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IceCap Asset Management: 'Not' Salma Hayek And The Keynesians' 3 Big Mistakes

Tyler Durden's picture




 

Salma Hayek is beautiful, rich and famous. Friedrich Hayek is a deceased Austrian economist. He wasn’t very good looking, certainly not wealthy but he did become famous – but only 20 years after his death and then only within the make believe world of nerdy economists. Fortunately for the World today, if we are lucky, Friedrich Hayek may become the most famous Hayek of them all. Until then, the World remains firmly trapped in an economic hell created by Friedrich’s (and therefore Salma’s) arch enemy – John Maynard Keynes. IceCap's Keith Dicker points out that, as most politicians and central bankers view the World in very short time frames, to truly understand the devastation wreaked by Keynesian economics, one has to take a step back and see how the financial destruction accumulated over time. It is true that these policies initially provided sugar highs for the economy – but the 3 step cycle of cutting interest rates, cutting taxes and borrowing money to create growth has finally reached its end point. If Mr. Keynes was alive today, we are confident he would be embarrassed that his lifelong work had been so severely distorted.

 

The war that no one heard about

Few people in the World are even vaguely familiar with perhaps the most important war over ideology ever waged. Some may say the American-Soviet cold war was the tops – yet this riff over 4 legs good, 2 legs bad had nothing on what we are about to share with you.

On one side, you had Friedrich Hayek and the Austrian School of Economics, while the other side was anchored by John Maynard Keynes and the later to be named Keynesian Economics.

 

It’s no coincidence

Since WWII, the Americans, Japanese, British and Europeans have spent way more money than they owned. But that was ok because the money they borrowed wouldn’t have to be repaid until some far away day in the future.

Unfortunately the future has now arrived and today, the next generations of Americans, Japanese, British and Europeans have all plunged into a deathly debt spiral.

Today it is no coincidence that the Americans, Japanese, British and Europeans have all set interest rates as close to 0% as possible.

Also today, it is no coincidence that the Americans, Japanese, British and Europeans are all printing money.

And finally, today it is also no coincidence that the Americans, Japanese, British and Europeans ignored Friedrich Hayek and instead followed the economic principles of John Maynard Keynes.

Today the entire global economic and financial system is rooted in unwavering support for John Maynard Keynes and his beliefs in deficit spending and debt-fueled growth.

 

Money makes the World go ‘round

Arts, science, and politics certainly makes the World go ‘round. Yet, nothing can move without money and capital. Thank goodness we have an army of academic and real-world economists tackling the dynamics of money.

Of course, when it comes down to it we should be grateful that Mr. Hayek and Mr. Keynes, both grappled with perhaps the most fascinating economics question of all time – what causes the economy to move and what should be done when it stops moving?

Mr. Hayek’s business cycle theory was groundbreaking to independent thinkers, yet terrifying to anyone with ambitions to become central bankers or masters of the universe.

The groundbreaking component was actually very easy to understand. In essence, the best way to influence the economy was to not influence the economy. Rather, instead of tinkering with interest rates, taxes and deficit spending, masters of the universe should instead focus on ensuring the amount of new money released into the economy was just enough to equal the natural growth rate of the economy.

Sadly, our great leaders dismissed this concept. Instead of giving us “not too much” and “not too little,” we received “way too much” and never “too little.”

Of course, the mere idea that one could not use their financial and economic acumen to control the World was clearly not acceptable to central bankers. It was even more preposterous to politicians who promised multiple chickens in multiple pots. Of course, exactly who paid for these extra chickens and extra pots was highly irrelevant.

Mr. Keynes’ view was very different in that he believed the business cycle could be influenced by a government’s use of fiscal policy which included taxes, spending and deficits.

So, instead of embracing Mr. Hayek’s theory, the masters of the universe obviously opted for Mr. Keynes’ economic theory.

Unfortunately, and through no fault of Mr. Keynes, over the years governments and their advisors have only seen a one-way street in that changes could only occur in one direction.

  • Taxes were always reduced, never increased.
  • Spending always increased, never reduced.
  • Deficits always grew, never eliminated.

If Mr. Keynes was alive today, we are confident he would be embarrassed that his lifelong work had been so severely distorted. Yet, presented with today’s economic dilemma - he would also be highly excited to begin his new and improved economic thesis.

