of the welfare-warfare state.

The analysts with the best arguments are the Austrians. As to whether they are going to be able to multiply fast enough, or recruit students fast enough, or train them fast enough, with some of them going into positions of authority, is problematical. But we do know this: there has been no systematic criticism of Keynesian theory and its policies except by the Austrians over the past 70 years. Only the Marxists gave comparable criticism, and their ship went down in 1991.

Keynesians talk to each other. They do not seek converts. They do not think they need to. Austrians, being in a small minority, seek to persuade non-Austrians. Keynesian economists get tenure for writing gibberish and including meaningless formulas that begin by assuming away reality. Austrians begin with reality: individual human action. Keynesians, when writing for the public, offer conclusions, not explanations. Austrians seek to explain their position, since they know the public is unfamiliar with the fundamentals of Austrian economics.

In a time of breakdown, Austrians will explain why it happened, and pin the blame on Keynesians: "Their system failed. They had control ever since 1940."

Keynesians will pin the blame on Keynesians who did not go far enough: "more of the same." We see this already "Krugman vs. Bernanke."

Which version will the public be ready to believe in a crisis? In the late 1930s, we found it: the Keynesians, who blamed the free market, not the neoclassical economists. "The present system is basically OK. We just need more time."

Housebroken Austrian Economists

The battle will be fought and won outside of academia. Here is where Austrians must learn to do battle.

Inside academia, to gain tenure, every assistant professor must go through the motions of genuflecting in front of the Keynesian altar. After they gain tenure, most anti-Keynesians cannot break the habit. They sugarcoat their criticisms of Keynesianism. They play the role of loyal opponents. This even includes some Austrians — those who are appalled by the rhetoric of the Mises Institute and Lew Rockwell.com. They are housebroken.

I recall one academic Austrian economist who told me that I am far too dismissive of Keynesianism, and far too contemptuous in my rhetoric. "You just can't say such things!" he told me, not grasping his grammatical error. I responded: "Yes, I can. And I do." That was in 1992. He has not changed. Neither have I.

We have different audiences. He teaches 130 students, three days a week, eight months a year, in a government-funded minor university with no clout within the economics guild. I have 120,000 people on my mailing lists, 70,000 of them five days a week, plus readers on Lew Rockwell.com two days a week, 52 weeks a year. I can play hardball with Keynesian twits. He must guard his words so as to curry favor with those whose opinions count in academia. He has spent his career looking over his shoulder at Keynesians, who exercise power in all of the social-science academic guilds, by whose rules he must play as an outsider who is barely tolerated inside the economics guild. I have spent mine telling the crowd that the emperor has no clothes, and that his tailors are mostly Keynesians, with a few monetarists pretending to hem the invisible garments. I do not abide by the rhetorical rules — "gentle, be gentle" — that Keynesian academics impose on their critics inside academia. "You sit in the corner and wait for your turn. You will get your 15 minutes. Be polite when you get your turn." That is not my style.

Conclusion

I offer this optimistic assessment: the bad guys are going to lose. Their statist policies will bring destruction that they will not be able to explain away. Their plea will be rejected. "Give us more time. We just need a little more time. We can fix this if you let us get deeper into your wallets."

In the very long run, the good guys are going to win, but in the interim, there is going to be a lot of competition to see which group gets to dance on the grave of the Keynesian system.

Get out your dancing shoes. Keep them polished. Our day is coming.

 

 


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Tue, 10/02/2012 - 14:01 | Link to Comment LawsofPhysics
LawsofPhysics's picture

"The system is sapping the productivity of the nation, because the Federal Reserve's purchases of debt are siphoning productivity and capital out of the private sector and into those sectors subsidized by the federal government."

-----------------------------------------------------------------

It isn't even that complicated.  Here, allow me to simplify; "The system is collapsing because productive people who provide, innovate, or create real goods and services of real value are not being compensated for their labor."

Fuck the god damn paper-pushing fuckers scaming and skiming wealth through financial bullshit "products".  

Then there is the issue of folks actually saving some capital.  Give them a decent return assholes.  anyone really believe the true cost for captial and risk is zero (ZIRP has destroyed captial pricing you dumb fucks)?

Couterparty risk is a bitch when moral hazard goes unchecked.  How many paper promises does your life depend on?  Hedge accordingly.

Tue, 10/02/2012 - 14:06 | Link to Comment Skateboarder
Skateboarder's picture

How many stupid VC-backed mobile games and web apps do you need? How many bullshit layers of indirection built on other layers of indirection do you need?

"CRM on the cloud? WHY NOT CRM ON YOUR PHONE SYSTEM!" I saw that on a billboard yesterday. I fucking lost it - what the fuck does that advertisement even mean! IMO people are producing pure shit these days, for the most part at least. GIGO always applies... garbage in, garbage out.

Tue, 10/02/2012 - 14:06 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Careful, don't date yourself, but yes good analogy.

Tue, 10/02/2012 - 14:25 | Link to Comment Skateboarder
Skateboarder's picture

Dating myself as in providing temporal context of my whenabouts? lol

Tue, 10/02/2012 - 14:56 | Link to Comment redpill
redpill's picture

Dear Keynesians,

 

Sorry for party rocking.

 

Love,

The Austrians

Tue, 10/02/2012 - 15:25 | Link to Comment notbot
notbot's picture

Best ZH piece I've ever read.  And I've read many.

They will not restructure the system, by decentralizing power, and by drastically reducing government spending. They will be forced to decentralize by the collapsed capital markets."

It could drag on a while, like Japan, but collapse seems like almost a sure thing.  It's painful to watch; no, it's worse than that...really it's excruciating. 

It seems like the only people who get it are Ron Paul, Jim Grant, and some ZH readers.  Throw in a few money managers like Seth Klarman and Einhorn and Paul Singer. But that's about it.

I need a support group, apparently.

Tue, 10/02/2012 - 15:49 | Link to Comment Darth Mul
Darth Mul's picture

Instead of a support group, maybe what you need is a good scare.

 

Go read the comments on Paul Krugman's blog.

 

These are the people who would jail film makers to protect speech, would amend the meaning of words to preserve the Constitution, and would like nothing more than to rule absolutely over your life and property via government proxy.

 

And they are as batshit crazy as they are full of self-righteousness.

Tue, 10/02/2012 - 16:12 | Link to Comment Overfed
Overfed's picture

According to one douche over there: "We don't have a debt problem, we have an unemployment problem." Fuck. I guess I never thought of it like that. If everybody had a job at TSA, all of our problems would be solved forever. /s

Tue, 10/02/2012 - 16:20 | Link to Comment Skateboarder
Skateboarder's picture

Everyone paid to grope each other? That's a pretty sight. No wonder I tended to agree when a buddy of mine called us the circlejerk species.

Tue, 10/02/2012 - 16:51 | Link to Comment notbot
notbot's picture

Darth...I already have that scare on a daily basis.  I live in NYC.  I'm surrounded by the High Priests of Keynesian Econ and the liberal mania.  

That's why I need a support group.  Some days, I wonder if I'm the only one in NYC who isn't liberal.

I know good people, and I mean sincerely good-hearted people, who are just blinded by the sheer magnitude of the Keynesian snowjob.  They aren't evil or stupid, they just haven't studied this for a living, or their livelihood doesn't depend on it, so they don't really get it.  They read the NYT.  They go to work in Marketing or PR or Medicine or some back-office job, and econ is an after-thought.

And that's what makes me so sick.  Because the people who are shoveling this propaganda do know, or should know, better. And they are duping otherwise good people.

Tue, 10/02/2012 - 16:17 | Link to Comment ListLincolnBism...
ListLincolnBismarkRoosevelt's picture

If only you, the "good" people, could see that's on purpose. Keynes is a british Lord and on the other end you are like modern private Indian Company. It's a global war for supremacy against the nations itself. You say failure ? I say a major step in an anglobloc : UE have alraidy decided to fusion all the markets, Gov. Scahs is on the BCE, Blair the Liar (know to be in big opposition on US war) was promoted à the head of the EU and his daughter Ashton rule the EU foreign affairs...

The dream is coming true for the private&publique imperialists. You play their game by denying the concept of nation like HenryIV, Carey (Lincoln), list (Bismarck) did, not to mention Roosevelt with the biggest industrial world power ever after his political economy. Just saying ! 

Tue, 10/02/2012 - 17:33 | Link to Comment nofluer
nofluer's picture

Okay... now we need a piece that drags MMT out into the sunshine as the absolutely ludicrous "theory" that it is - and kill it before it gains a following! When an MMT proponent told me that "monetary sovereigns have no constraints on printing money" I about lost it! I was laughing so hard I thought I'd need a life preserver to survive the flood of pissing myself! And like Keyunesians, the concept of "logic" is NOT in their lexicon!

GREAT piece!

Tue, 10/02/2012 - 17:40 | Link to Comment TimmyB
TimmyB's picture

What nonsense. Propping up Wall Street at the expense of Main Street isn't Keynesian. It's Kleptocracy.

Yeah, that's right. We live in a Kleptocracy. The owners of our county like it that way, so they can rob us blind without fear of arrest. This Austrian bullshit is just another attempt at propaganda by the owners of this country to hang a fig leaf over their rampant greed. Same with Rand. Just self serving bullshit to justify greed.

