'Consumers' Are Not Following Orders ?

[lektrode]

and the beatings will continue until morale improves...

any questions?
Consumers Are Not Following Orders

Submitted by Jim Quinn via The Burning Platform blog,

Last week the government reported personal income and spending for April. After months of blaming non-existent consumer spending on cold weather, shockingly occurring during the Winter, the captured mainstream media pundits, Ivy League educated Wall Street economist lackeys, and Keynesian loving money printers at the Fed have run out of propaganda to explain why Americans are not spending money they don’t have. The corporate mainstream media is now visibly angry with the American people for not doing what the Ivy League propagated Keynesian academic models say they should be doing.


The ultimate mouthpiece for the banking cabal, Jon Hilsenrath, who does the bidding of the Federal Reserve at the Rupert Murdoch owned Wall Street Journal, wrote an arrogant, condescending, putrid diatribe, directed at the middle class victims of Wall Street banker criminality and Federal Reserve acquiescence to the vested corporate interests that run this country. Here are the more disgusting portions of his denunciation of the formerly middle class working people of America.


We know you experienced a terrible shock when Lehman Brothers collapsed in 2008 and your employer responded by firing you.
We also know you shouldn’t have taken out that large second mortgage during the housing boom to fix up your kitchen with granite counter-tops.
You should feel lucky you’re not a Greek consumer.
Fed officials want to start raising the cost of your borrowing because they worry they’ve been giving you a free ride for too long with zero interest rates.
We listen to Fed officials all of the time here at The Wall Street Journal, and they just can’t figure you out.
Please let us know the problem.



The Wall Street Journal was swamped with thousands of angry responses from irate real people living in the real world, not the elite, QE enriched, oligarchs living in Manhattan penthouses, mansions on the Hamptons, or luxury condos in Washington, D.C. Hilsenrath presumes to know how the average American has been impacted by the criminal actions of sycophantic Ivy League educated central bankers and their avaricious Wall Street owners.


He thinks millions of Americans losing their jobs and their homes due to the largest control fraud in financial history is fodder for a tongue in cheek harangue, blaming the victims for the crime. Hilsenrath reveals he is nothing but a Fed flunky who is fed whatever message they want the plebs to hear. His job is to obscure, obfuscate, spread disinformation, and launch Fed trial balloons to see whether the ignorant masses are still asleep. The Fed and their owners can’t understand why their propaganda hasn’t convinced the peasantry to follow orders.


A system built upon an exponential increase in debt, cannot be sustained if the masses stop buying Range Rovers, McMansions, stainless steel appliances, 72 inch HDTVs, iGadgets, bling, and boob jobs on credit. His letter to America reeks of desperation. The Fed and their minions have used every play in their Keynesian monetary playbook, and are losing the game in a blowout. With a deflationary depression beginning to accelerate, they have no game.


Despairing mothers, unemployed fathers, impoverished grandmothers, and indebted young people are supposed to feel lucky because they aren’t starving to death like the wretched Greeks. We do have one thing in common with the Greeks. We’ve both been screwed over by bankers and corrupt politicians. Did you know you’ve been given a free ride by your friends at the Federal Reserve? Did you know that zero interest rates and $3.5 trillion of Quantitative Easing (aka money printing) were implemented to benefit you? According to Hilsenrath, the Fed lending money at 0.25% to their Wall Street bank owners, who then allow you to borrow from them at 15% on your credit card, represents a free ride for you. Are the subprime auto loan borrowers, who account for 30% of all auto sales, paying 13% interest getting a free ride?


Hilsenrath is purposefully lying. Bernanke and Yellen have been saying they want to start raising interest rates for the last four years. Remember the 6.5% unemployment rate bogey set by Bernanke in January 2013? Unemployment dropped below 6.5% in early 2014 on its way to 5.5% today. Did they raise rates? In 2013 we had two consecutive quarters of 4% GDP growth, with no Fed rate increase. In 2014 we had two consecutive quarters of 4.8% GDP growth, with no Fed rate increase. We have added ten million jobs and the stock market has tripled since 2009, with no Fed rate increase.