 

IceCap Asset Management Limited Global Markets November 2012

 

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Thu, 11/29/2012 - 19:38 | 3022252 Zero Govt
Zero Govt's picture

Sorry boys but this has nothing whatsoever even remotely in a million years to do with Keynes or economics (a quack profession)

this is about parasites (monopolists) and those most ingratiated in the power structure of Govt and central banking

blaming Keynes for Govt policies is like believing in ghosts or the vacuous jingoism left and right parties spew at election time.. it's all a smokescreen ...Govt follows a path of corruption, not academics mouthwash

Thu, 11/29/2012 - 19:44 | 3022283 Bollixed
Bollixed's picture

I have to agree the problem was not trying to follow Keynes, but rather allowing Curly, Larry, and Moe to perpetually be voted in and given control of things that obviously proved to be way above their heads.

Thu, 11/29/2012 - 20:02 | 3022320 NotApplicable
NotApplicable's picture

Keynes empowered big government, and big government empowered Keynes.

While he may actually have believed in his theory, I doubt that he ever had any expectations that they would cut spending during the good times. Instead, it gave him a safe exit (still championed by his apologizers to this day), that it only failed because they failed to follow it.

Some men are court historians. Keynes was a court economist. Both are nothing but attention whores in the guise of intellectuals.

I can't imagine he felt very smart around Hayek (or Mises).

Thu, 11/29/2012 - 22:31 | 3022630 flacon
flacon's picture

Keynes is alive today. He got reincarnated into the body of one Paul Krugman. 

Thu, 11/29/2012 - 22:25 | 3022610 PersonalRespons...
PersonalResponsibility's picture

Can't believe this isn't here yet.

Well, here you go...

http://youtu.be/GTQnarzmTOc?hd=1

 

 

Thu, 11/29/2012 - 19:58 | 3022311 Buckaroo Banzai
Buckaroo Banzai's picture

You are missing the point. Keynes provided the perfect intellectual cover for politicians to perpetrate their corrupt schemes. Garden-variety looting of the public treasury is suddenly justified as sound-- nay, RESPONSIBLE-- "economic policy".

Thu, 11/29/2012 - 20:04 | 3022325 NotApplicable
NotApplicable's picture

As well as the cover to miss the point, eh?

Thu, 11/29/2012 - 20:00 | 3022312 Buckaroo Banzai
Buckaroo Banzai's picture

dupe

Thu, 11/29/2012 - 20:10 | 3022341 negative rates
negative rates's picture

 Those who are most afraid of ghosts, are the ones that don't believe in them.

Thu, 11/29/2012 - 21:10 | 3022450 LongSoupLine
LongSoupLine's picture

Keynes was not alive yet when Rome fell.

 

i agree...this is a corrupt leadership issue.

Thu, 11/29/2012 - 19:34 | 3022264 Camtender
Camtender's picture

Motorboat..............

Thu, 11/29/2012 - 19:40 | 3022277 buzzsaw99
buzzsaw99's picture

All that highbrow theory is just stuff they use to distract people from the cesspool of corruption.

Thu, 11/29/2012 - 19:46 | 3022287 CPL
CPL's picture

It used to be intended to help people once until words and meanings changed.

Thu, 11/29/2012 - 19:49 | 3022291 Rainman
Rainman's picture

I couldn't read any of this stuff because I got too distracted looking for more pictures of Salma's colossal jugs !

Thu, 11/29/2012 - 20:14 | 3022347 bank guy in Brussels
bank guy in Brussels's picture

Tyler and the gang often cheat us with the thumbnail photo on the main page and then no pic at all in the article

William Banzai often comes thru with his full-size Banzai Babes however ... even totally (and tastefully) naked sometimes

A couple of years back there was a ZH poster with photo privileges who often added babes to the comment section ... A momo trader like Robot trader if I recall correctly

Tyler needs to realise ... Full size pics of a babe or two will help article read counts

And the ladies don't mind ... some glamour pix just like in the magazines at the hair salon ...

