To explain how this works, let’s briefly digress and explain Keynesian economics. This is the theory that you can jump-start a weak economy by having government borrow a lot of money and then “inject” this money into the economy. And that’s precisely what Obama did with the stimulus, mostly with more spending, but also with some tax cuts for favored constituencies. According to the theory, the money that is being spent by the government (and the recipients of tax cuts) will goose growth and create a ripple effect as producers hire people to deal with the increase in “aggregate demand.”
The Keynesians basically assume that there are no “opportunity costs” when government borrows money and spends it. That’s a bit of economic jargon, but it’s simply a way of saying that Keynesians think that money, for all intents and purposes, will sit idle and gather dust during an economic downturn in the absence of government.
This is a very nice theory…but only on a blackboard.
In reality, there is an “opportunity cost” when government borrows money and spends it. Resources are diverted from the productive sector of the economy. This might not be a problem if government spent money wisely, but stimulus schemes tend to reward interest groups with the most political clout. So instead of outlays for physical and human capital, which at least theoretically might improve the economy’s productive capacity, the White House directed the bulk of the stimulus to redistribution programs and handouts to state governments.
Imagine if I I came to you with a gun, pointed the gun at your head, and said "Give me your money. I am going to hire lots of people to do things for me. This is a good thing, and it will create more jobs."
You would understandably think that I was stark, raving mad.
You would say "Hey, Whited, my money is in the bank. The bank is loaning it to companies and firms and individuals. They're already creating jobs with my money. That's the only way the bank can earn the interest that they pay me. Put down the gun. Jobs are being created at the same rate you could create them with my money."
Imagine if I said "No, if I take your money, and hire people who overwhelmingly support me, it will create more tax revenue."
I can hear you now, stating vehemently that you know the best use for your money, and that I'm just trying to win favor with those who already love me and want your money.
Now, listen to this community-organizing, cash-for-clunkering, you-didn't-build-that, redistributionist, class-envy-agitating, crony-capitalist, Keynesian-bullshitting, economically ignorant resident of 1600 Pennsylvania Avenue.
If those layoffs had not happened, if public sector employees grew like they did in the past two recessions, the unemployment rate would be 6.5 instead of 7.5. Our economy would be much better off, and the deficit would still be going down because we would be getting more tax revenue......
Instead of using a scalpel to get rid of programs we don’t need and keep vital investments that we do, the same group has kept in place this meat cleaver called the sequester that is just slashing all kinds of investments in education and research and our military. Yet all the things that are needed to make this country a magnet for good middle class jobs, those things are being cut. These moves don’t just hurt our economy in the long term. They hurt our middle class right now.....
Over the past four years, another 700,000 workers at the federal, state and local levels of government lost their jobs. These are cops and firefighters. About half of them are people that work in our schools. Those are real jobs. It doesn’t help a company like Amazon when a teacher, cop or a firefighter loses their job. They don’t have money to place an order. That’s hundreds of thousands of customers who have less money to spend.
See, he thinks your spending isn't good enough. If you've got your money in a bank, it's getting spent. He wants to put the gun to your head and spend it HIS way.
It really is that simple.
I got into an interesting conversation at the bar with an electrical contractor while I was celebrating my birthday last night. (52nd birthday, BTW.)
We were talking about building inspectors, corrupt building inspectors, and the people that most regulations are written to benefit. (Hint: It ain't you.)
The guy was obviously a skilled electrician. Plenty smart. But then he let loose with this statement: At least all those rules and regulations create jobs and help the economy.
I couldn't help myself. Like I said, I was celebrating my birthday with plenty of Jim Beam and wasn't capable of self-censorship. I remembered the Milton Friedman "spoons" story.
The story goes that Milton Friedman was once taken to see a massive government project somewhere in Asia. Thousands of workers using shovels were building a canal. Friedman was puzzled. Why weren’t there any excavators or any mechanized earth-moving equipment? A government official explained that using shovels created more jobs. Friedman’s response: “Then why not use spoons instead of shovels?”