We are supposedly in the sixth year of an economic recovery and the Fed is still keeping the discount rate at a Lehman “world is ending” emergency level of .25%. Six years after the last recession the discount rate was 5.25%. The last time the unemployment rate was this low the discount rate was 4%. The only ones getting a free ride from the Fed’s zero interest rate policy and QE to infinity have been Wall Street banks, the .1% who live off the carcasses of the dying middle class, zombie corporations who should have gone bankrupt, and politicians who keep running up the national debt with no consequences – YET. The Federal Reserve is a blood sucking leech on the ass of America. Their cure has been far worse than the original illness – Wall Street criminality. In fact, their cure has been to reward the Wall Street criminals while spreading cancer to the working class and euthanizing senior citizens.

Hisenrath and his puppet masters at the Fed can’t figure you out. For decades you have followed their orders and bought Chinese produced shit with one of your 13 credit cards. The Bernays’ propaganda playbook has produced wins for the ruling class since the early 1980’s. Their record is 864 – 0 versus the working class. Our entire warped economic system since the 1980’s has been dependent upon an exponential increase in debt peddled by Wall Street to citizens, government and corporations to give the appearance of a growing, healthy economy.
An economy built upon the consumption of iGadgets, Cheetos, meat lovers stuffed crust pizza, and slave labor produced Chinese baubles, along with the production of enough arms to blow up the world ten times over, and the doling out of trillions to the non-productive class, is doomed to fail. Maybe I can explain the situation in such a way that even an Ivy League educated central banker or a Wall Street Journal faux journalist will understand.
Maybe Jon and his Fed cronies could be enlightened by a look at the American consumer before the bubble boys (Greenspan, Bernanke) and gals (Yellen) at the Fed, along with the corporate fascist takeover of our political system, and the propaganda spewing corporate media monopolies, combined to deform our financial and economic system for their sole enrichment. The lack of spending by consumers might just be due to some of the following factors:

• Back in 1980 income meant money earned through working, investing, and saving. The amount of personal income made up of wages totaled 60% in 1980. Today it totals 51%. Interest earned on savings accounted for 14% in 1980. Today it accounts for 8%, as the Fed has punished seniors and savers with negative real interest rates. Since 2009 the Fed has robbed over $1 trillion in interest income from seniors and savers with their zero interest rate policy and handed it to the Wall Street banking cabal. Bernanke didn’t just throw seniors under the bus, he ran them over, backed up over them, and ran them over again.
• In a shocking development, government welfare transfers accounted for 11% of total personal income in 1980 and have risen to 17% today. Only the government could classify money which has been absconded at gunpoint from working Americans in the form of taxes and redistributed back to other Americans as welfare payments, as personal income. If you take money from your left pocket and put it in your right pocket, is that income? The replacement of wages and interest by welfare redistribution payments has not benefited society whatsoever.
• In 1980 consumer credit outstanding as a percentage of personal income totaled 15%. Today it totals 22%, an all-time high. It is higher than the bubble peak in 2007-2008. Real per capita disposable income has only risen by 88% over the last 35 years. Meanwhile, real per capita consumer debt has risen by 288%. Wages and earnings from saving have been replaced by debt. The propagandists for consumerism have convinced the ignorant masses to spend money they don’t have, while pretending to be wealthier and successful. Consumer debt currently stands at a towering all-time high of $3.4 trillion, almost ten times the $350 billion level in 1980. Hilsenrath and the Fed are upset with you because credit card debt still lingers $122 billion, or 12% below 2008 levels. It has forced them to dole out $900 billion of government controlled subprime debt to University of Phoenix wannabes and any deadbeat that can scratch an X on an auto loan application. The U.S. economic system is like a Great White Shark that must keep swimming or it will die. The Federal Reserve run U.S. economic system must keep generating debt or it will die. They are growing desperate and you are not following orders.

• Before the grand debt delusion overtook the populace, they were saving 11% of their disposable personal income. In 1980, Depression era adults still believed in saving for large purchases such as a house, car, appliance or home improvement. The young adult Boomers didn’t have the same experiential deterrent. They were convinced by the Wall Street debt peddlers, Madison Avenue maggots, and corrupt politicians that saving was for suckers. Live for today, for tomorrow may never come. Well tomorrow did come. Boomers are entering their retirement years with $12,000 in retirement savings, while still in debt up to their eyeballs. There have been 10,000 Boomers turning 65 every day since 2010. This will continue unabated through 2029. This demographic certainty was already depressing consumer spending, as this age demographic spends far less than 25 to 54 year olds. Factor in the pitiful amount of savings and you have an ongoing spending implosion.

