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Steve Keen On Keynes And The Failings Of The Neoclassical School
When it comes to economics, our ridicule of the underpinnings of the dismal voodoo science are well known. Only Ivy league professors can profess to predict the future based on special case equations that isolate a system in vacuum, completely oblivious of the fact that nothing in the world is linear and if anything, a system based on Lorenz attractors and Mandelbrott theory would be far better suited to demonstrate that as far as predicting the future is concerned, it is nothing short of an exercise in futility. That said, we do appreciate the work of those economists who are first to admit not only their own limitations but the limits of the art, not science, that they engage in. Chief among them is Australian Steve Keen, whose work and analysis we always enjoy. For those unfamiliar with Keen, we have attached the following just released interview with Ross Ashcroft of The Renegade Economist in which he deconstructs the failings of contemporary interpretations of Keynesianism (in essence the usurpation of theory by those in power to perpetuate their own greedy practical pursuits), and exposes the core of neoclassical economics that guide every day macroeconomics for the sham it is: "fundamentally neoclassical economists are the priests of Capitalism, but the priests don't necessarily know there is god. They have this model of god and ditto with neoclassical economics: they have a model of capitalism which is almost but not quite, completely unlike actual capitalism. And they don't even realize that they have erected a smokescreen behind which if people want to rip the system off, then there is plenty of avenues created by these guys." Just a thought, but perhaps it is time for #OccupyWallStreet to pay a visit and #OccupyNYUEconomicsDepartment...
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Yes, I did listen to the interview. I have a lot of respect for Keene but I also see him suggesting that the change has to come from the top, from the right application of the right kind of economic control. I'm questioning the control itself.
Or, people who believe that an enlightened market (made up of "enlightened" people [who tend to seek positions of power at ALL costs]) is the "solution."
Sorry, but without some sort of ability for the market to understand the REAL future (didn't Keen talk about this?) we're fucked. No possibility of any seventh-generation thing here.
Sigh, even those who can see that enlightened politicians aren't the answer, aren't, themselves, enlightened... But, it's always easy and cheap to chastise others (all the while sitting on a personal bias that's loaded up on capturing as much as possible).
If you're suggesting that there is no "solution" then I agree...
Sounds like something a right wing demagogue Republican would say. Not suggesting that is what you are, but if you propose a 20 second sound byte simplistic solution with no substance, well...don't expect to be taken seriously.
I'm saying that waiting for a politician to "take on" the financial industry, without realizing our responsibility as individuals to control the power of those politicians, is dangerous.
The people who Keene paints as the victims, while they have been taken advantage of by politicians and banks, are also responsible for their own futures. As long as individuals depend on a politician to save them, they will have more of the same.
And calling me a right wing Repub is a little off, since Republicans are guilty of the same thing. "Elect the right man and all will be well". I think people need to take responsibility. The populace, in general, has for generations now, looked to government to provide for them.
I'm saying the mindset of the people needs to change in order for there to be a solution. Waiting for the right politician to come along is not the solution.
Keene suggested that in 2008 the banks should have been nationalized and all the people who mis-calculated and bought a house during the boom, should have had their debts reduced or forgiven, and given the deed to the homes. The moral hazard of bailing out individuals who make bad choices, is just as dangerous as the moral hazard of bailing out banks who made bad choices.
He wanted the govt to respond to distortions in the market with more intervention.
http://karmaisking.wordpress.com/2009/12/20/why-isnt-steve-keen-an-austr...
Also, Keen argued that in Australia they "didn't have a Fannie/Freddie that contributed" suggesting that it was free market that led to Australian housing bubble. When in fact Australia had incentive programs that distorted the market, encouraging homeownership, as well as manipulation of interest rates. He cannot logically conclude then that the "free market" created the bubble and that the solution is government oversight.
http://www.youtube.com/watch?v=YsoeVL5biq8
Furthermore, it always amuses me that anyone who questions Keen and the Keynesian solution, is automatically called a right wing Republican. The assumption seems to be that if I'm not a marxist Keynesian, I must be a neo-classical economist and support fascism.
From where I'm standing, Steven Keen and the Republicans are on the same side.
GOVERNMENT action, whether Keen's way or the Neo-classical way, are not the solution.
"Furthermore, it always amuses me that anyone who questions Keen and the Keynesian solution, is automatically called a right wing Republican."
Hm... I haven't that impression. But, if you're sensitive to that kind of thing then I guess that's your right to feel/see it that way.
"GOVERNMENT action, whether Keen's way or the Neo-classical way, are not the solution."
AND, as long as the "free market" discounts the future it too is NOT the "solution."
BTW - I'd hope that people understand that there is NO "solution" to anything. "Solution" is permanent, and as long as time keeps clicking away nothing is permanent. This is why I advocate mechanisms that provide for the greatest diversity and dynamics: that's why I'll continue to see "free capitalism" as the best looking horse at the glue factory.
I'm an equal opportunity analyst. I see people on both(?) sides spouting stuff that's two-dimensional, stuff that doesn't scale or model into the future. Instead of looking to address this point everyone runs around touting whatever their pet economic theory is, claiming superiority over the others. All fine and dandy, until, that is, we find out that we're arguing over who is the best horse at the glue factory. This is all mental masturbation.
Neither Keen or anyone else has any viable models because those models will HAVE to experience the real world of human hubris and greed, not to mention the real world of physical limits.
"Elect the right man and all will be well". I think people need to take responsibility. The populace, in general, has for generations now, looked to government to provide for them.
