The Keynesian Nightmare Continues...

[OrangeEmpire]

if it was Keynesian economics that drove the economy of the US through the roof after WWII, why wasn't the economy booming before WWII? Between Hoover and FDR, a Keynesian would be having daily orgasms over make work programs, annual tax increases, and rubbish like Smoot-Hawley.

+1

The reason, gov't does not create wealth.....

 

[CSpindizzy]

Greenspan: Fiscal Stimulus Worked Far Less Than Expected - Real Time Economics - WSJ

The former head of the Federal Reserve said fiscal stimulus efforts have fallen far short of expectations, and the government now needs to get out of the way and allow businesses and markets to power the recovery.

 

[BigPapaVol]

Yes, they grew during the Keynesian age.

They have been stagnant in the Age of Friedman.

(See other post).

PS - I'm not Keynes' nephew.

Stagnant? Wonder what gives and why you'd just make up crap?

Keynes would have disowned you like a mad cow riddled herd.
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[sjt18]

if it was Keynesian economics that drove the economy of the US through the roof after WWII, why wasn't the economy booming before WWII? Between Hoover and FDR, a Keynesian would be having daily orgasms over make work programs, annual tax increases, and rubbish like Smoot-Hawley.

The economy in the US grew because so many things had been destroyed in WWII. We were effectively the only industrial nation that hadn't been hit. Our war machine was re-tooled to make things for peace time. We profited from re-building the world. Keynesians didn't have the ability to control that much activity or squelch it immediately. The following 30 years of almost unopposed/uninterrupted Keynesian pollicies brought us to a crisis in the late 70's and opened the door for emerging economy's like Japan to capture large segments of our industrial base.

 

[utgibbs]

really? What was the level of G? How did it actually happen? It wasn't Keynesian policy. We had an enormous expansion driven by many things, but it wasn't driven by a big G.

As to your unemployment gibberish, all it stands to do is overprice labor, which just happened to drive your chart, just as it did in Europe. However, since all those systems of overblown labor pricing and government intervention at the bottom end up in a massive inflation hole, the system blows itself up and the fed has to step in, tighten the screws and induce damn near the same that just happened with wholesale real estate devaluation. Funny how that real estate bubble started.

It seemed to create a metric of real wealth that you were applauding a couple of pages back. Real, sustained wealth.

I guess I see where pouring a trillion in liquidity and 800bn in stimulus is the system "not blowing up...." It's lucky the FED didn't step in.... :crazy:

 

[utgibbs]

The economy in the US grew because so many things had been destroyed in WWII. We were effectively the only industrial nation that hadn't been hit. Our war machine was re-tooled to make things for peace time. We profited from re-building the world. Keynesians didn't have the ability to control that much activity or squelch it immediately. The following 30 years of almost unopposed/uninterrupted Keynesian pollicies brought us to a crisis in the late 70's and opened the door for emerging economy's like Japan to capture large segments of our industrial base.

It's interesting you say this. Of course, John Williamson was preaching "crisis creation" just before the Bush Junta entered the White House.

Crisis, as we have seen, is good for business.

Japan captured large segments of our industrial base? Which ones? They became globally competitive to be sure, using a much stronger Keynesian approach. MITI ruled.

 

[utgibbs]

Stagnant? Wonder what gives and why you'd just make up crap?

Keynes would have disowned you like a mad cow riddled herd.
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BPV, I posted the data. From multiple sources. Including the Hoover Institute.

So, the question is, why are you continuing with the farce?

 

[utgibbs]

Greenspan: Fiscal Stimulus Worked Far Less Than Expected - Real Time Economics - WSJ

Hmmmm, from one of the primary architects of the crisis.

Interesting.

 

[utgibbs]

if it was Keynesian economics that drove the economy of the US through the roof after WWII, why wasn't the economy booming before WWII? Between Hoover and FDR, a Keynesian would be having daily orgasms over make work programs, annual tax increases, and rubbish like Smoot-Hawley.

:facepalm:

We weren't on a Keynesian model before WWII. Keynes didn't publish The General Theory until 1936!

The Great Depression - everyone has a theory. Lack of regulation, money supply, gold, blah, blah, blah. I tend to like Galbraith's short paragraph in the preface to "1929"

"...fiction replaced reality, and people got reamed."

A good reminder in today's climate as well.

More to the point, although we had done some trust busting through the early part of the century, we were basically on laissez-faire capitalism, and we experienced a major "market failure." (Needless to say, monopoly capital is of course one of the first outcomes of laissez-faire capitalism).

 

[n_huffhines]

More to the point, although we had done some trust busting through the early part of the century, we were basically on laissez-faire capitalism, and we experienced a major "market failure." (Needless to say, monopoly capital is of course one of the first outcomes of laissez-faire capitalism).

Laissez Faire? You know the federal reserve had been around since 1913? The whole money and banking system is centrally driven. That's not the free market. Fractionalized banking created the bubble, it burst, fractionalized banking exacerbated the situation (bank runs caused the money supply to shrink by 2/3), smoot-hawley, erratic policy (big money investors sent their money abroad to avoid unpredictable regulation), etc., etc. It wasn't the free market.

Name one monopoly that ever existed without government assistance. I only know of 1 (consequently the ALCOA corporation who was the only firm in the world privy to an element necessary to produce aluminum). They had the extremely rare natural monopoly. Every other monopoly has either been achieved through government lobbying (railroads) or government itself (public schools, postal service).

There's almost no such thing as a real free market monopoly. Honestly. People point to microsoft today, but how can you say they are a monopoly when their computers are 1/2 the price of apple? Microsoft also allows a lot more competition for software on their systems than apple does. But microsoft is the best example of a monopoly that we have.

 

[n_huffhines]

Yes, they grew during the Keynesian age.

They have been stagnant in the Age of Friedman.

That's funny. Wasn't the age of Keynes also the age of the labor union? That's cartel behavior. That's like saying, "the real price of oil has increased because of OPEC. Let's all pat ourselves on the back."

I'm pretty sure Friedman told China and Chile* exactly what to do in the 1970's. Crazy that these perpetually poor countries are phenomenally wealthy in relative terms 40 years later. The prime minister of Estonia had no idea what to do after the fall of the USSR. He read Free to Choose and followed it to a T, and their economy has boomed. Economists now call Estonia "The Baltic Tiger".

http://www.artdiamondblog.com/archives/2006/09/free_to_choose_2.html

*this is well-documented. Friedman's nobel prize was highly protested because he had offered assistance to Pinochet's authoritarian regime in Chile. Friedman responded by essentially saying, "Nobody cares that I offered the same help to authoritarian left China. But when I help the authoritarian right, that's means for protest."

 

[sjt18]

It's interesting you say this. Of course, John Williamson was preaching "crisis creation" just before the Bush Junta entered the White House.

Crisis, as we have seen, is good for business.

The Bush policies of his last 2 or 3 years were very Keynesian... from the bailouts to his and the Congressional Dem's first swing at "stimulus".

Japan captured large segments of our industrial base? Which ones? They became globally competitive to be sure, using a much stronger Keynesian approach. MITI ruled.

Textiles before they lost it too. Automobiles- they made many processes economically unfeasible in the US due to lower wages and a Deming approach to production. Heavy industrial equipment for plastics, printing, et al.

 

[BigPapaVol]

It seemed to create a metric of real wealth that you were applauding a couple of pages back. Real, sustained wealth.

I guess I see where pouring a trillion in liquidity and 800bn in stimulus is the system "not blowing up...." It's lucky the FED didn't step in.... :crazy:

At some point you either answer the question or go away branded.
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[BigPapaVol]

BPV, I posted the data. From multiple sources. Including the Hoover Institute.

So, the question is, why are you continuing with the farce?

Really, that was your justification. The curve flattened because the economic opportunity of our postwar expansion dried up and INFLATION killed any nominal growth as it did for years. Then in the Reagan years we ground the world to a halt to combat the wealth destruction and drove unemployment to its likely practical spot which happen to rebalance supply vs demand in the labor market. Maybe you struggle, but that's a pretty basic economic concept.

Maybe if you applied some more real world to the post WWII boom, you'd better appreciate that governmental meddling did exactly jack to drive the growth.
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[utgibbs]

Laissez Faire? You know the federal reserve had been around since 1913? The whole money and banking system is centrally driven. That's not the free market. Fractionalized banking created the bubble, it burst, fractionalized banking exacerbated the situation (bank runs caused the money supply to shrink by 2/3), smoot-hawley, erratic policy (big money investors sent their money abroad to avoid unpredictable regulation), etc., etc. It wasn't the free market.

Name one monopoly that ever existed without government assistance. I only know of 1 (consequently the ALCOA corporation who was the only firm in the world privy to an element necessary to produce aluminum). They had the extremely rare natural monopoly. Every other monopoly has either been achieved through government lobbying (railroads) or government itself (public schools, postal service).

There's almost no such thing as a real free market monopoly. Honestly. People point to microsoft today, but how can you say they are a monopoly when their computers are 1/2 the price of apple? Microsoft also allows a lot more competition for software on their systems than apple does. But microsoft is the best example of a monopoly that we have.

I meant early part of the 20th century.

 

[utgibbs]

Really, that was your justification. The curve flattened because the economic opportunity of our postwar expansion dried up and INFLATION killed any nominal growth as it did for years. Then in the Reagan years we ground the world to a halt to combat the wealth destruction and drove unemployment to its likely practical spot which happen to rebalance supply vs demand in the labor market. Maybe you struggle, but that's a pretty basic economic concept.

Maybe if you applied some more real world to the post WWII boom, you'd better appreciate that governmental meddling did exactly jack to drive the growth.
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Inflation has been very low since mid-80s. Yet real wealth was going DOWN. You're theory doesn't fly as the data shows.

Meanwhile, where was all that inflation during the "boom years"? Why no inflation then? Why inflation in the 1970s, and why did it require the Volcker Shock to stop? Several other ways to stop inflation, after all, tried and proven on several continents.

Needs some 'splaining BPV. So does "we ground the world to a halt?" What does that mean? We ground the world to halt in WWII. Oh, the Sandinistas? They were two days' drive from Texas! And why did wealth creation tick up (anemically) AFTER Reagan then?

What "real world" are you talking about? The fact that wealth - even according to your primary metric - increased dramatically under Keynesian policy? Not just in the US, but devastated Western Europe, and Japan? Hell, even Chile was doing well during this period. Four continents, two decades of the greatest wealth creation in history after what "was probably the worst thing to happen ever."

You've got a lot of explaining to do.

 

[utgibbs]

Textiles before they lost it too. Automobiles- they made many processes economically unfeasible in the US due to lower wages and a Deming approach to production. Heavy industrial equipment for plastics, printing, et al.

They didn't lose textiles. They planned and targeted textiles and light industries first, and then targeted and planned the next phase into heavy industry / electronics.

 

[BigPapaVol]

Inflation has been very low since mid-80s. Yet real wealth was going DOWN. You're theory doesn't fly as the data shows.

Meanwhile, where was all that inflation during the "boom years"? Why no inflation then? Why inflation in the 1970s, and why did it require the Volcker Shock to stop? Several other ways to stop inflation, after all, tried and proven on several continents.

Needs some 'splaining BPV. So does "we ground the world to a halt?" What does that mean? We ground the world to halt in WWII. Oh, the Sandinistas? They were two days' drive from Texas! And why did wealth creation tick up (anemically) AFTER Reagan then?

What "real world" are you talking about? The fact that wealth - even according to your primary metric - increased dramatically under Keynesian policy? Not just in the US, but devastated Western Europe, and Japan? Hell, even Chile was doing well during this period. Four continents, two decades of the greatest wealth creation in history after what "was probably the worst thing to happen ever."

You've got a lot of explaining to do.

Are you kidding me. This selective silliness is moronic. Your "inflation has been low since the 80s" is an actual response? What happened to actual employment post the fix for Carter and Keynes Brazilian style inflation? What actually happened there? Why would the oil shock matter? What does big unemployment do to pricing in the labor market? Post that, how quickly does labor pricing grow thereafter? Why would wages ever grow faster than CPI? If they do, is that real wealth? Remotely sustainable? Help me understand wealth accumulation and how it happened I America via you silly socialist bullshiz. You don't like mechanisms because they're as foreign to you as playing ball, but give it a try. They have to exist. Absolutely have to.

And just so you know, growth in wealth isn't something I tied to housing. Housing growth wasn't anything more than affordability via longer term financing availability. At some point it had to taper off because you reach full home ownership similarly to reaching full employment. Thereafter, should never grow faster than population growth or we're inducing a bubble of destructible wealth.

As to your historic pile of wealth creation worldwide gibberish, it would mean more if you had the least clue how it happened or what drove it in the least. Keynesian policy as the driver of worldwide prosperity is one of the most simplistic and ridiculous things I've ever heard. For God's sake, you idiotically tried to tie Japan into your fold, which is just stupid.
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[CSpindizzy]

At some point you either answer the question or go away branded.
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It will be another graph and movement to something else.

 

[utgibbs]

Are you kidding me. This selective silliness is moronic. Your "inflation has been low since the 80s" is an actual response? What happened to actual employment post the fix for Carter and Keynes Brazilian style inflation? What actually happened there? Why would the oil shock matter? What does big unemployment do to pricing in the labor market? Post that, how quickly does labor pricing grow thereafter? Why would wages ever grow faster than CPI? If they do, is that real wealth? Remotely sustainable? Help me understand wealth accumulation and how it happened I America via you silly socialist bullshiz. You don't like mechanisms because they're as foreign to you as playing ball, but give it a try. They have to exist. Absolutely have to.

And just so you know, growth in wealth isn't something I tied to housing. Housing growth wasn't anything more than affordability via longer term financing availability. At some point it had to taper off because you reach full home ownership similarly to reaching full employment. Thereafter, should never grow faster than population growth or we're inducing a bubble of destructible wealth.

As to your historic pile of wealth creation worldwide gibberish, it would mean more if you had the least clue how it happened or what drove it in the least. Keynesian policy as the driver of worldwide prosperity is one of the most simplistic and ridiculous things I've ever heard. For God's sake, you idiotically tried to tie Japan into your fold, which is just stupid.
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Wow, a lot of statements without any cohesion / tying anything together.

Here is an attempt to answer some of the wild, uncorrelated statements: 1. monetarist policy will always increase unemployment; it's one of its functions 2. it is silly to deny wealth creation during the Keynes years; it is solid, pegged to GDP, providing massive growth in an economic metric you said was among the most important, and certainly growing real wages. 3. It was during the 1970s that money was decoupled from actual physical meaning - namely, real tangible wealth. This has precipitated a clearly unsustainable / grossly mis-leveraged economy. 4. Big oil shock was 1973. We can certainly explore this in more detail. In fact, it has enormous consequences now. I'm exploring the theory that 3% compound growth is pegged to a similar growth in oil production.....

There is a lot of statements in there, BPV. Try to tie them together with some coherence next time, please.

 

[utgibbs]

It will be another graph and movement to something else.

A graph seems more clear than just wild, incoherent statements, IMHO.

As your graph helped elucidate.

 

[utgibbs]

you know standards of living. . . home ownership, income, unemployment, % of people living in poverty

Shameless Bump.

It was droski. I assume you haven't given any metrics BPV.

PS - I noticed a Cato Institute link earlier. It's pretty easy to dismiss most of their talking papers; they aren't a strong, impartial scientific organization by any means. However, as a Libertarian organization, their commitment to the Bill of Rights is absolutely commendable.

 

[BigPapaVol]

Wow, a lot of statements without any cohesion / tying anything together.

Here is an attempt to answer some of the wild, uncorrelated statements:

1. monetarist policy will always increase unemployment; it's one of its functionsThis is patently retarded. Could not be stupider. Walk me down the actual economics of such a silly comment. Presumably you understand macro.

2. it is silly to deny wealth creation during the Keynes years; it is solid, pegged to GDP, providing massive growth in an economic metric you said was among the most important, and certainly growing real wages. How was the wealth produced? Actually tie to a Keynesian policy. You know, those policies to which you're attributing the growth. Make that happen for me. I've asked about 10 time. If you're right, this will be a very simple task, rather than posting lagging indicators, do something.

3. It was during the 1970s that money was decoupled from actual physical meaning - namely, real tangible wealth. This has precipitated a clearly unsustainable / grossly mis-leveraged economy. you simply have no idea what you're talking about here. None. You wouldn't know BOP accounting if it hit you between the eyes and it's blatantly obvious to anyone who actually understands macro.

4. Big oil shock was 1973. We can certainly explore this in more detail. In fact, it has enormous consequences now. I'm exploring the theory that 3% compound growth is pegged to a similar growth in oil production.....

Odd then, that we watched South American style inflation kill enormous swaths of wealth and income for a decade thereafter, since the Keynesian plan had it all fixed right up.See Bold.

There is a lot of statements in there, BPV. Try to tie them together with some coherence next time, please.

Your silly little games regarding coherence are absurd. If you knew remotely what you're talking about regarding econ, you'd plainly see all the linkages. You don't, so it appears Venusian and it's tough for you to go to some other site and hunt down answers to questions that don't fit into to your Utopian silliness.

I get it.

Now that we've settled that you wouldn't know the money multiplier from a pair of pliers, let's move on.

 

[utgibbs]

That's funny. Wasn't the age of Keynes also the age of the labor union? That's cartel behavior. That's like saying, "the real price of oil has increased because of OPEC. Let's all pat ourselves on the back."

I'm pretty sure Friedman told China and Chile* exactly what to do in the 1970's. Crazy that these perpetually poor countries are phenomenally wealthy in relative terms 40 years later. The prime minister of Estonia had no idea what to do after the fall of the USSR. He read Free to Choose and followed it to a T, and their economy has boomed. Economists now call Estonia "The Baltic Tiger".

artdiamondblog.com: "Free to Choose" Turns Estonia into "Boomtown"

*this is well-documented. Friedman's nobel prize was highly protested because he had offered assistance to Pinochet's authoritarian regime in Chile. Friedman responded by essentially saying, "Nobody cares that I offered the same help to authoritarian left China. But when I help the authoritarian right, that's means for protest."

You think it is wrong to increase wealth, wages, health, and prosperity? Your first paragraph seems to be going there.

Friedman also said, regarding Chile, "I am dispensing professional advice. Would you criticize a doctor doing the same?" I personally feel Friedman was just a college professor although he knew full well it required "shock treatment" to get his plans implemented.

In a rather delicious bit of irony regarding Chile: Allende would call his election in 1970 the "Chilean Way to Socialism." It is true the Pinochet adopted El Ladrillo - the Brick - the economic plan written by the "Chicago Boys" those Chileans like Silva de Castro who studied under Harberger at Uni of Chi.

It is true it required a Chilean genocide to implement, which probably should count as a strike against it. However, Pinochet never privatized Codelco. In addition, when El Ladrillo completely failed and made Chile the worst affected during the Volcker Shock, Pinochet had to RENATIONALIZE everything. It was called "The Chicago Way to Socialism....." It was the nationalized Codelco which saved Pinochet, in something of an irony. Without those revenues, he couldn't pay the army, and he would have been ousted.

The real growth in Chile has happened since the plebiscite with a return to their long democratic tradition and a mixed economy. Allende, by the way, was voted as the greatest Chilean in 2007 I believe.

 

[BigPapaVol]

You think it is wrong to increase wealth, wages, health, and prosperity? Your first paragraph seems to be going there.

ignoring the real reasons for the expansion makes you look senseless. Inability to link policy to outcome makes you look downright boneheaded.

Friedman also said, regarding Chile, "I am dispensing professional advice. Would you criticize a doctor doing the same?" I personally feel Friedman was just a college professor.

So.

In a rather delicious bit of irony regarding Chile: Allende would call his election in 1970 the "Chilean Way to Socialism." It is true the Pinochet adopted El Ladrillo - the Brick - the economic plan written by the "Chicago Boys" those Chileans like Silva de Castro who studied under Harberger at Uni of Chi.

more babble.

It is true it required a Chilean genocide to implement, which probably should count as a strike against it. However, Pinochet never privatized Codelco. In addition, when El Ladrillo completely failed and made Chile the worst affected during the Volcker Shock, Pinochet had to RENATIONALIZE everything. It was called "The Chicago Way to Socialism....."

had to? Please.

The real growth in Chile has happened since the plebiscite with a return to their long democratic tradition and a mixed economy. Allende, by the way, was voted as the greatest Chilean in 2007 I believe.

Have you ever looked into the failures of actual privatization? Some have failed. Know why?