Tag Archives: Keynes

Hitler’s Economics, by LLewellyn H. Rockwell Jr.

Socialists disown Hitler although Socialist is in the Nazi name (Nationalsozialistische Deutsche Arbeiterpartei (National Socialist German Workers’ Party). Keynesians disown Hitler although many of his economic policies are straight from Keynes’ playbook. From Llewellyn H. Rockwell Jr. at mises.org:

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[Originally published August 02, 2003.]

For today’s generation, Hitler is the most hated man in history, and his regime the archetype of political evil. This view does not extend to his economic policies, however. Far from it. They are embraced by governments all around the world. The Glenview State Bank of Chicago, for example, recently praised Hitler’s economics in its monthly newsletter. In doing so, the bank discovered the hazards of praising Keynesian policies in the wrong context.

The issue of the newsletter (July 2003) is not online, but the content can be discerned via the letter of protest from the Anti-Defamation League. “Regardless of the economic arguments” the letter said, “Hitler’s economic policies cannot be divorced from his great policies of virulent anti-Semitism, racism and genocide.… Analyzing his actions through any other lens severely misses the point.”

The same could be said about all forms of central planning. It is wrong to attempt to examine the economic policies of any leviathan state apart from the political violence that characterizes all central planning, whether in Germany, the Soviet Union, or the United States. The controversy highlights the ways in which the connection between violence and central planning is still not understood, not even by the ADL. The tendency of economists to admire Hitler’s economic program is a case in point.

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Fascism: The American Way of Life, by Gary D. Barnett

It’s a harsh verdict, but according to Gary D. Bennett, those who warn of impending fascism in America are too late. He makes a strong case. From Bennett at lewrockwell.com:

“All within the state, nothing outside the state, nothing against the state.” ~Benito Mussolini

Mussolini was not the originator of hatred of free markets and laissez faire, or of Fascism, a description more suited to Thomas Carlyle, but he was certainly the true father of Fascism. His ideology and opinions are key in any effort to understand real Fascism, the embodiment of the current U.S. political system.

The United States of America, regardless of the misguided belief by the masses that this is the land of the free, is undeniably by strict political definition, a Fascist oligarchy. Yes, there are some aspects of democracy, socialism, communism, and Marxism, but Fascism by the few is the ruling political ideology of today’s America.

This explains the obvious mindset of “American exceptionalism,” and the nonsensical belief America is the epitome of right and good. The root of this arrogant, obnoxious thinking has for generations been by state design. This notion is perpetuated throughout the life of all citizens by state indoctrination and brainwashing, beginning with government controlled schools that claim quasi-ownership of children from infancy to full adulthood. The aim of these institutions is to indoctrinate the masses to produce model citizens in a society that is loyal to community, city, state, and nation, and one opposed to self-interest, self-ownership and individualism.

In order for the State to successfully affect this system, all aspects of society have to function harmoniously with Fascist ideology, including the economy. The U.S. economy has been based upon Keynesianism for decades, a theory developed by John Maynard Keynes in the 1920s and 1930s during the Great Depression. Government intervention is a mainstay of Keynes theory; government interference and partnership with industry is the major tenet of Fascism.

Mussolini’s own description of Fascism was “Fascism is the marriage of corporation and state,” and “Fascism should rightly be called corporatism, as it is the merger of corporate and government power.”

To continue reading: Fascism: The American Way of Life

The Keynesian Cult Has Failed: “Emergency” Stimulus Is Now Permanent, by Charles Hugh Smith

Keynesian economics has no predictive ability, but continues to be followed and revered because it provides cover for the growth of the state and its expanding control of the economy. From Charles Hugh Smith at oftwominds.com:

Can we finally admit that eight years of following the Keynesian coloring-book have not just failed, but failed spectacularly?

What do we call a status quo in which “emergency measures” have become permanent props? A failure. The “emergency” responses to the Global Financial Meltdown of 2008-09 are, eight years on, permanent fixtures. Everyone knows what would happen if the deficit spending, money-printing, zero interest rates, shadow banking, asset purchases by central banks and all the rest of the Keynesian Cult’s program stopped: the status quo falls apart.
Keynesianism Vs The Real World
Let’s start by reviewing the core contexts of the economy.
1. The dominant socio-economic structures since around 1500 AD are profit-maximizing capital (“the market”) and nation-states (“the government”).
2. The dominant economic theory for the past 80 years is Keynesianism, i.e. the notion that the state and central bank must aggressively manage private-sector consumption (demand) and lending via centrally planned and funded fiscal and monetary stimulus during downturns (recessions/depressions).
Simply put, the conventional view holds that there are two (and only two) solutions for whatever ails the economy: the market (profit-maximizing capital) or the government (nation-states and their central banks). Proponents of each blame all economic and social ills on the other one.
In the real world, the vast majority of Earth’s inhabitants operate in economies with both market and state-controlled dynamics in varying degrees.

Why $19 Trillion In Debt IS a PROBLEM, by Lance Roberts

Debt service, even with ultra-low interest rates, becomes a burden that weighs on an economy. From Lance Roberts at davidstockmanscontracorner.com:

According to the World Economic Forum, the United States has achieved a new TOP 10 ranking. Tell us what we’ve won Bob:

“Coming in at #10 – the United States, at 104%, gets nothing but the privilege of being on the list of countries with the highest debt/GDP ratios.”