I'm saying the mindset of the people needs to change in order for there to be a solution. Waiting for the right politician to come along is not the solution.
**********
You're correct-but when Politicians have free rein on buying votes-the right man will never get elected-
What we need most of all is an anchor on our money/credit supply-
People need to be able to "save" and not have their money Inflated away which has the tendency to force people to borrow and spend on assets that rise in value in order to protect their buying power ie:real-estate for an example-but when the pool of greater fools dry up-it always ends in losses anyway-
This was Gold's function at one time where a penny saved was a penny earned and the price of Gold never fluctuates-
Inflation and Deflation based on trade balances becomes a highly functioning Psychological force in directing and correcting excesses and imbalances in the economy
Prices and wages ebb and flow with trade-but buying power remains relatively stable in either direction-
When people cannot buy their way into power and skim-the Sociopaths find a new occupation and honest people step up to the plate to lead the country-not for gain but for the betterment of their society-
"When people cannot buy their way into power and skim-the Sociopaths find a new occupation and honest people step up to the plate to lead the country-not for gain but for the betterment of their society-"
Never has and never will happen. Sorry. As long as levers of power can be pulled it'll never happen.
As to "the betterment of their society," what about the abuses that a society that's realized "betterment" bestows upon another society? Is this still a "better" society? Historically the "betterment" of a society can be shown to have been heavily based on wealth extraction from another society (or group of people [natives etc.]).
It all SOUNDS good and all, but it's that real-world application thing that starts to be a bit nagging. The founders of the US Constitution were VERY studied, yet they still managed to condemn the future of the US (based on hypocrisy from the very start with "all men are created equal," except our slaves and the other poor bastards that were here in the "open lands").
It all SOUNDS good and all, but it's that real-world application thing that starts to be a bit nagging.
*************
You completely missed the point and obviously have not studied the Psychological effects of the stern discipline of Gold standard-
GB had 100 years of Gold standard-no wars and at the end of 100 years it took the same amount of Gold to purchase the same goods and services as it did 100 years earlier-
You hit one of the nails on the head. The populace needs to take some responsibility for how we got in this mess and for getting us out. I see only one honest politician in all of Washington, and that is Ron Paul. It will take more than one politician to change anything, we will be waiting a long time for the right politician(s) that are honest, etc. to come along.
It takes a long time for wards of the state to question their benefactors and demand change. Come on people quit the two party game, failed -isms, etc, time to wake up.
I don't disagree, but Keen, better than most I've seen, clearly identifies where & what the problem is - the parasitical financial sector which has coopted governments and is killing the real economy.
Yes, individuals need to take responsibility and action, and with OWS, it seems they are starting to organize (hopefully into a strong enough voice to be heeded), but to slam Keen for warning that unless there are politicians willing to take on & neuter Wall Street, there will be chaos & violence ahead, seems disingenuous to me.
And if you comprehended what I said, I didn't call you a right wing Repub - in fact explicitly said I wasn't, but you offering a simple "government is the problem" comment certainly sounded like coming from one. If you have a problem with that, I can't help you.
pain and soros...
The reason that no politician could pull off what Keen suggests is that the politician would be assasinated if he/she even mentioned 'debt jubilee'...
Therefore, it will be left to a right wing wing nut rabble rouser to stir the populations to revolt/war... Hitler comes to mind.
And, with the backing of the "Church." Gott mit uns?
I keep telling everyone, quit trying to maintain levers of power as they'll surely be used against you. Let go of the fucking shore. Quit trying to construct all of humanity to conform to some ideology (social OR economic [which is the same thing]).
Either you get a nasty controlling govt to protect your "property rights" or you get nothing (except yourself and your neighbors). Can't be just a "little pregnant" here!
Don't disagree - in fact, Keen even expressed his concern about this & that with growing chaos and escalating violence, it will set the stage for another Hitler to emerge.
I haven't followed all his writings, and from what I've read, he is a deflationist who discounts the possibility of hyperinflation and seems indifferent to gold as a hedge, but he is bang on about the cause of this mess (Wall Street bankers) and the first course of action to avoid the eventuality of another right wing demagogue taking power is to neuter the bankers and return them to a utility rather than operating as the house of a casino where they win & the "players" lose.
Hari Seldon still claims the Imperial Empire will break up at the edges first before the core collapses.
Makes me think of my old grandpaw back in Mississippi in the 30's & 40's plowing his corn field with a mule. Some one asked grandpaw one day what was the hardest part of plowing with a mule. Grandpaw said, "getting it's attention" They then asked, "well grandpaw how do you get a mule's attention?" Grandpaw replied, "that's easy, you just hit it in the head with a two-by-four."
We just haven't gotten the attention of the fat cats running the banks & government. I can assure you one day we will. And just like hitting a mule in the head with a two-by-four, it won't be pretty.
Why spend precious energy trying to reform criminal behavior? Price of lumber is going up!
In earlier times they'd send offenders out on their own- ostracism. I'm thinking that WE all set out on our own without these folks, let them hang on to that which they'll sink with. It's not just the people, but the paradigm. Slamming the donkey just means that we keep dealing with asses. (apologies for substituting one animal for another- no harm meant toward either donkeys or mules)
This economist is an idiot statist who has obviously not read any Hayek, Rothbard, Mises, Block, Hoppe, etc.. etc..
Just another looter in sheeps clothing.
Glad someone agrees with me! There are some interesting debates online btwn Keen followers and Austrians.