What's funny is how many here eat this shit up.

Tue, 10/02/2012 - 19:22 | Link to Comment tennisdude
tennisdude's picture

What does a worldview based on non-aggression have to do with greed? Keynesian = Kleptocracy. It's only natural.

Tue, 10/02/2012 - 23:20 | Link to Comment JeffB
JeffB's picture

"Best ZH piece I've ever read.  And I've read many."

---

I completely agree.

I just hope he's right about the good times following the bad. Some Russian scientists and engineers were living off of scraps they could pick up in garbage dumps after the collapse of the Soviet Union if I recall.

Hopefully things will be better coming out the other side, but it might be hell getting there.

 

Tue, 10/02/2012 - 16:31 | Link to Comment putaipan
putaipan's picture

not to rain on anyone's victory dance.....but an alternative version of 'post-keynsianism'-

http://kcur.org/post/economic-roundtable-post-keynesian-theory

i don't know how to score the 'fake austrians' ( hat tip to max k. and others) but this guy's cock sure walk gets high marks

Tue, 10/02/2012 - 17:41 | Link to Comment nofluer
nofluer's picture

I was quite surprised when I saw that L Rendal Wray (UMKC) was apparently a regular contributor on the Mises Institutes blog... He's not an Austrian!!! As I understand it, he's one of the originators of MMT!!!

Tue, 10/02/2012 - 19:23 | Link to Comment NidStyles
NidStyles's picture

He's a convert.

Tue, 10/02/2012 - 14:42 | Link to Comment bigdumbnugly
bigdumbnugly's picture

The analysts with the best arguments are the Austrians. As to whether they are going to be able to multiply fast enough, or recruit students fast enough, or train them fast enough, with some of them going into positions of authority, is problematical.

 

i got it!   gov't subsidizes austrians!

and removes condoms from their schools of study.

 

next problem please...

Tue, 10/02/2012 - 18:06 | Link to Comment Elzon1
Elzon1's picture

The funny thing is we would likely take offense to this...

 

Even though we would be supportive of the thoughtfulness. 

 

Although, the ladies wouldn't be as supportive since there wouldn't be any welfare for their children and there would be economic turmoil until we finally took full control of the situation.

 

But hey, if the austrian school of thought attracts the ladies we wouldn't be a minority for very long ;)

Tue, 10/02/2012 - 14:06 | Link to Comment AnAnonymous
AnAnonymous's picture

'Americanism' is all about real stuff...

Tue, 10/02/2012 - 14:33 | Link to Comment PiratePawpaw
PiratePawpaw's picture

And I really got a lot of cool stuff.

Tue, 10/02/2012 - 21:10 | Link to Comment akak
akak's picture

AnAnonymous, do you know why you are such an extreme douchbag?  It is because you do NOTHING but make sweeping, simplistic and bigoted assertions with utterly no facts, no arguments, and no logic behind any of them. Just repeating the same tired claims endlessly does not make them true.

Nor do you ever try to engage in any form of honest debate here --- you just monotonously dump your blanket anti-American accusations and generalizations in this forum and then run away like the anti-intellectual coward and troll that you are.  And the few times that you do ever respond to other posters, we get nothing from you but circular arguments, evasion and diversion, with NEVER any attempt to either defend your blind assertions and accusations or to logically challenge other posters' condemnations or refutations of those same naked assertions.  Clearly, you are here for no reason at all other than to spread your sick and obsessive anti-American hatred.

You idiotically attempt to blame Americans for every single thing wrong in the world today, while never acknowledging the role that your own consumption-mad nation of China, for example, plays in the madness that is the economic and political world of today.  No, according to you, EVERYTHING that is bad in the world can be laid at the feet of the citizens (each and every one of them) of only one nation in the world, the USA --- never our sociopathic leaders in Washington, never our financial overlords, but ALL of us collectively.  That kind of irrational thinking is known as prejudice and bigotry, and is your (only) stock in trade.

There are plenty of posters, most of them in fact (myself included) who are perfectly willing to condemn our psychopathic leaders in Washington, our hopelessly corrupt political system, and many perverted aspects of our US society and "culture" (such as it is). But you are not content with limiting yourself to such logic --- no, according to you, EVERY American alive today, or who has every lived, is responsible for ALL the sins of the world.  That is collectivism in its most perverse, extreme and idiotic form.

You are dishonest, irrational, hate-filled and close-minded, and that is why no other sincere poster here ever agrees with you or upvotes your ridiculously bigoted and nonsensical comments.

I have nothing whatsoever but contempt for you.

Tue, 10/02/2012 - 14:21 | Link to Comment malikai
malikai's picture

Actually, CRM is very important on the clouds.

Failing at CRM in the clouds can lead to a spiraly, firey death for the crew and passengers.

Tue, 10/02/2012 - 14:24 | Link to Comment kaiserhoff
kaiserhoff's picture

I'm not sure you understand, kind sir.

In the near future, we will spend all day typing with our thumbs and our toes, gossiping with the same five or six chumps we have known since kindergarten.  That and the SOMA will be more than sufficient for our needs.  And Ben von Numbnutts prints on...

Tue, 10/02/2012 - 14:32 | Link to Comment dugorama
dugorama's picture

It's not that Keynesianism, per se, is at fault.  I'm all for an injection of stimulus during bad times.  Rather, it's the failure to recognize the liquidity trap that threatens us.  The author is correct - having exhausted monetary stimulus, it's time to try something else.  The policy failure is not having a Plan B.  Fiscal stimulus is clumsier and slower to enact and react, but the R party in Congress has taken that off the table anyway (except for more military spending).  That leaves us with????

 

Once real interest rates are near zero, nevermind negative, it's time to realize that more liquidity injections only benefit the first line recipient.  

Tue, 10/02/2012 - 16:30 | Link to Comment Darth Mul
Tue, 10/02/2012 - 16:38 | Link to Comment putaipan
putaipan's picture

big greenie for "not even wrong"! ok ok so is this guy 'not even wrong'?.....

http://libertyrevival.wordpress.com/

don't know how i found it/haven't seen it linked by anyone....but i like it. iwish max keiser or someone would get him as a guest.

 

Tue, 10/02/2012 - 17:28 | Link to Comment tip e. canoe
tip e. canoe's picture

it's a shame that there isn't more discussion/debate centered around "geolibertarianism".

Tue, 10/02/2012 - 15:57 | Link to Comment surfsup
surfsup's picture

Its not Keynesian philosphy its INTEREST - PERIOD!   Interest has killed far more economies than anything else and the terminal phase of systems which over extend because of SIMPLE INTEREST is trackable.  90% of solutions would solve NOTHING -- keep interest in the picture you'll get the same shit.    Think "Obamaphone" does the money changing scam -- you want interest pad on your savings so you play along with the abstractions of blame on tangential aspects!   THINK!

http://perfecteconomy.com/pg-probability-of-worldwide-economic-collapse.html

 

Tue, 10/02/2012 - 16:33 | Link to Comment Darth Mul
Darth Mul's picture

Er...  and spending money you don't have.

 

And borrowing money when you burn through that in order to "create jobs" in order to pay back the money you'll borrow when the money you borrowed isn't paid back because you had to borrow more to pay someone else that you'd borrowed from before.

 

I suppose if you just keep on doing it a real realw hole lot, eventually unicorns come and bring you sexy leprechauns carrying gold coins and free ice cream.

Tue, 10/02/2012 - 16:26 | Link to Comment ListLincolnBism...
ListLincolnBismarkRoosevelt's picture

Lord Keynes is an eugenist, british imperialist and malthusian ! Wat you try to say (with the nonsense from the imperialists) is that Henry IV boost the real economy with the birth of the modern state. Or, if you dare challegging the most ridiculous nonsense from the british mind,  Roosevelt boost the industrial US capacity with injection IN THE REAL ECONOMY, PEOPLE INCLUSIVE.  

Tue, 10/02/2012 - 17:53 | Link to Comment nofluer
nofluer's picture

It's not that Keynesianism, per se, is at fault.  I'm all for an injection of stimulus during bad times.

OMG! A closet Keynesian!!! HELLLLLLPPPPP!!!!! (running away.)

Ummm.... isn't the whole IDEA of "stimulus" a Keynesian concept? IN any case, just in case you DON'T know - I'll ask you this, where does the government GET the "money" to stimulate the economy with? (Think carefully, now... if you can...)

Tue, 10/02/2012 - 18:47 | Link to Comment dugorama
dugorama's picture

What closet?  No, I'm for avoiding depressions if possible.  That doesn't mean I think you blindly inflate to the moon.  Is your world only black and white?

Okay, so you naysayers do what when the economy runs aground?  Wait for food riots to break out and then hunker down in your basement with your shotguns?  

yes, I actually believe that there is a role for regulating an economy - I like streets and sewers and air traffic control and etc.  And I think we should pay for it with some combo of taxes and user fees.  Do I think we should only spend in some artificial accounting period exactly what we took in during that same artificial accounting period?  No.  I'm for that old fashioned concept of surpluses in good times (remember Clinton's budget? or the biblical injunction to save 7 years of crops?) and deficits in bad.  Not bat shit crazy deficits, but don't be like Arkansas and leave highways halfbuilt because you can't issue bonds.

