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The Failure of Keynesianism

Tyler Durden's picture


Submitted by James E Miller of the Ludwig von Mises Institute of Canada,

It’s hard not to agree with the old aphorism “history doesn’t repeat itself, but it does rhyme.” It’s nice to think we learn from our mistakes; yet we always seem to repeat them at some later date.

Reading the daily news, you would be hard-pressed to find mention that there is still an employment crisis unfolding in many industrialized countries. The New York Times recently reported that employers in the United States hired only 175,000 workers in February. This is apparently a cause for celebration among economists. The unemployment rate in the U.S. still remains at an historic high of 6.7%, and there appears to be no date in sight for a return of full employment, but no matter; the economy is supposedly gaining steam.

The only problem is, nobody seems to care much anymore. High unemployment is a constant reality now. Nearly six years of slagging job creation has created a cloud of apathy for most people. It’s just accepted that not everyone who wants to find work will be able to; or they will wander from low-wage job to low-wage job without any kind of security.

The current economic malaise is reminiscent of what the Great Depression was like. Persistently high unemployment with no conceivable end; massive government intervention in the marketplace; a changing industrial landscape; and even social and cultural transformation. We’re less than a century removed from the biggest economic hardship ever faced in America, and the same mishaps are unfolding in front of our eyes.

Then and now, something has remained perennial: the utter incompetence on government’s part to cure economic stagnation.

Newscasters, state officials, and academic economists all tell us government is capable of spending us into prosperity. No matter how much dough is thrown at the glob known as the “economy,” large numbers of people remain out of work. During the Depression, the glut of joblessness lasted for nearly fifteen years. Uncle Sam spent like a drunken sailor while swallowing up much of the economy in fascist scheme after fascist scheme.

The very same thing goes on today, all at the behest of Keynesian-type political actors who provide the intellectual ammunition necessary to justify government’s outstretched hand. With neatly obscure formulas and obtuse language, the apparatchik darlings of Keynes love branding themselves as deep-thinking scientists capable of engineering the perfect economy. When their policy is put to work, we get the opposite. Job creation stagnates, living standards slump, and misery spreads. The siphons of entrepreneurial growth don’t pump; they are bogged down with the grimy sludge of currency manipulation and government hubris.

After decades of constant failure, I mean this wholeheartedly: the followers of the Keynesian school don’t have a damn clue on how to fix the economy. Why my gauche phrasing? Their policy prescription is a complete and total failure. The Great Depression; the stagflation of the 1970s; the Great Recession we see today; in each instance, Washington was impotent to reverse the damage. Keynesians are either pathetically ignorant, or maliciously deceptive.

Taking rhetorical shots doesn’t mean much without some evidence. So let’s meet the Keynesians on their terms. First, economic science itself will be interpreted through the lens of positivism. That means data, in whatever form, will be used to justify whether something works or not. Of course the assumption will be made that spending is the driver of economic prosperity – not saving or investment. The same goes for boundless money printing, which is said to infuse the “animal spirits” with a rejuvenating elixir.

So what have they got for successes? Keynesians used to tout the efforts of Franklin Roosevelt (not so much Herbert Hoover, who was proto-Rooseveltian) during the Great Depression as vindication for their theory. I remember being told in no uncertain terms that Uncle Sam stepped up to save the downtrodden from excess capitalism in my American Presidency 301 class. Sure, it wasn’t an economics course; but it’s the same tale spun by economists anyway.

What does the data say? From 1931 to 1940, the unemployment rate never went south of 10%. From the onset of the Depression, Washington spending went up 97% under the Hoover Administration. According to the White House’s official statistics, the federal budget increased from $3.5 billion in 1931 to $13.6 billion in 1941, jumping in size year after year. A combination of deficit spending and tax hikes (admittedly not a Keynesian remedy) allowed for this gorge in consumption. Meanwhile, the Federal Reserve goosed the economy by first stabilizing the monetary base and increasing the supply of money after the initial contraction during the Depression’s early years. According to the Historic Statistics of the United States, the Federal Reserve increased its holding of U.S. securities from $510 million in 1929 to over $6 billion in 1942. During the same period, the central bank’s balance sheet went from about $5.5 billion to $29 billion.

That’s no small stimulus. And yet the unemployment rate failed to drop significantly during the Depression years. Most of Keynes’s disciples admit that nearly fifteen years of high unemployment leaves much to be desired on the part of muscular government. The counterfactual is then deployed that Roosevelt’s domestic efforts lightened the economic burden foisted upon America. What finally put the Depression to bed, they argue, was the incredible amount of spending during World War II.

But as economic historian Robert Higgs shows, measures of economic performance were highly skewed during wartime. Unemployment fell and production ramped up, but this was due to the draft and building of armaments. Rationing was widespread to the point where basic foodstuffs and toiletries were scarce. If a wartime economy counts as prosperity, then the homeless today are the living embodiment of luxury.

World War II is a bunk fantasy that in no way proves the Keynesian theory correct. The same goes for the fascist orgy known as the New Deal. Fast-forward to today, and the same charlatans are preaching from the gospel of government interventionism. They implore Washington to fight back against the Great Recession with the same blunted tools: spending and money printing.

When the housing bubble burst and the economy began to tank, then-Chairman of the Federal Reserve Ben Bernanke and crew nearly tripled the central bank’s balance sheet. As of right now, the Fed’s sheet stands at about $4 trillion. In 2008, it was at $800 billion. Not to be outdone, the federal government ramped up spending by running nearly-trillion dollar deficits year-after-year. Once again, all this effort has only made a slight dent in the unemployment rate.

From a strictly empirical perspective, the Keynesian theory is a disaster. Positivism wise, it’s a smoldering train wreck. You would be hard-pressed to comb through historical data and find great instances where government intervention succeeded in lowering employment without creating the conditions for another downturn further down the line.

No matter how you spin it, Keynesianism is nothing but snake oil sold to susceptible political figures. Its practitioners feign using the scientific method. But they are driven just as much by logical theory as those haughty Austrian school economists who deduce truth from self-evident axioms. The only difference is that one theory is correct. And if the Keynesians want to keep pulling up data to make their case, they are standing on awfully flimsy ground.


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Sun, 03/16/2014 - 13:16 | 4555199 Tsunami Wave
Tsunami Wave's picture

So much of what is considered 'mainstream economics' is complete and utter crap.  It's a very simple PHILOSOPHY (not mathematics, not a science) for people to understand once you see how people/various organizations and incentives work in all scenarios.

Sun, 03/16/2014 - 13:46 | 4555342 NihilistZero
NihilistZero's picture

I am so tired of the "full employment" straw man.  The perpetuation of bubbles is to preserve the Oligarchs power structure and nothing more.  A market economy may have a persistently high unemployment rate, but it will also have the greatest social mobility, both up and down.  Also as market forces ALWAYS lower the cost of EVERYTHING even the unemployed, if in the social circle of anyone with a job, will have a better quality of life than they do that under fascist Keynesian economics.  Not to mention they are always a step a away from employment as capitalisms natural creative destruction creates constant opportunity.

Sun, 03/16/2014 - 15:08 | 4555660 CognacAndMencken
CognacAndMencken's picture



The author of this article should be smart enough to understand that real, true Keynesian economics has never been practiced.

Real Keynesian economics dictates that governments pick up the GDP slack during down times, but also - EQUALLY - reduce its debt during good times. It has to balance - that's the only way Keynesian economics works.  This has never happened; our government just spends and spends and spends.  Even Ron Paul takes federal money and spends it on bullshit: in 2010, he was the biggest porker in Washingotn - he requested $400M in earmarks ($8M of it went to "shrimp marketing.") Our politicians, red and blue and Ron Paul included, take every penny on the table - whether they need it or not - and spend it. Keynesian economics can't work in such a wasteful system.

Of course, the author of this article knows this.  He's paid to write pro-libertarian propaganda pieces and discredit anything that has to do with Keynes, whether true or not.




Sun, 03/16/2014 - 15:29 | 4555783 economics9698
economics9698's picture

The elites could care less about the peasants.  All they care about is a good system of government and inflation to rip off the peasants without creating a revolt.  Everything else is bull shit.

Sun, 03/16/2014 - 15:31 | 4555792 CognacAndMencken
CognacAndMencken's picture



Did you just up-vote yourself?  I happen to refresh at the very minute you posted and you've already got an up arrow....????  If memory serves correct, this has happened before with you....

Sun, 03/16/2014 - 16:05 | 4555906 saveandsound
saveandsound's picture

who cares?

Mon, 03/17/2014 - 11:47 | 4558832 StandardDeviant
StandardDeviant's picture

Probably no one, you're right.  But you must admit that up-voting yourself is tacky, isn't it?  Would Chuck Norris up-vote himself?