He sees monsters where there are only theories. I'm tired of arguing with Yves Smith about this knucklehead. So now Tyler is promoting him. Ugh!
Classical and neo-classical economics is built upon an empirical edifice. This guy talks about it like it began as a cult or a religion. If the theories are no good, refute them or develop new ones in a rigorous fashion. Don't bitch about some global cabal of evil, fascist economists promoting a theory like it was brought down from Mt. Sinai. It's a straw man argument.
Economists propose theories that attempt to explain real-world behavior. Many of them fall short or are incomplete. The end. Where's the goddamn conspiracy? And he simply doesn't understand rational expectations theory at all, or he deliberately misrepresents its foundations. I assume the latter because he is clearly a smart guy.
I give him credit: he made some great predictions. He should have left it at that. Instead, he wants to promote Neo-Keynesian "religion" to replace the neo-Classical "religion" he abhors. Obama/Pelosi have shown how well this works out. It's like a Vitalogist criticizing a pre-Renaissance barber.
Where's Hayek when you need him?
Well you're wrong about what he said though. He said Neo-classicals are amongst the most altruistic and actually believe what they're doing is helping everyone. He never claimed it was a cult or secret conspiracy.
However, he still just said "Lol it's shit" and never explained why. I'm sure he explains why in his book, but it's not like I'm gonna read it.
All economists are statists in the end. Show me where "less is more" is to actually be actualized and i'll show you a liar. The fact is implicit in "less is more" is "more have less" and hence...government. From whence New York City you ask? Hard to imagine but there used to be a time when that town bailed out the Treasury Department and not vice-versa as it is now. And so the wheel turns...
If the theories are no good, refute them
////////////////////////////////////////////////////////////////////////
The thesis were refuted by ongoing progress.
When one makes predictions and it is not validated by progress, the thesis is dismissed. A starting state, progress, sampled state. If the sample does not validate the prediction, the thesis is void.
All that economists talking is just an effort to provide themselves with activity so they are not out of work.
I have never met a professor who had any common sense. Case in point!
Don't get around much?
It's statements like this that rally angry mobs to incite violence, and usually done by armchair warriors unwilling to get their own hands dirty. Sigh...
Here's a professor with common sense:
http://video.google.com/videoplay?docid=4364780292633368976
Pitching out all professors with the bathwater is like tossing out science because someone's misapplied it (science being a PROCESS of discovery).
All said, if you're talking about economics professors then I'd have to agree. Economics is only a mechanism for presenting a front story to cover the scene-of-the-crime tracks of/from the rich.
"while china pulls us up"
mmmm, sure bout that?
he says that Australia is saved by its mineral exports to China.
Spending a lot of time stroking it eh? Really got a hard-on over this...
Anyone who was looking at this with an open mind would have heard him say that Australia is CURRENTLY doing "OK" because it has resources (that China wants).
Since NOTHING can last forever, using the word "saved" is meaningless (in ANY debate): if one wants to use it then it needs to be specified as a durational event. Eventually China WILL stop importing from Australia and Australia can no longer claim to be supported/"saved" by their mineral exports.
I see no one talking about the elephant in the room, and that's how one's pet economic theory is going to do when growth no longer expands/increases.
Steve is awesome. I have held back in posting this link. Why? I have been at the bottom of the barrel twice in my life. REPEAT TWICE!!
Each time, without government intervention or special favors to borrow money from my friends. I bailed myself from my mistakes.
Today, I'm debt free and live life like a incognito peasant. Sure I have three houses and four cars, but you would never know it. My blood boils when I see OWS. Will never forget how I survived without any government assistance and turned my life into a success story.
Link from CM:
On Friday October 7th, a beautiful blue-sky and warm-ish October day, I went to Francotti Park in NYC with Livio Sanchez (film editor) and Debby Brand (camera operator) to see firsthand what Occupy Wall Street was all about and record what we could
Occupy Wall Street: What's Really Going On
All I see are dirt bags who are promoting a United Nations faction.
Atomizer, because you are the prototype for what humans should be, you should start gathering the contingent to form your own society.
Defined territory is not a form of society, yet it has been an axis of evil for ages. I don't recruit. During unsettled times, America and our global community beats as one heart. This is how society operates in one note of harmony. Never forget these words..
Oh I won't. But I do wonder how you plan to cut out the diseased parts of the heart. You shouldn't pay them off, so what's the alternative?
That's up to our society to decide!
Atomizer's life can be yours too for only $19.95 FRN's! (a $99.99 FRN value!)
CALL NOW OPERATORS ARE STANDING BY
well...what are you going to do about it then? they really are the 99 percent! we can always go on pretending "they" don't exist. Well...from Ancient Rome to today..the human race hasn't changed one bit. Pardon them if they impose on your success story...but let's be real here...these folks aren't protesting because "they didn't make it the old fashion way"....they protesting because they know a foreclosed future when they see one.
I think your math is off a bit: 3,000 protesters/8,000,000 people in New York = 0.0375% (just a bit shy of 99%). Even if there were 10,000 protesters (which I doubt very much) you're still a bit short of 99% at 0.125%.
Don't bring numbers into this. It confuses some people.
While you're at it, go ahead and work up the numbers for those who control (or think they do) the lot of us.
But, what, in order for you to accept that there are more people out there you require how many for you to count (from your couch)? Would that be more less than could possible squeeze in some physical area?
The Titanic sunk from ONE iceberg.
I prefer to think of this in terms of The Matix, where it's up to each individual to stop believing in the false system (built and maintained by TPTB).