• The propaganda machine was so well oiled, the savings rate actually reached 1.9% in 2005, as the masses all believed they would live luxurious retirements off their home equity windfall. How’d that delusion work out? The current level of 5.6% is seen as troublesome by the powers that be. They cannot accept the crazy concept of saving and investment when their entire warped paradigm is built upon borrowing and consumption. Banks don’t make money when you save and they despise when you use cash. They can’t sustain their opulent lifestyles without their 3% VIG on every electronic transaction, 15% compounded interest on the $5,000 average credit card balance, billions in late fees for being one day late with your payment, $4 on every ATM transaction, and the myriad of other fees and surcharges designed to bilk you and keep you from saving. The saving rate will continue to climb as people have no choice to make up for years of living beyond their means.
• Hilsenrath is willfully ignorant as he pretends to not understand why the American people will not or cannot accelerate their spending. It is really quite simple. Even a PhD should be able to understand. Real median household income was $52,300 in 1989. Real median household income today is $51,939. The median household has made no economic advancement in the last quarter of a century. And this is using the manipulated lower CPI figure. Using a true inflation rate would show a dramatic decline over the last 25 years. There has been virtually no wage growth during this supposed six year recovery. The industrial base of the country has been gutted, except for the production of arms to blow up brown people in the Middle East. Young people have $1.3 trillion of student loan debt weighing them like an anchor, and those Ruby Tuesday waitress jobs and Home Depot cashier jobs aren’t going to cut it.

• So we have the demographic dilemma of aging, under-saved, over-indebted Boomers who are being forced to spend less. We have an over-indebted, under-employed youth who don’t have anything to spend. And lastly we have the 25 to 54 year old age bracket who should be in their prime earning and spending years who are still 4 million jobs short of where they were in 2007 before the Fed induced financial collapse. The only age bracket to gain jobs since the crisis has been 55 to 69, as they have been forced to work to make up for their lost interest income. The only people making job gains are those least likely to spend.

• The spending crescendo in 2004 through 2007 was fueled by the Greenspan housing bubble and the $3 trillion of mortgage equity withdrawal used to buy BMWs, in-ground Olympic size pools, Jacuzzis, vacations to Tahiti, home theaters, granite countertops, stainless steel appliances, and boob jobs, by delusional, apparently brain dead Americans who fell for the Bernaysian propaganda spewed by the Wall Street criminal class, hook line and sinker. The majority of shell shocked underwater home owners have been unable to sell since the housing crash. A 35% price decline will do that. The Fed has created $3.5 trillion out of thin air, more than quadrupled their balance sheet with toxic mortgages from Wall Street, artificially suppressed interest rates to bring mortgage rates to record lows, and was a co-conspirator along with Fannie, Freddie, FHA, and Wall Street hedge funds (Blackrock) to delay foreclosure sales and pump home prices with their buy and rent scheme. The result has been unaffordably high prices, mortgage applications at 1997 levels (60% below 2005 levels), first time buyers at a record low, and a non-existent housing recovery – despite the MSM propaganda saying otherwise.

• The last data point which might help the math challenged Hilsenrath understand why you aren’t spending is total U.S. vehicle miles driven. The chart below shows a relentless climb from 1982 through to the 2008 collapse. It coincides with the debt fueled consumption orgy over this same time frame. The unrelenting expansion of retail outlets and importing of cheap Chinese crap required a lot of trucks to haul the crap. It required a lot of trips to the mall in the minivans and SUVs by soccer moms living in our suburban sprawl paradise. In case you hadn’t noticed, the fastest growing retailer in the U.S. since 2008 has been Space Available. The well run retailers like Home Depot and Wal-Mart saw the writing on the wall and stopped expanding. The badly run retailers like Sears and JC Penney have been closing hundreds of stores. And the really badly run retailers like Radio Shack have gone bankrupt. Vehicle miles have essentially flat-lined for the last six years as retailers are closing more stores than they are opening, job growth has been non-existent and commerce within the U.S. is stagnant. If we were experiencing a real economic recovery, vehicle miles would be surging.