Do you think US Steel can build a plant without borrowing?  If so, they'd have never built the first one nor the last.  

None of these statements indicate that I think we should triple the national debt, nor are they "not even wrong".

"Lighten up Francis" to quote a poster from yesterday quoting from a favorite flick.

 

 

Tue, 10/02/2012 - 19:40 | Link to Comment nofluer
nofluer's picture

Low hanging fruit fruit first...

I'm for that old fashioned concept of surpluses in good times (remember Clinton's budget?

Clinton never had a surplus. What Clinton had was a batshit crazy chairman of the FED (Greenspaz) who printed his buns off to inflate alll the bubbles that are now popping like a kettle of pop corn at temperature! That and a whole bunch of accounting tricks, and monetary tricks (like shifting from long term Treasuries to short term, and like inventing the Roth IRA so he could collect taxes in the present on money that would probably never be taxed otherwise) and spending the SS "trust fund" like EVERY other president since LBJ. 

And you didn't answer my question, Keynesian... WHERE DOES THE GOVERNMENT GET THE MONEY TO SPEND DURING "BAD TIMES"????? A government is not a business. It doesn't make "products" from which it earns profits to set aside "for bad times." So where does the government's slush fund come from????? Come on, Keynesian - you know... admit it.

When bad times come, if the government has NOT inflated the money, some citizens will have savings that will see them through (the value of thrift - the principle behiind the whole 7 years of fat and lean thiing). Others will still be working and earning. And some will be unemployed with no resources to see them through for whatever reason. That's what CHARITY is all about - helping your fellow man through hard times. It is NOT the government's job or responsibility to care for individuals in the population!!! The US Constitution makes provision for the GENERAL welfare - ie infrastructure, defense, etc. things that benefit the ENTIRE population - the background of the nation - NOT for the inDUHvidual! If someone's too lazy to work - let them starve!

One of the things that I think is part of the "general welfare" is regulation of the banking system so it doens't abuse the people. Proper regulations like Glass-Steagal are properly within the governments portfolio. Creating an "independent bank" that takes over the governmemt's function of creating and controling the currency is NOT a proper function of government. There is absolutely NO authority for the government to pass its power to regulate and print money to an outside entity. As well assign control of the Army and Navy to a Mafia Don! You'd get pretty much the same result that we now see coming from the FED.

As to the save for 7 years and spend for 7 years - first that command came directly from God. Are you saying that our government gets commands from God? (I think some of them think they ARE god!) And second, that was a ONE TIME SITUATION - not an ongoing policy.

US Steel is not a government. Different principles, different case.

 

Tue, 10/02/2012 - 21:57 | Link to Comment Mr. Magniloquent
Mr. Magniloquent's picture

Why do you believe an economy needs central planning (See: Regulation)? Do you honestly believe that people do not desire plumbing or having their air traffic coordinated without being compelled to participate?

Tue, 10/02/2012 - 23:54 | Link to Comment NidStyles
NidStyles's picture

The first derpession was caused by economic stimulus...

Wed, 10/03/2012 - 04:16 | Link to Comment falak pema
falak pema's picture

the first "derpression" was caused by irrational exuberance and greed. 

Your understanding of economics matches your acumen for looking into closets and finding bogeymen.

Mon, 10/15/2012 - 20:09 | Link to Comment BigJim
BigJim's picture

US M2 tripled between 1913 and 1929, Falak. Without artificially cheap credit leveraged "irrational exuberance and greed" can't get off the ground.

Tue, 10/02/2012 - 14:01 | Link to Comment DoChenRollingBearing
DoChenRollingBearing's picture

A conservative guy I know a month ago believed that Romney would win.  Now he thinks Obama will.  Rather than being dejected, he has done something that is interesting.

He has now gone into a WHOLE 'NOTHER mode of thought: Looking out for No. 1.  He has a good niche (taking advantage of Dodd-Frank to make LOTS of money lending at usurious rates), so he is making money while he can...  He then will "Go Galt" if he can no longer make money in the field he knows.  

He has a plan and is ready.

Tue, 10/02/2012 - 15:38 | Link to Comment Dr. Acula
Dr. Acula's picture

Your commie friend likes Romney? So he loves Romneykov socialist health care plan and Komrade Ryan's bailouts? Gross.

Anyway, Obama will almost certainly win:

http://pollyvote.forecastingprinciples.com/index.php/about-polly/past-performance.html

"Polly takes advantage of one of the best procedures to improve accuracy: combining forecasts. A meta-analysis of 30 studies found that combining reduced the error of the typical forecast on average by 12% (Armstrong 2001). For the past five elections, the PollyVote has shown that the gains from combining can be even higher, if the forecasting situation meets the conditions under which combining is most beneficial (Graefe et al. 2010)"

Tue, 10/02/2012 - 17:58 | Link to Comment nofluer
nofluer's picture

Hummmm.... what did you say? OH! I get it... I think. You ignore the fact that you're using invalid sources of imputs and pure unadulterated BS and grant validity to the result BECAUSE you combined a bunch of pure unadulterated BS with OTHER sources of pure unadulterated BS, and so you end up with a MORE CORRECT pile of BS. Did I get that right?

Tue, 10/02/2012 - 18:30 | Link to Comment falak pema
falak pema's picture

don't corner him into logic; he loves sophistry and denial of the undeniability of irrefutable fact. 

That is not tact or tactics, its just blatant act of fartassery.

Tue, 10/02/2012 - 21:11 | Link to Comment Dr. Acula
Dr. Acula's picture

Yes, that's more or less what it says.

Forecasting is obviously an art, not a science.

 

Wed, 10/03/2012 - 07:34 | Link to Comment Umh
Umh's picture

That's just like bundling a large number of sub prime mortgages together and calling it AAA.

Tue, 10/02/2012 - 14:08 | Link to Comment knukles
knukles's picture

Nope.
All my neo-Keynesian uber-liberal People's Republic of Kalifornia government employee golf buds think if more debt and currency is printed and more (as in everybody) work for the gubamint everything be Hunkie Dorie A-OK in Never Never Land.

They still seem to have a look of abject confusion when I ask them why retaining what I've earned is greed but taking it away from me is not...

 

In fact they all agree with the Insane (as one person I know describes him) Dr. Krugman that the whole problem is that Not Enuf Has Been Done, Yet.
To which I point out a QED with the unheralded debt and federal budget expenditures and money growth with a barely breathing economy which by their reckoning should be going va va voom gangbusters... but WTF...  No accounting for stupidity...

Tue, 10/02/2012 - 14:16 | Link to Comment kaiserhoff
kaiserhoff's picture

Hell, knuks, I'm talking to the same retards on the other coast, and I hate golf.

Try this.  When all reason fails, just ask "Why should we keep feeding you?"

They don't understand, but the blank, bull frog stares you get from the fuckers is a real hoot.

Tue, 10/02/2012 - 14:30 | Link to Comment knukles
knukles's picture

Kaiserhoff, so true
LOL

Here's another one.
One day they were railing on about how corporate executives should have no influence upon board members and salary decisions as it represented a Conflict of Interest.
Sensing a perfect opportunity to screw 'em over blind with their very own logic, I mentioned that....

Should gubamint employees have a say in their compensation?

To which they resoundingly replied but of fucking course, dipshit (in so many words) because they pay taxes, too!

To which I replied that they only fund a small portion of their salaries, medical and retirement bennies since their tax rate is not 100% which is a greater percentage "conflict of interest" than the corporate employee...

Bullfrog looks, deluxe.

 

Tue, 10/02/2012 - 15:25 | Link to Comment Anusocracy
Anusocracy's picture

"They still seem to have a look of abject confusion when I ask them why retaining what I've earned is greed but taking it away from me is not..."

The same look that you would get if you were talking to hunter-gatherer tribesmen, or monarchs and royalty, of days past.

That's what the culture was and you are an anomaly. Culture hasn't caught up with you yet.

Tue, 10/02/2012 - 14:02 | Link to Comment mrktwtch2
mrktwtch2's picture

good and valid points but the author misses one key element..if the usa goes down so does the rest of the world economically because they need our consumer base..there fore they will try to keep the american consumer alive at any cost..

Tue, 10/02/2012 - 16:34 | Link to Comment Darth Mul
Darth Mul's picture

No - you miss the point.  What they want to do, and have largely done, is extract wealth from American labor and investment capital...  and before blowing up the federal reserve note...  offshoring some of it and using the rest to buy actual, real assets - things like houses, and land, and water purifiers, and hollow point bullets, and tins of spam...}

 I mean, goddamnit, son - you're exactly the sort of peckerwood being addressed by this here article.

 

Oh boy - when the zombies come, you are going to be inordinately fucked.  I mean, we're all fucked, but folks like you are going to be first into the Hope Camps....