"OldTrooper" by chance part of the Praetorian Guard?
The Anti-Keynes collection, including the more-recent rebuttal of Keynesianism by Hunter Lewis titled:
Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts
http://blog.mises.org/15469/the-anti-keynes-collection/
After I finish that excellent book dismissing the conclusion given by that other excellent book on the sex of angels, I'll give that collection a try.
Propagandists partnering to give their propaganda substance... So funny and so US citizenish.
Even Keynesian practise needed a revaluation of the shiny stuff - there is no one God - we are living in a complex Greek universe.
That video is sad , if Keynes had only lived longer the whole present would be different right ? Then Centralized Control would have worked better. Reminds me of a guy whom i conversed with on the web who told me that Karl Marx was just misunderstood and misapplied and that's why communism has never been applied properly wow..
Also reminds me of all the hardcore capitalists who say that capitalism hasn't really been tried.
Perhaps everyone and NO ONE is correct?
This is nothing more than dogma. NOTHING is PURE or CAN work (can be dynamic enough), can operate in an actual REAL WORLD without being distorted (unless you want to employ a global structure, and I'm not thinking so).
I'm still wanting to know how capitalism (in the real world) can manage to operate without perpetual growth. Never mind it working without being hijacked. And never mind the question of how a very limited govt can provide "property rights" should growth stop or massive imbalances occur.
Hey, I'm all FOR something else. I'm also ready to watch all other wannabes fail: well, I dislike pain, but I like to see humility served up.
We have seen (and listened to) the Enemy and he and she are Emotional Nuts and spoiled beyond belief. Frankly if your a rightwing nut or left wing nut your still a nut.. whe you see people foaming at the mouth you are seeing trouble and the Soverign man (simon black ) is right as far as not being to tied to one country if things get outta hand..http://heavenbounf.blogspot.com/2011/10/we-have-seen-and-listened-to-enemy-and.html i don'gt care what [people are spewing when they are this worked up and others listen to and give them encouragement you have a bomb waiting to go off in peoples with this sentiment...
No NO no!!! un fettered capitalism is a recipe for annihilation.. that is what Keen is saying/ Have a game of football or any sport take away the referee and watch what happens it gets very ugly...
Ther is also an argument that the referee can spoil a game by doing too much and over interfering that is valid and always requires review.. but you right wing morons that want the referee removed completely are getting what you want and it is very ugly....
Tyler please keep printing Keene, another beacon of truth in this cess pit of abject misery....
But..... if the referee has a gun, a for-profit prison system, openly takes bribes, and is above the law, then it looks a bit less like a football game, and a bit more like the UNITED STATES.
Sure, if we just SAY that everyone is equal then everyone IS! Never mind the (BIG) head-start (by folks like the Rothchilds etc.).
But, That wasn't the System that everyone here advocates, That one is DEFECTIVE! Theirs would never suffer such problems because it's PURE; only the poor and "non-productive" (yeah, like making iCrap is "productive" go ahead and defend the meaning of "productive," folks) could fuck it up. Yeah, we hate those systems that try and provide any sort of equalization to the victims of our past failures, and OUR system, assuming we get to keep what we currently have (and the others can stay down where they belong, because, well because they aren't important, they don't make stuff that "helps" society, stuff like iCrap [that we use to program them to stay in their place]).
I just see Keen doing the exact same thing as all those who are arguing that capitalism hasn't really been tried. Purity only exists in the mind... And, just like all the major religions that claim that the Messiah will only return when everyone converts (the world has been made pure, or some other equal impossibility), we're NOT going to get everyone on the same page (I'd be concerned that any attempt will only create one big homogenized population that will tragically discover that on that theoretical chalk board they forgot to add in the part that this is a finite planet).
"but you right wing morons that want the referee removed completely are getting what you want and it is very ugly...."
OK, let's settle down on using ugly labeling.
For me I'm happy to see "them" get what they ask for. I suspect, however, that when it doesn't turn out to be as the "theory" said it would that they'll find someone under a bridge or something to blame for the failure: pretty standard human nature.
I'm really interested in seeing how the "property rights without any govt of substance" thing works out.* Stocking up on popcorn! (though I DO worry about shortages, but I'm assured that pure capitalism will see to it that nature would never run out of popcorn)
* NOTE: I champion for NO govt, that way abuses won't be tolerated (hidden behind separate law structures). And, yes, I realize that I too will be subject to any harsh realities, but then again, we're not going to escape this end either...
Damn Straight!
It is funny how expansion leads people to see failures when there is only normal progress.
The current situation is simply a normal stage in expansion.
One drinks a lot, one gets a hangover.
It is rather futile to try to avoid normal consequences.
You do not want hangover? You dont drink much.
Alas, indeed, this solution, while simple and efficient, does not appeal to US citizens.
US citizens had a similar issue with soda drinks. They used to contain a lot of sugar and drinking a lot caused people to get fat.
So they innovated. They brought on substitutes for sugar. Result: you can drink a lot of soda drinks, no longer get fat in the doing but expose yourself to contract more serious diseases than obesity condition.
The mere solution of drinking less soda drinks was not US citizenish so...
Ha!
Set = humans
Subset = "each of us"
"Each of us" doesn't want others to tell us what to do. "Each of us" is a human. "Each of us" cannot tell oneself what to do! (except, of course, to "consume mass quantities")
Please do not tell me that I cannot tell myself that I cannot tell myself that I cannot consume! It's too confusing!