So this concludes my little tutorial for the Ivy League educated central bankers at the Fed and the Wall Street Journal Fed mouthpiece – Jon “I don’t understand” Hilsenrath. I know it is difficult for people to understand something when their paycheck depends upon them not understanding it, but this is pretty simple stuff. Pompous, arrogant, egocentric assholes who write for the Wall Street Journal, run JP Morgan, or control monetary policy for the world, know exactly what they have done, what they are doing, and who is benefiting. We all know the benefits of ZIRP and QE have gone only to the .1% who run the show. We know income inequality is at all-time highs. We know TPP will be passed, because the corporate fascists control the purse strings of our political class. We know the status quo will be maintained at all costs by the Deep State.


We know mega-corporations continue to ship jobs overseas and replace us with cheap foreign labor. We know the current administration actively encourages illegals to pour over our borders, swamp our social safety net, increase crime, and take jobs from Americans. We know the government has us under mass surveillance and will not hesitate to use all of that military equipment in the hands of local police against us. The will of the people is nothing but an irritant to those in power. They might not have us figured out, but a growing number of critical thinking, increasingly pissed off people, have them figured out. The debt expansion days are numbered. A deflationary depression is in the offing. The coming civil strife, financial panic, war, and overthrow of the existing social order will rival the three previous tumultuous upheavals in U.S. history – American Revolution, Civil War, Great Depression/World War II. Fourth Turnings are a bitch.



Hopefully I’ve explained the situation to the satisfaction of Jon and Janet. The mood in this country is darkening by the day. There is no going back to the good old days of yesteryear. They are long gone. No amount of debt issuance and propaganda is going to work. The system is overloaded. The people are angry. The politicians are captured. The banking elite are ransacking the nation for every last dime they can get their grubby little hands on. The military industrial complex is itching for war with Russia and China. The world hates us. If you can’t see it coming, you are either blind, dumb, or an Ivy League educated economist. So go out and spend to make your slave owners happy.

[gwynedd1]

Re: 'Consumers' Are Not Following Orders ?

and the beatings will continue until morale improves...

any questions?
Consumers Are Not Following Orders

Yes I have one.

What Keynesian economic policy has recently been applied? Government spending on the banking sector is Monetarism in Keynesian clothing. Its meat filled cabbage roll vegetarianism. Its shovel ready bull-pucky to suggest handing treasuries out to big finance is a direct government consumption of a surplus of labor.

Keynesian policy cannot fail in its financial goal. When it fails, it fails to effectively use the unused surplus of labor like a road to nowhere. Keynesian policy runs amok in North Korea with empty 4 lane highways.

[astonas]

Re: 'Consumers' Are Not Following Orders ?

Yes I have one.

What Keynesian economic policy has recently been applied?

The idea that looser fiscal and monetary policies encourage private-sector economic growth (independent of the productivity of the additional spending) comes from Keynes.

Government spending on the banking sector is Monetarism in Keynesian clothing. Its meat filled cabbage roll vegetarianism. Its shovel ready bull-pucky to suggest handing treasuries out to big finance is a direct government consumption of a surplus of labor.

Keynesian policy cannot fail in its financial goal. When it fails, it fails to effectively use the unused surplus of labor like a road to nowhere. Keynesian policy runs amok in North Korea with empty 4 lane highways.

The boldface statement makes no sense.

We currently have looser fiscal and monetary policies (not just in supporting the banking sector, but also in the buying of armaments, and many other forms of government spending) and we have not seen a surge of private-sector economic growth.

And yes, of course there are many ways to waste money, including handing money to bankers and roads to nowhere. But it was in fact Keynes who claimed that the latter at least would still serve to stimulate the economy. When it fails to do so, that is not Keynesianism "run amok" or mis-applied, but Keynesiansm (as it was intended by its author) being proven to not work.

Many would argue not only that Keynesian policy can fail, but that it has.

[dcarrigg]

Re: 'Consumers' Are Not Following Orders ?

Many would argue not only that Keynesian policy can fail, but that it has.

Keynes called what's going on in the US "pushing on a string." You can pull on a string to get something done, but pushing on a string accomplishes nothing. What he meant was that monetary policy is asymmetric; it being easier to stop an expansion á la Volcker than to end a severe contraction á la Greenspan/Bernanke.

What they have been doing does feel quite monetarist. Look at the US and the UK. Sequesters and cuts at the same time as loose monetary policy. That feels pretty monetarist to me.