Mon, 03/17/2014 - 07:19 | 4557721 Canoe Driver
Canoe Driver's picture

What?! I always upvote myself. Is there a rule against that?  If there's not, just subtract one, Einstein.

Sun, 03/16/2014 - 15:37 | 4555810 FuzzyDunlop21
FuzzyDunlop21's picture

whats the difference. why bother discussing the merits of true Keynesian economics when we (including the author) know we are never going to have it so long as our politicians behave like crack whores. I think, in time, you could get rid of Keynesian economics from society. But I do not ever think we can get our politicians to act responsibly.

Sun, 03/16/2014 - 15:42 | 4555839 economics9698
economics9698's picture

The only way to change politicans is a gold standard and 100% fractional reserve banking.  

Sun, 03/16/2014 - 20:04 | 4556713 Dick Buttkiss
Dick Buttkiss's picture

You meant 0%, right?

Though I think we'll get to 100% first.

Sun, 03/16/2014 - 20:19 | 4556741 economics9698
economics9698's picture

100% fractional reserve banking aka Full Reserve Banking.  


Historically conservative banks loaned out 50% and risky banks 80% or even 95%.  This unevenness allowed the conservative banks to create runs on the risky banks and hence the need for a banking cartel aka the Federal Reserve.

Today if you look at the excess reserves its running about 85% to 78%.  In good times it would be the full allowable 90% loaned out.

Mon, 03/17/2014 - 07:22 | 4557728 Canoe Driver
Canoe Driver's picture

A 10% Tier 1 Capital ratio is both appropriate and sufficient. The ratios today are approaching 2%, which is absurdly dangerous.

Sun, 03/16/2014 - 17:21 | 4556145 Pegasus Muse
Pegasus Muse's picture

On Ron Paul & his alleged pork.  I'm sure this had nothing to do with his appropriations request.  /sarc


The Deepwater Horizon oil spill (also referred to as the BP oil spill, the BP oil disaster, the Gulf of Mexico oil spill, and the Macondo blowout) began on 20 April 2010 in the Gulf of Mexico on the BP-operated Macondo Prospect. It claimed eleven lives[6][7][8][9] and is considered the largest accidental marine oil spill in the history of the petroleum industry, an estimated 8% to 31% larger in volume than the previously largest, the Ixtoc I oil spill. Following the explosion and sinking of the Deepwater Horizon oil rig, a sea-floor oil gusher flowed for 87 days, until it was capped on 15 July 2010.[8][10] The US Government estimated the total discharge at 4.9 million barrels (210 million US gal; 780,000 m3).[3] After several failed efforts to contain the flow, the well was declared sealed on 19 September 2010.[11] Some reports indicate the well site continues to leak.[12][13] 

Sun, 03/16/2014 - 22:05 | 4557076 mophead
mophead's picture

There was no out-of-control oil spill. It was a hoax. And those pictures were doctored/phony. Days after the NASA photos were released there were helicopters flying over the gulf and all's you could see were prestine blue seas.

Mon, 03/17/2014 - 00:14 | 4557377 TheReplacement
TheReplacement's picture

Did you say something?  Pretty sky.

Sun, 03/16/2014 - 18:56 | 4556477 RaceToTheBottom
RaceToTheBottom's picture

I agree, there must be the reduction to balance the printing for it to be true Keynesianism.  Political pandering in this country plus the longer economic cycles don't force the prostitute politicians the more difficult part of the cycle.

Therefore this has become a once in a lifetime event.  We have saddled the FED with 5 Trillion dollar balance sheet and have nothing to show for it plus no way to try and balance out the cycle next time. 

Next time we SPLAT, technically speaking.

Sun, 03/16/2014 - 23:45 | 4557320 Weisshaupt
Weisshaupt's picture

I think we all know that what is really practived here is Neo-Keynesian economics and not what Keynes himself adovcated ( which really isn't much more revolutionary than saying the govt should save for a rainy day, just like individuals do)  But Keynesian economis  won't work because the governmnet is run by men, and usually the worst, most narcissitic of men, (for who else is sick enought to want the job?)  and ithe philosphy is  used as an excuse to increase the opportunities for graft and corruption. 


Mon, 03/17/2014 - 00:11 | 4557368 TheReplacement
TheReplacement's picture

Why does it seem like Keynsianismistalic voodoo never works?  Your whole point is we've never driven down the debt but why doesn't it work to restore good times?  The recoveries have been due to wars, reduced regulations, reduced taxes, and bubble blowing.  Did Government debt cause the .com bubble to burst nor the housing crisis or black Friday or Monday or whatever.  We keep getting crapped on no matter what in this system.  It is not getting better.  Wealth disparity is at an all time high.  We've had 100 years of this crap and that is enough.  This is not a test tube.  You are playing with my life.  You are on very thin ice.  Knock it off.

Mon, 03/17/2014 - 02:08 | 4557486 GoldIsMoney
GoldIsMoney's picture

"The author of this article should be smart enough to understand that real, true Keynesian economics has never been practiced."


Yes they forget the part with paying back. But I think they tried there very best to print everone out of this mess, and that still has failed remarkably.


Mon, 03/17/2014 - 06:51 | 4557693 easypoint
easypoint's picture

@C&M   When money is created with interest owed upon it (interest that is not created) as has been the case in the US since 1914 when the Fed started operations conincident with our entry into WWI, how, exactly, might this debt be reduced during the good times? No matter how frugal the government the money simply does not exist to satisfy the principal and interest due on this debt since the interest is never created. Show me the math.

Sun, 03/16/2014 - 15:09 | 4555719 Seeking Aphids
Seeking Aphids's picture

Ok N...if you combine your market economy ideas with your prior agreement that infrastructure should remain in the public realm you may have something. Education should also remain in the public realm. Multinationals need to be taxed to pay for such support. Taxes for small businesses and employees need to be reduced. Access of employees to paid vacations, UI, medical insurance and pension plans should be guaranteed by government. Everthing else should be subject to a 'market economy' as you suggest......

Sun, 03/16/2014 - 16:25 | 4555946 NihilistZero
NihilistZero's picture

No problem with public schools as long as they are NOT compulsory (having teachers babysit the dumbass kids ruins it for the rest) and EVERYTHING is administered at the local level with no state or federal mandates.  1000 communities trying 1000 approaches to education.  Can't imagine a better way to get results, and since it's not compulsory if you don't like the system you can pull your kids out.  As far as insurance, vacations, etc. on principle I disagree, but in practice I wouldn't mind.  Just like Milton Friedman with the Negative Income Tax.   In a mixed economy where the working class is denied some many of the benefits of free markets, mostly because the oligarchs and their sychophants use "socialism" to engineer the economy in their favor, .gov can use it's redistributive powers to give workers some of the stability .corp enjoys.




Sun, 03/16/2014 - 16:17 | 4555947 headhunt
headhunt's picture

It sounds good but government invariably f's everything up, especially if you allow government unions.

Government unions is the baby Satan of society; always bad, always stinks, always crying and always, always hungry.

Sun, 03/16/2014 - 13:47 | 4555348 yogibear
yogibear's picture

All those academics like Ben Bernanke, Charles Evans and Glen Hubbard polluted all those young minds at the universities with false economic garbage.


Sun, 03/16/2014 - 14:08 | 4555440 Anusocracy
Anusocracy's picture

True Believers are not able to understand or accept that their beliefs are the cause, not the cure.

They will cling to what they think is the best course for survival right to the very end.

Sun, 03/16/2014 - 13:49 | 4555361 ShrNfr
ShrNfr's picture

I am not so convinced that it is philosophy so much as a "cargo cult religion".

Sun, 03/16/2014 - 14:11 | 4555450 Anusocracy
Anusocracy's picture

It is the response of the mind of a forager, not a producer.

Sun, 03/16/2014 - 14:02 | 4555414 midtowng
midtowng's picture

Mises articles are all the same, and none are worth reading.

Sun, 03/16/2014 - 13:19 | 4555206 B2u
B2u's picture

Fuck Keynes.

Sun, 03/16/2014 - 13:29 | 4555248 0b1knob
0b1knob's picture

In USSA, Keynes fucks you.

Jackoff Smirnoff

Sun, 03/16/2014 - 13:45 | 4555336 JoeSexPack
JoeSexPack's picture

Fuck Keynes? Many men did exactly that.


He was a flaming homosexual, like Obama.


Zionist MSM says that's all good clean fun.

Sun, 03/16/2014 - 13:20 | 4555211 icanhasbailout
icanhasbailout's picture

Keynesianism is simply an framework for using government and banks to loot a nation of its wealth.