Ah yes, the faith based economics, read Keynsian, crowd trying to claim that the present iteration of Keynsianism has it all wrong. But the next one will surely interpret Keynes correctly. If it sounds familiar, refer back to the debates betweem the Trotskyites and the Stalinist, or the Stalinists and the Maoists, or the Leninists and the Keynsians. Oh wait, it's the same church, just a different denomination. No wonder they can't figure out capitalism, since they still haven't figures out socialism. But the reason they've stopped trying to work their intellectual magic on sicialism is because they instinctively know .......wait for it....socialism es muerte:)
I checked out Keen's website and on one of the threads he commented that using gold as money was an attempt to commoditize it. Essentially he thinks gold as money will not affect bubbles and busts. In his words, it is orthagonal to the problem, and he focuses on ponzi debt systems.
Would someone please tell Keen that our ponzi debt system enables fiat money and inflation tax on the middle class? And that with a gold money system, you couldn't have ponzi debt systems because as a commodity that requires labor, it cannot be turned into a ponzi.
I would register on his site but he requires payment and I'm not gonna pay the minimum $2 when I'll never bother with his site again.
No thanks, not interested. He misses the whole point about the Fed and their role in the financial crisis of this century.
Except physical gold is never the currency the market decides one given a free choice ... the lure of interest is too great. Without government regulation free market actors will voluntarily chose fractional reserve banking ... historically proven.
The moment fractional reserves come into the game it all turns into a confidence/ponzi game again ... we've always had booms and busts, gold or no gold. Fiat currencies "merely" make it easier to hide corruption for longer, 4 decades of massive trade deficits is an accomplishment which would not have been possible on the gold standard, but it's only worse than fractional reserves in degrees.
Marco,
I respectfully disagree. Gold has been money much longer than paper. Yes, there are elements of society that choose paper systems. These are politicians and socialists that look to take advantage of society by instituting a corruptable fiat money regime. However in history the clear choice of the people has been honest money. It is only in the last century that the educational system, media, etc.. has been so completely controlled by those in charge of fiat money that we have lost site of this. But the frame of reference for 5000 years is very clear.
Yes we have always had booms and busts, but they were smaller in the past with gold as a regulator. It is fact, you can study it.
Keen appears to be an educational elitist that wants the status quo and rails against ponzi debt so you he can have power in the direction of the economy as an 'expert'. Ignoring the Fed and fiat money shows he is not interested in change benefiting the people.
It was businessmen (goldsmiths) who created fractional reserve banking because of greed and it was the man on the street who went along with it because of greed and short term thinking. Promissory notes from banks with only fractional gold reserves were the standard currency long before the last century started ... you just can't blame fractional reserve banking on government and socialism without being disingenuous or naive.
"Yes we have always had booms and busts, but they were smaller in the past with gold as a regulator. It is fact, you can study it."
Psst! This is the year 2011. Total global trade (and associated dependencies) and population sizes are significantly greater. And we're now collectively encountering a shrinking resource base: in the past we'd just go on to conquer others, but "others" today have been pretty much exploited).
When will people get it? BIG = FAIL. And that goes for a BIG GOOD WITCH (pure capitalism or whatever).
As Marco states, time has given us the outcome, and it's pretty clear that we're not liking it. It's a clear demonstration of what happens when systems go BIG. If people can provide some semblance of an argument on how Their system could keep from getting BIG (or, somehow magically defy nature's forces of keeping things from getting big), getting corrupted (we're talking a lot of power-hungry people out there!), AND of it addressing the issue of no-growth (due to physical REAL WORLD limitations) then I'm all ready to go! Until that time I'd suggest that people quit with all the superiority shit: I am on board for the existing to go bye bye (not because I have a plan to replace it with MY pet system, but because I've sided with nature, and nature dictates that it's coming to an end).
I like Keen and he is right about debt, but we haven't had real capitialism for a while. Socialism sucks, except for the elites and rulers!
PS. Crony capitialism also sucks!
Concentrated power (in man's hands) sucks!
P.S. Socialism for only the elites also sucks.
Great insight!
"NEVER overate sincerity."
"The most sincere person you will ever meet, is the person chasing you down the street, with an axe, trying to chop your head off!"
With all 'sincerity' - trusting neoclasical economic thought and those so called economists, who continually tout that falsely proven point of view, is what has gotten the world where it is.
And YOUR sincerity is?
Oh how fun it is to toss rocks at glass houses. Problem is is that all our houses are made of glass. But, I'm sure that this gave a sense of self-superiority, and good on you for sharing your orgasm with us!
Don't bother buy Steve Keen's book: Debunking Economics he peddles. It's an unreadable diatribe!
We all know that >99% of economist didn't see the current crisis coming. What more needs telling.
I wonder if his reference to a deleveraging peak of 15% per year during the great depression not exceeding 5% /year since is accurate. Which country was he referring to that currantly is deleveraging at 25% per year?
They have a model of capitalism that is almost like but which is really completely unlike actual capitalism- well said.
Beware the silver bullet syndrome.
No matter how many times humanity reattaches the fallen wheel and returns to the wagon seat, the wheel will once again fail.
It isnt enough to just repair the wheel and dust off ones hands.
Be ever vigilant or be resigned to ever stopping for inevitable failures.
Foraging species band together for protection. While many are feeding with heads down, others are alert and watchful for danger.
Only the predators work alone.
Vegetation can be browsed to oblivion, in which case one could say that it too can be killed, and by groups of foraging specie.