So…it’s just $19 Trillion? A mere doubling of the national debt in eight years isn’t really a problem, right? According to Bob Bryan at Business Insider, that answer is – no.

“Debt is an issue only if you can’t repay it or if other people believe you can’t repay it. And, as Business Insider’s Myles Udland has noted, the US can literally print the money it needs to repay its debt, and it still maintains a high credit rating.”

Bob is correct. The “fear mongering” over debt levels, and President Obama’s threats of default if we “shut down the government,” are just that – fear mongering. Entitlements and interest payments are mandatory expenditures of the government which get paid regardless of whether the Government is shut down or not.

However, what Bob misses is the much bigger point which is the impact on debt levels as it relates to economic prosperity.

According to Keynesian theory, some microeconomic-level actions, if taken collectively by a large proportion of individuals and firms, can lead to inefficient aggregate macroeconomic outcomes, where the economy operates below its potential output and growth rate (i.e. a recession).

Keynes contended:

“A general glut would occur when aggregate demand for goods was insufficient, leading to an economic downturn resulting in losses of potential output due to unnecessarily high unemployment, which results from the defensive (or reactive) decisions of the producers.”

In other words, when there is a lack of demand from consumers due to high unemployment, the contraction in demand would force producers to take defensive actions to reduce output.

In such a situation, Keynesian economics states:

Government policies could be used to increase aggregate demand, thus increasing economic activity and reducing unemployment and deflation. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.

Keynes’ was correct in his theory. In order for government deficit spending to be effective, the “payback” from investments being made through debt must yield a higher rate of return than the debt used to fund it.

The problem is that government spending has shifted away from productive investments that create jobs (infrastructure and development) to primarily social welfare and debt service which has a negative rate of return. According to the Center On Budget & Policy Priorities nearly 75% of every tax dollar goes to non-productive spending.

To continue reading: Why $19 Trillion In Debt IS a PROBLEM

 

The Warren Buffett Economy——Why Its Days Are Numbered (Part 4), by David Stockman

For Part 1

For Part 2

For Part 3

From David Stockman, at davidstockmanscontracorner.com:

As documented in Parts 1-3, the Fed has generated a $50 trillion financial bubble since Alan Greenspan took the helm in August 1987. After 27 years, honest price discovery has been destroyed, thereby reducing the nerve centers of capitalism—-the money and capital markets—-to little more than gambling casinos.

Accordingly, speculative rent-seeking in the financial arena has replaced enterprenurial innovation and supply side investment and productivity as the modus operandi of the US economy. This has resulted in a severe diminution of main street growth and a massive redistribution of windfall wealth to the tiny share of households which own most of the financial assets. Warren Buffett’s $73 billion net worth is the poster boy for this untoward state of affairs.

The massive and systematic falsification of asset prices which lies at the heart of this deformation of capitalism is a direct and unavoidable consequence of monetary central planning. That is, the pursuit of Keynesian business cycle management and stimulus through central bank interest rate pegging and massive monetization of existing public debt and other securities—-especially since the latter has no purpose other than to artificially goose the price of bonds and lower their yields; and also via other indirect methods of financial asset levitation such as the Greenspan/Bernanke/Yellen doctrine of wealth effects and the implicit central bank “put” which underpins the economics of buy-the-dip speculators.

As previously indicated, the Keynesian bathtub model of a closed, volumetrically driven economy is a throwback to specious theories about the inherent business cycle instabilities of market capitalism that originated during the Great Depression. These theories were wrong then, but utterly irrelevant in today’s globally open and technologically dynamic post-industrial economy.

As reviewed in Part 3, the very idea that 12 people sitting on the FOMC can adroitly manipulate an economic ether called “aggregate demand” by means of falsifying market interest rates is a bad joke when in it comes to that part of “potential GDP” comprised of goods production capacity. In today’s world of open trade and massive excess industrial capacity, the Fed can do exactly nothing to cause the domestic steel industry’s capacity utilization rate to be 90% or 65%.

It all depends upon the marginal cost of labor, capital and materials in the vastly oversized global steel market. Indeed, the only thing that the denizens of the monetary politburo can do about capacity utilization in any domestic industry is to re-read Keynes’s 1930 essay in favor of homespun goods and weep!

As I detailed in the Great Deformation, the Great Thinker actually came out for stringent protectionism and economic autarky six years before he published the General Theory and for good and logical reasons that his contemporary followers choose to completely ignore. Namely, protectionism and autarky are an absolutely necessary correlate to state management of the business cycle and related efforts to improve upon the unguided results generated by business, labor and investors on the free market. Indeed, Keynes took special care to make sure that his works were always translated into German, and averred that Nazi Germany was the ideal test bed for his economic remedies.
Eighty years on from Keynes’ incomprehensible ode to statist economics and thorough-going protectionism, the idea of state management of the business cycle in one country is even more preposterous. Potential labor supply is a function of the global labor cost curve and now comes in atomized form as hours, gigs, and temp agency contractual bits, not census bureau headcounts.

http://davidstockmanscontracorner.com/the-warren-buffett-economy-why-its-days-are-numbered-part-4/

To continue reading: The Warren Buffet Economy