 

Tue, 10/02/2012 - 14:03 | Link to Comment hannah
hannah's picture

the world will be in chaos when TSHTF...? really...no shit...! i think that is the definition of shit hit the fan. funny because russia was much better prepared for its collapse. they had black markets in place and the people didnt expect a handout.....europe and the ussa's populations will really feel the bite without their cell phones and reality shows....and also food, housing ,heating and a/c.

Tue, 10/02/2012 - 14:08 | Link to Comment NewWorldOrange
NewWorldOrange's picture

"they had black markets in place"

A very important point. Black markets provided crucial price information that a centrally-planned economy cannot do efficiently or accurately.

Tue, 10/02/2012 - 15:41 | Link to Comment Half_A_Billion_...
Half_A_Billion_Hollow_Points's picture

Guys, you know what will happen.  One charismatic leader will emerge, saying the system doesn't work because he doesn't have enough powers, then he'll get all the powers the founders fought against, then you're suddenly in Argentina.

 

The people in Argentina were richer than Americans some decades ago.  

 

People like Ron Paul will be even more censured.  We're going full-blown totalitarian, and the public will be in euphoric uproar.  The only question is whether the thin façade of democracy will still be here.

Tue, 10/02/2012 - 16:20 | Link to Comment Overfed
Overfed's picture

I've been saying for some time now that O'bomb-a is just a Reichstag Fire away from casting off the disguise and showing his true Idi Amin/Robert Mugabe wannabe self. The groundwork is in place, all nice and 'legal'. Just one event. Full-tilt police state. And the 80+% of the people in this country who are morons will line up to gobble his goo. Mark my words. We're proper fucked.

Tue, 10/02/2012 - 20:15 | Link to Comment JuliaS
JuliaS's picture

You know what a black market is? I'll tell you. It's not something you "put in place". It's not an underground cave you attend to exchange weapons and organs. It's me telling you: "I want to get this thing from you. What would you want in return?"

Black market is an act of exchange. It's normal trade, as oppose to overregulated, oversubsidized or overtaxed, fiat denominated, well documented and properly legislaed official transaction.

Want black market? Trade!  Exchange one thing for another, be it money, commodity, service or a future favor.

USSR had black market? Every single person in the world has it in his pocket, figuratively speaking. You don't need a lemonade stand, a business license or a revenue form to run it.

Just do it!

Tue, 10/02/2012 - 14:05 | Link to Comment NewWorldOrange
NewWorldOrange's picture

SUPERB article. One of the best here yet IMO.

I thought it worth a mention that the Soviet Union had to resort to spying on the West for price information on even the most basic goods and services.

Tue, 10/02/2012 - 14:38 | Link to Comment falak pema
falak pema's picture

dream on. It was a good tv show, 'cos it didn't take itself seriously.

Tue, 10/02/2012 - 15:21 | Link to Comment SoNH80
SoNH80's picture

The Soviet system was lousy for the Soviets and their vassals, but brought lots of dividends to the Western peoples (cushy military billets in nice places like Italy, Japan, West Germany, U.K. for American farm boys, temporary 1945-1970 moderation in bankster behavior, Marshall Plan aid, etc.).  Big irony.

Tue, 10/02/2012 - 16:19 | Link to Comment falak pema
falak pema's picture

what has the soviet system got to do with present times; apart from the fact our capitalists are as corrupt as the bolsheviks. Corruption is corruption; irrespective of system. Monarchs, popes, dictators, oligarchs, hookers...the list is endless, and its not about the USS of R! 

Stop frothing about a past chimera. 

Tue, 10/02/2012 - 16:24 | Link to Comment SoNH80
SoNH80's picture

Point taken.  Nostalgia is a bad habit.

Tue, 10/02/2012 - 17:25 | Link to Comment NewWorldOrange
NewWorldOrange's picture

"what has the soviet system got to do with present times"

If you still don't know, after the author's excellent exposition on it, no one can possibly tell you.

"apart from the fact our capitalists are as corrupt as the bolsheviks."

Exactly. You just told yourself. However, let me fix that for you:

Our cronies are as corrupt as their cronies

and their corruption has been greatly multiplied by the largesse of the State in its attempt to make everyone's economic decisions for them based on mandates from ivory towers that steal wealth from the people and hand it over to cronies.

Tue, 10/02/2012 - 18:09 | Link to Comment falak pema
falak pema's picture

not the state, the capitalist class behind the curtain.

Your sophistry rhymes with your sterile historical perspective. There have been states with honest governance. But the US time line is short and specific. Very specific, it makes the US perspective very myopic.  

Go see a good B western. With Randolph Scott, and you'll see who runs the town, from behind the Sheriff. Don't blame law and order. If the big boys pull the strings. That is the US experience par excellence. 

Americanese is so simple really. That's why it is so Manichean in its logic. When its not arrogant and sophist à la fois, since PAx Americana days launched the big bazaar.   

Wed, 10/03/2012 - 02:12 | Link to Comment NidStyles
NidStyles's picture

Just because you're a closet communist doesn't mean we can't tell that you are a communist. Don't you think you should be finding a new place to annoy the shit out of the people? Perhaps like the corner where whores to the state like you belong?

Tue, 10/02/2012 - 14:06 | Link to Comment AnAnonymous
AnAnonymous's picture

Another wonderful 'american' piece

quote:
I realized this very early in my career, long before I got a PhD.

quote:
The battle will be fought and won outside of academia.

How 'american' indeed.

Tue, 10/02/2012 - 14:14 | Link to Comment NewWorldOrange
NewWorldOrange's picture

True. A basic trust in the evidence provided by one's senses, and one's common sense, rather than in silver pony-tails spewing from ivory towers, traditionally carries more weight in America than in, say, Europe.

Tue, 10/02/2012 - 14:09 | Link to Comment AnAnonymous
AnAnonymous's picture

Strange. There was a post calling crap on the whole article, telling that post keynesians predicted it all.
It disappeared.

Tue, 10/02/2012 - 14:23 | Link to Comment LULZBank
LULZBank's picture

Time for Dancing with the Economists... ?

Tue, 10/02/2012 - 17:53 | Link to Comment TheFourthStooge-ing
TheFourthStooge-ing's picture

AnEncephalous said:

Strange. There was a post calling crap on the whole article, telling that post keynesians predicted it all.
It disappeared.

Strange. There is a post made of crap, tangential to the whole article, telling that post 'americans' caused it all.

It's still here, unfortunately, smelling like another AnAnonymousitizenism roadside turd.

Tue, 10/02/2012 - 14:14 | Link to Comment css1971
css1971's picture

While I sympathise with the sentiment, the writing is terrible.

Tue, 10/02/2012 - 14:23 | Link to Comment NewWorldOrange
NewWorldOrange's picture

Are you insane? A good writer always writes to his audience. If it had been published in some high-brow journal of economics...ok. The author knows the difference.

Tue, 10/02/2012 - 17:29 | Link to Comment Time for Titus
Time for Titus's picture

I feel just the opposite about Mr. North. I've followed his writings, off and on, for 30 years. He is in some ways brilliant, in some ways breathless. 

Regarding his sentiment, he's been predicting the collapse of civilization for at least 25 years now. He was crowing with glee as Y2K approached, so happy that all his years of predicting the collapse were about to come true.

That was 12 years ago. I tend to think the collapse is coming soon myself, but I don't boldly predict it in print over and over again. 

So, while North's sentiment is iffy, his writing has always been tremendously interesting. Quite frankly, he is a brilliant entertainer.

Not that there's anything wrong with that.

Tue, 10/02/2012 - 20:25 | Link to Comment bilejones
bilejones's picture

The two inevitable rules of predicting catastrophe:

1. It always takes longer than you think to get started.

2. Once started it always happens faster than you though possible.

Wed, 10/03/2012 - 16:53 | Link to Comment Kobe Beef
Kobe Beef's picture

Gary North wrote something I have taken to heart: "You can't replace something with nothing."

He was writing about the deteriorating state of the US Postal Service, and mostly nobody cares because it's largely been replaced by email and FedEx. As Collapse has been one of his recurring themes, naturally he expanded the idea to other elements of our collapsing centrally-planned state. And his conclusion, which I enthusiastically espouse, was simple:

Create and utilize parallel arrangements now, so that when the government fails, you have something that already works better to replace it with. In a networked world, this is cheaper, faster, and easier than ever before.

The obvious choice for Zero Hedgers is replacement currencies. As another poster already stated about black markets: Just Do It. You have nothing to lose but your chains.

Tue, 10/02/2012 - 14:14 | Link to Comment francis_sawyer
francis_sawyer's picture

 "Economic" & "Central Planning" are two words that should not collide in the same sentence...

Tue, 10/02/2012 - 15:12 | Link to Comment FL_Conservative
FL_Conservative's picture

The reason Keynesian economics doesn't work is because it's a model developed by academics inside a vacuum.  If any of them had spent any time OUTSIDE of the college classroom, they'd realize that only free market forces understand the value of capital and employ the financial discipline to allocate it effectively amongst alternative investment opportunities.

Wed, 10/03/2012 - 17:12 | Link to Comment Kobe Beef
Kobe Beef's picture

I agree, but free market forces don't allow them to play the role of Omniscient Chief Administrator. There's some mighty big egos in the Social Science Ivory Towers, and I've never met one who wasn't also a raving idealist of some stripe. They're not as rich as the banksters, nor as intelligent as the hard scientists, nor as respected as the oncologists, so they take out their frustrations on the rest of us. It's like Revenge of the Hall Monitors.

