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"Textbook Economics" Quote Of The Day
For our quote of the day, we go to none other than the Fed's favorite mouthpiece, the WSJ's Jon Hilsenrath:
Fed officials have been frustrated in the past year that low interest rate policies haven't reached enough Americans to spur stronger growth, the way economics textbooks say low rates should... Multiply the fruit of cheap credit across millions of households—with healthy portions of interest savings spent on goods and services—and the U.S. should be recovering more quickly, according to textbook economics.
No... not the textbooks... Does this mean... Economics 101 is... nothing but one epic lie, based on Ponzi assumptions which work in a world of constant and gradual leveraging, and completely fall apart in a deleveraging world such as the one we have now?
And will the Fed, in its attempt to prove its blind faith in voodoo correct, destroy the real world by stuffing the CTRL-P channel full of increasingly more meaningless electronic dollar equivalents, merely to confirm once and for all that the Keynesian utopia may be an illusion, but nobody will be left to enjoy the aftermath of the biggest lie of the past century unraveling?
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Especially all the ones that are no longer used because of their long term effects, the methods that caused more harm than good and the many that doctors still don't understand. You might as well go to a witch doctor. They're just highly paid mechanics with a license to drug people.
And those who do both can make a lot of money :)
I think there might have been a reason its called Keynesian THEORY. i think after 3-4 years we can say this theory does not apply in all situations. Obviously its time to change directions and try a different method. Lets not keep thrying to cram that square peg into that round hole because the THEORY says it should work.
We haven't been trying Keynesian theory. What we are doing is Milton Friedman's theory.
Its a mix of keynes and monetarism(friedman), for example purchase of MBS securities. Also jsut generally supporting the US government "stimulus" of spend and pretend.
The government has been cutting spending. We had shortlived, too small, stimulus in 2009 / 2010 and Keynes has been nowhere to be seen since then.
Cut in spending? Did we just raise the debt ceiling, yup. are we going to breach it again? Yup.
So you don't know the difference between government revenue and expenditures? When you factor national, state, and local, yes American government is cutting spending.
And what of the trillions upon trillions of unfunded obligations? How will we "cut" absolute spending in the face of massive increase in transfer, ss, pension and healthcare payments that's only just starting? States are "cutting" present budgets so they can pay those other massive payments that dwarf the budgets. There is no net cutting, none whatsever and there never will be until insolvency or hyperinflation.
Are revenues down? Yup.
This is pure monetarist supply-side hokum; not even a whiff of Keynes General Theory to be found.
Consider what is being advocated below:
"If, on the contrary, money-wages were to fall without limit whenever there was a tendency for less than full employment, the asymmetry would, indeed, disappear. But in that case there would be no resting-place below full employment until either the rate of interest was incapable of falling further or wages were zero. In fact we must have some factor, the value of which in terms of money is, if not fixed, at least sticky, to give us any stability of values in a monetary system."
Uncle Milty wasn't much of an influence before the 80's. You need to blame Samuelson as well now- he of the mathmatical model, but that debt cycle garbage didn't work before Samuelson either. Keynes was the start for the big debt train, it is a little late to try and blame others for picking up the speed.
Reagan was the start of the big debt train Before Reagan we, as a nation, were responsible with our finances. Keynes argued that you should not run deficits when the economy is strong.
You might want to check you're economic history. Nixon was the start of the worse part of debt and inflation when he closed the gold window in 1971. Reagan (traitor that he was) was a pip compared to Bush and Obama.
Keynes also stated that government would never stop running deficits and that a totaltarian regime was best suited to his theoretical framework. Easy to prescribe medicine that will never be swallowed.
Absolutely untrue. Vietnam was a huge splurge before then and the crazy rates of the 70s were it's birthright.
Annualized spending rate of increase for Obama 1.4%...for Shrubya 5.3% (LBJ was 4.6% from '63 to '69).
You missed the 'guns and butter' policy in the 1960's with LBJ? That led directly to Nixon's closing of the gold window in 1971.
EDIT: point already made above. Thanks
This doesn't change the fact that Raygun tripled the national debt with his "Don't Tax Still Spend" for two terms.
a little off target in time but probably the eventual outcome
Russian economist and academic Igor Panarin says that there is a strong possibility that the United States will break into six pieces by June 2010,
http://www.youtube.com/watch?v=Jxi-DB3PiLQ
I wish the EU would take the NE corridor, DC and the Fed! Us flyover peons in the midwest would love to be part of the Republic of Texas... might get a decent, real monetary system out of it....
