Economic recovery: you're doing it wrong
Post Reply
 
Thread Rating:
  • 0 Votes - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
29-11-2013, 12:00 PM
Economic recovery: you're doing it wrong
On CNN today, 59% say the economy hasn't recovered. Quick recap:

Austrian economists predicted a massive Fed-induced housing bubble would collapse and lead to a banking crisis. Keynesians said they were doomsdayers. But in 2008 it happened. Score: Austrians:1, Keynesians:0.

Keynesians said the solution was a one-time “stimulus” of government spending and having the Fed print money and give it to the banks (“quantitative easing”), and that would drive down unemployment and spur economic growth and increase tax revenue. We did it the Keynesians' way. Let's see how this worked out:

1) Austrians warned that printing money and giving it to the banks doesn't increase the nation's wealth; it merely dilutes the dollar, and that the “losers” are those who get paid in or save in dollars (the poor and middle class), and the “winners” are the banks who get this dump of new money as well as the 1%'ers who save and earn in floating instruments (stocks, etc.). Even Keynesians now admit that the “recovery” has gone entirely to the 1%, and the poor and middle have actually lost ground. link Austrians:2, Keynesians:0

2) Austrians warned it wouldn't be a one-time increase in government spending and then return to prior levels, because once you let the government spend a lot more money, they won't give it up. See chart 1 below. Austrians:3, Keynesians:0

3) Austrians warned it would REDUCE, not increase tax revenue. See chart 1 again. Austrians:4, Keynesians:0

4) Austrians warned QE also wouldn't be a one-time “adrenaline shot” but rather a long term heroin habit. 5 years later, they're still doing QE and can't shake it. Austrians:5, Keynesians:0

5) Keynesians claimed the stimulus would reduce unemployment. See the chart 2, which came from the Keynesian economists. Actual unemployment got worse than Keynesians predicted it would have without any stimulus. Austrians:6, Keynesians:0

6) Today Keynesians claim a delayed victory because in the past couple years unemployment figures have finally started dropping. However, when you factor in that employment did NOT go up, that means the unemployment went down only because people gave up looking for work. Austrians:7, Keynesians:0

7) Keynesians predicted that austerity would fail, and countries which cut spending would suffer slow growth, and countries which increase spending would have faster growth. Of course, it's the exact opposite. See chart 3. Austrians:8, Keynesians:0

Now Austrians are predicting a currency collapse within the next decade. Keynesians again say they're doomsdayers. We shall see.... Anybody want to place bets?

Chart 1:
[Image: Spending+vs+Revs+%25+GDP]

Chart 2:
[Image: BG-labor-force-participation-AUG-2013-chart-1.ashx]

Chart 3: The countries which reigned in spending have enjoyed the highest growth rates, and the more closely countries followed the Keynesian stimulus playbook, the more they've lost.
[Image: GovspendingGDP.jpg]
Find all posts by this user
Like Post Quote this message in a reply
29-11-2013, 12:05 PM
RE: Economic recovery: you're doing it wrong
yes, yes, I know some of these words

[Image: sigvacachica.png]
Find all posts by this user
Like Post Quote this message in a reply
[+] 4 users Like nach_in's post
29-11-2013, 02:39 PM
RE: Economic recovery: you're doing it wrong
[Image: liberal-stock-market.jpg]

I love charts!
Find all posts by this user
Like Post Quote this message in a reply
[+] 1 user Likes black_squirrel's post
29-11-2013, 03:44 PM
RE: Economic recovery: you're doing it wrong
@black_squirrel, can you clarify the point you wanted to make with your chart that shows the massive transfer of wealth from the poor & middle class to the rich?

As we Austrians said all along (as I did in my OP), when the Fed prints a bunch of money and gives it to the banks, investment houses and other super rich, they dump it into the stock market, and their wealth soars as stock prices skyrocket, as shown by your chart. You didn't dispute that the "wealth chart" for the poor and middle class, is the mirror opposite; they have gotten poorer and poorer in the past few years as inequality is skyrocketing and massive wealth is transferred from the poor and middle class to the rich through the Fed's monetary policy.