So I said "If the goal is to create jobs and help the economy, why not use lanterns instead of electricity?" I don't remember his response, if there was one.
Here's something I found on the Forbes website while I was looking for the "spoons" story.
Economies prosper when multitudes of ordinary people are motivated to make improvements. This is because information and insights needed to make an economy prosper are widely dispersed. There’s far more than could ever be centralized, validated and updated in a place like the federal government. The most reliable way to motivate people? Harness their self-interest: let them try making a profit by starting a business based on their information and insights. Government can best promote prosperity by, among other things, maintaining equal rights, low taxes, free trade, sound money, predictable laws and protection against force and fraud. Government should let consumers render their verdicts in open markets – no subsidies, special favors or bailouts.
Creating artificial hurdles, and then paying government bureaucrats to monitor the hurdles, does not help an economy. It's all about production, baby !!
I had to get that out of my system. Have a good day, and be thankful for the electrical contractors who bring power to your laptop/phone/ipad/ipod/Blackberry reading device IN SPITE OF the electrical code, and not because of it.
Both sets of printing press owners, Bernanke's and North Korea's, are churning out bills for themselves and their buddies - the people who get to spend them first.
But let's assume that "stimulus" of this sort is a good thing.
One of the minor teleprompters at the White House apparently has a virus, a bad one that causes Alan Krueger to repeat himself every month. (BTW, this is the same Krueger of the infamous Krueger and Card minimum wage study of New Jersey restaurants that survived a mandatory wage increase. You could use the same methodology to prove that no one has ever died from Russian roulette. Don't interview anyone but the survivors.)
When the monthly employment report came out Friday morning, Alan Krueger, Chairman of President Barack Obama's Council of Economic Advisers, quickly commented on the White House blog. He began with the observation that "more work remains to be done":
April 4, 2013 - "While more work remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression. It is critical that we continue the policies that are helping to build an economy that creates jobs and works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007."
If the words sound familiar, there's a good reason. After a brief respite in March, Mr. Krueger used the same two opening sentences in the April post that were used in the preceding seven Employment Situation blog posts (although to be fair, Megan Slack is credited with the November 2012 entry).
February 1, 2013 - "While more work remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to heal from the wounds inflicted by the worst downturn since the Great Depression. It is critical that we pursue the policies needed to build an economy that works for the middle class as we continue to dig our way out of the deep hole that was caused by the severe recession that began in December 2007."
January 4, 2013 - "While more work remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to heal from the wounds inflicted by the worst downturn since the Great Depression. It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007."
December 7, 2012 - "While more work remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to heal from the wounds inflicted by the worst downturn since the Great Depression. It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007."
November 2, 2012 - "While more work remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to heal from the wounds inflicted by the worst downturn since the Great Depression. It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007."
October 5, 2012 - "While there is more work that remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to heal from the wounds inflicted by the worst downturn since the Great Depression. It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007."
September 7, 2012 - "While there is more work that remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression. It is critical that we continue the policies that are building an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007."
August 3, 2012 - "While there is more work that remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression. It is critical that we continue the policies that build an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007."
Please, please, please, Mr. Krueger. Stop working.
To hear Washington tell it, if we cut back on the increase, not the total, but the increase of government spending, we're going to go bankrupt, resort to cannibalism, and start listening to disco again. 30 seconds of video here. Please watch it. Who does it remind you of?
Let's break down the Keynesian Logic (sic) here....
Economies rely on spending.
I spend a lot, and you spend a lot.
Government takes money from both of us, and spends it. This makes it look like government spends even more, and is even more vital. But it's the same amount of money.
But even if we weren't spending our money instantly, we would have it in a bank. The bank attracts our savings by paying interest. The only way they can generate this interest it by loaning it to other people who want to..... spend it.