Apparently Hilsenrath's textbook doesn't have a section on Liquidity Traps. All the more reason why nobody should listen to him, he doesn't know basic economics.
IT'S THE DEBT, STUPID!
What good is ZIRP if there is no significant capital base outside of the Russell 2000? BAC can borrow at 25 basis points and charge north of 20% on revolving consumer debt? Damn good deal for them, sucks for Joe 6-Pak, who has been laid off for the last year in surburban Atlanta and is 90 days in arrears on his underwater mortgage and maxed out on his CCs.
Of course, Ivory Tower Acdeme has no friggin clue about normal life in flyover country, so Mr Hilsenrath's ignorance is to be expected.
See....!
I told you all central bankers are delusional and Liars...!
0.03% interest on my 'High Yield Accounts' accounts....mmm..where should I spend all that extra interest income, Ben?
My grandmother gave me the best advice, she had 3 rules:
1 if a person doesn't take care of their teeth, they won't take care of anything.
2 everything changes but the land - that is where you put your money.
3 a woman can throw money out the back door faster than a man can bring it in the front.
She lived to be 96, passed away in 2007. She was born in 1911 in Kentucky and lived her life in the mountains of east Tennessee. Told me this 30 years ago. I still think she's right..
Good advice.
My Grandmother used to tell me "Go down to the creek boy and get me a willow switch"
Man I hated fetching that stinging instrument of ass destruction !!!
She must have been a central banker or politician.
Humpty Dumpty sat on a wall
Humpty Dumpty had a great fall...
All the king's horsemen
and all the king's men
couldn't put Humpty togeather again.
textbook
Keynes was the idiot that the politicians came to love. He wrote a wonderful thought that allowed them to avoid a
decision.
Faced with two options : 1. RaIse taxes or 2. Cut spendIng. Keynes provided the political class with a complex theory if they just created inflation via money printing (QE) or interest rate suppression they could reap the benefits without making a decision. Win win.
Von Mises nevered waiver to call an ignoramus an ignoramus. Neither should we.
No, Keynes said we need government spending in a liquidity trap (and we do). It was Milton Friedman who said we could solve the problem with money printing alone.
One thing Keynes defenders forget is that he said gov should build excess reserves in times o plenty in order to spend in times when the business cycle turned down. Doesn't work without the buildup. Can't rely on buyers to buy the debt, leaving out the current ponzi of the fed buying, which isn't working. And besides, we have more than enough cops and firefighters and teachers, not to mention their pensions, which is a whole nother ball of wax.
Al Gore ran on the idea of a "lockbox" to build up reserves. Don't blame Keynes for the failure of the voters to get it right.
I don't actually blame Keynes. I was just saying that without the reserves, his theory has one hand tied behind its back. And yes, quite a bit of this shitstorm should sit on Shrubs shoulders.
Economist 'genius', Time's Man of the Year, Harvard/MIT educated (in the dismal 'science' of fractional reserve/modern monetary theory charlatism), Princeton Professor, '15 Minute Solution' Ben S. Bernanke's absolutely incorrect predictions and prognostications from 2005 through 2007 (I guess one has to be ABYSMAL at what they do to get both political puppet parties to vote to renominate you if you're the Federal Reserve Chairman):
Compilation of Video Clips of Predictions of The Bernank That Have To Be Watched & Heard to be Believed - YouTube
TIS, Ben has actually been very successful if you measure success by three years of record high Banker Bonuses. After all, they onw him and the Fed, so in their eyes Ben is a hero. Sad for the other 99.9% of the world.
"Neither a borrower. nor a lender be"
Hamlet, the musical on Gilligan's island.
"And will the Fed, in its attempt to prove its blind faith in voodoo correct, destroy the real world by stuffing the CTRL-P channel full of increasingly more meaningless electronic dollar equivalents, merely to confirm once and for all that the Keynesian utopia may be an illusion, but nobodys (wealth) will be left to enjoy (in) the aftermath of the biggest lie of the past century unraveling?"
Yes...and they can cite chapter and verse as to why they are correct even when proven wrong by the facts as they are.
