Statist intervention – the consequences, by Alasdair Macleod

Eighty-seven years ago John Maynard Keynes created Baffle Them With Bullshit Economics. It was full of holes, but it had one huge virtue as far as the political class was concerned. It offered a justification for government intervention in the economy, and in fact said economies couldn’t run without it. We are now witnessing the ultimate consequences of BTBE, and hopefully its intellectual demise. From Alasdair Macleod at

This article looks at our current economic condition from the viewpoint of classical economics. It is now 87 years since classical economics were dismissed by John Maynard Keynes in his “General Theory of Employment, Interest, and Money”.

Central to Keynes’s opus was a desire to create a role for the state, intervening in economic affairs. In searching for this objective, he had to traduce the law of the markets — Say’s law. We show why this was mistaken. The error has been at the root of the accumulated errors of monetary policies ever since.

It has led to the destruction of the dollar’s purchasing power, reflected in a gold price which has risen from $35 to $2000 — a depreciation of the dollar’s value as a medium of exchange relative to legal, sound money of over 98%. Furthermore, it has weakened America and her allies relative to the rising hegemons who may or may not have a cohesive understanding of economics, but at least are not in thrall to the failed statist policies of the West.


The US Government, which is already expected to have a budget deficit this year of over $1.4 trillion, faces a recession. We can predict a recession because M2 money supply which feeds directly into GDP is contracting. And a recession leads into lower tax receipts and higher welfare spending. The deficit will be far larger than $1.4 trillion.

The establishment in charge of monetary policy now faces a difficult problem. It needs to fund a soaring government deficit, which as a department of government is its top priority. Other than taxes there are two sources for this funding, the deployment of savings and the printing of money. It is never really clear where this money comes from: if it comes from savings, then savers divert capital resources from private sector actors to the government, and that is bad news for the productive economy which needs capital resources. If it does not come from savers, then it comes from the expansion of credit from the banking system.

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