“The definition of stupidity is doing the same thing over and over again and expecting different results”
-Albert Einstein, (who by the way is dead so therefore his ideas are apparently no longer relevant according to Chuckles)
John Maynard Keynes is dead and his ideas have been thoroughly discredited. Barack Obama’s stimulus package is not a new idea, and it is certainly not something that I would describe with the adjectives “change” and “hope.” A pretty stupid president already aligned himself with an equally stupid congress to pass a stimulus package that didn’t work. So now an even stupider president along with the same stupid congress is going to pass another stimulus package, and we are supposed to believe that Obama’s Midas touch will save us.
The following is a quote from an article in the LA Times entitled, “Keynes can’t help us now:”
There is something desperate about the way economists are clinging to their dogeared copies of Keynes’ “General Theory.” Uneasily aware that their discipline almost entirely failed to anticipate the current crisis, they seem to be regressing to macroeconomic childhood, clutching the Keynesian “multiplier effect” — which holds that a dollar spent by the government begets more than a dollar’s worth of additional economic output — like an old teddy bear.
They need to grow up and face the harsh reality: The Western world is suffering a crisis of excessive indebtedness. Governments, corporations and households are groaning under unprecedented debt burdens. Average household debt has reached 141% of disposable income in the United States and 177% in Britain. Worst of all are the banks. Some of the best-known names in American and European finance have liabilities 40, 60 or even 100 times the amount of their capital.
The delusion that a crisis of excess debt can be solved by creating more debt is at the heart of the Great Repression. Yet that is precisely what most governments propose to do.
-Niall Ferguson
Niall’s article rigorously suggests that deleveraging and restructuring are better solutions to the financial crisis than taking on more debt to solve the problem that we have too much debt. His article also highlights the lurking problem of deflation and the problem this poses to governments who intend to inflate themselves out of debt. Chuckles believes that we will be able to pay for these stimulus packages with our future prosperity. Most reasonable economists grudgingly admit that the logical outcome of the massive government indebtedness we are witnessing will be a period rampant inflation as our bankrupt government resorts to printing money to stave of further economic decline.
The following is a quote from a New York Times op-ed:
We can’t afford a wildly inefficient stimulus, they argued, which contains no exit strategy to return the country to fiscal balance. – David Brooks
Barack Obama was elected with a 53% mandate for change. However, here again he is repeating the same mistakes as Bush just with different ideology. His rush to pass this stimulus package rivals Bush’s rush to war in Iraq.
The following is a quote from Alan Greenspan’s autobiography:
The fall of the Soviet Union concluded a vast experiment: the long standing debate about the virtues of the economies organized around free markets and those governed by centrally planned socialism is essentially at an end…The verdict on central planning has been rendered, and it is unequivocally negative. – Alan Greenspan
The next quote is from a New York Time article that discusses the mixed results of the large government stimulus packages that were passed in Japan after their financial system crashed in the late 1980s:
Among ordinary Japanese, the spending is widely disparaged for having turned the nation into a public-works-based welfare state and making regional economies dependent on Tokyo for jobs. Much of the blame has fallen on the Liberal Democratic Party, which has long used government spending to grease rural vote-buying machines that help keep the party in power. -Martin Fackler, New York Times
This article does a good job of bringing in points of view from people on both sides of this issue. All of the Japanese sources of the article say that stimulus packages didn’t help and caused more problems than they fixed. All of the American sources in the article believe that Japanese stimulus packages worked better than economists are willing to admit. I would argue that the best course of action would be to not do what the Japanese did, since they ended up prolonging their financial crisis for about a decade. Of course Barack Obama was pretty young when this all happened, so maybe no one has told him yet that his ideas aren’t new, and that historically they haven’t worked.
I will conclude with some quotes from Jon Markman about Why the bank bailouts are doomed:
You can’t very well have a bankrupt banking system, however, so the market has spent the first three weeks of the new year pricing in the inevitable next step: nationalization of most large banks. The reason is simple: If your owner can print money, you don’t need to keep any reserves. Problem solved.
To be sure, the landscape of world business would change dramatically. Private owners have made a mess of things, but you can bet government bureaucrats would be worse. They probably would take fewer smart risks, such as lending money to the next Michael Dell or Bill Gates, and more dumb ones, like giving mortgages to low-income families with meager means of repayment.
Personally, I loathe this neo-statism, which is a less objectionable term for socialism. The best course of action, which would have been the most painful in the short term but beneficial in the long term, would have been to force banks to open all their books to regulators and investors, allowing us to see which were solvent and which were not. Then the Federal Deposit Insurance Corp., which is sort of a mini-nationalizer, could have closed the bad banks and merged their assets into strong banks, and we would be halfway through the crisis by now.
Amen, Amen, Hallelujah, and Amen. I couldn’t have said this better – even though I did say extremely similar things in my post, Baracktile Dysfunction 2: My Stimulus Package is Bigger than your Stimulus Package.
Hello Friend,
I’m sorry, I couldn’t help but notice this in your post:
*****Albert Einstein, (who by the way is dead so therefore his ideas are apparently no longer relevant according to Chuckles)*****
I can only assume that came in response to this, which I wrote in my response to ”
*****I’m sorry dude, but Milton Freidman is dead, as is William F. Buckley. And their ideas have been thoroughly discredited.*****
Sigh. I have come to the sad conclusion that I have given you too much credit. Previously I wouldn’t have imagined that possible.
Perhaps you will note the conjunction AND in that phrase. People familiar with language (most any language, to my knowledge) should be aware that a conjunction acts to join. In a logical construction, ‘and’ is an operator that requires both asserted premises to be true in order for the conclusion to be true. e.g. “if A AND B, then C”. You’ll note that both A and B are required. in this example “if A and NOT B, therefore, NOT C”. Logic at its simplest.