Plus, Uncle Scam & the Fabian Foundations don't pay for studies that don't advocate a larger role for government. Remember that post Tyler put up detailing how the Fed bought the Economics profession? I do. It's true.

Tue, 10/02/2012 - 14:17 | Link to Comment RiverRoad
RiverRoad's picture

Might as well just let monks in monasteries put it all back together again.

Tue, 10/02/2012 - 16:36 | Link to Comment Darth Mul
Darth Mul's picture

Or tell you how to reach and repeatedly stimulate the G spot while looking casual.

 

 

Heh heh...   I wonder if Paul Krugman has ever given a woman an orgasm without some artificial stimulus...

 

 

 

Tue, 10/02/2012 - 14:17 | Link to Comment 323
323's picture

yay team

Tue, 10/02/2012 - 14:23 | Link to Comment insanelysane
insanelysane's picture

I was in college in the early 80s and hung out with this math wiz.  Kid was never sober but was taking Calc 4 as a freshman.  Anyway, one day he says to me, we don't need to fight the Russians, we just need to out produce them because they can't keep up.  At the time, I thought to myself that the guy was completely shit-faced and I thought that until '91.

 

Finance has been the world's battle ground since Vietnam and the FED is setting us up for a disaster.

Tue, 10/02/2012 - 17:11 | Link to Comment Dr. Acula
Dr. Acula's picture

von Mises said similar stuff:

"The peoples who have developed the system of the market economy and cling to it are in every respect superior to all other peoples. The fact that they are eager to preserve peace is not a mark of their weakness and inability to wage war. They love peace because they know that armed conflicts are pernicious and disintegrate the social division of labor. But if war becomes unavoidable, they show their superior efficiency in military affairs too. They repel the barbarian aggressors whatever their numbers may be."

 

Tue, 10/02/2012 - 14:29 | Link to Comment Jack Burton
Jack Burton's picture

I find this to be a very interesting article, which really nails the situation of the old Soviet Union. Even well before World War II Stalin and his gang were dumbstruck at the near collapse of their Soviet State. Only by turning the country into a vast and literal slave camp did they keep the economy going and industrialize it to a degree. In the face of failure after failure, Stalin and Co. came to the conclusion that their Soviet State was failing because there was not enough communism in it and the people by nature were weak and stupid. Thus they took to a police state and slave state to squeeze as much out of a by nature resource rich land. This provided a burst of development as the threat of a gun to the head did motivate many to sacrifice for communism.

As one Soviet citizen put it, "Under Stalin we all worked with a gun to our head. This produced the goods for a time, but when Stalin died and the gun was taken away from our heads, the people simply stopped working".

I am amazed that no one saw the collapse of the Soviet Union coming. I traveled a bit in the Soviet Union of the late 70's and early 80's I was there only a week before I told some of my fellow travelers that this state was doomed and very soon!  Anyone with eyes could see this place was in total collapse at that time.

I favor Austrian economics. I am just as convinced that America and Europe of today are headed to a collapse as I was of the Soviet collapse all those years ago.  Simply look at the money printing madness and market manipulation of today!

My only argument with the above article is that it lets the crony capitalists of the modern financialized economy off the hook. Banks and the markets of today are totally corrupt and as much to blame for the coming collapse as the welfare state. They share in equal measure the cause of our coming collapse. Greed and corruption between the Federal Reserve and the Bankers and Specualtors that they service are just as gulity as the people living off of government benefits. Also, never forget the vast cost of the military industrial complex. It is not at the level of the Soviet War Machine, but it is DAMN CLOSE!!!

Tue, 10/02/2012 - 14:30 | Link to Comment RiverRoad
RiverRoad's picture

Agreed.  That's why I can't help rooting for the monks.

Tue, 10/02/2012 - 16:16 | Link to Comment G. Marx
G. Marx's picture

 

No one saw it coming? The Austrians did. Look for a book:

"Crisis Investing" by Doug Casey.

Was the number one book on investing for two decades. Published: 1979.

http://www.amazon.com/Crisis-Investing-Douglas-Casey/dp/0806516127

In it, Mr. Casey makes some predictions. One was: The USSR will collapse by the end of the twentieth century. The response was shock and ridicule. The idea of the Soviet Empire collapsing in two decades was inconceivable a the time.

Anyway, there's my proof. The Austrians saw it coming.

Tue, 10/02/2012 - 16:39 | Link to Comment Darth Mul
Darth Mul's picture

..and no incentive and also - in their Left Wing Krugmanatarian zeal, they actually had a brain drain issue, which was part of it, I dare say.

 

When you kill a lot of the fuckers who know best how to get shit out of the land, and out of the peasants, there's a learning curve, after which you're reliant on 3rd string farmers and industrial bosses.

 

Wed, 10/03/2012 - 17:20 | Link to Comment Kobe Beef
Kobe Beef's picture

I received a Soviet-made military watch as a gift in the late 80's. Got the cyrillic script, red star, and the big ol' CCCP right across the face of it. The hands fell off about a month later.

I still keep it. Along with my Hundred Trillion Zimbabwe Dollar Bills.

Tue, 10/02/2012 - 14:28 | Link to Comment q99x2
q99x2's picture

Bitcoin will come out as supreme victor. Get your bitcoins ready.

Tue, 10/02/2012 - 17:49 | Link to Comment putaipan
putaipan's picture

it's the 'supreme victor' part that kinda gives me the heebyjeebies, that and the kaiser sorse inventor.... i mean what if that IS the digital beast bucks 'they' have intended all along. for now i trust it about as much as i trust assange.

Tue, 10/02/2012 - 14:36 | Link to Comment Dr. Engali
Dr. Engali's picture

While this was a good article and I lean to the Austrian school of thought I think the author is off base because the fix is in as far as to who they are going to blame , and that is free market capitalism( which this isn't it).The populous have know idea what the difference is between a Keynesian and an Austrian, but they think they know what capitalism is and TPTB are doing a good job of demonizing it.

Tue, 10/02/2012 - 14:53 | Link to Comment NewWorldOrange
NewWorldOrange's picture

Dr, the author isn't "off base". You're simply equivocating on the word "fix." Generally agree with the rest of your post.

Tue, 10/02/2012 - 15:29 | Link to Comment Dr. Engali
Dr. Engali's picture

My point is that when the reset comes we will end up with some sort of Keynesian-based economy on the other side, as governments love to overspend and bankers love to finance them The only way we won't visit we can got the central banking system at its core. I find that scenario very unrealistic.

Tue, 10/02/2012 - 16:44 | Link to Comment Darth Mul
Darth Mul's picture

Roughly half the populous thinks you can have an economy based on people trading around increasingly 'derivated' and hypothecated and overrated debt without hurting the country or the productive working classes {and inventors and sciencey-types}.

 

And, roughly, the other half want their money for nothing and their chicks for free.

 

The 7-9% or so of us who recognized Ron Paul as the only thing approaching a sane, reasonable, sensible candidate have all talked to the Lord recently, and while he said we're gonna come out of this okay, he's pretty sure the rest of you are fucked.

 

..As it were.

 

Bullets, bread, water filters, seeds and antibiotics will be things you'll want to buy with your gold, bitches.

 

Give it 5 months.

 

 

 

 

Tue, 10/02/2012 - 14:36 | Link to Comment falak pema
falak pema's picture

one more lie of ideological invention : die on the grave of Oligarchy mayhem.

Ludwig Von Mises, if he had any sense of proportion in analysing current ponzi, would have peed down your nostrils. He had a sense of ethics and moral values in what he wrote; not you. You talk of Keynes like you understood him. You don't. 

The monster of USSR died; and morphed into Oligarchy country. Mirror image of PAx Americana. Just greedy men of same mindset on selfish agendas without restraint.

All you talk about is bogeymen and "hate"! False pope of free markets; that are as free as a canary in its cage. 

Tue, 10/02/2012 - 14:51 | Link to Comment Dr. Acula
Dr. Acula's picture

Completely unintelligible

Tue, 10/02/2012 - 14:55 | Link to Comment NewWorldOrange
NewWorldOrange's picture

A worthlessly simplistic and wholly DOUCHEBAG analysis. Did you even read the article? You seem to be having a unusually bad day.

Tue, 10/02/2012 - 15:58 | Link to Comment falak pema
falak pema's picture

anybody who pretends that this problem is the resultant of anything but Neo-feudal oligarchy is nuts; this guy forgets that the basis of ALL nation state constructs begins from ethics and asking yourself why we build a nation. America like revolutionary France was built to serve an ideal. Never forget that lesson of past sufferance imposed, and the yoke thrown off!  It is about freedom which as the time line shows in not as free as we think it is; as one man's freedom is another man's slavery. 

So regulation and balance between individual freedoms and collective values has to be found.

This article is looking for bogey men and defends a concept which is undefendable, that free markets can arbitrate for mankind and find resolution. They can't. They only serve short term impulses and ephemeral trends; not civilization values. Our attrition times are the most dire and eloquent testimonial to this socio-economic truth.

