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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: Joe Btfsplk who wrote (767111)	1/30/2014 6:56:09 PM
From: Joe Btfsplk	2 Recommendations Recommended By FJB Taro Read Replies (1) \| Respond to of 1576619

There’s a stench in the air... Why Keynes' Quack Money Theories Still Hurt Us Today Two recent comments underscore the crisis in modern economies, a critical situation that is at the heart of the sluggish global economy and that could, if not corrected, lead to an ever uglier political environment. The blame for the mess we are in lies with John Maynard Keynes. The head of the IMF , Christine Lagarde, recently warned that falling prices are threatening a fragile recovery: “With inflation running below many central banks’ targets, we see rising risks of deflation, which could prove disastrous for the recovery.” Her concern echoes that of the European Central Bank head, Mario Draghi, who spoke around the same time about deflation risks and declared that the ECB will remain “accommodative.” Classical economists going back to Adam Smith have regarded the production of products and services as the “real economy” and money and credit as the “symbol economy.” In other words, money reflects what people are doing in the marketplace. Money and credit are tools of commerce. Keynes turned that thinking on its head, audaciously asserting that money and credit are the real drivers of the economy. Control money and you control the production of products and services. To classical economists this is like stating that the sun rises in the West and sets in the East. But thanks to the Great Depression, Keynes’ heresy became orthodoxy. Monetarism is a Keynesian offspring. Keynes famously observed: “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.” Unfortunately too many government officials and economists, while not pretending to be exempt from ideas, are today slaves of Keynes’ misguided monetary notions. Hence the current orthodoxy: Pump out enough money, and all will be well. The impact of high tax rates, regulations that hamper enterprise and gum up the flexibility of labor markets, and bloated public sectors, which absorb and waste resources that could be productively put to work for everyone’s benefit by businesspeople and investors, are downplayed or ignored. What Keynes posited was the equivalent of saying that manipulating scales is the way to attack obesity. Money is a measure of value. Like a clock or ruler, it has little or no intrinsic value. Its function is to facilitate commerce. Completely alien to today’s finance ministers, central bankers and most economists is the idea that money works best when it has a stable value. The “deflation” that worries so many of today’s economic worthies is actually a reflection of a still sluggish economic environment, which, in turn, is in no small part attributable to credit markets that have been warped by the suppression of interest rates. When the price of borrowing money is distorted, the financing of productive commerce is hindered. Vibrant economies, not central banks, create real money, and wealth is abundantly created when tax rates are low, money is stable and regulations are reasonable.

To: Joe Btfsplk who wrote (767111)	1/30/2014 7:59:12 PM
From: combjelly	2 Recommendations Recommended By bentway Bilow Read Replies (1) \| Respond to of 1576619

Wow. Some predicted the failure of the Soviet Union. No one else saw that coming... You ever read a novel called The Space Merchants? It was by Frederick Pohl and CM Kornbluth. It predicted the failure of the Soviet Union. It was written in 1952. I can pretty much guarantee neither were fans of von Mises. Let's look at something else. The near collapse of the global economy in 2007-2008. AS didn't and wouldn't have been able to predict that. There were some who were warning about a collapse, but they are mostly Keynesians. AS prescription for the near collapse was austerity. We have a decent experiment here, because some countries practiced it from the beginning, others went with a stimulus followed by varying degrees of austerity and at least one did no austerity at all. Romania went with austerity from the beginning. It devastated their economy. It just recently started to grow again, but it has a long way to go before it returns to the pretty crappy level it enjoyed in 2007. Most of the rest of the developed world went with an initial stimulus, most as a larger percentage of GDP than the US. And most of them weathered the Bellyflop better than the US. But most European countries implemented strong austerity measures after the initial stimulus. And, per Keynesian economics, their economies fell off the cliff. The more austere, the harder the fall. The US implemented much milder austerity measures and saw a lot better results. Which again is in accordance with Keynesian economics. New Zealand did not implement austerity measures. Their economy recovered in 2009 and has been growing at a decent clip ever since. That is despite their economy being primarily export driven. There is a reason most real economists think AS is a bunch of cranks. Their policies don't work. But they do make things worse...