Robert Higgs rules. In his recent article published at LewRockwell.com he is quite straightforward at blasting the idiocy of Keynesian economics and its proponents such as Martin Feldstein. He begins:
Writing in the Wall Street Journal on December 24, 2008, Martin Feldstein gives us an article entitled “Defense Spending Would Be Great Stimulus.” The title tells you everything you need to know: military Keynesianism is the medicine being prescribed by a leading figure of the politico-economic Establishment – a Harvard professor, former chairman of the Council of Economic Advisers, former president of the American Economic Association, president emeritus of the National Bureau of Economic Research, and member of the President’s Foreign Intelligence Advisory Board. That a man so drenched in professional honors and attainments would be peddling such long-discredited claptrap speaks volumes about the state of mainstream economics. When you think it can’t sink any lower, it does.
Feldstein opines that “countering a deep economic recession requires an increase in government spending to offset the sharp decline in consumer outlays and business investment that is now under way. Without that rise in government spending, the economic downturn would be deeper and longer.” This statement encapsulates the essence of vulgar Keynesianism. It would seem that Feldstein, like nearly every other lion of the mainstream economics profession, failed to notice that by the very empirical-test standard the profession considers sacrosanct, this theory was decisively refuted by the events of 1945–47 – or perhaps the mainstreamers believe that after their model had, as they see it, proved its mettle so beautifully on the upside from 1940 to 1945, its abysmal failure to predict from 1945 to 1947 need not be taken seriously.
And later:
Keynesian economics rests on the presumption that government spending, whether for munitions or other goods, creates an addition to the economy’s aggregate demand and thereby brings into employment labor and other resources that otherwise would remain idle. The economy gets not only the additional production occasioned by the use of these resources, but still more output via a “multiplier effect.” Hence comes the Keynesian claim that even government spending to hire people to dig holes in the ground and fill them up again has beneficial effects: even though the shovelers create nothing of value, the multiplier effect is set in motion as they spend their money income for consumption goods newly produced by others.
At the Ludwig von Mises Institute, William L. Anderson has written a fantastic article describing the causes of our bubble economy mostly by doing a number on Paul Krugman, recent Nobel Prize winner who doesn’t seem to have a clue about reality. It’s a great read:
As a long-time critic of the part-time economist and full-time political partisan Paul Krugman, I would be remiss if I did not give him at least some credit for being able to point out the obvious: Bernard Madoff’s Ponzi scheme really is a prototype for the modern US economy. Yes, Krugman is right, but, alas, I am also required to add that a broken clock is still more consistent at telling time than Krugman is at explaining economic phenomena.
Indeed, the US economy has gone through two destructive financial bubbles in the past decade, although the government’s response to the last bubble has been to spread the damage throughout the economy to where the damage can no longer be relatively contained. The Madoff revelations are simply another blow to the reeling financial industry that not long ago was “creating” multimillionaires who had not yet made it to their fifth reunions at Harvard or Duke.
Two quotes, one from Barack Obama and the other from his choice for chief of staff, Rahm Emanuel, spell out their intentions.
Obama said: “Painful crisis also provides us with an opportunity to transform our economy to improve the lives of ordinary people.”
One would have to know and understand the progressive politics (and adherence to socialistic policies and Keynesian economics) to be able to read between the lines. But Emanuel is more straightforward, saying “You never want a serious crisis to go to waste.”
Wow. Politicians don’t even bother to hide their agendas any more.
This is the subject of John Stossel’s most recent commentary.
So they will “transform our economy.” Obama’s nearly trillion-dollar plan will not merely repair bridges, fill potholes and fix up schools; it will also impose a utopian vision based on the belief that an economy is a thing to be planned from above. But this is an arrogant conceit. No one can possibly know enough to redesign something as complex as “an economy,” which really is people engaging in exchanges to achieve their goals. Planning it means planning them.
Obama and Emanuel want us to believe that their blueprint for reform will bring recovery from the recession. Yet we have recovered from past recessions without undertaking a radical social and economic transformation.
These days I’m reminded of the semi-jingoistic words from “God Bless The U.S.A: Proud To Be An American” by Lee Greenwood. It makes me somber and introspective. Perhaps it should be renamed “Sad To Be An American” to make it more accurate. I’m in this mood because I’ve come to the realization that Ben Bernanke, Hank Paulson, and almost everyone within our federal government have adopted the main principle of Dr. Gideon Gono. The principle is: Failure is not an option. Who is this Dr. Gideon Gono you ask?
Dr. Gideon Gono is the chairman of the Central Bank of Zimbabwe. He has been instrumental in fighting the threat of deflation in Zimbabwe. In fact, he fought deflation so successfully that inflation is now said to be growing annually at 516 quintillion percent (as of November 2008). Just to show how largely successful Gono has been, here is 516 quintillion shown with zeros on the end:
516,000,000,000,000,000,000 %
Prices are doubling every 1.3 days in Zimbabwe. Certainly that can’t happen in America right? I hope not. Of course, if that were to happen I could pay off my mortgage with about 2 minutes worth of work.
As reported by The Future of Freedom Foundation, the SCOTUS has narrowly ruled that the Bush administration’s policy of holding detainees indefinitely without judicial review is unconstitutional:
Once in a while the fading embers of freedom flare with defiant vigor. That happened in June when the U.S. Supreme Court sternly informed the Bush administration that it may not hold people suspected of being terrorists indefinitely without charge and without judicial review at its prison at Guantanámo Bay, Cuba.