The crux of the difference is that monetarist economics involves the control of money in the economy, while Keynesian economics involves government expenditures (Congress). Monetarists believe in the control of the supply of money in the economy (FED) and allow the rest of the market to fix itself. Keynesian economists believe that a troubled economy continues in a downward spiral unless something is done to drive consumers to buy more goods and services (Government domestic investment and hiring). Both of these macroeconomic theories directly impact the way lawmakers create fiscal and monetary policies. If both types of economists were equated to motorists, monetarists would be most concerned with adding gasoline to their tanks, while Keynesians would be most concerned with keeping their motors running.

Look what's up with spending and .gov employment over the Obama administration:





Obama has been playing this more like Milton Friedman than like Keynes, despite what talking points you may have heard. And I'm willing to bet dollars to donuts that the 2015 projection bar in that graph ends up way shorter than they think at George Mason University (home of the Keynes haters)

[Raz]

Re: 'Consumers' Are Not Following Orders ?

I read a lot but I'm no economist. I'm just a simple man.

Even at 0.00% interest a loan must be paid back, even if it is principal only that's amortized.

Our country is drowning in debt, much of it bad - only the bankster's madam (the Fed) is servicing it through a rotten, fraudulent policy of financial repression. But the principal of the loan is still there - Student loans for near worthless degrees, bad mortgages, et cetera.

This suffocates the real productive economy as millions of people are literally debt serfs to the banks, yet they along with the realtors prevent this chain from being removed from the slaves. And multinational corporations are also some of the major stockholders in each of our 535 public serpents thereby preventing necessary changes in taxation and trade policies. Then there are the public employees unions, et cetera.

These are all structural issues that must be addressed if we're ever to come out of this mess.

[astonas]

Re: 'Consumers' Are Not Following Orders ?

I'm not disagreeing that monetarism is equally silly. And I understand that there is a big difference between the two philosophies.

My point was merely that the even the monetarists still buy into a portion of Keynes' thinking -- namely that what a stagnant economy principally needs is more stimulation, rather than better regulation, to begin to thrive. They just disagree on what that stimulation consists of. Keynes said it was government spending. Friedman said it was monetary intervention.

It is the part that they agree on that I believe is worth questioning. My suspicion is that both Milton Friedman-style monetarism and Keynesianism are simply incorrect in ascribing economic effects to the causes they cite.

[dcarrigg]

Re: 'Consumers' Are Not Following Orders ?

I read a lot but I'm no economist. I'm just a simple man.

Even at 0.00% interest a loan must be paid back, even if it is principal only that's amortized.

Our country is drowning in debt, much of it bad - only the bankster's madam (the Fed) is servicing it through a rotten, fraudulent policy of financial repression. But the principal of the loan is still there - Student loans for near worthless degrees, bad mortgages, et cetera.

This suffocates the real productive economy as millions of people are literally debt serfs to the banks, yet they along with the realtors prevent this chain from being removed from the slaves. And multinational corporations are also some of the major stockholders in each of our 535 public serpents thereby preventing necessary changes in taxation and trade policies. Then there are the public employees unions, et cetera.

These are all structural issues that must be addressed if we're ever to come out of this mess.

What you're preaching about is something older than either of these. It's probably worth noting that none of the major schools of economic thought at this point are particularly worried about deficits. Neither the "drown Uncle Sam in the bathtub of debt" Austrians, nor the "blow it out the fed right to Wall Street" Monetarists, nor the "bring back the WPA" Keynesians.

They may tell you that debt is their top priority. But it's not. Neither at the Fed, nor off the books in DoD land, nor on the official books.

There are no conservatives at the econ bullhorn anymore. Only radical anti-state utopians, bankers, and liberals.

And the great irony is, of the three, once you peel back the hood a little ways, it might just happen that the liberal Keynesians are the closest thing to Burkean economic conservatives America has got left. Buckley made sure of that.

[Southernguy]

Re: 'Consumers' Are Not Following Orders ?

As I understand Keynes proposal was to put money in the hands of real people-workers. That money in turn would be spent as goods and services.
What the FED is doing is puting money in bankers hands. That money is not spent, except for stocks or extremely expensive property. The assets price's rise, and so the wealth of the richest. No new economic activity is created.

[gwynedd1]

Re: 'Consumers' Are Not Following Orders ?

The idea that looser fiscal and monetary policies encourage private-sector economic growth (independent of the productivity of the additional spending) comes from Keynes.

