Guest Post: How To Spot A Keynesian

Tyler Durden's picture

Via Gregory Cummings of the Ludwig von Mises Institute of Canada,

According to the great Doctor Gary North, the litmus test of Keynesianism is the attack on austerity. He writes:

Let’s say that you are reading an article on what the Greek government should or should not do. You read that the government’s proposed austerity measures will lead to a reduction of production. This will lower tax revenues. The government-debt-to-GDP ratio will increase. Austerity will therefore not solve Greece’s economic problems.


The article was written by a Keynesian.

In an opinion piece published by The Globe and Mail entitled “Europe must realize austerity doesn’t work,” Pierre Briancon is true to this Keynesian form:

The Greek economy has shrivelled to three quarters of what it was three years ago, before embarking on its successive turnaround-cum-bailout plans. Euro zone governments keep contributing religiously to their own recession by forcing ever higher degrees of pain on their sick economies.


Spain is slashing public spending and wonders why its gross domestic product is shrinking as well. Britain is slowly sinking under the mindless policies of austerity without perspective. Meanwhile, central bankers keep pushing for ever stricter fiscal discipline, under the eternal slogan of ideologues throughout centuries: “There’s no other way.”

First of all, the laughable notion of the unflinching central banker insistent on fiscal discipline makes about as much sense as Betty Crocker advocating hunger strikes.

Briancon continues:

Meanwhile it is left to the IMF’s economists to state the obvious. The record is clear. Austerity hasn’t worked. There’s little hope it will. Let’s first work on growth. Then we’ll be virtuous.

Austerity simply means less government spending. By “growth,” the author means an elevated GDP statistic brought about by more government spending. Keynesians believe that government spending is a panacea.

The money that government spends comes from a combination of taxation, borrowing and monetary inflation. In order to evaluate the impact of austerity it is necessary to reflect on these sources of government spending.

When less money is confiscated from taxpayers through taxation, private citizens retain more of their wealth. With increased coffers, individuals may then spend the fruits of their labour on additional capital or consumer goods. How does this shrivel the economy?

When less money is borrowed by the government, more money is available to be lent to private citizens instead. Individuals may then use these loans to invest in capital or purchase consumer goods. How does this shrink the economy?

In the insidious case of monetary inflation, money is created out of thin air and then spent by the government. According to John Maynard Keynes, monetary inflation performs the “miracle… of turning a stone into bread.”

But the truth of the matter is that there is no such thing as a free lunch. The phony prosperity of monetary inflation is entirely illusory. You cannot get something for nothing.

Dr. North sums up his Keynesian litmus test as follows:

So, whenever you see a criticism of austerity as fostering recession, you are reading a Keynesian. He may not call himself a Keynesian, but in this case, he is delusional.


Only Keynesianism teaches that reduced national government spending (“austerity”) in a nation whose national government spends 40% of its GDP (Greece) will produce a recession.

Keynesian economic pundits advance many fallacious arguments about government spending. Chief among them is the egregious notion that mortgaging your posterity with debt and deficits is somehow “virtuous.”

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Ghordius's picture

Austerity is like healthy living. Yes, please, but not today. Tomorrow is another day.

Thomas's picture

Exactly. My simile is that saving is like dieting; there is no especially convenient time. Ya just gotta do it. Difference is that for Club Med, it's no longer a choice. 

knukles's picture

To a Keynesian,
Mathematics is an Inconvenient Truth

no taste's picture

A Keynesian is a person who believes that Escher's prints describe the real world.

Thomas's picture

Who is doing all the junking?

dracos_ghost's picture

To a Keynesian(aka Whimpey of Popeye fame),

I'll gladly pay you Tuesday for bailing out the ruling elite today.

unununium's picture

How about austerity only for the insolvent.

Ah yes, that's also known as NO BAILOUTS.

knukles's picture

Are you sure we're not lost?
Didn't we pass by here a few minutes ago?

LMAOLORI's picture



We may never pass this way again

Just Kidding the Bernank is more like the movie Groundhog Day then that song

Bernanke Defends Stimulus

shovelhead's picture

He he,

Ever notice that the heroin addict will always opt to risk dying from an overdose vs. dying from going cold turkey even though the risk of death by withdrawal is almost nil?