Government takes our money by force. If the only rationale for this theft is to create jobs and help the economy, we could be doing that without their freakin' help. I want to create jobs in industries that I like, not necessarily in industries that have given The Teleprompter Jesus a shitload of contributions. Plus, even though I'm a moral leper, I still don't like giving money to an asshole who blows up children with drones.
Some of the other money pumped into our economy is borrowed from other nations, other individuals, or from ourselves. Keynesian economists don't worry about this, mostly because they're not the ones who will have to pay it back.
The other money pumped into our economy is printed at a facility on Blue Mound Road in Fort Worth TX, or at another facility in Washington D.C. Nothing is backing it. Not gold, not silver. It's just paper.
Taking money by force is bad. Printing money out of thin air is bad. Borrowing isn't necessarily bad in some cases, but if you're putting the loan on the credit cards of 5-year-olds, it's bad.
If the only things keeping our economy afloat are 1) theft 2) borrowing, and 3) counterfeiting, then we need to re-examine everything we think we know about government, economics, and politics.
In which Bill Moyers gives Paul Krugman a nice, long, loving tongue-bath. Not for the faint of heart. Warning: toward the end of the video, both men praise the Depression era's WPA art projects.
If Barack Obama/Nancy Pelosi/Harry Reid and Co. were to break into Fort Knox, throw all the gold into the Atlantic, then shoot the CEO of every Productive (i.e. non-green) company, and then, as a follow-up, pour radioactive waste into every functioning oil well in North America, I wonder what Paul Krugman of the New York Holy Times would do to justify it. Because he would find a way to justify it.
If the only way to hire one more government bureaucrat involved adding 3 trillion to the national debt, selling our children to China as household slaves, and worsening the condition of every low income family in the nation, I wonder what Paul Krugman would write to justify it.
Because he would find a way to justify it.
There are people in politics that I admire. I think Ron Paul is as close as they come to being an American hero. But he plugged in the occasional earmark here and there. Ask him why, and he'll say that that's how the game is played. It's what the system requires. He shouldn't have done the earmarks.
He also should've paid more attention to his newsletters in the 80's, and not allowed any racist commentary to get in. If you want to be president, you've gotta keep your eye on the ball.
See??? I just criticized Ron Paul. I think it helps my objectivity a bit.
I think the world of former New Mexico governor and LP presidential candidate Gary Johnson, and would probably volunteer to be the mother of his next child. But I totally disagree with his stance on privatizing prisons, and I don't care how much money it saved the state of New Mexico. The government should have a monopoly on initiating force. It's that simple. I think Gary Johnson is wrong, wrong, wrong on this issue.
But Paul Krugman? If Barack Obama were to start locking up people for bing left-handed, confiscating their illegally earned left-handed incomes, and sending them to Montana for "re-education", I truly believe that Paul Krugman would write a column about how this will eventually help the economy.
I've been phenomenally busy at work.
I'll be incredibly busy for the next four weeks.
So I'm thinking about posting nothing but updates to this chart until I have time to write something else.
Obama predicted terrible, terrible things if we didn't pass his pork-laden stimulus bill. Horrible things.
A gang of idiots passed his stimulus bill.
Ever since then, things have been worse than his predictions of what would happen without the thefts/giveaways.
Is there anyone out there who can still defend this crap? Anybody at all???
When thieves are in power, people with money hide their money. It really is that simple.
I haven't had time to watch all of this, but the Libertarian Blogosphere is touting it as the greatest episode of Paul Krugman torture available for children under 18. Posting it here for future reference, in case I'm in a bad mood one day and need cheering up.
Here's what someone calling himself Tyler Durden had to say about the vid:
Forget Ali - Frazier; ignore Santelli - Liesman; dismiss Yankees - Red Sox; never mind Silva - Sonnen; the new undisputed standard by which all showdowns will be judged happened in Spain over the weekend.