Sun, 03/16/2014 - 13:48 | 4555354 lordylord
lordylord's picture

Keynesian economics is based on the existence of a central planning authority.  It violates the very essence of freedom.  Only individuals who have nothing of value to offer society advocate Keynesian economic policies.  Otherwise, one would advocate decentralized free markets.  Governments use it to preserve and grow their power and control.      

Sun, 03/16/2014 - 13:21 | 4555217 Greenskeeper_Carl
Greenskeeper_Carl's picture

Keynesian economics hasn't failed, we just have to print MOAR money and create MOAR debt. That's the only reason we haven't had dramatic growth, is that we aren't creating enough debt and money. It's the key to prosperity people. Don't you guys read Paul krugman? Duh...

Sun, 03/16/2014 - 13:28 | 4555242 tony bonn
tony bonn's picture

"the utter incompetence on government’s part to cure economic stagnation."

this is where an otherwise excellent article turns into malodorous crap right before our eyes and noses....the government is not incompetent - it is pure is hellbent on destroying a free economy with independent actors through fraudulent snake oil are a tax cow and a serf.

the plutocrats who hired keyenes to invent his claptrap come from the same line as william rockefeller, king of the snake oil cure. he sold petroleum and castor oil as a cure for all maladies. and so keynes invented his petroleum snake oil as a "cure" for freedom and an elixir for totalitarianism.

Sun, 03/16/2014 - 22:39 | 4555842 Radical Marijuana
Radical Marijuana's picture

Yeah, tony bonn, I agree that it is disingenuous to regard what the political puppets do as due to "incompetence." Look at the puppet masters to see that the real goals are what is actually achieved. Keynes was always selectively applied. Only those things which would made the ruling classes more wealthy and powerful were actually adopted, never the entire package as Keynes proposed. Meanwhile, America, and almost the whole world, is sinking into the same stinking swamp:

There is no meritocracy: It’s just the 1 percent, and the game is rigged


I REPEAT MY BASIC VIEW THAT ECONOMICS IS A SCIENCE THE WAY THAT WARFARE IS A SCIENCE. Success in warfare was based on deceits, and so, success in economics became based on frauds. The real jobs of the political puppets who were funded by the plutocrats were to fool enough of the people enough of the time. That is why it was consistently the case the the most successful politicians were always the best professional liars and immaculate hypocrites.

The latest example of that is, of course, President Obama who has an almost perfect track record of actually doing the opposite of what he said he would do when campaigning for votes. The whole system is terminally rigged, with nothing that I can perceive outside of the established politics that can compete with current systems of legalized lies, backed by legalized violence. In that context, any assertions that somehow it is merely "incompetence" that is to blame for policy "failures" is quite ridiculous. The American government has become the most successful, quite scientifically implemented, system of organized crimes that there have ever been. The only longer term problem continues to be the paradoxical threat of final failure from too much success at controlling civilization with astronomically sized ENORMOUS FRAUDS.

I would not agree that blaming Keynes for his bullshit being selectively picked to be promoted as the camouflage for more organized crimes is a fair criticism of Keynes as a whole. Similarly, I find the entire von Mises' school of thought to be too superficial, since it tends to deliberate ignore the real social facts that the money systems developed inside of the murder systems, as that is directed by the principles and methods of organized crime, so that governments became the biggest form of organized crime, controlled by the best organized gangs of criminals. Keynes did not advocate that! Rather, he maintained a typical bunch of impossible ideals about how we are all interdependent, and that we should collectively adjust ourselves for our mutual benefit. Hah! Of course, that was selectively applied, to become the justification for adjusting government policies to benefit the few even more at the expense of the many.

In my view, the only genuine solutions would have to adopt an attitude of using unitary mechanisms, to accept the basic fact that human realities are always organized lies, operating robberies. However, nobody who is paid to do economics is going to get paid to promote that kind of radical truth, that civilization is operated according the principles and methods of organized crime, despite that being actually the case, because it must necessarily be the way that general energy systems function.

The sublime paradoxes of economic theories are the same as the sublime paradoxes of military theories. Controlling other people through using lies backed by violence is never going to admit that that is what is actually happening. Instead, various schools of economics are going to present different perspectives based on false fundamental dichotomies, and the related impossible ideals, about what should happen. From a sublime point of view, it is delightfully ironic that every possible economic theory that was going to be socially successful was going to do so by enabling the rationalization of frauds, through promoting its kind of idealized bullshit, which would be selectively applied through the actual ways that the production of destruction controls production. All socially successful economic theories tend to deliberately ignore that FACT that the production of destruction necessarily controls production, and that therefore, the people who are the best at being dishonest, and backing that up with violence, actually dominate the way that the real economy operates.

To argue that that happens due to "incompetence" is ridiculous! Rather, the paradox is that anyone who does not understand the ways that organized crime made and maintained the powers of states, and directed how those powers were used, is intellectually incompetent when they do not face those fundamental social facts. Ah, but then, the paradox redoubles that being socially successful requires embracing that kind of incompetence, because it actually serves a larger context of competence, in the ways that the real economy operates as a system of organized crime, which promotes every possible kind of bullshit about itself not being that.

Sun, 03/16/2014 - 22:49 | 4557194 zionhead
zionhead's picture

RM I thought they deleted you its been so long since I seen you post.

The shit is getting creepy, now on the ASIAN news they're saying the plane is in a CIA hangar in Kazahkstan, and they're showing the flight path over Myanmar 24/7 on most channels.

Nothing like the WEST, the true story is being told.

No doubt that CIA stole the plane, but then why the dog & pony about looking  for it in the west MSM? Boeing all along knew where it was, from their Chicago offices shared with Rahm Emmanuel.


The power to MURDER for FIAT control is going far beyond criiminal insanity the WEST has gone full retard to start a war with RUSSIA and CHINA at the same time.

Don't see ZH paying attention to the real theatre.


Sun, 03/16/2014 - 22:55 | 4557206 zionhead
zionhead's picture

Carnegie and Rockefeller were fond of saying "Making money  is easy, keeping it is hard"

What if you could setup a government so your family and offspring could be rich and powerful FOREVER,... what would it look like? What whould you have to do? Who would ADMIN it for you?

All is show all is theatre, ... play along get rich, fail to play go to jail


MASS CULLING is coming WW3, is here the USofZIO-CON has ignited a hornets nest in CHINA & RUSSIA simultaneously.

Out of the great war will come IMF-SDR no doubt, and the ADMIN will be ZIO-NEO-CON forever.


The end of history is here.

Sun, 03/16/2014 - 13:31 | 4555260 glaucon was right
glaucon was right's picture

I hope Keynes burns in hell next to Marx...

Sun, 03/16/2014 - 13:50 | 4555366 yogibear
yogibear's picture

HaHa he wanted to be buried instead they cremated the bastard. They wanted to make sure there was no remains left of the guy when this fraud's theories met the test of time.

Sun, 03/16/2014 - 13:31 | 4555262 Oldballplayer
Oldballplayer's picture

Well, it took 2 years of bombing England before we could get our industries moving again.

I figure it would take about a day this time around.

Sun, 03/16/2014 - 13:32 | 4555266 withglee
withglee's picture

No matter how you spin it, Keynesianism is nothing but snake oil sold to susceptible political figures. Its practitioners feign using the scientific method. But they are driven just as much by logical theory as those haughty Austrian school economists who deduce truth from self-evident axioms. The only difference is that one theory is correct. And if the Keynesians want to keep pulling up data to make their case, they are standing on awfully flimsy ground.

The only difference is that one theory is correct.

Neither Keynesian nor Austrian theories are correct. But of course these are not the only two theories that can be brought to bear on the subject.  And then, there is of course just plain common sense which points us to the cause of our economic problems and their solution.

Lets call this common sense solution "traderism". It's principle attributes: Free access to money (i.e. certified promises to complete trades) and "guaranteed" zero inflation all the time everywhere.

Sun, 03/16/2014 - 13:54 | 4555382 FreedomGuy
FreedomGuy's picture

The Austrians are correct. The proof af accuracy is not explaining the past but predicting the future and analyzing the severe flaws in opposing theories.

However, Keynesianism is quite resilient. Any failure of the theory is simply attributed to insufficient use of the theory. This is similar to the idea that all government failures are due to lack of government and the solutions are more, not less of the same. This fact alone means we will see the abolition of Keynesian theory at about the same time as we see the abolition of government. It appeals to the fatal conceits of the elites.

Sun, 03/16/2014 - 14:44 | 4555591 withglee
withglee's picture

Neither the Keynesian nor the Austrian theories recognize money for what it obviously is ... "a promise to complete a trade". This is obvious by inspecting trade: (1) Negotiation; (2) Promise to deliver; (3) Delivery. In simple barter, (2) and (3) happen simultaneously on-the-spot. Money allows (2) and (3) to happen over time and space.

