Why all the hate for Keynesian Economics?

[Mr Bananagrabber]

Absolutely agree.

Which is where I come in with reaffirming my belief that easing is just about the LAST thing we need.

I don't look at interest rates in order to assess the stance of monetary policy. Are interest rates low because money is loose, pushing interest rates below equilibrium, or because the Fisher effect (low expected inflation, hence tight money) is pushing them lower? I look at nominal GDP growth and inflation to assess the stance of monetary policy, both of which are at all time lows. So I conclude that money is tight and in need of easing. Perhaps you're using a different metric?

[Norsklow]

SNIP

Inside-money creators certainly do want to do that. The problem is that inside money, such as deposits, are backed by outside money, reserves. So if the relative demand for currency changes, which draws down on bank reserves, then the quantity of inside money which private banks can back must shrink. So if the demand for outside money (currency plus reserves) changes, then the quantity of outside money must change equally so that private banks can keep inside money in equilibrium. So the central bank must ease in response to an increase in the demand for outside money, and tighten in response to a decrease in demand.

I think/suspect that there are a number of inside-money creators that are free or relatively free from such restrictions, or can by-pass them in certain ways - quite independent of State control.
1] Credit card companies AFAIK have no onerous restrictions. I have no idea what State control there is for Wonga in the UK ( or rather, I seem to remember a Gov't minister indicating he hadn't and did not see why he should ). I consider them a pernicious influence.
2] There are such sources of usable funds such as off-shore dollars and euros. Cash can be carried and traded. I do not believe the well has run dry.
3] Historically, Banks have been able to create an uncertain amount of media of exchange without having a government currency behind them. Case in point: the HK dollar - which was a private vehicle of the HSBC - predating the existence of the Hong Kong 'State'.
I am assuming that these activities already HAVE consistently overstepped the mark of prudence ( Credit Card debt would not have been an issue had sufficient prudence been exercised.
I am furthermore thinking that the very existence of the bad debt problem is by itself ample proof of the lack of prudence.

Based on these beliefs, I think that Easing is an error. Most of the hurts are self-created,and I am opposed to offering a way out.

Also, thank you for being extremely reasonable. It's rare to find somebody willing to consider the opinions of the other side.

Here be things that I can learn from. I do not know why/how other countries do things, and I appreciate learning how they do this or that and why it is so. I'm just a historian who read up hard on economy,and not an economist. I am aware of my own ignorance - which helps in being reasonable. I am asking the questions because I am uncertain of the answers.

Yes, that's equivalent to setting a level target.

That is the State acting the Matron - which is fit and proper.
I am weary of the Matron playing the Harlot.

( Please feel free to correct )

[Norsklow]

Which is where I come in with reaffirming my belief that easing is just about the LAST thing we need.

I don't look at interest rates in order to assess the stance of monetary policy. Are interest rates low because money is loose, pushing interest rates below equilibrium, or because the Fisher effect (low expected inflation, hence tight money) is pushing them lower? I look at nominal GDP growth and inflation to assess the stance of monetary policy, both of which are at all time lows. So I conclude that money is tight and in need of easing. Perhaps you're using a different metric?

See below, now above. I am calling into question the need and advisability for the State to do so under current conditions. ( What is this Fisher effect?)

[Paixao]

Also a fallacy the problem is distribution of tax burden

what should be happening is tax cuts for the poor/middle class who spend their money on necessities like food, housing and clothes (i.e. consumer products that need to be produced by workers) rather than tax cuts for the rich who won't spend it during hard times

This. When the working class spend money, it goes to the middle class.
When the middle class spend money, it goes to the rich.
They get taxed, and it goes to the government.
Who gives it to the working class.

I call it trickle up economics.

The only problem is... that the Rich don't get taxed (enough), and could never possibly spend 100 million dollars, so they save it, draining the economy of 100 million dollars. Now do this for 60000 rich people (some of which can save several billion dollars) and you get a huge drain on the economy.

Also most governments do very poorly at giving back the money to the working class...

[Greed and Death]

Here is the deal, if your a functional govnerment your infrastructure should already be maintained sufficiently, and doing infrastructure work early only means there is less to do tomorrow.