The first statement, Friedman and Buckley being dead was flippant. but the AND was the crux of the argument, The argument may be sound in this case, but not valid, logically speaking: “if dead AND discredited, then irrelevant”. The reason it is not nec. valid is because there are dead people with relevant ideas, and living people with irrelevant ideas. I was just sad to see that either you stopped reading midway through my post and held me responsible for selective sentences taken from a whole, or don’t understand the purpose of a conjunction. Just as you introduced me to the wonderful world of Irony, I would like to introduce you to this delightful form of speech. It makes logical constructions easier AND it’s pretty easy to get the hang of. (see how I used that right there?)
On a different note, I was happy to see you only pay lip service to the idea of abandoning rigor. You post was at least (more) cohesive and reasonable. You may be wrong, you may not be. And, as I’ve said before, I’m no real fan of the bailout, but I’m less a fan of the politics and ideologies that brought it into place (rep and dem alike… they all share blame). Thanks for all the articles you quote. At least this looks like food for thought.
Best,
Chuckles
Chuckles, it hardly proves your intelligence to claim a comment was made in jest, AND then denounce the irrationality of a counterargument that was also made in jest. Irony AND sarcasm are often bed buddies.
I deliberately chose to misinterpret your comment about Friedman and Buckley for rhetorical purposes. In a way I was exchanging flippant remark for flippant remark.
I do understand what conjunctions are and how they work. Typically they are punctuated with commas or semi-colons instead of periods. By separating both clauses into different sentences the “joining” function of the conjunction is somewhat diminished.
If you are really looking for a rigor overload, you should read the books, Devil Take the Hindmost and Manias, Panics, and Crashes. Thanks for the compliment by the way.
Re: Blogdor
It hovers near the bottom of my priority list to have readers of this blog to think me intelligent. But I feel it necessary to tell you that I, too, was kidding. It was an ironic way of complaining about him ignoring my actual argument. If I were to have played it straight, I would have said something like, “did you not see that I said the reason I believe them to be irrelevant is that their ideas have been discredited?” Perhaps that would have been better, but something about this site causes some kind of sarcasm wave to wash over me. Could just be me.
Re: Admin,
I think you require level-9 Jedi senses of sarcasm to catch that you intended it as a flippant remark. To the undertrained, it just looks like you misrepresented the argument. We could continue the debate on the logical application of punctuation to conjunctions, but I think the issue has been thoroughly hashed. I’ll def check out the book, prob this weekend when I’m at Borders.
Cheers
Critics of English commonly say that the Greeks had like 50 words for love, ergo their language was better. I would argue that American English needs more than one word for sarcasm. You are also correct that I did misrepresent the argument, and I did this intentionally. Maybe sophistry is a better word for this than sarcasm, but at least this maneuver caught your attention which I guess was my intention. I also agree that nothing kills a debate like fighting about punctuation – especially those shifty commas.
Wow, this slough of comments is now about 4 times removed from the original post, and merely to make the point that each of you really did get the others’ sarcasm, and was only ignoring it (albeit sarcastically and ironically, of course). It seems to me that this argument has devolved to the point of proving the others’ skill in detecting sarcasm to be utterly inadequate (of course I am only typing this to prop up my own ego by pouncing on the fact – isn’t this what political blogging is really all about?!?).
Anyway, I want to make a brief comment on the original post, and will try to avoid, or at least explicitly denote, any sarcasm or subtle ironies along the way.
Claiming that Keynes has been utterly discredited is a bit of an overstatement. I would agree that the consensus among academic economists is likely to agree with your position, but it is essential to note that this is not necessarily an empirical, but a theoretical disagreement. I would also add that an academic consensus based on mutual theoretical positions (but lacking data to support the main propositions) does not, at least in my book, constitute a “discrediting” of the theory. Granted, economists have moved in other directions in the past decades and Keynesian economists are surely the minority, but this is quite possibly as much a result of the socio-historical dynamics of the discipline of economics as it is of any actual experimentation or data collection. Using the oft-cited mantra of economists everywhere, if “data [really] is king,” then the jury is still out on Keynes, and like it or not the current stimulus package will constitute a wealth of data to determine the extent to which a government can in fact spend its way out of a recession.
Try this NPR story on for size:
http://www.npr.org/templates/story/story.php?storyId=100018973
Jake,
Keynes being discredited is an overstatement, and it is intended as a a rebuttal to Chuckles’ comment in a previous post that Milton Friedman’s ideas have been thoroughly discredited, which was also an overstatement.
Your blind faith in data is about as disturbing as Chuckles’ privilege of rigor. It is arguable that some of the best mathematicians, statisticians, data collectors, and economists were enlisted and hired by big investment banks to become “financial engineers.” Through rigorous application of data projected through complicated models of super computers, these financial engineers created financial instruments such as collaterized debt obligations, asset backed securities, derviatives… If you don’t know what these are by now – even after reading about them in hundreds of articles about this crisis – then you are probably in the same boat as many prominent bankers who still don’t know what these are and they have “trillions” of dollars worth of them on their balance sheets. These bankers even paid bright analytic minds to tell them that these financial instruments would be good investments based on these analysts’ ability to tell a good story based on rigorous application of data.
I actually had already read the article you cited, but decided to ignore it when it essentially made the point that Keynes’ theories have yet to be tested with no mention of Japan’s recent financial crises.
I also see some problems with this statement, “Basically, people aren’t spending enough money, either because they don’t have any or because they got laid off or are afraid they’re about to get laid off.” People aren’t spending enough money??? All of the sudden Americans determine that it is no longer in their best interest to spend money that they don’t have, and this is seen as a bad thing. If we won’t go into debt anymore because credit has tightened, then our government will go into debt for us to pay for things it can’t afford.