Keynesian Magic and Wizardry

[Tsing Tao]

Quote from trefoil:

1. This belongs in Economics. Why'd you put it here?
2. Keynes understood risk. The others only understand 1+1=2 (well, Friedman understood 2*2 = 4, at least. But he got into deep water at Statistics 101). But a large economy, like a suspension bridge over a big bay, has problems a wee little bridge over a babbling brook will never have. Like having to take into account, say, the curvature of the Earth, which the engineers of the Verazzano Narrows Bridge had to do.
3. It's easy for the engineers of the wee little bridge over the babbling brook to criticize the engineers of the Verazzano Narrows. No one in his right mind would trust them to build a large suspension bridge over a big bay, though.

You might or might not know Keynes was a statistician of probabilities who wrote about this subject before he wrote about economics. What he understood, at a deep level, was that you can't actually use the assumptions of statistics to model an economy.
Unfortunately, his followers didn't quite understand this. Just as unfortunately, neither do the people who think they're against him.

1. I posted it here because it was the political elements I wanted to discuss. Ie, the result of following Keynesian ideals in today's administration.

2.and 3 - cute bridge analogy, but it really doesn't have all that much to do with the blog article.

I will agree with you that those who practice Keynesian theory today do so in a bastardized form, and do not follow Keynes as he meant his ideas to be followed.

 

[Tsing Tao]

Quote from Ricter:

Now I'd like to argue the OP's second assertion; again, I'll try to be equally persuasive:

It's not witchcraft.

And keeping to the line of pathetic debate you have started, I'll respond in kind:

Yes it is.

 

[RCG Trader]

Quote from Tsing Tao:

And keeping to the line of pathetic debate you have started, I'll respond in kind:

Yes it is.

What would Hayek have done? Asking, not arguing.

 

[Tsing Tao]

Quote from RCG Trader:

What would Hayek have done? Asking, not arguing.

In order to answer that, I'll have to ask you when you are talking about. For example, what Hayek would do now (after we are neck deep in debt and recession) is different than what he would have done, say, early 80s. But Hayek isn't really who I would even apply to this situation. Von Mises is a better candidate for monetary theory and inflation.

You should pick up a book on Austrian Theory. You might be surprised at how much you find to make logical sense.

 

[Max E.]

Quote from RCG Trader:

What would Hayek have done? Asking, not arguing.

Rip the band aid off right at the start, and Balance the budget or come close to it.... We would have seen 15% unemployment, but we would have gotten rid of all the cancer, and we wouldnt still be pissing around with it.

Given what is happening in Europe right now, and their desire to find a sound place to invest money, we would have seen trillions of dollars flowing into this country, and we would be booming again.

Unemployment may be 2-3% higher, but we would have taken our medicine, and the budget would be balanced, and we would be back on our way to creating a healthy economy again.

Instead what we have is 8% unemployment with an unsustainable deficit which we have done nothing to fix.... 3 years of keynesian economics has left us treading water with all the same problems we had from the get go......

 

[Tsing Tao]

Quote from Max E. Pad:

Rip the band aid off right at the start, and Balance the budget or come close to it.... We would have seen 15% unemployment, but we would have gotten rid of all the cancer, and we wouldnt still be pissing around with it.

Given what is happening in Europe right now, and their desire to find a sound place to invest money, we would have seen trillions of dollars flowing into this country, and we would be booming again.

Unemployment may be 2-3% higher, but we would have taken our medicine, and the budget would be balanced, and we would be back on our way to creating a healthy economy again.

I once read a quote about our current economic situation (I cannot remember where I saw it so I cannot give proper citation) but it went along the lines of :

Would you rather throw up constantly for 6 months straight, or be nauseous for 20 years?

 

[RCG Trader]

Quote from Max E. Pad:

Rip the band aid off right at the start, and Balance the budget or come close to it.... We would have seen 15% unemployment, but we would have gotten rid of all the cancer, and we wouldnt still be pissing around with it.

Given what is happening in Europe right now, and their desire to find a sound place to invest money, we would have seen trillions of dollars flowing into this country, and we would be booming again.

Unemployment may be 2-3% higher, but we would have taken our medicine, and the budget would be balanced, and we would be back on our way to creating a healthy economy again.

Instead what we have is 8% unemployment with an unsustainable deficit which we have done nothing to fix.... 3 years of keynesian economics has left us treading water with all the same problems we had from the get go......

Okay, this what I suspected. Next question to you and to Tsing, which politician will do that, anywhere, on this earth?

 

[RCG Trader]

Quote from Tsing Tao:

In order to answer that, I'll have to ask you when you are talking about. For example, what Hayek would do now (after we are neck deep in debt and recession) is different than what he would have done, say, early 80s. But Hayek isn't really who I would even apply to this situation. Von Mises is a better candidate for monetary theory and inflation.

You should pick up a book on Austrian Theory. You might be surprised at how much you find to make logical sense.

I am not conversant with Mises, but what would he have done? I have posted often that we are beyond the event horizon. Could Mises pull us back?

 

[Tsing Tao]

Quote from RCG Trader:

Okay, this what I suspected. Next question to you and to Tsing, which politician will do that, anywhere, on this earth?

Ron Paul would try. I'm not sure he would be able to get a lot of it passed unless the population rose up in support of him.

As for your other question on Mises, what could he do now? That is a very good question. I, like you, believe we are past the event horizon. However, let's make lots of assumptions here. Let's assume ol' Ludwig got elected to be supreme chancellor of the United States. Ultimate dictator powers, congress was disbanded and he could do whatever he wanted. I'm guessing on the order, but here's how I think he would do it.

1. End the Fed - enough said. If Ludwig were a vindictive guy, he'd drag Bernanke through the streets, but that's really just Tsing Tao channeling him. While he was at it, get rid of fannie, freddie and sallie.

2. Reduce federal spending by massively cutting defense, and all sorts of departments the Constitution never spelled out in the first place - education, housing, energy, etc. Get rid of all of them.

3. Revise the tax code. Move to a flat tax, get rid of the IRS completely.

4. Push for sound currency - preferably by pegging the rate to some gold/silver combination.

5. Install Balanced Budget amendment to Constitution.

6. Penalize American companies that export jobs abroad and reward (generously) through taxation companies that bring jobs back to the United States.

7. Eliminate lobbyists (which wouldn't be a problem if he were dictator anyway) in the political system. Illegal. Done.

8. Amend the constitution once more to put in term limits for any politician once he gave up dictator position and reinstalled congress and the executive branch.

9 Return most legislative powers to the state. End most federal regulations (except for those over environmental and military matters).

10. Install and strengthen property rights of the individual.

This would be about half the work he'd need to do. Could he stop the end? i don't know. He might have to exercise a default to get a clean slate. But when all was said and done, the United States would be a beacon of light in the world and everyone would want to come there, invest and work.

 

[Max E.]

Quote from Tsing Tao:

Would you rather throw up constantly for 6 months straight, or be nauseous for 20 years?

I almost want to beat my head against a wall thinking about this, where have we gotten after running ridiculous deficits for 4 years? We are in the exact same position we were in to begin with, and the deficit is just as bad.....

Then guys like krugman have the audacity to question the concept that people want to invest in countries with a sound economy, even when German bond yields WENT NEGATIVE last week when european investors were looking for sound places to park money.......

Thats what Krugman dismisses as "the confidence fairy"...... what a fucking idiot.....