The best
description of the reversal of fortune is Mary's Magnificat, recorded in
the Gospel of Luke, chapter 1, verses 46-55. "He hath put down the
mighty from their seats, and exalted them of low degree" (v. 52).
This
was a fundamental theme in the Old Testament. We are told that those
who hold their position by means of political power and corruption
always lose their position. They are always overthrown. They look
unbeatable. They are always defeated. The prophets of Israel came before
kings and commoners with this message. Isaiah 1 is a good example.
Isaiah even identified a major technique of the power elite: inflation.
"Thy silver has become dross, thy wine mixed with water" (Isa 1:22).
The more things change, the more they stay the same.
THE POWER ELITE
What
do I mean by the power elite? The phrase was coined by Leftist
sociologist C. Wright Mills in 1956. His book remains a classic. Its
main chapter is here. Liberal columnist Richard Rovere in 1956 called it the American Establishment.
Conservatives refer to it as the Insiders or the Conspiracy. David
Rothkopf, writing from inside, calls them the superclass. Sometimes they
are called the PTB: the Powers that Be. I think conservative journalist
and historian Otto Scott said it best: the behind-the-scenes fellows
who are too clever by half.
Showing posts with label Keynesian Economics. Show all posts
Showing posts with label Keynesian Economics. Show all posts
Sunday, March 10, 2013
The Errors of Keynes's Critics
by Steven Kates
I was intrigued by the review that Philipp Bagus wrote of The Errors of Keynes (Los Errores de la Vieja Economía), a book written in Spanish by Juan Ramón Rallo, part of which deals with Say’s Law.
An important understanding is taking hold, that the road to unwind Keynesian economics travels through Say’s Law. Keynes himself could not have been clearer about the significance of Say’s Law to the entire structure of his argument. Keynes emphasized, over and over again, in The General Theory (TGT) that he was reversing the conclusions of those who believed Say’s Law to be true. Thus, there are two things that need to be done if you are going to refute Keynes. First, you have to know what Say’s Law is. Then you have to show it is valid.
I was intrigued by the review that Philipp Bagus wrote of The Errors of Keynes (Los Errores de la Vieja Economía), a book written in Spanish by Juan Ramón Rallo, part of which deals with Say’s Law.
An important understanding is taking hold, that the road to unwind Keynesian economics travels through Say’s Law. Keynes himself could not have been clearer about the significance of Say’s Law to the entire structure of his argument. Keynes emphasized, over and over again, in The General Theory (TGT) that he was reversing the conclusions of those who believed Say’s Law to be true. Thus, there are two things that need to be done if you are going to refute Keynes. First, you have to know what Say’s Law is. Then you have to show it is valid.
Friday, February 22, 2013
The final countdown
By Alasdair Macleod
Governments have refused to accept the necessity of a period of economic re-adjustment following the credit-bubble. The bubble burst about five years ago and economic progress has been effectively suspended ever since. The consequences of this refusal to accept reality are at a minimum to make this adjustment unnecessarily drawn out and needlessly painful, without offering a better eventual outcome.
Reduced to its bare bones, the choice has been either to accept that unviable businesses and over-extended banks must go bust, or to ignore the problem and hope it goes away. We are familiar with this dilemma as investors: a business that refuses to adapt to new realities will eventually fail. Before it does, its investors have the chance either to sell their shares and perhaps reinvest their money more profitably, or to refuse to accept an early loss on their investment. Most of us, being human, take the latter course and usually regret it.
Governments have refused to accept the necessity of a period of economic re-adjustment following the credit-bubble. The bubble burst about five years ago and economic progress has been effectively suspended ever since. The consequences of this refusal to accept reality are at a minimum to make this adjustment unnecessarily drawn out and needlessly painful, without offering a better eventual outcome.
Reduced to its bare bones, the choice has been either to accept that unviable businesses and over-extended banks must go bust, or to ignore the problem and hope it goes away. We are familiar with this dilemma as investors: a business that refuses to adapt to new realities will eventually fail. Before it does, its investors have the chance either to sell their shares and perhaps reinvest their money more profitably, or to refuse to accept an early loss on their investment. Most of us, being human, take the latter course and usually regret it.
The paradox of choice
By Alasdair Macleod
Here is a puzzle for Keynesian and other neo-classical economists.
When a consumer buys something, he must choose; and if he increases his purchase of one product, he must reduce his purchases of other products by the same amount. In other words he cannot buy both. This must be true for whole communities as well. How then can you have economic growth?
It is of course impossible without monetary inflation. This is because any statistical average, in this context GDP, can only grow if people are not forced to choose between alternatives, a condition that can only occur if they are given extra money. Not even a draw-down on savings to spend on consumption creates extra spending, because it is merely reallocates spending on capital goods to consumption goods. This simple point has been ignored by all neo-classical economists. The result is that in their pursuit of so-called economic growth, they have committed themselves to monetary inflation. Their concept of growth is to make that extra money available to consumers, so that they are not limited to what they earn and forced to choose. It has also become the basis for economic modelling, which takes known demand for products and services and from it extrapolates growth for an average of all of them.