So what point are you trying to make by posting a chart that shows the massive wealth gains in the stock market since Obama took over? Are you agreeing with me what a tragedy "stimulus" has been, and how it's worked exactly like the Austrians predicted? Or are you actually proud of all the wealth that's been generated for thoe wealthy who have significant investment in the stock market? Are you yourself one of those rich guys who is heavily invested in the NASDAQ, and you're just showing off how much wealth you've made since 2009? Are you posting that chart in defense of Obama, or in condemnation of him? Please clarify...
Find all posts by this user
Like Post Quote this message in a reply
29-11-2013, 10:29 PM
RE: Economic recovery: you're doing it wrong
If you knew anything about American economics you would know that American politicians abandoned Keynesian economics for Milton Friedman "trickle down economics" during the Reagan administration. NOTHING they have done has had it's primary objective to reduce poverty, increase economic mobility, or increase the wages of the consumer classes. With the exception of Bernie Sanders, Keynesians are few and far between. When the government spends, spends, spends, and almost all of it is targeted at business (like for the last 33 years ) that's trickle down economics not Keynesian. When you protect domestic businesses and enforce regulations that require businesses to pay living wages so people can afford to actually participate in the economy THAT'S Keynesian. Franklin Roosevelt ushered in the era of American Keynesianism with "The New Deal". The conservatives have been dismantling it since the "Reagan Revolution". I'm not saying you're wrong in your assessment of our spending policies, just that you're blaming the wrong groups. You should be looking at Milton Friedman, Thomas Friedman, and the Chicago School of Economics. Keynesianism has been dead for quite a while in the USA.

You can lead a theist to reason, but, you cannot make him think.
Find all posts by this user
Like Post Quote this message in a reply
29-11-2013, 10:50 PM
RE: Economic recovery: you're doing it wrong
frank,
I do admire the sardonic way in which you undermine people's off-the-cuff comments by subtly deriding their arguments using sarcasm and reductio ad absurdum.

It has the delightful dual effect of making you appear ultra-smart and making the poster feel publically shamed and often results in ill-thought-through defensive responses which can then be destroyed with seeming relish.

I'm liking you, you are keeping us honest.

Carry on. Drinking Beverage

Find all posts by this user
Like Post Quote this message in a reply
[+] 1 user Likes DLJ's post
29-11-2013, 10:56 PM (This post was last modified: 29-11-2013 11:14 PM by DLJ.)
RE: Economic recovery: you're doing it wrong
(29-11-2013 10:29 PM)NoSkyDaddy Wrote:  ... You should be looking at Milton ... Keynesianism
...

Milton-Keynesianism is over-rated as a style of living but it has some nice shops.

I used to live not far from Milton-Keynes so I know from whence I speak.

Find all posts by this user
Like Post Quote this message in a reply
30-11-2013, 12:16 AM
RE: Economic recovery: you're doing it wrong
(29-11-2013 10:29 PM)NoSkyDaddy Wrote:  If you knew anything about American economics you would know that American politicians abandoned Keynesian economics for Milton Friedman "trickle down economics"... You should be looking at Milton Friedman, Thomas Friedman, and the Chicago School of Economics. Keynesianism has been dead for quite a while in the USA.

From Wikipedia: 2008–2009_Keynesian_resurgence "In 2008 and 2009, there was a worldwide resurgence of interest in Keynesian economics among prominent economists and policy makers. This included discussions and implementation of economic policies in accordance with the recommendations made by John Maynard Keynes in response to the Great Depression— most especially fiscal stimulus and expansionary monetary policy."