The only way around this is to build things you don't need ie roads in the country side that are underused, the problem with this is that has to be paid for a taxes will raise in a response so you end up making future generations pay for things you do not need.

[Greed and Death]

This. When the working class spend money, it goes to the middle class.
When the middle class spend money, it goes to the rich.
They get taxed, and it goes to the government.
Who gives it to the working class.

I call it trickle up economics.

The only problem is... that the Rich don't get taxed (enough), and could never possibly spend 100 million dollars, so they save it, draining the economy of 100 million dollars. Now do this for 60000 rich people (some of which can save several billion dollars) and you get a huge drain on the economy.

Also most governments do very poorly at giving back the money to the working class...

They don't save it they invest it.
Investments drive the economy not drain it.

[The United Colonies of Earth]

I was reading this article about Libertarianism and it mentioned the majority of young people in America don't believe Keynesian principles work (i.e. increasing government spending will not increase overall spending). This really confused me, maybe it's because I'm not American, but I never saw Keynesian economics as A. associated with the left wing or B. at all disputable.

Can someone explain to me how anyone can actually disagree with it? I've always thought it was like disagreeing with it was like disagreeing with the link between smoking and lung cancer (although, that said, I heard that done a week ago)

They've been made unpopular because a bunch of actions made the Obama stimulus fail, and Republicans swore to oppose them to the last politician/lobbyist whore.

[Alien Space Bats]

Here is the deal, if your a functional govnerment your infrastructure should already be maintained sufficiently, and doing infrastructure work early only means there is less to do tomorrow.

The only way around this is to build things you don't need ie roads in the country side that are underused, the problem with this is that has to be paid for a taxes will raise in a response so you end up making future generations pay for things you do not need.

Keep in mind that a great many infrastructure targets offer some variation down the road with regards to when work on a replacement can occur. If you have a 5-10 year window on the replacement of a particular bridge, you can time that work to coincide with slow periods in construction (in fact, you should time replacement to coincide with slow periods of construction, if only to keep construction costs down).

The upshot of all this is that repair/replacement work should not be scheduled to occur on an even basis, unless the work in question is so regular (maintaining rights of way, patching, resurfacing, etc.) that you can't count on being able to shift it from a period of greater economic activity to a period of lesser economic activity.

---

Then, too, there's some investment spending that's clearly counter-cyclical. Job retraining is one example; in a changing economy, each recession is going to alter the character of the economy and labor's skill set will have to change accordingly. Ideally, this should be handled like other forms of spending that are set up as "automatic stabilizers", such as unemployment compensation, public assistance, etc.

[Free Tristania]

If I want some stimulation I don't rely on the invisible hand.

The invisible hand is invisible because it isn't there.

[Norstal]

They don't save it they invest it.
Investments drive the economy not drain it.

You see this?

The only way around this is to build things you don't need ie roads in the country side that are underused, the problem with this is that has to be paid for a taxes will raise in a response so you end up making future generations pay for things you do not need.

That's called investment. A bad one, but an investment nonetheless.

[Greed and Death]

They don't save it they invest it.
Investments drive the economy not drain it.

You see this?

The only way around this is to build things you don't need ie roads in the country side that are underused, the problem with this is that has to be paid for a taxes will raise in a response so you end up making future generations pay for things you do not need.

That's called investment. A bad one, but an investment nonetheless.

In a very broad sense you can call a money sink an investment. It just has a negative affect on the economy rather than a positive one.

So yes your correct it is a money losing investment that weakens the economy.

[Caninope]

Well they're half right at least. Government spending ended it, but most of the spending happened before there was even a war.

Well it crowded out private sector consumption though... kinda hard to claim that's what you wanted.

Out of curiosity, where do you stand on the Keynesian multiplier effect and the "crowding out" effect?

Do you believe that crowding out will ultimately have a larger effect than any multiplier effect?

[Caninope]

Well it crowded out private sector consumption though... kinda hard to claim that's what you wanted.

Not really.The private sector left nearly a quarter of all Americans unemployed. The government gave out jobs, and a lot of them were pure bullshit. Some government employees at the the time had jobs that were literally moving a pile of rocks fifteen feet in one direction, then moving it back the next day, repeat. They were essentially handouts as the labor itself had no value whatsoever. Yet this provided people with paychecks, and the GDP had actually returned to pre-Depression levels before Hitler even took power in Germany!