Both Keynesian and Austrian mechanisms just attempt to throttle the creation of money by observing some supposedly related measures indicating the proper level.

Traderism, on the other hand, always creates money in the exact amount required by the traders. It is merely certification of their trading promises. And because of its direct relation to actual trading promises, the supply and demand for money are always in perfect balance. When delivery is made, the certificates are returned and extinguished.

This leaves us with the issue of failure to deliver (DEFAULT). DEFAULTs leave certificates in circulation and work against the Medium of Exchange (MOE) the same as do counterfeits (i.e. certificates not originated from trading promises). To reclaim these DEFAULTED certificates, INTEREST collections of like amount must take place to assure INFLATION is zero at all times. The operative relation is INFLATION = DEFAULT - INTEREST. INTEREST is not some arbitrary number determined by elites in London (e.g. LIBOR). It is not a representation of the "time value of money". It is just a way of collecting DEFAULTS and there is just one right (i.e. non-arbitrary) amount of INTEREST ... and that is equal to DEFAULT experienced.

Neither Keynesian nor Austrian mechanisms have this direct link to trade. The Keynesians drop money from helicopters (inflationary). The Austrians try to tie it to commodities (deflationary unless someone hits the mother lode). Both inflation and deflation of the MOE inhibits free trade. The only right value for inflation is zero.

Sun, 03/16/2014 - 16:07 | 4555887 Radical Marijuana
Radical Marijuana's picture

Money is only "a promise to complete a trade" within the impossibly idealized world of voluntary contracts. Money is measurement backed by murder, because robbery is the foundation, with some dynamic equilibria in the forces of robbery somewhat enabling relatively voluntary contracts.

Being able to engage in trade depends upon not being simply robbed instead. Trading only relatively exists within the reality of robbery. The foundation of all economics is organized lies, operating organized robberies. The paradox of governments, which are supposed to provide some enforced rule of law to enable there to be volunatary contracts trading within that context, is that then those who control the governments become the greatest of all robbers, because they command the power of governments to rob, and to kill to back up their robbery.

The only economic theories that could make real sense are ones which accept that they operate within militarism, where militarism is merely a large scale application of the principles and methods of organized crime. The theoretical way forward is to go through paradigm shifts to stop using false fundamental dichotomies and related impossible ideals in order to try to understand what it going on. Rather, one should apply the ideas of general energy systems to human situations, which then results in understanding how and why the methods of organized crime are what actually controls civilization, and must necessarily do so, and therefore, the only better resolutions of chronic political problems found in economics are working towards better dynamic equilibria between the different systems of organized lies, operating robberies.

The production of destruction that controls all other production is on a continuum with all other production, because it is all the same energy, operating through similar systems. Any idealized notions about what "money" should be are wrong, if they do not face the real facts that money is measurement backed by murder. Of course, the perpetual paradox of both militarism and economics was that social success was based upon lying about themselves as much as possible. Therefore, more radical truth about either is extremely problematic to try to advance.

Sun, 03/16/2014 - 18:39 | 4556432 withglee
withglee's picture

Hmmm. Makes me wonder what world you live in. During my lifetime I have experienced only petty thefts and never have robbed anyone. I have been reliably robbed by our Medium of Exchange at the rate of about 4% a year. At the beginning of my career, I was robbed by my government at the rate of about 25% per year  and about 25% of our people were dependent on the government. Now both those ratios are well over 50% and growing geometrically.

If we properly mange the MOE for zero INFLATION, we not only eliminate the 4% annual leak due to inflation; we eliminate government's ability to grow beyound its constituents desire and ability to pay for its services.

A properly managed MOE is achievable, just like a civilized trading environment is achievable. But we won't achieve it if we don't even understand what money is.

Money is not a measurement backed by murder. We probably can't have big government without murder (a good argument for less government). But we can have money without murder.

Mon, 03/17/2014 - 02:10 | 4557216 Radical Marijuana
Radical Marijuana's picture

Sorry, withglee, but we must agree to disagree. I will not concede that what money should be is what money actually is. The ideal that money enables there to be a Medium Of Exchange is nice sounding, however, there cannot be a society without violence any more than there can be a physics without force.

Ironically I agree with your paragraph that:

"A properly managed MOE is achievable, just like a civilized trading environment is achievable. But we won't achieve it if we don't even understand what money is."

However, I believe that you fail to operate a sufficiently radical and penetrating concept of what money is. I approach the concept of money through thermodynamics and information theory, with a radical transformation of the standard ideas about entropy, because I recognized that an arbitrary minus sign was inserted into the entropy equations, due to a desire that measurements of power and information have positive values, rather than negative values, as the mathematics itself states. Thus, we thoroughly live in a Bizarro Mirror World, where everything is understood backwards, including money. It was not an accident that the meaning of the word "money" was gradually inverted and perverted by the triumphs of the banksters corrupting governments. However, most people who begin to perceive that still only superficially do so, and so, still want to propose idealized solutions, which can never exist in the real world.

In my view, the suggestion that our public money supply should be a well-managed medium of exchange is a nice enough idea, but has nothing to do with what actually exists, namely that money is measurement backed by murder. It is the force of governments, demanding taxes, and deeming fiat money to be be legal tender, that make the fraud of creating our current medium of exchange out of nothing, as debts, by private banks, become a runaway triumph of organized crime, which is about the worst possible way to manage the public money supply to function as a public utility that enables an overall fair medium of exchange to operate.

I tend to agree with the ideal goals that you are pointing towards. However, I regard all political economy to be necessarily inside of human ecology, and thus, the money system is actually inside the murder system. It does not matter if we do not like that, it nevertheless still is the way that things actually work. In my view, a better managed medium of exchange could only work within the context of a better managed murder system. In my view, withglee, you do not understand what money IS, because you replace that too much with what you think money should be. My view is that the only realistic way to maybe approach making money become more what it should be requires facing the facts about what it actually is.

At present, the international banksters dominate the world's monetary systems, and they actually operate those as force backed frauds, as a result of the long history of them applying the methods of organized crime to effectively take control of the political processes. Along the way to doing that, they also dominated the funding of the schools of economics which would pump out the kinds of bullshit that the banksters approved of, in order to facilitate them operating their financial frauds. That is the context in which I regard Keynes' "failure."

Mon, 03/17/2014 - 09:31 | 4558060 withglee
withglee's picture

I approach the concept of money through thermodynamics and information theory

Do you approach trade the same way? How does your approach view barter vs contracted agreement?

From my education, thermodynamics is two laws ... neither of which have I ever deliberately used or consciously needed ... I never worked with steam.

My education never covered information theory ... beyond the simple sampling principles of Shannon. My formal education ended just as solid state physics was beginning. I have noticed the word entropy cropping up when talking of information so maybe that's the connection.

I have difficulty appreciating your thinking. Does it really have to be complicated? 

If our current economy is a system of murder (and thus not trade) and money is its conduit (and not a promise to complete a trade), what do you propose? 

I once had formal training is problem solving. It went like this: (1) Draw a descriptive model (how things are ... what you have); (2) Draw a normative model (how things should be ... what you want and need); (3) Remove the gaps between (1) and (2) thus moving (1) to (2).

Since a MOE has never been properly managed, my writing is definitely in the (2) department. But that's not because money is "not" a "promise to complete a trade". It is because for some reason people can't grasp that obvious reality.


Mon, 03/17/2014 - 10:16 | 4558262 withglee
withglee's picture

Sorry Radical Marijuana. I "never" agree to disagree.

Reality is ALWAYS organized systems of lies operating organized robbery.

In my previous reply I described a method of attacking a problem. Two things I left out. (1) The "descriptive model" must be verified accurate. (2) The "normative model" must be verified better than the "descriptive model".

I don't subscribe to your descriptive model. I can verfiy instances of your description but I don't find them to be pervasive.

T O D D at W I T H G L E E period C O M

Mon, 03/17/2014 - 15:16 | 4560031 Radical Marijuana
Radical Marijuana's picture


I will try to email you at the address you gave above.

Sun, 03/16/2014 - 17:18 | 4556137 FreedomGuy
FreedomGuy's picture

Interesting theory. I have a theory I am debating at this point. I would like to do a thesis on it. It is related to yours in some way. Money is essentially a receipt for labor. It is an accounting. The natural course of money is neither inflation or deflation. As productivity increases the value of an hour of labor goes up. The most important point is that government creation of money is equivalent to theft or forgery. There is no labor or productivity behind the money. So, it devalues the receipts that exist and essentially defrauds whoever gets it. They gave the government actual products and services for forged receipts. It is no different than counterfeiting which should be an appealing concept here on ZH.

What you call default, I call fraud or theft.