Win-win for all ... with just a few more babes on our world-favoured financial news site

Thu, 11/29/2012 - 20:28 | 3022353 Citxmech
Citxmech's picture

Here's another vote for some gratuitous pics of Ms. Hayek.

Mmmmm. . .

Thu, 11/29/2012 - 20:42 | 3022400 Citxmech
Citxmech's picture

Screw-it.  This should do it:  http://www.youtube.com/watch?v=UYxxgvA8rlM

Thu, 11/29/2012 - 21:58 | 3022554 hairball48
hairball48's picture

Bodacious Tata's!!!!! Making me sweat watching her. :)

Fri, 11/30/2012 - 01:43 | 3022890 AustriAnnie
AustriAnnie's picture

No, we wouldn't mind.

Just don't try to connect Salma Hayek (the Hayek who raised massive quantities of money for Obama's campaign) with F.A. Hayek.

Its a huge stretch to make that connection.

Just call her hot. Don't try to make her Keynes' archenemy.  

Thu, 11/29/2012 - 19:58 | 3022306 Flakmeister
Flakmeister's picture

Hayek will win in the end; an economic theory suitable for  a low tech agrarian society in a sauve qui peut world that is the only possible outcome in a ecological overshoot we have created...

Somehow, I don't think he would have been made happy by this development...

And yes, Keynes, like Christ, would be aghast at what has been done in his name...

Thu, 11/29/2012 - 21:08 | 3022448 nmewn
nmewn's picture

The perfumed, aristocrat Lord Keynes knew exactly what he was doing.

"Some economic scribblers hostile to Keynes want too much to attack him personally as if he created the modern state, but appear to be most hesitant about challenging the state themselves. Keynes did not create the modern state. He found it the way it is, and, obviously, from the context of his German foreword, prepared a scheme or system to work within its confines; the greater and more total the state employment of his General Theory, the better. The core of Keynes is found in two consecutive sentences in the German foreword:

"The theory of aggregate production, which is the point of the following book, nevertheless >>>can be much easier adapted to the conditions of a totalitarian state<<< than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory."

http://mises.org/daily/3693

Defend the prick all you want but Lord Keynes was no friend to the common man toiling at his labors attempting to feed, house and clothe self & family. He could not be, as he knew within himself the governments debts could never be repaid in a "democracy". 

He was a rapist in every sense of the word.

Thu, 11/29/2012 - 21:28 | 3022495 Flakmeister
Flakmeister's picture

Why don't you just go off and live in a log cabin off of the land... Lord knows you are desperately crying out for it....

And if you think what I wrote was a defense of Keynes, you have a serious reading comprehension problem...

Thu, 11/29/2012 - 22:21 | 3022598 nmewn
nmewn's picture

"Why don't you just go off and live in a log cabin off of the land..."

I live in a house (that I partially built) on land I can live off of if needed...while you, by all appearances...live in a concrete jungle, good luck with that. Did Keyenes know how to use a hammer or wire an electrical socket, plumbing, roofing...any CONCRETE work in his background?

"And if you think what I wrote was a defense of Keynes, you have a serious reading comprehension problem..."

And yes, Keynes, like Christ, would be aghast at what has been done in his name...

Pretty sure Christ never advocated for any economic or social system more accommodative to, a totalitarian state.

You think comparing Christ to Keynes is a good analogy here spud? Tell me the good works & deeds of Keynes...I'm all eyes & ears...

Thu, 11/29/2012 - 22:29 | 3022620 CrockettAlmanac.com
CrockettAlmanac.com's picture

Well the man did possess an unshakeable faith even in his own worst ideas. Keynes continued to believe in the importance of eugenics even after the fall of Hitler.

 

Keynes was a proponent of eugenics. He served as Director of the British Eugenics Society from 1937 to 1944. As late as 1946, shortly before his death, Keynes declared eugenics to be "the most important, significant and, I would add, genuine branch of sociology which exists."[135]

 

http://en.wikipedia.org/wiki/John_Maynard_Keynes

Thu, 11/29/2012 - 22:44 | 3022647 nmewn
nmewn's picture

Yes indeed.

All true. He was a eugenicist, how "unusual" to find an ardent eugenicist so infatuated with the "possibilities" of the totalitarian state.

