Edit: I am not the author of this piece, I am merely sharing it. New to the diaries, not to DK. Longtime fan and when I read this I wondering what a wider sample would respond; specifically, economically.
How do you respond to this criticism of progressive economics?
Credit: Brett MacDonald
To those of you talking Economics, Take a look:
You see an accumulation of wealth at the top because smart people made a lot of money legitimately then invested it wisely with other smart people that had the know how...bankers. Keynesian Economics is not the solution. Federalizing the government as described in the Constitution and Explained in the Federalist papers is the solution. This will be an economics discussion, not a federalist one.
These people also were rich. It is not more difficult to become as rich as the rich people of today, that is a myth.
The rich people who you speak of are not collecting a paycheck at the expenses of the American People. That is a myth.
Besides for Goldman-Sachs. They are evil. That isn't a myth.
But otherwise, the Bill Gates and Richard Bransons of the world, even the Koch brothers and Steve Burke are not the evil robber barons you portray them as. The issue is politically systemic not economic mishaps!
Keynesian economics is basically the last resort of all Banana republics and can be divided into three categories of government intervention into the market economy:
(1) Direct Expenditure: This was the form that Keynes believed was ideal, government expenditure directly in the market to create jobs. Some Keynesians (Keynes is actually believed to had said something to this effect as well) have gone so far as to claim that the government paying a man to fill a hole one day and pay him to dig it back up the next was still an effective economic stimulus. The goal is to inject cash flow into the economy to encourage spending.
[Keynes' source of this money injection into the economy? Bond Sales and Quantitative Easing]
(2) Quantitative easing is best explained by the video in brackets just beneath this bullet point, it's clear, concise and entertaining I highly recommend it. Essentially, money must be printed to be injected into the economy. Well since that money has to come from somewhere enter the economy from somewhere, enter the Fed, the Banking System, and the general global population. (B) This also occurs when the federal reserve loans new money to banks which actually creates debt.
(3) Bond are sold through the federal reserve. Often times they are sold to banks in this country, other times they are sold to foreign governments...like China. Govt bonds are micro loans with a fixed expiration date and commission. More or less its like buying stock in a government's dollar, where instead of being at the whim of NASDAQ influences, the idea is you have the security of a Government. Now, without getting into credit ratings and other details that will detract from the general argument, when you allow a nation like China to buy your bonds, you are basically printing money and adding new income to the money supply. You are also strengthening the Chinese dollar. Enough of this.
A fiat currency is fine. But limitless printing and money supply manipulation is an incredibly bad decision in the long run and in the short run. It leads to a duct-tape solution that holds back the temporary ebb of recession in the mid game but its never sufficient enough for a real recovery and the money never efficiently reaches the hands of individuals.
Consider a couple of the bailouts -- What exactly is different in Kenyesian Economic theory from the typical trickle down theory? Today, Keynesian economics has come to mean bailouts are for banks and corporations.
Other bailouts are more in the spirit of what John M. Keynes imagined -- Direct government expenditure and a lot of the highway renovations happened because of Obama and Bush's stimulus packages. Some are too direct like the Bush tax rebate. Both of these methods fail.
Direct expenditure does not create real wealth. (A) Wealth cannot be created (we will get to this in a minute).
Direct expenditure favors a group, typically unions or a specific contractor, and does not actually create jobs. It just gives more work to people that have jobs already for the most part.
Sure there is some expansion, but not much. The jobs that it creates are like the dollar that was used to create them -- inflated, like the money supply itself.
When the government expenditure ends, and it always ends, times are temporarily good (if the money pump was done to a necessary extent). But what follows is a recession caused by the inflation of the dollar value and the debt that is inevitably created by bailouts, bond sales, and direct expenditure.
(A) Wealth cannot be created -- What I mean by this is that, despite what some may tell you in the Economics realm, the Conservation of Matter still applies. All the shit that exists today (the material), even people, are what is real wealth. It is a fixed unknown number.
And if you are not a believer of what I just said I endeavor to convert you to the light of Austrian economics, TRY THIS THOUGHT EXPERIMENT:
The answer is a net loss. Consider this: Before removing the Gold Standard or whatever monetary system was at play prior to your rise to power, there was some form of wealth and wealth storage. Some currency preceded your own, your highness. Let's pretend that this was a neutralized currency (as opposed to centralized) and that it was backed in Gold and finite. We will call it the 'Real Wealth'. When you stepped on stage and regulated the commerce policy, you created a new fiat currency. Upon loaning it to banks you did something particularly interesting. You set them up for failure. If you are the sole creator of money and your loan was the Genesis loan, you didn't create a net gain but a net debt. Does that make sense?
If as my creditor you loan my bank 100 dollars and ask for a quarter percent return in 5 months, I cannot give you any more than at most the 100 dollars you loaned to me, there isn't any more money, I only have what you created.
Now, Obviously this is not the way things work in the real world. And for good reason too. When we removed the gold standard we had already generated quite a bit of 'Real Wealth' that was of value. Removing the gold standard is not the issue, printing money is the issue. Once we began printing money that was not backed by a finite resource and began loaning it out to banks at an interest rate (no matter how close to zero) the banks and the American populace will slowly see the Real Wealth (measured by the strength of the Dollar on the Gold Standard) deteriorate.
[Broken Window Fallacy -- http://cur.lv/... -- A good video on the way to look at economic logic]
(C) What does create jobs and generate wealth? Ingenious start ups. Ingenuity alone. Hard work. Captains of Industry. Supply and Demand. Free Markets. Collective Rights of both Employers and Employees. Balance of Counter Ambition.
But never Government Intervention.
I do not believe in the Gold Standard but I do believe in a finite money supply that is divided beyond the first two decimal places. Essentially I support crypto currency as a viable alternative.