Austrians, I believe recognize the fluid nature of money. Tieing it to a commodity is actually a way to prevent abuse, although imperfect. I believe they reject monetary stimulus ideas, controlled interest rates and exchange rates because of these factors.

Gold is essentially barter where the money has some intrinsic value. Thus is understood everywhere in the world even by the illiterate. Drop me into any country and let me flash a gold piece with any logo you like on it and trade can begin. Try fixing exchange rates with that. Will the Chinese give us 6 gold pandas for one eagle? Nope. However an ounce of gold in China will buy more stuff or labor in China. This offers a semblance of honest trade and fair valuation.

Thanks for a rational reply. I will have to think about your theory.

Sun, 03/16/2014 - 18:41 | 4556339 withglee
withglee's picture

Why would you object to the obvious concept that money is "a promise to complete a trade"? It's a much broader view than your "receipt for labor". Actually, it is a receipt for a promise to complete a trade. Future labor may be what is being promised. But other items of trade can also be promised.

For example, if I buy a house, the seller doesn't want my labor. He wants something he can trade for other things he wants. I promise my labor and get that promise certified. I may have promised gold or some other item of barter. I then barter my labor for certificates (money) and return it as agreed.

Money (this certified promise), once created, is an item of barter. It satisfies a trading promise on the spot just like gold, silver, ... or Federal Reserve Notes (which should be managed this way but have a 4%/year INFLATION leak). But its integrity must be protected (i.e. managed). Certification of trading promises must be recorded and followed. If the promise is not delivered(i.e. the certificates not returned as promised), that is a DEFAULT and those certificates must be recovered.

In the mean time they circulate as the "most" valuable items of barter. This is because they are universally accepted in trade, are in free supply (there is always the exact amount required ... no more ... no less), and are guaranteed not to lose their value.

This can only result from INFLATION (of the Medium of Exchange (MOE)) being held at zero. And that can only result from free certification of trading promises, recovery and extinguishing of certificates as agreed, and the recovery of DEFAULTS with equal INTEREST collections.

A nice (and necessary) feature of this perfectly logical mechanism is that it has natural negative feedback. As traders begin to DEFAULT, new trading promises are impeded by additional INTEREST load. But reliable traders (those who don't default) always enjoy zero INTEREST ... and the marketplace always enjoys zero INFLATION of the MOE.

Regarding the value of money: That is determined by the traders. The manager of the MOE has no concern for value.

Re government creation of money: You are correct. That is fraud, just as counterfeiting money is fraud. Governments make trading promises they never keep. They just roll them over (which is DEFAULT). They are deadbeat traders and would not be able to get their trading promises certified because the INTEREST applied would be enormous for their class of trader.

DEFAULT is "not" fraud or theft. Everyone makes promises they can't keep at one time or another. Those doing it on purpose would be quickly identified and their INTEREST load would go up ... just as people making fraudulent (or frequent) insurance claims are quickly identified and their rates go up (usually to exhorbitant levels).

Austrians don't understand very simple concepts like "there's only one ounce of gold per person on Earth so gold could never be used to back all trading promises". Thus, I doubt they understand much else either. Austrians focus on prices and how traders value things. Proper managment of the MOE has no interest in this. And the value of gold "is not" understood everywhere. Just a couple years ago it was valued 50% higher than now. Just in the last few weeks its value is going back up (with respect to FRNs). True money would never take this roller coaster ride.

Re. Exchange rates: Every properly managed MOE would have a fixed exchange rate with respect to other properly managed MOEs over all time and space. That's what zero INFLATION guarantees. Improperly managed MOEs like BitCoins and FRNs are a crap shoot.

As with any item of barter (gold and certified trading promises included), the value is in the eyes of the beholder. But properly managed certified trading promises have no supply/demand issues of their own. Gold and other items of barter do and that complicates trades using them.

Mon, 03/17/2014 - 02:22 | 4557498 StychoKiller
StychoKiller's picture


Austrians don't understand very simple concepts like "there's only one ounce of gold per person on Earth so gold could never be used to back all trading promises".


Yeah, and ya cain't eat it either!  This single sentence from you proves that you do NOT understand gold!

Mon, 03/17/2014 - 11:23 | 4558672 withglee
withglee's picture

So ... enlighten me.

Sun, 03/16/2014 - 23:06 | 4557231 Radical Marijuana
Radical Marijuana's picture

FreedomGuy, I would REPEAT this quote in the context of your partial approach to correctly understanding what was happening:

Silent Weapons for Quiet Wars

"Energy is recognized as the key to all activity on earth. Natural science is the study of the sources and control of natural energy, and social science, theoretically expressed as economics, is the study of the sources and control of social energy. Both are bookkeeping systems: mathematics. Therefore, mathematics is the primary energy science. And the bookkeeper can be king if the public can be kept ignorant of the methodology of the bookkeeping. ... In this structure, credit, presented as a pure element called "currency," has the appearance of capital, but is in effect negative capital. Hence, it has the appearance of service, but is in fact, indebtedness or debt. ... if balanced in no other way, will be balanced by the negation of population (war, genocide)... They must eventually resort to war to balance the account, because war ultimately is merely the act of destroying the creditor ... War is therefore the balancing of the system by killing the true creditors (the public ...)"

Money should be a symbolic understanding of general energy systems, and money should primarily be based on energy (with matter recognized as a form of energy). However, that could not be done unless one faced one of the basic facts about energy systems, that they are controlled by their most labile components. In human terms, civilization is controlled by the people who are the best at being dishonest, and backing that up with violence.

That system of staking claims, and backing those up with coercions, has driven civilization to become stark raving mad, and therefore, be headed towards self-destruction. Since our REAL death controls were developed by the history of warfare, which enabled the War Kings to create the powers of sovereign states, whose powers were captured by the Fraud Kings, the private banks, the REAL debt controls have become systems of maximized social frauds. Since the force of governments backing up those frauds can never make them become true, governments only drive the societies in which those frauds are amplified to become more psychotically insane.

Welcome to the Bizarro Mirror World, Folks. It is guaranteed to continue to become more so in the foreseeable future. More radical truth about the political economy inside the human ecology is not allowed into our mainstream social views, therefore, no saner human ecology is possible. Rather, the de facto triumph of the banksters' fraudulence precludes understand either natural or industrial energy systems, in order to operate those as better evolutionary ecologies. The paradox of civilization is that the history of successful warfare was based upon backing up deceits with destruction, which then segued into the history of successful finance being based upon backing up frauds with force.

The overall result is a society operating in the most insane ways possible, where that insanity is armour plated against being changed to become any saner. Therefore, our fundamentally fraudulent financially accounting systems drive us through spirals of more and more insane social polarizations, and destruction of the natural world, while developing better industrial ecologies is practically impossible because our accounting systems are NOT consistent with the laws of nature, as general energy systems, EXCEPT by being the result of the ways that lies can be successfully backed up with violence, in order to become the dominant, biggest bullies' bullshit, i.e., our STATE RELIGION money system of frauds, backed by force, which, of course, denies and suppresses the actual facts about itself as much as possible.

Tue, 03/18/2014 - 03:25 | 4562089 FreedomGuy
FreedomGuy's picture

I can see the energy point but I think it goes to far. You leave out ingenuity though. All property and progress is man's ingenuity applied to available resources. The fraud is on many levels. I believe their is also a sincere belief by many in things that are...wrong. We all suffer for it when our systems are centrally planned and controlled.

Mon, 03/17/2014 - 02:05 | 4557482 GoldIsMoney
GoldIsMoney's picture

 ... "a promise to complete a trade". 


This is wrong. Money is the counterpart of a completed trade. You offer something, other buy it an pay you for it. So you have done something (but in the case of our system, where the money creators, create the money out of nothing and got interest for it), you have got paid. The money is not a promise that you may be able to buy whatever else you like it's a payment you accepted for a job you've done. And usually you can count, that others do honor that. Even in our disturbed and castraded economy this still holds.

Sun, 03/16/2014 - 13:32 | 4555269 xamax
xamax's picture

I will NOT participate to this discussion.
To me, what is important is that S&P500 continues to rise. We have the Fed to clean the rest.

Sun, 03/16/2014 - 13:34 | 4555278 DavidC
DavidC's picture

I'm not a Keynesian but it's worth pointing out that one of the tenets of it, as far as I understand, is to pay down debt during the good times and increase debt during the bad times, so there's a balancing effect. Suffice it to say, during the good times governments have spent (wasted?) the windfalls and have had nothing there when needed.


Sun, 03/16/2014 - 13:49 | 4555349 hairball48
hairball48's picture

It is NOT government's place to run up debt to create demand in the economy regardless if they pay it back.

Gov't needs to BUTT OUT and let the markets and the  economy sort themselves out.

