Are Keynesian's insane?

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goes211's picture
goes211
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Are Keynesian's insane?

Here is a quote this week from Larry Summers. Yes it is the same Larry Summers that deregulated most OTC derivatives, was Treasury Secretary under Clintion, and economic adviser to Obama.

http://blogs.reuters.com/lawrencesummers/2011/10/24/to-fix-the-economy-f...

The central irony of financial crisis is that while it is caused by too much confidence, too much borrowing and lending and too much spending, it can only be resolved with more confidence, more borrowing and lending, and more spending. 

Albert Einstein is famous for saying "Insanity is doing the same thing over and over again and expecting different results".

Using this definition aren't all Keynesian economists insane?

SagerXX's picture
SagerXX
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Maybe insane...

...or maybe they just ate some bad shrimp.

PastTense's picture
PastTense
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"John Maynard Keynes argued

"John Maynard Keynes argued that surpluses should be accumulated during good years so that they could be spent to stimulate demand during bad ones. This lesson was well understood during the golden age of Keynesian social democracy, after World War II, when, aided by moderate inflation, the governments of the countries in the Organization for Economic Cooperation and Development greatly reduced their ratios of public debt to GDP"

http://www.beezernotes.com/wordpress/?p=4500

Please explain why you think this is insane.

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Bad Shrimp

Sager,

Dude, you crack me up.

Past Tense,

Because implicit in Modern Keynesian theory, in the bad times, money should be borrowed against the future; a 'wager' that things will get better, and if someone bails you out now, you'll repay them later.

The quote you posted in no way shape or form represents what's happening right now on the international monetary stage.
It's far more akin to paying one bill with a credit card, then paying the credit card with another credit card.

The quote above would be like using your savings to pay off your debt until you could get on your feet.
Cheers,

Aaron

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goes211
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Surpluses in good times only happen on accident if at all...
PastTense wrote:

"John Maynard Keynes argued that surpluses should be accumulated during good years so that they could be spent to stimulate demand during bad ones. This lesson was well understood during the golden age of Keynesian social democracy, after World War II, when, aided by moderate inflation, the governments of the countries in the Organization for Economic Cooperation and Development greatly reduced their ratios of public debt to GDP"

http://www.beezernotes.com/wordpress/?p=4500

Please explain why you think this is insane.

A few points

  1. My comment was about modern day Keynesian's like Paul Krugman, Brad DeLong, Larry Summers, ... and specifically Larry's quote saying that what is needed is more of the very things that caused the problems in the first place.  Clearly $800 billion in stimulus was too small but how much is it going to take to create this mythical self sustaining recovery?  These guy are now acting like Captain Ahab, chasing around the Moby DIck ( recovery ), thinking they are just a few more harpoons ( stimulus ) away from finally winning.  They are going to meet Captain Ahab's fate and take the rest of the crew ( us ) down with them.
  2. Even in good times I don't think governments can run long term supluses in any modern day western democracy.  Politicians in these systems can only get elected by promising more goodies to the electorate than their opponents.  It is nearly impossible for bringers of bad news to be elected.  I recently heard this joke which rings somewhat true.  "The problems in America today are because there are fewer people that work for a living than there are people that vote for a living." 
  3. Modern day debt based monetary systems require growth.  If the government is running large surpluses, there might not be enough monetary growth to keep the system functioning.
  4. The article you linked to specifically mentions Reagan as a beginning of this problem but the country has very rarely been in surplus in modern times.  Reagan deficits were downright quaint compared to the current deficits.  Also realize that Clintion never truly ran a surplus,  Even if you think he did, by 2001 the dot com bubble had burst and the country was going to go deep in the red no matter what happend.  Of course it could have been much better if Bush had not lowered taxes and started two wars, but that is a whole nother discussion.
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  PastTense wrote: "John

 

PastTense wrote:

"John Maynard Keynes argued that surpluses should be accumulated during good years so that they could be spent to stimulate demand during bad ones. This lesson was well understood during the golden age of Keynesian social democracy, after World War II, when, aided by moderate inflation, the governments of the countries in the Organization for Economic Cooperation and Development greatly reduced their ratios of public debt to GDP"

http://www.beezernotes.com/wordpress/?p=4500

Please explain why you think this is insane.

It's insane to think that a government would even have a surplus, let alone accumulate it and not spend it on some self-serving purpose. Just look at the supposed "Golden Age of Keynesian Social Democracy": how many budget surpluses were there and how much accumulation did we see? To think that a government bureaucrat would have his hands on a pot of taxpayer money and not spend it is the definition of insanity.