I'd also say that a herd of thundering cattle can do more harm than a single hawk.
An interesting study about animal behavior, which is also a discussion on humans, is Peter Kropotkin's Mutual Aid (available on an Internet [for free] near you).
But, I (tend to) get your point.
Sometimes humor tells it best...
http://www.youtube.com/watch?v=hTvJbmRoxHQ&NR=1
I don't believe that it mentions any actions or solutions: good, because I don't trust anyone to build a cage for me. Am pleased that SOMEONE can note/identify that endless growth on a finite planet is a poor strategy: it was only a small bit part, but better than nothing I guess. I'm sure that this point will be dismissed because it comes from the "other" side of the political spectrum.
It is, at times, difficult to wade through all the subtle changes that have occurred in this country, particularly the truly drastic changes that took place during the 20th Century. The problem is that there is simply not much information about these subtle, but drastic and transformative changes that were implemented in our government and country but, there are hints.
These hints can be found in various publications, documents and news sources from the period from the 1930's to our present day, but the interpretation of these hints requires connecting dots that are not always apparent. One area in particular went through a massive and relatively misunderstood metamorphosis beginning in the 30's and today we remain trapped by those changes in the very foundational structure of our economic system.
It was, without a doubt, a revolution; one that completely overturned the order and role of our government in our lives. This revolution came in the form on a complete economic transformation that promoted the intervention of government into the markets, but that was just part of the story; for this transformation allowed the government to expand its ability to intervene into every area of the lives of the American People.
Under the cloak of saving free market capitalism this revolution subverted the very foundations of the free market and throughout the process it has been instrumental in subverting the Constitutional foundation of individual freedom within this country. The Great Depression opened the door to the imagination of economists and politicians; since that time it has run wild.
The government came to the rescue during the 1930's and has been in the rescue business ever since. What the American People didn't know was the heavy price of that rescue; most are still unaware of the actual price that they have paid since the government came to the rescue or the price they continue to pay. They say that nothing is free and that has never been as true as what we have been wooed to relinquish in return for what is purported to be economic security.
We look at what occurred during the 30's and think that the government only intervened in the markets, banks and industry, but the truth is that this was only a portion of the rescue plan that revolutionized the foundational economic and political principles of our country. The other part of this rescue plan involved the government playing a direct role regulating all income, savings, and investments and spending.
Of course, we think we are in control of our income, our savings, spending and investments, but the reality is that the government has implemented controls through various subsidies, taxation, as well as government ownerships and partnerships in various sectors of the economy. Even wages and prices are manipulated through this system of government management. For decades we have been fed the line that we live under free market capitalism, but it is impossible to compare what this government has done over the past three quarters of a century and believe that it remotely resembles free market capitalism or freedom, for that matter.
With the goal of full employment and capacity production, this government began to take a path that would radically change the entire complexion of not only the political economy, but the social economy of this country. In the process, the structure of our government was also transformed into a system of bureaucratic administration responsible for the management of this massive economic machine they created. Once this system was created it could not be abandoned without massive economic and social disruption, the political price for such disruption would simply be too high a price for the politicians to pay therefore, it continues. Of course, it is not without its benefits, but those who benefit are not the working men and women of this country.
In order to sugar-coat the reality of this massive management system the government bureaucrats invented various labels such as "Compensatory Fiscal and Monetary Policy", it simply sounded much better than Government Managed Economy, but the name doesn't change the meaning. The drift into a socialized system of economic, social and political management began during the 30's and the march toward a full-fledged, systematic socialistic government has continued unabated. Once implemented, the system became self-perpetuating.
As J. Kenneth Galbraith said:
"There is a widespread notion that one of the most primitive of modern ideological choices is whether a government shall be Keynesian or not . . . no present or future administration really has the non-Keynesian choice."
Regardless of which political party is in office, the nature of this political economic system, once it was implemented, became self-perpetuating. It moves the country toward a self-socializing form of government regardless of the desires of the People of this country and even our elected representatives. The revolution in economy thought during the 30's was far more than economic in nature; it was also completely revolutionary in the political and social arenas as well.
By the 1940's this revolution in "new economics" had infiltrated the universities of this country and permeated economic thinking to the point that all opposing views were effectively rooted out of the higher educational system in this country. A generation of economic students were completely indoctrinated in the essentials of this new economic catechism. By 1950, the majority of universities and professors were teaching this new economic doctrine, textbooks reflected the accepted doctrine and the students were oblivious to just what they were being taught since it was the only accepted school of economic thought presented.
The truth of the matter is that so-called new economic theory was not new at all, but a revival of core socialist patterns of economic thought that were formulated during the second half of the 1800's. This core socialist pattern involved government intervention into economic affairs that would gradually lead to government intervention into social affairs; the outcome of which would be a transformation of the entire political structure of the country.
One of the ideas that arose from The Great Depression was the idea of "social-consumption expenditures", sounds innocuous enough until we understand what it means and the purposes behind such expenditures.
Lawrence Klein, in his book "The Keynesian Revolution" provided the meaning and the purpose behind such expenditures:
"We need a non-profit institution like the government which can provide a comprehensive, minimum program of social security in order to reduce the propensity to save. This program must cover the entire population, and it must cover all those contingencies which cause people to save on a large scale for the future."
While maintaining the label of free-market capitalism and individual freedom that is associated with it, we have a system that both confiscates and redistributes the labor property of people in order to reduce savings. In a managed economy, savings is an anchor that weighs down the movement of the entire system of this political economy. Under this managed system savings must either be drastically reduced or eliminated all together in order for other aspects of control to take place; it is easy to see that the reduction of savings in this country has been achieved.
