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Keynesian Economics, Exposed; Godwin’s Law, Broken

March 15th, 2010 - 5:30 am

Via my Year One blogging buddy, Pejman Yousefzadeh, comes this happy fun story about America’s good credit:

Moody’s Investor Service, the credit rating agency, will fire a warning shot at the US on Monday, saying that unless the country gets public finances into better shape than the Obama administration projects there would be “downward pressure” on its triple A credit rating.

Examining the administration’s outlook for the federal budget deficit, the agency said: “If such a trajectory were to materialise, there would at some point be downward pressure on the triple A rating of the federal government.”

If you had a time machine and it was good for only one trip, would you go back and give contraceptives to Hitler’s parents — or to the parents of John Maynard Keynes?

Obviously, I’m being facetious, but only by half.

Hitler discredited fascism, by launching wars of aggression and sending millions of Jews, Gypsies, gays, and the handicapped to the gas chambers. And, minus the extent that he started all those wars and killed all those people — well, good for Hitler.

Again, obviously, I’m being facetious.

But I’m not being facetious at all when I tell you that Keynes legitimized fascism, by giving decent, liberal democracies license to tax and spend and borrow in the name of political expedience.

Look, whatever Keynes may have gotten right — I suppose he could wipe his own bottom unassisted — what he got wrong is precisely what bedevils us today. And Keynes, the fascistic bastard, I think got it wrong on purpose.

Let me explain.

Quite famously, Keynes wrote, “In the long run we are all dead.” Which politicians of the Great Depression, and long thereafter, took to mean, “Right now I can buy votes with money borrowed from people who aren’t even born.” And Keynes enabled them. Keynesian theory held that governments should save money in the good times, so that they could spend it during lean times to “stimulate” the economy.

Gee, where have we heard that word before?

But let’s be frank here. That bit Keynes said about saving money must have been with a wink and a nod and a nudge, nudge — because popular democracies almost never save any money. And Keynes was too smart not to know it, and too conniving not to say it.

Of course, Keynesian theory also held that inflation and recession couldn’t coexist — but then Richard Nixon and Jimmy Carter and the 1970s came along and disproved all that. And yet, somehow, liberal governments still hold by Keynes.

But why?

Simple. What Keynes did was to give license to government today, to borrow from tomorrow — and the consequences be damned. And there’s nothing a politician likes to hear better than that he can buy votes from Paul, using Peter’s money, without Peter ever being the wiser. Because if you follow the Keynesian example, Peter hasn’t been born yet. Convenient, that. In olden times, politicians had to rob from people who could shout to high heaven that they’d been fleeced. But then the unborn don’t exactly turn out in huge numbers on election day.

And that’s where we are today — borrowing trillions from China and Japan in the expectation that our grandkids will someday, somehow, foot the bill.

France, Germany, China — these countries ignored Keynes during the recent Great Recession, and now they are all well on their merry ways to recovery.

The United States and Britain are still, tragically, under JMK’s sway — and it’s no coincidence that our two nations our about to go for a double dip in the pool of total suckiness.

Keynes got one thing right in his inglorious career. In the days after World War One, he argued that Weimar Germany would never be able to repay the debts it owed under the terms of the ruinous Versailles Treaty. And he was right. The German economy burned to the ground, and Hitler arose from its ashes.

And yet, by the theories of that same inglourious basterd, we have saddled ourselves — in the space of just one year! — with debts perhaps as great as those faced by the fragile Weimar Republic of 1920. What will come from our ashes? No one can say.

Had anyone listened 90 years ago, Keynes could have saved the world from Adolf Hitler. Had anyone listened just last year, we’d be spared the risk of becoming Weimar America.

So. You’ve got that time machine. Who gets the condom?

UPDATE: Honestly, this is nothing compared to what PJTV lets me get away with on Hair of the Dog — the only effective cure for the Sunday morning chat shows.

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