John Maynard Keynes

Keynesian Twilight Zone

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There are few things sadder than a one trick pony whose trick fails to work.  Obama, with a faith whose fervency cannot be doubted, believes with all his soul that vast government spending is the mechanism to lift the country out of this never ending bad slump.  That his policies have failed to do anything other than to increase our massive public debt, sways him not at all.  For a true ideologue, and that is what Obama clearly is, a collision between reality and  beliefs merely means that reality is wrong since the beliefs are beyond question.  Thus in economic policy this administration is one endless Groundhog Day where the nation is stuck in a loop of high unemployment, minimal economic growth and ever expanding public debt. Continue reading

Vatican Bank Chief Condemns Keynesianism

Current fiscal and monetary policies in the United States and Europe risk increasing government control over national economies, resulting in weakened political strength throughout “the whole of the western world,” the Vatican’s top banking expert said.

Writing in the Jan. 14 edition of the Vatican newspaper, L’Osservatore Romano, Tedeschi warned of the growing influence of “Keynesian” economic theory on both sides of the Atlantic.

Governments on both sides of the Atlantic, he said, are committed to Keynes’ policy of increasing public debt to sustain levels of economic production, consumption, and employment.

He said artificially low interest rates are another key to the strategy of increasing spending and discouraging saving. With no incentive to keep money in the bank, those who would have otherwise been savers are pushed to spend.

“Zero interest rates factually equal a de facto transfer of wealth from he who was a virtuous saver (although not for Keynes) to he who has become virtuously (for Keynes) indebted,” he said. “Practically, it’s about a hidden tax on poor savers, a tax transferred to the wealthy, (that is), over-indebted states, business people and bankers.

More. That sound you hear is Morning’s Minion’s head exploding. Continue reading

German Economist: America Is Becoming Too European

I found this piece from the English-language edition of Der Spiegel by University of Hamburg economics professor Thomas Straughaar very interest, in part because it reads very much as written by someone who is looking at American history and culture from the outside, yet trying to understand it for what it is. A key passage from the second page:

This raises a crucial question: Is the US economy perhaps suffering less from an economic downturn and more from a serious structural problem? It seems plausible that the American economy has lost its belief in American principles. People no longer have confidence in the self-healing forces of the private sector, and the reliance on self-help and self-regulation to solve problems no longer exists.

The opposite strategy, one that seeks to treat the American patient with more government, is risky — because it does not fit in with America’s image of itself.

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