Its like some weird "cult religion" commiting suicide right before our very eyes...at least we lived long enough to see it...good times for those who come after ;-)
someone ought to tip these morons to the FACT that the ONLY crew benefitting from the "low' interest rates are the banks....and are they making the most of it hosing the middle class? YOU BETCHA....
credit cards are averaging 13-14%
and refis? oh, you can have the low, low rate....which the banks load up with all sorts of fees....and then, and then, just to make sure they get their mega profit? Mandatory private mortgage insurance which...excuse me...you can only get from them, and takes you right back over your current payment to something HIGHER.
Hello Bennie? let's talk about the low rates and you handing an outright gift of nice fat profits to your buddies.
what a joke these guys are....what a sad, sad joke.
You have to play like the big banks do. You need to take out an insurance policy on yoursef if you default. Oh wait regular people can't do that.
PMI should be illegal. $1500 up front and $60 a month you pay to insure the bank against your default. Shouldn't the bank pay for that?
Of course there is a way around PMI, most credit unions don't charge it.
Even the biggest idiot in the world knows he can't afford a $250k home while making minimum wage at Home Depot. Doesn't matter if a 30 year mortgage is .2%, still can't afford the payment. Sorry, second or third biggest idiot since Krugman seems to think it is possible.
Either the median home has to go to $50k or the minimum wage has to go to $30 an hour without inflation causing the home value to skyrocket. Homes going to $50k with the Fed in charge isn't going to happen, and minimum wage going to $30 without massive inflation isn't going to happen either. In other words, economic stagnation is here to stay.
Banks won't lend unless you already have the cash or the credit, which leads to the question. If you already have the cash, why would you need the bank to lend? If you already have the credit and aren't using it, you don't need more.
I could put a house on my credit card, but I'm not going to do that with a 14.9% interest rate. BofA must think I'm as retarted as a DC politician if they think I am going to tap my $100k credit line at 14.9%. I might borrow if they drop it down to .9%. I just hope they don't catch on to my escape plan of visiting 100 ATMs one day and skipping the country with $100k in my pockets.
I lol whenever I see the $3 million dollar homes listed in Brooklyn where at night you can regularly hear gun fire ringing through the street
As a business owner I can tell you the only way to get any loan today is to prove to the bank that you don't need it..
Have you tried using the assets of the company you're about to LBO as collateral and then inflating the hollowed husk with enough debt to blow it up like a whale carcass?
Don't, you'll upset Mitt.
"Even the biggest idiot in the world...must think I'm as retarted".
I'm pretty sure you won't get far with only $300, skippy.
110 million private sector workers and 110 million entitlement takers.
As long as the takers want only what the tax payers are currently paying I guess we have peaceful coexistence.
We may be close to tipping over, however, if the takers want anymore than their current stipend.
Wonder what will happen then?
http://www.amazon.com/Atlas-Shrugged-Ayn-Rand/dp/0452011876/ref=sr_1_1?i...
Juantitative Easing
Legalize weed. Tax coffers fill up.
We're happy and hungry (more tax revenue), need gas to make munchie run (tax revenue), we buy more weed on the way home (tax revenue), creativity and innovation lead to new business startups (more tax revenue) and employment opportunities (less unemployment= fewer social benefits paid= more spendable tax revenue), we manufacture a gazillion and sixty products at reasonable cost with massvive "novelty" demand (yes..more tax revenue).
Hemp cleans the air, cleans the water, and saves trees.
Print money, make rope for Bankers, make LEVIS and tons of textiles, and punch the pesticide biz (hemp needs none) in the balls.
TA DAAAA.
There you have it... a better world.
Funny that we are posting two minutes apart on this subject nmewn.
(Two economists who apparently agree?)
This is it, Bernake's going to unveil the Helicopter!
http://orangejuiceblog.com/wp-content/uploads/2009/05/sapd-helicopter.jpg
i can't believe i just read that. "interest savings" obviously implies that you're borrowing money to purchase things that you can't afford outright. so this jackweasel is essentially suggesting that you should always leverage yourself to the max by applying your marginal savings to your existing monthly burn? that instead of saving that extra $400 a month, or applying it to the principal, you burn it on ipads and dinners?
reminds me of the mindset in the NJ suburb i grew up in - everyone had nice houses and multiple cars, maybe a shore house, etc, and almost everyone was two paychecks away from being bankrupt.