Here is a puzzle for Keynesian and other neo-classical economists.
When a consumer buys something, he must choose; and if he increases his purchase of one product, he must reduce his purchases of other products by the same amount. In other words he cannot buy both. This must be true for whole communities as well. How then can you have economic growth?
It is of course impossible without monetary inflation. This is because any statistical average, in this context GDP, can only grow if people are not forced to choose between alternatives, a condition that can only occur if they are given extra money. Not even a draw-down on savings to spend on consumption creates extra spending, because it is merely reallocates spending on capital goods to consumption goods. This simple point has been ignored by all neo-classical economists. The result is that in their pursuit of so-called economic growth, they have committed themselves to monetary inflation. Their concept of growth is to make that extra money available to consumers, so that they are not limited to what they earn and forced to choose. It has also become the basis for economic modelling, which takes known demand for products and services and from it extrapolates growth for an average of all of them.
The Central Bank Revolution I (Well ‘Nominally’ So)
by Ben Davies
“The Checklist Manifesto – How to get things right”, is a masterful book for its narrative and practical application. Written by Atul Gawande, an acclaimed surgeon based in the US, he takes us on a journey of how the simple checklist helps individuals deal with immensely complex situations, where risks can be calculated and often lives protected – skyscraper construction, medicine and investment banking.
First introduced into the US Air Force to assist pilots, the humble checklist in all its simplicity has helped generations of pilots navigate the complexity of flying modern aeroplanes. Gawande himself has introduced the concept into operating theatres and hospitals around the world with astounding success.
“The Checklist Manifesto – How to get things right”, is a masterful book for its narrative and practical application. Written by Atul Gawande, an acclaimed surgeon based in the US, he takes us on a journey of how the simple checklist helps individuals deal with immensely complex situations, where risks can be calculated and often lives protected – skyscraper construction, medicine and investment banking.
First introduced into the US Air Force to assist pilots, the humble checklist in all its simplicity has helped generations of pilots navigate the complexity of flying modern aeroplanes. Gawande himself has introduced the concept into operating theatres and hospitals around the world with astounding success.
Thursday, January 10, 2013
It’s a mad mad mad mad world
By Detlev Schlichter
Shinzo Abe, Japan’s new prime minister,
has some exciting new ideas about how to make Japan’s economy grow. How
about the government borrows a lot of money and spends it on building
bridges and roads all over the country?
If
that doesn’t sound so new, it is because it isn’t. It is what Japan has
been doing for 20 years, and it is the main reason why Japan is now the
most heavily indebted nation on the planet – and still not growing a
lot. Its debt-to-GDP ratio stands at an eye-watering, world-record 230
percent, which already guarantees that the country’s pensioners-to-be
(and Japan has a lot of those) will never be repaid with anything of
true value for the government bonds they kept patiently accumulating in
their pension funds, and that they optimistically keep calling ‘assets’.
But
never mind. The Keynesians agree that this policy was a roaring
success, and that this is why the country needs more of it, as,
strangely, Japan has still not regained self-sufficient growth after 2
decades of such a policy. Hmmm. Well, in any case, surely the next set
of roads and bridges are going to make all the difference. I suggest
that this should be called the ‘Krugman-doctrine’, after the outstanding
Keynesian thinker, Paul Krugman:
even if a few trillion of new government debt and a few trillion of
newly-printed paper-money have not revitalized your economy, the next
trillion in government deficit-spending and the next trillion in new
central-bank money will finally get the economy going. “Just keep the
foot on the gas pedal until the economy grows, damn it!”
Tuesday, January 8, 2013
Japan in 2013
The Japanese government for the last twenty three years has employed the Keynesian tools of deficit spending and more recently the monetarist policies of expanding money supply in an attempt to stop the economy from sliding into recession and to develop some growth. On paper, it has only achieved the former objective; in reality it has emasculated the productive capability of her domestic economy.
Before the speculative bubble of the late-1980s the Japanese economy was driven by savings. Her strong savings flow gave Japanese industry access to a stable low-cost source of real capital with which it was able to produce high-quality goods for export at competitive prices. While there was, in the free market sense, much wrong with Japan this characteristic more than compensated for her economic sins. However, the bubble came along, fuelled by the institutional greed of the Zaibatsu which through their banks sanctioned a spectacular expansion of credit, and as bubbles go this one went pop spectacularly. Since then the government has done everything it can to stop banks folding and industrial malinvestments from being liquidated.
Keynesian Economics vs. Austrian Economics
Keynesian Economics & Monetary Economics vs. Austrian Economics
Featuring Ben Bernanke, Paul Krugman, Peter Schiff, and Ron Paul
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