I don't know where you get this, but I do no comment on anything without reading the original source. From my reading of him a Keynesian stimulus is specifically fiscal policy and specifically to consume the surplus of labor. There is no indirect encouragement factor at all other than its later consequences.

The boldface statement makes no sense.

That remains to be seen.

We currently have looser fiscal and monetary policies (not just in supporting the banking sector, but also in the buying of armaments, and many other forms of government spending) and we have not seen a surge of private-sector economic growth.

We do? Based upon what criteria? Besides the fact that Keynes does not belong in a conversation of interest rates , according to one of the more well known monetarists, interest rates often fall with tight monetary policy. I believe monetary policy was by a wide margin far looser in 2007.

http://www.cato.org/publications/com...under-bernanke

As to this massive fiscal stimulus to GDP where is this?

https://www.cbo.gov/publication/45653

Most importantly it did not seem to tighten the labor market.

And yes, of course there are many ways to waste money, including handing money to bankers and roads to nowhere.

Those two just don't go together in this context.

But it was in fact Keynes who claimed that the latter at least would still serve to stimulate the economy. When it fails to do so, that is not Keynesianism "run amok" or mis-applied, but Keynesiansm (as it was intended by its author) being proven to not work.

Many would argue not only that Keynesian policy can fail, but that it has.

You never read Keynes, clearly. I am more apt to believe you read a Conservative blog that repeats an undying myth. A Keynsian fiscal stimulus cannot have unemployment, by definition. In the extreme of central planing, the Soviet Union for example, unemployment was not even legal. The problem is, as I have said, the product of the labor can be dubious.

Financially Keynesian policy can never fail anymore than water cannot be wet for when the water dries there is no water. So if "full employment" is not reached, that being the goal, then it isn't purely Keynesian full employment policy that is being followed.

[gwynedd1]

Re: 'Consumers' Are Not Following Orders ?

As I understand Keynes proposal was to put money in the hands of real people-workers. That money in turn would be spent as goods and services.
What the FED is doing is puting money in bankers hands. That money is not spent, except for stocks or extremely expensive property. The assets price's rise, and so the wealth of the richest. No new economic activity is created.

Its Moneratism in Keynesian garb.

[Raz]

Re: 'Consumers' Are Not Following Orders ?

As I understand Keynes proposal was to put money in the hands of real people-workers. That money in turn would be spent as goods and services.
What the FED is doing is putting money in bankers hands. That money is not spent, except for stocks or extremely expensive property. The assets price's rise, and so the wealth of the richest. No new economic activity is created.

You've got the picture.

A $3 Trillion public works project - some of it building prisons for the likes of Angelo Mozillo, Lloyd Blankfein, John Corzine, et cetera - would have been truly beneficial to at least some degree. But our Federal Government is pretty close to totally corrupt and prostituted to the bankers, insurers, multinational corporations and public employees unions.

I don't see a way out of this on the near horizon.

[Raz]

Re: 'Consumers' Are Not Following Orders ?

What you're preaching about is something older than either of these. ...I

There are no conservatives at the econ bullhorn anymore. Only radical anti-state utopians, bankers, and liberals.

And the great irony is, of the three, once you peel back the hood a little ways, it might just happen that the liberal Keynesians are the closest thing to Burkean economic conservatives America has got left. Buckley made sure of that.

Count me as a Burkean. It sounds close enough to a Paleoconservative for me.

And thanks for the article from The American Conservative. It's probably the only truly conservative voice left.

[gwynedd1]

Re: 'Consumers' Are Not Following Orders ?

You've got the picture.

A $3 Trillion public works project - some of it building prisons for the likes of Angelo Mozillo, Lloyd Blankfein, John Corzine, et cetera - would have been truly beneficial to at least some degree. But our Federal Government is pretty close to totally corrupt and prostituted to the bankers, insurers, multinational corporations and public employees unions.

I don't see a way out of this on the near horizon.

Now that is a Keynesian argument " to some degree beneficial" ; more or less Keynes mused over the prospect that his society rarely directly compared subsidies against direct charity and welfare. He wondered why suddenly charity fell out of economic scope so that the effect is welfare and unemployment are more tolerated than a subsidy.

It is curious how common sense, wriggling for an escape from absurd conclusions, has been apt to reach a preference for wholly “wasteful” forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict “business” principles. For example, unemployment relief financed by loans is more readily accepted than the financing of improvements at a charge below the current rate of interest; whilst the form of digging holes in the ground known as gold-mining, which not only adds nothing whatever to the real wealth of the world but involves the disutility of labour, is the most acceptable of all solutions.