During a debate on Europe's crisis, Pedro Schwartz (a mild-mannered Spanish 'Austrian' economics professor) took on the heavyweight Paul 'I coulda been a Fed Chair contender' Krugman, and - in our humble opinion - wiped the floor with his Keynesian philosophy.
From the medicinal use of more debt to fix too much debt, to the Japanization of world economies and the demand-side bias of every- and any-thing - interested only in the short-term economic growth; the gentlemanly Spaniard notes, with regard to the European crisis, the fact that "Keynesians got us into this mess and now we have to sacrifice our principals so that they can get us out of this mess".
Humble and generous in his praise - though definitively serious with his criticism - Schwartz opines: "Often Nobel prize winners are tempted to pontificate on matters that are outside the specialty in which they have excelled," noting "the mantle of authority whereby what ever they say - whether sensible or not - is accepted with resignation from some and enthusiasm by others."
Krugman's red-faced anger is evident at the conclusion as he even refused to shake Schwartz's hand after the debate.
For 15 minutes of both education and entertainment - this is as good as it gets...
•Starting from around 35:00 the Spanish professor praises and criticizes in a thoughtful and gentle tone
•At around 39:00, he addresses the demand-side description of the world
•Krugman's less-than-happy response (which sparks quite a rowdy argument) begins around 48:20
The Worshipful Company of Glaziers and Painters of Glass has released a statement in support of the economic stimulus activities undertaken this week in London.
“Over the past three nights,” said guild spokesman JM Keynes, “The brave young people of London have taken it upon themselves to guarantee the economic health of our city for years to come.” Keynes went on to explain that the Glaziers expect a 10,000% increase in demand for new glass windows over the coming weeks, which will employ hundreds of new glassmakers, who are paid as much as six francs for each new window produced.
Shopkeeper F (Frederic) Bastiat took a rather dimmer view of the stimulus package, citing its cost to his business. “Look here,” he said, gesturing to his store’s broken window. “They broke that, broke the door, came in and took things right off the shelves.” Bastiat expects that his insurance will cover some of the damages, but that much of his inventory will be a total loss. “I had a year’s profits tied up, just in what was on the shelves,” he explained. “And some of it they just destroyed! This television was too heavy to steal, I suppose, so they just smashed it.”
Bastiat’s selfishness, though, is not representative of most Londoners. In addition to creating jobs and increasing private spending, the stimulus is providing an increased standard of living for some participants. ”I got tones of stuff todayyyy!” explained one of the stimulus agents via twitter, ” … whop whop … wat ev;; it was free so i took it ennit,, didn’t get caught so[.]”
Hit the link up top to read the rest. This guy is greatness.
Here's something I've been pondering for the last few weeks.
My employer, Jukt Micronics, is about to lease a new mega-warehouse. My boss and I have been working on the deal for a couple of months.
We already have several warehouses and had to justify the deal to the company owners, and to our president, Marvel Variants.
(On one of our tours of the facility, Mr. Variants took this pic of me lounging at the spot where I hope to take my lunch breaks. I consider it to be one of the greatest Libertarian portraits ever produced, and I hope the jury will remember this deed when Variants is put on trial for ripping off comic book geeks.)
Anyway, to justify the new warehouse, my boss and I had to determine how many forklifts we could eliminate. The lease at this space is less per square foot than one of our other locations, so that helped. We figured out how much time we could save by consolidating some locations. The calculations for how much we would save on fuel took up a couple of days.
Here's the big one, the one that probably closed the deal for us....
We won't have to hire as many people.
I repeat - we won't have to hire as many people.
I think my employers have a good relationship with their employees. In years past, they've actually gone to the bank to borrow money so they could give Christmas bonuses!! But the process of purchasing labor from people is only a means to an end, and that end is to provide display fixtures to grocery stores in exchange for money. We do not have a goal of saving and creating jobs.
(Otherwise, we would lobby for the government to outlaw forklifts and trucks. Think of all the jobs that would save or create.)