Free markets are not free, they bow to oligarchy and require regulation to find balance and adherence to rule of law and to value systems that the nation state cherises more than anything else.

Our reality today is the most eloquent testimony that the values of these psychorigid shills devoid of all references other than to the godlike market, is as empty as those of the catholic church or any "ideal" world that does not accept the rule of hard analytical reality, where facts do not bend to theory. We are living an age of narcissic value systems. And pure economia logic is no panacea to this moral emptiness. its a sterile science, bowing incessantly to the market.

This is pure ideological hopium, in the face of the opposite to what VOn Mises predicted would be the outcome : Theory and practise. Dogma and then Inquisition and burning bogeymen; rinse and repeat. Enuff said. Reality speaks for itself in the land of free enterprise. Reaganomics was blessed by Hayek and got us where it did! 

Keynes found balance. In a field that was NOT an exact science. ANybody who pretends it is, is a liar. He at least had the elegance of saying : its a compromise. Fiscal and monetary means the two faces of state and private banking power plays, in a market economy that must not morph into irrational exuberance fed on monoploy laissez faire; the lesson of 1929. 

At least he contributed. That others have gone overboard in his "name" is the fallacy of the times. Don't blame Jesus for the catholic church, theocracy and the inquisition! 

This guy "spewks" theory that defies our current reality; like a latter day adventist! 

You guys better wake up if you want to get your country back. 

As for douche bag, go wash your mouth unless you are capable of formulating an analysis that fits the facts and does not spout outmoded dogma. 

Tue, 10/02/2012 - 16:32 | Link to Comment NewWorldOrange
NewWorldOrange's picture

"unless you are capable of formulating an analysis that fits the facts and does not spout outmoded dogma."

Pot, meet kettle.

How can anyone "formulate an analysis" of a slew of overarching generalisms, fallacies of every sort, emotionally-driven absurdities, disconnected historicism, irrelevant sermons on "ethics", and false dichotomies, all strewn together in one unintelligible mess? Just askin'

Tue, 10/02/2012 - 16:39 | Link to Comment falak pema
falak pema's picture

perfect logic. thanky you! You walk to second base! 

Von Mises and the USSR, you and current USA...spot on! 

Tue, 10/02/2012 - 17:17 | Link to Comment Dr. Acula
Dr. Acula's picture

Another omphalos is a big fan of a bodice ripper. A lowly toothpick almost tries to seduce the impresario. A lunatic, some widow from a tenor, and the saintly necromancer are what got Timosha into trouble. Now and then, a toothache bestows great honor upon the maestro behind the clock.

Tue, 10/02/2012 - 17:30 | Link to Comment NewWorldOrange
NewWorldOrange's picture

LMAO! Falak, now there's a lesson on constructing intelligible arguments for you;)

Tue, 10/02/2012 - 17:42 | Link to Comment falak pema
falak pema's picture

to each his own. 

Tue, 10/02/2012 - 17:16 | Link to Comment Dr. Acula
Dr. Acula's picture

"[markets] only serve short term impulses and ephemeral trends; not civilization values"

WTF are "civilization values"?

 

Tue, 10/02/2012 - 17:31 | Link to Comment falak pema
falak pema's picture

just read the constitution of the US and the declaration of independence and all that the philosophers have written since time immemorial.

Are you suffering from memory loss?

In many ways your attitude is symptomatic to the current societal mindset; if you can't eat it it don't exist. Hey, pop corn and the green back I understand; but ethics and right n wrong.

Wow, now that...consequences...why can't we all be like Gerald Ford, can't think and chew gum all at once; why can't we be like tricky Dickie : only one rule, just do it, but don't get caught! 

Hey what's this thingie called civilization values and accountablity! 

It not religion so it can't be all that serious. Civilization values! Baloney! 

Typical socialist talk. 

Now that is true enterprise. 

Tue, 10/02/2012 - 17:36 | Link to Comment NewWorldOrange
NewWorldOrange's picture

"Typical socialist talk."

Just what I was thinking!

I'm reminded of a certain post by Bonzai yesterday...something about cats walking on ceilings.

 

Tue, 10/02/2012 - 18:23 | Link to Comment KK Tipton
KK Tipton's picture

"Hey what's this thingie called civilization values and accountablity! 

It not religion so it can't be all that serious. Civilization values! Baloney! "

 

Correct.

Remember what Buckminster Fuller said. The only thing that matters is integrity.

Integrity is the only thing that would allow the human race to "make it".
Personal integrity of every human. Civilizations "values" flow from there.

 

Very good related read by him:

Grunch of Giants | The Buckminster Fuller Institute - http://bit.ly/PXoA0k

Tue, 10/02/2012 - 17:31 | Link to Comment NewWorldOrange
NewWorldOrange's picture

"WTF are "civilization values"?"

Whatever the socialists/central planners wish of course;)

Tue, 10/02/2012 - 16:46 | Link to Comment Darth Mul
Darth Mul's picture

did you write that in Japanese then translate to English then back to Japanese, then back to English?

 

Don't lie to me.

 

I can tell if you lie.

Tue, 10/02/2012 - 17:39 | Link to Comment falak pema
falak pema's picture

your orientally brilliant at sensing the unsoundable and occidentally fluent in many dialects; true as a monk full of certainty having exposed the lying dialectic. 

You would have done proud to all of the church of white friars. 

 

Tue, 10/02/2012 - 14:31 | Link to Comment Manipulism
Manipulism's picture

"because we are not a total military state."

Really?

Tue, 10/02/2012 - 14:46 | Link to Comment Dr. Engali
Dr. Engali's picture

Well we aren't at war with the muppets yet .... are we?Hmmm now that I think of it ..Goldman....yep we are a total military state.

Tue, 10/02/2012 - 14:32 | Link to Comment The Axe
The Axe's picture

Tyler pound this shit until the roof  comes down and your bones collapse...cause AAPl  breaks  650     and the ponzi     is over.......

Tue, 10/02/2012 - 14:32 | Link to Comment jesusonline
jesusonline's picture

A sharp article, but for one thing - there is nothing to celebrate here. Because when 

The bad guys are going to lose.

they will take the rest of us with them. 

Tue, 10/02/2012 - 18:21 | Link to Comment CrockettAlmanac.com
CrockettAlmanac.com's picture

Always with the negative waves, Moriarty.

 

http://www.youtube.com/watch?v=Xyh-JpWdGmQ

Tue, 10/02/2012 - 14:38 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

Expecting the government and politicians to solve problems is like building a missle upside-down and then wondering why it failed to achieve orbit.  We definitely are on the threshold of something....

Tue, 10/02/2012 - 14:42 | Link to Comment dark pools of soros
dark pools of soros's picture

So why doesn't Austria use sound money?  Is it time for a renaming?

Tue, 10/02/2012 - 14:44 | Link to Comment williambanzai7
williambanzai7's picture

Actually, Central Europe overall adapted to change rather well. Things started going haywire when the European debt pushers arrived to set up their local infrastructure.

Russia on the other hand turned into a decade long kleptocapitalist free for all.

Tue, 10/02/2012 - 15:30 | Link to Comment dark pools of soros
dark pools of soros's picture

steady push of heroin into the country plays a big part

 

http://www.independent.co.uk/news/world/europe/krokodil-the-drug-that-eats-junkies-2300787.html

 

big enough that when the taliban stopped all production in 2001 an event occurred to revert it back to the norm

 

Tue, 10/02/2012 - 14:47 | Link to Comment sink critically
sink critically's picture

The digital age is reaping it's own reward. When the worship of 1's and 0's so far outpaces the respect for humanity and it's environment abundance is annihilated and austerity ensues. When people reject humanity and embrace digitization they limit creativity to only the two options of 1 and 0. If humanity is to survive it's status must be elevated above a string of numbers on a screen. We are more than our net worth, and until the average worker is compensated with a living wage in addition to being rewarded for innovation (instead of silenced) we are doomed as a species.

Tue, 10/02/2012 - 15:12 | Link to Comment Dr. Acula
Dr. Acula's picture

"When people reject humanity and embrace digitization they limit creativity to only the two options of 1 and 0"

False. A 6 GB DVD means limiting yourself to 2^6,000,000 options.

"until the average worker is compensated with a living wage... we are doomed as a species"

True. If a worker's wages are insufficient for living, they will die.

 

Tue, 10/02/2012 - 15:18 | Link to Comment sink critically
sink critically's picture

It's a people before profits argument, not that there's anything fundamentally wrong with an infinite number of digits, see pi.

Tue, 10/02/2012 - 14:48 | Link to Comment GreatUncle
GreatUncle's picture

The final trigger and it is being pulled is the restriction of consumption. You cannot have a full blow industrial society without a reasonable level of consumption it don't work. If it doess here a million quid go and build an industry where nobody is going to buy anything and see how long you last.

The current money creation game is only targetting the perceived sensible debt and the unfunded liabilities.

A falling consumption line crossing the increasing debt line should see it blow on the grounds no consumption, debt not serviceable because nobody could earn it.

Probably why no austerity is ever going to work.