If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.


Keynes , The General Theory of Employment, Interest and Money.

[gwynedd1]

Re: 'Consumers' Are Not Following Orders ?

Count me as a Burkean. It sounds close enough to a Paleoconservative for me.

And thanks for the article from The American Conservative. It's probably the only truly conservative voice left.

Have a look at the Republican Party Platform of 1956, which would now be defined as well to the left.

[astonas]

Re: 'Consumers' Are Not Following Orders ?

I don't know where you get this, but I do no comment on anything without reading the original source. From my reading of him a Keynesian stimulus is specifically fiscal policy and specifically to consume the surplus of labor. There is no indirect encouragement factor at all other than its later consequences.

This response appears to depend on a misreading of my statement. I had already previously recognized that I had been vague, and clarified it, using a subsequent post:

I'm not disagreeing that monetarism is equally silly. And I understand that there is a big difference between the two philosophies.

My point was merely that the even the monetarists still buy into a portion of Keynes' thinking -- namely that what a stagnant economy principally needs is more stimulation, rather than better regulation, to begin to thrive. They just disagree on what that stimulation consists of. Keynes said it was government spending. Friedman said it was monetary intervention.

It is the part that they agree on that I believe is worth questioning. My suspicion is that both Milton Friedman-style monetarism and Keynesianism are simply incorrect in ascribing economic effects to the causes they cite.

Keynes made popular the idea that it is a government's job to provide stimulus to a weak economy (and yes, as you pointed out, he did refer specifically to fiscal stimulus to reduce unemployment). The monetarists accepted the first part (providing stimulus reduces unemployment) but changed the nature of the stimulus to a monetary form (make money more available). The second part of their argument wasn't Keynes, but the first part (provide stimulus to reduce unemployment) was his.

And that's how they failed to question the more fundamental point: is stimulus (of any kind) even the best form of intervention? When people are too fearful to spend because they are worried about not having a job, there are different ways to change their mind. One was Keynes': Give them all jobs. Another was Friedman's: Play with the money supply. Another, however, was Erhardt's: Give them a safety net so joblessness has no economic sting, but also regulate the markets so that labor could achieve fair wages.

Erhardt was told that this would mean that people would not work! His reply was that as long as the currency was strong, it would be desired by the people, and they would choose to work. Greed will not simply go away, it is a part of human nature. And this approach did indeed bear fruit, in the German Wirtshaftswunder, and later in reunification. In other words, create a social state that permits the marketplace to function properly, but tweak it until it focuses on building things, rather than destroying lives. The second is not required for the first to happen. "Creative destruction" should apply to businesses, but not people's economic survival.

In other words, broad "stimulus" is never really required at all, as long as government can guarantee a level playing field. The existence of economic problems (such as high unemployment) mean it isn't level. The solution is to find out in what way, and fix that cause.

You never read Keynes, clearly. I am more apt to believe you read a Conservative blog that repeats an undying myth.

I have read Keynes, though I'll admit that it's been a while, and the only Conservative blog I read is this one. As I pointed out above, the misunderstanding most likely arose from my vague wording.

A Keynsian fiscal stimulus cannot have unemployment, by definition. In the extreme of central planing, the Soviet Union for example, unemployment was not even legal. The problem is, as I have said, the product of the labor can be dubious.

Financially Keynesian policy can never fail anymore than water cannot be wet for when the water dries there is no water. So if "full employment" is not reached, that being the goal, then it isn't purely Keynesian full employment policy that is being followed.

THAT ISN'T THE GOAL. Please don't put words in my mouth. I never said anything about Keynesianism failing to reduce unemployment! As you point out, it is perfectly obvious that it can. I spoke exclusively about it failing to create private-sector growth. Those ideas are simply not the same thing. And Keynes' failure was precisely in selecting the wrong goal. To be correct, he needed to step back, look at the bigger picture, and realize that unemployment wasn't the source of the problem, but an effect. He failed to identify where in the economic chain intervention would have the maximum impact.