LOL so many on ZH know it's fubar..crimes have costs they always have and the bigger the crime the higher the costs until no amount ben prints will cover it with out the criminals at the heart of it all being forced to meet justice and lose everthing they ever gained.
As for improving the economy only justice will do it..after that any competent small successful business man could turn this boat around as long as he never let the Ivy league profs anywhere near power again.
I do believe we are coming to a realization we do not live in a perfect world.
What lousy textbooks. Any economics textbook that doesn't have
SAY NO TO FIAT CURRENCY AND FRACTIONAL RESERVE BANKING!!!
stamped on EVERY freaking page is only worthy of use as bound toilet paper.
Fractional reserve banking is OK when compared to what we have today: fictional reserve banking.
I see that Paul Samuelson, author of my Econ 101 & 102 textbooks that I pored over back in the early 70s, just died at 94. No wonder why the great unwashed are so economically ignorant. Brainwashing takes many forms, with the most effective being that you have no idea that it is happening.
the ivy league economists know it is impossible to have crime at the highest levels of finance..because we have all these pols and lawyers writing laws that make it illegal..what we need is more laws and regs that's the economist mantra..more laws more regs and then everyone will be honest..
for the little people we know, its not the number of laws and regs it's swift justice and long jail terms that keep the laws..a DOJ and SEC that are never there to do the job is a criminal's wet dream.
Here's a great quote from an economic giant:
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of the voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
---Ludwig von Mises
“You're right, we did it,” Ben Bernanke told Milton Friedman in a speech celebrating the Nobel laureate’s 90th birthday in 2002. He was referring to Mr Friedman’s conclusion that central bankers were responsible for much of the suffering in the Depression. “But thanks to you,” the future chairman of the Federal Reserve continued, “we won’t do it again.”
Well here we go. Thank you Ben Bernanke and Milton Friedman.
The truly sad thing is that it was done on purpose to bail out England. There was no accident or misunderstanding of monetary policy. It was flat out deliberate. They should've been hung from a tree for treason.
Welcome to the new normal bitchez! I'm feeling hurngry for some Japanese food with a side of Greek!
the frog tried education with the scorpion and viper..you know how that ended. education for what life as a tax slave?
What are interest savings? Are these savings real? Are the savings actual discretionary funds? And why must these funds be spent on goods and services? As opposed to put to some other purpose? What does the textbook say about (economic) distortions caused by low interest rates? What does the textbook say causes low interest rates? Aren't low interest rates--like low prices--the result of low demand for the underlying (i.e. credit)? Why should low demand lead to higher demand?
Are reporters getting dumber?
Here is what your ZIRP experiment has done.. 14% real unemployment, 45% less wealth in the middle class, 7% inflation, A nation that has become government dependent, the largest sense of anti government sentiment ever, A stock market that only moves up if Ben Bernanke hints, moves or farts, 46 million Americans on food stamps, commodity prices that keep rising, 10 Trillion dollars deeper in debt, an additional 8 Trillion in interest free loans to Banks and Countries that are fucking Zombies, a credit rating downgrade.. I could go on all night. The most destructive outcome will be the collapse of the DOLLAR! The dollar is toast . China, Russia, Japan, Iran, India, Brazil are all making preparations to say goodbye to the FED'S Fiat. You think the financial meltdown was a blow to America? You have not seen anything yet. Just read today how Russia, China and Iran are staging their own military exercise in no other then SYRIA? Read it and weep bitchez...
http://www.debka.com/article/22094/Russia-China-Iran-plan-to-stage-in-Sy...
Game over for the worlds reserve currency... Alliances and preparations are being made and nobody seems to notice? Meanwhile the only people that have benefited from the FED'S intervention is the very Banks and CRONY Corporations that caused the financial collapse to begin with. Record bonuses and payplans to reward those who destroyed America! This is what FASCISM looks like and it is staring you in the face... So just keep watching the bailouts happen, and just keep watching the money disappear into the FASCIST KLEPTOCRATS' pockets!
Spot on. I've never been so amazed that a wealth transfer of epic proportions can be carried out right in front of everyone's noses. I remember the story of the guy who left the factory every night pushing his empty wheelbarrow past the guard who dutifully made sure there was nothing in the wheelbarrow. Of course, he was stealing wheelbarrows right out in plain sight.