In a too-close-for-comfort 5-4 ruling, the Court reminded the American people — indeed, the world — that arbitrary power destroys individual liberty. Where government can lock people up and throw away the key — answerable to no one at all — there liberty does not dwell. That is what the Bush administration has aspired to, but in June the Court drew a line.
In invoking the cherished principle of habeas corpus, the Court was emphatic:
[Protection] for the privilege of habeas corpus was one of the few safeguards of liberty specified in a Constitution that, at the outset, had no Bill of Rights….
The Framers viewed freedom from unlawful restraint as a fundamental precept of liberty, and they understood the writ of habeas corpus as a vital instrument to secure that freedom.
The Constitution does not distinguish between citizens and noncitizens when it talks about “privileges.” To be sure, the Constitution permits Congress to suspend the writ of habeas corpus “when in Cases of Rebellion or Invasion the public Safety may require it.” But the Court said that the Suspension Clause was not satisfied by the Military Commissions Act of 2006 (MCA), Section 7, which forbade any court from considering a petition for a writ of habeas corpus for “an alien detained by the United States who has been determined by the United States [i.e., the Bush administration] to have been properly detained as an enemy combatant or is awaiting such determination.”
Continue reading the article, written by Sheldon Richman, here.
The claim that the “gold standard” caused or worsened the Great Depression debunked.
by Jake, the Champion of the Constitution
Originally published December 25, 2008 at http://www.nolanchart.com/article5706.html
The purpose of the following is to argue that the “gold standard,” as understood by most of the public, did not cause or worsen the Great Depression as current FED Chairman Ben Bernanke has based many of his papers, speeches, and, to a large extent, his entire career on. In our contemporary times, I do believe this blame must be firmly rejected and monetary policy should, at the very least, be debated in a national forum. Indeed many other economists, such as the Friedman family, Anna Schwartz, Alan Greenspan, and Jeffrey “Shock Doctor” Sachs, have all propagated this lie. (photo)
On the latest LewRockwell.com podcast Ron Paul is the guest. They talk for over 18 minutes regarding the series of bailouts our lovely federal government has brought forth.
He begins by suggesting that perhaps they don’t really care directly about the bailouts but rather their ultimate goal may be nationalization.
However, he does speak of having hope about the prospects for liberty in America’s future.
Ron Paul appeared again on FOX Business News yesterday discussing the latest push for more government bailouts. Paul discusses his own lack of authority as a congressman when it comes to the Fed and other decisions. This guy Ron Paul sounds like a glorious broken record to me.
I wish those in power would just act on his suggestions. Hopefully their desperation will lead them to just say, “Hey, lets try this thing Ron Paul keeps talking about. Maybe it will work.” That is highly unlikely when Ron Paul’s push for free market policies and getting out of the bailout and regulation business are what the unwashed masses believe got us into this mess. Ron Paul’s words are a hard sell in a political climate that always looks to the government to solve problems rather than individuals and the private sector.
Watch and listen to Ron Paul continue to make sense below.
One of Lord John Maynard Keynes’s essays “The Great Slump of 1930″ is extremely relevant today as we look forward at the 2009 economy and future governmental antics. Let’s take a look!
by Jake, the Champion of the Constitution
Originally published December 20, 2008 at http://www.nolanchart.com/article5674.html
The outstanding contemporary relevance of Lord Keynes’ short essay “The Great Slump of 1930” comes from the fact that Keynes faced very similar dire auspices as he grappled with the uncertain future of the 1930 global economic downturn. At the time he wrote the essay, Keynes was trying to explain both the origins of the crisis and its future length and severity. Needless to say, he missed the boat completely, although like a good medieval soothsayer he did manage to hedge his bet a little. Obviously, the “Great Slump” was not a temporary downturn but instead heralded the Great Depression, which would last until the wartime economy of WWII stimulated industry in the United States while utterly destroying Europe, the epitome example of lost wealth via Henry Hazlitt’s “broken window” illustration. Based on recent FED manuevers and Obama’s future taxation and government expansion plans, most likely the modern-day Keynesian-Friedmanite command-and-control corporate governments will respond in a similar hapless manner as Keynes’ abject failure almost 80 years ago. (photo)
This new video from the Center for Freedom and Prosperity Foundation takes a look at Keynesian Economics from both theoretical an practical, real-world perspectives. It does a decent job at quickly explaining why Keynesianism doesn’t work, even in theory, but falters when the host (Dan Mitchell of the Cato Institute) says:
…we should quickly note that government could finance stimulus spending by printing money rather than borrowing, but thankfully that idea doesn’t seem to be on the table since almost all politicians now realize that it would be foolish to mimic the disastrous inflationary policies of basket case economies such as Argentina and Zimbabwe.
Unfortunately, that’s exactly what the Federal Reserve has been doing, and with great fervor.
Then it goes on to give a multitude of examples of how Keynesian policies have failed throughout history, beginning with the Great Depression. Take a look.
Liberty Maven
The purpose of the following is to argue that the “gold standard,” as understood by most of the public, did not cause or worsen the Great Depression as current FED Chairman Ben Bernanke has based many of his papers, speeches, and, to a large extent, his entire career on. In our contemporary times, I do believe this blame must be firmly rejected and monetary policy should, at the very least, be debated in a national forum. Indeed many other economists, such as the Friedman family, Anna Schwartz, Alan Greenspan, and Jeffrey “Shock Doctor” Sachs, have all propagated this lie. (
The outstanding contemporary relevance of Lord Keynes’ short essay “