Tue, 10/02/2012 - 14:48 | Link to Comment TheMuppet
TheMuppet's picture

"It was not just that the USSR went down. The entire mythology of revolutionary violence as the method of social regeneration, promoted since the French Revolution, went down with it. As I wrote in my 1968 book, Marxism was a religion of revolution. And Marxism died institutionally in the last month of 1991."

Dream on. Revolutions happen for a reason.  If there isn't a ready-made ideology by which a revolution explains itself, one will be created.  No wonder you hedge your bet with the conditional, "institutionally".

Tue, 10/02/2012 - 14:49 | Link to Comment Joe A
Joe A's picture

"The Soviet Union was based on socialism, and socialist economic calculation is irrational". Oh sure, capitalism is very rational. The 'success' of capitalism is based on the fact that there is access to unlimited credit. How rational is that? Well, that sort of backfired in our faces. And what do they do now? They socialise losses made by capitalistic institutions.

The author goes on to say that in 1991 the Sovjet union was poverty stricken. I don't want to say anything positive about the Sovjet union but the real poverty started when Geoffry Sachs and the cowboy capitalist that followed him came to the Russia to 'help' in the transition phase to market economy. State assets literally worth billions were sold off for millions to the likes of Abramovich, a cigarette salesperson. Russia went from 2% povertry rate to 25% poverty rate in months and Russia lost 40% of its GDP, something that only happened before when the nazis invaded Russia.

Tue, 10/02/2012 - 15:07 | Link to Comment NewWorldOrange
NewWorldOrange's picture

""The Soviet Union was based on socialism, and socialist economic calculation is irrational". Oh sure, capitalism is very rational. The 'success' of capitalism is based on the fact that there is access to unlimited credit."

No, the success of true capitalism, as opposed to socialism, in the context of this article, is that capitalism has a well-functioning price mechanism. "Unlimited credit" is a product of central banking, which is not inherent to capitalism but is "crony capitalism's" bastard child. The USSR couldn't efficiently price things even with all the spying on the West for prices, and even with the relatively accurate prices provided by their own huge black market. In the absence of central planning, the crucial price mechanism functions very well under capitalism (that's pretty much a truism.)

All you sophistic children who have never read a word of Mises (and couldn't understand it if you did), or for that matter, have trouble making simple distinctions or grasping basic context, really ought to find another outlet for your frustrations.

Tue, 10/02/2012 - 15:33 | Link to Comment Joe A
Joe A's picture

"True capitalism" is a fantasy, a utopia. There is no such thing as a free market because some are more free than others. The market is rigged. There is no such thing as a 'crucial price mechanism that functions well' because just as with natural or physical/mechanical systems, in economical systems there are frictions and losses. Although the law on thermodynamics state that energy is never lost, it is just not available anymore in the form that you need. Same thing with economical systems, whether socialst or capitalist. Losses are compensated by borrowing from future generations (without wondering if these generations would agree to that) or by gold, silver or any other valuable resource. Central banks such as the Fed by the way are made up of capitalist institutions and just because you don't like them, you can not dismiss them as "crony capitalism's" bastard child. They are capitalist, period.

So you decide who can vent their 'frustrations' here on ZH or not? You don't even understand that economical systems never ever can have 'crucial price mechanism that functions well' due to the inherent nature of systems having frictions and loss of availability for which you somehow have to compensate.

Tue, 10/02/2012 - 16:14 | Link to Comment NewWorldOrange
NewWorldOrange's picture

What I do understand is that when a government amasses mountainous debt, it wasn't an inevitable outcome of capitalism. It can happen under any economic system. During most of the America's first two centuries, the government held little or no debt at all.

I also understand that under capitalism, prices are set by market participants "voting" with their money, not by central planners, and that "functions well" does not mean subject to the kind of analysis and control that "thermodynamic systems" are.

The attempt to reduce the complex interractions of millions of people setting prices by voting with their money, to the simplistic equations like those used by physicists, is the perogative of Keynesian fools, not me, and their exercise of that perogative is the reason we're all in the huge mess that we are and why it keeps getting worse.

 

Tue, 10/02/2012 - 16:28 | Link to Comment Joe A
Joe A's picture

Now you assume that people 'voting' with their money and which according to you are the basis of the market are rational beings. Humans are not rational beings at all. They mostly are being driven by instincts and emotions. Humans think they are rational but they are not. Marketeers know that very well. You therefore with that argument completely undermine your position. I also think that your statement that equations used by physicists are simplistic compared to the complex interactions of millions of people "voting" with their money is wrong. These interactions are not complex at all. They are based on real needs (such as food, shelter, warmth) and perceived needs such as the next model sneakers ("I gotta have them"). True capitalism fails because of the friction and losses mentioned in my previous post and due to the fact that true capitalism does not take into consideration human nature which is selfish. Selfishnes could be considered rational but is not due to the fact that many if not most people are not rational at all. Also, capitalism perverts real costs of things since they do not take into consideration the real costs of resources. In most economic systems, the value of a minerals used in a product for instance are formed by its extraction, processessing and transportation costs but not by its intrinsic value. That becomes clear now when resources are getting scarce. Adam Smith's invisible hands of the market is a bunch of bull.

Tue, 10/02/2012 - 16:47 | Link to Comment NewWorldOrange
NewWorldOrange's picture

"Now you assume that people 'voting' with their money and which according to you are the basis of the market are rational beings. Humans are not rational beings at all."

Yeah, all the more reason to let central planners make their buying/selling decisions for them eh?

"I also think that your statement that equations used by physicists are simplistic compared to the complex interactions of millions of people "voting" with their money is wrong."

You really ought to study up on the complex variable as it's used in praxeology. Its relevance to this line of argument cannot be overstated.

"True capitalism fails because of the friction and losses mentioned in my previous post and due to the fact that true capitalism does not take into consideration human nature which is selfish."

Actually just the opposite is true. People are selfish by nature. No economic system will ever "correct" for that, and shouldn't. Capitalism is the only system which accepts and recognizes this. Other systems try to undo human nature and are doomed to fail.

"Also, capitalism perverts real costs of things since they do not take into consideration the real costs of resources. In most economic systems, the value of a minerals used in a product for instance are formed by its extraction, processessing and transportation costs but not by its intrinsic value."

And therein lies the heart of the argument. Value is subjective, not "intrinsic" or objective, and any rational, working economic system builds upon that most fundamental truth. A thing is worth what anyone is willing to pay for it.

Tue, 10/02/2012 - 17:04 | Link to Comment Joe A
Joe A's picture

"Yeah, all the more reason to let central planners make their buying/selling decisions for them eh?". I never said that central planners should do that. But I also do not believe in the rationality of the market, because it is not rational but distorted and rigged.

"You really ought to study up on the complex variable as it's used in praxeology. Its relevance to this line of argument cannot be overstated." And you should get a book on physics.

"Actually just the opposite is true. People are selfish by nature. No economic system will ever "correct" for that, and shouldn't. Capitalism is the only system which accepts and recognizes this. Other systems try to undo human nature and are doomed to fail." Mankind due to the selfish nature of humans, is doomed to fail. You see, people want freedom but they don't want responsibility.

"And therein lies the heart of the argument. Value is subjective, not "intrinsic" of objective, and any rational, working economic system builds upon that most fundamental truth. A thing is worth what anyone is willing to pay for it.". No, the value of a thing is determined by how much there is left of it, in the case of resources + plus intrinsic or existence value (what it is worth for future generations). That is why capitalism is autodestructive: it is willing to pillage and plunder the world's resources to sell more useless crap until there is nothing left and the market will collapse. Therefore, the market and capitalism are not rational.

Tue, 10/02/2012 - 17:16 | Link to Comment NewWorldOrange
NewWorldOrange's picture

"I never said that central planners should do that."

Then who?

"And you should get a book on physics."

I have a degree in Applied Physics, not that that has anything to do with economics. As I already said, trying to reduce the complex variable that is even a primitive economy, to the equations you find in the hard sciences, is a fool's game and is the reason we're in this mess.

"Mankind due to the selfish nature of humans, is doomed to fail."

Mankind, due to the selfish nature of humans, succeeded as a species so well it is now at the apex of the food chain.

"You see, people want freedom but they don't want responsibility."

An important dynamic tension. The study of harmonics and of feedback in PHYSICS comes to mind. Heh. Socialists/Keynesians want people to have only as much freedom as they wish to dictate from ivory towers, i.e., none.

"That is why capitalism is autodestructive: it is willing to pillage and plunder the world's resources to sell more useless crap until there is nothing left and the market will collapse."

Any force-based economic system (the central planners dictate allocation of resources) will always, and has always, also dictated what freedoms are plundered, and its economic inefficiency makes plunder necessary to it's survival. And who decides what's "worthless crap"? You? The other central planners? No thanks.

"A thing is worth what anyone is willing to pay for it.". No, the value of a thing is determined by how much there is left of it, in the case of resources."

You're utterly hopeless, and get the last word;) Thanks for the lively discussion. If you do reply, please tell me if humans in your socialist utopia are to be viewed as particles or fields (presumably both.) Thank you.