Basically, while it is obvious that Keynesianism works in the trivial sense of guaranteeing low unemployment, my point is that if unemployment is a problem in the first place, the government has previously failed in its regulation of the marketplace in some other way. Finding and fixing that original problem is a far more effective use of time and funds than simply handing a job to every person who would like one. Keynes failed not in explaining a valid mechanism, but in identifying the correct goal. Zero unemployment is not equal to universal, or even general, well-being. While safeguarding the general well-being is usually thought of as a valid goal of government, directly controlling employment is less obviously so.

I should point out (before it becomes contentiously nit-picked) that I'm using the term "regulation" of a marketplace rather loosely above, since it isn't always specifically "rules" that are needed, but sometimes other forms of intervention, such as a high-quality educational system, which shift the parameters or boundaries of markets, to help level the playing-field.

For example, a good and free educational system allows workers to train, or re-train, for emerging industries. This clearly will affect the boundaries of the market for private education, as well as the labor market, and government should not be afraid to do so. That is a valid and beneficial intervention for a government to make in a market. Even Adam Smith agreed with that! Similarly, a social safety net permits workers to not obsess about saving for lean times, so they are free to spend the money they earn, which increases the velocity of money, and this intervention clearly will also affect the market for retail banking and investment services. Sufficiently strong retirement programs similarly take away the need for workers to obsess about investing for the distant future, and permits the natural and unforced constriction of speculation to a more heavily-regulated financial sector. (Since the average worker doesn't invest as much, they are less also likely to vote for extremely low tax rates or regulations for rentier income sources.) This serves to restrict the FIRE sector's growth, and political influence, without direct intervention.

THESE are the sorts of marketplace intervention that form the most natural scope of government. When the government FAILS to fulfill its legitimate mandate to intervene, increasing unemployment is one possible EFFECT. Another is declining per-capita-GDP. Trying to alter such effects directly, without addressing the underlying causes, is a losing game. It assumes a reversal of the real causality. And it makes this mistake because of the most fundamental and common error in economics: that these numbers can be thought of as greatly meaningful in their own right, independent of the people and lives involved. They aren't. The reality is more complicated, and it was Keynes who over-simplified it, and thereby led us into a debate about a false dichotomy.

I hope it is now clear that I am not just recycling talking points from a conservative, anti-Keynesian blog. I reject all of those arguments as well, and just as strongly as I reject those of Keynes. My position is that both these sides are simply having the wrong debate entirely. There is a third way, which rejects the fundamental validity of the framework the other two are disagreeing within. It takes the position that their entire economic framework needs to be re-thought, with the damage Keynes* did with his incorrect framing (which was accepted by Hayek, Friedman, and the like) being thrown out entirely.

Keynes' most pernicious residue is that even those who disagree violently with him (eg. the US's far right today) still accept his implicit (in my opinion, incorrect) framing of the terms of the debate. Perhaps most commonly accepted without critical thought are the use of metrics like GDP and unemployment as proxies for measuring the success or failure of government intervention. Neither of these is a reasonable assessment of the well-being of the populace, and many of the problems we see today stem directly from their use in that context. The size of the number just isn't what matters most.

These errors are everywhere. People see growth in a parasitic financial sector, and say, "It's helping GDP go up! That's good!" when it fact it is the opposite of good. The same financial sector later gets slammed, and people are panicked into a giveaway because this huge sector will decline, and therefore GDP will, which means we will by definition be in a "recession". Yes, we will. But only because the wrong metric is being employed, which doesn't take into account the nature of the economic activity that is declining. The decline of a parasitic sector should be the sort of thing that is cheered by the nation as a whole! Even though it increases unemployment. We want those people to retrain into the production/consumption portion of the economy, where they don't serve as an economic drag. That kind of "recession" is a good thing, particularly when a social infrastructure exists that allows affected people to retool for a new industry, rather than having their lives destroyed.

But by accepting the metrics popularized by Keynes as valid measures of success, we have instead become hostage to those who are able and willing to cravenly utilize them to gain wealth for themselves, at the expense of the commonweal. We have handed to them the ability to dictate to the country what is "good for us" and "bad for us".

We have to stop playing that game. It's rigged. And it's just as badly rigged by those who wave Keynes' flag as those who wave Friedman's. In truth, the same people provide the money to make both rags.



* Before I get jumped on for "not reading", I'll just point out that I'm fully aware that while Keynes did not invent GDP (that was Kuznetz), but I do claim that he and his work did popularize it, which resulted in it being the principal metric for assessing an economy today.