Sun, 03/16/2014 - 15:25 | 4555769 headhunt
headhunt's picture

Then how are the politicians suppose to get elected?

Sun, 03/16/2014 - 14:01 | 4555410 FreedomGuy
FreedomGuy's picture

The part of the theory that appeals to the State is the idea to control the "commanding heights" of the economy. There is monetary theory and the debt parts. Keynes had some common sense but an ideology becomes what is done, not what is theorized. Communism really has not been properly practiced either, but it is was the basis for Stalin, Mao, Castro and others.

States prefer to intervene in all economies and virtually all interventions are called Keynesian.

Sun, 03/16/2014 - 13:35 | 4555284 JEHR
JEHR's picture

I do not think the blame lies with the Keynesian economic theory; rather, it lies with the politicians who insist on small government, who take big money for their campaigns from banks and corporations, who do not understand the role of money in the economy, who think socialism is communism, who think deregulation is better than regulation, who think private enterprise is better than the needs of the public, etc.

Sun, 03/16/2014 - 15:20 | 4555751 headhunt
headhunt's picture

'...politicians who insist on small government'

You have got to be kidding..

Our government is so fat Jabba the Hutt calls it fat.

Sun, 03/16/2014 - 18:01 | 4556302 Pickleton
Pickleton's picture

LMAO!  You usally post under the name, 'Clueless in Seattle' dont you?

Sun, 03/16/2014 - 13:44 | 4555329 Caviar Emptor
Caviar Emptor's picture

Any economic "system" whether Keynesian or Austrian, will eventually become distorted by power, greed and immediate needs. There will always be an excuse why they ultimately go off the rails (usually the excuse is that the real thing would have succeeded had it not been for those dang politicians). Keynesianism (if there ever really was such a thing) was simply the solution of the moment to deal with the problems of the times. It has outlived it's useful purpose. Now a new salesman will try and convince you to throw out your old system and buy a new one which is "guaranteed" or your money back

Sun, 03/16/2014 - 15:17 | 4555740 headhunt
headhunt's picture

Is it called "Hope and Change"?!

Sun, 03/16/2014 - 13:47 | 4555346 Ellesmere
Ellesmere's picture

Keynes' ideas were never properly nor fully implemented.

The "failure of Keynesianism" makes no sense.

Sun, 03/16/2014 - 13:52 | 4555369 hairball48
hairball48's picture

The "failure of Keynesianism" makes no sense.

The "failure of Keynesiansism" makes perfect sense to those of us who have any common sense.

Sun, 03/16/2014 - 13:58 | 4555397 H. Perowne
H. Perowne's picture

Neither were Marx's, hey? Baby, give me one more chance, it'll be different this time.

Always the same excuses. Always. Thanks for playing, now please sit at the little table while the grownups talk.

Sun, 03/16/2014 - 14:02 | 4555415 novictim
novictim's picture are talking to idiots.

Sun, 03/16/2014 - 13:53 | 4555378 angryBuddhist
angryBuddhist's picture

Let's keep a heat lamp on a corpse and, so long as we can keep the body temperature at 98.6, statistically the corpse should be deemed in good health.

Sun, 03/16/2014 - 14:00 | 4555406 novictim
novictim's picture

Zero Hedge, you clearly DO NOT UNDERSTAND THIS TOPIC!  But here you go AGAIN!?

Keynesian solutions are TRICKLE UP solutions, NOT trickle down solutions like we are seeing.  How do you NOT know this?!

STOP!  Before you print another stupid article on "Keynesian" economics, please first figure out what Keynesian Economic solutions would look like.  

(HINT: Keynesian solutions should look like FDR-style New Deal FISCAL policy measures...high taxes on the rich funneled to help pay for INFRASTRUCTURE SPENDING ... JOBS TO EMPLOY 80% of the unemployed!)


Geitner and Bernanke/Yellen are using MONETARY policy, not Keynesian Fiscal policy, to bail out the banks and is Neoclassical Economics... is ABSOLUTELY Classic Supply Side economics/Trickle down economics.  And it does not work!

Keynes is not in the building, you dufus.  That is why we are so screwed.

Sun, 03/16/2014 - 14:02 | 4555413 H. Perowne
H. Perowne's picture

You know, I hear if YOU TYPE IN ALL CAPS it makes you look SMARTER and that PEOPLE SHOULD LISTEN TO YOU??!!

Sun, 03/16/2014 - 14:04 | 4555424 novictim
novictim's picture

It is called shouting...I can't help myself.  Idiots and morons make me shout.

Sun, 03/16/2014 - 14:11 | 4555441 H. Perowne
H. Perowne's picture

Avoid mirrors. Glad you fixed that caps key, at least.

Sun, 03/16/2014 - 14:18 | 4555486 NihilistZero
NihilistZero's picture

novictim, you place yourself in a pickle.  You're right in that current policies do not match Keynes theories.  But the fact of the matter is those implementing these policies use Keynes and FDR was a shield so it's not unfair to call out what Keynesian theory has become.  I will agree with you that some "proper" Keynes could have done us some good the past few years.  Everytime I talk to shitty Verizon tech support I long for municipal fiber broadband backed by federal grants.  LLocal jobs and local control of a vital infrastructure.  I'm a libertarian, but infrastructure is best left to the public sphere with as local control as possible.



Sun, 03/16/2014 - 15:10 | 4555723 headhunt
headhunt's picture

Not as long as government unions are legal.

Sun, 03/16/2014 - 16:35 | 4555991 NihilistZero
NihilistZero's picture

So I'm guessing I got 2 down votes for the suggestion that Locally administered municipal broadband would be better than Verizon?  It's stupid shot like this that makes me shake my head...  People have been so anti government indoctrinated that they ignore FACTS.  Look at the satisfaction rates among municipal broadband customers in North Carolina.  Look at how the local tel com monopolies tried to shut them down.  Ayn Rand fucktards are objective about everything but REALITY.

Sun, 03/16/2014 - 18:10 | 4556329 Pickleton
Pickleton's picture

How the fuck you call yourself a libertarian and then yammer 'people have been so anti-government indocrinated'  is beyond me.  And to top it off, you sound like a fucking fascist. You're prolly one of those fucktards that thinks there's such a thing as a leftist libertarian.


Sun, 03/16/2014 - 20:19 | 4556758 NihilistZero
NihilistZero's picture


Fuck. Off.

Sun, 03/16/2014 - 18:34 | 4556420 TimmyM
TimmyM's picture

The problem with your proposition is that you are forcing the non users and infrequent users to subsidize the poop sockers and porn addicts. There are people who dwell entirely in the physical world. They may or not be wise to avoid the virtual world, but they have the right not to pay for your online activity.

Sun, 03/16/2014 - 14:34 | 4555569 NakedEconomics
NakedEconomics's picture

Thank you novictim, for proving someone around here has more than a Degree in Masterbation.  Sadly, the blogtards outnumber the thinkers 100 to 1.


We aren't in anything close to Keynesian econmics, other than the government has indeed gone into debt.  This is still trickle down economics, and the money is staying in bankers hands and it's not making it to Main Street.  If the government goes into debt, but puts the money into a hole in the ground, these blogtards would still call it Keynesiesim.  It makes no sense!!  The main premise of Keynesian Economics, is that Main Street gets money to spend.  No Main Street spending, means no recovery.


Anyone who reads this article, and nods their head in agreement, is clearly clueless.

Sun, 03/16/2014 - 18:41 | 4556443 TimmyM
TimmyM's picture

Where you go wrong is assuming that government is capable of taking money from one and giving it to another. Keynesian theory is snake oil because it can not be executed. It goes against the nature of man to pull it off.

Mon, 03/17/2014 - 02:24 | 4557499 zionhead
zionhead's picture

WHY talk of debt the FED-RES can create 100's of trillions of USD per year and out the back-door send them all over the world to do 'gods' work.

Why call this DEBT?

Me thinks that only an apologist can watch what goes on in the USA/ISRAEL and call this issuance of FIAT as 'debt based', ... now with 100's and 100's of trillions of secret FIAT creation, ... paid back to whom as debt? The FED? Nada

They'll just print by way of MURDER, Inc, until the USD is worthless then issue a JUBILEE, and reset the game. Post game the new fiat to infinite will be called IMF-SDR.

But talking about KEYNES, or Mises, or Austria is all masturbation,.. there is NO debt, and taxpayers my god, the USA hasn't financed by tax revenue for since pre WW2.


Post reset, the IMF will try to put SGD, CHF,..EURO out of business, HILLARY-2016 will call any non-IMF currency as 'axis of evil'.

DEBT my ass, only little people pay back DEBT, and that is called SLAVERY.