Remember, the goal is worker productivity, full employment that allows the system to continue maintain control, particularly social control; without it the flaws in the system quickly become apparent. The focus therefore, is jobs; even the most useless jobs are considered vital to the entire complexion of the system. To understand just how far this ideology goes the words of Theodore Morgan explains the extent that the government will take in order to maintain the system: ". . . even from the point of view of output, it is better to employ men in digging holes and filling them up than not to employ them at all; it is better to employ men to make products which we thereupon dump in the middle of the ocean than to leave them idle."
Of course, all of this was seen during The Great Depression, the government followed the recommendations of Keynes to "do something". This rather strange concept can be found throughout the economic theories of those who espoused the "new economy". While it is apparent that those who follow such economic thought must have considered their proposals and theories logical, the following example should show just how irrational these people were, and still are: "Giving money to foreigners is a form of "investment," even though we get nothing in return. If we could only export one of the printing presses used for the manufacture of Federal Reserve Notes to, let us say, China, our foreign investment would be enormously higher."
Keynesian lunacy has run rampant in our country and still, to this very day, influences our government in ways that few understand. According to these ideologues, government spending, obviously of any type, stimulates private employment and economic stability, yet it is all financed through taxing or inflationary monetary policy which drains and strains the entire "private sector" within the mixed economy. As we have seen, this government, along with its partner in managed finance: the Federal Reserve Bank, has effectively manufactured the monetary system needed to achieve the socialization of this country, without the use of a fiat monetary system none of this would be possible. It is also a mistake to believe that the Federal Reserve Banking system serves an economic purpose, it does not, its purpose is political in nature and the directors of the Federal Reserve are completely faithful to the political trust of those who appointed them and the legislation that allows the bank to continue functioning in a political capacity that promotes very specific socio-economic agendas.
Those who followed Keynes were well aware that sound money had to be destroyed otherwise there would simply be no way to implement the complete core socialist pattern in this country. The various proposals of Keynes and his subsequent disciples, who advocated "compensatory fiscal and monetary policies", by implication, necessitated the abandonment of sound money and this was accomplished by the introduction of inconvertible currency. Once the currency became inconvertible it was merely a formality to then create a total fiat system, which was accomplished in 1971. As Nixon said when he cut all ties between the U.S. Federal Reserve Note [once known as the Dollar] and gold: "We are all Keynesians now!"
Of course, Keynes was well aware of the dangers of fiat currency, so too have his subsequent Keynesians and Keynesian-derivations. They have all readily admitted that inflation, and the depreciation of the fiat currency is a problem, but they maintain it is controllable, but the controls are as onerous as the problem. Thus to prevent the effects of an ever-expanding fiat monetary supply, these proponents maintain that the government must have the power to manipulate credit, interest rates, prices and wages. The government, in accordance with this ideology, must be "given" total control over all fiscal policy.
This control, this power "allows" them to spend whenever and spend whatever amount that they "feel" is needed to stimulate the economy, but it also "allows" them to tax, regulate and stifle to any degree to restrain the subsequent inflation brought about by their print and spend fiscal policies. What this means is that the government central planners have a direct affect on the lives of each and every American. Not only do they directly affect the lives of Americans in terms of individual income, savings and expenditures, but essentially the future of the American People to actually determine the direction of their lives is also affected by these policies.
Now, because of the very nature of this "new economic" system, the only alternative to this form of management is for the government to implement wage and price controls. If all of this sounds like Socialism, there is a reason for that. Many of our politicians; and most of those who adhere to the officially approved economic thought don't seem to realize just what this system has done and is doing to this country. It is absolutely amazing to listen to our politicians, the economists they listen to and the media that covers this entire theatrical production of folly and irresponsibility. The have utterly failed to grasp the fact that by "allowing" government to maintain complete control over fiscal and monetary policy that it has effectively abolished the free market principles that promote individual liberty and freedom. The entire concept of government control over the aspects of the market is completely inconsistent with the Constitutional traditions of the United States and destructive to those means.
However, to avoid the flaws inherent within this mixed and managed economy, the government must maintain and expand its authority over taxes, spending, credit, investment, wages and general price controls otherwise the system eventually stumbles. Thus, the self-perpetuating nature of the system becomes of paramount importance even though every solution becomes a subsequent problem that requires yet another solution which creates even more problems. The cat cannot stop chasing its own tail.
Again, to understand the mentality of these "new economists", these Keynesians and Keynesian-derivatives we need look no further than their writings. When dealing with the rapid increasing debt, these economists seem to give us a choice between two untenable conditions. As the Stanford economist Tarshis stated: "If we do not want high debt, high interest rates, high wages, and high prices, then in effect we do not want high employment and prosperity." Such logic is required by this political economic ideology and by implication, the system does not allow for one without the other.There are so many connections that are unseen in this system, so many forces at play that few know the consequences of the interactions of those forces, but the consequences are becoming more and more evident.
One such consequence we are facing today is that of our creditors and their willingness to continue to finance our economy through the purchases of U.S. Treasuries. Even a few decades ago this question was on the minds of the Keynesians, once again as Tarshis said: "The only question, then, is whether the government can always find a lender or someone who will accept government bonds. In the final analysis this is no problem for the simple reason that the government controls the Federal Reserve Banks and can always compel them to buy government bonds. Anyone who controls a bank and is free to make the rules under which it operates will have no trouble in borrowing money. The government is in precisely this position, and therefore can always secure funds.There is no sign that a high debt exhausts the credit of the government of the United States. And since as a last resource "it can borrow from itself," there need be no fear on this account."