From the new Fed chairman's wikipedia page: "Yellen is a Keynesian economist and believes in the modern version of the Phillips curve, which, in its original, pre-1970s form, stated a simple inverse relationship between unemployment and inflation." The 2nd choice, Larry Summers, was also a Keynesian. The predecessor, Bernanke "is an avowed Keynesian".

Sorry, but the response to the 2008 financial crisis _WAS_ a classic Keynesian response: loose monetary policy and increased government spending to "prime the pump". No economist is disputing this. And if you were to tell today's prominent economists that none of them are Keynesian and they're all followers of Friedman, they'd punch you in the face.

I _DO_ agree with you "government spends, spends, spends, and almost all of it is targeted at business". And I DO agree with you it's effectively trickle-down economics because it makes the rich get richer and richer, and "stimulus" meaning handing trillions of new dollars to bankers who are already billionaires, hoping it will generate jobs. So we're in total agreement on what's happening. And I'd agree with you that Keynes wouldn't be too happy to see how his policies have been twisted and perverted to help the uber-rich. BUT, where I think you're totally clueless is to suggest that this "stimulus" is from Friedman. I dare you to find one sentence in all the volumes of work from Friedman where he EVER advocated increased government spending and debt to stimulate the economy. Never happened. That IS a Keynesian concept. It has been horribly perverted, and the rich have figured out how to distort it to their advantage. But, that IS what the Austrians have said all along. When you empower the government to massively shift wealth around, which is what Keynes advocated, those who are already wealthy and powerful will figure out how to use it to their advantage. That's what we're seeing.
Find all posts by this user
Like Post Quote this message in a reply
30-11-2013, 01:19 AM
RE: Economic recovery: you're doing it wrong
It was a Keynesian response to an economic free fall. No one can say with certainty what an Austrian response would have resulted in. We have seen past Austrian responses though. As with those who argue for communism, the evidence is not really on your side.

If you are going to describe the events the model leading to the collapse as Keynesian though, I think you need to find out what these words mean. Incompetent, and laissez faire are both terms that come to mind. Let's keep this simple: In a Keynesian model the spending of a government is neutral over the economic cycle, maximum when private spending is weak, and minimal when private spending is strong. Is that how you would describe the Bush era?

Give me your argument in the form of a published paper, and then we can start to talk.
Find all posts by this user
Like Post Quote this message in a reply
[+] 1 user Likes Hafnof's post
30-11-2013, 08:27 AM
RE: Economic recovery: you're doing it wrong
(30-11-2013 12:16 AM)frankksj Wrote:  From Wikipedia: 2008–2009_Keynesian_resurgence "In 2008 and 2009, there was a worldwide resurgence of interest in Keynesian economics among prominent economists and policy makers. This included discussions and implementation of economic policies in accordance with the recommendations made by John Maynard Keynes in response to the Great Depression— most especially fiscal stimulus and expansionary monetary policy."

From the new Fed chairman's wikipedia page: "Yellen is a Keynesian economist and believes in the modern version of the Phillips curve, which, in its original, pre-1970s form, stated a simple inverse relationship between unemployment and inflation." The 2nd choice, Larry Summers, was also a Keynesian. The predecessor, Bernanke "is an avowed Keynesian".
Sorry, but the response to the 2008 financial crisis _WAS_ a classic Keynesian response: loose monetary policy and increased government spending to "prime the pump". No economist is disputing this. And if you were to tell today's prominent economists that none of them are Keynesian and they're all followers of Friedman, they'd punch you in the face.
If you're taking them to task as Keynesians because that's the label they give themselves, fair enough. In that case I take issue with their assessment of themselves. Appealing to a Keynes' style expenditure to bail out a failing, top down, supply side economic model does not make you a Keynesian IMO. It's more of a hijacking of the language to paint a new face on a failed economic theory and appeal to those who want Keynesian policies reinstated.