Sun, 03/16/2014 - 15:05 | 4555701 headhunt
headhunt's picture

Trickle down economics would require the money to 'trickle down', what is going on is as close to Keynesian as it is to Trickle Down. What we have is a communist administration sprinkled with fascism.

No Trickle, no Keynes.

Sun, 03/16/2014 - 21:56 | 4557063 Accounting101
Accounting101's picture

Will you and your tribal bullshit please go away. You are a tool for the Oligarchs.

Sun, 03/16/2014 - 14:04 | 4555420 ebworthen
ebworthen's picture

Alchemists couldn't turn lead into Gold but they had lifelong careers paid by Kings and Serfs while attempting it.

Sun, 03/16/2014 - 14:04 | 4555421 Seasmoke
Seasmoke's picture

I am a student of common sense.

Sun, 03/16/2014 - 14:06 | 4555429 Ifigenia
Ifigenia's picture

every economic theory would be doomed if the 1% get all and the 99sheeps get nothing. Even capitalism would fail if the sacrosaint basis "Private gains Private losses" travesti to "private gains public losses"

Sun, 03/16/2014 - 14:06 | 4555432 explosivo
explosivo's picture

Old news. Keynesianism was destroyed intellectually by the reality of stagflation in the 1970s. The problem is the 50%+ of the population that either doesn't understand or doesn't give a shit enough to fight back in any way. 

Sun, 03/16/2014 - 14:28 | 4555537 Seahorse
Seahorse's picture

more like 90%

Sun, 03/16/2014 - 14:14 | 4555461 AgShaman
AgShaman's picture

There's plenty of "economists" in Ukraine.

Like Operation 'Paper Clip'....we should bring them here to sort out this economic conundrum

Sun, 03/16/2014 - 14:35 | 4555578 drstrangelove73
drstrangelove73's picture

The Demagogue Party needs Keynes like a miner needs coal.
If you are a materialist,and a demagogue,you need a rationale for robbing Peter to pay Paul;it's your MO.
So,they have no further to look than the hoary old faggot,Lord Keynes to dress up their thieving and robbery.

Sun, 03/16/2014 - 14:44 | 4555623 falak pema
falak pema's picture

Here we go again : a sponsor of ZH has to have its recurrent ideological rant posted, foul mouthing a man who has ---like it or not--successfully gone down in history.

The only active Austrian economist who ACTUALLY exercised influence on a nation state's economic policy, over a sustained period of time of a major nation, was Jacques RUEFF, who advised and framed the financial Gaulist policy of the Vth french republic from 1958 to 1965. Nobody else from that school ever left their ivory tower of university theorising to actually enact gold standard  as financial mantra in a large developed country post BW accord in 1945.

And remember, Keynes was for Bancor not USD hegemony to avoid the Triffin paradox that brought the USD down in 1971. The USD option was IMPOSED by his american counterpart in 1944 inception of new construct.

It was under Rueff's insistence that France sent a warship to collect its gold from US vaults. But under Us pressure of Johnson era de Gaulle replaced him with fiat proponent Guiscard D'Estaing whose name was later associated with the French law that abolished that France's CB use ONLY its own printing press to generate new money under its guarantee.

Instead, France started borrowing massively, from 1973 onwards post new law and eurodollar market explosion, on the US private banking controlled eurodollar market of City drowning in Petromonarchy recycling of their cash surpluses. We know where that led to. 

But this US petrodollar hegemony post 1971 revoke is not neo Keynesianism; its Friedmanism and floating rates mantra. Friedman like Hayek were both anti Keynes policies. So its their mindsets that influenced Nixon.

What the US CB has done in the subsequent Reaganomics age is not neo-Keynesian plays; it neo oligarchy plays to save their private wealths by using crony capitalism to socialise the debt.

Nothing to do with Keynes. Miserly Mises keeps blowing his tin plated horn trumpeting gold is the only solution to world monetary woes.

Wrong; don't confuse ways and means.

This current dystopian situation is a problem of mindset corruption, of effacement of all moral hazard,  not of use of monetary instruments in a pseudo science obscurantist political concoction where debt has now been deemed asset. 

We have lost all sense of values. Don't blame people who provided a reasonable balance in another age--post the greatest financial crisis known to man; aka 1929 collapse-- with the current corruption of capitalism. 

Bogey man, bogey man, you be THE useful idiot or fall guy for an age of lies, damn lies...

Sun, 03/16/2014 - 16:43 | 4556011 Seer
Seer's picture

No down-arrow from me, as I don't do that to people who take the time to enumerate their position, BUT...

This current dystopian situation is a problem of mindset corruption, of effacement of all moral hazard,  not of use of monetary instruments in a pseudo science obscurantist political concoction where debt has now been deemed asset.

This "situation" has EVERYTHING to do with the pressures bearing from the finite world upon a human paradigm set for infinite growth.  And while I hardly find an "answer" in the musings of Mises, I DO find that there's at least some connection to the physical world, which is desperately required, though I don't know whether the realities of it all are truly recognized by supporters of Mises (of Mises himself).

Seeking "solutions" when we haven't properly phrased the "question" is a way of getting nowhere...

Sun, 03/16/2014 - 17:56 | 4556215 falak pema
falak pema's picture

Agreed, and the point you raise is now unfortunately a reality that many do NOT want to address.

Nevertheless, as I always TRY and base my posts on past facts, and as someone who has seen the Oil business raise the alarm signals as of 1978 (second oil crisis) and having understood the implications of Club of Rome finite limitations that were published in 1972 and as they have played out subsequently; given that from 1972 to today the world population has more than DOUBLED --- just think of that statistic-- whereas our per capita energy consumption has continued to increase globally, your case in point makes this Mises vs Keynes debate a quaint look into Lady Shalott's mirror! 

That mirror has cracked from side to side.

But people like to live in the past as its more confortable than imagining an uncertain future. Thats human nature.


Mon, 03/17/2014 - 02:51 | 4557529 Rock On Roger
Rock On Roger's picture

Educate all women of humankind and allow them freedom of their own person.

That will solve the human population crisis.

Stack On

Sun, 03/16/2014 - 14:46 | 4555626 hairball48
hairball48's picture

One of the tenets of keynesianism was that the federal Gov't needed to step in and create demand during economic downturns. The gov't needed to create programs and spend money when the private sector did not thus keeping people employed who would otherwise be laid off.

Call it whatever you want but  that is exactly what is happening today.

It was a bad idea in the 30's and it's still a bad idea.

Austrian's Rule!! :)

Gold and silver are the only real money.

Sun, 03/16/2014 - 16:11 | 4555926 Nick Jihad
Nick Jihad's picture

I vote for calling the the "conventional wisdom". "Everybody knows" that deficit spending stimulates the economy, just as "everyone knows" that zero-interest-rates stimulate the economy.  It isn't necessary to call these ideas Keynesianism any longer, especially since the man himself would probably not endorse these policies today.

Sun, 03/16/2014 - 16:50 | 4556030 Seer
Seer's picture

"Gold and silver are the only real money."

The "problem" isnt with money itself, it's of our expectations of what it is to do.  So much as I can tell, and I would surely love to hear it otherwise, it's that it serves to promote growth, and on a finite planet, regardless of how well we would seek to constrain ourselves, it's almost a certainty that we'd manage to remove those bindings in order to "achieve growth."  This is EXACTLY as is has gone down.  Currency devaluation is all about faking growth: today, however, since everyone is doing it, it's all a big cluster-fuck and it's hard (for most) to see The Big Lie.

Sun, 03/16/2014 - 14:55 | 4555661 Walt D.
Walt D.'s picture

"From a strictly empirical perspective, the Keynesian theory is a disaster."????

Sort of like Anthropological Global Warming.

If economics is to be considered a science, albeit a dismal one, then it is worthless if its forecasts are not backed up experimental data. (Same is true for AGW).

Sun, 03/16/2014 - 23:44 | 4557297 Radical Marijuana
Radical Marijuana's picture

Walt D.:

Humans blamed for climate change is an issue which has become like a dog twirling around chasing its own tail (which is somewhat similar to how the Federal Reserve Board directs the economic system.) We can only pray that the more cosmic factors, such as the Earth's decreasing magnetic field, & other causes for why there may be return to another ice age, give us more of break? Otherwise, the runaway feedbacks caused by human activities have already been engaged!

Arctic Death Spiral and the Methane Time Bomb

The most important point was about the 34:48 mark:

"The human trigger is now almost irrelevant. THE FEEDBACKS HAVE TAKEN OVER."

That human civilizations were controlled by lies backed up with violence, added to the quantum leaps of human power due to the industrial revolution, has run away with itself! The financial frauds, in the form of debt engines, have driven debt slavery to generate numbers which are debt insanities. Probably the worse aspects of that are the biggest, most globalized, consequences, whereby the greatest collective losses were always accumulating, at the same time that only the privatized profits and benefits were being paid attention to.