 

Tue, 10/02/2012 - 17:32 | Link to Comment Dr. Acula
Dr. Acula's picture

"trying to reduce the complex variable that is even a primitive economy, to the equations you find in the hard sciences, is a fool's game"

That's why there are no constants of economics like there are constants of physics (e.g. speed of light, gravitational constant, Planck's constant, fine structure constant, etc.)

The only way to understand economics is through actual understanding. Not reducing it to formulae.

 

Tue, 10/02/2012 - 17:41 | Link to Comment NewWorldOrange
NewWorldOrange's picture

Well said, but don't underestimate a Keynesian's willingness to insert constants or variables at will into the equations they think govern human wants and needs, or to assign whatever values to those that suit them best at any given time, or to change them at will to suit the latest ridicule heaped on them.

Tue, 10/02/2012 - 17:40 | Link to Comment Joe A
Joe A's picture

Humans are top dogs but are running out of cats to chase.

True, centrally planned economies are big polluters and users of resources, but market is not much better. Market is based on mass consumption and mass waste of things to throw away at the end of the day.

Please, you have to admit there is lot of useless crap out there that just appeals to human's irrationality and cheap emotions.

Also my thanks to you for a lively discussion although you are pretty utterly hopeless yourself. Gotta go.

FYI, I am not a socialist. Does not work but I also do not believe in the almightiness of capitalism. Like I said, it is rigged. I have admit that I don't know what a good system would be.

The thing is that the world with its seamingly endless consumption is really on a road to nowhere. The world is losing resources and ecosystems with the services they provide at a frightening pace. Perhaps men's ingenuity that got us in that mess can save us out of there. There is a task for quantum-physicists perhaps to come up with some renewable, stainable energy source. It is all very nice an stuff what they are doing at CERN looking for the god particle but how about developing nuclear fusion or some other innovation?

Tue, 10/02/2012 - 17:48 | Link to Comment NewWorldOrange
NewWorldOrange's picture

I up arrowed you for that one. Not bad when you stick with normative things, and don't fray into such controversial topics as whether a car has value because humans value it, or because it would have the same value even on a planet full of reptiles. Heh.

"Please, you have to admit there is lot of useless crap out there that just appeals to human's irrationality and cheap emotions."

I agree. I just don't want some central planners to decide what's crap and what's not for me.

Tue, 10/02/2012 - 17:55 | Link to Comment Joe A
Joe A's picture

I suspected it was you who arrowed it up.

Regarding useless crap: many leave it up to marketeers to tell them that something is not crap. I believe in freedom but many feel free to become sheep.

Thanks again and I really gotta go now. Good night or good whatever at your spot.

Tue, 10/02/2012 - 20:33 | Link to Comment shovelhead
shovelhead's picture

So much bullshit in one post is breathtaking.

A bid and ask price meet and a transaction occurs.

Where is this 'frictional loss' ?

Selfishness? WTF? Hot tip: Satisfying wants is the very definition of trade. One desires what the counterparty offers more than what they hold, otherwise no trade takes place. Consummation requires both parties voluntarily meet their 'selfish' goals.

In most economic systems, the value of a minerals used in a product for instance are formed by its extraction, processessing and transportation costs but not by its intrinsic value.

????

What the buyer pays for it IS it's intrinsic value. Another buyer may desire it more and the bid price increases to reflect that desire.

Ever hear of E BAY?

Rationality has absolutly nothing to do with anything. $100,000 for a baseball card is not rational to me but to the collector who must have it may consider it a bargain to be jumped on. Different strokes etc. Find an equation for that.

Sounds to me like some sociology mush trying to be baked in some kind economic framework.

Good luck with that.

 

 

Tue, 10/02/2012 - 17:28 | Link to Comment Dr. Acula
Dr. Acula's picture

""True capitalism" is a fantasy, a utopia. There is no such thing as a free market because some are more free than others"

Absolute zero is a fantasy, a utopia. There is no such thing as absolute zero because some atoms are warmer than others.

The chromosphere is a fantasy, a utopia. There is no such thing as a chromosphere because some regions of gas are more rarified than others.

Blah blah blah...

Tue, 10/02/2012 - 17:48 | Link to Comment Joe A
Joe A's picture

When my bank account shows zero, it is pretty real.

Some people glorify capitalism so that is why I called it a utopia. Capitalism is distorted. The game is rigged. Even Adam Smith knew that you cannot leave everything to the market cause rather sooner than later you would have monopolies. Contrary to what many people think, Smith did not object to some oversight of the market.

edit: socialism is also pretty much a utopia

Tue, 10/02/2012 - 21:28 | Link to Comment Dr. Acula
Dr. Acula's picture

>Even Adam Smith knew that you cannot leave everything to the market cause rather sooner than later you would have monopolies.

So, because you are so afraid of markets leading to the formation monopolies, you want to establish monopolies. Specifically, the kind that stick people in cages and ovens.

Anyway, market forces work against monopolies for a number of reasons. Profit-seeking entrepeneurs seek to enter the field and undercut monopolies. Cartel members are notoriosly likely to defect. The socialist calculation argument applies even to overly-large corporations where there is no means of establishing prices for internally exchanged goods and services.

>Smith did not object to some oversight of the market.

FYI, Smith was a cheap rip off of Cantillon and Turgot. Also, economics has advanced considerably since Smith.

 

Tue, 10/02/2012 - 17:52 | Link to Comment NewWorldOrange
NewWorldOrange's picture

Nice Dr. Acula. I frequently comment about the "sophistry" all over this blog. Get the socialists riled up and it gets slung around like Federal Reserve debt instruments on Wall Street.

Tue, 10/02/2012 - 18:43 | Link to Comment falak pema
falak pema's picture

the USSR was a command economy, not a market economy.

You can't compare a command economy and market economy. In the latter, prices are based on cost, as production in theory matches "planned demand".

In the other, price is discovered by supply and demand; until it goes oligarchy controlled, inevitable in a NONREGULATED economy. 

Thats historic precedent. Free markets are never free, but they are not command economies. That is an extreme case. Its no longer a reference today.

You've got to change your menu, get off those fatty foods. You know today the US economy is morphing into a command economy on the risk assets front.

'Cos capital markets are totally fukked by those very oligarchs who are scions of so called free markets.

They have made MArx's prediction come true in the land of free enterprise. Supreme irony.

EH?? Chew on that. And it was not imposed by Keynes's Matamore or golliwog Putin or Stalin's Belephegor! 

Tue, 10/02/2012 - 14:49 | Link to Comment giggler123
giggler123's picture

On a long enough timeline the survival rate for everyone drops to zero - this sums it best...

Tue, 10/02/2012 - 14:51 | Link to Comment Monkeyfister
Monkeyfister's picture

For the life of me, I cannot understand how shipping pallets of money directly to the Banksters to first pillage for bonuses, and then promptly set on fire, qualifies as keynesianism. Keynes supported any type of money to get directly to Main Street with no stops along the way. He never advocated for the Banksters to serve as middle-man skimmers, and shortstops in that process, which is what is happening now.

 

The proper term for what is happening is Crony Capitalism. It has absolutely nothing to do with Keynes' philosophy. In fact, it is in direct opposition to what he espoused.

Tue, 10/02/2012 - 15:55 | Link to Comment delacroix
delacroix's picture

keynes, also said to accumulate a surplus in a strong economy, to spend into a weak economy. not weaken the economy further, by stimulation, funded with more debt.

Tue, 10/02/2012 - 16:51 | Link to Comment Monkeyfister
Monkeyfister's picture

And who was it that gave away our accumulating surplus as tax cuts to the wealthy, and an un-funded elective war in Iraq? Oh, yeah, it was that one guy who served eight years as POTUS, but everyone chooses to forget they voted for him.

 

 

Tue, 10/02/2012 - 16:50 | Link to Comment NewWorldOrange
NewWorldOrange's picture

Keynes espoused that in times of economic downturn, governments "stimulate" via taxation, not CNTRL-P. But he certainly espoused "stimulus", which only serves to prop up (bail out) malinvestment. An analogy might be that Keynes proposed keeping the heroin addict going by taking money from his neighbors to give to him so he can buy more heroin, Bernanke attempts to keep him addicted by cooking up more heroin and providing it to the addict's dealers at low cost (and assuming those dealers will trickle the savings down to the addict), and the Austrians would not do either and would let the addict sink or swim.

Tue, 10/02/2012 - 16:35 | Link to Comment Overfed
Overfed's picture

For the life of me, I can't understand why anybody would worship at the alter of a pederast like Keynes. He was the worst kind of sociopathic monster, one who partook of child sex slaves.

Tue, 10/02/2012 - 16:58 | Link to Comment NewWorldOrange
NewWorldOrange's picture

That may all be true, though I prefer to focus on his economic theories and not his personal "habits." Why do people worship at his alter as we're seeing on this thread? Because they worship at the alter of socialism, and the two go hand-in-hand. Destroy the theories of Keynes and all that's left of the arguments for socialism are the philosophically normative ones. And who gets to decide what's best for everyone and what they "should" value? A full-blown nanny-state makes for a lot of very unhappy, unfulfilled, highly controlled, powerless people and a few absolutely corrupt tyrants. 1984 was a great expression of this.

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