Now, think of the yammering you hear when Congressman Felcher is trying to justify a new project in his district.
This new Perpetual Motion Facility will bring 1,397 new jobs to North Texas ! Our investment in Bottled Fairy Flatulence will employ 257 citizens of the D/FW area ! The Porkulus Plan has saved or created 2 million jobs since 2009 !
And on and on and on. The higher the number, the more likely the boondoggle will come into being, right?
So if you had control of your tax money had an extra $15,000, and wanted to invest it in a place that would use it wisely, where would you put it?
Would you want to give the money to John Boehlout Boehner and The Teleprompter Jesus so they could hire as many people as possible? Even if a lot of those people are just standing around or doing busywork?
Or would you want to invest it in a project that was trying to use the money as efficiently as possible?
How much more would you be willing to pay for a computer that was produced by 6,000 people instead of 4,000 ??
One last question....Since Washington is now infested with Keynesian economists who are trying to stimulate the economy by "creating jobs", is there any doubt in your mind why our economy is in the tank?
Leave employers alone to fight it out and compete. Stop using tax money to fund insanity. The entrepreneurs, not the Community Organizers, will come up with the best use for it. The jobs and the prosperity will follow.
Here's an idea for a great Libertarian political ad for October. The text is from The Boston Globe's Jeff Jacoby, on the Cash For Clunkers travesty.
IN THE market for a used car? Good luck finding a bargain: The price of “pre-owned’’ vehicles has climbed considerably over the past year. According to Edmunds.com, a website for car buyers, a three-year-old automobile today will set you back, on average, close to $20,000 — a spike of more than 10 percent since last summer. For some popular models, the increase has been much steeper. In July, a used Cadillac Escalade was going for around $35,000, or nearly 36 percent over last July’s price.
Hit the video. Seriously. Hit the video of these guys pumping Sodium Silicate into the engine of a Volvo, under orders from our President. You don't have to watch, just listen while you read the rest. Now, back to our commentary from Mr. Jacoby.
....Part of the answer is that the supply of used cars is artificially low, because your Uncle Sam decided last year to destroy hundreds of thousands of perfectly good automobiles as part of its hare-brained Car Allowance Rebate System — or, as most of us called it, Cash for Clunkers. That was the program under which the government paid consumers up to $4,500 when they traded in an old car and bought a new one with better gas mileage. The traded-in cars — which had to be in drivable condition to qualify for the rebate — were then demolished: Dealers were required to chemically wreck each car’s engine, and send the car to be crushed or shredded.
Crank up the volume on the video. Hear the whine? Does it sound like vandals destroying a car? Destroying the economy? Destroying employment? DO YOU HEAR THE NOISE OF BARACKAGANDAN LUNACY?????
Congress and the Obama administration trumpeted Cash for Clunkers as a triumph — the president pronounced it “successful beyond anybody’s imagination.’’ Which it was, if you define success as getting people to take “free’’ money to make a purchase most of them are going to make anyway, while simultaneously wiping out productive assets that could provide value to many other consumers for years to come. By any rational standard, however, this program was sheer folly.
Briefly cut away to a clip of some obviously low-income people wandering through a used car lot. Then go back to the shrieking Volvo.
Of the 700,000 cars purchased during the clunkers frenzy, the estimated net increase in sales was only 125,000. Each incremental sale thus ended up costing the taxpayers a profligate $24,000.
Show a Cash For Clunkers-era clip of some Yuppies driving a new Prius out of a parking lot. Be sure they've transferred their Obama bumpersticker from the Clunker to the Prius. Then go back to the whining Volvo.
Even on environmental grounds, Cash for Clunkers was an exorbitant dud. Researchers at the University of California-Davis calculated that the reduction of carbon dioxide attributable to the program cost no less than $237 per ton. In contrast, carbon emissions credits cost about $20 per ton in international markets.
The whole carbon credits scam is environmentalist bullshit, but some people believe in it. Kinda like Catholics used to believe in purchasing Indulgences. Let it stay in the ad.