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 I put myself in the

 I put myself in the Keynesian camp.  I don't see how any thinking person can ignore Keynes' theoretical framework.  I think the the post-collapse vision that both Keynesians and Austrians have is not all that far apart in a practical sense.  We both see empty shelves.  I see them because no one is working to make anything to put on the shelves, and no one has any money to buy anything even if it shows up.  A loaf of bread for a dollar is just as out of reach as the Austrian's loaf of bread for $100.  

When it comes time to buy a pound of beans to feed your family, it will be better to have that dreaded dollar in your pocket than an ounce of gold that you will have to chop up and agree ona price in order to spend.  Cash is king - and will be into the forseeable and not so forseeable future.

 

 

 

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goes211 wrote: Albert
goes211 wrote:

Albert Einstein is famous for saying "Insanity is doing the same thing over and over again and expecting different results".

Thats a good quote, but an even better quote from Einstein calls into question the very framework of our economic models, aka, the monetary market structure of private ownership and competitive labor/consumer markets.

"The economic anarchy of capitalist society as it exists today is, in my opinion, the real source of the evil. We see before us a huge community of producers the members of which are unceasingly striving to deprive each other of the fruits of their collective labor - not by force, but on the whole in faithful compliance with legally established rules"

What I think is insane has nothing to do with the theoretical concepts of Keynes or Austrians, it is the assumptions surrounding the hypothesis of monetary-market economics to be the only way to facilate proper resource distribution.

All sorts of illogical, ill-informed and ill-formed arguments supporting the 'pricing mechanism' and motivating human labor, etc. of monetary economics, that are continually being refuted by contemporary research.

Another great quote, this one from Peter Joseph,

"The human race will become a resource based economy regardless, that or we continue to eat ourselves into extinction"

The economic model of monetary market capitalism will lead us to a global Easter Island, unless of course critical awareness and objective, analytical thought starts to become mainstream. Though, with sites, comments, and posts such as these I doubt it is very likely. However, humans are quite the adabtable bunch so it is possible. 

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heffe wrote: goes211
heffe wrote:
goes211 wrote:

Albert Einstein is famous for saying "Insanity is doing the same thing over and over again and expecting different results".

Another great quote, this one from Peter Joseph,

"The human race will become a resource based economy regardless, that or we continue to eat ourselves into extinction"

The economic model of monetary market capitalism will lead us to a global Easter Island, unless of course critical awareness and objective, analytical thought starts to become mainstream. Though, with sites, comments, and posts such as these I doubt it is very likely. However, humans are quite the adabtable bunch so it is possible. 

 

You opened up a can of worms with that one. Hope you're ready to defend your position. I would guess your outnumbered at least 10 to 1 in your support of anything Peter Joseph says. Good luck. I agree with every word you wrote, but good luck.

Why do I say that? I haven't been here long on these boards, but  I have yet to see anyone give ground on their ideological postion. Economic and politics should be synonomous with religion in my opinion.

http://mitworld.mit.edu/video/794  - Andrew Lo (on the insanity quote) He states in his lecture that economics is pseudo science. On a scale of 1 to 5 1 being completely subjective and 5 being 2+2 fact. Economics is a 3 at best.

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heffe
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Current economics = psuedoscience
Rihter wrote:

You opened up a can of worms with that one. Hope you're ready to defend your position. I would guess your outnumbered at least 10 to 1 in your support of anything Peter Joseph says. Good luck. I agree with every word you wrote, but good luck.

Why do I say that? I haven't been here long on these boards, but  I have yet to see anyone give ground on their ideological postion. Economic and politics should be synonomous with religion in my opinion.

http://mitworld.mit.edu/video/794  - Andrew Lo (on the insanity quote) He states in his lecture that economics is pseudo science. On a scale of 1 to 5 1 being completely subjective and 5 being 2+2 fact. Economics is a 3 at best. 

Being outnumbered isn't a worry of mine, as Mark Twain once said, "If you find yourself on the side of the majority, its time to pause and reflect"

As far as the 'economics is a psuedo science', I could not agree more!  It is quite possibly the most 'enshrined' system to have ever existed, as anyone who dares to object to its operation is considered either uninformed or a lunatic commie.  It is quite literally, becoming a religious ideology, where supporters don't even consider the act of questioning its validity.

My favorite arguments include the infamous 'pricing mechanism' of monetary economics, which are assumed to be the most efficient means of balancing supply/demand with value, yet few even wonder if the hypothesis of pricing mechanisms is even valid (which it isn't).

but yes, I am always ready to offer evidence for the arguments I post, and I am always willing to admit my being wrong about a certain belief, and move to a more truthful disposition. My only problem is time, being busy doesn't facilitate much time to squabble with strangers on the internet.

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Andrew Lo

http://mitworld.mit.edu/video/794 

Check out the lecture when you find the time. It's boring like any lecture should be, but informative. It's very middle of the road as far as ideology as well.

I might even rewatch it tonight to pick up on some things I may have missed.

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