He also worked hand in hand with one Harry Dexter White at the first Bretton Woods...introducing, Harry Dexter White aka...Jurist:

http://www.conservapedia.com/Harry_Dexter_White

 

Thu, 11/29/2012 - 20:03 | 3022323 Joe moneybags
Joe moneybags's picture

To say that a battle is going on between Keynesian and Austrian economics is like saying there is a battle going on between Christianity and Ooga Booga-ity. (Ooga Booga is a little known religious cult, about which nobody really knows or cares, just like Austrian economic concepts.) It's only we followers of Von Misses (who the heck was he, and how much did he ever make?) hoping for Hale-Bob to finally arrive and cleanse humanity of our greedy sins.

We'd be smarter to learn the rules of those who already profit by them, than hoping against hope that that the rules magically change on their own, due to some hidden force that has not changed the old ways for 400 plus years.

Thu, 11/29/2012 - 21:32 | 3022503 Future Jim
Future Jim's picture

The world is the result of our individual choices.

Thu, 11/29/2012 - 20:06 | 3022334 negative rates
negative rates's picture

It was said of Hollywood upon the second coming of christ, that two things were to be certain. First they would be scared to death of his arrival, and secondly, nobody would ever ask him where he got his money.

Thu, 11/29/2012 - 20:10 | 3022343 I am Jobe
I am Jobe's picture

Must be trashy in the USSA to be rich. Just look around. No more brins needed.

 

Save a Fish, Eat  a Pussy is the New Amerika.

Thu, 11/29/2012 - 20:33 | 3022385 Joebloinvestor
Joebloinvestor's picture

Everyone succeeds when failure is removed, don't they?

Thu, 11/29/2012 - 20:40 | 3022398 ultimate warrior
ultimate warrior's picture

I'm half way done with "The Road to Serfdom" and it is amazing how everything Hayek states about socialism and central planning has come to pass in the USSA. He warned us 70 years ago the dangers of socialism and no one listened. We are about to pay the price for that mistake.

Thu, 11/29/2012 - 22:03 | 3022568 LadyEconomist
LadyEconomist's picture

Ludiwig von Mises also put Marxism to shreds. I don't understand how anyone can even bring these leftists theories back again and argue them. It was put to rest in 1930-ties already. We need to reeducate our sociaty. 

Thu, 11/29/2012 - 20:47 | 3022413 prains
prains's picture

Socialism is the smoke screen behind which the Olicorptocracy is stealing all the wealth, the is NO ism. It's just good old fashion rent seeking.

Thu, 11/29/2012 - 20:49 | 3022418 Flakmeister
Flakmeister's picture

Been hitting the cough syrup, have we?

Let me guess, you hold that Obama is Kenyan Marxist?

Thu, 11/29/2012 - 21:03 | 3022442 Bunga Bunga
Bunga Bunga's picture

The biggest idiocy of so called Keynsian economists is promoting endless economic growth in a constrained world.

We are overusing the planet by at least 20%. A natural growth rate should be less than zero. 

Thu, 11/29/2012 - 21:16 | 3022464 woggie
woggie's picture

the beast is on the gobble
and all that matters is we're all headed for it's belly
http://youtu.be/ntmthFyaYzY

Thu, 11/29/2012 - 21:55 | 3022548 LadyEconomist
LadyEconomist's picture

Here is the famouse and somewhat classic,

 "Fear the Boom and Bust" a Hayek vs. Keynes Rap Anthem

http://www.youtube.com/watch?v=d0nERTFo-Sk

and

Fight of the Century: Keynes vs. Hayek Round Two

http://www.youtube.com/watch?v=GTQnarzmTOc

John Papola and Russ Roberts and the whole EconStories.tv are great! I love these music clips. Very good, hats off!

Fri, 11/30/2012 - 00:19 | 3022790 Bansters-in-my-...
Bansters-in-my- feces's picture

Salma has very lovely breast,and I would like to see her in the back room imidiately.

Thanks in advance....

Hung gry.

Fri, 11/30/2012 - 05:06 | 3022978 david_a_levastre
david_a_levastre's picture

I'm confused, Britain isn't in Europe anymore? And I'm not talking about the E.U. Also can someone actualy explain why the French deficit is so erratic compared to his Keynesians friends?

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