Dr. Keynes prefers happy addicts and dealers alike. He's the heroin dealers best friend.

It's the compassionate thing to do. The tricky part is finding someone to keep buying the heroin for the junkie.

Harbanger's picture

The problem for the addict is they're learning that Socialism does'nt work without keynesian economics.  Even without military spending ie. Europe,  that size of Govt. spending, employment and entitlements are simply unsustainable.  It took 100 yrs for the  experiment to come to cliffs edge.  So now we're going either full Statism which the addict wants, or we're going back to a responsible society with a social safety net.

DonGenaro's picture

the problem with socialism is that every new generation of fools thinks that *they* can "do it right".

wolfidan's picture

Give us fresh cash, no austerity please.

Poor Grogman's picture

The unfortunate reality is that that Keynesianism is a theory that requires the use of fiat money, central banking, and fractional reserve lending.

The three pillars supporting your "enslavement".

Keynesianism describes how to best manage that system of enslavement, while maximizing debt buildup and empowering the state.

So it does "work" as a theory after all. One just has to realize that it was never designed to work in our favour.

Debt serfdom bitchezz..

Dexter Morgan's picture

Keynesian Bitchezz!!

bank guy in Brussels's picture

The 'Keynesian-bashing' has become a ZH meme of mindless group bullying, lowest-common-denominator 'group think', but the truth should be said

The above Mises article is superficial shite, superficial rhetoric against mythical straw opponents, sowing confusion ... it is appealing to the naive, it is an author reaching for lowest common denominator with deceptive slogans

This is one of those pieces giving credence to the detailed articles recently coming out, pointing out how libertarians are being funded by billionaires, as a way to fool possible angry dissidents into supporting oligarchs and the raping of working class and common people

There are stupid Keynesians, sure, and lots of government waste and corruption ... but it is another stupid mug's game, another form of slavery to the rich, to claim that all government support for suffering people should be condemned ... with 'Keynesian' another catch-all negative label for supposedly stupid 'do-gooders'

Economic reality is a wee bit different than these armchair 'Mises institute' fantasies

The article above is quite misleading about

- what is Keynesianism

- what is actually 'austerity' as in destroying the pensions and minimal incomes of workers and the poor, versus the 'nobler' alleged goal of government economising - the article gives a misleading definition

- the important differing nature of a balance sheet recession (covered on ZH frequently, but which the article doesn't confront in its effort to spread deception)

- whether there is overall credit deleveraging in a society or just government re-leveraging or de-leveraging, a big important factor

- how countries like Greece are the victims of 3-sided fraud involving lenders outside of Greece as well as factors within Greece, plus how Greece is being ravaged by a dysfunctional currency

When food shelves in America go empty I wonder how quickly the Keynesian-bashers all piling on, might change their views about whether 'government should do something'

Much better and more accurate stuff in an article like below, actually facing economic reality, Ambrose Evans-Pritchard's latest, 'Euroland's debt strategy is an economic and moral disgrace'

Ghordius's picture

+1 well reasoned arguments. Note that the Canada Mises club is a bit... special

Thanks for the AEP article, though as usual it's a typical "Death to the EUR!" AEP's. Biased is no word for it.

css1971's picture

I've noticed the Canadian mises articles are crap too.

The last one was some muppet wittering on about free markets and government interference in the oil sands producers.

css1971's picture

They still haven't killed the banks...

Until the debt is defaulted upon this isn't getting any better.

The Keynesianism is the maintainenance of the bankers. I agree about the article though it's drivel.

TWSceptic's picture

Anyone who calls Mises explanations 'fantasies' should not be taken serious. Just for entertainment I would like to see a debate between you and Tom Woods, he would destroy your keynesian BS arguments faster than you can say stimulus. There is no 'ok version' of keynesianism, your statist arguments are invalid.

Harbanger's picture

"The 'Keynesian-bashing' has become a ZH meme of mindless group bullying,"

Bullying?  :)  What a fag.  You better pray they can kick the can for another 100 years.  When the Keynesian induced crash happens, your neighbors will eat you alive.  To me, you're officially the Castrati in Brussels.