Using Department of Transportation figures, the Associated Press calculated that replacing inefficient clunkers with new cars getting higher mileage would reduce CO2 emissions by around 700,000 tons a year — less than Americans emit in a single hour. Likewise, the projected reduction in gasoline use amounted to about as much as Americans go through in 4 hours. (And that’s only if you assume — contrary to historical experience — that fuel consumption decreases when fuel efficiency rises.)
When all is said and done, Cash for Clunkers was a deplorable exercise in budgetary wastefulness, asset destruction, environmental irrelevance, and economic idiocy. Other than that, it was a screaming success.
Cut to the 3:55 mark on the video. Watch the guy with the fire extinguisher. Listen to the vandals giggle.Cut to a graph of declining employment. Cut to a quick graph of declining home sales. Cut to a quick graph of increased automobile prices.Then go to one more voiceover.
Do you really want to send the people who did this back to Washington?
My name is The Whited Sepulchre, and I approved this message.
A reader of Radley Balko's Agitator blog took him to task for not commenting on the libertarian who flew a plane into an IRS building. Here's Mr. Balko's response:
Sorry for my silence. It’s just that yesterday’s events have stunned me into a moral crisis. I’ve been up all night recontemplating my entire political philosophy. It’s so clear now how a philosophy that espouses nonviolence and peaceful, voluntary exchange could drive a man to fly a plane into a building in a murderous, suicidal act of hate.
I can’t believe I didn’t see it all along.
Well said, Mr. Balko.
It's too soon to be posting anything glib or flippant about this, and I apologize ahead of time for being insensitive. But....
This guy did a huge amount of damage to a building, and it will cost hundreds of thousands of dollars, if not millions, to repair it.
Just think of the jobs created or saved....
Here's a video from the Cash For Clunkers era, illustrating the same flawed concept. Let's destroy things to stimulate the economy.
The long-awaited Keynes vs. Hayek smackdown rap video, courtesy of the good folks at Cafe Hayek. For those new to the conflict, Fast Freddy Hayek, the bald guy, believed that markets, economies, and ummm....YOU should be left alone. Keynes, the guy in the dark suit, believed that everything should be run by people from Cambridge.
Here are the lyrics: (The phrase "animal spirits" was Keynes' term for acting on emotion rather than logic, or acting because of a desire to do something rather than nothing. IMAO, that's a perfect explanation for why people favor Keynesian flurries of spending whenever there's a financial crisis. But that's just me.)
We’ve been going back and forth for a century [Keynes] I want to steer markets, [Hayek] I want them set free There’s a boom and bust cycle and good reason to fear it [Hayek] Blame low interest rates. [Keynes] No… it’s the animal spirits
[Keynes Sings:]
John Maynard Keynes, wrote the book on modern macro The man you need when the economy’s off track, [whoa] Depression, recession now your question’s in session Have a seat and I’ll school you in one simple lesson
BOOM, 1929 the big crash We didn’t bounce back—economy’s in the trash Persistent unemployment, the result of sticky wages Waiting for recovery? Seriously? That’s outrageous!