In the same vein of thought, Lawrence Klein said: "An internally held public debt can never be a burden, because we owe it to ourselves." Of course, this line of thought rests solely upon the idea that the managed "mixed economy" can, under the "compensatory fiscal and monetary policies" continue to grow enough to produce a balance between production and debt, thus affecting the ability to reduce the burden of debt. The balancing act cannot however, be sustained under such an economic system because the system is in constant conflict with the natural market forces that always seek to correct distortions, particularly when those distortions are created by numerous and massive external interventions which seek to artificially manipulate the economy for social and political reasons. Those social and political reasons are based in the concept that the government is the sole provider of appropriate social action, thus it is therefore, the sole granter of all benefits to achieve such action.
Another Keynesian voice from the 50's denotes the attitude that now flourishes in this government: "Probably, majority opinion agrees with our own national policy that the right of a man to engage in business for himself is not a basic freedom." ~ Theodore Morgan. This grand ideological experiment has created the most unbelievable contradictions in our country; while labeling itself as the defender of our liberty and freedom on one hand, on the other it implements policies that are totally and absolutely alien to the principles this country was founded on. It is as if those in our government cannot understand the connection between economic freedom and individual freedom; there is no concept within our government that not only does "compensatory fiscal and monetary policy" infringes upon the liberty of the People, but that it actually contributes to a steady decline in the economic prosperity of this country.
Make no mistake about what the so-called ethical goals of this government are, those goals are doctrinally Socialist whether it is ever admitted or not. Through the years, the decades, it has been easy for these ideologues to accuse and blame free-market capitalism for all the economic and social woes faced in this country, yet when we understand that those economic and social woes are not the result of free-market capitalism, but are a direct result of seven decades or more of government intervention and social engineering.
Even today, the People are hearing that in order to save free-market capitalism we need to abandon the principles of the free-market. Saving capitalism seems to be the favorite mantra of Socialist ideologues and yet, today, as in the 1930's, the problem is not the free-market, but the distortions brought about by government intervention. Under this Keynesian Socialist system the solutions always turn into problems that require more solutions; this fact is clearly evident by looking at the effects of this economic thought in this country over the last seventy-five or more years.
Through the decades, there has been a growing vested interest in the various types of government spending, especially in terms of subsidies; political corruption is a natural outcome of the creation of such vested interests. Indeed, along with vested interests in spending and subsidies, there is the inclination toward inefficiency and waste, not only in material resources, but in terms of human resources as well.
We have allowed our minds to be glossed over with decades of indoctrination that presents a completely different portrayal of our political, social and economic situation in this country; the reality is concealed by years of acceptance and compliance. Those who continue on this diet of social preferences, politically correct social planning and the collective conscience of our country never understand the problems that such policies create, they simply appear unable to see the connection and therefore they must always seek yet another scapegoat on which to place their hands before banishing the animal to the wilderness. Eventually there will be no scapegoats on which to place blame and they will have to take full responsibility for the policies they have promoted and enacted.
As a former Keynesian, Dr. L.A. Hahn stated: For it [the Keynesian view] presupposes an economy whose members do not see through the changes brought about by monetary or fiscal manipulation or as some might say, the swindle. Above all, it presupposes that people are blinded by the idea that the value of money is stable by the "money illusion."
Indeed, Keynesian Economics and its derivatives are little more than the Economics of Illusions, but it appears that those illusions have been so pervasive and obviously persuasive that few in their ranks question its validity. The concrete proof of the illusionary nature of these economic theories is the economy itself; it is the product of such nostrums. As such, it is impossible to believe that based on the illusionary nature of these theories and the application of those theories that a healthy economy can be produced by the policies that emanate from them. If the assumptions are incorrect, then the results of those assumptions will also be incorrect.
Contrary to those who are following closely in the footsteps of Keynes and his theoretical descendants, it is impossible to have underinvestment in free markets, additionally if they seek a remedy for unemployment they need look no further than to a return of free market labor and the removal of trade barriers, which, by the way, includes the so-called free-trade agreements which are nothing more than managed trade.
There is no alternative, for as we are seeing this government is following a well-beaten Keynesian path toward even further dislocation. It is absurd to believe that this government, by utilizing the same type of policies that created this economic dislocation, can, by simply enlarging those polices, cure the economic ailments that this country now suffers. The government is once again embarking on yet another easy-money policy to solve the problems that easy-money polices caused in the first place.
Unemployment cannot be cured by such actions; perhaps I should say that employment, productive economic employment, cannot be created by such actions. The government is once again traveling down the expedient road that will ultimately lead absolutely no where. Thus is will only perpetuate and in the process only aggravate the very problems it seeks to solve. Eventually, these forces will converge into a situation that is completely beyond the control of any policies, but for some reason those in our government are blinded by the idea that although the solution they are seeking to implement has been the source of the problem that maybe it will work this time if we throw much more money at it; the results will be catastrophic.
Decades have proven that Washington, D.C. is filled with weakness and immense amounts of bad judgment; as well as political officials who are willing to yield to various influences that are far from beneficial to this country and its People. Perhaps the circumstances faced by this country will finally awaken the People to the reality that they now find themselves and in the process the People will once again place demands for real responsibility on every level of government.