Guest Post: Keynesian Solutions - After Total Failure -Try, Try Again

Tyler Durden's picture

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SheepDog-One's picture

Gee wouldnt it be nice if one of these centuries we could just have a common sense economic system not devised by satanic lunatics and their ivory tower minions? 

DormRoom's picture

you mean like Raegonomic, which inflated a 30 year old debt bubble from junk bonds -> LTCM -> internet -> real estate, creating a structural imbalance visa iva China.

Keynesian economics has the answers for deflation.  Friedman has the answers for stagflation.

Unfortunately, we were in a deflation, which was aided by fiscal stimulus, and mismanaged by monetary stimulus, creating stagflation.  Now we need to put the Keynesian toolkit away, and take up Friedman.


The problem is we can't raise interest rate to reign in the money supply, unless we upset the mortgage market, and destabilize all the deleveraging going on.

So the US is gone donkey kong

Thus we may be in a liquidity trap, not from Keynesian economics, but the mismanagment of it!



MillionDollarBonus_'s picture

Keynsianism is the ONLY form of economics adopted by the world's top economists at ivy league schools. There is a reason for this - the US has a consumer economy, not an export economy. There is no point in saving in a consumer economy because this only stimulates production. A consumer economy needs perpetual monetary and fiscal stimulus to stimulate consumption. The Chinese are TOTALLY dependant on US consumption of their exports. If the doomers have their way, the entire world economic system will collapse.

spiral_eyes's picture

not only do we need a housing bubble. now we need an alien invasion. 

we got the first. will we get the second? 

aggregate demand, bitchez.

by the way, million dollar bonus. you're full of shit. learn your geopolitics. chinese factories could easily convert to making weapons. or they could sell their output to countries with less devalued currencies. OR to the domestic market. you don't think the chinese will pay handsomely for an ipad?

Ausperity's picture

It's been on the books for years, and currently looks to be more likely than open war amongst superpowers... I've been saying this for years, and now I get to show my tinfoil colors on ZH-


Bluebeam, bitchez!!!

TruthInSunshine's picture

There are Sock Puppets literally swarming Zero Hedge (or Leo K and Harry Wanger from behind proxies - or both).

It gets worse every day.


spiral_eyes's picture

i don't have a problem with the sock puppets. i find them very funny. and we need as much humour as possible in these dark days.

CosmicBuddha's picture



I agree. I think these are agents from the ministry of misinformation. You know George Orwell was right. No right minded person could believe the rubbish these twats are writing, they must be being paid to cynically spread this garbage.

Ausperity's picture

If I am an agent of the Ministry, it is without my knowledge and consent, but I hear that is now standard protocol.... saves money on labor.  Now who says that government spends irresponsibly?!



New_Meat's picture

<channeling Yul Brynner>

'What is this word "responsibility?"  I like this word "responsibility!" '

- Ned

{no sweat, they have your rats and face-cage all lined up}

DosZap's picture


not only do we need a housing bubble. now we need an alien invasion. 

we got the first. will we get the second?


We already did, and it's on vacation.



magpie's picture

It's perfectly clear that deficits will have to grow to infinity. And it's even better that none of the consumer goods are manufactured in the USA. Unemployed persons are probably the only demographic who can devote themselves wholeheartedly to increasing consumption, so it is only fair and bullish that there should be more of them. All signs of capital flight are transitory.

AldousHuxley's picture

Keynsian like communism sounds good in theory,where government spends during recession, but also must SAVE during booms.

However in practice, corrupt bureaucrats will take advantage of it by spending during recession and spending even more during booms giving themselves more power than they deserve.


You see why democracts and republicans couldn't cut any budget....the entire US economy ponzi scam depends on government contracts.

AldousHuxley's picture

Which ruling family founded University Chicago and milton freeman's "research"?

Which ruling family controls JP Morgan Chase

Which ruling family founded the Federal Reserve?


Can you say Rockefellers? And guess what the occupation of the present day Rocefeller is? hint: starts with i and you do it on wall st.

Freddie's picture

Who are they Rockefellers puppet masters?  Also starts with an R.

CosmicBuddha's picture



Any system that is rotten to the core needs to collapse.