I had a real plan any fool can understand The advice, real simple—boost aggregate demand! C, I, G, all together gets to Y Make sure the total’s growing, watch the economy fly
We’ve been going back and forth for a century [Keynes] I want to steer markets, [Hayek] I want them set free There’s a boom and bust cycle and good reason to fear it [Hayek] Blame low interest rates. [Keynes] No… it’s the animal spirits
You see it’s all about spending, hear the register cha-ching Circular flow, the dough is everything So if that flow is getting low, doesn’t matter the reason We need more government spending, now it’s stimulus season
So forget about saving, get it straight out of your head Like I said, in the long run—we’re all dead Savings is destruction, that’s the paradox of thrift Don’t keep money in your pocket, or that growth will never lift…
because…
Business is driven by the animal spirits The bull and the bear, and there’s reason to fear its Effects on capital investment, income and growth That’s why the state should fill the gap with stimulus both…
The monetary and the fiscal, they’re equally correct Public works, digging ditches, war has the same effect Even a broken window helps the glass man have some wealth The multiplier driving higher the economy’s health
And if the Central Bank’s interest rate policy tanks A liquidity trap, that new money’s stuck in the banks! Deficits could be the cure, you been looking for Let the spending soar, now that you know the score
My General Theory’s made quite an impression [a revolution] I transformed the econ profession You know me, modesty, still I’m taking a bow Say it loud, say it proud, we’re all Keynesians now
We’ve been goin’ back n forth for a century [Keynes] I want to steer markets, [Hayek] I want them set free There’s a boom and bust cycle and good reason to fear it [Keynes] I made my case, Freddie H Listen up , Can you hear it?
Hayek sings:
I’ll begin in broad strokes, just like my friend Keynes His theory conceals the mechanics of change, That simple equation, too much aggregation Ignores human action and motivation
And yet it continues as a justification For bailouts and payoffs by pols with machinations You provide them with cover to sell us a free lunch Then all that we’re left with is debt, and a bunch
If you’re living high on that cheap credit hog Don’t look for cure from the hair of the dog Real savings come first if you want to invest The market coordinates time with interest
Your focus on spending is pushing on thread In the long run, my friend, it’s your theory that’s dead So sorry there, buddy, if that sounds like invective Prepared to get schooled in my Austrian perspective
We’ve been going back and forth for a century [Keynes] I want to steer markets, [Hayek] I want them set free There’s a boom and bust cycle and good reason to fear it [Hayek] Blame low interest rates. [Keynes] No… it’s the animal spirits
The place you should study isn’t the bust It’s the boom that should make you feel leery, that’s the thrust Of my theory, the capital structure is key. Malinvestments wreck the economy
The boom gets started with an expansion of credit The Fed sets rates low, are you starting to get it? That new money is confused for real loanable funds But it’s just inflation that’s driving the ones
Who invest in new projects like housing construction The boom plants the seeds for its future destruction The savings aren’t real, consumption’s up too And the grasping for resources reveals there’s too few
So the boom turns to bust as the interest rates rise With the costs of production, price signals were lies The boom was a binge that’s a matter of fact Now its devalued capital that makes up the slack.
Whether it’s the late twenties or two thousand and five Booming bad investments, seems like they’d thrive You must save to invest, don’t use the printing press Or a bust will surely follow, an economy depressed
Your so-called “stimulus” will make things even worse It’s just more of the same, more incentives perversed And that credit crunch ain’t a liquidity trap Just a broke banking system, I’m done, that’s a wrap.
We’ve been goin’ back n forth for a century [Keynes] I want to steer markets, [Hayek] I want them set free There’s a boom and bust cycle and good reason to fear it [Hayek] Blame low interest rates. [Keynes] No it’s the animal spirits
“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”
John Maynard Keynes The General Theory of Employment, Interest and Money
“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”
This is freakin' criminal. The thing that makes the world better now, compared to 100 years ago, is our "stuff". Once "stuff" is created, it doesn't have to be re-created for each new user. Outside of Washington, this is called Progress. These really are the dumbest fools that God put guts in.
This is a video of how the "clunkers" are destroyed. Has anyone on that Ship Of Fools considered what this practice does to the used car market, the market that poor people rely on? (As supply drops, prices rise, etc. ?) Has anyone in that Parliament Of Whores considered the value to the environment of saving 5 mpg, vs the environmental costs of destroying and creating a perfectly good vehicle?
Make your kids leave the room, turn down the volume, and watch this (a fresh coat of Whitening to the GOC for the link.)
I've written 3 consecutive posts about this abortion, and every time I think I'm at a loss for words, something else about it comes to mind. Or I find that Denny at the GOC has posted some Vandal Porn like this. Unbelieveable.