Terrorist's picture

Bank guy
Our financial system is an unsustainable house of cards.
Your focus on GDP growth is ignorant.
The present level of Global GDP was created by borrowing from future spending.
You wish to create some dream state of maintaining the status quo, so you can go on extracting fiat without producing anything.
You know nothing, AEP is an idiot.
Your post contains a bunch of double speak that does not directly refute one thing.
The only productive thing left for you to do to justify your existence is to give away your ill gotten gains to those suffering from the inevitable retrenchment.

Ghordius's picture

Ah, a nice sexist one: virtuous comes from vir = MAN
blame the female vote and it's byproducts
No patriarchy, no virtue. Plenty of feel-good, though.

Enjoy! ;-)

Damn, nobody willing to play this game... :-(

knukles's picture

Is that why women weren't allowed on golf courses?

h0oS's picture

Hmm, how about borrowing as much as possible, using that money to buy gold and silver, then dropping taxes to zero and defaulting on all loans. Then launch a new currency backed by your gold/silver reserves, that'll fixit in a jiffy.

Yen Cross's picture


How To Spot A Keynesian:

                  He's the "brain-dead thespian", with a compost pile in his back yard!

icanhasbailout's picture

you can spot a Keynesian by the eagerness with which he spends money not his own

Skateboarder's picture

"Can I borrow fifty bucks again?"

"What for? You already owe me fifty bucks!"

"Don't worry man, I got you next time. I'll pay back last time's fifty bucks when I come by to borrow another hundred next week."

Urban Redneck's picture

I thought that was how to spot a Kenyan

LMAOLORI's picture



This is how you spot a Kenyan lol Lord of the Rings: Obama’s wedding band allegedly carries word ‘Allah’

Yen Cross's picture

That's a little above my "pay grade".

knukles's picture

So what's his birth certificate say?

LMAOLORI's picture



Paul Krugman already gave us that answer last week remember he said the president showed his birth certificate he just left out that it was photo shopped isn't that good enough for you - some of you are so hard to please :)

LMAOLORI's picture




Plus a thousand if I could that simple statement says it all

petolo's picture

How about the two farmers who bought and sold the same mule to each other, every time for more money. As the one farmer who was about to buy the mule back for a little more money, approached  the other,  he was told the mule had been sold to someone else. Upon hearing that the first farmer complained bitterly: why did you go and do that; we had a real good thing going.

hawk nation's picture

You cant fix stupid

Bring back natural selection and the kenesians vanish

new guy's picture

A fellow ZHer posted this comment a few monthes ago.

"Austerity is not a policy. Its what happens when your broke."

Nothing else need be said

Towhog's picture

We have enjoyed exponential expansion due to credit expansion, fed printed deficit spending, and regular tax & borrow federal deficits which leave us at a precipice 75 percent higher than historical growrh would imply.
It is an illusion of sorts. Stopping any of the sources if the illusion will bring us to an unpleasant reality. If that flow should stop the apparent money supply will be consumed by the black hole of deleveraging at also an exponential rate. Due to fractional reserve lending in particular the deleveraging caused by austerity will be rapid and ugly.
That is where they have left us.
The magicians will create endless illusions trying to delay the world's ultimate day of reckoning. We will ride along until the end as the alternative is unbearable for civilization. We have passed the event horizon. Think in terms of collapse of the roman empire on a global scale.
Teach your children to be self sufficient!

Yen Cross's picture

O/T , But here I sit looking for a gap to get filled. The October 7th aud/usd open. That is a 40+pip free fall.

GoldenTool's picture

Why does everything always have to be black or white?  Both sides use bait and switch to try and "prove" arguments.  Inside the box is still inside the box.


operari sequitur esse

chistletoe's picture

slow news day, Tyler?

Yen Cross's picture

This isn't required reading/ just saying

Tsunami Wave's picture

Slow day for you to comment?

Yen Cross's picture

 I can smell a storm a 'brewing".

bunkermeatheadprogeny's picture

How to spot a Keynesian: His nose looks like the number 6.

XtraBullish's picture

I like the VIX Nov 20 call for a move to $10.00 by November 15th - currently $1.38. I think that the hedgies will start buying insurance on the head-and-shoulders AAPL top by buying the VIX starting tonight.