RacerX's picture

Keynsian economics is popular because it is the preferred economics of the Governments and ruling elite. Never mind whether it makes sense or is feasible or sustainable. It simply enables these power structures to continue growing.

cocoablini's picture

Why all the thumbs down- he's right. All economies except Marxism( thats not an economic model either) are based on a variety of pyramid schemes and persistent "growth." there is no sustainable economic mkdel- its all based on inflation, growth, begger thy neighbor and resource consumption until it collapses. Theres a machine burn down and restart- a la Rome or World War 2. Japan has managed in a negative growth environmwnt because credit and mo ey and growth can fester or foster elsewhere. Now we have a global trainwreck- a huge credit and money implosion. Krugman and his martian attack are the only thing that can save us now. What a screwball

NotApplicable's picture

Because captialism is not a pyramid scheme and doesn't require constant growth. Capitalism is nothing more than individuals consuming less than they produce, using their leftover wealth to invest in the creation of other wealth that is in demand in order to satisfy human needs. Whether this creates growth depends upon each person's time preference (consume today, or save it for tomorrow) and other factors as the durability of the wealth produced (lettuce vs. lead, for example).

As Mises (and Rothbard) demonstrate, even an isolated Crusoe would engage in capitalism by choosing to make a fishnet, but only after saving enough fish to survive while he made it.

nmewn's picture

"As Mises (and Rothbard) demonstrate, even an isolated Crusoe would engage in capitalism by choosing to make a fishnet, but only after saving enough fish to survive while he made it."

Exactly so.

Well worth everyones time to follow these links...its so simple and basic even a Keynesian can follow along ;-)

Orchist's picture

"Thus we may be in a liquidity trap, not from Keynesian economics, but the mismanagment of it!"


Denial is the most predictable of human responses.  Sad how everyone clings to this model.


RockyRacoon's picture

Denial is when a person has the wrong awareness and is unwilling to move to the right state of acceptance because it would then require action.

Libertarians for Prosperity's picture



Lots of bad advice out there.  

At this moment, gold is somewhere in the $1830's.  

Last night, Turd Ferguson apologized to his readers for being MIA during the day, as he had spent the entire day figuring out where gold was headed overnight.  His conclusion:  with gold at $1912, he said it would be "allowed" to run higher, perhaps to $1936 or even to $2000 by Wednesday, then the cartel would instigate margin hikes and bring it back down.  

Today, gold did the exact opposite. Right now, it's running ~$100 in the opposite direction.  $1833 instead of $1936.

As it turns out, at the time of his posting, $1912 was - ironically - the exact top.  Instead of gold heading toward $1936 (god only knows where he got this precise price from) it went straight to the $1830's.  

That's a $100 error in less than 24 hours!


For someone who runs a blog predicting the hourly movements of gold, he's made some huge errors lately.  First, he advised his readers NOT to buy the summer gold rally.  Now, he tells them it's headed to $1936 or $2000 by tomorrow, and it actually goes $100 in the OPPOSITE direction.

WTF Turd?



EscapeKey's picture

I'm still waiting for you to criticize Obama for taking more money from Wall Street than any other candidate. You seemed to forget about that the other day. But no worries, you can explain what a sell-out he is in your reply.

AldousHuxley's picture

Black Obama was elected to screw poor americans (mostly black) and Africans when US will take oil from Nigeria and Somalia after war with Iran.


The man behind the curtain will always hire a face which resembles the population about to get screwed. He can sell pain easier that way.

EscapeKey's picture

Oh yeah I know, there's fuck all difference between the mainstream candidates for either party - they're both bought and paid for by the same Wall St interests. Both Rothbard and Quigley wrote on this.

But I want that idiot shill to criticize Obama in actual writing. He won't do it.

Stumpy's picture

He also said that if you were trading this market and thinking to sell, to do it right now. Seems like a lot of folks did just that.

Internet Tough Guy's picture

Anyone who makes next day price predictions is an idiot. So what's your price prediction for tomorrow?

Libertarians for Prosperity's picture

All of Turd's posts are short term (usually hourly) price predictions, based off very amateur chart analysis.    

And, from what I can tell, his calls are no different than dart throws. 

Fortunately for Turd, his blog is full of brain-dead doomer goons who don't pay any attention to his 24 hour predictions.  That's the irony of the whole thing....  he posts hourly charts for traders to a bunch of doomer goons who bury metals in their backyard. It's like the wrong audience attending the wrong show, and everyone's ok with it.  Turd just keeps posting nonsense, and his readers just keep ignoring it.




nope-1004's picture

He also said that the desperate cartel, who is losing control, will slam metals down into the Benocide circus act.  So taking out a sentence or two to serve your own agenda, like JPM often does, is way too Blythish.