(30-11-2013 12:16 AM)frankksj Wrote:  I _DO_ agree with you "government spends, spends, spends, and almost all of it is targeted at business". And I DO agree with you it's effectively trickle-down economics because it makes the rich get richer and richer, and "stimulus" meaning handing trillions of new dollars to bankers who are already billionaires, hoping it will generate jobs. So we're in total agreement on what's happening. And I'd agree with you that Keynes wouldn't be too happy to see how his policies have been twisted and perverted to help the uber-rich....
That IS a Keynesian concept. It has been horribly perverted, and the rich have figured out how to distort it to their advantage. But, that IS what the Austrians have said all along. When you empower the government to massively shift wealth around, which is what Keynes advocated, those who are already wealthy and powerful will figure out how to use it to their advantage. That's what we're seeing.
Yes, we do agree on that. And it is supply side theory which originated in the Chicago School of economics although admittedly not due to Friedman (you learn something new every day). From wiki:Supply-side economics developed during the 1970s in response to Keynesian economic policy, and in particular the failure of demand management to stabilize Western economies during the stagflation of the 1970s, in the wake of the oil crisis in 1973.[6] It drew on a range of non-Keynesian economic thought, particularly the Chicago School and Neo-Classical School.

Keynesian policies have been historically used to stimulate demand at the consumer level and create the potential for new profit streams, which stimulates competition for that revenue, and creates new jobs, providing new incomes (more demand), etc., etc., etc.... The basis for Keynesianism is creating demand at a consumer level. Until Reagan we also had strong progressive tax policies that discouraged greed and encouraged reinvestment (you didn't get tax breaks without reinvestment). These days we throw money at the wealthy and beg them to give us jobs.Consider
(30-11-2013 12:16 AM)frankksj Wrote:  BUT, where I think you're totally clueless is to suggest that this "stimulus" is from Friedman. I dare you to find one sentence in all the volumes of work from Friedman where he EVER advocated increased government spending and debt to stimulate the economy. Never happened.

From Milton Friedman's Wikipedia page
: "His ideas concerning monetary policy, taxation, privatization and deregulation influenced government policies, especially during the 1980s. His monetary theory influenced the Federal Reserve's response to the global financial crisis of 2007–08.", and "Friedman was initially unable to find academic employment, so in 1935 he followed his friend W. Allen Wallis to Washington, where Franklin D. Roosevelt's New Deal was 'a lifesaver' for many young economists.[22] At this stage, Friedman said that he and his wife 'regarded the job-creation programs such as the WPA, CCC, and PWA appropriate responses to the critical situation,' ", also "Friedman was the main proponent of the monetarist school of economics. He maintained that there is a close and stable association between price inflation and the money supply, mainly that price inflation should be regulated with monetary deflation and price deflation with monetary inflation. He famously quipped that price deflation can be fought by 'dropping money out of a helicopter.' ".
Ben Bernanke has been criticized for using just such strategies by Forbes and thinkinvesting.com, and from Bernanke's Wiki page: In 2002, following coverage of concerns about deflation in the business news, Bernanke gave a speech about the topic.[48] In that speech, he mentioned that the government in a fiat money system owns the physical means of creating money. Control of the money supply implies that the government can always avoid deflation by simply issuing more money. He said "The U.S. government has a technology, called a printing press (or today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at no cost."[48]

He referred to a statement made by Milton Friedman about using a "helicopter drop" of money into the economy to fight deflation. Bernanke's critics have since referred to him as "Helicopter Ben" or to his "helicopter printing press." In a footnote to his speech, Bernanke noted that "people know that inflation erodes the real value of the government's debt and, therefore, that it is in the interest of the government to create some inflation."
It seems that although he claims to follow Keynes, he actually follows Friedman. Trying to spend your way out of economic crisis only works when you get the money to consumers who can then make market based choices and stimulate competition for new potential revenue and puts people to work in the process.

You can lead a theist to reason, but, you cannot make him think.
Find all posts by this user
Like Post Quote this message in a reply
[+] 1 user Likes NoSkyDaddy's post
Post Reply
Forum Jump: