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Spengler

The Global Failure of Keynesianism

April 5th, 2013 - 8:07 am

Should we fear a catastrophic outcome, as former OMB director David Stockman claims? That is extremely unlikely. There is one great source of strength in the U.S. economy, namely the energy sector. With the United States poised to overtake Saudi Arabia as the world’s largest oil producer by 2020, the U.S. current account deficit is likely to settle in the 2% range, down from the 6% range during the mid-2000s. That will enhance America’s capacity to borrow overseas by reducing the risk of future dollar depreciation. The prospective improvement in America’s current account gives the Federal Reserve and the Obama administration a great deal more slack.

But it is fanciful to expect that energy alone will drive a U.S. economic boom. It’s great for North Dakota and a few other states, and it’s good for the current account balance and the U.S. dollar. We’ve already had a massive decline in natural gas prices and a massive increase in the proportion of our energy coming from natural gas, and the effect on overall economic output is small.

No magic bullet — not the Fed, not the energy boom, not the modest improvement in home prices- — is going to get the U.S. economy out of what Nobel Prize laureate Edmund Phelps calls a “structural slump.” This isn’t a new depression. It’s not even a double-dip recession. It’s just a permanent headache.

Graph of S&P Case-Shiller 20-City Home Price Index

The economy is stagnating, not recovering, and Americans are hurting. Republican leaders are playing small ball against the administration over budgetary issues. Getting out of the structural slump will require radical changes. It will probably take a drastic reduction on taxes on capital income, including corporate profits, capital gains, interest, and dividends to get investment going again. Slashing the defense budget, which has been the great driver of technological advances since the Second World War, is devastatingly wrong-headed by economic as well as national security criteria. Obamacare is killing small business. The National Federation of Independent Business’ Optimism Index remains at recession lows. The biggest negatives cited by small business owners are taxes and government regulation.

Small business optimism report for March 2013

 

The Republican Party needs to articulate the kind of broad vision for prosperity founded on free markets and American strength that we had under Reagan. Waiting for the pendulum to swing back in our direction just isn’t good enough.

More: Behind the Dismal Jobs Numbers: The ‘New’ Economy Takes Shape

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Top Rated Comments   
The brilliance of free market democracy is in allowing the market enough political oxygen to come to equilibrium.

In this country, we stumble, stammer and stutter every time we utter the words socialism, communism and other brand names for the strangulation of the free market by political ham-fisting it, under various pastel colored scams.

Obama can't run for President as a "small c communist", or even as a "soft, compassionate, Euro-Socialist". So, he must feign umbrage at being called what has defined him since he was sitting on a bar stool in a sleazy bar with Frank Marshall Davis.

When leftist politics runs fiscal policy, the free market is deprived of oxygen.

Keynes was a fool. And his followers are bigger fools. Never...in the history of mankind, has such an utterly abysmal batting average been championed as an All-Star in so many nations...as this mound of crapology by Keynes.

We have to begin to treat small c communism for what it is and we can't/won't because we fear the taunt of McCarthyism. It's the trump card that beats back any semblance of logic. Much like the race card, it is pulled out no matter what is said, argued or debated...as a shield and sword, by radical leftists.

And therein lies the rub. Republicans are terrified and cowed into submission because of the leftists trump cards and their iron-fisted lock on the propaganda machine in the mass "news" outlets, Hollywood and academia.

The barstool fools who dribble out nonsense about Wall Street being evil and the lemmings who wear their ignorance of radical leftism like a badge of honor...don't have a clue. Parliamentary governance is a messy affair. But, at least the additional choices would give a chance to a voice of clarity and sanity.

Right now, we have none of the former from Republicans and an utter void of the latter from the Democrats.
1 year ago
1 year ago Link To Comment
The problem is that 90%+ of the creatures who call themselves Republicans and who work inside the Beltway have no interest whatsoever in free markets. Without big government and crony capitalism, they don't have party favors to hand out to get big contributions to get re-elected over and over with (and cushy, high-paying jobs after politics via the revolving door). They're members of the Incumbent Party, just like Dems, only with a slightly different shopping list that they want to spend someone else's money on. For someone who is supposedly so astute, Mr. Goldman, I'd have thought you might have noticed this by now. They're not "articulating" a vision on free markets because they don't believe in them either.
1 year ago
1 year ago Link To Comment
All Comments   (72)
All Comments   (72)
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Bear in mind if the isolationist win the debate David P. Goldman and Paul Krugman may end up burning at the stake for high crimes on their views become the wicker men,figure of speech , last thoughts to each other:" how did we end up bosom buddies."
there I will be clawing my way up to the holy mounts , with 10,000 year old Lilith on my left and 2000 year old Mary Magdeline on my right making the last attempt to bring back sanity some may say as i begin to preach about this great Ark how 13 heavens have come down to the earth.
Will they listen is the next question?
1 year ago
1 year ago Link To Comment
footnote
excerpt from ancient 2000 year old text Jesus speaks what to do when the isolationist take over:
"16 Then let them which be in Judaea flee into the mountains:

17 Let him which is on the housetop not come down to take any thing out of his house:

18 Neither let him which is in the field return back to take his clothes.

19 And woe unto them that are with child, and to them that give suck in those days!

20 But pray ye that your flight be not in the winter, neither on the sabbath day:

21 For then shall be great tribulation, such as was not since the beginning of the world to this time, no, nor ever shall be.
1 year ago
1 year ago Link To Comment
Crude oil flows to the greatest potential for profit globally, via the commodities market. Domestic retained or purchased crude oil, is leveraged for 'fuels' by limiting refineries and capacity. Beyond this point, it gets in the 'weeds' between the majors and the independents. You can do a search of historic data charts on this subject to gain a better picture. Fuel production never excedes or equals domestic 'unregulated' consumer demand. Demand is always somewhat regulated by production and pricing.
1 year ago
1 year ago Link To Comment
Lot's of nice charts and graphs. Just curious: where is this free market nirvana, with completed unregulated markets? Hong Kong? Nope. So where is it?
1 year ago
1 year ago Link To Comment
Are we going back to the pre-Reagan era of stagflation, which disproved Keynes? The Fed created an horrific recession by tightening money until all of the inflation was squeezed out of it. Reagan backed the Fed and urged Americans to "stay the course". It worked. Are we going back on this?

What President will be able to cure it? How can you run for office promising to create a recession?
1 year ago
1 year ago Link To Comment
No one here seems to see the benefit of a stable currency.
1 year ago
1 year ago Link To Comment
Oh the irony! "Slashing the defense budget, which has been the great driver of technological advances since the Second World War, is devastatingly wrong-headed by economic as well as national security criteria."

You do realize you're supporting Keynesian spending in an article titled, "The Global Failure of Keynesianism" right? Love it.
1 year ago
1 year ago Link To Comment
Keynes wanted government spending to increase demand. The beneficial impact of defense/NASA R&D has nothing to with demand in the Keynesian sense: it fosters innovations which private entrepreneurs can commercialize later. Pure free markets exist in the imagination of economists. There is a limited but indispensable role for government in the economy which has nothing to do with Keynes.
1 year ago
1 year ago Link To Comment
*****
(Five Stars)
1 year ago
1 year ago Link To Comment
Looking around the world, there's a pretty good correlation between economic performance and government stimulus. The countries that have opted for austerity are doing badly. Europe is in a second recession and is suffering from very high levels of unemployment. Countries like the U.S. that have followed a somewhat less deflationary course—a small Federal stimulus program combined with austerity on the state level—have done somewhat better. Countries following more stimulative policies have done best (Australia, China.) Spengler is simply wrong.

He's also wrong about the politics. Keynesianism is certainly not in general favor among those in power. If it were, the central banks wouldn't be going in for second best policies like quantitative easing because their governments would be pursuing fiscal measures such as increased public investment.

The policies of many governments, especially in Europe, reflect the triumph of Conservative economic ideas over the last several decades. Cheer up! Your side is winning, which is why we're all losing. Like the Depression itself, the feckless response to the economic crisis, is a consequence of not following Keynesian advice. Keynes, after all, recommended that governments should run surpluses during boom times. Greenspan and Bush made sure that didn't happen. He was also aware that policies that promote economic inequality, i.e. pretty much the beating heart of the Republican platform, also promote economic instability.
1 year ago
1 year ago Link To Comment
To all Pjmedia readers,
Please don't waste your time responding to Jim Harrishmuck a.k.a. Jim Hitlerson. He has venomous opinions about everything. He thinks he knows everything about everything. He thinks he has the answer to all of the world's problems. He's what Thomas Sowell might call a self-anointed messiah. He's extremely childish. He throws tantrums. He evades questions. He hates Jews and hates Israel. Please don't pay attention, to this immature, malignant, narcissistic, anti-Semitic demagogue.
1 year ago
1 year ago Link To Comment
Krugman? Is that you, Paul?
1 year ago
1 year ago Link To Comment
Hoover/Roosevelt turned a recession into the Great Depression with your policies, and Bush (somewhat)/Obama are doing the same now.

On theother hand, Reagan used a combination of Supply Side and Moneterism to ride out the recession and create such a great expansion.
1 year ago
1 year ago Link To Comment
Did you just say that government can spend your money more wisely than you can? That printing near counterfit bills is productive?That the $ is more wisely spent on my family by government than i could? Baloney! government is a vaccum cleaner sucking loose change from neighborhoods to spend it to improve the neighborhoods? Sounds like a book from Jonathan Swift!
1 year ago
1 year ago Link To Comment
Ha ha ha, snort chortle, laugh, cough, eyes water as I roll on floor.
Gosh I love a good satire.
l
1 year ago
1 year ago Link To Comment
Horse manure, and a particularly odious brand at that. Those that have cut gubmint spending and are doing badly are those that were already functionally bankrupt before they pulled their heads from the smelly place. Germany for example, would be doing just fine were it not propping up Greece, Cyprus, and Spain.

There are only 3 ways to create (which is the same as increase) real wealth. You can mine it, grow it, or manufacture it.

Gubmint "stimulus" just shuffles paper money around while reducing its real value. It is thinly veiled and thoroughly vile redistributionism.
1 year ago
1 year ago Link To Comment
"You can mine it, grow it, or manufacture it."
The greatest Revelation Jacob had when he worked for Laban is how God makes everything grow. Cursed are the people who become atheist. When they mine the ground and greed takes over they say we have killed the dragon but the invisible dragon comes and devours the people. the Manufacturing age comes and all the little people are turned into cogs in the machine but their false prophets point to the future they call progress and instead we enter the new age of slavery with Evil Atheist masters controlled by Satan the Devil when the world then comes to the great dead end and looks like Mars
The promise of Jesus :I will give you the bright morning star , venus turned into the new earth and never will the people forget what atheism brings to our earth if the people do not find repentance
1 year ago
1 year ago Link To Comment
I am very familiar with that part of the Bible (in the original, not translation) and I have no idea what you are trying to say.
1 year ago
1 year ago Link To Comment
it works like this Laban
I do the heavy lifting and the dangerous climb into the heavens replacing the old gods with the saints as the True God reveals releasing Rachel (Lilith ) from her father while you boast about how you do not need the translation because you yes you read the original language and then you do your poop with Nephilim pride before the fall
good luck with your cheap heady authority -it is a waste of my time but still the question: why have so many people been seduced by it?
1 year ago
1 year ago Link To Comment
Waxwing -- I don't hear the same "boast"fullness from mzk's comment as you seem to. I think you may be over-reacting to him.

Nevertheless, I will tell you that I have neither read the story of Jacob in the original nor in any translation. And given this ignorance, or perhaps because of it, I too am unclear as to what you are getting at with your comments.

1 year ago
1 year ago Link To Comment
James Bond had license to kill. I yes I was given a license to boast so i yes i can take advantage of every tool needed to complete my mission for God and getting my fingernails to grow long and my toe nails to long to grip the great mountains I climb can be good tool and then I repent latter
i also have kind heart for kids with Nephilim pride when it looks like everyone around them is out to kill them and they can repent latter
and this is good you do not understand me this shows despite my boast i keep sacred secrets I yes I in charge of bringing Lilith to the great holy mountains from the pit of thorns see the folly of tinkle economics and the destruction it is bringing to the west as we see in Europe playing into the hands of Atheist communist capitalist Red China with ambition to become the superpower of the world and I believe the west has traitors to bring this about
1 year ago
1 year ago Link To Comment
footnote
of course you are not Laban just one of his lazy jealous sons when you see your fall and blindness repent sinner
1 year ago
1 year ago Link To Comment
footnote
"Genesis 31:10-13

New International Version (NIV)

10 “In breeding season I once had a dream in which I looked up and saw that the male goats mating with the flock were streaked, speckled or spotted. 11 The angel of God said to me in the dream, ‘Jacob.’ I answered, ‘Here I am.’ 12 And he said, ‘Look up and see that all the male goats mating with the flock are streaked, speckled or spotted, for I have seen all that Laban has been doing to you. 13 I am the God of Bethel, where you anointed a pillar and where you made a vow to me. Now leave this land at once and go back to your native land.’”
1 year ago
1 year ago Link To Comment
The good news is, there are enough useful idiots to follow your Leninist crapology and outright lies.

The bad news is, only the trolls here fit the description. You must be lost. Took a wrong turn at MSNBC. You'll find all the ignorant lemmings and parrots there you desire, comrade.

1 year ago
1 year ago Link To Comment
Parse it as one will, a "governmemt dollar" is still only a dollar. That the government spends it adds not an iota of value. If anything, given the usual self interest coupled with myopia of the clowns attracted to government you can be certain it'll be wasted.
1 year ago
1 year ago Link To Comment
The brilliance of free market democracy is in allowing the market enough political oxygen to come to equilibrium.

In this country, we stumble, stammer and stutter every time we utter the words socialism, communism and other brand names for the strangulation of the free market by political ham-fisting it, under various pastel colored scams.

Obama can't run for President as a "small c communist", or even as a "soft, compassionate, Euro-Socialist". So, he must feign umbrage at being called what has defined him since he was sitting on a bar stool in a sleazy bar with Frank Marshall Davis.

When leftist politics runs fiscal policy, the free market is deprived of oxygen.

Keynes was a fool. And his followers are bigger fools. Never...in the history of mankind, has such an utterly abysmal batting average been championed as an All-Star in so many nations...as this mound of crapology by Keynes.

We have to begin to treat small c communism for what it is and we can't/won't because we fear the taunt of McCarthyism. It's the trump card that beats back any semblance of logic. Much like the race card, it is pulled out no matter what is said, argued or debated...as a shield and sword, by radical leftists.

And therein lies the rub. Republicans are terrified and cowed into submission because of the leftists trump cards and their iron-fisted lock on the propaganda machine in the mass "news" outlets, Hollywood and academia.

The barstool fools who dribble out nonsense about Wall Street being evil and the lemmings who wear their ignorance of radical leftism like a badge of honor...don't have a clue. Parliamentary governance is a messy affair. But, at least the additional choices would give a chance to a voice of clarity and sanity.

Right now, we have none of the former from Republicans and an utter void of the latter from the Democrats.
1 year ago
1 year ago Link To Comment
Good post. I would point out that while Keynesian policy has rarely worked to help an economy, it never fails to help politicians justify more spending and more government. Its real purpose, perhaps?

And I would argue that the intimidation factor for Republicans and conservatives is not the name calling by the left. It is the megaphone in the press that amplifies it to the exclusion of any other voice. We can argue with and best the progs, but we have no megaphone comparable to theirs.

That is the real problem facing the country. If we had balanced reporting, the political process would be self-correcting, as it was in this country for so long.

1 year ago
1 year ago Link To Comment
"When leftist politics runs fiscal policy, the free market is deprived of oxygen."

What party held the majority of the legislative branch during the rise of the great economic powerhouse in the world? Or is one to assume you think a president runs and controls the nations economy? Do you have any links to all your complaints when the economy was good?
1 year ago
1 year ago Link To Comment
Reagan outmaneuvered the Democrats, the same way he did the studio heads when he was union boss of SAG. He did it with help from DINOs, which the true Democrats kicking and screaming.
1 year ago
1 year ago Link To Comment
There were presidents in the U.S. before Reagan! The U.S. made it strides to economic greatness before Reagan!
1 year ago
1 year ago Link To Comment
The problem for the freedom lover is that Keynesian economics dumps money on the unproductive in order to get them to invest in the economy. That just makes the unproductive want more free money. How does a world-view that emphasizes hard work and fiscal discipline compete with that? Nov 2012 was my epiphany. If a president can be reelected under the conditions that the country was (is) in, then my belief is, and i really hate to be a nattering nabob of negativism, that the event horizon has been crossed. Things are definitely going to get worse, government graft is going to literally have to dry up, and riots will ensue, before Uncle Humpty Sam can be put back together again.
1 year ago
1 year ago Link To Comment
ALL the intellectuals on PJM have complaining and blaming down to a fine art without any rational proposal(s) for resolve! But heres the question for the intellectuals. Precisely what economic system (theory) of the more recognized, would you replace Keynesian economics with? How would you implement it?
1 year ago
1 year ago Link To Comment
What good will any of this do as long as the GOP is portrayed 24/7 as a virtual KKK? In case you haven't noticed it, that's where the info war's being fought, not with common sense. Liberal's voted for Obama with 4 years of 8% unemployment under his belt.

They simply blamed arch-Nazi Bush and transferred that to arch-racist Romney. Need I remind anyone that Yahoo and Politico fired two men for completely baseless racist accusations against Romney?

As long as the GOP doesn't truly understand what kind of a war they're in, they're gonna keep losing it, and graphs won't help.

We're I the GOP, I'd be filing hate-speech charges against American celebrities, bloggers, writers and other artists outside America. Is MSNBC and NBC fed outside America? Hit 'em. What are the Las Vegas odds Melissa Harris-Perry, Michael Eric Dyson and Al Sharpton just happen to peg whites as wrong 100% of the time? About the same as Nazis did Jews I'd say.

I'd start with the Council of Europe's European Commission against Racism and Intolerance in Strasbourg.

Then I'd hit the U.K. Ireland, Canada, Brazil and India. All those liberals extend their careers and web sites outside America. No career, no money. No money, no voice.
1 year ago
1 year ago Link To Comment
Don't forget British libel laws (and those derived of them, like in Israel) are much stricter than in the US, with our unique (exceptional) version of rights. If US laws were like British/Israeli, Ariel Sharon would have beaten Time magazine. Libe lsuits might be a good way to go.

But note that the system is rigged. The Left tends to control the courts. You may find your scheme backfiring.
1 year ago
1 year ago Link To Comment
The mixing of PC Left ideology and the reality beneath the propaganda (CF Bleachers writes about this better than anyone) with the reverse race card (the only actual race card being played in the US these days) makes a toxic formula. Resisting it within the bounds of play, within the mainstream airwaves, is futile apparently. The Romney's yield to it, like someone raising his arm to fend off a blow. Then add in the depth of corruption associated with Obama's Presidency, and the formula is really for societal dysfunction or even eventual civil war. What stops this in my opinion is that many of the average people just keep on keeping on, producing and cooperating in the face of the ideological madness and wars raging above and around them.
1 year ago
1 year ago Link To Comment
"under the racial restrictions that lasted from the presidency of Brigham Young until 1978, persons with any black African ancestry could not hold the priesthood in the LDS Church and could not participate in most temple ordinances, including the endowment and celestial marriage" wikipeda

If Romney had one of his sons marry a black woman or if he adopt a black baby held in the arms of his blond beauty wife wife lips dripping with married honey , breast fit for suckling future kings and queens in the celestial Kingdom then perhaps the Queen of Sheba would not have been so angry with him this queen I bow my head to every time I go to the thrones in hell and get him to be loser man in election
who know?
1 year ago
1 year ago Link To Comment
So what? I can't marry a Jew in Israel or a Muslim in Egypt. Are they all racists? Can I be the member of a priesthood in India or Ethiopia? Can I be an Imam? A Rabbai? Religion, even in America, isn't a diversity pie, and in case you haven't noticed, this isn't 1978.
1 year ago
1 year ago Link To Comment
Although you could go to Cyprus and marry a Jew (even a male one, heaven help us) and the Israeli government would recognize it.

But the key point is "until 1978". The LDS backed out of it.
1 year ago
1 year ago Link To Comment
There is this mystery, a sacred secret revealed , great beauty above, that great suffering was endured to have this mystery revealed

Ephesians 3

The Message (MSG)
The Secret Plan of God

3 1-3 This is why I, Paul, am in jail for Christ, having taken up the cause of you outsiders, so-called. I take it that you’re familiar with the part I was given in God’s plan for including everybody. I got the inside story on this from God himself, as I just wrote you in brief.

4-6 As you read over what I have written to you, you’ll be able to see for yourselves into the mystery of Christ. None of our ancestors understood this. Only in our time has it been made clear by God’s Spirit through his holy apostles and prophets of this new order. The mystery is that people who have never heard of God and those who have heard of him all their lives (what I’ve been calling outsiders and insiders) stand on the same ground before God. They get the same offer, same help, same promises in Christ Jesus. The Message is accessible and welcoming to everyone, across the board.

7-8 This is my life work: helping people understand and respond to this Message. It came as a sheer gift to me, a real surprise, God handling all the details. When it came to presenting the Message to people who had no background in God’s way, I was the least qualified of any of the available Christians. God saw to it that I was equipped, but you can be sure that it had nothing to do with my natural abilities.

8-10 And so here I am, preaching and writing about things that are way over my head, the inexhaustible riches and generosity of Christ. My task is to bring out in the open and make plain what God, who created all this in the first place, has been doing in secret and behind the scenes all along. Through followers of Jesus like yourselves gathered in churches, this extraordinary plan of God is becoming known and talked about even among the angels!



1 year ago
1 year ago Link To Comment
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