Keep pimpin' anyway, you fraud-mouthed banker whore.


Libertarians for Prosperity's picture

Yeah, but that wasn't suppose to happen until gold hit $2000, and a margin hike was gonna be the weapon of choice. 

It didn't hit $2000 and it wasn't due to margin hikes. 

Wrong.  And Wrong. 



magpie's picture

Margin hike this morning in Shanghai.

If you are planning on making the yuan a reserve currnecy, gold is your enemy too.

Libertarians for Prosperity's picture

No. No. No. 

Today's selloff isn't because of Shanghai.  Besides, when Turd and The Doomers talk about margin hikes, they're clearly referencing the queen dragon and her lair - Blythe and the CME. 


Ausperity's picture

I figured it would be wise to take a poll to see what the other ZHers think of this joker "Libertarians for Prosperity" and his true nature.

Could he be...


A) A bitter nerd who is still hooked into MSM and doesn't understand why none of his smart friends like him?

B) A latently homosexual white male who has allowed his white guilt to justify his fantasies and make them even hotter?

C) An asshole who knows the score but types the tripe he does to make us lose faith in humanity?

D) A heavily oppressed minority who lives in an upper-income area?



I'll start... I'm guessing it's a combination of A and B... what do you guys think?

Terminus C's picture

The others are tempting but the more than likely answer is e)

Or... just a troll looking for attention.

EscapeKey's picture

Just a bought and paid for garden-variety shill. Kind of boring, really.

nope-1004's picture

Yeah, you're right.  Gold didn't hit $2000, therefore, it will never hit $2,000.  Those 3 sec. charts, maxed out to 24 hrs, tell the whole story.

It was never going over $1200.

Never going over $1500

When it hits $1800, then that means total anarchy.

Y'all have been saying shit like this for years.  When it hits $10,000, you'll look at a 2 second chart over a 3 hour period and claim it will never hit $10,005.

LMFAO at you!

DosZap's picture

LIber fo,@15:41,

This party is LONG from over................

Sinclair said to hold on, there would be days with $200-$300.00 swings, up/down, before the end of it.........this is GOOD, this a pause, this will be healthy for the NEXT leg up.

Hide and Watch.

slaughterer's picture

The $1900-$2000 range will be a very difficult battle.  It will take at least 3 or 4 attempts to break $2000.  Of course, if there is QE3, then $2500 will be a reasonable year-end target, as the USD will likely be devalued another 20%.

hungarianboy's picture

I'm not so sure with your argument. Here are a few reasons.


1: Gold went up on the assumption of inflation. Later as safe Haven. ( Safe haven for what? I rather have some CHF than Gold )

2: Real inflation? Ok where is all the money?

3: Looking at the FRA:OIS there is shortage of USD. So, why so high with gold? I think any possible QE3 or what ever is on the agenda is already priced in.

fuu's picture

You are lucky he is wrong once every 3 months or you would have nothing to talk about.

President Starkey's picture

Taking gold/financial advice from a chap who runs yogurt stands as the gospel is probably not prudent at this juncture.

I like the Turd but no one is right 100% of the time.  Cut the guy some slack.  I really do think he is trying to help folks.



DosZap's picture

Libertarians @15:19,

Well, LOL, HAVE you bought the DIP????

sasebo's picture

Anybody ready for some Austrian economics yet? If so vote for Ron Paul. Think Dr. Paul might shake things up a little bit when he puts Austrians at treasury, the fed & dept of justice?

Mises said in 1931 -

"Credit expansion cannot increase the supply of real goods. It merely brings about a rearrangement. It diverts capital investment away from the course prescribed by the state of economic wealth and market conditions. It causes production to pursue paths which it would not follow unless the economy were to acquire an increase in material goods. As a result, the upswing lacks a solid base. It is not real prosperity. It is illusory prosperity. It did not develop from an increase in economic wealth. Rather, it arose because the credit expansion created the illusion of such an increase. Sooner or later it must become apparent that this economic situation is built on sand."


Taken a look at the statists manipulated, phoney GDP lately?

Cassandra Syndrome's picture

Austrian School is by far the best. 150 years and 6 generations of economists who are spot on but never get a say in policy because its bad news for the self interests of policy makers! Its akin to Turkeys voting for Thanksgiving or Christmas!

White.Star.Line's picture

A good dose of Austrian School Economics combined with some healthy skepticism over government policy makes one a well-rounded realist.