Although it seems to me to be that, presently, nature may be giving us a bit of a reprieve, the human triggers for climate changes have already been pulled, and hence, those guns are going off in sequence. MEANWHILE, SINCE THE HUMAN SOCIAL PYRAMID SYSTEMS WORK THROUGH COMBINATIONS OF RULING CLASSES WHICH ARE DISHONEST AND VIOLENT, CONTROLLING THE MASSES, WHO ARE KEPT IGNORANT AND AFRAID, NONE OF THIS INFORMATION MANIFESTS IN ANY WAYS WHICH CAN COHERENTLY RESPOND. LEARNING ABOUT THE CLIMATE IS IRRELEVANT SINCE THE SOCIAL REALITIES OF LIES, BACKED BY VIOLENCE, WILL NOT DO THINGS DIFFERENT. The ruling classes "solutions" were bullshit, and their presentation of the problem biased. At the same time, the vast majority continue to act on the same evil deliberate ignorances.

Attempting to do better science on climate is just as useless as was similar attempts to understand facts about hemp, or money, or anything else that exists in our civilization. Better science about society runs into the problem that society is controlled by lies, backed up by violence, that has made the attitudes of evil deliberate ignorances be the dominant features about everything! Since civilization is controlled by ruling classes being dishonest and violent, while those ruled are ignorant and afraid, therefore, "learning" anything turns out almost totally "useless." Apart from attempting to understand things merely for the sake of understanding things, there are no practical political points there.

Human beings triggering climate change problems is merely one of the biggest overall manifestations of the general patterns of lies, backed by violence, maintaining systems based on ignorance and fear. Decades of attempting to promote more hemp truth had trivial results which compromised with old lies. So far, that is the same pattern regarding money, as well as the human response to climate change. The difference is that we have run out of time!!!

Economics is a science like warfare is a science. Success in warfare depended on deceits, and success in economics depended upon frauds. All forms of human science were enterprises that were subject to the distortions of their funding. The overall fraudulent accounting system has enabled us to have runaway systems of privatized profits, which got to deliberately ignore the socialized losses. In my opinion, despite the temporary break that we appear to be currently getting from more cosmic factors, the basic greenhouse gases mechanism are still working. They have already triggered runaway feedback loops which will render all other political issues relatively trivial or moot during the 21st Century. My view is there will not be more than 10 billion people in 2100, there will be less than 1 billion.

Keynesian economics was mostly another rationalization of paying for the present with claims on the future. The problem is that in the longer term, that accumulates to destroy the future. Fraudulent financing of human activities did not merely drive runaway social polarization. It also drove runaway destruction of the natural world, which will become way worse than social polarization, as well as make that social polarization way worse.

The ability of civilization to be controlled by legalized lies, backed by legalized violence, will turn out to have become a suicidal social madness, leading towards its destruction. However, nobody is going to change anything in the short-term because of that. Instead, the established systems will continue to use the same old bullshit justifications, like Keynesianism, or whatever other fashions, for making more and more "money" out of nothing, as debts, which will drive the spirals of society further into psychotic breakdowns, because backing up frauds with force never changes those frauds into the truth.

Creating "money" out of nothing, as debts, facilitated deliberately ignoring the laws of nature. Anthropological Global Warming is going to be one of the ways that future generations really pay for previous and current generations having done that. It has already been triggered, although it is currently being mitigated by some natural factors. However, there is no reasonable doubt that it is going to runaway, the same as everything other thing our civilization is doing is running away with itself, due its basic mechanisms being that society is controlled by lies, backed by violence, relentlessly, ruthlessly, and recklessly being the main factors that are fashioning the real future.

Sun, 03/16/2014 - 14:59 | 4555678 DOGGONE
DOGGONE's picture

Putin can point out this:

The Public Be Suckered

Sun, 03/16/2014 - 15:03 | 4555695 smacker
smacker's picture

Describing Keynesianism as "snake oil" is brilliant.

That's exactly what I've thought about it for years...and I'm not an economist by profession. Just a Mr Nobody gifted with a generous amount of logic and common sense.

Sun, 03/16/2014 - 15:09 | 4555717 AgShaman
AgShaman's picture

I'm are over-qualified and not welcome in determining economic policy in the colorful Republic of Unicorn Scatology

Sun, 03/16/2014 - 15:05 | 4555702 I Write Code
I Write Code's picture

You lost me at:

The unemployment rate in the U.S. still remains at an historic high of 6.7%

The real rate is probably double that, not even counting underemployment and falling wages.

We are in an environment now that Keynes never dreamed of in his worst nightmares, running huge acknowledged budgetary debts, running continuous huge trade debts, printing money without regard to side-effects, yada yada.  If anything Keynes was ever taught or ever said were still true, we'd be past full employment and everyone would have six jobs.

Sun, 03/16/2014 - 16:30 | 4555980 I am Jobe
I am Jobe's picture

Dang, Amerikan Universoties have no otehr choice than to brainnwash the future pimps and hookers. 

Party on Failures Bitxhezzz


Sun, 03/16/2014 - 16:35 | 4555992 Seer
Seer's picture

Sure, Keynes deserves to be poked at, but don't pretend that what's in the mirror is prettier...

Paradigms of perpetual growth on a finite planet = FAIL.

Honesty demands that we apply measures equally... lest, of course, we don't care to fall victim to some other "snake oil salesman."

Sun, 03/16/2014 - 17:16 | 4556128 Johnny Cocknballs
Johnny Cocknballs's picture

Whatever wisdom Keynes himself possessed as to prescriptions for a very particular time and place, the 'neoKeynesians' like Krugman are abject sophists, consumed solely with cherry-picking data and the rhetorical art of never being wrong.

Sun, 03/16/2014 - 17:46 | 4556237 stopthejunk1
stopthejunk1's picture

Peter Schiff wants to go on a date with you.

Just because you're not "winning" doesn't mean that "the system doesn't work." Just because your ideas of social or economic justice aren't met by the system, doesn't mean "the system doesn't work."
Just because you're on the bottom doesn't mean that something is broken.
Just because you rant and swear like a teenager doesn't mean that you have a legitimate point.

The proposition "Keynesianism doesn't work" is not falsifiable. You can say whatever you want, but making unfalsifiable claims puts you squarely in the same category as those that you're criticizing.

The economic problems we have are not related to Keynes being right or wrong. They have more to do with anarcho-capitalists who do dumbass things like eviscerate Glass-Steagall in order to set loose the profits. Would Keynes have done that? uh, no, I don't think so.

Sun, 03/16/2014 - 18:28 | 4556394 The Abstraction...
The Abstraction of Justice's picture

I look at the front page of a Communist youth brochure or some such, and its promoting open borders, free immigration and diversity. Then I read a libertarian pamphlet, and its the same bloody front pagel.

Sun, 03/16/2014 - 18:40 | 4556438 logicalman
logicalman's picture

Honest exchange and real money.

A huge amount of problems solved.


Sun, 03/16/2014 - 19:32 | 4556611 kragsquest
kragsquest's picture

Keynes was a peace loving humanitarian.  No he was a ****-sucking slave of unprincipled people.


Bernanke and Yellin to the heads at Goldman, JP Morgue, etc.; "We need to get the word out that the precious metals are losers, you guys need to get front and center panning the precious metals in every form and we will keep pumping liquidity into the system. If any of your people are caught red-handed, contact us personally and we will pull some strings so they just get a slap on the wrist. I just want to be sure that we remain on the same page with policy. We just spoke with John Kerry and the state department will continue to pressure foreign governments for more access to our financial representatives and our military is ready to act on a moment's notice to strike when we get obstructed. Keep doing what you are doing and #1 concern, we need to keep a lid on the precious metals!"

Sun, 03/16/2014 - 21:10 | 4556938 mikeadamson
mikeadamson's picture

I never agree with the author because I reject his utopian outlook but I sure do admire his persistence.

Sun, 03/16/2014 - 21:14 | 4556948 Ass to Mouth
Ass to Mouth's picture

Keynes underestimated how lazy black people are.

Mon, 03/17/2014 - 04:46 | 4557608 Loophole
Loophole's picture


Wealth redistribution (i.e. stealing) has "failed ."

What a surprise.

Has it occurred to anyone that the people pushing Keynesianism are and always have been frauds?

Mon, 03/17/2014 - 04:57 | 4557618 Loophole
Loophole's picture

Keynesianism and monetarism are both just silly rationalizations for taking wealth from those who produce it.

Why on Earth would anyone think that either would bring anything but destruction?

"We" all prosper when one or the other are practiced?

What a joke.

I just don't think the people responsible are that dumb.

They aren't failing. They are successfully robbing us blind.

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