People don't realize that every time the Fed prints, money is being stolen from the poor and given to the rich. Occupy WS is protesting over the 1%, not even realizing that it is the Fed who is responsible for this all along, right in front of their noses.
Time to put an end to this charade, time for the Central Bankers to get what is coming to them. Time to suffer, Bernanke.
Let the MASS ARRESTS begin here in the U.S. http://tinyurl.com/cd5cyjo/
"In the middle ages, tenant farmers worked 3 months out of the year for the lord of the estate. In return, they got land, a house and a communal defense system. And we call those people serfs.
Now, we're committed to 6 months of labor to achieve what the peasants of the Middle Ages accomplished by their 3 month contract with their lords. If those poor wretches were serfs, what word can we find to describe ourselves?"
- Rob Roy http://www.cordwoodmasonry.com/
Muppets?
Banker Sow
Debt Mule
Best.Thread.Ever.
Can the MMT people just admit there is no rainbow-color skittle pooping unicorn now?
http://en.wikipedia.org/wiki/The_Structure_of_Scientific_Revolutions
To understand what is happening in economics. Economics is now faced with what is called "anomalous data" that does not fit the current paradigm: data which it cannot even properly measure and data it does not have terminology to describe.
The problem is this: the revolution is not simply a scientific one, this revolution involves our entire civilization, because we have allowed bank-money and the monetary theory crafted to support bank-money to shape the whole of Western Civilization.
A ZHer from the past (1874):
"What are the annual savings of the English working classes? 20M pounds? The Royal Commissioners who have recently been looking into the working of the Friendly Societies set down the aggregate income of these institutions at 11M pounds per year; and the mass of what the working classes put by finds its way into the the hands of the collectors of the Foresters, of the Ancient Shepherds, of the Odd Fellows, or of the Antediluvian Order of Buffaloes. Trade unions of course take the tithe of the wages of the artisans; but this tithe can hardly be set down as savings. It is really an industrial war-tax, and is generaly in the long run spent on the last shilling on strikes or lock-outs. A large portion of the 11M paid into the friendly and burial socieities sticks to the palms of the collectors, frequently as much as 25%, a collector's round often being worth 700 pound per year. Five percent, is frequently spent on what is called "lush money", and at the end of the year some of the clubs divide the balance and start afresh. The Manchester Unity with an income of 700,000 pound is said to have 3.5M in 3 per cents, and the Loyal Order of Ancient Shepherds has 125,000 pound. But these are mere trifles in comparison with what the amounts ought to be, and I fear there is much truth in the recent observation of a Scottish Sheriff that 'out of every shilling paid into a friendly society, the poor might just as well throw 6d into the Clyde.' The savings-banks are practically a failure, although they hold twice if not three times the amount held by all the 32,000 societies in the country. The amount of deposits in the hands of the National Debt Commissioners at the end of 1872 was 59M pound, or within a fraction of the amount held by the savings-banks of a single American state of New York. There is comparitively no thrift in the English working classes. But what premium do we offer for thrift when the societies fritter away 50 percent of the savings that pass through their hands and the banks give 2.5 percent for deposits? John Bull, it is said, can stand a good many things, but he can't stand 2.5 percent, and there is quite as much human nature in corduroy as in broadcloth."
Hey- what is this stuff that Jon Hilsenrath sees coming from the Fed? Maybe this time is could it be Shinola? How can I tell?
I don't want to depend on any goverment. That is why i make money cfd trading now. I am financially tatally independant and that feels good in these economically harsh times.
"It could take 10 years for jobs to return to pre-crisis leve!"
"We already saved millions of jobs with sitimulate packages"
Well I'm just a dumb shit but in my day textbooks said that if you screwed up your business you went bankrupt. It was called 'Free Markets', 'Survival of the Fittest', and 'Creative Destruction'.
Anything like a bailout would have been seen as communist plots to undermine capitalism.
If there was actually cheap credit available he'd probably be right!
every debt is somebody's asset!
so everybody reading this, I owe you a million dollars!...YOUR RICH!!!
Oh O, I can only pay you is scrapped off chewing gum and bottle caps, but until that moment comes...your RICH!!!
Borrowing is income, and debt is wealth
The problem is that the mainstream media and those in power are using the WRONG textbooks. They have assumed that Keynes was right... They should be using the works of Smith, Mises, Schumpeter, Hayek and Rothbard. Not those of Malthus, Ricardo, Keynes and Marx...