It actually took until 1940 for the real GDP to return to previous levels.

[Caninope]

Which leads me to the question:

'what makes you think that increasing the amount of money - even if you use Gold money - is a Good Thing?

Because nominal wages are rigid downwards.

Also, on the theory of rational expectations has some implications that could mean, as market monetarists argue, that could mean that an increase in the monetary supply (and thus the nominal income) could lead to real GDP growth.

[Caninope]

You wiped your arse with the most influential book in all of economics? That takes either... balls, or desperation.

Friedman's work is all toilet paper to me. And don't give me that "oh he won a Nobel" line, the Economics Nobel is a more of a glorified popularity contest than the peace prize.

Because the quantity theory of money, the Friedman rule, and the Friedman-Savage utility function are all useless, amirite?

[L Ron Cupboard]

Smells like ... animal spirits.

[Eleutheria]

Smells like ... animal spirits.

...or low interest rates

[American Constitutional States]

Keynes believed that his economics was best suited for a totalitarian state.

[Zaras]

Keynes believed that his economics was best suited for a totalitarian state.

You're 100% fucking wrong. Quit making shit up and contribute something useful to the thread.

[PapaJacky]

Keynes believed that his economics was best suited for a totalitarian state.

You're 100% fucking wrong. Quit making shit up and contribute something useful to the thread.

>1 post

Overreacting, man.

[Densaner]

I was reading this article about Libertarianism and it mentioned the majority of young people in America don't believe Keynesian principles work (i.e. increasing government spending will not increase overall spending). This really confused me, maybe it's because I'm not American, but I never saw Keynesian economics as A. associated with the left wing or B. at all disputable.

Keynesian Economics are fine. However it has two parts -

1. In good times the government runs a surplus. It cuts back on unnecessary programs and services and generally tightens belts.

2. In bad times the government deliberately runs a deficit and intervenes in the economy where needed to promote growth, jobs and investments.

I live in the UK. During the "good" times our Labour government spent too much money and allowed the deficit to grow too large. This then exploded during the recession. The current government is engaged in slash and burn economics which has resulted in a double dip recession.

Keynesian Economics are a good way to run an economy. It would be nice if someone had tried it in my country.

[PapaJacky]

The only problem is... that the Rich don't get taxed (enough), and could never possibly spend 100 million dollars, so they save it, draining the economy of 100 million dollars. Now do this for 60000 rich people (some of which can save several billion dollars) and you get a huge drain on the economy.

Also most governments do very poorly at giving back the money to the working class...

They don't save it they invest it.
Investments drive the economy not drain it.

Investing in things that doesn't produce jobs isn't helping the economy but rather each other.

Also, investments don't help the economy when compared to saving it in a bank. The reason behind this is basic economics.

Finally, it's true that the richest don't pay enough, especially on the state level. Texas for example, effectively takes away 3% of their richest 1% tax payers' income while effectively takes away 12% of their poorest 20% tax payers' incomes. The difference is widest in the State of Washington, where the ratio of state taxes paid as apart of income between the Poorest 20% and the Richest 1% is at 6:1.

[PapaJacky]

I was reading this article about Libertarianism and it mentioned the majority of young people in America don't believe Keynesian principles work (i.e. increasing government spending will not increase overall spending). This really confused me, maybe it's because I'm not American, but I never saw Keynesian economics as A. associated with the left wing or B. at all disputable.

Keynesian Economics are fine. However it has two parts -

1. In good times the government runs a surplus. It cuts back on unnecessary programs and services and generally tightens belts.

2. In bad times the government deliberately runs a deficit and intervenes in the economy where needed to promote growth, jobs and investments.

I live in the UK. During the "good" times our Labour government spent too much money and allowed the deficit to grow too large. This then exploded during the recession. The current government is engaged in slash and burn economics which has resulted in a double dip recession.

Keynesian Economics are a good way to run an economy. It would be nice if someone had tried it in my country.

This is true. The countries that poured about 5% or more of their GDP into emergency spending programs (U.S., Australia, Japan, China) recovered to their pre-recession GDPs at a faster rate than European countries that only had modest emergency spending programs.